The Transportation Division of Petrolia Paint Company Can Purchase Paint

Multiple Choice

The Transportation Division of Petrolia Paint Company can purchase paint from an independent producer at $12.60 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. Which of the following would occur if the company uses dual pricing to record the Transportation Division purchases of paint from the Paint Division?

A) debit the Paint Division for $24.00
B) credit the corporate cost account for $11.40
C) debit the Transportation Division for $12.60
D) credit the Paint Division for $12.60
E) credit the Paint Division for $32.40