A subsidiary borrowed $200,000 from its parent on February 1, 2020. The yearly interest rate is 3%, and interest is due quarterly on the first day of May, August, November, and February. The principal of the loan is due on February 1, 2022. It is now December 31, 2020, the end of the accounting year, and the subsidiary has made interest payments as required.
Required
a. What balances appear in the December 31, 20202, trial balances of the parent and its subsidiary with respect to this intercompany loan? What balances should appear on the consolidated financial statements?
b. Prepare the working paper eliminating entries needed for this intercompany loan at December 31, 2016.

Question

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The Answer of A subsidiary borrowed $200,000 from its parent on February 1, 2020. The yearly interest rate is 3%, and interest is due quarterly on the first day of May, August, November, and February. The principal of the loan is due on February 1, 2022. It is now December 31, 2020, the end of the accounting year, and the subsidiary has made interest payments as required.
Required
a. What balances appear in the December 31, 20202, trial balances of the parent and its subsidiary with respect to this intercompany loan? What balances should appear on the consolidated financial statements?
b. Prepare the working paper eliminating entries needed for this intercompany loan at December 31, 2016.

A Subsidiary Borrowed $200,000 from Its Parent on February 1