10 In accordance with IFRS 11, what type of joint arrangement was established by R and S

R and S established a joint arrangement using a separate vehicle RS.

RS does not confer separation between the parties and the separate vehicle itself.
Answer: Joint operation B

11 The total assets of R included in its separate statement of financial position would be
Cash 100,000 50% 50,000
Transportation equipment 600,000 100% 600,000
Furniture & fixtures 500,000 50% 250,000
900,000 B

12 The total liabilities of S included in its separate statement of financial position

Other liabilities 200,000 50% 100,000 A
ed by R and S

on would be
 Joint Operation
Contributions (merchandise) Net sales
Expenses Other income
Net purchases Ending inventory
Total debits Total credits
Net loss if DR balance Net income if CR balance

The balance of JO account must be equal to the sum of all the capital accounts of
Unadjusted JO account balance, ending inventory not yet accounted on the CR sid

13. How much is the net profit or (net loss) of the joint operation for the two-month operation ending De
Joint Operation
Contribution - Chona 12,750 30,600 Sales - Anna
Contribution - Bella 10,500 6,300 Sales - Anna
Purchases - Anna 5,250 1,815 Ending inventory - B
Freight - Anna 525
Selling expense - Anna 600

29,625 38,715
9,090 C [Net income]

14 How much total cash will the managing operator (Anna) pay to the two operat
after the joint operation ended in Year 1?
Anna, Capital
Sales - Anna 30,600 5,250 Purchases - Anna
Sales - Anna 6,300 525 Freight - Anna
600 Selling expense - An
4,545 Share NI = 50% x 9,0
36,900 10,920
25,980 C
DR balance = To pay

15 How much cash will Bella receive from the joint operation?
Bella, Capital
End invty - Bella 1,815 10,500 Bella contribution
2,727 Share NI = 30% x 9,0
1,815 13,227
11,412 A
CR balance = To receive

Chona, Capital
12,750 Contribution - Chona
1,818 Share NI = 20% x 9,0
- 14,568
14,568
CR balance = To receive
Double check:
Bella - to receive 11,412
Chona- to receive 14,568
Anna - to pay 25,980
 Sales xxx
COGS (xxx)
Gross profit xxx
Expenses (xxx)
Net income (loss) xxx

he capital accounts of the joint operators.

ccounted on the CR side.

h operation ending December 31, Year 1?

Sales - Anna
Sales - Anna
Ending inventory - Bella

C [Net income]

pay to the two operators (Bella and Chona)

Purchases - Anna
Freight - Anna
Selling expense - Anna
Share NI = 50% x 9,090

Bella contribution
Share NI = 30% x 9,090

Contribution - Chona
Share NI = 20% x 9,090
 Average, Easy and Difficult formed a joint operation. The following were their contributions:
Easy P100
Average P120
Difficult P 80
On completion of the joint operation, the joint operator’s books show the following:
Easy Average Difficult
Personal accounts, before closing 100 CR 120 CR 580 DR
Expenses, paid from JO cash 240
Unsold inventory taken 60
The contractual arrangement stipulates that Difficult, the appointed manager,
is entitled to a salary of P6 and a bonus of 15% of profit after salary and bonus.
Any balance of profit or loss is shared equally.

16 How much were the sales of the joint operation?

Before closing balance
Joint venturer 1, capital xxx
Joint venturer 2, capital xxx
Joint venturer 4, capital xxx
Unadjusted profit/loss xxx *Unadjusted balance of JO account
Add: ending inventory xxx
Net income/loss xxx

Sales xxx
Contributions (as COGS before ending inventory) (xxx)
Net purchases (Purchases + Freight in - Purchase DR&A) (xxx)
Gross profit xxx
Less: expenses (xxx)
Profit/loss before adjustment xxx
Ending inventory xxx
Net income/loss xxx

Joint Operation
Contributions Net sales
Net purchases
Expenses
Unadjusted DR balance of joint operation account Unadjusted CR balance of joint operation accoun
Ending inventory
Net loss if DR balance Net income if CR balance
Note: If JO account has debit balance = unadjusted net loss
If Jo account has debit balance = unadjusted net income
Capital accounts and JO account have opposite balance

Easy -100 CR
Average -120 CR
Difficult 580 DR
Unadjusted profit/loss 360 DR - if capital account and CR if JO account
Add: ending inventory 60
Net income/loss 420

Sales (workback) 900 A

Contributions (as COGS before ending inventory) 300 (100 + 120 + 80)
Gross profit 600
Less: expenses 240
Profit/loss before adjustment 360
Ending inventory 60
Net income/loss 420

Joint Operation
Contributions 300 900 Sales
Expenses 240
360 Unadjusted profit, Unadjusted JO acco
60 Ending inventory
420 Net income

17 How much cash will Difficult, the holder of JO cash, pay to Easy and Average?

Difficult, Capital
Sales 900 80 Contribution
Ending inventory 60 240 Expenses paid
180 Share NI

960 500
460 B
DR balance = To pay
Profit distribution:
Easy Average Difficult Total
Salary 6 6
Bonus 54 54
Remainder (equally) 120 120 120 360
Total 120 120 180 420

NI before S and B 420

Salary 6 Percentage
NI before S and B 414 115%
Bonus 54 15%
NI after S and B 360 100%

Capital accounts (to double check)

Easy Average Difficult
Unadjusted balance 100 120 (580)
Share in NI 120 120 180
Ending inventory (60)
Adjusted capital balances 220 240 (460)
receive receive pay
 their contributions:

he following:

JO account

of joint operation account

and CR if JO account

100 + 120 + 80)

profit, Unadjusted JO account

Difficult, Capital
Unadjusted balance 580 180 Share NI
Ending inventory 60
640 180
460 B
DR balance = To pay
A, B and C formed a joint operation, whereby each will share equally in income and expense
Account balances upon completion of the joint operation were as follows:
JO – cash 20 DR
Joint operation 5 DR Unadjusted net loss, DR balance
B’ account 15 DR
C’s account 10 CR
A agreed to be charged for the cost of unsold inventory. A’s share in the profit was P4.

How much is the cost of the unsold inventory?

Joint Operation Profit/loss before adjustmen

Contributions Net sales Ending inventory (workba
Net purchases Net income/loss
Expenses
Unadjusted loss Unadjusted profit
Ending inventory JO Dr balance
Net income
ually in income and expenses.
as follows:

s, DR balance

re in the profit was P4.

Profit/loss before adjustment -5

Ending inventory (workback) 17 A (12 + 5)
Net income/loss 12 (P4 share NI x 3 operators)

Joint Operation
5
17 Ending inventory
12 Net income
A, B and C formed a joint operation. At year end, A’s books show the following balances?
JO – cash 20 DR
Receivable from B 15 DR
Payable to C 22 CR
The cost of unsold merchandise is P18. The joint operation’s profit is P11.

What is the balance of the Joint Operation account before the distribution of profit? Unadjus

Joint Operation
Contributions Net sales Profit/loss before adjustment
Net purchases +Ending inventory (workback)
Expenses Net income/loss
JO unadjusted (C) 7
18 Ending inventory adjsutment
11
wing balances?

ion of profit? Unadjusted net profit/loss

ss before adjustment -7 Dr balance in JO account

inventory (workback) 18
11 Cr balance in JO account
20. In accordance with IFRS 11, what type of joint arrangement was established by X, Y and Z?
Parties have joint control over the separate vehicle.
The entity, not the parties has rights to assets and obligations for the liabilities relating to the arrangemen
Joint venture A

21. What standard shall be applied by Company Z?

Participants to the joint arrangement, except Company Z, have joint control over the separate vehicle.
Interest in the joint arrangement: A 40%, B 40% and Z 20%
Z is not a joint venturer under PFRS 11
Z have significant influence
Z will use PAS 28 D - as an investment in associate

22. What is the amount of interest of Company X in Entity XYZ as of December 31, Year 1?
Investment in JV - beginning 10,000,000 (25M x 40%)
+ Share in net income 1,520,000 (4M x 40%)
Investment in JV - 12/31/Y1 11,520,000 A

Rental income 5,000,000

- OPEX 1,000,000
- Taxes and licences 200,000
Net income of JV - Y1 3,800,000

23. What is the amount of interest of Company X in Entity XYZ as of December 31, Year 2?
Investment in JV - 12/31/Y1 11,520,000
+ Share in net income 3,000,000 (7.5M x 40%)
- Share in dividends 1,200,000 (3M x 40%)
Investment in JV - 12/31/Y2 13,320,000 D

Rental income 8,000,000

- OPEX 500,000
Net income of JV - Y2 7,500,000
shed by X, Y and Z?

relating to the arrangement.

er the separate vehicle.

mber 31, Year 1?

31, Year 2?
Income from investment in joint venture as accounted by the joint venturer:
Reported Net income of JV xxx
+/- Amortization of FV adjustment xxx
Adjusted net income - JV xxx
x Interest in the JV x%
Income from joint venture xxx

Reported Net income of JV 90,000

-Amortization - building 20,000 (140,000 / 7 years)
-Amortization - trademark 21,000 (P210,000 / 10 years)
Adjusted net income - JV 49,000
x Interest in the JV 40%
Income from joint venture 19,600 D

Carrying amount of investment in joint venture:

Investment in JV - beginning 500,000
+Share in net income of JV 19,600
-Share in dividends declared by JV 12,000 (40% x 30,000)
Investment in JV - ending 507,600 A
0 / 10 years)
On January 1, 20X1, Entity A and Entity B established a joint venture by investing P5M each for equal capita
The joint venture reported the following data for the years ended 20X1, 20X2 and 20X3:
Net income Dividends
Year
(loss) declared
20X1 1,000,000 200,000
20X2 (12,000,000) -
20X3 6,000,000 3,000,000

26 What is the investment loss to be reported by Entity A in relation to the joint venture for the
27 What is the investment income to be reported by Entity B in relation to the joint venture for th
Notes:
1 Investment in JV under equity method must not fall below zero.
2 If the net loss will reduce the investment account below zero, the amount of loss to be recognized b
must be equal to the amount that will only reduce the investment in JV to zero.
3 Previouly unrecognized losses by the joint venturer will be recognized when the venturer has ear
in the subsequent period.

Same for joint venturers A and B

Investment in JV - beginning 5,000,000
+ share in net income 500,000 (1M x 50%)
- share in dividends 100,000 (200,000 x 50%)
Investment in JV - 12/31/20X1 5,400,000
- share in net loss 5,400,000 C Actual share in net loss is P6M (50% of 12M), but the i
- share in dividends -
Investment in JV - 12/31/20X2 -
+ share in net income 2,400,000 B (6M x 50% - Unrecognized net loss in 20X2 [6M - 5.4M
- share in dividends 1,500,000 (3M x50%)
Investment in JV - 12/31/20X3 900,000
ng P5M each for equal capital interest in the arrangement.
and 20X3:

n to the joint venture for the year ended December 31, 20X2?
on to the joint venture for the year ended December 31, 20X3?

ount of loss to be recognized by the joint venturer

ed when the venturer has earned net income

P6M (50% of 12M), but the investment will be negative

d net loss in 20X2 [6M - 5.4M])

On January 1, Year 1, Entity A became a party in a joint venture by SMEs.
A joint controlled entity called Entity Q was established.
A acquired 30% of the ordinary shares of Q for P300,000 and paid P10,000 transaction costs.
During the year, Q reported P400,000 net income and paid P150,000 dividends.
At the end of the year, Fair value of A’s interest in Q was P350,000 and cost of disposal was P20,000.

Cost model Equity method

Transaction costs
Transaction costs included in
Initial measurement included in transaction
transaction price.
price.
Income from joint Share in profit or loss of joint
Dividend income
venture venture

Subsequent measurement Cost minus impairment Cost minus impairment

28. What amount would be reported by A as investment in Entity Q at the end of Year 1 using cost model?

Acquisition cost 300,000.00

Transaction cost 10,000.00
Cost 310,000.00

Fair value 350,000.00

Cost to sell 20,000.00
Recoverable cost 330,000.00
No impairment loss.

Carring amount (w/c ever is lower) 310,000.00

29. What amount would be reported by A as investment in Entity Q at the end of Year 1 using equity meth

Acquisition cost 300,000.00

Transaction cost 10,000.00
Share in NI 120,000.00
Dividends (45,000.00)
Carrying amount before impairment 385,000.00

Fair value 350,000.00

Cost to sell 20,000.00
 Recoverable cost 330,000.00
Subject to impairment RA < CA

Carring amount (w/c ever is lower) 330,000.00

Impairment loss 55,000.00

30. What amount would be reported by A as investment in Entity Q at the end of Year 1 using fair value m
Fair value 350,000.00
Gain on change in fair value 50,000.00

31. The net effect on profit or loss of A of all the transactions related to the investment in the joint controll
Dividend income 45,000.00

32. The net effect on profit or loss of A of all the transactions related to the investment in the joint controlled e
Share in NI 120,000.00
Impairment loss (55,000.00)
Net effect on PL 65,000.00

33. The net effect on profit or loss of A of all the transactions related to the investment in the joint controlled
Dividend income 45,000.00
Gain on Change in Fair value 50,000.00
Transaction cost (expense) (10,000.00)
Net effect on PL 85,000.00
000 transaction costs.

cost of disposal was P20,000.

Fair value model

Transaction costs excluded

from transaction price.

Dividend income

No impairment. Changes in
fair value to profit or loss

the end of Year 1 using cost model?

the end of Year 1 using equity method?

(30% x 400,000)
(30% x 150,000)
 B
(385,000 - 330,000)

the end of Year 1 using fair value model?

C
(350,000 fair value - 300,000 cost)

the investment in the joint controlled entity using cost model

D (30% x 150,000)

e investment in the joint controlled entity using equity method

(30% x 400,000)
(385,000 - 330,000)
C

he investment in the joint controlled entity using fair value model

(30% x 150,000)
(350,000 - 300,000)