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1Chapter 6
Joint Arrangements
NAME:
Professor:
Section:
Date:
Score:
QUIZ:
Use the following information for the next two questions:
A, BCand
C formed
a joint
operation.
agreed on the following:
is the
appointed
as the
manager.They
As compensation,
C is entitled to a ₱120 salary plus bonus
of 25% of profit after deducting the salary and the bonus. However, C will be charged for the
cost of any unsold inventory.
Interest of 10% per annum is allowed to A’s and B’s capital contributions.
Any remaining profit or loss is divided equally.
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The joint operation was complete after a year.
y ear. The following were the transactions:
A contributed cash of ₱400 and merchandise costing ₱800.
B contributed merchandise costing ₱1,600. B paid freight of ₱80 in the transfer.
C purchased merchandise worth ₱400 using A’s cash contribution.
C paid expenses of ₱800 using his own cash.
C made total sales of ₱3,200.
All inventories were sold except one-half of those contributed by B.
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1. How much is the jjoint
oint oper
operation
ation’s
’s profi
profitt after de
deductio
duction
n for salar
salary
y but before ded
deductio
uction
n for
bonus?
a. 192
b. 240
c. 360
d. 420
2. On th
thee cash settlement
settlement between
between the joint operators,
operators,
a. A pays ₱1,288.
b. B pays ₱1,816.
c. C receives ₱96.
d. All of these
Use the following information for the next two questions:
A and B formed a joint operation. The following were the transactions during the yea
year:
r:
A
B
Total purchases
400
320
Total sales
960
720
Expenses paid
800
Other income
40
The joint operation was completed at the end of the year. Each joint operator is entitled to a 10%
commission on its purchases and a 20% commission on its sales. Any remaining profit or loss is
divided equally.
3. How muc
much
h is the profit
profit (loss)
(loss) of the joint
joint op
operati
eration?
on?
a. 200,000
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b. (200,000)
c. 180,000
d. (180,000)
4. On th
thee cash settlement
settlement between
between the joint operators,
operators,
a. A pays B ₱368
b. B pays A ₱368
c. A pays B ₱428
d. B pays A ₱428
solution for 3 & 4
PURCHASE A
PURCHASE B
EXPENSES A
JOINT OPERATION- A
400
960
320
720
800
40
200
ALLOCATION TO:
PROFIT FOR THE YEAR
A
10% COMMISSION
(10% x 4ON
00) PURCHASE
40
(10%x 320)
20% COMMISSION ON SALES
(20% x 960)
(20% x 720)
TOTAL TO BE DIVIDED EQUALLY
ALLOCATION: (208/2)
NET SHARE- AS ALLOCATED
B
TOTALS
50
(40)
(32)
32
192
(192)
(144)
(208)
208
-
144
(104)
128
CASH SETTLEMENT IS DETERMINATION AS FOLLOW
JOINT OPERATION – A
PURCHASE
400
960
EXPENSES
800
NET SHARE
128
CASH SETTLEMENT – RECEIPT
368
PURCHASE
NET SHARE
SALES A
SALES B
OTHER INCOME-B
PROFIT- CREDIT BALANCE
(104)
72
COLLECTION ON SALES
JOINT OPERATION – B
320
720
COLLECTION ON SALES
72
40
COLLECTION ON OTHER INCOME
368
CASH SETTLEMENT - PAYMENT
5. A, B and C fo
formed
rmed a joint
joint operation
operation wh
which
ich was ccomple
ompleted
ted duri
during
ng the year
year.. A, the ap
appoint
pointed
ed
manager, is entitled to a bonus of 10% of the profit before deducting the bonus. Any
remaining profit or loss is divided equally. On the joint operation’s completion date, B’s and
C’s books show the following balances before adjusting and closing entries:
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Account with A
Account with B
Account with C
Books of
B
16 Cr.
Books of C
16 Cr.
48 Cr.
56 Dr.
The unsold merchandise was charged to A at a cost of ₱88. On the cash settlement between the
joint operators,
a.
b.
c.
d.
A re
rece
ceiives
ves ₱4
₱48.
8.
B pays ₱72.
C pays ₱32.
a and c
16*
6. A, B and C for
formed
med a joint
joint operatio
operation.
n. Profit
Profit or loss
loss shall
shall be div
divide
ided
d equal
equally.
ly. On the joi
joint
nt
operation’s completion date, the books of A, the appointed manager, show the following
account balances:
Debit
Credit
JO – Cash
80
Joint operation
20
B Co.
60
C Co.
40
A’
A’ss sh
shar
aree in the
the join
jointt oper
operat
atio
ion’
n’ss prof
profit
it is ₱16
₱16.. A agre
agreed
ed to be cha
charg
rged
ed fo
forr the
the un
unso
sold
ld
merchandise. How much is the cost of unsold merchandise charged to A?
a. 28
b. 62
c. 68
d. 72
solution:
If A’s share in the joint operation’s profit is P6 and profit and loss is dividend equally between 3
joint operations, then the total profit of the joint operation must be P48 (16 for each joint
operation’s multiplied by 3 joint operators).
unsold merchandise is squeezed after placing relevant data in the joint operation accou
accounts.
nts.
DEBIT BALANCE
JOINT OPERATORS
20
68
UNSOLD MERCHANDISE
48 PROF
PROFIT
IT-C
-CRE
REDI
DIT
T BA
BALA
LANC
NCE
E (1
(16*
6*3)
3)
7. A, B, and C form
formed
ed a joint operation.
operation. On the
the joint operati
operation’s
on’s com
completi
pletion
on date, the book
bookss of
A, the appointed manager, show the following account balances:
Debit
Credit
JO – Cash
80
Account with B
60
Account
Acco
unting
ing wit
with
h
C
88
The cost of unsold inventory is ₱72. The joint operation’s profit is ₱44. How much is the balance
of the joint operation account before distribution of profit?
a. 28
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b. 116
c. 56
d. 0
Use the following information for the next two questions:
A, B, and C formed a joint operation. The joint operators shall make initial contributions ₱40
each. Profit and loss shall be divided equally. The following data relate to the joint operation’s
transactions:
Joint operation
Expenses paid from JO cash
Value of inventory taken
A
32 Cr.
20
20
B
40 Cr.
8
24
C
48 Cr.
12
16
8. How m
much
uch is
is the join
jointt oper
operati
ation’
on’ss sales?
sales?
a. 280
b. 40
c. 80
d. 76
9. How m
much
uch is
is the
the cash
cash settl
settleme
ement
nt to
to B?
a. ₱80 receipt
b. ₱80 payment
c. ₱32 receipt
d. ₱76 receipt
10. On January 1, 20x1, PATRIMONY
PATRIMONY Co. entered into a joint arrangemen
arrangementt classified
classified as a joint
venture
vent
ure.. For an invest
investmen
mentt of ₱2,000,
₱2,000,000,
000, PAT
PATRIM
RIMONY
ONY Co. obt
obtain
ained
ed 30% intere
interest
st in
HERITAGE Joint Venture, Inc. During the year, HERITAGE Joint Venture, Inc. reported
profit of ₱4,000,000 and other comprehensive income of ₱800,000, i.e., a total
comprehensive income of ₱4,800,000. HERITAGE Joint Venture, Inc. declared dividends of
₱2,40
₱2,
400,0
0,000
00.. How
How mu
much
ch is the
the carr
carryi
ying
ng amou
amount
nt of the
the inve
invest
stme
ment
nt in join
jointt ve
vent
ntur
uree on
December 31, 20x1?
a. 2,720,000
b. 2,480,000
2,000,000
c.
d. 4,160,000