Company Parent Compan y Subsidiary Compan y Accounts Debit Credit Debit Credit Cash £10,000 £4,000 Accounts Receivable 25,000 10,000 Inventory 30,000 12,000 Short-Term Investments 40,000 6,000 Prepaid Assets 35,000 12,000 Investment in Subsidiary 290,000 Long-Term Notes Receivable 150,000 14,000 Debt Service Fund 50,000 Depreciable Assets 900,000 350,000 Accumulated Depreciation £200,00 0 £50,000 Intangible Assets 45,000 20,000 Current Liabilities 92,000 44,000 Long-Term Notes Payable 225,000 119,000 Common Stock 400,000 200,000 Retained Earnings 482,000 50,000 Sales Revenue 750,000 245,000 Cost of Goods Sold 330,000 160,000 Selling Expenses 100,000 45,000 Administrative Expenses 120,000 70,000 Interest Expenses 24,000 5,000 Other Important Information: 1. Subsidiary Company’s assets and liabilities are all shown at fair value except for: a. The fair value of Inventory is 32,000. b. The fair value of Depreciable Assets is 370,000. 2. Subsidiary company sold Parent Company an item that is in Parent Company’s inventory for 10,000 and cost Subsidiary Company 5,000. The sale was made to Parent Company on credit, and no payment has been made. 3. On December 27, 2012, Parent Company made a long-term loan to Subsidiary Company in the amount of 100,000. 4. Subsidiary Company paid Parent Company 7,000 for Consulting Services. Subsidiary Company considers this an Administrative Expense, and Parent Company considers it Sales Revenue. 5. Exchange rates are: March 31, 2012, Exchange Rate: 1 £ = $1.24 Average Rate for 2012: 1 £ = $1.22 December 31, 2012, Exchange Rate: 1 £ = $1.20
