Question

Sub provides services to Parent during 2012. This is how Parent and Sub report these services on their respective income statements: Parent- Service Expense $400,000 Sub- Service Revenue $400,000 Service Expense $350,000 Service Revenue _________.

Answer 1

Parent reports service expense of $400,000 and Sub reports service revenue of $400,000, while Sub also reports a service expense of $350,000.

Step-by-step explanation:

Sub provides services to Parent during 2012. Parent reports the service received as an expense on their income statement, while Sub reports the service provided as revenue on their income statement. According to the given information, Parent reports Service Expense of $400,000, which means they spent $400,000 on the services provided by Sub.

On the other hand, Sub reports Service Revenue of $400,000, which represents the income they earned by providing services to Parent. Additionally, Sub also reports Service Expense of $350,000, which could represent the costs incurred by Sub in providing the services to Parent. However, the value of Service Revenue is not provided in the question.