GONZALES, CAIRA LOIS D.

DO IT # 1
A B C Agreement for Type of Control Explanation
Control
1 60% 15% 25% 60% Sole Control Only A can
make decisions
2 60% 15% 25% 80% Joint Control A and C share
control
3 60% 20% 20% 90% Collective Combined
Control Control results
to more than
90%
4 60% 15% 25% 75% Joint Control At least 75% or
exceed 75%
were met

EXERCISE 1
Butch, Alex, and Roy combined their resources to buy and sell electronic gadgets imported
from Singapore for a duration of three months starting October 1, 2015. Butch, as a
purchasing manager, will be allowed a 5% commission on net purchases. Profit is to be
divided equally among them. Venture transactions are as follows:
Oct 1 Butch contributed P350,000 to the venture and required the other participants to do
the same
3 Butch went to Singapore to buy the imported gadgets. Transportation,
accommodation, and food spent amounted to P200,000. The goods purchased
amounted to P1,000,000 requiring 50% down payment with the balance payable
after three months
6 A stall rented in Greenhills. Advance rental paid. P150,000
31 Summary of cash sales: P500,000 net of P50,000 operating expenses

Nov 2 Advance rental was paid

22 Total operating expenses paid. P75,000
30 Summary of cash sales, P750,000

Dec 1 Advance rental was paid

25 Operating expenses paid P125,000
26 Butch got his 5% commission
30 Summary of cash sales P1,500,000

Jan 2 The balance due to supplier was paid

4 Unsold goods were taken by Alex, P20,000 and Roy P40,000
5 Cash is distributed to the operators
Requirements:
a. Entries in the books of the joint venture up to cash distribution. Prepare
a table for profit distribution.
Oct 1 Cash 1,050,000
Butch, Capital 350,000
Alex, Capital 350,000
Roy, Capital 350,000

3 Miscellaneous Expense 200,000

Purchases 1,000,000
Cash 700,000
Accounts Payable 500,000

6 Rent Expense 150,000

Cash 150,000

31 Cash 500,000
Operating Expenses 50,000
Sales 500,000
Cash 50,000

Nov 2 Rent Expense 150,000

Cash 150,000

22 Operating Expenses 75,000

Cash 75,000

30 Cash 750,000
Sales 750,000

Dec 1 Rent Expense 150,000

Cash 150,000

25 Operating Expense 125,000

Cash 125,000

26 Operating Expenses 50,000

Butch, Capital 50,000

30 Cash 1,500,000
Sales 1,500,000

Jan 2 Accounts Payable 500,000

Cash 500,000
 4 Alex, Capital 20,000
Roy, Capital 40,000
Merchandise 60,000

Sales 2,750,000
(500K + 1.5M +750K)
Merchandise 940,000
(1M-60K)
Rent Expense 450,000
Operating Expense 300,000
Miscellaneous Expense 200,000
Butch, Capital 286,666.67
Alex, Capital 286,666.67
Roy, Capital 286,666.67

Butch, Capital 686,666.67

Alex, Capital 616,666.67
Roy, Capital 596,666.67
Cash 1,900,000.01

Share
Profit 860,000
Butch 33.33% 286,666.67
Alex 33.33% 286,666.67
Roy 33.33% 286,666.67

Total Net Income Additional Capital Total

Butch 286,666.67 50,000 350,000 686,666.67
Alex 286,666.67 350,000 616,666.67
(20,000)
Roy 286,666.67 350,000 596,666.67
(40,000)
Total 1,900,000.01

b. Entries in the books of each venturer.

Books of Butch
Oct 1 Investment in Joint Venture 350,000
Cash 350,000

Dec 26 Cash 50,000

Commission Income 50,000

Jan 5 Investment in Joint Venture 286,666.67

Income from Joint Venture 286,666.67
 Cash 686,666.67
Investment in Joint Venture 686,666.67

Books of Alex
Oct 1 Investment in Joint Venture 350,000
Cash 350,000

Jan 4 Merchandise 20,000

Investment in Joint Venture 20,000

Jan 5 Investment in Joint Venture 286,666.67

Income from Joint Venture 286,666.67

Cash 616,666.67
Investment in Joint Venture 616,666.67

Books of Roy
Oct 1 Investment in Joint Venture 350,000
Cash 350,000

Jan 4 Merchandise 40,000

Investment in Joint Venture 40,000

Jan 5 Investment in Joint Venture 286,666.67

Income from Joint Venture 286,666.67

Cash 596,666.67
Investment in Joint Venture 596,666.67

c. Cash schedule T Account, Investments T Accounts. Income Summary. T acct

Cash
1,050,000 700,000
500,000 150,000
750,000 150,000
1,500,000 75,000
500,000
150,000
125,000
3,800,000 1,900,000
1,900,000

Butch
350,000 686,666.67
50,000
 286,666.67
686,666.67 686,666.67

Alex
350,000 20,000
286,666.67 596,666.67
616,666.67 616,666.67

Roy
350,000 40,000
286,666.67 636,666.67
596,666.67 596,666.67

Income Summary
2,750,000 940,000
450,000
300,000
200,000
286,666.67
286,666.67
286,666.67
2,750,000 2,750,000

EXERCISE 2
Mac and Donald formed a joint operation and each operator purchased goods worth
P300,000 to be sold during the Christmas season. They decided to divide the profits equally
after considering a 5% commission on each sales made. They further agreed to record all of
the joint transactions in their books and make a cash settlement at the end of the Christmas
season. The following additional data were given to you.

1. Joint operation was credited for sales withheld by Mac, P600,000 and Donald,
P550,000
2. Expenses paid in Cash by Mac, P115,000 and Donal P195,000
3. Unsold goods amounted to 15% of the cost of purchases and participants decided to
take this over for the purposes of closing the operation

Requirements
a. Entries in Mac’s book up to cash settlement with a table of accountability to
determine Due to or From Operator.
Joint Operation 600,000
Cash 300,000
Donald 300,000
Cash 600,000
Donald 550,000
Joint Operation 1,150,000

Joint Operation 310,000

Donald 195,000
Cash 115,000

Merchandise 45,000
Donald 45,000
Joint Operation 90,000

Joint Operation 330,000

Income from Joint Operation 166,250
Donald 163,750

Donald 63,750
Cash 63,750

Joint Operation
600,000 1,150,000
310,000 90,000
910,000 1,240,000
330,000

Mac Donald Total

600,000 x 5% 30,000
550,000 x 5% 27,500 57,500
Remainder 136,250 136,250 272,500
Profit Allocation 166,250 163,750 330,000

Mac Donald
Investment 300,000 300,000
Profit 166,250 163,750
Total 466,250 463,750

Cash withheld 485,000 355,000

(600K-115K) (550K-195K)
Merchandise 45,000 45,000
Total 530,000 400,000

Equity (63,750) 63,750

(accountability)
 b. Entries in Donald’s book up to cash settlement
Joint Operation 600,000
Cash 300,000
Mac 300,000

Cash 550,000
Mac 600,000
Joint Operation 1,150,000

Joint Operation 310,000

Cash 195,000
Mac 115,000

Merchandise 45,000
Mac 45,000
Joint Operation 90,000

Joint Operation 330,000

Income from Joint Operation 163,750
Mac 166,250

Cash 63,750
Mac 63,750

EXERCISE 7
The following account reflects the transaction of the joint venture in the books of the
participants.
Joint Operation
Nov 5 Merchandise purchased P12,750 Nov 8 Cash sales withheld by A 30,500
by C
17 Merchandise purchased 10,500 Dec 5 Cash sales withheld by B 6,300
by B
18 Expenses paid by A 550 Dec 12 Cash sales withheld by C 2,500
Dec 3 Merchandise purchased 5,450
by A

As manager, A is allowed a 10% bonus on income after bonus, remaining profits to be

divided equally among them. The venture is terminated on December 15 with unsold
merchandise of P1,550 taken by C.
Requirements
a. Entries in comparative format
Books of A Books of B Books of C
Nov 5 Joint Operation 12,750 Joint Operation 12,75 Joint Operation 12,750
0
C 12,750 C 12,750 Cash 12,750
 8 Cash 30,500 A 30,50 A 30,500
0
Joint Operation 30,500 Joint Operation 30,500 Joint Operation 30,500

17 Joint Operation 10,500 Joint Operation 10,50 Joint Operation 10,500

0
B 10,500 Cash 10,500 B 10,500

18 Joint Operation 550 Joint Operation 550 Joint Operation 550

Cash 550 A 550 A 550

Dec 3 Joint Operation 5,450 A 5,450 A 5,450

Cash 5,450 Cash 5,450 Cash 5,450

5 B 6,300 Cash 6,300 B 6,300

Joint Operation 6,300 Joint Operation 6,300 Joint Operation 6,300

12 C 2,500 C 2,500 Cash 2,500

Joint Operation 2,500 Joint Operation 2,500 Joint Operation 2,500

15 C 1,550 C 1,550 Merchandise 1,550

Joint Operation 1,550 Joint Operation 1,550 Joint Operation 1,550

b. Determine the balances in equity accounts and the last entry to record cash
settlement
Joint Operation
12,750 30,500
10,500 6,300
550 2,500
5,450 1,550
29,250 40,850
11,600

Joint Operation - Cash

12,750 30,500
10,500 6,300
550 2,500
5,450
29,250 39,300
10,050

A B C Total
Bonus 1,054.55 1,054.55
10%(11,600-B)
Remainder 3,515.15 3,515.15 3,515.15 10,545.55
Total 4,569.70 3,515.15 3,515.15 11,600
 A B C
Investment 5,450 10,500 12,750
Profit 4,569.70 3,515.15 3,515.15
Total 10,019,70 14,015.15 16,265.15

Cash withheld 29.950 6,300 2,500

(30,500-550)
Merchandise 1,550
Total 29,950 6,300 4,050

Equity -19,930.3 7,715.15 12,215.15

(accountability)

Books of A Books of B Books of C

B 7,715.15 Cash 7,715.15 Cash 12,215.15
C 12.215.15 A 7,715.1 A 12.215.15
5
Cash 19,930.3

EXERCISE 3
Pepe and Pilar decided to open a souvenir shop during the town’s fiesta. They agreed to
manage the stall in rotation with Pepe reporting in the first seven hours starting at seven o’
clock in the morning and Pilar from three o’ clock in the afternoon up to nine o’ clock in
the evening. The arrangement required for profits to be divided equally. The transactions
are as follows
1. Pepe purchased the souvenirs at a cost of P1,500,000
2. Pilar paid for the stall operating expenses P500,000
3. Cash sales were made and withheld by each operator, Pepe, P1,250,000 and Pilar
P1,500,000
4. Pepe returned the remaining unsold souvenirs and got a cash refund of P150,000
5. Profit was determined at the end of the town fiesta
6. Cash settlement was made by the operators
Requirements
a. Record in each book only the transactions affecting each operator
Books of Pepe Books of Pilar
Joint Operation 150,000 Joint Operation 50,000
Cash 150,000 Cash 50,000

Cash 125,000 Cash 150,000

Joint Operation 125,000 Joint Operation 150,000

Merchandise 15,000
Joint Operation 15,000
Joint Operation 45,000 Joint Operation 45,000
Income from Joint Operation 45,000 Income from Joint Operation 45,000

b. Determine the profit or loss in each book

Pepe
150,000 125,000
15,000
150,000 140,000
10,000

Pilar
50,000 150,000
100,000

Total Net Income: 100,000-10,000 = 90,000

c. Record cash settlement supported by accountability table
Pepe Pilar
Investment 150,000 50,000
Profit Share 45,000 45,000
(900K/2)
Total 195,000 95,000

Cash withheld 125,000 150,000

Inventory 15,000
Total 140,000 150,000

Equity (Accountability) 55,000 -55,000

Books of Pepe Books of Pilar

Cash 55,000 Joint Operation 55,000
Joint Operation 55,000 Cash 55,000

EXERCISE 6
Charlie and Henry join in a venture selling souvenirs during the Olympics held in Manila.
They agree that a commission of 20% be allowed on net purchases and 25% on sales made
by each one and the remaining profits be divided by Charlies and Henry 60:40,
respectively. The following accounts were found in each book
Joint Operation (Charlie’s Books)
Purchases 19,000 Sales 16,000
Purchases 5,000
 Joint Operation (Henry’s Books)
Expenses 3,000 Sales 12,000

a. Each keeps his receipts from sales. What is the profit (loss) share of each operator?
Charlie Henry Total
Commission 3,800
(19,000 x 20%)
Commission 4,000
(16,000 x 25%)
Commission 3,000 10,800
(12,000 x 25%)
Ratio 60:40 120 80 200
Profit Allocation 7,920 3,080 11,000

Net Income: (16,000+12,000+5,000)-(19,000+3,000) = 11,000

b. How much is the amount due to (from) the venture in the final settlement?
Charlie Henry
Investment 19,000 3,000
Profit Share 7,920 3,080
Total 26,920 6,080

Cash withheld 16,000 12,000

Inventory 5,000
Total 21,000 12,000
Equity (Accountability) 5,920 -5,920_

c. Make the last two entries in each operator’s book

Books of Charlie Books of Henry
Joint Operation 7,92 Joint Operation 3,080
0
Income from Joint Operation 7,920 Income from Joint Operation 3,080

Cash 5,92 Joint Operation 5,920

0
Joint Operation 5,920 Cash 5,920

EXERCISE 4
Dan Company, Ed Company, and Fe Company pooled their resources to buy and sell
sports equipment. Profits are to be divided according to the ratio 4:3:3, respectively. An
employee of Dan Company, Peter, was tasked to act as the manager. Their transactions are
as follows:
1. Each of the operators contributed to P250,000 cash
 2. Peter purchased the goods for P600,000 including P150,000 import duties and
freight
3. Operating expenses were paid by Peter, P75,000
4. The good were sold for cash P700,000
5. Only 80% of the equipment were sold
6. The 20% unsold goods were taken by Dan Company
7. Profit was determined at this point.

Requirements
a. Entries in the books of Dan Company up to cash settlement supported by a table of
equity for each operator to determine cash settlement
Joint Operation – Cash 750,000
Cash 250,000
Ed 250,000
Fe 250,000

Joint Operation 600,000

Joint Operation - Cash 600,000

Joint Operation 75,000

Joint Operation - Cash 75,000

Joint Operation – Cash 700,000

Joint Operation 700,000

No Entry

Merchandise Inventory 120,000

Joint Operation 120,000
(600Kx 20%)

Joint Operation 145,000

Ed 43,500
Fe 43,500
Income from Joint Operation 58,000

Cash 188,000
Ed 293,500
Fe 293,500
Joint Operation - Cash 775,000

Income: (600,000+75,000)-(700,000+120,000) = 145,000

Dan Ed Fe Total
40% 30% 30%
 58,000 43,500 43,500 145,000

Joint Operation – Cash

750,000 600,000
700,000 75,000
1,450,000 675,000
775,000

Investment Profit
Beg 775,000
Ed 250,000 43,500 (293,500)
Fe 250,000 43,500 (293,500)
Dan 188,000

b. Entries in the books of Ed Company

Dan 250,000
Joint Operation 500,000
Cash 250,000
Dan 250,000
Fe 250,000

Joint Operation 600,000

Dan 600,000

Joint Operation 75,000

Dan 75,000

Dan 700,000
Joint Operation 700,000

No Entry

Merchandise Inventory 120,000

Joint Operation 120,000

Joint Operation 145,000

Dan 58,000
Fe 43,500
Income from Joint Operation 43,500

Cash 293,500
Dan 293,500
 EXERCISE 5
The books of three operators with P as the managing participant show the following
N O P
Joint Operation Cash P10,000 dr
Joint Operation 5,000 dr
Accounts Receivable
Account with N P12,000 cr P12,000 cr
Account with O P13,000 cr P13,000 cr
Account with P 10,000 cr 10,000 cr
Joint Operation 35,000 dr 35,000 dr 35,000 dr

Unsold goods of P5,000 were taken over by N. Profit are divided equally
Requirements
a. Make the last three entries of each operator to record
 Takeover of unsold goods
 Profit Sharing
 Settlement made by N with P who agreed to take over the receivables
Books of N Books of O Books of P
Merchandise 5,000 N 5,000 N 5,000
Inventory
Joint Operation 5,000 Joint Operation 5,000 Joint Operation 5,000

Joint Operation 30,000 Joint Operation 30,000 Joint Operation 30,000

Income from Joint 10,000 Income from Joint 10,000 Income from Joint 10,000
Operation Operation Operation
O 10,000 N 10,000 O 10,000
P 10,000 P 10,000 N 10,000

N 12,000
O 13,000
Cash 12,000 Cash 13,000 Joint Operation Cash 10,000
P 12,000 O 13,000 Cash 15,000
Profit: 35,000-5,000 = 30,000/3 = 10,000

b. Last entry should be supported by a table showing equity of each operator to

determine the settlement
N O P
Investment 2,000 23,000 0
Profit 10,000 10,000 10,000
Total 12,000 13,000 10,000

Withheld 15,000
Inventories 5,000
Total 20,000
Equity 12,000 13,000 10,000
(accountability)