If a Foreign Subsidiary Is Located in a Low Tax

question 5

Multiple Choice

If a foreign subsidiary is located in a low tax country, the parent company would probably use a ________.

• A)high transfer price on inventory shipped from the parent to the subsidiary
• B)high transfer price on goods sold by the subsidiary to the parent
• C)low transfer price on inventory shipped from the subsidiary to the parent
• D)tax credit price to minimize local tax liabilities

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Definitions:

Pump Division

A specialized unit or segment within a company focused on the production or sales of pump-related products.

Outside Supplier

An external entity that provides goods or services to a company, often used in the context of manufacturing or procurement.

Operating At Capacity

A situation where a business is utilizing all available resources to produce goods or services at maximum output.

Usual Selling Price

The regular or typical price at which goods or services are sold in the market under normal conditions.