29 Jun Question 1. The Internal Revenue Code regulates transfer
Question
1. The Internal Revenue Code regulates transfer pricing in the United States by encouraging the use of a transfer price that
a. reflects what the price would have been if the underlying transaction was between unrelated parties.
b. shifts all income to the United States based company.
c. maximizes parent taxable income regardless of where the parent corporation is incorporated.
d. shifts all income to the highest income tax jurisdiction.
2. A manufacturer produced a good with a value of 250, the retailer added 125 to the value of the good. Assuming the value added tax rate is 15% the net value added tax due to the government by the retailer is
a. 37.50
b. 18.75
c. 56.25
d. 0
3. A manufacturer produced a good with a value of 300, the retailer added 140 to the value of the good. Assuming the value added tax rate is 10% the final price to the consumer would be
a. 470
b. 484
c. 517
d. 454
4. Parent Corporation is located in a country with an income tax rate of 40%. Subsidiary Company is located in a country with an income tax rate of 25%. The best tax strategy for the enterprise would be to set the transfer prices on sales of goods from the subsidiary to the parent at a price that is
a. higher than the price that would be in effect for unrelated parties in an arms length transaction.
b. lower than the price that would be in effect for unrelated parties in an arms length transaction.
c. equal to the price that would be in effect for unrelated parties in an arms length transaction.
d. transfer prices do not affect overall tax paid.
Chapter 9
5. The International Accounting Standards Board (IASB) works to formulate international accounting standards that are adopted by each country
a. when approved by the IASB.
b. when accepted by the majority of IASB member countries.
c. on a voluntary basis.
d. only after acceptance by 2/3 of IASB member countries.
6. Latin accounting principles tend to result in
a. very conservative accounting measurements.
b. less descriptive and more secretive accounting disclosure.
c. high reliance on historical cost measures.
d. a low level of constancy with tax regulations.
7. When accounting for investments using the equity method, which country’s accounting system determines significant influence when an investor has acquired more than 10% of the voting stock?
a. United States
b. Mexico
c. Japan
d. Germany
8. The main difference between U.S. accounting standards and international accounting standards when accounting for plant, property and equipment is
a. international accounting standards require the use of current fair value with changes recognized in equity only.
b. U.S. accounting standards do not allow the write-down of assets due to impairment.
c. international accounting standards allow plant, property and equipment to be stated at current fair value with changes recognized in income or equity.
d. U.S. accounting standards allow plant, property and equipment to be stated at current fair value with changes recognized in income or equity.
9. Which of the following statements best differentiates multinational firms from domestic firms?
a. Multinational firms have overseas sales offices.
b. Multinationals engage in both importing and exporting.
c. Multinational firms have one or more plant(s) in a foreign country.
d. Multinational business people make use of worldwide sales, capital, and labor markets.
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