On January 1, 20X8, Putter Corporation acquired 40 percent of the voting shares of Shank Company for $65,000. Shank reported net income of $45,000 and paid dividends of $10,000 in 20X8. Putter reported operating income of $50,000 for the year. There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent. Assume that the equity method is being used.

37) Based on the preceding information, what would Putter report as income tax expense for the year?

A) $17,500

B) $18,760

C) $23,800

D) $22,540

38) Based on the preceding information, what amount would Putter report as net income (after taxes) for the year?

A) $49,240

B) $68,000

C) $64,000

D) $67,500

Company P holds 70 percent of the voting shares of Company S. During 20X8, Company S sold land with a book value of $125,000 to Company P for $150,000. Company P continues to hold the land at the end of the year. The companies file separate tax returns and are subject to a 40 percent tax rate. Assume that Company P uses the fully adjusted equity method in accounting for its investment in Company S.

40) Based on the information given, which consolidating entry relating to the intercorporate sale of land is to be entered in the consolidation worksheet prepared at the end of 20X8?