Intra group Loans

Hi Sir,

The quetion on the kit is:

”On 1 July 20×7, Spider acquired 60% of the equity shares capital of FLY and on that date made a $10Mn loan to FLY at a rate of 8% per annum.

What will be the effect on group retained earnings at the year end date of 31 December 20×7 when this intra group transaction is cancelled.

A) RE will increase by $400K
B) RE will be reduced by $240K
C) RE will be reduced by $160K
D) There will be no effect on group retained earnings.

The cprrect answer is C. But suppose its Fly who made the loan to Spider, then what would be the correct answered. I think maybe it will increase Group RE by $160k instead of reducing it. Am I right Sir?