Transfer Price: This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization. To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

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Answer 1

Question

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

B.

To determine

Whether the division C should purchase from the external suppliers.

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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On January 1, 2024, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $532,000 by Elmira on December 31, 2026. The effective interest rate is 8%. Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: How much sales revenue would Wright recognize on January 1, 2024, for this transaction? Prepare journal entries to record the sale of merchandise on January 1, 2024 (omit any entry that might be required for the cost of the goods sold), the December 31, 2024, interest accrual, the December 31, 2025, interest accrual, and receipt of payment of the note on December 31, 2026.

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $28,000 at the beginning of 2024. No previously written-off accounts receivable were reinstated during 2024. At 12/31/2024, gross accounts receivable totaled $466,700, and prior to recording the adjusting entry to recognize bad debts expense for 2024, the allowance for uncollectible accounts had a debit balance of 51,300. Required: Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2024. Determine the amount of accounts receivable written off during 2024. If Johnson instead used the direct write-off method, what would bad debt expense be for 2024?

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $28,000 at the beginning of 2024. No previously written-off accounts receivable were reinstated during 2024. At 12/31/2024, gross accounts receivable totaled $466,700, and prior to recording the adjusting entry to recognize bad debts expense for 2024, the allowance for uncollectible accounts had a debit balance of 51,300. Required: What was the balance in gross accounts receivable as of 12/31/2023? What journal entry should Johnson record to recognize bad debt expense for 2024? Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2024. Determine the amount of accounts receivable written off during 2024. If Johnson instead used the direct write-off method, what would bad debt expense be for 2024?

Answer 2

Question

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

B.

To determine

Whether the division C should purchase from the external suppliers.

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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Answer 3

Question

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

B.

To determine

Whether the division C should purchase from the external suppliers.

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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Answer 4

Question

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

B.

To determine

Whether the division C should purchase from the external suppliers.

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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Answer 5

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

B.

To determine

Whether the division C should purchase from the external suppliers.

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

Answer 6

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

Answer 7

Chapter 22, Problem 22.24E

A.

To determine

Transfer Price:

This is a price which is charged by one sub-unit of an organization to another sub-unit for supplying a product or service in the same organization.

To determine: The transfer price for the component be set so that division managers acting in their own division’s best interests take actions that are also in the best interest of the whole company.

Answer 8

B.

To determine

Whether the division C should purchase from the external suppliers.

Answer 9

B.

To determine

Whether the division C should purchase from the external suppliers.

Answer 10

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

Answer 11

C.

To determine

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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 recommends setting the transfer price at 125 to avoid the loss to company from the decision of division C.

Whether the division C should purchase from the external suppliers.

To explain: Whether the division C should purchase from the external suppliers and the transfer price to be set for the component so that the division managers can take actions in the best interest of the company as a whole.

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Chapter 22 Solutions