Lupisan Baysa
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Advanced Accounting...
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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
AA 1 - Chapter 1 (2008 edition) page 3
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
AA 1 - Chapter 1 (2008 edition) page 4
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
AA 1 - Chapter 1 (2008 edition) page 5
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 -
AA 1 - Chapter 1 (2008 edition) page 6
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
AA 1 - Chapter 1 (2008 edition) page 7
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
AA 1 - Chapter 1 (2008 edition) page 8
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
AA 1 - Chapter 1 (2008 edition) page 9
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
AA 1 - Chapter 1 (2008 edition) page 10
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
AA 1 - Chapter 1 (2008 edition) page 11
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
AA 1 - Chapter 1 (2008 edition) page 12
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
AA 1 - Chapter 1 (2008 edition) page 13
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
AA 1 - Chapter 1 (2008 edition) page 14
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
AA 1 - Chapter 1 (2008 edition) page 15
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
AA 1 - Chapter 1 (2008 edition) page 16
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
AA 1 - Chapter 1 (2008 edition) page 17
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
AA 1 - Chapter 1 (2008 edition) page 18
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
AA 1 - Chapter 1 (2008 edition) page 19
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
AA 1 - Chapter 1 (2008 edition) page 20
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
AA 1 - Chapter 1 (2008 edition) page 21
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
AA 1 - Chapter 1 (2008 edition) page 22
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
AA 1 - Chapter 2 (2008 edition) page 2
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
AA 1 - Chapter 2 (2008 edition) page 3
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
AA 1 - Chapter 2 (2008 edition) page 4
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
AA 1 - Chapter 2 (2008 edition) page 5
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
AA 1 - Chapter 2 (2008 edition) page 6
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
AA 1 - Chapter 2 (2008 edition) page 7
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
AA 1 - Chapter 2 (2008 edition) page 8
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
AA 1 - Chapter 2 (2008 edition) page 9
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
AA 1 - Chapter 2 (2008 edition) page 10
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
AA 1 - Chapter 2 (2008 edition) page 11
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
AA 1 - Chapter 2 (2008 edition) page 12
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
AA 1 - Chapter 2 (2008 edition) page 13
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
AA 1 - Chapter 2 (2008 edition) page 14
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
AA 1 - Chapter 2 (2008 edition) page 15
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
AA 1 - Chapter 2 (2008 edition) page 16
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
AA 1 - Chapter 2 (2008 edition) page 17
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
AA 1 - Chapter 2 (2008 edition) page 18
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)
AA1 - Chapter 3 (2008 edition) 3
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 -
-
AA1 - Chapter 3 (2008 edition) 4
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
-
AA1 - Chapter 3 (2008 edition) 5
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
AA1 - Chapter 3 (2008 edition) 6
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
AA1 - Chapter 3 (2008 edition) 7
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
AA1 - Chapter 3 (2008 edition) 8
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
AA1 - Chapter 3 (2008 edition) 9
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.
Accounts Payable Cash
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
Chapter 3 – Partnership Liquidation Suggested Answers
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)
-
Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
Problem 3 – 8 (cont.) Requirement 1 January: a. Cash Accounts Receivable b.
February:
March:
Neri, Capital Ordan, Capital Pacia, Capital Cash
c.
Accounts Payable Cash
d.
Pacia, Loan Pacia, Capital Cash
a.
Cash Accounts Receivable
b.
Neri, Capital Ordan, Capital Pacia, Capital Cash
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
c.
page
Neri, Capital Ordan, Capital Pacia, Capital Cash
39,500 19,750 19,750
79,000
Problem 3 - 9 Requirement 1
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 -Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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)
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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) -
L O A N Daza Esteban
P
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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) -
L O A N Daza Esteban
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
Chapter 3 – Partnership Liquidation Suggested Answers
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)
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
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
(
(
Chapter 3 – Partnership Liquidation Suggested Answers
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
Chapter 3 – Partnership Liquidation Suggested Answers
page
Problem 3 - 7 Requirement 3
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
Chapter 3 – Partnership Liquidation Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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.
Investment in Joint Venture Income from Joint Venture
2,471,333
3.
Cash Investment in Joint Venture
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.
Investment in Joint Venture Income from Joint Venture
1,262,334
4.
Cash Investment in Joint Venture
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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.
Joint Venture Marissa
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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.
Joint Venture Marissa
7,000
4.
Joint Venture Marissa
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
page 12
Requirement 2 Books of the Joint Venture 1. Merchandise Yolly, Capital Beth, Capital
104,000
2.
Accounts Receivable Sales
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
4.
Cash Investment in Joint Venture
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.
Cash Investment in Joint Venture
Books of Marissa 1. Investment in Joint Venture Income from Joint Venture P8,000 + P5,647 = P13,647 2.
Cash Investment in Joint Venture
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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)
AA1 - Chapter 4 – Joint Ventures (2005) Suggested Answers
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.
AA1 - Chapter 4 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
Cash Accounts Receivable
10,000
CCM Corp. Cash May
1,750
5,000
Accounts Receivable Sales
18,000
Purchases CCM Corp.
15,000
Cash Accounts Receivable
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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.
Income Tax Income Tax Payable
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 5 (2008 edition)
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
AA1 - Chapter 6 (2008 edition) page 3
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
AA1 - Chapter 6 (2008 edition) page 4
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.
Installment Sales Cost of Installment Sales Deferred Gross Profit
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
AA1 - Chapter 6 (2008 edition) page 5
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
AA1 - Chapter 6 (2008 edition) page 6
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
AA1 - Chapter 6 (2008 edition) page 7
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
Installment Sales Cost of Installment Sales Deferred Gross Profit
4,700,000
Installment Accounts Receivable Installment Sales
4,500,000
Cost of Installment Sales Inventory
2,610,000
Cash Installment Accounts Receivable – 2005 Installment Accounts Receivable – 2006
3,885,000
Installment Sales Cost of Installment Sales Deferred Gross Profit
4,500,000
Deferred Gross Profit Realized Gross Profit
1,410,000
Installment Accounts Receivable Installment Sales
5,800,000
Cost of Installment Sales Inventory
3,074,000
Cash Installment Accounts Receivable – 2005 Installment Accounts Receivable – 2006 Installment Accounts Receivable – 2007
5,010,000
Installment Sales Cost of Installment Sales Deferred Gross Profit
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
AA1 - Chapter 6 (2008 edition) page 8
2008
Installment Accounts Receivable Installment Sale
6,100,000
Cost of Installment Sales Inventory
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
AA1 - Chapter 6 (2008 edition) page 9
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
AA1 - Chapter 6 (2008 edition) page 10
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
AA1 - Chapter 6 (2008 edition) page 11
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
AA1 - Chapter 6 (2008 edition) page 12
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
AA1 - Chapter 6 (2008 edition) page 13
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
AA1 - Chapter 6 (2008 edition) page 14
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.
Income Tax Income Tax Payable
21,987
c.
Income Summary Income Tax
21,987
d.
Income Summary Retained Earnings
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
Cash Installment Contract Receivable Installment Revenue
48,000
Dec. 31
Cash Installment Contract Receivable Installment Revenue
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
AA1 - Chapter 6 (2008 edition) page 15
(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
AA1 - Chapter 6 (2008 edition) page 16
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
AA1 - Chapter 6 (2008 edition) page 17
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
AA1 - Chapter 6 (2008 edition) page 18
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
AA1 - Chapter 6 (2008 edition) page 19
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
AA1 - Chapter 6 (2008 edition) page 20
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
AA1 - Chapter 6 (2008 edition) page 21
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
AA1 - Chapter 6 (2008 edition) page 22
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
AA1 - Chapter 6 (2008 edition) page 23
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
AA1 - Chapter 6 (2008 edition) page 24
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
2007 - Recognized revenue Cost of revenue Gross profit
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
2008 - Recognized revenue Cost of revenue Gross profit
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
AA1 - Chapter 7 (2008 edition)
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
c. Cash Accounts Receivable
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
AA1 - Chapter 7 (2008 edition)
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%
2006 - Recognized revenue Cost of revenue Gross profit
To date P25,000,000 23,000,000 P 2,000,000
Recognized in prior year/s -
To be recognized this year P25,000,000 23,000,000 P 2,000,000
2007 - Recognized revenue Cost of revenue Gross profit
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
2008 - Recognized revenue Cost of revenue Gross profit
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
AA1 - Chapter 7 (2008 edition)
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%
2006 - Recognized revenue Cost of revenue Gross profit
To date P21,875,000 17,500,000 P 4,375,000
Recognized in prior year/s -
To be recognized this year P21,875,000 17,500,000 P 4,375,000
2007 - Recognized revenue Cost of revenue Gross profit
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
AA1 - Chapter 7 (2008 edition)
page
c. Cash Accounts Receivable
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 ==========
2007 - Recognized revenue Cost of revenue Gross profit
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
2008 - Recognized revenue Cost of revenue Gross profit
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
c. Cash Accounts Receivable
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
2008-Revenue Cost of revenue Gross profit
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
2006-Revenue Cost of revenue Gross profit
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.
Cash Accounts Receivable
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
Deferred Franchise Cost Cash
500,000
Dec. 31
Interest Receivable Interest Revenue
400,000
2008 Jan. 1
July
Cash Notes Receivable Interest Receivable
2,400,000
15
Deferred Franchise Cost Cash
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1 - Chapter 7 (2008 edition)
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
AA1- Chapter 8 (2008 edition) 3
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)
Shipments from Home Office Home Office
300,000
(2)
Accounts Receivable Sales
390,000
(3)
Expenses Cash Accrued Expenses
74,000
300,000 390,000 72,000 2,000
AA1- Chapter 8 (2008 edition) 4
(4)
page
Cash Sales Discount Accounts Receivable
288,000 6,000
(5)
Home Office Cash
150,000
(6)
Furniture and Fixtures Cash
(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
AA1- Chapter 8 (2008 edition) 5
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
Shipments from Home Office Home Office
2,500 10,000 6,500
2,500 10,000 6,500
AA1- Chapter 8 (2008 edition) 6
page
16
Home Office Cash
2,000
20
Home Office Shipments from Home Office
1,200
25
Home Office Accounts Receivable
150
30
Expenses Home office
800
31
Home Office Income Summary
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)
Shipments from Home Office Home Office
615
615
AA1- Chapter 8 (2008 edition) 7
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)
Home Office Accounts Receivable
(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
AA1- Chapter 8 (2008 edition) 8
(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
AA1- Chapter 8 (2008 edition) 9
(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)
Shipments from Home Office Home Office
(c)
Purchases Cash
(d)
Equipment Home Office
(e)
Accounts Receivable Sales
250,000
Cash Accounts Receivable
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.
Accounts Receivable Sales
80,000
80,000
AA1- Chapter 8 (2008 edition) 10
page
b.
Purchases Accounts Payable
21,000
c.
Shipments from Home Office Home office
40,000
d.
Cash Accounts Receivable
76,000
e.
Accounts Payable Cash
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
AA1- Chapter 8 (2008 edition) 11
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
AA1- Chapter 8 (2008 edition) 12
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
Problem 8-4 Requirement 1 a.
Cash Shipments from Home Office Accounts Receivable Home Office Home Office Cash
Branch Books 15,000 102,000 26,000 9,000
b.
Accounts Receivable Sales
62,000
c.
Cash Accounts Receivable
26,000
d.
Purchases Accounts Payable
30,000
e.
Accounts Payable Cash
14,500
f.
Expenses Cash
12,500
g.
Cash Home Office Accounts Receivable
16,000 1,500
Shipments from Home Office Home Office
12,500
h.
143,000 9,000
62,000 26,000 30,000 14,500 12,500
17,500 12,500
AA1- Chapter 8 (2008 edition) 13
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.
Accounts Receivable Sales
346,000
c.
Cash Accounts Receivable
400,000
d.
Purchases Accounts Payable
316,000
e.
Accounts Payable Cash
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
AA1- Chapter 8 (2008 edition) 14
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
AA1- Chapter 8 (2008 edition) 15
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
AA1- Chapter 8 (2008 edition) 16
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.
Shipments from Home Office Home Office
6,000
b.
Expenses Home Office
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.
Home Office Income Summary
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
AA1- Chapter 8 (2008 edition) 17
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
Income Tax Income Tax Payable
12,828
Income Summary Income Tax
12,828
Income Summary Retained Earnings
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
AA1- Chapter 8 (2008 edition) 18
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.
Branch Income Branch
9,900
b.
Income Summary Branch Income
9,900
9,900 9,900
125,100 524,100
AA1- Chapter 8 (2008 edition) 19
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
Problem 8-7 Requirement 1 a.
Shipments from Home Office Operating Expenses Home Office Current
57,600 8,100
65,700
AA1- Chapter 8 (2008 edition) 20
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
AA1- Chapter 8 (2008 edition) 21
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
AA1- Chapter 8 (2008 edition) 22
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
AA1- Chapter 8 (2008 edition) 23
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
AA1- Chapter 8 (2008 edition) 24
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)
AA1- Chapter 8 (2008 edition) 25
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.
Branch Branch Income
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.
Purchases Accounts Payable
2.
Shipments from Home Office Home Office
360,000
3.
Accounts Receivable Sales
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
Cash Accounts Receivable
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
AA1- Chapter 9 (2008 edition) page 3
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
Branch Shipments to Branch Allowance for Markup in Branch Inventory 150,000/300,000 = 50%
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.
Shipments from Home Office Home Office
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
AA1- Chapter 9 (2008 edition) page 4
Land Allowance for Markup in Branch Inventory Allowance on Transfer of Land 120,000/240,000 = 50%
300,000 120,000 80,000
2.
Branch Shipments to Branch Allowance for Markup in Branch Inventory 160,000/400,000 = 40%
560,000
3.
Branch Branch Income
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.
Branch Income Income Summary
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
AA1- Chapter 9 (2008 edition) page 5
c.
Home Office Books Shipments to Branch Unrealized Intercompany Inventory Profit Branch
400 140
Branch Books
Home Office Shipments from Home Office
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
AA1- Chapter 9 (2008 edition) page 6
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
AA1- Chapter 9 (2008 edition) page 7
Problem 9 – 2
Home Office Books
a.
Dagupan Branch Cash
b.
Dagupan Branch Baguio Branch Shipments to Branch
25,000 40,000
c.
Furniture and Fixtures Cash
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.
Shipments from Home Office Home Office
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
AA1- Chapter 9 (2008 edition) page 8
f.
Home Office Cash
g.
Home Office Shipments from Home Office
2,500
h.
Expenses Home Office
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.
Shipments from Home Office Home Office
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
AA1- Chapter 9 (2008 edition) page 9
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.
Shipments from Home Office Home Office
257,600
3.
Home Office Cash
247,400
Accounts Receivable Home Office
2,400
4.
Expenses Home Office
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
AA1- Chapter 9 (2008 edition) page 10
Branch Income Income Summary
85,000
85,000
Requirement 3 Shipments from Home Office Home Office
1,400
Cash Home Office
2,000
Problem 9 - 4 Requirement 1
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
Branch Income Income Summary
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
AA1- Chapter 9 (2008 edition) page 11
b.
a.
Home Office Income Summary
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.
Branch Income Branch
10,000
c.
Allowance for Overvaluation in Branch Inventory Branch Income P18,000 - (P12,000 x 25/125) = P15,600
15,600
d.
Branch Income Income Summary
e.
Income Tax Income Tax Payable
12,110
f.
Income Summary Income Tax
12,110
g.
Income Summary Retained Earnings
22,490
Problem 9 - 6 Requirement 1
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
AA1- Chapter 9 (2008 edition) page 12
Requirement 2
Home Office Books
a.
Sales Income Summary Cost of Sales Operating Expenses
b.
Branch Branch Income
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.
Branch Income Income Summary
34,720
e.
Income Tax Income Tax Payable
26,628
f.
Income Summary Income Tax
26,628
g.
Income Summary Retained Earnings
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
AA1- Chapter 9 (2008 edition) page 13
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
AA1- Chapter 9 (2008 edition) page 14
c.
Sales Shipments to Branch Merchandise Inventory, end Income Summary Purchases Expenses Merchandise Inventory, beginning
250,000 30,000 55,000
d.
Branch Income Income Summary
18,800
e.
Income Tax Income Tax Payable
11,830
f.
Income Summary Income Tax
11,830
g.
Income Summary Retained Earnings
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.
Home Office Accounts Receivable
2,000
c.
Cash Branch
5,000
d.
Expenses Home Office
1,000
e.
Shipments from Home Office Home Office
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
AA1- Chapter 9 (2008 edition) page 15
AA1- Chapter 9 (2008 edition) page 16
AA1- Chapter 9 (2008 edition) page 17
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
AA1- Chapter 9 (2008 edition) page 18
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
AA1- Chapter 9 (2008 edition) page 19
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
AA1- Chapter 9 (2008 edition) page 20
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
AA1-Chapter 9 (2008 edition)
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
AA1-Chapter 9 (2008 edition)
page3
AA1 - Chapter 9 (2008 edition)
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
AA1 - Chapter 9 (2008 edition)
page 19
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