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Joint Arrangements: Use The Following Information For Questions 1 and 2

McKee and Nelson entered into a joint operation to speculate in the stock market. They each contributed around $5,000 and agreed to split earnings equally at the end of the year. A summary of their brokerage statements for the year showed McKee had purchases of $45,000 and sales of $48,700 while Nelson had purchases of $18,000 and sales of $16,800. Their joint operation profit was $3,700.

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Mary Jescho Vidal Ampil
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1K views

Joint Arrangements: Use The Following Information For Questions 1 and 2

McKee and Nelson entered into a joint operation to speculate in the stock market. They each contributed around $5,000 and agreed to split earnings equally at the end of the year. A summary of their brokerage statements for the year showed McKee had purchases of $45,000 and sales of $48,700 while Nelson had purchases of $18,000 and sales of $16,800. Their joint operation profit was $3,700.

Uploaded by

Mary Jescho Vidal Ampil
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Joint

Arrangements

Use the following information for questions 1 and 2:
McKee and Nelson enter into a contract to speculate on the stock market, each using approximately P5,000 of
personal cash. The earnings are to be divided equally, and settlement is to be made at the end of the year after
all securities have been sold. A summary of the monthly brokerage statements for the year follows:
McKee Nelson
Total of all purchase confirmations . . . . . . . . . . . . . . . P45,000 P18,000
Total of all sales confirmations . . . . . . . . . . . . . . . . . . . 48,700 16,800
Interest charged on margin accounts . . . . . . . . . . . . 80 50
Dividends credited to accounts . . . . . . . . . . . . . . . . . 40 100
1. The joint operation profit (loss) is:
2. Final settlement will require payments as follows:
a. McKee pays Nelson P2,405.
b. McKee and Nelson receive P1,255 each.
c. McKee receives from Nelson P1,150.

d. None of these.


Use the following information for questions 3 and 4:
Bar and Car join in a operation for the sale of football souvenirs at the Rose Bowl game. Partners agree to the
following: (1) Bar shall be allowed a commission of 20% on net purchases made by him, (2) each member shall
be allowed a commission of 25% on his own sales, (3) any remaining profit shall be shared equally. Operation
transactions follow:
Bar Car
Cash purchases . . . . . . . . . . . . . . . . . . . . . . P950 —
Expenses paid . . . . . . . . . . . . . . . . . . . . . . . . — P150
Sales (each keeps his receipts) . . . . . . . . . . 800 600

3. The joint operation profit (loss) is:


4. In the final settlement, the amount due to (from) operators:
a. Bar, P415; Car, P(415). c. Bar, P645; Car, P645.
b. Bar, P420; Car, P(420). d. None of these.


5. Reyes, Silva and Tan formed a joint operation. Reyes was designated as the manager and was to record the
joint operation’s transactions in his own books. As manager, Reyes was to be allowed a salary of P12,000;
the remaining profit or loss was to be divided equally. The following balances appeared at the end of 20x4,
before adjustment for operation inventory and profit:
Joint operation cash . . . . . . . . . . . . . . P48,000 P —
Joint operation . . . . . . . . . . . . . . . . . . . . — 15,000
Silva, capital . . . . . . . . . . . . . . . . . . . . . . 1,000 —
Tan, capital . . . . . . . . . . . . . . . . . . . . . . — 27,000
The venture was terminated on December 31, 20x4 and unsold merchandise costing P10,500 were taken
over by Tan. Reyes made cash settlement with Silva and Tan. In the final cash settlement, how much did Tan
receive?


Use the following information for questions 6 to 8:
R Inc., S Co., and T Inc. sign an agreement to collectively purchase an oil depot and to hire a company to manage
and operate the depot on their behalf. The costs involved in running the pipeline and the revenue earned from
the oil depot are shared by the three parties based on their ownership percentage. All major operating and
financing decisions related to the oil depot must be agreed to by the three companies. The cost of purchasing
the oil depot was P84,000,000. The oil depot has an estimated 20-year useful life with no residual value. The
management fee for operating the oil depot for 20x4 was P16,800,000. Revenue earned from the oil depot in
20x4 was P27,720,000. R invested P25,200,000 for a 30% interest.
6. Compute the share of R Inc. in the revenue of the joint operation for 20x4:
7. Compute the share of R Inc. in the expenses of the joint operation for 20x4:
8. Compute the share of R Inc. in the net income of the joint operation for 20x4:


Use the following information for questions 9 to 12:
Using the same information in the preceding problem, Instead of contributing cash for a 30% interest in the oil
depot, R contributed metal sheet to be used by the company constructing the oil depot. R had manufactured
the metal sheet at a cost of P18,480,000. All parties to the contract agreed that the fair value of these metal
sheets was P25,200,000 and the fair value of the oil depot once it was completed was P84,000,000. The other
operators have a 70% interest in the joint operation.
9. Determine the realized gain upon the contribution of the metal sheets:
10. Determine the unrealized gain upon the contribution of the metal sheets:
11. Determine the amortization expense for the year 20x4s:
12. Determine the oil depot’s net cost at the end of 20x4

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