Calculate the total amount of income tax

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Reference no: EM133079622

Question - 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 tax 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 tax 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.

Reference no: EM133079622

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