Pink Ltd Is the Parent Floyd Ltd B) C) D)
Contingent Liability

Multiple Choice

Pink Ltd is the parent Floyd Ltd.On 1 January 20X3 Pink made a loan to Floyd in the form of bills of exchange in the total amount of $80 000 face value.Floyd was required to repay the $80 000 amount (which included the interest component) on 1 October 20X3.On 1 February Pink discounted $20 000 of the bills with the Darkside bank, without recourse, and received $15 000 cash.Floyd was unaware of the discounting.The end of financial reporting year for the group is 30 June.
Which is the correct set of consolidation entries for June 30 20X3 in respect of the bills of exchange?:

A)
$\begin{array}{llcc}\text { Accounts} &\text { Debit \$} &\text { Credit \$ } \\ \text {(Adjustments column) } & \\ \text { Bills payable-to Pink } &20000\\ \text {Bills payable-to others } &&20000\\ \text {(Eliminations column) } &\\ \text { Bills payable } &60000\\ \text { Bills receivable } &&60000\\\end{array}$



B)
$\begin{array}{llcc} \text {(Adjustments column) } & \\ \text { Bills payable-to Pink } &150000\\ \text {Bills payable-to others } &&150000\\ \text {(Eliminations column) } &\\ \text { Bills payable } &65000\\ \text { Bills receivable } &&65000\\\end{array}$

C)
$\begin{array}{llcc} \text {(Adjustments column) } & \\ \text { Bills payable-to Pink } &20000\\ \text {Bills payable-to others } &&20000\\ \text {(Eliminations column) } &\\ \text { Bills payable } &60000\\ \text { Bills receivable } &&60000\\\end{array}$


D)
Contingent liability $\quad$ $\quad$ $\quad$ 80000
(not double entry)