On 1 July 2016, the Ears & Eyes Joint Operation

Multiple Choice

On 1 July 2016, the Ears & Eyes Joint Operation was established. The two joint operators participating in this arrangement, Ears Ltd and Eyes Ltd, share control equally. Both joint operators contributed cash to establish the joint operation. The joint operation holds equipment with a carrying amount of $1 200 000. Both joint operators depreciate equipment using the straight-line method and the depreciation is regarded a cost of production. The equipment has a useful life of 5 years. At 30 June 2017, Ears Ltd had sold all of the inventories distributed to it and Eyes Ltd had sold 50% of the inventories distributed to it. At 30 June 2017, Eyes must recognise which of the following entries, in relation to depreciation, in its records?

A) DR Depreciation expense $240 000
B) DR Accumulated depreciation $120 000
C) DR Inventories $60 000
D) DR Cost of goods sold $120 000