Solution-What adjustment should be made to income tax

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?

a. Increase it by $1,600

b. Decrease by $1,600

c. Increase it by $4,800

d. Decrease it by $4,800.

Reference no: EM132764508

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What adjustment should be made to income tax expense

Reference no: EM132764508

Reference no: EM132764508

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