JOINT VENTURE
1. Joint control is defined as
A. The power to govern the financial and operating policies of another entity.
B. The power to participate in the financial and operating policy decisions of another
entity.
C. The contractually agreed sharing of control of an arrangement which exists only
when decisions about relevant activities require majority consent of the parties
sharing control.
D. The contractually agreed sharing of control of an arrangement which exists only
when decisions about relevant activities require unanimous consent of the parties
sharing control.
2. It is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets and obligations for the liabilities relating to the
arrangement
A. Joint asset
B. Joint operation
C. Joint entity
D. Joint venture
3. A joint arrangement that is structured without a separate vehicle is a
A. Joint asset
B. Joint operation
C. Joint entity
D. Joint venture
4. It is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement.
A. Joint entity
B. Joint undertaking
C. Joint operation
D. Joint venture
5. It is the joint arrangement that involves the establishment of a corporation in which
each party has an equity interest in the net asset of the corporation.
A. Joint venture
B. Joint operation
C. Either joint operation or joint venture
D. Neither joint operation or joint venture
6. A, B, C are joint operators of Joint Operation D (each having equal share in interest).
On January 1, 2021, A sells equipment having a book value of P51,200 to the
operation for P128,000. The equipment had an estimated useful economic life of 5
years at that date.
At what amount will A show this equipment at its statement of financial position at
January 1, 2021?
A. 17,067
B. 21,333
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C. 42,667
D. 0
7. At what amount will A show this equipment at its statement of financial position at
December 31, 2021?
A. 34,133
B. 42,667
C. 13,653
D. 17,067
Numbers 13-18
On January 1, 2021, SME A acquired a 35% equity of Y Corporation for P92,800. SME
A shares in the joint control of the relevant activities of Y Corporation in relation to its
profitability operations. Transaction costs of 5% of the purchase price of the shares
were incurred by SME A.
On December 31, 2021, Y Corporation declared and paid dividends of P24,000 for the
year ended 2021. For the year ended December 31, 2021 Y Corporation recognized a
loss of P67,200.
Published price quotations do not exist for the shares of Y Corporation. Using
appropriate valuation techniques SME A determined the fair value of its investment in
Y Corporation at December 31, 2021 as P104,000. Costs to sell are estimated at 9%
of the fair value of the investment. SME A does not prepare consolidated financial
statements because it does not have any subsidiary.
8. What is the profit (loss) to be recognized by SME A in 2021 from entity Y under the
fair value method?
A. 13,200
B. 14,960
C. 9,600
D. 3,600
9. What is the profit (loss) to be recognized by SME A in 2021 from entity Y under the
cost method?
A. 5,600
B. (24,000)
C. (17,184)
D. ( 1,184)
10. What is the profit (loss) to be recognized by SME A in 2021 from entity Y under the
equity method?
A. (23,520)
B. 4,144
C. 7,840
D. ( 1,856)
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