Question
Question a. Explain the treatment of dividends paid from the associate under the equity method of accounting if (i) the investor is not a parent
Question
a. Explain the treatment of dividends paid from the associate under the equity method of accounting if (i) the investor is not a parent and does not prepare consolidated financial statements and (ii) the investor is a parent and prepares consolidated financial statements.
b. P Ltd owns 100% of the shares of S Ltd. P Ltd provided S Ltd with management services for which they havecharged S Ltd $25,000 during the current financial year. Of this amount, $4,500 was outstanding at year end. Theadjusting consolidation entries at the end of the period were:
Management Fees | Dr | $25,000 |
|
Management Expense | Cr |
| $25,000 |
Accounts Payable | Dr | $4,500 |
|
Accounts Receivable | Cr |
| $4,500 |
Required
- Explain why the above entries are made, noting the adjustment to each account separately.
- Explain why there is no tax adjustment in regard to the entry above.
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