Question 1

The one-line method of reporting jointly controlled operations and jointly controlled assets:

Accepted Answer

A)  discloses joint venture liabilities. 
B)  offsets joint venture liabilities against assets. 
C)  does not recognise liabilities. 
D)  none of the above. 
A)  discloses joint venture liabilities. 
B)  offsets joint venture liabilities against assets. 
C)  does not recognise liabilities. 
D)  none of the above.

Question 2

Discuss the control test for asset recognition in relation to the line-by-line method of accounting for interests in jointly controlled operations and jointly controlled assets.

Accepted Answer

Truehe control test for asset recognitio

Question 3

The main advantage of the one-line method of disclosing interests in jointly controlled operations and jointly controlled assets is disclosure of these interests.

Accepted Answer

A) True 
 B)False

Question 4

Alternative reporting formats are allowed under AASB 11 for jointly controlled entities.

Accepted Answer

A) True 
 B)False

Question 5

The concept of joint control:

Accepted Answer

A)  includes unilateral control. 
B)  includes significant influence. 
C)  excludes unilateral control and significant influence. 
D)  none of the above. 
A)  includes unilateral control. 
B)  includes significant influence. 
C)  excludes unilateral control and significant influence. 
D)  none of the above.

Question 6

Accounting Standard AASB 11 Joint Arrangements does not apply to investments in joint ventures:

Accepted Answer

A)  by venture capital organisations. 
B)  by unit trusts. 
C)  that are held for sale. 
D)  all of the above. 
A)  by venture capital organisations. 
B)  by unit trusts. 
C)  that are held for sale. 
D)  all of the above.

Question 7

In July 20X6,Midstream Ltd entered into a joint venture operation with Delta Ltd to explore for minerals in the area of interest KP97.Midstream Ltd contributed $5 000 000 in cash and Delta Ltd contributed specialised drilling equipment with an agreed fair value of $5 000 000.The venturers shared control of the operation.All the assets of the operation were held by the venturers as tenants in common.The estimated useful life of the plant was five years.In the accounts of Delta Ltd,this equipment was carried at cost $6 000 000 less accumulated depreciation $3 000 000.For the year ended 30 June 20X7,the following financial statements were prepared by the joint venture manager (amounts in thousands): Balance Sheet as at 30 June 20X7
$\begin{array}{lll}\text { Assets }\
\text {Cash }&\$2000\
\text {Equipment (net of accumulated depreciation $ \$ 1000 $ ) }&4000\
\text { Total assets } & \$ 6000 \
\text { Less liabilities } & 1000\
\text { Venture capital }&\$5000
\end{array}$
 Performance Statement for the Year ended 30 June 20X7
Interest revenue$\quad$$\quad$$\quad$$300
Explaration expenditure$\quad$$\quad$5300 At 30 June 20X7,the exploration had not yet advanced to the stage where a reliable estimate could be made of the recoverable mineral reserves in KP97.
The journal entry to record the initial investment of Delta Ltd would be:

Accepted Answer

A)  Debit Investment in Joint Venture $5 000 000, Credit Plant and Equipment $6 000 000, Debit Accumulated Depreciation $3 000 000, Credit Gain on Disposal of Property, Plant and Equipment $1 000 000, Credit Unearned Income $1 000 000. 
B)  Debit Cash $2 500 000, Debit Plant $2 500 000, Credit Plant and Equipment $6 000 000, Debit Accumulated Depreciation $3 000 000, Credit Gain on Disposal of Property, Plant and Equipment $1 000 000, Credit Unearned Income $1 000 000. 
C)  Debit Investment in Joint Venture $5 000 000 and Credit Plant Disposal account $5 000 000. 
D)  None of the above. 
A)  Debit Investment in Joint Venture $5 000 000, Credit Plant and Equipment $6 000 000, Debit Accumulated Depreciation $3 000 000, Credit Gain on Disposal of Property, Plant and Equipment $1 000 000, Credit Unearned Income $1 000 000. 
B)  Debit Cash $2 500 000, Debit Plant $2 500 000, Credit Plant and Equipment $6 000 000, Debit Accumulated Depreciation $3 000 000, Credit Gain on Disposal of Property, Plant and Equipment $1 000 000, Credit Unearned Income $1 000 000. 
C)  Debit Investment in Joint Venture $5 000 000 and Credit Plant Disposal account $5 000 000. 
D)  None of the above.

Question 8

The line-by-line method of accounting for interests in jointly controlled entities is recommended by AASB 11 because:

Accepted Answer

A)  it reflects the venturer's control over the future economic benefits. 
B)  it is the method used for jointly controlled operations and jointly controlled assets, which only differ from jointly controlled entities in their legal form. 
C)  it is consistent with the legal form of a joint arrangement. 
D)  none of the above. 
A)  it reflects the venturer's control over the future economic benefits. 
B)  it is the method used for jointly controlled operations and jointly controlled assets, which only differ from jointly controlled entities in their legal form. 
C)  it is consistent with the legal form of a joint arrangement. 
D)  none of the above.

Question 9

Jointly controlled operations and jointly controlled assets result from an unincorporated contractual association.

Accepted Answer

A) True 
 B)False

Question 10

In July 20X6,Midstream Ltd entered into a joint venture operation with Delta Ltd to explore for minerals in the area of interest KP97.Midstream Ltd contributed $5 000 000 in cash and Delta Ltd contributed specialised drilling equipment with an agreed fair value of $5 000 000.The venturers shared control of the operation.All the assets of the operation were held by the venturers as tenants in common.The estimated useful life of the plant was five years.In the accounts of Delta Ltd,this equipment was carried at cost $6 000 000 less accumulated depreciation $3 000 000.For the year ended 30 June 20X7,the following financial statements were prepared by the joint venture manager (amounts in thousands): Balance Sheet as at 30 June 20X7
$\begin{array}{lll}\text { Assets }\
\text {Cash }&\$2000\
\text {Equipment (net of accumulated depreciation $ \$ 1000 $ ) }&4000\
\text { Total assets } & \$ 6000 \
\text { Less liabilities } & 1000\
\text { Venture capital }&\$5000
\end{array}$
 Performance Statement for the Year ended 30 June 20X7
Interest revenue$\quad$$\quad$$\quad$$300
Exploration expenditure$\quad$$\quad$5300 At 30 June 20X7,the exploration had not yet advanced to the stage where a reliable estimate could be made of the recoverable mineral reserves in KP97.
The journal entry to record the initial investment of Midstream Ltd would be:

Accepted Answer

A)  Debit Investment in Joint Venture $5 000 000 and Credit Cash $5 000 000. 
B)  Debit Cash $2 500 000, Debit Plant and Equipment $2 500 000 and Credit Cash $5 000 000. 
C)  Debit Investment in Joint Venture $2 500 000, Debit Plant and Equipment $2 500 000 and Credit Cash $5 000 000. 
D)  None of the above. 
A)  Debit Investment in Joint Venture $5 000 000 and Credit Cash $5 000 000. 
B)  Debit Cash $2 500 000, Debit Plant and Equipment $2 500 000 and Credit Cash $5 000 000. 
C)  Debit Investment in Joint Venture $2 500 000, Debit Plant and Equipment $2 500 000 and Credit Cash $5 000 000. 
D)  None of the above.

Question 11

A jointly controlled entity can be:

Accepted Answer

A)  a company. 
B)  a partnership. 
C)  a trust. 
D)  all of the above. 
A)  a company. 
B)  a partnership. 
C)  a trust. 
D)  all of the above.

Question 12

According to AASB 11.24,a venturer must recognise its interest in a jointly controlled entity using:

Accepted Answer

A)  proportionate consolidation. 
B)  The equity method. 
C)  either proportionate consolidation or the equity method. 
D)  one-line method. 
A)  proportionate consolidation. 
B)  The equity method. 
C)  either proportionate consolidation or the equity method. 
D)  one-line method.

Question 13

The essential element that would distinguish a business undertaking as a partnership and NOT a joint venture operation would be:

Accepted Answer

A)  the business undertaking makes a profit in the year. 
B)  there is no joint control agreement so that the undertaking is neither a joint venture entity nor a joint venture operation. 
C)  the business activity is an undertaking formed by the investors with the intention of making a profit. 
D)  none of the above. 
A)  the business undertaking makes a profit in the year. 
B)  there is no joint control agreement so that the undertaking is neither a joint venture entity nor a joint venture operation. 
C)  the business activity is an undertaking formed by the investors with the intention of making a profit. 
D)  none of the above.

Question 14

In a venture in which there are jointly controlled assets,the venturers share the assets as tenants in common; which means that:

Accepted Answer

A)  each venturer has a proportionate interest in each joint controlled asset. 
B)  each venturer has a distinct but unidentifiable share of each jointly controlled asset. 
C)  each venturer has a distinct and identifiable share of each jointly controlled asset. 
D)  none of the above. 
A)  each venturer has a proportionate interest in each joint controlled asset. 
B)  each venturer has a distinct but unidentifiable share of each jointly controlled asset. 
C)  each venturer has a distinct and identifiable share of each jointly controlled asset. 
D)  none of the above.

Question 15

A 50% joint venturer acquires a further 10% interest in a jointly controlled operation,paying $2 000 000 to the jointly controlled operation whose assets including cash $1 000 000 have a fair value of $4 000 000.The acquisition will have the following effect on the venturer's cash position:

Accepted Answer

A)  reduced by $2 000 000. 
B)  reduced by $700 000. 
C)  reduced by $1 000 000. 
D)  none of the above. 
A)  reduced by $2 000 000. 
B)  reduced by $700 000. 
C)  reduced by $1 000 000. 
D)  none of the above.

Question 16

Discuss the principles applying to the calculation of a gain on the sale of a portion of a jointly controlled operation.

Accepted Answer

Calculation of gain on sale of a portion

Question 17

In July 20X6,Midstream Ltd entered into a joint venture operation with Delta Ltd to explore for minerals in the area of interest KP97.Midstream Ltd contributed $5 000 000 in cash and Delta Ltd contributed specialised drilling equipment with an agreed fair value of $5 000 000.The venturers shared control of the operation.All the assets of the operation were held by the venturers as tenants in common.The estimated useful life of the plant was five years.In the accounts of Delta Ltd,this equipment was carried at cost $6 000 000 less accumulated depreciation $3 000 000.For the year ended 30 June 20X7,the following financial statements were prepared by the joint venture manager (amounts in thousands): Balance Sheet as at 30 June 20X7
$\begin{array}{lr}\text { Assets }
\text { Cash } & \$ 2000 \
\text { Equipment (net of accumulated depreciation } \$ 1000 \text { ) } & 4000\\text { Total assets } & \$ 6000 \
\text { Less liabilities } & 1000\\text { Venture capital }&\$5000
\end{array}$ Performance Statement for the Year ended 30 June 20X7
Interest revenue$\quad$$\quad$$\quad$$\quad$$\quad$$300
Exploration expenditure$\quad$$\quad$5300 At 30 June 20X7,the exploration had not yet advanced to the stage where a reliable estimate could be made of the recoverable mineral reserves in KP97.
At the reporting date,30 June 20X7,the effect of the adjustments to record the interest of Midstream Ltd in the joint venture would be:

Accepted Answer

A)  Debit Deferred Exploration Expenditure $2 650 000, Credit Interest Revenue $150 000, Credit Investment in Joint Venture $2 500 000. 
B)  Debit Deferred Exploration Expenditure $2 650 000, Debit Cash $1 000 000, Debit Plant and Equipment $2 500 000, Credit Accumulated Depreciation-Plant $500 000, Credit Sundry Liabilities $500 000, Credit Interest Revenue $150 000 and Credit Investment in Joint Venture $5 000 000. 
C)  Debit Exploration Expense $2 650 000, Credit Interest Revenue $150 000 and credit Investment in Joint Venture $2 500 000. 
D)  None of the above. 
A)  Debit Deferred Exploration Expenditure $2 650 000, Credit Interest Revenue $150 000, Credit Investment in Joint Venture $2 500 000. 
B)  Debit Deferred Exploration Expenditure $2 650 000, Debit Cash $1 000 000, Debit Plant and Equipment $2 500 000, Credit Accumulated Depreciation-Plant $500 000, Credit Sundry Liabilities $500 000, Credit Interest Revenue $150 000 and Credit Investment in Joint Venture $5 000 000. 
C)  Debit Exploration Expense $2 650 000, Credit Interest Revenue $150 000 and credit Investment in Joint Venture $2 500 000. 
D)  None of the above.

Question 18

Where a venturer is a subsidiary company,the equity method would be applied to an investment in a jointly controlled entity:

Accepted Answer

A)  in the joint venture entity financial statements. 
B)  in the subsidiary's financial statements. 
C)  in the consolidated financial statements. 
D)  none of the above. 
A)  in the joint venture entity financial statements. 
B)  in the subsidiary's financial statements. 
C)  in the consolidated financial statements. 
D)  none of the above.

Question 19

Midstream Ltd and Delta Ltd enter into a business undertaking to lease a 100-hectare vineyard from Pinot Ltd.There is a contractual agreement between the two companies whereby they share control and must agree on all strategic financial and operating decisions.The two companies appoint Todman Management Pty Ltd as the vineyard manager.A separate set of accounting databases is established for the undertaking and each investor contributes cash capital to the undertaking and holds the assets as tenants in common.Each of the investing companies enters into a separate agreement with the vineyard manager to sell the produce of the vineyard in the market on their behalf.The business undertaking is:

Accepted Answer

A)  a joint venture operation because the investors have agreed to a sharing of control and to a sharing of the outputs of the vineyard. 
B)  a joint venture entity because the undertaking has been established as a separate entity in which there is a simple sharing of control. 
C)  a simple partnership in which two companies operate as partners in a business undertaking with the intention of making a profit. 
D)  none of the above. 
A)  a joint venture operation because the investors have agreed to a sharing of control and to a sharing of the outputs of the vineyard. 
B)  a joint venture entity because the undertaking has been established as a separate entity in which there is a simple sharing of control. 
C)  a simple partnership in which two companies operate as partners in a business undertaking with the intention of making a profit. 
D)  none of the above.

The one-line method of reporting jointly controlled operations and jointly controlled assets:

Discuss the control test for asset recognition in relation to the line-by-line method of accounting for interests in jointly controlled operations and jointly controlled assets.

The main advantage of the one-line method of disclosing interests in jointly controlled operations and jointly controlled assets is disclosure of these interests.

Alternative reporting formats are allowed under AASB 11 for jointly controlled entities.

The concept of joint control:

Accounting Standard AASB 11 Joint Arrangements does not apply to investments in joint ventures:

The line-by-line method of accounting for interests in jointly controlled entities is recommended by AASB 11 because:

Jointly controlled operations and jointly controlled assets result from an unincorporated contractual association.

A jointly controlled entity can be:

According to AASB 11.24,a venturer must recognise its interest in a jointly controlled entity using:

The essential element that would distinguish a business undertaking as a partnership and NOT a joint venture operation would be:

In a venture in which there are jointly controlled assets,the venturers share the assets as tenants in common; which means that:

A 50% joint venturer acquires a further 10% interest in a jointly controlled operation,paying $2 000 000 to the jointly controlled operation whose assets including cash $1 000 000 have a fair value of $4 000 000.The acquisition will have the following effect on the venturer's cash position:

Discuss the principles applying to the calculation of a gain on the sale of a portion of a jointly controlled operation.

Where a venturer is a subsidiary company,the equity method would be applied to an investment in a jointly controlled entity:

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Fair Value Adjustments and Tax Effects

Intra-Group Transactions

Non-Controlling Interest

Partly-Owned Subsidiaries: Indirect Non-Controlling Interest

Consolidated Cash Flow Statements

Accounting for Associates and Joint Ventures: the Equity Method

Translation and Consolidation of Foreign Currency Financial Statements

Segment Reporting by Diversified Entities

Filters

Exam 8: Accounting for Joint Arrangements

The one-line method of reporting jointly controlled operations and jointly controlled assets:

Discuss the control test for asset recognition in relation to the line-by-line method of accounting for interests in jointly controlled operations and jointly controlled assets.

The main advantage of the one-line method of disclosing interests in jointly controlled operations and jointly controlled assets is disclosure of these interests.

Alternative reporting formats are allowed under AASB 11 for jointly controlled entities.

The concept of joint control:

Accounting Standard AASB 11 Joint Arrangements does not apply to investments in joint ventures:

The line-by-line method of accounting for interests in jointly controlled entities is recommended by AASB 11 because:

Jointly controlled operations and jointly controlled assets result from an unincorporated contractual association.

A jointly controlled entity can be:

According to AASB 11.24,a venturer must recognise its interest in a jointly controlled entity using:

The essential element that would distinguish a business undertaking as a partnership and NOT a joint venture operation would be:

In a venture in which there are jointly controlled assets,the venturers share the assets as tenants in common; which means that:

A 50% joint venturer acquires a further 10% interest in a jointly controlled operation,paying $2 000 000 to the jointly controlled operation whose assets including cash $1 000 000 have a fair value of $4 000 000.The acquisition will have the following effect on the venturer's cash position:

Discuss the principles applying to the calculation of a gain on the sale of a portion of a jointly controlled operation.

Where a venturer is a subsidiary company,the equity method would be applied to an investment in a jointly controlled entity:

Text Objectives and Introduction to Consolidation

Principles of Consolidation

Fair Value Adjustments and Tax Effects

Intra-Group Transactions

Non-Controlling Interest

Partly-Owned Subsidiaries: Indirect Non-Controlling Interest

Consolidated Cash Flow Statements

Accounting for Associates and Joint Ventures: the Equity Method

Translation and Consolidation of Foreign Currency Financial Statements

Segment Reporting by Diversified Entities

Filters