Exam 15: Joint Arrangements

On 1 July 2016, the Ears & Eyes Joint Operation was established. The two joint operators participating in this arrangement, Ears Ltd and Eyes Ltd, share control equally. Both joint operators contributed cash to establish the joint operation. The joint operation holds equipment with a carrying amount of $1 200 000. Both joint operators depreciate equipment using the straight-line method and the depreciation is regarded a cost of production. The equipment has a useful life of 5 years. At 30 June 2017, Ears Ltd had sold all of the inventories distributed to it and Eyes Ltd had sold 50% of the inventories distributed to it. At 30 June 2017, Eyes must recognise which of the following entries, in relation to depreciation, in its records?

Ally Ltd and Cat Ltd have established the Ally Cat Joint Operation. Ally Ltd has a 60% interest in the joint operation and Cat Ltd has a 40% interest. Ally Ltd contributed an asset with a carrying amount of $180 000 and a fair value of $240 000 and Cat Ltd agreed to provide technical services to the joint operation over the first two years of operations. The fair value of the technical services was agreed to be $160 000 and the cost to provide the services was estimated at $130 000 at the inception of the joint operation. As part of its initial contribution entry Ally Ltd will record a:

When a joint operator is accounting for an interest in joint operation it is required to recognise which of the following in its financial statements? I.The assets that it controls II. The liabilities that it incurs III.Its share of income from the sale of goods by the joint operation IV. The expenses that it incurs I Yes Yes Yes Yes II Yes Yes No No III Yes No Yes No IV Ye No No No

A joint operation holds equipment with a carrying amount of $1 200 000. The two joint operators participating in this arrangement share control equally. They also depreciate equipment using the straight-line method. The equipment has a useful life of 5 years. At reporting date, each joint operator must recognise which of the following entries in its records in relation to depreciation?

Three joint operators agree to an arrangement in which they have an equal share in a manufacturing joint operation. The work undertaken in setting up the joint operation cost $600 000 and each operator contributed in cash. Each operator will need to recognise which of the following accounting entries?

Three joint operators are involved in a joint operation that manufactures mining equipment. At the beginning of the year the joint operation held $100 000 in cash. During the year, the joint operation paid wages of $40 000. Additionally, creditors amounting to $80 000 were paid and the joint operators contributed $30 000 cash each to the joint operation. The balance of cash held by the joint operation at the end of the year is:

On 1 July 2016, Sunday Ltd entered into a 50:50 joint operation with Night Ltd to develop an open cut coal mine in central Queensland. Each operator's initial contribution was $4 million. Sunday contributed $2 million cash and equipment with a fair value of $2 million and a book value of $1 000 000. Night contributed $4 million cash. Additional information -Production costs for the JO for the year ended 30 June 2017 were as follows. 00 Purchases 1500 Wages 2600 Management fee Total production costs 4900 Less: work in progress Cost of production -The remaining useful life of the equipment contributed by Sunday is 5 years. -Night is responsible for the day to day management of JO and has recognised the management fee received during the year as revenue. The costs of providing these management services to JO was $450 000. -Night has sold all of the coal distributed to it and Sunday has sold 50% of the coal distributed to it by 30 June 2017. An extract of JO's balance sheet at 30 June 2017 shows: 00 Assets Cash 1300 Work in progress 1300 Finished goods inventories 200 Plant \& equipment 2000 Accounts payable Net assets Which of the following will not form part of Sunday Ltd's initial contribution entry?

According to AASB 11/IFRS 11 Joint Arrangements, joint control exists where:

Which of the following statements is not correct in relation to joint control?