Subsidiary declared dividends to Parent

Parent has to record the dividend receivable from the subsidiary so, in parent's books, Dr Receivable (80% x 450) 360 and Cr Retained Earnings Now we can cancel the 360 receivable in parent against 360 of the 450 payable in the subsidiary leaving just 90 liability as a dividend payable in the subsidiary Now what's confusing me are the other figures in your question! What's this $15,000 dividend payable in the subsidiary's current liabilities? Answer that one for me and I'll continue with my answer!

Hi MikeLitte, Firstly, thank you so much for the quick response. I have a few questions: Is the credited retained earnings of 360 equivalent to investment income to the Parent? And why should we add the 360(investment income=dividends) into our retained earning, instead do we need to eliminate investment income when producing consolidated statements? There is no additional information on the 15,000 dividend payable in the subsidiary's current liability. So sorry! ;( It is given as 15,000 dividend payable as at 31 Dec 20X1. Once again, thank you so much for the help.

"Is the credited retained earnings of 360 equivalent to investment income to the Parent?"? Yes "And why should we add the 360(investment income=dividends) into our retained earning, instead do we need to eliminate investment income when producing consolidated statements?" I HAVE eliminated the intra-group dividend here"Now we can cancel the 360 receivable in parent against 360 of the 450 payable in the subsidiary leaving just 90 liability as a dividend payable in the subsidiary" As for the consolidated statement of profit or loss, the 360 receivable from the subsidiary is excluded / ignored and instead the statement of profit or loss includes the subsidiary figures from Revenue down to Profit after tax, so the figure out of which the subsidiary is paying its dividend (profit after tax) IS included within the consolidation Clear?

Hi tutor, I am sorry! I still does not get this part. As for the consolidated statement of profit or loss, the 360 receivable from the subsidiary is excluded / ignored and instead the statement of profit or loss includes the subsidiary figures from Revenue down to Profit after tax, so the figure out of which the subsidiary is paying its dividend (profit after tax) IS included within the consolidation

When we consolidate, we add in all the subsidiary's figures from their own statement of profit or loss from revenue right down to profit after tax. The dividend declared by the subsidiary is declared out of that year's profit after tax. But we've included that profit after tax within the consolidation So that's why we ignore the income (dividend from subsidiary) from the parent's profit or loss

Hi tutor, Thank you for the patient response. I have one last question - when you wrote Cr retained earning by 360. Am I suppose to add 360 to our retained account, since we Cr RE?

Yes, absolutely. Technically it would have been better if I had said "in the parent's records Dr Receivables and Cr Investment Income" That has the effect of increasing the parent's retained earnings figure. I thought I could short-cut the explanation, but clearly I was wrong :-( Better?

Dear Tutor, Your explanation was marvellous. It is me, the student, who is lacking. Thank you so much! May you have a great day ahead! :)

No worries - I've been doing this a lot longer than you!