Rose Limited and Petal Limited formed a joint operation and share in the output of the joint operation 75:25. The joint operation paid a management fee of $250 000 to Rose Limited during the current period. The cost to Rose Limited of supplying the management service was $200 000. The amount of profit that Rose Limited will recognise in relation to the provision of the management fee to the joint operation is:

Question

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Rose Limited's profit from the management fee is $50,000 ($250,000 - $200,000). However, since Rose Limited owns 75% of the joint operation, it can only recognize 25% of the profit as external, which is $12,500 (25% of $50,000).

Rose Limited and Petal Limited Formed a Joint Operation and Share