A joint operation holds equipment with a carrying amount of $1 200 000. The two joint operators participating in this arrangement share control equally. They also depreciate equipment using the straight-line method. The equipment has a useful life of 5 years. At reporting date each joint operator must recognise the following entry, in relation to depreciation, in its records:
A) DR Depreciation $240 000.
B) DR Depreciation $120 000.
C) DR Investment in joint operation $240 000.
D) DR Assets in joint operation $120 000.

Question

Quizplus · Accepted Answer

Since the joint operators share control equally, each operator will recognize 50% of the depreciation expense. Therefore, the correct entry to be recognized by each joint operator would be DR Depreciation $120 000. Options A and C are incorrect because they recognize a higher amount of depreciation than what is appropriate for each joint operator's share. Option D is incorrect because joint operators do not have separate asset accounts under IFRS 11.

A Joint Operation Holds Equipment with a Carrying Amount of $1