Exam 32: Joint Arrangements

On 1 July 20X0, 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: 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: Tasman Ltd's initial contribution entry will include a debit to the cash in JO account of:

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

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: 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: Which of the following will not form part of Abel Ltd's initial contribution entry?

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:

Which of the following statements is not correct?

A 50:50 joint operation was commenced between two participants. Participant One contributed cash of $50 000, and Participant Two contributed a Building with a fair value of $50 000. Using the line-by-line method of accounting, participant One would record: