Which of the Following Events Is an Intercompany Transaction That

question 63

Multiple Choice

Which of the following events is an intercompany transaction that requires the deferral and later recognition of income?

• A) cash dividend payment from a subsidiary corporation to its parent corporation
• B) sale of inventory from a subsidiary corporation to its parent corporation
• C) accrual of rentals on a lease of real property owned by one group member that is used by another group member; both group members use the accrual method of accounting
• D) None of the above transactions require the deferral and later recognition of income.

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Definitions:

Beginning of Process

The stage in production at which the manufacture of goods or processing of materials starts.

Lead Time

The time interval between the initiation of a process and its completion, often used in the context of supply chain and production.

Value-Added Time

The portion of the production process where value is actually added to the product or service, as perceived by the customer.

Non-Value-Added Time

Periods during a manufacturing or service process that do not contribute directly to the final value or product, such as waiting or movement times, which businesses aim to minimize.