WIS-sub is a wholly owned Canadian subsidiary of Parent-Co a US corporation.WIS-SuB annually resells to industrial manufacturing companies approximately 30,000 industrial ovens purchased from Parent-Co, that are neither branded nor warranted.

The operating margin WIS-sub earned on its intercompany resales was 1.5%.

Parent-Co also sells 5,000 industrial ovens to an independent third party reseller in Canada for $100,000 each.Unlike the industrial ovens sold to WIS-sub, the industrial ovens sold in Canada to the third party reseller are warranted and bear the valuable Parent-Co label.

QUESTIONS

1.Draw the legal entity organization chart and the intercompany flows in separate diagrams.Write down the important facts.