(08 Task Performance 1) PDF

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Joint Arrangements...

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SOLVING: (35 points: 7 items x 5 points) Direction: Read the problems below and give what is being asked. Write your answers on another sheet ofpaper. 1. On January 1, 20X1, Entity A and Entity B, both public entities, P3,000,000 and P2,000,000 for a capital interest ratio of 60:40. incorporating entities provided that the decisions on relevant unanimous consent of both entities. Moreover, Entity A and Entity of Entity C.

incorporated Entity C by investing The contractual agreement of the activities of Entity C will require B will have rights to the net assets

The financial statements of Entity C provided the following data for 20X1:  Entity C reported a net income of P1,000,000 for 20X1 and paid cash dividends of P400,000 on December 31, 20X1.  During 20X1, Entity C sold inventory to Entity A with a gross profit of P50,000. 80% of those inventories were resold by Entity A to third persons during 20X1. The remainder was resold to thirdpersons during 20X1.  On July 1, 20X1, Entity C sold a piece of machinery to Entity B at a loss of P20,000. At the time ofsale, the machinery has remaining useful life of two (2) years. Required: Determine the following: a. The investment income to be reported by Entity A for the year ended December 31, 20X1. Answer: Unadjusted investment income if Entity A for 20x1 (1,000,000x60%) Less: Unrealized gross profit in ending inventory of entity A (50,000x20%x60%) Adjusted Investment income for Entity A for 20x1

₱ 600,000 (6,000) ₱594,000

b. The balance of Investment in Entity C to be reported by Entity B on December 31, 20X1.

Answer: Initial measurement of investment in Entity C Add: Unadjusted investment income for Entity B for 20x1 (1,000,000x40%) Unadjusted loss on sale of machinery (20,000x40%) Less: Realized Loss on sale of machinery (20,000/2x6/12x40%) 20x1 dividend received from Entity C (400,000x40%) Investment in Entity C and B’s book on December 31, 20x1

₱ 2,000,000 400,000 8,000 (6,000) (160,000) ₱2,242,000

2. On January 1, 20X0, Station Inc. invested P2,000,000 cash in a joint venture for 50% interest. For the yearsended December 31, 20X0, 20X1, and 20X2, the joint venture reported the following data: Year 20X0 20X1 20X2

Net Income (Net Loss) P1,000,000 (6,000,000) 7,000,000

Dividend Distribution P300,000 500,000

Required: Determine the following: a. Share in net loss or investment to be reported by Station Inc. for the year ended December 31, 20X1. Answer: Net Loss 20x1 X Capital Interest Net Loss to be reported by Station Inc. 20x1

₱ 6,000,000 50% ₱3,000,000

b. The book value of Investment in Joint venture to be reported by Station Inc. as of December

31, 20X2. Answer: Investment 20x0 Share in Net Income (1,000,000x50%) Share in dividend distribution (300,000x50%) Balance of investment 20x0 Share in Net loss 20x1 (6,000,000x50%) Balance as of 20x1 Share in net income 20x2 (7,000,000x50%) Share in dividend distribution (500,000x50%) Book value of Investment

₱ 2,000,000 500,000. 150,000. 2,350,000 3,000,000. (650,000) 3,500,000 (250,000) ₱2,600,000

3. Entity X and Entity Y incorporated Entity Z to manufacture a microchip to incorporate entities as components for their final products for cellular phones and tablets. The contractual agreement of the incorporating entities provided that the decisions on relevant activities ofEntity C will require the unanimous consent of both entities. Entity X and Entity Y have rights to the assets, and obligations for the liabilities, relating to the agreement.Entity X and Entity Y will own the ordinary shares of Entity Z in the ratio of 60:40. The contractual agreement of Entity X and Entity Y also provided the following about the assets andliabilities of Entity Z:  Entity X owns the land and incurs the loan payable of Entity Z.  Entity Y owns the building and incurs the note payable of Entity Z.  The other assets and liabilities are owned by Entity X and Entity Y based on their capital interest in Entity Z. 

The sales revenue of Entity Z includes sales to Entity X and Entity Y in the amount of P1,000,000 and P2,000,000, respectively. As of the end of the first year, Entity X and Entity Y were able to resell 30% and 60% of the inventory coming from Entity Z to third persons.

At the end of the first operation, Entity Z provided the following data of its financial statements: Inventory P1,000,000 Land 3,000,000 Building 5,000,000

Accounts Payable P2,000,000 Notes Payable 1,000,000 Loan Payable 4,000,000 Share Capital 1,000,000 Retained 1,000,000 Earnings Sales Revenue 5,000,000

Required: Determine the following: a. Amount of total assets to be reported by Entity X concerning its interest in Entity Z. Answer: Land owned by Entity X Add: Interest of Entity X on co-owned inventory (1,000,000x60%) Total Assets to be reported by Entity X concerning its interest in Entity Z.

₱ 3,000,000 600,000 ₱3,600,000

b. Amount of total liabilities to be reported by Entity Y concerning its interest in Entity Z.

Answer: Notes Payable owned by Entity Z Add: Interest of Entity on co-owned accounts payable (2,000,000x40%) Total Liabilities to be reported by Entity Y concerning its interest in Z c.

₱ 1,000,000 800,000 ₱1,800,000

Amount of sales revenue to be reported by Entity X concerning its interest in Entity Z. Answer: Sales revenue reported by Entity Z Less: unsold Inventory of Entity X coming from Entity Z (1,000,000x70%) Unsold inventory of Entity Y coming from Entity Z (1,000,000x40%) Sales revenue to third persons

₱ 5,000,000 (700,000) (800,000) P3,500,000

Sales revenue to be reported by Entity X (3,500,000x60%)

₱2,100,000...