So EOC in reading 16, number 10 make sense.
Answer says, “Under the proportionate consolidation method, Zimt’s balance sheet would show its own total liabilities of XXX plus half of Oxbow’s liabilities of XXX.”
Number 22 doesn’t make sense.
Answer says, " Under the proportionate consolidation method, Supreme healthcare’s consolidated financial statements will include its 50% share of the joint venture’s total assets".
Shouldn’t that read…"… will include its 50% share of the other company"
I don’t see how you can answer question 22 because they consolidated both company’s total assets, so you don’t know how much of the assets each company had previously.
For example, if Supreme healthcare had 1400 total assets, and Bettercare had 100 total assets, then supreme healthcare would report 1450 total assets, and the answer is C.
As I read it, there are two companies (BetterCare and Supreme Healthcare) and a joint venture of which each company owns 50%.
The answer makes sense to me.
With that same logic, the answer to number 10 should be
686+577=1263/2=632.
Answer is A.
But the answer is b
I’m always wary of two phrases on the internet:
“By that same logic . . .”, and, “You just proved my point.”
In question 10, you have 2 companies: Zimt and Oxbow. That’s it. Nothing more. Zimt owns 50% of Oxbow, so it shows 100% of its own assets and liabilities on its balance sheet and 50% of Oxbow’s assets and liabilities.
In question 22 you have 2 companies _ and a joint venture _: three legal entities. Not just two. Supreme Healthcare owns 50% of the joint venture and BetterCare owns 50% of the joint venture, but neither company owns any portion of the other company.
It isn’t the same logic because it isn’t the same situation. Not even remotely.
Thank you. Cfai text has only 2 sentences explaining proportionate consolidation.