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CA Intermediate · Advanced Accounting · AS 27 Financial Reporting of Interests in Joint Ventures

Arjun Ltd holds a 40% interest in Zenith Ltd, a jointly controlled entity. In its consolidated financial statements Arjun Ltd uses proportionate consolidation. Zenith Ltd's balance sheet shows: fixed assets Rs 50,00,000, current assets Rs 30,00,000, current liabilities Rs 20,00,000, long-term loans Rs 10,00,000. How much will Arjun Ltd include as its share of total assets in the consolidated balance sheet?

Arjun Ltd includes Rs 32,00,000 as its share of total assets. Under proportionate consolidation, each asset line is taken at the venturer's share. Zenith's total assets are Rs 80,00,000 (50,00,000 plus 30,00,000), and 40% of this is Rs 32,00,000; liabilities are shown separately.

  1. ARs 20,00,000
  2. BRs 32,00,000Correct
  3. CRs 80,00,000
  4. DRs 24,00,000

Explanation

Total assets of Zenith = 50,00,000 + 30,00,000 = 80,00,000. Share at 40% = 32,00,000. Rs 24,00,000 is 40% of net assets of 60,00,000 less loans, which wrongly nets liabilities against assets; Rs 80,00,000 ignores the proportion.

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