On 1 July 2019 Murchison Ltd entered into a contractual arrangement with Pelion Ltd to form...
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On 1 July 2019 Murchison Ltd entered into a contractual arrangement with Pelion Ltd to form a joint operation to manufacture laminated timber panels for use in the construction industry in Tasmania. The two parties have agreed that all decisions affecting the joint operation require unanimous consent. The joint operation interests are 50:50 respectively. The joint operation is to be managed by Pelion Ltd, which receives a management fee of $50,000 per annum with payment made twice yearly. The initial contributions to the joint operation are as follows: Agreed value $5,000,000 $5,000,000 Murchison Ltd Pelion Ltd Asset contributed Plant and equipment Cash at bank At 1 July 2019 the plant and equipment was carried in the account records of Murchison Ltd at $3,500,000 (original cost $5,000,000 and accumulated depreciation of $1,500,000) and is expected to have a remaining economic life of 10 years. At 1 July 2019 Murchison Ltd chose to adopt the revaluation model under AASB 116 Property, Plant and Equipment and revalue the remaining interest in the plant and equipment contributed to the joint operation on the same basis as the fair value included in the joint operation agreement. Murchison Ltd and Pelion Ltd depreciate plant and equipment on a straight line basis at the rate of 10% per annum. Depreciation on plant and equipment is regarded as a cost of production. The financial statements prepared by Pelion Ltd for the joint operation for the year to 30 June 2020 are as follows: Joint Operation Statement of Financial Position at 30 June 2020 Assets Cash Work in progress Plant and Equipment Liabilities Accounts payable Accrued expenses Joint Operators' Interest 2,600,000 100,000 5,420,000 8,120,000 340,000 280,000 620,000 7,500,000 Joint Operation Statement of Cash Receipts and Payments for the year to 30 June 2020 Contribution received - 1 July 2019 Less cash payments: Wages and salaries Supplies and materials Equipment purchased (purchased 1 July 2019) Administration Management fee Cash balance at 30 June 2020 Joint Operation Statement of Costs of production for the year to 30 June 2020 Wages and salaries Supplies and materials Administration Management fee Less work in progress Cost of production $ 5,000,000 (550,000) (1,220,000) (420,000) (160,000) (50,000) (2,400,000) 2,600,000 $ 780,000 1,560,000 210,000 50,000 2,600,000 (100,000) 2,500,000 During the year, the joint operation has produced an amount of laminated timber panels and each joint operator has received its respective share of this output by 30 June 2020. The details for each of the operators of the joint operation output received and sold are as follows: Output sold Output still on hand Revenue from sale of output [Total 20 marks] Note: For the purposes of this question the company income tax rate is 30%. Date Required Using the template provided, in accordance with AASB 11 Joint Arrangements, prepare the journal entries in the records of Murchison Ltd in relation to the joint operation for the year ended 30 June 2020. 8⁰ Murchison Ltd 60% 40% $1,300,000 Format Particulars V B Pelion Ltd I 100% 0% $900,000 Debit ($) Credit ($) On 1 July 2019 Murchison Ltd entered into a contractual arrangement with Pelion Ltd to form a joint operation to manufacture laminated timber panels for use in the construction industry in Tasmania. The two parties have agreed that all decisions affecting the joint operation require unanimous consent. The joint operation interests are 50:50 respectively. The joint operation is to be managed by Pelion Ltd, which receives a management fee of $50,000 per annum with payment made twice yearly. The initial contributions to the joint operation are as follows: Agreed value $5,000,000 $5,000,000 Murchison Ltd Pelion Ltd Asset contributed Plant and equipment Cash at bank At 1 July 2019 the plant and equipment was carried in the account records of Murchison Ltd at $3,500,000 (original cost $5,000,000 and accumulated depreciation of $1,500,000) and is expected to have a remaining economic life of 10 years. At 1 July 2019 Murchison Ltd chose to adopt the revaluation model under AASB 116 Property, Plant and Equipment and revalue the remaining interest in the plant and equipment contributed to the joint operation on the same basis as the fair value included in the joint operation agreement. Murchison Ltd and Pelion Ltd depreciate plant and equipment on a straight line basis at the rate of 10% per annum. Depreciation on plant and equipment is regarded as a cost of production. The financial statements prepared by Pelion Ltd for the joint operation for the year to 30 June 2020 are as follows: Joint Operation Statement of Financial Position at 30 June 2020 Assets Cash Work in progress Plant and Equipment Liabilities Accounts payable Accrued expenses Joint Operators' Interest 2,600,000 100,000 5,420,000 8,120,000 340,000 280,000 620,000 7,500,000 Joint Operation Statement of Cash Receipts and Payments for the year to 30 June 2020 Contribution received - 1 July 2019 Less cash payments: Wages and salaries Supplies and materials Equipment purchased (purchased 1 July 2019) Administration Management fee Cash balance at 30 June 2020 Joint Operation Statement of Costs of production for the year to 30 June 2020 Wages and salaries Supplies and materials Administration Management fee Less work in progress Cost of production $ 5,000,000 (550,000) (1,220,000) (420,000) (160,000) (50,000) (2,400,000) 2,600,000 $ 780,000 1,560,000 210,000 50,000 2,600,000 (100,000) 2,500,000 During the year, the joint operation has produced an amount of laminated timber panels and each joint operator has received its respective share of this output by 30 June 2020. The details for each of the operators of the joint operation output received and sold are as follows: Output sold Output still on hand Revenue from sale of output [Total 20 marks] Note: For the purposes of this question the company income tax rate is 30%. Date Required Using the template provided, in accordance with AASB 11 Joint Arrangements, prepare the journal entries in the records of Murchison Ltd in relation to the joint operation for the year ended 30 June 2020. 8⁰ Murchison Ltd 60% 40% $1,300,000 Format Particulars V B Pelion Ltd I 100% 0% $900,000 Debit ($) Credit ($)
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Murchison Ltd Joint Operation Journal Entries for the year ended 30 June 2020 1 July 2019 Contri... View the full answer
Related Book For
Business Statistics
ISBN: 9780133899122
3rd Canadian edition
Authors: Norean D. Sharpe, Richard D. De Veaux, Paul F. Velleman, David Wright
Posted Date:
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