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PROBLEMS PROBLEM 1: TRUE OR FALSE 1. A joint arrangement is accounted for under PFRS 11 only if all the parties have joint control over the arrangement. 2. A joint arrangement involving joint ownership over an asset is most likely to be classified as a joint venture under PFRS 11. 3. A joint arrangement that is structured through a separate vehicle is always classified as a joint venture. Use the following information for the next three questions: A and B enters into a contract to contribute cash to acquire a tricycle. A and B will have joint control over the operation of the tricycle and will share equally in the revenues and expenses. 4. The contract between A and B is a joint venture. 5. A and B are referred to as joint tricycle venturers. 6. The tricycle is referred to in PFRS 11 as separate vehicle. 7. An entity that acquires an interest in a joint operation whose activity constitutes a business shall account for its share as a business combination. 8. A joint venturer uses either PFRS 11 or PAS 28 to account for its investment. 9. Under the equity method, the investment is initially measured at fair value and subsequently adjusted for the investor's share in the investee's changes in equity. 10. Under the equity method, fair value does not necessarily affect the investment's measurement at the reporting date. 7. An entity that altes a business shall account operation whose activity constitutes a business shall account for its share as a business combination. 8. A jiint venturer uses either PFRS 11 or PAS 28 to account for sinvestment. its investment. 0. Under the equity method, the investment is initially measured at fair value and subsequently adjusted for the investor's share in the investee's changes in equity. 10. Under the equity method, fair value does not necessarily affect the investment's measurement at the reporting date. PROBLEM 2: MULTIPLE CHOICE - THEORY 1. It is an arrangement of which two or more parties have joint control. a. joint operation b. joint venture c. joint arrangement d. elbow joint 2. 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 operation c. joint arrangement b. joint venture d. elbow joint 3. A party that has joint control of a joint venture is called a a. joint operationer. c. joint venturist. b. joint operator. d. joint venturer. 4. A joint arrangement in which the assets and liabilities relating to the arrangement are held in a separate vehicle a. is a joint operation. c. is a joint arrangement. b. is a joint venture. d. can be a or b 5. Read Co. and Learn Co. are publishers of textbooks. Read and Learn enters into a contract to put up a bookstore which shall be named Knowledge Bookstore. Knowledge will have its own assets, incur its own liabilities, and earn and incur its own revenues and expenses. Read and Learn will each have a 50% interest in the net assets and profits of Knowledge. The joint arrangement between Read and Learn is most likely a a. joint operation. c. joint venture. b. jointly controlled net assets. d. none of these 6. When there are no separate books maintained for a joint operation, the joint operation's transactions may be summarized in a management account called "Joint Operation." A credit balance in the joint operation account represents a. profit. c. cash receipt. b. loss. d. cash payment. 7. On settlement, Roof Co., a joint operator, had a credit balance in its Capital account in the joint operation's separate books. Which of the following statements is most likely to be correct? a. The joint operation has earned profit. b. The joint operation has incurred loss. c. Roof Co. may need to make additional contribution to the joint operation. d. Roof Co. can expect a return of its investment, including a return on the investment if the joint operation has earned profit. 8. In which of the following shall an entity account for its interest in a joint operation as a business combination? a. The joint operation is an existing business when the entity acquired its interest. b. "On formation, one or more of the parties to the joint operation contributes a business. c. On formation, all the parties contributed groups of assets that do not constitute businesses. d. a or b 2. If an entity's statement of financial position shows an "investment" account for its interest in a joint arrangement, a user of the entity's financial statement would most like find out in the notes that the nature of the joint arrangement is a(an) a. joint operation. b. joint venture. c. investment in associate. d. any of these 10. In its financial statements, Pulham Corp. uses the equity method of accounting for its 30% ownership of Angles Corp. The ownership interest gives Pulham Corp. joint control over Angles Corp., a joint venture. At December 31, 1991, Pulham has a receivable from Angles. How should the receivable be Teported in Pulham's 1991 financial statements? d. The receivable should be eliminated