Go Ltd, for Ltd and It Ltd Contractually Form a Jointly

question 10

Multiple Choice

Go Ltd, For Ltd and It Ltd contractually form a jointly controlled operation on 1 July 2003 to construct an oil well to extract oil that each of the venturers will refine. The three companies agree to contribute the following amounts of capital to the venture in the same proportion as their rights to the assets and outputs:

The funds are used on 1 July 2003 to purchase the land for $20 million and a rig and other equipment for $10 million. The balance of $20 million will be called on by the joint venture manager as required. For Ltd and It Ltd borrowed $5 million and $4 million respectively to finance their contributions to the joint venture.
The following information relates to the year ending 30 June 2004:
Total cost of production $3,500,000. These costs have been deferred in order to amortise them as the production of oil commences.
Of the total costs of production all but $500,000 have been paid in cash.
The joint venture manager called on the venturers to contribute a further $4,000,000 in total with each venturer contributing the appropriate portion according to their share in the joint venture (provided above) .
Assume that the necessary entries have been made to record the formation of the joint venture. What entries would be required to record the transactions for the year ended 30 June 2004?

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