On 1 July 2023 Perth Ltd entered into a 50:50 joint operation with Tasmania Ltd to develop robotic home appliances. Each operator’s initial contribution was $1 million. Perth contributed $500 000 cash and equipment with a fair value of $500 000 and a book value of $400 000. The remaining useful life of the equipment contributed by Perth is 5 years. Tasmania Ltd contributed $1 million cash.

Additional information:

An extract of the joint operation’s balance sheet on 30 June 2024 shows:

Assets	$
Cash	290,000
Raw materials	80,000
Work in progress	460,000
Finished goods inventories	100,000
Equipment	500,000
less: Accumulated depreciation	-100,000
Total Assets	1,330,000
Liabilities
Accrued wages	40,000
Accounts payable	140,000
Total Liabilities	$180,000
Net Assets	1,150,000

Production costs for the joint operation for the year ended 30 June 2024 were:

Raw materials	$420,000
Wages	340,000
Depreciation	100,000
Overhead expenses	550,000
Total production costs	1,410,000
Less Cost of inventories	-950,000
Work in Progress at 30 June 2024	$460,000

Cash receipts and payments for the year ended 30 June 2024 were:

	Payments	Receipts
Contributions		$1,500,000
Wages	$300,000
Raw materials	360,000
Overhead expenses	550,000
	$1,210,000	$1,500,000

3. The following entries will form part of Perth Ltd’s initial contribution entry except for:

a. DR Cash in JO account $750 000.

b. DR Equipment in JO account $250 000.

c. CR Cash $500 000.

d. CR Gain on equipment $50 000.

4. Tasmania Ltd’s initial contribution entry will include a debit to the Cash in JO account of:

a. $750 000.

b. $1 000 000.

c. $1 500 000.

d. $2 000 000.

5. By 30 June 2024, Tasmania Ltd has sold all of the robotic appliances distributed to it by the joint operation and Perth has sold 60% of its distribution of robotic appliances. The value of these inventories sold by Perth Ltd is:

a. $255 000

b. $285 000

c. $425 000

d. $475 000