A division of Saskowski Company is located in Bulgaria.The country places restrictions on the amount of funds that may be paid as dividends to foreign owners.If Saskowski Company wants to maximize the amount of cash received from the foreign division,Saskowski Company should set a ________.
A)high transfer price for goods transferred out of Bulgaria
B)high transfer price for goods transferred into Bulgaria
C)low transfer price for goods transferred out of Bulgaria
D)low transfer price for goods transferred into Bulgaria

Question

Quizplus · Accepted Answer

By setting a high transfer price for goods transferred into Bulgaria, the division in Bulgaria will have a lower taxable income, resulting in lower dividend restrictions on the amount of funds that can be paid to foreign owners. This allows Saskowski Company to maximize the amount of cash received from the foreign division.

A Division of Saskowski Company Is Located in Bulgaria