(Solution Manual) Advanced Accounting Volume 1 Solution Manual

Guerrero,Peralta, 1

Business

Solution Manual

1st Edition

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Solution Manual for Advanced Accounting Volume 1 Solution Manual, The downloadable file consists of 193 pages, and the total size of the file is 3.09 MB. Purchase now only for highly discounted price.

Author(s): Guerrero, Peralta

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lOMoAR cPSD|6306152 Advanced Accounting Guerrero Peralta Volume 1 Solution Manual lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 1 CHAPTER 1 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 1-1: a Jose's capital should be credited for the market value of the computer contributed by him. 1-2: b (40,000 + 80,000)  2/3 = 180,000 x 1/3 = 60,000 . 1-3: a Cash P100,000 Land 300,000 Mortgage payable ( 50,000 ) Net assets (Julio, capital) P350,000 1-4: b Total Capital (P300,000/60%) P500,000 Perla's interest 40% Perla's capital Less:Non -cash asset contributed at market value Land P 70,000 Building 90,000 Mortgage Payable ( 40,000) P200,000 _120,000 Cash contribution P 80,000 1-5: d - Zero, because under the bonus method, a transfer of capital is only required. 1-6: b Reyes Santos Cash P200,000 P300,000 Inventory – 150,000 Building Equipment Mortgage payable – 150,000 400,000 ( 100,000 ) Net asset (capital) P350,000 P750,000 1-7: c AA BB CC Cash Property at Market Value P 50,000 P 80,000 Mortgage payable Equipment at Market Value ( 35,000) P55,000 Capital P 50,000 P 45,000 P55,000 lOMoAR cPSD|6306152 2 Chapter 1 1-8: a PP RR SS Cash Computer at Market Value P 50,000 25,000 P 80,000 P 25,000 60,000 1-9: c Capital P 75,000 P 80,000 Maria P 85,000 Nora Cash Merchandise inventory P 30,000 P 90,000 Computer equipment 160,000 Liability Furniture and Fixtures 200,000 ( 60,000) Total contribution P230,000 P190,000 Total agreed capital (P230,000/40%) Nora's interest P575,000 60% Nora's agreed capital Less: investment P345,000 190,000 Cash to be invested P155,000 1-10: d Roy Sam Tim Cash Office Equipment Note payable P140,000 – – P220,000 _( 60,000 ) – – Net asset invested P140,000 P160,000 P – Agreed capitals, equally (P300,000/3) = P100,000 1-11: a Lara Mitra Cash P130,000 P200,000 Computer equipment Note payable – 50,000 _( 10,000 ) Net asset invested P130,000 P240,000 Goodwill (P240,000 - P130,000) = P110,000 1-12: a Perez Reyes Cash P 50,000 P 70,000 Office Equipment Merchandise 30,000 – – 110,000 Furniture 100,000 Notes payable ( 50,000 ) Net asset invested P 80,000 P230,000 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 3 1-12: Continued Bonus Method: Total capital (net asset invested) P310,000 Goodwill Method: Net assets invested P310,000 Add: Goodwill (P230,000 -P80,000) _150,000 Net capital P460,000 1-13 : b Required capital of each partner (P300,000/2) P150,000 Contributed capital of Ruiz: Total assets P105,000 Less Liabilities 15,000 90,000 Cash to be contributed by Ruiz P 60,000 1-14 : d Total assets: Cash P 70,000 Machinery 75,000 Building _225,000 P370,000 Less: Liabilities (Mortgage payable) 90,000 Net assets (equal to Ferrer's capital account) P280,000 Divide by Ferrer's P & L share percentage 70% Total partnership capital P400,000 Required capital of Cruz (P400,000 X 30%) P120,000 Less Assets already contributed: Cash P 30,000 Machinery and equipment 25,000 Furniture and fixtures 10,000 65,000 Cash to be invested by Cruz P 55,000 1-15 : d Adjusted assets of C Borja Cash P 2,500 Accounts Receivable (P10,000 -P500) 9,500 Merchandise inventory (P15,000 -P3,000) 12,000 Fixtures Asset contributed by D. Arce: 20,000 P 44,000 Cash P 20,000 Merchandise 10,000 30,000 Total assets of the partnership P 74,000 lOMoAR cPSD|6306152 lOMoAR cPSD|6306152 4 Chapter 1 1-16 : a Cash to be invested by Mendez: Adjusted capital of Lopez (2/3) Unadjusted capital P158,400 Adjustments: Prepaid expenses 17,500 Accrued expenses ( 5,000) Allowance for bad debts (5% X P100,000) _( 5,000 ) Adjusted capital P165,900 Total partnership capital (P165,900/2/3) Multiply by Mendez's interest P248,850 ⅓ Mendez's capital P 82,950 Less Merchandise contributed 50,000 Cash to be invested by Mendez P 32,950 Total Capital: Adjusted capital of Lopez P165,900 Contributed capital of Mendez 82,950 Total capital P248,850 1-17: d Moran, capital (40%) Cash P 15,000 Furniture and Fixtures _100,000 P115,000 Divide by Moran's P & L share percentage 40% Total partnership capital P287,500 Multiply by Nakar's P & L share percentage 60% Required capital of credit of Nakar: P172,500 Contributed capital of Nakar: Merchandise inventory P 45,000 Land 15,000 Building 65,000 Total assets P125,000 Less Liabilities 30,000 P 95,000 Required cash investment by Nakar P 77,500 1-18: c Garcia's adjusted capital (see schedule 1) P40,500 Divide by Garcia's P & L share percentage 40% Total partnership capital P101,250 Flores' P & L share percentage 60% Flores' capital credit P 60,750 Flores' contributed capital (see schedule 2) 43,500 Additional cash to be invested by Flores P 17,250 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 5 1-18: Continued Schedule 1: Garcia, capital: Unadjusted balance P 49,500 Adjustments: Accumulated depreciation ( 4,500) Allowance for doubtful account ( 4,500 ) Adjusted balance P 40,500 1-19: d Schedule 2: Flores capital: Unadjusted balance P 57,000 Adjustments: Accumulated depreciation ( 1,500) Allowance for doubtful accounts ( 12,000 ) Adjusted balance P 43,500 Ortiz Ponce Total ( 60%) ( 40%) Unadjusted capital balances P133,000 P108,000 P241,000 Adjustments: Allowance for bad debts ( 2,700) ( 1,800) ( 4,500) Inventories 3,000 2,000 5,000 Accrued expenses _( 2,400 ) ( 1,600) ( 4,000) Adjusted capital balances P130,900 P106,000 P237,500 Total capital before the formation of the new partnership (see above) P237,500 Divide by the total percentage share of Ortiz and Ponce (50% + 30%) 80% Total capital of the partnership before the admission of Roxas Multiply by Roxas' interest Cash to be invested by Roxas P296,875 20% P 59,375 1-20: d Merchandise to be invested by Gomez: Total partnership capital (P180,000/60%) P300,000 Gomez's capital (P300,000 X 40%) Less Cash investment P120,000 30,000 Merchandise to be invested by Gomez P 90,000 Cash to be invested by Jocson: Adjusted capital of Jocson: Total assets (at agreed valuations) P180,000 Less Accounts payable 48,000 P132,000 Required capital of Jocson Cash to be invested by Jocson _180,000 P 48,000 lOMoAR cPSD|6306152 6 Chapter 1 1-21 : b Unadjusted Ell, capital (P75,000 – P5,000) P 70,000 Allowance for doubtful accounts ( 1,000) Accounts payable ( 4,000 ) Adjusted Ell, capital P 65,000 1-22 : c Total partnership capital (P113,640/1/3) P340,920 Less Divino's capital _113,640 Cortez's capital after adjustments P227,280 Adjustments made: Allowance for doubtful account (2% X P96,000) 1,920 Merchandise inventory ( 16,000) Prepaid expenses ( 5,200) Accrued expenses 3,200 1-23 : a Cortez's capital before admission of Divino P211,200 Total assets at fair value P4,625,000 Liabilities (1,125,000) Capital balance of Flora P3,500,000 1-24 : c Total capital of the partnership (P3,500,000 ÷ 70%) P5,000,000 Eden agreed profit & loss ratio 30% Eden agreed capital 1,500,000 Eden contributed capital at fair value 812,000 Allocated cash to be invested by Eden P 688,000 1-25 : c Rey Sam_ Tim Total_ Contributed capital (assets -liabilities)P471,000 P291,000 P195,000 P957,000 Agreed capital (profit and loss ratio) 382,800 382,800 191,400 957,000 Capital transfer (Bonus) P 88,200 P(91,800) P 3,600 - 1-26: d Total agreed capital (P90,000 ÷ 40%) P225,000 Contributed capital of Candy (P126,000+P36,000 -P12,000) 150,000 Total agreed capital (P90,000 ÷ 40%) 225,000 Candy, agreed capital interest 60% Agreed capital of Candy 135,000 Contributed capital of Candy Withdrawal of Candy 150,000 P 15,000 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 7 1-27: a Total agreed capital (210,000 ÷ 70%) P300,000 Nora’s interest 30% Agreed capital of Nora P 90,000 Cash invested 42,000 Merchandise to be invested by Nora P 48,000 1-28: a Contributed capital of May (P194,000 - P56,000) P138,000 Agreed capital of May (P300,000 x 70%) 210,000 Cash to be invested by May P 72,000 1-29 : d Zero, because the bonus method involves only a transfer of capital. 1-30 : b Cash Noy P 10,000 Bi P 14,000 Accounts receivable - Net 92,000 92,000 Merchandise inventory 216,000 150,000 Computer equipment 24,000 14,000 Furniture and fixtures 18,000 ---- Total assets at fair value 360,000 270,000 Accounts payable (108,000) (72,000 ) Net assets invested 252,000 198,000 Agreed capital 250,000 200,000 Goodwill (withdrawal) P (2,000 ) P 2,000 1-31: c Villar Roxas Cash P 2,205,000 P - Office equipment 630,000 - Merchandise inventory - 1,575,000 Notes payable ( 210,000 ) - Contributed capital 2,625,000 1,575,000 Agreed capital 2,520,000 1,680,000 Bonus to Roxas P( 105,000 ) P 105,000 1-32: b Total capital before adjustments (P210,750 + P103,000) P313,750 Allowance for doubtful accounts ( 10,000) Accumulated depreciation (P1,000 – P500) 500 Obsolete inventory ( 3,500 ) Total assets of the partnership P300,750 lOMoAR cPSD|6306152 8 Chapter 1 1-33: b Gibo Edu Cash P 19,200 P136,800 Accounts receivable 163,200 129,600 Merchandise inventory 240,000 216,000 Equipment 60,000 - Accounts payable (60,000) (96,000) Notes payable (12,000 ) - Contributed capital 410,400 386,400 Loss on sale of equipment (1,800 ) 1,800 Net assets 408,600 388,200 Additional investment by Edu Agreed capital - P408,600 20,400 P408,600 1-34: a Garnett Bryant Unadjusted capital P2,443,364 P3,097,528 Accumulated depreciation ( 80,000) 200,000 Accounts receivable written off ( 108,000 ) ( 140,000 ) Adjusted capital contributed 2,255,364 3,157,528 Agreed capital Capital withdrawal 2,255,364 P - 1,503,576* P 1,653,952 * Total agreed capital (P2,255,364 / 60%) P3,758,940 Bryant’s interest Agreed capital of Bryant 40% P1,503,576 1-35: a Total capital P3,758,940 Total liabilities 4,299,396 Total assets P8,058,336 1-36: a Gordon Fernando Unadjusted capital P220,000 P309,375 Undervaluation of inventory 11,000 - Allowance for doubtful accounts (2,750) ( 4,125) Accrued expenses - (20,250 ) Contributed capital 228,250 285,000 Agreed capital of Gordon (P285,000/75%) x 25% 133,250 285,000 Capital withdrawal by Gordon P 95,000 P - lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 9 SOLUTIONS TO PROBLEMS Problem 1 – 1 1. a. Books of Pedro Castro will be retained by the partnership To adjust the assets and liabilities of Pedro Castro. 1. Pedro Castro, Capital ............................................................. Merchandise Inventory...................................................... 600 600 2. Pedro Castro, Capital ............................................................. Allowance for Bad Debts .................................................. 200 200 3. Accrued Interest Receivable .................................................. Pedro Castro, Capital......................................................... 35 35 Computation: P1,000 x 6% x 3/12 = P15 P2,000 x 6% x 2/12 = _20 Total ................................ P35 4. Pedro Castro, Capital ............................................................. Accrued Interest Payable................................................... (P4,000 x 5% x 6/12 = P100) 100 100 5. Pedro Castro, Capital ............................................................. Accumulated Depreciation – Furniture and Fixtures ........ 800 800 6. Office Supplies ...................................................................... Pedro Castro, Capital......................................................... 400 400 To record the investment of Jose Bunag. Cash ................................ ................................ ............................... 15,067.50 Jose Bunag, Capital ............................................................... 15,067.50 Computation: Pedro Castro, Capital (1) P600 P31,400 (2) 200 35 (3) (4) 100 400 (6) (5) 800 P1,700 P31,835 P30,135 Jose Bunag, Capital : 1/2 x P30,135 = P15,067.50 lOMoAR cPSD|6306152 10 Chapter 1 b. A new set of books will be used Books of Pedro Castro To adjust the assets and liabilities. See Requirement (a). To close the books. Notes Payable............................................................................... 4,000 Accounts Payable ......................................................................... 10,000 Accrued Interest Payable.............................................................. 100 Allowance for Bad Debts ............................................................. 1,200 Accumulated Depreciation – Furniture and Fixtures ................... 1,400 Pedro Castro, Capital ................................................................... 30,135 Cash ....................................................................................... 6,000 Notes Receivable ................................................................... 3,000 Accounts Receivable ............................................................. 24,000 Accrued Interest Receivable .................................................. 35 Merchandise Inventory .......................................................... 7,400 Office Supplies ...................................................................... 400 Furniture and Fixtures............................................................ 6,000 New Partnership Books To record the investment of Pedro Castro. Cash ........................................................................................... 6,000 Notes Receivable.......................................................................... 3,000 Accounts Receivable .................................................................... 24,000 Accrued Interest Receivable......................................................... 35 Merchandise Inventory................................................................. 7,400 Office Supplies............................................................................. 400 Furniture and Fixtures .................................................................. 6,000 Notes Payable ........................................................................ 4,000 Accounts Payable................................................................... 10,000 Accrued Interest Payable ....................................................... 100 Allowance for Bad Debts....................................................... 1,200 Accumulated Depreciation – Furniture and Fixtures............. 1,400 Pedro Castro, Capital ............................................................. 30,135 To record the investment of Jose Bunag. Cash ................................ ................................ ............................... 15,067.50 Jose Bunag, Capital ............................................................... 15,067.50 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 11 2. Castro and Bunag Partnership Statement of Financial Position October 1, 2011 A s s e t s Cash ..... ...... ... ........................................................................................... P21,067.50 Notes receivable .......................................................................................... 3,000.00 Accounts receivable .................................................................................... P 24,000 Less Allowance for bad debts...................................................................... 1,200 22,800.00 Accrued interest receivable ......................................................................... 35.00 Merchandise inventory ................................................................................ 7,400.00 Office supplies ................................. .......................................................... 400.00 Furniture and fixtures .................................................................................. 6,000 Less Accumulated depreciation................................................................... Total Assets ........................................................................................ 1,400 4,600.00 P59,302.50 Liabilities and Capital Notes payable ........................................................................................... P 4,000.00 Accounts payable ........................................................................................ 10,000.00 Accrued interest payable ............................................................................. 100.00 Pedro Castro, Capital................ ................................................................... 30,135.00 Jose Bunag, Capital ..................................................................................... _15,067.50 Total Liabilities and Capital ............................................................... P59,302.50 Problem 1 – 2 Contributed Capitals: Jose: Capital before adjustment ................................ ......................... P 85,000 Notes Payable ................................ ................................ .............. 62,000 Undervaluation of inventory ................................ ........................ 13,000 Underdepreciation.................................................................. ( 25,000) P 135,000 Pedro: Cash ................................................. ...................................... 28,000 Pablo: Cash ................................ ................................ ............................. 11,000 Marketable securities ............................................................. _57,500 68,500 Total contributed capital.............................................................................. P 231,500 Agreed Capitals: Bonus Method: Jose (P231,500 x 50%) ................................ ................................ ... P115,750 Pedro (P231,500 x 25%) ................................ ................................ .... 57,875 Pablo (P231,500 x 25%) ................................ ................................ . 57,875 Total ................................ ................................ ............................... P231,500 lOMoAR cPSD|6306152 12 Chapter 1 Goodwill Method . To have a goodwill, the only possible base is the capital of Pablo. The computation is: Contributed Capital Agreed Capital Goodwill Jose P135,000 P137,000 (50%) 2,000 Pedro 28,000 68,500 (25%) 40,500 Pablo 68,500 68,500 (25%) – Total P231,500 274,000 42,500 Total agreed capital (P68,500  25%) = 274,000 Jose, Pedro and Pablo Partnership Statement of Financial Position June 30, 2011 Bonus Method Goodwill Method Assets: Cash P 49,000 P 49,000 Accounts receivable (net) 48,000 48,000 Marketable securities 57,500 57,500 Inventory 85,000 85,000 Equipment (net) 45,000 45,000 Goodwill – 42,500 Total P284,500 P327,000 Liabilities and Capital: Accounts payable P 53,000 P 53,000 Jose, capital (50%) 115,750 137,000 Pedro, capital (25%) 57,875 68,500 Pablo, capital (25%) 57,875 68,500 Total P284,500 P327,000 Problem 1 – 3 1. Books of Pepe Basco To adjust the assets. a. Pepe Basco, Capital...................................................................... Estimated Uncollectible Account .......................................... 3,200 3,200 b. Pepe Basco, Capital...................................................................... Accumulated Depreciation – Furniture and Fixtures............. 500 500 lOMoAR cPSD|6306152 Partnership Basic Considerations and Formation 13 To close the books. Estimated Uncollectible Account ....................................................... 4,800 Accumulated Depreciation – Furniture and Fixtures.......................... 1,500 Accounts Payable................................................................................ 3,600 Pepe Basco, Capital ............................................................................ Cash.. ....................................................... .................................... 31,500 400 Accounts Receivable .................................................................... 16,000 Merchandise Inventory................................................................. 20,000 Furniture and Fixtures .................................................................. 5,000 2. Books of the Partnership To record the investment of Pepe Basco. Cash .... ... ........................................................................................... 400 Accounts Receivable .......................................................................... 16,000 Merchandise Inventory ....................................................................... 20,000 Furniture and Fixtures......................................................................... Estimated Uncollectible account .................................................. 5,000 4,800 Accumulated Depreciation – Furniture and Fixtures ................... 1,500 Accounts Payable ......................................................................... 3,600 Pepe Basco, Capital...................................................................... 31,500 To record the investment of Carlo Torre. Cash .... ... ........................................................................................... Carlo Torre, Capital ..................................................................... 47,250 47,250 Computation: Pepe Basco, capital (Base) ................................ ............................... P31,500 Divide by Pepe Basco's P & L ratio ................................ ................ 40% Total agreed capital ................................ ................................ .......... P78,750 Multiply by Carlo Torre's P & L ratio ................................ ............. 60% Cash to be invested by Carlo Torre ................................ .................. P47,250 Problem 1 – 4 a. Roces' books will be used by the partnership Books of Sales 1. Adjusting Entries (a) Sales, Capital ......................................................................... Accumulated Depreciation – Fixtures ............................... 3,200 3,200 (b) Goodwill ................................................................................ Sales, Capital ..................................................................... 32,000 32,000 lOMoAR cPSD|6306152 14 Chapter 1 2. Closing Entry Allowance for Bad Debts ............................................................. 12,800 Accumulated Depreciation – Delivery Equipment ...................... 8,000 Accumulated Depreciation – Fixtures .......................................... 91,200 Accounts Payable ......................................................................... 64,000 Notes Payable............................................................................... 40,000 Accrued Taxes.............................................................................. 8,000 Sales, Capital................................................................................ 224,000 Cash ....................................................................................... 4,800 Accounts Inventory................................................................ 72,000 Merchandise Inventory .............................................. ............ 192,000 Prepaid Insurance................................................................... 3,200 Delivery Equipment............................................................... 48,000 Fixtures .................................................................................. 96,000 Goodwill ................................................................................ 32,000 Books of Roces (Books of the Partnership) 1. Adjusting Entries (a) Roces, Capital .............................................................................. Allowance for Bad Debts....................................................... 1,600 1,600 (b) Accumulated Depreciation – Fixtures .......................................... Roces, Capital ........................................................................ 16,000 16,000 (c) Merchandise Inventory................................................................. Roces, Capital ........................................................................ 8,000 8,000 (d) Goodwill....................................................................................... Roces, Capital ........................................................................ 40,000 40,000 2. To record the investment of Sales. Cash .... ... ........................................................................................... 4,800 Accounts Receivable .......................................................................... 72,000 Merchandise Inventory ....................................................................... 192,000 Prepaid Insurance................................................................................ 3,200 Delivery Equipment............................................................................ 48,000 Fixtures ... ........................................................................................... 96,000 Goodwill . ........................................................................................... Allowance for Bad Debts ............................ ................................. 32,000 12,800 Accumulated Depreciation – Delivery Equipment ...................... 8,000 Accumulated Depreciation – Fixtures .......................................... 91,200 Accounts Payable ......................................................................... 64,000 Notes Payable............................................................................... 40,000 Accrued Taxes.............................................................................. 8,000 Sales, Capital................................................................................ 224,000 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formatio 15 b. Sales' books will be used by the partnership Books of Roces 1. Adjusting Entries See Requirement (a). 2. Closing Entry Allowance for Bad Debts ............................................................. 1,600 Accumulated Depreciation – Delivery Equipment ...................... 12,800 Accumulated Depreciation – Fixtures .......................................... 64,000 Accounts Payable ......................................................................... 104,000 Accrued Taxes.............................................................................. 6,400 Roces, Capital .............................................................................. 224,000 Cash ....................................................................................... 14,400 Accounts Receivable ............................................................. 57,600 Merchandise Inventory .......................................................... 132,800 Prepaid Insurance................................................................... 4,800 Delivery Equipment............................................................... 19,200 Fixtures ....................................................................... ........... 144,000 Goodwill ................................................................................ 40,000 Books of Sales (Books of the Partnership ) 1. Adjusting Entries See Requirement (a). 2. To record the investment of Roces. Cash .... ... ........................................................................................... 14,400 Accounts Receivable .......................................................................... 57,600 Merchandise Inventory ....................................................................... 132,800 Prepaid Insurance................................................................................ 4,800 Delivery Equipment.................................................. .......................... 19,200 Fixtures ... ........................................................................................... 144,000 Goodwill . ........................................................................................... 40,000 Allowance for Bad Debts ............................................................. 1,600 Accumulated Depreciation – Delivery Equipment ...................... 12,800 Accumulated Depreciation – Fixtures .......................................... 64,000 Accounts Payable ......................................................................... 104,000 Accrued Taxes.............................................................................. 6,400 Roces, Capital .............................................................................. 224,000 lOMoAR cPSD|6306152 16 Chapter 1 c. A new set of books will be opened by the partnership Books of Roces 1. Adjusting Entries See Requirement (a). 2. Closing Entry See Requirement (b). Books of Sales 1. Adjusting Entries See Requirement (a). 2. Closing Entry See Requirement (a). New Partnership Books To record the investment of Roces and Sales. Cash .... ... ........................................................................................... 19,200 Accounts Receivable .......................................................................... 129,600 Merchandise Inventory ....................................................................... 324,800 Prepaid Insurance................................................................................ 8,000 Delivery Equipment (net) ................................................................... 46,400 Fixtures (net).......................................... ............................................. 84,800 Goodwill ........................................................................................... 72,000 Allowance for Bad Debts ............................................................. 14,400 Accounts Payable ......................................................................... 168,000 Notes Payable............................................................................... 40,000 Accrued Taxes.............................................................................. 14,000 Roces, Capital ............................................ .................................. 224,000 Sales, Capital................................................................................ 224,000 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 17 Problem 1 – 5 1. To close Magno's books. Allowance for Bad Debts.................................................................... 1,000 Accounts Payable................................................................................ 6,000 Notes Payable ..................................................................................... 10,000 Accrued Interest Payable .......................... .......................................... 300 R. Magno, Capital............................................................................... 24,700 Cash.. ........................................................................................... 5,000 Accounts Receivable .................................................................... 13,000 Merchandise Inventory................................................................. 12,000 Equipment .................................................................................... 3,000 Other Assets ........................................................ ......................... 9,000 2. To adjust the books of Lagman. Goodwill . ........................................................................................... 8,000 Allowance for Bad Debts ............................................................. 210 J. Lagman, Capital........................................................................ 7,790 3. To record the investment of Magno. Cash .... ... ........................................................................................... 5,000 Accounts Receivable .......................................................................... 13,000 Merchandise Inventory ....................................................................... 12,000 Equipment........................................................................................... 3,000 Other Assets........................................................................................ 9,000 Allowance for Bad Debts ............................................................. 1,000 Accounts Payable ......................................................................... 6,000 Notes Payable............................................................................... 10,000 Accrued Interest Payable.............................................................. 300 R. Magno, Capital ........................................................................ 24,700 To adjust the investments of the partners. Cash ................................ ................................ ................................ .......... 10,300 R. Magno, Capital ........................................................................ 10,300 (P35,000 – P24,700 = P10,300) J. Lagman, Capital ................................ ................................ .................... 35,790 Cash.. ........................................................................................... 23,300 Accou nts Payable to J. Lagman ................................................... 12,490 (P63,000 + P7,790 = P70,790 – P35,000 = P35,790) lOMoAR cPSD|6306152 18 Chapter 1 4. Lagman and Magno Statement of Financial Position December 31, 2011 A s s e t s Cash .... ... ........................................................................................... Accounts receivable............................................................................ P34,000 P – Less Allowance for bad debts............................................................. 1,210 32,790 Merchandise inventory ....................................................................... 21,000 Equipment........................................................................................... 8,000 Other assets ......................................................................................... 46,000 Goodwill ........................................................................................... 8,000 Total Assets .................................................................................. P115,790 Liabilities and Capital Accounts payable................................................................................ P 18,000 Notes payable...................................................................................... 15,000 Accrued interest payable..................................................................... 300 Accounts payable to J. Lagman ......................... ................................. 12,490 J. Lagman, capital ............................................................................... 35,000 R. Magno, capital................................................................................ 35,000 Total Liabilities and Capital ......................................................... P115,790 Problem 1 – 6 1. Books of Toledo Toledo, Capital ............................................................................. 4,800 Allowance for Bad Debts (15% x P32,000) .......................... 4,800 Books of Ureta Ureta, Capital ............................................................................... Allowance for Bad Debts (10% x P24,000) .......................... 2,400 2,400 Cash (90% x P12,000) .................................................................. 10,800 Loss from Sale of Office Equipment............................................ Office Equipment................................................................... 1,200 12,000 Toledo, Capital (1/4 x P1,200) ..................................................... 300 Ureta, Capital ............................................................................... Loss from Sale of Office Equipment ..................................... 900 1,200 lOMoAR cPSD|6306152 Partnership – Basic Considerations and Formation 19 2. New Partnership Books Cash.. ........................................................................................... 3,200 Accounts Receivable .................................................................... 32,000 Merchandise ................................................................................. 40,000 Office Equipment ......................................................................... Allowance for Bad Debts....................................................... 10,000 4,800 Accounts Payable................................................................... 10,000 Notes Payable ........................................................................ 2,000 Toledo, Capital ...................................................................... To record the investment of Toledo. 68,400 Cash.. ........................................................................................... 22,800 Accounts Receivable .................................................................... 24,000 Merchandise ................................................................................. 36,000 Toledo, Capital ............................................................................. Allowable for Bad Debts ....................................................... 300 2,400 Accounts Payable................................................................... 16,000 Ureta, Capital ......................................................................... 64,700 To record the investment of Ureta. 3. Cash .... ... ........................................................................................... 3,400 Ureta, Capital ............................................................................... 3,400 To record Ureta's cash contribution. Computation: Toledo, capital (P68,400 – P300) ................................ .................... P 68,100 Divide by Toledo's profit share percentage ................................ ... 50% Total agreed capital of the partnership ................................ ........... P136,200 Multiply by Ureta's profit share percentage ................................ .. 50% Agreed capital of Ureta ................................ ................................ ... P 68,100 Ureta, capital ................................ ................................ .................. 64,700 Cash contribution of Ureta ........................................................... P 3,400 or Toledo, capital (P68,400 – P300) ................................ .................... P 68,100 Less Ureta, capital ................................ ................................ .......... 64,700 Cash contribution of Ureta ........................................................... P 3,400 lOMoAR cPSD|6306152 20 Chapter 1 4. Toledo and Ureta Partnership Statement of Financial Position July 1, 2011 A s s e t s Cash .... ... ........................................................................................... P 29,400 Accounts receivable............................................................................ P56,000 Less Allowance for bad debts............................................................. 7,200 48,800 Merchandise........................................................................................ 76,000 Office equipment ............................................. ................................... Total Assets .................................................................................. 10,000 P164,200 Liabilities and Capital Accounts payable................................................................................ P 26,000 Notes payable...................................................................................... 2,000 Toledo, capital .................................................................................... 68,100 Ureta, capital....................................................................................... 68,100 Total Liabilities and Capital ......................... ................................ P164,200 lOMoAR cPSD|6306152 Partnership Operations 21 CHAPTER 2 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 2-1: d Jordan Pippen Total Annual salary P120,000 P80,000 P200,000 Balance, equally ( 10,000 ) ( 10,000 ) ( 20,000 ) Total P110,000 P 70,000 P180,000 2-2: a JJ KK LL Total Bonus (.20 X P90,000) P18,000 – Interest JJ (.15 X P100,000) P15,000 – – –) P 18,000 KK (.15 X P200,000) P 30,000 –) LL (.15 X P300,000) P45,000) 90,000 Balance, equally ( 6,000 ) ( 6,000 ) ( 6,000 ) ( 18,000 ) Total profit share P27,000 P 24,000 2-3: a P39,000 P 90,000 2-4: a Allan Michael Total Interest Allan - .10 X (P40,000 + 60,000 /2) P 5,000 ) Michael - .10 X (P60,000 + 70,000/2) P 6,500) P 11,500 Balance, equally _14,000 _14,000 28,000 Total P 19,000 P20,500 P 28,000 2-5: a Fred Greg Henry Total Interest (.10 of average capital) P12,000 P 6,000 P 4,000 P 22,000 Salaries 30,000 20,000 50,000 Balance, equally ( 35,000 ) ( 35,000) ( 35,000) (105,000) Total P 7,000 ( P29,000) (P11,000) (P 33,000) 2-6: b Average Capital Date Capital Balance Months Unchanged Peso Months January 1 140,000 6 P 840,000 July 1 180,000 1 180,000 August 1 165,000 5 825,000 12 P1,845,000 Average capital - P1,845,000/12 = P153,750 Interest (P153,750 X 10%) = P 15,375 lOMoAR cPSD|6306152 22 Chapter 2 2-7: c Capital Months Peso Date Balance Unchanged Months January 1 P16,000 3 P 48,000 April 1 17,600 2 35,200 June 1 19,200 3 57,600 September 1 15,200 4 60,800 12 P201,600 Average Capital(P201,600/12) = P16,800 2-8: a Net profit before bonus P 24,000 Net profit after bonus (P24,000/120%) 20,000 Bonus to RJ 4,000 Balance (P24,000 -P4,000)X3/5 12,000 Total profit share P 16,000 2-9: a LT AM Total Interest P3,200 P 3,600 P 6,800 Salaries 15,000 7,500 22,500 Balance, 3:2 (11,580) ( 7,720) ( 19,300) Total P 6,620 P 3,380 P 10,000 2-10 : b Net income after salary, interest and bonus P467,500 Add back: Salary (P10,000 X 12) P120,000 Interest (P250,000 X .05) 12,500 _132,500 Net income after bonus (80%) P600,000 Net income before bonus (P600,000/80%) _750,000 Paul's bonus P150,000 2-11 : b CC DD EE Total Salary P 14,000 P 14,000 Balance P14,000 P 8,400 5,600 28,000 Additional profit to DD ( 1,500) 2,100 ( 600) – Total P12,500 P10,500 P 19,000 P 42,000 Net income Fees Earned P90,000 Expenses _48,000 Net Income P42,000 lOMoAR cPSD|6306152 Partnership Operations 23 2-12: c LL MM NN Total Interest P 2,000 P 1,250 P 750 P 4,000 Annual Salary 8,500 – – 8,500 Additional profit to give LL, P20,000 9,500 5,700 3,800 19,000* Additional profit to give MM, P14,000 – 7,050 – 7,050 Total *(P9,500/50%) = P19,000 P20,000 P14,000 P 4,550 P 38,550 2-13: a Excess (Deficiency) RR SS TT Total RR (P80,000 - P95,000) P15,000 – –) SS (P50,000 - P40,000) – (P10,000) –) P 5,000 Balance 4:3:1 _47,500 _35,625 _11,875 95,000 Total P62,500 P25,625 P11,875 P100,000 Net Income (200,000 - 100,000) = P100,000 2-14: b AA - 100,000 X 10% 150,000 X 20% Remainder, 210,000 AA P 10,000 30,000 BB CC Total ) ) P 40,000 BB (60,000 X .05) P 3,000 ) CC (60,000 X .05) P 3,000 6,000 Balance, equally 68,000 _68,000 _68,000 _204,000 2-15: Total P108,000 P71,000 P71,000 a AJ BJ CJ Bonus to CJ Net profit before bonus P44,000 Net profit after bonus (P44,000/110%)P40,000 – – P4,000 P250,000 Total P4,000 Interest to BJ – P1,000 – 1,000 Salaries P 10,000 – 12,000 Balance, 4:4:2 6,800 _6,800 3,400 22,000 _17,000 Total P 16,800 P7,800 P19,400 P44,000 2-16: c Total profit share of Pedro P200,000 Less: Salary to Pedro P 50,000 Interest 20,000 70,000 Share in the balance (40%) P130,000 Net profit after salary and interest (130,000/40%) Add: Total Salaries P150,000 P325,000 Total Interest 70,000 _220,000 Total Partnership Income P545,000