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Joint Venture

103

CHAPTER 6
MULTIPLE CHOICES

6-1: a
Assets per Jessica Company- balance sheet
Jessica’s proportionate interest in assets of JV (50%)
Total assets of Jessica
6-2: a

P3,550,000
1,000,000
P4550,000

Total liabilities only of Jenny Co.

6-3: b
6-4: b
Investment of Heart
Profit share:
Sales
Cost of sales (150,800 ÷ 125%)
Gross profit
Expenses
Net Profit
Profit/loss ratio
Balance of investment in JV

P80,000
150,800
120,640
30,160
10,000
20,160
x 40%

8,064
P88,064

6-5: a
Cash
Merchandise inventory
Accounts receivable
Total assets
Sweet Co’s, proportionate interest
Sweet Company’s share in total asset

P190,000
29,360
150,800
370,160
x 60%
P222,096

6-6: a
Sales
Cost of sales
Purchases
Merchandise inventory, end (50% of P10,000)

7,200
P10,000
__5,000

_5,000

Gross profit
Expenses

2,200
___500

Net profit

P 1,700

500 (cr) P 5.000 ___850 Balance of Investment account P10.104 Chapter 6 6-7: b Original investment (cash) Profit share (P1.000 x 40%) Salve (P10.700 / 2) P10.500 x 3) P 6.000 x 15%) Profit share of Salas (P10.500 Cost of unsold merchandise (inventory) taken by Dante P19.000 x 35%) P 500 (dr) P 2.000 (cr) 4.500 6-12: b Due from Edwin (debit balance) P 9.000 __4.500 Joint venture profit before fee to Salas P11.000 _13.500 .500 Edwin Capital: Debits: Balance before profit distribution Credits: Profit share P14.500 Joint venture profit after fee to Salas (P11.500 Balance P 3.500 (cr) 6-11: d Joint venture account balance before profit distribution (debit) Joint venture profit (P4.500 Total P 4.500 / 115%) P10.000 ______ _3.000 x 25%) P 1.000 6-10: b Salas Salve Balance before profit distribution Profit share:Sabas (P10.000 __2.500 _2.000 6-8: a 6-9: b Fee of Salas (P10.850 Joint venture account before profit distribution (credit balance) Unsold merchandise P 9.

000 + P8.300/2) P18.000 14.500 P20.000 __4.150) Final settlement to jack P 8.600 __6.500 Due to Ferdie (credit balance) _20.000 6-13: a JV account balance before profit distribution (cr) Unsold merchandise (required dr balance after profit distribution) P 4.800 Isaac Capital P 1.500 Settlement to Dante (balance of JV Cash account) Debits: Balance before cash settlement Due from Edwin Credits: Due to Ferdie P30.500 P19.Joint Venture 105 Settlement to Ferdie (Balance of capital account) Debits: Credits: Balance before profit distribution Profit share P –0– P16.000 x 20%) (P 200) Cash settlements P 2.000 __9.800 3.000 1.600 / 110%) Fee to Jerry P 6.200 P 3.000 x 50%) Isaac (P6.000 6-15: b Sales Cost of sales: Merchandise inventory.150 Gross profit (loss) Expenses (P400 + P200) Net profit (loss) P14.500 Balance P39. end (P8.300 __4. beg (contributions) Freight Purchases P14.600 __2.500 _20.000 P 600 6-14: d Harry Capital Balances before profit distribution Profit distribution: Harry P6.150 (150) __600 P( 750) 6-16: c Contributions to the Joint Venture (P5.000 Joint venture profit before fee to Jerry Joint venture profit after fee (P6.000 300 __4.000) Loss share (P750 x 50%) Unsold merchandise taken (withdrawal) P13.000 Goods available for sale Merchandise inventory.475 .000 ( 375) ( 4.

000 105.000 200.000 100.000 15.000 155.000 90.000 Credit balance (Profit) P 30.000 90.000 Investment in JV Merchandise inventory 90.000 P200.000 Computation of JV Profit Total debit to JV Total credit to JV P170.000 105.000 90.000 200.000 Cash Investment in JV 15.000 Joint Venture JV cash 20.000 20.000 105.000 .000 Joint Venture JV cash 60.106 Chapter 6 SOLUTIONS TO PROBLEMS Problem 6 – 1 Books of Blanco (Manager) JV Cash Joint Venture Cash Ablan Capital 100.000 Investment in JV Profit from JV 15.000 Distribution Joint Venture Profit from JV Ablan capital Ablan capital JV cash Cash JV cash 30.000 155.000 105.000 15.000 JV cash Joint Venture Books of Ablan 60.

6.000 Income summary 150.000 45.000 Cash 82.000 Sales 5. 150.000 Merchandise inventory Ella capital 20. 3.Joint Venture 107 Problem 6 – 2 Books of the Joint Venture 1. 7.000 20.500 2.000 Income summary Merchandise inventory Purchases 77. 2.500 Income summary Expenses 39.500 Distribution of profit: Income summary Diaz capital Ella capital Fabia capital 80.000 9.000 .000 10.000 11.000 Expenses Diaz capital 9.000 Fabia capital Cash 10.000 11.000 30. 8.000 Adjusting and closing entries: (a) (b) Expenses Supplies Sales 500 500 150.000 2.500 33.000 Purchases Supplies Diaz capital 80. 4.000 11.000 150.000 39.000 Expenses Cash 30.000 60. Computer equipment Ella capital Fabia capital 105.

000 Investment in Joint Venture Merchandise inventory 20.000 11.000 20.000 45.000 Books of Fabia: (1) (2) Investment in Joint Venture Computer equipment 45.000 To record profit share: Investment in Joint Venture Profit from Joint Venture 11.000 82.108 Chapter 6 Books of Diaz (1) (2) (3) Investment in Joint Venture Cash 82.000 60.000 Cash 10.000 9.000 Investment in Joint Venture (3) 10.000 11.000 To record profit share: Investment in Joint Venture Profit from Joint Venture 11.000 To record profit share: Investment in Joint Venture Profit from Joint Venture 11.000 .000 Investment in Joint Venture Cash 9.000 Books of Ella: (1) (2) (3) Investment in Joint Venture Computer equipment 60.000 11.

500 1.000 500 10.000 3.500 JV cash Bueno capital 10.000 24.000 2.500 1.000 26: Joint Venture JV cash 12.000 9.000 June 30: JV cash JV accounts receivable 15.Joint Venture 109 Problem 6 – 3 (1) No Separate Set of Joint Venture Books is Used Books of Duran (Manager) May 1: 7: Joint Venture Castro capital Cash 12.000 30: To record unsold merchandise taken by Duran: Merchandise inventory Joint Venture 3.000 15.000 27: JV cash Joint Venture 16.500 9.000 14.000 2.500 30: JV accounts receivable Joint Venture 16.000 .000 To record profit distribution: Joint Venture Profit from JV Bueno capital Castro capital 6.000 9.000 9.000 2.000 To record settlements: Bueno capital Castro capital JV cash Cash Accounts receivable 12.

000 .000 16.000 A Separate Set of Books is used: Books of the Joint Venture May 1: 7: Merchandise inventory Castro capital Duran capital 12.000 2.000 14.500 Cash 10.500 9.000 15.JV accounts receivable 1.000 Accounts receivable 27: Cash 15.000 2.000 Sales 9.000 12.000 500 Bueno capital 26: Purchases Cash 30: Accounts receivable Sales June 20: Cash 10.000 12.000 110 Chapter 6 Books of Bueno May 7: Investment in Joint Venture Cash June 30: Investment in Joint Venture Profit from Joint Venture Cash 10.000 Books of Castro May 1: Investment in Joint Venture Merchandise inventory June 30: Investment in Joint Venture Profit from Joint Venture Cash 12.000 9.000 2.000 12.000 2.000 Investment in Joint Venture 12.000 9.500 16.000 10.000 Investment in Joint Venture (2) 14.

000 19.500 Books of Duran (Manager/Operator) May 1: Investment in Joint Venture Cash June 30: Investment in Joint Venture Profit from Joint Venture Cash 500 500 2.000 1.000 3.500 3. 1 requirement) 2. end Merchandise inventory Purchases 25.000 2.500 9.500 .000 2.000 2.000 14.000 Income summary Income summary Merchandise inventory.000 2.000 24.000 Settlements to Venturers: Bueno capital Castro capital Duran capital Merchandise inventory Accounts receivable Cash 12.500 Distribution of profit: Income summary Bueno capital Castro capital Duran capital 6.000 12.Joint Venture 111 June 30: Closing entries: Sales 25.000 2.500 Investment in Joint Venture Books of Bueno and Castro (Same as in No.000 2.

700 9.300 7.000 Joint venture Cash Rolex capital 64.560 4.000 10.400 37.800 30.000 Joint venture Cash Rolex capital Timex capital 55.000 34.000 111.500 9.310 To record sales: JV cash (P421.000 13.500 Joint venture Cash Rolex capital Timex capital 30.000 13.240 10.000 x 96%) 404.000 15.600 65.770 Cash Rolex capital Timex capital JV cash 45.000 Joint venture Cash Rolex capital Timex capital July: 102.160 .730 16.100 Rolex capital JV cash 30.000 16.000 34.560 125.400 64.970 31.112 Chapter 6 Problem 6 – 4 (1) Books of Seiko (Manager/Operator) April1: May: June: JV Cash Notes payable – PNB Roles capital Timex capital August: 34.300 Cash Rolex capital Timex capital JV cash 40.000 67.

Joint venture 404.800 64.574 __274.000 34.240 16.700 31.660 Computations: Settlement to Rolex .000 P146.429 Computed as follows: Total debits tot he JV account Total credits to the JV account P269.000 15.874 .000 To record distribution of profit: Joint venture Gain from JV (30%) Rolex capital (60%) Timex capital (10%) 134.687 128.290 To record settlement: Cash Rolex capital Times capital JV cash 32.Balance of capital account: Debits: June July August Payment of note payable P30.000 Credits: April 1 May June July August Profit share P34.160 Gain (credit balance) P134.000 _34.000 67.874 14.574 13.000 47.870 _404.099 175.287 80.290 40.000 8.560 _80.160 Joint Venture 113 To record payment of loan to PNB: Notes payable – PNB Rolex capital Timex capital Joint venture (Interest expense) JV cash 34.000 34.000 110.

000 _330.700 .300 10.800 87.Credit balance P 128.160 P506.099 175.500 + P43.874 114 Chapter 6 Settlement to timex – Balance of capital account Debits: July August Payment of loan P 10.500 Credits: April 1 June July August Profit share P 34.500 Balance of JV cash Less:Settlement to Rolex Settlement to Timex P128.000 65.500 _159.500 __34.560 4.874 __14.300) Current liabilities: P 72.500 P247.000 P 57.429 _71.000 _175.660 Settlement to Seiko (2) _142.973 P 32.099 Settlement to Seiko – Balance of JV cash account Debits: April 1 Loan proceeds P102. 2008 Books of Seiko (Manager/operator) Current assets: Investment in joint Venture: Joint Venture assets: Cash Joint Venture Less:Equity of other venturers (P116.000 13.599 Credit balance P 14.687 Partial Balance Sheet June 30.000 125.310 __13.000 9.500 _110.000 _404.160 Credits: June July August Payment of loan P 30.

500 50.000 Rolex capital April June P 30. 2008: JV Cash April 1 P102.100 _111.000 __9.500 Notes Payable P34.000 Accounts payable Other liabilities Capital stock Retained earnings P 61.000 _118.000 122.000 47.500 Timex capital P34.Notes payable – PNB 34.000 96.000 Joint Venture June May June P 64.500 Total assets P326.000 P146.700 P 30.000 P30.500 Total liabilities and stockholders' equity P326.300 Problem 6 – 5 Consolidated Balance Sheet Cash Receivables Inventory Other assets P 61.800 __64.000 Joint Venture 115 Computation of balances as of June 30.000 102.000 April June P43.000 _______ P 34.000 Consolidated Income Statement Sales P246.750 April 1 May June .400 Balance P175.500 __40.500 P116.000 Balance P 72.

307. 400.Mortgage Cash Reduced mortgage and paid interest.Mortgage Cash Reduced mortgage and paid interest.000 2.750 Mortgage payable Interest expense.100.000 3.750 Gross profit Operating expenses 122.000 Mortgage payable 200.000 Cash Reduced mortgage and make semi-annual interest payment.000 Cash Paid for improvements.000 1. Sept 30: Oct 31: Nov 30: Dec 31: 950.750 408.500 253.000 950.000 .000 MacDo Additional contribution at 6%.000.000 __58.000 Mortgage payable Interest expense.000 Interest expense.750 116 Chapter 6 Problem 6 –6 (a) Journal entries on venture books June 15: Cash 1.Mortgage 21.500 221. 250.400.000 750.000 MacDo Initial contribution at 6% July 1: Land 1.100.Cost of sales _124.000 Mortgage payable Interest expense.000.000 Mortgage payable Cash Purchased land for cash and 6% mortgage.650.250 Consolidated net income P 63.000 8.Mortgage Cash Reduced mortgage and paid interest. 300. Aug 1: Cash 1.000 7. Land 1.

31: 31: 1. 31: 31: 31: 31: 2.000 Sales Sales to date.000 60.600.000.650 596.100 Interest expense.600.000 628.000 Commissions Cash P2.250 60.000 596.600.000 2.000. (b) 801.000 x 5% 130.Venturer MacDo 6% on P1.000 from June 15 to December 31.600. Sales 130.000 40. and on P1.100.000 Land (cost of land sold) Expenses Commissions Interest expense.000 628.Joint Venture 31: 117 Cash 2. 596.000 from August 1 to December 31.650 Income summary MacDo MacEn To divide gain.mortgage Interest.000.145.000 . 60:40.650 MacDo 801.venturer Income summary To close income and expense accounts. 1.650 238.000 1.650 Journal entries on MacDo’s books: June 15: Investment in Joint Venture Cash Initial contribution.100 130.100 60.000 Expenses Cash Paid expenses 628.660 Cash Payment on account.

205. 2008 Sales Cost of land sold: Land Improvements Total Unsold land Gross profit Expenses: Advertising and office expenses Interest on mortgage Interest on advances Commissions Net gain Distributions: MacDo (P596.650 x 60%) MacEn (P596.650 MacDo and MacEn Joint Venture Income Statement For the period from June 15 to December 31.350.600.000 950.000 130.660 Mac Do and MacEn Joint Venture Balance Sheet December 31.Aug 1: Investment in Joint Venture Cash Additional contribution.000 P3.145.000 1.000 2. 357.000 118 Chapter 6 Dec 31: 31: 31: Investment in Joint Venture Interest income Interest earned on cash advanced.000 858.000 1.650 P 357.990 238.650 357.350 P 596.000 Investment in Joint Venture Gain on Joint Venture 60% of gain on venture.455.000 .100.650 x 40%) P2. 60.100 40.400.000 60.100. 1. 2008 Assets Cash P 250.250 60. (c) 801.000 P2.000 P 628.000 1.990 Investment in Joint Venture Repayment in part of advances.990 Cash 801.

650 (931.000) P238.340 130.455.886.000 P238.716.Land Total Assets 2.000 MacEn Total P2.000 130.660 (130.660 .955.990 60.660 P2.000 P2.650) P1.517.660 368.660 P 596.000 417.000 P 357.990 (801.000 786.650 2.100.340 238.000 368.000 1.100.000 Liabilities and equity: Mortgage payable MacDo MacEn Total liabilities and equity P 500.990 2.716.650) P1.205.650 60.455.000 Joint Venture 119 Venturers equity (interest) Invested Shares: Gain Interest on advances Commissions Total Balances Withdrawn Equity (interests) MacDo P2.