**Financial Consolidation and Interest Recording Exercise**On January 1, 2010, the parent company lends $5,000,000 to a 70% owned subsidiary at a 6% annual interest rate for two years. The subsidiary pays the accrued interest at the end of each year. Answer the following:a. **Interest Income Recorded:** - How much interest income is recorded on the Parent's books in 2010?b. **Interest Expense Recorded:** - How much interest expense is recorded on the subsidiary's books in 2010?c. **Parent’s Journal Entry on January 1, 2010:** - Dr. _______________ $ - Cr. _______________ $d. **Subsidiary’s Journal Entry on January 1, 2010:** - Dr. _______________ $ - Cr. _______________ $e. **Consolidation Worksheet Entry on December 31, 2010 (Intercompany Receivable and Payable Elimination):** - Dr. _______________ $ - Cr. _______________ $f. **Consolidation Worksheet Entry on December 31, 2010 (Intercompany Interest Income and Expense Elimination):** - Dr. _______________ $ - Cr. _______________ $g. **Consolidated Loan Receivable at December 31, 2010:**h. **Consolidated Loan Payable at December 31, 2010:**i. **Consolidated Interest Income at December 31, 2010:**j. **Consolidated Interest Expense at December 31, 2010:**k. **Noncontrolling Interest in Subsidiary Net Income (assuming no other transactions in 2010):**These exercises involve journal entries and consolidations necessary for the financial statements of the parent company and its subsidiary. Properly recording and eliminating intercompany loans and interest is crucial for accurate financial reporting.

Note: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts…

On January 1, 2010, parent lends 70% owned subsidiary $5,000,000 at 6% annual interest for b. How much interest expense is recorded on the subsidiary's books in 2010. two years. Subsidiary pays the accrued interest at the end of each year. Answer the following: How much interest income is recorded on the Parent's books in 2010. What journal entry did the parent record on January 1, 2010 a. C. Dr. Cr.

On January 1, 2010, parent lends 70% owned subsidiary $5,000,000 at 6% annual interest for b. How much interest expense is recorded on the subsidiary's books in 2010. two years. Subsidiary pays the accrued interest at the end of each year. Answer the following: How much interest income is recorded on the Parent's books in 2010. What journal entry did the parent record on January 1, 2010 a. C. Dr. Cr.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Fringe Benefit Tax

Fringe benefits are in addition to the compensation that companies give to their employees. It is an additional benefit above the stated salary. It helps to keep the employees of the firm motivated as sometimes the only salary is not enough to retain the quality employees of the firm. There are different types of fringe benefits. Fringe benefits are given in both private as well as public enterprises.

Question

**Financial Consolidation and Interest Recording Exercise**

On January 1, 2010, the parent company lends $5,000,000 to a 70% owned subsidiary at a 6% annual interest rate for two years. The subsidiary pays the accrued interest at the end of each year. Answer the following:

a. **Interest Income Recorded:**
- How much interest income is recorded on the Parent's books in 2010?

b. **Interest Expense Recorded:**
- How much interest expense is recorded on the subsidiary's books in 2010?

c. **Parent’s Journal Entry on January 1, 2010:**
- Dr. _______________ $
- Cr. _______________ $

d. **Subsidiary’s Journal Entry on January 1, 2010:**
- Dr. _______________ $
- Cr. _______________ $

e. **Consolidation Worksheet Entry on December 31, 2010 (Intercompany Receivable and Payable Elimination):**
- Dr. _______________ $
- Cr. _______________ $

f. **Consolidation Worksheet Entry on December 31, 2010 (Intercompany Interest Income and Expense Elimination):**
- Dr. _______________ $
- Cr. _______________ $

g. **Consolidated Loan Receivable at December 31, 2010:**

h. **Consolidated Loan Payable at December 31, 2010:**

i. **Consolidated Interest Income at December 31, 2010:**

j. **Consolidated Interest Expense at December 31, 2010:**

k. **Noncontrolling Interest in Subsidiary Net Income (assuming no other transactions in 2010):**

These exercises involve journal entries and consolidations necessary for the financial statements of the parent company and its subsidiary. Properly recording and eliminating intercompany loans and interest is crucial for accurate financial reporting.

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