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-credit, then Rogue River's total U.S. corporate tax on the foreign earnings would be ________.

Question

Quizplus · Accepted Answer

The U.S. tax on the foreign income is $35,000 (35% of $100,000). The foreign tax credit is $25,000 (25% of $100,000). Therefore, the total U.S. tax after the credit is $10,000 ($35,000 - $25,000).

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