On 1 July 20X0 Home Ltd Lent $10 Million to Its

Multiple Choice

On 1 July 20X0 Home Ltd lent $10 million to its wholly-owned subsidiary - Loan Ltd.The loan is for a term of 10 years at a fixed rate of 15% per annum.Loan Ltd pays this interest each year on 30 June.What is the elimination entry for the year ended 30 June 2001?

A) $\begin{array} { l r r } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Loan receivable } & 10000000 & \\\text { Loan payable } & & 10000000 \\\text { Interest revenue } & 1500000 & \\\text { Interest expense } & & 1500000\end{array}$
B) $\begin{array}{lrr}\text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Loan receivable } & & 10000000 \\\text { Loan payable } & 10000000 &\end{array}$

C) $\begin{array}{lrr}\text { Accounts } & \text { Debit } \$ & \text { Credit \$ } \\\text { Loan receivable } & & 10000000 \\\text { Loan payable } & 10000000 & \\\text { Interest revenue } & 1500000 & \\\text { Interest expense } & & 1500000\end{array}$

D) $\begin{array} { l r c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Interest revenue } & 1500000 & \\\text { Interest expense } & & 1500000\end{array}$