The Following Information Is Available for Company ABC -The United States Decides to Block Funds Leaving the Country

question 12

Multiple Choice

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

• A) $6,000.
• B) $7,000.
• C) $9,000.
• D) $10,000.

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