Ketchem Corp., a cash basis taxpayer, and Catcham Corp., an accrual basis taxpayer, are parent-subsidiary corporations. In January-November of year 1, Ketchem sold $50,000 of supplies to Catcham, which Catcham paid for on a 1/20 net 30 basis, always paying on Day 20. On December 27 of year 1, Ketchem 's December sale of supplies to Catcham, Ketchem 's taxable income is $600,000 and Catcham's is $120,000. How much taxable income should Ketchem and Catcham report on the year 1 consolidated tax return?
a. $720,000
b. $770,000
c. $74,000
d. $710,000
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