On January 1, Year 6, HD Ltd., a building supply company, JC Ltd., a construction company, and Mr. Saeid, a private investor, signed an agreement to carry out a joint operation under the following terms and conditions:

• JC would buy and renovate homes on behalf of the three parties to the joint operation in addition to its other construction activities. It would arrange a first mortgage on the property when purchasing the home.

• HD would supply all of the construction materials at a reduced markup from its regular sales.

• Mr. Saeid would guarantee the payment of the mortgage and would lend money to JC for the down payment on the purchase of the property and to finance the cost of materials and labour during the renovation. The loans would be interest free with no monthly payments and would be repayable out of the proceeds on sale of the property.

• All three parties would have a one-third interest in the properties under renovation and cash for joint properties, would be responsible for one-third of the mortgage payable and loan payable to Mr. Saeid and would receive one-third of the profit from sale of the renovated properties. 

• JD would pay the other two joint operators their share of the profit on each property within 30 days of the closing date for the sale of the property.

• All three parties must agree on major operating and financing decisions with respect to joint operations of the renovated houses.

Condensed financial statements for HD Ltd. and JC Ltd. for the year ended December 31, Year 6, were as follows:

Additional information:

• During Year 6, HD had sales of $102,000 to JC at a markup of 20 percent of selling price. On December 31, Year 6, the property under renovation included supplies purchased from JC of $30,000.

• HD reports its share of income from the joint operations when it is received from JC. 

• Both companies pay income tax at a rate of 40% on taxable income. 

Required:

Prepare corrected Year 6 financial statements for HD in accordance with IFRS 11.

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STATEMENTS OF FINANCIAL POSITION At December 31, Year 6 Assets JC Ltd. $ 360,000 HD Ltd. Joint properties under renovation Inventory Cash for joint properties Other assets 460,000 36,000 1,200,000 728,000 $1,660,000 $1,124,000 HD Ltd. JC Ltd. Shareholders' Equity and Liabilities $ 500,000 $ 200,000 Ordinary shares Retained earnings Mortgage payable Loan payable to Mr. Saeid 220,000 300,000 270,000 126,000 Other liabilities 940,000 228,000 $1,660,000 $1,124,000 INCOME STATEMENTS For the year ended December 31, Year 6 Sales-joint operations $ 621,000 Sales-other 1,700,000 1,529,000 Income from joint operations 40,000 1,740,000 2,150,000 474,000 Cost of goods sold-joint operations Cost of goods sold-other Selling expenses-joint operations Payment to other venturers Other expenses 1,176,000 1,244,000 27,000 80,000 169,000 360,000 Income tax expense 60,000 2,054,000 80,000 1,616,000 Profit $ 124,000 96,000