Fiona Ltd obtained control of Belinda Ltd on 1 January 20X2.The following items may require attention for group data adjustments:
Belinda had shipped $50 000 of inventory to Fiona.As at control date Fiona had not received or recognised this shipment.
Fiona had made a $10 000 payment to Belinda for interest payment on an inter-company loan, but as of 1 January 20X2 Belinda had not received the payment.
The loan made from Fiona to Belinda was $100 000 and has a maturity date of 20X7.
The Fiona Group uses the revaluation model for property.Belinda's property needs to be revalued upwards $30 000, and Belinda has agreed to do so, but as of control date this had not been done.
Belinda has an intangible copyright asset which is not recognised by Belinda but has a fair value of $80 000.
The question refers to the consolidation worksheet prepared at control date.
-Assume that the worksheet uses both data adjustment and eliminations columns.With regard to the intra-group loan between Fiona and Belinda, the correct consolidation data adjustment entry would most likely be:
A)Dr loan receivable $10 000; Credit loan.
B)Dr loan $110 000; Cr loan $100 000, loan expense $10 000.
C)Dr loan receivable $10 000; Credit loan revenue.
D)No entry required.

Question

Quizplus · Accepted Answer

The interest payment of $10,000 is an intra-group transaction that would be eliminated in consolidation, but since Belinda had not received the payment as of the control date, there is no discrepancy in the recorded amounts of the loan between Fiona and Belinda that needs adjusting. The principal amount of the loan does not require adjustment simply because of an in-transit interest payment.

Fiona Ltd Obtained Control of Belinda Ltd on 1 January