Transfer Pricing: This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization. To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

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Answer 1

Question

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

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Problem No. 2 The trial balance of Cleint Lumanao Nacho Supplies on February 10, 2025, before accepting Shila Tajonera as partner is shown as follows: Account Title Debit Credit Ato Cash reening smuo P 100,000 Accounts Receivable 250,000 Allowance for Uncollectible Accounts P 20,000 o Merchandise Inventory Equipment Accumulated Depreciation Accounts Payable Notes Payable 120,000 275,000 55,000 50,000 82,000 538,000 Lumanao, Capital Total P 745,000 P 745,000 Tajonera offered to invest cash to get a capital credit equal to one-half of Lumanao's capital after giving effect to the adjustments below. Lumanao accepted the offer. Valuation of some of the assets and liabilities of Lumanao, as agreed by the partners, are the following: • The merchandise is to be valued at P93,000. The accounts receivable is estimated to be 90% collectible. • The equipment is to be valued at P200,000. The partners also agreed that the name of the partnership will be Nacho Business. Required: 1. In the books of…

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Answer 2

Question

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

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Answer 3

Question

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

Expert Solution & Answer

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Answer 4

Question

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

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Answer 5

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

Answer 6

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

Answer 7

Chapter 22, Problem 22.23E

A.

To determine

Transfer Pricing:

This refers to a process of pricing in which one sub-unit of an organization charges a price to another sub-unit for supplying a product or service to the sub-unit of the same organization.

To determine: The after-tax operating income be maximized if it sold the 200,000 chainsaws in the U or in F division.

Answer 8

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

Answer 9

B.

To determine

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

Answer 10

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

Answer 11

C.

To determine

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 22 - Prob. 22.1Q Ch. 22 - Describe three criteria you would use to evaluate...Ch. 22 - What is the relationship among motivation, goal...Ch. 22 - Name three benefits and two costs of...Ch. 22 - Organizations typically adopt a consistent...Ch. 22 - Transfer pricing is confined to profit centers. Do...Ch. 22 - What are the three methods for determining...Ch. 22 - What properties should transfer-pricing systems...Ch. 22 - All transfer-pricing methods give the same...Ch. 22 - Prob. 22.10Q

Solution Summary: The author explains the calculation of the after-tax operating income if the chainsaws were sold in the U or F division.

Whether the transfer price calculated in requirement 2 in 22E result in the division managers of U taking the actions determined to be optimal in requirement 1.

The minimum transfer price at which the U division manager will agree and does this price results the company in a whole paying more import duty and taxes than the answer to requirement 2 and by how much.

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Chapter 22 Solutions