- May 29, 2023 at 10:01 am #685288sherlitaParticipant
- Topics: 1
- Replies: 1
I had a question regarding a sum in Kaplan on interpretations. The parents consolidated results are provided and we are asked to remove the results of the new subsidiary and assess the parents performance
The doubt is:
“For several years, Saachi Co has provided a consultancy service to Parul Co, for which it
invoices $400,000 per month. Parul Co includes this as an operating expense and pays Saachi
as soon as it receives the invoice”
The subsidiary was acquired 4 months ago therefore i assumed that you need to add $1600 back to the operating expenses of the parent once its removed. However in the answer they have also added it to the revenue of the parent. I did not understand the reasoning for this.
Could you please help me? Thanks in advanceJune 8, 2023 at 12:11 pm #686501P2-D2Keymaster
- Topics: 4
- Replies: 6699
Sorry, I’m not 100% sure why they are adding the figure to the revenue balance. I’d have thought that the figure would need to be removed from revenue on consolidation as part of the other side of the journal entry of removing the intra-group trading.
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