P Ltd Provides Management Services to Its Subsidiary Company S

question 12

Multiple Choice

P Ltd provides management services to its subsidiary company S Ltd for $100,000 per year.At the end of the current year S Ltd owes $20,000 of this fee.The entry required on consolidation is:

• A) DR Management Fee Revenue $100,000 CR Management Fee Expense $100,000
• B) DR Management Fee Revenue $100,000 CR Management Fee Expense $100,000
• DR Accrued Fees Payable $20,000
• CR Accrued Fees Receivable $20,000
• C) DR Management Fees Revenue $80,000 CR Management Fees Expense $80,000
• D) None of the above

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Definitions:

Operating Profit

The income generated from the primary activities of a business before subtracting any tax and interest expenses.

Retail Selling Price

The price at which goods or services are sold to the final consumer, including any markups applied by retailers.

Profit

The financial gain obtained when the revenue generated from a business activity exceeds the expenses, costs, and taxes associated with it.

Wholesale Price

The cost at which goods are sold to retailers by manufacturers or distributors before any retail markup.