acct ch 15.3b

Exercise 15-31 (Algo) International Transfer Prices: Ethical Issues (LO 15-4) Whitehill Chemicals has two operating divisions. Its Formulation Division In the United States mixes, processes, and tests basic chemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell various products. Operating expenses amount to $277 million in the US. and $79.7 million in Ireland exclusive of the costs of any goods transferred from the US. Revenues In Ireland are $212 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.7 million. However, if it had been purchased from an Independent U.S. supplier, the cost would be $53.7 million. The marginal income tax rate is 20 percent in the U.S. and 12 percent in Ireland. Required: What is the company's total tax liability to both jurisdictions for each of the two alternativé transfer pricing scenarios ($40.7 million and $53.7 million)?…

Exercise 15-31 (Algo) International Transfer Prices: Ethical Issues (LO 15-4) Whitehill Chemicals has two operating divisions. Its Formulation Division in the United States mixes, processes, and tests basic chemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell various products. Operating expenses amount to $27.0 million in the U.S. and $79.0 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $205 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.0 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $53.0 million. The marginal income tax rate is 20 percent in the U.S. and 12 percent in Ireland. Required: What is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios ($40.0 million and $53.0 million)?…

Transfer Pricing; International Considerations; Strategy As indicated in the chapter, determining the appropriate transfer price in a multinational setting is a very complex problem, with multiple strategic considerations. Consider as an example a U.S. company with a subsidiary in Italy and asubsidiary in Ireland. The Italian subsidiary produces a product at a cost of $1,000 per unit. This unitis then sold to the Irish subsidiary, which adds $100 of cost to each unit. The unit is then shipped tothe U.S. parent company, which adds an additional $100 of cost to each unit. The unit is then sold to aU.S. customer for $2,000. Assume that the tax rate in Italy is 30%, the tax rate in Ireland is 15%, andthe tax rate in the United States is 35%.Required1. Define the term transfer price. Why is transfer pricing strategically important to organizations?2. What creates income tax planning opportunities when determining transfer prices in a multinational setting? Where could one go to obtain…

Exercise 15-31 (Algo) International Transfer Prices: Ethical Issues (LO 15-4) Whitehill Chemicals has two operating divisions. Its Formulation Division in the United States mixes, processes, and tests basic chemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell various products Operating expenses amount to $27.5 million in the U.S. and $79.5 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $210 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.5 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $53.5 million. The marginal income tax rate is 20 percent in the U.S. and 12 percent in Ireland, Required: What is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios ($40.5 million and $53.5 million)?…

15.1

1. Multinational corporations Why do companies go global? Multinational corporations operate in locations across the world. Each company has its own motive for its presence in different countries. Consider the following case: Saltwater Logistics Corp.'s domestic demand has matured and leveled off. Consequently, the firm is looking to expand its operations overseas because it believes that its growth opportunities are more promising in foreign markets. Which of the following best describes the reason Saltwater Logistics Corp. has decided to go global? To seek production efficiency To avoid political, trade, and regulatory hurdles To broaden its markets Now consider the case of Blue Box Crate Company. Many of Blue Box Crate Company's customers have expanded to India. Consequently, Blue Box Crate Company has decided to expand its operations to India to better serve its customers. Blue Box Crate Company has decided to go global in order to

Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufacturing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retailunit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for theseproducts. The retail unit in country Y sells the product to final customers for $450,000. Zen is considering adjusting its transfer prices to reduce overall corporate tax liability.Required1. Assume that both country X and country Y have corporate income tax rates of 40% and that no specialtax treaties or benefits apply to Zen. What would be the effect on Zen’s total tax burden if the manufacturing unit raises its price from $300,000 to $360,000?2. What would be the effect on Zen’s total taxes if the manufacturing unit raised its price from $300,000 to$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?3. Comment on any ethical issues you observe in this case

Question 12 Which of the following is an example of a greenfield investment made by a foreign company in the UAE? Mcdonald’s USA opens a franchisee restaurant in Dubai Mall Amazon US partners with Careem in UAE Uber US acquires Careem in UAE IBM opens an IBM fully owned subsidiary office in Dubai