Accounting Book 1 Lupisan Baysa Answer Key

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Accounting Book_1 Lupisan& Baysa Answer key
Accounting (Far Eastern University)
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CHAPTER 1
Review of the Accounting Process
E 1-1
1. Unearned Revenue 11. Accrued Expense
2. Prepaid Expense 12. Accrued Revenue
3. Accrued Expense 13. Prepaid Expense
4. Accrued Expense 14. Unearned Revenue
5. Prepaid Expense 15. Accrued Expense
6. Unearned Revenue
7. Accrued Revenue
8. Accrued Expense
9. Unearned Revenue
10. Accrued revenue
E 1-2
1. Allowance for Uncollectible Accounts
2. Rent Expense
3. Office Supplies Expense
4. Salaries Payable
5. Prepaid Insurance
6. Interest Revenue
7. Interest Payable
8. Unearned Rent
9. Accumulated Depreciation
10. Income Summary
E 1-3
1. a. Unearned Rent 25,000
Rent Revenue 25,000
P300,000 x 1/12 = P25,000
No reversing entry
b. Insurance Expense 75,000

Prepaid Insurance 75,000

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P90,000 x 10/12 = P75,000
No reversing entry
2. a. Rent Revenue 275,000

Unearned Rent 275,000
P300,000 x 11/12 = P275,000

Rent Revenue 275,000
b. Prepaid Insurance 15,000

Insurance Expense 15,000
P90,000 x 2/12 = P15,000

E 1-4
1. a. Interest Expense 40,000
Interest Payable 40,000
P2,000,000 x 6% x 4/12 = P40,000
b. Prepaid Insurance 50,000

P72,000 x 25/36 = P50,000
c. Prepaid Rent 330,000

Rent Expense 330,000
P360,000 x 11/12 = P330,000
d. Uncollectible Accounts Expense 60,000

Allowance for Uncollectible Accounts 60,000
e. Salary Expense 180,000

Salaries Payable 180,000

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P450,000 x 2/5 = P180,000
f. Depreciation Expense – Office Equipment 106,000

Accumulated Depreciation – Office Equipment 106,000
P480,000  5 = P96,000 +
P120,000  5 x 5/12 = P10,000
g. Supplies on Hand 4,500

Supplies Expense 4,500
h. Rental Revenue 120,000

P180,000 x 4/6 = P120,000
i. Income Summary 180,000

Merchandise Inventory 180,000

Income Summary 220,000
2. a, b, c, e, g & h
E 1-5
1. a. Income Summary 50,000
Inventory, beg. 50,000
Inventory, end 140,000

b. Inventory, end 140,000

Purchases Returns 20,000
Cost of Goods Sold 2,000,000
Purchases 2,100,000
Freight-in 10,000

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2. Approach 2
a. Sales 5,000,000
Interest Revenue 25,000
Income Summary 5,025,000
b. Income Summary 2,980,000
Inventory, end 140,000
Purchases Returns and Allowances 20,000
Purchases 2,100,000
Freight-In 10,000
Administrative Expense 500,000
Sales Returns 5,000
Sales Discounts 10,000
Selling Expenses 450,000
Interest Expense 15,000
c. Income Summary 2,045,000

Castro, Capital 2,0450,000
d. Castro, Capital 500,000

Castro, Drawing 500,000
E 1-6
1. A 6. B or C 11. B 16. B
2. A 7. A 12. A 17. A
3. A 8. C 13. A 18. C
4. A 9. A 14. A 19. B
5. B 10. B 15. C 20. B
P 1-1
1. a. Insurance Expense 12,000

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P48,000 x 3/12 = P12,000
No reversing entry
b Rent Revenue 210,000

P270,000 x 7/9 = P210,000

Rent Revenue 210,000
c. Supplies 4,500
P12,000 – P3,000 = P9,000

Supplies 4,500
d. Depreciation Expense 52,500

Accumulated Depreciation 52,500
P350,000/5 x 9/12 = P52,500
no reversing entry
e. Uncollectible Accounts Expense 8,000

no reversing entry
f. Interest Receivable 1,500

P150,000 x 12% x 30/360 = P1,500

Interest Receivable 1,500

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g. Salary Expense 155,000


Salary Expense 155,000
h. Merchandise Inventory 122,000

P 1-2
a. Income Summary 120,000
b. Merchandise Inventory 150,000

c. Sales 5,700,000
Purchase Returns & Allowance 90,000
d. Income Summary 4,029,000

Sales Returns and Allowance 150,000
Purchases 3,000,000
Freight-in 120,000
Salary Expense 540,000
Depreciation Expense 24,000
Office Expense 150,000
e. Income Summary 1,791,000

Olson, Capital 1,791,000

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f. Olson, Capital 180,000

Olson, Drawing 180,000
P 1-3
Adjusting Income Statement Statement of Financial Position

Entry Revenue Expenses Net Income Assets Liabilities Capital
a. NE + - NE + -
b. + NE + + NE +
c. NE + - - NE -
d. NE + - - NE -
e. NE + - - NE -
f. + NE + NE - +
g. NE + - NE + -
P 1-4
1. a. Commissions Receivable 7,200
Commissions Income 7,200
b. Rent Expense 36,000

Prepaid Rent 36,000
c. Office Supplies Expense 6,600

Office Supplies 6,600
d. Depreciation Expense
2,400
e. Salaries Expense 4,800
f. Unearned Commissions 8,000

Commissions Income 8,000
g. Interest Expense 1,200

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2. a. Income Summary 111,000

Salaries Expense 64,800
Rent Expense 36,000
Office Supplies Expense 6,600
Depreciation Expense – Office Equipment 2,400
b. Commissions Income 175,200

c. Income Summary 64,200

Valdez, Capital 64,200
d. Valdez, Capital 32,000

Valdez, Drawing 32,000
3. Net Income = P64,200
P 1-5
1. Insurance Expense 30,000
2. Depreciation Expense – Office Equipment 75,000

Depreciation Expense – Automobile 260,000
Accumulated Depreciation - Automobile 260,000
3. Unearned Management Fees 80,000

Management Fees Earned 80,000
P120,000 x 4/6 = P80,000
4. Prepaid Advertising 40,000

Advertising Expense 40,000
P100,000 x 2/5 = P40,000
Multiple Choice

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1. C 4. C 7. D 10. B 13. B
2. D 5. B 8. C 11. A 14. A
3. C 6. D 9. A 12. C 15. C
TM 1
1. T 6. F 11. F 16. F 21. T
2. T 7. F 12. F 17. T 22. T
3. T 8. F 13. F 18. F 23. T
4. T 9. T 14. F 19. T 24. F
5. F 10. T 15. T 20. T 25. F
TM 2
1. D 6. B 11. B 16. B
2. C 7. C 12. A 17. D
3. C 8. C 13. D 18. B
4. B 9. B 14. C 19. B
5. A 10. B 15. C 20. C
TM 3
1. B 6. D 11. B 16. A 21. B
2. D 7. C 12. C 17. D 22. C
3. D 8. C 13. A 18. A 23. A
4. B 9. A 14. C 19. C 24. D
5. D 10. A 15. C 20. D 25. B
TM4
1. N 5. N 9. N 13. Y 17. Y
2. Y 6. N 10. Y 14. Y 18. Y
3. N 7. Y 11. N 15. Y 19. Y
4. N 8. Y 12. N 16. Y 20. Y
TM 5
1. O 6. F 11. P 16. Q
2. B 7. E 12. T 17. V
3. H 8. A 13. M 18. W
4. N 9. I 14. G 19. S
5. K 10. X 15. Z 20. D

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CHAPTER 2
Nature and Formation of a Partnership
E 2-1
a. Cash 400,000
Alonzo, Capital 400,000
b. Accounts Receivable 500,000

c. Inventories 240,000
P300,000 x 80% = P240,000
d. Equipment 540,000
P900,000 x 6/10 = P540,000
E 2-2
1. Cash 450,000
Accounts Receivable 180,000
Equipment 125,000
Accounts Payable 105,000
Notes Payable 90,000
Aquino, Capital 820,000
Cash 410,000
Asuncion, Capital 410,000
P820,000 X 3/2 = P1,230,000 X 1/3 = P410,000
2. Allowance for Uncollectible Accounts 5,000


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Equipment 55,000

Cash 450,000
Equipment 125,000
E 2-3
1. a. Amores, Capital 25,000
b. Merchandise Inventory 160,000

Amores, Capital 160,000
c. Amores, Capital 30,000

c. Prepaid Expenses 72,000
d. Cash 1,717,000
Andrada, Capital 1,717,000
(P1,612,000 – P25,000 + P160,000 + P30,000 = P1,717,000
2. a. Cash 208,000
Merchandise Inventory 1,600,000
Prepaid Expenses 72,000
Amores, Capital 1,717,000

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b. Cash 1,717,000
Andrada, Capital 1,717,000
Amores and Andrada Company

Statement of Financial Position
January 1, 2014
Assets
Cash P1,925,000
Accounts Receivable P460,000
Less Allowance for Uncollectible Accounts 25,000 435,000
Prepaid Expenses 72,000
Total Assets P4,032,000
Liabilities and Capital

Accounts Payable P598,000
Amores, Capital P1,717,000
Andrada, Capital 1,717,000 3,434,000
Total Liabilities and Capital P4,032,000
E 2-4
1. Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,000,000
Aranas, Capital 1,200,000
2. Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,100,000
Aranas, Capital 1,100,000

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P 2-1
1. a. Merchandise, Inventory 50,000
Acosta, Capital 50,000
b. Acosta, Capital 75,000
c. Interest Receivable 3,750
P375,000 x 6% x 2/12 = P3,750
d. Acosta, Capital 18,750
P750,000 x 10% x 3/12 = P18,750
e. Accumulated Depreciation 450,000
Furniture and Fixtures 600,000
f. Office Supplies 15,000
g. Cash 1,262,500
Aguas, Capital 1,262,500
P2,700,000 + 50,000 – 75,000 + 3,750 – 18,750 -150,000 + 15,000 = 2,525,000/2 = 1,262,500
Acosta and Aguas

December 1, 2014
Assets
Cash P 1,862,500
Notes Receivable 375,000
Accounts Receivable P 2,250,000
Less Allowance For Uncollectible Accounts 225,000 2,025,000
Interest Receivable 3,750

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Furniture And Fixtures 1,200,000

Total Assets P 6,131,250
Notes Payable P 750,000
Accounts Payable 1,575,000
Total Liabilities P 2,343,750
Acosta, Capital P 2,525,000
Aguas, Capital 1,263,500
Total Capital 3,787,500
Total Liabilities and Capital P 6,131,250
P 2-2
1. a. April, Capital 9,000
Allowance for Doubtful Accounts 9,000
b. April, Capital 21,000

Accrued Expenses 21,000
c. Accumulated Depreciation 112,500

April, Capital 800,000
Cash 187,500
Equipment 250,000
2. a. Merchandise Inventory 50,000

Arias, Capital 50,000
b. Arias, Capital 7,500

c. Cash 357,500
Arias, Capital 357,500

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P800,000  40% x 60% = P1,200,000 - (800,000 + 50,000 – 7,500) = 357,500

d. Accumulated Depreciation 37,500
Equipment 37,500
e. Cash 187,500
Equipment 137,500
April, Capital 800,000
April and Arias
October 1, 2014
Assets
Cash P 657,500
Accounts Receivable P 825,000
Less Allowance For Doubtful Accounts 16,500 808,500
Equipment 400,000
Total Assets P2,616,000
Accounts Payable P 595,000
Total Liabilities P 616,000
April, Capital P 800,000
Arias, Capital 1,200,000
Total Liabilities and Capital P2,616,000
P 2-3
1. Cash 70,000

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Equipment 70,000
Albano, Capital 920,000
Cash 50,000
Equipment 120,000
Abada, Capital 1,090,000
2. Abada, Capital 10,000


Abada, Capital 50,000

Equipment 60,000

Cash 70,000
Equipment 70,000
Albano, Capital 920,000
P 2-4
1. Abante, Capital 150,000

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Abante, Capital 200,000


Furniture and Equipment 450,000
Goodwil 250,000
P2,000,000 – (P2,700,000 -150,000 – 200,000 – 240,000 –
360,000 = P1,750,000) = P250,000
Cash 3,000,000
Arevalo, Capital 3,000,000
Land 1,800,000
Mortgage Payable 300,000
Almonte, Capital 1,500,000
2. Accounts Receivable 840,000

Furniture and Equipment 600,000
Goodwill 250,000
Abante, Capital 2,000,000
Cash 3,000,000
Arevalo, Capital 3,000,000
Land 1,800,000
Mortgage Payable 300,000
Almonte, Capital 1,500,000

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P 2-5
1. a. Cash 518,000
Abueva, Capital 1,670,000
b. Accounts Receivable 1,792,000

Office Equipment 206,000
Goodwill 145,000
Alano, Capital 1,670,000
Abueva and Alano Partnership

June 1, 2014
Assets
Cash P 518,000
Accounts Receivable P 1,792,000
Less Allowance For Doubtful Accounts 150,000 1,642,000
Office Equipment 206,000
Goodwill 145,000
Abueva, Capital P 1,670,000
Alano, Capital 1,670,000 3,340,000
P 2-6
1. P1,080,000 P80,000 + P440,000 + P200,000 + P600,000 – P240,000 = P1,080,000
2. P1,100,000 (P1,080,000 + P1,120,000) / 2 = P1,100,000
3. P1,320,000 P2,200,000 x 60% = P1,320,000
Multiple Choice
1. B

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2. A
3. B
4. D
5. D
6. B (P80,000 + P340,000 + P900,000) – P300,000 = P1,020,000
7. C Aster = P489,000 – P7,500 = P481,500
Amie = P273,000 - P9,000 – P5,400 = P258,600
8. C P9,000 + (P189,000 – P12,000) + P460,000 + P140,000 = P786,000 x 2 = P1,572,000
9. B (P600,000 x 1/2) – (P220,000 – P30,000) = P110,000
10. D Total partnership capital + Total partnership liabilities = Total partnership assets
P600,000 + (P30,000 + P20,000) = P650,000
11. A P600,000/2 = P300,000- (200,000-20,000)= P120,000.
12. B P90,000 + P30,000 + P130,000 – P100,000 = P150,000
13. C P240,000 + (P150,000 + P 100,000 = P250,000) = P490,000
14. B (P240,000 + P150,000) x 60% = P234,000
(P240,000 + P150,000) x 40% = P156,000- P150,000 =P6,000
15. B
16. B P600,000 + P120,000 = P720,000
17. C P720,000 + P1,200,000/2 = P960,000
18. C P960,000 – P720,000 = P240,000
19. B
20. D P720,000 + P1,200,000 = P1,920,000 x 75% = P1,440,000
TM 6
1. F 5. T 9. T 13. T 17. F
2. F 6. T 10. T 14. T 18. T
3. F 7. F 11. F 15. F 19. T
4. T 8. T 12. T 16. T 20. T
TM 7
1. Limited partnership 9. Agreed value
2. Industry, skill, talent or service 10. Nominal partner
3. Capitalist industrial partner 11. Articles of Co-Partnership
4. Mutual agency 12. Secret partner
5. De facto partnership 13. Securities and Exchange Commission
6. Memorandum entry 14. Limited or LTD.
7. Nontrading partnership 15. Limited partner
8. Partnership 16. Loan Payable

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17. Capital share

18. Bonus
19. Arrive at Agreed value or FMV
20. General professional partnership
TM 8
1. A 5. C 9. C 13. C 17. B
2. A 6. D 10. C 14. A 18. C
3. D 7. D 11. A 15. B 19. D
4. B 8. B 12. C 16. A 20. D
TM 9
Problem A
1. Cash 800,000
Land 375,000
Building 1,200,000
Alvis, Capital 1,375,000
Ancheta, Capital 1,425,000
2. Cash 800,000
Land 375,000
Building 1,200,000
3. Cash 800,000
Land 375,000
Building 1,200,000

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Problem B
1. a. Ablan, Capital 50,000

b. Ablan, Capital 27,000
Inventories 27,000
c. Ablan, Capital 10,000

Other Assets 10,000
a. Amias, Capital 75,000

b. Amias, Capital 35,000

Inventories 35,000
c. Amias, Capital 18,000

Other Assets 18,000
2. a. Accounts Payable 894,700

Notes Payable 1,000,000
Ablan, Capital (P3,209,880 – P50,000 – P27,000 – P10,000) 3,122,880
Cash 55,000
Accounts Receivable 1,122,680
Inventories 573,175
Land 3,015,000
b. Accounts Payable 1,218,250

Amias, Capital (P3,641,760 – P75,000 – P35,000 – P18,000) 3,513,760
Cash 111,770
Inventories 1,265,510

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Buildings 2,141,335
3. a. Cash 55,000
Inventories 573,175
Land 3,015,000
Ablan, Capital 3,122,880
b. Cash 111,770
Buildings 2,141,335
Amias, Capital 3,513,760
Ablan and Amias Partnership

May 1, 2014
Assets
Current Assets
Cash P 166,770
Inventories 1,838,685 P 5,892,585
Noncurrent Assets
Land P 3,015,000
Buildings 2,141,335
Furniture and Fixtures 425,670 5,582,005
Notes Payable P 2,725,000

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Total Liabilities P 4,837,950
Ablan, Capital P 3,122,880

Amias, Capital 3,513,760

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CHAPTER 3
Partnership Operations
E 3-1
1. Borres = 250/500 x P600,000 = P300,000
Buendia = 150/500 x P600,000 = P180,000
Bustos = 100/500 x P600,000 = P120,000
2. Borres = 3 / 6 x P600,000 = P300,000

Buendia = 1 / 6 x P600,000 = P100,000
Bustos = 2 / 6 x P600,000 = P200,000
E 3-2
Banal, Capital 112,250
Benson, Capital 137,750
Banal Benson Total
10% Interest on average capital P 89,000 P114,500 P203,500
Remainder – divided equally 23,250 23,250 47,500
Total P112,250 P137,750 P250,000
Computation of average capital

Banal 1/01 - 3/31 P800,000 x 3 P 2,400,000
4/01 - 8/31 960,000 x 5 4,800,000
9/01 – 10/31 840,000 x 2 1,680,000
11/01 – 12/31 900,000 x 2 1,800,000
P10,680,000 / 12 P890,000
Benson 1/01 - 2/28 P1,200,000 x 2 P 2,400,000

3/01 - 6/30 1,020,000 x 4 4,080,000
7/01 - 9/30 1,160,000 x 3 3,480,000
10/01 – 12/31 1,260,000 x 3 3,780,000
P13,740,000 / 12 P1,145,000
E 3-3
Benito Bunye Total

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a. Interest of 10% on excess average capital P 40,000 P 40,000

Salaries 300,000 P200,000 500,000
Remainder – divided in the ratio of 70:30 112,000 48,000 160,000
Total P452,000 P248,000 P 700,000
b. Interest of 10% on excess average capital P 40,000 P 40,000

Salaries 300,000 P200,000 500,000
Remainder –divided in the ratio of 70:30 ( 98,000) ( 42,000) ( 140,000)
Total P242,000 P158,000 P 400,000
E 3-4
1. Blanco = 120/300 x P120,000 = P48,000; Banda = 180/300 x P120,000 = P72,000

3. Blanco Banda Total
Interest of 8% on original investment P 9,600 P14,400 P 24,000
Balance – divided equally 48,000 48,000 96,000
Total P57,600 P62,400 P120,000
4. Blanco Banda Total

Salaries to partners P 54,000 P 45,000 P 99,000
Total P 64,500 P 55,500 P120,000
E 3-5
1. Bueno Beran Total
Interest of 8% on beginning capital P 48,000 P 54,000 P102,000
Salaries to partners 225,000 115,000 340,000
Balance – divided 3:2 (40,200) (26,800) (67,000)
Total P232,800 P142,200 P375,000
2. Beran = P375,000 x 2/5 = P150,000; however, minimum guaranteed amount to Beran is P175,000
Bueno = P375,000 – P175,000 = P200,000

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E 3-6
Net income after salaries, interest and bonus P322,000
Interest (P200,000 x 10%) P20,000
Salaries (8,000 x 12) 96,000 116,000
Net income before interest and salaries P438,000
Bonus rate x 25%
Amount of bonus to be credited to Basco P109,500
E 3-7
Income before income tax = P650,000 / 70% = P928,571
1. B = .05 x P928,571 = P46,428
2. B = .05 (P928,571 – B)
= P46,428 / 1.05
= P44,217
3. B = .05 (P928,571 – T)
T = .30 (P928,571) = P278,571
B = .05 (P928,571 – P278,571)
= .05 (P650,000)
= P32,500
4. B = .05 (P928,571 – B – T)
T = .30 (P928,571) = P278,571
B = .05 (P928,571 – B – P278,571)
= .05 (P650,000 – B)
= P32,500 / 1.05
= P30,952
E 3-8
1. Balbin Bagtas Banta Total
Capital balances P240,000 P200,000 P200,000 P 640,000
Required capital 256,000 224,000 160,000 640,000
Cash received (paid) (P 16,000) (P 24,000) P 40,000 ----
Banta, Capital 40,000

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Balbin, Capital 16,000

Bagtas, Capital 24,000

Capital balances P240,000 P200,000 P200,000 P 640,000
Additional investment P 80,000 P 80,000 -------- P 160,000
P240,000 / 40% = P600,000; P200,000 / 35% = P571,428; P200,000 / 25% = P800,000
Cash 160,000
Balbin, Capital 80,000
Bagtas, Capital 80 000

Capital balances P240,000 P200,00 P200,000 P640,000
0
Additional investment(withdrawals) -------- 10,000 (P50,000) P 40,000
Banta, Capital 50,000

Bagtas, Capital 10,000
Cash 40,000
E 3-9
Drawings charged against capital P520,000
Less Additional investment 100,000
Decrease in capital P420,000
Less Net decrease in capital 240,000
Share in net income P 180,000
Profit share  25%
Net income of the partnership P720,000
P 3-1
1. Income Summary 300,000
Bondoc, Capital 180,000

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Barba, Capital 120,000

Bondoc = P300,000 x 60% = P180,000
Barba = P300,000 x 40% = P120,000

Bondoc = P300,000 x 210/360 = P175,000
Barba = P300,000 x 150/360 = P125,000
Berba, Capital 100,000
Bondoc = P300,000 x 255,000/382,500* = P200,000
Barba = P300,000 x 127,500/382,500** = P100,000
* Jan. 1 – Apr. 30 P210,000 x 4 = P 840,000

May 1 – Sept. 30 300,000 x 5 = 1,500,000
Oct. 1 - Dec. 31 240,000 x 3 = 720,000
P3,060,000 / 12 P255,000
**Jan. 1 – Mar. 31 P150,000 x 3 = P 450,000

Apr. 1 – Dec. 31 120,000 x 9 = 1,080,000
P1,530,000 / 12 127,500
P382,500

Bondoc Barba Total
8% interest on ave. cap. P 20,400 P 10,200 P 30,600
Balance – equally 134,700 134,700 269,400
P155,100 P144,900 P300,000


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Bondoc Barba Total

Salaries P 60,000 P 48,000 P108,000
Bal. – ending cap. ratio 128,000 64,000 192,000
P188,000 P112,000 P300,000

Bondoc Barba Total
Bonus P 75,000 P 75,000
Bal. – ave. capital ratio P150,000 75,000 225,000
P225,000 P 75,000 P300,000
Bonus P300,000 x 1/3 divided by 1 1/3 = P75,000
P 3-2
Bernal, Capital 243,300
Burgos, Capital 106,700
Bernal Burgos Total
8% int. on beg. capital P 28,800 P 35,200 P 64,000
Balance – 3: 1 214,500 71,500 286,000
P243,300 P106,700 P350,000

Bernal Burgos Total
Salaries P 70,000 P130,000 P200,000
12% int. on ending capital 48,000 60,000 108,000
Balance – equally 21,000 21,000 42,000
P139,000 P211,000 P350,000

Bernal Burgos Total

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Salaries P 45,000 P 85,000 P130,000

12% int. on ave. cap.* 49,000 50,800 99,800
Balance – 3:1 90,150 30,050 120,200
P184,150 P165,850 P350,000
* Jan. 1 – May 31 P360,000 x 5 = P1,800,000

June 1 – Oct. 31 460,000 x 5 = 2,300,000
Nov. 1 – Dec. 31 400,000 x 2 = 800,000
P7,900,000 / 12 P408,333
Jan. 1 – June 30 P440,000 x 6 = P 2,640,000

July 1 – Oct. 31 360,000 x 4 = 1,4400,000
Nov. 1 – Dec. 31 500,000 x 2 = 1,000,000
P5,080,000 / 12 P423,333

Bernal Burgos Total
Salaries P 50,000 P100,000 P150,000
10% int. on ave. capital 40,833 42,333 83,166
Balance – 40%, 60% 46,734 70,100 116,834
P137,567 P212,433 P350,000

Bernal Burgos Total
Salaries P50,000 P50,000 P100,000
8% int. on beg. capital 28,800 35,200 64,000
Bonus -.10 (NI – S – I ) 18,600 18,600
Balance – 2:3 66,960 100,440 167,400
P164,360 P185,640 P350,000

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P 3-3
Bilbao Bertol Borja Total
1. 6% interest on capital P 33,600 P 24,000 P 14,400 P 72,000
Salaries 96,000 80,000 176,000
Balance – 5:3:2 (149,000) ( 89,400) ( 59,600) (298,000)
Total P(115,400) P 30,600 P 34,800 P(50,000)
2. 6% interest on capital P 33,600 P 24,000 P ,14400 P 72,000

Salaries 96,000 80,000 176,000
Balance – 5:3:2 ( 64,000) ( 38,400) ( 25,600) (128,000)
Total P( 30,400) P 81,600 P 68,800 P120,000
3. 6% interest on capital P 33,600 P 24,000 P 14,400 P 72,000

Salaries 96,000 80,000 176,000
Bonus 27,000 27,000
Balance – 5:3:2 112,500 67,500 45,000 225,000
Total P 146,100 P214,500 P 139,400 P500,000
P 3-4
1. Basa Benito Beltran Bagnes Total

Salaries P400,000 P200,000 P 600,000
Bonus 60,000 40,000 100,000*
Interest 100,000 90,000 P 40,000 P 94,000 324,000
Balance 269,000 269,000 269,000 269,000 1,076,000
Total P829,000 P599,000 P309,000 P363,000 P2,100,000
*B = 5% (P2,100,000 – B) = P100,000 x 3/5 = P60,000

x 2/5 = 40,000

Salaries P 400,000 P 200,000 P 600,000

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Interest 100,000 90,000 P 40,000 P 94,000 324,000

Balance (431,000) (431,000) (431,000) (431,000) (1,724,000)
Total P 69,000 P(141,000) P (391,000) (P337,000) (P800,000)

Interest P 100,000 P 90,000 P 40,000 P 94,000 P 324,000
Bonus 22,857 15,238 38,095
Salaries 291,937 145,968 437,905*
Total P 414,794 P 251,206 P 40,000 P 94,000 P 800,000
B = 5% (P800,000 – B) = P38,095 x 3/5 = P22,857; P38,095 x 2/5 = P15,238

*P437,905 x 4/6 = P291,937; P437,905 x 2/6 = P145,968
P 3-5
1. Balte Bala Total
8% interest on capital P40,000 P 24,000 P 64,000
Salaries 120,000 80,000 200,000
20% bonus on net income 238,000 238,000
Balance – capital ratio 430,000 258,000 688,000
Total P828,000 P 362,000 P1,190,000
2. Sales 4,800,000
Cost of Goods Sold 2,100,000
Operating Expenses 1,000,000
Income Taxes 510,000

Balte, Capital 828,000
Bala, Capital 362,000
Balte, Capital 60,000

Bala, Capital 100,000

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Balte, Drawing 60,000

Bala, Drawing 100,000
Balte and Bala Partnership

Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014
Balte Bala Total

Capital balances, January 1, 2014 P 500,000 P300,000 P 800,000
Add Distribution of net income for 2014:
Interests P 40,000 P 24,000 P 64,000
Salaries 120,000 80,000 200,000
Bonus 238,000 238,000
Balance - capital ratio 430,000 258,000 688,000
Total share in net income P 828,000 P 362,000 P1,190,000
Total P1,328,000 P 662,000 P1,990,000

Less Drawings 60,000 100,000 160,000
Capital balances, December 31, 2014 P1,268,000 P 562,000 P1,830,000
P 3-6
1. Net sales (P1,525,000 – P25,000) P1,500,000
Cost of goods sold:
Purchases P980,000
Less Merchandise inventory, end 305,000 675,000
Gross profit P 825,000
Operating expenses (300,000 – 12,500 – 5,000 + 17,500 + 30,000) 330,000
Income before income tax P 495,000
Income tax 148,500
Net income P 346,500
2. Brenda Brosas Total
Salaries (P150,000 x 8/12) P100,000 P100,000
Additional 10% of NI after salaries 24,650 24,650
Balance – original capital 138,656 P83,194 221,850
Total P263,306 P83,194 P346,500

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3. Brenda Brosas Total

Beginning capital P625,000 P375,000 P1,000,000
Add Share in net income 263,306 83,194 346,500
Total P888,306 P458,194 P1,346,500
Less Drawings 100,000 150,000 250,000
Ending capital P788,306 P308,194 P1,096,500
P 3-7
Be on Top Company
Income Statement
Sales P5,100,000
Cost of goods sold:
Purchases P4,920,000
Less: Purchase returns and allowances P 99,000
Purchase discounts 138,000 237,000
Cost of goods available for sale P4,683,000
Less Merchandise inventory, December 31 1,406,000 3,277,000
Gross profit P1,823,000
Other operating income – interest 27,000
Selling expenses (schedule 1) ( 530,300)
Administrative and general expenses (schedule 2) ( 801,800)
Operating income P 517,900
Interest expense ( 30,000)
Net income before Income Tax P487,900
Net Income after Income Tax P 341,530
Division of net income:

Bathan Buenas Total
Interest P 60,000 P 48,900 P108,900
Salaries 100,000 100,000

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Total P226,3150 P115,215 P341,530
Schedule 1 – Selling expenses Schedule 2 – General and administrative expenses

Sales salaries P480,000 Taxes P 36,500
Store supplies 19,500 Doubtful accounts 9,300
Depreciation 21,300 Others 756,000
Advertising 9,500 Total P801,800
P530,300
Be on Top Company
Bathan Buenas Total

Original capital P600,000 P489,000 P1,089,000
Add Share in net income 226,315 115,215 341,530
Total P826,315 P604,215 P1,430,530
Less Drawing 144,000 54,000 198,000
Capital, December 31, 2010 P682,315 P550,215 P1,232,530
Be on Top Company
December 31, 2014
Assets
Current assets:
Cash P582,750
Notes receivable 120,000
Accounts receivable P186,000
Less Allowance for doubtful accounts 9,300 176,700
Interest receivable 6,000
Merchandise inventory 1,406,000
Prepaid taxes 10,000
Store supplies 16,500 P2,317,950
Noncurrent assets
Store furniture P222,000
Less Accumulated depreciation 21,300 200,700

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Total assets P2,518,650

Current liabilities;
Notes payable P 360,000
Accounts payable 756,000
Advertising payable 9,500
Taxes payable 10,500
Interest payable 3,750
Income tax payable 146,370
Total liabilities P1,286,120
Bathan, capital P 682,315

Buenas, capital 550,215
Total partners’ capital 1,232,530
Total liabilities and capital P2,518,650
3. Adjusting entries
Adjustment for inventories is included in the closing entries
a. Store Supplies Expense 19,500

Store Supplies 19,500
b. Depreciation Expense 21,300

c. Advertising Expense 9,500
Advertising Payable 9,500
d. Prepaid Taxes 10,000

Taxes 10,000
e. Taxes 10,500
Taxes Payable 10,500
f. Interest Expense 3,750

g. Interest Receivable 6,000

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h. Doubtful Accounts Expense 9,300

i. Income Tax 146,370

Income Tax Payable 146,370
Closing entries
a. Merchandise Inventory 1,406,000
Purchase Returns and Allowances 99,000
Purchase Discounts 138,000
Sales 5,100,000
b. Income Summary 6,428,470

General Expenses – Others 756,000
Purchases 4,920,000
Sales Salaries 480,000
Taxes 36,500
Store Supplies Expense 19,500
Depreciation Expense 21,300
Advertising Expense 9,500
Doubtful Accounts Expense 9,300
c. Income Summary 341,530

Bathan, Capital 226,3150
Buenas, Capital 115,215
d. Bathan, Capital 144,000

Buenas, Capital 54,000
Bathan, Drawing 144,000
Buenas, Drawing 54,000

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P 3-8
Bacani, Badeo and Barte
For the Three Years Ending December 31, 2014
Bacani Badeo Barte Total

Original capital P1,000,000 P500,000 P 400,000 P1,900,00
0
Less: Share in net loss – 2012 (sch. 1) ( 8,000) ( 14,000) ( 20,000) ( 42,000)
Drawing (72,000) (86,800) ( 96,000) (254,800)
Capital, January 1, 2013 P 920,000 P 399,200 P 284,000 P1,603,20
0
Add Share in net income – 2013 (sch. 2) 107,200 99,952 93,040 300,192
Total P1,027,200 P 499,152 P 377,040 P1,903,39
2
Less Drawing 139,600 163,200 177,200 480,000
Capital, January 1, 2014 P 887,600 P 335,952 P 199,840 P1,423,39
2
Add Share in net income – 2014 (sch. 3) 170,855 153,656 145,489 470,000
Total P1,058,455 P 489,608 P 345,329 P1,893,39
2
Less Drawing 163,200 195,200 169,600 528,000
Capital, December 31, 2014 P 895,255 P 294,408 P 175,729 P1,365,39
2
Schedule 1 – Distribution of 2012 net loss

Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 60,000 30,000 24,000 114,000
Balance – equally ( 164,000) ( 164,000) ( 164,000) ( 492,000)
Total P( 8,000) P( 14,000) P(20,000) P( 42,000)
Schedule 2 – Distribution of 2013 net income

Salaries P 96,000 P 120,000 P 120,000 P336,000

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Balance – equally ( 44,000) ( 44,000) ( 44,000) ( 132,000)
Total P 107,200 P 99,952 P 93,040 P300,192

Salaries P 96,000 P 120,000 P 120,000 P336,000
Bonus 8,100 8,100
Balance – equally 13,499 13,499 13,499 40,497
Total P 170,855 P 153,656 P 145,489 P470,000
Bonus = P470,000 – (P336,000 + P85,403) x 20/120 = P8,100
P 3-9
1. Balmes = 5/10 x 80% = 40%
Bamban = 3/10 x 80% = 24%
Buela = 2/10 x 80% = 16%
Bagnes 20%
2. Corrected net income = P400,000 – ( P24,000 - P62,000 - P40,000 + P30,000 + P18,000

x 70%) = P379,000
Balmes = P379,000 x 40% = P151,600 Buela = P379,000 x 16% = P60,640

Bamban = P379,000 x 24% = P 90,960 Bagnes = P379,000 x 20% = P75,800
Multiple Choice
1. C Jan. 1 – Mar. 31 P 80,000 x 3 = P 240,000
Apr. 1 – May 31 96,000 x 2 = 192,000
June 1 – Aug. 31 112,000 x 3 = 336,000
Sept. 1 – Dec. 31 72,000 x 4 = 288,000
P1,056,000 / 12 = P88,000
2. B Bañas Belda

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Capital beg. P 120,000 P 118,000

Share in net loss (32,000) (16,000)
P88,000 P102,000
3. A Bernardo Belo
Salaries P 110,000 P 90,000
Balance – 60:40 (12,000) (8,000)
P98,000 P82,000
4. D Bustos
Net Profit P220,000
Bonus P220,000 x 10%/110% (20,000) 20,000
Interest P220,000 – P200,000 = P20,000 x 10% (2,000)
Salaries ( 44,000) 24,000
Balance P 154,000
Share of Bustos x 2/10 30,800
Total profit share of Bustos P74,800
5. B Banta:
Jan. 1 – June 30 P200,000 x 6 = P 1,200,000
Jul. 1 - Dec. 31 320,000 x 6 = 1,920,000
P 3,120,000 / 12 = P260,000 x 10% = P26,000
Berba: P300,000 x 10% = 30,000
Borja:
Jan. 1 – Sept. 30 P450,000 x 9 = P4,050,000
Oct. 1 – Dec. 31 310,000 x 3 = 930,000
P4,980,000/12 = P415,000 x 10% = 41,500
P97,500
6. C Salaries = P120,000 + P96,000 + P72,000 P 288,000

Interest 97,500
Balance = P10,000 x 3 30,000
Total P 415,500
7. C Original capital P 950,000

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Additional investment 120,000

Withdrawals ( 140,000)
Net income 415,500
Total partnership capital P1,345,500
8. B Besa Basco Buan Baduel Total
Interest P 7,500 P3,750 P3,750 P3,000 P18,000
Salaries 15,000 9,000 24,000
Add’l profit to Baduel 5,000 5,000
Balance 15,000* 15,000 10,000 10,000 50,000
P37,500 P27,750 P13,750 P18,000 P97,000
*P37,500 – P7,500 – P15,000 = P15,000/30% = P50,000
9. B
10. C
11. C try distributing any profit or loss amount
12. C Bulan Bustos Bucao Total

Salaries P24,000 P18,000 P12,000 P 54,000
Interest 19,500 24,700 29,400 73,600
Balance – 2:4:4 10,480 20,960 20,960 52,400
Total P53,980 P63,660 P62,360 P180,000
Bulan
Jan. 1 – July 1 P150,000 x 6 = P 900,000
July 1 – Oct. 1 180,000 x 3 = 540,000
Oct. 1 – Dec. 31 170,000 x 3 = 510,000
P1,950,000 / 12 = P162,500
Bustos
Jan. 1 – Aug. 1 P200,000 x 7 = P1,400,000
Aug. 1 – Oct. 1 220,000 x 2 = 440,000
Oct. 1 – Dec. 31 210,000 x 3 = 630,000
P2,470,000 / 12 = P205,833
Bucao

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Jan. 1 – Nov. 1 P250,000 x 10 = P2,500,000

Nov. 1 – Dec. 31 220,000 x 2 = 440,000
P2,940,000 / 12 = P245,000
13. A Bulan Bustos Bucao

Original capital P150,000 P200,000 P250,000
Additional investment 30,000 20,000
Withdrawals ( 10,000) ( 10,000) ( 30,000)
Share in net income 53,980 63,660 62,360
Capital, Dec. 31, 2005 P223,980 P273,660 P282,360
14. D Briones Balen Burgos Total

Interest P 94,500 P 47,730 P 32,470 P174,700
Salaries 244,650 165,250 409,900
Balance –Equally (278,616) (278,616) (278,616) (835,848)
Total P 60,534 (P80,896 (P251,248)
)
TM 10
1. F 5. T 9. F 13. T 17. T
2. F 6. F 10. T 14. T 18. F
3. T 7. T 11. T 15. F 19. T
4. T 8. T 12. T 16. T 20. T
TM 11
1. L 4. J 7. E 10. N 13. I
2. B 5. M 8. A 11. P 14 Q
3. K 6. D 9. O 12. G 15. C
TM 12
1. D
2. B
3. B
4. C

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5. C
6. C Beltran Barba Total
Capital beginning P400,000 P500,000 P900,000
Share in net income-equally 200,000 200,000 400,000
Share in net loss – 2:1 ( 160,000) ( 80,000) ( 240,000)
Capital, end P440,000 P620,000 P1,060,000
7. C P2,500,000 + (P1,800,000 + P400,000) = P4,700,000 – P2,000,000 = P2,700,000
8. B Beran and Banda = 300/1,100 x P1,100,000 = P300,000;

Banjo = 500/1,100 x P1,100,000 = P500,000
9. B Banzon Borja Total

Salaries P160,000 P200,000 P360,000
Interest on beginning capital 36,000 60,000 96,000
Remainder – equally 72,000 72,000 144,000
Total P268,000 P332,000 P600,000
10. B P520,000 – P100,000 – P240,000 = P180,000 / 20% = P900,000
11. D Jan. 1 – June 30 P 840,000 x 6 = P5,040,000

July 1 – July 31 1,080,000 x 1 = 1,080,000
Aug. 1 – Dec. 31 990,000 x 5 = 4,950,000
P11,070,000/12 = P922,500 x12%=P110,700
12. D Basilio Bituin Total

Salaries P220,000 P 180,000 P400,000
Remainder – Equally ( 20,000) ( 20,000) ( 40,000)
Total P 200,000 P 160,000 P360,000
13. A P1,000,000 + (P900,000 x 20%) – P200,000 = P980,000
14. C P600,000 + P200,000 = P800,000/2 = P400,000
15. B P400,000 – P30,000 + (P450,000 x 60%) = P640,000
TM 13
Problem A

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Beltran, Bernal and Basco Partnership

Schedule of the Distribution of Partnership Profit
Beltran Bernal Basco Total

Salaries P57,600 P48,000 P38,400 P144,000
Interest 34,560 46,080 66,240 146,880
Balance – equally 53,040 53,040 53,040 159,120
Total distribution of net income P145,200 P147,120 P157,680 P450,000
Beltran, Bernal and Basco Partnership

Beltran Bernal Basco Total

Original capital P384,000 P576,000 P864,000 P 1,824,000
Add: Additional investment 96,000 96,000
Share in net income 145,200 147,120 157,680 450,000
Total P625,200 P723,120 P1,021,680 P2,370,000
Less Drawing ( 48,000) ( 48,000) (192,000) ( 288,000)
Capital, December 31, 2014 P577,200 P675,120 P829,680 P2,082,000
Problem B
1.
Double B Partnership
Income Statement
Sales P1,800,000
Cost of goods sold:
Inventory, January 1 P 800,000
Purchases 1,200,000
Less Inventory, December 31 1,050,000 950,000
Gross profit P850,000
Operating expenses:
Depreciation – building P30,000

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Depreciation – furniture and fixtures 30,000

Other operating expenses 300,000 360,000
Net income before Income Tax P490,000
Income Tax 147,000
Net Income after Income Tax P343,000
2. Net income is allocated as follows:

Bilbao Bragas Total
Salaries P240,000 P240,000 P480,000
Interest on beginning capital 75,000 62,000 137,000
Remainder -2:3 (109,600) (164,400) (274,000)
Total P205,400 P137,600 P343,000

Bilbao, Capital, 205,400
Bragas, Capital 137,600
3. Bilbao, Capital 200,000

Bragas, Capital 240,000
Bilbao, Drawing 200,000
Bragas, Drawing 240,000
Double B Partnership
Bilbao Bragas Total

Capital, January 1 P1,300,000 P1,240,000 P2,540,000
Add: Additional investment 200,000 200,000
Share in net income 205,400 137,600 343,000
Total P1,705,400 P1,377,600 P3,083,000
Less Drawing 200,000 240,000 440,000
Capital, December 31 P1,505,400 P1,137,600 P2,643,000

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CHAPTER 4
Partnership Dissolution
EXERCISES
Exercise 4-1
1. Camus, Capital (90,000 x 1/3) 30,000
Cuenco, Capital (60,000 x 1/3) 20,000
Cerda, Capital 50,000
2. Other Assets 120,000

Camus, Capital (P120,000 x 75%) 90,000
Cuenco, Capital (P120,000 x 25%) 30,000
Camus, Capital [(P90,000 + P90,000) x 1/3] 60,000

Cuenco, Capital [(P60,000 + P30,000) x 1/3] 30,000
3. Cash 90,000
Camus, Capital (P30,000 x 60%) 18,000
4. Cash 90,000
Other Assets 120,000
Camus, Capital (P120,000 x 60%) 72,000
AC CC Asset
Rev
Old P270,000 P150,000 P120,000
New 90,000 90,000 ------
P360,000 P240,000 P120,000
5. Cash 90,000
Camus, Capital (P30,000 x 60%) 18,000

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Exercise 4-2
1. Cular, Capital 20,000
Canda, Capital 20,000

Capco, Capital 20,000
Cular, Capital 12,000
Cruz, Capital 8,000
P70,000  ¼ = P280,000 – (P100,000 + P80,000 + P60,000) = P40,000
Capco, Capital (P100,000 + P20,000) x ¼ 30,000

Cular, Capatil (P80,000 + P12,000) x ¼ 23,000
Cruz, Capital (P60,000 + P8,000) x ¼ 17,000
Canda, Capital 70,000
3. Cash 115,000
Canda, Capital 88,750.0
0
Capco, Capital P26,250 x 50% 13,125
Cular, Capatil P26,250 x 30% 7,875
Cruz, Capital P26,250 x 20% 5,250
AC CC Bonus
Old P266,250 P240,000 P26,250
New 88,750 115,000 (26,250)
P355,000 P355,000 P ------
Exercise 4-3
1. Catral, Capital 160,000
Conti, Capital 160,000
P480,000 x 1/3 = P160,000
2. Clemente, Capital 120,000


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P360,000 x 1/3 = P120,000
3. Catral, Capital P336,000 x ¾ 252,000

Clemente, Capital P336,000 x ¼ 84,000
P126,000 1/4 = P504,000 – P840,000 = P336,000
Catral, Capital 57,000

Clemente, Capital 69,000
(P480,000 – P252,000) x 1/4 = P57,000
(P360,000 - P84,000 ) x 1/4 = P69,000
Exercise 4-4
1a. Carlos, Capital (P200,000 x ¼) 50,000
Cruz, Capital (P300,000 x 1/3) 100,000
Caparas, Capital 150,000
1b. Cash 120,000

Carpio, Capital 120,000
2. Carlos (P200,000 – 50,000 = 150,000

P150,000)
Cruz (P300,000 – 100,000 = P200,000) 200,000
Caparas 150,000
Carpio 120,000
Exercise 4-5
1. Bonus Method
Cash 200,000
Cuenca, Capital (P25,000 / 2) 12,500
Claudio, Capital (P25,000 / 2) 12,500
Cabral, Capital 175,000
AC CC Bonus
Old P525,000 P500,000 P25,000
New 175,000 200\,000 (P25,000

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)
P700,000 P700,000 -----
2. Asset Revaluation Method

Cash 200,000
Cuenca, Capital (P100,000 / 2) 50,000
Claudio, Capital 50,000
Cabral, Capital 200,000
AC CC Asset Rev.
Old P600,000 P500,000 P100,000
New 200,000 200,000 ------
P800,000 P700,000 P100,000
Exercise 4-6
1. Cash 120,000
Choy, Capital (P21,000 x 3/7) 9,000
Chua, Capital (P21,000 x 2/7) 6,000
Cheng, Capital (P21,000 x 2/7) 6,000
Chiu, Capital 99,000
AC CC Bonus
Old P396,000 P375,000 P21,000
New 99,000 120,000 (21,000
)
P495,000 P495,000 -------

Choy, Capital (P105,000 x 3/9) 45,000
Chua, Capital 30,000
Cheng, Capital 30,000
Cash 120,000
Chiu, Capital 120,000
AC CC Asset
Rev

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Old P480,000 P375,000 P105,00

0
New 120,000 120,000 -
P600,000 P495,000 P105,000
Problem 4-1
1. Carmen, Capital 40,000
Centeno, Capital 20,000
Corrales, Capital 60,000

Carmen, Capital 72,000
P120,000  1/3 = P360,000 – P240,000 = P120,000
Carmen, Capital ([P160,000 + P72,000] x 1/3) 77,333

Centeno, Capital [(P80,000 + P48,000) x 1/3] 42,667

Cash 120,000
AC CC Asset
Rev
Old P360,000 P240,000 P
120,000
New 120,000 120,000 -----
P480,000 P360,000 P
120,000
4. Cash 120,000
Carmen, Capital (P60,000 x 60%) 36,000
Centeno, Capital (P60,000 x 40%) 24,000

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AC CC Bonus
Old P180,000 P240,000 P(60,000
)
New 180,000 120,000 60,000
P360,000 P360,000 --------
5. Cash 160,000
6. Cash 160,000
7. Cash 100,000
AC CC Bonus
Old P255,000 P240,000 P15,000
New 85,000 100,000 (15,000)
P340,000 P340,000 --------
8. Cash 110,000
Other Assets 90,000
AC CC Asset
Rev
Old P330,000 P240,000 P90,000
New 110,000 110,000 --------
P440,000 P350,000 P90,000

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9. Cash 96,000
Carmen, Capital (P16,000 x 60%) 9,600
Centeno, Capital (P16,000 x 40%) 6,400
10. Cash 60,000

P240,000  4/5 = P300,000 x 1/5 = P60,000
Problem 4-2
1. Cash 150,000
Calma, Capital 150,000
AC CC
Old P300,000 P300,000
New 150,000 150,000
P450,000 P450,000
2. Cash 120,000
Coral, Capital 12000
Corpuz, Capital 3000
AC CC Bonus
Old (3/4) P315,000 P300,000 P15,000
New (1/4) 105,000 120,000 (15,000)
P420,000 P420,000 ------
3. Cash 60,000
Coral, Capital 24,000
Corpuz, Capital 6,000
AC CC Bonus
Old P270,000 P300,000 (P30,000)
New 90,000 60,000 30,000

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P360,000 P360,000 -
4. Coral, Capital (P180,000 x ¼) 45,000

Corpuz, Capital (P120,000 x ¼) 30,000

Coral, Capital [(P180,000 + P24,000) ¼] 51,000

Corpuz, Capital [(P120,000 + P6,000) ¼] 31,500
6. Cash 90,000
Other Assets 60,000
AC CC Asset Rev.
Old P360,000 P300,000 P 60,000
New 90,000 90,000 ------
P450,000 P390,000 P 60,000
Problem 4-3
1 a. Cash 350,000
.
Coloma, Capital 350,000
b. Cash 500,000
Castillo, Capital (P25,000 x 70%) 17,500
Cordova, Capital (P25,000 x 30%) 7,500
AC CC Bonus
Old P1,425,00 P1,400,00 P25,000
0 0

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New 475,00 500,000 ( 25,000)

0
P1,900,00 P1,900,00 -----------
0 0
c. Cash 700,000
Castillo, Capital (P700,000 x 70%) 490,000
Cordova, Capital (P700,000 x 30%) 210,000
AC CC Asset Rev
Old P2,100,00 P1,400,00 P700,000
0 0
New 700,00 700,000 -----------
0
P2,800,00 P2,100,00 P700,000
0 0
d. Castillo, Capital 140,000

Cordova, Capital 210,000
e. Castillo, Capital 112,000

Cordova, Capital 168,000
Problem 4-4
1. Total capital of old partners P690,000
Fraction of interest of old partners  4/5
Total partnership capital after admission of Cruz P862,500
Interest of Cruz x 1/5
Required contribution of Cruz P172,500
2 a. Bonus method
AC CC Bonus
Cortes P435,000 P420,000 P15,000

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Canda 250,000 240,000 10,000

Cena 35,000 30,000 5,000
Cruz 180,000 210,000 ( 30,000)
P900,000 P900,000 -------
2b. Asset Revaluation method

AC CC Asset Rev
Cortes P495,000 P420,000 P75,000
Canda 290,000 240,000 50,000
Cena 55,000 30,000 25,000
Cruz 210,000 210,000 -
P1,050,00 P900,000 P 150,000
0
Problem 4-5
1. a. Asset Revaluation method
Cash 90,000
Ciara, Capital 18,000
Cora, Capital 18,000
Celia, Capital 9,000
Other Assets 45,000
Carla, Capital 90,000
AC CC Asset Rev
Old P 630,000 P (P45,000)
675,000
New 90,000 90,000 -
P720,000 P765,000 (P45,000)
b. Bonus method
Cash 90,000
Cora, Capital 2,250

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AC CC Bonus
Old P669,375 P675,000 (P5,625)
New 95,625 90,000 5,625
P765,000 P765,000 -----
Ciara Cora Celia Carla

Capital balances – Bonus method P321,750 P213,750 P134,875 P95,625
Capital balances – Asset Revaluation method P306,000 P198,000 P126,000 P90,000
Reduction in depreciation due to asset revaluation 11,25 11,250 11,250 11,250
0
Capital balances after reduction in depreciation P P209,250 P137,250 P101,250
317,250
Net advantage (disadvantage) of bonus over asset rev. P 4,500 P4,500 (P (P5,625)
3,375)
Celia will prefer the asset revaluation method over the bonus method because of the P3,375 advantage over the bonus method.
2. a. Ciara, Capital 40,500

b. Other Assets 45,000

P90,000  1/8 = P720,000 – P675,000 = P45,000
Ciara, Capital (P324,000 + P18,500) x 1/8 42,750

Cora, Capital (P216,000 + P18,000) x 1/8 29,250
Celia, Capital (P135,000 + P9,000) x 1/8 18,000

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Problem 4-6
1. Cabal Cadiz Caldea Camo Total
Capital balances before the admission of Camo P150,000 P180,000 P300,000 P630,000
Purchase of 1/6 interest of Cadiz (30,000) 30,000 -----
Contribution to the partnership 150,000 150,000
Asset revaluation to old partners 4,000 6,000 10,000 20,000
Bonus to old partners 4,000 6,000 10,000 (20,000) ------
Capital balances after the admission of Camo P158,000 P162,000 P320,000 P160,000 P800,000
2. Cabal = 20% x 80% = 16% Caldea = 50% x 80% = 40%

Cadiz = 30% x 80% = 24% Camo = 20%
Problem 4-7
Corona Calderon Calixto Total
Capital balances Dec. 31, 2013 before closing P250,000 P150,000 P400,000
Distribution of 2013 profit:
Salaries P45,000 P45,000 P90,000
Balance (12,000) (8,000) (20,000)
Share in 2013 profit P33,000 P37,000 P70,000
Total P283,000 P187,000 P470,000
Drawing (41,000) (34,000) (75,000)
Capital balances, January 1,2014 P242,000 P153,000 P395,000
Investment of Calixto P100,000 100,000
Bonus to Calixto (39,000) (26,000) 65,000
Capital balances after the admission of Calixto P203,000 P127,000 P165,000 P495,000
Share in 2014 loss (26,250) (18,750) (30,000) (75,000)
Drawing (37,500) (25,000) (34,000) (96,500)
Capital balances, January 1, 2015 P139,250 P83,250 P101,000 P323,500
Loss on sale of the partnership business (82,600) (59,000) (94,400) (236,000)
Cash Settlement to partners P56,650 P24,250 P6,600 P87,500
MULTIPLE CHOICE
1. C
2. C

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3. A
4. B
5. B Chan Ching Chen Total

Capital bal. before admission of P250,000 P150,000 P100,000 P500,000
Chat
Asset Revaluation 30,000 18,000 12,000 60,000
Balances P280,000 P168,000 P112,000 P560,000
Interest sold to Chat (25%) ( 70,000) ( 42,000) ( 28,000) ( 140,000)
Balances after the admission of P210,000 P126,000 P 84,000 P420,000
Chat
6. B
7. B Total partnership capital before the admission of Co P280,000

Fraction of interest of old partners  5/6
Total partnership capital after the admission of Co P336,000
Fraction of interest of Co x 1/6
Required contribution of Co P 56,000
8. A Cordova Constancio
Capital balances before adjustment P641,976 P728,352
Uncollectible accounts ( 20,000) ( 35,000)
Worthless inventories ( 5,500) ( 6,700)
Other assets written off ( 2,000) ( 3,600)
Adjusted capital P614,476 P683,052
9. B Total capital (P614,476 + P683,052) P1,297,528

Total liabilities (P178,940 + P200,000 + P243,650 + P345,000) 967,590
10. A Total capital (P1,297,528 / 80%) P1,621,910

Interest acquired by Cuyugan x 20%
Cash to be contributed by Cuyugan P 324,382
11. D Cordova Constancio

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Capital balances P614,476 P683,052

Required capital (P1,297,528 / 2) 648,764 648,764
Cash paid (received) P 34,288 (P 34,288)
12. B Cordova Constancio Cuyugan

Capital balances P614,476 P683,052 P324,382
Cash paid (received) 34,288 ( 34,288)
Net income 130,000 130,000 65,000
Drawings ( 50,000) ( 65,000) ( 28,000)
Capital balances, end of first year P728,764 P713,764 P361,382
13. C Conrado = ½ x 2/3 2/6

Cosio = 1/4 x 2/3 1/6
Cosme = 1/4 x 2/3 1/6
14. B Agreed capital P 750,000

Contributed capital 700,000
(P500,000+P200,000)
Asset Revaluation P 50,000
15. B Conrado Cosio Cosme Cueto Total
Capital bal. before the
admission of Cueto P250,000 P150,000 P100,000 P500,000
Transfer of 1/3 interest ( 50,000 P 50,000 ------
)
Investment of Cueto 200,000 200,000
0 0
Capital bal. after the
admission of Cueto P275,000 P112,50 P112,50 P250,00 P750,000
0 0 0

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TEST MATERIALS
Test Material No. 14 Test Material No. 15
1. T 6. F 11. F 1. Positive Asset Revaluation 11. Admission by
investment
2. F 7. T 12. F 2. Agreed capital 12. Bonus to old partners
3. T 8. F 13. F 3. Bonus 13. Liquidation
4. T 9. F 14. T 4. Total contributed capital 14. Capital credit
5. F 10. T 15. T 5. Dissolution 15. When AC is not given
16. T 6. Interest 16. Old partners’ capital
17. T 7. Dissolution 17. Fraction of interest
18. F 8. Admission by purchase/Sale of 18. Negative Asset
interest Revaluation
19. T 9. Agreed capital 19. Personal gain or loss
20. F 10 Admission by purchase 20. Net advantage
Test Material No. 16

1. B
2. C
3. A
4. B
5. B
6. D
7. A
8. B P190,000 x 2 = P380,000 + P160,000 = P540,000 x 1/5 = P108,000
9. C
10. D P180,000 + (P20,000 x 2/5) = P188,000
AC CC Bonus
Old partners P420,000 P400,000 P20,000
New partner 140,000 160,000 (20,000)
P560,000 P560,000 ------
11. A P480,000 X 1/6 = P80,000

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12. C (P100,000 + P200,000)  2/3 = P450,000 x 1/3 = P150,000

13. B Cariaso Carino Carillo
Capital balances before admission of P400,000 P200,000 P100,000
Cardel
Asset Revaluation
(P200,000  1/4) - P700,000 = 60,000 30,000 10,000
P100,000
Capital balances after asset revaluation P460,000 P230,000 P110,000
Fraction of remaining interest ¾ ¾ ¾
Capital balances after admission of Cardel P345,000 P172,500 P82,500
14. A P400,000 x 3/4 = P300,000; P200,000 x 3/4 = P150,000; P100,000 x 3/4 = P75,000
15. B
16. C AC CC Bonus
Cariaso P385,000 P400,000 (P15,000)
Carino 192,500 200,000 (7,500)
Carillo 97,500 100,000 (2,500)
Cardel 225,000 200,000 25,000
P900,000 P900,000 -
17. B Coral Camus Cerda Cordero Total
Capital bal. bef. adm P190,000 P160,000 P120,000 P470,000
Transfer of 15% int. ( 24,000 P 24,000 ------
)
Investment of Cordero 160,00 160,000
0
Bonus to old partners 22,000 0 0 (44,000 ------
13,200 8,80 )
0
Capital bal. after the
admission of Cordero P227,000 P158,20 P134,80 P140,00 P660,000
0 0 0
18. A
19. B
20. C Coral 40% x 80% = 32%
Camua 40% x 80% = 32%
Cerda 20% x 80% = 16%

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Cordero 20%

Problem A
1. Asset revaluation to old partners - P100,000; no bonus

AC CC Asset Rev
Old P600,000 P500,000 P100,000
New 150,000 150,000 -------
P750,000 P650,000 P100,000
2. No asset revaluation; bonus to old partners - P20,000

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 -------
3. No asset revaluation;, bonus to new partner - P45,000

AC CC Bonus
Old P455,000 P 500,000 (P45,000)
New 195,000 150,000 45,000
P650,000 P650,000 ------
4. Asset revaluation to old partners - P100,000; bonus to old partners - P37,500

AC CC Asset Rev Bonus
Old P637,500 P500,000 P100,000 P 37,500
New 112,500 150,000 ------- ( 37,500)
P750,000 P650,000 P100,000 -------
5. No asset revaluation; bonus to old partners - P20,000.

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 --------

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Problem B
Total capital of the partnership [(P148,000 + P260,000 + P192,000)  80%] P750,000
Interest of Cinco x 20%
Contribution of Cinco P150,000
Problem C
Carandang Cojuangco Capistrano

Capital balances before the admission of Canete P240,000 P120,000 P60,000
Asset revaluation [(P120,000  1/4) - P420,000] 36,000 18,000 6,000
Capital balances after asset revaluation P276,000 P138,000 P66,000
Remaining interest x 3/4 x 3/4 x 3/4
Capital balances after the admission of Canete P207,000 P103,500 P49,500

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CHAPTER 5
Change in Capital Structure by Withdrawal, Retirement, Death or Incapacity of a Partner
Exercise 5-1
1.a. Bonus method
Dee, Capital 20,000
Dantes, Capital (P5,000 x 3/5) 3,000
Dungca, Capital (P5,000 x 2/5) 2,000
Cash 25,000
1.b Asset Revaluation method

Other Assets (P5,000  1/6) 30,000
Dee, Capital 20,000
Cash 25,000
Dantes, Capital (P30,000 x 3/6) 15,000
Dungca, Capital (P30,000 x 2/6) 10,000
2. Asset Rev. Dantes Dungca

Capital balances after retirement of
Dee under the bonus method P47,000 P28,000
Balances after retirement of Dee

under asset revaluation method P30,000 P65,000 P40,000
Depreciation on asset rev. – equally (30,000) ( 15,000) ( 15,000)
Balances after depreciation ------ P50,000 P25,000
Dantes will prefer the asset revaluation method. The gain is P3,000 under the asset
revaluation method compared with the bonus method.
Exercise 5-2
1. Diesta, Capital 80,000
Dayrit, Capital (P10,000 x3/4) 7,500
Dayag, Capital (P10,000 x 1/4) 2,500
Cash 96,000
2. Other Assets (P16,000  1/5) 80,000

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Diesta, Capital 80,000

Dayrit, Capital (P80,000 x 3/5) 48,000
Dayag, Capital (P80,000 x 1/5) 16,000
Cash 96,000
Exercise 5-3
Daria, capital, January 1 P25,000
Drawing ( 4,000)
Share in net income (P20,000 x 40%) 8,000
Interest of Daria upon retirement P29,000
1. Other Assets (P33,000 – P29,000 = P4,000 / 40%) 10,000

Daria, Capital 29,000
Cash 33,000
Ditas, Capital (P10,000 x 30%) 3,000
Dulce, Capital (P10,000 x 30%) 3,000
2. Ditas, Capital (P4,000/2) 2,000

Dulce, Capital (P4,000/2) 2,000
Daria, Capital 29,000
Cash 33,000
Exercise 5-4
1. Dolor, Capital 40,000
Damian, Capital 20,000
Damaso, Capital 20,000
2. Dolor, Capital 40,000

Cash 32,000
Damaso, Capital 5,000
3. Other Assets (P46,000 – P40,000 = P6,000/ 20%) 30,000

Dolor, Capital 40,000

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Cash 46,000
Damaso, Capital 15000
Exercise 5-5
1. Domingo, Capital 70,000
Dizon, Capital 70,000
2. Dencio, Capital 10,000

Doctor, Capital 5,000
Domingo, Capital 70,000
Cash 90,000
3. Other Assets (P90,000 – P70,000 = P20,000 / 20%) 100,000

Domingo, Capital 70,000
Dencio, Capital 40,000
Doctor, Capital 20,000
Exercise 5-6
1. Dimla, Capital 1,440
Distor, Capital 960
Daza, Capital 12,000
Cash 14,400
2. Daza, Capital 12,000

Cash 9,600
Dimla, Capital 1,440
Distor, Capital 960
PROBLEMS
Problem 5-1

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1. Delfin, Capital 200,000

Cash 200,000

Diokno, Capital (P60,000 x ½) 30,000
Decena, Capital (P60,000 x ½) 30,000
Cash 260,000
3. Other Assets (P6,000  1/3) 180,000

Delfin, Capital 200,000
Cash 260,000
Diokno, Capital (P180,000 x 1/3) 60,000
Decena, Capital (P180,000 x 1/3) 60,000

Cash 160,000

Cash 175,000
Other Assets (P25,000  1/3) 75,000
Problem 5-2
1. Merchandise Inventory 7,000
Capital Adjustment Account 7,000


Danao, Capital 4,000
Daylan, Capital 2,000
Dahlia, Capital 2,000

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2. Dahlia, Capital 27,000

Cash 2,000
Problem 5-3
1 Damo Dayan Datu
Capital, January 1, 2015 P120,000 P 70,000 P 80,000
Net loss ( 12,000) ( 8,000) ( 20,000)
Drawing ( 25,000) ( 25,000) ( 25,000)
Capital upon retirement of Dayan P 83,000 P 37,000 P 35,000
2. Damo, Capital 10,500

Datu, Capital 17,500
Dayan, Capital 37,000
Cash 30,000
Inventory 35,000
P37,000 – P30,000 = P7,000  20% =P35,000
3a. Other Assets (P10,000 / 20%) 50,000

Dayan, Capital 37,000
Cash 47,000
Damo, Capital (P50,000 x 30%) 15,000
Datu, Capital (P50,000 x 50%) 25,000
b. Dayan, Capital 37,000

Damo, Capital 3,750
Datu, Capital 6,250
Cash 47,000
Problem 5-4
1. Daet, Capital 12,000
Dais, Capital 8,000
Dancel, Capital 140,000
Cash 160,000

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2. Dancel, Capital 140,000

Daet, Capital 140,000

Cash 130,000
Daet, Capital 6,000
Dais, Capital 4,000

Cash 168,000
Dais, Capital 16,000

Cash 80,000
7. Dancel. Capital 140,000

Delia, Capital 140,000
Problem 5-5
1. Books 72,000
Other Assets 48,000
Cash 288,000
David, Capital 36,000
Duque, Capital 36,000
2. Dizon, Capital 240,000

Cash 120,000
Notes payable 108,000

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3a. Dizon, Capital 240,000

Cash 180,000
Notes payable 108,000
b. Other Assets (P288,000 – P240,000 = P48,000/40%) 120,000

Cash 180,000
David, Capital (P120,000 x 30%) 36,000
Duque, Capital (P120,000 x 30%) 36,000
Problem 5-6
Danao, Diaz, Dolor and Dungca Partnership
Statement of Partners' Equity
Danao Diaz Dolor Dungca Total

Capital, January 1 P 84,000.00 P 75,000.00 P 48,000.00 P45,000.00 P252,000.00
Distribution of net income:
Jan. 1 - Sept. 30 13,500.00 10,125.00 5,062.50 5,062.50 33,750.00
Oct. 1 - Dec. 31 4,705.15 3,528.86 1,764.43 9,998.44*
Transfer of Dungca capital to (50,062,50) ( 50,062.50)
his estate
Retirement of Dolor 7,832.42 5,874.31 ( 54,826.93) ( 41,120.20)
Capital, December 31 P110,037.57 P 94,528.17 --------- --------- P204,565.74
* P45,000 – P33,750 – (P50,062.50 x 10% x 3/12)) = P9,998.44
Income Summary 33,750.00

Danao, Capital 13,500.00
Diaz, Capital 10,125.00

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Dolor, Capital 5,062.50

Dungca, Capital 5,062.50
Dungca, Capital 50,062.50

Payable to the Estate of Dungca 50,062.50

Payable to the Estate of Dungca 1,251.56

Diaz Costa, Capital 1,764.43
Dolor, Capital 54,826.93

Notes Payable 41,120.20
MULTIPLE CHOICE
1. C
2. A
3. C
4. A
5. A
6. C Amount paid by the partnership P 71,000
Capital of Dayrit
Total capital before withdrawal of Dayrit P210,000
Total capital after withdrawal of Dayrit 160,000 50,000
Asset Revaluation to Dayrit P 21,000
Profit share of Dayrit  30%
Total asset revaluation P 70,000
7. B Capital of Dino before purchasing interest from Dolor P 35,000
Interest of Dolor transferred to Dino 25,000
Capital of Dino P 60,000
8. D Doctor's capital before the withdrawal of Dolor P 45,000

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Share in the bonus given to Dolor

(P33,000 - P25,000) x 3/6 4,000
Doctor's capital after the withdrawal of Dolor P 41,000
9. A The same as the capital before the withdrawal of Dolor, P35,000
10. C Dino’s capital before the withdrawal of Dolor P 35,000
Share of Dino in the revaluation of assets
Excess payment to Dolor P8,000
Profit share of Dolor  40%
Increase in asset per revaluation P20,000
Share of Dino in the asset revaluation x 30% 6,000
Dino’s capital after the withdrawal of Dolor P 41,000
11. C
12. B Dizon Dionisio Divino
Loan and capital balances P206,000 P154,000 P360,000
Revaluation of assets 24,000 24,000 48,000
Bonus to Dizon 12,000 ( 4,000) ( 8,000)
P242,000 P174,000 P400,000
13. B P180,000 + P10,000 – P220,000 = (P30,000)/40% = (P75,000)
14. D P60,000 + (20,000 x 20%) - P15,000 - P80,000 = P31,000
15. D P31,000/20% = P155,000 x 40% = P62,000
TEST MATERIALS

1. F 5. F 9. T 13. T 17. T
2. T 6. T 10. F 14. T 18. T
3. T 7. F 11. T 15. F 19. F
4. F 8. T 12. F 16. T 20. F

1. B
2. C
3. A
4. A

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5. C
6. B P160,000 - (P30,000 x 1/2) = P145,000
7. B P30,000  40% = P75,000 x 30% = P22,500 + P160,000 = P182,500
8. C
9. B P80,000 + P160,000 – P30,000 = P130,000
10. D

1. Diones, Capital 56,000
Donato, Capital 42,000
Dulay, Capital 14,000

Dumlao, Capital 56,000

Inventories 12,000
Equipment 26,000
Cash 62,000

Cash 64,000

Cash 20,000
Equipment 52,000

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CHAPTER 6
Partnership Liquidation – Lump-sum
Exercise 6-1
E2 Partnership
Statement of Liquidation
June 1 - 30, 2014
Non-cash CAPITAL
Cash Assets Liabilities Encabo Elorde
Profit and loss ratio 225/500 275/500
Balances before liquidation P 25,000 P600,000 P125,000 P225,000 P275,000
Sale of non-cash assets and distribution of loss 350,000 ( 600,000) ( 112,500) (137,500)
Balances P375,000 P125,000 P 112,500 P137,500
Payment of liabilities ( 125,000) ( 125,000)
Balances P250,000 P 112,500 P137,500
Payment to partners ( 250,000) ( 112,500) (137,500)
Exercise 6-2
1.
Elias, Enrico and Ener
January 1 – 31, 2015
Non-cash C A P I T A L
Cash Assets Liabilities Elias Enrico Ener
Profit and loss ratio 3/8 3/8 2/8
Balances before liquidation P 80,000 P810,000 P270,000 P60,000 P290,000 P270,000
Sale of non-cash assets and distribution of loss 634,000 (810,000) (66,000) ( 66,000) ( 44,000)
Payment of liquidation expenses ( 24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P270,000 (P15,000) P215,000 P220,000
Payment of liabilities (270,000) (270,000)
Balances P420,000 (P15,000) P215,000 P220,000
Additional investment of Elias 15,000 15,000
Balances P435,000 P215,000 P220,000
Payment to partners ( 435,000) ( 215,000) ( 220,000)

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2.
Elias , Enrico and Ener
January 1 – 31, 2015
Non-cash Note Payable C A P I T A L
Cash Assets to Elias Liabilities Elias Enrico Ever
Balances before liquidation P 80,000 P810,000 P70,000 P200,000 P60,000 P290,000 P270,000
Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P70,000 P200,000 (P15,000) P215,000 P220,000
Balances P490,000 P70,000 (P15,000) P215,000 P220,000
Offset of loan against debit balance in the
capital balance of Elias ( 15,000) 15,000
Balances P490,000 P55,000 P215,000 P220,000
Payment to partners (490,000) ( 55,000) ( 215,000) ( 220,000)
3. Elias , Enrico and Ener
January 1 – 31, 2015
NR from Non-cash NP C A P I T A L
Cash Enrico Assets to Elias Liabilities Elias Enrico Ever
Balances before liquidation P 80,000 P110,000 P700,000 P70,000 P200,000 P60,000 P290,000 P270,000
Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P110,000 P70,000 P200,000 P26,250 P256,250 P247,500
Balances P490,000 P110,000 P70,000 P26,250 P256,250 P247,500
Offset of receivable against credit balance in
the capital of Enrico (110,000) ( 110,000)
Balances P490,000 P70,000 P26,250 P146,250 P247,500
Payment to partners (490,000) ( 70,000) ( 26,250) ( 146,250) ( 247,500)
Exercise 6-3

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Case 1
Enteng and Estrel

January 1 – 31, 2015
Other Loans_______ Capital______
Cash Assets Liabilities Enteng Estrel Enteng (90%) Estrel (10%)
Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000
Sale of other assets & dist. of loss 268,000 (400,000) (118,800) ( 13,200)
Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 38,800) P 6,800
Balances P 44,000 P 36,000 P 40,000 (P 38,800) P 6,800
Offset of loan against debit balance
in ( 36,000) 36,000
the capital of Enteng
Balances P 44,000 P 40,000 (P 2,800) P 6,800
Additional loss to Estrel for the 2,800 ( 2,800)
deficiency of Enteng
Balances P 44,000 P 40,000 P 4,000
1. Cash 268,000 4. Estrel, Capital 2,800

Enteng, Capital 118,800 Enteng, Capital 2,800
Estrel, Capital 13,200
2. Liabilities 264,000 5. Estrel, Loan 40,000

Cash 264,000 Estrel, Capital 4,000
Cash 44,000
3. Enteng, Loan 36,000

Enteng, Capital 36,000

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Case 2
Enteng and Estrel

January 1 – 31, 2015

Cash Assets Liabilities Enteng Estrel Enteng Estrel
Sale of other assets and distribution of loss 268,000 (400,000) ( 92,400) ( 39,600)
Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 12,400) (P 19,600)
Payment of liabilities (264,000) ( 264,000)
Balances P 44,000 P 36,000 P 40,000 (P 12,400) (P 19,600)
Offset of loan against debit
balance in capital account (12,400) ( 19,600) 12,400 19,600
Balances P 44,000 P 23,600 P 20,400
1. Cash 268,000 3. Enteng, Loan 12,400

Enteng, Capital 92,400 Estrel, Loan 19,600
Estrel, Capital 39,600 Enteng, Capital 12,400
Other Assets 400,000 Estrel, Capital 19,600
2. Liabilities 264,000 4. Enteng, Loan 23,600

Cash 264,000 Estrel, Loan 20,400
Cash 44,000

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Case 3
Enteng and Estrel

January 1- 31, 2015
Cash Assets Liabilities Enteng Estrel Enteng Estrel
Sale of other assets & distribution of loss 268,000 (400,000) ( 66,000) ( 66,000)
Balances P 308,000 P 264,000 P 36,000 P 40,000 P 14,000 (P 46,000)
Balances P 44,000 P 36,000 P 40,000 P 14,000 (P 46,000)
in the capital of Estrel (40,000) 40,000
Balances P 44,000 P 36,000 P 14,000 P ( 6,000)
Additional loss to Enteng for the deficiency of Estrel ( 6,000) 6,000
Balances P 44,000 P 36,000 P 8,000
1. Cash 268,000 4, Enteng, Capital 6,000

Enteng, Capital 66,000 Estrel, Capital 6,000
2. Liabilities 264,000 5. Enteng, Loan 36,000

Cash 264,000 Enteng, Capital 8,000
Cash 44,000
3. Estrel, Loan 40,000

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Exercise 6-4
Esguerra Esteban Estrada Eugenio

Capital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000
Loan from partners 2,000
Total partners’ interest P 13,000 P 10,300 P 13,700 P 9,000
Loss on realization (P46,000 – P12,000) ( 13,600) ( 10,200) ( 6,800) ( 3,400)
Balances (P 600) P 100 P 6,900 P 5,600
Additional loss to partners 600 ( 300) ( 200) ( 100)
Balances -------- (P 200) P 6,700 P 5,500
Additional loss to partners 200 ( 133) ( 67)
Distribution of cash to partners --------- --------- P 6,567 P 5,433

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Problem 6-1
Ester, Edna, Emma, and Eva

October 1-31,2014
Other Rec'l from Eva, C A P I T A L

Cash Assets Ester Liabilities Loan Ester (4) Edna (2) Emma (1) Eva (1)
Balances before liquidation P 50,000 P950,000 P62,500 P 450,000 P37,500 P381,250 P 93,750 P50,000 P50,000
Sale of asset and distribution of loss 500,000 ( 950,000) ( 225,000) ( 112,500) ( 56,250) ( 56,250)
Balances P 550,000 P62,500 P 450,000 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)
Balances P 100,000 P62,500 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)
Offset of receivable against
credit balance in the
capital account of Ester (62,500) ( 62,500)
Balances P 100,000 P37,500 P 93,750 (P 18,750) (P 6,250) (P 6,250)
Additional loss to the partners
for the deficiency of Edna
shared 4:1:1 ( 12,500) 18,750 ( 3,125) ( 3,125)
Balances P 100,000 P37,500 P 81,250 (P 9,375) (P 9,375)
balance in the capital
account of Eva ( 9,375) 9,375
Balances P 100,000 P28,125 P 81,250 (P 9,375)
Payment to partners ( 100,000) (26,250) ( 73,750)
Balances P 1,875 P 7,500 (P 9,375)
Additional investment by 9,375 9,375
Emma
Balances P 9,375 P 1,875 P 7,500

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Journal entries to record the liquidation of the partnership
1. Cash 500,000
Ester, Capital 225,000
Edna, Capital 112,500
Emma, Capital 56,250
Eva, Capital 56,250
2. Liabilities 450,000
Cash 450,000
3. Esters, Capital 62,500

Receivable from Ester 62,500
4. Ester, Capital 12,500

Emma, Capital 3,125
Eva, Capital 3,125
Edna, Capital 18,750
5. Eva, Loan 9,375

Eva, Capital 9,375
6. Eva, Loan 26,250

Cash 100,000
7. Cash 9,375
Emma, Capital 9,375
8. Eva, Loan 1,875

Cash 9,375

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Problem 6-2
1. Esteban, Capital P 144,000 3. a. Cash 463,000

Esteban, Drawing ( 12,000) Eugenio, Capital 52,500
Total interest of Esteban P 132,000 Evaristo, Capital 31,500
Cash received by Esteban 111,000 Esteban, Capital 21,000
Share of Esteban in the loss on P 21,000 Other Assets 568,000
liquidation
Fractional share of Esteban  2/10
Total loss on liquidation P 105,000 b. Liabilities 200,000
Cash 200,000
c. Evaristo, Loan 40,000

Eugenio, Capital 79,500
Evaristo, Capital 102,500
Esteban, Capital 111,000
Cash 333,000
2.
Eugenio , Evaristo and Esteban
January 1 – 31, 2015
CAPITAL
Other Evaristo, Eugenio Evaristo Esteban
Cash Assets Liabilities Loan (5/10) (3/10) (2/10)
Balances before liquidation P 70,000 P 568,000 P 200,000 P 40,000 P 132,000 P 134,000 P132,000
Sale of other assets & distribution of loss 463,000 ( 568,000) ( 52,500) ( 31,500) ( 21,000)
Balances P 533,000 P 200,000 P 40,000 P 79,500 P 102,500 P 111,000
Balances P 333,000 P 40,000 P 79,500 P 102,500 P 111,000
Payment to partners ( 333,000) ( 40,000) ( 79,500) (102,500) ( 111,000)

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Problem 6-3
Case 1
Estrella, Espino and Espiritu
January 1- 31, 2015
Other L O A N C A P I T A L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 250,000 ( 340,000) (36,000) (36,000) (18,000)
Balances P 270,000 P 112,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000
Payment of liabilities ( 112,000) (112,000)
Balances P 158,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000
Payment to partners ( 158,000) (5,000) (8,000) (59,000) ( 24,000) (62,000)
Case 2
January 1 - 31, 2015
Other L O A N C A P I TA L
Sale of assets & distribution of loss 185,000 (340,000) (62,000) ( 62,000) (31,000)
Balances P 205,000 P 112,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000
Balances P 93,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000
Offset of loan against debit balance in
the capital of Espino ( 2,000) 2,000
Balances P 93,000 P 3,000 P 8,000 P 33,000 P 49,000
Payment to partners ( 93,000) (3,000) (8,000) (33,000) (49,000)
Case 3

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January 1 -31, 2015
Other L O A N C A P I T A L
Sale of assets & distribution of loss 170,000 (340,000) (68,000) ( 68,000) (34,000)
Balances P 190,000 P 112,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000
Balances P 78,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000
balance in the capital of
Espino ( 5,000) 5,000
Balances P 78,000 P 8,000 P 27,000 (P 3,000) P 46,000
Payment to partners ( 78,000) ( 8,000) ( 25,000) ( 45,000)
Balances P 2,000 (P 3,000) P 1,000
Additional investment by
Espino 3,000 3,000
Balances P 3,000 P 2,000 P 1,000

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Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
Estrella (2) Espino (2) Espiritu (1)

Capital balances before cash distribution P 27,000 (P 3,000) P 46,000
Add loan balance 8,000
Total partners’ interest P 27,000 (P 3,000) P 54,000
Restricted interest - possible loss to Estrella and Espiritu in the
ratio of 2:1 if Espino fails to pay his deficiency ( 2,000) 3,000 ( 1,000)
Free interests - amounts to be paid to partners P 25,000 P 53,000
Payment to apply on:
Loan P 8,000
Capital P 25,000 45,000
Cash distribution P 25,000 P 53,000
Case 4

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January 1 – 31, 2015
Other LOAN CAPTIAL

Sale of assets & distribution of loss 125,000 ( 340,000) (86,000) (86,000) (43,000)
Balances P 145,000 P 112,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000
Balances P 33,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000
in the capital of Espino ( 5,000) 5,000
Balances P 33,000 P 8,000 P 9,000 (P21,000) P 37,000
Balances P 9,000 (P21,000) P 12,000
Additional investment by Espino 21,000 21,000
Balances P 21,000 P 9,000 P 12,000

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Schedule to Accompany Statement of Liquidation
Amount to be Paid to Partners
Estrella (2) Espino (2) Espiritu (1)

Capital balances before cash distribution P 9,000 (P 21,000) P 37,000
Add loan balance 8,000
Total partners’ interest P 9,000 (P 21,000) P 45,000
Restricted interest - possible loss to Estrella and Espiritu in
the ratio of 2:1 if Espino fails to pay his deficiency (14,000) 21,000 ( 7,000)
Balances (P 5,000) P 38,000

Restricted interest - possible loss to Espiritu if Estrella
fails to pay his deficiency 5,000 ( 5,000)
Free interests - amounts to be paid to partners P 33,000
Loan P 8,000
Capital 25,000
Cash distribution P 33,000

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Case 5
January 1 - 31, 2015
Other Other LOAN CAPITAL
Sale of assets & distribution of loss 90,000 (340,000) (100,000) (100,000) (50,000)
Balances P 110,000 P 112,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000
Balances P 2,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000
in the capital of Espino ( 5,000) 5,000
Balances P 2,000 P 8,000 (P 5,000) (P 35,000) P 30,000
Additional investment by Estrella 40,000 5,000 35,000
and Espino
Balances P 40,000 P 2,000 P 8,000 P 30,000
Payment of liabilities and payment ( 40,000) ( 2,000) (8,000) ( 30,000)
to partners

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Problem 6 – 4
1.
Asset Book Value Cash (Gain) Loss
Realized
Accounts Receivable P 60,000 P64,000 (P 4,000)
Merchandise Inventory 50,000 25,000 25,000
Prepaid Advertising 2,000 800 1,200
Machinery and Equipment 40,000 24,000 16,000
P152,000 P113,800 P 38,200
2.
Evasco-Ellor Partnership
January 1 – 31, 2015
Cash Other Accounts Notes CAPITAL

Assets Payable Payable Evasco (4) Ellor (6)
Balances before
liquidation P 1,000 P152,000 P20,000 P 86,000 P 30,000 P 17,000
Sale of assets and
distribution of loss 113,800 (152,000) (15,280) (22,920)
Balances P114,800 P20,000 P 86,000 P 14,720 (P 5,920)
Unrecorded liabilities 2,000 1,000 ( 1,200) ( 1,800)
Balances P114,800 P22,000 P 87,000 P 13,520 (P 7,720)
Payment of liabilities (109,000) (22,000) (87,000)
Balances P 5,800 P 13,520 (P 7,720)
Additional investment of
Ellor 4,000 4,000
Balances P 9,800 P 13,520 (P 3,720)
Additional loss to
Evasco for the
deficiency of Ellor ( 3,720) 3,720
Balances P 9,800 P 9,800
Payment to Evasco ( 9,800) ( 9,800)
3.
a. Cash 113,800
Evasco, Capital 15,280
Ellor, Capital 22,920
Prepaid Advertising 2,000
Machinery and Equipment 100,000
b. Evasco, Capital 1,200

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Notes Payable 1,000
c. Accounts Payable 22,000

Cash 109,000
d. Cash 4,000
e. Evasco, Capital 3,720

f. Evasco, Capital 9,800

Cash 9,800
MULTIPLE CHOICE
1. C Total assets = Total capital + Total liabilities

= P60,000 + P 3,000 P 63,000
Less Cash = P3,000 + P22,200 - P23,200 ___2,000
Book value of noncash assets P 61,000
2. B P61,000 - P23,200 = P37,800 x 4/21 P 7,200
3. B Espina Espinosa Esteban Estrellita

Capital bal. before liquidation P1,000 P25,000 P25,000 P 9,000
Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400)
Balances (P4,400) P17,800 P14,200 (P5,400)
Add’l loss to Espinosa and Esteban 4,400 ( 3,920) ( 5,880) 5,400
Cash payments to partners P 8,320
4. C Total capital P70,000

Less Cash left for distribution 28,000
Loss on realization P 42,000
5. A E1 E2 E3
Capital bal. before liquidation P 40,000 P 25,000 P 5,000
Loss on realization ( 21,000) (14,000) ( 7,000)
Balances P 19,000 P 11,000 P( 2,000)
Addl loss to E1 & E2 for the deficiency of E3 ( 1,200) ( 800) 2,000
Cash payment to E1 P 17,800
6. D Total capital (P360,000 + P72,000) P432,000

Total liabilities 84,000
Total loss on liquidation P516,000
7. A Espera Elor Este

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Capital balances P 100,000 P 80,000 P 300,000

Drawing ( 60,000) ( 40,000) (20,000)
Distribution of net income 24,000 24,000 24,000
Loss on liquidation (172,000) (172,000) (172,000)
Balances (P108,000) P(108,000) P 132,000
Additional loss to Elor and Este 108,000 ( 54,000) ( 54,000)
Cash to be distributed to Este P 78,000
8. B Escano Ender Evelo

Balances before liquidation P10,000 P35,000 P41,000
Loss from sale of non-cash assets ( 16,000) ( 12,000) ( 12,000)
Balances (P 6,000) P23,000 P29,000
Additional loss for deficiency of Escano 6,000 ( 3,000) ( 3,000)
Balances P20,000 P26,000
Add Loan balance 14,000
Cash to be received by Ender P34,000
9. B Escano Ender Evelo

Balances before liquidation P10,000 P35,000 P41,000
Loss on liquidation - P45,000 ( 18,000) ( 13,500) ( 13,500)
Balances (P 8,000) P21,500 P27,500
Additional loss for deficiency
of Escano (P8,000 - P5,000 = P3,000) 3,000 ( 1,500) ( 1,500)
Payment to Evelo 26,000
10. D Cash to be received by Escano P12,000

Escano capital before liquidation 10,000
Escano’s share in the gain on realization P 2,000
Escano 's profit share  40%
Total gain on realization P 5,000
Book value of non-cash assets 70,000
Cash realized from sale of non-cash assets P75,000
11. C Capital of Echo before liquidation P50,000

Share in loss from liquidation (P60,000 x 6/10) (36,000)
Amount to be received by Echo P14,000
12. B Echo Egay Elma

Loss on realization (12,000) (12,000) (36,000)
P38,000 P38,000 (P26,000)
Addl loss for the deficiency of Elma (13,000) (13,000) 26,000
Amt to be received by Egay P25,000
13. A Esmer Estrel Ellea Elmer

14. A Capital and loan balances P 50,000 P 50,000 P50,000 P 75,000

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15. B Loss on realization ( 112,000) ( 56,000) ( 56,000) ( 56,000)

Balances (P 62,000) (P 6,000) (P 6,000) P 19,000
Add’l loss for the def of Estrel ( 3,000) 6,000 ( 1,500) ( 1,500)
Amount to be received from the partnership P 17,500
Personal assets 200,000
Amount available to personal creditors of Elmer P217,500
TEST MATERIALS
Test Material No. 21 Test Material No. 22

1. F 11. T 1. Loan payable 11. Marshaling of assets
2. F 12. T 2. Lump-sum liquidation 12. Capital deficiency
3. T 13. F 3. Right of offset 13. Gain on realization
4. T 14. T 4. Liquidation 14. Liquidation expenses
5. T 15. T 5. Realization 15. Loss to the other partner
6. F 16. F 6. Loan rec’l from partner 16. Capital balance
7. T 17. T 7. Installment liquidation 17. Personal creditors
8. T 18. F 8. Deficient partner 18. Additional investment
9. F 19. T 9. Statement of liquidation 19. Addition to capital
10. T 20. T 10. Insolvent partner 20. Profit and loss ratio

1. A
2. D
3. D
4. C
5. D
6. C
7. B
8. A
9. C
10. D
11. D
12. A P100,000/4 = P25,000
13. B P120,000 x 2/3 = P80,000; P120,000 x 1/3 = P40,000
14. C P80,000 x 3/5 = P48,000; P80,000 x 2/5 = P32,000
15. D P60,000 + P90,000 – P20,000 = P130,000
16. A Emy Ely Evy
Capital balances before liquidation P280,000 P160,000 P20,000
Distribution of loss on realization ( 70,000) ( 42,000) ( 28,000)
Balances P210,000 P118,000 (P 8,000)
Additional loss for
the deficiency of Evy ( 5,000) ( 3,000) 8,000
Balances P205,000 P115,000
Cash payments to partners ( 205,000) ( 115,000)
17. C P320,000 - (P120,000 x 4/10) = P272,000

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18. A Eden Elisa Elma

Capital balances before liquidation P320,000 P 90,000 P110,000
Distribution of loss on realization ( 144,000) ( 180,000) ( 36,000)
Balances P176,000 (P 90,000) P 74,000
Additional loss for the deficiency of
Elisa ( 72,000) 90,000 ( 18,000)
Payment to Elma P 56,000
19. C Estacio Estioco

Capital balances (P21,000) P21,000
Loan 45,000
Cash payment to partners P24,000 P21,000
20. A P140,000 + P10,000 = P150,000 –

P120,000 = P30,000/40% = P75,000

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Test Material 24
Problem A
EEE Partnership
January 1 – 31, 2015
Cash Non-cash Accounts Loan Payable to CAPITAL
Assets Payable Empoy Estoy Empoy Eloy
Balances before liquidation P 25,000 P 475,000 P 240,000 P 30,000 P120,000 P 50,000 P 60,000
Sale of assets and dist. of loss 260,000 (475,000) (43,000) (86,000) (86,000)
Balances P 285,000 P 240,000 P 30,000 P 77,000 (P36,000) (P 26,000)
Balances P 45,000 P 30,000 P 77,000 (P36,000) (P 26,000)
Offset of loan against deficiency of
Empoy ( 30,000) 30,000
Balances P 45,000 P 77,000 (P 6,000) (P26,000)
Additional loss to Estoy and Empoy
for the deficiency of Eloy ( 333) ( 667) 1,000
Balances P 45,000 P 76,667 (P 6,667) (P25,000)
Additional investment by Empoy and
Eloy 31,667 6,667 25,000
Balances P 76,667 P 76,667
Payment to Estoy ( 76,667) (76,667)

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2.
a, Cash 260,000
Estoy, Capital 43,000
Empoy, Capital 86,000
Eloy, Capital 86,000
Inventories 100 000
Property, Plant and Equipment 300,000
b. Accounts Payable 240,000

Cash 240,000
c. Loan Payable to Empoy 30,000

d. Estoy, Capital 333

Empoy Capital 667
Eloy, Capital 1,000
e. Cash 31,667
Eloy, Capital 25,000
f. Estoy, Capital 76,667

Cash 76,667
3.
Estoy Empoy Eloy

Personal assets P250,000 P300,000 P350,000
Applied to
Personal liabilities ( 230,000) ( 240,000) ( 325,000)
Partnership liabilities ( 6,667) ( 25,000)
Balances P 20,000 P 53,333 ---

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Problem B
1. a. Escobar Elloso Echaves

Capital balances before liquidation P90,000 P 90,000 P 30,000
(Receivables) Payables ( 75,000) 40,000 60,000
Total partners’ interest P15,000 P130,000 P 90,000
Loss on realization ( 32,200) ( 32,200) ( 16,100)
Balances (P17,200) P 97,800 P 73,900
Additional investment of Escobar 17,200
Payment to partners ( 97,800) ( 73,900)
b. Escobar Elloso Echaves

Balances (P29,200) P 85,800 P 67,900
Additional loss to Elloso and Echaves 25,200 ( 16,800) ( 8,400)
Balances (P 4,000) P 69,000 P 59,500
Additional investment of Escobar 4,000
c. Escobar Elloso Echaves

Liquidation expenses ( 9,950) ( 9,950) ( 4,975)
Balances (P39,150) P 75,850 P 62,925
Additional loss to Elloso and Echaves 39,150 ( 26,100) ( 13,050)
2. Partnership assets of P455,500 (excluding cash) less partnership liabilities of P308,500 is

partnership net assets of P147,000. Price offered is P140,000; the loss on sale of the
business is P7,000. Therefore, it is wiser to accept the offer for the purchase of the
business for P140,000. The loss shall be P7,000 compared with liquidating the business
and selling the other assets for P300,000 incurring loss on realization of P155,500.

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CHAPTER 7
Installment Liquidation
E 7-1
Cash Aguilar Bernardo
Balances before liquidation P 40,000 P 80,000 P 44,000
Restricted interest – possible loss of P84,000 if nothing is
realized on the remaining non-cash assets ( 50,400) ( 33,600)
Balances P 40,000 P 29,600 P 10,400
Distribution of cash to partners ( 40,000) ( 29,600) ( 10,400)
E. 7-2
Conde Dalmacio
Balances before liquidation P142,000 P 108,000
Estimated liquidating expenses ( 10,000) ( 10,000)
Possible loss of P220,000 if nothing is realized on non-cash
assets (110,000) (110,000)
Balances P22,000 (P12,000)
Additional possible loss to Conde for the deficiency of
Dalmacio ( 12,000) 12,000
Balances P 10,000 -
Payment to Conde ( 10,000) -
E 7-3
Estela, Fajardo and Gomez
Cash Priority Program
PAYMENTS
Estela Fajardo Gomez Estela Fajardo Gomez
Capital balances P 30,000 P 70,000 P40,000
Add Loan balances 20,000 20,000 30,000
Total partners’ interest P 50,000 P 90,000 P 70,000
Profit and loss ratio 40% 40% 20%
Loss absorption balance P125,000 P225,000 P350,000
Allocation 1 – Cash to Gomez
reducing LAB to an amount
reported for Fajardo
(P125,000 x 20%) (125,000) P25,000
Balances P125,000 P225,000 P225,000
Allocation II – Cash to Fajardo &
Gomez reducing LAB to an
amount reported for Estela
P100,000 x 40% (100,000) P40,000
P100,000 x 20% (100,000) 20,000
Balances P125,000 P125,000 P125,000 - P40,000 P45,000
Allocation III – further cash
distribution may be made in the
P & L ratio

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E 7-4
Halili, Ibanez and Jacinto
PAYMENTS
Halili Ibanez Jacinto Halili Ibanez Jacinto
Allocation I – Cash to Ibanez
reducing LAB to an amount
reported for Jacinto (P4,900 x
2/7) ( 4,900) P 1,400
Balances P19,600 P40,600 P40,600
Allocation II – Cash to Ibanez &
Jacinto reducing LAB to an
amount reported for Halili
P21,000 x 2/7 (21,000) 6,000
P21,000 x 1/7 (21,000) P 3,000
Balances P19,600 P19,600 P19,600 - P 7,400 P 3,000
Allocation III – Further cash
distributions may be made in
the P & L ratio
2. Book value of assets P30,000

Loss on realization
Capital balance of Halili prior to realization P 11,200
Cash to be received by Halili 10,000
Share of Halili in the loss on realization P 1,200
Fractional share of Halili 4/7 2,100
Cash to be realized of the sale of assets P27,900
3. Allocation III – P3,200  4/7 = P5,600 x 1/7 P 800

Allocation II 3,000
Total cash received by Jacinto P 3,800
4. Book value of assets P 30,000

Total cash available
Allocation I P 1,400
Allocation II – P1,800 – P1,400  2/3 600 2,000
Loss on liquidation P 28,000

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E 7-5
1. Kho, Lagman and Magno
January 1, 2014
PAYMENTS
Kho Lagman Magno Kho Lagman Magno
Capital balances before liquidation P 36,000 P 54,000 P18,000
Add Note payable to Magno 14,000
Loss absorption balances P120,000 P180,000 P80,000
Allocation I – Cash to Lagman reducing
LAB to an amount reported for Kho
(P60,000 x 3/10) (60,000) P18,000
Balances P120,000 P120,000 P80,000
Allocation II – Cash to Kho & Lagman
reducing LAB to an amount reported for
Magno (P40,000 x 3/10) ( 40,000) (40,000) P12,000 12,000
Balances P80,000 P80,000 P80,000 P12,000 P20,000 -
Allocation III – Further cash distributions
may be made in the P & L ratio
2. Kho, Lagman and Magno
January to March, 2014
Other NP to PAYMENTS
Cash Assets Liabilities Magno Kho Lagman Magno
Balances before liquidation P12,000 P146,000 P36,000 P14,000 P36,000 P54,000 P18,000
January:
Sale of assets and dist. of
loss 30,000 ( 38,000) ( 2,400) ( 2,400) ( 3,200)
Payment of liquidation
expenses ( 3,600) ( 1,080) (1,080 (1,440)
Distribution of cash to
partners (sch. 1) ( 2,400) (2,400)
Balances P108,000 P14,000 P32,520 P48,120 P13,360
February:
Sale of assets and
distribution of gain 44,000 (35,000) 2,700 2,700 3,600
Payment of liquidation
expenses (8,400) (2,520) (2,520) (3,360)
Distribution of cash to
partners (sch. 2) (35,600) (10,000) (25,600)
Balances P73,000 P14,000 P22,700 P22,700 P13,600
March:
Sale of assets and
distribution of loss 36,000 (73,000) (11,100) (11,100) (14,800)
Balances P36,000 P14,000 P11,600 P11,600 P(1,200)
Offset of loan against
deficiency ( 1,200) 1,200
Final payment to partners (P36,000) (P12,800) (P11,600) (P11,600
)

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Schedule 1
January 31, 2014
Amount Kho Lagman Mango

Cash available P2,400
Allocation I – Payable to Lagman P2,400 P2,400
Schedule 2
February 28, 2014
Amount Kho Lagman Mango

Allocation I – Balance
Payable to Lagman P2,400 P2,400
Allocation II – Payable to Kho and
Lagman P20,000 P10,000 10,000
P10,000 P25,600 -
3. Journal entries
January Cash 30,000
Kho, Capital 2,400
Lagman, Capital 2,400
Magno, Capital 3,200
Other assest 38,000
Kho, Capital 1,080

Cash 3,600
Liabilities 36,000
Cash 36,000

Cash 2,400
February Cash 44,000

Other assets 35,000
Kho, Capital 2,700
Kho, Capital 2,520

Cash 8,400

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Kho. Capital 10,000

Cash 35,600
March Cash 36,000

Kho, Capital 11,100
Other assets 73,000
Note Payable to Magno 1,200

Note Payable to Magno 12,800

Kho, Capital 11,600
Cash 36,000

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P 7-1
NOPQ Trading
February 1 – March 31, 2014
CAPITAL
Other Noble Noble Orbos Pimentel Quezon
Cash Assets Liabilitie Loan (20%) (30%) (30%) (20%)
s
Balances before liquidation P100,320 P193,530 P21,360 P15,000 P24,120 P96,480 P109,020 P27,870
February:
Sale of assets & distribution of loss 49,320 (66,060) ( 3,348) ( 5,022) ( 5,022) ( 3,348)
Payment of liquidation expenses ( 8,220) ( 1,644) ( 2,466) ( 2,466) ( 1,644)
Balances P123,670 P127,470 P 3,610 P15,000 P19,128 P88,992 P101,532 P22,878
Payment to partners (sch. 1) (120,060) ( 7,980) (49,770) (62,310)
Balances P 3,610 P127,470 P 3,610 P 7,020 P19,128 P39,222 P39,222 P22,878
March:
Sale of assets & distribution of gain 48,330 (44,850) 696 1,044 1,044 696
Payment of liquidation expenses ( 7,380) ( 1,476) ( 2,214) ( 2,214) ( 1,476)
Balances P 40,950 P 82,620 P 7,020 P18,348 P38,052 P38,052 P22,098
Payment to partners (sch. 2) ( 40,950) ( 7,020) ( 1,824) (13,266) (13,266) ( 5,574)
Balances, March 31 P 82,620 P16,524 P24,786 P24,786 P16,524

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NOPQ Trading Co.

Schedule To Accompany Statement of Liquidation
Februart 28, 2014
Noble Orbos Pimentel Quezon

Capital balances before cash distribution P19,128 P88,992 P101,532 P22,878
Add Loan balances 15,000
Total partners’ interest P34,128 P88,992 P101,532 P22,878
Restricted interest – possible loss if nothing is
realized on remaining assets (25,494) (38,241) (38,241) (25,494)
Balances P 8,634 P50,751 P 63,291 (P2,616)
Restricted interest – additional possible loss if
Quezon is unable to pay his deficiency
(20:30:30) ( 654) ( 981) ( 981) (2,616)
Free interest – payments to partners P 7,980 P49,770 P62,310
Payment to apply on
Loan P 7,980
Capital P49,770 P62,310 P -----
Total cash distribution P 7,980 P49,770 P62,310 P -----
NOPQ Trading Co.

Schedule To Accompany Statement of Liquidation
March 31, 2014
Noble Orbos Pimentel Quezon

Capital balances before cash distribution P18,348 P38,052 P38,052 P22,098
Total partners’ interest P25,368 P38,052 P38,052 P22,098
realized on remaining assets (16,524) (24,786) (24,786) (16,524)
Free interest – payments to partners P8,844 P13,266 P13,266 P 5,574

Loan P 7,020
Capital 1,824 P13,266 P13,266 P 5,574
Total cash distribution P 8,844 P13,266 P13,266 P 5,574

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P 7-2
1. January : a. Cash 112,000
b. Reyes, Capital 2,200

Samson, Capital 1,100
Toledo, Capital 1,100
Cash 4,400

Cash 38,000
d. Toledo, Capital 9,000

Cash 16,000
February: a. Cash 36,000


Samson, Capital 700
Toledo, Capital 700
2,800
Cash 38,000
Reyes, Capital 500
Samson, Capital 250
Toledo, Capital 250
d. Salary Payable to Reynes 6,000

Reyes, Capital 1,400
Cash 19,800
March: a. Cash 35,000

Reyes, Capital 4,000

Cash 4,000
c. Reyes, Capital 39,500

Cash 79,000

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P 7-2
Reyes, Samson and Toledo Partnership

January 1 – March 31, 2015
CAPITAL
Other Toledo Sal. Pay Reyes Samson Toledo
Cash Assets Liabilities Loan to Reyes
Balances before liquidation P19,000 P191,000 P77,000 P 9,000 P 6,000 P50,000 P28,000 P40,000
January:
Collections from customers 112,000 (112,000
)
Balances P88,600 P79,000 P39,000 P 9,000 P 6,000 P47,800 P26,900 P38,900
Payment to partners (see schedule) ( 16,000) ( 9,000) ( 7,000)
Balances P72,600 P79,000 P39,000 P 6,000 P47,800 P26,900 P31,900
February:
Collections from customers 36,000 (36,000)
Payment of liquidation expenses ( 2,800) ( 1,400) ( 700) ( 700)
Payment of liabilities & dist. of gain (38,000) (39,000) 500 250 250
Balances P67,800 P43,000 P6,000 P46,900 P26,450 P31,450
Payment to partners (see schedule) (19,800) (6,000) ( 1,400) ( 3,700) ( 8,700)
Balances P48,000 P43,000 P45,500 P22,750 P22,750
March:
Collections from cust. & dist. of loss 35,000 (43,000) ( 4,000) ( 2,000) ( 2,000)
Balances P79,000 P39,500 P19,750 P19,750
Payment to partners ( 79,000) (39,500) (19,750) (19,750)

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Reyes, Samson and Toledo Partnership

January 1, 2015
PAYMENTS
Reyes Samson Toledo Reyes Samson Toledo
Capital balances before liquidation P 50,000 P28,000 P40,000
Add Loan balances 6,000 9,000
Total partners’ interest P 56,000 P28,000 P49,000
Profit and loss ratio ¸ 50% ¸ 25%  25%
Allocation I – Cash to Toledo reducing LAB to an amount reported
for Reyes and Samson, reduction of P84,000 requires payment
(25% x P84,000) (84,000) P21,000
Balances P112,000 P112,000 P112,000 - - P21,000
Allocation II – Further cash distributions may be made in the profit and loss ratio
SCHEDULE OF CASH DISTRIBUTION:

Amount Reyes Samson Toledo
January: Cash available P16,000
Allocation I:
Payable to Toledo 16,000 P16,000
February: Cash available P19,800

Allocation I – Balance
Payable to Toledo 5,000 5,000
Allocation II
Payable according
to P & L ratio P14,800 P7,400 P3,700 P3,700
P7,400 P3,700 P8,700

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P 7-3
Urbe, Verde and Waje
January 1, 2015
PAYMENTS
Urbe Verde Waje Urbe Verde Waje
Loan balances 45,000 30,000 P13,000
Total partners’ interest P165,000 P120,000 P43,000
Allocation I – Cash to Verde reducing
LAB to an amount reported for
Urbe (P70,000 x 30%) (70,000) P21,000
Balances P330,000 P330,000 P265,000
Allocation II – Cash to Urbe & Verde to
reduce LAB to an amount reported
for Waje (P65,000 x 30%)
(P65,000 x 20%) (65,000) (65,000) P32,500 19,500
Balances P265,000 P265,000 P265,000 P32,500 P40,500 -
Allocation III – Further cash
distributions may be made in the P
& L ratio
2.
Amount Urbe Verde Waje

January:
Allocation I – payable to Verde 15,000 P15,000
February:
Allocation I – Bal. payable to Verde 6,000 P6,000
Allocation II – Payable to Urbe and Verde in the
ratio of 50:30 P34,000 P21,250 P12,750
P21,250 P18,750
March:
Allocation II – Balance 18,000 P11,250 P 6,750
Allocation III – Based on P & L ratio P72,000 360,00 21,600 P14,400
P47,250 P28,350 P14,400
April:
Allocation III – Based on P & L ratio 30,000 P15,000 P9,000 P6,000

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P 7-3
Urbe, Verde and Waje

January 1 to April 30, 2014
Other LOAN CAPITAL

Cash Assets Urbe Verde Waje Urbe Verde Waje
Balances before liquidation P338,000 P45,000 P30,000 P13,000 P120,000 P90,000 P40,000
January:
Sale of assets P15,000 (15,000)
Payment of partners (15,000) (15,000)
Balances P323,000 P45,000 P15,000 P13,000 P120,000 P90,000 P40,000
February:
Sale of assets 40,000 (40,000)
Payment to partners (40,000) (21,250) (15,000) (3,750))
Balances P283,000 P23,750 P13,000 P120,000 P86,250 P40,000
March:
Sale of assets 90,000 (90,000)
Payment to partners (90,000) (23,750) (13,000) (23,500) (28,350) (1,400)
Balances P193,000 P96,500 P57,900 P38,600
April:
Sale of assets & distribution of loss 30,000 (193,000) (81,500) (48,900) (32,600)
Balances P30,000 P15,000 P9,000 P 6,000
Payment to partners (30,000) (15,000) (9,000) (6,000)

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P 7-4
Xavier, Yambot and Zapanta
Cash Distribution Schedule
June 30, 2014
PAYMENTS
Xavier Yambot Zapanta Xavier Yambot Zapanta
Capital balances before liquidation P 67,000 P 45,000 P 31,500
Receivable from partners (12,000) (7,500)
Allocation I – Cash to Yambot to
reduce LAB to amount reported
for Zapanta (P30,000 x 30%) 30,000 P9,000
Balances P110,000 P120,000 P120,000
Allocation II – Cash to Zapanta &
Yambot to reduce LAB to an
amount reported for Xavier 10,000 10,000 3,000 2,000
Balances P110,000 P110,000 P110,000
Allocation III – Based on P & L ratio
(P6,000 + P100,000 – P17,000 =
P89,000 – P14,000)
P37,500 22,500 15,000
TOTALS P37,500 P34,500 P17,000
P 7-5
Fernan, Luisa and Susan
For the Period of January 1, 2013 to May 31, 2015
Fernan Luisa Susan Total

2013
Original investment P 50,000 P 30,000 P 80,000
Distribution of net income (sch.1) 15,200 12,800 28,000
Total P 65,200 P 42,800 P108,000
Drawings ( 7,000) ( 6,000) ( 13,000)
Balances, December 31 P58,200 P 36,800 P95,000
2014
Investment of Susan (sch. 2) ( 9,100) ( 4,900) P 54,000 40,000
Distribution of net loss ( 4,200) ( 3,000) ( 4,800) ( 12,000)
Balances P 44,900 P 28,900 P 49,200 P123,000
Drawings ( 4,900) ( 3,900) ( 4,200) ( 13,000)
Balances, December 31 P 40,000 P 25,000 P 45,000 P110,000
2015
Distribution of cash in Feb. (sch. 3) ( 5,000) ( 5,000) ( 10,000)
Balances P 35,000 P 25,000 P 40,000 P100,000
Distribution of cash in April (sch. 4) ( 7,000) ( 5,000) ( 8,000) (20,000)
Balances P 28,000 P 20,000 P 32,000 P 80,000
Sale of assets & distribution of loss in May (sch. 5) (17,500) (12,500) (20,000) ( 50,000)
Balances P 10,500 P 7,500 P 12,000 P 30,000

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Final cash distribution 10,500 7,500 12,000 30,000

Fernan Luisa Total

Salaries P10,000 P10,000 P20,000
Remainder – 65%:35% 5,200 2,800 8,000
Total P15,200 P12,800 P28,000
Schedule 2 – Admission of Susan
Total capital before admission of Susan P

95,000
Investment of Susan 40,000
Total capital P135,00
0
Interest acquired by Susan 40%
Capital credit of Susan P
54,000
Investment of Susan 40,000
Bonus to Susan from old partners (shared 65%:35%) P
14,000
Schedule 3 – Cash distribution in February
Fernan Luisa Susan

Capital balances before dist. of cash P40,000 P25,000 P45,000
realized on remaining assets (P100,000) 35,000 25,000 40,000
Free interest – amount to be paid to partners P 5,000 P ------- P 5,000
Schedule 4 – Cash distribution in April
Fernan Luisa Susan

Capital balances before dist. of cash P35,000 P25,000 P40,000
realized on remaining assets (P80,000) 28,000 20,000 32,000
Free interest – amount to be paid to partners P 7,000 P 5,000 P 8,000
Schedule 5 – Loss on realization of assets in May

Capital balances equal to net assets P80,000
Cash realized on sale of assets 30,000
Loss on realization P50,000

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MULTIPLE CHOICE
MC 7-1 A
Elaine Flor Gina
Less loss on realization ( 16,000) (16,000) ( 8,000)
Balances P24,000 P49,000 P40,000
Less Restricted interest – possible loss of P90,000
on other assets (36,000) (36,000) (18,000)
Balances (P12,000) P13,000 P22,000
to Flor and Gina for the def. of Elaine 12,000 ( 8,000) ( 4,000)
Payment to partners - P 5,000 P18,000
MC 7- 2 B
Elaine Flor Gina
Balances after loss on realization P24,000 P49,000 P40,000
on other assets and possible liquidation
expenses (37,200) (37,200) (18,600)
Balances (P13,200) P11,800 P21,400
to Flor and Gina for the def. of Elaine 13,200 ( 8,800) ( 4,400)
Payment to Gina - - P17,000
MC 7-3 D
Elaine = P14,000 x 40% = P5,600
Flor = P14,000 x 40% = P5,600
Gina = P14,000 x 20% = P2,800
MC 7-4 C
Total credits (P105,000 + P5,000) P110,000
Less Cash 700
Other assets P109,300
MC 7-5 D
Capital of Aguas [P25,000 – (P20,000 x 60%)] P13,000
Amount received in final settlement 19,000
Share on gain on realization P 6,000
Profit ratio of Aguas  60%
Total gain on realization P10,000
Book value of other assets 109,300
Cash realized on other assets P119,300

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MC 7-6 D
PAYMENT
Aguas Bernal Coral Aguas Bernal Coral
Allocation I (133,333) P20,000
Balances P21,667 P180,000 P180,000
Allocation II (158,333) (158,333) P39,583 23,750
Balances P21,667 P21,667 P21,667 --- P39,583 P43,750
Cash received by Coral P33,000

Less Cash received per Allocation I 20,000
Cash received from Allocation II P13,000
 15/40
Total cash available for Allocation II P34,667
Share of Bernal X 25/40
Cash received by Bernal P21,667
MC 7-7 D
MC 7-8 C
Book value of other assets P280,000
Less Cash realized 220,000
Loss on realization P 60,000
Profit and loss share of Dalmacio X 3/6
Total loss to Dalmacio P 30,000
MC 7-9 C
Capital of Damian P 70,000
Less Share on the loss on realization (P6,000 x 2/6) 20,000
Cash received by Damian P 50,000
MC 7- 10 A
Dalmacio Damian Davide
Total partners’ interest P150,000 P 70,000 P 30,000
Loss on realization (15,000) (10,000) ( 5,000)
Balances P135,000 P 60,000 P 25,000
Restricted interest – pos. loss of P190,000 on other assets (95,000) (63,333) (31,667)
Balances P 40,000 (P 3,333) (P 6,667)
Restricted interest – possible loss to Dalmacio ( 10,000) 3,333 6,667
Cash received by Davide -0-

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MC 7-11 B
PAYMENT
Felix Fojas Fajardo Felix Fojas Fajardo
Loans (25,000) 50,000
Total partners’ int. P225,000 P125,000 P125,000
Loss absorption P750,000 P250,000 P625,000
balances
Balances P625,000 P250,000 P625,000
Allocation II (375,000) (375,000) 112,500 P75,000
Balances P250,000 P250,000 P250,000 P150,000 - P75,000
Alloc. III P&L ratio
MC 7-12 D
Creditors Felix Fojas Fajardo
Amount available P325,000 P 250,000
Payment to creditors (250,000)
Allocation. I (37,500) P37,500
Allocation II (37,500 22,500 P15,000
P250,000 P60,000 - P15,000
MC 7-13 A
MC 7-14 C
Felix Fojas
Amount to Felix P180,000
Allocation II (112,500) 112,500
Allocation III P 30,000 30,000
P30,000/30% x 50% P50,000
MC 7-15B
Fojas Fajardo
Allocation II P 75,000
Allocation III P180,000
P180,000/50% x 20% 72,000
P147,000
TM 25
1. E 5. H 9. I 13. A
2. M 6. M 10. C 14. N
3. K 7. D 11. B 15. L
4. F 8. G 12. J
TM 26
1. A
2. D
3. B

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4. D
Abril Suarez Custodio
Allocation 1 – Cash to Custodio to reduce his
balances to that of Abril and Suarez (P155,000
x 20% = P31,000) (155,000)
Balances P185,000 P325,000 P325,000
Allocation 2 – Cash to Suarez and Custodio to
reduce their balances to that of Abril
(P140,000 x 40% = P56,000;
P140,000 x 20% = P28,000) (140,000) (140,000)
Balances P185,000 P185,000 P185,000
Allocation 3 – further cash distribution shall be made based on P & L ratio
Abril Suarez Custodio

Allocation 1 P31,000
Allocation 2 – P9,000 x 4/6 P6,000
P9,000 x 2/6 P3,000
P ------ P6,000 P34,000
5. D
Allocation 2 – P3,000 x 4/6 P2,000
P3,000 x 2/6 P1,000
P ------ P2,000 P32,000
6. A P24,000 x 4/10 = P9,600; P24,000 x 2/10 = P4,800
7. D
Donato Munoz Torres

Capital balances before liquidation P 72,000 P 80,000 P86,000
Total partners’ interest P 72,000 P100,000 P86,000
Allocation 1 – Cash to Torres to reduce his
balance to that of Donato and Munoz
(P190,000 x 20% = P38,000 (190,000)
Balances P240,000 P200,000 P240,000
Allocation 2 – Cash to Donato and Torres to
reduce their balances to that of Munoz
(P40,000 x 30% = P12,000;
P40,000 x 20% = P8,000) (40,000) (40,000)
Balances P200,000 P200,000 P200,000
Allocation 3 – Further cash distribution shall be
based on P & L ratio

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8. C P190,000 x 20% = P38,000
9. B Available cash = P30,000 + P80,000 – P62,000 = P48,000
Allocation 2 – P10,000 x 3/5 P6,000
P10,000 x 2/5 P4,000
P6,000 P ---- P42,000
10. A
Allocation 2 Balance – P10,000 x 3/5 P 6,000

P10,000 x 2/5 P4,000
Allocation 3 – P & L ratio 21,000 P35,000 14,000
P27,000 P35,000 P18,000

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TM 27
2.
ASC Partnership
June 30, 2014
PAYMENTS
Alfonso Santos Censon Alfonso Santos Censon
Add Loan balances 25,000
Total partners’ interest P200,000 P300,000 P100,000
Loss absorption balance P400,000 P1,000,00 P500,000
0
Allocation I – Cash to Santos to reduce his balance to that of
Alfonso and Censon (P500,000 x 30% = P150,000) (500,000) P150,00
Balances P400,000 P500,000 P500,000
Allocation 2 – Cash to Santos and Censon to reduce their balances
to that of Alfonso
(P100,000 x 30% = P30,000;
P100,000 x 20% = P20,000) (100,000) (100,000) P30,000 20,00
Balances P400,000 P400,000 P400,000 - P30,000 P170,00
Allocation II – Further cash distributions may be made in the profit and loss ratio
Cash available for distribution = P230,000 + P100,000 – P150,000 = P180,000
2.
Alfonso Santos Censon Total
Allocation 1 P150,000 P150,000
Allocation 2 – P30,000 x 3/5 18,000 P12,000 30,000
Total P ---- P168,000 P12,000 P180,000

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CHAPTER 8
Organization and Formation of a Corporation
E 8-1
a. Memorandum entry method
Jan. 1 Authorized to issue 250,000 shares of 10% preference share capital with a par value of
P100.
1 Authorized to issue 500,000 shares of ordinary share capital with a stated value of P20.
1 Cash 9,375,000
Preference Share Capital (62,500 x P100) 6,250,000
Ordinary Share Capital (125,000 x P20) 2,500,000
Ordinary Share Capital in Excess of Stated Value 625,000
May 1 Cash 3,000,000

Preference Share Premium 500,000
Dec. 1 Cash 600,000

Ordinary Share Capital (25,000 x P20) 500,000
b. Journal entry method

Jan. 1 Unissued Preference Share Capital 25,000,000
Authorized Preference Share Capital 25,000,000
1 Unissued Ordinary Share Capital 10,000,000

Authorized Ordinary Share Capital 10,000,000
1 Cash 9,375,000
Unissued Preference Share Capital 6,250,000
Unissued Ordinary Share Capital 2,500,000
May 1 Cash 3,000,000

Unissued Preference Share Capital 2,500,000
Dec. 1 Cash 600,000

Unissued Ordinary Share Capital 500,000

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APC page 120
E 8-2
a. Memorandum entry method
Apr. 1 Authorized to issue 500,000 shares of ordinary share capital with a par value of P20.
1 Cash 7,200,000
Ordinary Share Premium 3,200,000
25 Pre-Operating Expenses 150,000

Ordinary Share Premium 50,000
May 28 Equipment 400,000

b. Journal entry method

Mar. 1 Unissued Ordinary Share Capital 10,000,000
Authorized Ordinary Share Capital 10,000,000
1 Cash 7,200,000
Unissued Ordinary Share Capital 4,000,000
25 Pre-Operating Expenses 150,000

Apr. 28 Equipment 400,000

E 8-3
1. Authorized to issue 500,000 shares of ordinary share capital with a par value of P20
Cash 6,250,000
Ordinary Share Premium (250,000 x P5) 1,250,000
2. Authorized to issue 500,000 shares of Ordinary Share Capital with a stated value of P15.
Cash 6,250,000
Ordinary Share Capital in Excess of Stated Value 2,500,000
3. Authorized to issue 500,000 shares of no-par and no stated value Ordinary Share Capital.
Cash 6,250,000

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APC page 121
E 8-4
Authorized to issue 500,000 shares of ordinary share capital with a stated value of P20.
a. Cash 2,500,000
b. Pre-Operating Expenses 150,000

Note: shares issued should be 2,500 and NOT 25,000
c. Pre-Operating Expenses 50,000

d. Land 300,000
e. Cash (50,000 x P24) 1,200,000

E 8-5
June 1 OSC Subscription Receivable (35,000 x P50) 1,750,000
OSC Subscribed (35,000 x P20) 700,000
1 Cash (P1,750,000 x 60%) 1,050,000

OSC Subscription Receivable 1,050,000
Sept. 8 Cash 700,000

OCS Subscription Receivable 700,000
8 OSC Subscribed 700,000

Ordinary Share Capital 700,000
E 8-6
July 1 Cash 3,125,000
8 Pre-Operating Expenses (1,250 x P120) 150,000

Preference Share Capital (1,250 x P100) 125,000
Preference Share Premium (1,250 x P20) 25,000
12 OSC Subscription Receivable (75,000 x P20) 1,500,000

OSC Subscribed (75,000 x P10) 750,000

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APC page 122
12 Cash 900,000
OSC Subscription Receivable 900,000
P1,500,000 x 60% = P900,000
July 21 Merchandise Inventory 10,000

Land 150,000
Building 100,000
Equipment 20,000
30 Cash (P1,500,000 – P900,000) 600,000


E 8-7
Sept. 1 OSC Subscription Receivable (125,000 x P30) 3,750,000
OC Subscribed (125,000 x P20) 2,500,000
1 Cash (P3,750,000 x 40%) 1,500,000

8 Land 750,000
10 Cash 750,000
P2,200,000 / 3 = P750,000
20 Cash 750,000
30 Cash 750,000
30 OSC Subscribed 2,500,000

Ordinary Share Capital 2,500,000
E 8- 8
a. OSC Subscription Receivable (125,000 x P25) 3,125,000
OSC Subscribed (125,000 x P10) 1,250,000
Ordinary Share Capital in Excess of Stated Value 1,875,000
Cash (P3,125,000 x 60%) 1,875,000


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APC page 123
b. Cash (50,000 x P25 x 40%) 500,000

OSC Subscribed 500,000

c. Cash (60,000 x P25 x 40%) 600,000


d. Receivable from Highest Bidder 150,000

15,000 sh x P25 x 40% = P150,000
e. Receivable from Highest Bidder 50,000

Cash 50,000
f. Cash 200,000
Receivable from Highest Bidder 200,000
P 8-1
Aug. 1 Authorized to issue 50,000 shares of P100 par value preference share capital.
1 Authorized to issue 500,000 shares of P20 par value ordinary share capital.
2 PSC Subscription Receivable (15,000 x P120) 1,800,000

PSC Subscribed (15,000 x P100) 1,500,000
2 Cash 540,000
PSC Subscription Receivable 540,000
P1,800,000 x 30% = P540,000

2 Cash (5,250,000 x 20%) 1,050,000

30 Cash (P1,800,000 x 30%) 540,000

31 Cash (100,000 x P30 x 80%) 2,400,000


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APC page 124

31 Cash (75,000 x P30 x 40%) 900,000

Sept. 21 Cash 528,000

11,000 sh x P120 x 40% = P528,000
21 PSC Subscribed 1,100,000
21 Receivable from Highest Bidder 192,000

4,000 sh x P120 x 40% = P192,000
28 Cash 192,000
28 PSC Subscribed 400,000

Preference Share Capital (4,000 x P100) 400,000
30 Cash 900,000
75,000 sh x P30 x 40% = P900,000
30 Ordinary Share Capital Subscribed 1,500,000

P 8-2
Nov. 2 OSC Subscription Receivable (50,000 x P60) 3,000,000
Ordinary Share Premium (50,000 x P10) 500,000
2 Cash (P3,000,000 x 40%) 1,200,000

5 Equipment 700,000

16 Cash (P1,800,000 x 20%) 360,000

28 Cash (35,000 x P60 x 60%) 1,260,000


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APC page 125

Dec. 16 Cash 1,200,000

25,000 sh x P60 x 80% = P1,200,000


5,000 sh x P60 x 80% = P240,000

Cash 15,000
26 Cash 255,000

P 8-3
Partnership Books
1. Inventories 90,000
2. Accumulated Depreciation 160,000

Equipment 80,000
3. Capital Adjustment Account 100,000

Goodwill 100,000
4. Goodwill 156,000
FMV of OS issued (14,000 sh@P70) P980,000
Adj. NA, excluding cash
(P112,000+P296,000+P520,000-P104,000) 824,000
Goodwill P156,000
5. Capital Adjustment Account 226,000

Bautista, Capital (3/4) 169,500
Bernaldo, Capital (1/4) 56,500

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APC page 126
6. Rainbow Corp. Stocks 980,000

Inventories 296,000
Equipment 520,000
Goodwill 156,000
7. Bautista, Capital 563,500

Bernaldo, Capital 458,500
Cash 42,000
Rainbow Corp. Stocks 980,000
New Corporation’s Books

1. Authorized to issue 50,000 shares of P50 par value ordinary share capital.
2. Cash (10,000 x P70) 700,000

3. Accounts Receivable 124,000

Inventories 296,000
Equipment 520,000
Goodwill 156,000
P 8-4
1.
a. Land 150,000
Preference Share Capital 100,000
b. Cash 35,000
Preference Share Capital 25,000
c. Pre-operating Expenses 5,400

d. Cash 78,000
2. PS = P125,000 /P50 par = 2,500 shares

OS = P 64,000 / P5 par = 12,800 shares

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APC page 127
P 8-5
1. Total preference shares issued (P1,000,000/P50 par) 20,000 sh
PS issued for equipment 10,000
PS issued for cash 10,000 sh
2. Preference share premium P120,000

Premium from issuance in exchange for equipt. (P550,000 – P500,000) 50,000
Share premium from issuance for cash P 70,000
Issuance price per share = P50 + (P70,000/10,000) P 57
3. OSC issued = P3,000,000/P10 300,000 sh
4. Issuance price per share = P7,500,000/300,000 sh P25.00
5. PIC from issuance of PS for equipment P50,000
P 8-6
1. P1,440,000/ P50 = 28,800 shares
2. P1,360,000/P10 = 136,000 shares
3. P720,000 / P50 = 14,400 shares
4. P280,000/P10 = 28,000 shares
5. (P2,160,000 + P216,000) / (28,800 + 14,400) = P55
6. (P1,640,000 + P328,000) / (136,000 + 28,000) = P12
7. P360,000 / 14,400 shares = P25
8. P12 – (P182,000/28,000 sh) = P5.50
Multiple Choice
8-1 D 25,000 sh x P24 x 25% = P150,000
8-2 A
8-3 D 4,000 sh x P110 x 25% = P110,000
8-4 C 2,000 sh x P17 = P34,000
8-5 A (25,000 + 1,000 + 5,000) x P20 = P620,000
8-6 D (25,000 x P2) + (1,000 x P4) + (5,000 x P6) = P84,000
8-7 D (P900,000 – P750,000) + (P100,000 x P15) + (5,000 x P5) = P1,675,000
8-8 D [(50,000 + 50,000 +100,000) x P15] + (5,000 x P50) + P1,675,000 = P4,925,000
8-9 B
8-10 D (100,000 x P30) + (3,000 x P50) =3,150,000
8-11 B (7,500 + 6,000 x P4) = P54,000
8-12 A
8-13 A
8-14 A
8-15 D
TM 28
1. T 6. T 11. T 16. F 21. T
2. F 7. F 12. T 17. T 22. T
3. F 8. F 13. F 18. T 23. T
4. T 9. T 14. F 19. F 24. F
5. F 10. T 15. T 20. F 25. T

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APC page 128
TM 29
1. Corporation 11. Outstanding share capital
2. Incorporation 12. Delinquent subscriber
3. Domestic corporation 13. 25%
4. Incorporators 14. 25%
5. Pre-operating costs/organization costs 15. Paid-in capital in excess of stated value
6. Stated value 16. P5.00
7. Ordinary share capital 17. 50 years
8. Preference share capital 18. Stock certificate
9. Par value 19. P Receivable from highest bidder
10 Ordinary share capital 20. Goodwill
TM 30
1. C 5. C 9. A 13. C 17. D
2. C 6. A 10. B 14. B 18. A
3. D 7. B 11. B 15. C 19. C
4. C 8. D 12. C 16. B 20. D
TM 31
Problems
A. 1. P50,000 P60,000 (total) – P10,000 (land) = P50,000

2. P55 P2,750,000 / 50,000 sh = P55
3. 500,000 sh P5,000,000 / P10 = 500,000 sh
4. P15 P7,500,000 / 500,000 sh = P15
5. P50,000 P550,000 – (10,000 sh x P50) = P50,000
B. 1. P100 / 325 sh P42,250/P130 = 325 shares; P32,500/325 sh = P100

2. P70,000 P120,000 – (1,000 x P50) = P70,000
3. P50,000
4. P2,460,000 (24,000 sh x P60) + (6,000 sh x P120) + (2,000 sh x P150)
5. P64,000 8,000 sh x P8 = P64,000
C.
1. 57,600 sh P2,880,000 / P50
2. 272,000 sh P2,720,000 / P10
3. 28,800 sh P1,440,000 / P50
4. 56,000 sh P560,000 / P10
5. P55 (P4,320,000 + P432,000) / (57,600 + 28,800) = P55
6. P12 (P3,280,000 + P656,000) / (272,000 + 568,000) = P12
7. P25 P720,000 / 28,800 = P25
8. P5.50 P12 – (P364,000/56,000)

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APC page 129
CHAPTER 9
Operations, Dividends, Book Value and Earnings per Share
E 9-1
Contributed Capital:
10% Preference Share Capital, P100 par, cumulative, 10,000 shares
authorized, 4,000 shares issued and outstanding P 400,000
Ordinary Share Capital, P20 par, 100,000 shares authorized,
50,000 shares issued and outstanding 1,000,000
Ordinary Share Capital Subscribed – 10,000 shares 200,000
Total Contributed Capital P1,950,000
Retained Earnings 250,000
Total Shareholders’ Equity P2,200,000
E 9-2
10% Preference Share Capital, P40 par, 40,000 shares authorized,
20,000 shares issued and outstanding P800,000
Preference Share Capital Subscribed P40,000
Less PSC Subscription Receivable 14,000 26,000
Ordinary Share Capital, P10 stated value, 500,000 shares authorized,
Paid-in Capital in Excess of Par – Preference Shares 120,000
Paid-in Capital in Excess of Stated Value – Ordinary Shares 100,000
E 9-3
Mar. 1 Retained Earnings 400,000
Dividends Payable 400,000
40,000 sh x P10 = P400,000
Apr. 15 Dividends Payable 400,000

Cash 400,000
Sept. 1 Retained Earnings 800,000

40,000 sh x P20
30 Dividends Payable 800,000

Cash 800,000
E 9-4
Apr. 1 Retained Earnings 200,000
100,000 sh x P2

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APC page 130
May 2 Dividends Payable 200,000

Cash 200,000
June 1 Retained Earnings 600,000

Share Capital Dividends Distributable 500,000
PIC from Share Capital Dividends 100,000
100,000 sh x 10% x P60
July 15 Share Capital Dividends Distributable 500,000

E 9-5
1. Retained Earnings 1,875,000
PIC from Share Capital Dividends 1,125,000
500,000 sh x 15% x P25 = P1,875,000
500,000 sh x 15% x P10 = P 750,000

2. Retained Earnings 2,500,000

Share Capital Dividends Distributable 2,500,000
500,000 sh x 50% x P10 = P2,500,000
Share Capital Dividends Distributable 2,500,000

E 9-6
Mar. 15 Retained Earnings 10,000
2,000 sh x P5 = P10,000
Apr. 15 Dividends Payable 10,000

Cash 10,000
July 15 Retained Earnings 40,000

Property Dividends Payable 40,000
2,000 sh x P20
Property Dividends Payable 40,000

Investment in Pentagon Corp. Stocks 40,000
Oct. 15 Retained Earnings 15,000

2,000 sh x 30% x P25
Dec. 1 Share Capital Dividends Distributable 15,000


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APC page 131
E 9-7
Annual PSC dividend requirement – 100,000 sh x P100 x 12% = P1,200,000
1.
2012 2013 2014
Preference P1,200,000 P1,200,000 P1,200,000
Ordinary 1,300,000 2,300,000 5,300,000
Total P2,500,000 P3,500,000 P6,500,000
Dividends per share:
Preference P12.00 P12.00 P12.00
Ordinary P 2.60 P 4.60 P10.60
2.
Preference Ordinary Total
2012
Dividends in arrears – 2 yrs. P2,400,000 P2,400,000
Current dividends 100,000 P ----------- 100,000
Total P2,500,000 P ----------- P2,500,000
Dividends per share P25.00 P –0--

2013
Dividends in arrears P1,100,000 P1,100,000
Current dividends 1,200,000 1,200,000
Balance – Ordinary P1,200,000 1,200,000
Total P2,300,000 P1,200,000 P3,500,000
Dividends per share P23.00 P 2.40

2014
Current dividends P1,200,000 P1,200,000
Balance – Ordinary P5,300,000 5,300,000
Total P1,200,000 P5,300,000 P6,500,000
Dividends per share P12.00 P 10.60

3.
2012
Regular dividends P1,200,000 P600,000 P1,800,000
Balance –P700,000
Preference – 10/15 466,667 466,667
Ordinary – 5/15 233,333 233,333
Total P1,666,667 P833,333 P2,500,000
Dividends per share P16.67 P1.67

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APC page 132
2013
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance –P1,700,000
Preference – 10/15 1,133,333 1,133,333
Ordinary – 5/15 566,667 566,667
Total P2,333,333 P1,166,667 P3,500,000

2014
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

4.
2012
Dividends in arrears – 2 yrs. P2,400,000 P2,400,000
Current dividends 100,000 P ----------- 100,000
Total P2,500,000 P ----------- P2,500,000
Dividends per share P25.00 P –0--

2013
Dividends in arrears P1,100,000 P1,100,000
Regular dividends 1,200,000 P 600,000 1,800,000
Balance – P600,000
Preference – 10/15 400,000 400,000
Ordinary – 5/15 200,000 200,000
Total P2,700,000 P 800,000 P3,500,000

2014
Balance – P4,700,000
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

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APC page 133
5.
2012
Regular dividends P1,200,000 P600,000 P1,800,000
Balance –P700,000
Preference – 10/15 466,667 466,667
Ordinary – 5/15 233,333 233,333
Total P1,666,667 P833,333 P2,500,000

2013
Preference 800,000 800,000
Ordinary 900,000 900,000
Total P2,000,000 P1,500,000 P3,500,000
2014
Preference 800,000 800,000
Ordinary 3,900,000 3,900,000
Total P2,000,000 P4,500,000 P6,500,000
E 9-8
1. P5,000,000 / 200,000 shares P25.00
2. Total Shareholders’ Equity P5,000,000

Equity identified with preference shares (10,000 sh x P120) 1,200,000
Equity identified with ordinary shares P3,800,000
BV/share: PS – P120.00; OS – P3,800,000/100,000 = P38.00
E 9-9
a. P10,000/60,000 = P.17
b. P70,000/60,000 = P1.17
c. P90,000/60,000 = P1.50
d. P150,000/60,000 = P2.50
e. P180,000/60,000 = P3.00

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APC page 134
E 9-10
Profit P750,000
Less earnings identified with preference share capital
(20,000 sh x P100 x 10%) 200,000
Earnings identified with ordinary shares P550,000
Earnings per share P550,000/300,000 = P1.67
P 9-1
1.
2014
Jan. 2 Cash 3,125,000
125,000 sh x P25
Mar. 2 Cash (62,500 sh x P30) 1,875,000

Mar. 31 Land 300,000

Building 500,000
Dec. 31 Income Summary 750,000

31 Retained Earnings 531,250

125,000 + 62,500 + 25,000 = 212,500 sh x P2.50
2015
Jan. 31 Dividends Payable 531,250
Cash 531,250
Feb. 14 OSC Subscription Receivable (50,000 x P50) 2,500,000

14 Cash 1,000,000
OSC Subscription Receivable 1.000,000
P2,500,000 x 40%
Mar. 15 Cash 1,500,000

P2,500,000 x 60%


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APC page 135
Dec. 31 Income Summary 2,000,000

Retained Earnings 2,000,000

212,500 + 50,000 = 262,500 x P2

Stock Dividends Distributable 525,000
PIC from Stock Dividend 131,250
262,500 x 10% x P25 = 262,500
2.
Ordinary share Capital, P20 par, 500,000 shares authorized,
212,500 shares issued and outstanding P4,250,000
3.
BCD Corporation
Statement of Changes in Shareholders’ Equity
Ordinary Ordinary PIC from

Share Share Stock Retained
Capital Premium Dividend Earnings Total
Balances, January 1, 2014 P - P - P - P -
Issuance of 125,000 shares@P25 2,500,000 625,000 P3,125,000
Issuance of 62,500 shares@P30 1,250,000 625,000 1,875,000
Issuance of 25,000 shares in exchange
for land and building 500,000 300,000 800,000
Profit for 2014 750,000 750,000
Declaration of cash dividends of P2.50 ( 531,250) ( 531,250)
Balances, December 31, 2014 P4,250,000 P1,550,000 p 218,750 P6,018,750
P 9-2
MMM Corporation
For the Two Years Ending December 31, 2014
Ordinary Ordinary
Share Share Retained
Capital Premium Earnings Total
2013:
Issued 120,000 shares @ P24 P2,400,000 P 480,000 P2,880,000
Loss for the year (P300,000) ( 300,000)
Balances, December 31 P2,400,000 P 480,000 (P300,000) P2,580,000
2014:
Issued 80,000 shares @ P30 1,600,000 800,000 2,400,000
Profit for the year 800,000 800,000
Balances, December 31 P4,000,000 P1,280,000 P500,000 P5,780,000

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APC page 136
VVV Inc.
For the Two Years Ending December 31, 2014
5% Preference
Preference Ordinary Share Retained
Share Share Premium Earnings Total
2013:
Issued 6,000 PS @ P120 P 600,000 P 120,000 P 720,000
Issued 200,000 ordinary shares P1,400,000 1,400,000
Profit for the year P 240,000 240,000
Dividends:
PS – P600,000 x 5% ( 30,000) ( 30,000)
OS – 200,000 shares x P.25 ( 50,000) ( 50,000)
Balances, December 31 P 600,000 P1,400,000 P 120,000 P 160,000 P2,280,000
2014:
Issued 5,000 PS @ P130 500,000 150,000 650,000
Issued 100,000 OS @ P10 1,000,000 1,000,000
Profit for the year 600,000 600,000
Dividends:
PS – 1,100,000 x 5% ( 55,000) ( 55,000)
OS - 300,000 shares x P.50 ( 150,000) ( 150,000)
Balances, December 31 P1,100,000 P2,400,000 P 270,000 P 555,000 P4,325,000
MMM Corp.
Shareholders’ Equity
December 31, 2014
Ordinary Share Capital, P20 par, 200,000 shares authorized,
all issued and outstanding P4,000,000
Ordinary Share Premium 1,280,000 P5,280,000
VVV Inc.
December 31, 2014
5% Preference Share Capital, P100 par, 200,000 shares authorized,
11,000 shares issued and outstanding P1,100,000
Ordinary Share Capital, no par, no Stated Value 500,000 shares
authorized,
Preference Share Premium 270,000 P3,770,000

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APC page 137
P 9-3
DEF Corporation
Balance Sheet
December 31, 2014
Assets
Current Assets:
Cash P 200,000
Accounts Receivable P 100,000
Less Allowance for Doubtful Accounts 10,000 90,000
Total Current Assets P 521,000
Noncurrent Assets:
Land P1,000,000
Office Equipment, net of Accumulated Depreciation of P45,000 105,000
Store Equipment, net of Accumulated Depreciation of P75,000 175,000 1,280,000
Liabilities
Current Liabilities:
Total Liabilities P 226,800
Ordinary Share Capital, P20 par, 50,000 shares
issued and outstanding P1,000,000
Total Shareholders’ Equity 1,574,200
Total Liabilities and Shareholders’ Equity P1,801,000
DEF Corporation
Ordinary Ordinary Retained
Share Capital Share Premium Earnings Total
Balances, Jan. 1 P 980,000 P 95,000 P228,000 P1,303,000
Issuance of CS 20,000 5,000 25,000
Declaration and dist. of dividends ( 80,000) ( 80,000)
Profit for 2014 326,200 326,200
Balances, Dec. 31 P1,000,000 P100,000 P474,200 P1,574,200

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APC page 138
DEF Corporation
Income Statement
Sales (net of discounts of P50,000) P2,450,000
Cost of Goods Sold:
Merchandise Inventory, Jan. 1 P 150,000
Purchases (net of ret. and allow. of P100,000) 1,300,000
Cost of Goods available for Sale P1,450,000
Less Merchandise Inventory, Dec. 31 210,000 1,240,000
Gross Profit P1,210,000
Selling Expenses:
Sales Salaries P258,000
Advertising 75,000
Delivery 50,000
Depreciation – Store Equipment 25,000
Miscellaneous 20,000 (438,000)
Administrative Expenses:
Office Salaries P189,000
Light and Power 60,000
Insurance 18,000
Depreciation – Office Equipment 15,000
Miscellaneous 18,000 (306,000)
Profit before Income Tax P 466,000
Income Tax (30%) 139,800
Profit P 326,200
Earnings per share P326,200/ 50,000 shares P6.524
3. Adjusting Entries



Store Salaries 8,000

Office Salaries 4,000

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APC page 139
Depreciation Expense – Store Equipment 25,000

Accumulated Depreciation – Store Equipment 25,000

Income Tax 139,800

Closing Entries
Sales 2,500,000
Purchases Returns and Allowances 100,000
Sales Discount 50,000
Purchases 1,400,000
Advertising 75,000
Delivery 50,000
Depreciation Expense – Store Equipment 25,000
Miscellaneous Expenses 20,000
Office Salaries 189,000
Light and Power 60,000
Insurance 18,000
Miscellaneous Administrative Expenses 18,000

P9-4
PS OS TOTAL
2012
Regular dividend P200,000 P100,000 P300,000
PS – 2/3; OS –1/3 100,000 50,000 150,000
Total P300,000 P150,000 P450,000
2013
Regular dividend P200,000 P100,000 P300,000
PS – 2/3; OS –1/3 300,000 150,000 450,000
Total P500,000 P250,000 P750,000

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APC page 140
PS OS TOTAL
2014
Regular dividend P 200,000 P100,000 P 300,000
PS – 2/3; OS –1/3 933,333 466,667 1,400,000
Total P1,133,333 P566,667 P1,700,000
2.
PS OS TOTAL
2012
Dividends in arrears P400,000 --- P400,000
Current dividends 50,000 --- 50,000
Total P450,000 P –0-- P450,000
Dividends per share P22.50 P—0--
2013
Dividends in arrears P150,000 ---- P150,000
Current dividends 200,000 200,000
Balance – to Ordinary P400,000 400,000
Total P350,000 P400,000 P750,000
2014
Current dividends P200,000 P 200,000
Balance – to ordinary P1,500,000 1,500,000
Total P200,000 P1,500,000 P1,700,000
3.
2012 PS OS Total
Dividends in arrears P240,000 P240,000
Regular dividends 80,000 P40,000 120,000
Balance – P90,000
PS – 10/15; OS 5/15 60,000 30,000 90,000
Total P380,000 P70,000 P450,000
2013
Regular dividends P 80,000 P 40,000 P120,000
PS – 10/15; OS 5/15 420,000 210,000 630,000
Total P500,000 P250,000 P750,000
2014
Regular dividends P 80,000 P 40,000 P 120,000
PS – 10/15; OS 5/15 1,053,333 526,667 1,580,000
Total P1,133,333 P566,667 P1,700,000

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APC page 141
4.
2012 PS OS Total
Dividends in arrears P240,000 P240,000
Regular dividends 80,000 P40,000 120,000
Balance – P90,000 50,000 40,000 90,000
Total P370,000 P80,000 P450,000
2013
Regular dividends P 80,000 P 40,000 P120,000
Balance – P630,000 50,000 580,000 630,000
Total P130,000 P620,000 P750,000
2014
Regular dividends P 80,000 P 40,000 P 120,000
Balance – P1,580,000 50,000 1,530,000 1,580,000
Total P 130,000 P1,570,000 P1,700,000
P 9-5
Less Equity identified with PS (10,000 sh @ P30) 300,000
Equity identified with OS P2,000,000
BV per share
PS P 30.00
OS (P2,000,000 / 100,000 sh) P 20.00

Less Equity identified with PS
Liquidation value (10,000 sh @ P25) P250,000
Div. in arrears (P25,000 x 5 yrs.) 125,000 375,000
Equity identified with OS P1,925,000
BV per share
PS P 37.50
OS (P1,925,000,000 / 100,000 sh) P 19.25
P9-6
a. Profit P20,000
Less Earnings identified with PS (10,000 sh @ P25 x 10%) 20,000
Earnings identified with OS -----
b. Profit P75,000
Equity identified with OS P50,000
Earnings per share

(P50,000 / 100,000 sh) P .50

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APC page 142
c. Profit P120,000
Equity identified with OS P95,000
Earnings per share

(P95,000 / 100,000 sh) P .95
d. Profit P300,000
Earnings identified with OS P275,000
Earnings per share

(P275,000 / 100,000 sh) P 2.75
P 9-7
10% PS, P100 par, 25,000 shares authorized,
12,000 shares issued and outstanding P 1,200,000
OS, P10 par, 500,000 shares authorized,
OS Dividend Distributable, 35,000 shares 350,000
OS Subscribed, 10,000 shares 100,000
Preference share Premium 120,000
PIC from Stock Dividend 105,000
Retained Earnings
Appropriated for contingencies P250,000
Appropriated for Bond Retirement 300,000
Total P550,000
Unappropriated 600,000 1,150,000
Multiple Choice
1. B 4. C 7. B 10. B 13. C 16. A 19. A
2. B 5. A 8. C 11. A 14. D 17. B 20. D
3. B 6. A 9. D 12. D 15. B 18. C
TM 32
1. T 5. F 9. F 13. T 17. T
2. T 6. F 10. F 14. T 18. F
3. T 7. F 11. T 15. F 19. T
4. T 8. F 12. F 16. F 20. F

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APC page 143
TM 33
1. Contributed capital 11. Deficit
2. Share Capital 12. Book value per share
3. Share premium 13. Unappropriated retained earnings
4. Liquidating dividend 14. Retained earnings
5. Scrip dividend 15. Participating preference share capital
6. Dividends 16. Paid-in Capital from share capital dividend
7. Appropriated retained earnings 17. Fair value
8. Property dividend 18. Share Capital Dividend Distributable
9. Small share capital dividend 19. Share capital Dividend
10. Dividends in arrears 20. Earnings per share
TM 34
1. A 6. C 11. C 16. A 21. D
2. B 7. A 12. C 17. C 22. B
3. D 8. A 13. D 18. B 23. A
4. D 9. D 14. D 19. C 24. B
5. B 10. A 15. D 20. A
TM 35
1. C ABC – P5.00; DEF – P12.00
2. D P252,000 + P116,550 + P118,420 + P116,000 + P12,000 = P614,970
3. B P614,970 + P38,390 = P653,360
4. B 400 sh x P50 x 6% = P1,200
5. A PS = P48,000; CS – P180,000 – P48,000 = P132,000
6. A PS = P48,000 / 6,000 = P8.00; CS = P132,000 /12,000 = P11.00
7. B P801,400 – P601,100 = P200,300
8. B 60,000 x 40% x P20 = P480,000
9. A P480,000/60,000 sh
10. B 60,000 sh X10% (4/40) x P30 (P50-P20) = P180,000
TM 36
1. P3,750,000 75,000 sh x P50
2. P1,500,000 75,000 sh x P20
3. P5,250,000 P3,750,000 + P1,500,000 OR 75,000 sh x P70
4. P250,000 P1,000,000 – P750,000
5. P5,500,000 P5,250,000 + P250,000
6. P73.33 P5,500,000/75,000
7. P10.00 P750,000/75,000
8. P13.33 P1,000,000/75,000
TM 37
1. P4.00 P50 x 8%
2. P24,450,000 P450,000 + P16,000,000 + P8,000,000
3. 9,000 sh P450,000 / P50
4. 1,600,000 sh P16,000,000 / P10
5. P72,000 P450,000 x 8% x 2 years
6. P68 LV + Div. in arrears = P60 + (P4 x 2 years) = P68
7. P16.77 P27,450,000 – [(9,000 x 68)] = P26,838,000/ 1,600,000 sh

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APC page 144
TM 38
Year Share
capital Case1 Case 2 Case 3 Case 4
2010 Preference P114,286 P114,286 P 60,000 P 60,000

Ordinary 285,714 285,714 340,000 340,000
2011 Preference P 64,286 P64,286 P60,000 P60,000

Ordinary 160,714 160,714 165,000 165,000
2012 Preference P37,500 P37,500 P37,500 P37,500

Ordinary --------- --------- ----------- ----------
2013 Preference P75,000 P60,000 P75,000 P60,000

Ordinary --------- 15,000 ---------- 15,000
2014 Preference P 91,071 P 85,714 P 67,500 P 60,000

Ordinary 208,929 214,286 232,500 240,000

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APC page 145
CHAPTER 10
Share Capital Transactions Subsequent to Original Issuance
E 10-1
1.a Ordinary Share Capital (2,000 sh x P50) 100,000
Ordinary Share Premium (2,000 sh x P20) 40,000
Paid-In Capital from Retirement of OSC 50,000
Cash (2,000 sh x P45) 90,000
b Ordinary Share Capital 100,000

Paid-In Capital from Retirement of OSC 20,000
Cash (2,000 sh x P60) 120,000
2. 200,000 – 2,000 = 198,000 shares issued and outstanding
E 10 -2
1. Treasury Shares (5,000 sh x P20) 100,000
Cash 100,000

Retained Earnings Appropriated for Treasury Shares 100,000
Cash (3,500 sh x P35) 122,500

Treasury Shares (3,500 x P20) 70,000
Paid-In Capital from Sale of Treasury Shares 52,500

SHAREHOLDERS’ EQUITY
2. Contributed Capital:
Ordinary Share Capital, P25 par, 100,000 shares issued,
98,500 shares outstanding, 1,500 shares in the treasury P2,500,000
Paid-in Capital from Sale of Treasury Shares 52,500 P3,552,500
Retained Earnings:
Retained Earnings Appropriated for Treasury Shares P 30,000
Unappropriated Retained Earnings 1,470,000 1,500,000
Total Contributed Capital and Retained Earnings P5,052,500
Less Treasury Shares, at cost - 1,500 shares 30,000
E 10-3
1. Alternative 1
a. Received 5,000 ordinary shares as donation from a major shareholder
b. Cash 250,000
Donated Capital 250,000
5,000 shares x P50

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APC page 146
Alternative 2
a. Treasury Shares 200,000
b. Cash 250,000
Treasury Shares 200,000
PIC from Sale of Treasury Shares (or Donated Capital) 50,000
2. after the after the sale

donation of the don shs
Issued 150,000 shs 150,000shs
Outstanding 145,000 shs 150,000shs
E 10-4
1.a Preference Share Capital (3,000 sh x P50) 150,000
Preference Share Premium (3,000 sh x P25) 75,000
PIC from Conversion of PSC into OSC 105,000
Ordinary Share Capital (3,000 sh x 4 x P10) 120,000
b Preference Share Capital (3,000 sh x P50) 150,000

c Preference Share Capital (3,000 sh x P50) 150,000

2.a Issued and outstanding PS 47,000 OS 112,000

b PS 47,000 OS 130,000
c PS 47,000 OS 124,000
E 10-5
1.a Ordinary Share Capital, P20 par 1,000,000
Ordinary Share Capital, P4 par 1,000,000
b Ordinary Share Capital, P20 par 1,000,000

c Ordinary Share Capital, P20 par 1,000,000

Ordinary Share Capital, P15 par (50,000 sh x P15) 750,000
Paid-In Capital from Reduction in Par Value of OSC 450,000
NOTE: ….. in exchange for one ordinary share with a par value of P20 instead of P25

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APC page 147
d Ordinary Share Capital, P20 par 1,000,000

Ordinary Share Capital, P20 stated value 1,000,000
PIC from Exchange of Par for No-Par Share Capital 200,000
NOTE: …..one new ordinary share with a stated value of P20 in exchange for one
ordinary share with a par value of P20
2. a 20,000 x 5 = 100,000 shares c. 20,000 shares

b 20,000/4 = 5,000 shares d. 20,000 shares
E 10-6
1.a Treasury Shares (5,000 shares x P10) 50,000
Cash 50,000

Cash (4,000 x P12) 48,000

PIC from Sale of Treasury Shares 8,000
Retained Earnings Appropriated for treasury Shares 40,000

Cash (1,000x P7) 7,000


b. Preference Share Capital (1,000x P100) 100,000

Ordinary Share Capital (1,000 x 10 x P5) 50,000
2. Issued and Outstanding PS 9,000 shs OS 510,000 shs
P 10 -1
1.a PSC Subscription Receivable (10,000 sh x P125) 1,250,000
OSC Subscription Receivable (20,000 sh x P60) 1,200,000
PSC Subscribed (10,000 sh x P100) 1,000,000
OSC Subscribed (20,000 sh x P50) 1,000,000

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APC page 148
Cash 1,225,000
PSC Subscription Receivable (P1,250,000 x 50%) 625,000
OSC Subscription Receivable (1,200,000 x 50%) 600,000
b. Cash 1,225,000
PSC Subscribed 1,000,000

OSC Subscribed 1,000,000
Preference Share Capital 1,000,000
c. Treasury Shares - Ordinary Share Capital (2,500 sh x P50) 125,000

Cash 125,000
d. Preference Share Capital (3,000 sh x P100) 300,000

Ordinary Share Capital (3,000 sh x P50) 150,000
e. Cash (1,500 sh x P65) 97,500

Treasury Shares (1,500 sh x P50) 75,000
f. Received 2,000 ordinary shares as donation from a major shareholder
g. Cash (2,000 x P56) 112,000

h. Cash (1,000 sh x P60) 60,000

i. Ordinary Share Capital, P50 par (23,000 x P50) 1,150,000

Ordinary Share Capital, P30 stated value (23,000 sh x P30) 690,000
PIC from Exchange of Par for No-Par Shares 660,000
j. Income Summary 1,500,000

k. Retained Earnings 93,000

PS = 7,000 sh x P100 x 10% = P70,000
CS = 23,000 sh x P1 = 23,000

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APC page 149
2. SHAREHOLDERS’ EQUITY
Share Capital:
10% Preference Share Capital, P100 par, 20,000 shares
authorized, 7,000 shares issued and outstanding P700,000
Ordinary Share Capital, P30 stated value, 50,000 shares
authorized, 23,000 shares issued and outstanding 690,000 P1,390,000
Additional Paid-in Capital:
Preference share Premium P175,000
Paid-in Capital from Exchange of Par for No-Par Shares 660,000
Paid-in Capital from Sale of Treasury Shares 32,500
Paid-in Capital from Conversion of PSC into OSC 225,000
Donated Capital 112,000 1,204,500
P 10-2
Requirement 1
a. Treasury Shares – Ordinary SC (5,000 sh x P16) 80,000
Cash 80,000
b. Preference Share Capital (10,000 sh x P100) 1,000,000
Ordinary Share Capital (10,000 x 4 x P20) 800,000
Ordinary Share Capital (500 sh x P20) 10,000
d. Retained Earnings 571,000
PSC= 40,000 x P100 = P4,000,000 x 5% = P200,000
OSC = (150,000 + 40,000 + 500 – 5,000) x P2 =P371,000
e. Land 50,000
Retained Earnings Appropriated for treasury Shares 32,000
f. Ordinary Share Capital, P20 par(150,000 + 40,000 + 500) x P20 3,810,000
g. Income Summary 200,000

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APC page 150
2. SHAREHOLDERS’ EQUITY
Share Capital:
5% Preference Share Capital, P100 par, 40,000 shares
issued and outstanding P4,000,000
Ordinary Share Capital, P10 par, 381,000 shares issued,
378,000 shares outstanding, 3,000 shares in treasury 3,810,000 P 7,810,000
Additional Paid-in Capital:
Preference Share Premium P 200,000
Paid-in Capital from Sale of Treasury Shares 18,000
Paid-in Capital from Conversion of PSC into OSC 250,000 1,220,500
Total Contributed Capital P 9,030,500
Retained Earnings:
Retained Earnings Appropriated for treasury Shares P 48,000
Less Treasury Shares at Cost (3,000 shares) 48,000
P 10 – 3
Share Capital:
10% Preference Share Capital, P50 par, 115,000
shares issued and outstanding P 5,750,000
Ordinary Share Capital, P5 par, 2,050,000 shares
issued, including 5,000 shares in the treasury 10,250,000 P16,000,000
Additional paid-in capital:
Preference Share Premium P 1,150,000
Paid-in Capital from Sale of Treasury Shares 30,000 6,555,000
Retained Earnings:
Retained Earnings Appropriated for Treasury Shares P 70,000
Less Treasury Shares, at cost (5,000 shares) 70,000
*A work sheet may be prepared to facilitate computation of the above balances.
Problem 10 – 4
Assets Liabilities SE APIC RE Profit
1. D NE D NE NE NE
2. I NE I I NE NE
3. I NE I D* NE* NE
I NE I NE* D* NE
4. NE NE NE D D NE

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APC page 151
*The indicated loss may be debited to the APIC arising from sale of the treasury Share Capital in No. 2
or such indicated loss may be debited to retained earnings.
P 10-5
Javier Company
For the Fiscal Year Ended June 30, 2014
PS OS APIC RE TS
Balances, June 30, 2013 P3,000,000 P1,000,000 P 9,200,000 P2,550,000
Issuance of 5,000 PSC @ P140 500,000 200,000
Issuance of 20,000 OSC @ P70 200,000 1,200,000
Retirement of 1,000 PSC @ P150 ( 100,000) ( 40,000) ( 10,000)
Purchase of 5,000 TS @ P80 P400,000
Share split of 2 for 1
Reissuance of TS @ P52 60,000 ( 200,000)
Declaration of dividends
PSC = P3,400,000 x 10% ( 340,000)
OSC = 235,000 x P6 ( 1,410,000)
Profit for the year 750,000
Balances, June 30, 2014 P3,400,000 P1,200,000 P10,620,000 P1,540,000 P200,000
MULTIPLE CHOICE
MC10-1 A Total profit since incorporation P 420,000

Total cash dividends paid ( 130,000)
Total value of share capital dividends distributed ( 30,000)
Retained earnings, end P 260,000
MC10-2 B 1/7 - 40,000 sh x P12 P 480,000

12/2 - 6,000 sh x P13 ( 78,000)
12/31- Profit for the year 300,000
Total shareholders’ equity, 12/31/14 P 702,000
MC10-3 B P15 par x 2 = P30  5 P6.00
MC10-4 C 200,000 sh  2 = 100,000 sh x P5 500,000 shs
MC10-5 A 15,000 sh x 3 x p25 P1,125,000
MC10-6 A 1/1/12 - 100,000 sh x P15 P1,500,000

2012– 2014 - Profit 450,000
- Cash dividends ( 230,000)
1/10/14 - Treasury Shares (6,000 sh x P12) ( 72,000)
11/20/12 - Reissue of Treasury Shares (4,000 sh x P8) 32,000
Total shareholders’ equity P1,680,000
MC10-7 B 4,000 shares x P4 = P16,000
MC10-8 A Proceeds from sale of treasury Share Capital P 210,000

Cost of treasury Share Capital 120,000
Paid-in capital from sale of treasury Share Capital P 90,000

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APC page 152
MC10-9 B (100,000 +10,000) x 2 = 220,000 – [(5,000 – 1,000) x 2] = 212,000

MC10-10 B (40,000 x P105) – (600 x P110) + (400 x P95) + P830,000 – P200,000 = P4,802,000
TM 39
1. T 6. T 11. T 16. F
2. F 7. T 12. T 17. F
3. F 8. T 13. F 18. T
4. F 9. F 14. F 19. T
5. F 10. T 15. T 20. F
TM 40
1. Treasury shares
2. Convertible preference shares
3. Stock or share split / share split-up
4. Recapitalization
5. Paid-in Capital from Retirement of Share Capital
6. Cost method
7. Share split down / reverse share split
8. Retained Earnings
9. Decrease
10. Retained Appropriated for Treasury shares
11. Memorandum entry
12. Selling price
13. Contributed Capital
14. Reacquisition by donation
15. Retirement of share capital
TM 41
1. D
2, C
3. D
4. A
5. B
6. A
7. D
8. C
9. C
10. D
11. A 6,000 x P20 = P120,000 (same as before the Share Capital split)
12. A
13. C 20,000 x P30 = P600,000
14. B
15. B Authorized - 10,000; Issued - 4,400; Outstanding - 4,400 - 500 = 3,900
16. A Authorized - 10,000 x 2 = 20,000; Issued - (4,400 + 100) x 2 = 9,000;
Outstanding - (4,400 - 500 + 100) x 2 = 8,000
17. A P1,650,000 - (1,000 shares x P40) = P1,610,000
18. C 100,000 shares x P30 = P3,000,000
NOTE: 2010 should be 2014

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APC page 153
19. B (100,000 sh x P50) + (5,000 sh x P20) - (15,000 sh x P15) = P4,875,000

20. B 100,000 shares x 3 - 300,000 shares - 15,000 shares = 285,000 shares
TM 42
Problem A:
Outstanding Ordinary Add'l Paid-In Retained
Shares Share Capital Capital Earnings TSE
1. 230,000 P 4,600,000 P1,350,000 P4,650,000 P10,600,000
2. 400,000 4,000,000 1,200,000 5,400,000 10,600,000
3. 400,000 8,000,000 1,200,000 1,400,000 10,600,000
4. 200,000 3,000,000 2,200,000 5,400,000 10,600,000
5. 195,000 3,900,000 1,180,000 5,400,000 10,480,000
TM 43
a. Preference Share Capital (500 sh x P100) 50,000
Preference Share Premium (500 sh x P20) 10,000
Paid-In Capital from Retirement of PSC 2,500
Cash (500 sh x P115) 57,500
PSC 3,500 shs OSC 10,000 shs
b. Treasury Shares (1,000 sh x P25) 25,000

Cash 25,000
Cash 28,000
Treasury Shares 25,000
Paid-In Capital from Sale of Treasury Shares 3,000
c. Preference Share Capital (1,000 sh x P100) 100,000

d. Ordinary Share Capital, P20 par 200,000

Ordinary Share Capital, P5 par 200,000

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APC page 154
CHAPTER 11
Financial Reporting and Analysis
Exercise 11-1
1. A 6. A 11. A 16. C
2. C 7. F 12. F 17. D
3. D 8. B 13. H 18. G
4. A 9. A 14. B 19. H
5. -C 10. F 15. E 20. G
Exercise 11-2
1. Cash P 320,000
Inventories 500,000
Accounts receivable 220,000
Total current assets P1,040,000
2. Accounts payable P 280,000

Interest payable 60,000
Wages payable 180,000
Total current liabilities P 520,000
3. Total current assets P1,040,000

Equipment 1,700,000
4. Total assets P2,740,000

Less Total liabilities
(CL of P520,000 + NCL of P600,000) 1,520,000
Total shareholders’ equity P1,220,000
Less Ordinary shares 1,000,000
Retained earnings P 220,000
Exercise 11-3
1. Investing 6. Operating
2. Operating 7. Operating
3. Operating 8. Financing
4. Operating 9. Financing
5. Investing 10. None
Exercise 11-4
Reported profit P500,000

Add (deduct):
Loss on sale of equipment 10,000
Depreciation expense 50,000
Profit before working capital changes P560,000
Decrease in accounts receivable 70,000
Decrease in accounts payable (60,000)
Cash provided by operating activities P570,000

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APC page 155
Exercise 11-5
Proceeds from issuance of bonds P4,000,000

Payment of dividends (1,000,000)
Cash provided by financing activities P3,000,000
Exercise 11-6
1. Current ratio = P1,040,000/P600,000 = 1.73:1
2. Acid-test ratio = P590,000/P600,000 = .98:1
Exercise 11-7
1. a Receivable turnover
2013 = 7,000,000 / [(650,000 +720,000) /2] = 7,000,000 / 685,000 10.22
2014 = 7,800,000 / [(720,000 + 745,000 /2] = 7,800,000 / 732,500 10.65
b. Average collection period

2013 = 365 days / 10.22 days 36 days
2014 = 365 days / 10.65 days 34 days
c. Inventory turnover
2013 = 4,450,000/925,000 4.81
2014 = 4,650,000 / 1,050,000 4.43
d. No. of days’ sales in inventory

2013 = 365 days / 4.81 days 76 days
2014 = 365 days / 4,43 83 days
2. Receivables are collected within the credit period of 45 days but not within the discount period of
10 days. There is efficient collection of receivables; however, the company may review further its
discount rate and discount period so as to encourage or motivate customers to avail of such.
The movement of inventories is slow – it takes between 76 and 83 days for the company to sell its
inventories. Though receivables are collected within the credit period, the company may still face a
problem in the payment of its payable because of the long period it takes for inventories to be sold.
Exercise 11-8
1. Profit margin on sales P150,000 / P6,000,000 2.5%
2. Rate of return on total assets P150,000 / P3,250,000 4.6%
3. Asset turnover ratio P6,000,000 / P3,250,000 1.85
4. Rate of return on ordinary SE P150,000 / P1,142,500 13.13%
5. Gross profit ratio P1,800,000 / P6,000,000 30%
6. Receivable turnover ratio P6,000,000 / P67,250 89.22

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APC page 156
7. Average collection period 365 days / 89.22 4 days

Problem 11-1
NOP Corporation
December 31, 2014
Assets
Current assets:
Cash and cash equivalents P2,400,000
Short-term investments 3,500,000
Accounts receivable, net 5,000,000
Prepaid expenses 80,000 P15,950,000
Noncurrent assets:
Noncurrent receivables P1,105,000
Property, plant and equipment 6,205,000 7,310,000

0
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable and other short-term obligations P 312,500
Accounts payable 589,500
Accrued liabilities 4,218,000
Other current liabilities 1,815,000 P 6,935,000
Noncurrent liabilities and deferred taxes 2,625,000
Total liabilities P 9,560,000
Total shareholders’ equity 13,700,000
Total liabilities and shareholders’ equity P23,260,000
Problem 11-2
Where Cash inflow, outflow

reported or no effect
a. Acquired an equipment for cash I Cash outflow
b. Paid salaries of employees O Cash outflow
c. Recorded depreciation on plant assets O Addition to profit
d. Issued ordinary shares F Cash inflow
e. Paid dividends to ordinary shareholders F Cash outflow
f. Paid bank loan F Cash outflow
g. Purchased merchandise on account NC No effect
h. Sold merchandise on account NC No effect
i. Realized a gain on sale of plant assets O Deduction from profit
j. Purchased securities classified as held-to-maturity I Cash outflow

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APC page 157
Problem 11-3
RST Company
Statement of Cash Flows
Cash flows from operating activities

Profit before tax P 800,000
Adjustments for:
Depreciation 310,000
Interest expense 60,000
Operating profit before working capital changes P1,170,000
Increase in accounts receivable ( 480,000)
Increase in merchandise inventory ( 140,000)
Increase in accounts payable 280,000
Cash generated from operations P 830,000
Interest paid ( 60,000)
Income taxes paid ( 140,000)
Net cash provided by (used in) operating activities P 630,000
Cash flows from investing activities

Proceeds from sale of equipment 170,000
Cash flows from financing activities

Proceeds from issuance of ordinary shares P 80,000
Retirement of bonds payable ( 120,000)
Payment of dividends ( 540,000)
Net cash provided by (used in) financing activities ( 580,000)
Net increase in cash P 220,000

Cash balance, beginning 400,000
Cash balance, end P 620,000
NOTE: 2012 should be 2013
Problem 11-4
1. Earnings per share P5,352,000 / 56,000 shares P95.57
2. Return on ordinary SE P5,352,000 / P10,321,000 51.86%
3. Return on assets P5,352,000 / 18,430,000 29.04%
4. Current ratio P7,928,000 / P4,270,000 1.71:1
5. Receivable turnover ratio P38,730,000 / 2,106,000 18.22
6. Average collection period 365 days / 18.22 20 days
7. Inventory turnover ratio P20,110,000 / 2,585,000 7.78
8. Number of days in inventory 365 days / 7.78 47 days

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APC page 158
9. Number of times interest was earned P8,140,000 / P500,000 16.28 times
10. Asset turnover ratio P38,370,000 / P18,430,000 2.08
11. Debt to total assets ratio P8,470,000 / P19,804,000 .43:1
12. Debt to equity ratio P8,470,000 / P11,334,000 .75:1
13. Cash debt coverage ratio P6,040,000 / P8,109,000 .74:1
Problem 11-5
GHI JKL
1. LIQUIDITY RATIOS
a. Current ratio 1.06:1 1.08:1
b. Receivable turnover 10.05 10.06
c. Average collection period 36 days 36 days
d. Inventory turnover 6.10 8.99
e. Days in inventory 60 days 41 days
f. Current cash debt coverage r 42 32
2. SOLVENCY RATIOS
a. Debt to total assets ratio .48:1 .53:1
b. Times interest earned 31.87 times 31.63 times
c. Cash debt coverage ratio
3. PROFITABILITY RATIOS
a. Profit margin 21% 13%
b. Asset turnover .77 1.06
c. Return on assets 16.80% 14.62%
d. Return on ordinary SE 33.58% 33.31%
MULTIPLE CHOICE
1. C 5. A 9. B
2. B 6. D 10. C
3. A 7. C 11. D
4. A 8. D 12. C

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APC page 159
CHAPTER 13
Introduction to Cost Accounting
E 12-1
1. A 6. A 11. A 16. A
2. A 7. A 12. A 17. A
3. A & C 8. A 13. A 18. C
4. A 9. A&C 14. A 19. A
5. A 10 A 15. A 20. A
.
E 12-2
Lakbay Manufacturing Company
Income Statement
For the Month Ended April 30, 2014
Sales P1,440,000
Cost of Goods Sold 966,000
Gross Profit P 474,000
Operating Expenses:
Marketing Expenses P72,000
Administrative Expenses 14,400 86,400
Income Tax 135,660
Profit P251,940
Lakbay Manufacturing Company

Statement of Cost of Goods Sold
For the Month Ended April 30, 2014
Direct Materials:
Raw Materials Inventory, beginning P120,000
Raw Materials Purchases 720,000
Raw materials Available for Use P840,000
Less Raw Materials Inventory, end 170,000
Direct Materials Used P 670,000
Direct Labor 300,000
Factory Overhead 200,000
Total Manufacturing Cost P1,170,000
Add Work in Process Inventory, beginning 160,000
Total Cost of Work Put into Process P1,330,000
Less Work in Process Inventory, end 300,000
Cost of Goods Manufactured P1,030,000
Add Finished Goods Inventory, beginning 140,000
Cost of Goods Available for Sale P1,170,000
Less Finished Goods Inventory, end 204,000
Cost of Goods Sold P 966,000

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APC page 160
E 12-3
1. Raw Materials, June 30 P150,000
Add Raw Materials Put into Process 240,000
Raw materials Available for Use P390,000
Less Raw Materials, June 1 120,000
Raw Materials Purchased P270,000
2. Raw Materials Put into Process P240,000

Add Direct Labor
Department A P140,000
Department B 160,000 300,000
Prime Costs P540,000
3. Direct Labor P300,000

Add Factory Overhead
Department A (P140,000 x 120%) P168,000
Department B (P160,000 x 80%) 128,000 296,000
Conversion Costs P596,000
4. Raw Materials Put into Process P240,000

Total Manufacturing Cost P836,000
5. Total Manufacturing Cost P836,000

Add Work in Process, June 1 160,000
Total Cost of Work Put into Process P996,000
Less Work in Process, June 30 128,000
Cost of Goods Manufactured P868,000
6. Cost of Goods Manufactured P868,000

Add Finished Goods, June 1 108,000
Cost of Goods Available for Sale P976,000
Less Finished Goods, June 30 120,000
Cost of Goods Sold P856,000
E 12-4
Company A
Finished Goods, beginning P1,200,000
Add Cost of Goods Manufactured 7,600,000
Less Cost of Goods Sold (P8,000,000 x 60%) 4,800,000
Finished Goods, end P4,000,000
Company B
Cost of goods sold P2,600,000
Add Finished goods, end 380,000

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APC page 161
Company C
Add Finished Goods, beginning 90,000
Less Finished Goods, end 104,000
Add Gross Profit 192,000
Sales P858,000
E 12-5
a. Raw Materials Purchases 80,000

Vouchers Payable 80,000
b. no entry
c. Factory Payroll 80,000

Withholding Taxes Payable 9,600
SSS Contributions Payable 6,000
Medicare Contributions Payable 280
d. Vouchers Payable 64,120

Cash 64,120
e. Direct Labor 64,000

Indirect Labor 16,000
Factory Payroll 80,000
f. Factory Payroll Taxes 8,000

Medicare Contributions Payable 640
Employees’ Compensation Contributions Payable 1,360
g. Sundry Factory Overhead 36,000

h. Depreciation Expense – Factory 4,200

Insurance – Factory 1,560
Property Taxes – Factory 2,500
Accumulated Depreciation – Factory 4,200
Accrued Property Taxes 2,500
i. Raw Materials, end 10,000

Work in Process, end 18,260
Manufacturing Summary 28,260
P80,000 - P66,000 – P4,000 = P10,000
P66,000 + P64,000 + P4,000 + P16,000 + P8,000 + P36,000 +
P4,200 + P1,560 + P2,500 – P184,000 = P18,260

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APC page 162
j. Accounts Receivable 160,000

Sales 160,000
k. Cash 80,000
l. Manufacturing Summary 212,260

Direct Labor 64,000
Factory Payroll Taxes 8,000
Sundry Factory Overhead 36,000
Depreciation Expense – Factory 4,200
Insurance – Factory 1,560
Property Taxes – Factory 2,500
m. Finished Goods, end 64,000

P184,000 – (P160,000 x 75%) = P64,000
E 12-6
1. Direct Materials, January 1 P12,800
Add Purchases of Direct Materials 18,000
Direct Materials Available for Use P30,800
Less Direct Materials, December 31 10,800
Direct Materials Used P20,000
2. Cost of Goods Sold (3) P105,400

Add Gross Profit 22,600
Sales P128,000

Add Finished Goods, January 1 16,000
Less Finished Goods, December 31 10,600
4. Direct Materials Used (1) P 20,000

Direct Labor 26,000
Factory Overhead 58.000

Add Work in Process, December 31 4,000
Less Total Manufacturing Cost 104,000
Work in Process, January 1 P - 0--

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APC page 163
6. Direct Materials Used (7) P11,800

Add Direct Materials, December 31 9,200
Less Purchases of Direct Materials 14,000
Direct Materials, January 1 P 7,000
7. Total Manufacturing Cost P43,000

Less: Direct Labor P16,000
Factory Overhead 15,200 31,200
Direct Materials Used
P11,800
8. Cost of Goods Sold P44,000

Add Finished Goods, December 31 10,600
Less Finished Goods, January 1 8,000
Cost of Goods Manufactured
P46,600
9. Sales P67,600
Less Cost of Goods Sold 44,000
Gross Profit
P23,600
10 Total Manufacturing Cost P43,000

.
Add Work in Process, January 1 9,600
Less Cost of Goods Manufactured (8) 46,600
Work in Process, December 31 P 6,000
11 Total Manufacturing Cost (15) P80,800

.
Less: Direct Materials Used P18,800
Direct Labor P36,000
12 Direct Materials Used P18,800

.
Add Direct Materials, December 31 11,000
Less Direct Materials, January 1 13,800
Purchases of Direct Materials P16,000
13 Sales P110,000
.
Less Gross Profit 24,000

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APC page 164
14 Cost of Goods Sold (13) P86,000

.
Add Finished Goods, December 31 12,400
Less Finished Goods, January 1 15,600
15 Cost of Goods Manufactured (14) P82,800

.
Add Work in Process, December 31 600
Less Work in Process, January 1 2,600
16 Direct Materials, January 1 P 3,000

.
Add Direct Materials Purchased 16,000
Materials Available for Use P19,000
Less Direct Materials Used 11,200
Direct Materials, December 31 P 7,800
17 Total Manufacturing Cost P36,200

.
Direct Labor 12,000 23,200
Factory Overhead P13,000
18 Cost of Goods Manufactured P36,200

.
Add Finished Goods, January 1 12,000
Finished Goods, December 31 P14,200
19 Sales P80,000
.
Gross Profit P46,000
20 Cost of Goods Manufactured P36,200

.
Add Work in Process, December 31 5,000
Less Total Manufacturing Cost 36,200
Work in Process, January 1 P 5,000
P 12 – 1
1. Total Manufacturing Cost P3,600,000

Less Cost of Goods Manufactured 3,400,000

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APC page 165
Difference in Work in Process beginning and ending P 200,000

÷ 20%
Work in Process, December 31 P1,000,000

Add Work in Process, January 1 (P1,000,000 x 80%) 800,000
Total Cost of Goods Put into Process P4,400,000

Less: Manufacturing Overhead (P3,600,000 x 25%) P 900,000
Direct Labor (P900,000 / 72%) 1,250,000 2,150,000
Direct Materials Used P1,450,000
P 12 – 2
1. a. Raw Materials Purchases 400,000
b. Other Factory Overhead 70,000
c. Direct Labor 280,000
Administrative Salaries 30,000
Medicare Contributions Payable 2,250
Pag-ibig Contributions Payable 12,600
d. Vouchers Payable 351,310
Cash 351,310
e. Factory Payroll Taxes 28,400
Sales Payroll Taxes 4,750
Administrative Payroll Taxes 2,700
Medicare Contributions Payable 2,250
Pag-ibig Contributions Payable 12,600
f. No entry
g. No entry
h. Accounts Receivable 1,078,000
Sales 1,078,000
i. Cash 810,000
j. Vouchers Payable 440,000
Cash 440,000
k1 Work in Process, end 94,400

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APC page 166
Raw Materials, end 60,000

Indirect Materials 70,000
P36,000 + P70,000 + P280,000 + 60,000 + P28,400 +
P370,000 + P70,000 – P820,000 = P94,400
P100,000 + P400,000 – P370,000 – P70,000 = P60,000
k2. Manufacturing Summary 908,400

Raw Material Purchases 400,000
Other Factory Overhead 70,000
Indirect Materials 70,000
k3. Manufacturing Summary 136,000

Work in Process, beginning 36,000
Raw Materials, beginning 100,000
k4. Finished Goods 120,000
P70,000 + P820,000 – P770,000 = P120,000
k5. Income Summary 70,000

Finished Goods, beginning 70,000
k6. Sales 1,078,000

Administrative Salaries 30,000
Sales Payroll Taxes 4,750
Income Tax 66,165
k7. Income Summary 154,385

Linang Company
Cost of Goods Sold Statement
For the Month Ended July 31, 2014
Direct Materials:
Raw Materials, beginning P100,000
Add Raw Materials Purchases 400,000
Raw Materials Available for Use P500,000
Less: Indirect Materials P70,000
Raw Materials, end 60,000 130,000
Direct Materials Used P370,000
Factory Overhead:

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APC page 167
Indirect Materials P70,000

Other Factory Overhead 70,000 228,400
Add Work in Process, beginning 36,000
Less Work in Process, end 94,400
3. Linang Company
Income Statement
For the Month Ended July 31, 2014
Sales P1,078,000
Cost of Goods Sold 770,000
Gross Profit P 308,000
Operating Expenses:
Administrative Salaries P30,000
Sales Payroll Taxes 4,750 87,450
Income Tax 66,165
Profit P154,385
Linang Company
July 31, 2014
ASSETS
Cash (P200,000 - P351,310 + P810,000 – P440,000) P218,690
Accounts Receivable (P120,000 + P1,078,000 – P810,000) 388,000
Finished Goods 120,000
Work in Process 94,400
Raw Materials 60,000
TOTAL ASSETS P881,090
LIABILITIES
Vouchers Payable (P36,000 + P400,000 + P70,000 + P351,310 – P351,310 – P 66,000
P440,000)
SSS Contributions Payable (P16,800 + P21,000) 37,800
Medicare Contributions Payable (P2,250 + P2,250) 4,500
Pag-ibig Contributions Payable (P12,600 + P12,600) 25,200
TOTAL LIABILITIES P236,705

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APC page 168
Ordinary Share Capital P400,000
Retained Earnings (P90,000 + P154,385) 244,385
TOTAL STOCKHOLDERS’ EQUITY 644,385
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY P881,090
P 12 – 3
1. Raw Materials, beginning P128,000

Add Raw Materials Purchases 168,000
Raw Materials Available for Use P296,000
Raw Materials, end 120,000 276,000
Indirect Materials Used P 20,000
2. Factory Payroll paid P 88,000
Accrued Payroll 12,000
Direct Labor (64,000)
Indirect labor P 36,000
3. Indirect Materials P 20,000

Factory Insurance 1,200
Depreciation of Factory Equipment 6,800
Factory Utility Service 12,000
Total Factory Overhead P 76,000
4. Direct Materials Used P156,000

Direct Labor 64,000
Add Work in Process, beginning 164,000

P 12 – 4
1. P180,000 10. P 12,000 18. P260,000
2. P 30,000 11. P 34,000 19. P18,000

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APC page 169
3. P 46,000 12. P 42,600 20. P78,000

4. P 12,000 13. P123,600 21. P53,400
5. P 34,000 14. P 42,000 22. P80,400
6. P 36,000 15. P 36,600 23. P32,600
7. P 94,000 16. P132,400 24. P36,600
8. P 30,000 17. P 95,000 25. P40,000
9. P 82,000
MULTIPLE CHOICE
MC12- 1 B Cost of Goods Manufactured P680,000
Finished Goods, end ( 104,000)
Gross Profit 192,000
Sales P858,000
MC12- 2 A Raw Materials Purchased P 860,000

Less Increase in Raw Materials Inventory 30,000
Total Manufacturing Cost = Cost of Goods Manufactured P1,830,000
Decrease in Finished Goods Inventory 70,000
Cost of Goods Sold P1,900,000
MC12- 3 D Direct Materials, December 1 P 72,000

Direct Materials Purchases 168,000
Direct Materials, December 31 ( 60,000)
Prime Cost P300,000
MC12- 4 B Direct Labor P120,000

Factory Overhead [(P120,000 /15) x 20] 160,000
Conversion Cost P280,000
MC12- 5 D Prime Cost P300,000

Work in Process, December 1 36,000
Work in Process, December 31 (24,000)
MC12- 6 C Beginning inventories (P80,000 + P50,000 + P120,000) P250,000

Ending inventories (P100,000 + P70,000 + P140,000) (310,000)

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APC page 170

Cost of Goods Sold (756,000)
Direct Materials Purchases P360,000
MC12- 7 B Cost of Goods Sold P756,000

Finished Goods, September 30 140,000
Finished Goods, September 1 (120,000)
MC12- 8 C P756,000 x 200% = P1,512,000
MC12- 9 A Direct Materials, June 1 P246,000

Purchases 825,720
Direct Materials, June 30 (375,908)
Direct Materials Used in production P695,812
MC12-10 A Direct Materials Used P 695,812

Prime Cost P1,124,028
MC12-11 A Direct Labor P428,216

Factory Overhead (P16,470 x 11) 181,170
Conversion Cost P609,386
MC12-12 C Prime Cost P1,124,028

Work in Process, June 1 648,040
Total Cost of Goods Placed in Process P1,953,238
MC12-13 C Total Cost of Goods Placed in Process P1,953,238

Less Work in Process, June 30 1,153,382
Cost of Goods Manufactured P 799,856
MC12-14 B Cost of Goods Manufactured P799,856

Finished Goods, beginning 1,196,642
Finished Goods, ending (1,587,278)
MC12-15 C P428,216/16470 = P26.00
MC12-16 B P125,000/12.5% = P1,000,000
MC12-17 C P315,000/75% = P420,000
MC12-18 C Sales P1,000,000

Operating Expenses P125,000
Profit 125,000 250,000

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APC page 171
MC12-19 B Beginning Inventories P700,000

Ending inventories (1,115,000)
Purchases 230,000
Cost of Goods Sold (750,000)
Raw Materials, beginning P200,000
MC12-20 A P200,000 + P230,000 – P250,000 = P180,000
TM 44
1. T 6. F 11. F 16. F
2. F 7. T 12. T 17. T
3. T 8. F 13. T 18. F
4. F 9. T 14. F 19. T
5. F 10. F 15. F 20. F
TM 45 TM 46
1. A 6. E 1. B 6. D
2. B 7. G 2. B 7. A
3. H 8. K, L, M 3. C 8. C
4. D 9. I 4. C 9. B
5. K 10. N 5. C 10. C
11. A plus J
12. J
13. C
14. M
15. G
TM 47
1. B Sales P720,000
Gross Profit (440,000)
Finished Goods, end 60,000
Cost of Goods Manufactured (240,000)
Finished Goods, beginning P100,000
2. B Sales P1,400,000
Gross Profit (650,000)
Finished Goods, end 70,000
Finished Goods, beginning (120,000)
Cost of Goods Manufactured P 700,000
3. A Total Manufacturing Cost P170,000

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APC page 172
Prime Cost (P72,000/60%) (120,000)

Factory Overhead P 50,000
4. B Raw Materials Purchased P200,000

Increase in Work in Process ( 30,000)
Decrease in Finished Goods 20,000
5. D Direct Materials Used P600,000

Increase in Direct Materials Inventory 100,000
Direct Materials Purchases P700,000
6. A Finished Goods transferred out P340,000

Work in Process, beginning (100,000)
Direct Materials Used (220,000)
Direct labor (500,000)
Factory Overhead P120,000
7. B Cost of Goods Available for Sale P360,000
Finished Goods, end (240,000
Gross Profit 560,000
Sales P680,000
8. D Direct Materials P3,400,000

Direct Labor 1,600,000
Factory Overhead 2,400,000
Work in Process, beginning 600,000
Cost of Goods Manufactured (4,800,000)
Work in Process, end P3,200,000
9. A Total Manufacturing Cost = to Cost of Goods Manufactured P120,000

10 B Cost of Goods Manufactured P190,000

.
Work in Process end 30,000
Total Manufacturing Cost:
Direct Materials P60,000
Direct Labor 80,000
Work in Process, beginning P 40,000

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APC page 173
TM 48
Liwasan Corporation
Cost of Goods Sold Statement
Direct Materials:
Raw Materials Inventory, beginning P 176,000
Raw Materials Purchases P732,000
Add Freight-in on raw materials purchased 13,200
Delivered Cost of Raw Materials Purchases 745,200
Raw Materials Available for Use P 921,200
Less Raw Materials Inventory, end 128,000
Direct Labor 1,047,200
Factory Overhead* 1,145,600
Add Work in Process, beg 59,600
Cost of Goods Manufactured P2,968,000
Cost of Goods Sold P2,944,400
* Factory Overhead excluding depreciation P 936,800
Depreciation – manufacturing 208,800
Total P1,145,600
TM 49
a. Raw Materials Purchases 692,000
Factory Supplies 196,000
b. no entry
c. no entry
d. Direct Labor 98,000

Cash 98,000

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APC page 174
e. Depreciation Expense – Factory Building and Equipment 44,000

Accumulated Depreciation – Factory Building and 44,000
Equipment
f. Indirect Labor 372,000

Cash 372,000
g. Utilities – Factory 52,000

Cash 52,000
h. Other Factory Overhead 166,000

Cash 166,000
i1. Factory Supplies Inventory 10,000

P196,000 – P186,000 = P10,000
i2. Direct Materials Inventory, end 178,000

P692,000 + P256,000 – P770,000 = P178,000
P770,000 + P186,000 + P98,000 + P44,000 + P372,000 +
P52,000 + P166,000 + P164,000 – P1,690,000 = P162,000
i3. Manufacturing Summary 420,000

Direct Materials Inventory, beginning 256,000
Work in Process Inventory, beginning 164,000
i4. Manufacturing Summary 1,610,000

Direct Labor 98,000
Depreciation Expense – Factory Building and Equipment 44,000
Utilities – Factory 52,000
Other Factory Overhead 166,000
j. Accounts Receivable 2,524,000
Sales 2,524,000
k. Cash 2,390,000
l1. Finished Goods, end 294,000

P344,000 + P1,690,000 – P1,740,000 = P294,000
l2. Income Summary 344,000

m. Vouchers Payable 936,000

Cash 936,000

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APC page 175

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b. Insurance Expense 75,000

Downloaded by Angel Chua ([email protected])

P90,000 x 10/12 = P75,000

2. a. Rent Revenue 275,000

Unearned Rent 275,000

b. Prepaid Insurance 15,000

Insurance Expense 15,000

b. Prepaid Insurance 50,000

c. Prepaid Rent 330,000

d. Uncollectible Accounts Expense 60,000

e. Salary Expense 180,000

Downloaded by Angel Chua ([email protected])

P450,000 x 2/5 = P180,000

f. Depreciation Expense – Office Equipment 106,000

g. Supplies on Hand 4,500

h. Rental Revenue 120,000

i. Income Summary 180,000

Merchandise Inventory 220,000

Inventory, end 140,000

b. Inventory, end 140,000

Downloaded by Angel Chua ([email protected])

c. Income Summary 2,045,000

d. Castro, Capital 500,000

Downloaded by Angel Chua ([email protected])

Prepaid Insurance 12,000

b Rent Revenue 210,000

Unearned Rent 210,000

Supplies Expense 4,500

d. Depreciation Expense 52,500

e. Uncollectible Accounts Expense 8,000

f. Interest Receivable 1,500

Interest Revenue 1,500

Downloaded by Angel Chua ([email protected])

g. Salary Expense 155,000

Salaries Payable 155,000

h. Merchandise Inventory 122,000

b. Merchandise Inventory 150,000

d. Income Summary 4,029,000

e. Income Summary 1,791,000

Downloaded by Angel Chua ([email protected])

f. Olson, Capital 180,000

Adjusting Income Statement Statement of Financial Position

b. Rent Expense 36,000

c. Office Supplies Expense 6,600

f. Unearned Commissions 8,000

g. Interest Expense 1,200

Downloaded by Angel Chua ([email protected])

Interest Payable 1,200

2. a. Income Summary 111,000

b. Commissions Income 175,200

c. Income Summary 64,200

d. Valdez, Capital 32,000

3. Net Income = P64,200

2. Depreciation Expense – Office Equipment 75,000

3. Unearned Management Fees 80,000