JAMES CANTORNE

Joint Arrangements
2021 version
Problem 1. True of False
1. False.
It is enough that the joint control is rested upon two parties only or the combination of
two or more but not all are required to effect a unanimous decision.
2. False.
Under a joint venture, the parties or joint venturers have rights only to the net assets and
not on the assets. Therefore, a joint arrangement specifying that parties have ownership
of an asset is most likely to be classified as joint operation.
3. False.
While a joint arrangement that is not structured through separate vehicle is a joint
operation, a joint arrangement that is structured through the same may be classified as
joint operation or joint venture; it depends on the modifications of the parties.
4. False.
The contract is a joint arrangement because of existence of contractual arrangement and
joint control. However, it is a joint operation rather than a joint venture because their
contract is not structured through separate vehicle and clearly it indicates that parties
involved have rights over the assets and obligations on the liabilities of the joint
arrangement.
5. False.
A and B shall be referred to as joint operators because their joint arrangement is a joint
operation.
6. False.
Separate vehicle does not mean a usual way of interpreting the word vehicle, it pertains to
entities with identifiable financial structure even though it does not possess a legal
personality.
7. True.
8. False.
Both PFRS 11 and PAS 28 are applied to a joint venture. First, PFRS 11 is applied to
determine if the joint arrangement constitute a joint venture, only then the entity shall
apply PAS 28. In a separate financial statement under PAS 27, the investment in joint
venture may be accounted at cost, fair value (under PFRS 9), or under equity method.
9. False.
Under equity method, the investment is initially measured at cost and subsequently
adjusted for the investor’s share in the changes in equity of the investee. Specifically, add
the share over the net income and OCI and deduct share in losses and dividends because
dividends received by investor is treated as return or reduction of investment.
10. True.
Problem 2. MCQ – Theory
1. C. Joint arrangements.
The exact definition of Joint arrangements under PFRS 11
2. A. Joint operation.
The parties have rights on the assets and obligations on the liabilities indicate that the
joint arrangement is clearly a joint operation.
3. D. Joint venturer. A party that has a joint control of a joint venture is called joint
venturer.
4. D. can be a or b. A joint arrangement in which assets and liabilities are held in a separate
vehicle can be a joint venture or joint operation, it really depends on the modification
made by the parties.
5. C. Joint venture.
Read Co and Learn Co contract constitute the creation of Knowledge Bookstore having a
character of separate vehicle which is evidenced by right of ownership of its assets and
incur liabilities.
6. A. Profit.
A credit balance at the end of Joint Operation account means profit.
7. C. Roof Co. may need to make additional contribution to the joint operation
When the capital account of one joint operator has a credit balance, in the instance where
separate book is maintained, it means that the joint operator has a receivable.
8. D. A or B
9. B. Joint venture
10. D. The total receivable should be included as part of the investment in Angels, without
separate disclosure.
Problem 3. Exercises
1. A, B, and C
No. 1 requirement.
A’s book B’s book C’s book
a. Joint operation P420 Joint operation P420 Joint operation P420
Inventory P400 Payable to A P420 Payable to A P420
Cash 20
b. Joint operation P400 Joint operation P400 Joint operation P400
Payable to B P400 Cash P400 Payable to B P400

c. Joint operation P100 Joint operation P100 Joint operation P500

Payable to C P100 Payable to C P100 JO-Cash P400
A/P 100
 d. Receivable from C P1,600 Receivable from C P1,600 JO-Cash P1,600
Joint operation P1,600 Joint operation P1,600 Joint operation P1,600

e. Joint operation P110 Joint operation P110 Joint operation P110

Payable to C P110 Payable to C P110 Cash P110
Requirement B
JOINT OPERATION
a. Inventory P420 d. Sales P1,600
c. Inventory 500 Unsold inventory 60
e. Expenses 110
P1,030 P1,660
P630
Requirement C
Payable to A Payable to B
a. P420 b. P400
P/L 210 P/L 210
P630 P610

Payable to C
c. P100
e. 110
EI 60 P/L 210
P360

No. 2 Requirement
a. A’s book Joint operation book B and C book
Joint operation P420 Inventory P420 No entry
Inventory P400 A, Capital P420
Cash 20
b. B’s book Joint operation book A and C book
Joint operation P400 Cash P400 No entry
Cash P400 B, Capital P400
c. C’s book Joint operation book A and B book
Joint operation P100 Inventory P500 No entry
Accounts payable P100 Cash P400
C, Capital 100

d. Joint operation book A, B, and C book

Cash P1,600 No entry
Sales P1,600
e. C’s book Joint operation book A and B book
Joint operation P110 Operating expenses P110 No entry
 Cash P110 C, Capital P110

Income summary
Inventory beg P420 Sales P1,600
Inventory 500 Inventory end 60
Expenses 110
P1,030 P1,660
P630

A, Capital B, Capital
a. P420 b. P400
P/L 210 P/L 210
P630 P610

C, Capital
c. P100
e. 110
EI 60 P/L 210
P360

2. Bird co.
Carrying amount of investment P1,000,000
Share in loss (240,000)
Carrying amount at year end P760,000
*Under equity method, the investors share in P/L of the investee because they are viewed as one,
any dividends are treated as return on investment.
Problem 4. MCQs – Computational
1. A. 88 payment
Joint operation
Merchandise inventory P180 Sales P180
Expenses 200 Other income 10
Loss P190

A B Total
Commission on sales 24 12 36
Commission on purchase 10 8 18
Share in remaining (-244) (122) (122)
(88) (102) (P190)
 2. A. 900
Joint operation
Beg bal (100 + 120 + 80) P300
Expenses 240 Sales (360 + 300 + 240) P900
End bal (100 + 120 – 580) P360

3. A. 460
Joint operation
Beg bal (100 + 120 + 80) P300
Expenses 240 Sales P900
Ending inventory 60
Profit P420

Easy Average Difficult Total

Salary 6 6
Bonus (414/115%) x 15% 54 54
Share in remaining (360) 120 120 120
120 120 180 420

Payable to Easy and Average = 100 + 120 + 120 +120 = 460

4. A. 17
Joint operation
Debit balance P5
Ending inventory (5+12) P17
Profit (4 x 3) P12

5. C. 7 debit
Joint operation
Debit balance (18-11) P7
Ending inventory P18
Profit P11

6. C. B receives P18, P10 from A and P8 from C

Joint operation
Account with A P4
Account with B 12 Account with C P14
Unsold inventory 22
Profit P20
 A B C Total
Bonus 10% 2 2
Share in remaining (18) 6 6 6
8 6 6 20

Payable to A Payable to B
P4 P12
Inventory P22 P/L 8 P/L 6
P10 P18

Payable to C
P14
P6
P8

7. A. C receives P6.5, P2.5 from A and P4 from B.

*There are no profits or loss (6.5 debit in joint operation minus the 2.5 and 4 credit), therefore,
the cash settlement will be based on their respective accounts
8. D. LL pays MM P35,600 and NN pays LL P14,400
Joint operation
Account with LL P16,000
Account with MM 32,000 Account with NN P18,000
Unsold inventory 42,000
Profit P12,000

LL MM NN Total
Bonus 10% 1,200 1,200
Remaining (10,200) 3,600 3,600 3,600 10,800
4,800 3,600 3,600 P12,000

Payable to LL
P16,000
 Payable to MM
4,800 P32,000
Inventory 42,000 P/L 3,600
P21,200 P35,600

Payable to NN
P18,000
P3,600
P14,400

9. A. 20 receipt
Joint operation
Initial contribution P30
Expense paid 10 Sales P70
Ending balance P30

Joint operation
Initial contribution P30
Expense paid 10 Sales P70
Unsold inventory 15
Profit P45
P45 / 3 = P15
Payable to A
P10
Inventory P5 P/L 15
P20

10. B. 1,200,000
Tech co Revenue P1,000,000 plus the 50% share in the net income of Mecha Co of P400,000.