JiangCo Constructs the Following Table in Determining How to Apply

question 27

Multiple Choice

JiangCo constructs the following table in determining how to apply ASC 740-10 to its filing position for a transfer pricing issue. Its book-tax provision for the year, including $3 million for the uncertain transfer pricing issue, is $10 million. $$\begin{array} { c c c } \begin{array} { c } \text { Resulting Estimated } \\\text { Tax Benefit }\end{array} & \begin{array} { c } \text { Probability of Agreement } \\\text { between JiangCo and IRS }\end{array} & \begin{array} { c } \text { Cumulative Probability } \\\text { of Agreement }\end{array} \\\text { \$3 million } & 10 \% & 10 \% \\\text { \$2 million } & 35 \% & 45 \% \\\text { \$1.6 million } & 40 \% & 85 \% \\\text { \$1.1 million } & 15 \% & 100 \%\end{array}$$ Under ASC 740-10, JiangCo's book income tax expense for this item is:

• A) $13 million.
• B) $11.6 million.
• C) $11.4 million.
• D) $10 million.

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Definitions:

Antagonistic Muscles

Muscle pairs that work opposite each other; when one muscle contracts, the other relaxes, allowing movement in opposite directions.

CNS

The central nervous system, comprising the brain and the spinal cord.

Integration Center

A part of the nervous system, such as the brain or spinal cord, where information is processed and interpreted to initiate a response.

Reflex Arc

A neural pathway that controls an involuntary, rapid response to a stimulus.