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.

Question

Quizplus · Accepted Answer

Intercompany transactions, such as the sale of inventory from a subsidiary to its parent corporation, require the deferral and later recognition of income to eliminate the effects of the transaction on consolidated financial statements. This ensures that the consolidated financials only reflect transactions with external parties.

Which of the Following Events Is an Intercompany Transaction That