_____ Pilax owns 100% of the outstanding common stock of Silax, a foreign subsidiary located in a country having a 30% income tax rate and a 10% dividend withholding tax. For 2006, Silax reported net income of $1,400,000 and paid dividends of $560,000. Pilax intends for Silax's remaining 2006 earnings to be invested for an indefinite future period. Pilax's income tax rate is 40%. What amount should Pilax report for deferred income taxes payable in its balance sheet at 12/31/06?
A) $ -0-
B) $24,000
C) $56,000
D) $80,000
E) None of the above.

Question

Quizplus · Accepted Answer

Since Pilax intends for Silax's remaining earnings to be invested indefinitely, no deferred tax liability is recognized for the undistributed earnings of a foreign subsidiary.

_____ Pilax Owns 100% of the Outstanding Common Stock of Silax