When eliminating any unrealised profit arising when a joint operator provides services to a joint operation,the profit is eliminated against:
A)the investment in the joint operation.
B)fee revenue.
C)work in progress,finished goods and other inventory related accounts.
D)cash in JO.

Question

Quizplus · Accepted Answer

When a joint operator provides services to a joint operation, any unrealized profit must be eliminated. This profit is recorded on the income statement as fee revenue but has not yet been realized or collected. When eliminating this profit, it should be eliminated against work in progress, finished goods, or other inventory-related accounts as these accounts represent the assets that were produced or impacted by the provision of the service, and therefore the unrealized profit should be eliminated against these accounts. The investment in the joint operation or cash in the joint operation are not affected by the elimination of unrealized profit from the provision of services.

When Eliminating Any Unrealised Profit Arising When a Joint Operator