Question
Adams Company imports wooden parts from its Canadian subsidiary that are used in the production of children's toys. Per unit, part AA11 costs the Canadian
Adams Company imports wooden parts from its Canadian subsidiary that are used in the production of children's toys. Per unit, part AA11 costs the Canadian subsidiary $2.00 to produce and $0.40 to ship to Adams Company. Adams Company uses part AA11 to produce a toy buzzle that it sells to U.S. toy stores for $8.50 per unit. The following tax rates apply:Canadian income tax 33% U.S. income tax 35% U.S. import duty 10% of invoice price
Required:1. If part AA11 is sold to Adams Company at a price of $3.50 per unit, determine the total amount of: a) Net income. b) Taxes and duties paid to the U.S. and Canadian governments.
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