Advance Accounting -LUPISAN-CHAPTER 1.pdf

CHAPTER 1 Partnership Formation and Operations EXERCISES Exercise 1 –1 1.a

Campos, Capital Allowance for Uncollectible Accounts

14,000

Goodwill Campos, Capital

30,000

Accumulated Depreciation Campos, Capital Furniture and Fixtures

1.b

6,000 6,500

Campos, Capital Cash

40,000

Cash (P83,500 x 1/2) Tomas, Capital To record contributions of Tomas

41,750

Req. 2.

14,000 30,000

12,500 40,000 41,750

Campos and Tomas Partnership Statement of financial Position July 1, 2008 Assets

Cash Accounts Rec’l Less Allowance for Uncol Accts. Inventory Furniture Goodwill TOTAL ASSETS

P60,000 24,000

P41,750 36,000 100,000 7,500 30,000 P215.250

Liabilities & Owners’ Equity

Accounts Payable Campos, Capital Tomas, Capital

P90,000 83,500 41,750

________

TOTAL LIABILITIES & OWNERS’ EQUITY

P215,250

Exercise 1-2 1.

Cash Accounts Receivable Merchandise Inventory Equipment Allowance for Uncollectible Accounts Accounts Payable Notes Payable Bernal, Capital

90,000 36,000 54,000 25,000

2,000 21,000 18,000 164,000

AA 1 - Chapter 1 (2008 edition) page 2

2.

Cash Camino, Capital

100,000

100,000

Exercise 1 –3 1.

2.

Cash Land Building Legaspi, Capital Sabino, Capital

800,000 540,000 900,000

Cash Land Building Legaspi, Capital Sabino, Capital

800,000 540,000 900,000

800,000 1,440,000

1,120,000 1,120,000

Exercise 1 - 4 1.

Income Summary Santos, Capital (P238,000 x 260/425) Abad, Capital (P238,000 x 165/425)

238,000

2.

Income Summary Santos, Capital (P238,000 x 3,125/5,000) Abad, Capital (P238,000 x 1,875/5,000)

238,000

3.

Santos: Jan. 1 – Mar. 31 Apr. 1 – Apr. 30 May 1 – July 31 Aug. 1 – Dec. 31

P260,000 x 3 290,000 x 1 360,000 x 3 320,000 x 5

P780,000 290,000 1,080,000 1,600,000 P3,750,000/12

Abad: Jan. 1 – May 31 June 1 – Aug. 31 Sept.1 – Dec. 31

P165,000 x 5 215,000 x 3 195,000 x 4

P825,000 645,000 780,000 P2,250,000/12

Income Summary Santos, Capital Abad, Capital Interest on ave. capital Salaries to partners Balance - equally Net Profit

Abad P 11,250 100,000 ( 21,000) P 90,250

148,750 89,250

P312,500

P187,500 238,000

Santos P 18,750 150,000 ( 21,000) P 147,750

145,600 92,400

Total P 30,000 250,000 (42,000) P238 000

147,750 90,250


4.

Income Summary Santos, Capital Abad, Capital

238,000

Bonus to Santos 25% (P238,000 - B) Interest of 6% on excess average investment 6% (P312,500 - P187,500) Balance - 3:2 Net Profit

5.

Santos

Abad

Total

P 47,600 7,500 109,740 P 164,840

164,840 73,160

P 47,600

73,160 P73,160

Income Summary Santos, Capital (P238,000 x 15/25) Abad, Capital (P238,000 x 10/25)

7,500 182,900 P238,000

238,000

142,800 95,200

Exercise 1 – 5

Sanchez and Gomez Schedule of Distribution of Net Profit December 31, 2008 Sanchez Gomez 6% interest on average capital P 6,246 P 14.440 10% bonus on net profit after interest 8,331 Salaries 20,000 30,000 Balance – 70%, 30% 17,488 7,495 Net Profit P52,065 P51,935 Computation of average capital: Sanchez, Capital Jan. 1 P81,600 x 3 P 244,800 Apr. 1 P111,600 x 9 1,004,400 P1,249,200 Ave. capital (P1,249,200/12)

P104,100

Jan. 1 Aug. 1

Total P 20,686 8,331 50,000 24,983 P104,000

Gomez, Capital P224,000 x 7 P1,568,000 P264,000 x 5 1,320,000 P2,888,000

Ave. capital (P2,888,000/12)

P240,667

Computation of bonus: P160,000 x 65%= P104,000– P20,686 x 10% = P8,331 2.

Capital, January 1 Additional investment Net profit Drawings Capital, December 31

Sanchez and Gomez Statement of Partners’ Capital For the Year Ended December 31, 2008 Sanchez P 81,600 30,000 52,065 ( 41,600) P122,065

Gomez P224,000 40,000 51,935 ( 41,600) P274,335

Total P305,600 70,000 104,000 ( 83,200) P396,400


3.

Sanchez P 6,246 8,331 34,083 P48,660

Gomez P14.440 40,000 P 55,340

Total P 20,686 8,331 74,983 P104,000

8% interest on beg capital Salaries Balance 3:2 Net Profit

Mercado P 48,000 225,000 ( 38,700) P234,300

Puzon P 54.000 112,500 ( 25,800) P140,700

Total P102,000 337,500 ( 64,500) P375,000

8% interest on beg capital Balance – Salary ratio Net Profit

Mercado P 48,000 182,000 P230,000

Puzon P 54.000 91,000 P145,000

Total P102,000 273,000 P375,000

6% interest on average capital 10% bonus on net profit after interest Balance – Salary ratio Net Profit

Exercise 1-6 1.

2.

3.

Puzon P375,000 x 2/3 = P150,000; however, minimum guaranteed amount is P160,000 Mercado P375,000 – P160,000 = P215,000

Exercise 1 – 7 Net profit after salary, interest and bonus Interest P200,000 x 10% Salary P8,000 x 12 Net profit before interest and salary Bonus rate Amount of bonus to Lirio Exercise 1 – 8 1.

B = .25 x P500,000 = P125,000

2.

B = .25 x P500,000 = P100,000 1.25

3.

B T B B

= .25 (P500,000 - Tax) = .35 x P500,000 = P175,000 = .25 (P500,000 – P175,000) = P 81,250

4.

B B B B B

= .25 (P500,000 - B - Tax) = .25 (P50,0000 - B - P175,000) = P81,250 - .25B = P81,250/1.25 = P65,000

P20,000 96,000

P374,000 116,000 P490,000 x 25% P122,500


Exercise 1 - 9 1.

Estrella Felipe Salary P40,000 P20,000 Bonus 6,000 4,000 Interest 10,000 9,000 Balance 26,900 26,900 Total P82,900 P59,900 *B = 5% (P210,000 – B) = P10,000 2. Estrella Felipe Salary P40,000 P20,000 Interest 10,000 9,000 Balance ( 43,100) ( 43,100) Total P 6,900 (P 14,100) 3.

Estrella Interest P10,000 Bonus 6,000 Salary 25,067 Total P41,067 *P37,600 x 4/ 6 = P25,067;

Garcia P 4,000 26,900 P30,900

Jimenez P 9,400 26,900 P36,300

Garcia

Jimenez

P 4,000 ( 43,100) (P39,100)

P 9,400 ( 43,100) (P33,700)

Felipe Garcia P 9,000 P 4,000 4,000 12,533 _______ P25,533 P 4,000 P37,600 x 2/ 6 = P12,533

Jimenez P 9,400 ________ P 9,400

Total P 60,000 10,000* 32,400 107,600 P210,000 Total P 60,000 32,400 (172,400) (P 80,000) Total P 32,400 10,000 37,600* P 80,000

Exercise 1-10 1.

2.

Fees Earned Joseph, Capital Luis, Capital Operating Expenses Income Summary

750,000 50,000

Income Summary Joseph Capital Luis, Capital Nicolas, Capital

500,000

200,000 100,000 500,000 150,000 250,000 100,000

Exercise 1 – 11 1. Capital balances before payment of cash Required capital balances based on on profit and loss ratio Cash received (paid)

Benito

Cabral

Duenas

Total

P120,000

P100,000

P100,000

P320,000

128,000 (P 8,000)

112,000 (P 12,000)

80,000 P 20,000

320,000 -


Journal entry on the partnership books Duenas, Capital Benito, Capital Cabral, Capital

20,000

8,000 12,000

2.

Benito Cabral Duenas Total Capital balances before additional cash investment P120,000 P100,000 P100,000 P320,000 Required capital balances based on lowest possible cash investment* 160,000 140,000 100,000 400,000 Required additional cash investment P 40,000 P 40,000 P 80,000 * P120,000/40% = P300,000; P100,000/35% = P285,174; P100,000/25% = P400,000 Journal entry on the partnership books Cash Benito, Capital Cabral, Capital

80,000

3. Capital balances Required capital Additional investment(withdrawals)

Benito P120,000 120,000 --------

Cabral P100,000 105,000 5,000

Duenas, Capital Cash Cabral, Capital Exercise 1 – 12

Duenas Total P100,000 P320,000 75,000 300,000 (P 25,000) P 20,000 25,000

20,000 5,000

Enriquez and Flores Schedule Showing Adjustments in Capital For the Year Ended December 31, 2008

Reported net profit Adjustments: Equipment purchased charged to expense Depreciation on equipment Overstatement of 2008 ending inventory Corrected net profit

40,000 40,000

P400,000 P200,000 ( 20,000) ( 24,000) P156,000 x 65%

101,400 P501,400


Distribution of 2008 net profit Salaries Interest Balance Distribution of 2008 corrected net profit Salaries Interest Balance Adjustments 2.

Flores P120,000 45,000 34,000 P199,000

Total P240,000 75,000 85,000 P400,000

P120,000 30,000 111,840 P261,840 P 60,840

P120,000 45,000 74,560 P239,560 P 40,560

P240,000 75,000 186,400 P501,400 P101,400

Equipment Enriquez, Capital Flores, Capital Accumulated Depreciation Inventory Income Tax Payable

Problem 1 – 1 1.

Enriquez P120,000 30,000 51,000 P201,000

200,000

PROBLEMS

a.

Merchandise, Inventory Ruiz, Capital

60,000

b.

Ruiz, Capital Allowance for Uncollectible Accounts

30,000

c.

Interest Receivable Ruiz, Capital P150,000 x 6% x 2/12 = P1,500

1,500

d.

Ruiz, Capital Interest Payable P300,000 x 10% x 3/12 = P7,500

7,500

e.

Accumulated Depreciation Ruiz, Capital Furniture and Fixtures

f.

Office Supplies Ruiz, Capital

g.

Cash Santos, Capital

60,840 40,560 20,000 24,000 54,600

180,000 60,000 5,000 524,500

60,000 30,000 1,500

7,500

240,000 5,000 524,500


Ruiz and Santos Statement of Financial Position December 1, 2008 Assets Cash Notes Receivable Accounts Receivable Less Allowance for Uncollectible Accounts Interest Receivable Merchandise Inventory Office Supplies Furniture and Fixtures Total Assets Liabilities and Capital Notes Payable Accounts Payable Interest Payable Total Liabilities Ruiz, Capital Santos, Capital Total Capital Total Liabilities and Capital

P900,000 90,000

P300,000 630,000 7,500 P1,049,000 524,500

P 764,500 150,000 810,000 1,500 300,000 5,000 480,000 P2,511,000

P 937,500 1,573,500 P2,511,000

Problem 1-2 1.

2.

Cash Merchandise Inventory Tomas, Capital

518,000 1,152,000

Accounts Receivable Merchandise Inventory Office Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Vicente, Capital

1,792,000 256,000 160,000 198,000

1,670,000

160,000 576,000 1,670,000

Tomas and Vicente Statement of Financial Position June 1, 2008 Assets Cash Accounts Receivable Less Allowance for Uncollectible Accounts Inventories Office Equipment Goodwill Total Assets

P1,792,000 160,000

P 518,000 1,632,000 1,408,000 160,000 198,000 P3,916,000


Accounts Payable Tomas, Capital Vicente, Capital Total Liabilities and Capital

Liabilities and Capital P1,670,000 1,670,000

P 576,000 3,340,000 P3,916,000

Problem 1 – 3 1.

2.

Merchandise Inventory Goodwill Accumulated Depreciation Allowance for Uncollectible Accounts Equipment Rosas, Capital

3,000 3,000 900

Cash Accounts Receivable Merchandise Inventory Equipment Furniture and Fixtures Goodwill Allowance for Uncollectible Accounts Accounts Payable Perlas, Capital

5,000 46,000 108,000 12,000 9,000 3,000

Cash Accounts Receivable Merchandise Inventory Equipment Furniture and Fixtures Goodwill Allowance for Uncollectible Accounts Accounts Payable Perlas, Capital

5,000 46,000 108,000 12,000 9,000 3,000

Cash Accounts Receivable Merchandise Inventory Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Rosas, Capital

7,000 49,000 75,000 7,000 3,000

Problem 1 – 4 1. Cash Inventories Equipment Notes Payable Serrano, Capital

900,000 1,500,000 3,000,000

1,000 2,000 3,900

4,000 54,000 125,000

4,000 54,000 125,000

5,000 36,000 100,000

1,050,000 4,350,000


Cash Land Mortgage Payable Torres, Capital

600,000 6,000,000

Torres, Capital Serrano, Capital

150,000

Purchases Accounts Payable

900,000

Accounts Payable Cash

720,000

Mortgage Payable Interest Expense Cash

300,000 120,000

Notes Payable Interest Expense Cash

225,000 75,000

Accounts Receivable Sales

3,450,000

Cash Accounts Receivable

3,150,000

Selling and General Expenses Cash Accumulated Depreciation Accrued expenses

870,000

Serrano, Drawing Torres, Drawing Cash

351,000 351,000

Income Tax Income Tax Payable

204,750

Inventories, end Sales Inventories, beginning Purchases Selling and General Expenses Interest Expense Income Tax Income Summary

600,000 3,450,000

1,950,000 4,650,000 150,000 900,000 720,000

420,000

300,000 3,450,000 3,150,000 630,000 150,000 90,000

702,000 204,750

1,500,000 900,000 870,000 195,000 204,750 380,250


Income Summary Serrano, Capital Torres, Capital

380,250

Interest on beginning capital Salaries Remainder – 60%, 40% Net Profit

Serrano

P180,000 150,000 ( 137,850) P192,150

Torres

P180,000 100,000 ( 91,900) P188,100

Serrano, Capital Torres, Capital Serrano, Drawing Torres, Drawing

192,150 188,100

Total

P360,000 250,000 ( 229,750) P380,250

351,000 351,000

351,000 351,000

Serrano and Torres Partnership Statement of Recognized Income and Expenses For the Year Ended December 31, 2008 Sales Cost of Goods Sold: Inventories, beginning Purchases Cost of Goods Available for Sale Less Inventories, end Gross Profit Selling and General Expenses Operating Income Interest Expense Net Profit before Income Tax Income Tax Net Profit

P3,450,000 P1,500,000 900,000 P2,400,000 600,000

1,800,000 P1,650,000 870,000 P 780,000 195,000 P 585,000 204,750 P 380,250

Serrano and Torres Partnership Statement of Financial Position December 31, 2008 Assets Current Assets: Cash Accounts Receivable (P3,450,000 – P3,150,000) Inventories Property, Plant and Equipment: Land Equipment P3,000,000 Less Accumulated Depreciation 150,000 Total Assets

P1,878,000 300,000 600,000

P 2,778,000

P6,000,000 2,850,000

8,850,000 P11,628,000


Liabilities Current Liabilities: Accounts Payable (P900,000 – P720,000) Accrued Expenses Income Tax Payable Long-term Liabilities: Notes Payable (P1,050,000 – P225,000) Mortgage Payable (P1,950,000 – P300,000) Total Liabilities Serrano, Capital Torres, Capital Total Capital

P180,000 90,000 204,750 P 825,000 1,650,000

Capital

P

474,750

2,475,000 P 2,949,750

P4,341,150 4,337,100 8,678,250 P11,628,000

Total Liabilities and Capital Problem 1 - 5

1. P2,700,000 (P200,000 + P1,100,000 + P500,000 + P1,500,000 – P600,000 = P2,700,000) 2 P2,600,000. (P2,500,000 + P2,700,000) / 2 = P2,600,000 Problem 1 – 6 1.

Income Summary Bernabe, Capital Burgos, Capital Interest on beg. capital Balance – 3:1 Net Profit

2.

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on end capital Balance – Equally Net Profit

3.

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on average. cap Balance – 3:1 Net Profit

700,000 Bernabe P 28,800 477,000 P 505,800

Burgos 35,200 159,000 P 194,200 P

Total P 64,000 636,000 P700 000 700,000

Bernabe P 140,000 48,000 96,000 P 284,000

Burgos P 260,000 60,000 96,000 P 416,000

Total P400,000 P108,000 96,000 P700 000 700,000

Bernabe P 90,000 49,000 255,150 P 394,150

Burgos P 170,000 50,800 85,050 P 305,850

Total P260,000 99,800 340,200 P700 000

505,800 194,200

284,000 416,000

394,150 305,850


4.

Bernabe: Jan. 1 – May 31 June 1 – Oct. 31 Nov, 1 – Dec. 31

P360,000 x 5 460,000 x 5 400,000 x 2

P1,800,000 2,300,000 800,000 P4,900,000/12

P408,333

Burgos: Jan. 1 – June 30 July 1 – Oct. 31 Nov.1 – Dec. 31

P440,000 x 6 360,000 x 4 500,000 x 2

P2,640,000 1,440,000 1,000,000 P5,080,000/12

P423,333

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on average. cap Balance – 40%, 60% Net Profit

5.

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on beg. cap Bonus Balance – 2:3 Net Profit B = 10%(NI –S – I)

Problem 1 – 7 1.

2.

3.

6% interest on capital Salaries Balance – 5:3:2 Net Profit

700,000 Bernabe P 100,000 40,833 126,734 P 267,567

Burgos P 200,000 42,333 190,100 P 432,433

Total P300,000 83,166 316,834 P700 000 700,000

Bernabe P 100,000 28,800 43,600 156,960 P 329,360

Sandy P 16,800 ( 74,500) P(57,700)

6% interest on capital Salaries Balance – 5:3:2 Net Profit

P 16,800

6% interest on capital Salaries Bonus Balance – 5:3:2 Net Profit

P 16,800

( 32,000) P( 15,200)

56,250 P 73,050

Burgos P 100,000 35,200 235,440 P 370,640

Total P220,000 64,000 43,600 392,400 P700 000

267,567 432,433

329,360 370,640

Tammy P 12,000 48,000 ( 44,700) P 15,300

Manny P 7,200 40,000 ( 29,800) P 17,400

Total P 36,000 88,000 (149,000) P(25,000)

P 12,000 48,000 ( 19,200) P 40,800

P 7,200 40,000 ( 12,800) P 34,400

P 36,000 88,000 ( 64,000) P 60,000

P 12,000 48,000 13,500 33,750 P107,250

P 7,200 40,000

P 36,000 88,000 13,500 112,500 P250,000

22,500 P 69,700


B = (P250,000 – P36,000 – P88,000 – P72,000)25% = P13,500 Problem 1 - 8 1.

2.

5% interest on capital Salaries 20% bonus on net profit Balance – capital ratio Net Profit

Delmar P 2,500 12,000 22,100 40,250 P76,850

Pilar P 1,500 8,000 24,150 P33,650

Sales Cost of Goods Sold Operating Expenses Income Taxes Income Summary

480,000

Income Summary Delmar, Capital Pilar, Capital

110,500

Delmar, Capital Pilar, Capital Delmar, Drawing Pilar, Drawing

6,000 10,000

Total P 4,000 20,000 22,100 64,400 P110,500 210,000 100,000 59,500 110,500 76,850 33,650

6,000 10,000

Delmar and Pilar Company Statement of Changes in Partners’ Capital For the Year Ended December 31, 2008 Capital balances, January 1, 2008 Add Distribution of net income for 2008: Interests Salaries Bonus Balance - capital ratio Total share in net profit Total Less Drawings Capital balances, December 31, 2008

Delmar P 50,000

Pilar P30,000

Total P 80,000

P 2,500 12,000 22,100 40,250 P 76,850

P 1,500 8,000 24,150 P33,650

P 4,000 20,000 22,100 64,400 P110,500

P126,850 6,000 P120,850

P63,650 10,000 P53,650

P190,500 16,000 P174,500


Problem 1 - 9 Ramos, Gonzales and Martinez Statement of Changes in Partners’ Capital For Three Years Ended December 31, 2008 Capital, January 1, 2006 Distribution of net loss (Sch. 1) Withdrawals Capital, December 31, 2006 Distribution of net profit (Sch. 2) Withdrawals Capital, December 31, 2007 Distribution of net profit (Sch. 3) Withdrawals Capital, December 31, 2008

Ramos P 80,000 ( 2,000) (12,000) P 66,000 7,960 (13,960) P 60,000 21,840 (20,400) P 61,440

Gonzales P 48,000 ( 1,520) (14,480) P 32,000 8,320 (16,320) P 24,000 18,840 (24,000) P 18,840

Martinez P 40,000 ( 2,000) (16,000) P 22,000 7,720 (17,720) P12,000 18,120 (21,200) P 8,920

Total P 168,000 ( 5,520) (42,480) P120,000 24,000 (48,000) P 96,000 58,800 (65,600) P 89,200

Gonzales P 12,000 2,880 (16,400) P( 1,520)

Martinez P 12,000 2,400 (16,400) P( 2,000)

Total P 33,600 10,080 P 49,200 P( 5,520)

Gonzales P 12,000 1,920 ( 5,600) P 8,320

Martinez P 12,000 1,320 ( 5,600) P 7,720

Total P 33,600 7,200 (16,800) P 24,000

Gonzales P 12,000 1,440

Martinez P 12,000 720

5,400 18,840

5,400 18,120

Total P 33,600 5,760 3,240 16,200 58,800

Schedule 1 - Distribution of 2006 net loss Salaries to partners Interest of 6% on beg. Capital Balance – equally Net income

Ramos P 9,600 4,800 (16,400) P( 2,000)

Schedule 2 - Distribution of 2007 net profit Salaries to partners Interest of 6% on beg. Capital Balance – equally Net income

Ramos P 9,600 3,960 ( 5,600) P 7,960

Schedule 3 - Distribution of 2008 net profit Salaries to partners Interest of 6% on beg. Capital Bonus - 20% (P58,800 - P39,360 - B) Balance – equally Net income

Ramos P 9,600 3,600 3,240 5,400 21,840


Problem 1 -10

Robles, Bernal and Reyes Statement of Partners’ Capital For the Year Ended December 31, 2008 Robles

Capital balances before closing the nominal accounts Add Distribution of net profit: Drawing allowance Interest on average capital Balance - 60%, 30%, 10% Total Deduct Cash distribution Capital, December 31, 2008

Bernal

Reyes

Total

P120,000

P ( 2,000)

P20,000

P138,000

20,000 7,200 58,800 P206,000 122,720 P 83,280

14,000 240 29,400 P41,640

10,000 560 9,800 P40,360 26,480 P13,880

44,000 8,000 98,000 P288,000 149,200 P138,800

P41,640

P206,000 / 60% = P343,333; P40,360 / 10% = P403,600 P41,640 / 30% = P138,800 (required total capital) Problem 1 - 11

Chavez, Roman, and Valdez Statement of Changes in Partners’ Capital January 1 to November 1, 2008

Beginning balances Loan from Chavez Transfer of equipment to Valdez Balances Distribution of loss on realization* Salary to Valdez Int. to Chavez for 7 months Balance divided equally* Balances Dist. of cash in final settlement

Chavez Loan

Chavez Capital P 80,000

Roman Capital P 80,000

Valdez Capital P 80,000

P 60,000

P 80,000

P 80,000

( 16,000) P 64,000

P 60,000 60,000

2,100 ( 76,700) P 5,400 5,400

P 60,000

*Total partners’ equity as shown above Less Cash available for distribution Loss on realization Less Salary and interest Total loss to be divided equally

24,000 ( 76,700) P 3,300 3,300

( 76,700) P 11,300 11,300

P284,000 80,000 P204,000 26,100 P230,100

Total P240,000 60,000 ( 16,000) P284,000 24,000 2,100 ( 230,100) P 80,000 80,000


Problem 1 - 12

Canlas, David, Estrella and Fajardo Statement of Changes in Partners’ Capital Accounts For the Year Ended December 31, 2008

Investment Net profit Total Less: Excess rent (P225 x 6) Withdrawals Uncollectible accounts Capital, December 31

Canlas P309,000 237,700 P546,700

David P159,000 186,230 P345,230

P 78,000 18,000 P 96,000 P450,700

P 66,000 6,750 P 72,750 P272,480

Estrella P327,000 140,310 P467,310 P 13,500 87,000

Fajardo ------P 24,010 P 24,010

P100,500 P366,810

P 37,500 P(13,490)

Total P 795,000 588,250 P1,383,250 P 13,500 268,500 24,750 P 306,750 P1,076,500

P 37,500

Supporting computations: Revenue from fees Expenses: Total expenses, excluding depreciation and uncollectible accounts (P290,000 - P13,500) Depreciation [(P195,000 x 10%) + (P75,000 x 5%) Doubtful accounts (P24,000 x 50%) Net profit

P 900,000 P 276,500 23,250 12,000

311,750 P588,250

Distribution of net income 20% of gross fees from respective clients 20% of fees after April 1 after expenses but before bad debts Balance -Canlas-40%, David-35%, Estrella-25% Total

Canlas P 66,000

171,700 P237,700

David P 36,000

150,230 P186,230

Estrella

Fajardo

P 33,000

107,310 P140,310

Total P135,000

P24,010*

24,010

P24,010

429,240 P588,250

Revenues Expenses before uncollectible accounts (P276,500 + P23,250) x 180 / 900 Share of Fajardo

After April 1 P 180,000 59,950 P120,050 20% P 24,010

Problem 1-13 1.

Equipment Accumulated Depreciation Profit and Loss

13,500

1,350 12,150


2.

Profit and Loss Interest Payable P87,500 x 6% x 10/12 = P4,375

3.

Profit and Loss Abaya, Capital Reyes, Capital

4,375

159,025

Salaries Bonus [25% x (NI – B – S) ] Balance – equally Total 4.

4,375

Abaya P 39,000 24,610 P 63,610

Reyes P 58,500 12,305 24,610 P 95,415

Abaya, Capital Reyes, Capital Abaya, Drawing Reyes, Drawing

63,700 95,505

Total P 97,500 12,305 49,220 P159,025 36,000 62,500

36,000 62,500

Problem 1-14

1.

Jaime = 5/10 x 80% = 40% Madrid = 3/10 x 80% = 24%

2.

Corrected net income = P250,000 – (P12,000 – P31,000 – P20,000 + P15,000 + P9,000 x 65%) = P240,250 Jaime = P240,250 x 40% = P96,100 Madrid = P240,250 x 24% = P57,660

Soriano = 2/10 x 80% = 16% Matias = 20%

Soriano = P240,250 x 16% = P38,440 Matias = P240,250 x 20% = P48,050

MULTIPLE CHOICE 1. 2. 3. 4.

D D A C Abena – MV – Cost (P90,000 – P60,000) Buendia – MV – Cost (P60,000 – P70,000) Actual Inequity

5. 6. 7. 8.

A C B B

Molina’s contribution (P190,000 – P60,000) Nuevo’s tangible contribution Total capital contributions

Total P30,000 ( 10,000) P20,000 ( 20,000) P 0

Abena (60%) P18,000 ( 6,000) P12,000 ( 30,000) (P18,000)

Buendia (40%) P12,000 ( 4,000) P 8,000 10,000 P18,000

P130,000 100,000 P230,000


x 60% P 138,000 130,000 P 8,000

Capital credit of Molina Contribution of Molina Bonus to Molina 9.

Roxas = P596,250 - P5,550 = P590,700 Bernardo = P335,000 - P4,050 - P9,000 = P321,950

10.

Roxas = (P590,700 + P321,950) x 60% = P547,590 Bernardo = (P590,700 + P321,950) x 40% = P365,060

11.

Roxas = P650,000 – P590,700 = P59,300 Bernardo = P400,000 – P321,950 = P78,050

12.

Bruno = P150,000 - P90,000 = P60,000

13.

Total assets = Total liab. + Total capital = P25,000 + P300,000 = P325,000

14.

Cash contribution = (P248,850 x 1/3) – P50,000 = P32,950

15

Total capital = (P158,400 + P17,500 – P5,000 – P5,000) ÷ 2/3 = P248,850

16.

Required capital of Esteban (P287,500 x 60%) Non-cash contributions of Esteban (P125,000 – P30,000) Cash contribution

P172,500 95,000 P 77,500

17.

Contribution of Diaz Contribution of Esteban (P125,000 – P30,000 + P50,000) Total partnership capital

P115,000 145,000 P260,000

18.

C

P115,000 + P95,000 = P210,000/2

P105,000

19.

A

Net increase (decrease) in capital Add Withdrawals Total Less Additional investments Profit share Profit share percentage Total partnership net profit

(P120,000) 260,000 (P140,000) 50,000 P 90,000 ÷ 30% P300,000

20. 21. 22.

C B C

Net profit (exclusive of salary, interest and bonus) Salary (P2,000 x 12) Interest (P50,000 x 5%) Net profit after deduction of bonus Bonus = .20 (P120,000 + Bonus) = P24,000 + .20 Bonus = P24,000/.80 = P30,000

P 93,500 24,000 2,500 P120,000


23. 24.

25.

26.

27.

28.

29.

D

A

C

B

D

A

C

10% x P1,000,000 20% x P1,500,000 5% (P1M – P400,000) Balance – equally Net income

Interest Salaries Balance – equally

Bonus - 10%(P44,000 - B) Interest on capital in excess of P100,000 Salaries to partners Balance - 4:4:2

Bonus - 10%(P22,000 - B) Interest on capital in excess of P100,000 Salaries to partners Balance - 4:4:2

Bonus - 10%(P22,000 - B) Interest on capital in excess of P100,000 Balance – Salary ratio

Alberto P 100,000 300,000 680,000 P1,080,000

Ramos P24,000 60,000 ( 70,000) P14,000 Sison

P10,000 6,800 Sison

P10,000 (1,200) Sison

P8,636

Average capital of Tamayo P100,000 x 6 = P 600,000 160,000 x 6 = 960,000 P1,560,000/12 P130,000

Bustos

Cancio

P30,000 680,000

P30,000 680,000

Campos P12,000 40,000 (70,000) Torres P 1,000 6,800 Torres P 1,000 (1,200) Torres P 1,000

Ocampo P 8,000

Total P 100,000 300,000 60,000 2,040,000 Total P 44,000 100,000 ( 210,000)

( 70,000) Velasco P 4,000

Total P 4,000

12,000 3,400 P19,400

1,000 22,000 17,000 P44,000

Velasco P 2,000

Total P 2,000

12,000 (600) P13,400

1,000 22,000 (3,000) P22,000

Velasco P 2,000

Total P 2,000

10,364 P12,364

1,000 19,000 P22,000

Average capital of Vidal P225,000 x 9 = P2,025,000 155,000 x 3 = 465,000 P2,490,000/12 P207,500

Average capital of Banson - P150,000 Total int. on ave. capital= (P130,000 + P207,500 + P150,000) 10% = P48,750


30.

D

Interest on ave. capital Salaries to partners Balance - divided equally

31.

B

Total capital before net income (P475,000 + P60,000 – P70,000) Add Net profit Total capital, Dec. 31, 2008

32.

D

Andal P 47,250 122,325 (139,308) P 30,267

33.

C

Int. on average capital Salaries to partners Balance - equally Net increase (decrease)

P 48,750 144,000 9,000 P 201,750

A

35. 36. 37.

D A A

38.

B

Briones P 23,865 (139,308) P(115,443)

Camba P 16,235 82,625 (139,308) P( 40,448)

Net income = Net sales - CGS - Depr. - Oper. exp. Others) = P228,000 - P123,000 - P7,500 - P58,100 x 65% Mariano P10,000 1,561 8,781 P 20,342

Salary to partner for 10 mos. Bonus to managing partner Balance – based on orig. cap. TOTAL share in profit 34.

P465,000 201,750 P666,750

TOTAL share in profit Add Capital, beginning TOTAL Less Withdrawals Capital, end Interest Salaries Balance Add’l profit for Edna Net profit Salaries Bonus Interest Balance Total

Belen

P 20,342 125,000 P145,342 20,000 P125,342 Lorna

P25,610

Lucas

total P 10,000 1,561 14,049 P 25,610

P 5,268 P 5,268 P 5,268 75,000 P 80,268 30,000 P 50,268

Ursula

Total P 87,350 204,950 (417,924) P(125,624)

P 25,610 200,000 P 225,610 50,000 P 175,610

Edna

P 2,500.00 6,000.00 10,000.00

P 2,500.00 6,666.67

6,666.67

P12,000.00 16,000.00 33,333.34

________ P25,000.00

________ P18,500.00

_________ P9,166.67

3,333.33 P12,000.00

3,333.33 P64,666.67

Puno P40,000 13,000 1,000 7,000 P61,000

P2,000.00

Total

P 5,000.00 10,000.00 10,000.00

Quirino P36,000

Romero P13,650

750 7,000 P43,750

4,600 7,000 P25,200

Total P 89,650 13,000 6,350 21,000 P130,000


Computation of average capital: Puno, capital Jan. 1 – P10,000 x 3 Apr 1 - 9,000 x 3 July 1 - 11,000 x 3 Oct. 1 - 10,000 x 3 Quirino, capital Jan. 1 – P 6,000 x 6 July 1 - 10,000 x 3 Oct. 1 - 8,000 x 3 Romero, capital Jan. 1 – P40,000 x 3 Apr. 1 - 38,000 x 3 July 1 - 53,000 x 6

P 30,000 27,000 33,000 30,000

P120,000 / 12

P10,000

P 36,000 30,000 24,000 P 90,000 / 12

P 7,500

P120,000 114,000 318,000 P552,00 / 12

P46,000

Let X = Net Income P40,000 + 10% X + P1,000 + 1/3 (X – P89,650 – 10% X – P6,350 = P61,000 P40,000 + 10% X + P1,000 + 1/3 (90% X – P96,000) = P61,000 P40,000 + 10% X + P1,000 + 30% X – P32,000 = P61,000 10% X + 30% X = P61,000 – P40,000 – P1,000 + P32,000 40% X = P52,000 X = P130,000 39.

D

Legarda- 5/10 x 80% = 40% Madrigal-3/10 x 80% = 24%

Sotto - 2/10 x 80% = 16% Pimentel 20%

40.

C

Share of Legarda = P25,000 – ( P1,200 - P3,100 - P2,000 + P1,500 + P 900 x 65%) = P24,025 x 40% = P9,610

41.

C

Serrano

2008 Net income (P50,000 – P8,000) Salary to Serrano Remainder Divided equally

P42,000 ( 36,000) P 6,000 ( 6,000)

Understatement in 2007 NI Divided 60:40

P8,000 ( 8,000)

Income allocation

Toledo

P36,000 3,000

P 3,000

4,800

3,200

P43,800

P 6,200

1

CHAPTER 2 Partnership Dissolution EXERCISES Exercise 2 – 1 1.

Sales, Capital Rosales, Capital

140,000

2.

P280,000 + P320,000 + P200,000 = P800,000

140,000

Exercise 2 –2 1.

Total capital (P3,000,000 / 80%) Capital interest of Fidel Cash to be contributed by Fidel

2.

Cash Fidel, Capital

P3,750,000 x 20% P 750,000 750,000

750,000

Exercise 2 – 3

1. 2.

3.

Centeno, Capital Corales, Capital

40,000

Other Assets Cortes, Capital Centeno, Capital Claudio, Capital P140,000/ ¼ = P560,000 – (P200,000 + P 160,000 + P120,000)

80,000

Cortes, Capital P200,000 + P50,000 x 1/4 Centeno, Capital P160,000 + P20,000 x 1/4 Claudio, Capital P120,000 + P10,000 x 1/4 Corales, Capital

62,500 45,000 32,500

Cash

Cortez, Capital Centeno, Capital Claudio, Capital Corales, Capital old (3/4) new (1/4)

230,000

AC P532,500 177500 P710,000

CC P480,000 230,000 P710,000

Bonus_ P52,500 (52,500) P---0---

40,000 50,000 20,000 10,000

140,000 32,812 13,125 6,563 177,500


Exercise 2 – 4

1.

2.

3.

Conde, Capital Cuenco, Capital Catral, Capital Other Assets Conde, Capital Cuenco, Capital

360,000

Conde, Capital P270,000 + 270,000 x 1/3 Cuenco, Capital P180,000 + P90,000 x 1/3 Catral, Capital

180,000 90,000

Cash

270,000

Conde, Capital Cuenco, Capital Catral, Capital old (3/4) new (1/4)

4.

Cash Other Assets Conde, Capital Cuenco, Capital Catral, Capital old (3/4) new (1/4)

5.

90,000 60,000

AC P540,000 180,000 P720,000

CC P450,000 270,000 P720,000

Bonus_ P90,000 (90,000) P---0---

150,000 270,000 90,000

270,000 67,500 22,500 180,000

270,000 360,000

AC P 810,000 270,000 P1,080,000

CC P450,000 270,000 P720,000

Asset Re P360,000 P360,000

Cash Conde, Capital Cuenco, Capital Catral, Capital

270,000 67,500 22,500

360,000

Exercise 2-5 1a. Bonus Method Cash Alba, Capital Medel, Capital Almeda, Capital old (3/4) new (1/4)

180,000 6,000 9,000 AC P585,000 195,000 P780,000

CC P600,000 180,000 P780,000

Bonus_ P(15,000) 15,000 P---0---

195,000

270,000 90,000 270,000


1b.

Revaluation of Assets Method (AC = P180,000 ÷ 1/4 = P720,000) Alba, Capital (P60,000 x 40%) Medel, Capital (P60,000 x 60%) Other Assets (P780,000 - P720,000) To record revaluation of assets

24,000 36,000

Cash Almeda, Capital 2.

180,000

60,000

180,000

Balances under the bonus method

Alba P194,000

Medel P391,000

Almeda P195,000

Balances under the asset rev. method Additional depreciation Balances after depreciation

P200,000 ( 6,666) P193,334

P400,000 ( 6,667) P393,333

P200,000 ( 6,667) P193,333

Net advantage to Medel using the asset revaluation method

P 2,333

Exercise 2 - 6 1.

Garces, Capital Kalaw, Capital P120,000 x 1/2 = P60,000

60,000

2.

Cash Other Assets (P400,000 – P320,000) Kalaw, Capital Garces, Capital (P100,000 x 3/8) Hilario, Capital (P100,000 x 3/8) Juan, Capital (P100,000 x 2/8) Total agreed capital Total capital contribution Asset revaluation

60,000 80,000

P400,000 320,000 P 80,000

Interest acquired from Garces Cash invested in the partnership Total Capital credit of Kalaw Bonus to old partners Exercise 2 – 7 Bonus method Capital before admission of Estacio Contribution of Estacio Bonus to old partners Capital after admission of Estacio

60,000

40,000 37,500 37,500 25,000

P 60,000 60,000 P 120,000 100,000 P 20,000

Sabado P1,000,000

Galman P800,000

24,000 P1,024,000

16,000 P816,000

Estacio P500,000 ( 40,000) P460,000

Total P1,800,000 500,000 P2,300,000


Asset Revaluation method Capital before admission of Estacio Contribution of Estacio Adjustment of fixed assets to fair value Capital after admission of Estacio Exercise 2 – 8 1. Bonus method Capital balances before admission of new partners Contributions of new partners Bonus to old partners Capital balances after admission of new partners

Sabado P1,000,000

Galman P800,000

120,000 P1,120,000

80,000 P880,000

Noble

Calma

P64,000

P136,000

10,950

25,550

P74,950

P161,550

Reyes

Capital balances before admission of new partners Adjustment of assets to FV Contributions of new partners Capital balances after admission of new partners

P500,000 P500,000

Total P1,800,000 500,000 200,000 P2,500,000

Naval

P110,000 ( 24,000)

P120,000 ( 12,500)

P86,000

P107,500

Cash Equipment Noble, Capital Calma, Capital Reyes, Capital Naval, Capital 2. Asset Revaluation method

Estacio

130,000 100,000

Noble

Calma

P64,000 9,000

P136,000 21,000

P73,000

P157,000

Cash Equipment Inventory Land Building Noble, Capital Calma, Capital Reyes, Capital Naval, Capital Exercise 2 - 9 1a. Bonus Method Songco, Capital Bueno, Capital Manzano, Capital Cash/Payable to Songco

Reyes

Total P200,000 230,000 P430,000

10,950 25,550 86,000 107,500

Naval

Total

P110,000

P120,000

P200,000 30,000 230,000

P110,000

P120,000

P460,000

130,000 84,000 14,000 80,000

200,000 60,000 40,000

48,000 9,000 21,000 110,000 120,000

300,000


1b.

Asset Revaluation Method Songco, Capital Other Assets (P10,000 ÷ 1/6) Bueno, Capital (P50,000 x 3/5) Manzano, Capital (P50,000 x 2/5) Cash/ Payable to Songco

200,000 600,000

2. The bonus method will be preferred by Manzano Capital of Manzano after retirement Additional depreciation Capital of Manzano after additional depreciation Net advantage to Manzano with the use of the bonus method

300,000 200,000 300,000

Bonus Method P260,000 P260,000

Asset Rev P500,000 300,000 P200,000

P60,000

Exercise 2 – 10

1.

2.

3.

Delfin, Capital Damian, Capital Dencio, Capital

400,000

Delfin, Capital Cash Damian, Capital Dencio, Capital

400,000

Other Assets Delfin, Capital Cash Damian, Capital Dencio, Capital P460,000 – P400,000 = P60,000/ 1/3 = P180,000

180,000 400,000

Exercise 2 – 11

1.

Guzman, Capital January 1 Drawing Share in net profit Interest of Guzman upon retirement

Other Assets Guzman, Capital Cash Jorge, Capital Lopez, Capital P120,000 – P108,000 = P12,000/ 30% = P40,000

200,000 200,000 320,000 40,000 40,000

460,000 60,000 60,000

P100,000 (16,000) 24,000 P108,000 40,000 108,000

120,000 12,000 16,000


2.

Guzman, Capital Jorge, Capital Lopez, Capital Cash

108,000 5,143 6,857

120,000

Exercise 2 – 12 1.

2.

Building Villa, Capital Belen, Capital Marcos, Capital Cordero, Capital

200,000

Belen, Capital Cash

140,000

Villa, Capital Belen, Capital Marcos, Capital Cordero, Capital Cash

15,000 100,000 20,000 5,000

60,000 40,000 80,000 20,000 140,000

140,000

Exercise 2 - 13 1.

Galang, Capital Henio, Capital Israel, Capital Cash

12,000 8,000 140,000

2.

Israel, Capital Galang, Capital

140,000

3.

Israel, Capital Cash Galang, Capital Henio, Capital

140,000

4.

Other Assets Israel, Capital Cash Galang, Capital Henio, Capital

48,000 140,000

Israel, Capital Galang, Capital Henio, Capital Cash Other Assets

140 000 60,000 40,000

5.

160,000 140,000 130,000 6,000 4,000

148,000 24,000 16,000

120,000 120,000


6.

Israel, Capital Henio, Capital

140,000

140,000

PROBLEMS Problem 2 - 1 1.

2.

3.

4.

5.

6.

Locsin, Capital (P240,000 x 1/4) Montes, Capital (P120,000 x 1/4) Nava, Capital

60,000 30,000

Locsin, Capital (P240,000 x 1/3) Montes, Capital (P120,000 x 1/3) Nava, Capital

80,000 40,000

Other Assets Locsin, Capital (P180,000 x 3/4) Montes, Capital (P180,000 x 1/4) P540,000 – P360,000 = P180,000

180,000

Locsin, Capital [(P240,000 + P135,000) 1/3] Montes, Capital [(P120,000 + P45,000) 1/3] Nava, Capital

125,000 55,000

Cash Locsin, Capital (P90,000 x 3/4) Montes, Capital (P90,000 x 1/4) Nava, Capital AC old (1/2) 270,000 new (1/2) 270,000 540,000

180,000 67,500 22,500 CC 360,000 180,000 540,000

Cash Other Assets Nava, Capital Locsin, Capital (P60,000 x 3/4) Montes, Capital (P60,000 x 1/4) AC CC old (3/4) 540,000 360,000 new (1/4) 180,000 180,000 720,000* 540,000 *180,000 ÷ 1/4 = 720,000 Cash Nava, Capital Locsin, Capital (P60,000 x 3/4) Montes, Capital (P60,000 x 1/4)

Bonus (90,000) 90,000 ----180,000 180,000

Asset Rev 180,000 ----180,000 240,000

90,000

120,000 135,000 45,000

180,000

270,000

180,000 135,000 45,000

180,000 45,000 15,000


7.

Cash Locsin, Capital Montes, Capital Nava, Capital

240,000 54,000 18,000

8.

Cash Locsin, Capital (P22,500 x 3/4) Montes, Capital (P22,500 x 1/4) Nava, Capital (P510,000 x 1/4)

150,000

9.

Cash Other Assetsl (P660,000 – P525,000) Locsin, Capital (P135,000 x 3/4) Montes, Capital (P135,000 x 1/4) Nava, Capital (P660,000 x 1/4)

165,000 135,000

Cash Locsin, Capital (P24,000 x 3/4) Montes, Capital (P24,000 x 1/4) Nava, Capital (P504,000 x 1/3)

144,000 18,000 6,000

10

Problem 2 - 2 1. a. Ponce, Capital (P300,000 x ½) Anton, Capital b.

c.

Ponce, Capital (P300,000 x ¼) Salva, Capital (P200,000 x ¼) Victa, Capital (P100,000 x ¼) Anton, Capital Cash Ponce, Capital Salva, Capital Victa, Capital Anton, Capital Ponce Salva Victa Anton

2. a.

150,000 75,000 50,000 25,000 220,000

AC P307,500 204,500 103,000 205,000 P820,000

Other Assets Ponce, Capital Salva, Capital Victa, Capital P960,000 – P600,000 = P360,000

CC P300,000 200,000 100,000 220,000 P820,000

Bonus P 7,500 4,500 3,000 ( 15,000) -----360,000

312,000 16,875 5,625 127,500

101,250 33,750 165,000

168,000

150,000

150,000 7,500 4,500 3,000 205,000

180,000 108,000 72,000


b.

c.

Ponce, Capital Anton, Capital

240,000

Other Assets Ponce, Capital Salva, Capital Victa, Capital P180,000/ 25% = P720,000 – P600,000 = P120,000

120,000

Ponce, Capital Salva, Capital Victa, Capital Anton, Capital

90,000 59,000 31,000

Other Assets Ponce, Capital Salva, Capital Victa, Capital P220,000/ 25% = P880,000 – P820,000 = P60,000

60,000

Cash Anton, Capital Problem 2-3 1.a Cash Cabral, Capital Corpus, Capital Carlos, Capital Other Assets Camus, Capital old (3/4) new (1/4)

b.

Cash Cabral, Capital Corpus, Capital Carlos, Capital Camus, Capital old (1/2) new (1/2)

2.a

Cabral, Capital Corpus, Capital Carlos, Capital Camus, Capital

220,000

90,000 22,500 18,000 4,500 AC 630,000 90,000 720,000*

CC 675,000 90,000 765,000

Asset Rev (45,000) ----(45,000) 90,000 2,813 2,250 562

AC 669,375 95,625 765,000

CC 675,000 90,000 765,000

Bonus (5,625) 5,625 ----40,500 27,000 16,875

240,000 60,000 36,000 24,000

180,000 30,000 18,000 12,000

220,000

45,000 90,000

95,625

84,375


b.

Other Assets Cabral, Capital Corpus, Capital Carlos, Capital P90,000/ 1/8 = P720,000 – P675,000 = P45,000

45,000

Cabral, Capital Corpus, Capital Carlos, Capital Camus, Capital

43,312 29,250 17,438

Problem 2 - 4 1. a. Inventories Accumulated Depreciation – Equipment Allowance for Doubtful Accounts Accrued Liabilities Roces, Capital (P6,750 x 60/100) Lapuz, Capital (P6,750 x 40/100) b. c.

2.

5,625 7,500

Cash Doria, Capital P187,500/80% = P234,375 x 20% = P46,875 Lapuz, Capital Roces, Capital Roces = (P234,375 x 50%) – P103,800 = P13,388 Lapuz = (P234,375 x 30%) - P83,400 = (P13,388)

Problem 2 -5 Bal.before admission of Moreno Transfer of 1/6 int. to Moreno Investment of Moreno Asset revaluation Bonus to old partners Capital balances after admission of Moreno

13,388

90,000

3,450 2,925 4,050 2,700 46,875 13,388

Roces, Lapuz and Doria Statement of Financial Position April 1, 2008

ASSETS Cash Receivables P69,000 Less Allow. for DA 3,450 Inventories Equipment P52,500 Less Acc. Depr. 26,250 TOTAL ASSETS

46,875

22,500 18,000 4,500

LIABILITIES and PARTNERS’ CAPITAL P 82,875 Payables P66,750 Accrued Liabilities 2,925 65,550 Roces, Capital P117,188 129,375 Lapuz, Capital 70,312 Doria, Capital 46,875 234,375 26,250 ________ TOTAL LIABILITIES and P304,050 PARTNERS’ CAPITAL P304,050

Roldan P150,000

Angeles P180,000 (30,000)

Lazaro P300,000

6,000 6,000

6,000 6,000

8,000 8,000

P162,000

P162,000

P316,000

Moreno P 30,000 150,000 (20,000) P160,000

Total P630,000 150,000 20,000 P800,000


2.

Roldan 30% x 75% Angeles 30% x 75% Lazaro 40% x 75% Moreno

= = =

22.5% 22.5% 30% 25%

Problem 2 – 6 1.

2.

3.

4.

Lazo, Capital Madrid, Capital Buildings Allowance for Doubtful Accounts Allowance for Valuation of Investments

19,000 19.000

Lazo, Capital Madrid, Capital Nuguid, Capital (P200,000 – P19,000 + P19,000 – P20,000) 1/3 = P60,000 (P150,000 – P19,000 + P19,000 – P14,000) 1/3 = P45,333

60,000 45,333

8,000 20,000 10,000

105,333

Capital balances before admission of Nuguid Revaluation of assets Capital balances after revaluation Fraction of interest transferred to Nuguid Interest transferred to Nuguid Gain on transfer Cash distribution to partners

Lazo P199,000 ( 19,000) P180,000 x 1/3 P 60,000 31,138 P 91,138

Madrid P155,000 ( 19,000) P136,000 x 1/3 P 45,333 23,529 P 68,862

Total P354,000 ( 39,000) P316,000 x 1/3 P105,333 54,667 P160,000

Capital balances before admission of Nuguid Revaluation of assets Interest transferred to Nuguid Balances Share in net profit Drawings Capital balances, December 31, 2008

Lazo P199,000 ( 19,000) ( 60,000) P120,000 18,000 ( 15,000) P123,000

Madrid P155,000 ( 19,000) ( 45,333) P 90,667 18,000 ( 12,000) P 96,667

Nuguid

Cash Accounts Receivable Investments Accounts Payable Osorio, Capital Lazo, Capital Madrid, Capital Nuguid, Capital Osorio, Capital

P315,000 + P85,000 = P400,000 x 1/4 P100,000 – P85,000 = P15,000

66,000 40,000 20,000

5,000 5,000 5,000

105,333 P105,333 18,000 ( 28,000) P 95,333

41,000 85,000

15,000


Problem 2 - 7 1.

Montero, Capital Concio, Capital (P8,000 x 3/5) Domino, Capital (P8,000 x 2/5) Cash

100,000 4,800 3,200

2.

Montero, Capital Concio, Capital (P10,000 x 3/5) Domino, Capital (P10,000 x 2/5) Cash

100,000

3.

Montero, Capital Concio, Capital (P60,000 x 3/6) Domino, Capital (P60,000 x 2/6) Cash Other Assets (P10,000 ÷ 1/6)

100,000 30,000 20,000

4.

Montero, Capital (P6,000 x 1/6) Concio, Capital (P6,000 x 3/6) Domino, Capital (P6,000 x 2/6) Equipment [(P60,000 x 40%) – P18,000] Montero, Capital Equipment Cash

1,000 3,000 2,000

(P100,000 – P1,000)

99,000

108,000 6,000 4,000 90,000

90,000 60,000

6,000 18,000 81,000

Problem 2-8 1.

2.

3. a

Capital, January 1, 2008 Share in net loss Drawings Capital balances, December 31, 2008 Dangwa, Capital Dmaso, Capital Datu, Capital Cash Inventory P39,600 – P30,000 = P9,600 / 20% = P48,000 Other Assets Dangwa, Capital Cash Damaso, Capital Datu, Capital P48,000 – P39,600 = P8,400/ 20% = P42,000

Damaso P120,000 ( 9,600) ( 24,000) P 86,400

Dangwa P 70,000 ( 6,400) ( 24,000) P 39,600 39,600 14,400 24,000

Datu P 80,000 ( 16,000) ( 24,000) P 40,000

30,000 48,000 42,000 39,600

48,000 12,600 21,000


Dangwa, Capital Damaso, Capital Datu, Capital Cash

39,600 3,150 5,250

48,000

Problem 2 - 9 1.

Cash Luna, Capital Matias, Capital Noble, Capital Guzman, Capital Old New

2.

Cash Luna, Capital Matias, Capital Noble, Capital Other Assets Guzman, Capital Old New

120,000 2,000 2,000 2,000 AC P294,000 126,000 P420,000

CC P300,000 120,000 P420,000

Bonus P( 6,000) 6,000 ---60,000 20,000 20,000 20,000

AC P240,000 60,000 P300,000

CC P300,000 60,000 P360,000

Asset Rev (P60,000)

126,000

60,000 60,000

(P60,000)

3.

Matias, Capital Guzman, Capital P120,000 x 30% = P36,000

36,000

4.

Luna, Capital Matias, Capital Noble, Capital Cash

80,000 8,000 8,000

5.

Luna, Capital David, Capital

80,000

6.

Luna, Capital Matias, Capital Noble, Capital

80,000

36,000

96,000 80,000

40,000 40,000


Problem 2 -10

Canda, Pardo and Andres Statement of Changes in Partners’ Equity For the Period January 1, 2006 to January 1, 2009

Original capital, January 1, 2006 Corrected 2006 net profit Drawings Capital, January 1, 2007 Corrected 2007 net profit Drawings Capital, January 1, 2008 Corrected 2008 net loss Drawings Capital, January 1, 2009

Canda P 62,500 26,375 (15,000) P 73,875 10,875 (15,000) P 69,750 ( 6,750) (10,000) P 53,000

Schedule of computation of corrected net profit Reported net profit (loss) Understatement of accrued expenses Understatement of accrued revenues Overstatement of inventories Understatement of depreciation exp. Corrected net profit (loss) 2.

a.

b.

c.

2006 2007 2008 2006 2007 2008 2006 2007 2008

Pardo P 25,000 10,550 ( 7,800) P 27,750 4,350 ( 7,800) P 24,300 ( 2,700) ( 5,200) P 16,400 2006 P 44,000 ( 400 ) 250

Andres P 12,500 5,275 ( 5,200) P 12,575 2,175 ( 5,200) P 9,550 ( 1,350) ( 5,200) P 3,000 2007 P 18,500 400 ( 500 ) (

250 ) 100

( 1,500 )

1,500 ( 2,000 )

( 150 ) P 42,200

( 350 ) P 17,400

Revenue Receivable Canda, Capital Pardo, Capital Andres, Capital Expenses Payable Merchandise Inventory Accumulated Depreciation

150 2,000 800 400

Canda, Capital (P3,000 x 625/1000) Pardo, Capital (P3,000 x 250/1000) Andres, Capital (P3,000 x 125/1000) Furniture (P4,500 - P1,500)

1,875 750 375

Andres, Capital Furniture Cash

2,625

Total P 100,000 42,200 ( 28,000) P 114,200 17,400 ( 28,000) P 103,600 ( 10,800) ( 20,400) P 72,400 2008 P (10,500 ) ( (

500 650 ) 100 ) 150

2,000 ( 2,000 ) ( 200 ) P (10,800 )

650 2,000 700

3,000 1,500 1,125


Problem 2 -11 Abelar and Berces Statement of Changes in Partners’ Equity For the Period January 1, 2007 to January 15, 2009 Capital balances before closing the books, December 31, 2007 Net profit for 2007 (Sch 1) Drawing Capital, December 31, 2007 Admission of Custodio (Sch. 2) Net loss for 2008 Drawings Capital, December 31, 2008 Loss on realization on Jan. 15, 2009 Final cash distribution

Abelar

Berces

Custodio

Total

P 50,000 6,600 (8,200) P 48,400 (7,800) (5,250) (7,500) P 27,850 (16,520) P 11,330

P 30,000 7,400 (6,800) P 30,600 (5,200) (3,750) (5,000) P 16,650 (11,800)` P 4,850

P 33,000 (6,000) (6,800) P 20,200 (18,880) P 1,320

P 80,000 14,000 (15,000) P 79,000 20,000 (15,000) (19,300) P 64,700 (47,200) P 17,500

Abelar_ P 9,000 (2,400) P 6,600

Berces P 9,000 (1,600) P 7,400

Total P 18,000 ( 4,000) P 14,000

Schedule 1 - Distribution of 2007 net profit Salaries Balance - 60%, 40% Total Schedule 2 - Admission of Custodio Total capital contribution (P79,000 + P20,000) Interest to be credited to Custodio Capital credit of Custodio Capital contribution of Custodio Bonus to Custodio from Abelar and Berces

P 99,000 1/3__ P 33,000 20,000 P 13,000

MULTIPLE CHOICE 1. 2. 3.

B A B

4.

A

Lima Mitra

5.

A

Asset revaluationP60,000/20% = P300,000 - P150,000 Lima = [P100,000 + (P150,000 x 75%)] x 80% Mitra = [P 50,000 + (P150,000 x 25%)] x 80% Nova

P264,000 – [(P278,000 + P418,000 + P192,000) x 1/5] = P86,400 = =

P100,000 x 80% = P80,000 P 50,000 x 80% = P40,000 P150,000 P170,000 P 70,000 P 60,000


6.

D

7. 8. 9. 10.

D C C A

11.

C

12. 13.

D A

14.

C

Original investment Net profit Drawings Capital bal . before transfer to Desta Required capital based on orig. capital ratio after transfer to Desta of 1/4 int. Capital to be transferred to Desta Excess cash to be dist. based on orig. capital ratio (P30,000 - P18,810) Distribution of cash to Felix and Elias

Felix P 24,000 5,430 ( 5,050) P 24,380

Elias P 48,000 10,860 ( 8,000) P 50,860

Total P 72,000 16,290 ( 13,050) P 75,240

18,810 P 5,570

37,620 P 13,240

56,430 P 18,810

3,730 P 9,300

7,460 P 20,700

11,190 P 30,000

P90,000 – P75,000 = P15,000 Capital of Mison prior to admission of Zamora Share in the bonus from Zamora [(P90,000 – P75,000) 1/2) Capital of Mison in the new partnership Voltaire Asuncion Leonor

AC P180,000 210,000 195,000 P585,000

CC P150,000 180,000 195,000 P525,000

P195,000 – (P525,000 x 1/3 = P175,000) = P20,000 Old partners’ capital contribution Percentage of interest of old partners Total agreed capital of the new partnership Percentage of interest of Sison Capital credit of Sison Bonus to Sison Cash to be contributed by Sison Capital balances before adm. of Vidal Asset revaluation (P180,000/20% ) – P840,000 = P60,000 Adjusted capital balances Percentage of unsold interest Capital balances after adm. of Vidal

P105,000 7,500 P112,500 Asset Rev P30,000 30,000 P60,000 P600,000 ÷ 75% P800,000 x 25% P200,000 70,000 P130,000

Rivera P504,000

Sanchez P252,000

Torres P 84,000

36,000 P540,000 x 80% P432,000

18,000 P270,000 x 80% P216,000

6,000 P 90,000 x 80% P 72,000

15.

D

Total capital of the new partnership (P840,000/75%) Percentage of interest Amount to be invested by Vidal in the partnership

16.

B

Agreed capital Capital contribution = P95,000 + P80,000 + P60,000 + P80,000 = Asset revaluation

P1,120,000 x 25% P 280,000 P330,000 315,000 P 15,000


17.

A

P80,000 + P12,000 – P70,000 = P22,000

18.

C

Capital balance before admission of Manalo Interest sold to Manalo (P80,000 x 15%) Share in the recorded asset revaluation (P15,000 x 3/10) Share in the bonus from Manalo [(P80,000 + P12,000) - P70,000] x 3/10 Capital balance after admission of Manalo

19.

B

20.

A

21.

A

22.

A

23.

C

Capital balances, April 30, 2008 1/6 Interest transferred to Magno Balances Cash transfers to equalize investment Balances Distribution of net profit -equally Withdrawals Capital, June 30, 2008

Juan P 360,000 ( 60,000) P 300,000 ( 100,000) P 200,000 3,150 ( 1,500) P 201,650

P 80,000 (12,000) 4,500 6,600 P 79,100

Cosme P 225,000 ( 37,500) P 187,500 12,500 P 200,000 3,150 ( 2,000) P 201,150

Luna P 135,000 ( 22,500) P 112,500 87,500 P 200,000 3,150 ( 1,500) P 201,650

Agreed capital = (P201,650 + P201,150 + P201,650) ÷ 3/4 = Interest of Magno Required capital credit of Magno Capital balance of Magno before investing cash Cash to be invested by Magno Asset revaluation method: Capital contributions of partners Asset revaluation Additional depreciation Capital balances Bonus method: Capital contributions of partners Bonus to old partners from new partner Capital balances Net advantage of bonus method to Isleta Capital balance Uncollectible accounts Worthless inventories Other assets written off Adjusted capital Total capital P614,476 +P683,052 Total liabilities

Magno P 120,000 P 120,000 P 120,000 3,150 ( 2,000) P121,150

P805,933 1/4___ P201,483 121,150 P 80,333

Galang

Hizon

Isleta

P600,000 252,000 ( 140,000) P712,000

P480,000 168,000 ( 140,000) P508,000

P500,000

P600,000 63,000 P663,000

P480,000 42,000 P522,000

P500,000 ( 105,000) P395,000 P 35,000

Campos P641,976 ( 20,000) ( 5,500) ( 2,000) P614,476

Centeno P728,352 ( 35,000) ( 6,700) ( 3,600) P683,052 P1,297,528 967,590 P2,265,118

( 140,000) P360,000


24.

D

25.

D

26.

B

27. 28. 29. 30. 31. 32.

C C D D D A

33.

C

Total capital P1,297,528 / 80% Interest of Coronel Contribution of Coronel

P1,621,910 x 20% P 324,382

Capital balances Required capital P1,297,528/2 Cash paid (received)

Campos P614,476 648,764 P 34,288

Centeno P683,052 648,764 (P34,288)

Campos P614,476 34,288 130,000 (50,000) P728,764

Centeno P683,052 (34,288) 130,000 (65,000) P713,764

Capital balances Cash paid (received) Net profit Drawings

A

65,000 (28,000) P361,382

The capital balances would be the same as the balances prior to sale of interest. P4,000 x 2/5 = P1,600 P3,000 / 40% = P7,500 P12,000/3 = P4,000 Interest before retirement Adjustment of assets to FMV Retirement of Yumul Capital balance of Ylagan

34.

Coronel P324,382

Amount paid to retiring partner Capital of retiring partner Total capital before retirement Total capital after retirement Asset revaluation to retiring partner Fraction of interest of retiring partner Total asset revaluation

Yumul P103,000 12,000 P115,000 (115,000)

Yason P 77,000 12,000 P 89,000 ( 2,000)

Ylagan P180,000 24,000 P204,000 ( 4,000) P200,000 P28,000

P110,000 90,000

20,000 P 8,000 ÷ 2/10 P40,000

CHAPTER 3 Partnership Liquidation EXERCISES Exercise 3 - 1 Capital balances before liquidation Loan from partners Total partners’ interest Loss on realization (P46,000 – P12,000) Balances Additional loss to partners Balances Additional loss to partners Distribution of cash to partners

Aguilar P 11,000 2,000 P 13,000 (13,600) P( 600) 600 ----------------

Benito P 10,300

Casimiro P 13,700

David P 9,000

P 10,300 ( 10,200) P 100 ( 300) P ( 200) 200 ---------

P 13,700 ( 6,800) P 6,900 ( 200) P 6,700 ( 133) 6,567

P 9,000 ( 3,400) P 5,600 ( 100) P 5,500 ( 67) 5,433

Felipe P 20,000 7,500 ( 10,000) P 17,500 ( 16,250) P 1,250 ( 5,625) P( 4,375)

Total P 92,500 30,000 ( 35,000) P 87,500 ( 65,000) P 22,500 ( 22,500) ------

Exercise 3 - 2 Original investments Net income for 2007 Drawings in 2007 Total partners’ interest before dissolution Net assets distributed to partners Balances Loss to partners distributed 2:1:1 Cash settlement among partners

Duque P 50,000 15,000 ( 15,000) P 50,000 ( 32,500) P 17,500 ( 11,250) P 6,250

Espino P 22,500 7,500 ( 10,000) P 20,000 ( 16,250) P 3,750 ( 5,625) P( 1,875)

Exercise 3 - 3 1.

Guarin, Capital Receivable from Guarin To offset receivable from Guarin against his capital.

2.

Salary Payable to Henson Henson, Capital To include salary payable to Henson to his interest.

3.

Henson, Capital (P24,500 x 40%) Guarin, Capital (P24,500 x 60%) Loss from Liquidation To distribute loss from liquidation to partners.

4.

Henson, Capital (P9,500 + P500 - P9,800) Guarin, Capital (P18,000 - P1,500 - P14,700) Cash

1,500

500

9,800 14,700

200 1,800

1,500

500

24,500

2,000

AA1 - Chapter 3 (2008 edition) 2

page

Exercise 3 - 4 1. Original investment Net loss for six months* Loss on realization (P121,000 - P49,000 = P72,000) Balances Additional loss to partners Cash distribution to Ibarra *

2.

Ibarra P 60,000 (18,000) (36,000) P 6,000 ( 1,200) ( 4,800)

Total capital, March 1 (P60,000 + P54,000 + P16,000) Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) Net loss

Javier P 54,000 (12,000) (24,000) P 18,000 ( 800) P130,000 94,000 P 36,000

Book value of other assets Total loss on realization Capital balance of Katindig after dist. of net loss Excess of personal liabilities over personal assets Maximum amount of loss that can be absorbed by Katindig Fractional share of Katindig Cash that must be realized on sale of other assets

Exercise 3 – 5 1. Book value of other assets (P459,000 – P3,000) Cash realized: Accounts receivable [P180,000 – (P60,000 x 20%)] Merchandise inventory Prepaid advertising Machinery and equipment (P120,000 x 60%) Loss on realization

Katindig P 16,000 ( 6,000) (12,000) P( 2,000) 2,000

P121,000 P 10,000 ( 5,000) P 5,000 1/6__

( 30,000) P 91,000

P456,000 P168,000 75,000 2,400 72,000

317,400 P138,600

Lesaca – Manalo Partnership Statement of Liquidation December 31, 2008

Balances before liquidation Sale of assets and distribution of loss Balances Payment of liabilities Balances Additional investment by Manalo Balances Payment of liabilities Balances Additional loss to Lesaca Payment to Lesaca

Cash

P 3,000 317,400 P320,400 ( 320,400) 12,000 P 12,000 ( 600) P 11,400 P 11,400

Other Assets

P456,000 ( 456,000)

Liabilities AP NP P60,000

P258,000

Capital Lesaca

P60,000 ( 59,400) P600

P258,000 ( 258,000)

P34,560 ( 1,200) P33,360

(P32,160) ( 1,800) (P33,960) 12,000

P33,360

(P21,960)

P33,360 ( 21,960) P11,400

(P21,960) 21,960

P (

600 600)

P90,000 ( 55,440)

Manalo

P 51,000 ( 83,160)


Exercise 3 – 6 Capital balances before liquidation Restricted interest – possible loss Non-cash assets P600,000 Liquidation expenses 9,000 Unrecorded liabilities 15,000 Total P624,000 Balances Restricted interest – possible loss to Nocum, Oliva and Pascua for the deficiency of Quinto Balances Restricted interest – possible loss to Oliva and Pascua for the deficiency of Nocum Safe payment

page

Nocum P180,000

Oliva P300,000

Pascua P240,000

Quinto (P 33,000)

( 156,000) P 24,000

( 156,000) P144,000

( 156,000) P 84,000

( 156,000) (P189,000)

( 63,000) (P 39,000)

( 63,000) P 81,000

( 63,000) P 21,000

189,000 -

( 19,500) P 61,500

( 19,500) P 1,500

39,000 -

-


Exercise 3 - 8

PAYMENTS

page

Rama, Sison and Toledo Cash Priority Program Rama P30,000 20,000 P50,000 40% P125,000

Capital balances Add Loan balances Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I – Cash to Toledo reducing LAB to an amount reported for Sison (P125,000 x 20%) Balances P125,000 Allocation II - Cash to Sison & Toledo reducing LAB to an amount reported for Rama P100,000 x 40% P100,000 x 20% Balances P125,000 Allocation III - Further cash distribution may be made in the P & L ratio Exercise 3-9 1.

Capital balances before liquidation Add Note payable to Magno Total partners’ interest Profit and loss ratio Loss absorption balances Allocation I – Cash to Lagman reducing LAB to an amount reported for Julian (P60,000 x 3/10) Balances Allocation II – Cash to Julian & Lagman reducing LAB to an amount reported for Magno (P40,000 x 3/10) Balances Allocation III – Further cash distributions may be made in the P & L ratio

Sison P70,000 20,000 P90,000 40% P225,000

Toledo P40,000 30,000 P70,000 20% P350,000

P225,000

(125,000) P225,000

(100,000) P125,000

Rama

(100,000) P125,000

Sison

Toledo

P25,000

P40,000

20,000 P45,000

P40,000

Julian, Lagman and Magno Cash Priority Program January 1, 2008 Julian P 36,000

Lagman P 54,000

P 36,000 3/10 P120,000

P 54,000 3/10 P180,000

Magno P18,000 14,000 P 32,000 4/10 P80,000

P120,000

(60,000) P120,000

P80,000

( 40,000) P80,000

(40,000) P80,000

P80,000

Julian

PAYMENTS Lagman Magno

P18,000

P12,000 P12,000

12,000 P20,000

-


2.

page

Julian, Lagman and Magno Statement of Liquidation January to March, 2008

Balances before liquidation January: Sale of assets and dist. Of loss Payment of liquidation expenses Payment of liabilities Distribution of cash to partners (sch. 1) Balances February: Sale of assets and distribution of gain Payment of liquidation expenses Distribution of cash to partners (sch. 2) Balances March: Sale of assets and distribution of loss Balances Offset of loan against deficiency Final payment to partners

Cash P12,000

Other Assets P146,000

30,000

( 38,000)

( 3,600) ( 36,000) ( 2,400)

Liabilities P36,000

NP to Magno P14,000

( 2,400)

( 2,400)

( 3,200)

( 1,080)

(1,080

(1,440)

P32,520

(2,400) P48,120

P13,360

2,700

2,700

3,600

(2,520)

(2,520)

(3,360)

P14,000

(10,000) P22,700

(25,600) P22,700

P13,600

P14,000

(11,100) P11,600

(11,100) P11,600

(14,800) P(1,200)

(P11,600 )

(P11,600 )

(36,000) P108,000

44,000

P14,000

(35,000)

(8,400) (35,600)

36,000 P36,000

P73,000 (73,000)

( 1,200) (P12,800)

(P36,000)

PAYMENTS Lagman Magno P54,000 P18,000

Julian P36,000

Schedule 1 Installment Liquidation January 31, 2008 Cash available Allocation I – Payable to Lagman

Amount P2,400 P2,400

Julian

Lagman

Mango

P2,400

Schedule 2 Installment Liquidation February 29, 2008 Cash available Allocation I – Balance Payable to Lagman Allocation II – Payable to Julian and Lagman

Amount P2,400

Julian

P2,400 P20,000

Lagman

Mango

P2,400 P10,000 P10,000

10,000 P25,600

-

1,200


3. Journal entries January Cash Julian, Capital Lagman, Capital Magno, Capital Other Asset Julian, Capital Lagman, Capital Magno, Capital Cash Liabilities Cash Lagman, Capital Cash February

March

Cash Other assets Julian, Capital Lagman, Capital Magno, Capital

page

30,000 2,400 2,400 3,200 1,080 1,080 1,440 36,000 2,400 44,000

Julian, Capital Lagman, Capital Magno, Capital Cash

2,520 2,520 3,360

Julian. Capital Lagman, Capital Cash

10,000 25,600

Cash Julian, Capital Lagman, Capital Magno, Capital Other assets

36,000 11,100 11,100 14,800

Note Payable to Magno Magno, Capital

1,200

Note Payable to Magno Julian, Capital Lagman, Capital Cash

12,800 11,600 11,600

38,000

3,600 36,000 2,400 35,000 2,700 2,700 3,600

8,400

35,600

73,000 1,200

36,000


Exercise 3 - 10

Capital balances Profit and loss ratio Loss absorption balance Allocation I - Cash to Villa reducing LAB to an amount reported for Waldo (P4,900 x 2/7) Balances Allocation II - Cash to Villa & Waldo reducing LAB to an amount reported for Urbe P21,000 x 2/7 P21,000 x 1/7 Balances Allocation III - Further cash distribution may be made in the P & L ratio

2.

page

U, V and W Co. Cash Priority Program Urbe P 11,200 4/7 P 19,600

Villa P13,000 2/7 P 45,500

Waldo P 5,800 1/7 P 40,600

P 19,600

( 4,900) P 40,600

P 40,600

( 21,000) P 19,600

Book value of assets Loss on realization: Capital balance of Urbe prior to realization Cash to be received by Urbe Share of Urbe in the loss on realization Fractional share of Urbe Cash to be realized of the sale of assets

P 19,600

PAYMENTS

Urbe

Villa

P 1,400

6,000

(21,000) P 19,600

P 7,400

P 11,200 10,000 P 1,200 4/7_

2,100 P 27,900

Allocation III - P3,200 ÷ 4/7 = P5,600 x 1/7 Allocation II Total cash received by Waldo

P

4.

Book value of assets Total cash available Allocation I Allocation II - P1,800 - P1,400 = P400 ÷ 2/3 Loss on liquidation

P 30,000

2.

Accumulated Depreciation Equipment Capital Adjustment Account

3.

Goodwill Capital Adjustment Account P980,000 – P924,000 = P56,000

P 3,000 P 3,000

P 30,000

3.

Exercise 3 – 11 Partnership Books 1. Inventories Capital Adjustment Account

Waldo

800 3,000 P 3,800

P 1,400 600

90,000 160,000

56,000

2,000 P 28,000

90,000 80,000 80,000 56,000


page

4.

Capital Adjustment Account Belen, Capital (3/4) Bgnes, Capital (1/4)

226,000

5.

Colored Co. Stocks Allowance for Uncollectible Accounts Accounts Payable Accounts Receivable Inventories Equipment Goodwill

980,000 12,000 104,000

Belen, Capital Bagnes, Capital Cash Colored Co. Stocks

563,500 458,500

6.

169,500 56,500

124,000 296,000 520,000 156,000

42,000 980,000

New Corporation’s Books 1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital. 2.

Cash Ordinary Share Capital PIC in Excess of Par

700,000

3.

Accounts Receivable Inventories Equipment Goodwill Allowance for Doubtful Accounts Accounts Payable Ordinary Share Capital PIC in Excess of Par

124,000 296,000 520,000 156,000

500,000 200,000

12,000 104,000 700,000 280,000


page

Problem 3 – 2 (Case 3 – cont.) Calma, Daza and Esteban Schedule of Cash Distribution to Partners Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Calma and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Calma P 27,000

Daza P ( 3,000)

P 27,000

P ( 3,000)

( 2,000) P 25,000 P 25,000 P 25,000

Esteban P 46,000 8,000 P 54,000

3,000 -

( 1,000) P 53,000

-

P 8,000 45,000 P 53,000

AA1 - Chapter 3 – Partnership Liquidation (2005) Suggested Answers

page

Problem 3 – 2 (Case 4 – cont.) Calma, Daza and Esteban Schedule of Cash Distribution to Partners Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Calm and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency Balances Restricted interest - possible loss to Esteban if Calma fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Calma P 9,000

Daza P (21,000)

P 9,000

P (21,000)

Esteban P 37,000 8,000 P 45,000

(14,000)

21,000

P( 5,000)

-

P 38,000

5,000 -

-

( 5,000) -

-

P 8,000 25,000 P 33,000

-

( 7,000)

Chapter 3 – Partnership Liquidation Suggested Answers

page

Problem 3 - 3 1.

a.

Cash Accumulated Depreciation Fuentes, Capital (P72,000 x 5/15) Goco, Capital (P72,000 x 5/15) Herrera, Capital (P72,000 x 3/15) Isla, Capital (P72,000 x 2/15) Merchandise Inventory Accounts Receivable Store Fixtures

48,000 25,000 24,000 24,000 14,400 9,600

b.

Accounts Payable Cash (P28,000 + P48,000)

76,000

c.

Fuentes, Capital Herrera, Capital Isla, Capital Goco, Capital

4,500 2,700 1,800

Fuentes, Capital Isla, Capital Herrera, Capital

1,500 600

Fuentes, Loan Isla, Loan Fuentes, Capital Isla, Capital

2,000 3,000

f.

Cash Fuentes, Capital Herrera, Capital

6,000

g.


4,000

h.

Isla, Loan Cash

2,000

a.

Accounts Payable Fuentes, Capital

4,000

b.

Isla, Loan Fuentes, Capital Herrera, Capital

2,000 3,000

d.

e.

2.

55,000 60,000 30,000 76,000

9,000

2,100

2,000 3,000 1,000 5,000 4,000 2,000 4,000

5,000


page

Problem 3 – 3 (cont.) 3.

a.

Accounts Payable Herrera, Capital

4,000

b.

Isla, Capital Fuentes, Capital Herrera, Capital

2,000

4,000 1,000 1,000

Schedule to support the entries in Requirement 1

Balances before liquidation Distribution of loss Balances Additional loss for the deficiency of Goco Balances Additional loss for the deficiency of Herrera Balances Offset against debit balance in capital account Balances Additional investment by partners Payment to Isla

L O A N Fuentes Isla P 2,000 P 5,000

C A P I T A L Goco Herrera P15,000 P10,000 ( 24,000) ( 14,400) P( 9,000) P( 4,400)

P 2,000

P 5,000

Fuentes P27,000 ( 24,000) P 3,000

P 2,000

P 5,000

( 4,500) P( 1,500)

9,000 -

( 2,700) P( 7,100)

( 1,800) P( 2,400)

P 2,000

P 5,000

( 1,500) P( 3,000)

-

2,100 P( 5,000)

( 600) P( 3,000)

( 2,000) -

( 3,000) P 2,000

2,000 P( 1,000)

P( 5,000)

3,000 -

-

P 2,000

1,000 -

-

-

5,000 -

Isla P 9,000 ( 9,600) P( 600)

-


page

Problem 3 -5 JKLM Trading Co. Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners February 28, 2008 Capital balances before dist. of cash Add Loan balances Total partners’ interest Restricted interest - possible loss if nothing is realized on remaining assets Balances Restricted interest - additional possible loss if Manabat is unable to pay his deficiency (20:30:30) Free interest - payments to partners Payment to apply on Loan Capital Total cash distribution

Jocson P 19,128 15,000 P 34,128

Kaimo P 88,992

Legarda P 101,532

Manabat P 22,878

P 88,992

P 101,532

P 22,878

( 25,494) P 8,634

( 38,241) P 50,751

( 38,241) P 63,291

( 25,494) P( 2,616)

( 654) P 7,980

( 981) P 49,770

( 981) P 62,310

P 49,770 P 49,770

P 62,310 P 62,310

P 7,980 P 7,980

2,616 -

-

JKLM Trading Co. Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners March 31, 2008 Capital balances before dist. of cash Add Loan balance Total partners’ interest Restricted interest - possible loss if nothing is realized on remaining assets Free interest - payment to partners Payment to apply on: Loan Capital Total cash distribution

Jocson P 18,348 7,020 P 25,368

Kaimo P 38,052

Legarda P 38,052

Manabat P 22,098

P 38,052

P 38,052

P 22,098

( 16,524) P 8,844

( 24,786) P 13,266

( 24,786) P 13,266

(16,524) P 5,574

P 7,020 1,824 P 8,844

P 13,266 P 13,266

P 13,266 P 13,266

P 5,574 P 5,574

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

page

Problem 3 – 6

QRS Partnership Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners July 31, 2008 Quizon Roman Balances before cash distribution P116,250 P159,750 Add Loan balance 150,000 Total partners’ interest P116,250 P309,750 Restricted interest – possible loss of P480,000 on remaining unsold assets and cash withheld of P30,000 ( 255,000) ( 153,000) Balances ( P138,750) P156,750 Restricted interest – possible loss of P138,750 to Roman and Silva 138,750 ( 83,250) Balances P 73,500 Restricted interest – possible loss to Roman ( 6,000) Payment to Roman to apply on loan P 67,500 QRS Partnership Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners August 31, 2008 Quizon Roman Balances before cash distribution P 93,000 P145,800 Add Loan balance 82,500 Total partners’ interest P 93,000 P228,300 Restricted interest – possible loss of P375,000 on remaining unsold assets and cash withheld of P30,000 ( 202,500) ( 121,500) Balances ( P109,500) P106,800 Restricted interest – possible loss of P109,500 to Roman and Silva 109,500 ( 65,700) Payment to Roman to apply on loan and to Silva to apply on capital P 41,100

Silva P151,500 P151,500 ( 102,000) P 49,500 ( 55,500) (P 6,000) 6,000

Silva P142,200 P142,200 ( 81,000) P 61,200 ( 43,800) P 17,400


Problem 3 - 7 Requirement 1

Capital balances Loan balances Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I - Cash to Ureta to reduce LAB to amount reported for Tabora Balances Allocation II - Cash to Tabora and Ureta to reduce LAB to amount reported for Veloso Balances Allocation III - Further cash distribution may be made based on P & L ratio

page

Tabora, Ureta and Veloso Cash Priority Program January 1, 2008 Tabora P120,000 45,000 P165,000 50% P330,000

Ureta P 90,000 30,000 P120,000 30% P400,000

Veloso P 40,000 13,000 P 53,000 20% P265,000

P330,000

( 70,000) P330,000

P265,000

( 65,000) P265,000

( 65,000) P265,000

P265,000

Requirement 2 January: Cash available Allocation I - payable to Ureta February: Cash available Allocation I - Bal. payable to Ureta Allocation II - Payable to Tabora and Ureta in the ratio of 50:30

Amount

Tabora

PAYMENTS Tabora Ureta

P21,000

P32,500 P32,500

Ureta

P15,000 15,000

P15,000

P40,000 6,000

P 6,000

P34,000

March: Cash available Allocation II - Balance Allocation III - Based on P & L ratio

P90,000 18,000 P72,000

April: Cash available Allocation III - Based on P & L ratio

P30,000 30,000

19,500 P40,500

Veloso

P21,250 P21,250

12,750 P18,750

P11,250 36,000 P47,250

P 6,750 21,600 P28,350

P14,400 P14,400

P15,000

P 9,000

P 6,000

Veloso


Problem 3 – 8 (cont.) Requirement 1 January: a. Cash Accounts Receivable b.

February:

March:

Neri, Capital Ordan, Capital Pacia, Capital Cash

c.


d.

Pacia, Loan Pacia, Capital Cash

a.


b.


c.

Accounts Payable Cash Neri, Capital Ordan, Capital Pacia, Capital

d.

Salary Payable to Neri Neri, Capital Ordan, Capital Pacia, Capital Cash

a.

b.

Cash Neri, Capital Ordan, Capital Pacia, Capital Accounts Receivable Neri, Capital Ordan, Capital Pacia, Capital Cash

page

112,000 2,200 1,100 1,100 38,000 9,000 7,000 36,000 1,400 700 700 39,000

6,000 1,400 3,700 8,700 35,000 4,000 2,000 2,000 2,000 1,000 1,000

112,000

4,400 38,000

16,000 36,000

2,800 38,000 500 250 250

19,800

43,000

4,000


c.

page


39,500 19,750 19,750

79,000


Capital balances Receivable from partners Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I - Cash to Yuson to reduce LAB to amt. reported for Zapata Balances Allocation II - Cash to Zapata and Yuson to reduce LAB to amt. reported for Wilson Balances Allocation III - Based on P & L ratio (P6,000 + P100,000 P17,000 = P89,000 - P14,000) TOTALS

Wilson, Yuson and Zapata Cash Distribution Schedule June 30, 2008 Wilson P 67,000 12,000 P 55,000 50% P110,000

Yuson P 45,000 P 45,000 30% P150,000

Zapata P 31,500 7,500 P 24,000 20% P120,000

P110,000

30,000 P120,000

P120,000

P110,000

10,000 P110,000

10,000 P110,000

P AY M E N T S Wilson Yuson

Zapata

P 9,000

3,000

P37,500 P37,500

22,500 P 34,500

P 2,000

15,000 P17,000


page

Problem 3 – 9 Requirement No 2

Wilson, Yuson and Zapata Cash Distribution Schedule July 1 - September 30, 2008

Capital balances before liquidation July - Dist. of loss on sale of assets (1) Liquidation expenses Payment of liabilities Payment to partners (2) Balances Aug.- Liquidation expenses Equipment taken by Zapata Gain on transfer of eqt. to Zapata Payment to Yuson (3) Balances Sept- Dist. of loss on sale of assets (4) Liquidation expenses Final distribution to partners (1) (2) (3) (4)

Liabilities P 17,000 (17,000) -

Wilson P 55,000 (4,750) (500)

Yuson P 45,000 (2,850) (300)

P 49,750 (750)

(6,500) P 35,350 (450)

(3,000) -

P 52,000 (10,000) (500) P41,500

(1,800) (4,000) P 32,700 (6,000) (300) P26,400

Zapata P 24,000 (1,900) (200) P 21,900 (300) (10,000) (1,200) P 12,800 (4,000) (200) P8,600

(P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets (P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1 schedule of cash distribution below8,000 – 1,500 – 2,500 +4,000 (P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale

Capital balances after dist. of equipment to Zapata Profit and loss ratio Loss absorption balance Allocation I - Cash to Yuson to reduce LAB to amt. reported for Wilson Balances Allocation II - Cash to Wilson & Yuson to reduce LAB to amount reported for Zapata Balances Allocation III – P & L ratio

Schedule of Cash Distribution August 31, 20068 Wilson Yuson Zapata P 52,000 50% P104,000

P 36,700 30% P122,333

P 12,800 20% P 64,000

P104,000

18,333 P104,000

P 64,000

40,000 P 64,000

40,000 P 64,000

P 64,000

Wilson

Yuson

P 5,500

P20,000 P20,000

12,000 P 17,500

Zapata


Problem 3 - 9 - Requirement 3 Cash available in September Allocation I – Balance Allocation II Balance - Allocation III

Problem 3 -10

page

Amount P76,500 1,500 32,000 P43,000

Yuson

Zapata

P 20,000 21,500 P 41.500

P 1,500 12,000 12,900 P 26,400

P 8,600 P 8,600

Arceo, Basco and Cervo Statement of Changes in Partners’ Capital For the Period January 1, 2006 to May 31, 2008

2006: Original investment Distribution of net income (sch. 1) Drawings Balance, December 31 2007: Investment of Cervo (sch. 2) Distribution of net loss Drawings Balances, December 31 2008: Distribution of cash in Feb. (sch. 3) Distribution of cash in April (sch. 4) Balances Sale of assets & distribution of loss in May (sch. 5) Final cash distribution Schedule 1 - Distribution of 2006 net income Salaries Remainder – 65%:35% Total

Wilson

Arceo

Basco

P50,000 15,200 (7,000) P58,200

P30,000 12,800 (6,000) P36,800

(9,100) 4,200 (4,900) P40,000

(4,900) 3,000 (3,900) P25,000

P54,000 4,800 (4,200) P45,000

40,000 12,000 (13,000) P110,000

(5,000) (7,000) P28,000

(5,000) P20,000

(5,000) (8,000) P32,000

(10,000) (20,000) P 80,000

(17,500) P 10,500

(12,500) P 7,500

(20,000) P 12,000

(50,000) P 30,000

Arceo P10,000 5,200 P15,200

Schedule 2 - Admission of Cervo Total capital before admission of Cervo Investment of Cervo Total capital Interest acquired by Cervo Capital credit of Cervo Investment of Cervo Bonus to Cervo from old partners (shared 65%:35%)

Cervo

Total P 80,000 28,000 (13,000) P 95,000

Basco P10,000 2,800 P12,800 P 95,000 40,000 P135,000 40% P 54,000 40,000 P 14,000

Total P20,000 8,000 P28,000


page

Schedule 3 - Cash distribution in February Capital balances before dist. of cash Restricted interest - possible loss if nothing is realized on remaining assets (P100,000) Free interest - amount to be paid to partners

Arceo P40,000

Basco P25,000

Cervo P45,000

35,000 P 5,000

25,000 P ------

40,000 P 5,000

Arceo P 35,000

Basco P25,000

Cervo P40,000

28,000 P 7,000

20,000 P 5,000

32,000 P 8,000

Schedule 4 - Cash distribution in April Capital balances before dist. of cash Restricted interest - possible loss if nothing is realized on remaining assets (P80,000) Free interest - amount to be paid to partners Schedule 5 - Loss on realization of assets in May Capital balances equal to net assets Cash realized on sale of assets Loss on realization Problem 3-11 Partnership Books 1. Inventories Prepaid Expenses Goodwill Accrued Expenses Leony, Capital Espie, Capital 2.

3.

P80,000 30,000 P50,000

60,000 3,000 243,000

Rover Corp. Stocks Accounts Payable Accrued Expenses Allowance for Uncollectible Accounts Cash Accounts Receivable Inventories Prepaid Expenses Furniture and Equipment Goodwill

4,500,000 600,000 6,000 120,000

Leony, Capital Espie, Capital Rover Corp. Stocks

2,600,000 1,900,000

6,000 200,000 100,000

450,000 660,000 1,350,000 3,000 2,520,000 243,000

4,500,000


page

Corporation’s Books 1. Cash Accounts Receivable Inventories Prepaid Expense Furniture and Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Accrued Expenses Ordinary Share Capital 2.

450,000 660,000 1,350,000 3,000 2,520,000 243,000

Land Cash Pre-Operating Expenses Ordinary Share Capital PIC in Excess of Par

3,600,000 1,500,000 450,000

120,000 600,000 6,000 4,500,000

4,800,000 750,000

Rover Corporation Statement of Financial Position July 1, 2008 Assets Cash Accounts Receivable (net of Allow of P120,000) Inventories Prepaid Expenses Land Furniture and Equipment Goodwill Total Assets

P 1,950,000 540,000 1,350,000 3,000 3,600,000 2,520,000 243,000 P10,206,000

Liabilities and Shareholders’ Equity Accounts Payable P 600,000 Accrued Expenses 6,000 Total Liabilities P 606,000 Shareholders’ Equity Ordinary Share Capital P9,300,000 PIC in Excess of Par 750,000 Retained Earnings (deficit) (450,000) Total Shareholders’ Equity P9,600,000 Total liabilities and SH equity P10,206,000

MULTIPLE CHOICE 1. 2. 3. 4.

D D C C

5.

A

Share on loss on realization (P39,000 + P4,800 – P33,000) Percentage ownership of Imperial Total loss on realization

P10,800 ÷ 20% P54,000

Total capital Cash available Loss on realization

P70,000 28,000 P42,000


6.

B

7.

D

8.

A

page

Capital bal. before liquidation Loss on realization Balances Add’l loss to Gueco & Tiangco for the deficiency of Barcelon Cash distribution to partners

Gueco P 40,000 ( 21,000) P 19,000

Tiangco P 25,000 (14,000) P 11,000

Bacelon P 5,000 ( 7,000) P( 2,000)

( 1,200) P 17,800

( 800) P 10,200

2,000 P ---0---

Total capital (P360,000 + P72,000) Total liabilities Total loss on liquidation

Capital balances Drawing Distribution of net income Loss on liquidation Balances Additional loss to partners Cash to be distributed Coronel

to

Alarcon P 100,000 ( 60,000) 24,000 (172,000) P(108,000 108,000

9.

C

10

C

11

C

Total assets = Total capital + Total liabilities = P60,000 + P 3,000 Less Cash = P3,000 + P22,200 – P23,200 Book value of noncash assets

12

C

P61,000 – P23,200 = P37,800 x 3/21

P432,000 84,000 P516,000 Baretto P 80,000 ( 40,000) 24,000 (172,000) P(108,000) ( 54,000)

Total capital Loans from partners Total partners’ interest Cash available to partners (P37,500 – P28,500) Total loss on realization Capital balances before liquidation Loan balances Total partners’ interest Loss on realization Balances – cash to be paid to partners

Coronel P 300,000 (20,000) 24,000 (172,000) P 132,000 ( 54,000) P 78,000 P40,000 7,500 P47,500 9,000 P38,500

Doria P 24,500 4,000 P 28,500 ( 23,100) P 5,400

Elma P 15,500 3,500 P 19,000 ( 15,400) P 3,600 P 63,000 ___2,000 P 61,000 P 5,400


13

B

Capital balances Loss on realization Additional loss Payment to Lazaro

14

C

15 16 17

A A B

D

19

C

20

A

Jurado P 1,000 ( 5,400) P( 4,400) 4,400

Katindig P25,000 ( 7,200) P(17,800) 3,920

Lazaro P25,000 ( 10,800) P14,200 ( 5,880) P 8,320

Total credits equal debits (P130,000 + P44,000 + P90,000) Less Cash Book value of other assets Loss on realization [(P50,000 + P17,600 – P55,200)/40%] Cash received from sale of other assets

Capital balances Loss on realization Additional loss Amt to be rec.from the part.

18

page

Esper P 50,000 (112,000) P(62,000) (3,000)

Ester P50,000 ( 56,000) P(6,000) 6,000

Marcelo P 9,000 ( 14,400) P( 5,400) 5,400

P264,000 40,000 P224,000 31,000 P193,000

Ethel P50,000 ( 56,000) P(6,000) ( 1,500)

Elmer P 75,000 ( 56,000) P19,000 (1,500) P 17,500 200,000 P217,500

Initial investment Purchases Sales Interest Dividends Cash held Equal share Cash received (paid)

Urbe P 137,500,000 ( 1,237,500,000) 1,339,250,000 ( 2,200,000) 1,100,000 P 238,150,000 172,012,500 (P 66,137,500)

Capital balances before liquidation Loss on liquidation (P180,000) Cash to be received by Delia

Delia P480,000 ( 72,000) P408,000

Erma P135,000 ( 90,000)

Flora P165,000 ( 18,000)

Delia P480,000 ( 216,000) P264,000 ( 108,000)

Erma P135,000 ( 270,000) (P135,000) 135,000

Flora P165,000 ( 54,000) P111,000 ( 27,000) P 84,000

Capital balances before liquidation Loss on liquidation (P540,000) Add’l loss to Delia & Flora Cash to be received by Flora

Viray P 137,500,000 ( 495,000,000) 462,000,000 ( 1.375,000) 2,750,000 P 105,875,000 172,012,500 P 66,137,500


21

D

22 23 24

D B A

25

B

26

D

27

C

28

C

Capital balances before liquidation Loss on liquidation (P180,000) Balances Possible loss if remaining inventories are not sold Balances Add’ loss to Delia & Flora Distribution of cash to partners

page

Delia P480,000 ( 72,000) P408,000

Erma P135,000 ( 90,000) P 45,000

Flora P165,000 ( 18,000) P147,000

(192,000) P216,000 ( 156,000) P 60,000

( 240,000) (P 195,000) 195,000 -

( P ( P

48,000) 99,000 39,000) 60,000

Estrada Fortuna Gener Balances before liquidation P 40,000 P 65,000 P 48,000 Loss on sale of assets - P40,000 ( 16,000) (16,000) ( 8,000) Possible loss if nothing is realized on remaining assets - P90,000 ( 36,000) (36,000) (18,000) Balances P( 12,000) P 13,000 P 22,000 Add’l possible loss to Fortuna and Gener for deficiency of Estrada 12,000 ( 8,000) ( 4,000) Balances - cash to be distributed P --------P 5,000 P 18,000 Capital balance of Gener before distribution of cash P 18,000 Share in the cash to be withheld for possible liquidation expenses - P3,000 x 20%/60% (shared by Fortuna & Gener) ( 1,000) Cash to be received by Gener P 17,000 The remaining cash will be distributed according to profit and loss ratio. Thus the P14,000 will be distributed as follows: Estrada - P14,000 x 40% = P5,600 Fortuna - P14,000 x 40% = P5,600 Gener - P14,000 x 20% = P2,800 Total capital before drawing and net loss P 135,000 Drawing ( 10,000) Net loss for the year ( 20,000) Total liabilities 5,000 Total assets P 110,000 Cash on hand ( 700) Amount of noncash assets before liquidation P 109,300 Capital balance of Aguila before dist. of net loss P 25,000 Share in net loss (P20,000 x 60%) ( 12,000) Capital balance of Aguila before liquidation P 13,000 Cash to be received by Aguila 19,000 Share of Aguila in the gain on sale of other assets P 6,000 Percentage share of Aguila ÷ 60% Total gain on sale of other assets P 10,000 Book value of other assets 109,300 Cash to be realized from sale of other assets P 119,300


29

30

D

B

Capital balances Drawing Net loss Total partners’ interest Profit and loss ratio Loss absorption bal. Alloc. I - Cash to Corpuz Balances Alloc. II -Cash to Balweg and Corpuz Balances Alloc. III - Based on P & L ratio

1st P500,000 next P75,000 next P375,000 Remainder

A

33

C

Balweg P 50,000

( 12,000) P 13,000 ÷ 60% P 21,667

( 5,000) P 45,000 ÷ 25% P180,000

P 21,667

P180,000

Corpuz P 60,000 (10,000) ( 3,000) P 47,000 ÷ 15% P313,333 (133,333) P180,000

P 21,667

(158,333) P 21,667

(158,333) P 21,667

Priority Creditors 100%

Nera Capital 100% 60% 30%

PAYMENTS Aguila

Balweg

Corpuz

P 20,000 P 39,583 P 39,583

23,750 P43,750

P 33,000 ( 20,000) P 13,000 ÷ 15/40 P 34,667 x 25/40 P 21,667 Vulnerability Ranking 3 1 2

- P450,000 / 30% = P150,000 - P250,000 / 50% = P 50,000 - P250,000 / 20% = P125,000

D

32

Aguila P 25,000

Cash received by Corpuz Cash received from Allocation I Cash received from Allocation Ii Fractional share (B – 25% and C -15%) Total cash distributed Fractional share of Balingit Cash received by Balingit Nera Ochoa Perez

31

page

Ochoa Capital

50%

Perez Loan

26.67%

Perez Capital

13.33% 20.00%

Nera Ochoa Perez Total P450,000 P250,000 P250,000 P950,000 ( 150,000) ( 250,000) ( 100,000) ( 500,000) P300,000 -----P150,000 P450,000 ( 225,000) (150,000) ( 375,000) P 75,000 --------P 75,000 Reyes (20%) Santos (40%) Torres (40%) Net capital balances P100,000 P440,000 P310,000 Possible loss of P700,000 ( 140,000) (280,000) ( 280,000) Balances (P 40,000) P160,000 P 30,000 Possible loss from Reyes debit balance 40,000 ( 20,000) ( 20,000)` Cash distribution -----P140,000 P 10,000 Equities Loss to absorb Ochoa Balances Loss to absorb Perez Balance


34 35

D C

Capital balances Add Loan Total partners’ interest Divided by P & L ratio Loss absorption capacity Allocation 1 Balances Allocation II

page

Roger P108,000 P108,000 30% P360,000 P360,000 ( 60,000) P300,000

Sergio P120,000 30,000 P150,000 50% P300,000 P300,000 P300,000

Tito P129,000 P129,000 20% P645,000 ( 285,000) P360,000 ( 60,000) P300,000

Roger

Sergio

P57,000 P18,000 P18,000

-

Allocation III – P & L ratio

36

37

B

A

Amount available Allocation 1 to Tito Allocation II – 30%, 20%

P72,000 57,000 P15,000

Amount available Allocation II – Balance Allocation III

P120,000 15,000 P105,000

Roger

Sergio

P 9,000 31,500 P40,500

Sergio

Tito

P52,500 P52,500

P 6,000 21,000 P27,000

38

D

39

C

Capital balances Adjustment in assets (P20,000 – P10,000 – P3,000) Adjusted capital

P260,000 7,000 P267,000

40

B

Total capital (P94,800 + P214,200) Adjustments in assets (P6,600 – P20,000 – P22,000) Adjusted capital Ordinary Share Capital (720 x 2 x P10) Preference Share Capital

P309,000 ( 35,400) P273,600 14,400 P259,200

Ordinary shares (P14,400 / P10) Preference shares (P259,200 / P100)

1,440 sh.. 2,592 sh.

Capital balances Revaluation of assets Adjusted capital Par of capital stock Shares of stock to be rec’d by partners

Jacinto P400,000 200,000 P600,000 ÷ P100 6,000 sh.

Tito P57,000 6,000 P63,000

P9,000 P9,000 Roger

Tito

Mapa P600,000 200,000 P800,000 ÷ P100 8,000 sh

Magno P1,000,000 200,000 P1,200,000 ÷ P100 12,000 sh

12,000 P69,000


41

C

page

Capital balances before incorporation Adjustment in assets Adjusted capital Ordinary Share Capital (720 @P10) Preference Share Capital

Roldan P94,800 ( 11,800) P83,000 7,200 P75,800

Moises P214,200 ( 23,600) P190,600 7,200 P183,400

Preference shares Ordinary shares

758 720

1,834 720

AA1 -Chapter 3 (2008 edition))s

page 1

Exercise 3 – 7

Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Offset of loan Additional investment by Velasco Balances Asset distributed to Viola Balances July sale of assets and distribution of loss Balances Payment of liabilities Balances Possible loss on remaining other assets Cash distribution to partners

Cash P 80,000 200,000 P280,000 ( 280,000) --90,000 P 90,000 P 90,000 540,000 P630,000 (350,000) P280,000 P280,000

Other Assets P960,000 ( 300,000) P660,000 P660,000 P660,000 ( 200,000) P460,000 ( 400,000) P 60,000 P 60,000 ( 60,000) -----

Liabilities P630,000

Velasco Loan P 50,000

P630,000 ( 280,000) P350,000

P 50,000

P350,000

----

P350,000

-----

P350,000 ( 350,000) ------

-----

-----

----

P 50,000 ( 50,000)

----

Viola P470,000 ( 60,000) P410,000 P410,000

CAPITAL Velasco (P140,000) ( 20,000) (P160,000)

Vicente P30,000 ( 20,000) P10,000 P10,000

P410,000 ( 212,000) P198,000 84,000 P282,000

(P160,000) 50,000 90,000 (P 20,000) 6,000 (P 14,000) 28,000 P 14,000

P282,000 ( 36,000) P246,000

P 14,000 ( 12,000) P 2,000

P44,000 ( 12,000) P32,000

P10,000 6,000 P16,000 28,000 P44,000


page

PROBLEMS

Problem 3-1 1.

Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Additional investment of Elma Balances Payment to partners

Elma, Erica and Edna Statement of Liquidation January 1 – 31, 2008 Non-cash Cash Assets Liabilities P 80,000 634,000 ( 24,000) P690,000 (270,000) P420,000 15,000 P435,000 ( 435,000)

P810,000 (810,000)

P270,000 P270,000 (270,000)

Elma 3/8 P60,000 (66,000) ( 9,000) (P15,000) (P15,000) 15,000

C A P I T A L Erica Edna 3/8 2/8 P290,000 P270,000 ( 66,000) ( 44,000) ( 9,000) ( 6,000) P215,000 P220,000 P215,000

P220,000

P215,000 ( 215,000)

P220,000 ( 220,000)


page

2.

Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Offset of loan against debit balance in the capital balance of Elma Balances Payment to partners 3.

Profit and loss ratio Balances before liquidation

Cash P 80,000 634,000 (24,000) P690,000 (200,000) P490,000 P490,000 (490,000)

Cash

P 80,000 Sale of non-cash assets and distribution of 634,000

Elma , Erica and Edna Statement of Liquidation January 1 – 31, 2008 Non-cash Note Payable Assets to Elma P810,000 (810,000)

P70,000

P200,000

P70,000

P200,000 (200,000)

P70,000 ( 15,000) P55,000 ( 55,000) Elma , Erica and Edna Statement of Liquidation January 1 – 31, 2008 NR from Non-cash Assets Erica

Elma

3/8 P60,000 (66,000) ( 9,000) (P15,000) (P15,000)

Liabilities

P70,000

P200,000

P110,000

P70,000

P110,000

P70,000

P200,000 (200,000)

P110,000

P700,000 (700,000)

Erica

Edna

P215,000

P220,000

P215,000 ( 215,000)

P220,000 ( 220,000)

3/8 P290,000 ( 66,000) ( 9,000) P215,000

2/8 P270,000 ( 44,000) ( 6,000) P220,000

15,000

NP to Elma

loss

Payment of liquidation expenses (24,000) Balances P690,000 Payment of liabilities (200,000) Balances P490,000 Offset of receivable against credit balance in the capital of Erica Balances P490,000 Payment to partners (490,000)

Liabilities

C A P I T A L

Elma

Erica

Edna

3/8 P60,000 (24,750)

3/8 P290,000 ( 24,750)

2/8 P270,000 ( 16,500)

( 9,000) P26,250

( 9,000) P256,250

( 6,000) P247,500

P26,250

P256,250

P247,500

P26,250 ( 26,250)

( 110,000) P146,250 ( 146,250)

P247,500 ( 247,500)

(110,000) P70,000 ( 70,000)

C A P I T A L


Problem 3 – 2 (Case 1)

Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Payment of to partners Problem 3 – 2 (Case 2)

Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital account Payment to partners

page

Calma, Daza and Esteban Statement of Liquidation January, 2009 Other Cash Assets Liabilities P 20,000 250,000 P 270,000 ( 112,000) P 158,000

P 340,000 (340,000) -

P 112,000

P 5,000

P 8,000

P 112,000 (112,000) -

P 5,000

P 8,000

C A Calma (2/5) P 95,000 (36,000) P 59,000

P 5,000

P 8,000

P 59,000

P 24,000

P

I T A L Daza Esteban (2/5) (1/5) P 60,000 P 80,000 (62,000) (31,000) P( 2,000) P 49,000

Calma, Daza and Esteban Statement of Liquidation January, 2009 Other Cash Assets Liabilities P 20,000 185,000 P 205,000 ( 112,000) P 93,000 P 93,000

L O A N Daza Esteban

I T Daza (2/5) P 60,000 (36,000) P 24,000

A L Esteban (1/5) P 80,000 (18,000) P 62,000 P 62,000

P 112,000

P 5,000

P 8,000

P 5,000

P 8,000

-

P 112,000 (112,000) -

C A Calma (2/5) P 95,000 (62,000) P 33,000

P 5,000

P 8,000

P 33,000

P( 2,000)

P 49,000

-

-

(2,000) P 3,000

P 8,000

P 33,000

2,000 -

P 49,000

P 340,000 (340,000) -


P


page

Problem 3 – 2 (Case 3)

Cash Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital account Balances Payment to partners Balances Additional investment by Daza Payment to partners

Calma, Daza and Esteban Statement of Liquidation January, 2009 Other Assets Liabilities

P 20,000 170,000 P 190,000 ( 112,000) P 78,000 P 78,000 ( 78,000) 3,000 P 3,000

P 340,000 (340,000) -

L Daza

O A N Esteban

P 112,000

P 5,000

P 8,000

P 112,000 (112,000) -

P 5,000

P 8,000

C A Calma (2/5) P 95,000 (68,000) P 27,000

P 5,000

P 8,000

P 27,000

-

-

(5,000) -

-

-

-

-

-

P 8,000 ( 8,000) -

P 27,000 ( 25,000) P 2,000

-

-

P 2,000

P I T A L Daza Esteban (2/5) (1/5) P 60,000 P 80,000 (68,000) (34,000) P( 8,000) P 46,000 P( 8,000) 5,000 P(3,000) P(3,000) 3,000 -

P 46,000 P 46,000 (45,000) P 1,000 P 1,000


page

Problem 3- 2 (Case 4)

Calma, Daza and Esteban Statement of Liquidation January, 2009 Cash

Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital account Balances Payment to partners Balances Additional investment by Daza Payment to partners

P 20,000 125,000 P 145,000 ( 112,000) P 33,000 P 33,000 ( 33,000) 21,000 P 21,000

Other Assets P 340,000 (340,000) -

Liabilities

L Daza

O A N Esteban

P 112,000

P 5,000

P 8,000

P 112,000 (112,000) -

P 5,000

P 8,000

C A P I T Calma Daza (2/5) (2/5) P 95,000 P 60,000 (86,000) (86,000) P 9,000 P(26,000)

P 5,000

P 8,000

P 9,000

P(26,000)

P 9,000

5,000 P(21,000)

P 9,000

-

-

(5,000) -

-

-

-

P 8,000 ( 8,000) -

-

-

-

-

P 9,000

P(21,000) 21,000 -

A L Esteban (1/5) P 80,000 (43,000) P 37,000 P 37,000 P 37,000 (25,000) P 12,000 P 12,000


page

Problem 3 – 2 (Case 5) Calma, Daza and Esteban Statement of Liquidation January, 2009 Other Cash Assets Liabilities Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital account Balances Additional investment by Calma and Daza Payment of liabilities, loan and capital

P 20,000 90,000 P 110,000 ( 110,000) 40,000 P 40,000

P 340,000 (340,000) -


P 112,000

P 5,000

P 8,000

P 112,000 (110,000) P 2,000

P 5,000

P 8,000

C A P I T A L Calma Daza Esteban (2/5) (2/5) (1/5) P 95,000 P 60,000 P 80,000 (100,000) (100,000) (50,000) P( 5,000) P(40,000) P 30,000

P 5,000

P 8,000

P( 5,000)

P(40,000)

P( 5,000) 5,000 -

5,000 P(35,000) 35,000 -

-

P

2,000

(5,000) -

-

P

2,000

-

P 8,000 P 8,000

P 30,000 P 30,000 P 30,000


Problem 1.

page

3-4

Estrella, Capital Estrella, Drawing Total interest of Estrella Cash received by Estrella

P 144,000 ( 12,000) P 132,000 111,000 Share of Estrella in the loss on P 21,000

liquidation

Fractional share of Estrella Total loss on liquidation

2.

Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Payment to partners

3.

 2/10 P 105,000

a.

Cash Eugenio, Capital Esteban, Capital Estrella, Capital Other Assets

463,000 52,500 31,500 21,000

b.

Liabilities Cash

200,000

c.

Esteban, Loan Eugenio, Capital Esteban, Capital Estrella, Capital Cash

40,000 79,500 102,500 111,000

568,000

200,000

333,000

Eugenio , Esteban and Estrella Statement of Liquidation January 1 – 31, 2008

Cash P 70,000 463,000 P 533,000 (200,000) P 333,000 ( 333,000)

Other Assets P 568,000 ( 568,000)

Liabilities P 200,000 P 200,000 ( 200,000)

Esteban, Loan P 40,000 P 40,000

Eugenio (5/10) P 132,000 ( 52,500) P 79,500

P 40,000 ( 40,000)

P 79,500 ( 79,500)

CAPITAL Esteban Estrella (3/10) (2/10) P 134,000 P132,000 ( 31,500) ( 21,000) P 102,500 P 111,000 P 102,500 (102,500)

P 111,000 ( 111,000)


page

Problem 3 - 6 QRS Partnership Statement of Liquidation July to September, 2008

Balances before liquidation July: Sale of assets Payment of liabilities Payment of liquidation expenses Payment of loan Balances August: Sale of assets Payment of liquidation expenses Payment of loan and capital

Balances Sept.: Sale of assets Payment of liquidation expenses Additional loss to Roman & Silva Payment to partners

Accounts Payable P1,215,000

Roman, Loan P150,000

Other Assets P2,010,000 ( 1,530,000)

( P

Cash 150,000 1,170,000 1,215,000) 7,500) 97,500 67,500) 30,000 66,000 7,500) 88,500 58,500) 30,000 165,000 7,500) 187,500

-

-

P

41,400

P

187,500

-

-

P

41,400

P ( ( P ( P ( P ( P

( 1,215,000)

P 480,000

-

P 480,000 ( 105,000)

-

P 375,000

-

P 375,000 ( 375,000)

-

P150,000 ( 67,500) P 82,500 P 82,500 ( 41,100) P 41,400

Quizon P300,000 ( 180,000)

C A P I T A L Roman Silva P270,000 P225,000 ( 108,000) ( 72,000)

( 3,750) P116,250

( 2,250) P159,750

( 1,500) P151,500

P116,250 ( 19,500) ( 3,750) P 93,000

P159,750 ( 11,700) ( 2,250) P145,800

P 93,000 ( 105,000) ( 3,750) (P 15,750) 15,750 -

P145,800 ( 63,000) ( 2,250) P 80,550 ( 9,450) P 71,100

P151,500 ( 7,800) ( 1,500) P142,200 ( 17,400) P124,800 ( 42,000) ( 1,500) P 81,300 ( 6,300) P 75,000


Problem 3 - 5

Balances before liquidation February: Sale of assets & distribution of loss Payment of liabilities Payment of liquidation expenses Balances Payment to partners (sch. 1) Balances March: Sale of assets & distribution of gain Payment of liabilities Payment of liquidation expenses Balances Payment to partners (sch. 2) Balances, March 31

page

JKLM Trading Statement of Liquidation February 1 - March 31, 2008 Cash P 100,320 49,320 ( 17,750) ( 8,220) P 123,670 ( 120,060) P 3,610 48,330 ( 3,610) ( 7,380) P 40,950 ( 40,950) P ---------

Other Assets P 193,530 ( 66,060)

Liabilities P 21,360 ( 17,750)

P 127,470

P 3,610

P 127,470

P 3,610

( 44,850)

Jocson Loan P 15,000

P 15,000 ( 7,980) P 7,020

p --------

P 82,620

P --------

P I Kaimo P 96,480

T A Legarda P 109,020

L Manabat P 27,870

( 3,348)

( 5,022)

(

5,022)

( 3,348)

( 1,644) P 19,128

( 2,466) P 88,992 (49,770) P 39,222

( 2,466) P 101,532 ( 62,310) P 39,222

( 1,644) P 22,878

P 19,128 696

( 3,610)

P 82,620

C A Jocson P 24,120

P 7,020 7,020 P -------

( 1,476) P 18,348 ( 1,824) P 16,524

1,044 ( 2,214) P 38,052 (13,266) P 24,786

1,044 ( 2,214) P 38,052 ( 13,266) P 24,786

P 22,878 696 ( 1,476) P 22,098 ( 5,574) P 16,524


page

Problem 3 - 8 Req. 2

Balances before liquidation January: Collections from customers Payment of liquidation expenses Payment of liabilities Balances Payment to partners (see schedule) Balances February: Collections from customers Payment of liquidation expenses Payment of liabilities & dist. of gain Balances Payment to partners (see schedule) Balances March: Collections from customers & dist. of loss Payment of liquidation expenses Payment to partners

Neri, Ordan and Pacia Statement of Liquidation January 1 - March 31, 2008 Cash P 19,000

Other Assets P 191,000

112,000 ( 4,400) ( 38,000) P 88,600 ( 16,000) P 72,600

(112,000)

36,000 ( 2,800) (38,000) P 67,800 ( 19,800) P 48,000

( 36,000)

Liabilities P 77,000

P 79,000

( 38,000) P 39,000

P 79,000

P 39,000

Pacia, Loan P 9,000

P 9,000 ( 9,000) -

P 43,000

( 39,000) -

-

P 43,000

-

-

35,000

( 43,000)

( 4,000) P( 79,000)

-

-

-

Sal. Pay. to Neri P 6,000

P I T Ordan P 28,000

A L Pacia P 40,000

( 2,200)

( 1,100)

( 1,100)

P 6,000

P 47,800

P 26,900

P 6,000

P 47,800

P 26,900

P 38,900 ( 7,000) P 31,900

P 6,000 ( 6,000) -

( 1,400) 500 P 46,900 ( 1,400) P 45,500

700) 250 P 26,450 ( 3,700) P 22,750

700) 250 P 31,450 ( 8,700) P 22,750

( 4,000)

( 2,000)

( 2,000)

( 2,000) P 39,500

( 1,000) P 19,750

( 1,000) P 19,750

-

C Neri P 50,000

A

(

(


page

Problem 3 -8 Requirement No 1

Neri, Ordan and Pacia Cash Priority Program January 1, 2008

Neri Capital balances before liquidation P 50,000 Add Loan balances 6,000 Total partners’ interest P 56,000 Profit and loss ratio ÷ 50% Loss absorption balance P112,000 allocation I - Cash to Pacia reducing LAB to an amount reported for Neri and Ordan. Reduction of P84,000 requires payment of 25% of P 84,000 Balances P112,000 Allocation II - Further cash distributions may be made in the profit and loss raio SCHEDULE OF CASH DISTRIBUTION: Amount January: Cash available P 16,000 Allocation I: Payable to Pacia 16,000 February:

Cash available Allocation I: Payable to Pacia Allocation II Payable according to P & L ratio

Neri -

Ordan

Pacia

---------

P 16,000

P 19,800 5,000 P 14,800 -

P 5,000 P 7,400 P 7,400

P 3,700 P 3,700

3,700 P 8,700

Ordan P 28,000

Neri

P 28,000 ÷ 25% P112,000

Pacia P 40,000 9,000 P 49,000 ÷ 25% P196,000

P112,000

( 84,000) P112,000

_______ --------

Ordan

Pacia

_______ ---------

P 21,000 P 21,000


page


Balances before liquidation January: Sale of assets Payment to partners Balances February: Sale of assets Payment to partners Balances March: Sale of assets Payment to partners Balances April: Sale of assets & distribution of loss Balances Payment to partners

Tabora, Ureta and Veloso Statement of Liquidation January 1 to April 30, 2008 Cash 15,000 (15,000) 40,000 ( 40,000) 90,000 ( 90,000) 30,000 P 30,000 (30,000)

Other Assets P 338,000

L Tabora P 45,000

A N Ureta Veloso P 30,000 P 13,000

C A P I T A L Tabora Ureta Veloso P 120,000 P 90,000 P 40,000

P 45,000

(15,000) P15,000

P 120,000

P 90,000

P 40,000

( 21,250) P 23,750

(15,000) -

P 13,000

P 120,000

( 3,750) P 86,250

P 40,000

(23,750) -

-

(13,000) -

( 23,500) P 96,500

( 28,350) P 57,900

( 1,400) P 38,600

-

-

-

( 81,500) P 15,000 P 15,000

( 48,900) P 9,000 P 9,000

(32,600) P 6,000 P 6,000

( 15,000) P 323,000 ( 40,000) P 283,000 ( 90,000) P 193,000 ( 193,000) -

O

P 13,000


page

AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers

page 4

Exercise 4-2 Books of Alvin, Managing Partner Feb.

12

Joint Venture Cash

10,000

14

Joint Venture Larry

2,000

15

Cash Larry Joint Venture

9,000 7,500

20

Cash Joint Venture

3,000

20

Joint Venture Income from Joint Venture Larry 10% commission on net purchases to Alvin 25% commission on own sales

7,500

20

Cash Larry

Books of Larry Feb. 12 Joint Venture Alvin

2,287.50

10,000

14

Joint Venture Cash

2,000

15

Cash Alvin Joint Venture

7,500 9,000

20

Alvin Joint Venture

3,000

20

Joint Venture Alvin Income from Joint Venture 10% commission on net purchases to Alvin 25% commission on own sales

7,500

20

Alvin Cash

2,287.50

10,000 2,000

16,500 3,000 4,287.50 3,212.50

2,287.50

10,000 2,000

16,500 3,000 4,287.50 3,212.50

2,287.50


page 5

Problem 4-2 Requirement 1 Books of Roland, Managing Partner 1.

Joint Venture Greg Medel Land

2.

Joint Venture Cash Improvements on land

3.

Joint Venture Cash Joint Venture Sales by venturers.

35,400,000

4.

Joint Venture Cash Joint Venture Sales by salesmen

14,300,000

5.

Joint Venture Joint Venture Cash Venture expenses

684,000

6.

Joint Venture Income from Joint Venture Salaries to Roland as managing partner

7.

40,300,000

3,000,000

72,000

Joint Venture Income from Joint Venture Greg Medel 10% commission on own sales

3,540,000

Joint Venture Income from Joint Venture Greg Medel Balance of profit divided equally

2,104,000

Greg Medel Joint Venture Cash Final cash settlement

21,481,333 15,471,333

19,500,000 13,000,000 7,800,000 3,000,000

35,400,000

14,300,000

684,000

72,000

490,000 1,280,000 1,770,000

701,334 701,333 701,333

36,952,666


Books of Greg 1. Joint Venture Land Medel Roland

page 6

40,300,000

2.

Joint Venture Roland Improvements on land

3.

Roland Joint Venture Sales by venturers.

35,400,000

4.

Roland Joint Venture Sales by salesmen

14,300,000

5.

Joint Venture Roland Venture expenses

684,000

6.

Joint Venture Roland Salaries to Roland as managing partner

7.

3,000,000

72,000

Joint Venture Roland Income from Joint Venture Medel 10% commission on own sales

3,540,000

Joint Venture Roland Income from Joint Venture Medel Balance of profit divided equally

2,104,000

Cash Medel Roland Final cash settlement

21,481,333 15,471,333

19,500,000 13,000,000 7,800,000 3,000,000

35,400,000

14,300,000

684,000

72,000

490,000 1,280,000 1,770,000

701,334 701,333 701,333

36,952,666


Books of Medel 1. Joint Venture Greg Land Roland

page 7

40,300,000

2.

Joint Venture Roland Improvements on land

3.

Roland Joint Venture Sales by venturers.

35,400,000

4.

Roland Joint Venture Sales by salesmen

14,300,000

5.

Joint Venture Roland Venture expenses

684,000

6.

Joint Venture Roland Salaries to Roland as managing partner

7.

3,000,000

72,000

Joint Venture Roland Greg Income from Joint Venture 10% commission on own sales

3,540,000

Joint Venture Roland Greg Income from Joint Venture Balance of profit divided equally

2,104,000

Greg Cash Roland Final cash settlement

21,481,333 15,471,333

19,500,000 13,000,000 7,800,000 3,000,000

35,400,000

14,300,000

684,000

72,000

490,000 1,280,000 1,770,000

701,334 701,333 701,333

36,952,666


page 8

Problem 4-2 Requirement 2 Books of the Joint Venture 1. Land Greg, Capital Medel, Capital Roland, Capital

40,300,000

2.

Land Roland, Capital

3.

Cash Sales

35,400,000

4.

Cash Sales

14,300,000

5.

Expenses Cash

6.

Sales Land Expenses Income Summary

7.

Income Summary Roland, Capital

72,000

Income Summary Greg, Capital Medel, Capital Roland, Capital

3,540,000

Income Summary Greg, Capital Medel, Capital Roland, Capital

2,104,000

8.

Greg, Capital Medel, Capital Roland, Capital Cash

3,000,000

684,000 49,700,000

21,481,333 15,471,333 12,063,334

19,500,000 13,000,000 7,800,000 3,000,000 35,400,000 14,300,000 684,000 43,300,000 684,000 5,716,000 72,000 1,280,000 1,770,000 490,000 701,333 701,333 701,334

49,016,000


Books of Greg 1. Investment in Joint Venture Land

page 9

19,500,000

2.

Investment in Joint Venture Income from Joint Venture

1,981,333

3.

Cash Investment in Joint Venture

21,481,333

Books of Medel 1. Investment in Joint Venture Land

13,000,000

2.


2,471,333

3.


15,471,333

Books of Roland 1. Investment in Joint Venture Land

7,800,000

2.

Investment in Joint Venture Cash

3,000,000

3.


1,262,334

4.


12,063,334

19,500,000 1,981,333 21,481,333

13,000,000 2,471,333 15,471,333

7,800,000 3,000,000 1,262,334 12,063,334

Problem 4-3 Books of Marissa 1. Joint Venture Yolly Beth

104,000

2.

Joint Venture Accounts Receivable Joint Venture

160,000

3.

Joint Venture Cash Joint Venture Joint Venture Accounts Receivable

153,000 7,000

44,000 60,000 160,000

160,000


page 10

4.

Joint Venture Joint Venture Cash

40,000

5.

Yolly Beth Joint Venture

10,000 7,500

6.

Joint Venture Yolly Beth Interest on investment.

1,560

7.

Joint Venture Income from Joint Venture Commission on sales.

8,000

8.

Joint Venture Yolly Beth Income from Joint Venture Allocation of the balance.

16,940

9.

Yolly Beth Cash Joint Venture Cash

40,306 59,047 13,647

Books of Yolly 1. Joint Venture Merchandise Inventory Beth

104,000

2.

Marissa Joint Venture

3.

Joint Venture Marissa

7,000

4.


40,000

5.

Merchandise Inventory Beth Joint Venture

10,000 7,500

6.

Joint Venture Income from Joint Venture Beth Interest on investment.

160,000

1,560

40,000

17,500 660 900

8,000

5,646 5,647 5,647

113,000

44,000 60,000 160,000 7,000 40,000

17,500 660 900


page 11

7.

Joint Venture Marissa Commission on sales.

8.

Joint Venture Income from Joint Venture Beth Marissa Allocation of the balance.

16,940

9.

Cash Beth Marissa

40,306 59,047

Books of Beth 1. Joint Venture Yolly Merchandise Inventory

8,000

104,000

2.

Marissa Joint Venture

160,000

3.


7,000

4.


40,000

5.

Yolly Merchandise Inventory Joint Venture

10,000 7,500

6.

Joint Venture Yolly Income from Joint Venture Interest on investment.

1,560

7.

Joint Venture Marissa Commission on sales.

8,000

8.

Joint Venture Yolly Income from Joint Venture Marissa Allocation of the balance.

16,940

9.

Yolly Cash Marissa

40,306 59,047

8,000

5,646 5,647 5,647

99,353

44,000 60,000 160,000 7,000 40,000

17,500 660 900

8,000

5,646 5,647 5,647

99,353


page 12

Requirement 2 Books of the Joint Venture 1. Merchandise Yolly, Capital Beth, Capital

104,000

2.


160,000

3.

Cash Uncollectible Accounts Expense Sales Discount Accounts Receivable

153,000 4,300 2,700

4.

Expenses Cash

40,000

5.

Yolly, Capital Beth, Capital Merchandise

10,000 7,500

6.

Sales Merchandise Sales Discounts Doubtful Accounts Expense Expenses Income Summary

160,000

7.

Income Summary Yolly, Capital Beth, Capital Marissa, Capital

26,500

8.

Yolly, Capital Beth, Capital Marissa, Capital Cash

40,306 59,047 13,647

Books of Yolly 1. Investment in Joint Venture Merchandise Inventory

44,000

2.

Merchandise Inventory Investment in Joint Venture

10,000

3.

Investment in Joint Venture Income from Joint Venture P660 + P5,646 = P6,306

6,306

44,000 60,000 160,000

160,000 40,000

17,500 86,500 2,700 4,300 40,000 26,500 6,306 6,547 13,647

113,000

44,000 10,000 6,306


4.


Books of Beth 1. Investment in Joint Venture Merchandise Inventory

page 13

40,306

60,000

2.

Merchandise Inventory Investment in Joint Venture

7,500

3.

Investment in Joint Venture Income from Joint Venture P900 + P5,647 = P6,6,547

6,547

4.


Books of Marissa 1. Investment in Joint Venture Income from Joint Venture P8,000 + P5,647 = P13,647 2.


59,047

13,647

13,647

40,306

60,000 7,500 6,547

59,047

13,647

13,647

Problem 4-4 1.

Merchandise Inventory Joint Venture

2.

Joint Venture Income from Joint Venture Bonus = 10% (NI – B) Bonus = 10% (P53,636.20 – B) = P4,785

3.

10,571.20 4,785

Joint Venture Income from Joint Venture Santi Romy Distribution of balance – 30%, 50%, and 20% to Noel, Santi, and Romy, respectively.

47,851.20

Santi Romy Cash Final cash settlement.

22,863.60 18,628.24

10,571.20 4,785

14,355.36 23,925.60 9,570.24

41,491.84


page 14

Problem 4-5 Books of Leo 1. Joint Venture Income from Joint Venture Bonus = 20% (NI – B) Bonus = 20% (P24,000 – B) = P4,000 2.

Income from Joint Venture Mandy Joint Venture Interest on deficiency and excess Leo = P10,000 x 12% x 6/12 = P600 Mandy = P5,000 x 12% x 6/12 = P300

3.

Joint Venture Income from Joint Venture Niel Mandy Balance of profit divided in the ratio of 4:4:2 to Leo, Niel, and Mandy, respectively

Books of Mandy 1. Joint Venture Leo

4,000

600

20,300

4,000

2.

Leo Income from Joint Venture Joint Venture

600

3.

Joint Venture Leo Niel Income from Joint Venture

20,300

Books of Niel 1. Joint Venture Leo 2.

Leo Mandy Joint Venture

3.

Joint Venture Leo Income from Joint Venture Mandy

4,000 600

20,300

4,000

300 300

8,120 8,120 4,060

4,000 300 300 8,120 8,120 4,060

4,000 300 300 8,120 8,120 4,060


page 15

MULTIPLE CHOICE 1.

A

Total credits in the Joint Venture account Less Total debits in the Joint Venture account Gain (excess of credit over debit)

P258,100 197,500 P 60,600

2.

D

Merchandise contribution Add Share in the gain (P60,600 x 2/10) Final settlement to Minda

P 85,000 12,120 P 97,120

3.

A

The account of Melissa has a debit balance, thus, she has to make payment.. The account of Nancy has a debit balance, thus, she has to make payment. The account of Olivia has a credit balance, thus, she has to receive payment.

4.

C

P150,000 + P105,000 = P255,000

5.

C

P120,000 + (135,000/3) = P165,000

6.

B

Capital of Tan Unsold merchandise taken by Tan Share on the venture income (P135,000* / 3) Amount received by Tan in final settlement

P270,000 ( 105,000) 45,000 P210,000

Credit balance in the Joint Venture account Unsold merchandise taken by Tan Venture income Salaries to Reyes Remainder – divided equally

P150,000 105,000 P255,000 120,000 P135,000

*

7.

B

15% (P115,000 –B) = P15,000

8.

C.

Credit balance in the Joint Venture account Unsold merchandise purchased by Soriente Net profit before bonus Bonus to Soriente [ 15% (P115,000 – B) Net profit after bonus

9.

C

P100,000 x 40% = P40,000

10.

B

Account balances Share in venture profit Cash settlement

P 90,000 25,000 P115,000 15,000 P100,000

Santos (P 5,000) 40,000 P35,000

Salazar P20,000 35,000 P55,000


11.

C

12.

B

13.

D

14.

A

page 16

Sales Less Sales discounts Net sales Cost of sales: Contributed merchandise Less Returned merchandise Gross profit Operating expenses (P6,450 + P58,650) Net income Less Bonus (P41,250 x 25/125) Net income after bonus

P240,000 4,050 P235,950 P156,000 26,400

129,600 P106,350 65,100 P 41,250 8,250 P 33,000

P41,250 x 25/125 = P8,250 Merchandise contribution Merchandise returns Interest on original capital Balance of profit divided equally Cash settlement Purchases Expenses Balance, end

Joint Venture 300,000 Sales 34,500 225,000 559,500

Iona P66,000 ( 15,000) 990 10,220 P62,210

Paula P90,000 ( 11,400) 1,350 10,220 P90,170

559,500 559,500

Sales revenue is a credit entry in the Joint Venture account. The total of the purchases, expenses and the ending balance is equal to total sales revenue. The ending balance is the sum of the credit balances of Marc and Martin of P120,000 and P105,000. 15.

B

P236,500 x 50% = P118,250

16.

A

Investment of Marc Cost of unsold goods assumed by Marc Share in the joint venture gain: Credit balance in the JV account Unsold goods assumed by the partners JV gain Share of Marc Cash settlement to Marc P12,000 – P2,500 = P9,500

17. 18.

B D

Contribution Less Share on loss (P12,000 – P2,500) Additional loss to Debbie Cash distribution

P150,000 ( 4,500) P225,000 11,500 P236,500 50% Debbie P10,000 4,750 P 5,250 ( 2,750) P 2,500

118,250 P263,750 Ellie P2,000 4,750 (P2,750) 2,750


19.

B

page 17

Valdez Ramos Receipts P789,200 P654,250 Less Investment 300,000 300,000 Revenue P489,200 P354,250 Sale of non-cash assets Total revenue Less Expenses – disbursements (P622,750 + P706,950) Joint venture profit

Total P 943,450 600,000 P1,543,450 1,329,750 P 213,750

20. 21.

B

Debit to Joint Venture account: Investment of Santos (12,000 shares @ P45) Investment of Cruz (8,000 shares @ P45) Manager’s fee [ 1% (176,000 + 240,000 + 133,000 +261,625)] Miscellaneous expenses Credit to Joint Venture account: Sales (4,000 @ P44) Sales (6,000 @ P40) Cash dividend [(12,000 + 8,000 – 4,000 – 6,000) x P2] Sales (3,500 @ P38) Sales [(10,000 – 3,500) x 115% = 7,475 shares x P35]

P540,000.00 360,000.00 8,106.25 1,500.00 P909,606.25 P176,000.00 240,000.00 20,000.00 133,000.00 261,625.00 P830,625.00

Net loss of the venture (P909,606.25 – P830,625)

P 78,981.25

22.

D

Investment of Cruz (8,000 shares @ P45) Less Share in JV net loss (P78,981.25 x 8/20) Share of Cruz after distribution of proceeds

P360,000.00 31,592.50 P328,407.50

23.

B

Loss upon the investment of shares (8,000 shares @ P10) Share in JV loss Loss of Cruz on the disposition of Palawan Oil Co. shares

P 80,000.00 31,592.50 P 111,592.50

Loss on the disposition of the shares of Cruz is the total of the loss upon investment of the shares (i.e. P45 – P55 = P10 per share) and the share on the net loss of the dissolved joint venture. 24.

A

20,000 shares x P40 MV = P800,000

25.

A

20,000 – 4,500 + 15,500 x 120% = 18,600 – 5,000 = 13,600 x P1 = P13,600

26

B

Proceeds from sale of shares; 4,500 x P44 5,000 x P25 6,000 x P28 7,600* x P35 Cost of the shares (see # 1) Loss from sale of the shares Expenses (3,000 + 4,700)

P198,000 125,000 168,000 266,000

P757,000 800,000 P 43,000 ( 7,700)


Dividend revenue Number of shares after stock dividend Less shares sold on November 5 Shares entitled to cash dividend Dividend per share Net loss

page 18

18,600 5,000 13,600 x P1

Share of Roxas on the venture loss * Contributed shares Shares sold on Oct. 20 Remaining shares Shares received as stock dividend (20% x 15,500) Shares sold on Nov. 5 and 22 Shares sold at P35

13,600 P 37,100 x 6/20 P11,130

20,000 4,500 15,500 3,100 (11,000) 7,600

27.

D

20,000 – 4,500 = 15,500 x 20% = 3,100

28.

C

Investment (10,000 shares @ P40) Share on the joint venture loss (P37,100 x 1/2 ) Share of Silverio on the distribution of proceeds

P400,000 18,550 P381,450

29.

A

Loss upon contribution of the shares [(P40 – P62) x 4,000] Share on the JV loss (P37,100 x 4/20) Tan’s loss on disposition of his investment in Golden Copper

P88,000 7,420 P95,420

CHAPTER 4 SUGGESTED ANSWERS EXERCISES Exercise 4 - 1 Paulo, Edwin and Marco Worksheet Summarizing Joint Venture Transactions May 12 to 26, 2008

Construction of stand Purchases Additional purchases Sales Stand taken by Edwin Unsold merchandise taken by Marco Net profit Distribution of profit: Permit paid by Paulo Commission Balance – shared 50%, 10% and 40% Share in net income Totals Cash settlement *

Joint Venture Debit Credit P 3,000 30,000 60,000 P153,000 2,000 4,000* P 93,000 P159,000 66,000 _______ P159,000 P159,000

Purchases Cost of sales (P153,000 / 180%**) Inventory, end Value upon which participants can purchase inventory Value assigned to the inventory taken by Lito

Debit

Paulo

P 80,000 P 80,000

Credit

P 30,000 45,000

P 75,000

P33,000 2,000

P90,000 85,000 P 5,000 x 80% P 4,000

Edwin

Credit

P10,000

P35,000

P10,000

_______ P35,000 ______ P35,000

P 9,900 1,857 P11,757 P21,757 13,243 P35,000

P _______ P 80,000 29,815 P109,815

1,530 24,000 9,285 P 34,815 P109,815 _______ P109,815

Debit

Debit

Marco

P40,000

Credit P 3,000 5,000

4,000 P44,000

P 8,000

_______ P44,000 ______ P44,000

P12,000 7,428 P19,428 P27,428 16,572 P44,000

** If markup is 80% of cost, then sales is 180% of cost.

AA1 - Chapter 4 (2008 edition)

page 2

Exercise 4 – 3 Books of Jolly

To set up inventory, end (should be set up before recognizing gain or loss)

Joint Venture Invty Joint Venture

110,000

To recognize gain or loss, shared 4:2:2 NI=P50,000 + P110,000

Joint Venture Income from JV Bernie Sonny

160,000

To record settlement with Sonny*

Sonny JV Cash Income from JV Bernie

78,000

*

Interest of Sonny (P38,000 + P40,000) Bonus to Jolly and Bernie (P78,000 x 20%) Cash settlement to Sonny

Books of Bernie

110,000

80,000 40,000 40,000 62,400 10,400 5,200

Jolly Joint Venture

110,000

Joint Venture Jolly Income from JV Sonny

160,000

Sonny Jolly Income from JV

78,000

Books of Sonny

110,000

80,000 40,000 40,000 72,800 5,200

Jolly Joint Venture

110,000

Joint Venture Jolly Bernie Income from JV

160,000

Cash Loss from JV Bernie Jolly

62,400 15,600 72,000

110,000

80,000 40,000 40,000

150,000

P78,000 15,600 P62,400

The bonus to Jolly and Bernie represents a gain to them and a loss to Sonny. The P15,600 bonus shall be shared by Jolly and Bernie in the ratio of 4:2. The, the sharing is as follows: Jolly – P15,600 x 4/6 = P10,400; Bernie – P15,600 x 2/6 = P5,200.


page 3

Problem 4-1 Dario, Val, and Rene Worksheet Summarizing Joint Venture Transactions August 7 - 10, 2008

Construction of stand Purchases Payment of permit to operate Additional purchases Sales Fire extinguishers divided among venturers Unsold merchandise taken by Dario Net profit Distribution of profit: Cleaning of lawn of Rene Commission Balance -75% to Dario and 25% to Val Totals Cash settlement

Purchases P10,000 + P15,000 Cost of Sales P45,000/200% Inventory end Inventory value taken by Dario

Joint Venture Debit Credit 1,000 10,000 500 15,000 45,000 26,500 19,759 46,250

1,250 46,250

Debit

Dario

15,000 3,333 1,250 19,583

10,000

21,000

Debit

Val

20,000 3,333

Credit

5,000

23,333

5,000

6,000 938 27,938

23,333

27,938

23,333

8,000 312 13,312 10,020 23,333

Debit

Rene

Credit 500

10,000 3,334

10,000

13,334

10,500

46,250

19,583 8,355 27,938 P25,000 22,500 P 2,500 X 50% P 1,250

Credit P 1,000 10,000

500 4,000 13,334 1,666 15,000

15,000 15,000

CHAPTER 5 SUGGESTED ANSWERS EXERCISES Exercise 5 – 1 1. Inventory on Consignment Merchandise Inventory To record transfer of merchandise to consignee.

90,000

2.

Consignee Receivable (P24,000 x 130%) Consignment Sales Revenue To record consignment sales.

31,200

3.

Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold.

24,000

4.

Merchandise Inventory Inventory on Consignment To record return of consigned goods.

66,000

5.

Commission Expense (P31,200 x 10%) Cash Consignee Receivable

3,120 28,080

2.

Commission Expense Cash Consignment Sales Revenue

or

3,120 28,080

3.

Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold.

24,000

4.

Merchandise Inventory Inventory on Consignment To record return of consigned goods.

66,000

Exercise 5 – 2 1. Consignor Books: Inventory on Consignment Finished Goods Inventory Inventory on Consignment Cash Consignee Payable

500,000 40,000

90,000

31,200

24,000

66,000

31,200

31,200 24,000

66,000

500,000 30,000 10,000


page 2

Commission Expense (P420,000 x 10%) Consignee Receivable Consignment Sales

42,000 378,000

Cost of Consignment Goods Sold Inventory on Consignment

362,880

420,000 362,880

*Cost of goods sold – P420,000 /1.25 = P336,000 Freight costs – P40,000 / P500,000 = 8% Freight on goods sold – P336,000 x 8% = P26,880 Total costs of goods sold – P336,000 + P26,880 = P362,800 Cash Consignee Payable Consignee Receivable 2.

278,000 10,000

288,000

Consignee Books: Memorandum entry to record receipt of goods on consignment. Consignor Receivable Cash

10,000

Cash Consignor Payable

420,000

Consignor Payable Commission Revenue

42,000

Consignor Payable Cash Consignor Receivable

288,000

10,000 420,000 42,000 278,000 10,000

3. Consignor financial statements: Statement of Financial Position – Assets section Consignee receivable Inventory on consignment

P 90,000 177,120

Statement of Recognized Income and Expenses Consignment sales P420,000 Less Cost of consignment sales 362,880 Commission expense Profit from consignment

P57,120 42,000 P15,120

Exercise 5-3 Requirement 1 – Consignment profits calculated separately Books of Consignor 1. Consignment –Out Merchandise Shipment on Consignment

7,000

7,000


2.

3.

page 3

Cash Consignment-Out Consignment-Out

3,500 2,500

Consignment-Out Consignment Income Sales (4 sets @P1,500) CGS (4 sets @P700) Freight-in (4/10 x P1,000) Commission (25% x P6,000) Consignment income

1,300 P6,000 ( 2,800) ( 400) ( 1,500) P1,300

6,000 1,300

Books of Consignee 1. Received 10 sets of electric fan from Ledesma ………… 2.

Consignment-In Cash

1,000

3.

Cash Consignment-In

6,000

4.

Consignment-In Consignment Income

1,500

5.

Consignment-In Cash

3,500

1,000 6,000 1,500 3,500

Requirement 2 – Consignment profits not calculated separately Books of Consignor 1. Shipped merchandise to Amoranto, a consignee, ……… 2.

3.

Cash Freight Commission Expense Merchandise on Consignment Sales

3,500 400 1,500 600

Merchandise on Consignment Income Summary Unsold merchandise on consignment (6 sets @P700)

4,200

Books of Consignee 1. Received 10 sets of electric fan from Ledesma, a consignor..

6,000 4,200

………………..

2.

Ledesma Cash

1,000

3.

Cash Sales

6,000

1,000 6,000


page 4

4.

Purchases (P6,000 – P1,500 commission) Ledesma

4,500

5.

Ledesma Cash

3,500

Exercise 5 – 4 1. Sales of laser discs, net of commissions and cartage Less: Cost Freight and handling Loss on laser discs consignment 2.

4,500 3,500

P180,000 5,400

Sales of TV sets, net of commissions and delivery & installation costs Less: Cost (15 x P9,000) Freight and handling [(15 + 3*)/24** x P10,800] Freight on return of defective units Profit on TV sets on consignments

P135,000 8,100 1,080

P181,800 185,400 P 3,600 P173,250 144,180 P 29,070

* Number of units returned = Cost of returned units / Cost per unit = P27,000 / P9,000 = 3 ** Units shipped to consignee = Total cost of TV sets shipped / Cost per unit = P216,000 / P9,000 = 24 3.

TV sets P54,000 + (P10,800 6/24 = P2,700) = P56,700

Exercise 5 – 5 1. Sales (300 x P1,000) + (100** x P1,100) Cost of sales (400 x P600) Gross profit Expenses: Freight (400/500 x P5,500) Safety devices (100/200 x P10,000) Commission (P410,000 x 10%) Delivery cost Consignment profit

P410,000* 240,000 P170,000 P 4,400 5,000 41,000 4,500

54,900 P115,100

*Consignee remitt6ance and charges represent only 90% of sales in as much as the 10% commission of the consignee has not yet been included among the charges (P364,500 + P4,500 = P369,000 / 90% = P410,000) ** The 100 units with safety device sold at P1,100 is computed as follows: Sales Sales of units without safety device (300 x P600) Sales of units with safety device Units sold (P110,000 / P1,100)

P410,000 300,000 P110,000 100


2.

page 5

Cost (100 x P600) Freight (100/500 x P5,500) Safety device (100/200 x P10,000) Inventory cost of consigned goods

P60,000 1,100 5,000 P66,100 PROBLEMS

Problem 5-1 Req. 1. Books of consignee; consignment sales merged with regular sales April

Received 20 sets of VCD player……………… CCM Corp. Cash Accounts Receivable Sales

24,000

Purchases CCM Corp.

20,000


10,000

CCM Corp. Cash May

1,750

5,000


18,000

Purchases CCM Corp.

15,000


15,000

CCM Corp. Cash Req. 2 – Books of consignor; consignment profits calculated separately

10,000

April

Consignment-Out Merchandise Inventory

36,000

Cash Consignment – Out Receivable – Consignee Consignment – Out

5,000 1,750 13,250

Consignment – Out Consignment Income

4,900

1,750 24,000 20,000 10,000 5,000 18,000 15,000 15,000 10,000

36,000

20,000 4,900


page 6

Sales (8 sets @P2,500) CGS (8 sets @P1,800) Freight-in (P1,000 x 8/20) Cartage-in (P750 x 8/20) Consignment profit May

P 20,000 ( 14,400) ( 400) ( 300) P 4,900

Cash Receivable – Consignee Consignment – Out

10,000 5,000

Consignment – Out Consignment Income Sales (6 sets @P2,500) CGS (6 sets @P1,800) Freight-in (P1,000 x 6/20) Cartage-in (P750 x 6/20) Consignment profit

3,675 P15,000 ( 10,800) ( 300) ( 225) P 3,675

15,000 3,675

3. Charge and Profit analysis

Charges by consignor: Cost of consigned goods Charges by consignee Freight-in Cartage-in Total Sales price Consignment profit

April Inventory

Sales

May Inventory

Total

Sales

P36,000

P14,400

P21,600

P10,800

P10,800

1,000 750 P37,750

400 300 P15,100 20,000 P 4,900

600 450 P22,650

300 225 P11,325 15,000 P 3,675

300 225 P11,325

Problem 5-2 Books of consignor 1.

Consignment – Out Merchandise Shipment on Consignment

2.

Consignment – Out Cash

3.

Cash Consignment – Out Receivable – Consignees Consignment – Out

4.

Merchandise Shipment on Consignment Consignment – Out Returned merchandise (4 sets @P1,000)

50,000 750 5,000 10,600 16,400 4,000

50,000 750

32,000 4,000


5.

page 7

Consignment – Out Consignment Income

5,700 Total

Sales

5,700

Inventory

Charges by consignor: Cost of consigned goods P46,000 P16,000 P30,000 Freight-out 750 300 450 Charges by consignee Cartage-in 1,000 400 600 Delivery and installation 1,600 1,600 Commission 8,000 8,000 Total P57,350 P26,300 P31,050 Sales price 32,000 Consignment profit P 5,700 *Note: Freight and cartage on sets returned are charged against sales of the period. Books of consignee 1. Received 50 cordless phones…………. 2.

Accounts Receivable Consignment – In

32,000

3.

Cash Accounts Receivable P32,000 – P16,400 (collectible) = P15,600

15,600

4.

Returned four (4) defective cordless phones…………….

5.

Consignment – In Delivery and Installation Expense Commission on Consignment Cash Remittance

15,600

32,000 15,600

1,600 8,000 5,000

Problem 5-3 Correcting entry to bring accounts with Alejo up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Alejo Account sales – Alejo Sales (65 stoves @ P3,600) Commission (25% of P234,000) Freight Amount owed Total amount remitted Balance-charge against Sunstar

P234,000 ( 58,500) ( 2,600) P172,900 ( 187,900) P 15,000

58,500 1,690 910 6,000

67,100


page 8

Entry that should have been made for transactions of Alejo on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Consignment Sales Alejo

187,900 58,500 1,690 910

234,000 15,000

Net effect of entries already made with Alejo for transfer of merchandise and remittance Cash Alejo Consignment Sales

187,900 52,100

240,000

Correcting entry to bring accounts with Burgos up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Burgos Account sales – Burgos Sales (15 stoves @ P3,600) Commission (25% of P54,000) Freight Amount owed Total amount remitted Balance-amount owed Sunstar

13,500 750 1,250 42,000

57,500

P54,000 ( 13,500) ( 2,000) P38,500 ( 11,500) P27,000

Entry that should have been made for transactions of Burgos on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Burgos Consignment Sales

11,500 13,500 750 1,250 27,000

54,000

Net effect of entries already made with Burgos for transfer of merchandise and remittance Cash Burgos Consignment Sales Problem 5-4 Entries to bring account with Domingo up to date

11,500 84,500

96,000


1.

page 9

Cash Operating Expenses Receivables-Consignees Remittance for 10 sets less charges

5,100 900

2.

Sales Receivables – Consignees Unsold units previously recognized as sales.

3,000

3.

Merchandise in Transit Cost of Goods Sold Merchandise returned and still in transit.

1,600

Entries to bring account with Estrella up to date 1. Cash Merchandise on Consignment Operating Expenses Receivables – Consignees

13,400 600 1,000

2.

Sales Receivables – Consignees

9,000

3.

Merchandise on Consignment Cost of Goods Sold Unsold units in the hands of consignee

4,800

4.

Merchandise on Consignment Operating Expenses Expenditures related to unsold consigned goods charged to expense

1,700

Entries to bring account with Fajardo up to date 1. Operating Expenses Receivables – Consignees Accounts Payable

960

2.

Sales Receivables – Consignees

2,400

3.

Merchandise in Transit Receivables – Consignees

1,280

Closing Entries 1. Sales Cost of Goods Sold Operating Expenses Income Summary 2.


715,600

72,219

6,000

3,000

1,600

15,000 9,000 4,800

1,700

600 360 2,400 1,280

420,100 89,160 206,340 72,219


3.

Income Summary Income Tax

4.

Income Summary Retained Earnings

2.

page 10

72,219 134,121

72,219 134,121

Moonstar Company Statement of Financial Position December 31, 2008

Current assets: Cash Receivables – Consignees Inventories: On hand In transit On consignment Total Current Assets Plant and Equipment Total Assets

P134,000 62,720 P112,000 2,880 7,100

Current Liabilities: Accounts Payable Income Tax Payable Ordinary Share Capital, P100 par Retained Earnings Balance, beginning Net income for 2008 Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity

P200,000 P 57,000 134,121

191,121

MULTIPLE CHOICE 1. 2 3. 4.

A C A A

5.

A

Receipts (215 x P500) Less Shipping charges Remittance

P107,500 2,100 P105,400

6.

B

(215 x 40% x P580) + (215 x 60% x P640) – (215 x P500) =

P24,860

7.

D

Receipts ( 7 dozens x 12 x P2,000) Charges: Expenses Commissions (15% x P168,000) Remittance

P168,000

P180,000 + P9,000 = P189,000

P 3,000 25,200

28,200 P139,800

121,980 318,700 170,000 P488,700 P25,360 72,219

391,121 P488,700


8.

9. 10.

C

C B

Sales 7 x 12 x P2,000 Cost of Sales 7 x 12 x P1,000 Freight 7 x P30 Expenses Commission P168,000 x 15% Sales ( 4 x P7,000) Charges: Commission (20% x P28,000) Freight Remittance

page 11

P84,000 210 3,000 25,200

P5,600 1,600

P168,000

112,410 P 55,590 P28,000 7,200 P20,800

11

D

Cost (6 x P4,000) Freight (P1,600 x 6/10) Balance of Merchandise on Consignment account

P24,000 960 P24,960

12

D

Sales Cost (4 x P4,000) Gross profit Less: Commission Freight (P1,600 x 4/10) Net profit on consignment

P28,000 16,000 P12,000

13.

B

Remittance Charges: Delivery expense Repairs Total Sales Cost of sales Gross profit Expenses: Commission (P79,800 x 15%) Repairs (P2,000 x 60/100) Delivery Shipping cost (P900 x 260/300) Consignment profit *Sales Less Sales of units with defects (200 x P300) Sales of repaired units Selling price of repaired units Number of repaired units that were sold Units sold without repairs Total number of units sold Unit cost Cost of sales

P5,600 640

6,240 P 5,760 P64,980

P 850 2,000

P11,970 1,200 850 780 P79,800 60,000 P19,800 ÷ P330 60 240 300 x P200 P52,000

2,850 P67,380 ÷ 85% P79,800 52,000* P27,800

14,800 P13,000


page 12

14

B

Cost (40 x P200) Repairs (P2,000 x 40/100) Shipping cost (P900 x 40/300) Value of inventory on consignment

P 8,000 800 120 P 8,920

15.

D

Remittance Charges: Cartage Advertising Delivery and installation Total

P54,600 P 600 3,600 2,400

Sales 16

17.

C

D

Sales Cost and expenses: Cost (6 x P7,200) Freight (P4,800 x 6/10) Cartage (P600 x 6/10) Advertising Delivery and installation Commission (15% x P72,000) Consignment income

P72,000 P43,200 2,880 360 3,600 2,400 10,800

Remittance Consignee charges, excluding the 15% commission (P4,500 + P3,000 + P750) Sum of remittances and charges

A

Sales Cost of sales (6 x P9000) Gross profit Expenses: Commission (P90,000 x 15%) Freight-out (P6,000 x 6/10) Marketing expense Delivery and installation Cartage (P750 x 6/10) Net profit from the sale of consigned goods

19

D

P90,000 x 15% = P13,500

20

A

Sales collected [(2 x P1,500) + (1 x P1,800 x 25%)] Commission (P3,450 x 15%) Remittance

63,240 P 8,760 P68,250 8,250 P76,500 ÷ 85% P90,000

Sales price of 6 refrigerators 18

6,600 P61,200 ÷ 85% P72,000

P90,000 54,000 P36,000 P13,500 3,600 4,500 3,000 450

25,050 P10,950

P3,450 720 P2,730


21

22

C

B

Sales Cost of sales ( 3 x P800) Gross profit Expenses: Trucking (P200 x 3/5) Delivery Commission Profit resulting from consignment Sales Cost (7 x P2,000) Gross profit Expenses: Advertising Commission Freight (P600 x 7/10) Net income on the consignment

23

C

( 3 x P2,000) + (P600 x 3/10) = P6,180

24

D

Remittance Charges by consignor Cost (P3,840 x 30/48) Freight and handling (P1,000 x 30/48) Freight and handling charged by consignee Net income

25

C

26.

T-shirts: Cost (P3,840 x 18/48) Freight and handling (P1,000 x 18/48) Baby dresses: Cost (P2,400 x 4/24) Freight and handling (P540 x 4/24) Cost of the inventory in the hands of consignee Sales Cost of sales (P90,000 x 7/10) Gross profit Expenses: Freight (P3,000 x 7/10) Commission Cartage-in (P1,050 x 7/10) Profit on consignment of TV sets

page 13

P4,800 2,400 P2,400 P120 170 720

_____ P1,390 P21,000 14,000 P 7,000

P1,000 4,200 420

5,620 P 1,380

P3,750 P2,400 625 75

P1,440 375 P 400 90

3,100 P 650

P1,815 490 P2,305 P84,000 63,000 P21,000

P2,100 8,400 735

11,235 P 9,765

27.

C

TV sets (P94,050 x 3/10) DVD sets (P84,450 x 2/5) Cost of inventory in the hands of consignee

P28,215 33,780 P61,995

28.

A

P3,375 / 15% = P22,500 / P1,500

15 units


29

30

31

C

A

D

Sales (15 x P1,500) Less: Advertising Delivery expense Commission Advances (150 x P900 x 60% x 15/150) Remittance

page 14

P2,250 1,125 3,375 8,100

Sales Less Cost (15 x P900) Expenses (P2,250 + P1,125 + P3,375) Consignment profit

P13,500 6,750

Sales Less: Cost (P8,400 x 9/12) Freight-out (P720 x 9/12) Delivery Commission Advertising Net income

P6,300 540 450 2,160 500

32.

B

P10,800 – P450 – P2,160 – P500 = P7,690

33

B

P9,120 x 3/12 = P2,280

34.

C

Net income Expenses: Freight (P240 x 6/10) Advertising Commission Gross profit Less Sales Cost of goods sold

P22,500

14,850 P 7,650 P22,500 20,250 P 2,250 P10,800

3,650 P 850

P 426 P 144 150 480

774 P1,200 2,400 P1,200

35

B

Cost per unit (P1,200 / 6 units) Unsold units Total cost of unsold units Inventoriable cost – freight (P240 x 4/10) Total cost

P200 x 4 P800 96 P896

36.

A

Remittance Charges: Advertising P120 Delivery 75 Total proceeds from sales, net of 20% commission

P3,165

37

C

Total sales price of the 7 handbags

195 P3,360 ÷ 80% P4,200

Cost (3 x P300) Freight (3/10 x P150) Advertising ( 3/10 x P120) Inventory of unsold handbags

P 900 45 36 P 981


38

39.

40

B

B

D

Sales Cost of sales (7 x P300) Gross profit Expenses: Freight ( 7/10 x P150) Commission (4,200 x 20%) Advertising ( P120 x 7/10) Delivery Net income on the consignment Sales (80 x P1,500) Charges: Cost of returning defective units Transportation Insurance Commissions (P120,000 x 20%) Reconditioning cost Balance Advances (80 + 10) x P300 Remittance Sales Cost of sales (80 x P500) Gross profit Expenses: Transportation (90/120 x P1,500) Insurance Cost of returning defective units Transportation of consignee (90/120 x P350) Insurance – consignee (90/120 x P200) Insurance loss (P500 x 10% x 10) Commission Reconditioning cost Profit on consignment

page 15

P4,200 2,100 P2,100 P 105 840 84 75

1,104 P 996 P120,000

P

100 350 200 24,000 150

24,800 P 95,200 27,000 P 68,200 P120,000 40,000 P 80,000

P 1,125 900 100 265 150 500 24,000 150

27,190 P 52,810

CHAPTER 6 SUGGESTED ANSWERS EXERCISES Exercise 6-1 Installment Accounts Rec’l, Jan. 1 Less Installment Accounts Rec’l, Dec. 31 Collections Gross profit rate (10,000/40,000; 4,400/20,000) Realized Gross Profit

2006 sales P 400,000 100,000 P 300,000 25%__ P 75,000

2007 sales P 200,000 40,000 P 160,000 22%__ P 35,200

Deferred Gross Profit, beg Less Deferred Gross Profit,end P100,000 x 25%, P40,000 x 22% Realized Gross Profit

2006 sales P 100,000 25,000 P 75,000

2007 sales P 44,000 8,800 P 35,200

Exercise 6-2 Deferred Gross Profit – 2006 [(P150,000 - -0- ) x 42%] Deferred Gross Profit – 2007 [(P480,000 - P120,000) x 37.5%] Deferred Gross Profit – 2008 [(P750,000 - P650,000) x 40%]* Realized Gross Profit * 66 2/3 ÷ 166 2/3 = 40% P300,000 ÷ 40% = P750,000

63,000 135,000 40,000

Exercise 6-3 (G) (1) P50,000 - P11,000 (E) (2) P10,500 - (25% of P20,000) = P5,500/P25,000 (F) (3) P50,000 x 22% (H) (4) P1,100/22% (B) (5) P80,000 x 75% (A) (6) P80,000 x 25% (C) (7) P28,200 + P91,800 (D) (8) P28,200/P120,000 (9) 2006 = P10,000 x 22% = P 2,200 2007 = P50,000 x 25% = 12,500 2008 = P45,000 x 23.5% = 10,575 Exercise 6-4 1. Deferred Gross Profit – 2006 Deferred Gross Profit – 2007 Deferred Gross Profit – 2008 Realized Gross Profit Deferred gross profit before adj. Deferred gross profit after adj. (Inst. contract rec’l x GP rate) Realized gross profit

238,000

P 39,000 22% P 11,000 P 5,000 P 60,000 P 20,000 P120,000 23.5% P 25,275 4,500 14,000 69,000 2006 P 8,000

2007 P26,000

87,500 2008 P105,000

__3,500 P 4,500

_12,000 P14,000

__36,000 P 69,000

AA1 - Chapter 6 (2008 edition) page 2

2.

Cash collections 2006 sales - P4,500 /35% 2007 sales - p14,000/30% 2008 sales - P69,000/40% Total

Installment Contract Receivable, beg. Less Installment Contract Receivable, end Collections

P 12,857 46,667 172,500 P232,024 2006 P 22,857 10,000 P12,857

2007 P86,667 40,000 P46,667

2008 P262,500 90,000 P 172,500

Exercise 6-5 a. Installment Contracts Receivable Installment Sales

250,000

b.

Cash Installment Contracts Receivable

120,000

c.

Cost of Installment Sales Inventory 50,000 / 250,000 = 20%

200,000

d.

Inventory of Repossessed Merchandise Deferred Gross Profit (P20,000 x 20%) Loss on Repossession Installment Contracts Receivable

14,500 4,000 1,500

e.

Expenses Cash

16,000

f.

Installment Sales Cost of Installment Sales Deferred Gross Profit

g.

Deferred Gross Profit Realized Gross Profit P120,000 x 20% = P 24,000

24,000

h.

Realized Gross Profit Expenses Loss on Repossession Income Summary

24,000

250,000

Exercise 6-6 a. Installment Contracts Receivable Installment Sales

600,000

b.

405,000

Cost of Installment Sales Shipments on Installment Sales

250,000 120,000 200,000

20,000 16,000 200,000 50,000 24,000

16,000 1,500 6,500

600,000 405,000


c.

Cash Installment Contracts Receivable

360,000

d.

Repossessed Merchandise Deferred Gross Profit (P40,000 x 32.5%) Loss on Repossession Installment Contracts Receivable

24,000 13,000 3,000

e.

Installment Sales Cost of Installment Sales Deferred Gross Profit 195,000/600,000 = 32.5%

600,000

f.

Deferred Gross Profit Realized Gross Profit P360,000 x 32.5% = P117,000

117,000

360,000

40,000 405,000 195,000

117,000

Exercise 6-7 Requirement 1 a. Cash Installment Contracts Receivable Interest Revenue b.

c.

1,400

Repossessed Merchandise Deferred Gross Profit (P4,000 x 40%) Loss on Defaults Installment Contracts Receivable

2,000 1,600 400

Deferred Gross Profit Realized Gross Profit (P1,240 x 40%)

496

Requirement 2 a. Repossessed Merchandise Deferred Gross Profit Loss on Defaults Exercise 6-8 Repossessed Merchandise (P13,500/120%) Deferred Gross Profit (P15,000 x 20%/120%) Loss on Repossession Installment Contracts Receivable Exercise 6-9 a. Trade-In Merchandise Installment Contracts Receivable Installment Sales

2,000 1,600

11,250 2,500 1,250

1,240 160

4,000 496

3,600

15,000 180,000 420,000

600,000


Estimated resale price Less: Reconditioning cost Gross profit Estimated realizable value

P30,000 _70,000

Selling price Less Overallowance (P300,000 – P180,000) Adjusted selling price

P280,000 __100,000 P 180,000 P720,000 120,000 P600,000

b.

Cost of Installment Sales Automobiles

500,000

c.


600,000

d.

Deferred Gross Profit Realized Gross Profit P180,000 x 16 2/3% = P30,000

Exercise 6 - 10 Correct entry Allowance for Doubtful Installment Contract Rec’l Deferred Gross Profit ( P 10,000 x 25/125 ) Repossessed Merchandise Installment Contract Receivable Correcting Entry Deferred Gross Profit Repossessed Merchandise Allowance for Doubtful Accounts Exercise 6-11 Requirement 1 Oct. 31 Cash Installment Contracts Receivable Real Estate Deferred Gross Profit GP rate = P150,000/P750,000 = 20%

30,000

1,450 2,000 6,550

2,000 6,550

200,000 550,000

Nov. 30

Cash Installment Contracts Receivable Interest Revenue 550,000 x 1% = 5,500

11,500

Dec. 31

Cash Installment Contracts Receivable Interest Revenue P550,000 – P6,000 = P544,000 x 1% = P5,440

11,440

500,000 500,000 100,000 30,000

10,000

8,550

600,000 150,000

6,000 5,500

6,000 5,440


31

Deferred Gross Profit Realized Gross Profit P200,000 + P6,000 + P6,000 = P212,000 x 20% Requirement 2 Oct. 31 Cash Installment Contracts Receivable Real Estate Deferred Gross Profit GP rate = P150,000/P750,000 = 20%

42,400

200,000 550,000

Nov. 30

Cash Installment Contracts Receivable Interest Revenue P550,000 x 1% = P5,500

6,000

Dec. 31

Cash Installment Contracts Receivable Interest Revenue P550,000 – P500 = P549,500 x 1% x = P5,495

6,000

31

Deferred Gross Profit Realized Gross Profit P200,000 + P500 + P505 = P201,005 x 20% = P40,201

Exercise 6-12

40,201

500 5,500

505 5,495

40,201

Realized gross profit none P 75,000 100,000/year

2008 2009 2010 – 2014

b.

2008 2009 2010 2011 – 2014

none none P 25,000 P100,000/year

P400,000 P100,000 P 75,000 none

c.

2008 2009 – 2014

P170,000 P 42,500

P230,000 P 57,500

Exercise 6-13 1. Installment payment = P1,260,000/5.6502 = P223,000 2. Journal entries Jan. 1 Cash Notes Receivable (P223,000 x 10) Real Estate Sales Discount on Notes Receivable Cost of Real Estate Sales Inventory or Real Estate

600,000 150,000

Recovery of cost P400,000 25,000

a.

Jan. 1

42,400

140,000 2,230,000

850,000

1,400,000 970,000 850,000


1

Dec. 31

Real Estate Sales Cost of Real Estate Sales Deferred Gross Profit GP rate = P550,000/P1,400,000 = 39.29% Cash Notes Receivable

223,000

31

Discount on Notes Receivable Interest Revenue (P2,230,000 – P970,000) x 12% = P151,200

151,200

31

Deferred Gross Profit Realized Gross Profit [P140,000 + (P223,000- P151,200)] x 39.29%

83,216

Exercise 6-14 Requirement 1 a. Land Land Improvements Cash b.

1,400,000

Cash Installment Contract Receivable Installment Sales A – 5 @ P400,000 = P2,000,000 B – 8 @ P300,000 = 2,400,000 C – 3 @ P200,000 = 600,000 Total P5,000,000

13,440,000 3,360,000 750,000 4,250,000

c.

Cost of Installment Sales 3,000,000 Land Land Improvements Cost of sales = 16,800,000/28,000,000 = 60% x P5,000,000 = P3,000,000 Land = 13,440,000/16,800,000 = 80% x P3,000,000 = P2,400,000 Land imp. = 3,360,000/16,800,000 = 20% x P3,000,000 = P 600,000

d.

1,400,000

Cash Installment Contract Receivable Interest Revenue Requirement 2 a. Installment Sales Cost of Installment Sales Deferred Gross Profit GP rate = 2,000,000/5,000,000 = 40% b. Deferred Gross Profit Realized Gross Profit (P750,000 + P1,300,000) x 40% = P820,000

5,000,000

820,000

850,000 550,000

223,000

151, 200

83,216

16,800,000

5,000,000

2,400,000 600,000

1,300,000 100,000 3,000,000 2,000,000 820,000


Exercise 6-15 2005 Installment Accounts Receivable Installment Sales

2006

2007

4,700,000

Cost of Installment Sales Inventory

2,585,000

Cash Installment Accounts Receivable

2,585,000


4,700,000

Installment Accounts Receivable Installment Sales

4,500,000


2,610,000

Cash Installment Accounts Receivable – 2005 Installment Accounts Receivable – 2006

3,885,000


4,500,000

Deferred Gross Profit Realized Gross Profit

1,410,000

Installment Accounts Receivable Installment Sales

5,800,000


3,074,000

Cash Installment Accounts Receivable – 2005 Installment Accounts Receivable – 2006 Installment Accounts Receivable – 2007

5,010,000


5,800,000

Deferred Gross Profit – 2005 Deferred Gross Profit – 2006 P1,350,000 – (P2,610,000-P2,475,000) Deferred Gross Profit – 2007 Realized Gross Profit

470,000 1,215,000 116,000

47,000 2,585,000 2,585,000 2,585,000 2,115,000 4,500,000 2,610,000 1,410,000 2,475,000 2,610,000 1,890,000 1,410,000 5,800,000 3,074,000 470,000 1,350,000 3,190,000 3,074,000 2,726,000

1,801,000


2008

Installment Accounts Receivable Installment Sale

6,100,000


3,111,000

Cash Installment Accounts Receivable – 2006 Installment Accounts Receivable – 2007 Installment Accounts Receivable – 2008

5,545,000

Installment Sales Cost of Installment Sales Deferred Gross Profit – 2008

6,100,000

Deferred Gross Profit – 2006 Deferred Gross Profit – 2007 Deferred Gross Profit – 2008 P3,355,000 – P3,111,000 Realized Gross Profit

450,000 1,740,000 244,000

Gross Profit Recognized: Full Accrual; Cost Recovery Method

2005 P 2,150,000 0

Exercise 6-16 Installment sales Cost of Installment sales Gross profit percentage Cash collections: 2006 Sales 2007 Sales 2008 Sales Realized gross profit on installment sales

2006 P 1,890,000 1,410,000

2007 P 2,726,000 1,801,000

6,100,000 3,111,000 450,000 1,740,000 3,355,000 3,111,000 2,989,000

2,434,000 2008 P 2,989,000 2,434,000

2006 P 400,000 248,000 38%

2007 P 475,000 280.250 41%

2008 P 525,000 341,250 35%

128,000

232,000 114,000

28,000 218,500 162,750 80,250

112,000

COMPUTATIONS : 1 P 341,250 / . 65 = P 525,000 2

P 400,000 x . 62 = P 248,000

3

1 - (P 280,250 / P 475,000) = 41%

4

Gross profit recognized in 2008 All costs from 2006 sales are recovered Cash received equals gross profit All cost from 2008 sales are not recovered Cash received goes to recover costs-gross profit Gross profit reported in 2008 from 2006 sales

P 80,250 28,000 0 P 52,250


Costs of 2007 sales Costs recovered in 2005 Costs to be recovered in 2005 Cash received related to 2007 sales 5

Cash collections in 2006 do not exceed costs of sales Realized gross profit in 2006 = P 0

6

Cash collections for 2006 sales ( P 128,000 + 232,000 ) Costs of 2006 sales Realized gross profit in 2007

Exercise 6-17 Requirement 1 2007 Jan. 1 Cash Notes Receivable (2,197,100 x 10) Real Estate Sales Discount on Notes Receivable (2,347,100 - 1,500,000) 1 Dec

Cost of Real Estate Sales (240,000 x 30) Inventory of Real Estate

P 280,250 114,000

P 360,000 248,000 P 112,000

1,500,000 21,971,000

7,200,000

31

Real Estate Sales Cost of Real Estate Sales Deferred Gross Profit - Real Estate Sales GP rate = 7,800,000/15,000,000 = 52%

31

Cash Notes Receivable

2,197,100

31

Discount on Notes Receivable Deferred Gross Profit - Real Estate Sales

1,350,000

Cash Notes Receivable

2,197,100

2008 Dec. 31 31

Discount on Notes Receivable Deferred Gross Profit - Real Estate Sales (P13,500,000 - P2,197,100 + P1,350,000) x 10% Requirement 2 Date Cost Collection Jan. 01, 2007 7,200,000 1,500,000 Dec. 31, 2007 2,197,100 Dec. 31, 2008 2,197,100

166,250 P 218,500

15,000,000

1,265,300

15,000,000 8,471,000 7,200,000 7,200,000 7,800,000

2,197,100 1,350,000

2,197,100 1,265,300

Unrecovered Cost 5,700,000 3,502,900 1,305,800


Notes receivable (P21,971,000 - P2,197,100 - P2,197,100) Less: Discount on notes receivable (P8,471,000-P1,350,000- P1,265,300) Deferred gross profit (P7,800,000 + P1,350,000 + P1,265,300) Unrecovered cost

P17,576,800 P 5,855,700 10,415,300

16,271,000 P 1,305,800

Exercise 6-18 Selling Price Cost of Land Gross Profit

P 10,000,000 4,000,000 P 6,000,000

Gross Profit rate ( 600 / 1,000 ) a) Full accrual method b) Installment method 2008 2009 2010 c) Cost Recovery method 2008 2009 2010

60% 2008 2009 – 2010

P 6,000,000 none

Collections P 400,000 300,000 ___300,000 P1,000,000

Cost Recovery P 160,000 120,000 ___120,000 P 400,000

Gross Profit P 240,000 180,000 ___180,000 P 600,000

Collections P 400,000 300,000 ___300,000 P 1,000,000

Cost Recovery P 400,000 ____-___ P 400,000

Gross Profit P 300,000 ___300,000 P 600,000

PROBLEMS Problem 6-1 1. 2007 - (P12,000* + P228,000) ÷ (P240,000 + P520,000 + P40,000) 2008 - (P1,500,000 - P975,000) ÷ P1,500,000 *P40,000 – P24,000 – P4,000 = P12,000 2.a. Installment Sales Cost of Installment Sales Deferred Gross Profit – 2008 b. Deferred Gross Profit – 2007 (520,000 x 30%) Deferred Gross Profit – 2008 (740,000 x 35%) Realized Gross Profit c. Sales Realized Gross Profit Cost of Sales Gain or Loss on Repossession Selling and Administrative Expenses

30% 35% 1,500,000

156,000 259,000 2,120,000 415,000

975,000 525,000

415,000

1,650,000 4,000 660,000


Income Summary d. Income Tax Income Tax Payable

77,350

e. Income Summary Income Tax

77,350

d. Income Summary Retained Earnings Requirement 3

143,650

221,000 77,350 77,350 143,650

Excellent Co. Statement of Recognized Income and Expenses For the Year Ended December 31, 2008

Sales Cost of Sales Gross Profit Realized Gross Profit on Installment Sales Total Realized Gross Profit Less Loss on Repossession Realized Gross Profit after Loss on Repossession Selling and Administrative Expenses Net Income before Income Tax Income Tax Net Income

P 2,120,000 _1,650,000 P 470,000 __415,000 P 885,000 ____4,000 P 881,000 __660,000 P 221,000 77,350 P143,650

Problem 6-2 Requirement 1 Computation of gross profit rates 2006 sales 2007 sales 2008 sales

P22,500/P50,0000 P96,000/P240,000 100% - (P310,000/P500,000)

45% 40% 38%

Requirement 2 Income Statement

Reliance Sales Corp. Statement of Recognized income and Expenses For the Year Ended December 31, 2008

Sales Cost of Sales: Inventory, January 1 Purchases Repossessed Mdse. Cost of Goods Available for Sale Less Inventory, Dec. 31 Gross Profit

Regular Sales P 192,000

Installment Sales P 500,000

Total P 692,000

P 30,000 455,000 __10,000 P495,000 __35,000

150,000 P 42,000

310,000 P 190,000

460,000 P 232,000


Less Deferred Gross Profit, including DGP on repossessed merchandise Realized Gross Profit on 2008 sales Add Realized Gross Profit on 2006 & 2007 sales Total Less Loss on Repossession [3,000-(3,600+4,000+1,900)] Realized gross profit after loss on Repossession Operating Expenses Net Loss Analysis of gross profit on installment sales: Installment sales Installment contracts rec’l, beginning Installment contracts rec’l, end Defaulted installment contracts rec’l Collections Gross profit rate Realized gross profit Deferred gross profit Requirement 3 -

Assets

________ P 42,000

32,300 P 157,700

32,300 P 199,700 100,650 P 300,350 3,500 P 296,850 300,000 P 3,150

2006

2007

2008 P500,000

P 50,000 ( 5,000) ( 8,000) P 37,000 45% P 16,650

P240,000 ( 20,000) ( 10,000) P210,000 40% P84,000

P 2,250

P 8,000

(80,000) (5,000) P415,000 38% P157,700 P 30,400

Reliance Corp. Statement of Financial Position December 31, 2008

Cash Inst. Contracts Rec’l, 2008 Inst. Contracts Rec’l, 2007 Inst. Contracts Rec’l, 2006 Accounts Rec’l Inventory Other Assets

P 25,000 80,000 20,000 5,000 40,000 35,000 52,000

Total Assets

P257,000

Problem 6-3 1 Schedule of Cost of Goods Sold . Inventory, January 1 Purchases, including freight-in Repossessed Merchandise Cost of Goods Available for Sale Less Inventory, December 31 Cost of Goods Sold

Liabilities & Shareholders’ Equity Accounts Payable P 75,000 Deferred Gross Profit, 2008 30,400 Deferred Gross Profit, 2007 8,000 Deferred Gross Profit, 2006 2,250 Ordinary Share Capital 100,000 Retained Earnings 41,350 ________ Total Liabilities & Shareolders’ Equity P257,000

P 240,000 1,250,000 70,000 P1,560,000 260,000 P1,300,000


2.

3.

Schedule of Allocation of Cost of Goods Sold Type of Amount of Amount Based Sale Sales on Cash Sales Cash P 300,000 P 300,000 Charge 600,000 500,000 Installment 1,500,000 1,200,000 P2,400,000 P2,000,000

Ratio 60/400 100/400 240/400

Allocation of CGS P 195,000 325,000 780,000 P1,300,000

Fuji Products Statement of Recognized Income and Expenses For the Year Ended December 31, 2008 Cash Charge Installment Sales Sales Sales Sales P300,000 P600,000 P 1,500,000 Cost of Sales 195,000 325,000 780,000 Gross Profit P105,000 P275,000 P 720,000 Less Deferred Gross Profit, 2008 sales 460,800 Realized Gross Profit on 2008 sales P105,000 P275,000 P 263,200 Add Realized Gross Profit on 2006 and 2007 sales Total Realized Gross Profit Less Loss on Repossession Realized Gross Profit after loss on repossession Operating Expenses, including bad debts Net Income before Income Tax Income Tax Net Income

Total P2,400,000 1,300,000 P1,100,000 460,800 P 639,200 P 169,500 P 808,700 51,000 P 757,700 465,000 P 292,700 102,445 P 190,255

Problem 6-4 1. Computation of gross profit rates 2006 sales 160,000/400,000 2007 sales 167,200/440,000 2008 sales 163,800/420,000 2.

Adjusting entries a. Installment Sales Cost of Installment Sales Deferred Gross Profit – 2008 b.

3.

Deferred Gross Profit –2006 Deferred Gross Profit –2007 Deferred Gross Profit –2008 Realized Gross Profit 2006 - (P110,000 – P28,000 - P9,000 - P5,000) x 40% = P27,200 2007 - (P250,000 – P92,000 - P2,800) x 38% = P58,976 2008 - (P420,000 – P238,000) x 39% = P70,980

Correcting entries a. Deferred Gross Profit – 2006 (9,000 x 40%) Deferred Gross Profit - 2007 (2,800 x 38%)

40% 38% 39% 420,000

27,200 58,976 70,980

3,600 1,064

256,200 163,800

157,156


b.

4.

Operating Expenses Inventory of Repossessed Merchandise(4,000 - 400 - 600) Deferred Gross Profit – 2006 (5,000 x 40%) Operating Expenses The indicated gain of P600 is ignored and deducted from the market value of the repossessed merchandise.

Closing entries a. Realized Gross Profit Operating Expenses Income Summary

157,156

b.


21,987

c.


21,987

d.


40,833

Problem 6-5 (1) Sept. 30

(2)

3,000 2,000

Cash Installment Contract Receivable Piano Deferred Gross Profit 60/160 = 37.5%

48,000 432,000

Oct. 31

Cash Installment Contract Receivable Installment Revenue

48,000

Nov. 30


48,000

Dec. 31


48,000

Date

Collection

Sept. 30 Oct. 31

48,000 48,000

Nov. 30

48,000

Dec. 31

48,000

Interest 432,000 x .005 = 2,160 386,160 x .005 = 1,931 340,091 x .005 = 1,700

Principal Reduction 48,000 45,840

Principal Balance 480,000 432,000 386,160

46,069

340,091

46,300

293,791

4,664 5,000

94,336 62,820 21,987 21,987 40,833

300,000 180,000

45,840 2,160 46,069 1,931 46,300 1,700


(3)

Dec. 31

(4)

2006 Feb.

Problem 6-6 (1)

Deferred Gross Profit 69,828 Realized Gross Profit 48,000 + 45,840 +46,069 + 46,300 = 186,209 x 37.5% = 69,828 Repossessed Piano Deferred Gross Profit Loss on Repossession Installment Contract Receivable

56,000 36,724 5,207

Sales 1,260,000 + (2,650,000 ÷1.06) Cost of Sales: Inventory, beginning Purchases

P 580,600 2,093,000 P2,673,600 333,000

Gross Profit Rate (1,419,400 / 3,760,000 )

Installment Time of Sale 1 2 3 4 5 6

(3 )

Equivalent Cash Sales Price 10,000 (10,600 ÷ 1.06) 7,350 (10,000 - 2,650) 6,893.50 (7,350 - (530 - 73.50) 6,432.43 (6,893.50 -(530 - 68.93) 5,966.75 (6,432.43-(530 - 64.32) 5,446.42 (5,966.75- (530 - 59.67) 5,021.38 (5,446.42- (530 - 54.96)

Contract Balance 10,600

Interest Revenue -

7,950 (10,600 - 2,650) 7,420 (7,950 -530) 6,890 (7,420 - 530) 6,360 (6,890 - 530) 5,830 (6,360 -530) 5,300 (5,830 -530)

73.50 (7,350 x 1%) 68.93 (6,893.50 x 1%) 64.32 (6,432.43x 1%) 59.67 (5,966.75 x 1%) 54.96 (5,496.42 x 1%) 50.21 (5,021.38 1%)

Installment Sales Price Less: Installment on contract 10,600 - (10,600 ÷ 1.06) Installment sales at cash sales price Less: Downpayment Collections Less interest

97,931 P3,760,000

Less: Inventory end Gross Profit

(2 )

69,828

2,340,600 P1,419,400 ÷3,760,000 37.75% Cash Collection 2,650 (10,600 x 25%) 530 (7,950 ÷ 15) 530 (7,950÷ 15) 530 (7,950 ÷15) 530 (7,950 ÷ 15) 530 (7,950 ÷ 15) 530 (7,950 ÷ 15) P10,600.00 600.00

P 1,590.00 206.70

P 2,650.00 1,383.30

P10.000.00 4,033.60


Balance Less: DGP 5,966.75 x 37.75% Repossessed Sales Repossessed Inventory Net gain on defaults

(4 )

2,252.45 2,300.00 1,800.00

Cash Sales (1,260,000 x 37.75%) Installment Sales: Downpayment 662,500 x 37.75% Installments on defaults 1,383.30 x 37.75% Installment Collections Less Interest (P2,650,000 - P10,600) /1.06 x .03716 Balance Realized Gross Profit

P5,966.70 P6,352.45 P 385.75

P

P791,820.00 92,528.40 P699,291.60 x 37.75%

475,650

250,093.75 522.20

263,982.60 P990,248.60

Problem 6-7 1. Total installment sales Less Installment Receivable - Dec. 31 Total Collections in Sales

P3,450,000 1,594,600 P1,855,400

2.

P1,855,400

Collections GPR: Total Selling price Total Cost GP Total sales RGP

P9,500,000 5,225,000 P4,275,000 ÷9,500,000

45%__ P 834,930

3.

Installment Receivable - Dec. 31 GPR Unrealized GP

P1,594,600 x 45%_ P 717,570

4.

Realized gross profit Interest Income Operating Expenses Net Income before Income Tax Income Tax Net Income

P 834,930 520,300 (682,130) P 673,100 235,585 P437,515

Problem 6-8 Sales (Schedule 1) Cost of Sales (43% of Sales, Schedule 2) Gross Profit Less Sales Commission Gross profit excluding Commission

P 8,060,000 3,465,800 P 4,594,200 221,000 P 4,373,200


Less DGP 4,373,200 / 8,060,000 x 5,370,000 Realized gross profit Expenses: Advertising Sales Managers Salaries Gen. Operating Expenses (2,360,000 x 1/ 4 ) Net loss Schedule 1 – Sales

2,913,658 P 1,459,542 P730,000 900,000 590,000

Total Sales Price P3,900,000 3,200,000 960,000 P8,060,000

A 26 @ 150,000 B 32 @ 100,000 C 12 @ 80,000 Schedule 2 - Cost of Sales Rate A B C

No. of lots 80 100 130 310

Cost of Land Legal fees, etc. Grading Water & Sewerage Paving expenses General operating expenses (2,360,000 x 3/4) Total cost Total sales value Cost of sales rate Problem 6 - 9 2007 Inventory Cash

2,220,000 P 760,458

Cash Received P1,650,000 800,000 240,000 P2,690,000

Installment NR Balance 2,250,000 2,400,000 720,000 5,370,000

Unit Sales Price 150,000 100,000 80,000

Total Sales Value P12,000,000 10,000,000 10,400,000 P32,400,000 P 4,800,000 600,000 2,250,000 1,849,000 2,663,000 1,770,000 P13,932,000 ÷ 32,400.000 43% 45,200

Notes Receivable – 2007 (32,000 + 62,000 + 3,600) Discount on Notes Receivable - 2007 (7,167 + 3,600 ) Installment Sales

97,600

Cost of Installment Sales (45,200 - 2,000) Inventory

43,200

Cash Notes Receivable - 2007 (32,000 + 3,600)

35,600

45,200 10,767 86,833 43,200 35,600


Discount on Notes Receivable - 2007 Interest Revenue

2008

3,600

Installment Sales Cost of Installment Sales Deferred Gross Profit - 2007

86,833

Deferred Gross Profit - 2007 Realized Gross Profit 43,633/86,833 = 50.25% x 32,000

16,080

Inventory Cash

52,020

Notes Receivable - 2008 (160,000 + 50,000 + 5,500 - 26,000) Discount on Notes Receivable 2008[8,043 + (5,500 - (7,167 5,579)] Installment Sales

89,500

Cost of Installment Sales (52,020 - 8,000) Inventory

44,020

Cash Notes Receivable – 2008 (89,500 - 60,000) Notes Receivable – 2007 (62,000 - 36,000)

55,500

Discount on Notes Receivable – 2008 (5,500 - 1,588) Discount on Notes Receivable – 2007 (7,167 - 5,579) Interest Revenue

3,912 1,588 77,545

Deferred Gross Profit - 2008 (29,500 - 3,912 x 43.33%) Deferred Gross Profit - 2007 (26,000 - 1,588 = 24,412 x 50.22%) Realized Gross Profit 33,525/77,545 = 43.23%

11,062 11,267

Cash Notes Receivable Idle Plant Deferred Gross Profit

43,200 43,633

16,080

52,020 11,955 77,545

Installment Sales Cost of Installment Sales Deferred Gross Profit - 2008

Problem 6-10 2005 Jan. 1

3,600

2,000,000 5,000,000

44,020 29,500 26,000

5,500 44,020 33,525

23,329

5,000,000 2,000,000


2006 July 1

Cash Notes Receivable Deferred Gross Profit

2007 Dec. 31

2008 Feb. 1

Feb. 1

1,900,000

Cash 2,250,000 Deferred Gross Profit 400,000 Notes Receivable Interest. Revenue 2,250,000 - (5,000,000 - 2,000,000 - 1,900,000) = 1,150,000 Cash Notes Receivable Interest Revenue

2,825,000

1,000,000 900,000

1,500,000 1,150,000

2,500,000 325,000

Deferred Gross Profit (2,000,000 + 900,000 - 400,000) 2,500,000 Gain on Sale of Idle Plant 2,000,000 Interest Revenue 500,000 (900,000 + 750,000 + 325,000 = 1,975,000 - 1,150,000 - 325,000 = 500,000) MULTIPLE CHOICE

1.

D

2 3 4

A B C

5

B

6

B

Inst. Sales 8,765,625 ÷ 68% Inst. Rec. beg. Inst. Rec. end Collections GPR

2008 P12,890,625 (9,728,125) P 3,162,500 x 32% P 1,012,000

Deferred gross profit before adjustment Deferred gross profit after adjustment 2007 - P16,250 x 30/130 2008 - P90,000 x 33 1/3 /133 1/3 Realized gross profit Operating expenses Net income Downpayment (P545,000 x .2) Inst. Collections (P545,000 x 8 x .40) Collections in year 1 on Year 1 Inst. Sales

2007

2006

P8,387,500 (3,025,000) P5,362,500 x 30% P1,608,750

P1,512,500 __________ P1,512,500 x 28% P 423,500

P10,037,500 P3,044,250

P38,000 P 3,750 22,500

26,250 P11,750 1,500 P10,250 P109,000 174,400 P283,400 x 35/135


7

A

Realized gross profit for Year 1 Installment sales - Year 2 Less Collections in Year 2 DP (P785,000 x .20) Installment collection (P785,000 x .80 x .40) Balance, end of Year 2

P 73,474 P785,000 P157,000 251,200

Unrealized GP on Year 2 installment sales at the end of Year 2

408,200 P376,800 x 35/135 P 97,689 P464,640 157,000 P621,640

8

B

Inst. Accts. Rec., end of year 3 On year 3 installment sales (P968,000 x .80 x .60) On Year 2 installment sales (P785,000 x .80 x .25) Total installment accounts receivable, end of Year 3

9

B

Total installment accounts receivable, end of Year 3 Total unrealized gross profit at end of Year 3

P621,640 x 35/135 P161,166

10

C

11

A

2007 - 100% - (31,250/62,500) = 50% x P25,000 2008 - 100% - (45,000/100,000) = 55% x P62,500 Total

12

D

Sales - regular Cost of sales - regular Gross profit - regular Realized gross profit (see D1) Total gross profit Selling expenses Net income

P187,500 112,500 P 75,000 46,875 P121,875 31,250 P 90,625

13 .

D

P610,750 x 60%

P366,450

14

D

P306,520 x 40%

P122,608

15

B

2006 sales - P17,400 x 36% 2007 sales - P(205,400 - P200 - P25,800) x 39% Total

16

B

Selling price Cost (P200 x 61%) Gain from sale of repossessed merchandise

17

B

(P344,460 - P67,440 - P2,200) x 34%

18

B

Market value of repossessed ref (P1,700 x 63%) Unrecovered cost (P2,200 x 66%) Loss on repossession

P12,500 34,375 P46,875

P 6,264 69,966 P76,230 P 200 122 P 78 P93,438.80 P1,071 1,452 P 381


19

D

2006 sales - 100% - (247/380) = 35% x P24,020 2007 sales - see 6-17 2008 sales - 100% - (379,260/602,000 = 37% 37% x (P602,000-P410,090) Total

20

D

( P100,000 - P12,500 - P6,250) x 50%

21

B

( 375,000 - 150,000) x 45%* *Installment sales Invty. Beg. Purchases Repossessions Mdse. Avail for sale Less Invty. End CGS Cost of Regular sale ( 312,500 x 70% ) Gross profit on Installment sales Gross profit rate on Installment (168,750/375,000)

22

A

(3,750 - (6,250 x 50%)

23

B

2006 sales - P108,750 x 25% 2007 sales - P120,000 x 27.5% 2008 sales - P 93,750 x 28% Total

24

A

Value assigned to repossessed merchandise: 2006 sales 2007 sales Unrecovered cost 2006 sales - P22,500 x 75% 2007 sales - P24,000 x 72.5% Loss on repossession

25

D

2006 sales - P24,000 x 39% 2007 sales - (P300,000 - P60,000 - P10,000) x 42% 2008 sales - (P480,000 - P320,000 - P5,000) x 40% Total

26

B

2007 sales - P4,500 - (P10,000 x 58%) 2008 sales - P3,500 - (P5,000 x 60%) Net gain (loss) on repossession

27

A

P360,000 x 33 1/3%

28

B

Loss = P8,000 - (P15,000 x 60%)

P

8,407.00 93,438.80

71,006.70 P172,852.50 P40,625

P 62,500 435,000 2,500 500,000 75,000 425,000 218,750 sales = 45%

P101,250 P 375,000

206,250

P625 loss P27,187.50 33,000.00 26,250.00 P86,437.50 P 9,000 13,500 P16,875 17,400

P22,500 34,275 P11,775 P 9,360 96,600 62,000 P167,960 P(1,300) 500 P (800) P120,000 P1,000


29 30

C A

(P800,000 - P250,000 - P300,000 - P15,000) x 40% (P75,810/42%) + P75,810

P94,000 P256,310

31

D

2006 sales - P35,800 x 32.26% 2007 sales - (P155,000 - P42,000) x 40% 2008 sales - (P256,310 - P100,500) x 42/142 total

P 11,550 45,200 46,085 P102,835

32

C

(P120,000 - P15,000 - P7,750) x 45%

33

C

Inventory, Dec. 31, 2007 Purchases Repossessions Cost of goods available for sale Less Inventory, Dec. 31, 2008 Cost of goods sold Less Cost of goods sold on regular sales (P385,000 x 70%) Cost of installment sales Gross profit rate on installment sales [100% - (263,500/425,000)] Realized gross profit - (P425,000 - P200,000) x 38%

P 70,000 555,000 3,000 P628,000 95,000 P533,000 269,500 P263,500 38% P85,500

34

A.

(7,750 x 55%) - 3,000

P1,262.50

35

B

Cash sales Charge sales (P180,000/120%) Installment sales (P446,400/124%) Total sales - cash basis

P 90,000 150,000 360,000 P600,000

36

A

Inventory, beginning Delivered cost of purchases Repossessed merchandise Cost of goods available for sale Less Inventory, end Cost of goods sold

P52,500 393,000 15,000 P460,500 70,500 P390,000

Cost of installment sales - P390,000 x 360/600

P234,000

37

C

Installment rec’l, beg Installment sales Installment rec’l, end Defaulted rec’l Collections

P43,762.50

2006 P 74,000

2007 P123,000

( 15,000) ( 18,000) P 41,000

( 45,000) ( 21,000) P 57,000

2008 P446,400 ( 270,000) ---___ P176,400


38

A

Sales price of Article “A” Less Overvaluation on trade -in Sales price Reconditioning cost Normal profit Market value of trade-in Allowed trade-in value Adjusted sales price Cost of Article “A” Gross profit Gross profit rate

P400,000 P110,000 ( 8,000) ( 22,000) P 80,000 120,000

40,000 P360,000 270,000 P 90,000 25%

Realized GP - (P80,000 + P40,000) x 25%

P30,000

39

C

Inst. rec’l balance, Dec. 31, 2007 (P360,000 - P120,000) Installment payment, Jan. 1 - Mar. 1 (P20,000 x 3) Inst. rec’l balance, April 1 Cost percentage Unrecovered cost Market value of repossessed mdse. (P13,500 - P800 - P2,700) Loss on repossession

40

B

Expected loss (125,000 x 4%*) Less: Loss on default 2008 P1,500 Recovery from sale of repossessed merchandise 175 Balance of allowance for defaulted contracts; Dec. 31, 2008 *Loss on default in 2007 on 2007 sales P 250 Loss on default in 2008 on 2007 sales 3,750 P 4,000 Recovery on sale of repossession in 2008 P 800 Repossessed Merchandise on hand 200 1,000 Expected loss P 3,000 ÷ Sales P75,000 Rate of loss as a % of sales 4%

41

42

C

C

Inst. contract rec’l beg. Less: Inst. Contract rec’l, end Inst. Contract rec’l written off Collections Gross profit rate Realized gross profit Lot A (791,086.20 x 30%) Lot B (973,333.30 x 25%) Lot C and House (P2,080,000 x 40%)

P2,000 3,750

P240,000 60,000 P180,000 x 75% P135,000 100,000 P 35,000 P5,000 1,325 P3,675

P31,500 5,750 P25,750 x 40% P10,300 P 237,325.80 243,333.30 832,000.00


Realized gross profit

P1,312,659.10

Schedule of Collection Lot A 3/31 - Initial balance 3/31 - Down payment 6/30 - P120,000 - (P1,200,000 x 2.5%) 9/30 - P120,000 - (P1,110,000 x 2.5%) 12/31- P120,000 - (P1,017,750 x 2.5%) Lot B 10/31 – Initial balance 10/31 – Down payment 12/31 – P200,000 – (P1,600,000 x 1.667%) Lot C 6/30 – Initial balance 6/30 – Down payment 12/31- P400,000 – (P2,400,000 x 5%) Allocation of Cost & GP rates: Lot A – P1,600,000 x 6/8 Lot B - P2,400,000 x 6/8 Lot C: Farm A – P400,000 B – P600,000 House - P1,520,000

Principal P514,280.00 90,000.00 92,250.00 94,556.20 P791,086.20 P800,000.00 173,330.30 P973,333.30 P1,800,000.00 280,000.00 P2,080,000.00

Balance P1,714,280.00 1,200,000.00 1,110,000.00 1,017,750.00 923,193.80 P2,400,000.00 160,000 1,426,666.70 P4,200,000 2,400,000 2,120,000

Cost P1,200,000 1,800,000

SP P1,714,280 2,400,000

GP P514,280 600,000

% 35% 25%

2,520,000

4,200,000

1,680,000

40%

43

B

Unpaid balance upon default Less: DGP (P2,120,000 x 40%) Unrecovered cost Market value [P2,520,000 – (P1,520,000 ÷ 20)] Gain on repossession

P2,120,000 848,000 P1,272,000 2,444,000 P1,172,000

44

A

8,000,000 – (8,000,000 x 20%) = 6,400,000 x 3% = 6,400,000 – (642,957.30 – 192,000) x 3% Collections to be applied on interest

P192,000.00 178,471.30 P370,471.30

45

D

Downpayment 1st inst. 642,957.30 - 192,000 2nd inst. 642,957.30 - 192,000 Total collections (P8,000,000 - (2,500,000 + 3,560,000) / 8,000,000] Realized gross profit

P1,600,000.00 450,957.30 464,486.00 P 2,515,443.30 x 24.25% P 609,995.00

CHAPTER 7

SUGGESTED ANSWERS Exercise 7-1 1. Contract price Cost incurred to date Est. cost to complete

2.

2006 P50,000,000 P 7,500,000 30,000,000

2007 P50,000,000 P34,500,000 8,625,000

Total estimated cost Total estimated gross profit Percentage of completion

37,500,000 P12,500,000 20%

P43,125,000 P 6,875,000 80%

2008 P50,000,000 P40,800,000 __________ P40,800,000 P 9,200,000 100%

2006 - Recognized revenue Cost of revenue Gross profit

To Date P10,000,000 7,500,000 P 2,500,000

Recognized in prior year/s -

To be recognized this year P10,000,000 7,500,000 P 2,500,000


P40,000,000 34,500,000 P 5,500,000

P10,000,000 7,500,000 P 2,500,000

P30,000,000 27,000,000 P 3,000,000


P50,000,000 40,800,000 P 9,200,000

P40,000,000 34,500,000 P 5,500,000

P10,000,000 6,300,000 P 3,700,000

2006

2007

2008

a. Construction in progress Cash, Materials, etc.

7,500,000

b. Accounts Receivable 8,000,000 Progress Billings on Const. Contracts

7,500,000 8,000,000

27,000,000 36,000,000

27,000,000 36,000,000

6,300,000 6,000,000

6,300,000 6,000,000


page

c. Cash Accounts Receivable

5,500,000

d. Cost of LTCC Construction in Progress Revenue from LTCC

7,500,000 2,500,000

33,000,000

5,500,000

33,000,000

27,000,000 3,000,000

10,000,000

30,000,000

e. Progress Billings on Construction Contracts Construction In Progress 3.

11,500,000

6,300,000 3,700,000

10,000,000

50,000,000

Statement of Financial Position Current Assets: Accounts Receivable

50,000,000

P5,500,000

Current Liabilities: Progress Billings on Construction Contracts Less Construction in Progress

P44,000,000 40,000,000

Exercise 7-2 a. Construction in Progress Cash, Materials, etc.

32,000,000

b. Accounts Receivable Progress Billing on Const. Contract

33,000,000


31,000,000

Cost of LTCC Construction in Progress Revenue from LTCC

11,500,000

23,000,000 2,000,000

2006 32,000,000 33,000,000 31,000,000

25,000,000

43,000,000 45,000,000 40,000,000

P4,000,000 2007 43,000,000 45,000,000 40,000,000

45,250,000 4,750,000

50,000,000

15,500,000

2008

22,000,000 29,000,000

22,250,000 2,750,000

2

15,500,000 22,000,000 29,000,000

25,000,000


page

e. Progress Billing on Const. Contracts Construction in Progress Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion

100,000,000 100,000,000 2006 P100,000,000 P 32,000,000 60,000,000 P 92,000,000 P 8,000,000 25%

2007 P100,000,000 P 75,000,000 16,000,000 P 91,000,000 P 9,000,000 75%

2008 P100,000,000 P 90,500,000 ___________ P 90,500,000 P 9,500,000 100%


To date P25,000,000 23,000,000 P 2,000,000




P75,000,000 68,250,000 P 6,750,000

P25,000,000 23,000,000 P 2,000,000

P50,000,000 45,250,000 P 4,750,000


P100,000,000 90,500,000 P 9,500,000

P75,000,000 68,250,000 P 6,750,000

P25,000,000 22,250,000 P 2,750,000

Exercise 7-3 1.

3

Contract price Total estimated cost: Cost incurred to date P 4,400,000 Estimated cost to complete 15,600,000 Total estimated gross profit Percentage of completion ( P 400,000/20,000,000) Gross profit to be recognized in 2008

P25,000,000 20,000,000 P 5,000,000 22% P 1,100,000


2.

page

Accounts Receivable Construction in Progress Progress Billings on Construction Contracts

Exercise 7-4

(P25,000,000 x 30% x 10%) (P4,400,000 + P1,100,000) (P25,000,000 x 30%)

4

P 750,000 P5,500,000 P7,500,000

Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion

2006 P35,000,000 P17,500,000 10,500,000 P28,000,000 P 7,000,000 62.5%

2007 P35,000,000 P29,250,000 3,250,000 P32,500,000 P 2,500,000 90%

2008 P35,000,000 P31,000,000 P31,000,000 P 4,000,000 100%


To date P21,875,000 17,500,000 P 4,375,000




P31,500,000 29,250,000 P 2,250,000

P21,875,000 17,500,000 P 4,375,000

P 9,625,000 11,750,000 P(2,125,000)

2008 - Recognized revenue Cost of revenue Gross profit 2. Journal entries

P35,000,000 31,000,000 P 4,000,000

P31,500,000 29,250,000 P 2,250,000

P 3,500,000 1,750,000 P 1,750,000

2006

2007

2008

a. Construction in Progress Cash, Materials, etc.

17,500,000

b. Accounts Receivable Progress Billing on Const. Contracts

16,000,000

17,500,000

11,750,000

11,750,000

12,000,000 16,000,000

1,750,000

1,750,000

7,000,000 12,000,000

7,000,000


page


15,000,000

d. Cost of LTCC Construction in Progress Construction in Progress Rev. from LTCC

17,500,000 4,375,000

15,000,000

10,000,000

10,000,000

10,000,000

11,750,000 21,875,000

5

10,000,000

1,750,000 1,750,000

2,125,000 9,625,000

3,500,000

e. Progress Billing on Const. Contract Construction in Progress

35,000,000

35,000,000

3. 2006 - Recognized revenue Cost of revenue Gross profit

To date P17,500,000 17,500,000 ==========

Recognized in prior year/s ============

To be recognized this year P17,500,000 17,500,000 ==========


P31,500,000 29,250,000 P 2,250,000

P17,500,000 17,500,000 ----------------

P14,000,000 11,750,000 P 2,250,000


P35,000,000 31,000,000 P 4,000,000

P31,500,000 29,250,000 P 2,250,000

P3,500,000 1,750,000 P1,750,000

Exercise 7-5 Revenue recognized in 2008 Gross profit/income recognized in 2008 Cost incurred in 2008

(P26,000,000 x 40%) (P3,120,000 - P1,300,000)

P10,400,000 1,820,000 P 8,580,000


Exercise 7-6 Revenue (CP x % of work done in 2007) Cost of revenue Gross profit (loss)

page

Binondo Project P12,000,000 12,400,000 P (400,000)

Pasig Project P1,290,000 1,400,000 P( 110,000)

Exercise 7-7 1. Contract revenue/price Less Total profit Total cost incurred Less Cost incurred in 2006 and 2008 Cost incurred in 2007

P10,000,000 800,000 P 9,200,000 5,900,000 P 3,300,000

2. Gross profit to date, 12.31.07 Cost incurred to date, 12.31.07 (P1,800,000 + P3,300,000) Revenue to date, 12.31.07 Percentage-of-completion (6,000,000/10,000,000)

P 900,000 5,100,000 P6,000,000 60%

3. Gross profit to date, 12.31.07 Percentage of completion Total estimated gross profit

P 900,000 ÷ 60% P1,500,000

4. Contract price Less Total estimated gross profit Total estimated cost Less Cost incurred to date Estimated cost to complete

P10,000,000 1,500,000 P 8,500,000 5,100,000 P 3,400,000

Exercise 7-8 Cash Notes Receivable Discount on Notes Receivable Unearned Franchise Fees

500,000 1,000,000

207,540 1,292,460

6


Exercise 7-9 1. Cash Notes Receivable Discount on Notes Receivable Unearned Franchise Fees

page

4,000,000 3,000,000

2. Cash Notes Receivable Discount on Notes Receivable (3,000,000-(2.48685 x 1,000,000) Revenue from Franchise Fees

4,000,000 3,000,000

3. Cash Unearned Franchise Fees

4,000,000

513,200 6,486,800

513,200 6,486,800 4,000,000

4. Cash 4,000,000 Notes Receivable 3,000,000 Discount on Notes Receivable Revenue from Franchise Fees Unearned Franchise Fees (1,000,000 x 2.48685) Exercise 7-10 2007 July 1 - Cash Notes Receivable Discount on Notes Receivable Unearned Franchise Fee P800,000 x 3.1699 = P2,535,900 P3,200,000 - P2,535,900 = P664,100

513,200 4,000,000 2,486,800

1,200,000 3,200,000

Sept. 1 - Deferred Franchise Cost Cash

100,000

Nov. 15 - Deferred Franchise Cost Cash

60,000

644,100 3,735,900

100,000 60,000

7


page

Dec. 31 - Discount on Notes Receivable Interest Revenue P2,535,900 x 10% x 6/12 = P126,795 2008 Jan. 10 - Deferred Franchise Cost Cash

126,795

100,000

15 - Unearned Franchise Fee Franchise Fee Revenue

3,735,900

15 - Cost of Franchise Fee Revenue Deferred Franchise Cost

260,000

July 1 - Cash Notes Receivable

800,000

1 - Discount on Notes Receivable Interest Revenue

126,795

Problem 7-1 a. Construction in Progress Cash, Materials, etc.

11,000,000

b. Accounts Receivable Progress Billing on Const. Contract

10,800,000


10,000,000

d. Cost of LTCC Construction in Progress Revenue from LTCC

11,000,000 2,750,000

2007 11,000,000 10,800,000

10,000,000

13,750,000

126,795

100,000 3,735,900 260,000 800,000 126,795

4,800,000

2008

9,200,000

10,000,000 4,800,000 1,450,000

4,800,000 9,200,000

10,000,000

6,250,000

8


page

e. Progress Billing on Construction Contracts Construction in Progress

20,000,000

Problem 7-2 Statement of Recognized Income and Expenses: Income: 2007 2008

P2,750,000 1,450,000

Statement of Financial Position Receivable: 2007 2008

P 800,000 -

Inventory - CIP, net of billings 2007 (13,750,000 - 10,800,000) 2008 Problem 7-3 Year 2006 2007 2008

20,000,000

P2,950,000 -

Income (loss) Recognized 1,000,000 1,000,000 1,000,000

Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion Gross profit to date Less Gross profit recognized in prior year/s Gross profit to be recognized this year

9

Rec’l ending balance 380,000 940,000 -

2006 P15,000,000 P 4,000,000 8,000,000 P12,000,000 P 3,000,000 33 1/3% P 1,000,000 _____-______ P 1,000,000

CIP Invty. ending balance 5,000,000 12,000,000 2007 P15,000,000 P10,000,000 2,500,000 P12,500,000 P 2,500,000 80% P 2,000,000 1,000,000 P 1,000,000

Cost in excess of billings 1,200,000 2,600,000 2008 P15,000,000 P12,000,000 ---------------P12,000,000 P 3,000,000 100% P 3,000,000 2,000,000 P 1,000,000


page

Problem 7-4

PROJECT A 2007 2008 P29,000,000 P29,000,000 P16,800,000 P26,400,000 11,200,000 ------------P28,000,000 P26,400,000 P 1,000,000 P 2,600,000 60% 100% P 600,000 P 2,600,000 ------600,000 P 600,000 P 1,000,000

Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit (loss) Percentage of completion Gross profit (loss) to date Less gross profit recognized in prior year Gross profit - current year

PROJECT B 2007 2008 P34,000,000 P34,000,000 P14,400,000 P21,200,000 17,600,000 13,000,000 P32,000,000 P34,200,000 P 2,000,000 P( 200,000) 45% P 900,000 P( 200,000)* -----900,000 P 900,000 P(1,100,000)

PROJECT C 2007 2008 P17,000,000 P17,000,000 P 3,200,000 P11,830,000 9,600,000 1,170,000 P12,800,000 P13,000,000 P 4,200,000 P 4,000,000 25% 91% P 1,050,000 P 3,640,000 ---1,050,000 P 1,050,000 P 2,590,000

* The entire loss should be recognized immediately (1) Percentage of completion method Gross profit Operating expenses Net income Problem 7-5 1. (a) Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion

2007 P2,550,000 1,200,000 P1,350,000 2006 P120,000,000 P 24,000,000 76,000,000 P100,000,000 P 20,000,000 24%

2008 P3,890,000 1,200,000 P2,690,000 2007 P120,000,000 P60,500,000 49,500,000 P110,000,000 P 10,000,000 55%

2008 P120,000,000 P90,000,000 10,000,000 P100,000,000 P 20,000,000 90%

2009 P120,000,000 P105,000,000 -------P105,000,000 P 15,000,000 100%

10

PROJECT D 2008 P2,000,000 P 5,600,000 10,400,000 P16,000,000 P 4,000,000 35% P 1,400,000 ----P 1,400,000


page

Recognized in To date P28,800,000 24,000,000 P 4,800,000

prior year ----------------

2007-Revenue Cost of revenue Gross profit

To date P66,000,000 60,500,000 P 5,500,000

Recognized in prior year P28,800,000 24,000,000 P 4,800,000


P108,000,000 90,000,000 P 18,000,000

P66,000,000 60,500,000 P 5,500,000

To date P120,000,000 105,000,000 P 15,000,000

Recognized in prior year P108,000,000 90,000,000 P 18,000,000


2009-Revenue Cost of revenue Gross profit 2. a

Construction in Progress Cash, Materials, etc.

2006 24,000,000

b.

Accounts Receivable Progress Billings on Const. Contract

26,000,000

c.


24,000,000

24,000,000 26,000,000 24,000,000

2007 36,500,000 31,000,000 27,000,000

11

To be recognized in current year P28,800,000 24,000,000 P 4,800,000 To be recognized in current year P37,200,000 36,500,000 P 700,000 P42,000,000 29,500,000 P12,500,000 To be recognized in current year P 12,000,000 15,000,000 P( 3,000,000)

36,500,000 31,000,000 27,000,000

2008 29,500,000 34,000,000 30,000,000

29,500,000 34,000,000 30,000,000

2009 15,000,000 29,000,000 30,000,000

15,000,000 29,000,000 30,000,000


d.

e.

page

Cost of LTCC Construction in Progress Construction in Progress Revenue from LTCC

24,000,000 4,800,000

36,500,000 700,000 28,800,000

29,500,000 12,500,000 37,200,000

15,000,000 42,000,000

Progress Billings on Const. Contracts Construction in Progress

Problem 7-6 Contract price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion Gross profit to date Less Gross profit recognized in prior year Gross profit - current year Problem 7-7 1. Recognized revenue Cost of revenue Gross Profit (loss)

120,000,000

2006 P14,000,000 P 5,000,000 7,500,000 P12,500,000 P 1,500,000 40% P 600,000 -----P 600,000

2006 P 1,100,000 1,000,000 P 100,000 – (1)

2. Contract-price Cost incurred to date Estimated cost to complete Total estimated cost Total estimated gross profit Percentage of completion Gross profit to date Less GP recognized in prior year/s GP to be recognized this year

2007 P14,000,000 P11,475,000 1,275,000 P12,750,000 P 1,250,000 90% P 1,125,000 600,000 P 525,000

2007 P1,300,000 (2) 1,250,000 P 50,000 2006 P3,500,000 1,000,000 P2,250,000 P3,250,000 250,000 30.77% P 76,925 P 76,925

2008 P13,000.000 P12,295,000 ------P12,295,000 P 705,000 100% P 705,000 1,125,000 P (420,000)

2008 P1,100,000 (3) 1,150,000 (4) P (50,000) 2007 P3,500,000 2,250,000 P 950,000 P3,200,000 300,000 70.3125% P 210,938 76,925 P 134,013

Total P3,500,000 3,400,000 –(5) P 100,000

12

3,000,000 12,000,000

120,000,000


page

Problem 7-8 Franchise A: The circumstances imply that the full accrual method could be used. Franchise revenue P3,578,000* Franchise cost 1,400,000 Interest revenue (P2,178,000 x 4%) Income from Franchise A *Initial deposit PV of four payments [4% for 4 periods (P600,000 x 3.6299)]

13

P2,178,000 87,200 P2,265,200

P 1,400,000 2,178,000 P 3,578,000

Franchise B: Because of the doubtful collection and only partial completion, the deposit method should be used. No revenue or income would be recognized in 2008 from the franchise fee. However, because the first payment of P600,000 was made, interest revenue of P87,200 would be recognized. Franchise C: Because of the doubtful collection but substantial completion, either the installment sales or cost recovery method could be used. If the installment sales method is used, gross profit of P843,600* would be recognized in 2008 plus interest revenue of P87,200. *Franchise revenue Franchise cost Franchise gross profit Gross profit percentage: P1,578,000 ÷ P3,578,000 Collections in 2008: Initial fee First payment: Interest P 87,200 Principal 512,800 Total P 600,000 Gross profit recognized – 2008: P1,912,800 x 44.1% = P843,600

P3,578,000 2,000,000 P1,578,000 44.1% P1,400,000 512,800 P1,912,800


page

14

If the cost recovery method is used, no revenue or income would be recognized, because the P2,000,000 collections are exactly offset by the P2,000,000 costs. Problem 7-9 2007 July 1 Cash Notes Receivable Unearned Franchise Fee

7,000,000 8,000,000

Aug. 15

Deferred Franchise Cost Cash

800,000

Sept. 15


500,000

Dec. 31

Interest Receivable Interest Revenue

400,000

2008 Jan. 1

July

Cash Notes Receivable Interest Receivable

2,400,000

15


1,000,000

31

Unearned Franchise Fee Cost of Franchise Revenue Franchise Fee Revenue Deferred Franchise Cost

1

Cash Notes Receivable Interest Revenue P6,000,000 x 10% x 6/12

15,000,000 2,300,000

2,300,000

15,000,000 800,000 500,000 400,000

2,000,000 400,000 1,000,000

15,000,000 2,300,000 2,000,000 300,000


Dec.

31

page

Interest Receivable Interest Revenue

200,000

Problem 7-10 1. Downpayment made on 1/1/ 07 Present value of an ordinary annuity (P240,000 x 3.69590) Total revenue recorded by Triple Eight

P 800,000.00 887,016.00 P1,687.016.00

2. Cost of acquisition

P 1,687,016

3. Cash Notes Receivable Discount on Notes Receivable Unearned Franchise Fees 4.

800,000.00 1,200,000.00

200,000

312,984.00 1,687,016.00

a. P800,000 cash received from downpayment. (P887,016.00 is recorded as unearned revenue from franchise fees). b. P800,000 cash received from downpayment c. None. (P 800,000 is recorded as unearned revenue from Franchise fees).

MULTIPLE CHOICE

1. 2. 3. 4. 5.

C B D A C

6. 7. 8. 9. 10.

11.

D

P20,000,000 x (3,000,000/15,000,000) =

B D D D C P4,000,000

15


12.

A

Contract price Less Total estimated cost: Cost incurred to date Est. cost to complete Total estimated income % of completion (3150/9450) Income to be recognized in 2007

page

P10,500,000 P3,150,000 6,300,000

9,450,000 P 1,050,000 33 1/3% P 350,000

13.

B

Contract price Total estimated cost Total estimated income Percentage-of-completion (27/81) Income recognized last year

14.

C

Contract price Total estimated cost (P4,650,000 + P10,850,000) Total estimated loss – to be recognized in full

P15,000,000 15,500,000 P 500,000

15

B

Contract price Total estimated cost (P4M + P4M + P2M) Total estimated gross profit Percentage-of-completion (8M/10M)

P14,000,000 10,000,000 P 4,000,000 80%

Gross profit to date Less Gross profit recognized in 2006 (P14M –P8M = P6M x 4/8) Gross profit to be recognized in 2007

P 3,200,000

Contract price Total estimated cost Total estimated gross profit Percentage-of-completion (600/1,800) Gross profit to be recognized in 2007

P3,000,000 1,800,000 P1,200,000 33 1/3% P 400,000

16

B

P9,000,000 8,100,000 P 900,000 33 1/3% P 300,000

P

3,000,000 200,000

16


17.

B

18

A

page

Contract price Total cost incurred Gross profit Gross profit percentage (1,200/12,000) Contract price Total estimated cost Total est. gross profit Percentage-of-completion Gross profit to date Less GP recognized in 2007 GP to be recognized In 2008

P12,000,000 10,800,000 P 1,200,000 10% Cubao P16,200,000 14,400,000 P 1,800,000 83 1/3% P 1,500,000 750,000 P 750,000

Marikina P25,200,000 23,100,000 P 2,100,000 100% P 2,100,000 1,872,000 P 228,000

Total GP = P750,000 + P228,000 19.

20,000,000/24,000,000

20

Contract price Total estimated cost Total estimated gross profit Percentage-of-completion GP to date GP recognized in prior years (P30M - P22M = P8M x 50%) GP to be recognized in 2008

21.

Total amount billed Less Balance of accounts receivable Total collections Amount deposited Cash collected not yet deposited

22

P150,000 ÷ 937,500/9,000,000

P 978,000 83.33% P30,000,000 24,000,000 P 6,000,000 83.33% P 5,000,000 4,000,000 P 1,000,000 P843,750 300,000 P543,750 500,000 P 43,750 P1,440,000

17


page

23

C

Mobilization fee (P1.2B x 1%) Collections on billings (1.2B x 10% x 90%) Total fee received by NNO

P 1.2M 10.8M P12.0M

24

B

Contract price Gross profit rate Total estimated gross profit Percentage-of-completion Realized gross profit

P100.00M 25% P25.00M 50% P12.50M

25. 26 27 28 29

B A B C

30

A

Downpayment First installment payment Add’l fee (P1,000,000 x 3%) Earned Franchise Fees

P 50,000 50,000 30,000 P130,000

31 32

C A

P 100,000 x 1/5 = P 20,000 + 1% of P500,000 = P 1,000,000 + 5% of P8,000,000 =

33

C

Downpayment PV of installment payment Additional fee ( P 9,000,000 x 5% ) Earned franchise fee

P 25,000 P1,400,000 P 100,000 199,650 450,000 P 749,650

18

CHAPTER 8 SUGGESTED ANSWERS

Exercise 8 - 1

EXERCISES

(a)

Working Fund - Agency Cash

5,000

(b)

Accounts Receivable - Agency Sales - Agency

50,000

(c)

Cash Accounts Receivable - Agency

35,000

(d)

Expenses - Agency Cash

4,500

(e)

Expenses - Agency Cash

2,250

(f)

Cost of Sales - Agency Shipments to Agency

36,000

5,000 50,000 35,000 4,500 2,250 36,000

Exercise 8- 2 (a)

Working Fund - Makati Agency Samples - Makati Agency Cash Shipments to Makati Agency

10,000 60,000

(b)

Accounts Receivable - Makati Agency Sales - Makati Agency

200,000

(c)

Cost of Sales - Makati Agency Shipments to Makati Agency

116,000

(d)

Salaries and Commission - Makati Agency Furniture and Fixtures - Makati Agency Cash

20,000 45,000

Delivery Expense - Makati Agency Office Supplies Expense - Makati Agency Cash

6,200 1,000

(e)

(f)

Samples Expense - Makati Agency Samples - Makati Agency

25,000

10,000 60,000 200,000 116,000

65,000

7,200 25,000

AA1- Chapter 8 (2008 edition) 2

page

(g)

Office Supplies - Makati Agency Office Supplies Expense

(h)

Depreciation Expense - Makati Agency Accumulated Depr. - Furniture & Fixtures

(I)

Sales - Makati Agency Agency Income Cost of Sales - Makati Agency Salaries and Commission - Makati Agency Delivery Expense - Makati Agency Samples Expense - Makati Agency Office Supplies Expense - Makati Agency Depreciation Expense - Makati Agency

(j)

Agency Income Income Summary

Exercise 8-3

300 1,250 200,000

30,850

300 1,250 30,850 116,000 20,000 6,200 25,000 700 1,250 30,850

Home Office Books

(a)

Cash Iloilo Branch

20,000

(b)

Iloilo Branch Cash

3,500

(c)

Expenses Iloilo Branch

1,200

(d)

Iloilo Branch Shipments to Iloilo Branch

32,000

(e)

Shipments to Iloilo Branch Iloilo Branch

15,000

(f)

Furniture and Fixtures Cash

(g)

Iloilo Branch Accumulated Depr. - Furniture & Fixtures

(h)

Branch Income Branch

5,500 550 2,600

20,000 3,500 1,200 32,000 15,000 5,500 550 2,600


page

Branch Office Books (a)

Home Office Cash

(b)

Expenses Home office

3,500

(c)

Home Office Cash

1,200

(d)

Shipments from Home Office Home Office

32,000

(e)

Home Office Shipments from Home Office

15,000

(f)

Memo entry

(g)

Depreciation Expense Home Office

(h)

Home Office Income Summary

Exercise 8-4 (a) (1) (5)

20,000

550 2,600

20,000 3,500 1,200 32,000 15,000

550 2,600

Home Office Books

Dagupan Branch Shipments to Branch

300,000

Cash Dagupan Branch

150,000

300,000 150,000

Branch Office Books (1)


300,000

(2)


390,000

(3)

Expenses Cash Accrued Expenses

74,000

300,000 390,000 72,000 2,000


(4)

page

Cash Sales Discount Accounts Receivable

288,000 6,000

(5)

Home Office Cash

150,000

(6)


(7)

Expenses Accumulated Depr. - Furniture & Fixtures

(b)

40,000

Merchandise Inventory Sales Shipments from Home Office Expenses Sales Discounts Income Summary

60,000 390,000

Income Summary Home Office (c)

8,000

62,000

294,000 150,000 40,000 8,000

300,000 82,000 6,000 62,000 62,000

Honda Sales, Inc. Statement of Recognized Income and Expenses - Branch For the Year Ended December 31,2008

Sales Less: Sales Discount Cost of sales: Shipment to Home Office Less: Inventory, end Gross Profit Expenses Net Profit (d)

P 390,000 6,000 P 300,000 60,000

P384,000 240,000 P 144,000 82,000 P 62,000

Honda Sales, Inc. Statement of Financial Position - Branch December 31,2008 Assets

Cash (-720,00 + 288,000 - 150,000 - 40,000) Accounts Receivable (390,000 – 294,000) Merchandise Inventory Furniture and Fixture Less: Accumulated Depreciation Total Assets

P 40,000 8,000

P 26,000 96,000 60,000 32,000 P 214,000


page

Liabilities Accrued Expenses Home Office (300,000 - 150,000 + 62,000) Total Liabilities

P

2,000 212,000 P 214,000

Exercise 8- 5 Home Office Books (a)

Furniture and Fixtures Branch

24,500

(b)

Branch Cash

24,500

(c)

Branch Accumulated Depr. - Furniture & Fixtures

(d)

Furniture & Fixtures - new Accumulated Depr. - Furniture & Fixtures Branch Income Furniture & Fixtures - old Cash Branch Office Books

2,450 40,000 2,450 7,050

(a)

Home Office Accounts Payable

24,500

(b)

Accounts Payable Home Office

24,500

(c)

Depreciation Expense Home Office

(d)

Memo entry

2,450

24,500 24,500 2,450

24,500 25,000

24,500 24,500 2,450

Exercise 8-6 Jan.

10

Notes Payable Home Office

10

Furniture and Fixtures Home Office

16


2,500 10,000 6,500

2,500 10,000 6,500


page

16

Home Office Cash

2,000

20


1,200

25

Home Office Accounts Receivable

150

30

Expenses Home office

800

31


750

Exercise 8 -7

2,000 1,200 150 800 750

Honda Company Reconciliation of Home Office and Branch Accounts December 31,2008 HO Books

Unadjusted balances Adjustments; (a) Merchandise in transit (b) Collection of home office accounts rec’l (c) Error in recording the net income of branch (P1,215 - P1,125) (d) Merchandise returned by branch still in transit Adjusted balances

Branch Books HO Acct. P 9,735

Branch Acct. P 8,400

615

2,500 90 ( 640) P 10,350

_______ P 10,350

Requirement 2 Home Office Books (b)

Branch Accounts Receivable

(c)

Branch Branch Income

(d)

Shipments to Branch Branch

2,500 90 640

2,500 90 640

Branch Books (a)


615

615


Exercise 8-8

page

Home Office Books

(a)

Allowance for Doubtful Accounts Makati Branch

600

(b)

Makati Branch General and Administrative Expense

1,250

(c)

Manila Branch Makati Branch

1,200

(d)

Makati Branch Allowance for Uncollectible Accounts

850

600 1,250 1,200 850

Branch Books (a)


(b)

General and Administrative Expenses Home Office

(c)

No entry

(d)

Uncollectible Accounts Expense Home office

Problem 8-1 (a)

600 1,250

850

600 1,250

850

PROBLEMS

Samples - Cebu Agency Advertising Materials - Cebu Agency Shipments to Cebu Agency Advertising Materials

60,000 35,000

(b)

Working Fund - Cebu Agency Cash

30,000

(c)

Accounts Receivable - Cebu Agency Sales - Cebu Agency

330,000

Cost of Sales - Cebu Agency Shipments to Cebu Agency

250,000

60,000 35,000 30,000 330,000 250,000


(d)

(e)

page

Cash Sales Discounts - Cebu Agency Accounts Receivable - Cebu Agency

245,000 5,000

250,000

Rent Expense - Cebu Agency Delivery Expense - Cebu Agency Repairs and Maintenance - Cebu Agency Cash

15,000 3,000 2,200

Salaries and Wages - Cebu Agency Commission Expense - Cebu Agency Salaries and Wages Commission Expense

10,200 33,000

(g)

Samples Expense - Cebu Agency Samples - Cebu Agency

15,000

(g)

Advertising Materials Expense - Cebu Agency Advertising Materials - Cebu Agency

10,500

(h)

Sales - Cebu Agency Agency Income Cost of Sales - Cebu Agency Sales Discounts - Cebu Agency Rent Expense - Cebu Agency Delivery Expense - Cebu Agency Repairs and Maintenance - Cebu Agency Salaries and Wages - Cebu Agency Commission Expense - Cebu Agency Samples Expense - Cebu Agency Advertising Materials Expense - Cebu Agency

(f)

(I)

Income Summary Agency Income

Problem 8- 2 (a)

Branch Cash

(b)

Branch Shipments to Branch

(c)

No entry

(d)

Branch Cash Equipment Gain on Transfer of Equipment

330,000 13,900

13,900

20,200

10,200 33,000 15,000 10,500

250,000 5,000 15,000 3,000 2,200 10,200 33,000 15,000 10,500 13,900

Home Office Books 150,000 90,000

90,000

150,000 90,000

3,000 75,000 12,000


(e)

No entry

(f)

Expenses Cash

(g)

and (h) no entry

(I)

Cash Branch

page

7,500

52,500

7,500

52,500

Branch Books (a)

Cash Home Office

150,000

(b)


(c)

Purchases Cash

(d)

Equipment Home Office

(e)


250,000


100,000

90,000 120,000 90,000

(f)

No entry

(g)

Depreciation Expense - Equipment Accumulated Depr. - Equipment

9,000

(h)

Selling and Administrative Expenses Cash

45,000

(I)

Home Office Cash

52,500

150,000 90,000 120,000 90,000 250,000 100,000

9,000 45,000 52,500

Problem 8-3 Requirement 1 a.


80,000

80,000


page

b.


21,000

c.

Shipments from Home Office Home office

40,000

d.


76,000

e.


20,200

f.

Allowance for Uncollectible Accounts Accounts Receivable

g.

Home Office Cash

30,000

h.

Expenses Cash

24,800

I.

Expenses Home Office

1,600

j.

Prepaid Expenses Accrued Expenses Expenses Allowance for Doubtful Accounts Accumulated Depreciation

200 400 1,700

k.

l.

Merchandise Inventory, end Sales Income Summary Merchandise Inventory, beg. Shipments from Home Office Purchases Expenses Home Office Income Summary

1,200

38,800 80,000 3,300

3,300

21,000 40,000 76,000 20,200 1,200 30,000 24,800 1,600

1,100 1,200

33,000 40,000 21,000 28,100 3,300


Requirement 2

page

Volvo Company Statement of Recognized Income and Expenses - Branch For the Year Ended December 31, 2008

Sales Cost of goods sold: Inventory, January 1 Purchases Shipments from home office Cost of goods available for sale Less Inventory, December 31 Gross profit Operating expenses Net loss

P80,000 P33,000 21,000 40,000 P94,000 38,800

55,200 P24,800 28,100 P 3,300

Volvo Company Statement of Financial Position - Branch December 31, 2008 Assets Cash (7,000 + 76,000 + 20,200 - 30,000 - 24,800) Accounts Receivable (24,400 + 80,000 - 76,000 -1,200) Less Allowance for Uncollectible Accounts Merchandise Inventory Prepaid Expenses Furniture and Fixtures Less Accumulated Depreciation Total Assets Liabilities

P27,200 1,600 P 7,700 6,600

Accounts Payable (4,000 + 21,000 - 20,200) Accrued Expenses Home Office (60,500 + 40,000 - 30,000 + 1,600 - 3,300) Total Liabilities

P 8,000 25,600 38,800 900 1,100 P74,400 P 4,800 800 68,800 P74,400

Volvo Company Statement of Changes in Home Office Account For the Year Ended December 31, 2008 Home office account balance, January 1 Add: Shipments from home office Expenses paid by home office Total Deduct: Remittance to home office Net loss Home office account balance, December 31

P 40,000 1,600 P 30,000 3,300

P 60,500 41,600 P102,100 33,300 P 68,800


page

Requirement 3 c.

Davao Branch Shipments to Branch

40,000

g.

Cash Davao Branch

30,000

i.

Davao Branch Cash

1,600

Branch Income Davao Branch

3,300

40,000 30,000 1,600 3,300


Cash Shipments from Home Office Accounts Receivable Home Office Home Office Cash

Branch Books 15,000 102,000 26,000 9,000

b.


62,000

c.


26,000

d.


30,000

e.


14,500

f.

Expenses Cash

12,500

g.

Cash Home Office Accounts Receivable

16,000 1,500


12,500

h.

143,000 9,000

62,000 26,000 30,000 14,500 12,500

17,500 12,500


I.

page

Home Office Cash

10,000

10,000

Home Office Books a.

Bacolod Branch Cash Shipments to Branch Accounts Receivable Store Furniture and Fixtures Bacolod Branch

143,000

9,000

b.


346,000

c.


400,000

d.


316,000

e.


362,000

f.

Expenses Accrued Expenses Cash

89,500 2,500

g.

Allowance for Uncollectible Accounts Bacolod Branch

1,500

h.

Bacolod Branch Shipments to Branch

12,500

I.

Cash Bacolod Branch

10,000

15,000 102,000 26,000 9,000 346,000 400,000 316,000 362,000

92,000 1,500 12,500 10,000


Requirement 2

page

Jazz Company Statement of Recognized Income and Expenses - Bacolod Branch For the Month Ended January 31, 2008

Sales Cost of goods Sold: Shipments from Home Office (102,000 + 12,500 + 6,000) Purchases Cost of Goods Available for Sale Less Merchandise Inventory, December 31 (9,800 + 600) Gross Profit Expenses (12,500 + 4,750 + 350+ 3,500) Net Loss

P 62,000 P120,500 30,000 P150,500 104,000

46,500 P 15,500 21,100 P 5,600

Jazz Company Statement of Financial Position - Bacolod Branch January 31, 2008 Assets Cash (15,000 - 9,000 + 26,000 - 14,500 - 12,500 + 16,000 - 10,000) Accounts Receivable (62,000 + 26,000 - 26,000 – 17,500) Merchandise Inventory (98,000 + 6,000) Total Assets Liabilities Accounts Payable (30,000 - 14,500) Accrued Expenses Home Office (143,000-9,000-1,500+12,500-10,000+6,000+4,750+350 -5,600) Total Liabilities

P 11,000 44,500 104,000 P159,500 P 15,500 3,500 140,500 P159,500

Jazz Company Statement of Recognized Income and Expenses - Home Office For the Month Ended January 31, 2008 Sales Cost of Goods Sold: Merchandise Inventory, January 1 Purchases Cost of Goods Available for Sale Less Shipments to Branch (102,000 + 12,500 + 6,000) Cost of Goods Available for Own Sale Less Merchandise Inventory, December 31 Gross Profit Expenses (89,500 - 4,750 + 1,000 + 7,500) Net Income from Own Operations Less Branch Net Loss Net profit Income Tax Net Profit

P346,000 P460,000 316,000 P776,000 120,500 P655,500 445,000

210,500 P135,500 93,250 P 42,250 5,600 P 36,650 12,828 P23,822


page

Jazz Company Statement of Financial Position - Home Office January 31, 2008 Assets Cash (150,000 - 15,000 + 400,000 – 362,000 - 92,000 + 10,000) Accounts Receivable (420,000 - 26,000 + 346,000 - 400,000) Less Allowance for Uncollectible Accounts (12,000 - 1,500) Merchandise Inventory Branch (143,000 - 9,000 - 1,500 + 12,500 - 10,000 + 6,000 + 4,750+ 350 - 5,600) Store Furniture and Fixtures (150,000 + 9,000) Less Accumulated Depreciation (46,000 + 1,350) Total Assets

P340,000 10,500

P159,000 47,350

P 91,000 329,500 445,000 140,500 111,650 P1,117,650

Liabilities and Shareholders’ Equity Accounts Payable (337,500 + 316,000 - 362,000) Accrued Expenses Income Tax Payable Ordinary Share Capital (282,000 + 36,650) Retained Earnings (282,000 + 23,822 Total Liabilities and Shareholders’ Equity

P 291,500 7,500 12,828 500,000 305,822 P1,117,650

Requirement 3

Jazz Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Month Ended January 31, 2008

Sales Cost of Goods Sold: Merchandise Inventory, January 1 Purchases Cost of Goods Available for Sale Less Merchandise Inventory, December 31 Gross Profit Expenses Net Profit Income Tax Net profit

P408,000 P460,000 346,000 P806,000 549,000

257,000 P151,000 114,350 P 36,650 12,828 P 23,822


page

Jazz Company Combined Statement of Financial Position for Home Office and Branch January 31, 2008 Assets Cash Accounts Receivable Less Allowance for Uncollectible Accounts Merchandise Inventory Store Furniture and Fixtures Less Accumulated Depreciation Total Assets

P384,500 10,500 P159,000 47,350

P 102,000 374,000 549,000 111,650 P1,136,650

Liabilities and Shareholders’ Equity Accounts Payable Accrued Expenses Income Tax Payable Ordinary Share Capital Retained Earnings Total Liabilities and Shareholders’ Equity Requirement 4

P 307,000 11,000 12,828 500,000 305,822 P1,136,650

Branch Books

a.


6,000

b.


4,750

c.

Expenses Home Office P22,500 + P9,000 = P31,500/7.5 yrs x 1/12

d.

Expenses Accrued Expenses

e.

Sales Merchandise Inventory, end Income Summary Shipments from Home Office Purchases Expenses

f.


350

3,500 62,000 104,000 5,600

5,600

6,000 4,750 350

3,500

120,500 30,000 21,100 5,600


page

Home Office Books a.

Bacolod Branch Shipments to Branch

6,000

b.

Bacolod Branch Expenses

4,750

c.

Expenses Bacolod Branch Accumulated Depreciation ( 150,000 - 30,000 = 120,000 x 10% x 1/12 = 1,000 ) Expenses Accrued Expenses

1,000 350

e.

Branch Income Bacolod Branch

5,600

f.

Sales Shipments to Branch Merchandise Inventory, end Income Summary Merchandise Inventory, beg. Purchases Expenses Branch Income

d.

g.

7,500

346,000 120,500 445,000


12,828


12,828


23,822

6,000 4,750

1,350 7,500 5,600

36,650 460,000 316,000 93,250 5,600 12,828 12,828 23,822


page

Problem 8-5 Requirement 1

Debits Cash NR AR Inventories F&E Branch Cur. CGS OE Credits AP CS HO Cur. RE Sales

Feroza Company Working Paper for Combined Financial Statement For the Year Ended December 31,2008

HO 63,000 10,500 120,600 143,700 72,150 124,050

BR 21,900

300,750 104,250 939,000

128,700 32,850 275,700

61,500 300,000 37,500 540,000 939,000

Net Profit

Adjustments Eliminations Dr. Cr.

Combined Income Statement Dr. Cr.

Combined Balance Sheet Dr. Cr. 84,900 10,500 176,550 180,000 72,150

55,950 36,300 a.124,050

124,050 151,650 275,700

429,450 137,100 61,500 300,000

a.124,050 124,050

124,050

566,550 125,100 691,650

37,500

691,650 691,650 691,650

524,100

Requirement 2 a.

b.

Sales Income Summary Cost of Goods Sold Operating Expenses Home Office Income Summary

151,650 9,900

9,900

128,700 32,850 9,900

Requirement 3 a.


9,900

b.

Income Summary Branch Income

9,900

9,900 9,900

125,100 524,100


page

Problem 8-6 Requirement 1

Isuzu Company Reconciliation of Home Office and Branch Accounts January 31, 2008

Unadjusted balances Add (deduct); Advertising expense charged to branch Merchandise shipment in transit Merchandise shipment for P16,560 recorded as P16,650 Collection of home office account Understatement of 1994 depreciation Remittance to home office in transit Adjusted balances

Home Office Books Branch Acct. P77,150

Branch Books Home Office Acct. P56,450 600 4,400

750 ( 540) (16,000) P61,360

(

90)

_______ P61,360

Requirement 2 Home Office Books a.

Cash Retained Earnings Accounts Receivable Iloilo Branch

16,000 540

750 15,790

Branch Books a.

Advertising Expense Shipments from Home Office Home Office

600 4,310

4,910


Shipments from Home Office Operating Expenses Home Office Current

57,600 8,100

65,700


b.

c.

page

Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beg. Shipments from Home Office Operating Expenses

778,200 122,180

Income Summary Home Office Current

116,990

116,990 47,800 680,800 54,790 116,990

Requirement 2 a.

Freight-Out Branch Current

470

b.

Cash Branch Current

19,200

c.

Branch Current Branch Income

116,990

Requirement 3

470 19,200 116,990

Ford Company Reconciliation of Current Account December 31,2008

Balances before adjustment Shipment in transit Advertising charged to branch Rent charged to branch Error in charging freight Remittance in transit

Branch Acct. P 206,344

(470) (19,200) P 186,674

Home Office Acct. P120,974 57,600 4,200 3,900 P 186,674


page

Problem 8-8 Mitsubishi Trading Company Reconciliation of Home Office and Branch Accounts December 31, 2008 Unadjusted balances Add (deduct): Error in recording cost of equipment Insurance premium recorded twice by branch Freight for P1,125 recorded as P1,215 Discount from home office not recorded Share of branch in advertising not recorded Error in recording remittance Adjusted balances

Branch Acct. P225,770

Home Office Acct. P220,485 3,150 675) 90) 800) 700 ________ P222,770 ( ( (

(

3,000) P222,770

Requirement 3 a.

Office Equipment Advertising Expense Insurance Expense Freight Discount from Home Office Home Office

3,150 700

675 90 800 2,285

MULTIPLE CHOICE

1.

B

2.

A

3.

A

Sales Cost of sales ( 400,0000 - 70,000) Gross profit Expenses [30,000 + 10,000 + (10,000 - 6,000) + 5,000] Net profit

4.

A

Sales Cost of sales w/o freight Add freight Cost of sales w/ freight

P400,000 330,000 70,000 49,000 P 21,000 P46,500 x 70% P32,550 1,100 P33,650


5.

Sales Less Sales Discount (39,690 / 98%) - 39,690 Cost of sales Gross Profit Expenses: Selling Administrative (46,500 x 5%) Samples Expenses Net Profit

6.

page

P46,500 810

P 2,820 2,325 1,900

P45,690 33,650 P12,040

7,045 P 4,995

17,500 + 8,000 +9,250 + (50,000 x 60% x 1/6)

7.

C

Sales Cost of sales Gross Profit Expenses Net Income

8. 9.

D B

P 87,00 / 125% = Sales Cost of sales Gross Profit Expenses (350 + 250) Net Income

P70,000 P 87,500 70,000 P 17,500 6,000 P 11,500

10

A

11

C

12

B

13

A

Sales Cost of sales Shipments Less Inventory, end Gross Profit Expenses Net Profit

P74,000

14 15

A A

P17,500 + 8,680

16

D

203,500 – (186,120 – 25,245 – 18,755) = 23,870

17

D

Home Office Current Branch Income Correct branch account - current

P176,000 105,000 P 71,000 39,750 P 31,250

P67,680 9,180

58,500 P15,500 6,820 P 8,680 P 26,180

P 48,125 23,870 P 71,995


18

B

Sales Cost of Sales: Shipments from home office Less Inventory, Dec. 31 Gross profit Expenses Net Profit

19

C

P90,000 + P14,400

20

A

P1,500 + 43,800 + 37,170

21

D

Net Sales (198,720 - 3,600) Cost of sales Beg. Inventory Shipments Goods available for sale End. Inventory Gross Profit Expenses (57,930 + 1,920) Net Profit

22

C

23

D

24

C

25

A

Balances before adjustment Adjustments: 1. Shipments in transit 2. HO AR collected by branch 3. Supplies returned 4. Error in recording Br. net income 5. Cash to Branch in transit

Balances Error in recording allowance Advances taken by Pres. Share in advertising expense Sales Cost of sales Inventory, beg. Merchandise from Home Office Merchandise available for sale Less Inventory, end Gross profit Operating Expenses Net profit of Branch A

page

P112,500 P120,000 30,000

90,000 P 22,500 8,100 P 14,400 P104,400 P 82,470 P 195,120

P 37,170 136,000 P 173,170 41,370

131,800 P 63,320 59,850 P 3,470

BR. Acct. HO Acct. P150,000 P117,420 37,500 10,500 (4,500) (1,080) 25,000 25,000 P179,920 P 179,920 P 179,920 BR Acct. P43,500 (550)

HO. Acct. P41,900 60

P42,950 P21,000 61,000 P82,000 19,000

900 P42,950 P 100,000

63,000 P37,000 21,000 P16,000


page

26

C

27

B

28

C

Imprest branch fund Accounts Receivable, Dec. 31 Inventory, Dec. 31 Balance of Branch account - current

P 1,500 53,000 12,000 P 67,000

29

D

Sales Cost of sales Inventory, Jan.1 Merchandise from Home office Merchandise available for sale Less Inventory, Dec.31 Gross profit Operating Expenses Net profit of Branch B

P 80,000

30

Imprest branch fund Accounts Receivable, Jan.1 Inventory, Jan.1 Home Office account

D

32

D

A

P 19,000 47,000 P 66,000 12,000

HO Account. Beg. Balances 1. Branch remittances 2. Shipment to branch 3. Home office expense paid by branch 4. Branch receivable collected by branch

31

Branch A P 2,000 55,000 21,000 P 78,000

Unadjusted balances 1. Remittance in transit 2. Shipment in transit 3. Home office expense paid by branch 4. Branch receivable collected by branch 5. Branch net profit Marketing Expense of another branch charged to Butuan Butuan’s remittance credited to Davao Net adjustment in Home Office Banch account

P

30,670 (55,000) 138,000 (5,700)

P 107,970 Branch Acct. P 133,970 (7,200) (5,700) 6,500 P 127,570

Branch B P 1,500 43,500 19,000 P 64,000

54,000 P 26,000 14,300 P 11,700 Branch Acct. P 30,670 (47,800) 160,000 (8,900) P 133,970 HO Acct. P 107,970 22,000 (8,900) 6,500 P 127,570 P (10,000) ( 65,700) P (75,700)


33

34

35

C

Fixed account not recorded by Butuan Inventory transfer recorded twice by Butuan Error in recording debit memo Net adjustment in Branch Books

D.

B.

page

4,650

Branch Account

P (53,960) 75,000 ( 90) P 20,950

Unadjusted balances

P165,920

Home Office Account P111,170

Net adjustment in Branch Account Adjusted balances

(75,700) P 90,220

(20,950) P 90,220

CHAPTER 9 SUGGESTED ANSWERS EXERCISES Exercise 9 - 1 Home Office Cash Cash Home Office Branch S Branch R Exercise 9 - 2 Home Office Shipments from Home Office Freight-In Shipments from Home Office Freight-In Cash Home Office Branch No. 5 Excess Freight Branch No. 1 Exercise 9 – 3

Books of Branch R

Books of Branch S

Books of the Home Office

Books of Branch No. 1

Books of Branch No. 5

Books of the Home Office

15,000

15,000

15,000

1,950

1,600 400

1,650 300

15,000

15,000

15,000

1,600 350

350 1,650

1,950

Home Office Books

1.

no entry

2.

Branch Shipments to Branch Allowance for Markup in Branch Inventory 120,000/240,000 = 50%

3.

no entry

4.

Branch Advertising Expense Depreciation Expense Utility Expense

360,000

134,000

240,000 120,000

40,000 70,000 24,000

AA1- Chapter 9 (2008 edition) page 2

5.

no entry Cash Branch

360,000

6.

no entry

7.


8.

Allowance for Markup in Branch Inventory Branch Income P300,000 x 50/150 = P100,000

100,000

9.

Branch Income Income Summary

158,000

1.


2.


360,000

3.


652,000

4.

Advertising Expense Depreciation Expense Utility Expense Home Office

40,000 70,000 24,000

5.

6.

7.

58,000

Branch Books

160,000


470,000

Home Office Cash

360,000

Merchandise Inventory Sales Purchases Shipments from Home Office Advertising Expense Depreciation Expense Utility Expense Income Summary

60,000 652,000

Income Summary Home Office

58,000

360,000

58,000 100,000

158,000

160,000 360,000 652,000

134,000 470,000 360,000

160,000 360,000 40,000 70,000 24,000 58,000 58,000


Exercise 9 - 4 a. Merchandise inventory, beg. Less Merchandise from home office at billed price Markup on merchandise shipped to branch Markup on current shipment (P96,000 – P80,000) Markup on beginning inventory

P150,000 P 36,000 16,000 P 20,000 x 120/20

Merchandise purchased from outsiders b.

Allowance for Intercompany Inventory Profit Branch Income Bal. of allowance before adjustment Adjusted balance of allowance acct (P84,000 x 20/120) Realized markup

Exercise 9 – 5

P36,000


2.

no entry

3.

Allowance for Markup in Branch Inventory Branch Income Realized markup on beginning inventory P600,000 x 55% = P330,000 x 25/125* Realized markup on current shipments P450,000 x 1/3 = P150,000 x 50/150 Total *(600,000 – 480,000) / 480,000 = 25% Branch Books

1.


2.

Accounts Receivable Sales P590,000 + P280,000 = P870,000

3.

no entry

22,000

14,000 P22,000

Home Office Books

1.

Exercise 9 – 6 1. Branch Cash Shipments to Branch

22,000

120,000 P 30,000

450,000

116,000

300,000 150,000

116,000

P 66,000 50,000 P116,000

450,000 870,000

820,000

450,000 870,000

80,000 240,000


Land Allowance for Markup in Branch Inventory Allowance on Transfer of Land 120,000/240,000 = 50%

300,000 120,000 80,000

2.


560,000

3.


130,000

4.

Allowance for Markup in Branch Inventory Branch Income Realized markup on 1st inventory transfer Realized markup on 2nd inventory transfer (P640,000 – P360,000) x 40/140 Total

200,000

5.

Allowance on Transfer of Land Branch Income

6.


P120,000

80,000

410,000

200,000

410,000

P36,450 27,000 P 9,450 4,550

P 9,450 4,900 P 4,550

80,000

P 1,600 36,400 P38,000 32,000 P 6,000 ÷ 20% P30,000

Exercise 9 - 8 a. Merchandise available for sale at billed price (P16,200 + P20,250) Merchandise available for sale at cost (P36,450/135%) Unrealized intercompany inventory profit balance before adjustment Unrealized Intercompany Inventory Profit Branch Income Balance before adjustment Adjusted balance (P18,900 x 35/135) Realized markup

130,000

80,000 P200,000

Exercise 9 - 7 Required balance of allowance (markup on branch ending inventory) P9,600 x 20/120 Adjustment for realized markup Balance of allowance before adjustment Allowance on current shipment (P160,000 x 20%) Allowance on branch beginning inventory Markup rate Branch beginning inventory, at cost

b.

400,000 160,000

4,550


c.

Home Office Books Shipments to Branch Unrealized Intercompany Inventory Profit Branch

400 140

Branch Books


540

540

540

Exercise 9 – 9 1. P20,000 ÷ 25/125 = P100,000 2.

Allowance for Markup in Branch Inventory Branch Income P100,000 + P350,000 – P80,000 = P370,000 x 25/125 = P74,000

Exercise 9 - 10 Separate cost of goods sold of the home office: Inventory, beginning Purchases Shipments to branch Cost of goods available for sale Less Inventory, end Separate cost of goods sold of the branch: Inventory, beginning From outside purchases From home office (P36,000 / 120%) Total Purchases Shipments from home office (P720,000 / 120%) Cost of goods available for sale Less Inventory, end: From outside purchases From home office (P42,000 / 120%) Combined cost of goods sold Exercise 9– 11 1. Shipments from home office Shipments to branch Markup

74,000

P 252,000 2,800,000 ( 600,000) P2,452,000 240,000

74,000

P2,212,000

P

12,000 30,000 P 42,000 96,000 600,000 P 738,000 P10,000 35,000

Total P450,000 375,000 P 75,000

45,000

Resold P360,000 300,000* P 60,000

693,000 P2,905,000 On Hand P90,000 75,000** P15,000

* 75,000 / 375,000 = 20% ** 90,000 / 120% = P75,000 2.

Cost of Goods Sold Inventory P60,000 + P450,000 – P90,000 = P420,000

420,000

420,000


3.

Billed Price P 60,000 450,000 P510,000 90,000 P420,000

Inventory, beginning Shipments Total Inventory, end Cost of goods sold

Cost P 50,000 375,000 P425,000 75,000 P350,000

Exercise 9 - 12 a. Merchandise Inventory, January 1 Add Shipments from Home Office Cost of Goods Available for Sale Cost of Goods Sold Sales, net of Sales Returns (P15,000 - P2,000) Sales rate Merchandise destroyed by fire at billed price b.

Markup P 10,000 75,000 P 85,000 15,000 P 70,000 P26,400 20,000 P46,400

P13,000 125%

Merchandise destroyed by fire at cost

Home Office Books Branch Loss from Fire Allowance for Markup in Branch Inventory Branch Branch Books Home Office Merchandise Inventory

Exercise 9 – 13 1. Branch Income Cost of Goods Sold P230,000 x 15/115 Branch 2.

Home Office Branch

3.

Allowance for Markup in Branch Inventory Inventory

Problem 9 – 1

30,000 6,000 36,000

50,000

520,000 9,000

10,400 P36,000 ÷ 120% P30,000

36,000 36,000

30,000 20,000 520,000 9,000

PROBLEMS

Beginning inventory: Acquired from vendors Acquired from home office Purchases from vendors Shipments from Home Office P180,000 + P30,000 Total inventory available for sale Less Ending inventory: Acquired from vendors Acquired from home office P60,000 + P30,000 Cost of goods sold

Billed Price

Cost

Markup

P100,000 40,000 240,000 210,000 P590,000

P100,000 32,000 240,000 168,000 P540,000

P 8,000 42,000 P50,000

40,000 90,000 P460,000

40,000 72,000 P428,000

18,000 P32,000


Problem 9 – 2

Home Office Books

a.

Dagupan Branch Cash

b.

Dagupan Branch Baguio Branch Shipments to Branch

25,000 40,000

c.


17,500

d.

Expenses Dagupan Branch

e.

Baguio Branch Sales Discounts Accounts Receivable

29,400 600

f.

Baguio Branch Dagupan Branch

15,000

g.

Shipments to Branch Dagupan Branch

2,500

h.

Dagupan Branch Baguio Branch

1,800

i.

Dagupan Branch Shipments to Branch Cash

20,100

j.

Baguio Branch Excess Freight Dagupan Branch

20,110 35

a.

Cash Home Office

b.


c.

no entry

d.

Home Office Cash

e.

no entry

10,000

800

Dagupan Branch Books

10,000 25,000

800

10,000

65,000 17,500 800

30,000 15,000 2,500 1,800 20,000 100

20,145

10,000 25,000

800


f.

Home Office Cash

g.


2,500

h.


1,800

i.

Shipments from Home Office Freight-In Home Office

20,000 100

Home Office Shipments from Home Office Freight-In Cash

20,145

j.

15,000

no entry

b.


c.

no entry

d.

no entry

e.

Cash Home Office

29,400

f.

Cash Home Office

15,000

g.

no entry

h.

Home Office Cash

i.

no entry

j.

Shipments from Home Office Freight-In Home Office

1.

Baguio Branch Cash

2,500 1,800

20,100 20,000 100 45

Baguio Branch Books

a.

Problem 9 – 3 Requirement 1

15,000

40,000

1,800

20,000 110

Home Office Books

20,000

40,000

29,400 15,000

1,800

20,110

20,000


2.

Baguio Branch Shipments to Branch Allowance for Markup in Branch Inventory

259,000

3.

Cash Baguio Branch

245,000

4.

Baguio Branch Cash

7,000

185,000 74,000 245,000 7,000

5 – 7 - no entry Baguio Branch Books

1.

Cash Home Office

18,000

2.


257,600

3.

Home Office Cash

247,400

Accounts Receivable Home Office

2,400

4.


7,000

5.

Cash Accounts Receivable Sales

6.

Expenses Cash

7.

Merchandise Inventory, end P30,100 + P1,400 Sales Income Summary Merchandise Inventory, beginning P257,600 + P1,400 Shipments from Home Office Expenses Income Summary Home Office

Requirement 2 Baguio Branch Branch Income Allowance for Markup in Branch Inventory Branch Income (P17,500 + P259,000 – P31,500) x 40/140

247,400 40,600 21,000 31,500 288,000

15,000

15,000 70,000

18,000 257,600 247,400 2,400 7,000

288,000 21,000

15,000 17,500 259,000 28,000 15,000

15,000 70,000



85,000

85,000

Requirement 3 Shipments from Home Office Home Office

1,400

Cash Home Office

2,000


Triple D Bookstore Statement of Recognized Income and Expenses - Quezon City Branch For the Year Ended December 31, 2008

Sales Cost of Goods Sold: Merchandise Inventory, beginning Shipments from Home Office Cost of Goods Available for Sale Less Merchandise Inventory, end Gross Profit Operating Expenses: Advertising and Promotion Depreciation Uncollectible Accounts Expense Others Net income

P 31,500 128,000 P159,500 22,750 P 6,400 2,400 1,250 36,600

Requirement 2 Branch Branch Income

9,260

Allowance for Markup in Branch Inventory Branch Income P136,750 x 25/125

27,350


36,610

Problem 9 - 5 a.

Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beginning Shipments from Home Office Selling Expenses Administrative Expenses

Branch Books

78,000 12,000 10,000

1,400 2,000

P192,690

136,750 P 55,940

46,680 P 9,260

9,260 27,350

36,610

10,000 80,000 4,000 6,000


b.

a.


10,000

Home Office Books Sales Shipments to Branch Merchandise Inventory, end Merchandise Inventory, beginning Purchases Selling Expenses Administrative Expenses Income Summary

310,000 64,000 30,000

b.


10,000

c.

Allowance for Overvaluation in Branch Inventory Branch Income P18,000 - (P12,000 x 25/125) = P15,600

15,600

d.


e.


12,110

f.


12,110

g.


22,490


Cash Accounts Receivable Merchandise Inventory Accounts Payable Home Office Sales Cost of Sales Operating Expenses

10,000

25,000 300,000 20,000 30,000 29,000 10,000 15,600

5,600

5,600 12,110 12,110 22,490

Triple F Products Inc. - Branch Trial Balance December 31, 2008 Debit 12,800 48,160 27,280

191,620 47,080 326,940

Credit

2,040 68,900 256,000 _______ 326,940


Requirement 2

Home Office Books

a.

Sales Income Summary Cost of Sales Operating Expenses

b.


17,300

c.

Allowance for Overvaluation of Branch Inventory Branch Income P191,620 x 10/110 P21,100 ÷ (P202,400 + P29,700 – P21,100) = 10%

17,420

d.


34,720

e.


26,628

f.


26,628

g.


76,080

a. b.

Branch Books Merchandise Inventory P202,400 – P189,200 Home Office Sales Income Summary Cost of Sales Operating Expenses

c.

Income Summary Home Office Requirement 3

640,600

13,200 256,000

17,300

Combined net income (P41,360 + P34,720 – P26,628) Combined Merchandise Inventory: Home Office Branch [ P27,280 + P13,200) ÷110%

41,360 452,840 146,400 17,300 17,420

34,720 26,628 26,628 76,080

13,200 17,300 191,620 47,080 17,300 P49,452

P156,640 36,800

P193,440


Problem 9 - 7 Triple G Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Year Ended December 31, 2008 Sales Cost of goods sold: Merchandise inventory, beginning Purchases Cost of goods available for sale Less Merchandise inventory, end Gross profit Operating expenses Net income before Income Tax Income Tax Net Income

P325,000 P107,500 215,000 P322,500 81,300

241,200 P 83,800 50,000 P 33,800 11,830 P 21,970

Inventory: Beginning Ending Home Office P 80,000 Branch P7,500 + (P24,000/120%) 27,500 P5,500 + (P26,000/125%) Total P107,500 ** P37,500 – P30,000 = P7,500/ P30,000 = 25% Requirement 2 Davao Branch Books a. Sales 75,000 Merchandise Inventory, end 31,500 Income Summary Shipments from Home Office Purchases Expenses Merchandise Inventory, beginning b.

Income Summary Home Office Requirement 3

12,500 Home Office Books

a.

Davao Branch Branch Income

b.

Allowance for Markup in Branch Inventory Branch Income Markup on branch beginning inventory (P24,000 x 20/120) Markup on shipments Allowance balance before adjustments Markup on branch ending inventory (P26,000 x 25/125) Realized markup

12,500 6,300 P 4,000 7,500 P11,500 5,200 P 6,300

P55,000 26,300 P81,300

12,500 37,500 15,000 10,000 31,500 12,500

12,500 6,300


c.

Sales Shipments to Branch Merchandise Inventory, end Income Summary Purchases Expenses Merchandise Inventory, beginning

250,000 30,000 55,000

d.


18,800

e.


11,830

f.


11,830

g.


21,970

15,000 200,000 40,000 80,000 18,800 11,830 11,830 21,970

Problem 9 – 8 Requirement 2 a. Plant Assets Branch

4,000

b.


2,000

c.

Cash Branch

5,000

d.


1,000

e.


3,000

f.

Retained Earnings Inventory P15,000 x 20/120

2,500

g.

Home Office Branch

11,000

h.

Sales Shipments from Home Office

48,000

4,000 2,000 5,000 1,000 3,000 2,500

11,000 48,000




MULTIPLE CHOICE 1. 2.

B B

9

A

3. 4.

C D

5. 6.

D B

10 11 12 13

C C D C

P13,200 + P350 = P13,550 P11,000 + P350 = P11,350

14

A

P12,000 x 20/120 = P2,000

15

D

Inventory, beginning (P165,000 / 125%) Shipments (P110,000 / 125%) Merchandise available for sale from home office at cost Cost of merchandise sold from home at cost Sales, net of returns and allowances Less Sales from merchandise purchased from outsiders (P7,500 x 120%) Sales from merchandise from home office Cost of sales at billed price Billed price rate Inventory destroyed by fire

7. 8.

D D

P132,000 88,000 P220,000 P165,250 9,000 P156,250 ÷ 125% P125,000 ÷ 125%

100,000 P120,000

16

D

Balance of allowance before adjustment Required balance of allowance (P1,170,000 x 20/120) Realized markup

P370,000 195,000 P175,000

17

C

Sales Cost of goods sold (P120,000 x 3/4 x 125%) Gross profit Operating expenses Net income reported by the branch

P141,000 112.500 P 28,500 27,000 P 1,500

18

A

P50,400/120%

P42,000

19

B

P90,000 + P36,000 – P2,520 – P50,400/120% = P60,900

20

B

Net income (loss) reported by branch Realized markup (P90,000 + P36,000 – P2,520 - P50,400 = P73,080) x 20/120 True net income of the branch

(P 7,800)

Net income reported by branch Realized markup [(P3,960 + P17,600 – P4,840) x 10/110] Actual branch income

P 4,800 1,520 P 6,320

21

B

12,180 P 4,380


22

B

Branch ending inventory, at cost (P4,840 / 110%) Home office ending inventory Ending inventory to be reported in the combined balance sheet

P 4,400 11,200 P15,600

23

D

Net income reported by the branch Realized markup[P280,000 - (P50,000 – P6,600)] x 40/140 True net income of the branch

P 5,000 67,600 P 72,600

24

B

Branch inventory from home office (P43,400 /140%) Branch inventory from outside purchases Total cost of branch inventory, end

P31,000 6,600 P37,600

25

D

P60,000 - P7,500

P52,500

26

A

P60,000 - (P7,500 x 120/20)

P15,000

27

B

Sales Cost of goods sold (P180,000 + P45,000 - P60,000) Operating expenses Realized markup [(P180,000 x 20/120) - P7,500 True net income of the branch

P 292,500 (165,000) ( 72,000) 22,500 P 78,000

28

A

Unadjusted balance of allowance account Markup on 2008shipments from home office (P390,000 – P300,000) Markup on beginning inventory Total merchandise inventory beg Merchandise from outside purchases

29

D

Sales Cost of goods sold (P54,600 + P390,000 + P144,600 - P48,750) Operating expenses Realized markup [P99,900 - (P39,000 x 30/130)] True net income of the branch

P99,900 90,000 P 9,900 x 130/30

P 42,900 54,600 P 11,700 P540,000 (540,450) ( 51,000) 90,900 P 39,450

30

C

P39,000 x 30/130 = P9,000

31

D

Sales (net of discount of P1,480) Cost of goods sold (P104,000 - P12,500) Operating expenses Net income reported by branch

P115,520 ( 91,500) ( 20,000) P 4,020

32

C

Net income reported by branch Realized markup (P91,500 x 25/125) True net income of the branch

P 4,020 18,300 P 22,320


33

C

34

D

35

36

C

A

Sales Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) Operating expenses Realized markup [P2,800 – (P3,960 x 10/110)] True profit of Cebu branch

P 37,400 ( 28,900) ( 3,000) 2,440 P 7,940

Sales Cost of goods sold (P16,000 + P80,000 – P24,000 – P20,000) Operating expenses Net income of the home office Net income of the branch Combined net income of the home office and branch

P110,000

Sales Cost of sales: Inventory, beginning Purchases Goods available for sale Shipments to branch (P110,000/110%) Goods available for own sale Less Inventory, end Gross profit Expenses Net income

P155,000

Sales Cost of sales: Inventory, beginning (P11,550 – P1,000) Shipments from HO, including freight-in Goods available for sale Less Inventory, end [(P10,400 + P5,000)/110%] + P520 + P250 Gross profit Expenses True branch net income

( 52,000) ( 10,000) P 48,000 7,940 P 55,940

P 23,000 190,000 P213,000 100,000 P113,000 30,000

83,000 P 72,000 52,000 P 20,000 P140,000

P 10,550 105,750 P116,300 14,770

101,530 P 38,470 28,400 P 10,470

37

D

(P10,400 + P5,000) x 10/110

P1,400

38

B

Unadjusted balance of allowance account Markup on 2008 shipments (P200,000 x 25%) Markup on beginning inventory

P 57,500 50,000 P 7,500 x 125/25 P 37,500

Branch beginning inventory at billed price


39

C

Sales Cost of goods sold (P37,500 + P250,000 - P40,000) Operating expenses Net income reported by branch

P400,000 (247,500) (100,000) P 52,500

40

C

Net income reported by branch Realized markup (P247,500 x 25/125) True net income of the branch

P 52,500 49,500 P102,000

41

B

Beginning inventory Purchases Shipments from home office Ending inventory Cost of goods sold reported by branch Realized markup [P19,750 - (P6,000 x 25/125)* Cost of goods sold at cost

P 8,000 30,000 93,750 ( 10,350) P 121,400 ( 18,550) P 102,850

*P93,750 – P75,000 = P18,750/P75,000 = 25% 42

C

The amount of the realized markup of P18,550

43

C

Adjusted net income Reported net income Realized markup Cost of sales at cost (P70,000 + P350,000 – P84,000) – P96,000

P156,000 60,000 P 96,000 ÷ P240,000 140%

44

C

P84,000 x 40/140

P24,000

45

A

72,500 ÷ (75,000 + 444,000 -84,000 – 72,500)

20%

46

D

P444,000 / 120%

P370,000

47

D

Sales Cost of goods sold (P75,000 + P444,000 - P84,000) Operating expenses Realized markup [P72,500 - (P84,000 x 20/120)] Adjusted profit of the branch

P 600,000 (435,000) (200,000) 58,500 P 23,500

48

C

P84,000 x 20/120 = P14,000

49

A

P84,000 – P14,000 = P70,000

50

B

Home office inventory (P160,500 - P10,500) Branch inventory (P108,000/120%) Inventories reported in the combined balance sheet

P 150,000 90,000 P 240,000

AA1-Chapter 9 (2008 edition)

page1

Problem 9 – 8

Triple J Wholesale Company Work Sheet for Combined Financial Statements For the Year Ended December 31, 2008

Debits

Cash Accounts Receivable Inventory Plant Assets, net Branch

Purchases Shipments from Home Office Expenses Income Tax

Trial Balance Home Office Branch 36,000 8,000 35,000 12,000 70,000 15,000 90,000 20,000

44,000

24,000 45,000 16,000

585,000

120,000

Accounts Payable Accrued Expenses Income Tax Payable Home Office

36,000 14,000

13,500 2,500

Ordinary Share Capital Retained Earnings

50,000 45,000

Credits

Sales Net income

Inventory, beg: Home Office Branch P2,000 + P21,000/120%

290,000

9,000

440,000 585,000

P55,000 19,500 P74,500

Adjustments and Eliminations Debit Credit (c ) 5,000 (b) 2,000 (f) 2,500 (a) 4,000 (a) 4,000 (c ) 5,000 (g) 11,000 (e) 3,000 (d) 1,000 (i) 36,400

(b) 2,000 (g) 11,000 (f)

95,000 120,000

(h) 48,000

Income Statement Debit Credit 82,500

74,500

Balance Sheet Debit Credit 49,000 45,000 74,500 94,000

314,000 61,000 36,400 49,500 16,500 36,400

(i) 36,400 (d) 1,000 (e) 3,000

50,000 42,500

2,500

(h) 48,000 112,900

Inventory, end: Home Office Branch

112,900

493,900 67,600 561,500

P70,000 12,500 P82,50

487,000 561,500 561,500

262,500

67,600 262,500


page2

Problem 9 – 9

Cash

Debits

Triple M Company Work Sheet for Combined Financial Statements For the Year Ended December 31, 2008 Trial Balance HO Branch 17,000 200

Inventory Sundry Assets Investment in Branch

23,000 200,000 60,000

Purchases Shipment from Home Office Freight-in from Home Office Sundry Expenses Income Tax

190,000

Credits Sundry Liabilities Income Tax Payable Ordinary Share Capital Retained Earnings Home Office Equity Sales Shipments to Branch Allowance for Markup in BI Cost of Goods Sold Net income

11,550 48,450

42,000

105,000 5,500 24,300

532,000

195,000

35,000

3,500

200,000 31,000 155,000 110,000 1,000 532,000

51,500 140,000 195,000

Adjustments and Eliminations Debit Credit a. 1,700 b. 1,800 e. 1,000

a. 1,700 g. 58,300 c. 5,000 d. 250

f. 110,000

Cost of Goods Sold Debit Credit 33,550

Income Statement Debit Credit

44,770

Combined Balance Sheet Debit Cred8t 20,700 44,770 248,450

190,000 5,750

h. 15,460

15,460 66,300 d. 250 h. 15,460

g. 58,300 f. 110,000 e. 1,000 193,510

38,750 15,460 200,000 31,000

b. 1,800 c. 5,000

193,510

295,000 229,300 229,300

44,770 184,530 229,300

Merchandise inventory, end: Home office Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 Total

184,530 266,290 28,710 295,000

P30,000 14,770 P44,770

295,000 295,000

313,920

28,710 313,920


page3


page 19

Problem 9 – 10

Debits Cash Accounts Receivable (net) Inventory – Home office Branch Fixed Assets (net) Branch Current Purchases Shipments from Home Office Sundry Expenses Income Tax Credits Accounts Payable Mortgage Payable Income Tax Payable Home Office Current Sales Shipments to Branch Allowance for Overvaluation Ordinary Share Capital Retained Earnings

Triple N Commercial Working Paper for Combined Financial Statements for Home Office and Branch For the Year Ended December 31, 2008 Trial Balance HO Branch 50,100 1,260 350,000 135,660 64,400 32,340 210,000 163,120 532,000 294,000 119,980 83,440 1,489,600

546,700

30,500 67,500

10,500 144,200

434,000 308,000 2,940 600,000 46,660 1,489,600

Adjustments HO Branch a. 5,320 b. 2,100 c. ( 2,500)

a. (5,320) d. 14,000 f. 23,667 23,667

f. 23,667

392,000

546,700

23,667

e. 10,976 24,576

e. 10,976 b. 2,100 c. ( 2,500) d. 14,000

24,576

Adjusted Trial Balance HO Branch 55,420 3,360 350,000 133,160 64,400 32,340 210,000 157,800 532,000 308,000 119,980 83,440 23,667 10,976 1,513,267 571,276 30,500 67,500 23,667

434,000 308,000 2,940 600,000 46,660 1,513,267

a.

2,940

Branch Income Statement Debit Credit

29,400

32,200

c. 157,800 b. 28,000

Home Office Income Statement Debit Credit 64,400

70,000

Combined Balance Sheet Debit Credit 58,780 483,160 102,200 210,000

532,000

280,000 83,440 10,976

119,980 23,667

10,500

41,000 67,500 34,643

10,976 157,800 392,000

571,276

Branch net income Home Office net income

Inventory, end: Home Office Branch [(P21,420 + P14,000) / 110%] Total

Eliminations Debit Credit

P 70,000 32,200 P102,200

c. 157,800 b. a.

392,000

28,000 2,940 188,740

188,740

434,000 280,000

403,816 20,384

424,200

740,047

784,000

854,140

424,200

424,200

43,953 784,000

784,000

854,140

600,000 46,660 789,803 20,384 43,953 854,140


page 19

Advance Accounting -LUPISAN-CHAPTER 1.pdf

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