P Ltd Lends $200 000 to Its Subsidiary S Ltd $\begin{array} { l l } \text { Dr. Loan Payable } & \$ 200,000 \\\text { Cr. Loan Receivable } & \$ 200,000\end{array}$

question 33

Multiple Choice

P Ltd lends $200 000 to its subsidiary S Ltd.At the end of the year,S Ltd has paid interest of $18 000 and owes a further $2000 (assume a tax rate of 30%) .The required consolidation entry is:

• A)\(\begin{array} { l l }
• \text { Dr. Loan Payable } & \$ 200,000 \\
• \text { Cr. Loan Receivable } & \$ 200,000
• \end{array}\)
• B)\(\begin{array} { l l }
• \text { Dr. Loan Payable } & \$ 200,000 \\
• \text { Cr. Loan Receivable } & \$ 200,000 \\
• \text { Dr. Interest Revenue } & \$ 20,000 \\
• \text { Cr. Interest Payable } & \$ 20,000
• \end{array}\)
• C)\(\begin{array} { l c }
• \text { Dr. Loan Payable } & \$ 200,000 \\
• \text { Cr. Loan Receivable } & \$ 200,000 \\
• \text { Dr. Interest Revenue } & \$ 20,000 \\
• \text { Cr. Interest Expense } & \$ 20,000 \\
• \text { Dr. Accrued Interest Payable } \$ 2000 & \\
• \text { Cr. Accrued Interest Receivable } \$ 2000
• \end{array}\)
• D)\(\begin{array}{l}
• \text { Entry } \mathrm { C } \text { plus: }\\
• \begin{array} { l l }
• \text { Dr. Deferred Tax Asset } & \$ 600 \\
• \text { Cr. Income Tax expense } & \$ 600 \\
• \text { Dr. Income Tax expense } & \$ 600 \\
• \text { Cr. Deferred Tax Liability } & \$ 600
• \end{array}
• \end{array}\)

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