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CMA Final · Corporate Financial Reporting · Consolidated Financial Statements and Separate Financial Statements

Holding Ltd has lent Rs 50 lakh to its wholly owned subsidiary Tej Ltd and charged interest of Rs 5 lakh for the year, which Tej has expensed. Holding's total interest income is Rs 12 lakh, including this Rs 5 lakh, and the group has no other interest income or expense. What interest income appears in the consolidated statement of profit and loss?

Consolidated interest income is Rs 7 lakh. Because the group is presented as a single economic entity, the Rs 5 lakh interest charged by the parent to its subsidiary is eliminated against the subsidiary's expense, leaving only the Rs 7 lakh earned from outsiders.

  1. ARs 7 lakhCorrect
  2. BRs 12 lakh
  3. CRs 5 lakh
  4. DRs 17 lakh

Explanation

Consolidated statements present the group as a single economic entity, so intragroup balances, income and expenses are eliminated. The Rs 5 lakh interest income of Holding and the matching expense of Tej are both removed. Consolidated interest income = 12 - 5 = Rs 7 lakh. Rs 12 lakh leaves the intragroup interest in.

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