The Tax Effect of Eliminating the Unrealised Profit from an Intragroup

question 12

Multiple Choice

The tax effect of eliminating the unrealised profit from an intragroup sale of inventories and adjusting the value of the inventories on hand is recognised as:

• A) an increase in income tax expense.
• B) an increase in deferred tax liability.
• C) a decrease in deferred tax liability.
• D) an increase in deferred tax asset.

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Definitions:

Joint Tenants

A form of co-ownership where parties own property equally with the right of survivorship.

Right of Survivorship

A legal principle in joint property ownership where, upon death, the deceased's share automatically transfers to the surviving owners.

Preliminary Order

An initial court order that sets conditions or arrangements in legal matters, often before a final decision is made.

Judicial Sale

A sale conducted under the supervision of a court, where the property is sold to satisfy a judgment.