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Long Quiz Week 12 Joint Arrangements - ACTG341 Advanced Financial Accounting and Reporting 1

The document contains 15 accounting problems related to various topics like revenue recognition, joint ventures, percentage of completion method, installment method, etc. It provides relevant financial information for each problem and asks questions to be solved based on that information.

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Marilou Arcillas Panisales
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128 views4 pages

Long Quiz Week 12 Joint Arrangements - ACTG341 Advanced Financial Accounting and Reporting 1

The document contains 15 accounting problems related to various topics like revenue recognition, joint ventures, percentage of completion method, installment method, etc. It provides relevant financial information for each problem and asks questions to be solved based on that information.

Uploaded by

Marilou Arcillas Panisales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. Instead of contributing cash for a 30% interest in the purchase of yacht, Angie A.

contributed fiberglass to be used by the company constructing the yacht. Angie A.


had manufactured fiberglass at a cost of P12,320,000. All parties to the contract
agreed that the fair value of fiber glass was P16,800,000 and the fair value of the
yacht once it was completed was P56,000,000. The other operators have a 70%
interest in the joint operation. Determine the amortization/depreciation expense for
the year 2017:
2. Instead of contributing cash for a 30% interest in the purchase of yacht, Angie A.
contributed fiberglass to be used by the company constructing the yacht. Angie A.
had manufactured fiberglass at a cost of P12,320,000. All parties to the contract
agreed that the fair value of fiber glass was P16,800,000 and the fair value of the
yacht once it was completed was P56,000,000. The other operators have a 70%
interest in the joint operation. Determine the yacht, net cost at the end of 2017:
3. On April 1, 20x7 Winston, Inc. entered into a franchise agreement with a local
business-man. The franchisee paid P300,000 and gave a P200,000, 8%, 3-year note
payable with interest due annually on March 31. Winston recorded the P500,000
initial franchise fee as revenue on April 1, 20x7. On December 30, 20x7, the
franchisee decided not to open an outlet under Winston's name. Winston canceled
the franchisee's note and refunded P160,000, less accrued interest on the note, of
the P300,000 paid on April 1. How much is the revenue from repossessed franchise
that Winston should recognize on December 30, 20x7?

4. Olivar Co. uses the installment-sales method. When an account had a balance of
P11,200, no further collections could be made and the dining room set was
repossessed. At that time, it was estimated that the dining room set could be sold for
P3,200 as repossessed, or for P4,000 if the company spent P400 reconditioning it.
The gross profit rate on this sale was 70%. The gain or loss on repossession was a –

5. Coaster manufactures and sells logging equipment. Due to the nature of its business,
Coaster is unable to reliably predict bad debts. During 20x8, Coaster sold equipment
costing P3,600,000 for P5,400,000. The terms of the sale were 20% down, with
equal payments due quarterly over the next 3 years. All payments for 20x8 were
made on schedule. Round answers to two places.
Assuming that Coaster uses the installment method of accounting for its installment
sales, what amount of realized gross profit will Coaster report in its income statement
for the year ended December 31, 20x8?

6. The COB CONSTRUCTIONS, INC. Started work on three job sites during the current
year.  Data relating to the three jobs are given below:
Costs Incurre
             Contract Price Est. cost to completeBillings on contractCollections on contract
d
Site A P500,000 P375,000 P            - P500,000 P400,000
Site B 700,000 100,000 400,000 100,000 50,000
Site C 250,000 100,000 100,000 - -
What amount of income should be reported for the current year if the percentage of completion
method is used for all contracts?

What amount of income should be reported for the current year if the zero profit method is used for
all contracts?
7. Wynne Inc. charges an initial franchise fee of P1,380,000, with P300,000 paid when
the agreement is signed and the balance in five annual payments. The present value
of the future payments, discounted at 10%, is P818,808. The franchisee has the
option to purchase P180,000 of equipment for P144,000. Wynne has substantially
provided all initial services required and collectibility of the payments is reasonably
assured. The amount of revenue from franchise fees is

8. Dairy, Inc. appropriately used the installment method of accounting to recognize


income in its financial statement. Some pertinent data relating to this method of
accounting include:
20x7 20x8
 
Installment sales P   750,000 P   900,000
Cost of sales        450,000       630,000
Gross profit P   300,000 P   270,000
     
Collections during
year:
   
On 20x7 sales P   150,000 P   150,000
On 20x8 sales        180,000
 
 
What amount to be realized gross profit should be reported on Daily’s income statement for 20x8?

9. During 20x6, Von Corporation sold merchandise costing P3,000,000 on an


installment basis for P4,000,000. The cash receipts related to these sales were
collected as follows: 20x6, P1,600,000; 20x7, P1,400,000; 20x8, P1,000,000.
How much is the realized gross profit on 20x7
What is the rate of gross profit on the installment sales made by Vaughn Corporation during 20x6? =

10. On January 1, 20x7, A, B, and C establish a joint arrangement to manufacture a


product that they will share equally. They will each contribute P400,000. A and B are
to contribute cash while C is to contribute a piece of equipment with a fair value of
P400,000. In the books of C, the carrying value of the equipment is P370,000.
Assume a ten-year life for the equipment from this date.
On January 1, 20x7, in C's balance sheet, the Equipment in JO account will be
presented at -
\\
11. PEG CONSTRUCTION CORPORATION uses the percentage of completion method
of accounting.  The company started work on two job sites during 20x6.  Data
relating to the two jobs are given below:
Actual cost Dec. Est. cost
  Contract Price
31, 20x6 to complete
Contract 1 P600,000 P150,000 P150,000
Contract 2 450,000 87,500 162,500
In 20x7, Contract 3 was started for a contract price of P900,000.  As of December 31, 20x7, the
following data are given.
Actualcost1/1/x6 Est. cost
  to 12/31/x7 to complete
Contract 1 P280,000 P70,000
Contract 2 180,000 120,000
Contract 3 180,000 320,000
What are the percentages of completion for the three contracts as of December 31, 20x7?

Using the percentage of completion method of recognizing income, how much income should be
reported for the year 20X7?

12. JOSE and CARLO in joint venture, contributed P24,000 each in order to purchase
canned goods which were 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 the canned goods, they wind up their venture. The
following are the venture transactions:

 Joint Venture credit balances were CARLO, (P19,200) and JOSE, (P16,800);
 Expenses paid from Joint Venture cash were P2,400 by CARLO and P3,120 by JOSE;
 Cost of unsold canned goods which CARLO and JOSE agreed to assume were P720 and
P1,120 respectively.

The total sales of the joint venture were:

13. JOSE and CARLO in joint venture, contributed P24,000 each in order to purchase
canned goods which were 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 the canned goods, they wind up their venture. The
following are the venture transactions:

 Joint Venture credit balances were CARLO, (P19,200) and JOSE, (P16,800);
 Expenses paid from Joint Venture cash were P2,400 by CARLO and P3,120 by JOSE;
 Cost of unsold canned goods which CARLO and JOSE agreed to assume were P720 and
P1,120 respectively.

In the final settlement, the amount due to OSANG including her investment was:

14. On December 1, 20x7, Dub Inc. authorized Smash to operate as a franchise for an
initial franchise fee of P3,400,000. P900,000 was received upon signing the contract,
and the balance is to be paid by a non-interest bearing note, due in five equal annual
installments beginning December 31, 20x8. Prevailing market rate is 12%. PV factor
is 3.60478. The down payment is nonrefundable and it represents a fair measure of
the services already performed by Dub, however, with regards to the balance,
substantial future services are still required. How much is the deferred franchise
revenue to be recognized as of December 31, 20x7?
15. On September 30, 20x8, Goblin Company consigned 40 freezers to Grim Company
costing P14,000 each for sales at P20,000 each and paid P16,000 in transportation
costs. On December 31, 20x8, Grim reported the sale of 10 freezers and remitted
P170,000. The remittance was net of the agreed 15% commission.
How much is the amount of ending inventory to be reported in relation to the consigned goods?
16. The following may be the form that a joint venture be established, except
Select one:
a. By agreement or contract alone
b. As a partnership
c. As a sole proprietorship
d. As a corporation

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