Ramon Magsaysay Memorial Colleges

Bachelor of Science in Accountancy Program

Pioneer Ave., General Santos City
Tel. No. 552-3348

Name: ______________________________ Date: ___________ Score: _____________

Subject : ADVANCED ACCOUNTING 1 Midterm Quiz – Joint Arrangements
Instructor: Mrs. Marivic B. Peñaflor, CPA,MBA AY: 2018-2019 2nd Semester

General Instruction: Write your final answer on the answer sheet. Read the problems carefully before
answering

Ace Company purchases 40% of Basket Company on January 1 for P700,000 that carry voting rights at a
general meeting of shareholders of Basket Company. Transaction cost of P 6,000 each was incurred by the
venturerrs. Ace Company and Blake Company immediately agreed to share control (wherein unanimous
consent is needed to all the parties involved) over the Basket Company. Basket reports assets on that date
of P1,600,000 with liabilities of P500,000. One building with a seven-year life is undervalued on Basket’s
books by P150,000. Also Basket’s book value for its trademark (10-year life) is overvalued by P120,000
and any goodwill will be amortized 10% per year. During the year, Basket reports net income of P90,000,
while paying dividends of P30,000. Basket company sold merchandise to Ace company that cost P 40,000
for P 60,000. One fourth of the merchandise remained unsold at year end. It was determined that the fair
value of each of their investment in Basket Company at December 31 as P 250,000 and P 230,000
respectively. Costs to sell are estimated at 5% of the fair value of the investment.

Required: Compute the amount of the investment account and investment income account/ dividend
income at the end of the year using equity, cost and fair value model under the following independent
assumptions:

Case 1 : using the same information given.

Case 2 : using the same information except that trademark and building were overvalued.
Case 3: Using the dame information except that trademark and building were undervalued and the cost of
investment amounting to P 250,000.
Case 4: Using the same information except that trademark and building were overvalued and the cost of the
investment amounting to P 260,000.

1. The ff. joint venture account reflects the transaction of the venture of A, B and C as recorded by each
Venturer (participant)
Joint Venture

2019
Nov. 5 Merchandise-C…….P12, 750 Nov. 18 Cash sales-A……P30, 600
17 Merchandise-B……P10, 500 Dec. 12 Cash sales-A……P6, 300
22 Freight-in-A……….P525 28 Merchandise-B…P1, 815
Dec. 3 Purchase-A………..P5, 250
13 Selling expenses…...P600

Distributions of gains or losses are to be trade as follows: A-50%, B-30%, and C-20%. The
venture is to close on December 31, 2019:

The joint venture profit (loss) is:

a. P7, 275
b. P9, 090
c. P25, 980
d. P29, 625
2. Using the same information in no. 1, how much of each Venturer (participant) receive in the final
settlement?
a. A- none; B-P11, 412; C-P14, 568
b. A- P4, 545; B-P11, 212; C-P10, 932
c. A-P5, 070; B-P11, 212; C-P10, 932
d. A- P4, 545; B-P11, 412; C-P14, 568
3. JJ, DD and AA formed a joint venture for the sale of assorted fruits during the Christmas season. Their
transactions during the two-month period are summarized below.
Joint Venture

2019
Nov. 6 Merchandise-JJ…..P8, 500
8 Merchandise-DD…P7, 000
10 Freight-in-AA……P200
Dec. 8 Purchase-AA…….P3, 500
14 Selling expenses-AA..P550
2019
Nov. 10 Cash sales-AA….P20, 400
12 Cash sales-AA …P4, 200
28 Merchandise-DD..P1, 210
Dec. 30 Unsold merchandise
charged to JJ….P540

The venture agreement provided for the division of gains and losses among JJ, DD and AA in the
ratio of 2:3:5. The venture is to close on December 31, 2008.

The joint venture profit (loss) is:

a. P6, 600
b. P(6, 600)
c. P6, 060
d. P(6, 060)
4. Using the same information in no. 3, how much would JJ receive cash in final settlement?
a. P9, 712
b. P8, 500
c. P1, 212
d. P9, 280
5. Anson and Baylon formed a joint venture. Their capital contributions and profit and loss ratio are presented
below:
Contributions
Cash Merchandise profit & loss ratio
Anson P5, 000 P8, 000 50%
Baylon - P6, 000 50%

A summary of the joint venture activities is presented below:

Purchase of merchandise by Baylon P4, 000
Expenses paid by Baylon:
Mayor’s payment P400
Freight on merchandise contribution by Anson P300
Delivery expense of merchandise sold P200
Sales (all of the merchandise contributed and
purchased by Baylon and one-half of those contribution
by Anson)-Selling price P14, 000

The balance of the joint venture account before profit or loss distribution is:
a. P4, 900
b. P14, 000
c. P14, 400
d. None
6. Using the same information in no. 5, the profit (loss) of the joint venture is:
a. P(450)
b. P750
 c. P(750)
d. P450
7. Using the same information in no. 5, how much would Anson receive in the final settlement assuming he
took the unsold merchandise at cost?
a. P13, 000
b. P12, 625
c. P8, 475
d. P8, 515
8. Alas and Bernal are participants in a venture for the acquisition of construction supplies at an auction. The
two participants agreed to contribute cash of P20, 000 each to be use in purchasing the supplies, and to
share profits and losses equally, they also agreed that each shall record his purchases, sales and expenses in
his own books.

Several months later, the two participants terminated the venture. The ff. data relate to the venture
activities:

Alas Bernal
Joint venture P16, 000 Cr. P18, 400 Cr
Value of inventory taken P600 P2, 200
Expenses paid from JV cash P800 P1, 800

The amount of joint venture sales is:

a. P77, 000
b. P27, 000
c. P34, 400
d. None
9. Using the same information in no. 8 Alas would receive in the final settlement:
a. P2, 000
b. P18, 600
c. P4, 000
d. P38, 000
10. On July 1, 2019, Alviar, Brosas and CAmus formed a joint venture for the sale of merchandise. Alviar was
designated as the managing participant. The profit or losses are to be divided as follows:
Alviar-50%
Brosas-25%
Camus-25%
On October 1, 2019 though the joint venture is still uncompleted, the participants agreed to recognize profit
or loss on the venture to date. The cost of inventory on hand is determined at P25, 000. The Joint Venture
account has debit balance of P15, 000 before distribution of profit and loss. No separate of book is maintain
for the joint venture and the participants record in their individual books all venture transactions.

The joint venture profit (loss) on October 1, 2019 is:

a. P10, 000
b. P25, 000
c. P(15, 000)
d. None
11. Using the same information in no. 10 and the joint venture account has a credit balance of P30, 000, the
joint venture profit (loss) is:
a. P(55, 000)
b. P55, 000
c. P(5, 000)
d. P5, 000
12. Ranto and Santo formed a joint venture to acquire and sell a special type of merchandise Ranto is to
manage the venture and to furnish the capital. The participants are to share equally any gain or loss on the
joint venture. On April 1, 2019 Santo sent RantoP10, 000 cash, which was all used to purchase
merchandise. Ranto paid freight of P240 on the merchandise purchased. On April 27, one-half of the
 merchandise was sold for P7, 200 cash. Ranto paid the cost of delivering merchandise to customers which
amounted to P260. no further transactions occurred until the end of the month.

The profit (loss) of the venture for the month of April 2019is:
a. P1, 820
b. P1,950
c. P(1,700)
d. None
13. Using the same information in no. 12, the account of Santo in the books of bRanto shows a debit (credit)
balance on April 30, 2019 after recognizing the profit (loss) on the uncompleted joint venture:
a. P(10, 910)
b. P10, 975
c. P10, 850
d. ZERO