Instruction 21.1:
Use the information to answer following question(s).
Rogue River Exporters USA has $100,000 of before tax foreign income. The host country has a corporate income tax rate of 25% and the U.S. has a corporate income tax rate of 35%.
-Refer to Instruction 21.1. If the U.S. treated the taxes paid on income earned in the host country as a tax-deductible expense, then Rogue River's total U.S. corporate tax on the foreign earnings would be ________.

Question

Quizplus · Accepted Answer

If the U.S. treated the taxes paid on income earned in the host country as a tax-deductible expense, then the total tax on foreign earnings would be:
Foreign tax paid = $100,000 x 25% = $25,000
Taxable income in the U.S. = $100,000 - $25,000 = $75,000
Total U.S. corporate tax = $75,000 x 35% = $26,250. 
Therefore, the correct answer is B.

Instruction 21.1: Use the Information to Answer Following Question(s)