Question

Description Zac Ltd and Tess Lid entered into a joint operation known as Trouble Ltd to collect and recycle empty water bottles from government departments on 1 January 2020. The joint operation agreement states that Zac Ltd and Tess Ltd will share output contributions and costs equally and that Zac Ltd and Tess Lid hold the joint Operation assets as tenants in common, with Zac Ltd and Tess Ltd each having a 50% interest The joint operation agreement established the initial contributions as follows: Assets Contribution: Zac Ltd Contribution: Tess Ltd Agreed Value Cost Agreed Value Cost $ 5 $ $ Cash 8.000.000 8.000.000 6.200.000 5,900,000 Building 9.700.000 10,000,000 6.200.000 6.800.000 Less accumulated depreciation (300.000) (700,000) Equipment 6.300.000 6,000,000 8.000.000 17.000.000 Less accumulated depreciation (500.000) (10,000,000) Total 22,200,000 21,100,000 22.200.000 21,100,000 Land The depreciation rates used by each of joint operators in their respective financial statements are Equipment 20% and Buildings 10% Both joint operator ayeed to record any depreciation of the joint operation using the straight-line method in their own separate financial statements. There are no residual values for the assets assigned to the joint operation The jont operators contributed, in total, a further $20,000,000 during the 2020 year with each joint Operator contributing the appropriate portion according to their original share in Trouble Lid. The joint operators chose not to revalue their remaining interests in the contributed assets in their separate recordo By agreement, Zac Lid will manage the joint operation project and will receive a management fee of $1,000,000 per annum. The management for has been treated as a period expense. $300,000 of this amount remains outstanding at 31 December 2020 and has been accrued in the Joint Operation Memorandum Accounts The joint operation purchased equipment for S5,000,000 on 1 January 2020, which had a useful to of 5 years, no residual value and was depreciated on the straight line basis. No sales of joint operation 2010 Extracts from the Joint Operation Memoranda Accounts for Trouble are provided below.

Answer 1

ONLY FIRST 4 SUBPARTS ANSWERED:

Ans-1

ASSET CONTRIBUTED	COST(net of Dep)	AGREED VALUE	GAIN/LOSS	TO BE RECOGNIZED
Land	5900000	6200000	300000	150000
Building	9700000	9700000	0	0
Equipment	5500000	6300000	800000	400000

As per AASB gain can only be recorded to the extent of other parties interest and loss fully.

Going by above principal :

Correct option is - (a) - Gain on sale of Equioment 400000

Ans-2

ASSET CONTRIBUTED	COST(net of Dep)	AGREED VALUE	GAIN/LOSS	TO BE RECOGNIZED
Cash	8,000,000	8,000,000	0	0
Building	6,100,000	6,200,000	100,000	50000
Equipment	7,000,000	8,000,000	1,000,000	500000

Option (b) is the right answer - Gain on sale of Equioment 500000

Ans-3

JO	Initial Brought	Purchase	Total Val	Dep @ 20%	Tess Share 50%
Equipment	14,300,000	5000000	19,300,000	1430000	715000

Ans-4

Since 300000 is outstanding meaning the balance was paid i.e (1000000 - 300000) = 700000

This amount will be debited to cash in books of Zac