AKL 1- Hutang Piutang Antar Perusahaan (Part 1)

Summary

This video tutorial on advanced financial accounting focuses on intercompany receivables and payables, particularly direct debt transfers between affiliated companies. The script uses an example where a parent company buys bonds from a subsidiary, explaining how to handle journal entries, interest payments, and amortization of discounts. Key concepts like elimination journals, interest expense, and income are discussed in detail, offering a clear guide for preparing consolidated financial statements. The tutorial emphasizes the importance of eliminating reciprocal accounts during consolidation to ensure accuracy in the financial reports.

Takeaways

• 😀 Intercompany receivables and payables refer to transactions between affiliated companies, such as a parent and its subsidiary.
• 😀 The focus of this video is on direct debt transfers between affiliated companies, where one company buys bonds from another.
• 😀 The parent company bought bonds worth 1,000,000,000 (nominal value) from its subsidiary for 9,000,000 at a 12% interest rate, payable twice a year.
• 😀 The bond purchase creates a discount of 10,000,000, which is amortized over the bond’s 10-year term.
• 😀 Before preparing consolidation reports, reciprocal accounts (such as bond investment and bond debt) need to be eliminated to avoid double counting.
• 😀 The bond interest, which is paid twice a year, is 12% of the nominal value. Each payment is split into two equal amounts.
• 😀 The journal entries for both the parent company and subsidiary must be recorded to reflect the bond sale, interest income, and expense.
• 😀 Amortization of the discount reduces the bond's book value over time, which is important for accurate consolidation.
• 😀 Year-end adjustments must be made for interest and amortization to ensure that the financial statements accurately reflect the correct amounts for both the parent and subsidiary.
• 😀 The elimination journal removes internal transactions between the parent and subsidiary, ensuring that no intercompany profits or expenses are included in the consolidated financial statements.

Q & A

What are intercompany receivables and payables?

Intercompany receivables and payables refer to amounts owed between affiliated companies, typically a parent company and its subsidiaries. These transactions can either be direct or indirect debt transfers.

What is the focus of this video regarding intercompany debt transfers?

The video specifically focuses on direct debt transfers of affiliated companies, where a parent company buys bonds from its subsidiary, establishing a direct financial relationship between them.

How does the parent company acquire bonds from its subsidiary in this example?

The parent company buys bonds from the subsidiary for 90,000,000, while the nominal value of the bonds is 100,000,000. The bonds have a 12% interest rate and a term of 10 years.

What is meant by 'discount amortization' in the context of bond purchases?

Discount amortization refers to the process of gradually writing off the difference between the nominal value of the bonds (100,000,000) and the purchase price (90,000,000). This difference, 10,000,000, is amortized over the bond's 10-year term.

How is the interest expense calculated for the subsidiary company?

The subsidiary calculates the interest expense as 13,000,000 per year, with 6,500,000 paid twice a year (on July 1 and January 1), which includes both the cash interest payment and the amortization of the discount.

What is the role of the parent company in terms of interest income?

For the parent company, the interest income is the same 13,000,000 annually, but it is received in two payments of 6,500,000 each. This is recorded as interest income in the parent company’s books.

Why are elimination journals required in the consolidation process?

Elimination journals are required to remove reciprocal accounts between affiliated companies, such as the bond debt in the subsidiary and the bond investment in the parent company. This prevents double-counting in the consolidated financial statements.

How is the journal entry made for the interest payment on July 1, 2011?

The subsidiary records a 6,500,000 interest expense and credits the discount on bond debt by 500,000, while the parent company records a 6,500,000 interest income and debits the bond investment by 500,000.

What happens during the year-end adjustment for the interest payment in the consolidation?

At the end of the year, on December 31, an adjustment journal is made to account for interest that will be paid on January 1 of the following year. The journal changes the cash to an interest receivable for the parent company, and the interest expense is recorded for the subsidiary.

How does the elimination journal change in the subsequent years, such as 2012?

In 2012, the bond investment increases by 1,000,000 due to the amortization of the discount. This increases the bond investment from 91,000,000 to 92,000,000. The elimination journals are adjusted accordingly to reflect this change.