USA Parent and Subsidiary Intercompany Entries


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Hello, our parent and subsidiary have a cost plus relationship. For example, the subsidiary's cost is $10,000 and the cost plus arrange was cost+10%, so the parent will transfer $11,000 to the subsidiary. What would be the appropriate way to account for the entry at the parent and sub? Here's what I think, is it correct? Thanks.

ParentDebitCredit
Inter-Company Expense11,000
Cash11,000

SubsidiaryDebitCredit
Cash11,000
Revenue1,000
Expenses10,000

ConsolidateDebitCredit
Inter-Company Expense11,000
Revenue1,000
Expense10,000
(net to zero)
 
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kirby

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Sub should credit a revenue account called Intercompany revenue for 11,000.
Then just eliminate the intercompany accounts in consolidation. I suggest you show the entries in a new post to make sure you get this.
 
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Sub should credit a revenue account called Intercompany revenue for 11,000.
Then just eliminate the intercompany accounts in consolidation. I suggest you show the entries in a new post to make sure you get this.
Thanks Kirby.
Was this what you were referring?

SubsidiaryDebitCredit
Cash11,000
Inter-Company Revenue11,000

So when consolidated, I would end up with cash used to pay for the expenses at the sub and recognized expenses.
ConsolidateDebitCredit
Cash10,000
Expenses10,000
 
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kirby

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Consolidation Entry is:

DR Inter-Company Revenue 11,000
CR Inter-Company Expense <11,000>
 

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