CLASSROOM EXERCISE -JOINT VENTURE
Doriega, Evasco and Formino formed a joint venture to sell statement shirts and other souvenir items for the annual sports competition among different universities. Their transactions during the two-month period are summarized below in the books of Formino, the manager of the joint venture.
Problem 1.
anuar!
"# "' ") ") #( #( #( # #
$nvestment of merchandise b! Doriega $nvestment of cash b! Doriega $nvestment of cash b! Evasco $nvestment of cash b! Formino $nvestment $nvestment of merchandise merchandise b! Evasco Freight-in ash sales ash sales /ithdrawal of merchandise b! Evasco
Februar!
' "( "+ #" #* #*
%urchases /ithdrawal of cash b! Doriega /ithdrawal of cash b! Formino 0elling e1penses 2nsold merchandise charged to Doriega 2n 2 nsold merchandise charged to Evasco
% &"',((( ##(,((( "*',((( #+(,((( '(,((( '(,((( (,((( ",*+',((( +'(,((( ")(,((( +',((( ',((( '(,((( )(,((( ',((( #(,(((
The contractual arrangements include distribution of gains and losses as follows3 Doriega, (45 (45 Evasco, Evasco, +'45 and Formino, Formino, #'4. The venture venture is completed completed and termina terminated ted on Februar! #*, #(". In the final settlement, how much would each venturer receive?
Problem 2.
6lejo, 7orja, and orpuz formed a joint venture. The contractual arrangement arrangement provides that orpuz is to manage the venture and is to receive a salar! of "4 of the profit after deduction of the salar! as an e1pense. The net profit after the salar! is to be divided as follows3 6lejo, +(45 7orja, #'4 and orpuz, '4. 8o separate books are used for the oint 9enture. oint venture is terminated after si1 months of operation. The trial balance prepared b! orpuz shows the following balances.
oint 9e 9enture a ash oint 9enture 6lejo, apital apital 7orja, apital
Debit % ", ",#&(,(((
Credit
% **,((( )#(,((( )#(,((( +(,(((
The venture has still some unsold merchandise worth %+,+(( which is to be taken b! orpuz. How much is the total interest of Corpuz before any settlement?
Problem 3.
:n ;arch ", #(" entities < and = each ac>uired #'4 of the ordinar! shares that carr! voting rights at a general meeting of shareholders of entit! for %"&,(((. Transact Transaction ion cost is &4 of the transactio transaction n price. Entities Entities < and = immediat immediatel! el! agreed agreed to share control control over entit! . For the !ear ended ended December ", #(" #(" entit! recognized recognized a profit profit of %"'( %"'(,(( ,(((. (. :n Decembe Decemberr (, (, #(" #(" entit! entit! decla declared red and paid a divide dividend nd of %&+, %&+,(( ((( ( for the !ear !ear #(" #(".. :n Decemb December er ", ", #(" #(" the fair fair value value of each each venture venturers? rs? investment investment in entit! is %"&*,(((. %"&*,(((. ost to sell sell is +4 of the fair value. value. @owever, @owever, there is no published published price >uotation for entit! entit! . 6ssuming Entit! Entit! < uses the e>uit! model to account account for its investment in entit! ,
How much is the investment in Dec. 31, !13?
Problem 4. On
December ", #("# entit! 6 ac>uired ( percent of the ordinar! shares that carr! voting rights of entit! A for %"((,(((. $n ac>uiring those shares entit! 6 incurred transaction costs of %",(((. Entit! 6 has entered into a contractual arrangement with another part! Bentit! C that owns #' percent of the ordinar! shares of entit! A, whereb! entities 6 and jointl! control entit! A. Entit! 6 uses the cost model to account for its investments in jointl! controlled entities. 6 published price >uotation does not e1ist for entit! A. $n anuar! #(" entit! A declared and paid a dividend of %#(,((( out of profits earned in #("#. 8o further dividends were paid in #(", #("+ or #("'. 6t December ", #("#, #(" and #("+, in accordance with 0ection #) Impairment of Assets, management assessed the fair values of its investment in entit! A as %"(#,(((, %""(,((( and %(,((( respectivel!. osts to sell are estimated at %+,((( throughout.
"ntity # measures its investment in entity $ on 31 December !1, !13 and !1% respectively at&
#ssumin', a published price (uotation e)ists for entity $. "ntity # measures its investment in entity $ on 31 December !1, !13 and !1% respectively at&
-End o !"ndo#$-
