Title | Solution Chapter 11 AFAR by Dayag |
---|---|
Course | Financial Accounting and Reporting |
Institution | Bulacan State University |
Pages | 16 |
File Size | 357.6 KB |
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Total Downloads | 845 |
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Chapter 11 Problem I 1. Contributions of cash by the operators Cash 360, KK Company 180, Cerise Company 180, Contribution by joint operators. Use of cash and loan to buy machinery & equipment and raw materials Machinery and equipment 96, Cash 60, Loans payable – machinery and equipment 36, C...
Chapter 11 Problem I 1. • Contributions of cash by the operators Cash KK Company Cerise Company Contribution by joint operators.
360,000 180,000 180,000
• Use of cash and loan to buy machinery & equipment and raw materials Machinery and equipment 96,000 Cash 60,000 Loans payable – machinery and equipment 36,000 Contribution by joint operators. Materials Accounts payable Acquisition of materials. • Labor incurrence Payroll Cash Accrued payroll Annual labor. • Loans from the bank Cash Bank loans payable Amount borrowed.
78,000 78,000
86,400 84,000 2,400
72,000 72,000
• Repayment of loan – machinery and equipment and other factory expenses Loan payable – machinery and equipment 12,000 Cash 12,000 Partial payment of loan. Accounts payable Cash Payment of trade creditors. Factory overhead control – heat, light and power Cash Payment of manufacturing expenses such as heat, light and power. • Depreciation of machinery and equipment Factory overhead control – depreciation Accumulated depreciation Depreciation of equipment.
50,400 50,400
156,000 156,000
9,600 9,600
• Transfer of materials, labor and overhead to Work-in-Process Work-in-process Payroll
309,600 86,400
Materials Factory overhead control – heat, light and power Factory overhead control – depreciation Allocation of costs to work-in-process
57,600 156,000 9,600
• Transfer of Work-in-Process to Finished Goods Inventory. Finished goods Work-in-process Allocation to finished goods
216,000 216,000
• Transfer of Finished Goods Inventory to Joint Operators throughout the year KK Company 96,000 DD Company 96,000 Finished goods 192,000 Delivery of output to joint operators. 2. Cash Contribution – Drei Work-in-Process 180,000 Labor Contribution – Cerise 86,400 180,000 Materials Bank loan 57,600 60,000 Factory Overhead – heat, etc. 156,000 Factory Balance,Overhead 12/31/x4 – depreciation 9,600 57,600 Balance, 12/31/x4 93,600
60,000
Machinery and equipment
216,000 84,000 Laborto Finished Goods 12,000
Machinery and equipment
50,400 Accounts payable 156,000 Factory overhead control
3. a. Total assets, P282,000 b. KK’s investment, P84,000 c. DD’s investment, P84,000 December 31, 20x4 Assets Current Assets Cash Finished goods inventory Work-in-Process inventory Materials inventory Total current assets Non-current Assets Equipment Less: Accumulated depreciation Total Assets Liabilities and Net Assets Current Liabilities Accrued payroll Accounts payable Non-current Liabilities Bank loan payable Loan payable – machinery and equipment
P 57,600 24,000 93,600 20,400 P 195,600 P 96,000 9,600
P
86,400 P282,000
2,400 27,600
P 30,000
P 60,000 24,000
__84,000
Total Liabilities Net Assets Total Liabilities and Net Assets Joint Operator’s Equity KK Company: Contributions – January 1, 20x4 Cost of inventory distributed DD Company: Contributions – January 1, 20x4 Cost of inventory distributed Total Joint Operator’s Equity
P 114,000 168,000 P282,000
P 180,000 ( 96,000) P 180,000 ( 96,000)
P 84,000
P 84,000 P168,000
Problem II 1. Ayala Corp. shall account for its interest in the joint operation as follows: Current assets (50% x P720,000) Property, plant and equipment (60% x P1,200,000) Expenses (60% x 720,000) Liabilities (75% x P960,000) Revenue (55% x P1,200,000) Interests in Joint Operation To recognize the share of Entity A in the assets, liabilities, revenues and expenses as follows:
360,000 720,000 432,000 720,000 660,000 132,000
2. The assets, liabilities, revenue and expenses are recognized and combined with those of Ayala’s own financial statements. The interest in joint operations at the end of the reporting period is reduced to P228,000, computed as follows: Interests in Joint Operation Less: Share in assets, liabilities, revenues and expenses Interest in operation, ending balance
P 360,000 132,000 P 228,000
Problem III 1. The joint operator, Entity A account for their interests in the joint operation as follows: Entity X—in 20x4 Profit or loss (construction costs) Cash/Accumulated depreciation/Trade payables To recognize the construction costs incurred in 20x4
4,800,000
Cash Profit or loss (construction revenue) To recognize the construction costs incurred in 20x4
8,400,000
4,800,000
8,400,000
Entity Y—in 20x4 Profit or loss (construction costs) Cash/Accumulated depreciation/Trade payables To recognize the construction costs incurred in 20x4
7,200,000
Cash Profit or loss (construction revenue) To recognize the construction costs incurred in 20x4
8,400,000
Problem IV
7,200,000
8,400,000
The joint operator, Entity K account for their interests in the joint operation as follows: January 1, 20x4 (P12,000,000 / 5 = P2,400,000) Property, plant and equipment (interest in an aircraft) Cash To recognize the purchase of an ownership-interest in a jointly controlled aircraft.
2,400,000 2,400,000
In 20x4 Cash Profit or loss (rental income) To recognize income earned in renting to others the use of the aircraft in 20x4.
12,000 12,000
Profit or loss (aircraft operating expenses) Cash To recognize the costs of running an aircraft in 20x4.
180,000
Profit or loss (depreciation expense) Accumulated depreciation (interest in an aircraft To recognize depreciation of an ownership-interest in a jointly controlled aircraft in 20x4: P12,000,000/20 years = P600,000/5 operators = P120,000 share for each joint operator.
120,000
180,000
120,000
Problem V 1. The following are the summaries of the above transactions for a joint operation in the form of a partnership: Event a. b. c. d. e.
Investment in Joint Operation Dr. Cr. P 12,000 120,000
AA Dr.
BB Cr. P12,000 120,000
Dr.
CC Cr.
Dr.
Cr. P 6,000
6,000 180,000
120,000 P588,000
P204,000 3,600
P60,000 P312,000 3,600
___3,000
________
________
______
P72,000 3,600 6,000 _______
10,800
f. *
________
6,000 ___3,000
NI**
P318,000 _297,000 P597,000
P597,000 ________ P597,000
P210,600 ________ P210,600
P252,000 __112,200 P364,200
P315,600 ________ P315,600
P 60,000 _147,000 P195,000
P81,600 _______ P81,600
_______ P 16,800 31,800 P48,600
_______ P597,000
________ P597,000
_153,600 P364,200
________ P364,200
________ P315,600
_120,600 P315,600
_______ P81,600
_33,000 P81,600
Cash** * Settlement Totals
* purchases, P300,000; cost of goods sold, P294,000; ending inventory P6,000 x 50% = P3,000. **NI – Net Income Allocation AA Allowance for cleaning-up operations
BB
CC
Total P
P
3,000 Commission: Aljon: 40% of P204,000
P81,600
Elerie: 40% of P312,000 Mac: 40% of P72,000
3,000 81,600
P124,80 0 28,800
10,20 30,600 0 _______ P112,2 P135,00 P31,80 Total 00 0 0 **Total credits of P597,000 – Total debits of P318,000 = P279,000, net income.
Balance (75%: 25%)
124,800 28,800 40,80 0 P279,00 0
2. The cash settlement entry (refer to No. 1 for the computation of settlement) would be as follows: AA, capital 153,600 BB, capital 120,600 CC, capital 33,000 Therefore, BB will pay P120,600 and CC will pay, P33,000 to AA as final settlement for the joint operations. Problem VI Schedule of Determination and Allocation of Excess Date of Acquisition – January 1, 20x4 Cost of investment Consideration transferred Less: Book value of stockholders’ equity of Son: Common stock (P3,600,000 x 30%) Retained earnings (P1,080,000 x 30%) Allocated excess (excess of cost over book value) Less: Over/under valuation of assets and liabilities: Increase in inventory (P240,000 x 30%) Increase in land (P960,000 x 30%) Increase in building (P600,000 x 30%) Decrease in equipment (P840,000 x 30%) Increase in bonds payable (P120,000 x 30%)
P2,016,000 P 1,080,000 324,000 P 72,000 288,000 180,000 ( 252,000) ( 360,000)
1,404,000 612,000
P
Positive excess: Goodwill (excess of cost over fair value)
252,000 P 360,000
The over/under valuation of assets and liabilities are summarized as follows: Anton Co. Anton Co. (Over) Under Book value Fair value Valuation Inventories (sold in 20x4) P1,200,000 P1,440,000 P 240,000 Land 1,080,000 2,040,000 960,000 Buildings – net ( 10 year remaining life) 1,800,000 2,400,000 600,000 Equipment – net ( 7 year remaining life) 1,440,000 600,000 ( 840,000) (1,320,000 Bonds payable (due January 1, 20x9) ( 1,200,000) ) ( 120,000) Net P4,320,000 P5,160,000 P 840,000 A summary or depreciation and amortization adjustments is as follows: Over/ 30% Account Adjustments to be amortized Under thereof Life P Inventories (sold in 20x4) 240,000 P 72,000 1
Current Year(20x4) P 72,000
Land Buildings – net ( 10 year remaining life) Equipment – net ( 7 year remaining life) Bonds payable (due January 1, 20x9) Net
960,000 600,000 ( 840,000 ) ( 120,00 0) P 840,000
288,000 180,000 ( 252,000 ) ( 36,000 )
10
18,000
7
(36,000)
5
( 7,200)
P 252,000
P 46,800
The following are entries recorded by the parent in 20x4 in relation to its investment in joint venture: January 1, 20x4: (1) Investment in DD Company 2,016,000 Cash 2,016,000 Acquired 30% joint control in DD Company. January 1, 20x4 – December 31, 20x4: (2) Cash Investment in DD Company (P720,000 x 30%) Record dividends from DD Company. December 31, 20x4: (3) Investment in DD Company Investment income (P1,440,000 x 30%) Record share in net income of DD Company.
216,000 216,000
432,000 432,000
December 31, 20x4: (4) Investment income Investment in DD Company……………………. Record amortization of allocated excess of inventory, equipment, buildings and bonds payable.
46,800 46,800
Thus, the investment balance and investment income in the books of TT Company is as follows: Investment in Joint Venture (DD Company) Cost, 1/1/x4 216,000 2,016,000 80%) NI of Anton 46,800 (1,440,000 x 30%) 432,000 Balance, 12/31/x4 2,185,200 Investment Income Amortization 46,800
Dividends – Son (720,000x Amortization
NI of Son 432,000 385,200
(P1,440,000 x 30%) Balance, 12/31/x4
To check the balance of Investment in Joint Venture (DD Company): DD Company’s Stockholders’ Equity, 12/31/20x4: Common stock
P3,600,00 0
Retained earnings P 1,080,000 1,440,000
Retained earnings,1/1/20x4 Net income – 20x4 Dividends – 20x4 Book value of stockholders’ equity of DD Company,12/31/20x4 Multiplied by: Interest in Joint Venture
( 720,000)
Book value of Interest in Joint Venture Add: Unamortized allocated excess – 30% thereof P252,000 – P46,800, amortization) Goodwill Investment in Joint Venture (DD Company) – equity method Multiple Choice Problems 1. a Books of X Inv. in JO be:
X, capital
1,800,00 0 P5,400,00 0 30% P1,620,00 0 205,200 360,00 0 P2,185,20 0
Journal entry for settlement should Z, capital………………………..
6,500 4,000
6,500
2,500
X, capital……………………
2,500 2,500
Y, capital……………………
4,000 Books of Y Inv. in JO 2,500 4,000
6,500
Books of Z Inv. in JO 2,500 4,000
Y. capital 4,000
Z, capital 6,500
6,500 2. Total credits - Investment in Joint Operations…………………………………P 25,810 Total debits - Investment in Joint Operations…………………………………. 19,750 Net income or total gain (credit balance)…………………………………….P 6,060 3. d Jose, capital 8,500 investment 1,212 share in net income (P6,060 x 2/10) 9,712
4. a – The 20,000 shares should be valued at market value, thus, P800,000 (20,000 shares x P40 per share)
5. b 20,000 shares at P40/share P800,000 Expenses 3,000
Jose, capital P 198,000 (4,500 x P44) – Sales 125,000 (5,000 x P25) 13,600* (13,600 x P1) - Cash dividend
4,700
Joint operation loss 37,100
P807,700 P
168,000 (6,000 x P28) - Sales 266,000 (7,600 x P35) P 770,600
* 9/30 Shares issued (6,000 + 10,000 + 4,000) 10/20 Sold 11/ 1 Stock dividend (20,000 – 4,500) x 20% 11/15 Sold Balance of shares outstanding before cash dividend
20,000 (4,500) 3,100 (5,000) 13,600
Therefore, Roxas share would be P11,130 (P37,100 x 6,000/20,000 shares) 6. c Investment in Joint Operations P400,000 Investment (10,000 shares x P40)
Share in net loss P37,100 x (10,000/20,000) P18,550
P381,450 7. b Unrealized loss due to decline in the value of shares at the time of investment (P62 – P40) x 4,000 shares Share in joint operation (P37,100 x 4/20) Reduction of loss by cash dividend (P13,600 x 4/20)
P68,000 __7,420 P98,140
8. a Investment in Joint Operations before net income or loss 15,000 25,000 ending inventory 10,000 net income 9. a (A- P10,000 x 50% = P5,000; B – P10,000 x 30% = P3,000; C – P10,000 x 20%) 10. a Purchases
Joint Operations 20,000 77,000 Sales (?)
Anson, Capital Unsold merchandise 600 20,000
Contr/Invest Profit(50%) Expenses
20,000
18,600
800 1,800 42,600
600 77,000
38,600 38,000
to Alas 34,400 (P16,000+ P18,400) 2,800 (P600 + P2,200) Unsold merchandise 37,200 Net profit 11. c – refer to No. 10 computation. 12. a Purchases 10,000 Freight-in 240 Freight-out 260
Investment in Joint Operations 7,200 sales
Santo, capital 10,000 Contribution/Invest
5,120 unsold
910 Share in NI
(P10,000 + P240) x 10,
1/2 12,320
10,910
500 1,820
13. a – refer to No. 12 for computation 14. c Investment in Joint Operations 3,500 Sales
before sale 6,500 Net loss 3,000 N, capital 1, 14,500
O, capital 1, 6,500
100
100 13,400
5,400
Distribution of Loss: M 300 (1,100) P ( 900)
Salary Balance, equally
P
N P
(1,100) P(1,100)
O P
(1,100) P(1,100)
15. a – refer to No. 14 for computation 16. a
Purchases 45,000
Investment in Joint Operations 48,700 Sales 16,800
18,000
Total P 300 (3,300) P(3,000)
Interest expense 80
40 Dividend 100
50 6
65,640
3,130 2,510 Net income 2,510 McKee, capital 48,7 45,000
Nelson, capital 16, 18,000
00
800 80 1,225 share in NI
40
50 1,225 share in NI
100
2,40
2,405
5
17. a – refer to No 16 for computation Nelson, capital McKee
2,405 2,405
18. b Investment in Joint Operations 800 sales
Purchases 950 Expenses 150
600 1,400 1,100 300 Net income Bar, capital 950
Car, capital 150 600
800 270 1,220 800
30 180 600
420 due to
Due
from
420
The entry for the settlement would be as follows (Car will pay Bar P420): Bar, capital 420 Car, capital 420 Distribution of net income Bar Commission on net purchases: 20% x P950 Commission on sales: 25% x P800 25% x P600 Balance, equally
19. b – refer to No. 18 for computations.
Car
P190
P190
200 (120) P270
Total
P150 (120) P 30
200 150
(240) P300)
20. c Investment in Joint Operations 15,000 before P/L 10,500 unsold merchandise Salary 12,000
–
Reyes
unsold 10,500
25,500 net income
Tan, capital 27,000 merch. 4,500 share in NI (1/3 x P13,500) 10, 31,500
500 13,500
21,000
21. b Revenues Total cash receipts (P78,920 + P65,245) Less: Cash investments (P30,000 + P20,000) Cash sales Add: Proceeds from sale of remaining assets Total Revenue Less: Expenses (P62,275 + P70,695) Net income
P144,345 50,000 P 94,345 60,000 P154,345 132,970 P 21,375
22. c Receipts 78,920
Benin, capital 30,000 Contribution
Receipts 65,425
Sucat, capital 20,000 Contribution
62,275 Disbursement 12,825 Share in NI (3/5) 78,
105,100
920
65,
70,695 Disbursement 8,550 Share in NI (2/5) 99,245
425 26,180
33,820
23. d N’s books: it shows P5,000 receivable from P, and P3,000 payable to O; thus, N should receive net cash of P2,000: O, capital 3,000 Cash 2,000 P, capital 5,000 O’s books: it shows P5,000 receivable from P, and P2,000 payable to N; thus, O should receive net cash of P3,000: N, capital 2,000 Cash 3,000 P, capital 5,000 P’s books: it shows P2,000 payable to N and P3,000 payable to O; thus, in final settlement, P should pay a total of P5,000; P2,000 and P3,000 to N and O, respectively: N, capital 2,000 O, capital 3,000 Cash 5,000 24. The Investment in Basket Co. as of December 31 is as follows: Acquisition cost, January 1, 2013 Add (deduct): Share in net income (P90,000 x 40%] 36,000 Share in dividends (P30,000 x 40%) Amortization of allocated excess Investment balance on December 31
P 500,000
( 12,000) ( 16,400) P 507,600
Cost of investment P 500,000 Less: Book value of interest acquired [40% x (P1,400,000 – P500,000)] 360,000 Allocated excess P 140,000 Less: Over/undervaluation of assets and liabilities: Increase in building (P140,000 x 40%) 56,000 Increase in trademark (P210,000 x 40) 84,000 Amortization of allocated excess: Building: P56,000 / 7 years Trademark: P84,000 / 10 years
P
8,000
8,400
25. b The joint arrangement is a joint venture because it needs unanimous consent to all parties involved. The parties recognize their rights to the net assets of Harrison Company as investments and account for them using the equity method. The Investment in Basket Co. as of December 31 is as follows: Acquisition cost, January 1, 2013 Add (deduct): Share in net income (P90,000 x 40%] 36,000 Share in dividends (P30,000 x 40%) Amortization of allocated excess Investment balance on December 31
P 500,000
( 12,000) ( 16,400) P 507,600
Cost of investment P 500,000 Less: Book value of interest acquired [40% x (P1,400,000 – P500,000)] 360,000 Allocated excess P 140,000 Less: Over/undervaluation of assets and liabilities: Increase in building (P140,000 x 40%) 56,000 Increase in trademark (P210,000 x 40) 84,000 Amortization of allocated excess: Building: P56,000 / 7 years Trademark: P84,000 / 10 years
P
8,000
8,400 Total