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Mikco, a foreign corporation, owns 100% of Flagco, a domestic corporation. Mikco manufactures a wide variety of fl ags for worldwide distribution. Flagco imports Mikco's fi nished goods for resale in the United States. Flagco's average fi nancial results for the last three years are as follows:Sales$20 millionCost of goods sold($15 million)Operating expenses($4 million)Operating profi t$1 millionFlagco's CFO has decided to use the comparable profi ts method to assess Flagco's exposure to an IRS transfer pricing adjustment by testing the reasonableness of Flagco's reported operating profi t of $1 million. An analysis of fi ve comparable uncontrolled U.S. distributorsindicates that the ratio of operating profi ts to sales is the most appropriate profi tability measure. After adjustments have been made to account for material differences between Flagco and the uncontrolled distributors, the average ratio of operating profi t to sales for each uncontrolled distributor is as follows: 6%, 8%, 10%, 10%, and 14%.Using this information regarding comparable uncontrolled U.S. distributors, apply the comparable profi ts method to assess the reasonableness of Flagco's reported profi ts. In addition, if an adjustment to Flagco's reported profi ts is required, compute the amount of that adjustment.
A finance company advertise that it will pay kump sum of rs 10000 at the end of 6 years to investor who deposit annually Rs1000. what interest rate is implicit in this offer?
The Federal Circuit Court has ruled that wholesale distribution and retail sales, even of the same product, constitutes distinct businesses. In a case involving a taxpayer from another circuit, the Tax Court has ruled that such costs invariably sh..
Building an Income Statement, During the year, the Senbet Discount Tire Company had gross sales of $1.06 million. The firm's cost of goods sold and selling expenses were $525,000 and $215,000, respectively. Senbet alo had note payable of $800,000...
Three years after the contribution date, the land contributed by Cheryl is sold by the partnership to a third party for $90,000. How much taxable gain will Cheryl recognize from the sale?
At what level of sales (in units) for the two-month period should Birch Company be indifferent between closing the plant or keeping it open? Show computations.
When the auditor is unable to obtain sufficient, competent evidence concerning the beginning inventory, which is material, the report is modified by adding an explanatory paragraph prior to the opinion paragraph and appropriate modification to the..
What are the two techniques used to convert trial balances from foreign currencies in U.S. dollars? Explain the situations when you would employ each metod.
In addition to the foregoing information, use the following data in determining the acceptability in this situation: Income from Net Cash Year Operations Flow 1 $100,000 $180,000 2 40,000 120,000 3 20,000 100,000 4 10,000 90,000 5 10,000 90,000 Th..
Assume that the bonds are called on December 31, 2009. Use the horizontal model (or write the journal entry) to show the effect of the retirement of the bonds. (Hint: calculate the amount paid to bondholders; then determine how much of the bond di..
Review the annual reports for PepsiCo, Inc. and The Coca-Cola Company in Appendixes A & B, especially the Consolidated Statements of Income and the Balance Sheets on pp. A4, A6, B1, & B2 of Financial Accounting.
Smithson corporation had a 1/1/08 balance in the allowance for doubtful accounts of $10000. During 2008, it wrote off $7200 of accounts receivable and collected $2100 on accounts previously written off.
A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for a total of $240 and used FIFO costing, the gros..
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