Solved

On 1 July 20X0, Abel Ltd Entered into a 50:50

question 21

Multiple Choice

On 1 July 20X0, Abel Ltd entered into a 50:50 joint operation with Tasman Ltd to develop an oil field off the south coast of Tasmania. Each operator's initial contribution was $2 million. Abel contributed $1 million cash and equipment with a fair value of $1 million and a book value of $500 000. Tasman's contributed $2 million cash.
Additional information
Production costs for the JO for the year ended 30 June 20X1 were:

The remaining useful life of the equipment contributed by Abel is 5 years.
Tasman is responsible for the day to day management of JO and has recognised the management fee received during the year as revenue. The costs of providing these management services to JO was $225 000.
Tasman has sold all of the oil distributed to it and Abel has sold 50% of the oil distributed to it by 30 June 20X1.
An extract of JO's balance sheet at 30 June 20X1 shows:

Tasman Ltd's initial contribution entry will include a debit to the cash in JO account of:

Determine the impact of inventory turnover and receivables turnover on the firm's operational efficiency.

Calculate liquidity ratios and understand their significance in evaluating a firm's short-term financial health.

Analyze and interpret the time it takes for a firm to turn inventory into sales and collect receivables.

Identify the components of the Du Pont analysis and their role in assessing firm performance.

Definitions:

Second Bank

Refers to the Second Bank of the United States, a federal institution that served as the country's central bank until its charter expired in 1836.

Profit-Making

The primary goal of most businesses and enterprises, which involves generating revenue in excess of its expenses to gain financial profit.

William Henry Harrison

The ninth President of the United States, whose term in 1841 was famously brief, lasting just one month before he died of pneumonia.

American System

An economic plan that emphasized high tariffs, a national bank, and federal subsidies for roads, canals, and other infrastructure projects to foster national growth and unity in the early 19th century.