1.

IFRS 11, provides that a joint operator shall recognize the following, in relation to its interest in a joint operation, except
a. Its expenses, including its share of any expenses incurred jointly
b. Its liabilities, including its share of any liabilities incurred jointly
c. Its interest as an investment using the equity method
d. Its assets, including its share of any assets held jointly

2. IFRS 11, provides that the classification of the arrangements will require entities to apply judgment when assessing their
rights and obligations arising from the arrangement by considering the following, except
a. The terms agreed by the parties in the contractual arrangements
b. The structure and legal form of the arrangement
c. When structured in a legal entity, the choice between proportionate consolidation and the equity method
d. When relevant, other facts and circumstances

3. According to IFRS 11, what is the method of accounting for investment in joint venture?
a. Proportionate consolidation method c. Equity method
b. Cost method d. Fair value

4. It is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the
arrangement.
a. Joint control c. Joint operation
b. Joint undertaking d. Joint venture

5. It is a party to a joint venture that has joint control of that joint venture.
a. Joint controller c. Joint operator
b. Joint undertaker d. Joint venturer

6. It is an entity that participates in a joint arrangement, regardless of whether that entity has joint control of the arrangement
a. Partner c. Joint operator
b. Party to a joint arrangement d. Joint venture

7. It is a separately identifiable financial structure, including separate legal entities or entities recognized by statute, regardless
of whether those entities have legal personality
a. Separate vehicle c. Joint operator
b. Party to a joint arrangement d. Joint venture

8. Under IFRS 11, as an exception to the general rule of mandatory equity method accounting for Investment in Joint Venture,
what is alternative treatment available to joint venture for an investment in joint venture held or is held indirectly through an
entity that is a venture capital organization, mutual trust fund, unit trust and similar entities including insurance-liked fund?
a. It may elect to measure the investment in joint venture at fair value through profit or loss
b. It may elect to measure the investment in joint venture at fair value through other comprehensive income
c. It may elect to measure the investment in joint venture at cost
d. It may elect to measure the investment in joint venture at proportionate consolidation

9. Under IFRS for SMEs, how shall the joint venture account for its Investment in Joint Venture?
a. Equity method c. Fair value under IFRS 9
b. Cost method d. Any of the above.

10. Under IFRS 11, how shall the joint operator account for its interest in a joint operation?
a. The joint operator shall account for its interest under Equity Method.
b. The joint operator shall account for its interest under Cost Method
c. The joint operator shall account for its interest using proportionate consolidation
d. The joint operator shall account for its interest by recognizing its assets, its liabilities, its revenue, its expenses and its
share in the jointly controlled assets, jointly incurred liabilities, jointly earned revenue and jointly incurred expenses
in accordance with the contractual arrangement.

11. What is the classification of the joint arrangement when the arrangement is structured without a separate vehicle such as
when the rights of each party to the total assets and obligations for total liabilities relating to the arrangement are clearly
established?
a. It shall be classified as joint venture
b. It shall be classified as joint operation
c. Neither joint venture nor joint operation
d. It can be either a joint operation or join venture depending on the company policy of the parties to the joint
arrangement.

12. What is the classification of the joint arrangement when the assets and liabilities relating to the arrangement are held by a
separate vehicle or when the arrangement is established with a separate vehicle?
a. It shall be classified as joint venture
b. It shall be classified as joint operation
c. Neither joint venture nor joint operation
d. It can be either a joint operation or joint venture depending on the legal form of the separate vehicle, terms of the
contractual arrangement or other relevant facts and circumstances.
Problem 1. The following information are taken from the books and records of Pacific Company and its branch. The balances
are at December 31, 2015, the second year of company’s operations.
Home Office Books Branch Books
Sales P 480,000
Expenses 120,000
Shipments to branch P 240,000
Allowance for overvaluation of branch inventory 69,000
The branch obtains all of its merchandise from the home office. The home office ships the merchandise at 125% of its cost.
The ending inventory of the branch is P 48,000 at the billed price.
1. The beginning inventory of the branch at billed price is:
2. The net income as reflected on the books of the branch is:
3. The true income of the branch is:

Problem 2. The unadjusted trial balance for the home office and the branch of Malakas Company show the following items on
December 31:
Home Office Books Branch Books
Allowance for overvaluation of branch inventory P 43,200
Shipments to branch 96,000
Purchases (from outsiders) P 30,000
Shipments from home office 115,200
Merchandise inventory, January 1 180,000
Branch inventory on December 31 is P 120,000, including P 19,200 acquired from outsiders. The home office bills the branch
at 120% cost.
1. How much of the branch inventory as of January 1 represented purchases from outsiders?
2. The realized branch profit to be adjusted is?

Problem 3. The following data were taken from the records of Luzon Corporation of Manila and its Rizal Branch for 2015:
Manila Office Rizal Branch
Sales P 636,000 P 189,000
Inventory, January 1 69,000 26,700
Purchases 492,000
Shipments to Branch 126,000
Shipments from home office 151,200
Inventory, December 31 85,500 35,100
Expenses 229,200 60,900
In 2015, Manila office billed the Rizal branch at 120% of cost which was lower by 5% than last year’s.
1. The true branch income (loss) in so far as the home office is concerned is?
2. The combined net income of the home office and the branch is?

Problem 4. Miles Company established a branch in Ayala by sending merchandise costing P 924,500 and effecting a fund
transfer of P 400,000 cash on January 1, 2016. The branch purchased equipment costing P 420,000 on April 1. As per
agreement, the home office will maintain all the property, plant, and equipment records. Ayala branch collected P 56,000
worth of Ortigas branch’s receivable on August 4. Cash remittance to the home was P 250,000 on September 28. On
November 21, Ayala branch returned defective merchandise worth P 125,000 to the home office. At the end of the year, the
company’s controller found out that the branch accountant had failed to record all the transactions initiated by the home office
from the second half of the year. Because of this, there is a significant discrepancy between the balances of the reciprocal
accounts. For the purpose of reconciling the reciprocal accounts, the controller instructed the accounting staff of the home
office to send a copy of the Investment in Ayala general ledger to the branch.
Investment in Ayala
1/1 Merchandise to Branch 924,500 4/2 Equipment Acquisition 240,000
1/1 Fund Transfer 400,000 9/30 Remittance 225,000
7/2 Merchandise to Branch 135,000 11/22 Return of goods from
8/31 Fund Transfer 95,000 Branch 12,500
10/5 Exoenses paid for Branch 29,000
1. What is the unadjusted balance of the home office account?
2. What is the adjusted balance of the reciprocal accounts?

Problem 5. During 2016, goods billed at P 3,250,000 were shipped to the branch at 130% of cost. The account Loading in
Branch Inventory has a balance of P 1,225,000 before adjustment. The beginning inventory of the branch from the home office
at cost is P 2,375,000, the beginning inventory of the branch from outsiders is P 540,000 and the amount of purchases from
outsiders is P 1,450,000. How much is the total goods available for sale of the branch from the home office?
ANSWER KEY:

Problem 4.
6. P45,000
Balance of Allowance for overvaluation of branch inventory account
before adjustment . . . . . . . . . P 69,000
Less Overvaluation of shipments from HO:
Billed price (P240,000 x 125%). . . . . . . . . . . . . . . . . P 250,000
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 60,000
Overvaluation of beginning inventory. . . . . . . . . . . . . 9,000
Add Beginning inventory at cost (P11,640 ÷ 25%) . . . . 36,000
Branch beginning inventory at billed price . . . . . . . . . P 45,000

7. P63,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 480,000
Cost of sales: (see no.6) . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . P 45,000
Shipments from HO (P240,000 x 125%). . . . . . . . . . 300,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,000
Less ending inventory. . . . . . . . . . . . . . . . . . . . . . . . 48,000 297,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Branch net income, per books . . . . . . . . . . . . . . . . . . . P 63,000

8. P122,400
Branch net income, per books (see no. 7) . . . . . . . . . P 63,000
Add realized profit -
Allowance for overvaluation of branch inventory P 69,000
Less Overvaluation of branch ending inventory:
Billed price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 48,000
Cost (P48,000 ÷ 125%). . . . . . . . . . . . . . . . . . . . 38,400 9,600 59,400
True branch net income. . . . . . . . . . . . . . . . . . . . . . . . P 122,400

Problem 5.
17. P36,000
Balance of Allowance for overvaluation of branch inventory . . . . . . . P 43,200
Less Overvaluation of shipments from HO (P115,200 – P96,000) . . . . . . . 19,200
Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . . . . . 24,000
Add Cost of beginning inventory from HO (P24,000 ÷ 20%) . . . . . . . . . . . 120,000
Beginning inventory from HO, at billed price. . . . . . . . . . . . . . . . . . . . . . . P 144,000

Merchandise inventory, January 1 per books . . . . . . . . . . . . . . . . . . . . . . P 180,000

Less beginning inventory from HO (see above) . . . . . . . . . . . . . . . . . . . . . 144,000
Branch beginning inventory from outsiders . . . . . . . . . . . . . . . . . . . . . . . . P 36,000

18. P26,400
Balance of allowance for overvaluation of branch inventory P 43,200
Less Overvaluation of branch ending inventory from HO:
Billed price (P120,000 – P19,200) . . . . . . . . . . . . . . . . . . . . P100,800
Cost (P100,800 ÷ 120%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,000 16,800
Realized branch profit to be adjusted . . . . . . . . . . . . . . . . . . . P 26,400

Problem 6
19. P9,990
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 189,000
Cost of sales:
Inventory, January 1 at cost (P27,000÷ 125%) . . . . . . . . P 21,360
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . . . . . 126,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,360
Inventory, December 31 at cost P35,100 ÷ 120%) . . . . . 29,250 118,110
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,890
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,900
True branch income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 9,990

20. P67,290
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 636,000
Cost of sales:
Inventory, January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 69,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,000
Less Shipment to branch . . . . . . . . . . . . . . . . . . . . . . . . . . 126,000
 Cost of goods available for own sale . . . . . . . . . . . . . . . 435,000
Less Inventory, December 31. . . . . . . . . . . . . . . . . . . . . . 85,500 349,500
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,500
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,200
Net income of home office . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,300
Add Branch net income (see no. 19) . . . . . . . . . . . . . . . . . . . 9,990
Combined net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 67,290

4. 585,500 – 844,500

5. 6,100,000