ACCA FA · Chapter 13 · Question 7 of 12
At the year end, P's receivables are $85,000 and S's are $46,000. P's receivables include $7,000 due from S. S's payables show $5,000 owed to P, because S sent a cheque for $2,000 just before the year end which P did not receive until after it. What are the consolidated receivables?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $124,000
Explanation
The cash in transit is first recorded as if it had been received by P: Dr Cash $2,000, Cr Receivables $2,000, so P's intra-group receivable becomes $5,000, matching S's payable. Consolidated receivables = $85,000 + $46,000 - $2,000 - $5,000 = $124,000, which equals deducting the full $7,000 originally in P's books. Deducting only $5,000 gives $126,000.
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