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

Hemant Ltd, a venturer in a jointly controlled entity, sells a machine with a carrying amount of Rs 5,00,000 to the entity for Rs 7,00,000. The entity is 30% owned by Hemant Ltd. The machine is still held by the entity, and there is no evidence of a net realisable value loss. In Hemant Ltd's consolidated financial statements using proportionate consolidation, how much of the gain can be recognised?

Hemant Ltd can recognise Rs 1,40,000. The total gain on the machine is Rs 2,00,000, and since the asset remains with the entity, the venturer recognises only the portion attributable to the other venturers' 70% interest and eliminates its own 30% share of Rs 60,000.

  1. ARs 2,00,000 in full
  2. BRs 1,40,000Correct
  3. CRs 60,000
  4. DNil

Explanation

The gain is Rs 2,00,000. Hemant may recognise only the portion attributable to the other venturers' interest, which is 70%: 2,00,000 x 70% = Rs 1,40,000. Its own 30% share, Rs 60,000, is eliminated as unrealised.

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