If a U.S. parent is shipping inventory to its Mexican subsidiary at an arbitrarily low transfer price,
A) the U.S. parent will show a higher pre-tax profit.
B) the Mexican government will collect relatively higher income taxes.
C) the Mexican government will collect relatively high import tariffs.
D) the Mexican subsidiary will show relatively lower profits.

Question

Quizplus · Accepted Answer

The Answer of If a U.S. parent is shipping inventory to its Mexican subsidiary at an arbitrarily low transfer price,
A) the U.S. parent will show a higher pre-tax profit.
B) the Mexican government will collect relatively higher income taxes.
C) the Mexican government will collect relatively high import tariffs.
D) the Mexican subsidiary will show relatively lower profits.

If a US Parent Is Shipping Inventory to Its Mexican Subsidiary at Subsidiary