Pell Company provides services to its subsidiary, Slicker Corporation, during the current year. This is how Pell and Slicker report these services on their respective income statements:
$$\begin{array} { | l | c | c | }
\hline & \text { Pell } & \text { Slicker } \
\hline \text { Service revenue } & \$ 400,000 & \$ - - \
\hline \text { Service expense } & \$ 350,000 & 400,000 \
\hline
\end{array}$$ How should the consolidated income statement for the year report these services?

Question

Pell Company provides services to its subsidiary, Slicker Corporation, during the current year. This is how Pell and Slicker report these services on their respective income statements:
$$\begin{array} { | l | c | c | } 
\hline & \text { Pell } & \text { Slicker } \
\hline \text { Service revenue } & \$ 400,000 & \$ - - \
\hline \text { Service expense } & \$ 350,000 & 400,000 \
\hline
\end{array}$$ How should the consolidated income statement for the year report these services?

Quizplus · Accepted Answer

In a consolidated income statement, intercompany transactions, such as services provided by a parent company to its subsidiary, are eliminated. Therefore, the service revenue and expense recorded by Pell and Slicker, respectively, for these internal services are eliminated in consolidation, leaving only the original expense incurred by Pell.

Pell Company Provides Services to Its Subsidiary, Slicker Corporation, During