Joint Venture Accounting Questions and Answers:
Learning Objectives:
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Answers of some important
joint venture questions.
Theoretical Questions:
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Define a "joint venture".
What are the different methods of recording transactions relating to
joint venture?
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Differentiate between
"joint venture" and "consignment".
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What is memorandum joint
venture account? How is it prepared?
Objective:
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State whether each of
the following statements is true or false:
(i) Joint venture and partnership are synonymous terms.
(ii) Joint venture has very long life.
(iii) Parties of joint venture are known as co-venturers
(iv) Co-venturers work for commission.
(v) Principle of mutual agency is applicable to joint venture.
(iv) Co-ventures and co-partners are interchangeable terms.
(iiv) Joint venture must have a permanent and distinct name to be
a legal form of organization.
Answers: [i. False ii. False iii.
True iv. False v. True vi. False vii. False]
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Select the most
appropriate answer:
(i) Joint venture account is: (a) a nominal account; (b) a personal
account; (c) a real account
(ii) Joint bank account is opened: (a) when no separate books for
the venture are maintained; (b) when separate books for the venture are
maintained (c) under no circumstances
(iii) When goods are purchased for the joint venture, the amount
is debited to: (a) Purchase account; (b) Joint venture account; (c)
Venturer's capital account.
(iv) In case of memorandum method when there are three
co-venturers, each co-venturer opens in its books for the venture: (a)
one account; (b) two accounts; (c) three accounts.
(v) When a venturer recording the transactions brings goods to
the joint venture from his own stock, the amount is credited to: (a)
joint venture account; (b) purchases account; (c) capital account.
Answers: [i. a ii. b iii. b iv. a v.
b]
Short Answer Questions:
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(i) A has spent $20,000
on account of a joint venture. What journal entry will you pass?
(a). When separate set of books are kept.
(b). When records are kept by A only.
(c). When records are kept by B (a co-venturer) only, and
(d). when records are kept by all parties
(ii) Is it necessary to pass a journal entry for the above
transaction in the books of B when memorandum method is adopted? [Answer:
No]
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B, a co-venturer, took
away goods worth $9,000 at the end of a venture. What entries will
you make when:
(a). There is a separate set of books.
(b). Records are kept by B only
(c). Records are kept by A only.
(d) There is a memorandum, method of recording transactions
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A and B completed a
venture and earned $30,000. They shared profits in the ratio of 2:1.
What journal entry will be passed when:
(a). There is a separate set of books.
(b). Records are kept by A only
(c). Records are kept by B only.
(d) There is a memorandum, method of recording transactions.
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A purchases goods worth
$20,000 for the joint venture and spend $2,000 on packing, insurance,
freight, etc. He sends it to B, who receives goods and spends $1800.
What journal entry will be passed when memorandum joint venture method
is adopted?
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