Midstream Ltd and Delta Ltd enter into a business undertaking to lease a 100-hectare vineyard from Pinot Ltd.There is a contractual agreement between the two companies whereby they share control and must agree on all strategic financial and operating decisions.The two companies appoint Todman Management Pty Ltd as the vineyard manager.A separate set of accounting databases is established for the undertaking and each investor contributes cash capital to the undertaking.The intention of the investing companies is to market the produce of the vineyard and make a profit.The business undertaking is:
A) a joint venture operation because the investors have agreed to a sharing of control.
B) a joint venture entity because it has been established to operate the vineyard with the intention of making a profit.
C) a simple partnership in which two companies operate as partners in a business undertaking.
D) none of the above.

Question

Quizplus · Accepted Answer

The business undertaking meets the criteria of a joint venture entity as it has been established by two companies with the intention of making a profit and sharing control. The appointment of a separate vineyard manager and the establishment of separate accounting databases further supports the establishment of a separate entity.

Midstream Ltd and Delta Ltd Enter into a Business Undertaking