Advanced accounting by guerrero peralta CHAPTER 6

Chapter 6 Books of Diaz 3 To record profit share: Books of Ella: 3 To record profit share: Books of Fabia: 3 To record profit share:... Problem 6 – 31 No Separate Set of Joint Venture Bo

CHAPTER 6 SOLUTIONS TO MULTIPLE CHOICES

6-1: a

Assets per Jessica Company- balance sheet P3,550,000

Jessica’s proportionate interest in assets of JV (50%) 1,000,000

6-2: a Total liabilities only of Jenny Co.

6-3: b

6-4: b

Profit share:

Cost of sales (150,800 ÷ 125%) 120,640

Profit/loss ratio x 40% 8,064

6-5: a

6-6: a

Cost of sales

Merchandise inventory, end (50% of P10,000) 5,000 _5,000

Chapter 6

6-7: b

6-8: a

Joint venture account before profit distribution (credit balance) P 9,000

Joint venture profit after fee to Salas (P11,500 / 115%) P10,000

6-9: b

6-10: b

Salas Salve

Balance before profit distribution P 500 (dr) P 2,000 (cr)

6-11: d

Joint venture account balance before profit distribution (debit) P 6,000

Cost of unsold merchandise (inventory) taken by Dante P19,500

6-12: b

Edwin Capital:

Debits: Balance before profit distribution P14,000

Settlement to Ferdie (Balance of capital account)

Credits:Balance before profit distribution P16,000

Settlement to Dante (balance of JV Cash account)

Debits: Balance before cash settlement P30,000

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 after fee (P6,600 / 110%) 6,000

6-14: d

Balances before profit distribution (P 200) P 1,800

Profit distribution:

6-15: b

Cost of sales:

Merchandise inventory, beg (contributions) P14,000

Merchandise inventory, end (P8,300/2) 4,150 14,150

6-16: c

Contributions to the Joint Venture (P5,000 + P8,000) P13,000

Unsold merchandise taken (withdrawal) ( 4,150)

Chapter 6

SOLUTIONS TO PROBLEMS

Problem 6 – 1

Joint Venture 60,000

Joint Venture 20,000

Joint Venture 200,000

Computation of JV Profit

Credit balance (Profit) P 30,000

Distribution

Problem 6 – 2 Books of the Joint Venture

8. Adjusting and closing entries:

Distribution of profit:

Chapter 6

Books of Diaz

(3) To record profit share:

Books of Ella:

(3) To record profit share:

Books of Fabia:

(3) To record profit share:

Problem 6 – 3

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

Books of Duran (Manager)

30: To record unsold merchandise taken by Duran:

To record profit distribution:

To record settlements:

JV accounts receivable 1,000

110

Chapter 6

Books of Bueno

Books of Castro

(2) A Separate Set of Books is used:

Books of the Joint Venture

June 30: Closing entries:

Merchandise inventory, end 3,000

Distribution of profit:

Settlements to Venturers:

Books of Duran (Manager/Operator)

Books of Bueno and Castro (Same as in No 1 requirement)

Chapter 6

Problem 6 – 4

(1) Books of Seiko (Manager/Operator)

To record sales:

JV cash (P421,000 x 96%) 404,160

Joint Venture 113

To record payment of loan to PNB:

Joint venture (Interest expense) 8,000

To record distribution of profit:

Computed as follows:

Total debits tot he JV account P269,870

Total credits to the JV account _404,160

To record settlement:

Computations:

Settlement to Rolex - Balance of capital account:

Credit balance P 128,874

114

Chapter 6

Settlement to timex – Balance of capital account

Settlement to Seiko – Balance of JV cash account

(2) Partial Balance Sheet

June 30, 2008

Books of Seiko (Manager/operator)

Current assets:

Investment in joint Venture:

Joint Venture assets:

Less:Equity of other venturers

Current liabilities:

Joint Venture 115

Computation of balances as of June 30, 2008:

April 1 P102,000 P30,000 June May P 64,100

Balance P175,500 Notes Payable Rolex capital

P34,000 April June P 30,000 P 34,000 April 1

47,800 May _ 64,700 June P

30,000 P146,500

P116,500

P34,000 April 9,000 June P43,300

Problem 6 – 5

Consolidated Balance Sheet

Consolidated Income Statement

Cost of sales _124,750

116

Chapter 6

Problem 6 –6

(a) Journal entries on venture books

Initial contribution at 6%

Purchased land for cash and 6% mortgage

Additional contribution at 6%

Paid for improvements

Interest expense- Mortgage 3,750

Reduced mortgage and paid interest

Interest expense- Mortgage 8,000

Reduced mortgage and paid interest

Interest expense- Mortgage 7,500

Reduced mortgage and paid interest

Interest expense- Mortgage 21,000

Reduced mortgage and make semi-annual interest payment

31: Cash 2,600,000

Sales to date

P2,600,000 x 5%

Paid expenses 31: Interest expense- Venturer 60,000

6% on P1,000,000 from June 15 to December 31, and on P1,100,000 from August 1 to December 31

Interest expense- mortgage 40,250

To close income and expense accounts

To divide gain, 60:40

Payment on account

(b) Journal entries on MacDo’s books:

June 15: Investment in Joint Venture 1,000,000

Initial contribution

Aug 1: Investment in Joint Venture 1,100,000

Additional contribution

118

Chapter 6

Dec 31: Investment in Joint Venture 60,000

Interest earned on cash advanced

31: Investment in Joint Venture 357,990

60% of gain on venture

Investment in Joint Venture 801,650 Repayment in part of advances

Income Statement

For the period from June 15 to December 31, 2008

Cost of land sold:

Expenses:

Advertising and office expenses P 628,100

Distributions:

Mac Do and MacEn Joint Venture

Balance Sheet

December 31, 2008

Assets

Total Assets P2,455,000

Liabilities and equity:

Joint Venture 119

Venturers equity (interest)

Invested P2,100,000 P2,100,000

Shares:

Commissions 130,000 130,000 Total 417,990 368,660 786,650

Withdrawn (801,650) (130,000) (931,650)

Equity (interests) P1,716,340 P238,660 P1,955,000