The US IRS Allows Transfer Prices to Be Set Using Comparable

question 4

Multiple Choice

The U.S. IRS allows transfer prices to be set using Comparable uncontrolled price method. This method requires

• A)finding the price that an unrelated willing seller would accept from an unrelated willing buyer.
• B)the price at which the good is resold by the distribution affiliate is reduced by an amount sufficient to cover overhead costs and a reasonable profit.
• C)an appropriate profit is added to the cost of the manufacturing affiliate.
• D)financial models and econometric techniques.

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Definitions:

Fixed Asset Account

An account on a company’s balance sheet that reports the cost and accumulated depreciation of assets with a useful life of more than one year.

Accumulated Depreciation

Accumulated Depreciation is the total amount of depreciation expense that has been recorded for an asset over its useful life, indicating the amount of value the asset has lost over time.

Book Value

The net value of a company's assets as found on its balance sheet, calculated by subtracting total liabilities from total assets.

Adjustment

Changes made to the financial records at the end of an accounting period to reflect true and fair values.