ABC and XYZ enter into a contract to set up a separate vehicle (entity 123) for the purpose of operating a tennis court. The contractual arrangement between the parties establishes joint control of the activities of the tennis court. Entity 123, and not ABC or XYZ, has rights to the assets and obligations to the liabilities of the arrangement. The following transactions of the joint arrangement occurred during 2022 and 2023: 2022: Received P5,000,000 each from the parties in the joint arrangement as initial investment Costs of incorporation paid amounted to P200,000 Acquired land at a cost of P2,000,000, cash Various costs to construct the tennis courts incurred and paid amounted to P6,000,000 Office equipment purchased on account, P500,000 Rental income collected from tennis players, P4 million Various operating costs paid amounted to P300,000 2023: Operating costs paid amounted to P500,000 Rental income collected from tennis players, P6 million Partial payment on the office equipment, P200,000 Declared and paid cash dividends, P1,500,000 Based on the policy of entity 123, the tennis courts are to be depreciated over 25 years while the equipment are to be depreciated over 5 years. Newly acquired depreciable assets are to be depreciated for a full year in the year of acquisition and not depreciated on the year of disposition. 1. How much is the net income (loss) of entity 123 for the year ended 2022 and 2023?
ABC and XYZ enter into a contract to set up a separate vehicle (entity 123) for the purpose of operating a tennis court. The contractual arrangement between the parties establishes joint control of the activities of the tennis court. Entity 123, and not ABC or XYZ, has rights to the assets and obligations to the liabilities of the arrangement. The following transactions of the joint arrangement occurred during 2022 and 2023:
2022: Received P5,000,000 each from the parties in the joint arrangement as initial investment Costs of incorporation paid amounted to P200,000 Acquired land at a cost of P2,000,000, cash Various costs to construct the tennis courts incurred and paid amounted to P6,000,000 Office equipment purchased on account, P500,000 Rental income collected from tennis players, P4 million Various operating costs paid amounted to P300,000
2023: Operating costs paid amounted to P500,000 Rental income collected from tennis players, P6 million Partial payment on the office equipment, P200,000 Declared and paid cash dividends, P1,500,000
Based on the policy of entity 123, the tennis courts are to be
1. How much is the net income (loss) of entity 123 for the year ended 2022 and 2023?
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