A 50:50 Joint Operation Was Commenced Between Two Participants $\begin{array}{llll}\text { DR } & \text { Building in JO } & \$ 40,000 \\ \text { CR } & \text { Building } & \$ 40,000\end{array}$

question 17

Multiple Choice

A 50:50 joint operation was commenced between two participants. Participant One contributed cash of $50 000, and Participant Two contributed a Building with a fair value of $50 000 and a carrying amount of $40 000. Using the line-by-line method of accounting, Participant Two would record:

• A) \(\begin{array}{llll}
• \text { DR } & \text { Building in JO } & \$ 40,000 \\
• \text { CR } & \text { Building } & \$ 40,000
• \end{array}\)
• B) \(\begin{array} { l l l l }
• \text { DR } & \text { Building in JO } & \$ 50,000 & \\
• & \text { CR } & \text { Building } & \$ 40,000 \\
• & \text { CR } & \text { Gain on sale of building } & \$ 10,000
• \end{array}\)
• C) \(\begin{array}{lll}\text { DR}&\text { Investment in joint operation } & \$ 50,000\\
• \text { CR } & \text { Building } & \$ 40,000 \\
• \text { CR } & \text { Gain on sale of building } & \$ 10,000
• \end{array}\)
• D)\(\begin{array}{lll}
• \text { DR } & \text { Cash in JO } & \$ 25,000 \\
• \text { DR } & \text { Building in JO } & \$ 20,000\\
• \text { CR } & \text { Building } & \$ 40,000 \\
• \text { CR } & \text { Gain on sale of building } & \$ 10,000
• \end{array}\)

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Definitions:

Cash Flow Problems

Situations where a business struggles to manage the timing and amounts of cash inflows and outflows, affecting its ability to meet financial obligations.

Federal Regulations

Laws established by federal agencies that dictate the conduct of individuals, businesses, and other entities.

Net Income

The total revenue minus total expenses, representing the profit or loss over a specific period.

Interest-Bearing Note

A debt instrument that pays interest to the holder at a fixed or variable rate until it matures.