chapter 4 sol man advanced

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 4

Exercise 4-2 Books of Alvin, Managing Partner Feb.

12 14 15

20 20

20

Joint Venture Cash

10,000

Joint Venture Larry

2,000

Cash Larry Joint Venture

9,000 7,500

Cash Joint Venture

3,000

Joint Venture Income from Joint Venture Larry 10% commission on net purchases to Alvin 25% commission on own sales

7,500

Cash Larry

Books of Larry Feb. 12 Joint Venture Alvin 14 15

20 20

20

10,000 2,000

16,500 3,000 4,287.50 3,212.50

2,287.50 2,287.50 10,000 10,000

Joint Venture Cash

2,000

Cash Alvin Joint Venture

7,500 9,000

Alvin Joint Venture

3,000

Joint Venture Alvin Income from Joint Venture 10% commission on net purchases to Alvin 25% commission on own sales

7,500

Alvin Cash

2,000

16,500 3,000 4,287.50 3,212.50

2,287.50 2,287.50

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 5

Problem 4-2 Requirement 1 Books of Roland, Managing Partner 1.

2.

3.

4.

5.

6.

7.

Joint Venture Greg Medel Land Joint Venture Cash Improvements on land

40,300,000 19,500,000 13,000,000 7,800,000 3,000,000 3,000,000

Joint Venture Cash Joint Venture Sales by venturers.

35,400,000

Joint Venture Cash Joint Venture Sales by salesmen

14,300,000

Joint Venture Joint Venture Cash Venture expenses

684,000

Joint Venture Income from Joint Venture Salaries to Roland as managing partner

35,400,000

14,300,000

684,000 72,000 72,000

Joint Venture Income from Joint Venture Greg Medel 10% commission on own sales

3,540,000

Joint Venture Income from Joint Venture Greg Medel Balance of profit divided equally

2,104,000

Greg Medel Joint Venture Cash Final cash settlement

490,000 1,280,000 1,770,000

701,334 701,333 701,333 21,481,333 15,471,333 36,952,666

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

Books of Greg 1. Joint Venture Land Medel Roland 2.

3.

4.

5.

6.

7.

Joint Venture Roland Improvements on land

page 6

40,300,000 19,500,000 13,000,000 7,800,000 3,000,000 3,000,000

Roland Joint Venture Sales by venturers.

35,400,000

Roland Joint Venture Sales by salesmen

14,300,000

Joint Venture Roland Venture expenses

684,000

Joint Venture Roland Salaries to Roland as managing partner

35,400,000

14,300,000

684,000 72,000 72,000

Joint Venture Roland Income from Joint Venture Medel 10% commission on own sales

3,540,000

Joint Venture Roland Income from Joint Venture Medel Balance of profit divided equally

2,104,000

Cash Medel Roland Final cash settlement

490,000 1,280,000 1,770,000

701,334 701,333 701,333 21,481,333 15,471,333 36,952,666

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

Books of Medel 1. Joint Venture Greg Land Roland 2.

3.

4.

5.

6.

7.

Joint Venture Roland Improvements on land

page 7

40,300,000 19,500,000 13,000,000 7,800,000 3,000,000 3,000,000

Roland Joint Venture Sales by venturers.

35,400,000

Roland Joint Venture Sales by salesmen

14,300,000

Joint Venture Roland Venture expenses

684,000

Joint Venture Roland Salaries to Roland as managing partner

35,400,000

14,300,000

684,000 72,000 72,000

Joint Venture Roland Greg Income from Joint Venture 10% commission on own sales

3,540,000

Joint Venture Roland Greg Income from Joint Venture Balance of profit divided equally

2,104,000

Greg Cash Roland Final cash settlement

490,000 1,280,000 1,770,000

701,334 701,333 701,333 21,481,333 15,471,333 36,952,666

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 8

Problem 4-2 Requirement 2 Books of the Joint Venture 1. Land Greg, Capital Medel, Capital Roland, Capital 2. 3. 4. 5. 6.

7.

8.

Land Roland, Capital

40,300,000 19,500,000 13,000,000 7,800,000 3,000,000 3,000,000

Cash Sales

35,400,000

Cash Sales

14,300,000

Expenses Cash Sales Land Expenses Income Summary

35,400,000 14,300,000 684,000 684,000 49,700,000 43,300,000 684,000 5,716,000

Income Summary Roland, Capital

72,000

Income Summary Greg, Capital Medel, Capital Roland, Capital

3,540,000

Income Summary Greg, Capital Medel, Capital Roland, Capital

2,104,000

Greg, Capital Medel, Capital Roland, Capital Cash

72,000 1,280,000 1,770,000 490,000 701,333 701,333 701,334 21,481,333 15,471,333 12,063,334 49,016,000

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

Books of Greg 1. Investment in Joint Venture Land 2. 3.

3.

19,500,000 19,500,000

Investment in Joint Venture Income from Joint Venture

1,981,333

Cash Investment in Joint Venture

21,481,333

Books of Medel 1. Investment in Joint Venture Land 2.

page 9

1,981,333 21,481,333

13,000,000 13,000,000

Investment in Joint Venture Income from Joint Venture

2,471,333

Cash Investment in Joint Venture

15,471,333

2,471,333 15,471,333

Books of Roland 1. Investment in Joint Venture Land

7,800,000

2.

Investment in Joint Venture Cash

3,000,000

Investment in Joint Venture Income from Joint Venture

1,262,334

Cash Investment in Joint Venture

12,063,334

3. 4.

7,800,000 3,000,000 1,262,334 12,063,334

Problem 4-3 Books of Marissa 1. Joint Venture Yolly Beth 2. 3.

104,000 44,000 60,000

Joint Venture Accounts Receivable Joint Venture

160,000

Joint Venture Cash Joint Venture Joint Venture Accounts Receivable

153,000 7,000

160,000

160,000

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

4. 5.

6.

7.

8.

9.

Joint Venture Joint Venture Cash

40,000

Yolly Beth Joint Venture

10,000 7,500

3. 4. 5.

6.

40,000

17,500

Joint Venture Yolly Beth Interest on investment.

1,560

Joint Venture Income from Joint Venture Commission on sales.

8,000

660 900

8,000

Joint Venture Yolly Beth Income from Joint Venture Allocation of the balance.

16,940

Yolly Beth Cash Joint Venture Cash

40,306 59,047 13,647

Books of Yolly 1. Joint Venture Merchandise Inventory Beth 2.

page 10

Marissa Joint Venture

5,646 5,647 5,647

113,000 104,000 44,000 60,000 160,000 160,000

Joint Venture Marissa

7,000

Joint Venture Marissa

40,000

Merchandise Inventory Beth Joint Venture

10,000 7,500

Joint Venture Income from Joint Venture Beth Interest on investment.

7,000 40,000

17,500 1,560 660 900

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

7.

8.

9.

Joint Venture Marissa Commission on sales.

3. 4. 5.

6.

7.

8.

9.

8,000 8,000

Joint Venture Income from Joint Venture Beth Marissa Allocation of the balance.

16,940

Cash Beth Marissa

40,306 59,047

Books of Beth 1. Joint Venture Yolly Merchandise Inventory 2.

page 11

Marissa Joint Venture

5,646 5,647 5,647

99,353 104,000 44,000 60,000 160,000 160,000

Joint Venture Marissa

7,000

Joint Venture Marissa

40,000

Yolly Merchandise Inventory Joint Venture

10,000 7,500

7,000 40,000

17,500

Joint Venture Yolly Income from Joint Venture Interest on investment.

1,560

Joint Venture Marissa Commission on sales.

8,000

660 900

8,000

Joint Venture Yolly Income from Joint Venture Marissa Allocation of the balance.

16,940

Yolly Cash Marissa

40,306 59,047

5,646 5,647 5,647

99,353

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 12

Requirement 2 Books of the Joint Venture 1. Merchandise Yolly, Capital Beth, Capital 2. 3.

4. 5.

6.

7.

8.

104,000 44,000 60,000

Accounts Receivable Sales

160,000

Cash Uncollectible Accounts Expense Sales Discount Accounts Receivable

153,000 4,300 2,700

160,000

160,000

Expenses Cash

40,000

Yolly, Capital Beth, Capital Merchandise

10,000 7,500

Sales Merchandise Sales Discounts Doubtful Accounts Expense Expenses Income Summary

40,000

17,500 160,000 86,500 2,700 4,300 40,000 26,500

Income Summary Yolly, Capital Beth, Capital Marissa, Capital

26,500

Yolly, Capital Beth, Capital Marissa, Capital Cash

40,306 59,047 13,647

6,306 6,547 13,647

113,000

Books of Yolly 1. Investment in Joint Venture Merchandise Inventory

44,000

2.

Merchandise Inventory Investment in Joint Venture

10,000

Investment in Joint Venture Income from Joint Venture P660 + P5,646 = P6,306

6,306

3.

44,000 10,000 6,306

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

4.

Cash Investment in Joint Venture

Books of Beth 1. Investment in Joint Venture Merchandise Inventory 2. 3.

4.

40,306 40,306

60,000 60,000

Merchandise Inventory Investment in Joint Venture

7,500

Investment in Joint Venture Income from Joint Venture P900 + P5,647 = P6,6,547

6,547

Cash Investment in Joint Venture

Books of Marissa 1. Investment in Joint Venture Income from Joint Venture P8,000 + P5,647 = P13,647 2.

page 13

Cash Investment in Joint Venture

7,500 6,547 59,047 59,047 13,647 13,647 13,647 13,647

Problem 4-4 1. 2.

3.

Merchandise Inventory Joint Venture Joint Venture Income from Joint Venture Bonus = 10% (NI – B) Bonus = 10% (P53,636.20 – B) = P4,785

10,571.20 10,571.20 4,785 4,785

Joint Venture Income from Joint Venture Santi Romy Distribution of balance – 30%, 50%, and 20% to Noel, Santi, and Romy, respectively.

47,851.20

Santi Romy Cash Final cash settlement.

22,863.60 18,628.24

14,355.36 23,925.60 9,570.24

41,491.84

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 14

Problem 4-5 Books of Leo 1. Joint Venture Income from Joint Venture Bonus = 20% (NI – B) Bonus = 20% (P24,000 – B) = P4,000 2.

3.

Income from Joint Venture Mandy Joint Venture Interest on deficiency and excess Leo = P10,000 x 12% x 6/12 = P600 Mandy = P5,000 x 12% x 6/12 = P300 Joint Venture Income from Joint Venture Niel Mandy Balance of profit divided in the ratio of 4:4:2 to Leo, Niel, and Mandy, respectively

Books of Mandy 1. Joint Venture Leo 2.

3.

3.

4,000

600 300 300

20,300 8,120 8,120 4,060

4,000 4,000

Leo Income from Joint Venture Joint Venture

600

Joint Venture Leo Niel Income from Joint Venture

20,300

Books of Niel 1. Joint Venture Leo 2.

4,000

Leo Mandy Joint Venture Joint Venture Leo Income from Joint Venture Mandy

300 300 8,120 8,120 4,060 4,000 4,000 600 300 300 20,300 8,120 8,120 4,060

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 15

MULTIPLE CHOICE 1.

A

Total credits in the Joint Venture account Less Total debits in the Joint Venture account Gain (excess of credit over debit)

P258,100 197,500 P 60,600

2.

D

Merchandise contribution Add Share in the gain (P60,600 x 2/10) Final settlement to Minda

P 85,000 12,120 P 97,120

3.

A

The account of Melissa has a debit balance, thus, she has to make payment.. The account of Nancy has a debit balance, thus, she has to make payment. The account of Olivia has a credit balance, thus, she has to receive payment.

4.

C

P150,000 + P105,000 = P255,000

5.

C

P120,000 + (135,000/3) = P165,000

6.

B

Capital of Tan Unsold merchandise taken by Tan Share on the venture income (P135,000* / 3) Amount received by Tan in final settlement

P270,000 ( 105,000) 45,000 P210,000

Credit balance in the Joint Venture account Unsold merchandise taken by Tan Venture income Salaries to Reyes Remainder – divided equally

P150,000 105,000 P255,000 120,000 P135,000

*

7.

B

15% (P115,000 –B) = P15,000

8.

C.

Credit balance in the Joint Venture account Unsold merchandise purchased by Soriente Net profit before bonus Bonus to Soriente [ 15% (P115,000 – B) Net profit after bonus

9.

C

P100,000 x 40% = P40,000

10.

B Account balances Share in venture profit Cash settlement

P 90,000 25,000 P115,000 15,000 P100,000

Santos (P 5,000) 40,000 P35,000

Salazar P20,000 35,000 P55,000

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

11.

C

12.

B

13.

D

page 16

Sales Less Sales discounts Net sales Cost of sales: Contributed merchandise Less Returned merchandise Gross profit Operating expenses (P6,450 + P58,650) Net income Less Bonus (P41,250 x 25/125) Net income after bonus

P156,000 26,400

129,600 P106,350 65,100 P 41,250 8,250 P 33,000

P41,250 x 25/125 = P8,250 Merchandise contribution Merchandise returns Interest on original capital Balance of profit divided equally Cash settlement

14.

P240,000 4,050 P235,950

A Purchases Expenses Balance, end

Joint Venture 300,000 Sales 34,500 225,000 559,500

Iona P66,000 ( 15,000) 990 10,220 P62,210

Paula P90,000 ( 11,400) 1,350 10,220 P90,170

559,50 0 559,50 0

Sales revenue is a credit entry in the Joint Venture account. The total of the purchases, expenses and the ending balance is equal to total sales revenue. The ending balance is the sum of the credit balances of Marc and Martin of P120,000 and P105,000. 15.

B

P236,500 x 50% = P118,250

16.

A

Investment of Marc Cost of unsold goods assumed by Marc Share in the joint venture gain: Credit balance in the JV account Unsold goods assumed by the partners JV gain Share of Marc Cash settlement to Marc P12,000 – P2,500 = P9,500

17. 18.

B D

Contribution Less Share on loss (P12,000 – P2,500)

P150,000 ( 4,500) P225,000 11,500 P236,500 50% Debbie P10,000 4,750 P 5,250

118,250 P263,750 Ellie P2,000 4,750 (P2,750)

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 17

Additional loss to Debbie Cash distribution 19.

B

Valdez P789,200 300,000 P489,200

( 2,750) P 2,500 Ramos P654,250 300,000 P354,250

Receipts Less Investment Revenue Sale of non-cash assets Total revenue Less Expenses – disbursements (P622,750 + P706,950) Joint venture profit

2,750 Total P 943,450 600,000 P1,543,450 1,329,750 P 213,750

20. 21.

B

Debit to Joint Venture account: Investment of Santos (12,000 shares @ P45) Investment of Cruz (8,000 shares @ P45) Manager’s fee [ 1% (176,000 + 240,000 + 133,000 +261,625)] Miscellaneous expenses Credit to Joint Venture account: Sales (4,000 @ P44) Sales (6,000 @ P40) Cash dividend [(12,000 + 8,000 – 4,000 – 6,000) x P2] Sales (3,500 @ P38) Sales [(10,000 – 3,500) x 115% = 7,475 shares x P35]

P540,000.00 360,000.00 8,106.25 1,500.00 P909,606.25 P176,000.00 240,000.00 20,000.00 133,000.00 261,625.00 P830,625.00

Net loss of the venture (P909,606.25 – P830,625)

P 78,981.25

22.

D

Investment of Cruz (8,000 shares @ P45) Less Share in JV net loss (P78,981.25 x 8/20) Share of Cruz after distribution of proceeds

P360,000.00 31,592.50 P328,407.50

23.

B

Loss upon the investment of shares (8,000 shares @ P10) Share in JV loss Loss of Cruz on the disposition of Palawan Oil Co. shares

P 80,000.00 31,592.50 P 111,592.50

Loss on the disposition of the shares of Cruz is the total of the loss upon investment of the shares (i.e. P45 – P55 = P10 per share) and the share on the net loss of the dissolved joint venture. 24.

A

20,000 shares x P40 MV = P800,000

25.

A

20,000 – 4,500 + 15,500 x 120% = 18,600 – 5,000 = 13,600 x P1 = P13,600

26

B

Proceeds from sale of shares; 4,500 x P44 5,000 x P25 6,000 x P28 7,600* x P35 Cost of the shares (see # 1)

P198,000 125,000 168,000 266,000

P757,000 800,000

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

Loss from sale of the shares Expenses (3,000 + 4,700) Dividend revenue Number of shares after stock dividend Less shares sold on November 5 Shares entitled to cash dividend Dividend per share Net loss

page 18

P 43,000 ( 7,700) 18,600 5,000 13,600 x P1

Share of Roxas on the venture loss * Contributed shares Shares sold on Oct. 20 Remaining shares Shares received as stock dividend (20% x 15,500) Shares sold on Nov. 5 and 22 Shares sold at P35

13,600 P 37,100 x 6/20 P11,130

20,000 4,500 15,500 3,100 (11,000) 7,600

27.

D

20,000 – 4,500 = 15,500 x 20% = 3,100

28.

C

Investment (10,000 shares @ P40) Share on the joint venture loss (P37,100 x 1/2 ) Share of Silverio on the distribution of proceeds

P400,000 18,550 P381,450

29.

A

Loss upon contribution of the shares [(P40 – P62) x 4,000] Share on the JV loss (P37,100 x 4/20) Tan’s loss on disposition of his investment in Golden Copper

P88,000 7,420 P95,420