Lupisan Baysa

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 Recl
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
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

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

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
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

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
-

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
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

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
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
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.
Ruiz, Capital
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

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
Office Supplies
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
Tomas, Capital
518,000
1,152,000
Accounts Receivable
Office Equipment
Goodwill
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

June 1, 2008
Assets
Cash
Accounts Receivable
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

page 9
Accounts Payable
Tomas, Capital
Vicente, Capital
Liabilities and Capital

P1,670,000
1,670,000
P 576,000
3,340,000
P3,916,000
Problem 1 3
1.
2.
Goodwill
Equipment
Rosas, Capital
3,000
3,000
900
Cash
Accounts Receivable
Equipment
Goodwill
Accounts Payable
Perlas, Capital
5,000
46,000
108,000
12,000
9,000
3,000
Cash
Accounts Receivable
Equipment
Goodwill
Accounts Payable
Perlas, Capital
5,000
46,000
108,000
12,000
9,000
3,000
Cash
Accounts Receivable
Equipment
Goodwill
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

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
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
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

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
Sales
Cost of Goods Sold:
Inventories, beginning
Purchases
Cost of Goods Available for Sale
Less Inventories, end
Gross Profit
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

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

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
474,750
2,475,000
P 2,949,750
P4,341,150
4,337,100
8,678,250
P11,628,000

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

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)
Salaries
Balance 5:3:2
Net Profit
P 16,800
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

page 14
B = (P250,000 P36,000 P88,000 P72,000)25% = P13,500

Problem 1 - 8
1.
2.
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
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

page 15
Problem 1 - 9
Ramos, Gonzales and Martinez
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
Distribution of net profit (Sch. 3)
Withdrawals
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

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

Balance equally
Net income
Ramos
P 9,600
3,960
( 5,600)
P 7,960

Bonus - 20% (P58,800 - P39,360 - B)
Balance equally
Net income
Ramos
P 9,600
3,600
3,240
5,400
21,840

page 16
Problem 1 -10
Robles, Bernal and Reyes

Statement of Partners Capital
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
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

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

page 17
Problem 1 - 12
Canlas, David, Estrella and Fajardo

Statement of Changes in Partners Capital Accounts
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
Profit and Loss
13,500
1,350
12,150

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
Molinas contribution (P190,000 P60,000)

Nuevos 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

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.
P115,000 + P95,000 = P210,000/2
P105,000
19.
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

page 20
23.
24.
25.
26.
27.
28.
29.
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
Balance - 4:4:2
Bonus - 10%(P22,000 - B)
Interest on capital
Balance - 4:4:2
Bonus - 10%(P22,000 - B)
Interest on capital
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

page 21
30.
Interest on ave. capital

Balance - divided equally
31.
Total capital before net income

(P475,000 + P60,000 P70,000)
Add Net profit
Total capital, Dec. 31, 2008
32.
Andal
P 47,250
122,325
(139,308)
P 30,267
33.
Int. on average capital

Balance - equally
Net increase (decrease)
P 48,750
144,000
9,000
P 201,750
35.
36.
37.
D
A
A
38.
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
Addl 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

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.
Legarda- 5/10 x 80% = 40%

Madrigal-3/10 x 80% = 24%
Sotto - 2/10 x 80% = 16%

Pimentel 20%
40.
Share of Legarda = P25,000 ( P1,200 - P3,100 - P2,000 + P1,500 + P

900 x 65%) = P24,025 x 40% = P9,610
41.
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
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/ = 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

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

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
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

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
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
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

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
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

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

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

Nava, Capital
80,000
40,000
Other Assets
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
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)
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
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

page 8
7.
Cash
Locsin, Capital
Montes, Capital
Nava, Capital
240,000
54,000
18,000
8.
Cash
Nava, Capital
(P510,000 x 1/4)
150,000
9.
Cash
Other Assetsl (P660,000 P525,000)
Nava, Capital
(P660,000 x 1/4)
165,000
135,000
Cash
Nava, Capital (P504,000 x 1/3)
144,000
18,000
6,000
10
Problem 2 - 2
1.
a. Ponce, Capital (P300,000 x )
Anton, Capital
b.
c.
Ponce, Capital (P300,000 x )

Salva, Capital (P200,000 x )
Victa, Capital (P100,000 x )
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

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

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
of Moreno
13,388
90,000
3,450
2,925
4,050
2,700
46,875
13,388
Roces, Lapuz and Doria

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

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 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

Interest transferred to Nuguid
Balances
Share in net profit
Drawings
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

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
Cash
100,000
3.
Montero, Capital
Concio, Capital
(P60,000 x 3/6)
Cash
Other Assets (P10,000 1/6)
100,000
30,000
20,000
4.
Montero, Capital (P6,000 x 1/6)

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

Share in net loss
Drawings
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

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

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
Corrected 2007 net profit
Drawings
Corrected 2008 net loss
Drawings
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
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

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
Admission of Custodio (Sch. 2)
Net loss for 2008
Drawings
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

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.
Lima
Mitra
5.
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

page 16
6.
7.
8.
9.
10.
D
C
C
A
11.
12.
13.
D
A
14.
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.
Total capital of the new partnership (P840,000/75%)

Percentage of interest
Amount to be invested by Vidal in the partnership
16.
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

page 17
17.
P80,000 + P12,000 P70,000 = P22,000
18.
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.
20.
21.
22.
23.
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
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

page 18
24.
25.
26.
27.
28.
29.
30.
31.
32.
C
C
D
D
D
A
33.
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
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
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
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
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)

3
Exercise 3 6
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
-

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
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.

Add Note payable to Magno
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

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

5
2.
page
Julian, Lagman and Magno

January to March, 2008

January:
Sale of assets and dist. Of
loss
Payment of liquidation
expenses
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

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

7
Exercise 3 - 10
Capital balances
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.
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
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.
Equipment
Capital Adjustment Account
3.
Goodwill
P980,000 P924,000 = P56,000
P 3,000
P 3,000
P 30,000
3.
Exercise 3 11
Partnership Books
1. Inventories
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

8
page
4.

Belen, Capital (3/4)
Bgnes, Capital (1/4)
226,000
5.
Colored Co. Stocks

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 Corporations 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
Accounts Payable
124,000
296,000
520,000
156,000
500,000
200,000
12,000
104,000
700,000
280,000

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
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.)

Schedule of Cash Distribution to Partners
Capital balances before cash distribution
Add loan balance
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
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
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)
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

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

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)

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
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
March 31, 2008
Add Loan balance
Restricted interest - possible loss if
nothing is realized on remaining assets
Free interest - payment to partners
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
July 31, 2008
Quizon
Roman
Balances before cash distribution
P116,250
P159,750
Add Loan balance
150,000
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
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
August 31, 2008
Quizon
Roman
Balances before cash distribution
P 93,000
P145,800
Add Loan balance
82,500
P 93,000
P228,300
on remaining unsold assets and cash
withheld of P30,000
( 202,500)
( 121,500)
Balances
( P109,500)
P106,800
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

Suggested Answers
Problem 3 - 7
Requirement 1
Capital balances
Loan balances
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

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

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

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
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

Suggested Answers
page
Problem 3 9 Requirement No 2
Wilson, Yuson and Zapata

Cash Distribution Schedule
July 1 - September 30, 2008

July - Dist. of loss on sale of assets (1)
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)
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
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

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

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

Suggested Answers
page
Schedule 3 - Cash distribution in February

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

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
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

Suggested Answers
page
Corporations Books
1.
Cash
Accounts Receivable
Inventories
Prepaid Expense
Goodwill
Accounts Payable
Accrued Expenses
2.
450,000
660,000
1,350,000
3,000
2,520,000
243,000
Land
Cash
Pre-Operating Expenses
3,600,000
1,500,000
450,000
120,000
600,000
6,000
4,500,000
4,800,000
750,000
Rover Corporation
July 1, 2008
Assets
Cash
Accounts Receivable (net of Allow
of P120,000)
Inventories
Prepaid Expenses
Land
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
P9,300,000
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.
Share on loss on realization

(P39,000 + P4,800 P33,000)
Percentage ownership of Imperial
P10,800
20%
P54,000
Total capital
Cash available
Loss on realization
P70,000
28,000
P42,000

Suggested Answers
6.
7.
8.
page
Capital bal. before liquidation

Loss on realization
Balances
Addl loss to Gueco & Tiangco
for the deficiency of Barcelon
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
Cash to be distributed
Coronel
to
Alarcon
P 100,000
( 60,000)
24,000
(172,000)
P(108,000
108,000
9.
10
11
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
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
Cash available to partners (P37,500 P28,500)
Loan balances
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

Suggested Answers
13
Capital balances
Loss on realization
Additional loss
Payment to Lazaro
14
15
16
17
A
A
B
19
20
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
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)

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

Addl 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

Suggested Answers
21
22
23
24
D
B
A
25
26
27
28

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
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
Addl 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
109,300
Cash to be realized from sale of other assets
P 119,300

Suggested Answers
29
30
Capital balances
Drawing
Net loss
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
33
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
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

Suggested Answers
34
35
D
C
Capital balances
Add Loan
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
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
39
Capital balances
Adjustment in assets (P20,000 P10,000 P3,000)
Adjusted capital
P260,000
7,000
P267,000
40
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
Adjusted capital
Par of capital stock
Shares of stock to be recd 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

Suggested Answers
41
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

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

Suggested Answers
page
PROBLEMS
Problem 3-1
1.

Sale of non-cash assets and distribution of loss
Payment of liquidation expenses
Balances
Balances
Additional investment of Elma
Balances
Payment to partners
Elma, Erica and Edna

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)

Suggested Answers
page
2.

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

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

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
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

(24,000)
Balances
P690,000
(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

Suggested Answers
Problem 3 2 (Case 1)

Balances
Payment of to partners

Balances
Balances
capital account
Payment to partners
page

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
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

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

Suggested Answers
page
Cash
Balances
Balances
capital account
Balances
Payment to partners
Balances
Additional investment by Daza
Payment to partners

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

Suggested Answers
page
Problem 3- 2 (Case 4)

January, 2009
Cash

Balances
Balances
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

Suggested Answers
page
January, 2009
Other
Cash
Assets
Liabilities
Balances
Balances
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
-
2,000
(5,000)
-
2,000
P 8,000
P 8,000
P 30,000
P 30,000
P 30,000

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.

Sale of other assets & distribution of loss
Balances
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

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)

Suggested Answers
page
Problem 3 - 6
QRS Partnership
July to September, 2008

July:
Sale of assets
Payment of loan
Balances
August: Sale of assets
Payment of loan and capital
Balances
Sept.: Sale of assets
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
41,400
187,500
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

Suggested Answers
Problem 3 - 5

February:
Balances
Payment to partners (sch. 1)
Balances
March:
Sale of assets & distribution of gain
Balances
Payment to partners (sch. 2)
Balances, March 31
page
JKLM Trading
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

Suggested Answers
page
Problem 3 - 8
Req. 2

January:
Collections from customers
Balances
Payment to partners (see schedule)
Balances
February:
Collections from customers
Payment of liabilities & dist. of gain
Balances
Payment to partners (see schedule)
Balances
March:
Collections from customers & dist. of
loss
Payment to partners
Neri, Ordan and Pacia

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

Suggested Answers
page
Problem 3 -8
Requirement No 1
Neri, Ordan and Pacia

January 1, 2008
Neri
P 50,000
Add Loan balances
6,000
P 56,000
50%
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

Suggested Answers
page
Problem 3 - 7
Requirement 3

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:
Balances
Payment to partners
Tabora, Ureta and Veloso

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)
-
P 13,000

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
10% commission on net purchases to Alvin
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

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
Salaries to Roland as managing partner
7.
40,300,000
3,000,000
72,000
Joint Venture
Greg
Medel
3,540,000
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

Suggested Answers
Books of Greg
1.
Joint Venture
Land
Medel
Roland
page 6
40,300,000
2.
Joint Venture
Roland
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
7.
3,000,000
72,000
Joint Venture
Roland
Medel
3,540,000
Joint Venture
Roland
Medel
2,104,000
Cash
Medel
Roland
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

Suggested Answers
Books of Medel
1.
Joint Venture
Greg
Land
Roland
page 7
40,300,000
2.
Joint Venture
Roland
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
7.
3,000,000
72,000
Joint Venture
Roland
Greg
3,540,000
Joint Venture
Roland
Greg
2,104,000
Greg
Cash
Roland
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

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

Suggested Answers
Books of Greg
1.
Investment in Joint Venture
Land
page 9
19,500,000
2.

1,981,333
3.
Cash
21,481,333
Books of Medel
1.
Land
13,000,000
2.

2,471,333
3.
Cash
15,471,333
Books of Roland
1.
Land
7,800,000
2.

Cash
3,000,000
3.

1,262,334
4.
Cash
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

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
Commission on sales.
8,000
8.
Joint Venture
Yolly
Beth
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
Beth
104,000
2.
Marissa
Joint Venture
3.
Joint Venture
Marissa
7,000
4.
Joint Venture
Marissa
40,000
5.
Beth
Joint Venture
10,000
7,500
6.
Joint Venture
Beth
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

Suggested Answers
page 11
7.
Joint Venture
Marissa
8.
Joint Venture
Beth
Marissa
16,940
9.
Cash
Beth
Marissa
40,306
59,047
Books of Beth
1.
Joint Venture
Yolly
8,000
104,000
2.
Marissa
Joint Venture
160,000
3.
Joint Venture
Marissa
7,000
4.
Joint Venture
Marissa
40,000
5.
Yolly
Joint Venture
10,000
7,500
6.
Joint Venture
Yolly
1,560
7.
Joint Venture
Marissa
8,000
8.
Joint Venture
Yolly
Marissa
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

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.
44,000
2.
10,000
3.

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

Suggested Answers
4.
Cash
Books of Beth
1.
page 13
40,306
60,000
2.
7,500
3.

P900 + P5,647 = P6,6,547
6,547
4.
Cash
Books of Marissa
1.
P8,000 + P5,647 = P13,647
2.
Cash
59,047
13,647
13,647
40,306
60,000
7,500
6,547
59,047
13,647
13,647
Problem 4-4
1.
Joint Venture
2.
Joint Venture
Bonus = 10% (NI B)
Bonus = 10% (P53,636.20 B) = P4,785
3.
10,571.20
4,785
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

Suggested Answers
page 14
Problem 4-5
Books of Leo
1.
Joint Venture
Bonus = 20% (NI B)
Bonus = 20% (P24,000 B) = P4,000
2.

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
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
Joint Venture
600
3.
Joint Venture
Leo
Niel
20,300
Books of Niel
1.
Joint Venture
Leo
2.
Leo
Mandy
Joint Venture
3.
Joint Venture
Leo
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

Suggested Answers
page 15
MULTIPLE CHOICE
1.
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.
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.
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.
P150,000 + P105,000 = P255,000
5.
P120,000 + (135,000/3) = P165,000
6.
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.
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.
P100,000 x 40% = P40,000
10.
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

Suggested Answers
11.
12.
13.
14.
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
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.
P236,500 x 50% = P118,250
16.
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

Suggested Answers
19.
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.
Debit to Joint Venture account:

Investment of Santos (12,000 shares @ P45)
Investment of Cruz (8,000 shares @ P45)
Managers 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.
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.
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.
20,000 shares x P40 MV = P800,000
25.
20,000 4,500 + 15,500 x 120% = 18,600 5,000 = 13,600 x P1 = P13,600
26
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)

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.
20,000 4,500 = 15,500 x 20% = 3,100
28.
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.
Loss upon contribution of the shares [(P40 P62) x 4,000]

Share on the JV loss (P37,100 x 4/20)
Tans 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.
page 2
Exercise 4 3
Books of Jolly
To set up inventory, end

(should be set up before
recognizing gain or loss)
Joint Venture Invty

Joint Venture
110,000
To recognize gain or loss,

shared 4:2:2
NI=P50,000 + P110,000
Joint Venture
Income from JV
Bernie
Sonny
160,000
To record settlement with

Sonny*
Sonny
JV Cash
Income from JV
Bernie
78,000
Interest of Sonny (P38,000 + P40,000)

Bonus to Jolly and Bernie (P78,000 x 20%)
Cash settlement to Sonny
Books of Bernie
110,000
80,000
40,000
40,000
62,400
10,400
5,200
Jolly
Joint Venture
110,000
Joint Venture
Jolly
Income from JV
Sonny
160,000
Sonny
Jolly
Income from JV
78,000
Books of Sonny
110,000
80,000
40,000
40,000
72,800
5,200
Jolly
Joint Venture
110,000
Joint Venture
Jolly
Bernie
Income from JV
160,000
Cash
Loss from JV
Bernie
Jolly
62,400
15,600
72,000
110,000
80,000
40,000
40,000
150,000
P78,000
15,600
P62,400
The bonus to Jolly and Bernie represents a gain to them and a loss to Sonny. The P15,600 bonus shall be shared by Jolly and Bernie in the ratio of 4:2. The, the
sharing is as follows: Jolly P15,600 x 4/6 = P10,400; Bernie P15,600 x 2/6 = P5,200.
page 3
Problem 4-1
Dario, Val, and Rene
Worksheet Summarizing Joint Venture Transactions
August 7 - 10, 2008
Construction of stand
Purchases
Payment of permit to operate
Additional purchases
Sales
Fire extinguishers divided among venturers
Unsold merchandise taken by Dario
Net profit
Distribution of profit:
Cleaning of lawn of Rene
Commission
Balance -75% to Dario and 25% to Val
Totals
Cash settlement
Purchases P10,000 + P15,000

Cost of Sales P45,000/200%
Inventory end
Inventory value taken by Dario
Joint Venture
Debit
Credit
1,000
10,000
500
15,000
45,000
26,500
19,759
46,250
1,250
46,250
Debit
Dario
15,000
3,333
1,250
19,583
10,000
21,000
Debit
Val
20,000
3,333
Credit
5,000
23,333
5,000
6,000
938
27,938
23,333
27,938
23,333
8,000
312
13,312
10,020
23,333
Debit
Rene
Credit
500
10,000
3,334
10,000
13,334
10,500
46,250
19,583
8,355
27,938
P25,000
22,500
P 2,500
X 50%
P 1,250
Credit
P 1,000
10,000
500
4,000
13,334
1,666
15,000
15,000
15,000
CHAPTER 5
SUGGESTED ANSWERS
EXERCISES
Exercise 5 1
1. Inventory on Consignment
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.
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.

To record cost of goods sold.
24,000
4.
To record return of consigned goods.
66,000
Exercise 5 2
1. Consignor Books:
Finished Goods Inventory
Cash
Consignee Payable
500,000
40,000
90,000
31,200
24,000
66,000
31,200
31,200
24,000
66,000
500,000
30,000
10,000
page 2
Commission Expense (P420,000 x 10%)

Consignment Sales
42,000
378,000

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
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

Consignment sales
P420,000
Less Cost of consignment sales
362,880
Commission expense
Profit from consignment
P57,120
42,000
P15,120
Exercise 5-3
Requirement 1 Consignment profits calculated separately
Books of Consignor
1.
Consignment Out
Merchandise Shipment on Consignment
7,000
7,000
2.
3.
page 3
Cash
Consignment-Out
Consignment-Out
3,500
2,500
Consignment-Out
Consignment Income
Sales (4 sets @P1,500)
CGS (4 sets @P700)
Freight-in (4/10 x P1,000)
Commission (25% x P6,000)
Consignment income
1,300
P6,000
( 2,800)
( 400)
( 1,500)
P1,300
6,000
1,300
Books of Consignee
1.
Received 10 sets of electric fan from Ledesma
2.
Consignment-In
Cash
1,000
3.
Cash
Consignment-In
6,000
4.
Consignment-In
Consignment Income
1,500
5.
Consignment-In
Cash
3,500
1,000
6,000
1,500
3,500
Requirement 2 Consignment profits not calculated separately

Books of Consignor
1.
Shipped merchandise to Amoranto, a consignee,
2.
3.
Cash
Freight
Commission Expense
Merchandise on Consignment
Sales
3,500
400
1,500
600
Income Summary
Unsold merchandise on consignment (6 sets @P700)
4,200
Books of Consignee
1.
Received 10 sets of electric fan from Ledesma, a consignor..
6,000
4,200
..
2.
Ledesma
Cash
1,000
3.
Cash
Sales
6,000
1,000
6,000
page 4
4.
Purchases (P6,000 P1,500 commission)

Ledesma
4,500
5.
Ledesma
Cash
3,500
Exercise 5 4
1. Sales of laser discs, net of commissions and cartage
Less: Cost
Freight and handling
Loss on laser discs consignment
2.
4,500
3,500
P180,000
5,400
Sales of TV sets, net of commissions and delivery & installation costs

Less: Cost (15 x P9,000)
Freight and handling [(15 + 3*)/24** x P10,800]
Freight on return of defective units
Profit on TV sets on consignments
P135,000
8,100
1,080
P181,800
185,400
P 3,600
P173,250
144,180
P 29,070
* Number of units returned = Cost of returned units / Cost per unit

= P27,000 / P9,000
= 3
** Units shipped to consignee = Total cost of TV sets shipped / Cost per unit
= P216,000 / P9,000
= 24
3.
TV sets P54,000 + (P10,800 6/24 = P2,700) = P56,700
Exercise 5 5
1. Sales (300 x P1,000) + (100** x P1,100)
Cost of sales (400 x P600)
Gross profit
Expenses:
Freight (400/500 x P5,500)
Safety devices (100/200 x P10,000)
Commission (P410,000 x 10%)
Delivery cost
Consignment profit
P410,000*
240,000
P170,000
P 4,400
5,000
41,000
4,500
54,900
P115,100
*Consignee remitt6ance and charges represent only 90% of sales in as much as the 10% commission
of the consignee has not yet been included among the charges (P364,500 + P4,500 = P369,000 /
90% = P410,000)
** The 100 units with safety device sold at P1,100 is computed as follows:
Sales
Sales of units without safety device (300 x P600)
Sales of units with safety device
Units sold (P110,000 / P1,100)
P410,000
300,000
P110,000
100
2.
page 5
Cost (100 x P600)

Freight (100/500 x P5,500)
Safety device (100/200 x P10,000)
Inventory cost of consigned goods
P60,000
1,100
5,000
P66,100
PROBLEMS
Problem 5-1
Req. 1. Books of consignee; consignment sales merged with regular sales
April
Received 20 sets of VCD player

CCM Corp.
Cash
Accounts Receivable
Sales
24,000
Purchases
CCM Corp.
20,000
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
36,000
Cash
Consignment Out
Receivable Consignee
Consignment Out
5,000
1,750
13,250
Consignment Out
Consignment Income
4,900
1,750
24,000
20,000
10,000
5,000
18,000
15,000
15,000
10,000
36,000
20,000
4,900
page 6

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
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
2.
Consignment Out
Cash
3.
Cash
Consignment Out
Receivable Consignees
Consignment Out
4.

Consignment Out
Returned merchandise (4 sets @P1,000)
50,000
750
5,000
10,600
16,400
4,000
50,000
750
32,000
4,000
5.
page 7
Consignment Out
Consignment Income
5,700
Total
Sales
5,700
Inventory
Charges by consignor:
Cost of consigned goods
P46,000
P16,000
P30,000
Freight-out
750
300
450
Charges by consignee
Cartage-in
1,000
400
600
Delivery and installation
1,600
1,600
Commission
8,000
8,000
Total
P57,350
P26,300
P31,050
Sales price
32,000
Consignment profit
P 5,700
*Note: Freight and cartage on sets returned are charged against sales of the period.
Books of consignee
1.
Received 50 cordless phones.
2.
Accounts Receivable
Consignment In
32,000
3.
Cash
Accounts Receivable
P32,000 P16,400 (collectible) = P15,600
15,600
4.
Returned four (4) defective cordless phones.
5.
Consignment In
Delivery and Installation Expense
Commission on Consignment
Cash
Remittance
15,600
32,000
15,600
1,600
8,000
5,000
Problem 5-3
Correcting entry to bring accounts with Alejo up to date
Consignment Commissions
Freight on Consignment Shipments (P2,600 x 65/100)
Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100)
Consignment Sales
Alejo
Account sales Alejo
Sales (65 stoves @ P3,600)
Commission (25% of P234,000)
Freight
Amount owed
Total amount remitted
Balance-charge against Sunstar
P234,000
( 58,500)
( 2,600)
P172,900
( 187,900)
P 15,000
58,500
1,690
910
6,000
67,100
page 8
Entry that should have been made for transactions of Alejo on the books of consignor:
Cash
Consignment Commission
Freight on Consignment Shipments
Prepaid Expenses on Consigned Merchandise
Consignment Sales
Alejo
187,900
58,500
1,690
910
234,000
15,000
Net effect of entries already made with Alejo for transfer of merchandise and remittance
Cash
Alejo
Consignment Sales
187,900
52,100
240,000
Correcting entry to bring accounts with Burgos up to date

Consignment Commissions
Freight on Consignment Shipments (P2,600 x 65/100)
Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100)
Consignment Sales
Burgos
Account sales Burgos
Sales (15 stoves @ P3,600)
Commission (25% of P54,000)
Freight
Amount owed
Total amount remitted
Balance-amount owed Sunstar
13,500
750
1,250
42,000
57,500
P54,000
( 13,500)
( 2,000)
P38,500
( 11,500)
P27,000
Entry that should have been made for transactions of Burgos on the books of consignor:
Cash
Consignment Commission
Freight on Consignment Shipments
Prepaid Expenses on Consigned Merchandise
Burgos
Consignment Sales
11,500
13,500
750
1,250
27,000
54,000
Net effect of entries already made with Burgos for transfer of merchandise and remittance
Cash
Burgos
Consignment Sales
Problem 5-4
Entries to bring account with Domingo up to date
11,500
84,500
96,000
1.
page 9
Cash
Operating Expenses
Receivables-Consignees
Remittance for 10 sets less charges
5,100
900
2.
Sales
Receivables Consignees
Unsold units previously recognized as sales.
3,000
3.
Merchandise in Transit
Cost of Goods Sold
Merchandise returned and still in transit.
1,600
Entries to bring account with Estrella up to date

1.
Cash
Operating Expenses
13,400
600
1,000
2.
Sales
9,000
3.
Cost of Goods Sold
Unsold units in the hands of consignee
4,800
4.
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
Accounts Payable
960
2.
Sales
2,400
3.
Merchandise in Transit
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
3.
Income Summary
Income Tax
4.
Income Summary
Retained Earnings
2.
page 10
72,219
134,121
72,219
134,121
Moonstar Company
December 31, 2008
Current assets:
Cash
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
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.
Receipts (215 x P500)

Less Shipping charges
Remittance
P107,500
2,100
P105,400
6.
(215 x 40% x P580) + (215 x 60% x P640) (215 x P500) =
P24,860
7.
Receipts ( 7 dozens x 12 x P2,000)

Charges: Expenses
Commissions (15% x P168,000)
Remittance
P168,000
P180,000 + P9,000 = P189,000
P 3,000
25,200
28,200
P139,800
121,980
318,700
170,000
P488,700
P25,360
72,219
391,121
P488,700
8.
9.
10.
C
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
Cost (6 x P4,000)
Freight (P1,600 x 6/10)
Balance of Merchandise on Consignment account
P24,000
960
P24,960
12
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.
Remittance
Charges:
Delivery expense
Repairs
Total
Sales
Cost of sales
Gross profit
Expenses:
Repairs (P2,000 x 60/100)
Delivery
Shipping cost (P900 x 260/300)
Consignment profit
*Sales
Less Sales of units with defects (200 x P300)
Sales of repaired units
Selling price of repaired units
Number of repaired units that were sold
Units sold without repairs
Total number of units sold
Unit cost
Cost of sales
P5,600
640
6,240
P 5,760
P64,980
P 850
2,000
P11,970
1,200
850
780
P79,800
60,000
P19,800
P330
60
240
300
x P200
P52,000
2,850
P67,380
85%
P79,800
52,000*
P27,800
14,800
P13,000
page 12
14
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.
Remittance
Charges:
Cartage
Advertising
Total
P54,600
P 600
3,600
2,400
Sales
16
17.
Sales
Cost and expenses:
Cost (6 x P7,200)
Freight (P4,800 x 6/10)
Cartage (P600 x 6/10)
Advertising
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
Sales
Gross profit
Expenses:
Freight-out (P6,000 x 6/10)
Marketing expense
Cartage (P750 x 6/10)
Net profit from the sale of consigned goods
19
P90,000 x 15% = P13,500
20
Sales collected [(2 x P1,500) + (1 x P1,800 x 25%)]

Remittance
63,240
P 8,760
P68,250
8,250
P76,500
85%
P90,000
Sales price of 6 refrigerators

18
6,600
P61,200
85%
P72,000
P90,000
54,000
P36,000
P13,500
3,600
4,500
3,000
450
25,050
P10,950
P3,450
720
P2,730
21
22
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
( 3 x P2,000) + (P600 x 3/10) = P6,180
24
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
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.
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.
P3,375 / 15% = P22,500 / P1,500
15 units
29
30
31
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.
P10,800 P450 P2,160 P500 = P7,690
33
P9,120 x 3/12 = P2,280
34.
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
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.
Remittance
Charges: Advertising
P120
Delivery
75
Total proceeds from sales, net of 20% commission
P3,165
37
Total sales price of the 7 handbags
195
P3,360
80%
P4,200
Cost (3 x P300)
Freight (3/10 x P150)
Advertising ( 3/10 x P120)
Inventory of unsold handbags
P 900
45
36
P 981
38
39.
40
Sales
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
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
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 Recl, Jan. 1
Less Installment Accounts Recl, 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%
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%]*
* 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 before adj.
Deferred gross profit after adj.
(Inst. contract recl 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

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
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
14,500
4,000
1,500
e.
Expenses
Cash
16,000
f.
Installment Sales
Deferred Gross Profit
g.

P120,000 x 20% = P 24,000
24,000
h.

Expenses
Income Summary
24,000
250,000
Exercise 6-6
a.
Installment Sales
600,000
b.
405,000

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

page 3
c.
Cash
360,000
d.
Repossessed Merchandise
Deferred Gross Profit (P40,000 x 32.5%)
24,000
13,000
3,000
e.
Installment Sales
195,000/600,000 = 32.5%
600,000
f.

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
Interest Revenue
b.
c.
1,400
Deferred Gross Profit (P4,000 x 40%)
Loss on Defaults
2,000
1,600
400

Realized Gross Profit (P1,240 x 40%)
496
Requirement 2
a.
Loss on Defaults
Exercise 6-8
Repossessed Merchandise (P13,500/120%)
Deferred Gross Profit (P15,000 x 20%/120%)
Exercise 6-9
a.
Trade-In Merchandise
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

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.

Automobiles
500,000
c.
Installment Sales
600,000
d.

P180,000 x 16 2/3% = P30,000
Exercise 6 - 10
Correct entry
Allowance for Doubtful Installment Contract Recl
Deferred Gross Profit ( P 10,000 x 25/125 )
Installment Contract Receivable
Correcting Entry
Exercise 6-11
Requirement 1
Oct. 31
Cash
Real Estate
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
Interest Revenue
550,000 x 1% = 5,500
11,500
Dec. 31
Cash
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

page 5
31

P200,000 + P6,000 + P6,000 = P212,000 x 20%
Requirement 2
Oct. 31
Cash
Real Estate
GP rate = P150,000/P750,000 = 20%
42,400
200,000
550,000
Nov. 30
Cash
Interest Revenue
P550,000 x 1% = P5,500
6,000
Dec. 31
Cash
Interest Revenue
P550,000 P500 = P549,500 x 1% x = P5,495
6,000
31

P200,000 + P500 + P505 = P201,005 x 20% = P40,201
Exercise 6-12
40,201
500
5,500
505
5,495
40,201

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

page 6
Dec. 31
Real Estate Sales

GP rate = P550,000/P1,400,000 = 39.29%
Cash
Notes Receivable
223,000
31

Interest Revenue
(P2,230,000 P970,000) x 12% = P151,200
151,200
31

[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 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.

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
Interest Revenue
Requirement 2
a.
Installment Sales
GP rate = 2,000,000/5,000,000 = 40%
b.
(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

page 7
Exercise 6-15
2005 Installment Accounts Receivable
Installment Sales
2006
2007
4,700,000

Inventory
2,585,000
Cash
Installment Accounts Receivable
2,585,000
Installment Sales
4,700,000

Installment Sales
4,500,000

Inventory
2,610,000
Cash
Installment Accounts Receivable 2005
3,885,000
Installment Sales
4,500,000

1,410,000

Installment Sales
5,800,000

Inventory
3,074,000
Cash
5,010,000
Installment Sales
5,800,000

Deferred Gross Profit 2006 P1,350,000 (P2,610,000-P2,475,000)
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

page 8
2008

Installment Sale
6,100,000

Inventory
3,111,000
Cash
5,545,000
Installment Sales
6,100,000

Deferred Gross Profit 2008 P3,355,000 P3,111,000
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
1 - (P 280,250 / P 475,000) = 41%
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

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
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

Deferred Gross Profit - Real Estate Sales
GP rate = 7,800,000/15,000,000 = 52%
31
Cash
Notes Receivable
2,197,100
31

1,350,000
Cash
Notes Receivable
2,197,100
2008
Dec. 31
31

(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

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
b. Deferred Gross Profit 2007 (520,000 x 30%)
Deferred Gross Profit 2008 (740,000 x 35%)
c. Sales
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

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.
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
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
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

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 recl, beginning
Installment contracts recl, end
Defaulted installment contracts recl
Collections
Gross profit rate
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.
December 31, 2008
Cash
Inst. Contracts Recl, 2008
Accounts Recl
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
.
Purchases, including freight-in
Less Inventory, December 31
Cost of Goods Sold
Liabilities & Shareholders Equity

Accounts Payable
P 75,000
Deferred Gross Profit, 2008
30,400
8,000
2,250
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

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
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
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
b.
3.

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

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
Piano
60/160 = 37.5%
48,000
432,000
Oct. 31
Cash
Installment Revenue
48,000
Nov. 30
Cash
Installment Revenue
48,000
Dec. 31
Cash
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

page 15
(3)
Dec. 31
(4)
2006
Feb.
Problem 6-6
(1)

69,828
48,000 + 45,840 +46,069 + 46,300 = 186,209 x 37.5% = 69,828
Repossessed Piano
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

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
P5,966.70
P6,352.45
P 385.75
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.

Interest Income
Operating Expenses
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

page 17
Less DGP 4,373,200 / 8,060,000 x 5,370,000

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

page 18
Discount on Notes Receivable - 2007

Interest Revenue
2008
3,600
Installment Sales
Deferred Gross Profit - 2007
86,833

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%)
33,525/77,545 = 43.23%
11,062
11,267
Cash
Notes Receivable
Idle Plant
43,200
43,633
16,080
52,020
11,955
77,545
Installment Sales
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

page 19
2006
July 1
Cash
Notes Receivable
2007
Dec. 31
2008
Feb. 1
Feb. 1
1,900,000
Cash
2,250,000
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.
2
3
4
A
B
C
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
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

page 20
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
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
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
11
2007 - 100% - (31,250/62,500) = 50% x P25,000

2008 - 100% - (45,000/100,000) = 55% x P62,500
Total
12
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
.
P610,750 x 60%
P366,450
14
P306,520 x 40%
P122,608
15
2006 sales - P17,400 x 36%

2007 sales - P(205,400 - P200 - P25,800) x 39%
Total
16
Selling price
Cost (P200 x 61%)
Gain from sale of repossessed merchandise
17
(P344,460 - P67,440 - P2,200) x 34%
18
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

page 21
19
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
( P100,000 - P12,500 - P6,250) x 50%
21
( 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
(3,750 - (6,250 x 50%)
23
2006 sales - P108,750 x 25%

2007 sales - P120,000 x 27.5%
2008 sales - P 93,750 x 28%
Total
24
Value assigned to repossessed merchandise:

2006 sales
2007 sales
Unrecovered cost
2006 sales - P22,500 x 75%
2007 sales - P24,000 x 72.5%
25
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
2007 sales - P4,500 - (P10,000 x 58%)

2008 sales - P3,500 - (P5,000 x 60%)
Net gain (loss) on repossession
27
P360,000 x 33 1/3%
28
Loss = P8,000 - (P15,000 x 60%)
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

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
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
(P120,000 - P15,000 - P7,750) x 45%
33
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
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
Delivered cost of purchases
Repossessed merchandise
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
Installment recl, beg

Installment sales
Installment recl, end
Defaulted recl
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

page 23
38
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
Inst. recl balance, Dec. 31, 2007 (P360,000 - P120,000)

Installment payment, Jan. 1 - Mar. 1 (P20,000 x 3)
Inst. recl balance, April 1
Cost percentage
Unrecovered cost
Market value of repossessed mdse. (P13,500 - P800 - P2,700)
40
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
Inst. contract recl beg.

Less: Inst. Contract recl, end
Inst. Contract recl written off
Collections
Gross profit rate
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

page 24
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
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
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
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]
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

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

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
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

Current Assets:
Accounts Receivable
50,000,000
P5,500,000
Progress Billings on Construction Contracts
Less Construction in Progress
P44,000,000
40,000,000
Exercise 7-2
a. Construction in Progress
32,000,000
Progress Billing on Const. Contract
33,000,000
c. Cash
Accounts Receivable
31,000,000
Cost of LTCC
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
15,500,000
22,000,000
29,000,000
25,000,000
page
e. Progress Billing on Const. Contracts

Contract price
Estimated cost to complete
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%

Cost of revenue
Gross profit
To date
P25,000,000
23,000,000
P 2,000,000

-

P25,000,000
23,000,000
P 2,000,000

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

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.
Contract price
Total estimated cost:
P 4,400,000
15,600,000
Percentage of completion ( P 400,000/20,000,000)
Gross profit to be recognized in 2008
P25,000,000
20,000,000
P 5,000,000
22%
P 1,100,000
2.
page
Accounts Receivable
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%)
P 750,000
P5,500,000
P7,500,000
Contract price
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%

Cost of revenue
Gross profit
To date
P21,875,000
17,500,000
P 4,375,000

-

P21,875,000
17,500,000
P 4,375,000

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)

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
17,500,000
Progress Billing on
Const. Contracts
16,000,000
17,500,000
11,750,000
11,750,000
12,000,000
16,000,000
1,750,000
1,750,000
7,000,000
12,000,000
7,000,000
page
c. Cash
Accounts Receivable
15,000,000
d. Cost of LTCC
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
10,000,000
1,750,000
1,750,000
2,125,000
9,625,000
3,500,000
e. Progress Billing on Const. Contract

35,000,000
35,000,000
3.
Cost of revenue
Gross profit
To date
P17,500,000
17,500,000
==========

============

P17,500,000
17,500,000
==========

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

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
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

P 900,000
60%
P1,500,000
4. Contract price
Less Total estimated gross profit
Less Cost incurred to date
P10,000,000
1,500,000
P 8,500,000
5,100,000
P 3,400,000
Exercise 7-8
Cash
Notes Receivable
Unearned Franchise Fees
500,000
1,000,000
207,540
1,292,460
Exercise 7-9
1. Cash
Notes Receivable
page
4,000,000
3,000,000
2. Cash
Notes Receivable
(3,000,000-(2.48685 x 1,000,000)
Revenue from Franchise Fees
4,000,000
3,000,000
3. Cash
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
Revenue from Franchise Fees
Unearned Franchise Fees (1,000,000 x 2.48685)
Exercise 7-10
2007
July 1 - Cash
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
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
11,000,000
Progress Billing on Const. Contract
10,800,000
c. Cash
Accounts Receivable
10,000,000
d. Cost of LTCC
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
page
e. Progress Billing on Construction Contracts

20,000,000
Problem 7-2
Statement of Recognized Income and Expenses:
Income: 2007
2008
P2,750,000
1,450,000

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
Gross profit to date
Less Gross profit recognized in prior year/s
Gross profit to be recognized this year
Recl ending balance

380,000
940,000
-
2006
P15,000,000
P 4,000,000
8,000,000
P12,000,000
P 3,000,000
33 1/3%
P 1,000,000
_____-______
P 1,000,000
CIP Invty. ending balance

5,000,000
12,000,000
2007
P15,000,000
P10,000,000
2,500,000
P12,500,000
P 2,500,000
80%
P 2,000,000
1,000,000
P 1,000,000
Cost in excess of billings

1,200,000
2,600,000
2008
P15,000,000
P12,000,000
---------------P12,000,000
P 3,000,000
100%
P 3,000,000
2,000,000
P 1,000,000
page
Problem 7-4
PROJECT A
2007
2008
P29,000,000
P29,000,000
P16,800,000
P26,400,000
11,200,000
------------P28,000,000
P26,400,000
P 1,000,000
P 2,600,000
60%
100%
P 600,000
P 2,600,000
------600,000
P 600,000
P 1,000,000
Contract price
Total estimated gross profit (loss)
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
2007
P2,550,000
1,200,000
P1,350,000
2006
P120,000,000
P 24,000,000
76,000,000
P100,000,000
P 20,000,000
24%
2008
P3,890,000
1,200,000
P2,690,000
2007
P120,000,000
P60,500,000
49,500,000
P110,000,000
P 10,000,000
55%
2008
P120,000,000
P90,000,000
10,000,000
P100,000,000
P 20,000,000
90%
2009
P120,000,000
P105,000,000
-------P105,000,000
P 15,000,000
100%
10
PROJECT D
2008
P2,000,000
P 5,600,000
10,400,000
P16,000,000
P 4,000,000
35%
P 1,400,000
----P 1,400,000
page
Recognized in
To date
P28,800,000
24,000,000
P 4,800,000
prior year
----------------
2007-Revenue
Cost of revenue
Gross profit
To date
P66,000,000
60,500,000
P 5,500,000
Recognized in
prior year
P28,800,000
24,000,000
P 4,800,000
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
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
d.
e.
page
Cost of LTCC
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

Problem 7-6
Contract price
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
Less GP recognized in prior year/s
GP to be recognized this year
2007
P14,000,000
P11,475,000
1,275,000
P12,750,000
P 1,250,000
90%
P 1,125,000
600,000
P 525,000
2007
P1,300,000 (2)
1,250,000
P 50,000
2006
P3,500,000
1,000,000
P2,250,000
P3,250,000
250,000
30.77%
P 76,925
P 76,925
2008
P13,000.000
P12,295,000
------P12,295,000
P 705,000
100%
P 705,000
1,125,000
P (420,000)
2008
P1,100,000 (3)
1,150,000 (4)
P (50,000)
2007
P3,500,000
2,250,000
P 950,000
P3,200,000
300,000
70.3125%
P 210,938
76,925
P 134,013
Total
P3,500,000
3,400,000 (5)
P 100,000
12
3,000,000
12,000,000
120,000,000
page
Problem 7-8
Franchise A:
The circumstances imply that the full accrual method could be used.
Franchise revenue
P3,578,000*
Franchise cost
1,400,000
Interest revenue (P2,178,000 x 4%)
Income from Franchise A
*Initial deposit
PV of four payments [4% for 4 periods
(P600,000 x 3.6299)]
13
P2,178,000
87,200
P2,265,200
P 1,400,000
2,178,000
P 3,578,000
Franchise B:
Because of the doubtful collection and only partial completion, the deposit method should be used. No revenue or income would be
recognized in 2008 from the franchise fee. However, because the first payment of P600,000 was made, interest revenue of P87,200 would
be recognized.
Franchise C:
Because of the doubtful collection but substantial completion, either the installment sales or cost recovery method could be used. If the
installment sales method is used, gross profit of P843,600* would be recognized in 2008 plus interest revenue of P87,200.
*Franchise revenue
Franchise cost
Franchise gross profit
Gross profit percentage: P1,578,000 P3,578,000
Collections in 2008:
Initial fee
First payment:
Interest
P 87,200
Principal
512,800
Total
P 600,000
Gross profit recognized 2008: P1,912,800 x 44.1% = P843,600
P3,578,000
2,000,000
P1,578,000
44.1%
P1,400,000
512,800
P1,912,800
page
14
If the cost recovery method is used, no revenue or income would be recognized, because the P2,000,000 collections are exactly offset by
the P2,000,000 costs.
Problem 7-9
2007
July 1
Cash
Notes Receivable
7,000,000
8,000,000
Aug. 15

Cash
800,000
Sept. 15

Cash
500,000
Dec. 31
Interest Receivable
Interest Revenue
400,000
2008
Jan. 1
July
Cash
Notes Receivable
Interest Receivable
2,400,000
15

Cash
1,000,000
31

Cost of Franchise Revenue
Franchise Fee Revenue
Cash
Notes Receivable
Interest Revenue
P6,000,000 x 10% x 6/12
15,000,000
2,300,000
2,300,000
15,000,000
800,000
500,000
400,000
2,000,000
400,000
1,000,000
15,000,000
2,300,000
2,000,000
300,000
Dec.
31
page
Interest Receivable
Interest Revenue
200,000
Problem 7-10
1. Downpayment made on 1/1/ 07
Present value of an ordinary annuity (P240,000 x 3.69590)
Total revenue recorded by Triple Eight
P 800,000.00
887,016.00
P1,687.016.00
2. Cost of acquisition
P 1,687,016
3. Cash
Notes Receivable
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.
P20,000,000 x (3,000,000/15,000,000) =
B
D
D
D
C
P4,000,000
15
12.
Contract price
Less Total estimated cost:
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.
Contract price
Total estimated income
Percentage-of-completion (27/81)
Income recognized last year
14.
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
Contract price
Total estimated cost (P4M + P4M + P2M)
Percentage-of-completion (8M/10M)
P14,000,000
10,000,000
P 4,000,000
80%

Less Gross profit recognized in 2006
(P14M P8M = P6M x 4/8)
P 3,200,000
Contract price
Percentage-of-completion (600/1,800)
P3,000,000
1,800,000
P1,200,000
33 1/3%
P 400,000
16
P9,000,000
8,100,000
P 900,000
33 1/3%
P 300,000
3,000,000
200,000
16
17.
18
page
Contract price
Total cost incurred
Gross profit
Gross profit percentage (1,200/12,000)
Contract price
Total est. gross profit
Percentage-of-completion
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
GP to date
GP recognized in prior years
(P30M - P22M = P8M x 50%)
GP to be recognized in 2008
21.
Total amount billed

Less Balance of accounts receivable
Total collections
Amount deposited
Cash collected not yet deposited
22
P150,000 937,500/9,000,000
P 978,000
83.33%
P30,000,000
24,000,000
P 6,000,000
83.33%
P 5,000,000
4,000,000
P 1,000,000
P843,750
300,000
P543,750
500,000
P 43,750
P1,440,000
17
page
23
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
Contract price
Gross profit rate
P100.00M
25%
P25.00M
50%
P12.50M
25.
26
27
28
29
B
A
B
C
30
Downpayment
First installment payment
Addl 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
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)

Cash
(g)
Iloilo Branch
(h)
Branch Income
Branch
5,500
550
2,600
20,000
3,500
1,200
32,000
15,000
5,500
550
2,600

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
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)

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

4
(4)
page
Cash
Sales Discount
Accounts Receivable
288,000
6,000
(5)
Home Office
Cash
150,000
(6)

Cash
(7)
Expenses
(b)
40,000
Sales
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)
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

5
page
Liabilities
Accrued Expenses
Home Office (300,000 - 150,000 + 62,000)
Total Liabilities
2,000
212,000
P 214,000
Exercise 8- 5
Home Office Books
(a)

Branch
24,500
(b)
Branch
Cash
24,500
(c)
Branch
(d)
Furniture & Fixtures - new

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)
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

Home Office
16

Home Office
2,500
10,000
6,500
2,500
10,000
6,500

6
page
16
Home Office
Cash
2,000
20
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 recl
(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)

Home Office
615
615

7
Exercise 8-8
page
Home Office Books
(a)

Makati Branch
600
(b)
Makati Branch
General and Administrative Expense
1,250
(c)
Manila Branch
Makati Branch
1,200
(d)
Makati Branch
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)

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

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

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)

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)

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

10
page
b.
Purchases
Accounts Payable
21,000
c.

Home office
40,000
d.
Cash
Accounts Receivable
76,000
e.
Accounts Payable
Cash
20,200
f.

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
200
400
1,700
k.
l.
Merchandise Inventory, end

Sales
Income Summary
Merchandise Inventory, beg.
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

11
Requirement 2
page
Volvo Company
Statement of Recognized Income and Expenses - Branch
Sales
Cost of goods sold:
Purchases
Shipments from home office
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)
Prepaid Expenses
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
Home office account balance, January 1
Add:
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

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
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

Home Office
12,500
h.
143,000
9,000
62,000
26,000
30,000
14,500
12,500
17,500
12,500

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.

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

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
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
Sales
Cost of Goods Sold:
Merchandise Inventory, January 1
Purchases
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

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)
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

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
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
Sales
Cost of Goods Sold:
Merchandise Inventory, January 1
Purchases
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

16
page
Jazz Company
Combined Statement of Financial Position for Home Office and Branch
January 31, 2008
Assets
Cash
Accounts Receivable
Store Furniture and Fixtures
Total Assets
P384,500
10,500
P159,000
47,350
P 102,000
374,000
549,000
111,650
P1,136,650

Accounts Payable
Accrued Expenses
Income Tax Payable
Retained Earnings
Requirement 4
P 307,000
11,000
12,828
500,000
305,822
P1,136,650
Branch Books
a.

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
Income Summary
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

17
page
Home Office Books

a.
Bacolod Branch
Shipments to Branch
6,000
b.
Bacolod Branch
Expenses
4,750
c.
Expenses
Bacolod Branch
( 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
Income Summary
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

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

19
page
Problem 8-6
Requirement 1
Isuzu Company
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
Home Office
600
4,310
4,910
Problem 8-7
Requirement 1
a.

Operating Expenses
Home Office Current
57,600
8,100
65,700

20
b.
c.
page
Sales
Income Summary
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

21
page
Problem 8-8
Mitsubishi Trading Company
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.
2.
3.
Sales
Cost of sales ( 400,0000 - 70,000)
Gross profit
Expenses [30,000 + 10,000 + (10,000 - 6,000) + 5,000]
Net profit
4.
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

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.
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
11
12
13
Sales
Cost of sales
Shipments
Less Inventory, end
Gross Profit
Expenses
Net Profit
P74,000
14
15
A
A
P17,500 + 8,680
16
203,500 (186,120 25,245 18,755) = 23,870
17
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

23
18
Sales
Cost of Sales:
Less Inventory, Dec. 31
Gross profit
Expenses
Net Profit
19
P90,000 + P14,400
20
P1,500 + 43,800 + 37,170
21
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
23
24
25
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

24
page
26
27
28
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
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
32
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
Butuans remittance credited to Davao
Net adjustment in Home Office Banch account
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)

25
33
34
35
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
Freight-In
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
Utility Expense
360,000
134,000
240,000
120,000
40,000
70,000
24,000

page 2
5.
no entry
Cash
Branch
360,000
6.
no entry
7.
Branch
Branch Income
8.

Branch Income
P300,000 x 50/150 = P100,000
100,000
9.
Branch Income
Income Summary
158,000
1.
Purchases
Accounts Payable
2.

Home Office
360,000
3.
Accounts Receivable
Sales
652,000
4.
Advertising 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
Sales
Purchases
Advertising 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

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
150,000/300,000 = 50%
2.
no entry
3.

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.

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

page 4
Land
Allowance on Transfer of Land
120,000/240,000 = 50%
300,000
120,000
80,000
2.
Branch
Shipments to Branch
160,000/400,000 = 40%
560,000
3.
Branch
Branch Income
130,000
4.

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

page 5
c.
Home Office Books

Shipments to Branch
Unrealized Intercompany Inventory Profit
Branch
400
140
Branch Books
Home Office
540
540
540
Exercise 9 9
1. P20,000 25/125 = P100,000
2.

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:
Purchases
Shipments to branch
Less Inventory, end
Separate cost of goods sold of the branch:
From outside purchases
From home office (P36,000 / 120%)
Total
Purchases
Shipments from home office (P720,000 / 120%)
Less Inventory, end:
From outside purchases
From home office (P42,000 / 120%)
Combined cost of goods sold
Exercise 9 11
1.
Shipments to branch
Markup
74,000
P 252,000
2,800,000
( 600,000)
P2,452,000
240,000
74,000
P2,212,000
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

page 6
3.
Billed Price
P 60,000
450,000
P510,000
90,000
P420,000
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 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
Branch
Branch Books
Home Office
Exercise 9 13
1. Branch Income
Cost of Goods Sold P230,000 x 15/115
Branch
2.
Home Office
Branch
3.

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

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.

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.

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

page 8
f.
Home Office
Cash
g.
Home Office
2,500
h.
Expenses
Home Office
1,800
i.

Freight-In
Home Office
20,000
100
Home Office
Freight-In
Cash
20,145
j.
15,000
no entry
b.

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.

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

page 9
2.
Baguio Branch
Shipments to Branch
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.

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
Expenses
Income Summary
Home Office
Requirement 2
Baguio Branch
Branch Income
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

page 10
Branch Income
Income Summary
85,000
85,000
Requirement 3
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
Sales
Cost of Goods Sold:
Merchandise Inventory, beginning
Less Merchandise Inventory, end
Gross Profit
Operating Expenses:
Advertising and Promotion
Depreciation
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

Branch Income
P136,750 x 25/125
27,350
Branch Income
Income Summary
36,610
Problem 9 - 5
a.
Sales
Income Summary
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

page 11
b.
a.
Home Office
Income Summary
10,000
Home Office Books

Sales
Shipments to Branch
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
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

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

page 13
Problem 9 - 7
Triple G Company
Combined Statement of Recognized Income and Expenses
for Home Office and Branch
Sales
Cost of goods sold:
Merchandise inventory, beginning
Purchases
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
31,500
Income Summary
Purchases
Expenses
b.
Income Summary
Home Office
Requirement 3
12,500
Home Office Books
a.
Davao Branch
Branch Income
b.

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

page 14
c.
Sales
Shipments to Branch
Income Summary
Purchases
Expenses
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.

Home Office
3,000
f.
Retained Earnings
Inventory
P15,000 x 20/120
2,500
g.
Home Office
Branch
11,000
h.
Sales
48,000
4,000
2,000
5,000
1,000
3,000
2,500
11,000
48,000

page 15

page 16

page 17
MULTIPLE CHOICE
1.
2.
B
B
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
P12,000 x 20/120 = P2,000
15
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
Balance of allowance before adjustment

Required balance of allowance (P1,170,000 x 20/120)
Realized markup
P370,000
195,000
P175,000
17
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
P50,400/120%
P42,000
19
P90,000 + P36,000 P2,520 P50,400/120% = P60,900
20
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
12,180
P 4,380

page 18
22
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
Net income reported by the branch

Realized markup[P280,000 - (P50,000 P6,600)] x 40/140
P 5,000
67,600
P 72,600
24
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
P60,000 - P7,500
P52,500
26
P60,000 - (P7,500 x 120/20)
P15,000
27
Sales
Cost of goods sold (P180,000 + P45,000 - P60,000)
Operating expenses
Realized markup [(P180,000 x 20/120) - P7,500
P 292,500
(165,000)
( 72,000)
22,500
P 78,000
28
Unadjusted balance of allowance account

Markup on 2008shipments from home office
(P390,000 P300,000)
Total merchandise inventory beg
Merchandise from outside purchases
29
Sales
Cost of goods sold
(P54,600 + P390,000 + P144,600 - P48,750)
Operating expenses
Realized markup [P99,900 - (P39,000 x 30/130)]
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
P39,000 x 30/130 = P9,000
31
Sales (net of discount of P1,480)

Cost of goods sold (P104,000 - P12,500)
Operating expenses
P115,520
( 91,500)
( 20,000)
P 4,020
32

Realized markup (P91,500 x 25/125)
P 4,020
18,300
P 22,320

page 19
33
34
35
36
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:
Purchases
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
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
(P10,400 + P5,000) x 10/110
P1,400
38
Unadjusted balance of allowance account

Markup on 2008 shipments (P200,000 x 25%)
P 57,500
50,000
P 7,500
x 125/25
P 37,500
Branch beginning inventory at billed price

page 20
39
Sales
Operating expenses
P400,000
(247,500)
(100,000)
P 52,500
40

Realized markup (P247,500 x 25/125)
P 52,500
49,500
P102,000
41
Beginning inventory
Purchases
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
The amount of the realized markup of P18,550
43
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
P84,000 x 40/140
P24,000
45
72,500 (75,000 + 444,000 -84,000 72,500)
20%
46
P444,000 / 120%
P370,000
47
Sales
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
P84,000 x 20/120 = P14,000
49
P84,000 P14,000 = P70,000
50
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
Debits
Cash
Accounts Receivable
Inventory
Plant Assets, net
Branch
Purchases
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

Retained Earnings
50,000
45,000
Credits
Sales
Net income
Inventory, beg:
Home Office
Branch P2,000 + P21,000/120%
290,000
9,000
440,000
585,000
P55,000
19,500
P74,500
Adjustments and
Eliminations
Debit
Credit
(c ) 5,000
(b) 2,000
(f) 2,500
(a) 4,000
(a) 4,000
(c ) 5,000
(g) 11,000
(e) 3,000
(d) 1,000
(i) 36,400
(b) 2,000
(g) 11,000
(f)
95,000
120,000
(h) 48,000
Income Statement
Debit
Credit
82,500
74,500
Balance Sheet
Debit
Credit
49,000
45,000
74,500
94,000
314,000
61,000
36,400
49,500
16,500
36,400
(i) 36,400
(d) 1,000
(e) 3,000
50,000
42,500
2,500
(h) 48,000
112,900
Inventory, end:
Home Office
Branch
112,900
493,900
67,600
561,500
P70,000
12,500
P82,50
487,000
561,500
561,500
262,500
67,600
262,500
page2
Problem 9 9
Cash
Debits
Triple M Company
Work Sheet for Combined Financial Statements
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
Retained Earnings
Home Office Equity
Sales
Shipments to Branch
Allowance for Markup in BI
Cost of Goods Sold
Net income
11,550
48,450
42,000
105,000
5,500
24,300
532,000
195,000
35,000
3,500
200,000
31,000
155,000
110,000
1,000
532,000
51,500
140,000
195,000
Adjustments and
Eliminations
Debit
Credit
a. 1,700
b. 1,800
e. 1,000
a. 1,700
g. 58,300
c. 5,000
d.
250
f. 110,000
Cost of Goods Sold

Debit
Credit
33,550
Income Statement
Debit
Credit
44,770
Combined
Balance Sheet
Debit
Cred8t
20,700
44,770
248,450
190,000
5,750
h. 15,460
15,460
66,300
d.
250
h. 15,460
g. 58,300
f. 110,000
e. 1,000
193,510
38,750
15,460
200,000
31,000
b. 1,800
c. 5,000
193,510
295,000
229,300
229,300
44,770
184,530
229,300
Merchandise inventory, end:

Home office
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770
Total
184,530
266,290
28,710
295,000
P30,000
14,770
P44,770
295,000
295,000
313,920
28,710
313,920
page3
page 19
Problem 9 10
Debits
Cash
Accounts Receivable (net)
Inventory Home office
Branch
Fixed Assets (net)
Branch Current
Purchases
Sundry Expenses
Income Tax
Credits
Accounts Payable
Mortgage Payable
Income Tax Payable
Home Office Current
Sales
Shipments to Branch
Allowance for Overvaluation
Retained Earnings
Triple N Commercial
Working Paper for Combined Financial Statements for Home Office and Branch
Trial Balance
HO
Branch
50,100
1,260
350,000
135,660
64,400
32,340
210,000
163,120
532,000
294,000
119,980
83,440
1,489,600
546,700
30,500
67,500
10,500
144,200
434,000
308,000
2,940
600,000
46,660
1,489,600
Adjustments
HO
Branch
a. 5,320
b. 2,100
c. ( 2,500)
a. (5,320)
d. 14,000
f. 23,667
23,667
f. 23,667
392,000
546,700
23,667
e. 10,976
24,576
e. 10,976
b. 2,100
c. ( 2,500)
d. 14,000
24,576
Adjusted
Trial Balance
HO
Branch
55,420
3,360
350,000
133,160
64,400
32,340
210,000
157,800
532,000
308,000
119,980
83,440
23,667
10,976
1,513,267
571,276
30,500
67,500
23,667
434,000
308,000
2,940
600,000
46,660
1,513,267
a.
2,940
Branch
Income Statement
Debit
Credit
29,400
32,200
c. 157,800
b. 28,000
Home Office
Income Statement
Debit
Credit
64,400
70,000
Combined
Balance Sheet
Debit
Credit
58,780
483,160
102,200
210,000
532,000
280,000
83,440
10,976
119,980
23,667
10,500
41,000
67,500
34,643
10,976
157,800
392,000
571,276
Branch net income

Home Office net income
Inventory, end:
Home Office
Branch [(P21,420 + P14,000) / 110%]
Total
Eliminations
Debit
Credit
P 70,000
32,200
P102,200
c. 157,800
b.
a.
392,000
28,000
2,940
188,740
188,740
434,000
280,000
403,816
20,384
424,200
740,047
784,000
854,140
424,200
424,200
43,953
784,000
784,000
854,140
600,000
46,660
789,803
20,384
43,953
854,140
page 19

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CHAPTER 1

Partnership Formation and Operations

Cash (P83,500 x 1/2)

Campos and Tomas Partnership

Liabilities & Owners Equity

TOTAL LIABILITIES &

AA 1 - Chapter 1 (2008 edition)

AA 1 - Chapter 1 (2008 edition)

Sanchez and Gomez

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

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

Sanchez and Gomez

AA 1 - Chapter 1 (2008 edition)

8% interest on beg capital

8% interest on beg capital

6% interest on average capital

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

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

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

= .25 (P500,000 - Tax)

= .25 (P500,000 - B - Tax)

AA 1 - Chapter 1 (2008 edition)

AA 1 - Chapter 1 (2008 edition)

Journal entry on the partnership books

Enriquez and Flores

Reported net profit

AA 1 - Chapter 1 (2008 edition)

Distribution of 2008 net profit

AA 1 - Chapter 1 (2008 edition)

Ruiz and Santos

Tomas and Vicente

AA 1 - Chapter 1 (2008 edition)

Liabilities and Capital

AA 1 - Chapter 1 (2008 edition)

Selling and General Expenses

AA 1 - Chapter 1 (2008 edition)

Interest on beginning capital

Serrano and Torres Partnership

Serrano and Torres Partnership

AA 1 - Chapter 1 (2008 edition)

Total Liabilities and Capital

1. P2,700,000 (P200,000 + P1,100,000 + P500,000 + P1,500,000 P600,000 = P2,700,000)

AA 1 - Chapter 1 (2008 edition)

AA 1 - Chapter 1 (2008 edition)

B = (P250,000 P36,000 P88,000 P72,000)25% = P13,500

Delmar and Pilar Company

AA 1 - Chapter 1 (2008 edition)

Schedule 1 - Distribution of 2006 net loss

Schedule 2 - Distribution of 2007 net profit

Schedule 3 - Distribution of 2008 net profit

AA 1 - Chapter 1 (2008 edition)

Robles, Bernal and Reyes

Capital balances before closing

P206,000 / 60% = P343,333;

Chavez, Roman, and Valdez

*Total partners equity as shown above

AA 1 - Chapter 1 (2008 edition)

Canlas, David, Estrella and Fajardo

Distribution of net income

AA 1 - Chapter 1 (2008 edition)

Profit and Loss

Profit and Loss

Jaime = 5/10 x 80% = 40%