Alpha Ltd, Beta Ltd and Gamma Ltd entered into an agreement to form a joint operation...

   

Transcribed Image Text:

Alpha Ltd, Beta Ltd and Gamma Ltd entered into an agreement to form a joint operation on 1 July 2018 to manufacture zenthium battery. The battery was the result of many years of research by Alpha Ltd and for which a patent has been registered. In setting up the joint operation, the operators agreed on the following initial contributions of assets. Carrying tamount ($) 200,000 250,000 200,000 Fair value Remaining life (years) Cost ($) 250,000 400,000 200,000 (S) 500,000 300,000 200,000 Assets Operators Alpha Ltd Beta Ltd Patent 25 10 Equipment Ltd Cash Gam Additional information: 1. The agreement specifies that the operators share control of the operation and all the assets of the operation are held by the operators as tenants in common. 2. The operators also agreed to share all costs and output in accordance with the ratio of their initial contribution. 3. As Alpha was the main driver behind this endeavour, the operators agreed that Alpha Ltd is to be the manager of the joint operation and will receive a management fee for this role. For the year ended 30 June 2019, the following financial statements were prepared by the joint operation manager. Statement of financial position as at 30 June 2019 Assets Cash 50,000 24,000 Supplies Inventory Equipment 106,000 400,000 Patent 500,000 1,080,000 Liabilities Accounts payable Net assets 280,000 280.000 800.000 Interest of joint operators Alpha Ltd Beta Ltd 400,000 240,000 160,000 800.000 Gamma Ltd Cost of production statement for the year ended 30 June 2019 75,000 Wages Supplies Less: supplies on hand 65,000 24.000 41,000 90,000 100,000 306,000 200,000 106.000 Utilities Management fee Less: output distributed to operators Output on hand By 30 June 2019, Alpha Ltd had sold 60% of the battery it received from the joint operation to the local market for a price of $98,000. Required: A. Prepare the journal entry required to record the initial investment by Alpha Ltd in the joint operation. (2 marks) B. Prepare the journal entries recorded by Alpha Ltd at 30 June 2019 to account for its investment in the joint operation, including the sale of the output received from the joint operation. (14 marks) C. Explain the difference between tenants in common and joint tenants in the context of interests in joint arrangements. (4 marks) Alpha Ltd, Beta Ltd and Gamma Ltd entered into an agreement to form a joint operation on 1 July 2018 to manufacture zenthium battery. The battery was the result of many years of research by Alpha Ltd and for which a patent has been registered. In setting up the joint operation, the operators agreed on the following initial contributions of assets. Carrying tamount ($) 200,000 250,000 200,000 Fair value Remaining life (years) Cost ($) 250,000 400,000 200,000 (S) 500,000 300,000 200,000 Assets Operators Alpha Ltd Beta Ltd Patent 25 10 Equipment Ltd Cash Gam Additional information: 1. The agreement specifies that the operators share control of the operation and all the assets of the operation are held by the operators as tenants in common. 2. The operators also agreed to share all costs and output in accordance with the ratio of their initial contribution. 3. As Alpha was the main driver behind this endeavour, the operators agreed that Alpha Ltd is to be the manager of the joint operation and will receive a management fee for this role. For the year ended 30 June 2019, the following financial statements were prepared by the joint operation manager. Statement of financial position as at 30 June 2019 Assets Cash 50,000 24,000 Supplies Inventory Equipment 106,000 400,000 Patent 500,000 1,080,000 Liabilities Accounts payable Net assets 280,000 280.000 800.000 Interest of joint operators Alpha Ltd Beta Ltd 400,000 240,000 160,000 800.000 Gamma Ltd Cost of production statement for the year ended 30 June 2019 75,000 Wages Supplies Less: supplies on hand 65,000 24.000 41,000 90,000 100,000 306,000 200,000 106.000 Utilities Management fee Less: output distributed to operators Output on hand By 30 June 2019, Alpha Ltd had sold 60% of the battery it received from the joint operation to the local market for a price of $98,000. Required: A. Prepare the journal entry required to record the initial investment by Alpha Ltd in the joint operation. (2 marks) B. Prepare the journal entries recorded by Alpha Ltd at 30 June 2019 to account for its investment in the joint operation, including the sale of the output received from the joint operation. (14 marks) C. Explain the difference between tenants in common and joint tenants in the context of interests in joint arrangements. (4 marks)

Answer rating: 100% (QA)

a Patent Ac Dr 500000 Alpha Ltd Cr 500000 Initial investment in the form of Patent b Journal Entries ... View the full answer