Joint Venture 103

CHAPTER 6
SOLUTIONS TO MULTIPLE CHOICES
6-1: a
Assets per Jessica Company- balance sheet P3,550,000
Jessicas proportionate interest in assets of JV (50%) ,000,000
Total assets of Jessica P4550,000
6-2: a Total liabilities only of Jenny Co.
6-3: b
6-4: b
!n"estment of #eart P$0,000
Profit share%
&ales 50,$00
Cost of sales (50,$00 ' (5%) (0,)*0
+ross profit 30,)0
,-penses 0,000
.et Profit (0,)0
Profit/loss ratio - *0% $,0)*
Balance of investment in JV P88,064
6-5: a
Cash P00,000
1erchan2ise in"entory (0,3)0
Acco3nts recei"able 50,$00
4otal assets 350,)0
&6eet Cos, proportionate interest - )0%
Sweet Companys s!a"e in total asset P###,0$6
6-6: a
&ales 5,(00
Cost of sales
P3rchases P0,000
1erchan2ise in"entory, en2 (50% of P0,000) 775,000 75,000
+ross profit (,(00
,-penses 777500
%et p"ofit P &,'00
104
Chapter 6
6-7: b
8ri9inal in"estment (cash) P0,000
Profit share (P,500 / () 777$50
Balance of (nvestment acco)nt P&0,850
6-8: a
Joint "ent3re acco3nt before profit 2istrib3tion (cre2it balance) P 0,000
:nsol2 merchan2ise 77(,500
Joint "ent3re profit before fee to &alas P,500
Joint vent)"e p"ofit afte" fee to Salas *P&&,500 + &&5,- P&0,000
6-9: b
;ee of &alas (P0,000 - 5%) P ,500
Profit share of &alas (P0,000 - (5%) 7(,500
Total P 4,000
6-10: b
Salas Salve
<alance before profit 2istrib3tion P 500 (2r) P (,000 (cr)
Profit share%&abas (P0,000 - *0%) *,000
&al"e (P0,000 - 35%) 777777 73,500
Balance P .,500 *c"- P 5,500 *c"-
6-11: d
Joint "ent3re acco3nt balance before profit 2istrib3tion (2ebit) P ),000
Joint "ent3re profit (P*,500 - 3) 73,500
Cost of )nsol/ me"c!an/ise *invento"y- ta0en by 1ante P&$,500
6-12: b
,26in Capital%
=ebits% <alance before profit 2istrib3tion P*,000
Cre2its% Profit share 77*,500
1)e f"om 2/win */ebit balance- P $,500
Joint Venture 105
&ettlement to ;er2ie (<alance of capital acco3nt)
=ebits% P >0>
Cre2its% <alance before profit 2istrib3tion P),000
Profit share 77*,500 7(0,500
1)e to 3e"/ie *c"e/it balance- P#0,500
&ettlement to =ante (balance of JV Cash acco3nt)
=ebits% <alance before cash settlement P30,000
=3e from ,26in 770,500 P30,500
Cre2its% =3e to ;er2ie 7(0,500
Balance P&$,000
6-13: a
JV acco3nt balance before profit 2istrib3tion (cr) P *,)00
:nsol2 merchan2ise (re?3ire2 2r balance after profit 2istrib3tion) 77(,000
Joint "ent3re profit before fee to Jerry P ),)00
Joint "ent3re profit after fee (P),)00 / 0%) 77),000
3ee to Je""y P 600
6-14: d
Harry Capital Isaac Capital
<alances before profit 2istrib3tion (P (00) P ,$00
Profit 2istrib3tion%
#arry P),000 - 50%) 3,000
!saac (P),000 - (0%) ,(00
Cas! settlements P #,800 P .,000
6-15: b
&ales P*,000
Cost of sales%
1erchan2ise in"entory, be9 (contrib3tions) P*,000
;rei9ht 300
P3rchases 77*,000
+oo2s a"ailable for sale P$,300
1erchan2ise in"entory, en2 (P$,300/() 77*,50 *,50
+ross profit (loss) (50)
,-penses (P*00 @ P(00) 77)00
%et p"ofit *loss- P* '50 -
6-16: c
Contrib3tions to the Joint Vent3re (P5,000 @ P$,000) P3,000
Aoss share (P550 - 50%) ( 355)
:nsol2 merchan2ise taBen (6ith2ra6al) ( *,50 )
3inal settlement to 4ac0 P 8,4'5
106
Chapter 6
SOLUTIONS TO PROLEMS
P!"b#$% 6 & 1
""'( ") #a*c" +Ma*a,$!- ""'( ") Ab#a*
JV Cash 00,000 Investment in JV 00,000
Joint Venture 00,000 Merchandise inventory 00,000
Cash 00,000
Ablan Capital 00,000
Joint Venture )0,000
JV cash )0,000
Joint Venture (0,000
JV cash (0,000
JV cash (00,000
Joint Venture (00,000
Comp)tation of JV P"ofit
4otal 2ebit to JV P50,000
4otal cre2it to JV P(00,000
Cre2it balance (Profit) P 30,000
1ist"ib)tion
Joint Venture 30,000 Investment in JV 5,000
Profit from JV 5,000 Profit from JV 5,000
Ablan capital 5,000
Ablan capital 05,000 Cash 05,000
JV cash 05,000 Investment in JV 05,000
Cash 55,000
JV cash 55,000
Joint Venture 107
P!"b#$% 6 & 2
""'( ") ./$ 0"1*. 2$*.3!$
14 Computer equipment 1!"
#lla capital $"
%abia capital &!"
24 Purchases '"
Supplies ("
)ia* capital '("
34 #+penses ,"
)ia* capital ,"
44 Cash 1!"
Sales 1!"
54 #+penses -"
Cash -"
64 Merchandise inventory ("
#lla capital ("
74 %abia capital 1"
Cash 1"
84 A2C3stin9 an2 closin9 entries%
.a/ #+penses !
Supplies !
.b/ Sales 1!"
Income summary 1!"
Income summary 00"!
Merchandise inventory ("!
Purchases '"
Income summary -,"!
#+penses -,"!
1ist"ib)tion of p"ofit5
Income summary --"
)ia* capital 11"
#lla capital 11"
%abia capital 11"
108
Chapter 6
""'( ") 51a6
+1- Investment in Joint Venture '("
Cash '("
+2- Investment in Joint Venture ,"
Cash ,"
+3- 4o recor2 profit share%
Investment in Joint Venture 11"
Profit from Joint Venture 11"
""'( ") E##a:
+1- Investment in Joint Venture $"
Computer equipment $"
+2- Investment in Joint Venture ("
Merchandise inventory ("
+3- 4o recor2 profit share%
Investment in Joint Venture 11"
Profit from Joint Venture 11"
""'( ") 7ab1a:
+1- Investment in Joint Venture &!"
Computer equipment &!"
+2- Cash 1"
Investment in Joint Venture 1"
+3- 4o recor2 profit share%
Investment in Joint Venture 11"
Profit from Joint Venture 11"
Joint Venture 109
P!"b#$% 6 & 3
+1- N" S$8a!a.$ S$. ") 0"1*. 2$*.3!$ ""'( 1( U($d
Boo0s of 1)"an *6ana7e"-
1ay % Joint Venture 1("!
Castro capital 1("
Cash !
7: JV cash 1"
1ueno capital 1"
26: Joint Venture ,"!
JV cash ,"!
30: JV accounts receivable 1$"
Joint Venture 1$"
03*$30: JV cash 1!"
JV accounts receivable 1!"
27: JV cash ,"
Joint Venture ,"
30: To "eco"/ )nsol/ me"c!an/ise ta0en by 1)"an5
Merchandise inventory -"
Joint Venture -"
To "eco"/ p"ofit /ist"ib)tion5
Joint Venture $"
Profit from JV ("
1ueno capital ("
Castro capital ("
To "eco"/ settlements5
1ueno capital 1("
Castro capital 1&"
JV cash (&"!
Cash 1"!
Accounts receivable 1"
JV accounts receivable 1"
110
Chapter 6
Boo0s of B)eno
1ay 5% Investment in Joint Venture 1"
Cash 1"
J3ne 30: Investment in Joint Venture ("
Profit from Joint Venture ("
Cash 1("
Investment in Joint Venture 1("
Boo0s of Cast"o
1ay : Investment in Joint Venture 1("
Merchandise inventory 1("
J3ne 30: Investment in Joint Venture ("
Profit from Joint Venture ("
Cash 1&"
Investment in Joint Venture 1&"
+2- A S$8a!a.$ S$. ") ""'( 1( 3($d:
Boo0s of t!e Joint Vent)"e
Ma9 1: Merchandise inventory 1("!
Castro capital 1("
)uran capital !
7: Cash 1"
1ueno capital 1"
26: Purchases ,"!
Cash ,"!
30: Accounts receivable 1$"
Sales 1$"
J3ne (0: Cash 1!"
Accounts receivable 1!"
27: Cash ,"
Sales ,"
Joint Venture 111
J3ne 30: Closin7 ent"ies5
Sales (!"
Income summary (!"
Income summary 1,"
Merchandise inventory" end -"
Merchandise inventory 1("!
Purchases ,"!
51(.!1b3.1"* ") 8!")1.:
Income summary $"
1ueno capital ("
Castro capital ("
)uran capital ("
Settlements to Vent)"e"s5
1ueno capital 1("
Castro capital 1&"
)uran capital ("!
Merchandise inventory -"
Accounts receivable 1"
Cash (&"!
Boo0s of 1)"an *6ana7e"+8pe"ato"-
1ay % Investment in Joint Venture !
Cash !
03*$30: Investment in Joint Venture ("
Profit from Joint Venture ("
Cash ("!
Investment in Joint Venture ("!
Boo0s of B)eno an/ Cast"o *Same as in %o. & "e9)i"ement-
112
Chapter 6
P!"b#$% 6 & 4
+1- Boo0s of Sei0o *6ana7e"+8pe"ato"-
April: JV Cash 1("
2otes payable 3 P21 -&"
4oles capital -&"
5ime+ capital -&"
1ay: Joint venture $&"1
Cash 1$"-
4ole+ capital 0"'
J3n$: 4ole+ capital -"
JV cash -"
Joint venture 111"&
Cash -0"&
4ole+ capital $&"0
5ime+ capital ,"-
J3ly: Cash &"
4ole+ capital 1!"
5ime+ capital 1"
JV cash $!"
Joint venture !!"00
Cash 1-",0
4ole+ capital -1"(&
5ime+ capital 1"!$
A393st: Cash &!"
4ole+ capital $0"
5ime+ capital 1-"!
JV cash 1(!"!
Joint venture -"$
Cash ,"0-
4ole+ capital 1$"!$
5ime+ capital &"-1
To "eco"/ sales5
JV cash .P&(1" + ,$6/ &&"1$
Joint venture &&"1$
Joint Venture 113
To "eco"/ payment of loan to P%B5
2otes payable 3 P21 -&"
4ole+ capital -&"
5ime+ capital -&"
Joint venture .Interest e+pense/ '"
JV cash 11"
To "eco"/ /ist"ib)tion of p"ofit5
Joint venture 1-&"(,
7ain from JV .-6/ &"('0
4ole+ capital .$6/ '"!0&
5ime+ capital .16/ 1-"&(,
Comp)te/ as follows5
5otal debits tot he JV account P($,"'0
5otal credits to the JV account 8&&"1$
7ain .credit balance/ P1-&"(,
To "eco"/ settlement5
Cash -("$'0
4ole+ capital 1('"'0&
5imes capital 1&",,
JV cash 10!"$$
C"%83.a.1"*(:
Settlement to :ole; < Balance of capital acco)nt5
=ebits% J3ne P30,000
J3ly 5,000
A393st )5,000
Payment of note payable 73*,000 P*),000
Cre2its% April P3*,000
1ay *5,$00
J3ne )*,500
J3ly 3,(*0
A393st ),5)0
Profit share 7$0,55* 77(5*,$5*
Cre2it balance P 1('"'0&
114
Chapter 6
Settlement to time; = Balance of capital acco)nt
=ebits% J3ly P 0,000
A393st 3,500
Payment of loan 773*,000 P 55,500
Cre2its% April P 3*,000
J3ne 0,300
J3ly 0,5)0
A393st *,30
Profit share 773,*(0 75,500
Cre2it balance P *,000
Settlement to Sei0o = Balance of JV cas! acco)nt
=ebits% April P0(,000
Aoan procee2s 7*0*,)0 P50),)0
Cre2its% J3ne P 30,000
J3ly )5,000
A393st (5,500
Payment of loan 70,000 7330,500
<alance of JV cash 55,))0
Aess%&ettlement to Dole- P($,$5*
&ettlement to 4ime- 77*,000 7*(,053
&ettlement to &eiBo P 3(,)$5
+2- Pa!.1a# a#a*c$ S/$$.
03*$ 30: 2008
Boo0s of Sei0o *6ana7e"+ope"ato"-
C3!!$*. a(($.(:
!n"estment in Coint Vent3re%
Joint Vent3re assets%
Cash P 5(,000
Joint Vent3re 755,500 P(*5,500
Aess%,?3ity of other "ent3rers
(P),500 @ P*3,300) 750,$00 $5,500
C3!!$*. #1ab1#1.1$(:
.otes payable > P.< 3*,000
Joint Venture 115
C"%83.a.1"* ") ba#a*c$( a( ") 03*$ 30: 2008:
JV Cas! Joint Vent)"e
April P0(,000 P30,000 J3ne 1ay P )*,00
<alance P 5(,000 J3ne 7,*00
<alance P55,500
%otes Payable :ole; capital
P3*,000 April J3ne P 30,000 P 3*,000 April
*5,$00 1ay
7777777 77)*,500 J3ne
P 30,000 P*),500
P),500
Time; capital
P3*,000 April
770,000 J3ne
P*3,300
P!"b#$% 6 & 5
C"*("#1da.$d a#a*c$ S/$$.
Cash P ),000
Decei"ables ((,000
!n"entory 0(,500
8ther assets 77*0,500
4otal assets P3(),000
Acco3nts payable P ),000
8ther liabilities 0),500
Capital stocB 50,000
Detaine2 earnin9s 7$,500
4otal liabilities an2 stocBhol2ersE e?3ity P3(),000
C"*("#1da.$d I*c"%$ S.a.$%$*.
&ales P(*),550
Cost of sales 7(*,550
+ross profit ((,000
8peratin9 e-penses 775$,(50
Consoli2ate2 net income P )3,550
116
Chapter 6
P!"b#$% 6 &6
(a) Jo3rnal entries on "ent3re booBs
J3ne 5% Cash ,000,000
1ac=o ,000,000
!nitial contrib3tion at )%
J3ly % Aan2 (,*00,000
1ort9a9e payable ,)50,000
Cash 550,000
P3rchase2 lan2 for cash an2 )% mort9a9eF
A39 % Cash ,00,000
1ac=o ,00,000
A22itional contrib3tion at )%F
Aan2 050,000
Cash 050,000
Pai2 for impro"ementsF
&ept 30% 1ort9a9e payable (50,000
!nterest e-pense- 1ort9a9e 3,550
Cash (53,550
De23ce2 mort9a9e an2 pai2 interestF
8ct 3% 1ort9a9e payable *00,000
!nterest e-pense- 1ort9a9e $,000
Cash *0$,000
De23ce2 mort9a9e an2 pai2 interestF
.o" 30% 1ort9a9e payable 300,000
!nterest e-pense- 1ort9a9e 5,500
Cash 305,500
De23ce2 mort9a9e an2 pai2 interestF
=ec 3% 1ort9a9e payable (00,000
!nterest e-pense- 1ort9a9e (,000
Cash ((,000
De23ce2 mort9a9e an2 maBe semi-ann3al
interest paymentF
Joint Venture 117
3% Cash (,)00,000
&ales (,)00,000
&ales to 2ateF
3% Commissions 30,000
Cash 30,000
P(,)00,000 - 5%
3% ,-penses )($,00
Cash )($,00
Pai2 e-penses
3% !nterest e-pense- Vent3rer )0,000
1ac=o )0,000
)% on P,000,000 from J3ne 5 to
=ecember 3, an2 on P,00,000
from A393st to =ecember 3F
3% &ales (,)00,000
Aan2 (cost of lan2 sol2) ,*5,000
,-penses )($,00
Commissions 30,000
!nterest e-pense- mort9a9e *0,(50
!nterest- "ent3rer )0,000
!ncome s3mmary 50),)50
4o close income an2 e-pense acco3ntsF
3% !ncome s3mmary 50),)50
1ac=o 50),)50
1ac,n (3$,))0
4o 2i"i2e 9ain, )0%*0F
3% 1ac=o $0,)50
Cash $0,)50
Payment on acco3ntF
(b) Jo3rnal entries on 1ac=os booBs%
J3ne 5% !n"estment in Joint Vent3re ,000,000
Cash ,000,000
!nitial contrib3tionF
A39 % !n"estment in Joint Vent3re ,00,000
Cash ,00,000
A22itional contrib3tionF
118
Chapter 6
=ec 3% !n"estment in Joint Vent3re )0,000
!nterest income )0,000
!nterest earne2 on cash a2"ance2F
3% !n"estment in Joint Vent3re 355,000
+ain on Joint Vent3re 355,000
)0% of 9ain on "ent3reF
3% Cash $0,)50
!n"estment in Joint Vent3re $0,)50
Depayment in part of a2"ancesF
(c) Mac5" a*d MacE* 0"1*. 2$*.3!$
I*c"%$ S.a.$%$*.
7"! ./$ 8$!1"d )!"% 03*$ 15 ." 5$c$%b$! 31: 2008
&ales P(,)00,000
Cost of lan2 sol2%
Aan2 P(,*00,000
!mpro"ements 050,000
4otal P3,350,000
:nsol2 lan2 (,(05,000 ,*5,000
+ross profit ,*55,000
,-penses%
A2"ertisin9 an2 office e-penses P )($,00
!nterest on mort9a9e *0,(50
!nterest on a2"ances )0,000
Commissions 30,000 $5$,350
.et 9ain P 50),)50
=istrib3tions%
1ac=o (P50),)50 - )0%) P 355,000
1ac,n (P50),)50 - *0%) (3$,))0
Mac 5" a*d MacE* 0"1*. 2$*.3!$
a#a*c$ S/$$.
5$c$%b$! 31: 2008
Assets
Cash P (50,000
Aan2 (,(05,000
4otal Assets P(,*55,000
9iabilities and equity:
1ort9a9e payable P 500,000
1ac=o ,5),3*0
1ac,n (3$,))0
4otal liabilities an2 e?3ity P(,*55,000
Joint Venture 119
Venturers equity .interest/
Mac)o Mac#n 5otal
!n"este2 P(,00,000 P(,00,000
&hares%
+ain P 355,000 P(3$,))0 P 50),)50
!nterest on a2"ances )0,000 )0,000
Commissions 30,000 30,000
4otal *5,000 3)$,))0 5$),)50
<alances (,55,000 3)$,))0 (,$$),)50
Gith2ra6n ($0,)50) (30,000) (03,)50 )
,?3ity (interests) P,5),3*0 P(3$,))0 P,055,000