A 60:40 Joint Operation Was Commenced Between Two Participants

question 3

Multiple Choice

A 60:40 joint operation was commenced between two participants. Participant One contributed cash of $60 000, and Participant Two agreed to provide technical services to the joint operation over a period of two years. The fair value of the services was determined to be $40 000 and the cost to provide the services was estimated to be $35 000 Using the line-by-line method of accounting, participant Two would record:

---

Definitions:

Work in Process Inventory

An account on the balance sheet that represents the cost of raw materials, labor, and overhead for products that are in production but not yet complete.

Equivalent Costs

The concept in cost accounting that represents the cost of materials, labor, and overheads in partially finished goods, expressed in terms of fully finished goods.

Conversion Cost

Conversion Cost refers to the combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished products.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all items available for sale during the period.