Pleasant Corporation (Pleasant) acquired 80% of the voting shares of Sad Ltd. (Sad) on January 1, Year 5. On Pleasant's December 31, Year 5, its accounts receivable contained a receivable of $20,000 from Sad. Which of the following statements pertaining to the intercompany receivable is correct?

Question 12Select one:

a.

The intercompany receivables and payables are both reduced by $16,000 [(80%)($20,000)] in the consolidation process.

b.

It is not necessary to eliminate the $20,000 intercompany receivable and payable during the consolidation process because the overall effect on consolidated net assets is nil.

c.

Both accounts receivable and payables on the consolidated statement of financial position will be eliminated by $20,000.

d.

The noncontrolling interest (balance sheet) is reduced by $4,000 [(20%)($20,000)]