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Premier (parent) had a trade payables owing to Sanford (subsidiary) of $ 350000 as at 30 sep 2010.This did not agree with the corresponding recievable in Sanford’s books due to a $130000 payment made to Sanford , which Sanford has not yet recorded.
Here, Sanfords’s receivables has to be decreased by $350000 and $130000
in consolidation. Here I assumed that the receivables have not been derecognised as a result of payment.
But in the solution $130000 has been and then $130000 and $ 350000 is subtracted.Can you please help me to figure out the reason for this.When you say that “$130,000 has been” I can only assume that, in Sandford’s records, the cash from Premier has been accelerated into Sandford and the entry Dr Cash $130,000 Cr Premier $130,000 has been put through
That being so, we now need to cancel $350,000 from both the combined receivables and the combined payables
So in the answer it probably shows:
$xxx,xxx + $480,000 – $130,000 – $350,000
Does that make sense to you now?
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