JOINT PRODUCTION OPERATIONS (20 marks) Alpha Ltd, Beta Ltd and Gamma Ltd entered into an agreement to form a joint operation on 1 July 2018 to manufacture zenthium battery. The battery was the result of many years of research by Alpha Ltd and for which a patent has been registered. In setting up the joint operation, the operators agreed on the following initial contributions of assets. Fair value Remaining life (years) Operators Alpha Ltd Beta Ltd Gamma Ltd Assets Patent Equipment Cash Cost ($) 250,000 400,000 200,000 Carrying amount ($) 200,000 250,000 200,000 500,000 300.000 200,000 25 10 Additional information: 1. The agreement specifies that the operators share control of the operation and all the assets of the operation are held by the operators as tenants in common. 2. The operators also agreed to share all costs and output in accordance with the ratio of their initial contribution 3. As Alpha was the main driver behind this endeavour, the operators agreed that Alpha Ltd is to be the manager of the joint operation and will receive a management fee for this role For the year ended 30 June 2019. the following financial statements were prepared by the joint operation manager Statement of financial position as at 30 June 2019 Assets $ $ Cash 50,000 Supplies 24,000 Inventory 106.000 Equipment 400,000 Patent 500,000 1,080,000 Liabilities Accounts payable 280.000 280,000 Net assets 800,000 Interest of joint operators 400,000 Beta Ltd 240,000 Gamma Ltd 160,000 Alpha Ltd Interest of joint operators Alpha Ltd Beta Ltd Gamma Ltd 400,000 240,000 160,000 800,000 Cost of production statement for the year ended 30 June 2019 $ Wages 75,000 Supplies 65,000 Less: supplies on hand 24,000 41,000 Utilities 90,000 Management fee 100,000 306,000 Less: output distributed to operators 200.000 Output on hand 106,000 By 30 June 2019, Alpha Ltd had sold 60% of the battery it received from the joint operation to the local market for a price of $98,000 Required: A. Prepare the journal entry required to record the initial investment by Alpha Ltd in the joint operation. (2 marks) B. Prepare the journal entries recorded by Alpha Ltd at 30 June 2019 to account for its investment in the joint operation, including the sale of the output received from the joint operation. (14 marks) C. Explain the difference between tenants in common and joint tenants in the context of interests in joint arrangements. (4 marks)