Question)

Beers Ltd, Musson Ltd and Tiffany's Ltd entered into a joint operation on 1 July 2018 to explore and mine gold in Western Australia. The economic life of the joint operation is 10 years. The joint operation agreement states that each operator will contribute the following assets to establish the joint operation and to provide for initial running costs.The fair value of the amounts contributed is shown in the following table:

From Beers Ltd (20%):

Deferredexploration and evaluation expenditure: 1,000,000

PPE: 500,000

Cash: 500,000

Total: 2,000,000

From Musson Ltd (30%):

Cash: 3,000,000

From Tiffany's Ltd (50%):

PPE: 3,000,000

Cash: 2,000,000

Total: 5,000,000

The contractual arrangement is that the operators divide extracted gold in proportion to their contributions to establish the joint operation, that is, the ratio 20:30:50. The operators meet the costs of production in the same proportions.

An external manager is appointed to manage the project and receives a management fee of $100,000 annually. The cash contributed by the operators is used by the manager to purchase additional property plant and equipment at a cost of $4,000,000 from independent third parties.

The deferred exploration and evaluation expenditure had been recorded in the books of Beers Ltd at $600,000. The property plant and equipment contributed to the joint operation by Beers Ltd was originally purchased for $1,500,000 with accumulated depreciation of $700,000 at 1 July 2018.This asset is considered impaired. Beers Ltd decides not to revalue its remaining interest in the non-current assets contributed to the joint operation. The PPE contributed by Tiffany's was new and recorded at $3,000,000.

Beers Ltd sold 80% of its gold for $200,000.

The following was extracted from the accounting records kept by the joint operation manager for the year ending 30 June 2019.

Joint operation balance sheet extract at 30 June 2019

Cash and cash equivalents: 400,000

Supplies: 100,000

Undistributed gold: 666,667

Deferred exploration and evaluation expenditure: ,000,000

Property Plant and Equipment 7,500,000

Accounts payable: (500,000)

Net assets 9,166,667

Joint operation cash receipts and payments for the year ended 30 June 2019

Cash contributions from operators 5,500,000

Less: Cash payments

Plant and Equipment (4,000,000)

Wages (500,000)

Materials and supplies (350,000)

Utilities (150,000)

Management fee (100,000)

Cash balance at the end of the period 400,000

Cost of production statement for the year ended 30 June 2019

Wages paid 500,000

Wages payable 200,000

Total: 700,000

Materials and supplies paid: 350,000

Materials and supplies payable 150,000

Less: Materials and supplies on hand (100,000)

Total: 400,000

Utilities: 300,000

Management fee 100,000

Total production cost 1,500,000

Less: Undistributed Gold 666,667

Cost of gold distributed 833,333

Required:

Prepare the required entries for Beers Ltd for the year ended 30 June 2019.