Worldwide Inc

question 63

Multiple Choice

Worldwide Inc., is a multinational company with divisions around the world. Division A in the United States purchases a part from Division G in China. The part can be purchased externally for $7 each. Transportation costs amount to $1 and the commission of $.50 will not need to be paid.
What is the transfer price using the comparable uncontrolled price method?

• A)$8.50
• B)$8
• C)$7
• D)$7.50

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Definitions:

Oral Contract

An agreement between parties spoken and agreed to aloud rather than written, yet is legally binding.

Consideration

The benefit, interest, right, or profit involved in an agreement or contract, on which it is based.

Statute of Frauds

A legal concept requiring certain types of agreements to be executed in writing and signed by the parties involved to be enforceable.

Collateral Promises

Agreements that are secondary to a primary transaction or promise, often requiring the backup of an asset as security.