Up and its 80 percent owned subsidiary (Down) reported the following figures for the year ending December 31, 2010. Down paid dividends of $30,000 during this period.

Sales. LO9 Cost of goods sold Operating expenses Dividend income . .

Up

$(600,000)

300,000 174,000

(24,000)

Down

$(300,000)

140,000 60,000

-0-

Net income

$(150,000) $(100,000)

In 2009, unrealized gains of $30,000 on upstream transfers of $90,000 were deferred into 2010. In 2010, unrealized gains of $40,000 on upstream transfers of $110,000 were deferred into 2011.

a. What figures appear in a consolidated income statement?

b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 30 percent.