During the year ended $30$ June $2014,$ Parent company guarantees borrowings of

Subsidiary company which amounts to $$1,000,000.$ At the time of the guarantee,

Subsidiary$’$s$’$ financial position was sound. During the year ended $30$ June $2015,$ the

financial condition of Subsidiary company deteriorates and at $30$ June $2015$

Subsidiary company files for protection from its creditors.

How should this be treated in Parent$’$s financial statements for the year ended

i$)30$ June $2014$ and

ii$)30$ June $2015.$

Answer rating: 100% (QA)

When a parent company guarantees the borrowings of a subsidiary and the subsidiary later faces finan... View the full answer