Quiz 33: Accounting for Equity Investments
Business
Q 1Q 1
As prescribed in AASB 131 "Interests in Joint Ventures", a jointly controlled entity maintains its own accounting records and prepares and presents financial statements in the same way as other entities in conformity with Australian equivalents to IFRSs.
Free
True False
True
Q 2Q 2
When two or more venturers combine their operations, resources and expertise to manufacture, market and distribute jointly a particular product this is likely to be categorised as a jointly controlled entity under AASB 131 "Interests in Joint Ventures".
Free
True False
False
Q 3Q 3
As prescribed in AASB 131 "Interests in Joint Ventures", where a separate entity is formed the joint venture is referred to as jointly controlled operations.
Free
True False
False
Q 4Q 4
In respect of its interests in jointly controlled operations, AASB 131 "Interests in Joint Ventures" prescribes a venturer to recognise in its financial statements, the assets that it controls and the liabilities that it incurs, and the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture.
Free
True False
Q 5Q 5
AASB 131 "Interests in Joint Ventures" prescribes disclosure by venturers of each category of asset and liability contributed to the jointly controlled operations.
Free
True False
Q 6Q 6
Disclosure prescribed in AASB 131 "Interests in Joint Ventures" relating contingent liabilities applies to all types of joint ventures.
Free
True False
Q 7Q 7
In order for a joint venture to exist for accounting purposes, each of the venturers must not be able to unilaterally control any major decision:
Free
True False
Q 8Q 8
Where an entity has significant influence but its consent to decisions is not required, it is not a joint venturer:
Free
True False
Q 9Q 9
AASB 131, 'Interests in joint ventures' specifies how the venturers should account for their interest in a joint venture and how the joint venture's accounts should be prepared.
Free
True False
Q 10Q 10
If a joint venture is deemed to be a reporting entity according to terms contained in the AASB Framework, then general purpose financial reports that comply with the relevant Accounting Standards may need to be prepared.
Free
True False
Q 11Q 11
The method of accounting for a jointly controlled entity is commonly known as the line-by-line method.
Free
True False
Q 12Q 12
AASB 131 provides guidelines on accounting for an interest in a partnership that has been established either as a joint venture or as a business activity with a view to a profit by the partners:
Free
True False
Q 13Q 13
When a joint venturer contributes assets to a joint venture the assets must be revalued in the books of the venturer:
Free
True False
Q 14Q 14
AASB 131 requires that the liabilities of a jointly controlled operation be separately disclosed by category:
Free
True False
Q 15Q 15
AASB 131 does not require the use of the equity method of accounting for an interest in a joint controlled entity (e.g., partnership) where the partnership is acquired and held exclusively for its disposal in the near future:
Free
True False
Q 16Q 16
An associate is an entity over which the investor has significant influence, which is not a subsidiary, but which may be a jointly controlled entity:
Free
True False
Q 17Q 17
Section 255b(i) of the Corporations Act 2001 requires joint ventures to prepare financial statements, separate from those prepared by the venturers:
Free
True False
Free
True False
Q 19Q 19
The accounting treatment for jointly controlled assets is very similar to that for jointly controlled entities:
Free
True False
Free
True False
Q 21Q 21
AASB 131 provides the choice between equity accounting and proportional consolidation, when accounting for jointly controlled entities:
Free
True False
Q 22Q 22
The direct requirement for a jointly controlled operation to prepare financial statements arises from:
A) Requirements under The Corporations Law relating to joint ventures.
B) AASB 131 'Interests in Joint Ventures'.
C) AASB 128 'Investments in Associates'.
D) ASIC requirements.
E) None of the given answers.
Free
Multiple Choice
Q 23Q 23
A joint venture is defined in AASB 131 as:
A) An arrangement whereby two or more parties carry on business with a common goal to make a profit and each can commit the joint venture to debts through decisions made unilaterally.
B) An arrangement whereby two or more venturers establish a common activity in which they jointly and severally take responsibility for liabilities and expenses and obtain the benefits of outputs generated.
C) A legal entity constituted by venturers pursuing a common goal and sharing control of assets and responsibility for expenses and liabilities.
D) A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
E) None of the given answers.
Free
Multiple Choice
Q 24Q 24
A jointly controlled operation:
A) Is a jointly controlled entity set up as a partnership.
B) Is a joint venture that is not yet functioning at its full capacity.
C) Is a joint venture that has not been set up as a separate entity from the joint venturers.
D) Is a jointly controlled entity that has commenced operations.
E) None of the given answers.
Free
Multiple Choice
Q 25Q 25
A contractual arrangement to establish a joint venture would normally cover matters such as:
A) Dividend distribution arrangements.
B) Authority for the joint venture to raise debt and equity capital.
C) The appointment of a governing body for the joint venture.
D) Dividend distribution arrangements and the appointment of a governing body for the joint venture.
E) None of the given answers.
Free
Multiple Choice
Q 26Q 26
The accounting method required for jointly controlled entities is:
A) Consolidation in the group accounts.
B) The equity method of accounting.
C) The net market value method.
D) The net present value method.
E) None of the given answers.
Free
Multiple Choice
Q 27Q 27
Where a joint venture is a partnership:
A) It should be accounted for by the venturer using the equity method.
B) It should be accounted for by the venturer using partnership accounting separately to the financial accounts of the venturers and any profit on sale of the output from the joint venture reported in the income statement of the individual venturers.
C) It should be accounted for by the venturer as a partnership and the line items added into the group's financial statements.
D) It should be accounted for using full consolidation accounting.
E) None of the given answers.
Free
Multiple Choice
Q 28Q 28
A jointly controlled entity:
A) Should be accounted for using the cost method in the venturer's own books and using the equity method in the group accounts (if they are prepared).
B) Should be accounted for using the net market method in the books of the venturer and also in the group accounts.
C) Should be accounted for using the cost method in the venturer's own books and using the equity method in the group accounts, if they are prepared. Where group accounts are not prepared, the equity method should be applied in the venturer's own books.
D) Should be accounted for using the net present value method in the group accounts and at cost in the venturer's own books.
E) None of the given answers.
Free
Multiple Choice
Q 29Q 29
A jointly controlled operation is required to be accounted for by the venturers, in which of the following ways:
A) Each recognising its share of the joint venture assets it controls, liabilities and expenses it incurs, and income that is earned from the sale of goods or services in its own accounts.
B) Using the lower of cost and net realisable value method to adjust the cost of the investment in the joint venture for changes in the equity value of the joint venture. the one-line method.
C) Applying the present value method to discount the expected future cash inflows from the output generated by the joint venture and matching these against the notional cost of the investment and the present value of expected cash outflows.
D) By consolidating the joint venture into their group accounts, and in particular recognising their share of the assets and liabilities in the joint venture and eliminating any inter-company transactions and unrealised profit.
E) None of the given answers.
Free
Multiple Choice
Q 30Q 30
A concern raised by opponents to the line-by-line method is that:
A) The benefits flowing from assets in a joint venture cannot be seen as belonging to any individual joint venturer.
B) Since joint ventures may be set up to share output or assets merging the assets, liabilities, income and expenses of this activity with those of a strictly profit-oriented enterprise reduces the usefulness of the information provided.
C) The method aggregates assets that are controlled by the entity with those that are the subject of joint control.
D) There is a problem attaching a value to potential income arising out of the shared outputs that are common to many joint ventures. Until an acceptable measurement method can be developed, opponents argue that note disclosures about joint ventures are more appropriate.
E) None of the given answers.
Free
Multiple Choice
Q 31Q 31
Go Ltd, For Ltd and It Ltd contractually form a jointly controlled operation on 1 July 2003 to construct an oil well to extract oil that each of the venturers will refine. The three companies agree to contribute the following amounts of capital to the venture in the same proportion as their rights to the assets and outputs:
The funds are used on 1 July 2003 to purchase the land for $20 million and a rig and other equipment for $10 million. The balance of $20 million will be called on by the joint venture manager as required. For Ltd and It Ltd borrowed $5 million and $4 million respectively to finance their contributions to the joint venture.
The following information relates to the year ending 30 June 2004:
Total cost of production $3,500,000. These costs have been deferred in order to amortise them as the production of oil commences.
Of the total costs of production all but $500,000 have been paid in cash.
The joint venture manager called on the venturers to contribute a further $4,000,000 in total with each venturer contributing the appropriate portion according to their share in the joint venture (provided above).
Assume that the necessary entries have been made to record the formation of the joint venture. What entries would be required to record the transactions for the year ended 30 June 2004?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 32Q 32
Have Ltd, Ay Ltd and Go Ltd contractually form a jointly controlled operation on 1 July 2003 to undertake a bauxite mining venture. The three companies agree to contribute the following amounts of capital to the venture in the same proportion as their rights to the assets and outputs:
The funds are used on 1 July 2003 to purchase the mining site for $50 million and drilling and other heavy machinery for $25 million. The balance of $25 million will be called on by the joint venture manager as required.
The following information relates to the year ending 30 June 2004:
Total cost of production $10,000,000. These costs have been deferred in order to amortise them as mining commences.
Of the total costs of production all but $3,000,000 have been paid in cash.
The joint venture manager called on the venturers to contribute a further $12,000,000 in total with each venturer contributing the appropriate portion according to their share in the joint venture (provided above).
What entries would be required to record the formation of the joint venture and the transactions for the year ended 30 June 2004?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 33Q 33
If a venturer contributes assets to a joint venture, the accounting treatment is which of the following:
A) Treat the contribution as a capital investment and replace the asset with an investment account called 'advance to joint venture'.
B) Close off the accumulated depreciation account if applicable to the asset account and remove the net book value of the other joint venturers' shares of the asset against the account 'advance to joint venture'. This leaves the venturer's own share in its own accounts.
C) The value of the contribution is assessed at fair value and the other venturers' share of the asset is treated as sold at fair value.
D) The asset is restated to fair value and the asset revaluation reserve treated as part of the advance to the joint venture.
E) None of the given answers.
Free
Multiple Choice
Q 34Q 34
Where an asset contributed to a joint venture is not recorded in the venturer's books at fair value a common accounting treatment is which of the following?
A) Revalue the asset and take any difference to an asset revaluation reserve. The other venturers' shares of the asset are then credited against the advance to joint venture account.
B) Treat the difference on the other venturers' shares as a profit or loss on sale.
C) Any profit or loss on the inter-company transaction is regarded as unrealised and eliminated in the accounts.
D) The asset is treated as sold to the joint venture and the profit or loss on the whole amount recognised in the period that it is contributed to the joint venture. Each venturer will record its share of the asset in its own accounts at fair value.
E) None of the given answers.
Free
Multiple Choice
Q 35Q 35
Creed Ltd and Nickleback Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2005. Creed Ltd is to contribute land and equipment and Nickleback Ltd agrees to contribute $8 million. It is agreed that they will share output, assets, and future contributions in the ratio 60:40 (Creed.Nickleback). The contribution by Creed Ltd has an agreed fair value of $9 million for the land and $3 million for the equipment. The book value of the land is $8 million and the net book value of the machinery is $2 million.
What are the entries to record the formation of the joint venture operation in the books of Creed Ltd and Nickleback Ltd?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 36Q 36
Sting Ltd and Pink Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Sting Ltd is to contribute land and production buildings and equipment. Pink Ltd agrees to contribute $8.1 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 50:50. The following information relates to the contribution by Sting Ltd.
What are the entries to record the formation of the joint venture operation in the books of Sting Ltd and Pink Ltd?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 37Q 37
Bush Ltd and Forest Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Bush Ltd is to contribute land and equipment. Forest Ltd agrees to contribute $5.1 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 70:30 (Bush/Forest). The following information relates to the contribution by Bush Ltd.
The following information relates to the year ending 30 June 2005:
Total cost of production $5,000,000. These costs have been deferred in order to amortise them as production commences.
Of the total costs of production all but $1,000,000 have been paid in cash.
The joint venture manager called on the venturers to contribute a further $4,500,000 in total with each venturer contributing the appropriate portion according to their share in the joint venture.
What entries would be required to record the formation of the joint venture and the transactions for the year ended 30 June 2004?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 38Q 38
The term 'associate' as used in AASB 128 applies in which circumstances?
A) To jointly controlled operations.
B) To jointly controlled entities.
C) To jointly controlled operations where the contractual arrangements include profit sharing.
D) To jointly controlled entities where the form of the entity structure is not a trust and there is no profit sharing.
E) None of the given answers.
Free
Multiple Choice
Q 39Q 39
AASB 131 disclosure requirements for jointly controlled operations include:
A) The name and principal activities of each jointly controlled operation.
B) For each category of liabilities, the amount of obligation arising out of jointly controlled operations.
C) For each category of assets, the aggregate amount employed in jointly controlled operations.
D) The name and principal activities of each jointly controlled operation and for each category of assets, the aggregate amount employed in jointly controlled operations.
E) All of the given answers.
Free
Multiple Choice
Q 40Q 40
AASB 131 requires that contingent liabilities:
A) Arising from jointly controlled operations (only) be disclosed in the financial statements of the venturers regardless of whether or not they are parent entities and so prepare group accounts.
B) Arising from jointly controlled operations and jointly controlled entities be disclosed in the group accounts (only) of the venturers.
C) Arising from joint venture activities be aggregated with all other contingent liabilities.
D) Arising from either jointly controlled entities or jointly controlled operations be separately disclosed.
E) None of the given answers.
Free
Multiple Choice
Q 41Q 41
AASB 131 requires which of the following capital commitments to be separately disclosed?
A) Capital commitments arising from joint ventures including those that have been contracted jointly with other venturers.
B) Capital commitments arising from guarantees provided for the liabilities of the other venturers.
C) The share of capital commitments of jointly controlled entities for which the entity will be liable.
D) Capital commitments arising from joint ventures including those that have been contracted jointly with other venturers and the share of capital commitments of jointly controlled entities for which the entity will be liable.
E) All of the given answers.
Free
Multiple Choice
Q 42Q 42
AASB 131 requires a venturer to disclose its share of a jointly controlled entity's items, including:
A) Amount of impairment losses recognised in profit or loss.
B) Abnormal items (net of tax).
C) Income tax expense.
D) Amount of impairment losses recognised in profit or loss and income tax expense.
E) All of the given answers.
Free
Multiple Choice
Q 43Q 43
Items required to be disclosed in summary form for jointly controlled entities are required by AASB 131 to be:
A) Disclosed separately for each jointly controlled operation in which the reporting entity has an interest.
B) Provided in a 5-year comparative format.
C) Used as a basis for calculating key ratios specified in the Standard that are to be disclosed along with the summary statement.
D) Disclosed in aggregate for jointly controlled entities in which the reporting entity has an interest.
E) All of the given answers.
Free
Multiple Choice
Q 44Q 44
AASB 131 describes a jointly controlled entity as being differentiated from other types of entities (particularly associates) on the basis that:
A) The function of a joint venture is different to all other types of entities because it does not have a focus on generating a profit.
B) The contractual arrangement between the venturers establishes joint control over the economic activity of the entity.
C) The function of a jointly controlled entity is to achieve a tax simplification for the venturers so that accumulated joint venture losses may more easily be carried forward to offset future profits of the venturers.
D) The contractual arrangement between the venturers establishes joint and several liability for the liabilities of the jointly controlled entity.
E) None of the given answers.
Free
Multiple Choice
Q 45Q 45
Happy Ltd, Go Ltd and Lucky Ltd contractually form a jointly controlled operation on 1 July 2003. The three companies agree to contribute the following amounts of capital to the venture in the same proportion as their rights to the assets and outputs:
The funds are used on 1 July 2003 to purchase land for $15 million and equipment for $5 million. The balance of $10 million will be called on by the joint venture manager as required. Go Ltd and Lucky Ltd borrowed $10 million and $3 million respectively to finance their contributions to the joint venture.
The following information relates to the year ending 30 June 2004:
Total cost of production $6 million. These costs have been deferred in order to amortise them as production commences.
Of the total costs of production all but $1.5 million has been paid in cash.
The joint venture manager called on the venturers to contribute a further $8 million in total with each venturer contributing the appropriate portion according to its share in the joint venture (provided above).
What entries would be required to record the formation of the joint venture and the transactions for the year ended 30 June 2004?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 46Q 46
Sunny Ltd, Rain Ltd and Cloud Ltd contractually form a jointly controlled operation on 1 July 2005. The three companies agree to contribute the following amounts of capital to the venture in the same proportion as their rights to the assets and outputs:
The funds are used on 1 July 2005 to purchase land for a mining site for $65 million and machinery and equipment for $25 million. The balance of $30 million will be called on by the joint venture manager as required. Sunny Ltd and Cloud Ltd borrowed $10 million and $30 million respectively to finance their contributions to the joint venture.
The following information relates to the year ending 30 June 2006:
Total cost of production $15 million. These costs have been deferred in order to amortise them as production commences.
Of the total costs of production all but $3 million has been paid in cash.
The joint venture manager called on the venturers to contribute a further $20 million in total with each venturer contributing the appropriate portion according to their share in the joint venture (provided above).
What entries would be required to record the formation of the joint venture and the transactions for the year ended 30 June 2006?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 47Q 47
Rolling Ltd and Stones Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Rolling Ltd is to contribute land and production buildings and equipment. Stones Ltd agrees to contribute $21.2 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 50:50. The following information relates to the contribution by Rolling LtD.
What are the entries to record the formation of the jointly controlled operation in the books of Rolling Ltd and Stones Ltd and to record the revaluation of land and equipment?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 48Q 48
Tubular Ltd and Bells Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Tubular Ltd is to contribute land and production buildings and equipment. Bells Ltd agrees to contribute $5 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 60:40 (Tubular:Bells). The following information relates to the contribution by Tubular Ltd.
What are the entries to record the formation of the jointly controlled operation in the books of Tubular Ltd and Bells Ltd?
A)
B)
C)
D)
E) None of the given answers.
Free
Multiple Choice
Q 49Q 49
According to AASB 131, for a jointly controlled operation:
A) each venturer uses its own property, plant and equipment, and carries its own inventory, and incurs its own expenses. However liabilities are incurred in, and finance is raised in, the name of the joint venture, as these represent the joint venture's obligations.
B) each venturer uses its own property, plant and equipment, and carries its own inventory. However, the joint venture incurs the expenses. Also, liabilities are incurred in, and finance is raised in, the name of the joint venture, as these represent the joint venture's obligations.
C) each venturer uses its own property, plant and equipment. However, inventory is carried by the joint venture, which also incurs the expenses. Furthermore, liabilities are incurred in, and finance is raised in, the name of the joint venture, as these represent the joint venture's obligations.
D) each venturer uses its own property, plant and equipment, and carries its own inventory. It also incurs its own expenses and liabilities, and raises its own finance, which represent its own obligations.
E) all assets are held, liabilities and expenses incurred, and finance raisings done in, the name of the joint venture.
Free
Multiple Choice
Q 50Q 50
When accounting for a jointly controlled operation, and the venturer is preparing a consolidated financial report, which of the following consolidation adjustments are necessary?
A) Elimination of sales on inventory between the joint venture and the venturer.
B) Elimination of any management services fees paid by the joint venture to the venturer.
C) Elimination of the dividends paid by the joint venture to the venturer.
D) All of the given answers.
E) None of the given answers; no consolidation adjustments are required.
Free
Multiple Choice
Q 51Q 51
Which of the following statements about jointly controlled assets is not correct?
A) A venturer shall recognise in its financial statements, the share of liabilities incurred jointly with other venturers in relation to the joint venture.
B) A venturer shall recognise in its financial statements, any expenses it has incurred jointly in respect of its interest in the joint venture.
C) A venturer shall recognise in its financial statements, any liabilities it has incurred.
D) A venturer shall recognise in its financial statements, the share of jointly controlled classified according to the nature of the assets.
E) The 'normal' consolidation procedures (i.e., adjustments and eliminations) are applied where the venturer prepares consolidated financial statements.
Free
Multiple Choice
Q 52Q 52
Interest in jointly controlled entities, using the equity method of accounting, shall be classified as:
A) A current asset.
B) A non-current asset.
C) An expense.
D) A minority interest.
E) A part of share capital.
Free
Multiple Choice
Q 53Q 53
Disclosure requirements for jointly controlled operations, according to AASB 131, include which of the following:
A) Each asset contributed to the jointly controlled operation, separately disclosed by category.
B) Each liability incurred by the jointly controlled operation, separately disclosed by category.
C) An aggregated amount of contingent liabilities and other commitments relating to the jointly controlled operation.
D) Each asset contributed to the jointly controlled operation, separately disclosed by category and each liability incurred by the jointly controlled operation, separately disclosed by category.
E) Each asset contributed to the jointly controlled operation, separately disclosed by category; each liability incurred by the jointly controlled operation, separately disclosed by category; and an aggregated amount of contingent liabilities and other commitments relating to the jointly controlled operation.
Free
Multiple Choice
Q 54Q 54
Which of the following statements is in accordance with AASB 131 "Interests in Joint Ventures"?
A) Investors in jointly controlled entities account for their investment under equity method if their ownership percentage exceeds 20%.
B) The existence of a contractual arrangement distinguishes interests in joint ventures from investments in associates in which the investor has significant influence.
C) The contractual arrangement establishes joint control over the joint venture in such a way no single venturer is in a position to control the activity unilaterally.
D) Activities that have no contractual arrangement to establish joint control but in substance have established joint control are considered joint ventures for the purposes of AASB 131.
E) None of the given answers.
Free
Multiple Choice
Q 55Q 55
Which of the following statements is not accordance with AASB 131 "Interests in Joint Ventures"?
A) A venturer is required to recognise its interest in a jointly controlled assets using proportionate consolidation or the alternative method, equity accounting.
B) A venturer is required to recognise its interest in a jointly controlled entity using proportionate consolidation or the alternative method, equity accounting.
C) In jointly controlled operations, when the venturer presents consolidated financial statements no adjustments or other consolidation procedures are required because the assets, liabilities, income and expenses are recognised in the financial statements of the venturer.
D) In jointly controlled assets, when the venturer presents consolidated financial statements no adjustments or other consolidation procedures are required because the assets, liabilities, income and expenses are recognised in the financial statements of the venturer.
E) None of the given answers.
Free
Multiple Choice
Q 56Q 56
A venturer that recognises in its financial statements the assets that it controls, the liabilities it incurs, the expenses that it incurs, and its share of the income that it earns from the sale of goods or services by the joint venture is prescribed by AASB 131 for which type(s) of joint venture(s)?
A) Jointly controlled entities;
B) Jointly controlled assets;
C) Jointly controlled operations
D) Jointly controlled assets and jointly controlled operations.
E) Jointly controlled entities and jointly controlled assets;
Free
Multiple Choice
Q 57Q 57
On 30 June 2013, Perkins Ltd, Thorpe Ltd and Hackett Ltd entered into a joint venture operation to produce apparel and related products for the Australian national swimming team. The venturers equally share in output and costs. On the same date, the recorded amounts of each venturer's contributions are as follows:
Assume that agreed values equal recoverable amount and no revaluations have occurred.
Which of the following combinations correctly indicates the effects on the statement of financial position and statement of financial performance of Perkins Ltd, respectively, after processing the journal entries to account for this joint venture arrangement?
A) No change; No change;
B) Asset increase; Profit increase
C) Asset decrease; Profit decrease
D) Asset increase; Profit increase
E) Asset decrease; Profit decrease
Free
Multiple Choice
Q 58Q 58
On 30 June 2013, Perkins Ltd, Thorpe Ltd and Hackett Ltd entered into a joint venture operation to produce apparel and related products for the . The venturers equally share in output and costs. On the same date, the recorded amounts of each venturer's contributions are as follows:
Assume that agreed values equal recoverable amount and no revaluations have occurred.
Which of the following combinations correctly indicates the effects on the statement of financial position and statement of financial performance of Thorpe Ltd, respectively, after processing the journal entries to account for this joint venture arrangement?
A) No change; No change;
B) Asset increase; Profit increase
C) Asset decrease; Profit decrease
D) Asset increase; Profit increase
E) Asset decrease; Profit decrease
Free
Multiple Choice
Q 59Q 59
On 30 June 2013, Perkins Ltd, Thorpe Ltd and Hackett Ltd entered into a joint venture operation to produce apparel and related products for the Australian national swimming team. The venturers equally share in output and costs. On the same date, the recorded amounts of each venturer's contributions are as follows:
Assume that agreed values equal recoverable amount and no revaluations have occurred.
Which of the following combinations correctly indicates the effects on the statement of financial position and statement of financial performance of Hackett Ltd, respectively, after processing the journal entries to account for this joint venture arrangement?
A) No change; No change;
B) Asset increase; Profit increase
C) Asset decrease; Profit decrease
D) Asset increase; Profit increase
E) Asset decrease; Profit decrease
Free
Multiple Choice