PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
Author: Jones
Publisher: MCG
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Chapter 13, Problem 36AP
a.
To determine
Calculate the transfer price that would all of the profit on these shirts be tax in country X.
b.
To determine
Calculate the transfer price that would all of the profit on these shirts be tax in country U.S
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Usco Inc. manufactures a product for $20 per
unit that is sold to its affiliate, Foreignco, for $24
per unit. Foreignco sells the product at $30 per
unit in the local market. Assuming a U.S. tax rate
of 21% and Foreignco's local income rate of 10%,
the total income tax is calculated as follows:
Usco
Foreignco
Total
Sales
$24
$30
$30
Cost of sales
20
24
20
Тахable
income
$4
$6
$10
Tax liability
$0.84
(21%)
$0.60
(10%)
$1.44
Assume the IRS adjusts the transfer price to $28.
Determine the total income tax if the tax
authority of Foreignco's local government does
not provide a correlative adjustment.
Group of answer choices
$2.28
$1.44
$1.88
$1.04
ABC limited (An Australian company) imports die-
cast parts from its Chinese subsidiary that are used
in the production of children's toys. Per unit, part
126 costs the Chinese subsidiary AUD $200 and
AUD $20 to ship to ABC limited. ABC limited uses
part 126 to produce a toy airplane that it sell to
local stores for AUD $600 per unit. The following
tax rates apply: Chinese income tax: 25% Australian
income tax: 30% Australian import duty: 10% of
invoice price Required:
a. Calculate the total amount of income taxs and
import duties paid to the Australian and Chinese
government if part 126 is sold to ABC limited at the
price of AUD $300 per unit
b. Calculate the total amount of income taxs and
import duties paid to the Australian and Chinese
government if part 126 is sold to ABC limited at the
price of AUD $400 per unit
c. Explain why the results got in part (a) and (b)
differ
Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United
States, Canada, England, and Australia.
Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total
gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between
the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of
$1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital
contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest
on the loan.
Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of
$2,240,000 on sales to its subsidiary during…
Chapter 13 Solutions
PRINCIPLES OF TAXATION F/BUS...(LL)
Ch. 13 - Why does a corporations state income tax cost...Ch. 13 - Prob. 2QPDCh. 13 - Prob. 3QPDCh. 13 - Prob. 4QPDCh. 13 - Borden Inc. conducts a business that spans four...Ch. 13 - Prob. 6QPDCh. 13 - Prob. 7QPDCh. 13 - Prob. 8QPDCh. 13 - Prob. 9QPDCh. 13 - Prob. 10QPD
Ch. 13 - Prob. 11QPDCh. 13 - Prob. 12QPDCh. 13 - Prob. 13QPDCh. 13 - Prob. 14QPDCh. 13 - Prob. 15QPDCh. 13 - Prob. 16QPDCh. 13 - This year, Mesa Inc.s before-tax income was...Ch. 13 - Prob. 2APCh. 13 - Prob. 3APCh. 13 - Prob. 4APCh. 13 - Prob. 5APCh. 13 - Prob. 6APCh. 13 - Prob. 7APCh. 13 - Prob. 8APCh. 13 - Prob. 9APCh. 13 - Prob. 10APCh. 13 - Prob. 11APCh. 13 - Prob. 12APCh. 13 - Prob. 13APCh. 13 - Prob. 14APCh. 13 - Prob. 15APCh. 13 - Prob. 16APCh. 13 - Prob. 17APCh. 13 - Prob. 18APCh. 13 - Prob. 19APCh. 13 - Prob. 20APCh. 13 - Prob. 21APCh. 13 - Prob. 22APCh. 13 - Prob. 23APCh. 13 - Prob. 24APCh. 13 - Prob. 25APCh. 13 - Prob. 26APCh. 13 - Prob. 27APCh. 13 - Prob. 28APCh. 13 - Prob. 29APCh. 13 - Prob. 30APCh. 13 - Prob. 31APCh. 13 - Prob. 32APCh. 13 - Prob. 33APCh. 13 - Prob. 34APCh. 13 - Prob. 35APCh. 13 - Prob. 36APCh. 13 - Prob. 37APCh. 13 - State E wants to encourage the development of a...Ch. 13 - Prob. 2IRPCh. 13 - Prob. 3IRPCh. 13 - Prob. 4IRPCh. 13 - Prob. 5IRPCh. 13 - Prob. 6IRPCh. 13 - Prob. 7IRPCh. 13 - Prob. 8IRPCh. 13 - Prob. 9IRPCh. 13 - Prob. 10IRPCh. 13 - Prob. 11IRPCh. 13 - Prob. 2RPCh. 13 - Prob. 3RPCh. 13 - Prob. 1TPCCh. 13 - Prob. 2TPCCh. 13 - Prob. 3TPCCh. 13 - Prob. 1CPCh. 13 - Prob. 2CP
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- Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of $1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest on the loan. Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of $2,240,000 on sales to its subsidiary during…arrow_forwardABC limited (An Australian company) imports die-cast parts from its Chinese subsidiary that areused in the production of children's toys. Per unit, part 126 costs the Chinese subsidiary AUD $200 and AUD $20 to ship to ABC limited. ABC limited uses part 126 to produce a toy airplane that it sell to local stores for AUD $600 per unit. The following tax rates apply: Chinese income tax: 25% Australian income tax: 30% Australian import duty: 10% of invoice price Required: a. Calculate the total amount of income taxs and import duties paid to the Australian and Chinese government if part 126 is sold to ABC limited at the price of AUD $300 per unit b. Calculate the total amount of income taxs and import duties paid to the Australian and Chinese government if part 126 is sold to ABC limited at the price of AUD $400 per unit c. Explain why the results got in part (a) and (b) differarrow_forwardABC limited (An Australian company) imports die-cast parts from its Chinese subsidiary that areused in the production of children’s toys. Per unit, part 126 costs the Chinese subsidiary AUD$200 and AUD $20 to ship to ABC limited.ABC limited uses part 126 to produce a toy airplane that it sell to local stores for AUD $600 perunit. The following tax rates apply:Chinese income tax: 25%Australian income tax: 30%Australian import duty: 10% of invoice priceRequired:a. Calculate the total amount of income taxs and import duties paid to the Australian andChinese government if part 126 is sold to ABC limited at the price of AUD $300 per unitb. Calculate the total amount of income taxs and import duties paid to the Australian andChinese government if part 126 is sold to ABC limited at the price of AUD $400 per unitc. Explain why the results got in part (a) and (b) differarrow_forward
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