The Following Information Is Available for Company ABC -If Canada Changes Its Corporate Income Tax to 35%,does the Provided

question 24

Multiple Choice

The following information is available for Company ABC.
(All amounts provided are in US dollars)
$\begin{array}{lll}&\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\&\text { (Canada, income tax rate: } & \text { (United States, income } \\&40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\\text { Sales } & \_\_\_& \$ 10,000 \\\text { Cost of goods sold } & 5,000 &\_\_\_ \\\text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\\end{array}$
-If Canada changes its corporate income tax to 35%,does the optimum transfer price change?

• A) Yes, it increases.
• B) Yes, it decreases.
• C) No, it doesn't change.
• D) Need more information.

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Definitions:

Cue To Distance

A sensory signal or perception that helps in estimating the distance between the observer and a target object.

Eye Muscles

Muscles surrounding the eyes that enable movements such as looking up, down, and side to side.

Motion Parallax

a depth cue that involves the relative movement of objects as the observer moves, giving clues about their distance.

Nearby Objects

Items or entities located in close proximity to a reference point or subject, often relevant in studies of attention, perception, and spatial relationships.