Go Ltd,For Ltd and It Ltd Contractually Form a Joint

question 53

Multiple Choice

Go Ltd,For Ltd and It Ltd contractually form a joint operation on 1 July 2013 to construct an oil well to extract oil that each of the joint operators 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: $$\begin{array} { | l | r | r | } \hline \text { Go Ltd } & \$ 25000000 & 50 \% \\\hline \text { For Ltd } & \$ 15000000 & 30 \% \\\hline \text { It Ltd } & \underline{\$ 10000000} & \underline { 20 \% } \\\hline &\underline{ \$ 50000000 }& \underline{100 \% }\\\hline\end{array}$$ The funds are used on 1 July 2013 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 2014:
Total cost of production of $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 joint operators to contribute a further $4 000 000 in total with each joint operator 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 2014?

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Definitions:

Trade-In Allowance

The value subtracted from the price of a new item when an old item is given as part of the deal.

Book Value

The net value of an asset or company calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

Accumulated Depreciation

The total amount of depreciation expense that has been charged to a fixed asset since it was in service, reducing its book value.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, reflecting the loss of value over time.