COST ACCOUNTING
TRANSFER PRICING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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PT A in Indonesia, a tea plantation company, has very fertile, rare and good soil to produce the best tea leaves in the world. The tea leaves produced by PT A are sold entirely to affiliated company B Ltd in Country S to then be packaged and given the brand “Pa Tea” which is very well known throughout the world due to the extensive marketing carried out by B Ltd since 20 years ago and due to the quality very good tea leaves. B Ltd then sells packaged tea bags all over the world. If you do an examination of PT A, then the most appropriate TP method is
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Profit Split
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TNMM dengan tested party PT A
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TNMM dengan tested party B Ltd
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Cost Plus dengan tested party PT A
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Explanation:
Detailed explanation-1: -Tea was introduced to Indonesia in the 1600s by Dutch colonists eager to replicate the success of English tea plantations in India. Although they initially experimented with varieties of Chinese tea, it was soon discovered that Assam teas from India are more suited to Indonesia’s hot, humid tropical clime.
Detailed explanation-2: -Hint: Tea cultivation is an example of plantation agriculture.
Detailed explanation-3: -Unsurprisingly China is top of the charts as the spiritual home of the humble cuppa and tops the list as the world’s largest tea producing country. China produces some 40% of the world’s tea weighing in at 2.4 million tonnes.
There is 1 question to complete.