Chapter 6 - 2013 ed
March 6, 2017 | Author: Jean Palada | Category: N/A
Short Description
Advanced Accounting - Guerrero 2013 edition...
Description
Joint Venture
113
CHAPTER 6 SOLUTIONS TO MULTIPLE CHOICES
6-1:
a Assets per Jessica Company- balance sheet Jessica’s proportionate interest in assets of JV (50%) Total assets of Jessica
6-2:
a
6-3:
b
6-4:
b Investment of Heart Profit share: Sales Cost of sales (150,800 ÷ 125%) Gross profit Expenses Net Profit Profit/loss ratio Balance of investment in JV
6-5:
6-6:
P3,550,000 1,000,000 P4550,000
Total liabilities only of Jenny Co.
P80,000 150,800 120,640 30,160 10,000 20,160 x 40%
8,064 P88,064
a Cash Merchandise inventory Accounts receivable Total assets Sweet Co’s, proportionate interest Sweet Company’s share in total asset a Sales Cost of sales Purchases Merchandise inventory, end (50% of P10,000)
P190,000 29,360 150,800 370,160 x 60% P222,096 7,200 P10,000 __5,000
_5,000
Gross profit Expenses
2,200 ___500
Net profit
P 1,700
114 Chapter 6
6-7:
6-8:
6-9:
6-10:
b Original investment (cash) Profit share (P1,700 / 2)
P10,000 ___850
Balance of Investment account
P10,850
a Joint venture account before profit distribution (credit balance) Unsold merchandise
P 9,000 __2,500
Joint venture profit before fee to Salas
P11,500
Joint venture profit after fee to Salas (P11,500 / 115%)
P10,000
b Fee of Salas (P10,000 x 15%) Profit share of Salas (P10,000 x 25%)
P 1,500 _2,500
Total
P 4,000
b Salas
6-11:
6-12:
Salve
Balance before profit distribution Profit share:Sabas (P10,000 x 40%) Salve (P10,000 x 35%)
P 500 (dr) P 2,000 (cr) 4,000 ______ _3,500
Balance
P 3,500 (cr) P 5,500 (cr)
d Joint venture account balance before profit distribution (debit) Joint venture profit (P4,500 x 3)
P 6,000 _13,500
Cost of unsold merchandise (inventory) taken by Dante
P19,500
b Edwin Capital: Debits: Balance before profit distribution Credits: Profit share
P14,000 __4,500
Due from Edwin (debit balance)
P 9,500
Joint Venture 6-12, continued
115
Settlement to Ferdie (Balance of capital account) Debits: Credits: Balance before profit distribution Profit share
P –0– P16,000 __4,500
Due to Ferdie (credit balance)
P20,500
Settlement to Dante (balance of JV Cash account) Debits: Balance before cash settlement Due from Edwin Credits: Due to Ferdie
P30,000 __9,500
Balance 6-13:
6-14:
a JV account balance before profit distribution (cr) Unsold merchandise (required dr balance after profit distribution)
P 4,600 __2,000
Joint venture profit before fee to Jerry Joint venture profit after fee (P6,600 / 110%) Fee to Jerry
P 6,600 __6,000 P 600
d Balances before profit distribution Profit distribution: Harry P6,000 x 50%) Isaac (P6,000 x 20%)
(P 200)
Cash settlements
P 2,800
Isaac Capital P 1,800
3,000 1,200 P 3,000
b Sales Cost of sales: Merchandise inventory, beg (contributions) Freight Purchases
P14,000 300 __4,000
Goods available for sale Merchandise inventory, end (P8,300/2)
P18,300 __4,150
Gross profit (loss) Expenses (P400 + P200) 6-16:
P39,500 _20,500 P19,000
Harry Capital
6-15:
_20,500
P14,000
14,150 (150) __600
Net profit (loss) c Contributions to the Joint Venture (P5,000 + P8,000) Loss share (P750 x 50%) Unsold merchandise taken (withdrawal)
P( 750) P13,000 ( 375) ( 4,150)
Final settlement to jack
P 8,475
116 Chapter 6
SOLUTIONS TO PROBLEMS Problem 6 – 1 Books of Blanco (Manager) JV Cash Joint Venture Cash Ablan Capital
100,000 90,000
Investment in JV Merchandise inventory
90,000
Investment in JV Profit from JV
15,000
90,000
100,000 90,000
Joint Venture JV cash
60,000
Joint Venture JV cash
20,000
JV cash Joint Venture
Books of Ablan
60,000 20,000 200,000 200,000
Computation of JV Profit Total debit to JV Total credit to JV
P170,000 P200,000
Credit balance (Profit)
P 30,000
Distribution of Profit: Joint Venture Profit from JV Ablan capital Ablan capital JV cash Cash JV cash
30,000 15,000 15,000 105,000 105,000 155,000 155,000
Cash Investment in JV
15,000 105,000 105,000
Joint Venture
117
Problem 6 – 2 Requirement (1) - Books of the Joint Venture 1.
2.
3. 4.
Computer equipment Ella capital Fabia capital
105,000 60,000 45,000
Purchases Supplies Diaz capital
80,000 2,000
Expenses Diaz capital
9,000
Cash
82,000 9,000 150,000
Sales 5. 6. 7. 8.
150,000
Expenses Cash
30,000
Merchandise inventory Ella capital
20,000
Fabia capital Cash
10,000
30,000 20,000 10,000
Adjusting and closing entries: (a) (b)
Expense Supplies Sales
1,500 1,500 150,000
Income summary
150,000
Income summary Merchandise inventory Merchandise inventory, beg (Investment of Ella) Purchases
97,500 2,500
Income summary Expenses
40,500
Distribution of profit: Income summary Diaz capital Ella capital Fabia capital
20,000 80,000 40,500 12,000 4,000 4,000 4,000
118 Chapter 6 Problem 6-2, continued:
Requirement #2 Books of Diaz Investment in JV 91,000 Cash 91,000
Books of Ella Investment in JV 80,000 Comp. Equip. 60,000 MI 20,000
Books of Fabia Investment in JV 45,000 Comp. Equip. 45,000 Cash Investment in JV
Investment in JV Inv. Income
4,000 4,000
Investment in JV Inv. Income
4,000 4,000
Investment in JV Inv. Income
10,000 10,000 4,000 4,000
Cash (110,000 x 44%) 48,000* C.E (105,000 x 44%) 46,000* MI (2,500 x 44%) 1,100 Supplies (500 x 44%) 200* COS (97,500 x 44%) 42,900 Expense (40,500 x44%) 17,800 Inv. Income 4,000 Sales (150,000x44%) 66,000 Investment in JV 95,000
Cash (110,000x38.5%) 42,350 CE (105,000 x38.5%) 40,000* MI (2,500 x 38.5%) 960* Supplies (500 x 38.5%) 190* COS (97,500 x 38.5%) 37.500* Exp (40,500 x 38.5%) 16,000* Inv. Income 4,000 Sales (150,000 x 38.5%) 57,000* Investment in JV 84,000
Cash (110,000 x 17.5%) 19,000 CE (105,000 x 17.5%) 18,000 MI (2,500 x 17.5%) 400 Supplies (500 x 17.5%) 90 COS (97,500 x 17.5%) 17,000 Exp (40,500 x 17.5%) 7,000 Inv. Income 4,000 Sales (150,000 x 17.5%) 26,000 Investment in JV 39,000
*rounded to balance
*rounded to balance
Diff. of P490 due to rounding of the amounts.
Note. Under the proportionate consolidation method, difference will exist in the journal entry (see above) because the profit and loss ratio (equally) is not equal to the venturer’s capital interest as computed below: Computation of capital interest: Investments Withdrawal Profit share Venturer’s capital Interest in the Joint Venture Diaz (P95,000/P218,000) Ella (P84,000/P218,000) Favia (P39,000/P218,000)
Diaz P91,000
Ella P80,000
4,000 P95,000
4,000 P84,000
Favia P45,000 (10,000) 4,000 P39,000
Total P196,000 (10,000) 12,000 P218,000
44% 38.5% 17.5%
It may be concluded that the proportionate consolidation method can be properly applied only if the profit and loss ratio and the venturer’s capital interest are equal. In US GAAP there is an exposure draft to eliminate the proportionate consolidation method. US
GAAP favor the use of the equity method contrary to IFRS No. 31 which favors the use of the proportionate consolidation method Joint Venture
119
Problem 6 – 3 (1)
No Separate Set of Joint Venture Books is Used
Books of Duran (Manager) May 1:
7:
Joint Venture Castro capital Cash
12,500
JV cash Bueno capital
10,000
26: Joint Venture JV cash
12,000 500 10,000 9,500 9,500
30: JV accounts receivable Joint Venture
16,000
June 30: JV cash JV accounts receivable
15,000
27: JV cash Joint Venture
16,000 15,000 9,000 9,000
30: To record unsold merchandise taken by Duran: Merchandise inventory Joint Venture
3,000 3,000
To record profit distribution: Joint Venture Profit from JV Bueno capital Castro capital
6,000 2,000 2,000 2,000
To record settlements: Bueno capital Castro capital JV cash Cash Accounts receivable
12,000 14,000 24,500 1,500 1,000
JV accounts receivable
1,000
120 Chapter 6 Problem 6-3, continued:
Books of Bueno May 7:
Investment in Joint Venture Cash
June 30: Investment in Joint Venture Profit from Joint Venture Cash
10,000 10,000 2,000 2,000 12,000
Investment in Joint Venture
12,000
Books of Castro May 1:
Investment in Joint Venture Merchandise inventory
June 30: Investment in Joint Venture Profit from Joint Venture Cash
12,000 12,000 2,000 2,000 14,000
Investment in Joint Venture (2)
14,000
A Separate Set of Books is used:
Books of the Joint Venture May 1:
7:
Merchandise inventory Castro capital Duran capital
12,500
Cash
10,000
12,000 500
Bueno capital 26: Purchases Cash 30: Accounts receivable Sales June 20: Cash
10,000 9,500 9,500 16,000 16,000 15,000
Accounts receivable 27: Cash
15,000 9,000
Sales
9,000
Joint Venture
121
Problem 6-3, continued:
June 30: Closing entries: Sales
25,000 Income summary
Income summary Merchandise inventory, end Merchandise inventory Purchases
25,000 19,000 3,000 12,500 9,500
Distribution of profit: Income summary Bueno capital Castro capital Duran capital
6,000 2,000 2,000 2,000
Settlements to Venturers: Bueno capital Castro capital Duran capital Merchandise inventory Accounts receivable Cash
12,000 14,000 2,500 3,000 1,000 24,500
Books of Duran (Manager/Operator) May 1:
Investment in Joint Venture Cash
June 30: Investment in Joint Venture Profit from Joint Venture Cash
500 500 2,000 2,000 2,500
Investment in Joint Venture Books of Bueno and Castro (Same as in No. 1 requirement)
2,500
122 Chapter 6
Problem 6 – 4 (1)
Books of Seiko (Manager/Operator)
April1:
May:
June:
JV Cash Notes payable – PNB Roles capital Timex capital
August:
34,000 34,000 34,000
Joint venture Cash Rolex capital
64,100
Rolex capital JV cash
30,000
Joint venture Cash Rolex capital Timex capital July:
102,000
16,300 7,800 30,000 111,400 37,400 64,700 9,300
Cash Rolex capital Timex capital JV cash
40,000 15,000 10,000
Joint venture Cash Rolex capital Timex capital
55,770
Cash Rolex capital Timex capital JV cash
45,000 67,000 13,500
Joint venture Cash Rolex capital Timex capital
30,600
65,000 13,970 31,240 10,560
125,500 9,730 16,560 4,310
To record sales: JV cash (P421,000 x 96%) Joint venture
404,160 404,160
Joint Venture Problem 6-4, continued:
123
To record payment of loan to PNB: Notes payable – PNB Rolex capital Timex capital Joint venture (Interest expense) JV cash
34,000 34,000 34,000 8,000 110,000
To record distribution of profit: Joint venture Gain from JV (30%) Rolex capital (60%) Timex capital (10%)
134,290 40,287 80,574 13,429
Computed as follows: Total debits tot he JV account Total credits to the JV account
P269,870 _404,160
Gain (credit balance)
P134,290
To record settlement: Cash Rolex capital Times capital JV cash
32,687 128,874 14,099 175,660
Computations: Settlement to Rolex - Balance of capital account: Debits: June July August Payment of note payable
P30,000 15,000 67,000 _34,000
Credits: April 1 May June
P34,000 47,800 64,700
P146,000
July August Profit share
31,240 16,560 _80,574
Credit balance
__274,874 P 128,874
124 Chapter 6 Problem 6-4, continued:
Settlement to timex – Balance of capital account Debits: July August Payment of loan
P 10,000 13,500 __34,000
P 57,500
Credits: April 1 June July August Profit share
P 34,000 9,300 10,560 4,310 __13,429
_71,599
Credit balance
P 14,099
Settlement to Seiko – Balance of JV cash account Debits: April 1 Loan proceeds
P102,000 _404,160
P506,160
Credits: June July August Payment of loan
P 30,000 65,000 125,500 _110,000
_330,500
Balance of JV cash Less:Settlement to Rolex Settlement to Timex
P128,874 __14,099
175,660
Settlement to Seiko (2)
_142,973 P 32,687
Partial Statement of Financial Position June 30, 2011 Books of Seiko (Manager/operator) Current assets: Investment in joint Venture: Joint Venture assets: Cash Joint Venture Less:Equity of other venturers
P 72,000 _175,500
P247,500
(P116,500 + P43,300)
_159,800
87,700
Current liabilities: Notes payable – PNB
34,000
Joint Venture Problem 6-4, continued:
125
Computation of balances as of June 30, 2011: JV Cash April 1 P102,000 Balance P 72,000
P30,000
Joint Venture June
May June
P 64,100 _111,400
Balance P175,500 Notes Payable P34,000
Rolex capital April
June
P 30,000 _______
P 34,000 47,800 __64,700
P 30,000
P146,500 P116,500
Timex capital P34,000 __9,000
April June
P43,300 Problem 6 – 5 Consolidated Statement of Financial Position Cash Receivables Inventory Other assets
P 61,000 122,000 102,500 __40,500
Total assets
P326,000
Accounts payable Other liabilities Capital stock Retained earnings
P 61,000 96,500 50,000 _118,500
Total liabilities and stockholders' equity
P326,000
Consolidated Income Statement Sales
P246,750
April 1 May June
Cost of sales
_124,750
Gross profit Operating expenses
122,000 __58,250
Consolidated net income
P 63,750
126 Chapter 6
Problem 6 –6 (a)
Journal entries on venture books June 15:
Cash
1,000,000
MacDo Initial contribution at 6% July 1:
Land
1,000,000 2,400,000
Mortgage payable Cash Purchased land for cash and 6% mortgage. Aug 1:
Cash
1,100,000
MacDo Additional contribution at 6%. Land
1,100,000 950,000
Cash Paid for improvements. Sept 30:
Oct 31:
Nov 30:
Dec 31:
1,650,000 750,000
950,000
Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest.
250,000 3,750
Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest.
400,000 8,000
Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest.
300,000 7,500
253,750
408,000
Mortgage payable 200,000 Interest expense- Mortgage 21,000 Cash Reduced mortgage and make semi-annual interest payment.
307,500
221,000
Joint Venture Problem 6-6, continued:
31:
127
Cash
2,600,000
Sales Sales to date. 31:
31:
31:
31:
2,600,000
Commissions Cash P2,600,000 x 5%
130,000
Expenses Cash Paid expenses
628,100
Interest expense- Venturer MacDo 6% on P1,000,000 from June 15 to December 31, and on P1,100,000 from August 1 to December 31. Sales
130,000
628,100 60,000 60,000
2,600,000
Land (cost of land sold) Expenses Commissions Interest expense- mortgage Interest- venturer Income summary To close income and expense accounts. 31:
31:
1,145,000 628,100 130,000 40,250 60,000 596,650
Income summary MacDo MacEn To divide gain, 60:40.
596,650
MacDo
801,650
596,650 238,660
Cash Payment on account. (b)
801,650
Journal entries on MacDo’s books: June 15:
Investment in Joint Venture Cash Initial contribution.
1,000,000 1,000,000
Aug 1:
Investment in Joint Venture Cash Additional contribution.
1,100,000 1,100,000
128 Chapter 6 Problem 6-6, continued:
Dec 31:
31:
31:
Investment in Joint Venture Interest income Interest earned on cash advanced.
60,000 60,000
Investment in Joint Venture Gain on Joint Venture 60% of gain on venture.
357,990
Cash
801,650
357,990
Investment in Joint Venture Repayment in part of advances. (c)
801,650
MacDo and MacEn Joint Venture Income Statement For the period from June 15 to December 31, 2011 Sales Cost of land sold: Land Improvements Total Unsold land Gross profit Expenses: Advertising and office expenses Interest on mortgage Interest on advances Commissions Net gain Distributions: MacDo (P596,650 x 60%) MacEn (P596,650 x 40%)
P2,600,000 P2,400,000 950,000 P3,350,000 2,205,000 P 628,100 40,250 60,000 130,000
1,145,000 1,455,000
858,350 P 596,650 P 357,990 238,660
Mac Do and MacEn Joint Venture Statement of Financial Position December 31, 2011 Assets Cash
P 250,000
Land Total Assets
2,205,000 P2,455,000
Liabilities and equity: Mortgage payable MacDo MacEn Total liabilities and equity
P 500,000 1,716,340 238,660 P2,455,000
Joint Venture
129
Problem 6-6, continued:
Venturers equity (interest) Invested Shares: Gain Interest on advances Commissions Total Balances Withdrawn Equity (interests)
MacDo P2,100,000
MacEn
Total P2,100,000
P 357,990 60,000
P238,660
P 596,650 60,000 130,000 786,650 2,886,650 (931,650) P1,955,000
417,990 2,517,990 (801,650) P1,716,340
130,000 368,660 368,660 (130,000) P238,660
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