Question
The following table shows selected amounts from the separate financial statements of a parent company (unconsolidated) and one of its subsidiaries. Note that 1) the
The following table shows selected amounts from the separate financial statements of a parent company (unconsolidated) and one of its subsidiaries. Note that 1) the parent company owns 100% of the subsidiary; 2) During the year the parent company sold some inventory to the subsidiary for $1,000 in scenario I and for $1,700 in scenario II. It had cost the parent company $1,000. The subsidiary further sold the inventory to an unrelated party for $2,000. 3) Located in two different countries, the parent company and the subsidiary have different income tax rates. Specifically, the rate for the parent company is 25% and the rate for the subsidiary is 50%. 4) Companies do not pay tax if their income is equal to or less than zero.
Please calculate and fill the cells with question marks.
| Scenario I | Scenario II | ||
| Parent Company ($) | Subsidiary ($) | Parent Company ($) | Subsidiary ($) |
Sales | 1,000 | 2,000 | 1,700 | 2,000 |
Cost of goods sold | 1,000 | 1,000 | 1,000 | 1,700 |
Gross profit | ? | ? | ? | ? |
Operating expense | 100 | 100 | 100 | 100 |
Taxable income | ? | ? | ? | ? |
Income tax | ? | ? | ? | ? |
Net Income | ? | ? | ? | ? |
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