Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Furtherassume that the transactions were conducted on cash basis.For each of the following independent scenarios in each of the independent parts:(1) Prepare all the relevant journal entries in the separate financial statements of the respective companies.(ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financialstatements of the Parent.(iii) Compare and contrast the accounting treatment/principles that you had applied in the independentscenarios in each part in preparing the journal entries and consolidation journal entries.Part A(a) On 20 December 20x1, a 90%-owned Subsidiary sold a piece of inventory which it bought for$200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with theParent and the net realisable value of the inventory was $250,000 on this date.(b) On 20 December 20x1, a Parent paid management fee of $200,000 to its 90%-owned Subsidiary. TheSubsidiary recognised the fee as income whilst the Parent recognised the fee paid as an expense.

Intragroup transactions are transactions that occur between entities in the group. They can be…

Answered: Assume that both the Parent and…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis.For each of the following independent scenarios in each of the independent parts: (i)Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii)Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii)Compareandcontrastthe accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a)On 20 December 20x1, a Parent paid interest of $200,000 to its 80%-owned Subsidiary.The Subsidiary recognised the interest as income whilst the Parent recognised the interest paid as an expense. (b)On 20 December 20x1, a Parent paid interest of $200,000 to its 80%-owned Subsidiary. The Subsidiary recognised the interest…
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a) On 20 December 20x1, a Parent paid interest of $200,000 to its 80%-owned Subsidiary. The Subsidiary recognised the interest as income whilst the Parent recognised the interest paid as an expense.
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. a)On 20 December 20x1, a 60%-owned Subsidiary paid rental of $200,000 to its Parent.The Parent recognised the rental as income whilst the Subsidiary company recognised the rental paid as an expense. The space area rented by the Subsidiary from the Parent comprises 2% of the building for which the Parent rented out to other external parties. In the separate financial statements of the Parent, the…
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a) On 20 December 20x1, a 90%-owned Subsidiary sold a piece of inventory which it bought for $200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date. (b) On 20 December 20x1, a Parent paid management fee of $200,000 to its 90%-owned Subsidiary. The Subsidiary recognised…
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. (a) On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory X which it bought for $200,000 to its Parent for $300,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date.
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries. Scenario (b) On 20 December 20x1, a 60%-owned Subsidiary paid rental of $200,000 to its Parent.The Parent recognised the rental as income whilst the Subsidiary recognised the rental paid as an expense. The space area rented by the Subsidiary from the Parent comprises 98% of the building for which the Parent occupies the remaining 2% thereof. In the separate financial statements of the Parent, the…
Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (b) On 20 December 20x1, a 70%-owned Subsidiary sold a piece of inventory Y which it bought for $300,000 to its Parent for $200,000. As at 31 December 20x1, that piece of inventory was still with the Parent and the net realisable value of the inventory was $250,000 on this date.
ABC Company has several subsidiaries that are included in its consolidated financial statements. In its December 31, year 1 trial balance. ABC had the following intercompany balances before eliminations: In its December 31, year 1 consolidated balance sheet, what amount should ABC report as intercompany receivables?
ABC Company has several subsidiaries that are included in its consolidated financial statements. In its December 31, year 1 trial balance. ABC had the following intercompany balances before eliminations: Determine the intracompany receivables.
1- In a business combination resulting in a parent-subsidiary relationship, the identifiable net assets of the subsidiary must be reflected in the consolidated balance sheet at their current values on the date of the business combination. Does this require the subsidiary to enter the current fair values of the identifiable net assets in its accounting records? Explain. 2- The controller of Ahmed Corporation, which has just become the parent of Hassan Company in a business combination, inquires if a consolidated income statement is required for the year ended on the date of the business combination. What is your reply? Explain
Which TWO of the following statements are correct when preparing consolidated financial statements?i) A subsidiary cannot be consolidated unless it prepares financial statements to the same reporting date as the parent.ii) A subsidiary with a different reporting date may prepare additional statements up to the group reporting date for consolidation purposesiii) A subsidiary’s financial statements can be included in the consolidation of the gap between the parent and the subsidiary reporting dates is five months or less.
December 31 consolidated financial statements are being prepared for Allsports Company and its new subsidiary acquired on July 1 of the current year. Should Allsports adjust its consolidated balances for the preacquisition subsidiary revenues and expenses?

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