Problem Library

Ohio Energy Company: Accounting for Joint Ventures

Length: 1-3 Hours

Discipline: Accounting

Level: Intermediate (majors)

Author: Cottell, Philip

Having worked through the Ohio Energy Company unfolding problem, students will understand the equity method at a level well beyond that presented in intermediate accounting textbooks. The problem engages the students with transactions in a context where the equity method is most commonly used in today’s economy, the joint venture investment. In addition to accounting for the cost of the investment and income earned by the joint venture, the problem adds the element of a contribution of technology by one of the joint venture partners. Once they have completed the problem, students will understand how to account for and reconcile differences in outside basis and inside basis.

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