Accounting Theory: Substance of Over- and Underallocating Taxes Assume that Poxco and Soxco, Poxco’s 100%-owned subsidiary, file a consolidated income tax return. Poxco allocates in¬

come tax expense to Soxco using a method that is inconsistent with FASB Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes.”

1. How should an overallocation of income taxes be reported by each entity?

2. How should an wwderallocation of income taxes be reported by each entity?

Financial Analysis Problems