Riverbend Semiconductor Corporation (RSC) is an Arizona corporation engaged in the manufacture and sale of semiconductors and other computer equipment. RSC spent $5.4 million on research and experimentation costs, and al its research and experimentation activity was conducted in the United States. The company handles its export sales through sales branches in Ireland and Taiwan. Total foreign sales from the foreign branches were $8.96 million and worldwide sales were $22.4 million. What amount of the total research and experimentation expense will be apportioned to foreign source income? Note: Enter the amount in dollar value not in millions. Expense apportioned to foreign source income
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- Riverbend Semiconductor Corporation (RSC) is an Arizona corporation engaged in the manufacture and sale of semiconductors and other computer equipment. RSC spent $3.5 million on research and experimentation costs, and all its research and experimentation activity was conducted in the United States. The company handles its export sales through sales branches in Ireland and Taiwan. Total foreign sales from the foreign branches were $8.2 million and worldwide sales were $20.5 million. What amount of the total research and experimentation expense will be apportioned to foreign source income?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…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…
- 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.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…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…
- Babylon Co. is a Japanese firm. It has a subsidiary in China that produces computer chips and sells them to European countries. The chips are invoiced in Japanese Yen. The subsidiary pays wages, rent, and other operating costs in China's currency (Yuan). Every month, the subsidiary remits a large amount of earnings to the Japanese parent. This is the only international business that Babylon Co. has. The subsidiary wants to borrow funds to expand its facilities, and can borrow Japanese Yen at 9 percent annually or borrow Chinese Yuan at 9 percent annually. Which currency should the parent tell the subsidiary to borrow, if the parent's main goal is to minimize exchange rate risk? Explain.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 £120Gregg 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 £92
- 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.ABC Ltd. ABC Ltd.’s principal business activity is the assembly of circuit boards. One of the key materials used is copper wiring, all of which is imported. As a cost cutting measure, a contract with a new overseas supplier was signed, and all of the company’s copper wiring is now supplied under this contract. Purchases are denominated in a foreign currency, but the company does not use forward exchange contracts in relation to its imports of copper wiring. The company has two production facilities, one of which produces goods for the export market, and the other produces goods for the domestic market. About half of its goods are exported, but the export market is suffering due to competition from cheaper producers overseas. Most domestic sales are made under contract with approximately 20 customers. In October 2020, production was halted for a week at the production facility which supplies the domestic market. A number of customers had returned goods, claiming faults in the circuit…Mama Mia Inc and Wonderful Inc are European-based companies with subsidiaries located in Kuala Lumpur. Both companies distribute chemical supplies (produced in Europe) to customers throughout Asia. Both subsidiaries purchase the products at cost and sell the products at 90 percent markup. The other operating costs of the subsidiaries are very low. Mama Mia Inc has a research and development centre in Europe that focuses on improving its medical technology. Wonderful Inc. has a similar centre based in Kuala Lumpur. The parent of each firm subsidizes its respective research and development centre on an annual basis. Which company is subject to a higher degree of economic exposure? Justify your answer with thorough explanation on both companies.