Hi tutor,

Please do WRITE DOWN EVERY JOURNAL ENTRY WITH A NARRATIVE as steps to get to the outcome, the outcome without such entries will NOT be accepted!

The question is about joint operation:

Thanks

1. A Ltd. B Ltd and C Ltd commenced a joint operation on 1 January 2020. A Ltd contributed a license with a fair value of $2.000.000. B Ltd and C Ltd each contributed $3,000,000 in cash. The book value of the license in the books of A Ltd as at the date of transfer was $1,400,000. A Ltd does not revalue the license subsequent to the transfer to the joint operation. The license had a remaining life of 3 years as at the commencement of the joint operation. The residual value of the license at the end of the useful life is $ 0. Output from the joint operation is shared in the ratio of the contributions (25%, 37.5% and 37.5% for A Ltd, B Ltd and C Ltd respectively). The contractual arrangement establishes that each joint operator shares interest in assets in proportion to their initial contributions. B Ltd uses the straight-line method to amortize intangibles. The company income tax rate is 30%. Required: Calculate the carrying amount of the asset in the accounts of B Ltd at31 December 2020 2. A Ltd. Ora Ltd and D Ltd commenced a joint operation on 1 July 2016. A Ltd contributed a patent with a fair value of $2.100.000 and cash of $900.000. The patent had a remaining life of 8 years as at the commencement of the joint operation. Ora Ltd and D Ltd each contributed $3,000,000 in cash. Output from the joint operation is shared equally between the three joint operators. The book value of the patent in the books of A Ltd as at the commencement of the joint operation was $800,000. There is not an active market for the patent and A Ltd does not revalue the patent subsequent to the transfer to the joint operation. Required: The contribution journal entry in the books of A Ltd on 1 July 2016 must include: A. Cr Gain on sale of patent $866,667 B. Cr Gain on sale of patent $650,000 C. Cr Cash $3,000,000 D. Dr Gain on sale of patent $433,333 E. None of the other answer options is true