A 50% Joint Venturer Acquires a Further 10% Interest in a Jointly

question 35

Multiple Choice

A 50% joint venturer acquires a further 10% interest in a jointly controlled operation,paying $2 000 000 to the jointly controlled operation whose assets including cash $1 000 000 have a fair value of $4 000 000.The acquisition will have the following effect on the venturer's cash position:

• A) reduced by $2 000 000.
• B) reduced by $700 000.
• C) reduced by $1 000 000.
• D) none of the above.

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Definitions:

Lockboxes

A service provided by banks to process payments more quickly by having checks sent to a special post office box instead of the company's address.

Customer Payments

The payments made by customers for products or services received from a company.

Zero-balance Account

A banking arrangement where a company’s bank account is maintained at a zero balance, with funds being transferred from a master account as needed.