Problem 1: On January 1, 2010, parent lends 70% owned subsidiary $5,000,000 at 6% annual interest for two years. Subsidiary pays the accrued interest at the end of each year. Answer the following.
a. How much interest income is recorded on the parent's books in 2010?
b. How much interest expense is recorded on the subsidiary's books in 2010?
c. What journal entry did the parent record on January 1, 2010?
d. What journal entry did the subsidiary record on January 1, 2010?
e. What consolidation worksheet entry is recorded at December 31, 2010 to eliminate the intercompany receivable and payable?
f. What consolidation worksheet entry is recorded at December 31, 2010 to eliminate the intercompany interest income and interest expense?