Connector Corporation invested in an unincorporated joint venture and elected to use pro rata consolidation in preparing its financial statements.Connector reported income of $120,000 from its separate operations and net income of $150,000 for the year ended December 31,20X8.The joint venture reported assets of $150,000 and liabilities of $60,000 on January 1,20X8,and assets of $240,000 and liabilities of $75,000 on December 31,20X8.It made no distributions to owners during the year.Connector reports total assets (excluding its investment in the unincorporated joint venture)of $550,000 at December 31,20X8.
-Based on the preceding information,Connector's total assets at the end of the year will be highest if it were able to use:
A)pro rata consolidation.
B)equity-method reporting.
C)cost-method reporting.
D)full consolidation.

Question

Quizplus · Accepted Answer

Full consolidation would result in the joint venture's assets and liabilities being consolidated into Connector's financial statements, which would increase Connector's total assets. Pro rata consolidation only reflects Connector's share of the joint venture, while equity-method reporting and cost-method reporting do not involve consolidation of the joint venture's financial statements at all. Therefore, full consolidation would result in the highest total assets for Connector.

Connector Corporation Invested in an Unincorporated Joint Venture and Elected