Pina Corp. owns 60% of Simon Corp.'s outstanding common stock. On May 1, 2016, Pina advanced Simon $90,000 in cash, which was still outstanding at December 31, 2016. What portion of this advance should be eliminated in the preparation of the December 31, 2016 consolidated balance sheet?
A) $90,000.
B) $54,000.
C) $36,000.
D) $-0-.

Question

Quizplus · Accepted Answer

In preparing consolidated financial statements, intercompany balances and transactions between the parent company and its subsidiaries must be eliminated in full. Since Pina Corp. advanced $90,000 to Simon Corp., and both are part of the same consolidated entity, the entire $90,000 advance should be eliminated to avoid double counting of assets and liabilities within the consolidated group.

Pina Corp Owns 60% of Simon Corp