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:

Amortized Loan

a loan in which the principal and interest are paid down over time through fixed monthly payments.

Effective Rate

The effective rate, often referred to as the effective annual rate, is the interest rate on a loan or financial product re-compounded on a yearly basis.

Amortization Schedule

An amortization schedule is a table detailing each periodic payment on an amortizing loan, illustrating how the principal amount is reduced over time.

Effective Rate

The actual interest rate an individual pays on a loan or earns on an investment, accounting for compounding.