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?
A) DR Depreciation expense $240 000
B) DR Depreciation expense $120 000
C) DR Investment in joint operation $240 000
D) DR Assets in joint operation $120 000

Question

Quizplus · Accepted Answer

Each joint operator will only recognize depreciation expense in their own records for their 50% share of the equipment. Therefore, the total amount of depreciation expense to be recognized is $1,200,000 / 5 years = $240,000 per year. Each joint operator will recognize depreciation expense of $240,000 x 50% = $120,000 in their own records. Therefore, the correct entry is DR Depreciation expense $120,000.

A Joint Operation Holds Equipment with a Carrying Amount of $1