The Transportation Division of Petrolia Paint Company can purchase paint from an independent producer at $18 per litre. The company has three divisions: Production, Transportation, and Paint. The company's Transportation Division is currently buying paint from the Paint Division for$24 per litre. Transfer prices are based on 125 percent of full cost. The market-based transfer price per litre is $12.60. Which of the following would NOT occur if the company uses dual pricing to record the Transportation Division purchases of paint from the Paint Division?
A) credit the Paint Division for $22.50
B) debit the corporate account for $9.90
C) debit the Transportation Division for $12.60
D) credit the Paint Division for $12.60
E) credit the Paint Division for $32.40

Question

Quizplus · Accepted Answer

The Answer of The Transportation Division of Petrolia Paint Company can purchase paint from an independent producer at $18 per litre. The company has three divisions: Production, Transportation, and Paint. The company's Transportation Division is currently buying paint from the Paint Division for$24 per litre. Transfer prices are based on 125 percent of full cost. The market-based transfer price per litre is $12.60. Which of the following would NOT occur if the company uses dual pricing to record the Transportation Division purchases of paint from the Paint Division?
A) credit the Paint Division for $22.50
B) debit the corporate account for $9.90
C) debit the Transportation Division for $12.60
D) credit the Paint Division for $12.60
E) credit the Paint Division for $32.40

The Transportation Division of Petrolia Paint Company Can Purchase Paint