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:

Demand Curve

A graphical representation in economics that shows the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at varying price levels.

Homothetic Preferences

A consumer preference structure in which utility functions display constant returns to scale, meaning relative consumption patterns do not change as income levels change.

Substitution Effect

The change in consumption patterns due to a change in relative prices of goods, leading individuals to substitute cheaper goods for more expensive ones.

Compensated Demand Function

A demand function that adjusts for changes in income to show how quantities demanded by consumers change in response to a price change while keeping utility constant.