How Would Any Management Fees Charged by a Parent Company

question 53

Multiple Choice

How would any management fees charged by a Parent Company to its Subsidiary be accounted for during the consolidation process?

• A) The Parent Company would only record its pro rata share of any management revenues.
• B) The Parent Company's profit on the rendering of management services would be charged to retained earnings.
• C) Both the Parent's management fees and the subsidiary's related expense would be eliminated when preparing Consolidated Financial Statements.
• D) No special accounting treatment is required, since this would have no effect on Consolidated Net Income.

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