Intercompany Financing Transactions Sessions Athletic Gear borrowed $7,500,000 f

Question

Intercompany Financing Transactions Sessions Athletic Gear borrowed $7,500,000 from its parent, PF Consolidated Inc., at an interest rate of 5%. The loan was made on September 30, 2016, with interest due semiannually on March 31 and September 30 of each year, and principal due in 2020. PPs accounting year ends on December 31. You are doing the consolidation working paper at December 31, 2017. The loan is still outstanding, and Sessions has made interest payments as required a. What balances appear in the December 31, 2017, trial balances of PF and Sessions with respect to this intercompany loan? What balances should appea Remember to use negative signs with your credit balance answers in the Dr (Cr) columns. r on the consolidated financial statements? PF Consolidated Inc. Sessions Athletic Gear Consolidated Balances Dr (Cr) Dr (Cr) Dr (Cr) Debit Credit Loan receivable Interest receivable Interest payable Loan payable Interest revenue Interest expense b. Prepare the working paper eliminating entries needed for this intercompany loan at December 31, 2017. General Journal Description Credit Loan payable Loan receivable To eliminate intercompany payab le/receivable interest payable #v Interest receivable To eliminate intercompany loan principal. Interest revenue Interest expense

Explanation / Answer

Note : Interest calculated semi annually - Interest on March 2017 (7500000*5%) is  $375000/- and on Sep 2017 (7500000*5%) is $ 375000/-. Hence total interest is $750000.

Answer for B)

Description Debit Credit

Loan Payable 7500000

Loan receivable 7500000

Interest payable 750000

Interest receivable 750000

Interest revenue 750000

Interest expense 750000

Particulars PF Consolidation Inc Session Athletic Gear Debit Credit Consolidated Balance Loan Receivable 7500000 Dr 0 7500000 0 Interest receivable 750000 Dr 0 750000 0 Interest payable 0 750000 cr 750000 0 Loan payable 0 7500000 cr 7500000 0 Interest revenue 750000 Cr 0 750000 0 Interest expensee 0 750000 Dr 750000 0 Total 9000000 9000000 0

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