Deck 17: Accounting for Joint Ventures

Question 1

A joint venture that involves the establishment of a corporation,partnership or other form of entity in which each venturer has an interest is known as a:

A)jointly controlled asset
B)jointly controlled entity
C)jointly controlled operation
D)jointly controlled investment

Answer 1

B

Question 2

Which of the following statements is incorrect?

A)jointly controlled assets and operations do not involve the establishment of separate entities
B)the important defining characteristic of a joint venture is that the contractual arrangement establishes joint control over the joint venture
C)jointly controlled assets and operations involve the establishment of separate entities
D)the joint venture agreement will typically set out the terms of the joint control over the commercial undertaking

Answer 2

C

Question 3

The major factors to consider in distinguishing between jointly controlled operations and jointly controlled assets are:

A)whether the venturers receive revenue from the sale of a joint product or the output from the assets
B)whether the entity is structured as a company or a trust
C)who owns,and the manner of control over,the assets being used in the joint venture
D)both A and C

Answer 3

D

Question 4

Which of the following statements is correct?

A)one of th e distinguishing factors for a jointly controlled entity is that the assets are owned or controlled jointly by the venturers
B)there are no statutory,professional of other requirements for a joint venture comprising jointly controlled assets to prepare separate financial statements
C)there are several statutory,professional of other requirements for a joint venture comprising jointly controlled assets to prepare separate financial statements
D)none of the above

Question 5

A contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control is known as a:

A)joint activity
B)joint operation
C)joint venture
D)joint partnership

Question 6

The usual distinguishing features of joint ventures are that they involve:

A)a large number of participants engaging in a specific project or business undertaking
B)a small number of participants engaging in a specific project or business undertaking
C)a project or business undertaking that is carried on for the mutual benefit of all venture participants
D)both B and C

Question 7

According to AASB 131,a venturer must separately disclose,unless the probability of loss is remote,the aggregate of which of the following contingent liabilities?

A)those contingent liabilities arising because the venturer is contingently liable for the liabilities of the other venturers of a joint venture
B)the venturer's share of the contingent liabilities of the joint ventures themselves for which it is - contingently liable
C)any contingent liabilities the venturer has incurred in relation to its interests in joint ventures and its share in each of the contingent liabilities incurred jointly with other venturers
D)all of the above

Question 8

Which of the following statements is incorrect?

A)each venturer to the jointly controlled entity uses its own property,plant and equipment and carries its own inventories
B)each venturer to the jointly controlled operation uses its own property,plant and equipment and carries its own inventories
C)for jointly controlled assets,each venturer will usually take a share of the output from the jointly controlled assets,and each bears an agreed share of the expenses incurred
D)a jointly controlled operation as involving the use of the assets and other resources of the venturers themselves

Question 9

The broad types of joint ventures identified in AASB 131 include:

A)jointly controlled assets
B)jointly controlled operations
C)jointly controlled entities
D)all of the above

Question 10

The method that results in the venturer's proportionate share of profits being recognised in a single line item in the statement of comprehensive income is known as:

A)proportionate consolidation
B)the equity method
C)the proportionate method
D)none of the above

Question 11

Which of the following statements is correct regarding proportionate consolidation?

A)many of the procedures appropriate for the application of proportionate consolidation are similar to the procedures for the consolidation of investments in subsidiaries
B)it means that the statement of financial position of the venturer includes its share of the assets that it controls jointly and its share of the liabilities for which it is responsible
C)it involves each venturer including its share of the income,expenses,assets and liabilities of the jointly controlled entity in its own financial statements
D)all of the above

Question 12

The disadvantage of the one- line method is that:

A)it overlooks the fact that the joint venture operation involves the direct ownership of assets and the direct incurrence of liabilities by the individual venturers
B)in the absence of further disclosures,it could mislead financial statement users by conveying a view that the proportions of joint venture assets and liabilities recognised are under the direct and absolute control of the venturer
C)it provides a more complete picture of the operations,resources and obligations of the entity and more information on the risks faced by the entity
D)none of the above

Question 13

The contractually agreed sharing of control over an economic activity is referred to as:

A)dominant control
B)joint control
C)shared control
D)none of the above

Question 14

An asset contributed to,or acquired for the specific purpose of the joint venture is known as a/an:

A)proportionately controlled asset
B)jointly owned asset
C)proportionately owned asset
D)jointly controlled asset

Question 15

For interests in jointly controlled operations,an individual venturer must recognise which of the following in its financial statements?

A)the assets that it controls
B)the liabilities that it incurs
C)its share of income that it earns from the sale of goods or services by the joint venture
D)all of the above

Question 16

The contractual arrangement between joint venturers would usually deal with such matters as:

A)the sharing by the venturers of the output,revenue,expenses or results of the joint venture
B)capital contributions by the venturers
C)the activity,duration and reporting obligations of the joint venture
D)all of the above

Question 17

A method of accounting whereby a venturer's share of each of the assets,liabilities,income and expenses of a jointly controlled entity is combined line by line with similar items in the venturer's financial statements is known as:

A)proportionate consolidation
B)equity consolidation
C)shared consolidation
D)unilateral consolidation

Question 18

Wally Ltd and Locky Ltd each contribute $50 000 for a 50% interest in WL Ltd,a jointly controlled entity structured as a company.The accounts for the jointly controlled company,WL Ltd,will disclose:

A)an asset titled "Investment in WL Ltd" of $100 000
B)a liability titled "Investment in WL Ltd" of $100 000
C)total share capital of $100 000
D)total share capital of $50 000

Question 19

Which of the following statements is correct?

A)a jointly controlled entity controls the assets of the joint venture,incurs liabilities and expenses,and earns income
B)a jointly controlled entity cannot enter into contracts in its own name or raise finance itself to fund the joint venture's activities.
C)a jointly controlled operation controls the assets of the joint venture,incurs liabilities and expenses,and earns income
D)all of the above

Question 20

The reasons for structuring an individual project as a joint venture include:

A)joint venture arrangements can provide taxation advantages for the participants
B)individual enterprises can pool their resources and jointly undertake projects that would be beyond the financial and managerial resources of the participants individually
C)joint ventures can be structured flexibly to suit the individual requirements of the different participants
D)all of the above

Question 21

Discuss the differences between a jointly controlled operation and jointly controlled assets.

Question 22

Explain the characteristics common to all joint ventures.

Question 23

Explain the proportionate consolidation and equity methods of recognising an interest in a jointly controlled entity.

Question 24

Discuss the major reasons for structuring an individual project as a joint venture.

Question 25

Define a jointly controlled entity and provide examples of this form of joint venture.

Question 26

Identify the major disclosure requirements for interests in joint ventures as specified in AASB 131,

Question 27

Explain the general nature of joint venture arrangements.