Advance Accounting Assignment 1 Answer

Addis Ababa University
College of Business and Economics

School of Commerce
Accounting and Finance Department
Advance Accounting Individual Assignment 1
Name- Chalachew Simachew

Section- E4A1
ID NO. - BEE/1434/09
Submitted to: Instructor Kiros
May, 2020
Addis Ababa, Ethiopia
Answer
Q1, Entities A and B own 55 per cent and 10 per cent respectively of the ordinary shares that carry
voting rights at a general meeting of shareholders of entity Z. Strategic decisions in entity Z require
approval by investors holding more than 60 per cent of the voting power.
. It provided that entities A and B have entered into a contractual arrangement that establishes
their joint control of entity Z, it is a joint venture (jointly controlled entity). Entities A and B are required
to account for their investments in entity Z
Q2. Entity A researches and develops drugs. Entity B manufactures drugs and promotes them
commercially. Entities A and B enter into a contractual arrangement whereby they equally participate
in the results of research and development and the commercial promotion of a particular drug that is
yet to be invented. In accordance with the contractual arrangement entity A undertakes the research
and development activities and entity B undertakes the manufacturing and commercial activities. The
entities share all costs and revenues. Identify this example as JO or JV? Clearly state your reasons
. Entities A and B have joint control over the specified research, development, manufacturing and
commercial activities—it is a joint venture (jointly controlled operation). Each venture (i.e. entities A
and B) is required to account for its interest in the jointly controlled operation.
Q3, a. March 1 2014
Investment of of JV -------------------------------120,000,000
Cash--------------------------------------------------------------------------120,000,000
b, Dec-31 2014
Investment of JV-------------------------------------------- 30,000,000
Investment income---------------------------------------------------------- 30,000,000
c , Dce- 20, 2014
Cash ------------------------------------------- 200,001,000
Investment of Jv -------------------------------------100,001,000
d, Dec 31-2015
Investment in JV ------------------------------------------ 120,000,000
Income ----------------------------------------------------------------- 120,000,000
e, Dec 31-1016
Investment of JV --------------------------------------------------- 90,000,000

Investment income ------------------------------------------------------- 90,000,000
Q4,
I. Recognition of investments in a joint venture.

Jan. 2 Investment in AB Company 400,000
Cash 400,000
II. Record share of Arbe share Company net income.
Dec. 31 Investment in Arbe Company 250,000
Investment Income 250,000
III. record proportionate share of joint venture’s assets, liabilities, revenue, and expenses
Dec. 31 Cash 2,000,000
Investment in Arbe Company 2,000,000
Account Payable 1,350,000
Revenue 1,000,000
Investment in Arbe Company 750,000
Expense 750,000
Q5, a. financial instrument; any contract that gives rises to a financial asset of one entity and a financial
liability or equity instrument of another.it classified as liability(debt) and equity (IAS 32) . it deals with
how financial investment are measured (IAS 39) and covers disclosure (IFRS 7).
b. Associate; an entity in which an investor has significant influence and which is neither a
subsidiary nor joint venture of the investor. and the required treatment in a group account is equity
account(.
c. Joint arrangement; arrangement in which two or more parties have joint control. It establish
principles for financial reporting by parties to a joint arrangement (IFRS 11).
d. Subsidiary; an entity that is controlled by another entity (IFRS 10). and also the required
treatment in a group account is equity account (IFRS 10).
Q6, Discuss the difference between joint operation and joint venture
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement
 Owners share in the output.

 Not structured through separate legal entity.
 Recognize operation in own financial record.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement
 Ownership entitled to a share of profit.

 Structured through different legal entity.
 Use equity method of accounting (same as Associates).

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Addis Ababa University

College of Business and Economics

Name- Chalachew Simachew

Submitted to: Instructor Kiros

Q3, a. March 1 2014

Investment of JV-------------------------------------------- 30,000,000

Investment income---------------------------------------------------------- 30,000,000

c , Dce- 20, 2014

Cash ------------------------------------------- 200,001,000

Investment in JV ------------------------------------------ 120,000,000

Income ----------------------------------------------------------------- 120,000,000

Investment of JV --------------------------------------------------- 90,000,000

I. Recognition of investments in a joint venture.

II. Record share of Arbe share Company net income.

Dec. 31 Investment in Arbe Company 250,000

Investment Income 250,000

Dec. 31 Cash 2,000,000

Investment in Arbe Company 2,000,000

Investment in Arbe Company 1,350,000

Account Payable 1,350,000

Investment in Arbe Company 1,000,000

Investment in Arbe Company 750,000

 Owners share in the output.

 Ownership entitled to a share of profit.

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