_____ Parrco and Subbco file a consolidated tax return. Subbco issues separate financial statements. Subbco's income statement
A) Need not include income tax expense.
B) Must include income tax expense allocated from the parent.
C) Must include income tax expense allocated from the parent only if the subsidiary is partially owned and the unowned shares are publicly held.
D) Must include income tax expense allocated from the parent only if Parrco is publicly owned.
E) None of the above.

Question

Quizplus · Accepted Answer

Subbco must include income tax expense allocated from the parent, Parrco, in its separate financial statements. This is because, for financial reporting purposes, each entity must reflect its share of the consolidated tax expense to provide a fair view of its financial performance, even though they file a consolidated tax return.

_____ Parrco and Subbco File a Consolidated Tax Return