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QUIZ:
1. Tech Co. and Robotics Co. are joint venturers of Mecha Co., a producer of high tech
machinery. Tech and Robotics, each have a 50% interest in the net assets of Mecha
Co. During the year, Tech Co. earns revenue of ₱1,000,000 from its own operations
while Mecha Co. reports revenue of ₱400,000. How much total revenue shall be
reported in Tech Co.’s statement of profit or loss for the year?
a. ₱1,000,000
b. ₱1,200,000
c. ₱1,400,000
d. Either a or b
2. Entity A acquires 50% interest in a joint venture for ₱1M and appropriately records
the transaction under an investment account. At the end of the period, the joint
venture reports profit of ₱1M and makes a total distribution of ₱600,000 to the
owners. How much is the net effect of the transaction in Entity A’s profit or loss for
the current year?
a. ₱.5M
b. ₱.3M
c. ₱.2M
d. 0
“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the
rock that is higher than I.” (Psalms 61:2)
- END –
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SOLUTIONS:
1. A – the joint arrangement is a joint venture. Accordingly, Tech Co. will use the
equity method to account for its investment in Mecha Co.
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