Beach, Inc

question 57

Multiple Choice

Beach, Inc., a domestic corporation, owns 100% of Mountain, Ltd., a manufacturing facility in Atlantis. Mountain has no operations or activities in the United States. The U.S. tax rate is 35% and the applicable Atlantis 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 Atlantis, and makes no distributions to Beach. What is Beach's effective tax rate for GAAP book purposes, assuming that Beach makes the permanent reinvestment assumption of ASC 740-30 (APB 23) ?

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

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Definitions:

Variable Costs

Costs that change in proportion to the volume of goods or services produced.

Accounting Profit

The financial gain calculated by subtracting total expenses from total revenues, as per accepted accounting principles.

Units

Basic quantities or measurements, used as standards for expressing and comparing quantities.

Accounting Profit

The net income for a company after all expenses have been subtracted from total revenue, according to standard accounting practices.