Cha

pte
r11
Probl
emI
1.
•Cont
ri
buti
onsofca
s hbyt h
eoperat
ors
Cas
h 360,
000
KKCompany 1
80,
000
Ceri
seCompany 1
80,
000
Contr
ibut
ionbyjointoper
ator
s.
•Us
eofc as
ha ndl
oantobuyma c
hine
ry&e qu
ipme
nta
ndr
awma
ter
ial
s
Machi
neryandequi
pment 96,
000
Cash 60,
000
Loanspayabl
e–ma chi
ner
ya ndequ
ipment 36,
000
Contri
buti
onbyjoi
ntoper
ator
s.
Mat
erial
s 78,
000
Accountspa
yabl
e 78,
000
Acquis
it
ionofmat
eri
al
s.
•La
bori nc
urren
ce
Payrol
l 86,
400
Cash 84,
000
Acc
ruedpayrol
l 2,
400
Annuallabor
.
•Loa
nsfromthebank
Cas
h 72,
000
Bankloa
nspayabl
e 72,
000
Amountbor
rowed.
•Repaymentofl
oan–ma chi
ner
ya n
de qu
ipme
nta
ndot
herf
act
orye
xpe
nse
s
Loanpayable–ma c
hin
eryandequi
pment 1
2,
000
Cash 1
2,
000
Par
ti
alpaymentofl
oan.
Ac
count
spayabl
e 50,
400
Cash 50,
400
Paymentoft
radec
redi
tor
s.
Fa
ctor
yov e
rhea
dc ont
rol–heat
,l
ig
htandpowe
r 1
56,
000
Cash 1
56,
000
Paymentofmanufa
cturi
nge
xpens
ess
uchasheat
,l
ig
hta
ndpowe
r.
•Deprec
iat
ionofma c hi
ner
ya ndequi
pment
Fa
c t
oryoverheadc ont
rol–de pr
eci
ati
on 9,
600
Accumu l
ate
dde pr e
ciat
ion 9,
600
Deprec
iat
ionofe quipment.
•Tr
ans
ferofma
ter
ial
s,l
abora
ndov
erh
eadt
oWor
k-i
n-Pr
oce
ss
Work-i
n -proc
ess 309,
600
Payroll 86,
400
Ma t
erial
s 57,
600
Factoryoverhe
adcon
trol–heat,
li
ghtandpowe
r 1
56,
000
Factoryoverhe
adcon
trol–depreci
ati
on 9,
600
Al
locati
onofc os
tst
owork-i
n-proce
ss
•Tr
ansfe
rofWor k-i
n-Pr
oces
stoFi
ni
she
dGoodsI
nve
ntor
y.
Fi
ni
shedg oods 21
6,000
Work-i
n-pr oce
ss 21
6,000
All
ocat
iont ofi
nis
hedgoods
•Tra
nsf
erofFin
ish
edGoodsI
nve
ntor
ytoJ
oin
tOpe
rat
orst
hrou
ghou
tth
eye
ar
KKCompany 96,
000
DDCompa n
y 96,
000
 Fi
nis
hedg
oods 1
92,
000
Del
i
ver
yofout
putt
ojoi
ntope
rat
ors
.
2.
Cas
h
Cont
ri
but
ion–Dr
ei 180,000 60,000 Mach
iner
yande qu
ipment
Cont
ri
but
ion–Ce
ris
e 1
80,000 84,000 La
bor
Ban
kloan 60,000 12,
000 Machi
neryandequi
pment
50,400 Ac
count
spayabl
e
156,
000 Fact
oryove
rheadcont
rol
Ba
lan
ce,
12/
31/
x4 57,
600

Work-i
n-Proce
ss
La
bor 86,400 21
6,000 t
oFi
ni
she
dGoods
Mate
rial
s 57,600
Fac
toryOverh
ead–he
a t
,et
c.1 56,000
Fac
toryOverh
ead–depre
cia
tion 9,600
Bal
ance,1
2/31
/x4 93,600
3.
a.
Tota lassets,P282,000
b.KK’
sinvestme nt,P84,000
c.
DD’si nvestme nt,P84,000
Dec embe r31 ,20x4
Ass
e t
s
CurrentAs sets
Ca s
h P57,
600
Fini
shedg oodsi nve
ntory 24,
000
Wor k-in-Pr ocessinven
tory 93,
600
Ma t
erialsinventory 20,
400
Totalc urrenta s
sets P1
95,
600
Non-c ur
r entAs set
s
Equ i
pme n t P96,
000
Less:
Ac cumu latedde pre
cia
tion 9,
600 86,
400
TotalAssets P282,
000
Li
abili
ti
esa ndNe tAsset
s
CurrentL i
abil
iti
e s
Accruedpa yr oll P 2,
400
Accoun t
spa ya ble 27,
600 P30,
000
Non-cu r
re ntLi
a bili
ti
es
Bankl oanpa ya bl
e P60,
000
Loanpa yable–ma chi
ner
yan
dequ
ipme
nt 24,
000 __84,000
TotalLiabil
iti
es P1 14,
000
NetAssets 168,
000
TotalLiabil
iti
esa ndNe tAs
set
s P282,
000
J
oin
tOpera
tor’
sEqui
ty
K
KCompany:Cont
ri
buti
ons–Janu
ary1
,20x
4 P1
80,
000
Cos
tofi
nvent
orydi
str
ibu
ted (96,
000) P84,
000
DDCompany:Contri
buti
ons–Jan
uar
y1,
20x
4 P1
80,
000
Cos
tofin
ventorydis
tri
but
ed (96,
000) P84,
000
Tot
alJ
oin
tOpe r
a t
or’
sEquit
y P1
68,
000
Probl
emII
1.Ayal
aCorp.
sha
lla
ccou
ntf
ori
tsi
nte
res
tint
hej
oi
ntope
rat
iona
sfol
l
ows
:
Currentassets(50% xP720, 000) 360,
000
Proper
ty, plantande qui
pme nt(60% xP1
,
200,000) 720,
000
Expenses(60% x720, 000) 432,
000
Li
abili
ti
e s(75% xP960, 000) 720,
000
Rev
e nue( 55% xP1 ,
200,000) 660,
000
I
nteres
t sinJoin
tOpe rat
ion 1
32,
000
Torecognizet heshareofEntit
yAintheas
set
s,l
i
abi
li
ti
es,r
eve
nue
sand
expens
e sasf oll
ows:
2.Theasset
s,l
ia
bil
i
tie
s,r
eve
nueandexpe
nsesa
rerec
ogni
zedan
dcombin
edwit
hthoseofAyal
a’
sownfi
nanci
al
st
atements
.Theint
ere
sti
njoi
ntope
rati
onsa
tth
ee ndoft
her
epor
ti
ngper
iodi
sreducedtoP228,
000,c
ompute
d
asfol
lows:
I
nte
restsi
nJoin
tOpe ra
tion P360,
000
L
ess:S
h arei
nasse
ts,
li
abili
ti
es,
rev
enuesa
nde
xpe
nse
s 1
32,
000
I
nte
restinoper
ati
on,endingbal
ance P228,
000
Probl
emI I
I
1.Thejoi
ntope
rat
or,
Ent
it
yAa
ccou
ntf
ort
hei
rin
ter
est
sint
hej
oi
ntope
rat
iona
sfol
l
ows
:
En
tit
yX—in20x4
Pr
ofi
torloss(c
onst
ruct
ionc os
ts) 4,
800,
000
Cash
/Ac c
umu l
ate
dde preci
ati
on/Tr
a depaya
ble
s 4,
800,
000
Tore
cognizetheconst
ruct
ioncostsi
ncurre
din20x4
Cas
h 8,
400,
000
Profi
torlos
s(c
on s
truc
ti
onreve
nue) 8,
400,
000
Torecogni
zethecons
truct
ionc
ost
sinc
urr
edi
n20x
4
En
tit
yY—i
n20x
4
Pr
ofi
torloss(c
onst
ruct
ionc os
ts) 7,
200,
000
Cash
/Ac c
umu l
ate
dde preci
ati
on/Tr
a depaya
ble
s 7,
200,
000
Tore
cognizetheconst
ruct
ioncostsi
ncurre
din20x4
Cas
h 8,
400,
000
Profi
torlos
s(c
on s
truc
ti
onreve
nue) 8,
400,
000
Torecogni
zethecons
truct
ionc
ost
sinc
urr
edi
n20x
4
Pr
obl
emIV
Thej
oi
ntope
rat
or,
Ent
it
yKa
cco
untf
ort
hei
rin
ter
est
sint
hej
oi
ntope
rat
iona
sfol
l
ows
:
J
anu
ary1,20x4(P1
2,000,000/5=P2, 400,
000)
Propert
y,pl
antande qui
pment(i
nte
res
tinanair
craf
t) 2,
400,
000
Cash 2,
400,
000
Tor ec
ogni
zethepur cha
seofanowner
shi
p-int
eres
tinaj
oi
ntl
y
contr
oll
edair
craft
.

I
n20x
4
Cas
h 1
2,
000
Profi
torloss(r
ent
ali
ncome) 1
2,
000
Torecogni
zeincomeear
nedinrent
ingt
oot
her
stheus
eoft
hea
irc
raf
t
i
n20x 4.
Pr
ofi
torloss(
ai
rcr
aftoper
ati
ngex
pen
ses) 1
80,
000
Cash 1
80,
000
Tore
cognizet
hecostsofr
unni
ngana
irc
rafti
n20x
4.

Profi
torl oss(depreci
ati
onexpense) 1
20,
000
Accumu lat
edde preci
ati
on(i
n t
ere
stinana
irc
raft 1
20,
000
Tor ecognizede preci
ati
onofanowne r
shi
p-i
nte
resti
najoi
ntl
y
control
le
da i
rcraftin20x4:P1
2,000,
000/20years=P600,
000/5
operators=P1 20,000
sharefore achjointopera
tor.

Probl
emV
1.Thefol
l
owi
nga
ret
hes
umma
rie
soft
hea
bov
etr
ans
act
ion
sforaj
oi
ntope
rat
ioni
nth
efor
mofapa
rtn
ers
hip:
Inve
stme
nti
n
Ev
ent Join
tOperat
ion AA BB CC
Dr. Cr
. Dr
. Cr. Dr
. Cr
. Dr
. Cr
.
a. P12,000 P1
2,
000
b. 120,000 1
20,
000
6,000 P 6,
000
 c. 1
80,
000 1
20,
000 P60,
000
d. P588,
000 P204,
000 P31
2,
000 P72,000
e. 3,
600 3,600 3,
600 1
0,800
6,
000 6,000
______ _______ ______ _____ _____
f
.* __ ___3,000 ___3,000 _ __ ______ __ __
P31
8,000 P597,
000 P21
0,600 P252,
000 P31
5,600 P60,000 P81,
600 P16,
800
______ ______ ______ _____
NI
** _297,000 __ __ __1 1
2,
200 __ _1
47,
000 __ 31
,
800
P597,000 P597,
000 P21
0,600 P364,
200 P31
5,600 P1
95,
000 P81,
600 P48,
600
Cas
h***
S
ett
le- ______ ______ _______ ______ _____
ment _ __ _153,
600 _ __ _1
20,600 __ _33,
000
Total
s P597,
000 P597,
000 P364,
200 P364,
200 P31
5,600 P31
5,600 P81
,600 P81
,
600
*pur
cha
ses
,P300,
000;
cos
tofg
oodss
old,
P294,
000;
endi
ngi
nve
ntor
yP6,
000x50% =P3,
000.
**NI–Ne
tIn
comeAl
l
oca
tion
AA BB CC Tot
al
Al
lowanc
ef orcl
ean
ing
-upoper
ati
ons P3,
000 P 3,
000
Commissi
on :
Al
j
on:40% ofP204,000 P81
,
600 81
,
600
El
eri
e:40% ofP312,
000 P1
24,
800 1
24,
800
Mac:
40% ofP72,000 28,
800 28,
800
_____
Balan
ce(
75% :25% ) 30,
600 10,
200 __ 40,
800
Total P11
2,
200 P1 35,
000 P31,
800 P279,
000
**Tot
alc
redi
tsofP597,
000 –Tot
alde
bit
sofP31
8,000=P279,
000,n
eti
ncome.
2.
Thec
a s
hsett
le
mentent
ry(
ref
ert
oNo.
1fort
hec
ompu
tat
ionofs
ett
le
men
t)wou
ldbea
sf ol
l
ows
:
AA,c
apit
al 153,
600
BB,capi
tal 1
20,
600
CC,capi
tal 33,
000
Th
ere
for
e,BBwi
l
lpa
yP1
20,
600a
ndCCwi
l
lpa
y,P33,
000t
oAAa
sfi
nals
ett
le
men
tfort
hej
oi
ntope
rat
ion
s.
Pr
oble
mVI
Sc
hedul
eofDe
ter
min
ati
ona
ndAl
l
oca
tionofEx
ces
s
DateofAcquis
iti
on–J anuary1 ,20x4
Costofinv
est
me nt
Consi
derati
ontransferr
ed P2,
016,
000
Less
:Bookvalueofs t
ockholde rs
’equ i
tyofSon:
Commons t
ock(P3,600, 000x30% ) P1
,
080,000
Ret
aine
de a
rnings(P1
,080, 000x30% ) 324,
000 1
,
404,
000
Al
locat
ede x
ce s
s(exces
sofc os toverboo kval
ue) P 61
2,
000
Less
:Over/undervalua
tionofa ss
etsandl i
abi
li
ti
es:
I
ncreas
ei ninve
ntory( P240,000x30% ) P 72,000
I
ncreas
ei nland(P960, 000x30% ) 288,
000
I
ncreas
ei nbuil
ding(P600, 000x30% ) 1
80,
000
Decre
aseine qui
pme n t(P840,000x30% ) (252,
000)
I
ncreas
ei nbondspa ya ble(P120,000x30% ) (360,000) 252,
000
Pos
it
iv
eex
ces
s:Goodwi
l
l(e
xce
ssofc
ostov
erf
airv
alu
e) P 360,
000
Theover
/un dervalu
a t
ionofass
etsandli
abi
li
ti
esa
res
umma
rizeda sfol
l
ows:
An t
onCo. An t
onCo. (
Over
)Un der
Bookv al
ue Fa i
rval
ue Val
ua t
ion
I
nvent
ori
es( sol
din20x 4) P1
,200,000 P1,
440,000 P 240, 000
Lan
d 1
,080,000 2,
040,000 960, 000
Bui
ldi
ngs–n et(10ye arre
mainin
glif
e) 1
,800,000 2,
400,000 600, 000
Equi
pmen t–n e
t(7ye a rr
emaini
ngli
fe) 1
,440,000 600,000 (840, 000)
Bondspaya ble(
du eJanuar
y1,20x9) (1,
200,000) (1,
320,
000) (1 20,000)
Net P4,320,000 P5,1
60,000 P 840, 000
Asumma ryordeprec
iat
ionanda mor
ti
zat
iona
dju
stme
ntsisasfol
l
ows
:
Over/ 30% Cur
ren
t
AccountAdju
stme
n t
stobea mort
ized Un der ther
eof L
ife Ye
ar(
20x4)
I
n v
entori
es(s
oldi
n20x 4) P 240, 000 P 72,000 1 P72,
000
Land 960,000 288,000 - -
 Bui
ldi
ngs–n e
t(10yearre
mai
nin
gli
fe) 600,
000 1
80,
000 1
0 18,
000
Equi
pmen t–net(7yearr
ema
ini
ngl
if
e) (840,000) (252,
000) 7 (36,000)
Bondspayabl
e(dueJ
anuar
y1,
20x9) (120,
000) (36,000) 5 (7,200)
Net P 840,
000 P252,
000 P46, 800
Th
efoll
owi
ngareent
ri
esre
c or
dedbytheparen
tin20x
4inr
ela
tiont
oit
sin
ves
tme
nti
njoi
ntve
ntu
re:
J
a n
uary1,
20x4:
(
1)I
nve
stmenti
nDDCompa n
y 2,
016,
000
Cash 2,
016,
000
Acqui
red30% joi
ntcont
rolinDD Company.
J
anuar
y1,20x4–De ce
mber31
,20x4:
(
2)Cash 21
6,000
In
vest
me nti
nDDCompany(P720,
000x30% ) 21
6,000
Rec
orddivi
dendsfr
omDDCompa ny.
Dec
e mber31,20x4:
(
3)In v
est
me nti
nDDCompa n
y 432,
000
Inv
estmenti
ncome(P1
,
440,
000x30% ) 432,
000
Recordshareinneti
ncomeofDDCompa
ny.
Dec
e mber31
,20x4:
(
4)I nv
est
mentin
come 46,
800
In
ves
tmentinDDCompany……………………. 46,
800
Recordamort
izat
ionofa
ll
ocat
edexc
essofi
nve
ntor
y,e
qui
pme
nt,
bui
l
dingsandbondspaya
ble.
Th
us,
thei
nve
stme
ntba
lanc
eadi
n nv
est
menti
ncomei
ntebook
h sofTTCompa
nyi
sasf
oll
ows
:
I
nvest
me nti
nJoi
ntV
entu
re(
DDCompany)
Cost
,1/1
/x4 2,
016,
000 21
6,000 Di
vi
dends–S on(
720,
000x80% )
NIofAnton 46,800 Amort
izat
ion
(
1,
440,000 x30% ) 432,
000
Bala
nce,12/
31/
x4 2,
185,
200

I
nves
tmentIn
come
Amort
iza
tion 46,
800 NIofSon
432,
000 (
P1,
440,000x30% )
385,
200 Bal
ance,1
2/31
/x4

Toc
hecktheba lanceofInvestme ntinJointVent
ure(DDCompa ny)
:
DDCompa n
y’sStockholders’Equity,1
2/31
/20x4:
Commons t
ock P3,
600,
000
Retain
e de arn
ings
Retainedea r
nings,1
/1/20x4 P1,080,
000
Neti nc
ome–20x 4 1
,
440,000
Dividends–20x 4 (720,000) 1
,
800,000
Bookv alueofs t
ockholders’equ i
tyofDDCompa ny,
12/
31/20x
4 P5,
400,000
Mu l
ti
pliedby: Int
erestinJ ointVenture 30%
Bookv alueofIn t
eres
ti nJointV entur
e P1
,620,
000
Add:Un amor ti
zeda l
loca t
e de x
cess–30% t here
of
P252, 000–P46, 800, amorti
zat
ion) 205,
200
Goodwi l
l 360,
000
In
vestme ntinJointVentu r
e( DDCompa ny)–equitymeth
od P2,1
85,
200
Mul
ti
pleChoi
ceProbl
ems
1
.a
Book
sofX
I
nv.
inJO X,
capi
tal J
our
nalent
ryforset
tl
ements
houl
dbe:
Z,ca
pit
al………………………. .6,
500
4,
000 6,
500 2,
500 X,capi
tal
…………………… 2,
500
2,
500 Y,
capit
al…………………… 4,
000
Book
sofY
I
nv.
inJ
O Y.
capi
tal
 2,
500 6,
500 4,
000
4,
000
Book
sofZ
I
nv.
inJ
O Z,
capi
tal
2,
500 6,
500
4,
000
6,
500
2.
Tota
lcredi
ts-In
ve s
tmenti
nJ oi
ntOper
ation
s…………………………………P25,81
0
Tota
ldebit
s-Invest
mentinJoin
tOperati
ons…………………………………. 1
9,
750
Neti
ncomeortotalgai
n(cr
editbal
anc
e)…………………………………….P 6,
060
3.
d
J
ose
,ca
pit
al
8,
500in
ves
tment
1,
21
2sha
reinn
etinc
ome(
P6,
060x2/
10)
9,
712

4.a–Th
e20,
000s
har
ess
hou
ldbev
alu
eda
tma
rke
tva
lue
,th
us,
P800,
000(
20,
000s
har
esxP40pe
rsh
are
)

5.b
Jose,c
api
tal
20,000sh
are
satP40/
sha
re P800,000 P1
98,000(4,500xP44)–S al
es
Expens
es 3,000 125,
000(5,000xP25)
4,
700 13,
600*(13,600xP1)-Cas
hdiv
ide
nd
168,
000(6,000xP28)-S a
les
266,000(7,600xP35)
P807,700 P770, 600
J
oin
tope
rat
ionl
oss P37,100
*
9/30S hare
sissue
d(6,000+1 0,
000+4,000) 20,000
10/20S ol
d (4,500)
11/1Stockdiv
idend(20,000–4,500)x20% 3,100
11/
15Sold (5,000)
Balanc
eofs hare
sou t
st
an di
ngbef
oreca
shdi
vi
dend 13,600
Th
ere
for
e,Rox
ass
har
ewou
ldbeP1
1,
130(
P37,
1
00x6,
000/
20,
000s
har
es)
6.c
I
nves
tmenti
nJointOperat
ion
s
S
harei
nne
tloss P400,000Inv
est
men
t(1
0,000s
har
esxP40)
P37,
1
00x(10,
000/
20,
000) P18,
550
P381
,450
7.b
Unre
ali
zedlos
sdu etodecli
neint
hevalueofs
hare
satt
het
imeofi
nve
stme
nt
(
P62–P40)x4, 000shares P68,000
Sh
areinjoi
ntoperati
on(P37,
100x4/20) __7,420
Re
ducti
onoflossbyc as
hdivi
dend(P1
3,600x4/20) P98,1
40
8.a
Inv
est
men
tinJ
oin
tOpera
tions
be
for
ene
tin
comeorl
oss 1
5,000 25,
000e ndi
nginv
ent
ory
10,
000n e
tincome
9.a(
A-P1
0,000x50% =P5,
000;
B–P1
0,000x30% =P3,
000;
C–P1
0,000x20% )
1
0.a
Joi
ntOpe
rati
ons An
son
,Ca
pit
al
Pu
rch
ase
s 000 77,
20, 000Sal
es(
?) Un
sol
dme
rch
andi
se 600 20,
000
 Cont
r/I
nves
t 20,
000 1
8,600Pr
ofi
t(
50% )
Expe
nses 800
1,
800 600 38,
600
42,
600 77,
000 38,
000 t
oAl
as
34,
400 (
P16,
000+
P1
8,400)
2,
800(P600+P2,200)
Unsoldmerc
han
dis
e
37,
200 Ne
tpr
ofi
t
1
1.c–r
efe
rtoNo.
10c
ompu
tat
ion
.
1
2.a
I
nvest
menti
nJ ointOperat
ion
s S
ant
o,ca
pit
al
Pu
rchas
es 1
0,000 7,200s al
es 10,
000 Con
tri
but
ion
/In
ves
t
Fr
eig
ht-i
n 240 5,120u n
sold 910S har
einNI
Fr
eig
ht-ou
t 260 (
P10,
000+P240)x1
/2
10,500 12,320 1
0,91
0
1,820

1
3.a–r
efe
rtoNo.
12f
orc
ompu
tat
ion
1
4.c
I
nve
stmenti
nJoi
ntOpera
tion
s
be
for
esale 6,
500 3,
500S al
es
Netl
oss 3,
000

N,
capi
tal O,c
api
tal
1
,
100 1
4,500 1
,
100 6,500
1
3,400 5,400

Di
st
ri
but
ionofL
oss
:
M N O Total
Sa
lar
y P 300 P - P - P 300
Bal
ance
,equ
all
y (1
,
100) (
1,
100) (
1,
100) (
3,300)
P(900) P(
1,
100) P(
1,
100) P(
3,
000)

1
5.a–r
efe
rtoNo.
14f
orc
ompu
tat
ion
1
6.a
I
nve
stmentinJoi
ntOperati
ons
Pu
rch
ase
s 45,
000 48,
700S al
es
1
8,000 16,
800
I
nte
res
tex
pen
se 80 40Divi
dend
50 1
00
63,130 65, 640
2,
510 2,
510Netincome

McK
ee,
capita
l Nel
son
,ca
pit
al
48,700 45,000 1
6,800 18,
000
40 80 1
00 50
1
,225sha
rei
nNI 1,
225sha
rei
nNI
2,405 2,
405

1
7.a–r
efe
rt oNo16forc
ompu
tat
ion
Ne
lson,c
api
tal 2,
405
McK
ee 2,
405

1
8.b
I
nve
stme
ntinJoi
ntOper
ati
ons
Pu
rch
ases 950 800sal
es
Ex
pense
s 150 600
 1
,
100 1
,
400
300Ne
tin
come

Bar
,ca
pita
l Car,
capi
tal
800 950 600 1 50
270 30
800 1 ,
220 600 1 80
420du
eto Du
efr
om 420

Th
een
tryf
orthes
ett
lementwoul
dbea
sfol
l
ows(
Carwi
l
lpa
yBa
rP420)
:
Ba
r,c
apit
a l 420
Car,c
apit
al 420
Di
st
ri
but
ionofn
eti
ncome
Ba
r Ca
r Tot
al
Commis
si
ononn e
tpu r
cha
ses
:
20% xP950 P1
90 P1
90
Commis
si
ononsales
:
25% xP800 200 200
25% xP600 P150 150
Bal
anc
e,equ
all
y (
120) (
120) (240)
P270 P30 P300)
1
9.b–r
efe
rtoNo.
18f
orc
ompu
tat
ion
s.
20.c
I
nve
stme
nti
nJ oin
tOpera
tions Tan
,c api
tal
15,000bef
oreP/ L 27,
000
10,500un
soldme rch
andi
se u
nsol
dme
rch
.10,
500 4,500sharei
nNI(
1/
3xP1
3,500)
S
ala
ry–Re
yes1
2,
000 25,500neti
nc ome 10,
500 31,
500
13,
500 21,
000

21
.b
Revenues
Totalca s
hr ece
ipts(
P78,920+P65,
245) P1
44,
345
Less:Cashinves
tme nt
s(P30,
000+P20,000) 50,
000
Cashs ale
s P94,
345
Add: Procee
dsf romsaleofre
mai
nin
gasset
s 60,
000
TotalRe ve
n ue P1
54,
345
Les
s :
Ex penses(P62,275+P70,695) 1
32,
970
Netincome P 21
,
375
22.
c
Be
nin
,capit
al Suca
t,c
api
tal
Re
cei
pts 78,
920 30,
000Contr
ibuti
on Re
cei
pts 65,
425 20,
000Cont
ri
buti
on
62,
275Dis
burse
me nt 70,
695Di
sbur
sement
12,
825Sha
reinNI(3/5) 8,
550Sh
areinNI(
2/5)
78,920 1 05,
100 65,
425 99, 245
26,1
80 33,
820

23.
d
N’sbooks
:itsh
owsP5,000r
ece
iva
blef
rom P,a
ndP3,
000pa
yabl
etoO;t
hus
,Nsh
oul
dre
cei
ven
etc
ashof
P2,000:
O,c
apit
al 3,
000
Cas
h 2,
000
P,c
api
tal 5,
000
O’sbook
s:i
tshowsP5,000r
ece
iva
blef
rom P,a
ndP2,
000pa
yabl
etoN;thus
,O sh
oul
dre
cei
ven
etc
ashof
P3,
000:
N,ca
pit
al 2,
000
Cash 3,
000
P,capi
tal 5,
000
P’
sbooks
: i
tshowsP2,
000paya
blet
oNandP3,
000pa yabl
etoO;
thu
s,i
nfi
nals
ett
le
ment
,Ps
hou
ldpa
yat
ota
l
ofP5,
000;P2,
000a ndP3,
000toNandO,
res
pect
iv
ely:
N,ca
pital 2,
000
O,capi
tal 3,
000
Cash 5,
000
24.
Th
eInves
tmentinBa sketCo.a sofDe cember31i
sasf
oll
ows
:
Acqui
si
ti
onc ost
, J
a nuary1,201 3 P500,
000
Add(dedu c
t):
Shareinn etincome( P90,000x40% ] 36,
000
Shareindi vi
dends( P30,000x40% ) (12,
000)
Amor t
izationofa l
locatedexc
ess (16,
400)
I
nvest
men tbalanceonDe cembe r31 P507,
600
Costofin
vest
me nt P500,
000
Less
:Bookvalueofinte
restacqu
ired[
40% x(P1,
400,
000–P500,
000)
] 360,
000
Al
locat
ede x
cess P1
40,000
Less
:Over/u
nderval
uati
onofa ss
etsan
dli
abi
l
iti
es:
I
ncreas
einbu i
ldin
g( P1
40,000x40% ) 56,
000
I
ncreas
eintradema rk(
P210,
000x40) 84,
000
Amor
ti
zati
onofal
loc
a t
edexc
ess
:
Bui
ldi
ng:
P56,000/7ye a
rs P 8,
000
Trade
mark:P84,
000/10year
s 8,
400

25.
b
Thejoi
nta
rrang
eme n
tisajoi
ntve
nturebec
aus
eitne
edsun
ani
mou
sconse
nttoal
lpa
rti
esin
volv
ed.Th
epa r
ti
es
rec
ogni
zethe
irrig
htstoth
en etass
etsofHar
ris
onCompa
nyasi
nve
stment
san
da c
countforthe
mu si
ngthe
equi
tymet
hod.
Th
eInves
tmentinBa sketCo.a sofDe cember31i
sasf
oll
ows
:
Acqui
si
ti
onc ost
, J
a nuary1,201 3 P500,
000
Add(dedu c
t):
Shareinn etincome( P90,000x40% ] 36,
000
Shareindi vi
dends( P30,000x40% ) (12,
000)
Amor t
izationofa l
locatedexc
ess (16,
400)
I
nvest
men tbalanceonDe cembe r31 P507,
600
Costofin
vest
me nt P500,
000
Less
:Bookvalueofinte
restacqu
ired[
40% x(P1,
400,
000–P500,
000)
] 360,
000
Al
locat
ede x
cess P1
40,000
Less
:Over/u
nderval
uati
onofa ss
etsan
dli
abi
l
iti
es:
I
ncreas
einbu i
ldin
g( P1
40,000x40% ) 56,
000
I
ncreas
eintradema rk(
P210,
000x40) 84,
000
Amor
ti
zati
onofa l
loc
a t
edexc
ess
:
Bui
ldi
n g
:P56,000/7ye a
rs P 8,000
Trademark:P84,
000/10year
s 8,
400
Total P16,400
26.b–r e
fertoNo.25forfurt
herdis
cuss
ion
.
Th
eIncomefromInv
e s
tmentinBaske
tCo.onDec
embe
r31i
sasf
oll
ows
:
Shar
einn e
tinc
ome( P90,000x40% ] P 36,
000
Amorti
zati
onofall
ocatedexc
ess (1
6,400)
I
ncomefromInvest
me ntonDecember31 P1
9,
600
27.
d
Thejoi
nta
rrange
me nti
sajoi
ntve
nturebec
aus
eitne
edsuna
nimou
sconse
nttoal
lpa
rti
esin
volv
ed.Th
epa r
ti
es
rec
ogni
zethei
rrigh
tstoth
en etass
etsofHar
ris
onCompa
nya si
nve
stment
san
da c
countforthe
mu si
ngthe
equi
tymet
hod.
Th
eInves
tmentinGol dma nCo.asofDe cember31
,2015i
sasf
oll
ows
:
Acqui
si
ti
onc ost
, Jan
u ar
y1 ,
2013 P600,
000
Add(dedu c
t):
Shareinn etin
come[ (
P140,000x3ye ar
s)x40% ] 1
68,
000
Shareindividends[(
P50,000x3ye ars
)x40% ] (60,
000)
Amor t
izati
onofa ll
ocat
ede xce
ss ( 0)
I
nvest
men tbalanceonDe cember31 P708,
000
 Costofinv
estment P600,
000
Less
:Bookvalueofi
nteres
tac
quir
ed(
40% xP1,
200,
000) 480,
000
Al
locat
ede x
cessP1
20,000
Le
s s
:Over/u
nderval
uati
onofas
set
san
dli
abi
l
iti
es 0
Goodwill P1
20,
000
Th
erei
snoi
ndi
cat
iona
stoi
mpa
irme
ntofg
oodwi
l
l.
28.d
Tode t
ermin
ewh et
heracontra
ctua
la r
range
me ntg
ive
sparti
escon
trolofanarr
ang
ementcol
l
ecti
vel
y,i
tis
nece
ssa
ryf i
rs
ttoident
if
yt herel
evan
ta c
ti
vit
ie
soft hata
rrang
ement.Tha
tis
,whatar
et h
ea ct
iv
it
iest
hat
si
gni
fi
cant
lyaff
ectt
here
turn
softhearra
ngement?
Whenidenti
fyi
ngt h
er ele
vantact
iv
it
ies,c
on s
ider
ati
onshoul
dbeg iv
ent othepu r
poseandde s
ignofth
e
ar
rangement
.Inpa r
ticu
lar,c
onsi
dera
tionshouldbeg i
ventotheri
skstowh i
chthejoi
ntarr
a n
gementwas
des
ign
edtobee xposed,t
heris
ksth
ejointar
rangementwasde
sig
nedtopassontothepar
ti
esi
nvol
vedwi
thth
e
j
oi
ntarran
gement,andwh e
the
rtheparti
esareexpose
dtosomeoral
lofth
oseri
sks.
Inma n
yc ases
,direc
tingthestr
ategicope rat
ingandf i
nanci
alpoli
ci
esofthearran
geme n
twillbetheacti
vit
ythat
mostsi
gn i
fi
cant
lya f
fectsret
urns.Often,thearrang
e mentrequir
esthepart
iestoagre
eonbot hoft hes
epolic
ies
.
However,i
ns omec as
es,unanimou sc ons
entma yber equ i
redtodirecttheoperati
ngpol i
ci
e s
,butn otthe
fi
nanci
alpoli
cies(orvicevers
a).Insu chcases,s
incethea c
tivi
ti
esaredir
ect
e dbydiffer
entpa r
ties
,theparti
es
wouldneedtoa ss
e s
swh ic
hoft hosetwoa cti
vi
tie
s(operati
ngorf i
nanci
ng)mostsi
gnif
icant
lyaffe
c t
sret
u r
ns,and
whethe
rt he
reisjointcontr
oloverth atacti
vi
ty.Thiswouldbet hecas
ewh en
e v
erther
eismor eth a
non eacti
vi
ty
tha
tsigni
fi
cantl
ya ff
ectsret
urnsofth ea r
rangements,a
ndt hoseact
iv
it
ie
saredirect
edbydi f
ferentpart
ies
.
Basedont heownershi
pstruct
ure,ev
enthoughWa ll
acecanblocka nydec
isi
on,Wall
acedoesnotc
ontrolt
he
arr
angeme nt
,becauseWa l
la
cen eedsZimme r
ma ntoa gre
e— t he
ref
orejoi
ntcontr
olbetwee
nWa ll
aceand
Zimmerma n(si
ncethei
rvote
sa ndonlythe
irvotes
,toget
hermee tthere
qui
r e
ment)
.Becau
setheyar
et heon
ly
combina
tionofpa r
ti
esthatcol
lec
tiv
elyc
ontrolth
ea rr
angemen
t ,iti
scle
arthatWall
aceandZimmermanmu s
t
unani
mous l
yagree.
Th
ea ppropri
atemethodforthejoi
ntv
entu
reist
hee
qui
tyme
thod.Th
eIn
comef
romIn
vest
menti
nGoldCo.
on
Dec
ember31 ,
2015isasfoll
ows:
Shar
ei nneti
ncome(P140,
000x40% ) P 56,
000
Amorti
zati
onofa l
loc
atedexces
s ( 0)
I
ncomef r
omI nve
stmentonDe c
ember31,
201
5 P 56,
000
29.d
Nojoi
n tc
on t
rol— mu l
ti
plecombina
tionsofparti
esc
oul
dbeu s
edtoreacha
greeme
ntandcoll
ect
iv
elycont
rol
th
ea rran
geme nt(i
.e
.,Walla
cea ndZi mme r
ma norWall
aceandAmeri
cancoul
dvotetoge
thertome ett
h e
requi
rement)
.Sinc
et he
rea remu l
ti
plec ombin
ati
ons
,an
dt hecon
tra
ctu
alagre
ementdoesnotspeci
fywhic
h
part
iesmustagree
,ther
eisnou n
animou scons
ent.
I
tshoul
dben otedthatsi
ncethe
reisnojoi
ntcont
rolasin
dic
ate
dpe rprobl
emandthepres
enceof50%
owner
shi
ph ol
din
gispr es
umedtogiv
esi
gnif
ic
antin
flu
enc
eofWa l
lac
eov e
rGoldma
n,un
les
sitcanbecl
earl
y
demonst
rat
edthatt
hisisnott
hecas
e.Th
eref
ore,
GoldmanCompanyiscons
ide
reda
sanass
oci
atei
nst
eadofa
j
ointv
entur
e.
Thea ppropri
atemethodforInves
tmentinAs
soc
iat
esi
sth
eequ
ityme
thod.Th
eIn
comef
romI
nve
stme
nti
nGol
d
Co.onDe cember31,2015isasfol
lows:
Shar
ei nneti
ncome(P140,000x40% ) P 56,
000
Amorti
zati
onofa l
loc
atede x
cess ( 0)
I
ncomef r
omI nve
stmentonDe cember31
,2015 P 56,
000
30.d
Noj
oi
ntc
ont
rol–mu
lti
plec
ombi
nat
ion
scou
ldbeu
sedt
ore
acha
gre
eme
nt.
I
tshoul
dben ote
dt hatsi
ncether
eisnojoi
ntcont
rolasin
dic
ate
dpe rprobl
ema ndthepres
enceof35%
owners
hiphol
din
gi spres
umedt ogiv
esi
gni
fi
canti
nfl
uen
ceofWa l
la
ceoverGoldma
n,u n
les
sitcanbecl
earl
y
demonst
rat
edthatthi
sisnotth
ec a
se.Th
ere
for
e,Gol
dma nCompanyisc
onsi
der
e da
sa nass
oci
atei
nst
eadofa
j
ointve
ntur
e.
Thea ppropri
atemethodforInves
tmentinAs
soc
iat
esi
sth
eequ
ityme
thod.Th
eIn
comef
romInve
stme
nti
nGol
d
Co.onDe cember31,2015isasfol
lows:
Shar
ei nneti
ncome(P140,000x40% ) P 56,
000
Amorti
zati
onofa l
loc
atede x
cess ( 0)
I
ncomef r
omI nve
stmentonDe cember31
,2015 P 56,
000
31
.a–downst
reamtrans
acti
on(r
efe
ra l
sotocon s
olida
tionforcorol
l
arya
nal
ysi
s)
Gros
sProfi
tMarkup:P36,
000/P90,000= 40%
I
nvent
oryRemaini
ngatYear
-En d P20,000
x:
Ma r
kup 40%
Unre
ali
zedprofi
tinendi
nginv
entor
y P8,000
x:
Own er
shi
p 30%
I
nter
companyUn r
eali
zedprof
iti
ne nding
i
nvent
ory P2,400
Multi
pleChoi
cePr
obl
ems–S
MEf
orJ
ointVe
ntur
es
1.a
2.a
3.a
4.a
5.c
6.a
7.a
8.a
9.c
10.a
11.
a
12.c
13.a
14.a
15.b
16.c
Costofinvest
me ntinent
it
yZ:
Purchaseprice……………………………………………………………………. . P28,000
Add:Tr ansac
tioncost
s(1
% xP28,000)
……………………………………… 280
Costs…………………………………………………………………………………. P28,280
Less
:Fairva l
ueonDe cember31
,20x4…………………….
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
P15,
000
Less:
Cos t
st ose
ll(
5% xP15,
000)……………………………………………. . 750 1 4,
250
I
mpa i
rme ntloss
………………………………………………………………………. . P14,030
1
7.d
Noe
ntr
yre
qui
redonl
ythede
cre
aseori
ncr
eas
einf
airv
aluei
sre
cog
nize
dtopr
ofi
tandl
oss
.
1
8.a
Costofinvestmentine nti
tyZ:
Purchasepr i
ce……………………………………………………………………. . P28,
000
Add:Tr ansacti
onc ost
s(1% xP28, 000)……………………………………… 280
I
niti
alcos t
s…………………………………………………………………………. . P28,280
Less
: SMEA’ sshareofe nt
ityZ’sl
ossfortheye
ar(
25% xP20,000)…….
..
.
.
. 5,
000
Costsofinvestment,De ce
mbe r31,20x4……………………………………. P23,
280
Les
s:FairvalueonDe c ember31,20x4……………………. .
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
..
.
.
..
P15,
000
Less:
Cos tstosell(
5% xP1 5,
000)……………………………………………. . 750 1 4,
250
I
mpa i
rme ntloss………………………………………………………………………. . P 9,
030

1
9.b
Costofinv
estmenti
nenti
tyZ………………. ………………………………………………. .
P28,000
Les
s:Fai
rvalueonDe c
ember31,
20x4…………………...
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.15,
000
Decrea
seinfairval
ueonDece
mbe r31
,20x4……………………………………………P1 3,
000
20.a
En
tit
yX:
Costofi
nve
stmenti
nenti
tyX……………….……………………………………………P1 0,000
Les
s:Fai
rval
ueonDecember31
,20x4………………….
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..1
3,000
I
ncreas
einfai
rval
ueonDe c
ember31
,20x
4…………………………………………P1 3,
000
En
tit
yY:
Costofi
nve
stmenti
nenti
tyY……………….……………………………………………P1 5,000
Les
s:Fai
rval
ueonDecember31,
20x4………………….
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..
.
..
.
.
..29,000
I
ncreas
einfai
rval
ueonDe c
ember31
,20x
4…………………………………………P1 4,
000

21
.d–r
efe
rtopa
rag
raph
sPFRS
sforS
MEspa
rag
raph
s15.
1
0an
d15.
1
1
20x
4:P101,
000becaus
er e
cover
abl
eamount–f ai
rvaluele
sscost
stos
ellofP98,
000isl
esst
hant
hec
ost
ofP101
,
000.
20x
5:P101,
000beca
useiti
sles
sthanre
cover
ableamount.
20x
6:P86,000bec
auserecov
erabl
eamountofP86,
000i sl
esstha
ncos
tofP101,
000.

22.
e–PFRS
sforS
MEspa
rag
raph
s15.
1
2,1
5.
14a
nd1
5.
15