Question

Abba Co. owns a 40% interest in Jay Ltd, a joint venture. Information for these two entities for the year ended July 31, 2019 is as follows Accounts receivable Sales Abba Co. $ 400,000 5,000,000 Jay Ltd. $ 300,000 3,900,000 During the year, Jay had sales of $600,000 to Abba At the end of the year. Abba owed $20,000 to Jay What would accounts receivable be on the consolidated balance sheet as at July 31, 2019? (Assume that the company was following proportionate consolidation for reporting joint ventures.) Multiple Choice O $500.000 < Prev 2018 Next >

Answer 1

Answer is $680,000

Calculations:

Worksheet (partial)
	Abba. Co.	Jay Ltd.	Debit	Credit	Total
Accounts receivable	$400,000	$300,000		20,000	$680,000

Explanation:

In the consolidated balance sheet, All the assets and liabilities of the both Companies consolidate together subjected to some adjustments. For the other 60%, there is separate disclosure as 'Non-controlling interest'.

Here, Total amount of accounts receivable is equal to sum of both the companies subjected to inter company adjustments. Accounts receivable of $20,000 is a inter company transaction. Hence, it should be adjusted.

i.e. $400,000+$300,000-$20,000 = $680,000.