Inter Group Income - Need Adjusting Entry Help!!!!

[gesha007]

Hi All,

I have a riddle with inter-company / intergroup expenses with a new client which I can not wrap my head around:

The Scenario consists of 3 Entities which are LLC and file form 1065( A LLC,B LLC and C LLC). A LLC Owns 92% of B LLC and C LLC owns the remaining 8%. A LLC also owns 49% of C LLC. Essentially, A LLC owns effectively another 4% of B LLC via its 49% ownership in C LLC.

For example sakes assume that A LLC contributes $1000 into LLC B. LLC B then expenses the funds to LLC C. LLC C picks up the funds as income and then finally expenses the funds outside the group.

Upon running this model I noticed a double counting / intercompany issue which needs to be adjusted. I am not sure how much and what the entry would look like or on whose books.

I have a model in excell. Please PM me so I could send it onto you.

 

[Triest123]

Hi All,

I have a riddle with inter-company / intergroup expenses with a new client which I can not wrap my head around:

The Scenario consists of 3 Entities which are LLC and file form 1065( A LLC,B LLC and C LLC). A LLC Owns 92% of B LLC and C LLC owns the remaining 8%. A LLC also owns 49% of C LLC. Essentially, A LLC owns effectively another 4% of B LLC via its 49% ownership in C LLC.

For example sakes assume that A LLC contributes $1000 into LLC B. LLC B then expenses the funds to LLC C. LLC C picks up the funds as income and then finally expenses the funds outside the group.

Upon running this model I noticed a double counting / intercompany issue which needs to be adjusted. I am not sure how much and what the entry would look like or on whose books.

I have a model in excell. Please PM me so I could send it onto you.

=> In A's Book
Dr Amount due from B $1000
Cr Bank $1000

In B's Book
1. Dr Bank $1000
Cr Amount due to A $1000

2. Dr Expenses paid to C $1000
Cr Bank $1000

In C's Book
1. Dr Bank $1000
Cr Income from B $1000

2. Dr Expenses paid to Outsider $1000
Cr Bank $1000


B is the subsidiary of A while C is the associate of A

The intercompany current account between A & B should be elminated

The consolidated entry is :

Dr Amount due to A $1,000
Cr Amount due from B $1,000
Being elminated the intercompany account between the Group

A only need to share the result of C (i.e. they are not consolidated)
As C finally expenses the funds outside the group,
so there is no unrealised gain / loss on such expenses. (i.e. no accounting entry should be made)

 

[gesha007]

triest. Thanks for even replying. I built a simple model in excell and it seems to me that C might be possibly recieving a "double benefit" on its share of income or losses. Do you mind taking a look?

I undertsand the Entry. But I feel there might be another one lurking there vis-a-vis the net effect of the allocation to C from its Ownership In B.

 

[Triest123]

triest. Thanks for even replying. I built a simple model in excell and it seems to me that C might be possibly recieving a "double benefit" on its share of income or losses. Do you mind taking a look?

I undertsand the Entry. But I feel there might be another one lurking there vis-a-vis the net effect of the allocation to C from its Ownership In B.

=> OH! I think A, B, C these three companies should be consolidated to form a single Group
as they have shareholdings among each other. Therefore the expense paid by B to C
should be elimiated.

The overall consolidated entries are :

1. Dr Amount due to A $1,000
Cr Amount due from B $1,000
Being elminated the intercompany's account between A & B

2. Dr Income from B $1,000
Cr Expenses paid to C $1,000
Being eliminated the intercompany's income and expenses between
B & C