Solution manual advanced accounting by baysa lupisan chapter 04

AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 4

Exercise 4-2
Books of Alvin, Managing Partner
Feb.

12
14
15

20
20

20

Joint Venture
Cash

10,000

Joint Venture
Larry

2,000

Cash
Larry
Joint Venture

9,000
7,500

Cash
Joint Venture

3,000

Joint Venture
Income from Joint Venture
Larry
10% commission on net purchases to Alvin
25% commission on own sales

7,500

Cash
Larry

Books of Larry
Feb.
12 Joint Venture
Alvin
14
15

20
20

20

10,000
2,000

16,500
3,000
4,287.50
3,212.50

2,287.50
2,287.50
10,000
10,000

Joint Venture
Cash

2,000

Cash
Alvin
Joint Venture

7,500
9,000

Alvin
Joint Venture

3,000

Joint Venture
Alvin
Income from Joint Venture
10% commission on net purchases to Alvin
25% commission on own sales

7,500

Alvin
Cash

2,000

16,500
3,000
4,287.50
3,212.50

2,287.50
2,287.50


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 5

Problem 4-2

Requirement 1
Books of Roland, Managing Partner
1.

2.

3.

4.

5.

6.

7.

Joint Venture
Greg
Medel
Land
Joint Venture
Cash
Improvements on land

40,300,000
19,500,000
13,000,000
7,800,000
3,000,000
3,000,000

Joint Venture Cash
Joint Venture
Sales by venturers.

35,400,000

Joint Venture Cash
Joint Venture
Sales by salesmen

14,300,000

Joint Venture
Joint Venture Cash
Venture expenses
Joint Venture
Income from Joint Venture
Salaries to Roland as managing partner

35,400,000

14,300,000
684,000
684,000
72,000
72,000

Joint Venture
Income from Joint Venture

Greg
Medel
10% commission on own sales

3,540,000

Joint Venture
Income from Joint Venture
Greg
Medel
Balance of profit divided equally

2,104,000

Greg
Medel
Joint Venture Cash
Final cash settlement

490,000
1,280,000
1,770,000

701,334
701,333
701,333
21,481,333
15,471,333
36,952,666

AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

Books of Greg
1.
Joint Venture
Land
Medel
Roland
2.

3.

4.

5.

6.

7.

Joint Venture
Roland
Improvements on land

page 6

40,300,000
19,500,000

13,000,000
7,800,000
3,000,000
3,000,000

Roland
Joint Venture
Sales by venturers.

35,400,000

Roland
Joint Venture
Sales by salesmen

14,300,000

Joint Venture
Roland
Venture expenses
Joint Venture
Roland
Salaries to Roland as managing partner

35,400,000

14,300,000
684,000
684,000
72,000

72,000

Joint Venture
Roland
Income from Joint Venture
Medel
10% commission on own sales

3,540,000

Joint Venture
Roland
Income from Joint Venture
Medel
Balance of profit divided equally

2,104,000

Cash
Medel
Roland
Final cash settlement

490,000
1,280,000
1,770,000

701,334
701,333
701,333

21,481,333
15,471,333
36,952,666


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

Books of Medel
1.
Joint Venture
Greg
Land
Roland
2.

3.

4.

5.

6.

7.

Joint Venture
Roland
Improvements on land

page 7

40,300,000
19,500,000
13,000,000
7,800,000
3,000,000
3,000,000

Roland
Joint Venture
Sales by venturers.

35,400,000

Roland
Joint Venture
Sales by salesmen

14,300,000

Joint Venture
Roland
Venture expenses
Joint Venture
Roland
Salaries to Roland as managing partner

35,400,000

14,300,000
684,000
684,000
72,000
72,000

Joint Venture
Roland
Greg
Income from Joint Venture
10% commission on own sales

3,540,000

Joint Venture
Roland
Greg
Income from Joint Venture
Balance of profit divided equally

2,104,000

Greg
Cash
Roland
Final cash settlement

490,000
1,280,000
1,770,000

701,334
701,333
701,333
21,481,333
15,471,333
36,952,666


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 8

Problem 4-2
Requirement 2
Books of the Joint Venture
1.
Land
Greg, Capital
Medel, Capital
Roland, Capital
2.
3.
4.
5.
6.

7.

8.

Land
Roland, Capital

40,300,000
19,500,000
13,000,000
7,800,000
3,000,000
3,000,000

Cash
Sales

35,400,000

Cash
Sales

14,300,000

Expenses
Cash
Sales
Land
Expenses
Income Summary

35,400,000

14,300,000
684,000
684,000
49,700,000
43,300,000
684,000
5,716,000

Income Summary
Roland, Capital

72,000

Income Summary
Greg, Capital
Medel, Capital
Roland, Capital

3,540,000

Income Summary
Greg, Capital
Medel, Capital
Roland, Capital

2,104,000

Greg, Capital
Medel, Capital
Roland, Capital

Cash

72,000
1,280,000
1,770,000
490,000
701,333
701,333
701,334
21,481,333
15,471,333
12,063,334
49,016,000


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

Books of Greg
1.
Investment in Joint Venture
Land
2.
3.

3.

19,500,000
19,500,000

Investment in Joint Venture
Income from Joint Venture

1,981,333

Cash
Investment in Joint Venture

21,481,333

Books of Medel
1.
Investment in Joint Venture
Land
2.

page 9

1,981,333
21,481,333

13,000,000
13,000,000

Investment in Joint Venture
Income from Joint Venture

2,471,333

Cash

Investment in Joint Venture

15,471,333

2,471,333
15,471,333

Books of Roland
1.
Investment in Joint Venture
Land

7,800,000

2.

Investment in Joint Venture
Cash

3,000,000

Investment in Joint Venture
Income from Joint Venture

1,262,334

Cash
Investment in Joint Venture

12,063,334

3.
4.

7,800,000
3,000,000
1,262,334
12,063,334

Problem 4-3
Books of Marissa
1.
Joint Venture
Yolly
Beth
2.
3.

104,000
44,000
60,000

Joint Venture Accounts Receivable
Joint Venture

160,000

Joint Venture Cash
Joint Venture
Joint Venture Accounts Receivable

153,000
7,000

160,000

160,000


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

4.
5.

6.

7.

8.

9.

Joint Venture
Joint Venture Cash

40,000

Yolly
Beth

Joint Venture

10,000
7,500

3.
4.
5.

6.

40,000

17,500

Joint Venture
Yolly
Beth
Interest on investment.

1,560

Joint Venture
Income from Joint Venture
Commission on sales.

8,000

660
900

8,000

Joint Venture
Yolly
Beth
Income from Joint Venture
Allocation of the balance.

16,940

Yolly
Beth
Cash
Joint Venture Cash

40,306
59,047
13,647

Books of Yolly
1.
Joint Venture
Merchandise Inventory
Beth
2.

page 10

Marissa

Joint Venture

5,646
5,647
5,647

113,000
104,000
44,000
60,000
160,000
160,000

Joint Venture
Marissa

7,000

Joint Venture
Marissa

40,000

Merchandise Inventory
Beth
Joint Venture

10,000
7,500

Joint Venture
Income from Joint Venture
Beth
Interest on investment.

7,000
40,000

17,500
1,560
660
900


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

7.

8.

9.

Joint Venture
Marissa
Commission on sales.

3.
4.
5.

6.

7.

8.

9.

8,000
8,000

Joint Venture
Income from Joint Venture
Beth
Marissa
Allocation of the balance.

16,940

Cash
Beth
Marissa

40,306
59,047

Books of Beth
1.
Joint Venture

Yolly
Merchandise Inventory
2.

page 11

Marissa
Joint Venture

5,646
5,647
5,647

99,353
104,000
44,000
60,000
160,000
160,000

Joint Venture
Marissa

7,000

Joint Venture
Marissa

40,000

Yolly
Merchandise Inventory
Joint Venture

10,000
7,500

7,000
40,000

17,500

Joint Venture
Yolly
Income from Joint Venture
Interest on investment.

1,560

Joint Venture
Marissa
Commission on sales.

8,000

660
900

8,000

Joint Venture
Yolly
Income from Joint Venture
Marissa
Allocation of the balance.

16,940

Yolly
Cash
Marissa

40,306
59,047

5,646
5,647
5,647

99,353


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 12

Requirement 2
Books of the Joint Venture
1.

Merchandise
Yolly, Capital
Beth, Capital
2.
3.

4.
5.

6.

7.

8.

104,000
44,000
60,000

Accounts Receivable
Sales

160,000

Cash
Uncollectible Accounts Expense
Sales Discount
Accounts Receivable

153,000

4,300
2,700

160,000

160,000

Expenses
Cash

40,000

Yolly, Capital
Beth, Capital
Merchandise

10,000
7,500

Sales
Merchandise
Sales Discounts
Doubtful Accounts Expense
Expenses
Income Summary

40,000

17,500
160,000

86,500
2,700
4,300
40,000
26,500

Income Summary
Yolly, Capital
Beth, Capital
Marissa, Capital

26,500

Yolly, Capital
Beth, Capital
Marissa, Capital
Cash

40,306
59,047
13,647

6,306
6,547
13,647

113,000

Books of Yolly
1.

Investment in Joint Venture
Merchandise Inventory

44,000

2.

Merchandise Inventory
Investment in Joint Venture

10,000

Investment in Joint Venture
Income from Joint Venture
P660 + P5,646 = P6,306

6,306

3.

44,000
10,000
6,306


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

4.

Cash
Investment in Joint Venture

Books of Beth
1.
Investment in Joint Venture
Merchandise Inventory
2.
3.

4.

40,306
40,306

60,000
60,000

Merchandise Inventory
Investment in Joint Venture

7,500

Investment in Joint Venture
Income from Joint Venture
P900 + P5,647 = P6,6,547

6,547

Cash

Investment in Joint Venture

Books of Marissa
1.
Investment in Joint Venture
Income from Joint Venture
P8,000 + P5,647 = P13,647
2.

page 13

Cash
Investment in Joint Venture

7,500
6,547
59,047
59,047
13,647
13,647
13,647
13,647

Problem 4-4
1.
2.

3.

Merchandise Inventory

Joint Venture
Joint Venture
Income from Joint Venture
Bonus = 10% (NI – B)
Bonus = 10% (P53,636.20 – B) = P4,785

10,571.20
10,571.20
4,785
4,785

Joint Venture
Income from Joint Venture
Santi
Romy
Distribution of balance – 30%, 50%, and 20% to
Noel, Santi, and Romy, respectively.

47,851.20

Santi
Romy
Cash
Final cash settlement.

22,863.60
18,628.24

14,355.36
23,925.60

9,570.24

41,491.84


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 14

Problem 4-5
Books of Leo
1.
Joint Venture
Income from Joint Venture
Bonus = 20% (NI – B)
Bonus = 20% (P24,000 – B) = P4,000
2.

3.

Income from Joint Venture
Mandy
Joint Venture
Interest on deficiency and excess
Leo = P10,000 x 12% x 6/12 = P600
Mandy = P5,000 x 12% x 6/12 = P300
Joint Venture
Income from Joint Venture
Niel

Mandy
Balance of profit divided in the ratio of 4:4:2 to
Leo, Niel, and Mandy, respectively

Books of Mandy
1.
Joint Venture
Leo
2.

3.

3.

4,000

600
300
300

20,300
8,120
8,120
4,060

4,000
4,000

Leo
Income from Joint Venture

Joint Venture

600

Joint Venture
Leo
Niel
Income from Joint Venture

20,300

Books of Niel
1.
Joint Venture
Leo
2.

4,000

Leo
Mandy
Joint Venture
Joint Venture
Leo
Income from Joint Venture
Mandy

300
300
8,120

8,120
4,060
4,000
4,000
600
300
300
20,300
8,120
8,120
4,060


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 15

MULTIPLE CHOICE
1.

A

Total credits in the Joint Venture account
Less Total debits in the Joint Venture account
Gain (excess of credit over debit)

P258,100
197,500
P 60,600

2.

D

Merchandise contribution
Add Share in the gain (P60,600 x 2/10)
Final settlement to Minda

P 85,000
12,120
P 97,120

3.

A

The account of Melissa has a debit balance, thus, she has to make payment..
The account of Nancy has a debit balance, thus, she has to make payment.
The account of Olivia has a credit balance, thus, she has to receive payment.

4.

C

P150,000 + P105,000 = P255,000

5.

C

P120,000 + (135,000/3) = P165,000

6.

B

Capital of Tan
Unsold merchandise taken by Tan
Share on the venture income (P135,000* / 3)
Amount received by Tan in final settlement

P270,000
( 105,000)
45,000
P210,000

Credit balance in the Joint Venture account
Unsold merchandise taken by Tan
Venture income
Salaries to Reyes
Remainder – divided equally

P150,000
105,000
P255,000
120,000
P135,000

*

7.

B

15% (P115,000 –B) = P15,000

8.

C.

Credit balance in the Joint Venture account
Unsold merchandise purchased by Soriente
Net profit before bonus
Bonus to Soriente [ 15% (P115,000 – B)
Net profit after bonus

9.

C

P100,000 x 40% = P40,000

10.

B
Account balances
Share in venture profit
Cash settlement

P 90,000
25,000
P115,000
15,000
P100,000

Santos
(P 5,000)
40,000
P35,000

Salazar
P20,000
35,000
P55,000


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

11.

C

12.

B

13.

D

page 16

Sales
Less Sales discounts
Net sales
Cost of sales:
Contributed merchandise
Less Returned merchandise
Gross profit
Operating expenses (P6,450 + P58,650)
Net income
Less Bonus (P41,250 x 25/125)
Net income after bonus

P156,000
26,400

129,600
P106,350
65,100
P 41,250
8,250
P 33,000

P41,250 x 25/125 = P8,250
Merchandise contribution
Merchandise returns
Interest on original capital

Balance of profit divided equally
Cash settlement

14.

P240,000
4,050
P235,950

A
Purchases
Expenses
Balance, end

Joint Venture
300,000
Sales
34,500
225,000
559,500

Iona
P66,000
( 15,000)
990
10,220
P62,210

Paula
P90,000

( 11,400)
1,350
10,220
P90,170

559,50
0
559,50
0

Sales revenue is a credit entry in the Joint Venture account. The total of the
purchases, expenses and the ending balance is equal to total sales revenue. The
ending balance is the sum of the credit balances of Marc and Martin of P120,000
and P105,000.
15.

B

P236,500 x 50% = P118,250

16.

A

Investment of Marc
Cost of unsold goods assumed by Marc
Share in the joint venture gain:
Credit balance in the JV account
Unsold goods assumed by the partners
JV gain

Share of Marc
Cash settlement to Marc
P12,000 – P2,500 = P9,500

17.
18.

B
D

Contribution
Less Share on loss (P12,000 – P2,500)

P150,000
( 4,500)
P225,000
11,500
P236,500
50%
Debbie
P10,000
4,750
P 5,250

118,250
P263,750
Ellie
P2,000
4,750
(P2,750)

AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

page 17

Additional loss to Debbie
Cash distribution
19.

B

Valdez
P789,200
300,000
P489,200

( 2,750)
P 2,500
Ramos
P654,250
300,000
P354,250

Receipts
Less Investment
Revenue
Sale of non-cash assets
Total revenue

Less Expenses – disbursements (P622,750 + P706,950)
Joint venture profit

2,750
Total
P 943,450
600,000
P1,543,450
1,329,750
P 213,750

20.
21.

B

Debit to Joint Venture account:
Investment of Santos (12,000 shares @ P45)
Investment of Cruz (8,000 shares @ P45)
Manager’s fee [ 1% (176,000 + 240,000 + 133,000 +261,625)]
Miscellaneous expenses
Credit to Joint Venture account:
Sales (4,000 @ P44)
Sales (6,000 @ P40)
Cash dividend [(12,000 + 8,000 – 4,000 – 6,000) x P2]
Sales (3,500 @ P38)
Sales [(10,000 – 3,500) x 115% = 7,475 shares x P35]

P540,000.00
360,000.00

8,106.25
1,500.00
P909,606.25
P176,000.00
240,000.00
20,000.00
133,000.00
261,625.00
P830,625.00

Net loss of the venture (P909,606.25 – P830,625)

P 78,981.25

22.

D

Investment of Cruz (8,000 shares @ P45)
Less Share in JV net loss (P78,981.25 x 8/20)
Share of Cruz after distribution of proceeds

P360,000.00
31,592.50
P328,407.50

23.

B

Loss upon the investment of shares (8,000 shares @ P10)
Share in JV loss
Loss of Cruz on the disposition of Palawan Oil Co. shares

P 80,000.00
31,592.50
P 111,592.50

Loss on the disposition of the shares of Cruz is the total of the loss upon
investment of the shares (i.e. P45 – P55 = P10 per share) and the share on the net
loss of the dissolved joint venture.
24.

A

20,000 shares x P40 MV = P800,000

25.

A

20,000 – 4,500 + 15,500 x 120% = 18,600 – 5,000 = 13,600 x P1 = P13,600

26

B

Proceeds from sale of shares;
4,500 x P44
5,000 x P25

6,000 x P28
7,600* x P35
Cost of the shares (see # 1)

P198,000
125,000
168,000
266,000

P757,000
800,000


AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers

Loss from sale of the shares
Expenses (3,000 + 4,700)
Dividend revenue
Number of shares after stock dividend
Less shares sold on November 5
Shares entitled to cash dividend
Dividend per share
Net loss

page 18

P 43,000
( 7,700)
18,600

5,000
13,600
x P1

Share of Roxas on the venture loss
* Contributed shares
Shares sold on Oct. 20
Remaining shares
Shares received as stock dividend (20% x 15,500)
Shares sold on Nov. 5 and 22
Shares sold at P35

13,600
P 37,100
x 6/20
P11,130

20,000
4,500
15,500
3,100
(11,000)
7,600

27.

D

20,000 – 4,500 = 15,500 x 20% = 3,100

28.

C

Investment (10,000 shares @ P40)
Share on the joint venture loss (P37,100 x 1/2 )
Share of Silverio on the distribution of proceeds

P400,000
18,550
P381,450

29.

A

Loss upon contribution of the shares [(P40 – P62) x 4,000]
Share on the JV loss (P37,100 x 4/20)
Tan’s loss on disposition of his investment in Golden Copper

P88,000
7,420
P95,420