PRACTICAL ACCOUNTING 2

THEORY & PRACTICE ADVANCE

ACCOUNTING JOINT
ARRANGEMENT
QUIZZER
 Joint Arrangement

Joint Arrangements

I. Introduction
PFRS 11 prescribes the accounting for a 'joint arrangement', which is defined as
contractual arrangement over which two or more parties have joint control. It is
important that entities understand the implications and interplay of both PFRS 10
and PFRS 11 to ensure the proper assessment of, and accounting for, current and
future joint arrangements.

Names can be misleading. Some agreements that are referred to as 'joint

arrangements' actually include arrangements whereby one party has control of an
entity. In these arrangements, the entity with control would consolidate it and the
other parti^ would account for their interest in that entity based on the nature of their
investment. Other arrangements may not be referred to as 'joint arrangements',
but may still be joint arrangements, as defined by PFRS 11. In other words, the
name of the agreement is not important it only matters whether it meets the
definition of a joint arrangement, as set out in PFRS 11.

PFRS 11 notes that a contractual arrangement is often, but not always, in writing
(although we expect unwritten agreements to be rare in practice). Statutory
mechanisms can create enforceable arrangements, either on their own or in
conjunction with contracts among the parties. A contractual agreement may be
incorporated in the articles, charter or by-laws of the entity (or the 'separate
vehicle' — a new term that is a broader concept than 'entity')

II. Definitions
Joint arrangement An arrangement of which two or more parties have joint control
Joint control The contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control
Joint Arrangement - Page
Lecture 1
Advance Accounting
Joint operation A joint arrangement whereby the parties that have joint control
of the arrangement have rights to the assets, and obligations
for the liabilities, relating to the arrangement
Joint venture A joint arrangement whereby the parties that have joint control
of the arrangement have rights to the net assets of the
arrangement
Joint venture A party to a joint venture that has joint control of that joint
venture Party to a joint
arrangement An entity that participates in a joint arrangement,
regardless of whether that entity has joint control of the
arrangement
Separate vehicle A separately identifiable financial structure, including separate
legal entities or entities recognized by statute, regardless of
whether those entities have a legal personality.

Business Combination - Page

Lecture 2
III. The Concept of Joint Control
A joint arrangement is an arrangement of which two or more parties have joint
control. A joint arrangement has the following characteristics:
The parties are bound by a contractual arrangement, and
The contractual arrangement gives two or more of those parties joint control of the
arrangement.

Joint control

Joint control is the contractually agreed sharing of control of an arrangement, which

exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
Before assessing whether an entity has joint control over an arrangement, an
entity first assesses whether the parties, or a group of the parties, control the
arrangement (in accordance with the definition of control in PFRS 10 Consolidated
Financial Statements).
After concluding that all the parties, or a group of the parties, controls the
arrangement collectively, an entity shall assess whether it has joint control of the
arrangement. Joint control exists only when decisions about the relevant activities
require the unanimous consent of the parties that collectively control the
arrangement.
The requirement for unanimous consent means that any party with joint control of
the arrangement can prevent any of the other parties, or a group of the parties,
from making unilateral decisions (about the relevant activities) without its consent.
A joint arrangement is either a joint operation or a joint venture.

IV. Types of Joint Arrangements

Joint arrangements are either joint operations or joint ventures:
A joint operation is a joint arrangement whereby the parties that have joint control
of the arrangement have rights to the assets, and obligations for the liabilities,
 relating to the arrangement. Those parties are called joint operators.
A joint venture is a joint arrangement whereby the parties that have joint control
of the arrangement have rights to the net assets of the arrangement. Those parties are
called joint venturers.

V. Classifying joint arrangements

The classification of a joint arrangement as a joint operation or a joint venture
depends upon the rights and obligations of the parties to the arrangement. An entity
determines the type of joint arrangement in which it is involved by considering the
structure and form of the arrangement, the terms agreed by the parties in the
contractual arrangement and other facts and circumstances.
 Regardless of the purpose, structure or form of the arrangement, the classification
of joint arrangements depends upon the parties' rights and obligations arising
from the arrangement.
A joint arrangement in which the assets and liabilities relating to the arrangement
are held in a separate vehicle can be either a joint venture or a joint operation.
A joint arrangement that is not structured through a separate vehicle is a joint
operation. In such cases, the contractual arrangement establishes the parties' rights
to the assets, and obligations for the liabilities, relating to the arrangement, and the
parties' rights to the corresponding revenues and obligations for the
corresponding expenses.

VI. Financial statements of parties to a joint

arrangement Joint Operations - Accounting by a
Joint Operator
A joint operator recognizes in relation to its interest in a joint
operation: Its assets, including its share of any assets held jointly;
Its liabilities, including its share of any liabilities incurred jointly;
Its revenue from the sale of its share of the output of the joint operation;
Its share of the revenue from the sale of the output by the joint operation; and its
expenses, including its share of any expenses incurred jointly.
A joint operator accounts for the assets, liabilities, revenues and expenses relating to its
involvement in a joint operation in accordance with the relevant PFRSs.
A party that participates in, but does not have joint control of, a joint operation shall
also account for its interest in the arrangement in accordance with the above if that
party has rights to the assets, and obligations for the liabilities, relating to the
joint operation.
Accounting by the Joint Operation Itself
Where the joint operation is undertaken outside a formal structure, such as a
corporation or partnership, separate accounting records do not need to be kept for
the joint operation. However, for accountability reasons it is expected that the joint
 operation agreement would require these records.
PFRS 11 does not provide standards on accounting for the joint operation itself.
Following are the situations wherein joint operations may arise.

A. Accounting Treatment for a Joint Operation (by an Unincorporated Joint Operation)

If the joint operation does not sell the output produced, but rather distributes it
to the operators, there is no profit or loss account raised by the operation. In
preparing accounts for the joint operation, the main purpose is to accumulate
costs as incurred. These are capitalized into a work in progress account, which is
transferred to the operators as inventory. Further, the joint operation accounts
provide information about the assets and liabilities relating to the joint operation
as well as the contributions from the operators. Hence, a statement of financial
position is the joint operation's main financial statement.
B. Accounting for Joint Operations - Partnership in Nature Separate records
A full set of separate accounting records may be kept for the joint venture so
that the venturers can assess the performance of the venture (e.g. through regular
management accounts). Where the venture has a full set of accounting records, the
transactions are recorded in exactly the same way as for an ordinary business. A
separate income statement can be extracted from which each venturer will be
credited or debited with his agreed share of the profit or loss. The venturers, may
maintain separate records for transactions affecting them through Investment in
Joint Venture account. The account is opened in the individual books of venturers
and used as follows:
Debited for:
Original and additional investment
Services rendered to the venture or a compensatory
basis Share in joint venture profits
Credited for:
Capital withdrawals from joint
venture Share in joint venture
losses
Cash settlement
In theory it is possible for a jointly controlled operations to have a full set of
records, but this is rare in practice.

II. No separate records

Often (and certainly in examination questions), due to the short life time or size of the
joint venture, it is not considered worthwhile opening a new set of records for what
may only be a few transactions. In this case each venturer will record transactions
on behalf of the venture in his own records, alongside his other business
dealings.

An account called Joint Venture is maintained to take the place of all nominal
accounts. The following transactions that affect the account would be as follows:
Joint Venture
Merchandise contribution Merchandise withdrawals
Purchases Merchandise returns
Freight-in Purchase returns and
allowances
Sales returns and all. Purchase discounts
Sales discounts Sates
Expenses Other income
If Joint Venture is completed, the balance of the Joint Venture account represents the
profit or loss. Credit balance represents profit and a debit balance represents loss.
 If Joint Venture is uncompleted, meaning there are still unsold merchandise, profit or
loss is a balancing figure between the balance of the Joint Venture account before
profit distribution and the cost of the unsold merchandise (the required debit balance
of the Joint Venture account after profit or loss distribution.)
III. Cash Settlement
Cash settlement may also be represented by the venturer's account balance after
recording investments, withdrawals, and share in venture gain. A debit balance
represents cash to be paid in final settlement while a credit balance represents cash to
be received. The recording of cash settlement on the books of each venturer
requires that:
1. All accounts, except personal accounts, be brought to zero balance and
2. Any unaccounted debit or credit is cash to be received or paid
To make cash settlement to venturers upon termination of a completed venture. Cash
settlement to a venturer may be computed as follows:
Investments Pxx
Add: Share in venture gain xx
Total Pxx
Less: Withdrawals xx
Cash settlement Pxx

C. Joint Ventures
A joint venturer recognizes its interest in a joint venture as an investment and shall
account for that investment using the equity method in accordance with PAS 28
Investments in Associates and Joint Ventures unless the entity is exempted from
applying the equity method as specified in that standard.

A party that participates in, but does not have joint control of, a joint venture accounts
for its interest in the arrangement in accordance with PFRS 9 Financial Instruments
unless it has significant influence over the joint venture, in which case it accounts for it
in accordance with PAS 28 (as amended in 2011).
 Advance Accounting

MCQ - Theory
1. It is the contractually agreed sharing of control over an economic activity, and exists only
when the strategic financial and operating decisions relating to the activity require the
unanimous consent of the parties sharing control.
a. Control c. significant influence
b. Joint control d. Controlling interest Punzalan 2014

2. Joint ventures can take many forms and structures. Joint ventures may be created as
partnership, as corporations, or as unincorporated associations. All of the following are
the distinct types of joint venture, except
a. Jointly controlled interests. c. Jointly controlled operations.
b. Jointly controlled entities. d. Jointly controlled assets Punzalan 2014
.
3. It is a form of joint venture, where each venturer should recognize in its separate
financial statements all assets of the venture that it controls, all liabilities that is incurs,
all expenses that it incurs, and its share of any revenues produced by the venture.
a. Jointly controlled interests. c. Jointly controlled operations.
b. Jointly controlled entities. d. Jointly controlled assets Punzalan 2014

4. It is a party to a joint venture and does not have joint control over that joint venture.
a. Venturer.
b. Investor in a joint venture.
c. Investor with a power to govern the financial and operating policies.
d. None of these. Punzalan 2014

5. Under proportionate consolidation, the minority interest in the venture is

a. Shown as deduction from the net assets.
b. Shown in the equity of the venture.
c. Shown as part of long-term liabilities of the venture.
d. Not included in the financial statements of the venture. Punzalan 2014
Joint Arrangement – MCQ Page 6
Theory
6. Which of the following statements about PAS 31, Interests in joint ventures is
incorrect?
a. PAS 31 requires proportionate consolidation or the equity method to be applied
when an interest in a joint venture is acquired and held with a view to its
disposal within 12 months of acquisition.
b. PAS 31 does not apply to investments that would otherwise be interests of
venturers in jointly controlled entities held by venture capital organization, mutual
funds, unit’s trusts and similar entities when those investments are classified as
held for trading.
c. PAS 31 provides exemption from application of proportionate consolidation or the
equity method similar to those provided for certain parents not to prepare
consolidated financial statements.
d. PAS 31 provides that joint control must be lost before proportionate consolidation
or the equity method ceases to apply. Punzalan 2014

7. Which of the following methods of accounting for its share of each of the joint venture's
assets and liabilities are available to a venturer in a jointly controlled entity?
1. The equity method.
2. Proportionate consolidation, combining its share of each with similar items it
controls.
3. Proportionate consolidation, showing separate line items for its share of each.
a. Methods 2 and 3 only c. Methods 1 and 2 only
b. Methods 1 and 3 only d. Methods 1,2, and 3 Punzalan 2014

8. The Flame Co. and the Tall Co. owns 60% and 40%, respectively of the equity of the Loop
Co. Flame and Tall have signed an agreement whereby all the strategic decisions in
respect of Loop are to be taken with the agreement of them both. Are the following
statements TRUE or FALSE, according to IAS 27, Consolidated and Separate Financial
Statements, IAS 28, Investment in Associates and IAS 31, Interest in Joint Ventures?
1. Flame should classify its investment in Loop as an investment in a subsidiary.
2. Tall should classify its investment in Loop as an investment in an associate.
Statement 1 Statement 2
a. False False
b. False True
c. True False
d. True True Punzalan 2014
9. Are the following statements in respect of the conditions for joint venture TRUE or
FALSE, according to IAS 31, Interest in Joint Ventures?
1. The venturers must have a contractual arrangement as to how strategic
decisions in respect of a joint venture are to be made
2. Majority voting is acceptable for strategic decisions in respect of a joint venture.
Statement 1 Statement 2
a. False False
b. False True
c. True False
d. True True Punzalan 2014

10. The Wind Co. has correctly classified its investment in Air Co. as an investment in a
joint venmre. Wind's statement of financial position shows debt of P500,000; Air's
statement of financial position shows debt of P700,000. Are the following statements
TRUE or FALSE, according to IAS 31, Interest in Joint Ventures?
1. Retained earnings in Wind's consolidated statement of financial position will be
the same, whether Wind uses proportionate consolidation or the equity method
to account for its interest in Air.
2. Debt in Wind's consolidated statement of financial position will be the same,
whether Wind uses proportionate consolidation or the equity method to account its
interest in Air.
Statement 1 Statement 2
a. False False
b. False True
c. True False
d. True True Punzalan 2014
 Joint Arrangement

MCQ – Problems
JOINT ARRANGEMENT
Investment Account
11. On January 1, 2013, Wilkins, Inc. and Xylo, Inc. (the parties) agreed to combine their
businesses by establishing a separate vehicle (Bremm, Inc.). Both parties expect the
arrangement to benefit them in different ways. Wilkins believes that the arrangement
could enable it to achieve its strategic plans to increase its size, offering an opportunity to
exploit its full potential for organic growth through an enlarged offering of products and
services. Xylo expects the arrangement to reinforce its business opportunities by
marketing more products. As a result, Wilkins, Inc. acquired 207o of the outstanding
common stock of Bremm, Inc. for P700,000. This investment gave Wilkins the joint
control over Bremm. Bremm's assets on that date were recorded at P3,900,000 with
liabilities of P900,000. Any excess of cost over book value of the investment was
attributed to patent having a remaining useful life of 10 years.
In 2013, Bremm reported net income of P170,000. In 2014, Bremm reported net income
of P210,000. Dividends of P70,000 were paid in each of these two years. What is the
equity method balance of Wilkin's Investment in Bremm, Inc. at December 31,2014?
a. P728,000 c. P756,000
b. P748,000 d. P776,000 Dayag 2013

12. On January 1, 2013, two real estate companies (the parties - Packet Company and Socket
Company) set up a separate vehicle (Harrison Company) for the purpose of acquiring and
operating a shopping centre. The contractual arrangement between the parties
establishes joint control of the activities that are conducted in Harrison Company.
The main feature of Harrison's legal form is that the entity, not the parties, has rights
to the assets, and obligations for the liabilities, relating to the arrangement. These
activities include the rental of the retail units, managing the car park, maintaining the
centre and its equipment, such as lifts, and building the reputation and customer base
for the centre as a whole.
As a result, Packet Company paid P1.6 million for 50,000 shares of Harrison's
ANSWER Page 9
KEY
Advance Accounting
voting common stock, which represents a 40% investment. No allocation to goodwill
or other specific account was made. The joint control over Harrison is achieved by this
acquisition and so Packet applies the equity method. Harrison distributed a dividend
of P2 per share during the year and reported net income of P560,000.
What is the balance in the Investment in Harrison account found in Packet's
financial records as of December 31,2013?
a. P1,724,000 c. P1,844,000
b. P1,784,000 d. P1,884,000 Dayag 2013

Joint Arrangement – MCQ Page

Theory 10
13. January 1, 2013 entities X and Y each acquired 30 per cent of the ordinary shares
that carry voting rights at a general meeting of shareholders of entity O for P300,000.
Acquisition-related costs, such as broker and legal fees paid amounts to P50,000 by
entity X. Entities X and Y immediately agreed to share control over entity O.

For the year ended December 31,2013 entity O recognized a profit of P400.000. On
December 30,2013 entity O declared and paid a dividend of P150,000 for the year 2013.
At December 31,2013 the fair value of each venturer's investment in entity O is P425,000.
However, there is no published price quotation for entity O.

In 2013 entity X purchased goods for P100,000 from entity O. At December 31, 2013
P60,000 of the goods purchased from entity O were in entity X's inventories (ie they had
not been sold by entity X). Entity O sells at a 50 per cent mark-up on cost.
Entities X and Y account for its investment in entity O using the equity method. At
December 31,2013 entity X would report its investment in entity O at:
a. P469.000 c. P419,000
b. P369,000 d. P375,000 Guerrero 2013

14. On January 1, 2013 entities M and N each acquired 30 per cent of the ordinary
shares that carry voting rights at a general meeting of shareholders of entity Z for
P300,000. Contingent consideration probable to be paid by entity M is measured reliably
at P50,000. Entities M and N immediately agreed to share control over entity Z.

For the year ended December 31,2013 entity Z recognized a profit of P400,000. On
December 30,2013 entity Z declared and paid a dividend of PI 50,000 for the year
2013. At December 31,2013 the fair value of each venturers' investment in entity Z is
P425,000. However, there is no published price quotation for entity Z.
On December 31,2013 entity M sells goods for P60,000 to entity Z. At December 31,2013
this goods were in the investories of Equity Z (ie they had not been sold by entity Z).
Entity M sells goods at a 50 per cent mark-up on cost. Entities M and N account for its
investment in entity Z using the equity method.

At December 31,2013 entity M would report its investment in entity

Z at: a. P439,000 c.
P363,000
b. P375,000 d. P300,000 Guerrero 2013
15. On January 1,2013 entities A and B (the venturers) form a joint venture (entity X).
Upon incorporation of entity X, entities A and B each take up 50 per cent of the share
capital of entity
X. In return for their interests in entity X entities A and B each contribute P100,000 to
entity X. Entity A contributes machine with a fair value of P100,000 and a carrying amount
of P80,000. Entity B's contribution is P100,000 cash.
The machine contributed by entity A has an estimated useful life of 10 years with no
residual value. Entity X's profit for the year ended December 31,2013 is P30,000
(after deducting depreciation expense of P10,000 on the machine contributed by entity
A). Entity A accounts for his investment using the equity method.

What is the cost of investment of entity A on December 31,

2013? a. P 90,000c.
P105,000
b. P121,000 d. P106,000 Guerrero 2013

16. On March 1,2013 entities A and B each acquired 30 per cent of the ordinary shares that
carry voting rights at a general meeting of shareholders of entity Z for P300,000.
Entities A and B immediately agreed to share control over entity Z.

On December 31,2013 entity Z declared a dividend of P100,000 for the year 2013.
Entity Z reported a profit of P60,000 for the year ended December 31, 2013. At
December 31,2013 the recoverable amount of each venturer's investment in entity Z
is P292,000 (fair value of P295,000 less costs to sell of P3,000). Entities A and B uses the
equity method to account for its investment in entity Z. However, there is no
published price quotation for entity Z.
On December 31,2013, entities A and B must each report its investment in entity Z
at: a. P285,000 c. P288,000
b. P290,000 d. P260,000 Guerrero 2013
Trade Receivable
17 The PLDT Group comprises the Smart Co. and its 75% owned subsidiary, Ka- Talk
Co. The PLDT Group also owns one-third of the equity of the Ka-Text Co. and has signed a
contract with other equity holders in Ka-Text Co., whereby all strategic financial and
operating decisions in respect of Text n Text require the unanimous consent of all
shareholders. The PLDT uses proportionate consolidation to account for jointly
controlled entities. 1 he carrying amounts of trade receivables in the separate financial
statements of these companies at December 31, 2008 are:
PLDT Co. 800,000
Ka-Talk Co. 500,000
Ka-Text Co. 300,000
 In accordance with IAS 27, Consolidated and Separate Financial Statements, and IAS 31,
Interest in Joint Ventures, what carrying amount of trade receivables should be
presented in the consolidated financial statements of PLDT Co.?
a. 1,275,000 c. 1,400,000
b. 1,300,000 d. 1,600,000 Punzalan 2014

Cost of Unsold Merchandise charge to venturer

18. DD, EE and FF formed a joint arrangement in 2013 and agreed to divide profits and
losses equally. The arrangement is terminated on December 31, 2014 even though
there are still unsold merchandise. On this date DD's trial balance contains the following
account balances before profit or loss distribution:
Debit Credit
J V cash P30,000
Joint operation 6,000
EE, capital FF, 14,000
capital P16,000
DD receives P4,500 for his share in the joint operations profit. Furthermore, he agrees to be
charged for the unsold merchandise as of December 31, 2014.
The cost of the unsold merchandise charged to DD is:
a. 3,000 c. 13,500
b. 15,000 d. 19,500 Dayag 2013

Venture Profit(Loss)
19. Pinoy and Big Brother formed a joint venture to sell second hand home appliances by
investing sufficient cash. They agreed to share profits and losses equally. They agreed to
operate for a period of one year, each will record his purchases, sales, and expenses in his
own books. After almost six months of operations, the following incomplete information
was made available:
Pinoy Big Brother
Joint venture account (Cr.) 60,000 120,000
Expenses paid 5,000 10,000
Unsold merchandise on hand 15,000 35,000
How much is joint venture
profit? a. 230,000 c. 165,000
b. 195,000 d. 130,000 Punzalan 2014
20. X is the manager of the joint venture of X, Y, and Z, which they decided to liquidate.
Before dissolution and liquidation, the following accounts appear in the books ofX:
Debit Credit
Joint venture 5,000
Participant Y 12,000
Participant Z 4,000
All the remaining merchandise and supplies of the joint venture were bought and paid
by X for P11,000. The resulting profits or losses were shared equally by the participants.
What were the joint venture's profits (losses)?
a. (5,000) c. (6,000)
b. 11,000 d. 6,000 Punzalan 2014

Net Income
21. OO, PP, and QQ formed joint operations to bankroll a series of cultural shows for
the Philippine Centennial celebration. OO and PP agreed to contribute cash and QQ
was to manage the affairs of the joint venture. QQ was to receive a bonus of 25% of
the net income after bonus, OO and PP were to be allowed interest on their capital
contributions at 6% per annum, and any remainder was to be divided equally among
the three partners. After a year, the joint operations was terminated and the
following information was provided: original capital contributions used to purchase
tickets, were P1,815,000 and P2,475,000, respectively, from OO and PP; QQ sold
tickets worth a total of P6,600,000; and, QQ paid expenses of P1,899,150 out of joint
operations funds. How much was the joint operations net income after the bonus to
QQ?
a. 257,400 c. 410,850
b. 328,680 d. 4,700,850 Dayag 2013

Share in Net Income

22. RR and SS are asked by the ABC to handle the marketing of a benefit basketball
game. Being avid fans, they readily accepted the offer and formed joint operations. To
achieve an equitable distribution of earnings, they agreed that the partner who finances
the purchase of tickets shall be entitled to a 20% commission, the partner who makes
ticket sales shall be entitled to a 25% commission, and any remainder was to be divided
equally. After the game was over, the following information was obtained: RR
purchased tickets worth P26J25; SS, advanced P4.125 for expenses; and, ticket sales
made by RR and SS, respectively, were P22,000 and P16,500. How much was SS's
share in the net income (loss) of the joint operations?
a. 825 c. (3,300)
b. 4,125 d. (7,425) Dayag 2013
Unrealized Gross Profit
23. Panner, Inc. owns 30 percent of Watkins and applies the equity method.
During the current year, Panner buys inventory costing P54,000 and then sells its
Watkins for P90,000. At the end of the year, Watkins still holds only P20,000 of
merchandise. What amount of unrealized gross profit must Panner defer in reporting
this investment using the equity method?
a. 2,400 c. P 8,000
b. P4,800 d. P10,800 Dayag 2013
Final Settlement
24. The joint operations accounts in the tooks of the joint operator, X, Y and Z,
show the balances below, upon termination of the joint operations and
distribution of the profits:
Accounts X Y 1
with Dr(Cr) Dr(Cr) Dr(Cr)
X - P2,500 P2,500
Y P4,000 - 4,000
Z (6,500) (6,500)
Final settlement of the joint operations will require payments as follows:
a. X pays P2,500 to Z, and Y pays P4,000 to Z.
b. Z pays P2,500 to X, and P4,000 to Y.
c. Y pays P6,500 to X, and Z pays P2,500 to Y.
d. No payment(s) to be made Dayag 2013
25. X, Y and Z agree to sell yellow t-shirts and visors on February 24 and 25, X
constructed a stand in front of Z's house at a cost of P200 chargeable to operations. Any
profit from the joint operations will be distributed first by the payment of P50 to Z to
cover the cost of cleaning his lot after the joint operations, then by allowing a 40%
commission on individual sales and, finally, by dividing the remainder between X and
Y in the ratio of 3:1. All purchases will be
out-of-pocket and all sales activities will be the responsibility of each individual.
On February 24, X purchased merchandise worth P5,000 using P1,000 handed to
him by Y and P4,000 of his own money. Z paid P100 for a permit to operate the
concession. X, Y and Z made sales at a mark-up of 100% on cost, as follows: X -
P3,400; Y
- P5,200; and, Z – P1,200, Z paid P180 for their personal meals, which is to be
shared equally by all of them.
On February 26, Z agreed to pay P100 for the stand. The balance of the
inventory was taken by X at 50% of cost, as agreed to by Y and Z.
The final cash settlement would be: Dayag 2013
X Y I X Y I
a. P5,340 (P4,260) (P1,080) c. P1,870 (P2,250) (P670)
b. P2,560 (P2.010) (P 550) d. P1,930 (P2,400) (P470)
26. V, I and P form a joint operation for the sale of merchandise. P are to contribute
the merchandise, while V is to act as the managing joint operator and I to be allowed a
bonus of 25% of the profit after deduction of the bonus as expense. I and P are to
be allowed 6% interest a year on their original investments. The balance of the profit
on the arrangement is to be divided equally among the three joint operators.
On July 1, 2013,1 and P contributed merchandise of P06.OOO and P90.0QD,
respectively. For the period between July 1 and October 1, V sold joint
operation's merchandise on account for P240,000, of which he collected P229,500,
allowed sales discounts of P4,050, and wrote off P6,450 as uncollectible. V paid
joint operations expenses of P58.560 from the joint operations cash. On October 1,
the joint operations was terminated and unsold merchandise was returned at the
following values: to I. P15,000, and to P, P11,400. Cash settlement was
completed by V on the same day.
The cash settlement received by I and P, respectively, are Dayag 2013
a. 62,234.00 and P90,194.00 c. 72,333.33 and 92,166.67
b. 62,666.67and P90.333.33 d. 73,468.00and 101,788.00

27. The books of three joint operators contain the following account balances.

N's Books O's Books P's Books

Account with N P2,000 Cr P2,000 Cr
Account with O P3,000 Cr 3,000 Cr
Account with P 5,000 5,000 Dr
Dr

When P makes final settlement of the arrangements, the entries are: Dayag 2013
N's Books O's Books P's Books
a. Debit... P P5,000 N P5.000 Cash........P5,000
Credit.. 0 3,000 P 2,000 N 2,000
Cash 2,000 Cash 3,000 0 3,000
b. Debit... Cash........................ P3,000 Cash . P2,000 N P3.000
0 2,000 N 3,000 0 2,000
Credit.. P 5,000 P 5,000 Cash .. 5,000
c. Debit... P P5,000 N P5,000 Cash . P5,000
Credit.. Cash....................... 3,000 P 3,000 N 3,000
0 2,000 Cash.......2,000 0 2,000
d. Debit... Cash ...................... P2,000 N P2,000 N P2,000
0 3,000 Cash 3,000 0 3,000
Credit.. P 5,000 P 5,000 Cash .. 5,000
28. LL, MM and NN formed a joint arrangement to purchase a piece of lot and to erect
an apartment building for sale. LL is to manage the joint arrangement hence, he will
receive a bonus of 10% of the joint operation's gain before deducting the bonus as an
expense. Any remaining gain or loss is to be divided equally among the joint
operators. The venture is completed on August 31,2013. On this date, the accounts of
MM and NN show the following balances:

Books of
MM NN
Account with LL P16,000 Cr. P16,000 Cr.
Account with MM 32,000 Cr.
Account with NN 18,000 Dr.

There are unused construction supplies which LL agreed to take over at its cost of P42,000.
Final settlement with the arrangement will require payments as follows:
a. LL pays NN P11,200, and MM pays NN P14,000.
b. LLpays NN P25,600,and MM P14,4O0.
c. LL pays MM P14,400, and NN pays LL P30,800.
d. LL pays MM P35,600, and NN pays LL P14,400. Dayag 2013

29. Reyes, Silva and Tan formed a joint arrangement. Reyes was designated as the managing
joint operator and was to record the joint operation's transactions in his own books.
As manager, Reyes was to be allowed a salary of P12,000; the remaining profit or loss was
to be divided equally.
The following balances appeared at the end of 2013, before adjustment for joint operations
inventory and profit:

Debit Credit
Joint operations cash P48.000 P
Joint operations - 15,000
 Silva, capital 1,000
Tan, capital 27,000

The arrangement was terminated on December 31, 2013 and unsold merchandise costing
P10,500 were taken over by Tan. Reyes made cash settlement with Silva and Tan.
In the final cash settlement, how much did Tan
receive? a. 31,500
c. 21,000
b. 27,000 d. 10,500 Dayag 2013
Capitalizing on alleged inside information, Dupe and Fluke formed a partnership venture to'
purchase, sells or otherwise trade-in Bre-X mining shares. Bre-X recently made a significant
finding of gold deposits in its property in Busang, Indonesia. They started cautiously by making
an initial but modest cash contribution of P137,500,000 each. They agree to divide earnings
equally and further agreed to settle and close the partnership venture after six months of furious
Purchases of shares:
but ferocious (insider) trading. Below is a synopsis1,237,500,000
By Dupe of the transactions for six months:
By Fluke 495,000,000

Sales of shares:
By Dupe 1,339,250,000
By Fluke 462,000,000

Interest charges:
By Dupe 2,200,000
By Fluke 1,375,000

Dividend Income:
By Dupe 1,100,000
By Fluke 2,750,000
How much will Fluke receive (or pay) in final settlement of the partnership venture?
a. (34,512,500) c. (31,625,000)
b. 2,887,500 d. 66,137,500 Punzalan 2014

30.

Comprehensive
Questions 1 & 2 are based on the following: Dayag 2013
31. Ace Company purchases 40% of Basket Company on January 1 for P500,000 that
carry voting rights at a general meeting of shareholders of Basket Company. Ace
Company and Blake Company immediately agreed to share control (wherein unanimous
consent is needed to all the parties involved) over Basket Company. Basket reports
assets on that date of P1,400,000 with liabilities of P500,000. One building with a
seven-year life is undervalued on Basket's books by P140,000. Also Basket's book
value for its trademark (10-year life) is undervalued by P210,000. During the year.
Basket reports net income of P90,000, while paying dividends of P30,000. What is the
Investment in Basket Company balance (equity method) in Ace's financial records as of
December 31?
a. P504,O00 c. P513,900
b. P507,600 d. P516,000
32. Using the same information in No. 31, the Income from Investment in
Basket Company in Ace's financial records as of December 31 ?
a. P36,000 c. P12,000
b. P19,600 d. P7,600

Questions 1 thru 4 are based on the following: Dayag 2013

33. Goldman Company reports net income of P140,000 each year and pays an annual cash
dividend of P50.000. The company holds net assets of P1,200,000 on January 1,2013.
On that date, Wallace Company purchases
40 percent of the outstanding stock for P600,000, which gives it the ability to
have joint control with Zimmerman Company over Goldman. At the purchase date,
the excess of Wallace's cost over its proportionate share of Goldman's book value
was assigned to goodwill. On December 31, 2015, what is the investment in Goldman
Company balance (equity method) in Wallace's financial records?
a. P600,000 c. P690,000
b. P660,0OO d. P708,000

34. Using the same information in No. 33, except that Goldman Company's ownership
structure is as follows:
75% is needed to direct relevant
activities; 50% ownership of Wallace
Company;
30% ownership of Zimmerman Company; and
20% ownership of American Company

What is the amount of Income from the Income from Investment in Goldman's Company in
Wallace financial records as of December 31?
a. P168,000 c. P60,000
b. P108,000 d. P56,000
35. Using the same information in No. 34, except that Goldman Company's ownership
structure is as follows:
75% is needed to direct relevant
activities; 50% ownership of Wallace
Company;
25% ownership of Zimmerman Company; and
25% ownership of American Company

What is the amount of Income from the Income from Investment in Goldman's Company in
Wallace financial records as of December 31?
a. P168,000 c. P 60,000
b. P108,000 d. P56,00O
36. Using the same information in No. 34, except that Goldman Company's ownership
structure is as follows:
Majority vote to direct relevant activities; 35% ownership of
Wallace Company; 35% ownership of Zimmerman Company;
Not applicable - ownership of American Company; and Widely
dispersed - other companies

What is the amount of Income from the Income from Investment in Goldman's Company in
Wallace financial records as of December 31 ?
a. P168,000 c. P60,000
b. P108,000 d. P56,000

Items 37 through 38 are based on the following information: Dayag 2013

37. On September 30, 2011 Roxas, Silverio and Tan agreed on a joint operations to sell
their common stock shares of the Golden Copper Mines. Gains and losses are to be
shared in proportion to the contributed shares.
Roxas contributes 6,000 shares, which had cost him P42 a share; Silverio gave 10,000
shares which had cost P58 each and Tan 4,000 shares which had cost P62 per share.
The par value of the shares was P50 and when the arrangement began market value
was P40 a share.
On October 20 he sold 4,500 shares for P44 a share and P3,000 expenses incurred.
On November 1, Golden Copper distributed a stock dividend of 20%. Tan sold 5,000
shares, ex-stock dividend, on November 5 for P25 a share. On November 15, Golden
Copper paid a cash dividend of PI per share. On November 22, he sold 6,000 shares
for P28. On December 20, the remainder of the shares were sold for P35 a share.
Tan's expenses were P4,700.
The 20,000 shares contributed to the arrangement should be valued
at: a. 800,000 c. 1,080,000
b. 1,000,000 d. 1,200,000
38. Assuming the arrangement is ended on December 31, the share of Roxas in the loss of
the arrangement would be:
a. P10.130 c. P13.130
b. 11,130 d. 12,130

39. If a distribution of proceeds is made on December 31. The share of Silverio would
amount to: a. P374,650 c. P381,450
b. 378,500 d. 385,300
40. Tan's loss on the disposition on his Investment in Golden Copper
is: a. 95,420 c.
105,420
b. 95,140 d. 120,140

Questions 1 & 2 are based on the following: Dayag 2013

41. Bar and Car join in an arrangement for the sale of football souvenirs at the Rose Bowl
game. Partners agree to the following: (1) Bar shall be allowed a commission of 20%
on net purchases made by him, (2) each member shall be allowed a commission of 25%
on his own sales, (3) any remaining profit shall be shared equally, Joint operation
transactions follow:
Bar Car
Cash purchases P950
Expenses paid - 150
Sales (each keeps his receipts) 800 600
The joint operation profit (loss) is:
a. P450 c. P(300)
b. 300 d. (450)

42. Using the same information in No. 41, the amount due to (from) joint
operators: a. Bar, P415; Car, P(415) c.
Bar, P645; Car, P645
b. Bar, P420; Car, P(420) d. Bar, P-0-; Car, P-0-

Questions 1 & 2 are based on the following: Dayag 2013

43. Joint operation activities for M, N, and O having proved to be unprofitable, the parties
agree to dissolve the arrangements. Accounts with the arrangements and joint
operators on the books of M, the managing partner, are as follows just before
dissolution and liquidation:
 Debit Credit
Joint Operation Cash P12,000
Joint Operation 6,500
N, Capital* P14,500
O, Capital 6,500
The balance of joint operation assets on hand is sold by M for P3,500. M is allowed
special compensation of P300 for winding up the arrangements; remaining profits
or loss is distributed equally.
The Joint Operations profit (loss) is:
a. 3,000 c. (3,000)
b. 10,000 d. Zero
44. Using the same information in No. 43, N and O received in final
settlement: a. N, P13,400; O,P5,400
c. N, P15,850; O,P7,850
b. N, P10,500; O,P3,500 d. None
Questions 1 & 2 are based on the following: Dayag 2013
45. McKee and Nelson enter into a contract to speculate on the stock market, each using
approximately their personal cash. The earnings are to be divided equally, and settlement
is to be made at the end of the year after all securities have been sold. A summary of
the monthly brokerage statements for the year follows:
McKee Nelson
Total of all purchase confirmations P45,000 P18,000
Total of all sales confirmations 48,700 16,800
Interest charged on margin accounts. 80 50
Dividends credited to accounts 40 100
The joint operation profit (loss) is:
a. 2,510 c. (3,370)
b. 2,640 d. None
46. Using the same information in No. 45, final settlement will require payments as
follows:
a. McKee pays Nelson P2,405.
b. McKee and Nelson receive P1,255 each.
c. McKee receives from Nelson P1,150.
d. None.
Questions 1 & 2 are based on the following: Dayag 2013
47. Al Benin and Rey Sucat formed a joint operation on January 1,2013 to operate two
stores to be managed by each joint operator. They agreed to contribute cash as
follows: Benin, P30,000; Sucat, P20,000.
Profits and losses are to be divided in the capital ratio. All the arrangements transactions
are for cash, and the cash receipts and disbursements of the arrangements during the
four-month period, handled through the joint operator bank accounts, are as follows:
Benin Sucat
Receipts P78,920 P65,425
Disbursements 62,275 70,695
On April 30, 2013, the remaining joint operation non-cash assets in the hands of the
joint operators were sold for P 60,000 cash. The joint operations were
terminated and settlement was made between Benin and Sucat. The arrangement
profit (loss) for the four- month period, after selling the remaining non-cash
assets, was:
a. 11,375 c. (31,375)
b. 21,375 d. (38,625)
48. Using the same information in No. 47, the P60,000 cash was divided between the
join operators in the following manner:
a. Benin, P16,180; Sucat, P43.820
b. Benin, P21,905; Sucat, P38,095
c. Benin, P26,180; Sucat, P33,820
d. Benin, P48,095; Sucat, P11,905

Questions 1 & 2 are based on the following: Dayag 2013

49. Ramos, Silva and Torre formed a joint operation.' Ramos is to act as managing joint
operator and is designated to record the joint operation accounts in his books. As
manager, he is allowed a salary of P12,000. Remaining profit (loss) is to be divided
equally.
The following balances appear at the end of 2013 before adjustments for joint operation's
inventory and profits.

Debit Credit
Joint operations cash P48,000
Silva, capital 3,000
Torre, capital P27,000

The arrangements is to terminate on December 31, 2013 with unsold merchandise costing
P10,400.
Assuming that the joint operations profit is P5,000, what is the balance of the Joint
Operation's account before the distribution of profit?
a. 6,400 (Credit) c. 19,000 (Debit)
b. 5,400 {Debit) d. 15,400 (Debit)

50. Using the same information in No. 49 and assuming that the joint operations incurs a
loss of P1,000, what is the balance of the joint operation's account before the
distribution of loss?
 a. 9,400 (Debit) c. 11,400 (Debit)
b. 9,400 (Credit) d. 11,400 (Credit)

Questions 1 & 2 are based on the following: Dayag 2013

51. Alas and Bernal are joint operators in a joint arrangements for the acquisition of
construction supplies at'an auction. The two joint operators agreed to contribute cash of
P20,000 each to be used in purchasing the supplies, and to share profits and losses
equally, they also agreed that each shall record his purchases, sales and expenses in
his own books.
Several months later, the two joint operators terminated the arrangement.
 The following data relate to the venture activities:
Alas Bernal

Joint operation P16,000 Cr. P1400 Cr.

Value of inventory taken 600 2,200
Expenses paid from JV cash 800 1,800
The amount of joint operations sales
is: a. 77,000 c. 34,400
b. 27,000 d. None

52. Using the same information in No. 51 Alas would receive in the final
settlement: a. 2,000 c. 4,000
b. 18,600 d. 38,000

Questions 1 & 2 are based on the following: Dayag 2013

53. On July 1,2013, Alviar, Brosas and Camus formed a joint arrangement for the sale
of merchandise. Alviar was designated as the managing joint operator. Profits or losses
are to be divided as follows: Alviar, 50%; Brosas; 25%; and Camus, 25%. On
October 1, 2013, though the joint operation is still uncompleted, the participants
agreed to recognize profit or loss on the venture to date. The cost of inventory on
hand is determined at P25,000. The Investment in Joint Operation account has a
debit balance of P15,000 before distribution of profit and loss, no separate set of
books is maintained for the joint operation and the participants record in their
individual books all venture transactions.
The joint operation profit (loss) on October 1, 2013 is:
a. 10,000 c. (15,000)
b. 25,000 d. None
54. Using the same information in No. 53 and the joint operation accounts has a credit
balance of P30,000, the joint operations profit (loss) is:
a. (55,000) c. (5,000)
 b. 55,000 d. 5,000

Questions 1 & 2 are based on the following: Dayag 2013

55. Ranto and Santo formed a joint arrangement to acquire and sell a special type of
merchandise Ranto is to manage the joint arragement and to furnish the capital.
The joint operations are to share equally any gain or loss on the joint operations. On
April 1, 2013, Santo sent Ranto P10,000 cash, which was all used to purchase
merchandise. Ranto paid freight of P240 on the merchandise purchased. On April 27, one
half of the merchandise was sold for P7,200 cash. Ranto paid the cost of delivering
merchandise to customers which amounted to P260. No further transactions
occurred until the end of the month.
 The profit (loss) of the joint arrangement for the month of April,
2013 is: a. P1,820 c. P(
1,700)
b. 1,950 d. None

56. Using the same information in No. 55, the account of Santo in the books of Ranto
shows a debit (credit) balance on April 30, 2013 after recognizing the profit (loss) on the
uncompleted joint arrangement:
a. P(10,910) c. P10,850
b. 10,975 d. Zero

Questions 1 & 2 are based on the following: Dayag 2013

57 MM and RR agreed on joint operations to purchase and sell car accessories.
They agreed to contributed P25,000 each to be used in purchasing the merchandise,
share equally in any gain or loss, and record their joint operations transactions in their
individual books. After one year, they decided to terminate the arrangement, and data
from their records were:
Joint operations account credit balances: in books of MM, P18,000; in books of RR,
P20,200, Cost of car accessories taken: by MM, P1,000; by RR, P1,800, Expenses
paid: by MM, P1,850; by RR, P2,600.
How much was the joint operations sales?
a. 83,750 c. 91.000
b. 86,550 d. 92,650
58. Using the same information in No. 57, compute the joint operations
gain? a. P38,200 c.
P42,750
b. 41,000 d. 45,550

Questions 1 & 2 are based on the following: Dayag 2013

59. The following joint operations account reflects the transactions of the arrangements of
A, B and C as recorded by each Venturer (participant).

Investment in Joint Operation

2004
Nov. 5 Merchandise-C P 12,750 Nov. 18 Cash sales-A P30,600
17 Merchandise-B 10,500 Dec. 12 Cash sales-A 6,300
22 Freight-in-A 525 28 Merchandise-B .. 1,815
Dec. 3 Purchase-A 5,250
13 Selling expenses - A. 600
Distributions of gains or losses are to be trade as follows: A - 50%; B -
30%; and C - 20%. The joint operations is to close on December 31, 2013:
 The joint operation profit (loss) is;
a. 7,275 c 25,980
b. 9,090 d. 29,625

60. Using the same information in No.59, how much of each joint operations receive in the
final settlement?
a. A - none B-P11,412; C-P14,568.
b. A-P4.545 B-P11,212; C-P10,932.
c. A-P5,070 B-P11,212; C-P10,932.
d. A-P4,545 B-P11,412; C-P14,568.

Questions 1 & 2 are based on the following: Dayag 2013

61. JJ, DD and AA formed a joint operation for the sale of assorted fruits during the
Christmas season. Their transactions during the two-month period are
summarized below.

Investment in Joint Operation

2004 2004
Nov. 6 Merchandise - JJ P8,500 Nov.10 Cash sales-AA P20,400
8 Merchandise - DD 7,000 12 Cash sales - 4,200
10 Freight-in - AA 200 AA 1,210
Dec. 8 Purchases - AA 3,500 28 Merchandise - DD ...
14 Selling expenses - AA .. 550 Dec.30 Unsold merchandise 540
charged to JJ
The joint arrangements provided for the division of gains and losses among JJ, DD
and AA in the ratio of 2:3:5. The joint operation is to close on December 31,
2013.
The joint operation profit (loss) is:
a. 6,600 c. 6,060
b. (6,600) d. (6,060)
62. Using the same information in No. 61, how much would JJ receive cash in final
settlement? a. 9,712 c. 1.212
b. 8,500 d. 9,280

Questions 1 thru 3 are based on the following: Dayag 2013

63. Anson and Baylon formed a joint arrangement. Their capital contributions, and profit and
loss ratio are presented below:

Contributions Profit and

Cash Merchandise Loss Ratio
Anson P5,000 P8,000 50%
Baylon 6,000 50%
 A summary of the joint operations activities is presented below:
Purchases of merchandise by Baylon P4,000
Expenses paid by Baylon:
Mayor's permit 400
Freight on merchandise contributed by Anson 300
Delivery expense of merchandise sold 200
Sales (all of the merchandise contributed and purchased by Baylon and
one-half of those contributed by Anson) - Selling price 14,000
The balance of the joint operations account before profit or loss distribution is:
a. 4,900 c. 14,400
b. 14,000 d. None

64. Using the same information in No. 63, the profit (loss) of the joint
operations is: a. (450) c. (750)
b. 750 d. 450

65. Using the same information in No. 63, how much would Anson receive in the final
settlement assuming he took the unsold merchandise at cost?
a. 13,000 c. 8,475
b. 12,625 d. 8,515

Questions 1 & 2 are based on the following: Punzalan 2014

K and L join in a venture for the sale of certain merchandise. The participants agree to the
following:
• K shall be allowed a commission of 10% on his net purchase.
• The participants shall be allowed commissions of 25% on their respective sales.
• K and L shall divide the profit or loss 60% and 40%,
respectively. Joint venture transactions follows:
Dec. 1 K makes cash purchase of P57,000
3 L pays venture expenses of
P9,000.
5 Sales are as follows: K- P48,000; L- P36,000. The participants keep their own
 cash receipts.
6 K returns unsold merchandise and receives P15,000
cash. 15 The participants make cash settlement.

66. In the distribution of the net profit of the venture, what are the shares
of K and L, respectively?
a. 4,260 3,230
b. 4,680 3,120
c. 4,820 3,430
d. 4,840 4,230
67. In the final settlement, what amount would L pay K?
a. 14,100 c. 14,890
b. 14,880 d. 15,100

Questions 1 thru 3 are based on the following: Punzalan 2014

Mac and Jolly, in a joint venture, contributed P150,000 each in order to purchase canned
goods which are sold by lots at a "closing-out" sale. They agreed to divide their profits
equally and each shall record his purchases, sales, and expenses in his own books. After
selling almost all of the canned goods, they wind up their venture. The following data
relate to the venture transactions:
• Joint venture credit balance of Mac was P120,000, and Jolly was P105,000.
• Expenses paid from the joint venture cash was P15,000 by Mac and P19,500 by
Jolly.
• Cost of unsold canned goods, which Mac and Jolly agreed to assume were P4,500 and
P7,000, respectively.
68. What was the total sales of the joint venture?
a. 559,500 c. 525,000
b. 536,500 d. 334,500
69. What was the joint venture gain or loss?
a. 202,000 c. 224,000
b. 213,500 d. 236,500
70. In the final settlement, what was the total amount due to Mac including his
investment? a. 256,500 c. 263,750
b. 258,000 d. 268,250

Questions 1 & 2 are based on the following: Punzalan 2014

Carlos and Horace join in a venture for the sale of handicraft souvenir at the PICPA
Convention. They agreed that Carlos shall be allowed a commission of 20% on his net
purchases; that each member shall be allowed a commission of 25% on his sales; and that any
remaining profit shall be shared in the respective ratio of 6:4. The venture's transactions
follows: cash purchase of PI,900 and sales of PI,600 were made by Carlos, and expenses of
P300 and sales of PI,200 were made by Horace. Each keeps his own sales receipts.
71. What is the joint venture profit (loss)?
a. 600 c. 700
b. (650) d. 900
72. How much is the amount due to (from) participants in the final
settlement? Carlos Horace
a. 415 (415)
b. 792 (792)
c. 860 (860)
d. 972 (972)
Questions 1 & 2 are based on the following: Punzalan 2014
Burgos and Casino are participants in a joint venture for the purchase through bidding and
sales of surplus auto parts from Clark Air Base. The winning bid price is P400,000 paid equally
by Burgos and Casino and constituting their investments in the joint venture. They agreed that
each will record his purchase, sales, and expenses in his own books and share profits and
losses equally.
After seven months, the joint venture was terminated and the following data relate to the
joint venture:

Burgos Casino

Joint venture account (Cr.) 155,000 175,000

Expenses paid from joint venture cash 7,500 15,000
Cost of auto parts taken 5,500 18,000

73. How much is the joint venture sales revenue?

a. 752,500 c. 776,000
b. 330,000 d. 730,000
74. In the final settlement, how much will Burgos receive?
a. 378,750 c. 371,250
b. 384,250 d. 176,750

Questions 1 & 2 are based on the following: Punzalan 2014

Mitra and Ramos agreed on a joint venture to purchase and sell car accessories. Their
contract stipulates that the participants shall contribute P25,000 each to be used in
purchasing the merchandise, share equally in any gain or loss, and record their venture
transactions in their individual books.
After one year, they decided to terminate the venture and the following data were taken
from their respective records:
• Joint venture credit account balances were P18,000 for Mitra and P20,200 for
 Ramos.
• Cost of car accessories taken by Mitra and Ramos were P1,000 and
P1,800, respectively.
• From the joint venture cash, expenses paid were P1,850 by Mitra and P2,600 by
Ramos.
75. How much were the joint venture sales?
a. 83,750 c. 91,000
b. 86,550 d. 92,650
76. How much was the joint venture gain?
a. 38,200 c. 42,750
b. 41,000 d. 45,550
Questions 1 & 2 are based on the following: Punzalan 2014
V, I, and P form a joint venture for the sale of merchandise. I and P are to contribute the
merchandise, while V is to act as the manager and is to be allowed a bonus of 25% of the
profit after deduction of the bonus as expense. I and P are to allow 6% interest a year on
their original investments. The balance of the profit on the venture is to be divided
equally among the three participants.

On July 1, 2010, I and P contributed merchandise of P66,000 and P90,000, respectively.

For the period between July 1 and October 1, V sold venture merchandise on account for
P240,000, of which he collected P229,500, allowed sales discounts of P4,050, and wrote
of P6,450 as uncollectible. V paid joint venture expenses of P58,650 from the venture
cash.
On October 1, the joint venture was terminated and unsold merchandise was returned at
the following values: to I- P15,000, and to P- P11,400. Cash settlement was completed by
V on the same day.
77. What is the net profit of the joint venture after the
bonus to V? a. 31,200 c. 33,072
b. 33,000 d. 33,420
78. What would be the cash settlement received by I and P,
respectively? a. 62,210.00 90,170.00
b. 62,234.00 90,194.00
c. 72,333.33 92,166.67
d. 73,468.00 101,788.00

Questions 1 & 2 are based on the following: Punzalan 2014

On October 1, 2010, A, B, and C entered into a joint venture business. They were to market a
special alarm device. The venture profits and losses were to be shared into 5:3:2 ratio,
respectively. On December 31, 2010 while the joint venture is still uncompleted, the three
participants decided to recognize the profits or losses for the three months period. The
inventory is listed at 25% above cost at P50,000. The joint venture account has a debit
balance of P24,000. No separate books are maintained for the joint venture.
79. What was the joint venture profits (losses) for the three months
period? a. 16,000 c.
(24,000)
b. 26,000 d. 13,500
80. What were the shares of A, B, and C in the profits (losses)?
A B C
a. (12,000) (7,200) (4,800)
b. 8,000 4,800 3,200
c. 13,000 7,800 5,200
d. 6,750 4,050 2,700
Items 81 and 82 are based on the following data (Appendix Problem): Guerrero 2013
On January 1,2013 entities A and B each acquired 30 per cent of the ordinary shares that
carry voting rights at a general meeting of shareholders of entity M for P100,000. The purchase
price is equal to the fair value of 30 per cent of entity M's identifiable assets less 30 per cent of
its identifiable liabilities. entities A and B immediately agreed to share control over entity
M. For the year ended December 31,2013 entity M recognized a loss of P600,000. Entities A
and B have no constructive or legal obligation with respect of their jointly controlled entity's
loss and have made no payments on its behalf.
Entity M recognized profit for the year ended December 31,2013 of P800,000. There is no
published price quotation for entity M. Investments are accounted for using the equity
method.

81. At December 31, 2013 how much investment in entity M should be reported by each
venturer? a. P100,000 c. P 180,000
b. P-0- d. P40,000

82. At December 31,2013 each venturer must measure their investment in entity
M at: a. P160,000 c.
P180,000
b. P100,000 d. P-0-

Number 16 and 17 are based on the following data (Appendix Problem): Guerrero 2013
On March 1,2013 entities A and B each acquired 30 per cent of the ordinary shares that carry
voting rights at a general meeting of shareholders of entity AB for P300,000. Entities A and B
immediately agreed to share control over entity AB.
On December 31, 2013 entity AB declared a dividend of P100,000 for the year 2013.
Entity AB reported a profit of P80,000 for the year ended December 31, 2013. At December
31,2013 the fair value of each venturer's investment in entity AB is P293,000 and the cost to
sell amounts to P3,000. There is no published price quotation for entity AB. Investments are
accounted for using the equity method.
83. At December 31,2013 entities A and B must each report their investment in Entity
AB at: a. P290,000 c. P300,000
b. P293,000 d. P296,000

84. How much impairment loss should be recognized by each

venturer? a. P10,000 c.
P13,000
b. P 3,000 d. P 7,000
Questions 1 thru 4 are based on the following: Guerrero 2013
85. On January 1, 2013 entities A and B each acquired 30 per cent of the ordinary shares
that carry voting rights at a general meeting of shareholders of entity X for P300,000.
Entities A and B immediately agreed to share control over entity X. For the year ended
December 31, 2013 entity X recognized a profit of P400,000.
On December 30, 2013 entity X declared and paid a dividend of PI 50,000 for the year
2013. At December 31, 2013 the fair value of each venturer's investment in entity X
is P425,000. Entities A and B uses the cost model to account for its investment in jointly
controlled entities. However, there is no published price quotation for entity X.
Investments are accounted for using the cost model.
At December 31, 2013 the venturers must report their investment in entity
X at: a. P300,000 c. P255,000
b. P345,000 d. P420,000

86. Using the same facts in No. 85, assuming on January 2,2013 entity X also declared a
dividend of P100,000 for the year 2012 and at December 31,2013 the fair value of
each venturer's investment in entity X is P400,000.
How much dividend income each venturer should recognize on December
31,2013? a. P45,000 c. P75,000
b. P30,000 d. P15,000

Using the same facts in No. 85. However, there is a published price quotation for entity X.
87. How much income is to be recognized by each venturer in profit or loss for the year
ended December 31, 2013?
a. P165,000 c. P125,000
b. P170,000 d. P200,000

88. At December 31,2013 the venturers must each report its investment in
entity X at: a. P425,000 c.
P330,000
 b. P300,000 d. P345,000

Question 89 and 90 are based on the following data: Guerrero 2013

Banks A and B (the parties) agreed to combine their corporate, investment banking, asset
management and service activities by establishing a separate vehicle (bank X).- Both parties
expect the arrangement to benefit them in different ways. The assets and liabilities held in
Bank X are the assets and liabilities of Bank X and not the assets and liabilities of the parties.
Banks A and B each have a 40 percent ownership interest in Bank X, with the remaining 20
per cent being listed and widely held. The stockholders' agreement between bank A and bank
B establishes joint control of the activities of bank X.
Transactions for year 2013 and 2014 follow:
2013 2014

Investments: Bank A P50M P5M

Bank B 50M 5M
Revenues 10M 12M
Cost and expenses 6M 7M
Dividends paid - Bank X - 4M
89. What is the interest of bankAin the joint arrangement at December 31, 2013?
a. P50 M c. P48 M
b. P48.4 M d. P40 M

90. What is the interest of bank B in the joint arrangement at December 31,
2014? a. P52.5 M c. P54.5M
b. P52.4 M d. P50.5 M

Questions 1 to 3 are based on the following data: Guerrero 2013

On January 1,2013, Red, White and Blue (the joint operators) jointly buy a helicopter for
P30 million cash. The joint arrangement includes the following agreements:
a. The parties are the joint owners of the helicopter.
b. The helicopter is at the disposal of each party for 70 days each year.
c. The parties may decide to use the helicopter or lease it to a third party.
d. The maintenance and disposal of the helicopter require the unanimous consent of the
parties.
e. The contractual arrangement is for the expected life (20 years) of the helicopter and can
be change only if all the parties agree. The residual value of the helicopter is NIL.
f. Revenues and expenses are to be shared equally among the joint
operators. In 2013 the parties paid P300,000 to meet the costs of maintaining
the helicopter.
In 2013 each party also incurred costs of running the helicopter when they made use of the
helicopter (eg Red incurred costs of P200,000 on pilot fees, aviation fuel and landing costs). In
2013 the parties earned rental income of P2.5 million by renting the helicopter to others.

91. What is the net income (loss) of the joint arrangement on December 31,2013?
a. P5 M c. P1.5M
b. P2.0 M d. P2.5 M

92. What is the book value of the helicopter in the books of Red on December
31,2013? a. P28.5 M c. P21.0M
b. P19.0M d. P 9.5 M
93. What is the share of White in the net income (loss) of the joint arrangement on
December 31,2013?
a. P166,667 c. P125,000
b. P150,000 d. P160,000

Use the following data in answering Nos. 1 to 3 Guerrero 2013

Two real estate companies, R and S (the parties) set up a separate vehicle (entity X) for the
purpose of acquiring and operating a shopping centre. The contractual arrangement between
the parties establishes joint control of the activities that are conducted by entity
X. The main feature of entity X's legal form is that the entity, not the parties, has rights to the
assets, and obligations for the liabilities, relating to the arrangement. These activities include
the rental of the retail units, managing the car park, maintaining the centre and its equipment,
such as lifts, and building the reputation and customer base for the centre as a whole.
The terms of the contractual arrangement are such that:
(a) entity X owns the shopping centre. The contractual arrangement does not specify
that the parties have rights to the shopping centre.
(b) the parties are not liable in respect of the liabilities of entity X. if entity X is
unable to pay any its liabilities, the liability of each to any third party will be
limited to the parties unpaid contribution.
(c) the parties have the right to sell or pledge their interests in entity X.
(d) each party receives a share of the income from the shopping centre (which is the
rental income net of the operating costs) in accordance with its interests in entity
X.
Transactions of the contractual arrangement for 2012 and 2013 follow: 2012:
Co. R and Co. S contributed P10 Million each for a one-half interest in the net assets of
Entity
X. Organization expenses incurred amounts to P100,000. Entity X acquired land at a cost of
P2 Million. Constructed a building (shopping centre) at a cost of P15 Million. Operating
expenses for the year amounts to P1Million. Rental income collected from the tenants, P10
Million. Net income or loss is distributed to the venturers in accordance with their
 interest. 2013:
Operating expenses (including depreciation) incurred for the year, P3.5 Million Rental
income collected for the year, P12 Million. Each venturer receives a share of the income
or loss from rental income net of the operating expenses.

94. What is the interest of Co. R in the joint venture as of December 31, 2012?
a. P14M c. P15M
b. P 14.45M d. P20M
95. What is the net income (loss) of Entity X on December
31,2013? a. P 8.5 M c.
P15.5 M
b. P12 M d. P10.5 M

96. What is the interest of Co. S in the joint arrangement as of December 31,
2013? a. P18.7M c. P10.0M
b. P14.5 M d. P14.0M

Numbers 1 to 3 are based on the following data: Guerrero 2013

A and B (the parties) are two companies whose businesses are the construction of many types
of public and private construction services. They set up a contractual arrangement to work
together for the purpose of fulfilling a contract with the government for the construction of a
motor way between two cities for P24 million (a fixed price contract).
The contractual arrangement determines the participation shares of A and B and
establishes:
a. joint control of the arrangement;
b. the rights to all the assets needed to undertake the activities of the arrangement are
shared by the parties on the basis of their participation shares in the arrangement;
c. the parties have joint responsibility for all operating and financial obligations relating
to the activities of the arrangement on the basis of their participation shares in the
arrangement; and
d. the profit or loss resulting from the activities of the arrangement is shared by A and B
on the basis of their participation shares in the arrangement.
In 2013, in accordance with the agreement between A and B:
• A and B each used their own equipment and employees in the construction
activity A constructed three bridges needed to cross rivers on the route at a
cost of P8 million
• B constructed all of the other elements of the motorway at a cost of P10 million. A
and B shares equally in the P24 million jointly invoiced to (and received from) the
 government.

97. What is the gross profit of the joint arrangement?

a. P8 million c. P6 million
b. P14 million d. P 4 million

98. What is the gross profit earned by A in 2013?

a. P6 million c. P4 million
b. P14 million d. P 2 million

99. What is the gross profit earned by B in 2013?

a. P 2 million c. P 7 million
b. P14 million d. P 6 millio
ANSWER SHEET
1.B 26.A 51.A 76.B
2.A 27.D 52.D 77.B
3.C 28.D 53.A 78.A
4.B 29.C 54.B 79.A
5.D 30.D 55.A 80.B
6.A 31.B 56.A 81.B
7.D 32.B 57.D 82.A
8.A 33.D 58.D 83.A
9.B 34.D 59.B 84.A
10.A 35.D 60.D 85.A
11.A 36.D 61.A 86.C
12.A 37.A 62.D 87.B
13.C 38.B 63.A 88.A
14.A 39.C 64.C 89.B
15.D 40.B 65.C 90.B
16.A 41.B 66.B 91.A
17.C 42.B 67.B 92.D
18.D 43.C 68.A 93.A
19.A 44.A 69.D 94.B
20.D 45.A 70.D 95.A
21.B 46.A 71.A 96.A
22.A 47.B 72.B 97.C
23.A 48.C 73.A 98.C
24.A 49.B 74.A 99.A
25.B 50.C 75.D