Which of the Following Intercompany Transactions Creates Temporary Book/tax Differences

question 38

Multiple Choice

Which of the following intercompany transactions creates temporary book/tax differences when a parent corporation owns 100% of a subsidiary's stock and the companies file a consolidated return?

• A) intercompany sale
• B) undistributed subsidiary earnings
• C) intercompany dividends
• D) None of the above items create temporary differences.

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Definitions:

Conversion Costs

Expenses incurred during the transformation of raw materials into finished goods, typically including direct labor and manufacturing overhead costs.

Neither

Not one nor the other of two specified things, typically used to express a negation.

Depreciation Expense

Spreading out the price of a tangible asset across its period of utility.

Prime Costs

The combined costs of direct materials and direct labor, which are directly attributable to the production of goods.