a) What is a joint venture b) Outline five advantages of a joint ventureV and W entered into a joint venture for purchase and sale of cotton. Their profit ratio being 2:1 and are also entitled to an interest of 12% per annum (on monthly basis) on money received as well as invested. Following transactions took place:• On 1.1.2010, V purchased 1000 bales of cotton at Shs500/bale, brokerage being Shs10/bale• On 28.2.2010,W purchased 500 bales of cotton at Shs520/bale, brokerage being Shs10/bale• On 28.2.2010, V sold 800 bales at Shs672/bale, brokerage being Shs12/bale and took proceeds to himself.• On 1.4.2010, W sold 600 bales at Shs580/bale, brokerage being Shs10/bale and took proceeds to himself.It was also agreed that each co- venture will at first sell from his own purchases and then, if need be, from the goods purchased by the other co-venture. The balance stock left unsold was taken by V at cost on 30.4.2010 when the accounts were settled between the co-ventures.RequiredYou are required to show the accounts of both co-ventures’ using the Memorandum Joint Venture Account Method.
a) What is a joint venture
b) Outline five advantages of a joint venture
V and W entered into a joint venture for purchase and sale of cotton. Their profit ratio being 2:1 and are also entitled to an interest of 12% per annum (on monthly basis) on money received as well as invested. Following transactions took place:
• On 1.1.2010, V purchased 1000 bales of cotton at Shs500/bale, brokerage being Shs10/bale
• On 28.2.2010,W purchased 500 bales of cotton at Shs520/bale, brokerage being Shs10/bale
• On 28.2.2010, V sold 800 bales at Shs672/bale, brokerage being Shs12/bale and took proceeds to himself.
• On 1.4.2010, W sold 600 bales at Shs580/bale, brokerage being Shs10/bale and took proceeds to himself.
It was also agreed that each co- venture will at first sell from his own purchases and then, if need be, from the goods purchased by the other co-venture. The balance stock left unsold was taken by V at cost on 30.4.2010 when the accounts were settled between the co-ventures.
Required
You are required to show the accounts of both co-ventures’ using the Memorandum Joint Venture Account Method.
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