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In mock exam 1 – BPP 2011, there is an question about intra-loan note between parent and subsidiary. In detail, at the date of acquisition, the parent acquired 50% of sub’ s 10% loan note at par. I wonder why the incurred interests related this intra loan note is not cancelled when making consoliated fianacial statements?
thanks so much!.I believe that it is. If it’s the question I’m thinking of, the consolidated income statement shows just $1,000.
If you look in the two separate income statements, the parent has $1,000 income and the subsidiary has $2,000 interest costs. cancel the $1,000 in the parent’s incomes against $1,000 of the $2,000 in the subsidiary’s expenses.
That leaves just $1,000 in the subsidiary’s expenses. I think you may have thought that that $1,000 is the same as the $1,000 in the parent’s figures per the question.
If that’s not the right question, the simple answer to your question is “It should have been”
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