Chancellor Limited provided a loan of $1 500 000 to its subsidiary Park Limited. On consolidation, which of the following adjustments is needed in relation to this intragroup loan?

Question

Quizplus · Accepted Answer

The consolidation process involves eliminating any intercompany transactions and balances to avoid double counting. In this case, Chancellor Limited provided a loan to its subsidiary Park Limited, which creates an intercompany balance. The correct adjustment is to eliminate this balance by recording a loan payable from Park Limited to Chancellor Limited and a corresponding loan receivable from subsidiaries in the consolidated financial statements. Option C accurately reflects this adjustment. Option B is incorrect because it incorrectly records a loan payable to Park Limited rather than from it. Option D is incorrect because it records a cash entry, which is not required since the loan was not repaid. Option A is incorrect because an adjustment is necessary to reflect the intercompany loan.

Chancellor Limited Provided a Loan of $1 500 000 to Its