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SB Portland Inc. (Portland) owns... Portland Inc. (Portland) owns 80% of Seattle Inc. (Seattle) and uses the cost method to account for its investment. The

SB Portland Inc. (Portland) owns...

Portland Inc. (Portland) owns 80% of Seattle Inc. (Seattle) and uses the cost method to account for its investment. The 2023 income statements of both companies are shown below.

Portland Seattle
Gross profit $100,000 $50,000
Miscellaneous revenues (losses) (30,000) (20,000)
Depreciation expense (20,000) (15,000)
Income tax expense (20,000 (6,000)
Net Income $30,000 $9,000

On January 1, 2023, Seattle acquired equipment for $7,000 and sold it the same day to Portland for $12,000. The equipment had a remaining useful life of 10 years on that date. Both companies are subject to an effective tax rate of 40%.

TB 07-17 Which of the following is the correct amount...

Which of the following is the correct amount of deferred taxes appearing on Portland's 2023 consolidated balance sheet?

Multiple Choice

$2,000

$2,700

$1,800

$1,140

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