A parent owns 100% of a subsidiary company. One month before its year-end date of March 31, 2031, the parent loaned the subsidiary $120,000. The subsidiary paid back $20,000 in January 2014. In the preparation of the consolidated balance sheet for March 31, 2014, What amount of this loan should be eliminated in the consolidated financial statements?

Question

Quizplus · Accepted Answer

In the preparation of consolidated financial statements, intercompany balances and transactions between the parent and subsidiary must be eliminated. Since the parent owns 100% of the subsidiary, the entire loan amount of $120,000 should be eliminated to avoid double counting of assets and liabilities within the consolidated financial statements.

A Parent Owns 100% of a Subsidiary Company