Beach, Inc

question 29

Multiple Choice

Beach, Inc., a domestic corporation, owns 100% of Mountain, Ltd., a manufacturing facility in Erasmus. Mountain has no operations or activities in the United States. The U.S. tax rate is 35% and the applicable Erasmus tax rate is 10%. For the current year, Beach earns $500,000 in taxable income. Mountain earns $300,000 in taxable income from its operations, pays $30,000 in taxes to Erasmus, and makes no distributions to Beach. What is Beach's effective tax rate for GAAP book purposes, assuming that Beach does not make the permanent reinvestment assumption of ASC 740-30 (APB 23) ?

• A)38.75%.
• B)35%.
• C)31.25%.
• D)25.63%.

---

Definitions:

Sales Journal

A specific type of journal used to record the sales of goods or services on credit.

General Journal

An accounting ledger where all types of transactions are initially recorded before being transferred to specific accounts.

Subsidiary Ledger

A detailed ledger that contains account information relating to specific areas like accounts receivable or payable, supporting the general ledger.

General Ledger

The master set of accounts that aggregates all transactions recorded for a business.