E 10-13

[Tax] Asset allocation in business combination, tax effect from equity investees 1. When Pop Corporation acquired its 100 percent interest in Son Corporation in a tax-free reorganization, Son’s equipment had a fair value of $12,000,000 and a book value and tax basis of $8,000,000. If Pop’s effective tax rate is 34 percent, how much of the purchase price should be allocated to equipment and to deferred income taxes?

a $8,000,000 and $0, respectively b $10,640,000 and $1,360,000, respectively c $12,000,000 and $1,360,000, respectively d $12,000,000 and $4,080,000, respectively