A Ltd and B Ltd Have Established the AB Joint

question 12

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 A 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 $54 000.
• C) Credit against the plant of $120 000.
• D) Credit against the gain on sale of plant of $18 000.

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