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Jack Corp. holds 70% of the outstanding stock of Jill Corp. Jill currently owes Jack $300,00...

Jack Corp. holds 70% of the outstanding stock of Jill Corp. Jill currently owes Jack $300,00 for inventory acquired over the past months. In preparing consolidated financial statements what amount of this debt should be included?

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Answer #1

In the preparing the consolidated financial statements, all the transaction with related parties are eliminated. So while preparing consolidated financial statement of Jack corp, amount owed by Jill corp will be eliminated. Below journal entry will be passed for elimination in consolidated financial statements.

Accounts payable of Jill corp A/c Dr. $300, 000

To Amount receivable as shown in books Jack corp. A/c $300, 000.

Hence after elimination, no balance will be reflected in consolidated financial statements.

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