Question

Sonar, a US company operating in the US and Country X, had pretax US source income...

Sonar, a US company operating in the US and Country X, had pretax US source income and foreign source income as follows:

US source income

$

600,000

Foreign source income—Country X

100,000

Total

$

700,000

Sonar paid $40,000 income taxes to Country X. What is Sonar’s net US tax liability (using a 21% corporate income tax rate) if it claims a foreign tax credit against its US tax liability for the income taxes paid in Country X?

Select one:

a. $107,000

b. $126,000

c. $147,000

d. $166,000

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

b. $1,26,000

Calculation:

Total Income = US source Income + Foreign source income = $6,00,000 + $1,00,000 = $7,00,000

Total Tax liability in US = Total Income X Tax Rate = $7,00,000 X 21% = $1,47,000

Now, the amount of foreign tax credit available = Total Tax liability in US X Income from Foreign source / Total Income

= $1,47,000 X $1,00,000 / $7,00,000

= $21,000

Hence, net tax liabilty in US = Total Tax liability in US - Amount of foreign tax credit available

= $1,47,000 - $21,000

= $1,26,000

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Santana Music is a​ U.S.-based MNC whose foreign subsidiary had pretax income of $58,000​; all​ after-tax...
Santana Music is a​ U.S.-based MNC whose foreign subsidiary had pretax income of $58,000​; all​ after-tax income is available in the form of dividends to the parent company. The local tax rate is 41%​, he foreign dividend withholding tax rate is5.2%​, and the U.S. tax rate is 32%. Compare the net funds available to the parent corporation ​(a) if foreign taxes cannot be applied as a credit against the U.S. tax liability and ​(b) if they can. The dividend available...
Krefeld, Inc. had the following taxable income: U.S. source income $ 1,435,000 Foreign source income 850,000...
Krefeld, Inc. had the following taxable income: U.S. source income $ 1,435,000 Foreign source income 850,000 Taxable income $ 2,285,000 Krefeld, Inc. paid $315,000 foreign income tax. Requirements: Determine the following: (1) U.S. Tax before Credits: (2) Foreign Tax Credit: (3) U.S. Tax Liability after Credits:
Blackwater Company has a foreign branch that earns income before income taxes of $500,000.  Income taxes paid...
Blackwater Company has a foreign branch that earns income before income taxes of $500,000.  Income taxes paid to the foreign government are $150,000 or 30%.  Sales and other taxes paid to the foreign government are $100,000.  Blackwater Company must include the $500,000 of foreign branch income in determining its home country taxable income.  In determining its taxable income, Blackwater can choose between taking a deduction for all foreign taxes paid or a credit only for foreign income taxes paid.  The corporate income tax rate in...
Trixie Company has a foreign branch in Switzerland that earns income before income taxes of $500,000....
Trixie Company has a foreign branch in Switzerland that earns income before income taxes of $500,000. Income taxes paid to the Swiss government are $150,000 or 30%. However, Switzerland is known for their extremely high local taxes - as such, Trixie Company's branch paid $250,000 to the Swiss government for sales and other local taxes. Trixie Company must include the $500,000 of Foreign branch income in determining its home country taxable income. In determining its taxable income, Trixie Company can...
Corporate Tax Liability The Talley Corporation had taxable operating income of $330,000 (i.e., earnings from operating...
Corporate Tax Liability The Talley Corporation had taxable operating income of $330,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $50,000, (2) dividends received of $15,000, and (3) dividends paid of $30,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. What is the after-tax income? Round your answers to the nearest dollar.
Janus Company reports taxable income $4.000,000 and a U.S. tax liability of $1,400,000. Of the taxable...
Janus Company reports taxable income $4.000,000 and a U.S. tax liability of $1,400,000. Of the taxable income, $3,000,000 is foregin source and $1,000,000 is U.S. source income. Of the foregin source income, $500,000 is classfied as foregin personal holding company income. Janus paid foregin taxes of $1,000,000 on active business income and $100,000 on passive income such as interest and dividends. (Assume 35% tax rate). Calculate the amount of foregin tax credit available to Janus.
The Talley Corporation had taxable operating income of $300,000 (i.e., earnings from operating revenues minus all...
The Talley Corporation had taxable operating income of $300,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $50,000, (2) dividends received of $25,000, and (3) dividends paid of $40,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. What is the firm’s taxable income, tax expense, after tax exspense?
Griffey Communications recently realized $125,000 in operating income. The company had interest income of $25,000 and...
Griffey Communications recently realized $125,000 in operating income. The company had interest income of $25,000 and realized $70,000 in dividend income. The company’s interest expense was $40,000. Taxable Income Tax on Base of Bracket Percentage on Excess above Base (%) Up to $50,000 0 15 50,000-75,000 7,500 25 75,000-100,000 13,750 34 100,000-335,000 22,250 39 335,10,000,000 113,900 34 10,000,000-15,000,000 3,400,000 35 15,000,000-18,333,333 5,150,000 38 Over 18,333,333 6,416,667 35 Using the corporate tax schedule above, what is Griffey's tax liability? (please explain...
Lafferty Company, a U.S. based company (21% tax rate) has a branch in a foreign country,...
Lafferty Company, a U.S. based company (21% tax rate) has a branch in a foreign country, which generated 750,000 foreign currency units (FCU) of pre-tax income. The branch paid it's home country 14% income taxes evenly throughout the year. The branch repatriated 165,000 FCU of after-tax profits to Lafferty on 9/27. Selected exchange rates for the year: 1/1 = $0.662; 9/27 = $0.633; 12/31 = $0.650; Average for the year = $0.645 Show all labeled and detailed computations for the...
The Talley Corporation had taxable operating income of $380,000 (i.e., earnings from operating revenues minus all...
The Talley Corporation had taxable operating income of $380,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $40,000, (2) dividends received of $15,000, and (3) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. What is the firm’s taxable income? Round your answer to the nearest dollar. $ 380,000 What is the tax expense? Round your...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT