_____ Pellax Owns 100% of the Outstanding Common Stock of Sellax

Multiple Choice

_____ Pellax owns 100% of the outstanding common stock of Sellax, a foreign subsidiary located in a country having a 25% income tax rate and a 10% dividend withholding tax. For 2006, Sellax reported net income of $600,000 and paid dividends of $250,000. Pellax intends for Sellax's remaining earnings to be distributed as dividends in the near future. Pellax's income tax rate is 40%. How much should Pellax record on its books in 2006 for income tax expense pertaining to Sellax's 2006 earnings?

A) $ -0-
B) $25,000
C) $60,000
D) $95,000
E) $120,000