When Preparing Consolidated Financial Statement Workpapers, Unrealized Intercompany Gains, as a Result

question 31

Multiple Choice

When preparing consolidated financial statement workpapers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when the selling affiliate is:

• A) the parent and the subsidiary is less than wholly owned.
• B) a wholly owned subsidiary.
• C) the subsidiary and the subsidiary is less than wholly owned.
• D) the parent of a wholly owned subsidiary.

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Definitions:

Tax Rate

The rate at which taxes are levied on an individual or a corporation's income.

Consolidated Tax Returns

A single tax return filed by a parent company and its subsidiaries as one taxpayer to IRS, consolidating their tax liabilities.

Income Tax Liability

The total amount of income tax owed to the government within a fiscal year.

Tax Rate

The rate at which the government taxes an individual or a corporation.