Which of the Following Is True About the Transfer Pricing

question 30

Multiple Choice

Which of the following is true about the transfer pricing methods of determining an arm's-length price?

• A) The arm's-length standard is only applicable for commodities businesses.
• B) The resale method is most applicable for transfers of components or unfinished goods to overseas subsidiaries.
• C) The cost-plus approach usually applies best to transfers to sales subsidiaries for ultimate distribution.
• D) The starting point for testing the appropriateness of transfer prices is a comparison with comparable uncontrolled transactions involving unrelated parties.

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Definitions:

Uniform Commercial Code

A full array of legal rules managing all trade interactions in the United States.

Revoke Acceptance

The act of nullifying acceptance of goods that are discovered to be non-conforming or defective under specific conditions.

Nonconforming Goods

Goods delivered under a sales contract that do not meet the quality, quantity, or specifications agreed upon by the buyer and seller.

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States, aimed at standardizing practices across states to facilitate easier trade and commerce.