An Appropriate Transfer Price Between Two Divisions of the Stark

question 18

Multiple Choice

An appropriate transfer price between two divisions of The Stark Company can be determined from the following data: (CIA adapted) What is the natural bargaining range for the two divisions?

• A)Between $20 and $50
• B)Between $50 and $70
• C)Any amount less than $50
• D)$50 is the only acceptable transfer price

---

Definitions:

Accounts Receivable

Accounts receivable are funds owed to a company by customers who have received goods or services but have not yet paid for them.

Accounts Payable

The amounts a company owes to creditors for items or services purchased on credit which are due within a year or within a company's operating cycle.

Equipment

Tangible assets used in operations, such as machinery and computers, which are not intended for sale.

Owner's Equity

Owner's equity is the residual interest in the assets of the entity after deducting liabilities, representing the owner's claim on the business assets.