A parent entity made an advance of $50 000 to its subsidiary. The parent charges interest of $3 000 on this advance. The consolidation adjustment to eliminate the advance is:

Question

Quizplus · Accepted Answer

The consolidation adjustment required to eliminate the advance is a reversal of the initial transaction. Therefore, the parent entity must debit "Advance from parent" for $50 000 and credit "Advance to subsidiary" for $50 000. This eliminates the balance of the advance. There is no need for an interest-related adjustment in this case.

A Parent Entity Made an Advance of $50 000 to Its