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at 1) During the year subsidiary A sold some i 000. Subsidiary B further sold the inventory erent income tax rates. Specifically, the rate ual to or less than zero. 4: According to the above information, subsi Scenario Subsidiary A Subsidiary Consolidates

at 1) During the year subsidiary A sold some i 000. Subsidiary B further sold the inventory erent income tax rates. Specifically, the rate ual to or less than zero. 4: According to the above information, subsi Scenario Subsidiary A Subsidiary Consolidates

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following table shows selected amounts from the separate financial statements of a company (unconsolidated) with two subsidiaries, A and B. Note that 1) During the year subsidiary A sold some inventory to subsidiary B for $1,000 in scenario I and for $1,700 in scenario II. It had cost subsidiary A $1,000. Subsidiary B further sold the inventory to an unrelated party for $2,000. 2) Located in two different countries, subsidiary A and subsidiary B have different income tax rates. Specifically, the rate for subsidiary A is 25% and the rate for subsidiary B is 50%. 3) Companies do not pay tax if their income is equal to or less than zero. Q24: According to the above information, subsidiary A has sold some inventory to subsidiary B. In international business, this practice is referred to as: Sales Cost of goods sold Gross profit Operating expense Taxable income income tax Net Income Scenario I Subsidiary A Subsidiary Consolidated 1,000 1,000 100 Exposure risk Expatriation Standardization Transfer pricing 2,000 1,000 100 1000 100 2000 1.700 100
Transcribed Image Text:The following table shows selected amounts from the separate financial statements of a company (unconsolidated) with two subsidiaries, A and B. Note that 1) During the year subsidiary A sold some inventory to subsidiary B for $1,000 in scenario I and for $1,700 in scenario II. It had cost subsidiary A $1,000. Subsidiary B further sold the inventory to an unrelated party for $2,000. 2) Located in two different countries, subsidiary A and subsidiary B have different income tax rates. Specifically, the rate for subsidiary A is 25% and the rate for subsidiary B is 50%. 3) Companies do not pay tax if their income is equal to or less than zero. Q24: According to the above information, subsidiary A has sold some inventory to subsidiary B. In international business, this practice is referred to as: Sales Cost of goods sold Gross profit Operating expense Taxable income income tax Net Income Scenario I Subsidiary A Subsidiary Consolidated 1,000 1,000 100 Exposure risk Expatriation Standardization Transfer pricing 2,000 1,000 100 1000 100 2000 1.700 100
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