No Tax- Effect Adjustments Are Necessary in Relation to the Consolidation

question 1

Multiple Choice

No tax- effect adjustments are necessary in relation to the consolidation elimination of intragroup services because:

• A)no temporary differences exist between the accounting and tax bases of any assets or liabilities arise due to these elimination entries
• B)no adjustment has been made to any expense or income accounts
• C)no adjustment has been made to any asset or liability accounts
• D)both A and C

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Definitions:

Reserve Requirement

A regulation set by central banks that specifies the minimum amount of reserves a bank must hold in relation to customer deposits.

Open Market Purchase

A monetary policy tool where the central bank buys government securities from the market in order to expand the money supply.

Money Supply

The total financial assets present within an economy, inclusive of cash, coins, and the amounts present in checking and savings accounts, at a certain point.

Reserve Requirement Ratio

The fraction of deposits that banks are required to hold in reserve, either in their vaults or with the central bank, not used for loans.