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CHAPTER 6
6-1: a
Assets per Jessica Company- balance sheet P3,550,000
Jessica’s proportionate interest in assets of JV (50%) 1,000,000
Total assets of Jessica P4550,000
6-3: b
6-4: b
Investment of Heart P80,000
Profit share:
Sales 150,800
Cost of sales (150,800 ÷ 125%) 120,640
Gross profit 30,160
Expenses 10,000
Net Profit 20,160
Profit/loss ratio x 40% 8,064
Balance of investment in JV P88,064
6-5: a
Cash P190,000
Merchandise inventory 29,360
Accounts receivable 150,800
Total assets 370,160
Sweet Co’s, proportionate interest x 60%
Sweet Company’s share in total asset P222,096
6-6: a
Sales 7,200
Cost of sales
Purchases P10,000
Merchandise inventory, end (50% of P10,000) __5,000 _5,000
Gross profit 2,200
Expenses ___500
Net profit P 1,700
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Chapter 6
6-7: b
Original investment (cash) P10,000
Profit share (P1,700 / 2) ___850
Balance of Investment account P10,850
6-8: a
Joint venture account before profit distribution (credit balance) P 9,000
Unsold merchandise __2,500
Joint venture profit before fee to Salas P11,500
6-9: b
Fee of Salas (P10,000 x 15%) P 1,500
Profit share of Salas (P10,000 x 25%) _2,500
Total P 4,000
6-10: b
Salas Salve
Balance before profit distribution P 500 (dr) P 2,000 (cr)
Profit share:Sabas (P10,000 x 40%) 4,000
Salve (P10,000 x 35%) ______ _3,500
Balance P 3,500 (cr) P 5,500 (cr)
6-11: d
Joint venture account balance before profit distribution (debit) P 6,000
Joint venture profit (P4,500 x 3) _13,500
Cost of unsold merchandise (inventory) taken by Dante P19,500
6-12: b
Edwin Capital:
Debits: Balance before profit distribution P14,000
Credits: Profit share __4,500
Due from Edwin (debit balance) P 9,500
Joint Venture 115
6-12, continued
6-13: a
JV account balance before profit distribution (cr) P 4,600
Unsold merchandise (required dr balance after profit distribution) __2,000
Joint venture profit before fee to Jerry P 6,600
Joint venture profit after fee (P6,600 / 110%) __6,000
Fee to Jerry P 600
6-14: d
Harry Capital Isaac Capital
Balances before profit distribution (P 200) P 1,800
Profit distribution:
Harry P6,000 x 50%) 3,000
Isaac (P6,000 x 20%) 1,200
Cash settlements P 2,800 P 3,000
6-15: b
Sales P14,000
Cost of sales:
Merchandise inventory, beg (contributions) P14,000
Freight 300
Purchases __4,000
Goods available for sale P18,300
Merchandise inventory, end (P8,300/2) __4,150 14,150
Gross profit (loss) (150)
Expenses (P400 + P200) __600
Net profit (loss) P( 750)
6-16: c
Contributions to the Joint Venture (P5,000 + P8,000) P13,000
Loss share (P750 x 50%) ( 375)
Unsold merchandise taken (withdrawal) ( 4,150)
Final settlement to jack P 8,475
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Chapter 6
SOLUTIONS TO PROBLEMS
Problem 6 – 1
JV cash 200,000
Joint Venture 200,000
Computation of JV Profit
Distribution of Profit:
Problem 6 – 2
Requirement (1) - Books of the Joint Venture
2. Purchases 80,000
Supplies 2,000
Diaz capital 82,000
3. Expenses 9,000
Diaz capital 9,000
4. Cash 150,000
Sales 150,000
5. Expenses 30,000
Cash 30,000
Distribution of profit:
Income summary 12,000
Diaz capital 4,000
Ella capital 4,000
Fabia capital 4,000
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Chapter 6
Problem 6-2, continued:
Requirement #2
Cash (110,000 x 44%) 48,000* Cash (110,000x38.5%) 42,350 Cash (110,000 x 17.5%) 19,000
C.E (105,000 x 44%) 46,000* CE (105,000 x38.5%) 40,000* CE (105,000 x 17.5%) 18,000
MI (2,500 x 44%) 1,100 MI (2,500 x 38.5%) 960* MI (2,500 x 17.5%) 400
Supplies (500 x 44%) 200* Supplies (500 x 38.5%) 190* Supplies (500 x 17.5%) 90
COS (97,500 x 44%) 42,900 COS (97,500 x 38.5%) 37.500* COS (97,500 x 17.5%) 17,000
Expense (40,500 x44%) 17,800 Exp (40,500 x 38.5%) 16,000* Exp (40,500 x 17.5%) 7,000
Inv. Income 4,000 Inv. Income 4,000 Inv. Income 4,000
Sales (150,000x44%) 66,000 Sales (150,000 x 38.5%) 57,000* Sales (150,000 x 17.5%) 26,000
Investment in JV 95,000 Investment in JV 84,000 Investment in JV 39,000
Note. Under the proportionate consolidation method, difference will exist in the journal entry
(see above) because the profit and loss ratio (equally) is not equal to the venturer’s capital
interest as computed below:
It may be concluded that the proportionate consolidation method can be properly applied only if
the profit and loss ratio and the venturer’s capital interest are equal.
Problem 6 – 3
7: JV cash 10,000
Bueno capital 10,000
To record settlements:
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Chapter 6
Books of Bueno
Cash 12,000
Investment in Joint Venture 12,000
Books of Castro
Cash 14,000
Investment in Joint Venture 14,000
7: Cash 10,000
Bueno capital 10,000
Sales 25,000
Income summary 25,000
Distribution of profit:
Settlements to Venturers:
Cash 2,500
Investment in Joint Venture 2,500
Problem 6 – 4
Computed as follows:
To record settlement:
Cash 32,687
Rolex capital 128,874
Times capital 14,099
JV cash 175,660
Computations:
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Chapter 6
Problem 6-4, continued:
Settlement to timex – Balance of capital account
Current assets:
Investment in joint Venture:
Joint Venture assets:
Cash P 72,000
Joint Venture _175,500 P247,500
Less:Equity of other venturers
(P116,500 + P43,300) _159,800 87,700
Current liabilities:
Notes payable – PNB 34,000
Timex capital
P34,000 April
__9,000 June
P43,300
Problem 6 – 5
126
Chapter 6
Problem 6 –6
Land 950,000
Cash 950,000
Paid for improvements.
128
Chapter 6
Problem 6-6, continued:
Dec 31: Investment in Joint Venture 60,000
Interest income 60,000
Interest earned on cash advanced.
Sales P2,600,000
Cost of land sold:
Land P2,400,000
Improvements 950,000
Total P3,350,000
Unsold land 2,205,000 1,145,000
Gross profit 1,455,000
Expenses:
Advertising and office expenses P 628,100
Interest on mortgage 40,250
Interest on advances 60,000
Commissions 130,000 858,350
Net gain P 596,650
Distributions:
MacDo (P596,650 x 60%) P 357,990
MacEn (P596,650 x 40%) 238,660
Assets
Cash P 250,000
Land 2,205,000
Total Assets P2,455,000