Reference no: EM131601173

Problem - Company P, the parent, purchased 75% of the outstanding shares of Company S, the subsidiary, two years prior to the end of the current year. Company P advanced Company S $100,000 on a long-term 5% note which is due five years from now in one payment. Included in the receivables and payables of the two companies is accrued interest on the unpaid balance of this note for the last three months of the current year. Except for this accrual, interest has been fully paid on the note. What is the correct eliminating entry on the work sheet?

A. Current liabilities                     1,250.00

Notes payable                             75,000.00

Notes receivable                         76,250.00

B. Current liabilities                     937.50

Notes payable                            75,000.00

Notes receivable                         75,937.50

C. Current liabilities                    1,250.00

Notes payable                            100,000.00

Notes receivable                        101,250.00

D. Current liabilities                   937.50

Notes payable                           100,000.00

Notes receivable                       100,937.50