A joint operation holds plant and equipment with a carrying amount of $450 000. The two joint operators participating in this arrangement share control equally. They also depreciate plant and equipment using the straight-line method. The plant and equipment has a useful life of 6 years. At reporting date, each joint operator must recognise the following entry, in relation to depreciation, in its records:
A) DR Depreciation $37 500.
B) DR Depreciation $75 000.
C) DR Assets in joint operation $37 500.
D) DR Investment in joint operation $75 000.

Question

Quizplus · Accepted Answer

CThe correct entries for each joint operator to recognize in relation to depreciation of the plant and equipment are A) DR Depreciation $37,500 and C) DR Assets in joint operation $37,500. The total annual depreciation is $450,000 / 6 = $75,000 for the joint operation as a whole. Since the two joint operators share control equally, each operator's share of the depreciation is $75,000 / 2 = $37,500. This amount is recognized as depreciation expense (A) and reduces the carrying amount of their share of the assets in the joint operation (C).

A Joint Operation Holds Plant and Equipment with a Carrying