Assignment Papers-Consolidated Tax Return With Intercompany Transactions

Assignment Papers-Consolidated Tax Return With Intercompany Transactions

Greenacre Corp and its subsidiary Blueacre are calendar year corporations that keep their respective books on the accrual basis. The companies have taxable income of $300,000 and $350,000, respectively, for tax year 20×4 (before consolidation adjustments, elimination entries and charitable deductions). The following transactions are included:

Land was sold by Greenacre Corp to a third party for $90,000. The land was acquired from Blueacre in 20×2. Blueacre acquired the land in 20×0 for $52,000.

Greenacre Corp’s taxable income includes a $15,000 dividend Blueacre paid to Greenacre Corp.

Greenacre Corp sold inventory to Blueacre in 20×5 for a realized $120,000 profit. The intercompany profit on the unsold inventory is $9,500. Greenacre Corp sold inventory to Blueacre in 20×6 for which deferred profit at the beginning of the year is $8,000. Blueacre sold this inventory to an external party. Greenacre Corp sold additional inventory to Blueacre in 20×6 for a realized $155,000 profit. The intercompany profit on the unsold inventory is $7,000.

Greenacre Corp and Blueacre contribute $16,000 and $15,000 to charity, respectively.