Subsidiary Company borrowed $75,000 from Parent Company on a note payable during the year. Before the consolidation entries were made on the worksheet, the balances in Parent Company's Notes Receivable and Notes Payable accounts were $175,000 and $255,000, respectively. A consolidated balance sheet shows:

Question

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In consolidation, intercompany transactions are eliminated. The $75,000 note between the Parent and Subsidiary is eliminated, reducing both Notes Receivable and Notes Payable by $75,000. Thus, Notes Receivable is $100,000 ($175,000 - $75,000) and Notes Payable is $255,000.

Subsidiary Company Borrowed $75,000 from Parent Company on a Note