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

Question

Quizplus · Accepted Answer

The entry required on consolidation is to recognize the management fee revenue and expense of $100,000 and also to record the accrued fees payable of $20,000 for S Ltd. Therefore, the correct entry is DR Management Fee Revenue $100,000, CR Management Fee Expense $100,000, DR Accrued Fees Payable $20,000, CR Accrued Fees Receivable $20,000. Option B is the only choice that includes this entry.

P Ltd Provides Management Services to Its Subsidiary Company S