Chapter 4 Suggested Answers
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CHAPTER 4 SUGGESTED ANSWERS EXERCISES Exercise 4 - 1 Cholo, Edwin and Lito Worksheet Summarizing Joint Venture Transactions May 12 to 26, 2003
Construction of stand Purchases Additional purchases Sales Stand taken by Edwin Unsold merchandise taken by Lito Net profit Distribution of profit: Permit paid by Cholo Commission Balance – shared 50%, 10% and 40% Share in net income Totals Cash settlement
*
Purchases Cost of sales (P153,000 / 180%**) Inventory, end
Joint Venture Debit Credit P 3,000 30,000 60,000 P153,000 2,000 4,000* P 93,000 P159,000 66,000 _______ P159,000 P159,000
Cholo Debit
Edwin Credit
Debit
P 30,000 45,000 P 80,000
P 80,000
Lito Credit
P10,000 P33,000 2,000
P 75,000
Credit P 3,000 5,000
P40,000
P35,000
P10,000
_______ P35,000 ______ P35,000
P 9,900 1,857 P11,757 P21,757 13,243 P35,000
4,000 P44,000
P 8,000
_______ P44,000 ______ P44,000
P12,000 7,428 P19,428 P27,428 16,572 P44,000
P
_______ P 80,000 29,815 P109,815 P90,000 85,000 P 5,000
1,530 24,000 9,285 P 34,815 P109,815 _______ P109,815
Debit
** If markup is 80% of cost, then sales is 180% of cost.
Chapter 4 – Joint Ventures Suggested Answers
page 2
Value upon which participants can purchase inventory Value assigned to the inventory taken by Lito
x 80% P 4,000
Exercise 4 – 2 Books of Jonee To set up inventory, end (should be set up before recognizing gain or loss) To recognize gain or loss,
Joint Venture Income from JV
Joint Venture
shared 4:2:2 NI=P50,000 + P110,000
Income from JV Vennie Sonie
To record settlement with Sonie*
Sonie JV Cash Income from JV Vennie
*
Books of Vennie
110,00 0
Jonee 110,000
160,00 0 80,000 40,000 40,000 78,000
Interest of Sonie (P38,000 + P40,000) Bonus to Jonee and Vennie (P78,000 x 20%) Cash settlement to Sonie
Joint Venture
Joint Venture
62,400 10,400 5,200
Jonee 110,000
160,00 0
Jonee Income from JV Sonie Sonie Jonee Income from JV
Books of Sonie
110,00 0
Joint Venture
Joint Venture 80,000 40,000 40,000
78,000 72,800 5,200
110,000 110,000
160,000
Jonee Vennie Income from JV Cash Loss from JV Vennie Jonee
80,000 40,000 40,000 62,400 15,600 72,000 150,000
P78,000 15,600 P62,400
The bonus to Jonee and Vennie represents a gain to them and a loss to Sonie. The P15,600 bonus shall be shared by Jonee and Vennie in the ratio of 4:2. The, the sharing is as follows: Jonee – P15,600 x 4/6 = P10,400; Vennie – P15,600 x 2/6 = P5,200. Take note that only the managing participant maintains real accounts. The other participants use the name of the managing participant instead of real accounts. In addition, a participant does not debit nor credit his name in his books. Instead, he uses personal accounts.
Construction of stand Purchases Additional purchases Sales Stand taken by Edwin Unsold merchandise taken by Lito Net profit Distribution of profit: Permit paid by Cholo Commission Balance – shared 50%, 10% and 40% Share in net income Totals Cash settlement
*
Purchases Cost of sales (P153,000 / 180%**) Inventory, end
Joint Venture Debit Credit P 3,000 30,000 60,000 P153,000 2,000 4,000* P 93,000 P159,000 66,000 _______ P159,000 P159,000
Cholo Debit
Edwin Credit
Debit
P 30,000 45,000 P 80,000
P 80,000
Lito Credit
P10,000 P33,000 2,000
P 75,000
Credit P 3,000 5,000
P40,000
P35,000
P10,000
_______ P35,000 ______ P35,000
P 9,900 1,857 P11,757 P21,757 13,243 P35,000
4,000 P44,000
P 8,000
_______ P44,000 ______ P44,000
P12,000 7,428 P19,428 P27,428 16,572 P44,000
P
_______ P 80,000 29,815 P109,815 P90,000 85,000 P 5,000
1,530 24,000 9,285 P 34,815 P109,815 _______ P109,815
Debit
** If markup is 80% of cost, then sales is 180% of cost.
Chapter 4 – Joint Ventures Suggested Answers
page 2
Value upon which participants can purchase inventory Value assigned to the inventory taken by Lito
x 80% P 4,000
Exercise 4 – 2 Books of Jonee To set up inventory, end (should be set up before recognizing gain or loss) To recognize gain or loss,
Joint Venture Income from JV
Joint Venture
shared 4:2:2 NI=P50,000 + P110,000
Income from JV Vennie Sonie
To record settlement with Sonie*
Sonie JV Cash Income from JV Vennie
*
Books of Vennie
110,00 0
Jonee 110,000
160,00 0 80,000 40,000 40,000 78,000
Interest of Sonie (P38,000 + P40,000) Bonus to Jonee and Vennie (P78,000 x 20%) Cash settlement to Sonie
Joint Venture
Joint Venture
62,400 10,400 5,200
Jonee 110,000
160,00 0
Jonee Income from JV Sonie Sonie Jonee Income from JV
Books of Sonie
110,00 0
Joint Venture
Joint Venture 80,000 40,000 40,000
78,000 72,800 5,200
110,000 110,000
160,000
Jonee Vennie Income from JV Cash Loss from JV Vennie Jonee
80,000 40,000 40,000 62,400 15,600 72,000 150,000
P78,000 15,600 P62,400
The bonus to Jonee and Vennie represents a gain to them and a loss to Sonie. The P15,600 bonus shall be shared by Jonee and Vennie in the ratio of 4:2. The, the sharing is as follows: Jonee – P15,600 x 4/6 = P10,400; Vennie – P15,600 x 2/6 = P5,200. Take note that only the managing participant maintains real accounts. The other participants use the name of the managing participant instead of real accounts. In addition, a participant does not debit nor credit his name in his books. Instead, he uses personal accounts.
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