Which of the Following Statements Best Describes the Required Accounting

question 8

Multiple Choice

Which of the following statements best describes the required accounting treatment with respect to income taxes on intercompany profits?

• A)These taxes can be ignored since an increase in income tax expense for one company is offset by an equivalent reduction in Income Tax expense for the other.
• B)They would be recognized as assets for the purchasing entity and liabilities for the selling entity.
• C)They would be recognized as liabilities for the purchasing entity and assets for the selling entity.
• D)They would be charged to retained earnings during the preparation of Financial Statements.

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Definitions:

NSF Check

Non-Sufficient Funds Check; a check that cannot be processed because the account on which it is drawn does not have enough funds.

Bank Service Charges

Fees charged by banks for various services such as account maintenance, transactions, and overdrafts.

Other Income

Comprises earnings from sources other than the main business activities, such as interest, dividends, or rental income.

Accounts Payable

Money owed by a company to its creditors for goods and services purchased on credit.