Midstream Ltd and Delta Ltd enter into a business undertaking in which they each commit 50-hectare vineyards.There is a contractual agreement between the two companies whereby they share control and must agree on all strategic financial and operating decisions relating to the two vineyards.The two companies appoint Todman Management Pty Ltd as the manager of the vineyard undertaking.A separate set of accounting databases is established for the undertaking and each investor contributes additional cash capital to the undertaking and hold assets other than the vineyards as tenants in common.The intention of the investing companies is to take their proportionate share of the produce from the two vineyards to use in their own wineries.The business undertaking is:
A) a joint venture operation because the investors have agreed to a sharing of control and to a sharing of the outputs of the vineyard.
B) a joint venture entity because the undertaking has been established as a separate entity in which there is a simple sharing of control.
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 satisfies the criteria for a joint venture operation as both investors have agreed to share control and the outputs of the vineyard. Additionally, a separate accounting database has been established and each investor has contributed additional cash capital to the undertaking while holding assets as tenants in common. The intention of both investors is to take their proportionate share of the produce for use in their own wineries.

Midstream Ltd and Delta Ltd Enter into a Business Undertaking