Chapter 13, Problem 13.20E

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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)?…

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