Multiple choice questions
1. Which international organization has developed transfer pricing guidelines that are used as the basis for transfer pricing laws in several countries?
a. World Bank.
b. Organization for Economic Cooperation and Development.
c. United Nations.
d. International Accounting Standards Board.
2. Which of the following types of transaction is most likely to be audited?
a. Sales of tangible property.
b. Licenses of intangible property.
c. Intercompany loans.
d. Intercompany services.
3. Which of the following is not a method commonly used for establishing transfer prices?
a. Cost-based transfer price.
b. Negotiated price.
c. Market-based transfer price.
d. Industry-wide transfer price.
4. Market-based transfer prices lead to optimal decisions in which of the following situations?
a. When interdependencies between the related parties are minimal.
b. When there is no advantage or disadvantage to buying and selling the prod¬uct internally rather than externally.
c. When the market for the product is perfectly competitive.
d. All of the above.
5. U.S. Treasury Regulations require the use of one of five specified methods to determine the arm's-length price in a sale of tangible property. Which of the following is not one of those methods?
a. Cost-plus method.
b. Market-based method.
c. Profit split method.
d. Resale price method.
6. Which group has negotiated the greatest number of advance pricing agree-ments with the U.S. Internal Revenue Service (IRS)?
a. Foreign parent companies with branches and subsidiaries in the United States.
b. U.S. parent companies with branches and subsidiaries in Canada and Mexico.
c. U.S. parent companies with branches and subsidiaries in Japan.
d. None of the above.