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boland boland
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7 years ago
Johnson Worldwide Aeronautics Inc., headquartered in the United States, is attempting to reduce the firm's consolidated total income taxes. The firm has just made a sale of parts to their affiliate in Lithuania, a country that has a corporate income tax rate of 15%. If the United States has a corporate income tax rate of 35%, which of the following transfer pricing strategies should Johnson attempt to follow?
A) If Johnson made an individual stand-alone sale of these parts on the open market the estimated price is $1,250,000. Therefore, this should be Johnson's price.
B) If Johnson were to allocate full costs including overhead and a reasonable profit on the sale, they could charge a total of $1,500,000. Therefore this should be Johnson's price.
C) Johnson's price to its affiliate makes no difference; the consolidated income taxes will be the same regardless of the transfer pricing technique used by the firm.
D) Comparable parts were sold to a subsidiary in the United States for $1,000,000, therefore, Johnson should price the parts for $1,000,000.
Textbook 
Fundamentals of Multinational Finance

Fundamentals of Multinational Finance


Edition: 5th
Authors:
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noxx53noxx53
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7 years ago
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boland Author
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#2
7 years ago
Woah how do you have the time to do all this?!

Thanks Smiling Face with Open Mouth
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#3
7 years ago
Happy to help Smiling Face with Open Mouth
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#4
3 years ago
Thank You!!
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