On 1 July 20X4,Gold Ltd Formed a Joint Venture Entity

Multiple Choice

On 1 July 20X4,Gold Ltd formed a joint venture entity with Maggs Ltd,Research Pty Ltd,to research for ultimate sale in the hamburger market the Giant Genetic Spud (GGS) and the Square Tomato (SR) .There was a contractual agreement under which each company shared control of the venture.Each company contributed $500 000 in share capital on that date,and,during the first year of operations,each contributed a further $2 000 000 through loans.For the year ended 30 June 20X5,the following financial statements were produced for the joint venture entity (amounts in thousands) : Balance Sheet as at 30 June 20X5
$\begin{array}{lll}\text {Assets }&\\\text { Cash}&\$50\\\text {Supplies inventory }&40\\\text {Equipment (net of accumulated depreciation \( \$ 50 \) ) }&450\\\text {Total assets }&\$540\\\text { Less liabilities}&\\\text {Loan payable}&\$4000\\\text {Accounts payable }&50\\&4050\\\text { Net assets} &-\$3510\\\text {Venturers' equity }&\$1000\\\text {Share capital}&4510\\\text { Accumulated losses}&-3510\\\text {Venturers' equity }&----\\\end{array}$
Statement of Research and Development Activity for the Year ended 30 June 20X5
$\begin{array}{lll}\text { Expenditure-Project ST}&\$2100\\\text {Expenditure-Project GGS }&2410\\\text { Total expenditure}&\$4510\\\end{array}$
At 30 June 20X5,Gold Ltd was uncertain as to the outcome of Project GT,but felt reasonably certain that Project GGS would develop into an economically viable patent right in the following year.
At 30 June 20X5,the net investment of Gold Ltd in the joint venture entity calculated using the equity method was:

A) $500 000.
B) $2 500 000.
C) $2 000 000.
D) none of the above.