FACULTY OF COMMERCE, MANAGEMENT AND LAW Investment in Waverly Ltd (Waverly) The management of Westlife has approached Jamie Ltd (Jamie) to form a partnership to manufacture sporting goods from 1 January 2021. A separate entity Waverly, has been formed. Each entity will have a 50% shareholding in Waverly and Waverly is a separate legal entity. The companies have signed an agreement that outlines the activities of the arrangement and establishes a joint operating committee. A representative from each company sits on the joint operating committee and decisions require unanimous consent. Westlife and Jamie will each be responsible for their own area of expertise. The companies carry out different parts of the manufacturing process, each using its own resources and expertise in order to manufacture and distribute the goods jointly. The two companies share the revenues from sales and jointly incur expenses. The revenues and common costs are shared as contractually agreed in the agreement. A separate bank account is established through which revenue will be received and shared costs will be paid. The bank account is in the name of both companies. Each company incurs their own separate costs such as labor costs, manufacturing costs, supplies, inventory of unused parts and work in progress and recognizes their separately incurred costs fully. Westlife and Jamie have committed to purchase Waverly's entire product line. The products must therefore to the quality control of both Westlife and Jamie. Any cash shortages that the partnership may incur will be financed by both parties in accordance with their shareholding. Required: In respect of transaction 1 Marks Calculate the sick leave related liability as at 31 December 2019 3 Prepare journal entries for the year 31 December 2020 and 7 January 2021 12 15 15 i. Provide a memorandum to the management of Westlife, dealing with the following questions: Is the agreement with Jamie a joint arrangement? 14 15 ii. If yes, what is the classification thereon and if not, what is it? 1 Page 18 of 27 FACULTY OF COMMERCE, MANAGEMENT AND LAW Communication skills: logical flow conclusion and format 30