On January 1, 2022, Entity A and Entity B signed an agreement to form a joint arrangement
Question:
On January 1, 2022, Entity A and Entity B signed an agreement to form a joint arrangement to manufacture campaign shirts for the coming election. They initially invested P250,000 cash each. The following transactions happened in 2022 in relation to the joint arrangement:
> Purchased machinery and equipment costing P150,000 (P80,000 paid in cash, the balance on account). It has an estimated useful life of 3 years with no residual value.
> Purchased raw materials amounting to P110,000 (including P15,000 indirect materials) on account. All were issued to production.
> Incurred and paid labor amounting to P120,960 (including P10,000 indirect labor).
> Incurred and paid other factory overhead – P25,000.
> Paid suppliers – P100,000.
> Finished all the jobs and sold to customers at 20% mark up.
> Collected all the accounts from customers.
Questions
1. How much is the cash balance of the joint arrangement as of December 31, 2022?
2. How much the share of Entity B in the net income (loss) of the joint arrangement?
3. How much is the share of Entity A in the revenue?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill