Exam 29: Joint Arrangements

AASB 11 Joint Arrangements, provides that joint control exists where:

Three joint operators are involved in a joint operation that manufactures ships chandlery. At the beginning of the year the joint operation held $50 000 in cash. During the year the joint operation incurred the following expenses: Wages paid $20 000, Overheads accrued $10 000. Additionally creditors amounting to $40 000 were paid and the joint operators contributed $15 000 cash each to the joint operation. The balance of cash held by the joint operation at the end of the year is:

In relation to the supply of a service to a joint operation by one of the joint operators, which of the following statements is correct?

A 60:40 joint operation was commenced between two participants. Participant One contributed cash of $60 000, and Participant Two agreed to provide technical services to the joint operation over a period of two years. The fair value of the services was determined to be $40 000 and the cost to provide the services was estimated to be $35 000 Using the line-by-line method of accounting, participant Two would record:

On 1 July 20X0, 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 20X1 Ears Ltd had sold all of the inventory distributed to it and Eyes Ltd had sold 50% of the inventory distributed to it. At 30 June 20X1 Venturer Eyes must recognise the following entry, in relation to depreciation, in its records:

Three joint operators agree to an arrangement in which they have an equal share in an agricultural joint operation. The work undertaken in setting up the joint operation cost $300 000 and each operator contributed in cash. Each operator will need to recognise the following accounting entry:

The following information relates to questions On 1 July20X0, Abel Ltd entered into a 50:50 joint operation with Tasman Ltd to develop an oil field off the south coast of Tasmania. Each operator's initial contribution was $2 million. Abel contributed $1 million cash and equipment with a fair value of $1 million and a book value of $500 000. Tasman's contributed $2 million cash. Additional information Production costs for the JO for the year ended 30 June 20X1 were: 00 Purchases 750 Wages 1300 Management fee 400 Total production costs 2450 Less: Work in progress (650) Cost of production 1,800 The remaining useful life of the equipment contributed by Abel is 5 years. Tasman 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 $225 000. Tasman has sold all of the oil distributed to it and Abel has sold 50% of the oil distributed to it by 30 June 20X1. An extract of JO's balance sheet at 30 June 20X1 shows: 00 Assets Cash 650 Work in progress 650 Finished goods inventory 100 Plant \& equipment 1000 Accounts payable (100) Net assets 2,300 -Tasman Ltd's initial contribution entry will include a debit to the Cash in JO account of:

The following information relates to questions A Ltd and B Ltd have established the AB Joint Operation. A Ltd has a 60% interest in the joint operation and B Ltd has a 40% interest. A Ltd contributed an asset with a carrying amount of $90,000 and a fair value of $120,000 and B 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 $80,000 and the cost to provide the services was estimated at $65,000 at the inception of the joint operation. -As part of its initial contribution entry A Ltd will record a:

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

Cash contributed to a joint operation was used to purchase Equipment ($100 000) and raw materials ($70 000). The following entry would be part of the overall recording of these transactions:

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 the following entry, in relation to depreciation, in its records:

The following information relates to questions A Ltd and B Ltd have established the AB Joint Operation. A Ltd has a 60% interest in the joint operation and B Ltd has a 40% interest. A Ltd contributed an asset with a carrying amount of $90,000 and a fair value of $120,000 and B 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 $80,000 and the cost to provide the services was estimated at $65,000 at the inception of the joint operation. -As part of its initial contribution entry B Ltd will record a:

When eliminating any unrealised profit arising when a joint operator provides services to a joint operation the profit is eliminated against:

Company A Limited and Company B Limited formed a joint operation and share equally in the output of the joint operation. The joint operation paid a management fee of $20 000 to Company A Limited during the current period. The cost to Company A Limited of supplying the management service was $14 000. Company A Limited records the management fee revenue as follows:

Company A Limited and Company B Limited formed a joint operation and share in the output of the joint operation 60:40. The joint operation paid a management fee of $20 000 to Company A Limited during the current period. The cost to Company A Limited of supplying the management service was $14 000. The amount of profit that Company A Limited will recognise in relation to the provision of the management fee to the joint operation is:

Wiseye Limited and Goodbody Limited agreed to form a joint operation to offer health services. To start the operation the joint operators agreed to contribute cash of $30 000 each. The joint operation will record which of the following entries to recognise this event?

Company A Limited and Company B Limited formed a joint operation and share in the output of the joint operation 60:40. The joint operation paid a management fee of $20 000 to Company A Limited during the current period. The cost to Company A Limited of supplying the management service was $14 000. Company A Limited records the management fee revenue as follows:

Which of the following statements is not correct?

The following information relates to questions On 1 July20X0, Abel Ltd entered into a 50:50 joint operation with Tasman Ltd to develop an oil field off the south coast of Tasmania. Each operator's initial contribution was $2 million. Abel contributed $1 million cash and equipment with a fair value of $1 million and a book value of $500 000. Tasman's contributed $2 million cash. Additional information Production costs for the JO for the year ended 30 June 20X1 were: 00 Purchases 750 Wages 1300 Management fee 400 Total production costs 2450 Less: Work in progress (650) Cost of production 1,800 The remaining useful life of the equipment contributed by Abel is 5 years. Tasman 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 $225 000. Tasman has sold all of the oil distributed to it and Abel has sold 50% of the oil distributed to it by 30 June 20X1. An extract of JO's balance sheet at 30 June 20X1 shows: 00 Assets Cash 650 Work in progress 650 Finished goods inventory 100 Plant \& equipment 1000 Accounts payable (100) Net assets 2,300 -Which of the following will not form part of Abel Ltd's initial contribution entry?

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