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A Ltd has 80% control over Y Ltd, sold inventory to Y Ltd during the year
A Ltd has 80% control over Y Ltd, sold inventory to Y Ltd during the year. This sale 100,000$ was recorded in trade receivables and trade payables. On 31/12/2018, Y Ltd remitted payment of 60,000$ for the inventory purchase but the payment was only recieved on 2/1/2019/
The adjustments required to eliminate intercompany balances are:
a. Minus 100,000$ from trade receivables and 60,000$ from trade payables
b. Minus 100,000$ from trade receivables and add 60,000$ to bank
c. Minus 100,000$ from trade receivables and minus 40,000$ from trade payables
d. Minus 100,000$ from trade receivables and 40,000$ from trade payables and add 60,000$ to bank
Expert Solution
Answer choice : D :Minus 100,000$ from trade receivables and 40,000$ from trade payables and add 60,000$ to bank
Explanation: to eliminate intercompany balance trade receivable is to deducted by 100000 dollars as the sale was made for 100000 dollars.
60000 dollars to be deducted from trade payable as out of 100000 dollars 40000 dollars has been paid and
40000 dollars added to bank as the same is received after 31/12/2018.
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