PRACTICE SET # 6: JOINT ARRANGEMENTS

Use the following information for the next two questions:

A, B and C formed a joint operation. They agreed on the following:
 C is the appointed as the manager. As compensation, C is entitled to a ₱120 salary plus bonus of
25% of profit after deducting the salary and the bonus. However, C will be charged for the cost
of any unsold inventory.
 Interest of 10% per annum is allowed to A’s and B’s capital contributions.
 Any remaining profit or loss is divided equally.

The joint operation was complete after a year. The following were the transactions:
 A contributed cash of ₱400 and merchandise costing ₱800.
 B contributed merchandise costing ₱1,600. B paid freight of ₱80 in the transfer.
 C purchased merchandise worth ₱400 using A’s cash contribution.
 C paid expenses of ₱800 using his own cash.
 C made total sales of ₱3,200.
 All inventories were sold except one-half of those contributed by B.

1. How much is the joint operation’s profit after deduction for salary but before deduction for
bonus?
a. 192
b. 240
c. 360
d. 420

2. On the cash settlement between the joint operators,

a. A pays ₱1,288.
b. B pays ₱1,816.
c. C receives ₱96.
d. All of these

Use the following information for the next two questions:

A and B formed a joint operation. The following were the transactions during the year:
  A B
Total purchases 400 320
Total sales 960 720
Expenses paid 800
Other income 40

The joint operation was completed at the end of the year. Each joint operator is entitled to a 10%
commission on its purchases and a 20% commission on its sales. Any remaining profit or loss is
divided equally.
3. How much is the profit (loss) of the joint operation?
a. 200,000
b. (200,000)
c. 180,000
d. (180,000)

4. On the cash settlement between the joint operators,

a. A pays B ₱368
b. B pays A ₱368
c. A pays B ₱428
d. B pays A ₱428

5. A, B and C formed a joint operation which was completed during the year. A, the appointed
manager, is entitled to a bonus of 10% of the profit before deducting the bonus. Any remaining
profit or loss is divided equally. On the joint operation’s completion date, B’s and C’s books
show the following balances before adjusting and closing entries:
  Books of B Books of C
Account with A 16 Cr. 16 Cr.
Account with B 48 Cr.
Account with C 56 Dr.

The unsold merchandise was charged to A at a cost of ₱88. On the cash settlement between the joint
operators,
a. A receives ₱48.
b. B pays ₱72.
c. C pays ₱32.
d. a and c

6. A, B and C formed a joint operation. Profit or loss shall be divided equally. On the joint
operation’s completion date, the books of A, the appointed manager, show the following account
balances:
  Debit Credit
JO – Cash 80
Joint operation 20
B Co. 60
C Co. 40

A’s share in the joint operation’s profit is ₱16. A agreed to be charged for the unsold merchandise.
How much is the cost of unsold merchandise charged to A?
a. 28
b. 62
c. 68
d. 72
7. A, B, and C formed a joint operation. On the joint operation’s completion date, the books of A,
the appointed manager, show the following account balances:
  Debit Credit
JO – Cash 80
Account with B 60
Accounting with C 88

The cost of unsold inventory is ₱72. The joint operation’s profit is ₱44. How much is the balance of
the joint operation account before distribution of profit?
a. 28
b. 116
c. 56
d. 0

Use the following information for the next two questions:

A, B, and C formed a joint operation. The joint operators shall make initial contributions ₱40 each.
Profit and loss shall be divided equally. The following data relate to the joint operation’s
transactions:
  A B C
Joint operation 32 Cr. 40 Cr. 48 Cr.
Expenses paid from JO cash 20 8 12
Value of inventory taken 20 24 16

8. How much is the joint operation’s sales?

a. 280
b. 40
c. 80
d. 76

9. How much is the cash settlement to B?

a. ₱80 receipt
b. ₱80 payment
c. ₱32 receipt
d. ₱76 receipt

10. On January 1, 20x1, PATRIMONY Co. entered into a joint arrangement classified as a joint
venture. For an investment of ₱2,000,000, PATRIMONY Co. obtained 30% interest in HERITAGE
Joint Venture, Inc. During the year, HERITAGE Joint Venture, Inc. reported profit of ₱4,000,000
and other comprehensive income of ₱800,000, i.e., a total comprehensive income of ₱4,800,000.
HERITAGE Joint Venture, Inc. declared dividends of ₱2,400,000. How much is the carrying
amount of the investment in joint venture on December 31, 20x1?
a. 2,720,000
b. 2,000,000
c. 2,480,000
d. 4,160,000