USA Parent and Subsidiary Intercompany Entries

[sliang]

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.

Parent	Debit	Credit
Inter-Company Expense	11,000
Cash		11,000

Subsidiary	Debit	Credit
Cash	11,000
Revenue		1,000
Expenses		10,000

Consolidate	Debit	Credit
Inter-Company Expense	11,000
Revenue		1,000
Expense		10,000

(net to zero)

 

[kirby]

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.

 

[sliang]

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?

Subsidiary	Debit	Credit
Cash	11,000
Inter-Company Revenue		11,000

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

Consolidate	Debit	Credit
Cash		10,000
Expenses	10,000

 

[kirby]

Consolidation Entry is:

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