Palmer Company Owns a 25% Interest in Sad,incorporated,a Domestic Company.sad

Question 18
Multiple Choice

Palmer Company owns a 25% interest in Sad,Incorporated,a domestic company.Sad had net income of $60,000 and paid dividends of $20,000.Palmer's tax rate is 35%.For simplicity,assume that Sad's undistributed earnings are Palmer's only temporary timing difference.Assume Sad qualifies for the 80% dividend received deduction.Which of the following statements is correct? A)The current tax liability is $700. B)The current tax liability is $1,050. C)Under GAAP,Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $700. D)Under GAAP,Palmer provides for income taxes on Sad's undistributed earnings with a credit to deferred tax liability of $1,050.