Which of the Following Events Is an Intercompany Transaction That

question 47

Multiple Choice

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

• A)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
• B)cash dividend payment from a subsidiary corporation to its parent corporation
• C)sale of inventory from a subsidiary corporation to its parent corporation
• D)None of the above transactions require the deferral and later recognition of income.

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Definitions:

Accounts Receivable

The sum customers owe a company in exchange for products or services that have been delivered or utilized, pending settlement.

Interest Calculation

The process of determining the amount of interest owed or earned over a specified time period, based on the principal amount and the rate of interest.

Accounts Receivable Turnover

This metric calculates how many times a business can turn its accounts receivable into cash during a certain period, indicating the efficiency of credit and collection policies.

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers for goods or services sold on credit.