A Ltd and B Ltd Have Established the AB Joint

question 15

Multiple Choice

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 $6000.

Understand the concept and purpose of the Accumulated Depreciation account.

Identify the types of assets that are subject to depreciation and the exceptions.

Distinguish between operating and capital leases and their impact on financial statements.

Recognize the indicators and accounting treatment of asset impairment.

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