Creed Ltd and Nickleback Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2005. Creed Ltd is to contribute land and equipment and Nickleback Ltd agrees to contribute $8 million. It is agreed that they will share output, assets, and future contributions in the ratio 60:40 (Creed.Nickleback). The contribution by Creed Ltd has an agreed fair value of $9 million for the land and $3 million for the equipment. The book value of the land is $8 million and the net book value of the machinery is $2 million.
What are the entries to record the formation of the joint venture operation in the books of Creed Ltd and Nickleback Ltd?
E) None of the given answers.

Question

Quizplus · Accepted Answer

The Answer of Creed Ltd and Nickleback Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2005. Creed Ltd is to contribute land and equipment and Nickleback Ltd agrees to contribute $8 million. It is agreed that they will share output, assets, and future contributions in the ratio 60:40 (Creed.Nickleback). The contribution by Creed Ltd has an agreed fair value of $9 million for the land and $3 million for the equipment. The book value of the land is $8 million and the net book value of the machinery is $2 million.
What are the entries to record the formation of the joint venture operation in the books of Creed Ltd and Nickleback Ltd?
E) None of the given answers.

Creed Ltd and Nickleback Ltd Enter into a Contractual Agreement