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:

Accounts Payable

A liability to a creditor, carried on an open account, usually for purchases of goods and services.

LIFO Retail Inventory Method

An accounting technique that values inventory on the assumption that the last items placed in inventory are sold first, specifically applied to retail settings.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

Net Markups

The amount by which the price of a security is increased above its initial offering price to the public, after deducting any fees or commissions.