Question 1

How is goal congruence achieved in decentralized organizations?

Accepted Answer

A) Forcing managers to take on corporate goals as their personal goals 
B) Creating incentives for managers to make decisions that are consistent with corporate goals 
C) Setting policies that direct managers in the way decisions should be made 
D) Eliminating the authority for divisional managers to make operating decisions 
A) Forcing managers to take on corporate goals as their personal goals 
B) Creating incentives for managers to make decisions that are consistent with corporate goals 
C) Setting policies that direct managers in the way decisions should be made 
D) Eliminating the authority for divisional managers to make operating decisions B

Question 2

A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when:

Accepted Answer

A) it is easiest for the taxpayer to calculate. 
B) the related party is primarily a sales subsidiary. 
C) there are no comparable uncontrollable sales and the related buyer is more than just a distributor. 
D) the average industry markup is greater than the taxpayer's standard markup. 
A) it is easiest for the taxpayer to calculate. 
B) the related party is primarily a sales subsidiary. 
C) there are no comparable uncontrollable sales and the related buyer is more than just a distributor. 
D) the average industry markup is greater than the taxpayer's standard markup. C

Question 3

How can the conflict between cost minimization and performance evaluation be overcome in a decentralized organization?

Accepted Answer

A) Dual transfer pricing systems 
B) Market-based transfer pricing systems 
C) Cost-based transfer pricing systems 
D) Negotiated transfer pricing systems 
A) Dual transfer pricing systems 
B) Market-based transfer pricing systems 
C) Cost-based transfer pricing systems 
D) Negotiated transfer pricing systems A

Question 4

What is the primary characteristic of a decentralized organization?

Accepted Answer

A) Size of divisions 
B) Number of divisions 
C) Delegation of decision making authority 
D) Diversity of foreign operations 
A) Size of divisions 
B) Number of divisions 
C) Delegation of decision making authority 
D) Diversity of foreign operations

Question 5

In keeping with Internal Revenue Code, Clarence Company transfers goods to Marguerite Corporation, its foreign subsidiary, at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%.What method of transfer pricing is Clarence using?

Accepted Answer

A) Cost-plus method 
B) Comparable uncontrolled price method 
C) Comparable profits method 
D) Resale price method 
A) Cost-plus method 
B) Comparable uncontrolled price method 
C) Comparable profits method 
D) Resale price method

Question 6

According to the Internal Revenue Service, the most reliable measure of an arm's-length prices for sales of tangible property in intercompany transactions is:

Accepted Answer

A) cost-plus method. 
B) comparable profits method. 
C) comparable uncontrolled price method. 
D) resale price method. 
A) cost-plus method. 
B) comparable profits method. 
C) comparable uncontrolled price method. 
D) resale price method.

Question 7

Of the signals that may cause a taxing authority to audit a company's transfer price, which one is the most important?

Accepted Answer

A) The nature of the business of the multinational corporation 
B) Unexpectedly low profit 
C) Profits higher than expected for a specific industry 
D) Parent company located in an emerging economy 
A) The nature of the business of the multinational corporation 
B) Unexpectedly low profit 
C) Profits higher than expected for a specific industry 
D) Parent company located in an emerging economy

Question 8

Which of the following is a limitation of cost-based transfer pricing?

Accepted Answer

A) Determining which measure of cost to use 
B) Lack of incentive for selling division to control cost 
C) Inefficiencies in one unit may be transferred to another unit 
D) All of the above 
A) Determining which measure of cost to use 
B) Lack of incentive for selling division to control cost 
C) Inefficiencies in one unit may be transferred to another unit 
D) All of the above

Question 9

What is the general rule for international transfer pricing advocated by the Organization for Economic Cooperation and Development (OECD)?

Accepted Answer

A) Cost-based prices 
B) Negotiated prices 
C) Arm's-length prices 
D) Discretionary prices 
A) Cost-based prices 
B) Negotiated prices 
C) Arm's-length prices 
D) Discretionary prices

Question 10

What is the time frame in which taxpayers must produce documentation to the IRS, in which it justifies the transfer pricing method that it has selected as being the most reliable measure of arm's-length price?

Accepted Answer

A) Within 90 days 
B) Within 60 days 
C) Immediately upon request 
D) Within 30 days 
A) Within 90 days 
B) Within 60 days 
C) Immediately upon request 
D) Within 30 days

Question 11

According to (Internal Revenue Service) IRS code Section 482, what is the standard used by the IRS for international transfer pricing?

Accepted Answer

A) Cost-based prices 
B) Discretionary prices 
C) Negotiated prices 
D) Arm's-length prices 
A) Cost-based prices 
B) Discretionary prices 
C) Negotiated prices 
D) Arm's-length prices

Question 12

A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country.Why is this often not successful?

Accepted Answer

A) Laws in the foreign country may prohibit such a scheme. 
B) The high transfer price would actually increase taxes. 
C) Foreign exchange losses will eliminate any tax savings. 
D) None of the above 
A) Laws in the foreign country may prohibit such a scheme. 
B) The high transfer price would actually increase taxes. 
C) Foreign exchange losses will eliminate any tax savings. 
D) None of the above

Question 13

The monetary amount used to record intercompany transactions is called:

Accepted Answer

A) exchange rate. 
B) transfer price. 
C) conversion rate. 
D) incremental cost. 
A) exchange rate. 
B) transfer price. 
C) conversion rate. 
D) incremental cost.

Question 14

What is the term used for intercompany transactions from a parent to a subsidiary?

Accepted Answer

A) Horizontal transfer 
B) Downstream transfer 
C) International transfer 
D) None of the above 
A) Horizontal transfer 
B) Downstream transfer 
C) International transfer 
D) None of the above

Question 15

According to a U.S.General Accounting Office report, what percent of foreign-controlled corporations paid no federal income tax in the period 1998-2005?

Accepted Answer

A) 22%-27% 
B) 35%-45% 
C) 66%-72% 
D) 80%-92% 
A) 22%-27% 
B) 35%-45% 
C) 66%-72% 
D) 80%-92%

Question 16

What is the primary advantage of a negotiated transfer price?

Accepted Answer

A) It is objectively determined. 
B) It reflects managers' ability to control cost. 
C) It is based on arms-length transactions with unrelated parties. 
D) It preserves managerial autonomy to make decisions. 
A) It is objectively determined. 
B) It reflects managers' ability to control cost. 
C) It is based on arms-length transactions with unrelated parties. 
D) It preserves managerial autonomy to make decisions.

Question 17

What is goal congruence?

Accepted Answer

A) Making the goals of individual managers the same as corporate goals 
B) Equating managerial goals to corporate goals 
C) Aligning managerial goals with corporate goals 
D) Giving managers complete autonomy to make decisions 
A) Making the goals of individual managers the same as corporate goals 
B) Equating managerial goals to corporate goals 
C) Aligning managerial goals with corporate goals 
D) Giving managers complete autonomy to make decisions

Question 18

While there are many advantages of decentralization, what is the major disadvantage of decentralized organizations?

Accepted Answer

A) Manageability of multiple divisions in both domestic and international operations 
B) Possible conflict between division managers' decisions and goals of the organization 
C) Making timely operating decisions 
D) All of the above 
A) Manageability of multiple divisions in both domestic and international operations 
B) Possible conflict between division managers' decisions and goals of the organization 
C) Making timely operating decisions 
D) All of the above

Question 19

In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on:

Accepted Answer

A) interest charged on intercompany loans. 
B) transfer prices for intangible property. 
C) charges for intercompany services. 
D) All of the above 
A) interest charged on intercompany loans. 
B) transfer prices for intangible property. 
C) charges for intercompany services. 
D) All of the above

Question 20

What is the term used for intercompany transactions from a subsidiary to a parent?

Accepted Answer

A) Upstream transfer 
B) Horizontal transfer 
C) International transfer 
D) None of the above 
A) Upstream transfer 
B) Horizontal transfer 
C) International transfer 
D) None of the above

How is goal congruence achieved in decentralized organizations?

A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when:

How can the conflict between cost minimization and performance evaluation be overcome in a decentralized organization?

What is the primary characteristic of a decentralized organization?

In keeping with Internal Revenue Code, Clarence Company transfers goods to Marguerite Corporation, its foreign subsidiary, at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%.What method of transfer pricing is Clarence using?

According to the Internal Revenue Service, the most reliable measure of an arm's-length prices for sales of tangible property in intercompany transactions is:

Of the signals that may cause a taxing authority to audit a company's transfer price, which one is the most important?

Which of the following is a limitation of cost-based transfer pricing?

What is the general rule for international transfer pricing advocated by the Organization for Economic Cooperation and Development (OECD)?

What is the time frame in which taxpayers must produce documentation to the IRS, in which it justifies the transfer pricing method that it has selected as being the most reliable measure of arm's-length price?

According to (Internal Revenue Service) IRS code Section 482, what is the standard used by the IRS for international transfer pricing?

A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country.Why is this often not successful?

The monetary amount used to record intercompany transactions is called:

What is the term used for intercompany transactions from a parent to a subsidiary?

According to a U.S.General Accounting Office report, what percent of foreign-controlled corporations paid no federal income tax in the period 1998-2005?

What is the primary advantage of a negotiated transfer price?

What is goal congruence?

While there are many advantages of decentralization, what is the major disadvantage of decentralized organizations?

In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on:

What is the term used for intercompany transactions from a subsidiary to a parent?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Taxation

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters

Exam 12: International Transfer Pricing

How is goal congruence achieved in decentralized organizations?

A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when:

How can the conflict between cost minimization and performance evaluation be overcome in a decentralized organization?

What is the primary characteristic of a decentralized organization?

In keeping with Internal Revenue Code, Clarence Company transfers goods to Marguerite Corporation, its foreign subsidiary, at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%.What method of transfer pricing is Clarence using?

According to the Internal Revenue Service, the most reliable measure of an arm's-length prices for sales of tangible property in intercompany transactions is:

Of the signals that may cause a taxing authority to audit a company's transfer price, which one is the most important?

Which of the following is a limitation of cost-based transfer pricing?

What is the general rule for international transfer pricing advocated by the Organization for Economic Cooperation and Development (OECD)?

What is the time frame in which taxpayers must produce documentation to the IRS, in which it justifies the transfer pricing method that it has selected as being the most reliable measure of arm's-length price?

According to (Internal Revenue Service) IRS code Section 482, what is the standard used by the IRS for international transfer pricing?

A multinational corporation may attempt to minimize the taxes it pays in a country with a high effective tax rate by setting a very high transfer price on goods transferred to a subsidiary in a high-tax country.Why is this often not successful?

The monetary amount used to record intercompany transactions is called:

What is the term used for intercompany transactions from a parent to a subsidiary?

According to a U.S.General Accounting Office report, what percent of foreign-controlled corporations paid no federal income tax in the period 1998-2005?

What is the primary advantage of a negotiated transfer price?

What is goal congruence?

While there are many advantages of decentralization, what is the major disadvantage of decentralized organizations?

In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on:

What is the term used for intercompany transactions from a subsidiary to a parent?

Introduction to International Accounting

Worldwide Accounting Diversity

International Convergence of Financial Reporting

International Financial Reporting Standards: Part I

International Financial Reporting Standards: Part II

Comparative Accounting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Additional Financial Reporting Issues

Analysis of Foreign Financial Statements

International Taxation

Strategic Accounting Issues in Multinational Corporations

Comparative International Auditing and Corporate Governance

International Corporate Social Reporting

Filters