Financial & Managerial Accounting
Financial & Managerial Accounting
17th Edition
ISBN: 9780078025778
Author: Jan Williams, Susan Haka, Mark S Bettner, Joseph V Carcello
Publisher: McGraw-Hill Education
Question
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Chapter 22, Problem 13E

a.

To determine

Ascertain the tax liability of each division using the transfer pricing.

b.

To determine

State the transfer pricing alternative that would produce the lowest tax liability for the company as a whole.

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On June 30, 2023, Wisconsin, Incorporated, issued $300,000 in debt and 15,000 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a fair value of $40 per share. Prior to the combination, the financial statements for Wisconsin and Badger for the six-month period ending June 30, 2023, were as follows (credit balances in parentheses): Revenues Expenses Net income Items Retained earnings, 1/1 Net income Dividends declared Retained earnings, 6/30 Cash Receivables and inventory Patented technology (net) Equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings Total liabilities and equities Wisconsin $ (900,000) 660,000 $ (240,000) $ (800,000) (240,000) 90,000 $ (950,000) $ 80,000 400,000 900,000 700,000 $ 2,080,000 $ (500,000) (360,000) (270,000) (950,000) $ (2,080,000) Badger $ (300,000) 200,000 $ (100,000) $ (200,000) (100,000) 0 $ (300,000) $ 110,000…
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Mason's net income was $850, and her gross income was $1,100. What was the total amount of deductions?
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