A Consolidation Worksheet Adjustment to Eliminate the Effect of Interest

question 20

Multiple Choice

A consolidation worksheet adjustment to eliminate the effect of interest revenue and interest expense relating to intragroup loans has which of the following tax effects?

• A) No tax effect
• B) Increase in current tax liability
• C) Increase in deferred tax liability
• D) Decrease in deferred tax asset

---

Definitions:

Sales Tax

A tax paid to a governing body for the sales of certain goods and services usually collected by the retailer at the point of purchase.

Account Receivable

A financial record of the money owed to a business by its customers for goods or services delivered on credit.

Perpetual Inventory System

An inventory management system that updates item records continuously as transactions occur, providing a real-time view of inventory levels.

Merchandise Returned

Items sent back to the seller by the buyer due to defects, dissatisfaction, or other reasons, often part of a refunds or exchanges process.