On 1 July 2023 Perth Ltd Entered into a 50:50

question 10

Multiple Choice

On 1 July 2023 Perth Ltd entered into a 50:50 joint operation with Hobart Ltd to develop robotic home appliances. Each operator's initial contribution was $1 million. Perth contributed $500 000 cash and equipment with a fair value of $500 000 and a book value of $400 000. The remaining useful life of the equipment contributed by Perth is 5 years. Tasmania Ltd contributed $1 million cash. Additional information:
An extract of the joint operation's balance sheet at 30 June 2024 shows:
$\begin{array}{lr}\text { Assets }&\$\\\text { Cash } & 290,000 \\\text { Raw materials } & 80,000 \\\text { Work in progress } & 460,000 \\\text { Finished goods inventories } & 100,000 \\\text { Equipment } & 500,000 \\\text { less: Accumulated depreciation } & -100,000\\\text { Total Assets }&1,330,000\\\text { Liabilities }\\\text { Accrued wages } & 40,000 \\\text { Accounts payable } & 140,000 \\\text { Total Liabilities } & \$ 180,000 \\\text { Net Assets } & \mathbf{1 , 1 5 0 , 0 0 0}\end{array}$ Production costs for the joint operation for the year ended 30 June 2024 were:
$\begin{array}{lr}\text { Raw materials } & \$ 420,000 \\\text { Wages } & 340,000 \\\text { Depreciation } & 100,000 \\\text { Overhead expenses } & 550,000\\\text { Total production costs } & 1,410,000 \\\text { Less Cost of inventories } & -950,000 \\\text { Work in Progress at 30 June 2024 } & \$ 460,000\end{array}$ Cash receipts and payments for the year ended 30 June 2024 were:
$\begin{array}{lr}&\text { Payments }&\text { Receipts }\\\text { Contributions }&&\$1,500,000\\\text { Wages } & \$ 300,000 \\\text { Raw materials } & 360,000 \\\text { Overhead expenses } & 550,000\\&\$1,210,000&\$1,500,000\end{array}$ The following entries will form part of Perth Ltd's initial contribution entry except for:

• A) DR Cash in JO account $750 000.
• B) DR Equipment in JO account $250 000.
• C) CR Cash $500 000.
• D) CR Gain on equipment $50 000.

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Definitions:

Conservation

The act of preserving, protecting, or restoring the natural environment and wildlife to prevent depletion or destruction.

Barrier

An obstacle that prevents movement or access, or a circumstance or issue that prevents people from understanding each other or from achieving their goals.

Preoperational Period

A stage in Jean Piaget's theory of cognitive development (approximately ages 2-7) during which children begin to engage in symbolic play and struggle with logic.

Reality

The quality or state of being actual or true and the totality of all things possessing actuality, existence, or essence.