Illustrate what is the company total tax liability

Assignment Help Financial Accounting

Reference no: EM13123046

Trans Atlantic Metals has two operating divisions. Its forging operation in Finland forges raw metal, cuts it, and then ships it to the United States where the company's Gear Division uses the metal to produce finished gears. Operating expenses amount to $10 million in Finland and $30 million in the United States exclusive of the costs of any goods transferred from Finland. Revenues in the United States are $75 million. If the metal were purchased from one of the company's U.S. forging divisions, the costs would be $15 million. However, if it had been purchased from an independent Finnish supplier, the cost would be $20 million. The marginal income tax rate is 60 percent in Finland and 40 percent in the United States.

Required:

a. Illustrate what is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios ($15 million and $20 million)?

b. Is it ethical to choose the transfer price based on the impact on taxes?

Reference no: EM13123046

Questions Cloud

Explain how might it do so without being currently taxed : A U.S. manufacturer wants to conduct business through a foreign subsidiary organized in a low tax jurisdiction. Explain how might it do so without being currently taxed on the subsidiary’s foreign earnings?

Problem regarding debt investments : Debt investments are recorded at the : a. face value of the bonds purchased. b. face value of the bonds purchased plus interest. c. price paid for the bonds plus interest. d. price paid for the bonds plus brokerage fees

What does it mean to audit around the computer : How might the senior audit manager or partner on a particular engagement determine how much cost is acceptable to incur in order to test a particular area? Can you think of any lower cost alternatives?

Illustrate what is the company total tax liability : Illustrate what is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios?

Learn how to write a perfect essay : learn how to write a perfect essay

Question regarding graphing word problem : A montly cost of a long distance phone plan in dollars is a linear function of the total calling time in minutes. When graphed the funtion gives a line with a slope of 0.13.

How much cost is acceptable to incur in order to test : What's the difference between random error resulting from manual processing and systematic error resulting from IT processing?

Adjusting journal entry to record securities at fair value : Cost and fair value data for the trading securities of Clifford Company at December 31, 2010, are $100,000 and $74,000, respectively. Which of the following correctly presents the adjusting journal entry to record the securities at fair value?

User Account

All Pages