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:

Lease Term

The duration for which a lease agreement is effective, specifying the start and end dates of the rental period.

Caveat Emptor

A Latin phrase meaning "let the buyer beware," indicating that the buyer takes the risk regarding the quality and condition of the product.

Marketable Title

A title to real property that is free from significant encumbrances or defects, and thus can be sold or transferred easily to another party.

Liens

Legal claims or rights against property that secure the payment of a debt or the discharge of an obligation to the property’s owner.