What is the amount and nature of the book-tax difference

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Problem 1: Coop Inc. owns 36% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays Coop a dividend of $26,000 in the current year. Chicken also reports financial accounting earnings of $36,000 for that year. Assume Coop follows the general rule of accounting for investment in Chicken. What is the amount and nature of the book-tax difference to Coop associated with the dividend distribution (ignoring the dividends received deduction)?

Multiple Choice

Option 1: $13,040 unfavorable.

Option 2: $13,040 favorable.

Option 3: $26,000 unfavorable.

Option 4: $26,000 favorable.

Reference no: EM132830130

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