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 variou products. Operating expenses amount to $270 million in the U.S. and $79.0 million in Ireland exclusive of the costs of any goods
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- 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 $26.7 million in the U.S. and $78.7 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $202 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $39.7 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $52.7 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 alternative transfer pricing scenarios ($39.7 million and $52.7 million)? Note: Enter your answers in dollars and not in millions of dollars. Total tax…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 $27.2 million in the U.S. and $79.2 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $207 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.2 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $53.2 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 ($40.2 million and $53.2 million)? Note: Enter your answers in dollars and not in millions of dollars. Total tax…Conner Manufacturing has one plant located in Italy and another plant located in the United States. The Italian plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Italian plant is operating at 75 per cent capacity. In Italy, the income tax rate is 32 per cent; in the United States, the corporate income tax rate is 35 per cent. The market price of the component is £240 and the Italian plant's costs to manufacture the component are as follows: Direct materials £60Direct labour 40Variable overhead 20Fixed overhead 30 Which transfer price would be in the best interest of the overall company? Group of answer choices £240 £100 £150 £120
- Gregg Manufacturing has one plant located in Belgium and another plant located in the United States. The Belgium plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Belgium plant is operating at 70 per cent capacity. In Belgium, the income tax rate is 30 per cent; in the United States, the corporate income tax rate is 35 per cent. The market price of the component is £280 and the Belgium plant's costs to manufacture the component are as follows: Direct materials £30Direct labour 50Variable overhead 12Fixed overhead 56 Refer to Figure 20-10. What is the minimum transfer price that the Belgium division would be willing to accept? Group of answer choices £280 £148 £136 £92Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of $1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest on the loan. Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of $2,240,000 on sales to its subsidiary during…Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products in Canada and England through branches in Toronto and London, respectively. Spartan reported total gross income on U.S. sales of $35,100,000 and total gross income on Canadian and U.K. sales of $7,800,000, split equally between the two countries. Spartan paid Canadian income taxes of $936,000 on its branch profits in Canada and U.K. income taxes of $1,092,000 on its branch profits in the United Kingdom. Spartan financed its Canadian operations through a $9 million capital contribution, which Spartan financed through a loan from Bank of America. During the current year, Spartan paid $540,000 in interest on the loan. Spartan sells its quidgets to Australian customers through its wholly owned Australian subsidiary. Spartan reported gross income of $2,240,000 on sales to its subsidiary during…
- Cloth plc is the parent of the enterprise and has a manufacturing subsidiary, Tweed Inc, which is based in the US. Tweed Inc purchases 60% of its manufacturing inputs from the parent company, and the remaining 40% from an unrelated New Zealand company Darwin Wools Limited. Tweed Inc sells 40% of its output to retailers in the Eurozone, 40% to retailers in the UK, and exports the remaining 20% to retailers in Canada. Tweed Inc is negotiating with their New Zealand supplier, Darwin Wools Limited, to purchase a consignment of wool. The order is for 1 million kilos of wool. Darwin Wools Limited has insisted that they receive New Zealand Dollars (NZ$). Tweed Inc agree to pay NZ$ 500,000 for the wool in 6 months’ time, though are concerned that the US$/NZ$ exchange rate might change adversely. The following market information is available: Current spot exchange rate US$1/ NZ$1.49 Forward rate (6 months) US$1/ NZ$1.42 NZ borrowing rate 2.00% p.a.…The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following information is available: U.S. income tax rate on the U.S. division’s operating income 40% French income tax rate on the French division’s operating income 45% French import duty 20% Variable manufacturing cost per chainsaw $100 Full manufacturing cost per chainsaw $175 Selling price (net of marketing and distribution costs) in France $300 Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of $250, based on comparable imports into France. The French import duty is charged on the price at which the product is transferred into France. Any import duty paid to the French authorities is a deductible expense for calculating French income…The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following information is available: U.S. income tax rate on the U.S. division’s operating income 40% French income tax rate on the French division’s operating income 45% French import duty 20% Variable manufacturing cost per chainsaw $100 Full manufacturing cost per chainsaw $175 Selling price (net of marketing and distribution costs) in France $300 Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of $250, based on comparable imports into France. The French import duty is charged on the price at which the product is transferred into France. Any import duty paid to the French authorities is a deductible expense for calculating French income…
- Wellington Manufacturing manufactures industrial ovens used primarily in the process of coating or painting metals. The ovens are sold throughout the world, and units are manufactured to customers’ specifications. On June 15, the company committed to sell two ovens to a major transnational customer.One of the ovens has a selling price of $549,600 and is to be paid for with foreign currency A (FCA). The other unit has a selling price of $297,975 and is to be paid for with foreign currency B (FCB). Both units were shipped, FOB shipping point, on September 15, and payment is due within 30 days of shipment. In order to hedge against exchange rate risks,Wellington acquired two put options on June 15 with notional amounts equal to the respective foreign currency selling prices. The options expire on October 15, and customer remittances are also received on October 15. Relevant information concerning the options and exchange rates is as shown: Fair Value of Option June 15 September 15…Billabong Fashion is based in Melbourne, Australia. Billabong Fashion has a subsidiary in Shanghai that generates RMB85 million in annual sales. Any earnings generated by the subsidiary are reinvested to support its operations. Belle Fashion is the close competitor of Billabong Fashion. Belle Fashion is a local Australian company located in Japan with annual export sale to Malaysia of about MYR 45 million. Based on the information provided, which firm is subject to a higher degree of translation exposure? Justify your answer with thorough explanation on both companies.Taft Corporation operates primarily in the United States. However, a few years ago it opened a plant in Spain to produce merchandise to sell there. This foreign operation has been so successful that during the past 24 months the company started a manufacturing plant in Italy and another in Greece. Financial information for each of these facilities follows:The company’s domestic (U.S.) operations reported the following information for the current year:Taft has adopted the following criteria for determining the materiality of an individual foreign country: (1) Sales to unaffiliated customers within a country are 10 percent or more of consolidated sales or (2) long-lived assets within a country are 10 percent or more of consolidated long-lived assets.Apply Taft’s materiality tests to identify the countries to report separately with respect to (a) revenues and (b) long-lived assets.