Have Ltd, Ay Ltd and Go Ltd Contractually Form a Jointly

question 11

Multiple Choice

Have Ltd, Ay Ltd and Go Ltd contractually form a jointly controlled operation on 1 July 2003 to undertake a bauxite mining venture. 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 mining site for $50 million and drilling and other heavy machinery for $25 million. The balance of $25 million will be called on by the joint venture manager as required.
The following information relates to the year ending 30 June 2004:
Total cost of production $10,000,000. These costs have been deferred in order to amortise them as mining commences.
Of the total costs of production all but $3,000,000 have been paid in cash.
The joint venture manager called on the venturers to contribute a further $12,000,000 in total with each venturer contributing the appropriate portion according to their share in the joint venture (provided above) .
What entries would be required to record the formation of the joint venture and the transactions for the year ended 30 June 2004?

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Definitions:

Recorded Incorrectly

Refers to transactions or entries that have been documented in an erroneous manner within the financial records.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.

Short-term Investments

Investments typically held for one year or less, intended for quick conversion to cash without a significant risk of loss.