Reference no: EM132756191

Question: Problem 1: X, Y, an Z agreed to form a joint operation. Profit or loss of the joint operation shall be divided equally. Y is appointed as the manager. The following were the transactions during the year:

• Inventory costing P 1,000 was sent by X to Y

• Freight paid by on the inventories sent to Y amounted to P 50

• Cash of P 2,000 was sent by Z to Y to be used to purchase additional inventory

• Y purchased additional inventory amounting to P 2,500, P 500 of which were made on account of Y

• Cash sales made by Y amounted to P 8,000

• Operating expenses amounting to P 550 were paid by Y using own cash

• Unsold inventory at year-end amounted to P 300

Required: 1. If there is no separate books maintained for Joint Operations, how much is the profit or loss of the Joint Operations?

2. How much is the share of profit of X, Y, and Z respectively?

3. Assume that the Joint Operation is liquidated and Z is charged the unsold inventory at cost, how much is the Joint Operation Cash to be shown in the books of Y?

4. How much is the cash receipt or (cash payment) of X, Y, and Z, respectively?

5. If there is a separate book maintained for Joint Operations, how much is the profit or loss of the Joint Operations?

6. How much is the share of profit of X, Y, and Z, respectively?

7. How much is the investment in Joint Operations of X, Y, and Z, shown in their respective books?

8. How much is the capital balance of X, Y, and Z, respectively shown in the Joint Operations Book?

Problem 2: GSW owns 20% in JV Inc. and uses the equity method to account for its interest in the joint venture. GSW has joint control over the JV Inc. In 2019, GSW sold inventory to JV Inc. for P 100,000 with a 50% gross profit on the transaction. The inventory remains unsold during 2019 and was only sold by JV Inc. to external parties only in 2020. GSW's income tax rate is 30%. Assuming JV Inc. reports profit of P 1,000,000 and P 1,500,000 on December 31, 2019 and 2020, respectively:

Required: 1. What is the share in profit of JV Inc. before adjustment for 2019 and 2020?

2. How much is the unrealized profit from the downstream sale net of tax for 2019 and 2020?

3. How much is the realized profit from downstream sale net of tax for 2019 and 2020?

4. How much is the adjusted share in profit of the JV Inc. for 2019 and 2020?

Problem 3: NOLA owns 20% in a joint venture and uses the equity method to account for its interest in the joint venture. NOLA has joint control over the joint venture. In 2019, the joint venture sold inventory to NOLA for P 100,000 with a 50% gross profit on the transaction. The inventory remains unsold during 2019 and was only sold by NOLA to external parties only in 2020. NOLA's income tax rate is 30%. Assuming Joint Venture reports profit of P 1,200,000 and P 1,800,000 on December 31, 2019 and 2020, respectively:

Required: 1. What is the share in the profit of joint venture before adjustment for 2019 and 2020?

2. How much is the unrealized profit from upstream sale net of tax for 2019 and 2020?

3. How much is the adjusted share in profit of the joint venture in 2019 and 2020?