AA1 - Chapter 4 Joint Ventures (2005) Suggested Answers

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MULTIPLE CHOICE 1. A Total credits in the Joint Venture account Less Total debits in the Joint Venture account Gain (excess of credit over debit) Merchandise contribution Add Share in the gain (P60,600 x 2/10) Final settlement to Minda P258,100 197,500 P 60,600 P 85,000 12,120 P 97,120

2.

3.

The account of Melissa has a debit balance, thus, she has to make payment.. The account of Nancy has a debit balance, thus, she has to make payment. The account of Olivia has a credit balance, thus, she has to receive payment. P150,000 + P105,000 = P255,000 P120,000 + (135,000/3) = P165,000 Capital of Tan Unsold merchandise taken by Tan Share on the venture income (P135,000* / 3) Amount received by Tan in final settlement * Credit balance in the Joint Venture account Unsold merchandise taken by Tan Venture income Salaries to Reyes Remainder divided equally 15% (P115,000 B) = P15,000 Credit balance in the Joint Venture account Unsold merchandise purchased by Soriente Net profit before bonus Bonus to Soriente [ 15% (P115,000 B) Net profit after bonus P100,000 x 40% = P40,000 Santos (P 5,000) 40,000 P35,000 Salazar P20,000 35,000 P55,000 P 90,000 25,000 P115,000 15,000 P100,000 P270,000 ( 105,000) 45,000 P210,000 P150,000 105,000 P255,000 120,000 P135,000

4. 5. 6.

C C B

7. 8.

B C.

9. 10.

C B

Account balances Share in venture profit Cash settlement

AA1 - Chapter 4 Joint Ventures (2005) Suggested Answers

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11.

Sales Less Sales discounts Net sales Cost of sales: Contributed merchandise Less Returned merchandise Gross profit Operating expenses (P6,450 + P58,650) Net income Less Bonus (P41,250 x 25/125) Net income after bonus P41,250 x 25/125 = P8,250

P240,000 4,050 P235,950 P156,000 26,400

129,600 P106,350 65,100 P 41,250 8,250 P 33,000

12. 13.

B D

Merchandise contribution Merchandise returns Interest on original capital Balance of profit divided equally Cash settlement 14. A Purchases Expenses Balance, end Joint Venture 300,000 Sales 34,500 225,000 559,500

Iona P66,000 ( 15,000) 990 10,220 P62,210

Paula P90,000 ( 11,400) 1,350 10,220 P90,170

559,500

559,500

Sales revenue is a credit entry in the Joint Venture account. The total of the purchases, expenses and the ending balance is equal to total sales revenue. The ending balance is the sum of the credit balances of Marc and Martin of P120,000 and P105,000. 15. 16. B A P236,500 x 50% = P118,250 Investment of Marc Cost of unsold goods assumed by Marc Share in the joint venture gain: Credit balance in the JV account Unsold goods assumed by the partners JV gain Share of Marc Cash settlement to Marc P12,000 P2,500 = P9,500 Contribution Less Share on loss (P12,000 P2,500) Additional loss to Debbie Cash distribution 19. B Receipts Valdez P789,200 P150,000 ( 4,500) P225,000 11,500 P236,500 50%

118,250 P263,750 Ellie P2,000 4,750 (P2,750) 2,750 Total

17. 18.

B D

Debbie P10,000 4,750 P 5,250 ( 2,750) P 2,500 Ramos P654,250

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Less Investment 300,000 300,000 Revenue P489,200 P354,250 Sale of non-cash assets Total revenue Less Expenses disbursements (P622,750 + P706,950) Joint venture profit 20. 21. B Debit to Joint Venture account: Investment of Santos (12,000 shares @ P45) Investment of Cruz (8,000 shares @ P45) Managers fee [ 1% (176,000 + 240,000 + 133,000 +261,625)] Miscellaneous expenses Credit to Joint Venture account: Sales (4,000 @ P44) Sales (6,000 @ P40) Cash dividend [(12,000 + 8,000 4,000 6,000) x P2] Sales (3,500 @ P38) Sales [(10,000 3,500) x 115% = 7,475 shares x P35] Net loss of the venture (P909,606.25 P830,625) 22. D Investment of Cruz (8,000 shares @ P45) Less Share in JV net loss (P78,981.25 x 8/20) Share of Cruz after distribution of proceeds Loss upon the investment of shares (8,000 shares @ P10) Share in JV loss Loss of Cruz on the disposition of Palawan Oil Co. shares

P 943,450 600,000 P1,543,450 1,329,750 P 213,750

P540,000.00 360,000.00 8,106.25 1,500.00 P909,606.25 P176,000.00 240,000.00 20,000.00 133,000.00 261,625.00 P830,625.00 P 78,981.25 P360,000.00 31,592.50 P328,407.50 P 80,000.00 31,592.50 P 111,592.50

23.

Loss on the disposition of the shares of Cruz is the total of the loss upon investment of the shares (i.e. P45 P55 = P10 per share) and the share on the net loss of the dissolved joint venture. 24. 25. 26 A A B 20,000 shares x P40 MV = P800,000 20,000 4,500 + 15,500 x 120% = 18,600 5,000 = 13,600 x P1 = P13,600 Proceeds from sale of shares; 4,500 x P44 5,000 x P25 6,000 x P28 7,600* x P35 Cost of the shares (see # 1) Loss from sale of the shares Expenses (3,000 + 4,700) Dividend revenue Number of shares after stock dividend

P198,000 125,000 168,000 266,000

P757,000 800,000 P 43,000 ( 7,700)

18,600

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Less shares sold on November 5 Shares entitled to cash dividend Dividend per share Net loss Share of Roxas on the venture loss

5,000 13,600 x P1

13,600 P 37,100 x 6/20 P11,130

* Contributed shares Shares sold on Oct. 20 Remaining shares Shares received as stock dividend (20% x 15,500) Shares sold on Nov. 5 and 22 Shares sold at P35 27. 28. D C 20,000 4,500 = 15,500 x 20% = 3,100 Investment (10,000 shares @ P40) Share on the joint venture loss (P37,100 x 1/2 ) Share of Silverio on the distribution of proceeds

20,000 4,500 15,500 3,100 (11,000) 7,600

P400,000 18,550 P381,450 P88,000 7,420 P95,420

29.

Loss upon contribution of the shares [(P40 P62) x 4,000] Share on the JV loss (P37,100 x 4/20) Tans loss on disposition of his investment in Golden Copper