DATE:

NAME:
Assignment 1: Joint Arrangements
Use the following information for questions 1-3
A and B are two companies whose businesses are the construction of
many types of public and private construction services. They set up a
contractual agreement to work together to the purpose of fulfilling a
contract with the government for the construction of a motor way
between two cities for P2 Million (a fixed price contract).
The contractual arrangement determines the participation shares of A
and B and establishes:
a. Joint control of the arrangement
b. The rights to all assets needed to undertake the activities of
the arrangement are shared by the parties on the basis of their
participation shares in the agreement
c. The parties have joint responsibility for all operating and
financial obligations relating to the activities of the
arrangement on the basis of their participation shares in the
agreement and
d. The profit or loss resulting from the activities of the
arrangement is shared by A and B on the basis of their
participation shares on the arrangement.
In 2013, in accordance with the agreement between A and B:
A and B each used their own equipment and employees in the
construction activity
A constructed three bridges needed to cross rivers on the route
at a cost of 8Million
B constructed all of the other elements of the motorway at a cost
of 10Million
A and B shares equally in the 24Million jointly invoiced to and
received from the government
1. What is the gross profit
b. 14M
c. 6M
2. What is the gross profit
c. 4M
d.
3. What is the gross profit
c. 7M

of the joint arrangement? a. 8M

d. 4M
earned by A in 2013? A. 6M
b.
2M
earned by B in 2013? A. 2M
b.
d. 6M

14M
14M

On January 1, 2011 entities A and B each acquired 30& of the ordinary

shares that carry voting rights at a general meeting of shareholders
of entity X, an SME for P300,000. Entities A and B immediately agreed
to share control over entity X. For the year ended December 31, 2011,
entity X recognized a profit of P400, 000.
On December 31, 2011 entity X declared and paid a dividend of P150,
000 for the year 2011. At December 31, 2011 the fair value of each
venturers investment in entity X is 425,000. Entities A and B uses
the cost model to account for its investment in jointly controlled
entities. However, there is no published price quotation for entity X.
4. At December 31, 2011 the venturers must report their investment in
entity X at:
a. 300,000
b. 345,000
c. 255,000
d. 420,000
5. Using the same facts in No.4, however there is a published price
quotation for entity X. How much income is to be recognized by each
venture in profit or loss for the year ended 12/31/2011?
a. 165,000
b. 170,000
c. 125,000
d. 200,000

6.
in
a.
b.
c.
d.

At December 31, 2011 the venturers must each report it investment

entity X at:
425,000
300,000
330,000
345,000

7. R, S and T formed a joint venture. R is to act as manager and is

designated to record the JV accounts on his books. As manager, R is
allowed to a salary of 120,000, remaining profit or loss is divided
equally. The following balances appear at the end of 2008 before
adjustment for inventory and profits.
Debit
Credit
Join Venture Cash
480,000
Joint Venture
150,000
S, Capital
30,000
T, Capital
270,000
The venture is terminated on December 31, 2008. Unsold merchandise
costing 105,000 are taken over by T. R made the settlement to S and T.
Venture income is:
a. 150,000
b. 135,000
c. 255,000
d. 105,000
8.
of
a.
b.
c.
d.

Using the same information in no. 7, how much is the profit share
R?
120,000
45,000
165,000
135,000

9. Using the same information

settlement would T receive?
a. 105,000
b. 210,000
c. 270,000
d. 315,000

in

no.

7,

how

much

is

the

final

10. On March 1, 2011, entities A and B each acquired 30% of the

ordinary shares that carry voting rights at a general meeting of
shareholders of entity Z for 300,000. Entities A and B immediately
agreed to share control over entity Z.
On December 31, 2011 entity Z declared a dividend of 100,000 for the
year 2011. Entity reported a profit of 60,000 for the year ended
December 31, 2011. At December 31, 2011 the recoverable amount of each
venturers investment in entity Z is 292,000 (fair value of 295,000
less costs to sell of 3,000. Entities A and B uses the equity method
to account for its investment in the entity. However, there is no
published price quotation for entity Z.
On 12/31/11, entities A and B must each report its investment in
entity Z at:
a. 285,000
b. 290,000
c. 288,000
d. 260,000
LCY