On January 1, 2022, Hawk Corporation and Key Ltd. agreed to purchase an ice rink...
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Accounting
On January 1, 2022, Hawk Corporation and Key Ltd. agreed to purchase an ice rink together, and signed a contract to operate the ice rink together as a joint operation. The ice rink cost $65,000,000 in total, with Hawk contributing 45% of the capital, and Key paying the remainder. The joint operation agreement specified that revenues and expenses were to be split between the two parent companies based on the proportion of capital invested. The two partners hired a management company (Rink Corporation) to operate the ice rink on their behalf. The ice rink was estimated to have a remaining useful life of 30 years. During 2022, the ice rink generated total revenue of $12,500,000, which was paid out in cash to each of Hawk and Key. At the end of 2022, Rink charged a management fee of $3,650,000 for operating the ice rink.
REQUIRED: Prepare all the journal entries required to record the joint operation on the books of Hawk Corporation.
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