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Proaid, Worldhelp and Global Action are three incorporated charities. All three provide ongoing assistance to communities in developing countries. Recently, a benefactor donated the patent

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Proaid, Worldhelp and Global Action are three incorporated charities. All three provide ongoing assistance to communities in developing countries. Recently, a benefactor donated the patent rights to a revolutionary water micro-filter to Proaid on the condition that the charity use the patent to provide clean water in needy communities. The water filter costs little to manufacture, can be reused many times, and can produce safe drinking water even from highly polluted water sources. Proaid does not possess the resources to develop the water filter on its own, so after discussions with Worldhelp and Global Action, the three charities sign an agreement to form a joint operation, Cleancup, on 1 July 2017, with the aim of setting up the manufacture and distribution of the water filters. Proaid agrees to contribute the patent rights, Worldhelp will contribute equipment and factory space, and Global Action will contribute cash. Worldhelp also agrees to act as joint operation manager to oversee the day-to-day manufacturing operations for an annual fee of $120,000. The agreement is that all costs will be shared equally by the three joint operators. The water filters will be manufactured and then distributed equally between the operators for sale or donation. The financial and record keeping management are the responsibility of the joint operation manager. However, each operator will determine and separately charge their own periodic depreciation and amortisation expense. Each operator guarantees further cash contributions to the joint venture, as required. The initial contributions to the Cleancup joint operation are as follows: Joint operator Asset Book value at 1 July 2017 Fair value contributed Proaid Paten $800,000 (zero accumulated $2,000,000 amortisation Worldhelp Equipment $800,000 (cost $1,000,000, $800,000 accumulated depreciation $200,000) Factory $700,000 (cost $1,200,000, $1,200,000 accumulated depreciation $500,000) Global Action | Cash $2,000,000 $2,000,000 The patent has a finite economic life of 10 years with a zero residual value at 1 July 2017. The equipment and factory both have a remaining economic life of 8 years at 1 July 2017, with a zero residual value. All three joint operators use the straight-line method of depreciation and amortisation. Both Proaid and Worldhelp have chosen not to revalue their remaining interest in the non-current assets contributed to the Cleancup joint venture.The financial statements prepared by the joint operation manager for the year ended 30 June 2018 are as follows: Cleancup Joint Operation Statement of Financial Position at 30 June 2018 $ S Cash and cash equivalents 460,000 Operators' interest 4,209,000 WIP inventories 162,000 Patent 2,000,000 Trade payables 370,000 Equipment 800,000 Accrued wages 43,000 Factory 1,200,000 Total 4,622,000 4,622,000 Cleancup Joint Operation Statement of Cash Receipts and Payments Year Ended 30 June 2018 $ Contribution received 1 July 2017 2,000,000 Less cash payments: Wages and salaries (630,000) Supplies and materials 652,000) Manufacturing overheads 300,000) Management fees (120,000) Cash balance at 30 June 2018 298,000 Cleancup Joint Operation Statement of Costs of Production Year Ended 30 June 2018 $ Wages and salaries 673.000 Supplies and materials 790.000 Manufacturing overheads 370.000 Management fees 120,000 WIP inventory (162,000) Total Costs Incurred 1,791,000 During the first year, the joint operation produced a range of different water filters. Each operator has received and sold 100% of their share of this output by the end of the period. Proaid's share of output was sold for $1,200,000, Worldhelp sold their share of output for $1,300,000, and Global Action sold their share of output for $800,000. Required: Prepare the general journal entries for the year ended 30 June 2018 for Proaid in respect of the Cleancup joint operation, assuming no entries have been made for the year ended 30 June 2018. Proaid uses the line-by-line method to account for its interest in the joint operation, in accordance with AASB 11: Joint Arrangements. (Please work in whole dollars. Small rounding errors will not be penalised)

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