 JOINT ARRANGEMENTS

 PFRS 11
 Answer # 1:
Solutions:
Profit or loss is computed as follows:
Joint Operation

Merchandise – A 800 3200 Sales - C

Purchase – A’s cash 400
Merchandise – B 1600 840 Unsold Inventory charged to C
Freight in – B 80
Expenses – C 800

360 Profit before salary but before Salaries Expense – C 120

Bonus – Credit Balance
240 Profit after Salary but before Bonus Expense** 48
Bonus – Credit Balance

192Profit after Salary and Bonus

B
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Interest on Capital -
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Interest on Capital -
A - ( 1200X 10%) 120 -120
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Interest on Capital -
A - ( 1200 X 10%) 120 -120
B - ( 1680X 10 %) 168 -168
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Interest on Capital -
A - ( 1200 X 10%) 120 -120
B - ( 1680 X 10 %) 168 -168
Profit after Interests on Capital -96
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C** 48 -48
Proftit after Salary and Bonus 192
Interest on Capital -
A - ( 1200 X 10%) 120 -120
B - ( 1680 X 10 %) 168 -168
Profit after Interests on Capital -96
Allocation ( 24/3 ) -32 -32 -32 96
Answer # 2:
Solution:
Profit is allocated to the joint operations as follows:
Allocation to: A B C Totals
Profit Before Salary and Bonus 360
Salary to C 120 -120
Bonus to C [B = 240 – (2401.25%)]
48
48 -48
-48
Proftit
Proftit after
after Salary
Salary and
and Bonus
Bonus 192
192
Interest on Capital -
Interest on Capital -
A - ( 1200 X 10%) 120 -120
A - ( 1200 X 10%) 120 -120
B - ( 1680 X 10 %) 168 -168
B - ( 1680 X 10 %) 168 -168
Profit after Interests on Capital -96
Profit after Interests on Capital -96
Allocation ( 24/3 ) -32 -32 -32 96
Allocation ( 24/3 ) -32 -32 -32 96
Net Share - As allocated 88 136 136 -
Net Share - As allocated 88 136 136 -
 Joint operation - A
Inventory contributed by A 400  
Cash contribution 800  
Net share in profit 88  
Cash settlement – receipt 1,288  

Joint operation - B
Inventory contributed 1,600  
Freight paid 80  
Net share in profit 136  
Cash settlement – receipt 1,816  

Joint operation – C
Cost of inventory
800 840
Expenses paid taken
Net share in profit 136
Cash settlement - receipt 96

ANSWER:C
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
Purchases – A 400

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
Purchases – A 400

Purchases – B 320

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
Purchases – A 400

Purchases – B 320

Expenses – A 800
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
480 Sales - A
Purchases – A 400

Purchases – B 320

Expenses – A 800

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
480 Sales - A
Purchases – A 400

240 Sales - B
Purchases – B 320

Expenses – A 800

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
480 Sales - A
Purchases – A 400

240 Sales - B
Purchases – B 320

40 Other income - B
Expenses – A 800

 
3.
Solution:
Requirement ( a) : Profit or Loss
Joint operation
480 Sales - A
Purchases – A 400

240 Sales - B
Purchases – B 320

40 Other income - B
Expenses – A 800

Loss - debit balance 760  

Answer : B
 4.
The loss is allocated as follows:
Allocation to: A B Totals
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
10% commission on purchases:
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
10% commission on purchases:
(10% x 400) – A 40 (40)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
10% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
10% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
20% commission on sales:
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
20% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
20% commission on sales:
(20% x 480) – A 96 (96)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
20% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
20% commission on sales:
(20% x 480) – A 96 (96)
(20% x 240) – B 48 (48)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
20% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
25% commission on sales:
(20% x 480) – A 96 (96)
(20% x 240) – B 48 (48)
Loss to be allocated equally     (976)
 4.
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
20% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
25% commission on sales:
(20% x 480) – A 96 (96)
(20% x 240) – B 48 (48)
Loss to be allocated equally     (976)
Allocation: (976 ÷ 2) -488 -488 976
 4. B
The loss is allocated as follows:
Allocation to: A B Totals
Loss during the year (760)
20% commission on purchases:
(10% x 400) – A 40 (40)
(10% x 320) – B 32 (32)
25% commission on sales:
(20% x 480) – A 96 (96)
(20% x 240) – B 48 (48)
Loss to be allocated equally     (976)
Allocation: (976 ÷ 2) -488 -488 976
Net share - as allocated (352) (408) -
5: A

Joint Operation
Debit Balance ( Squeeze) 28

72 Unsold Merchandise
44 Profit – Credit Balances
6.
Solution:
Profit of Joint Venture – 20x1 4,000,000

Multiply by: Ownership Interest 20%

Share in Profit Venture before adjustment 800,000

Elimination of Unrealized profit from down –
stream sale – Net of Tax(400,000x60%x70%)
(168,000)
Adjusted
C Share in Profit of Joint Venture 632,000
7. C
Solution:
Profit of joint venture – 20x2 4,800,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 960,000
Realized profit from downstream sale
– net of tax (400,000 x 60% x 70%) 168,000
Adjusted share in profit of
joint venture – 20x2 1, 128,000
 8. A
Solution:
Profit of joint venture – 20x1 4,000,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 800,000
Elimination of unrealized profit from upstream
Sale – net of tax ( 400,000x60%x70%x20%) (33,600)
Adjusted Share in Profit of
Joint Venture – 20x1 766,400
9. B
Solution:
Profit of joint venture – 20x2 4,800,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
Share in profit of joint venture before adjustment

before adjustment 960,000

Realized profit from upstream sale –
net of tax (400,000 x 60% x 70% x 20%) 33,600
Adjusted share in profit of
joint venture – 20x2 993,600
10.
Solution:
Profit of joint venture – 20x1 4,000,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 800,000
Elimination of unrealized gain from
downstream sale (80,000 x 9/10) (72,000)
Adjusted Share In Profit of
Joint Venture 728,000
A
11. C
Solution:
Profit of joint venture – 20x2 4,800,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 960,000
Recognition of realized gain from
downstream sale (80,000 ÷ 10 years) 8,000
Adjusted share in profit of
joint venture – 20x2 968,000
12. C

Solution:
Profit of joint venture – 20x1 4,000,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 800,000
Elimination of unrealized gain from
upstream sale (80,000 x 9/10 x 20%) (14,400)
Adjusted share in profit of
joint venture – 20x1 785,600
 13. C
Solution:
Profit of joint venture – 20x2 4,800,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 960,000
Recognition of realized gain from upstream
sale (80,000 ÷ 10 years) x 20% 1600
Adjusted share in profit of
joint venture – 20x2 961,600
14. A
Solution:
Profit of joint venture – 20x1 4,000,000
Multiply by: Ownership interest 20%
Share in profit of joint venture
before adjustment 800,000
Elimination of unrealized gain
from downstream sale (80,000)
Adjusted share in profit of
joint venture – 20x1 720,000
15. B
Solution:

Profit of joint venture – 20x2 4,800,000

Multiply by: Ownership interest 20%
Share in profit of joint venture – 20x2 960,000