On 1 July 2016, Tally Ltd and Cooktown Ltd signed a contractual agreement to form a joint operation for the manufacture of kitchen products. The agreement provided that Cooktown Ltd would contribute $240000 in cash while Tally Ltd would provide $40000 in cash and manufacturing equipment currently held by Tally Ltd that had a fair value of $200000. The equipment was currently recorded by Tally Ltd at a carrying amount of $180000, net of accumulated depreciation of $30000.

The agreement provided that each operator would receive half of the output of the joint operation. Depreciation on equipment is charged at 20% p.a. on cost, based on the expected pattern of use in the joint operation.

Financial information provided by the joint operation at 30 June 2017 was as follows.

Statement of Financial Position (partial)

Cash $56 000 Accounts payable $30 000

Raw materials 32 000 Accrued wages 26 000

Inventory (undistributed) 16 000 Loan 200 000

Work in progress 32 000

Equipment 400 000

Accumulated depreciation (80 000

$456 000 $256 000

Cash Receipts and Payments

Payments Receipts

Contributions $280 000

Loan 200 000

Purchase of raw materials $64 000

Wages 96 000

Purchase of equipment (2 July 2016). 200 000

Other expenses 64 000

$424 000 $480 000

Costs Incurred

Wages $112 000

Raw materials 72 000

Overheads including depreciation on equipment 144 000

328 000

Cost of inventory (296 000)

Work in progress at 30 June 2017 $32 000

Required

Prepare the journal entries in the records of Cooktown Ltd and for Tally Ltd in relation to the joint operation for the year ending 30 June 2017.