Hi, I hope someone can assist.

We have a parent company that has two subsidiaries. The contracting business outsources all labour to the vineyard business. In terms of the elmination between the revenue and expense I don't have a problem with that, however how do I treat costs to capital. The contracting company has performed work for the vineyard company that has increased the value of the vineyard asset. How do you eliminate the entries but still maintain the value of the asset?

Journal 1
Dr Vineyard Asset (Vine)
Cr Contract Revenue (Cont)

Elimination Journal
Dr Contract Revenue (Elim)
Dr Asset..

Many Thanks
Chantelle

I'm not sure I understand your question. Are you using the cost or equity method of accounting for consolidation?