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Sorry..I missed a word.
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, I reduced Sanfords’s receivables by $350000 and $130000
in consolidation. I assumed that the receivables have not been derecognised as a result of payment.But in the solution $130000 has been added and then $130000 and $ 350000 is subtracted.Can you please help me to figure out the reason for this.
Interesting!
Here’s an extract from the Premier question taken off the internet
“(iii) Premier had a trade payable balance owing to Sanford of $350,000 as at 30 September 2010. This agreed with the corresponding receivable in Sanford’s books.”
Where have you got this question from?
In my previous response I told you what the entries should be to deal with the issue of cash in transit and the reconciliation of intra-group current accounts
Is it possible that the answer has “brought back” the cash into Premier’s records (wrongly)
Have they Dr Cash and Cr Payables in Premier and can now cancel the full $480,000?
I suggest that you stick with the past exam questions as they were written by the examiner!
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