Assume that both the Parent and Subsidiary adopt 31 December as their financial year-end. Further assume that the transactions were conducted on cash basis. For each of the following independent scenarios in each of the independent parts: (i) Prepare all the relevant journal entries in the separate financial statements of the respective companies. (ii) Prepare all the relevant consolidation journal entries for the preparation of the consolidated financial statements of the Parent. (iii) Compare and contrast the accounting treatment/principles that you had applied in the independent scenarios in each part in preparing the journal entries and consolidation journal entries.

Part 2

(a) On 20 December 20x1, a 60%-owned Subsidiary paid rental of $200,000 to its Parent. The Parent recognised the rental as income whilst the Subsidiary company recognised the rental paid as an expense. The space area rented by the Subsidiary from the Parent comprises 2% of the building for which the Parent rented out to other external parties. In the separate financial statements of the Parent, the carrying amount of the building was $5,000,000 as at 31 December 20x1.

(b) On 20 December 20x1, a 60%-owned Subsidiary paid rental of $200,000 to its Parent. The Parent recognised the rental as income whilst the Subsidiary recognised the rental paid as an expense. The space area rented by the Subsidiary from the Parent comprises 98% of the building for which the Parent occupies the remaining 2% thereof. In the separate financial statements of the Parent, the carrying amount of the building was $5,000,000 as at 31 December 20x1.