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103

CHAPTER 6 SOLUTIONS TO MULTIPLE CHOICES

6-1: a Assets per Jessica Company- balance sheet Jessicas proportionate interest in assets of JV (50%) Total assets of Jessica 6-2: a 6-3: b 6-4: b Investment of Heart Profit share: Sales Cost of sales (150,800 125%) Gross profit Expenses Net Profit Profit/loss ratio Balance of investment in JV 6-5: a Cash Merchandise inventory Accounts receivable Total assets Sweet Cos, proportionate interest Sweet Companys share in total asset 6-6: a Sales Cost of sales Purchases Merchandise inventory, end (50% of P10,000) Gross profit Expenses Net profit 7,200 P10,000 __5,000 _5,000 2,200 ___500 P 1,700 P190,000 29,360 150,800 370,160 x 60% P222,096 P80,000 150,800 120,640 30,160 10,000 20,160 x 40% Total liabilities only of Jenny Co. P3,550,000 1,000,000 P4550,000

8,064 P88,064

104 Chapter 6

6-7: b Original investment (cash) Profit share (P1,700 / 2) Balance of Investment account 6-8: a Joint venture account before profit distribution (credit balance) Unsold merchandise Joint venture profit before fee to Salas Joint venture profit after fee to Salas (P11,500 / 115%) 6-9: b Fee of Salas (P10,000 x 15%) Profit share of Salas (P10,000 x 25%) Total 6-10: b Salas Balance before profit distribution Profit share:Sabas (P10,000 x 40%) Salve (P10,000 x 35%) Balance 6-11: d Joint venture account balance before profit distribution (debit) Joint venture profit (P4,500 x 3) Cost of unsold merchandise (inventory) taken by Dante 6-12: b Edwin Capital: Debits: Balance before profit distribution Credits: Profit share Due from Edwin (debit balance) P14,000 __4,500 P 9,500 P19,500 P 6,000 _13,500 Salve P 500 (dr) P 2,000 (cr) 4,000 ______ _3,500 P 3,500 (cr) P 5,500 (cr) P 1,500 _2,500 P 4,000 P10,000 P 9,000 __2,500 P11,500 P10,000 ___850 P10,850

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105

Settlement to Ferdie (Balance of capital account) Debits: Credits: Balance before profit distribution Profit share Due to Ferdie (credit balance) Settlement to Dante (balance of JV Cash account) Debits: Balance before cash settlement Due from Edwin Credits: Due to Ferdie Balance 6-13: a

P 0 P16,000 __4,500 _20,500 P20,500 P30,000 __9,500

P39,500 _20,500 P19,000 P 4,600 __2,000 P 6,600 __6,000

JV account balance before profit distribution (cr) Unsold merchandise (required dr balance after profit distribution) Joint venture profit before fee to Jerry Joint venture profit after fee (P6,600 / 110%) Fee to Jerry 6-14: d Harry Capital Balances before profit distribution Profit distribution: Harry P6,000 x 50%) Isaac (P6,000 x 20%) Cash settlements 6-15: b Sales Cost of sales: Merchandise inventory, beg (contributions) Freight Purchases Goods available for sale Merchandise inventory, end (P8,300/2) Gross profit (loss) Expenses (P400 + P200) Net profit (loss) 6-16: c Contributions to the Joint Venture (P5,000 + P8,000) Loss share (P750 x 50%) Unsold merchandise taken (withdrawal) Final settlement to jack (P 200) 3,000

P 600 Isaac Capital P 1,800 1,200 P 2,800 P 3,000 P14,000 P14,000 300 __4,000 P18,300 __4,150 14,150 (150) __600 P( 750) P13,000 ( 375) ( 4,150) P 8,475

106 Chapter 6

SOLUTIONS TO PROBLEMS Problem 6 1 Books of Blanco (Manager) JV Cash Joint Venture Cash Ablan Capital Joint Venture JV cash Joint Venture JV cash JV cash Joint Venture 100,000 90,000 100,000 90,000 60,000 60,000 20,000 20,000 200,000 200,000 Books of Ablan Investment in JV Merchandise inventory 90,000 90,000

Computation of JV Profit Total debit to JV Total credit to JV Credit balance (Profit) Distribution Joint Venture Profit from JV Ablan capital Ablan capital JV cash Cash JV cash 30,000 15,000 15,000 105,000 105,000 155,000 155,000 P170,000 P200,000 P 30,000 Investment in JV Profit from JV Cash Investment in JV 15,000 15,000 105,000 105,000

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107

Problem 6 2 Books of the Joint Venture 1. Computer equipment Ella capital Fabia capital Purchases Supplies Diaz capital Expenses Diaz capital Cash Sales 5. 6. 7. 8. Expenses Cash Merchandise inventory Ella capital Fabia capital Cash Adjusting and closing entries: (a) (b) Expenses Supplies Sales Income summary Income summary Merchandise inventory Purchases Income summary Expenses Distribution of profit: Income summary Diaz capital Ella capital Fabia capital 77,500 2,500 80,000 39,500 39,500 33,000 11,000 11,000 11,000 500 500 150,000 150,000 30,000 30,000 20,000 20,000 10,000 10,000 105,000 60,000 45,000 80,000 2,000 82,000 9,000 9,000 150,000 150,000

2.

3. 4.

108 Chapter 6

Books of Diaz (1) (2) (3) Investment in Joint Venture Cash Investment in Joint Venture Cash To record profit share: Investment in Joint Venture Profit from Joint Venture Books of Ella: (1) (2) (3) Investment in Joint Venture Computer equipment Investment in Joint Venture Merchandise inventory To record profit share: Investment in Joint Venture Profit from Joint Venture Books of Fabia: (1) (2) (3) Investment in Joint Venture Computer equipment Cash Investment in Joint Venture To record profit share: Investment in Joint Venture Profit from Joint Venture 11,000 11,000 45,000 45,000 10,000 10,000 11,000 11,000 60,000 60,000 20,000 20,000 11,000 11,000 82,000 82,000 9,000 9,000

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109

Problem 6 3 (1) No Separate Set of Joint Venture Books is Used

Books of Duran (Manager) May 1: Joint Venture Castro capital Cash JV cash Bueno capital 12,500 12,000 500 10,000 10,000 9,500 9,500 16,000 16,000 15,000 15,000 9,000 9,000

7:

26: Joint Venture JV cash 30: JV accounts receivable Joint Venture June 30: JV cash JV accounts receivable 27: JV cash Joint Venture 30: To record unsold merchandise taken by Duran: Merchandise inventory Joint Venture To record profit distribution: Joint Venture Profit from JV Bueno capital Castro capital To record settlements: Bueno capital Castro capital JV cash Cash Accounts receivable

3,000 3,000

6,000 2,000 2,000 2,000

12,000 14,000 24,500 1,500 1,000

JV accounts receivable
110 Chapter 6

1,000

Books of Bueno May 7: Investment in Joint Venture Cash 10,000 10,000 2,000 2,000 12,000 Investment in Joint Venture Books of Castro May 1: Investment in Joint Venture Merchandise inventory 12,000 12,000 2,000 2,000 14,000 Investment in Joint Venture (2) A Separate Set of Books is used: 14,000 12,000

June 30: Investment in Joint Venture Profit from Joint Venture Cash

June 30: Investment in Joint Venture Profit from Joint Venture Cash

Books of the Joint Venture May 1: Merchandise inventory Castro capital Duran capital Cash Bueno capital 26: Purchases Cash 30: Accounts receivable Sales June 20: Cash Accounts receivable 27: Cash Sales 9,000 9,000 9,500 9,500 16,000 16,000 15,000 15,000 12,500 12,000 500 10,000 10,000

7:

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111

June 30: Closing entries: Sales Income summary Income summary Merchandise inventory, end Merchandise inventory Purchases Distribution of profit: Income summary Bueno capital Castro capital Duran capital Settlements to Venturers: Bueno capital Castro capital Duran capital Merchandise inventory Accounts receivable Cash Books of Duran (Manager/Operator) May 1: Investment in Joint Venture Cash 500 500 2,000 2,000 2,500 Investment in Joint Venture Books of Bueno and Castro (Same as in No. 1 requirement) 2,500 12,000 14,000 2,500 3,000 1,000 24,500 6,000 2,000 2,000 2,000 19,000 3,000 12,500 9,500 25,000 25,000

June 30: Investment in Joint Venture Profit from Joint Venture Cash

112 Chapter 6

Problem 6 4 (1) Books of Seiko (Manager/Operator) JV Cash Notes payable PNB Roles capital Timex capital Joint venture Cash Rolex capital Rolex capital JV cash Joint venture Cash Rolex capital Timex capital July: Cash Rolex capital Timex capital JV cash Joint venture Cash Rolex capital Timex capital August: Cash Rolex capital Timex capital JV cash Joint venture Cash Rolex capital Timex capital To record sales: JV cash (P421,000 x 96%) 404,160 102,000 34,000 34,000 34,000 64,100 16,300 7,800 30,000 30,000 111,400 37,400 64,700 9,300 40,000 15,000 10,000 65,000 55,770 13,970 31,240 10,560 45,000 67,000 13,500 125,500 30,600 9,730 16,560 4,310

April1:

May:

June:

Joint venture

404,160

Joint Venture

113

To record payment of loan to PNB: Notes payable PNB Rolex capital Timex capital Joint venture (Interest expense) JV cash To record distribution of profit: Joint venture Gain from JV (30%) Rolex capital (60%) Timex capital (10%) Computed as follows: Total debits tot he JV account Total credits to the JV account Gain (credit balance) To record settlement: Cash Rolex capital Times capital JV cash Computations: Settlement to Rolex - Balance of capital account: Debits: June July August Payment of note payable Credits: April 1 May June July August Profit share P30,000 15,000 67,000 _34,000 P34,000 47,800 64,700 31,240 16,560 _80,574 32,687 128,874 14,099 175,660 P269,870 _404,160 P134,290 134,290 40,287 80,574 13,429 34,000 34,000 34,000 8,000 110,000

P146,000

__274,874

Credit balance

P 128,874

114 Chapter 6

Settlement to timex Balance of capital account Debits: July August Payment of loan Credits: April 1 June July August Profit share Credit balance Settlement to Seiko Balance of JV cash account Debits: April 1 Loan proceeds Credits: June July August Payment of loan Balance of JV cash Less:Settlement to Rolex Settlement to Timex Settlement to Seiko (2) Partial Balance Sheet June 30, 2008 Books of Seiko (Manager/operator) Current assets: Investment in joint Venture: Joint Venture assets: Cash Joint Venture Less:Equity of other venturers (P116,500 + P43,300) Current liabilities: P102,000 _404,160 P 30,000 65,000 125,500 _110,000 P128,874 __14,099 P506,160 P 10,000 13,500 __34,000 P 34,000 9,300 10,560 4,310 __13,429

P 57,500

_71,599 P 14,099

_330,500 175,660 _142,973 P 32,687

P 72,000 _175,500

P247,500 _159,800 87,700

Notes payable PNB

34,000

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115

Computation of balances as of June 30, 2008: JV Cash April 1 P102,000 Balance P 72,000 P30,000 June May June Joint Venture P 64,100 _111,400

Balance P175,500 Notes Payable P34,000 April June Rolex capital P 30,000 _______ P 30,000 P 34,000 47,800 __64,700 P146,500 P116,500 Timex capital P34,000 __9,000 P43,300 Problem 6 5 Consolidated Balance Sheet Cash Receivables Inventory Other assets Total assets Accounts payable Other liabilities Capital stock Retained earnings Total liabilities and stockholders' equity Consolidated Income Statement Sales P246,750 P 61,000 122,000 102,500 __40,500 P326,000 P 61,000 96,500 50,000 _118,500 P326,000 April June April 1 May June

Cost of sales Gross profit Operating expenses Consolidated net income

116 Chapter 6

_124,750 122,000 __58,250 P 63,750

Problem 6 6 (a) Journal entries on venture books June 15: Cash MacDo Initial contribution at 6% July 1: Land 2,400,000 1,650,000 750,000 Mortgage payable Cash Purchased land for cash and 6% mortgage. Aug 1: Cash MacDo Additional contribution at 6%. Land Cash Paid for improvements. Sept 30: Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest. Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest. Mortgage payable Interest expense- Mortgage Cash Reduced mortgage and paid interest. 250,000 3,750 253,750 400,000 8,000 408,000 300,000 7,500 307,500 950,000 950,000 1,100,000 1,100,000 1,000,000 1,000,000

Oct 31:

Nov 30:

Dec 31:

Mortgage payable 200,000 Interest expense- Mortgage 21,000 Cash Reduced mortgage and make semi-annual interest payment.

221,000

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117

31:

Cash Sales Sales to date.

2,600,000 2,600,000 130,000 130,000 628,100 628,100 60,000 60,000

31:

Commissions Cash P2,600,000 x 5% Expenses Cash Paid expenses Interest expense- Venturer MacDo 6% on P1,000,000 from June 15 to December 31, and on P1,100,000 from August 1 to December 31. Sales Land (cost of land sold) Expenses Commissions Interest expense- mortgage Interest- venturer Income summary To close income and expense accounts.

31:

31:

31:

2,600,000 1,145,000 628,100 130,000 40,250 60,000 596,650 596,650 596,650 238,660 801,650 801,650

31:

Income summary MacDo MacEn To divide gain, 60:40. MacDo Cash Payment on account.

31:

(b)

Journal entries on MacDos books: June 15: Investment in Joint Venture Cash Initial contribution. 1,000,000 1,000,000

Aug 1:

Investment in Joint Venture Cash Additional contribution.

1,100,000 1,100,000

118 Chapter 6

Dec 31:

Investment in Joint Venture Interest income Interest earned on cash advanced. Investment in Joint Venture Gain on Joint Venture 60% of gain on venture. Cash Investment in Joint Venture Repayment in part of advances.

60,000 60,000 357,990 357,990 801,650 801,650

31:

31:

(c)

MacDo and MacEn Joint Venture Income Statement For the period from June 15 to December 31, 2008 Sales Cost of land sold: Land Improvements Total Unsold land Gross profit Expenses: Advertising and office expenses Interest on mortgage Interest on advances Commissions Net gain Distributions: MacDo (P596,650 x 60%) MacEn (P596,650 x 40%) Mac Do and MacEn Joint Venture Balance Sheet December 31, 2008 Assets Cash P 250,000 P2,600,000 P2,400,000 950,000 P3,350,000 2,205,000 P 628,100 40,250 60,000 130,000

1,145,000 1,455,000

858,350 P 596,650 P 357,990 238,660

Land Total Assets Liabilities and equity: Mortgage payable MacDo MacEn Total liabilities and equity
Joint Venture

2,205,000 P2,455,000 P 500,000 1,716,340 238,660 P2,455,000

119

Venturers equity (interest) Invested Shares: Gain Interest on advances Commissions Total Balances Withdrawn Equity (interests) MacDo P2,100,000 P 357,990 60,000 417,990 2,517,990 (801,650) P1,716,340 MacEn P238,660 130,000 368,660 368,660 (130,000) P238,660 Total P2,100,000 P 596,650 60,000 130,000 786,650 2,886,650 (931,650) P1,955,000