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What adjustment should be made to income tax expense

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Question: X owns 100% of the common shares of Y. Both companies pay income tax at the rate of 40%. On January 1st .2020, X reported a gain of $20,000 when it sold equipment to Y. This equipment had a remaining life of 5 years on the date of the intercompany sale. When preparing the consolidated income statement for 2021, what adjustment should be made to income tax expense?

Reference no: EM132749543

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