Professional Documents
Culture Documents
1Chapter 6
Joint Arrangements
NAME: Date:
Professor: Section: Score:
QUIZ:
Use the following information for the next two questions:
A, B and C formed a joint operation. They agreed on the following:
C is the appointed as the manager. As compensation, C is entitled to a ₱120 salary plus bonus
of 25% of profit after deducting the salary and the bonus. However, C will be charged for the
cost of any unsold inventory.
Interest of 10% per annum is allowed to A’s and B’s capital contributions.
Any remaining profit or loss is divided equally.
The joint operation was complete after a year. The following were the transactions:
A contributed cash of ₱400 and merchandise costing ₱800.
B contributed merchandise costing ₱1,600. B paid freight of ₱80 in the transfer.
C purchased merchandise worth ₱400 using A’s cash contribution.
C paid expenses of ₱800 using his own cash.
C made total sales of ₱3,200.
All inventories were sold except one-half of those contributed by B.
1. How much is the joint operation’s profit after deduction for salary but before deduction for
bonus?
a. 192
b. 240
c. 360
d. 420
The joint operation was completed at the end of the year. Each joint operator is entitled to a 10%
commission on its purchases and a 20% commission on its sales. Any remaining profit or loss is
divided equally.
b. (200,000)
c. 180,000
d. (180,000)
JOINT OPERATION – B
PURCHASE 320 720 COLLECTION ON SALES
NET SHARE 72 40 COLLECTION ON OTHER INCOME
368 CASH SETTLEMENT - PAYMENT
5. A, B and C formed a joint operation which was completed during the year. A, the appointed
manager, is entitled to a bonus of 10% of the profit before deducting the bonus. Any
remaining profit or loss is divided equally. On the joint operation’s completion date, B’s and
C’s books show the following balances before adjusting and closing entries:
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Books of
B Books of C
Account with A 16 Cr. 16 Cr.
Account with B 48 Cr.
Account with C 56 Dr.
The unsold merchandise was charged to A at a cost of ₱88. On the cash settlement between the
joint operators,
a. A receives ₱48.
b. B pays ₱72. 16*
c. C pays ₱32.
d. a and c
6. A, B and C formed a joint operation. Profit or loss shall be divided equally. On the joint
operation’s completion date, the books of A, the appointed manager, show the following
account balances:
Debit Credit
JO – Cash 80
Joint operation 20
B Co. 60
C Co. 40
A’s share in the joint operation’s profit is ₱16. A agreed to be charged for the unsold
merchandise. How much is the cost of unsold merchandise charged to A?
a. 28
b. 62
c. 68
d. 72
solution:
If A’s share in the joint operation’s profit is P6 and profit and loss is dividend equally between 3
joint operations, then the total profit of the joint operation must be P48 (16 for each joint
operation’s multiplied by 3 joint operators).
unsold merchandise is squeezed after placing relevant data in the joint operation accounts.
JOINT OPERATORS
DEBIT BALANCE 20
68 UNSOLD MERCHANDISE
48 PROFIT-CREDIT BALANCE (16*3)
7. A, B, and C formed a joint operation. On the joint operation’s completion date, the books of
A, the appointed manager, show the following account balances:
Debit Credit
JO – Cash 80
Account with B 60
Accounting with
C 88
The cost of unsold inventory is ₱72. The joint operation’s profit is ₱44. How much is the balance
of the joint operation account before distribution of profit?
a. 28
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b. 116
c. 56
d. 0
10. On January 1, 20x1, PATRIMONY Co. entered into a joint arrangement classified as a joint
venture. For an investment of ₱2,000,000, PATRIMONY Co. obtained 30% interest in
HERITAGE Joint Venture, Inc. During the year, HERITAGE Joint Venture, Inc. reported
profit of ₱4,000,000 and other comprehensive income of ₱800,000, i.e., a total
comprehensive income of ₱4,800,000. HERITAGE Joint Venture, Inc. declared dividends of
₱2,400,000. How much is the carrying amount of the investment in joint venture on
December 31, 20x1?
a. 2,720,000
b. 2,000,000
c. 2,480,000
d. 4,160,000