The Following Information Relates to Questions

question 20

Multiple Choice

The following information relates to Questions
A Ltd and B Ltd have established the AB Joint Operation. A Ltd has a 60% interest in the joint operation and B Ltd has a 40% interest.

A Ltd contributed an asset with a carrying amount of $90,000 and a fair value of $120,000 and B Ltd agreed to provide technical services to the joint operation over the first two years of operations. The fair value of the technical services was agreed to be $80,000 and the cost to provide the services was estimated at $65,000 at the inception of the joint operation.

-As part of its initial contribution entry B Ltd will record a:

• A) Debit against the Services Receivable in JO account of $32,000;
• B) Debit against the Plant in JO account of $36,000;
• C) Credit against the Obligation to JO of $39,000;
• D) Credit against the Gain on Provision of Services of $6,000.

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Definitions:

Rate Of Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Supply And Demand

The relationship between the quantity of a commodity available and the desire for that commodity, determining its market price.

Interest Rate

The proportion of a total amount of money that is levied for borrowing it, commonly stated as a yearly percentage rate.

Loanable Funds

The money available for borrowing, which comes from savings and is demanded by borrowers for investment.