Question

On 1 July 2019, Tully Ltd and Cooktown Ltd signed a contractual agreement to form a joint operation for the manufacture of kitchen products. The agreement provided that Cooktown Ltd would contribute $ 241,000 in cash while Tully Ltd would provide $ 40,100 in cash and manufacturing equipment currently held by Tully Ltd that had a fair value of $ 199,900 . The equipment was currently recorded by Tully Ltd at a carrying amount of $ 180,100 , net of accumulated depreciation of $ 30,000 .

The agreement provided that each operator would receive half of the output of the joint operation. Depreciation on equipment is charged at 20% p.a. on cost, based on the expected pattern of use in the joint operation.

Financial information provided by the joint operation at 30 June 2020 was as follows.

Statement of financial Position (partial)
Cash	$ 56,000	Accounts payable	$ 40,000
Raw materials	32,000	Accrued wages	16,000
Inventory (undistributed)	14,200	Loan	200,000
Work in progress	31,900
Equipment	399,500
Accumulated depreciation	( 79,900 )
	$ 453,700		$ 256,000

Cash receipts and payments
	Payments	Receipts
Contributions		$ 281,100
Loan		200,000
Purchase of raw materials	64,000
Wages	96,000
Purchase of equipment (2 July 2019)	200,000
Other expenses	64,000
	$530,000	$ 481,100

Costs incurred
Wages	$ 112,000
Raw materials	72,000
Overheads including depreciation	144,000
	328,000
Cost of inventory	( 297,200 )
Work in progress at 31 July 2020	$ 30,800

Required
Prepare the journal entries in the records of Tully Ltd in relation to the joint operation for the year ending 30 June 2020.

Answer 1