JV P29.2

JV P29.2 - TUTORIAL 12 SOLUTIONS DQ5. AASB 131 Interest in...

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Unformatted text preview: TUTORIAL 12 SOLUTIONS DQ5. AASB 131 Interest in Joint Ventures uses joint control as a characteristic of a joint venture. Discuss what is meant by the term joint control? Paragraph 3 of AASB 131 contains the following definition of joint control: Joint control is the contractually agreed sharing of control over an economic activity and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the venturers) Note: - contractually agreed: see paras 9-10 of AASB 131, particularly the expectation for agreements in writing, and the potential contents of the agreement - control over financial and operating decisions - need for unanimous consent Note also paras 11 and 12 of AASB 131: - no single venturer is in a position to act unilaterally - all venturers must consent - where a venturer acts as manager, he/she acts within the policies detailed in the contract and consented to by the venturers. 1 Problem 29.2 Venturers share output, line-by-line method TAUNTON LTD – DIDLEY LTD Journal entries in records of Taunton Ltd $'000 1 July Cash in JV Plant & Equipment in JV Carrying Amount of Plant & Equipment Sold Plant & Equipment Proceeds on Sale Cash $'000 Dr Dr 1 900 600 Dr Cr Cr Cr 200 Dr Cr 1 500 Raw Material in JV Work-in-Progress in JV Inventory in JV Inventory Plant & Equipment in JV Other Expenses in JV Accum. Depreciation in JV Accounts Payable in JV Accrued Expenses in JV Cash in JV Dr Dr Dr Dr Dr Dr Cr Cr Cr Cr 180 1 550 290 1 000 475 220 Accum. Depreciation in JV Inventory in JV Work-in-Progress in JV Inventory Dr Cr Cr Cr (3 800/2) (800/2 + 400/2) 20 FV CA (400/2) 400 300 2 000 December Cash in JV Cash 1 500 30 June 235 265 50 3 165 (360/2) (3 100/2) (580/2) (2 000/2) (950/2) (440/2) (470/2) (530/2) (100/2) (3 400 – 470/2) 2 11 7 can be COGS if inventory is sold Depreciation based on 50% ($600 000 - $400 000) requires a $20 000 adjustment to depreciation expense which must be allocated across all forms of inventory which include the depreciation cost. Calculation Total Value % Allocation Work-in-Progress 1 550 54.6 10 920 Inventory in JV 290 10.2 2 040 35.2 7 040 Inventory 1 000 2 080 20 000 2840 2 Problem 29.2 (Cont’d) Journal entries in the accounts of Dudley Ltd $'000 1 July Loss on Revaluation of Plant Dr 100 Plant Cr Cash in JV Plant & Equipment in JV Carrying Amount of Plant & Equipment Sold Plant & Equipment Proceeds – Plant Sale Cash Dr Dr $'000 100 1 900 700 (3 800/2) (800/2 + 600/2) FV cos it has been revalued by Dudley 400 again, using FV (800/2) cos CA has been revalued to FV 800 Dr Cr Cr Cr 400 1 800 December Cash in JV Cash 30 June Dr Cr 1 500 Dr Dr Dr Dr Dr Dr Cr Cr Cr Cr 180 1 550 290 1 000 475 220 1 500 same as Taunton Raw Material in JV Work-in-Progress in JV Inventory in JV Inventory Plant & Equipment in JV Other Expenses in JV Accum Depreciation in JV Accounts Payable in JV Accrued Expenses in JV Cash in JV 235 265 50 3 165 3 (360/2) (3 100/2) (580/2) (2 000/2) (950/2) (440/2) (470/2) (530/2) (100/2) (3 400 – 470/2) ...
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