All of the Following Are True of Market-Based Transfer Prices

question 105

Multiple Choice

All of the following are true of market-based transfer prices except:

• A) They generally motivate the correct economic decision.
• B) They can be determined for all goods and services transferred internally.
• C) They may lead to goods and services purchased externally by the purchasing unit.
• D) To the extent they exist, they are objective.
• E) They provide an independent valuation for internal transfers.

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Definitions:

Common Stock

A type of corporate equity security that represents a share of ownership in a corporation, conferring voting rights and a portion of the profits (dividends).

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing shareholders' equity.

Stockholders' Equity

The ownership interest of shareholders in a company, calculated as the company's total assets minus its total liabilities.

Treasury Stock

Shares that were once part of the float and outstanding shares, but were bought back by the company, reducing the amount of stock on the open market.