P Ltd provides management services to its subsidiary company S Ltd for $100 000 per year.At the end of the current year,S Ltd owes $20 000 of this fee.The entry required on consolidation is:
A) Dr. Management Fee Revenue $\quad\quad\$ 100,000$
Cr. Management Fee Expense $\quad\quad\$ 100,000$
B) Dr. Management Fee Revenue $ \quad\quad\$ 100,000 $
Cr. Management Fee Expense $\quad\quad \$ 100,000 $
Dr. Accrued Fees Payable $ \quad\quad\quad\quad\$ 20,000 $
Cr. Accrued Fees Receivable $ \quad\quad\quad \$ 20,000 $
C) Dr. Management Fees Revenue $\quad\quad\$ 80,000$
Cr. Management Fees Expense $\quad\quad\$ 80,000$
D) none of the above

Question

P Ltd provides management services to its subsidiary company S Ltd for $100 000 per year.At the end of the current year,S Ltd owes $20 000 of this fee.The entry required on consolidation is: 
A) Dr. Management Fee Revenue $\quad\quad\$ 100,000$
Cr. Management Fee Expense $\quad\quad\$ 100,000$
B) Dr. Management Fee Revenue $ \quad\quad\$ 100,000 $
Cr. Management Fee Expense $\quad\quad \$ 100,000 $
Dr. Accrued Fees Payable $ \quad\quad\quad\quad\$ 20,000 $
Cr. Accrued Fees Receivable $ \quad\quad\quad \$ 20,000 $
C) Dr. Management Fees Revenue $\quad\quad\$ 80,000$
Cr. Management Fees Expense $\quad\quad\$ 80,000$
D) none of the above

Quizplus · Accepted Answer

The correct entry for consolidation involves eliminating intercompany transactions. Since S Ltd owes P Ltd $20,000, this amount is recognized as both accrued fees payable by S Ltd and accrued fees receivable by P Ltd, in addition to eliminating the $100,000 management fee revenue and expense.

P Ltd Provides Management Services to Its Subsidiary Company S $100,000\quad\quad\$ 100,000$100,000

P Ltd Provides Management Services to Its Subsidiary Company S $\quad\quad\$ 100,000$