# ANSWERS

1 D
Solution:
Joint Operations
Purchases - A 100 120 Sales - A
Purchases - B 80 60 Sales - B
Expenses - A 200 10 Other Income - B
380 190
Loss -190

Allocation to: A B TOTAL

Profit (Loss) for the Year -190 Purchases - A
10% Commission on Purchases Expenses - A
(100 x 10%) - A 10 -10
(80 x 10%) - B 8 -8 Cash Receipt
20% Commission on Sales
(120 x 20%) - A 24 -24
(60 x 20%) - B 12 -12
34 20 Purchases
Total to be divided equally: -244
Allocation ((172) / 2) -122 -122
Net Share as Allocated -88 -102

2 A
Solution:
Joint Operations
Contributions 300 900 Sales
Expenses 240
360 Balance Before Closing (100+120-580)

3 A
Solution:
Joint Operations Profit after salaries but before bo
Contributions 300 900 Sales Profit before salaries & bonus
Expenses 240 60 Ending Inventory Difficult, Salary
540 960 Profit after salaries but before bo
420 Profit before salaries & bonus

Profit Allocation: Easy Average Difficult TOTAL

Profit before salaries & bonus 420
Salary 6 6
Bonus 54 54
 Remaining Profit 120 120 120 360
Profit Allocation 120 120 180 420

4 A
Solution:
Joint Operations
Debit Balance 5
17 Ending Inventory
12 Profit (4 x 3)

5 C
Solution:
Joint Operations
Debit Balance 7
18 Ending Inventory
11 Profit

6 C
Solution:
Joint Operations
Account wih A 4 14 Account with C
Account with B 12 22 Ending Inventory
20 Profit

Profit Allocation: A B C TOTAL

Profit before salaries & bonus 20
Salary
Bonus (20 x 10%) 2 2
Remaining Profit 6 6 6 18
Profit Allocation 8 6 6 20

7 A
Solution:
Joint Operations
Account wih C 6.5 2.5 Account with A
4 Account with B
 0 Profit

Profit/Loss Allocation

8 D
Solution:
Joint Operations
Account wih LL 16000 18000 Account with NN
Account wih MM 32000 42000 Ending Inventory
12000 Profit

Profit Allocation: LL MM NN TOTAL

Profit before salaries & bonus 12000
Salary
Bonus (12000 x 10%) 1200 1200
Remaining Profit 3600 3600 3600 10800
Profit Allocation 4800 3600 3600 12000

9 B
Solution:
Joint Operations
30 Credit Balance (8+10+12)
15 Ending Inventory (5+6+4)
45 Profit

10 A
Solution:
1M own revenues only. Tech Co. uses the equity method to account for its investment in joint venture.
 Joint Operations - A
100 120 Sales - A
200 88 Net Share in Loss
300 208
92

Joint Operations - B
80 60 Sales
10 Other Income
102 Net Share in Loss
80 172
92 Cash Payment

t after salaries but before bonus: Bonus:

t before salaries & bonus 420 Profit after salaries but before bonus 414
-6 Less: 414/(1.15) -360
t after salaries but before bonus: 414 Bonus: 54

Joint Operations - Easy

Contributions 100
Profit/Loss Allocation 120
Receipt 220
 Joint Operations - Average
Contributions 120
Profit/Loss Allocation 120
Receipt 240

Total Payment to Easy and Average: 460

Joint Operations - A
Payable to A 4 22 Ending Inventory
Profit/Loss Allocation 8
10 Payment

Joint Operations - B
Payable to B 12
Profit/Loss Allocation 6
Receipt 18

Joint Operations - C
14 Receivable from C
Profit/Loss Allocation 6
8 Payment

Joint Operations - A
2.5 Receivable from A
Profit/Loss Allocation 0
 2.5 Payment

Joint Operations - B
4 Receivable from B
Profit/Loss Allocation 0
4 Payment

Joint Operations - C
Payable to C 6.5
Profit/Loss Allocation 0
Receipt 6.5

Joint Operations - LL
Balance 16000 42000 Ending Inventory
Profit/Loss Allocation 4800
21,200.00 Payment

Joint Operations - MM
Balance 32000
Profit/Loss Allocation 3600
Receipt 35,600.00

Joint Operations - NN
18000 Balance
Profit/Loss Allocation 3600
14,400.00 Payment

Joint Operations - A
Contributions 10 5 Ending Inventory
Profit/Loss Allocation 15
Receipt 20

tment in joint venture.

CASE 1: No separate records are maintained
A. Journal Entries
SMALL'S BOOK
Dr. Cr.
Joint Operation 100,000.00
A
Cash 100,000.00
Joint Operation 120,000.00
B
Payable to Medium 120,000.00
Joint Operation 80,000.00
C
Payable to Large 80,000.00
D No Entry

Receivable from Large 900,000.00

E
Joint Operation 900,000.00
Joint Operation 240,000.00
F
Receivable from Large 240,000.00

B. Profit after management fee and bonus.

Joint Operations
Medium Contribution 120000 900000 Sales
Purchases 180000 60000 Ending Inventory
Expenses 240000
420000 Profit before fee and bonus

Profit before fee and bonus 420000

Management Fee 6000
Bonus 54000
Profit after management fee and bonus 360,000.00

C. Cash Settlements
Profit Allocation: Small Medium Large
Profit before salaries & bonus
Management Fee 6000
Bonus 54000
Remaining Profit 120000 120000 120000
Profit Allocation 120000 120000 180000
CASE 2: Separate records are maintained.
A. Journal Entries
SMALL'S BOOK
Dr. Cr.
Joint Operation 100,000.00
A
Cash 100,000.00
B No Entry

C No Entry

D No Entry

E No Entry

F No Entry

B. Profit after management fee and bonus.

Sales 900,000.00
COGS:
Inventory, Beg 120,000.00
Purchases & Freight In 180,000.00
Total Goods Available for Sale 300,000.00
Inventory, End (160K+20K)/3 (60,000.00) (240,000.00)
Gross Profit 660,000.00
Expenses (240,000.00)
Profit before salaries & bonus 420,000.00
Management Fee (6,000.00)
Bonus (54,000.00)
 Profit after management fee and bonus 360,000.00

Profit Allocation: Small Medium Large

Profit before salaries & bonus
Management Fee 6,000.00
Bonus 54,000.00
Remaining Profit 120,000.00 120,000.00 120,000.00
Profit Allocation 120,000.00 120,000.00 180,000.00

3. Join Venture
Investment in Joint
Initial Investment 220,000.00 200,000.00 Dividends (500K X 40%)
Share on Profit (800k x 40%) 320,000.00
340,000.00
 MEDIUM'S BOOK LARGE'S BOOK
Dr. Cr.
Joint Operation 100,000.00 JO - Cash
Payable to Small 100,000.00 Payable to Small
Joint Operation 120,000.00 Joint Operation
Inventory 120,000.00 Payable to Medium
Joint Operation 80,000.00 JO - Cash
Payable to Large 80,000.00 Cash
Joint Operation
No Entry
JO - Cash
Receivable from Large 900,000.00 JO - Cash
Joint Operation 900,000.00 Joint Operation
Joint Operation 240,000.00 Joint Operation
Receivable from Large 240,000.00 JO - Cash

Ending Inventory Bonus:

Large's Puchases 120000 Profit after fee and bonus
ding Inventory Freight Charges 60000 Less: (414000/1.15)
180000 Bonus:
fit before fee and bonus Divide: 3
Ending Inventory 60000

TOTAL Joint Operations - Small

420000 Contribution 100000
6000 Profit/Loss Allocation 120000
54000 Receipt 220,000.00
360000
420000 Joint Operations - Medium
Contribution 120000
Profit/Loss Allocation 120000
Receipt 240,000.00

Joint Operations - Large

Contribution 80000
Profit/Loss Allocation 180000
Receipt 200,000.00
 MEDIUM'S BOOK LARGE'S BOOK
Dr. Cr.
No Entry No Entry

Joint Operation 120,000.00

No Entry
Inventory 120,000.00
Joint Operation
No Entry
Cash
No Entry No Entry

No Entry No Entry

No Entry No Entry

JO'S BOOK
Dr. Cr.
Cash 100,000.00
Small, Capital 100,000.00
Inventory 120,000.00
Medium, Capital 120,000.00
Cash 80,000.00
Large, Capital 80,000.00
Purchases 180,000.00
Cash 180,000.00
Cash 900,000.00
Sales 900,000.00
Expenses 240,000.00
Cash 240,000.00
 Small, Capital
TOTAL 100,000.00 Beg Capital
420,000.00 120,000.00 Profit/Loss Allocation
6,000.00 220,000.00 Receipt
54,000.00
360,000.00 Medium, Capital
420,000.00 120,000.00 Beg Capital
120,000.00 Profit/Loss Allocation
240,000.00 Receipt

Large, Capital
Ending Inventory 60,000.00 80,000.00 Beg Capital
180,000.00 Profit/Loss Allocation
200,000.00 Receipt

dends (500K X 40%)

 LARGE'S BOOK
Dr. Cr.
100,000.00
100,000.00
120,000.00
120,000.00
80,000.00
80,000.00
180,000.00
180,000.00
900,000.00
900,000.00
240,000.00
240,000.00

414000
360000
54000

perations - Small

erations - Medium

perations - Large
60000 Ending Inventory
LARGE'S BOOK
Dr. Cr.
No Entry

No Entry

80,000.00
80,000.00
No Entry

No Entry

No Entry