Sting Ltd and Pink Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Sting Ltd is to contribute land and production buildings and equipment. Pink Ltd agrees to contribute $8.1 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 50:50. The following information relates to the contribution by Sting Ltd.

What are the entries to record the formation of the joint venture operation in the books of Sting Ltd and Pink Ltd?
E) None of the given answers.

Question

Sting Ltd and Pink Ltd enter into a contractual agreement to form a jointly controlled operation on 1 July 2004. Sting Ltd is to contribute land and production buildings and equipment. Pink Ltd agrees to contribute $8.1 million in cash. It is agreed that they will share output, assets and future contributions in the ratio 50:50. The following information relates to the contribution by Sting Ltd.

What are the entries to record the formation of the joint venture operation in the books of Sting Ltd and Pink Ltd?

What are the entries to record the formation of the joint venture operation in the books of Sting Ltd and Pink Ltd?
E) None of the given answers.

Quizplus · Accepted Answer

Sting Ltd's entry:
Dr Land and production buildings and equipment 2,500,000
Cr Capital contribution - Joint venture 2,500,000

Pink Ltd's entry:
Dr Joint venture 8,100,000
Cr Cash 8,100,000

Therefore, the correct option is D.

Sting Ltd and Pink Ltd Enter into a Contractual Agreement