Lupisan Baysa

(1)

CHAPTER 1

Partnership Formation and Operations EXERCISES

Exercise 1 –1

1.a Campos, Capital 14,000

Allowance for Uncollectible Accounts 14,000

Goodwill 30,000

Campos, Capital 30,000

Accumulated Depreciation 6,000

Furniture and Fixtures 12,500

Cash 40,000

1.b Cash (P83,500 x 1/2) 41,750

Tomas, Capital 41,750

To record contributions of Tomas Req. 2.

Campos and Tomas Partnership Statement of financial Position

July 1, 2008

Assets Liabilities & Owners’ Equity

Cash P41,750 Accounts Payable P90,000

Accounts Rec’l P60,000 Campos, Capital 83,500

Less Allowance for

Uncol Accts. 24,000 36,000 Tomas, Capital 41,750

Inventory 100,000

Furniture 7,500

Goodwill 30,000 ________

TOTAL ASSETS P215.250 TOTAL LIABILITIES &OWNERS’ EQUITY P215,250

Exercise 1-2

1. Cash 90,000

Accounts Receivable 36,000

Merchandise Inventory 54,000

Equipment 25,000

Accounts Payable 21,000

Notes Payable 18,000

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AA 1 - Chapter 1 (2008 edition) page 2 2. Cash 100,000 Camino, Capital 100,000 Exercise 1 –3 1. Cash 800,000 Land 540,000 Building 900,000 Legaspi, Capital 800,000 Sabino, Capital 1,440,000 2. Cash 800,000 Land 540,000 Building 900,000 Legaspi, Capital 1,120,000 Sabino, Capital 1,120,000 Exercise 1 - 4 1. Income Summary 238,000 Santos, Capital (P238,000 x 260/425) 145,600 Abad, Capital (P238,000 x 165/425) 92,400 2. Income Summary 238,000 Santos, Capital (P238,000 x 3,125/5,000) 148,750 Abad, Capital (P238,000 x 1,875/5,000) 89,250 Santos: Jan. 1 – Mar. 31 P260,000 x 3 P780,000 Apr. 1 – Apr. 30 290,000 x 1 290,000 May 1 – July 31 360,000 x 3 1,080,000 Aug. 1 – Dec. 31 320,000 x 5 1,600,000 P3,750,000/12 P312,500 Abad: Jan. 1 – May 31 P165,000 x 5 P825,000 June 1 – Aug. 31 215,000 x 3 645,000 Sept.1 – Dec. 31 195,000 x 4 780,000 P2,250,000/12 P187,500 3. Income Summary 238,000 Santos, Capital 147,750 Abad, Capital 90,250

Santos Abad Total

Interest on ave. capital P 18,750 P 11,250 P 30,000

Salaries to partners 150,000 100,000 250,000

Balance - equally ( 21,000) ( 21,000) (42,000)

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AA 1 - Chapter 1 (2008 edition) page 3

4. Income Summary 238,000

Santos, Capital 164,840

Abad, Capital 73,160

Santos Abad Total

Bonus to Santos 25% (P238,000 - B) P 47,600 P 47,600 Interest of 6% on excess average investment 6% (P312,500 - P187,500) 7,500 7,500 Balance - 3:2 109,740 73,160 182,900 Net Profit P 164,840 P73,160 P238,000 5. Income Summary 238,000 Santos, Capital (P238,000 x 15/25) 142,800 Abad, Capital (P238,000 x 10/25) 95,200 Exercise 1 – 5

Sanchez and Gomez

Schedule of Distribution of Net Profit December 31, 2008

Sanchez Gomez Total

6% interest on average capital P 6,246 P 14.440 P 20,686

10% bonus on net profit after interest 8,331 8,331

Salaries 20,000 30,000 50,000

Balance – 70%, 30% 17,488 7,495 24,983

Net Profit P52,065 P51,935 P104,000

Computation of average capital:

Sanchez, Capital Gomez, Capital

Jan. 1 P81,600 x 3 P 244,800 Jan. 1 P224,000 x 7 P1,568,000

Apr. 1 P111,600 x 9 1,004,400 Aug. 1 P264,000 x 5 1,320,000

P1,249,200 P2,888,000

Ave. capital (P1,249,200/12) P104,100 Ave. capital (P2,888,000/12) P240,667 Computation of bonus: P160,000 x 65%= P104,000– P20,686 x 10% = P8,331

2.

Sanchez and Gomez Statement of Partners’ Capital For the Year Ended December 31, 2008

Sanchez Gomez Total

Capital, January 1 P 81,600 P224,000 P305,600

Additional investment 30,000 40,000 70,000

Net profit 52,065 51,935 104,000

Drawings ( 41,600) ( 41,600) ( 83,200)

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3. Sanchez Gomez Total

6% interest on average capital P 6,246 P14.440 P 20,686

10% bonus on net profit after interest 8,331 8,331

Balance – Salary ratio 34,083 40,000 74,983

Net Profit P48,660 P 55,340 P104,000

Exercise 1-6

1. Mercado Puzon Total

8% interest on beg capital P 48,000 P 54.000 P102,000

Salaries 225,000 112,500 337,500

Balance 3:2 ( 38,700) ( 25,800) ( 64,500)

Net Profit P234,300 P140,700 P375,000

2. Mercado Puzon Total

8% interest on beg capital P 48,000 P 54.000 P102,000

Balance – Salary ratio 182,000 91,000 273,000

Net Profit P230,000 P145,000 P375,000

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

Exercise 1 – 7

Net profit after salary, interest and bonus P374,000

Interest P200,000 x 10% P20,000

Salary P8,000 x 12 96,000 116,000

Net profit before interest and salary P490,000

Bonus rate x 25%

Amount of bonus to Lirio P122,500

Exercise 1 – 8 1. B = .25 x P500,000 = P125,000 2. B = .25 x P500,000 = P100,000 1.25 3. B = .25 (P500,000 - Tax) T = .35 x P500,000 = P175,000 B = .25 (P500,000 – P175,000) B = P 81,250 4. B = .25 (P500,000 - B - Tax) B = .25 (P50,0000 - B - P175,000) B = P81,250 - .25B B = P81,250/1.25 B = P65,000

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Exercise 1 - 9 1.

Estrella Felipe Garcia Jimenez Total

Salary P40,000 P20,000 P 60,000 Bonus 6,000 4,000 10,000* Interest 10,000 9,000 P 4,000 P 9,400 32,400 Balance 26,900 26,900 26,900 26,900 107,600 Total P82,900 P59,900 P30,900 P36,300 P210,000 *B = 5% (P210,000 – B) = P10,000 2.

Salary P40,000 P20,000 P 60,000

Interest 10,000 9,000 P 4,000 P 9,400 32,400

Balance ( 43,100) ( 43,100) ( 43,100) ( 43,100) (172,400)

Total P 6,900 (P 14,100) (P39,100) (P33,700) (P 80,000)

3.

Interest P10,000 P 9,000 P 4,000 P 9,400 P 32,400 Bonus 6,000 4,000 10,000 Salary 25,067 12,533 _______ ________ 37,600* Total P41,067 P25,533 P 4,000 P 9,400 P 80,000 *P37,600 x 4/ 6 = P25,067; P37,600 x 2/ 6 = P12,533 Exercise 1-10 1. Fees Earned 750,000 Joseph, Capital 50,000 Luis, Capital 200,000 Operating Expenses 100,000 Income Summary 500,000 2. Income Summary 500,000 Joseph Capital 150,000 Luis, Capital 250,000 Nicolas, Capital 100,000 Exercise 1 – 11 1.

Benito Cabral Duenas Total

Capital balances before payment

of cash P120,000 P100,000 P100,000 P320,000

Required capital balances based on

on profit and loss ratio 128,000 112,000 80,000 320,000

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-AA 1 - Chapter 1 (2008 edition) page 6

Journal entry on the partnership books

Duenas, Capital 20,000

Benito, Capital 8,000

Cabral, Capital 12,000

2.

Capital balances before additional

cash investment P120,000 P100,000 P100,000 P320,000

Required capital balances based on

lowest possible cash investment* 160,000 140,000 100,000 400,000 Required additional cash investment P 40,000 P 40,000 - P 80,000 * P120,000/40% = P300,000; P100,000/35% = P285,174; P100,000/25% = P400,000 Journal entry on the partnership books

Cash 80,000

Benito, Capital 40,000

Cabral, Capital 40,000

3.

Capital balances P120,000 P100,000 P100,000 P320,000 Required capital 120,000 105,000 75,000 300,000 Additional investment(withdrawals) --- 5,000 (P 25,000) P 20,000 Duenas, Capital 25,000 Cash 20,000 Cabral, Capital 5,000 Exercise 1 – 12

Enriquez and Flores

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

Reported net profit P400,000

Adjustments:

Equipment purchased charged to expense P200,000

Depreciation on equipment ( 20,000)

Overstatement of 2008 ending inventory ( 24,000)

P156,000

x 65% 101,400

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Distribution of 2008 net profit

Enriquez Flores Total

Salaries P120,000 P120,000 P240,000

Interest 30,000 45,000 75,000

Balance 51,000 34,000 85,000

P201,000 P199,000 P400,000

Distribution of 2008 corrected net profit

Salaries P120,000 P120,000 P240,000 Interest 30,000 45,000 75,000 Balance 111,840 74,560 186,400 P261,840 P239,560 P501,400 Adjustments P 60,840 P 40,560 P101,400 2. Equipment 200,000 Enriquez, Capital 60,840 Flores, Capital 40,560 Accumulated Depreciation 20,000 Inventory 24,000

Income Tax Payable 54,600

PROBLEMS Problem 1 – 1

1. a. Merchandise, Inventory 60,000

Ruiz, Capital 60,000

b. Ruiz, Capital 30,000

c. Interest Receivable 1,500 Ruiz, Capital 1,500 P150,000 x 6% x 2/12 = P1,500 d. Ruiz, Capital 7,500 Interest Payable 7,500 P300,000 x 10% x 3/12 = P7,500 e. Accumulated Depreciation 180,000 Ruiz, Capital 60,000

f. Office Supplies 5,000

Ruiz, Capital 5,000

g. Cash 524,500

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Ruiz and Santos

Statement of Financial Position December 1, 2008

Assets

Cash P 764,500

Notes Receivable 150,000

Accounts Receivable P900,000

Less Allowance for Uncollectible Accounts 90,000 810,000

Interest Receivable 1,500

Merchandise Inventory 300,000

Office Supplies 5,000

Total Assets P2,511,000

Liabilities and Capital

Notes Payable P300,000 Accounts Payable 630,000 Interest Payable 7,500 Total Liabilities P 937,500 Ruiz, Capital P1,049,000 Santos, Capital 524,500 Total Capital 1,573,500

Total Liabilities and Capital P2,511,000

Problem 1-2 1. Cash 518,000 Merchandise Inventory 1,152,000 Tomas, Capital 1,670,000 2. Accounts Receivable 1,792,000 Merchandise Inventory 256,000 Office Equipment 160,000 Goodwill 198,000

Vicente, Capital 1,670,000

Tomas and Vicente Statement of Financial Position

June 1, 2008 Assets

Cash P 518,000

Accounts Receivable P1,792,000

Less Allowance for Uncollectible Accounts 160,000 1,632,000

Inventories 1,408,000

Office Equipment 160,000

Goodwill 198,000

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Liabilities and Capital

Accounts Payable P 576,000

Tomas, Capital P1,670,000

Vicente, Capital 1,670,000 3,340,000

Total Liabilities and Capital P3,916,000

Problem 1 – 3

1. Merchandise Inventory 3,000

Goodwill 3,000

Accumulated Depreciation 900

Equipment 2,000 Rosas, Capital 3,900 Cash 5,000 Accounts Receivable 46,000 Merchandise Inventory 108,000 Equipment 12,000

Goodwill 3,000

Accounts Payable 54,000 Perlas, Capital 125,000 2. Cash 5,000 Accounts Receivable 46,000 Merchandise Inventory 108,000 Equipment 12,000

Goodwill 3,000

Accounts Payable 54,000 Perlas, Capital 125,000 Cash 7,000 Accounts Receivable 49,000 Merchandise Inventory 75,000 Equipment 7,000 Goodwill 3,000

Accounts Payable 36,000 Rosas, Capital 100,000 Problem 1 – 4 1. Cash 900,000 Inventories 1,500,000 Equipment 3,000,000 Notes Payable 1,050,000 Serrano, Capital 4,350,000

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AA 1 - Chapter 1 (2008 edition) page 10 Cash 600,000 Land 6,000,000 Mortgage Payable 1,950,000 Torres, Capital 4,650,000 Torres, Capital 150,000 Serrano, Capital 150,000 Purchases 900,000 Accounts Payable 900,000 Accounts Payable 720,000 Cash 720,000 Mortgage Payable 300,000 Interest Expense 120,000 Cash 420,000 Notes Payable 225,000 Interest Expense 75,000 Cash 300,000 Accounts Receivable 3,450,000 Sales 3,450,000 Cash 3,150,000 Accounts Receivable 3,150,000

Selling and General Expenses 870,000

Cash 630,000 Accumulated Depreciation 150,000 Accrued expenses 90,000 Serrano, Drawing 351,000 Torres, Drawing 351,000 Cash 702,000 Income Tax 204,750

Income Tax Payable 204,750

Inventories, end 600,000

Sales 3,450,000

Inventories, beginning 1,500,000

Purchases 900,000

Interest Expense 195,000

Income Tax 204,750

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Income Summary 380,250

Serrano, Capital 192,150

Torres, Capital 188,100

Serrano Torres Total Interest on beginning capital P180,000 P180,000 P360,000

Salaries 150,000 100,000 250,000 Remainder – 60%, 40% ( 137,850) ( 91,900) ( 229,750) Net Profit P192,150 P188,100 P380,250 Serrano, Capital 351,000 Torres, Capital 351,000 Serrano, Drawing 351,000 Torres, Drawing 351,000

Serrano and Torres Partnership

Statement of Recognized Income and Expenses For the Year Ended December 31, 2008

Sales P3,450,000

Cost of Goods Sold:

Inventories, beginning P1,500,000

Purchases 900,000

Cost of Goods Available for Sale P2,400,000

Less Inventories, end 600,000 1,800,000

Gross Profit P1,650,000

Operating Income P 780,000

Interest Expense 195,000

Net Profit before Income Tax P 585,000

Income Tax 204,750

Net Profit P 380,250

Serrano and Torres Partnership Statement of Financial Position

December 31, 2008 Assets Current Assets: Cash P1,878,000 Accounts Receivable (P3,450,000 – P3,150,000) 300,000 Inventories 600,000 P 2,778,000

Property, Plant and Equipment:

Land P6,000,000

Equipment P3,000,000

Less Accumulated Depreciation 150,000 2,850,000 8,850,000

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AA 1 - Chapter 1 (2008 edition) page 12 Liabilities Current Liabilities: Accounts Payable (P900,000 – P720,000) P180,000 Accrued Expenses 90,000

Income Tax Payable 204,750 P 474,750

Long-term Liabilities: Notes Payable (P1,050,000 – P225,000) P 825,000 Mortgage Payable (P1,950,000 – P300,000) 1,650,000 2,475,000 Total Liabilities P 2,949,750 Capital Serrano, Capital P4,341,150 Torres, Capital 4,337,100 Total Capital 8,678,250

Total Liabilities and Capital P11,628,000

Problem 1 - 5 1. P2,700,000 (P200,000 + P1,100,000 + P500,000 + P1,500,000 – P600,000 = P2,700,000) 2 P2,600,000. (P2,500,000 + P2,700,000) / 2 = P2,600,000 Problem 1 – 6 1. Income Summary 700,000 Bernabe, Capital 505,800 Burgos, Capital 194,200

Bernabe Burgos Total

Interest on beg. capital P 28,800 P 35,200 P 64,000

Balance – 3:1 477,000 159,000 636,000

Net Profit P 505,800 P 194,200 P700 000

Bernabe, Capital 284,000

Burgos, Capital 416,000

Salaries P 140,000 P 260,000 P400,000

Interest on end capital 48,000 60,000 P108,000

Balance – Equally 96,000 96,000 96,000

Net Profit P 284,000 P 416,000 P700 000

Salaries P 90,000 P 170,000 P260,000

Interest on average. cap 49,000 50,800 99,800

Balance – 3:1 255,150 85,050 340,200

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AA 1 - Chapter 1 (2008 edition) page 13 Bernabe: 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 P4,900,000/12 P408,333 Burgos: Jan. 1 – June 30 P440,000 x 6 P2,640,000 July 1 – Oct. 31 360,000 x 4 1,440,000 Nov.1 – Dec. 31 500,000 x 2 1,000,000 P5,080,000/12 P423,333 4. Income Summary 700,000 Bernabe, Capital 267,567 Burgos, Capital 432,433

Salaries P 100,000 P 200,000 P300,000

Interest on average. cap 40,833 42,333 83,166

Balance – 40%, 60% 126,734 190,100 316,834

Net Profit P 267,567 P 432,433 P700 000

Salaries P 100,000 P 100,000 P220,000

Interest on beg. cap 28,800 35,200 64,000

Bonus 43,600 43,600

Balance – 2:3 156,960 235,440 392,400

Net Profit P 329,360 P 370,640 P700 000

B = 10%(NI –S – I) Problem 1 – 7

Sandy Tammy Manny Total

1. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000 Salaries 48,000 40,000 88,000 Balance – 5:3:2 ( 74,500) ( 44,700) ( 29,800) (149,000) Net Profit P(57,700) P 15,300 P 17,400 P(25,000) 2. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000 Salaries 48,000 40,000 88,000 Balance – 5:3:2 ( 32,000) ( 19,200) ( 12,800) ( 64,000) Net Profit P( 15,200) P 40,800 P 34,400 P 60,000 3. 6% interest on capital P 16,800 P 12,000 P 7,200 P 36,000 Salaries 48,000 40,000 88,000 Bonus 13,500 13,500 Balance – 5:3:2 56,250 33,750 22,500 112,500 Net Profit P 73,050 P107,250 P 69,700 P250,000

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

1. Delmar Pilar Total

5% interest on capital P 2,500 P 1,500 P 4,000

Salaries 12,000 8,000 20,000

20% bonus on net profit 22,100 22,100

Balance – capital ratio 40,250 24,150 64,400

Net Profit P76,850 P33,650 P110,500

2. Sales 480,000

Cost of Goods Sold 210,000

Operating Expenses 100,000 Income Taxes 59,500 Income Summary 110,500 Income Summary 110,500 Delmar, Capital 76,850 Pilar, Capital 33,650 Delmar, Capital 6,000 Pilar, Capital 10,000 Delmar, Drawing 6,000 Pilar, Drawing 10,000

Delmar and Pilar Company Statement of Changes in Partners’ Capital

For the Year Ended December 31, 2008

Delmar Pilar Total

Capital balances, January 1, 2008 P 50,000 P30,000 P 80,000

Add Distribution of net income for 2008:

Interests P 2,500 P 1,500 P 4,000

Salaries 12,000 8,000 20,000

Bonus 22,100 22,100

Balance - capital ratio 40,250 24,150 64,400

Total share in net profit P 76,850 P33,650 P110,500

Total P126,850 P63,650 P190,500

Less Drawings 6,000 10,000 16,000

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Problem 1 - 9

Ramos, Gonzales and Martinez Statement of Changes in Partners’ Capital For Three Years Ended December 31, 2008

Ramos Gonzales Martinez Total

Capital, January 1, 2006 P 80,000 P 48,000 P 40,000 P 168,000

Distribution of net loss (Sch. 1) ( 2,000) ( 1,520) ( 2,000) ( 5,520)

Withdrawals (12,000) (14,480) (16,000) (42,480)

Capital, December 31, 2006 P 66,000 P 32,000 P 22,000 P120,000

Distribution of net profit (Sch. 2) 7,960 8,320 7,720 24,000

Withdrawals (13,960) (16,320) (17,720) (48,000)

Capital, December 31, 2007 P 60,000 P 24,000 P12,000 P 96,000

Distribution of net profit (Sch. 3) 21,840 18,840 18,120 58,800

Withdrawals (20,400) (24,000) (21,200) (65,600)

Capital, December 31, 2008 P 61,440 P 18,840 P 8,920 P 89,200

Schedule 1 - Distribution of 2006 net loss

Salaries to partners P 9,600 P 12,000 P 12,000 P 33,600

Interest of 6% on beg. Capital 4,800 2,880 2,400 10,080

Balance – equally (16,400) (16,400) (16,400) P 49,200

Net income P( 2,000) P( 1,520) P( 2,000) P( 5,520)

Schedule 2 - Distribution of 2007 net profit

Interest of 6% on beg. Capital 3,960 1,920 1,320 7,200

Balance – equally ( 5,600) ( 5,600) ( 5,600) (16,800)

Net income P 7,960 P 8,320 P 7,720 P 24,000

Interest of 6% on beg. Capital 3,600 1,440 720 5,760

Bonus - 20% (P58,800 - P39,360 - B) 3,240 3,240

Balance – equally 5,400 5,400 5,400 16,200

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Problem 1 -10

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

Robles Bernal Reyes Total

Capital balances before closing

the nominal accounts P120,000 P ( 2,000) P20,000 P138,000

Add Distribution of net profit:

Drawing allowance 20,000 14,000 10,000 44,000

Interest on average capital 7,200 240 560 8,000

Balance - 60%, 30%, 10% 58,800 29,400 9,800 98,000

Total P206,000 P41,640 P40,360 P288,000

Deduct Cash distribution 122,720 26,480 149,200

Capital, December 31, 2008 P 83,280 P41,640 P13,880 P138,800

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

Problem 1 - 11

Chavez, Roman, and Valdez Statement of Changes in Partners’ Capital

January 1 to November 1, 2008 Chavez

Loan ChavezCapital RomanCapital ValdezCapital Total

Beginning balances P 80,000 P 80,000 P 80,000 P240,000

Loan from Chavez P 60,000 60,000

Transfer of equipment to Valdez ( 16,000) ( 16,000)

Balances P 60,000 P 80,000 P 80,000 P 64,000 P284,000

Distribution of loss on realization*

Salary to Valdez 24,000 24,000

Int. to Chavez for 7 months 2,100 2,100

Balance divided equally* ( 76,700) ( 76,700) ( 76,700) ( 230,100)

Balances P 60,000 P 5,400 P 3,300 P 11,300 P 80,000

Dist. of cash in final settlement 60,000 5,400 3,300 11,300 80,000

*Total partners’ equity as shown above P284,000

Less Cash available for distribution 80,000

Loss on realization P204,000

Less Salary and interest 26,100

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Problem 1 - 12

Canlas, David, Estrella and Fajardo

Statement of Changes in Partners’ Capital Accounts For the Year Ended December 31, 2008

Canlas David Estrella Fajardo Total

Investment P309,000 P159,000 P327,000 --- P 795,000

Net profit 237,700 186,230 140,310 P 24,010 588,250

Total P546,700 P345,230 P467,310 P 24,010 P1,383,250

Less: Excess rent (P225 x 6) P 13,500 P 13,500

Withdrawals P 78,000 P 66,000 87,000 P 37,500 268,500

Uncollectible accounts 18,000 6,750 24,750

P 96,000 P 72,750 P100,500 P 37,500 P 306,750 Capital, December 31 P450,700 P272,480 P366,810 P(13,490) P1,076,500 Supporting computations:

Revenue from fees P 900,000

Expenses:

Total expenses, excluding depreciation and uncollectible

accounts (P290,000 - P13,500) P 276,500

Depreciation [(P195,000 x 10%) + (P75,000 x 5%) 23,250

Doubtful accounts (P24,000 x 50%) 12,000 311,750

Net profit P588,250

Distribution of net income

Canlas David Estrella Fajardo Total

20% of gross fees from respective

clients P 66,000 P 36,000 P 33,000 P135,000

20% of fees after April 1 after

expenses but before bad debts P24,010* 24,010

Balance -Canlas-40%, David-35%,

Estrella-25% 171,700 150,230 107,310 429,240

Total P237,700 P186,230 P140,310 P24,010 P588,250

After April 1

Revenues P 180,000

Expenses before uncollectible accounts (P276,500 + P23,250) x 180 / 900 59,950 P120,050 20% Share of Fajardo P 24,010 Problem 1-13 1. Equipment 13,500 Accumulated Depreciation 1,350

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2. Profit and Loss 4,375

Interest Payable 4,375

P87,500 x 6% x 10/12 = P4,375

3. Profit and Loss 159,025

Abaya, Capital 63,700

Reyes, Capital 95,505

Abaya Reyes Total

Salaries P 39,000 P 58,500 P 97,500 Bonus [25% x (NI – B – S) ] 12,305 12,305 Balance – equally 24,610 24,610 49,220 Total P 63,610 P 95,415 P159,025 4. Abaya, Capital 36,000 Reyes, Capital 62,500 Abaya, Drawing 36,000 Reyes, Drawing 62,500 Problem 1-14

1.

Jaime = 5/10 x 80% = 40% Soriano = 2/10 x 80% = 16% Madrid = 3/10 x 80% = 24% Matias = 20%

2. Corrected net income = P250,000 – (P12,000 – P31,000 – P20,000 + P15,000 + P9,000 x 65%) = P240,250 Jaime = P240,250 x 40% = P96,100 Soriano = P240,250 x 16% = P38,440 Madrid = P240,250 x 24% = P57,660 Matias = P240,250 x 20% = P48,050 MULTIPLE CHOICE 1. D 2. D 3. A 4. C

Total Abena(60%) Buendia(40%) Abena – MV – Cost (P90,000 – P60,000) P30,000 P18,000 P12,000 Buendia – MV – Cost (P60,000 – P70,000) ( 10,000) ( 6,000) ( 4,000) Actual P20,000 P12,000 P 8,000 Inequity ( 20,000) ( 30,000) 10,000 P 0 (P18,000) P18,000 5. A 6. C 7. B 8. B Molina’s contribution (P190,000 – P60,000) P130,000

Nuevo’s tangible contribution 100,000

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x 60%

Capital credit of Molina P 138,000

Contribution of Molina 130,000 Bonus to Molina P 8,000 9. Roxas = P596,250 - P5,550 = P590,700 Bernardo = P335,000 - P4,050 - P9,000 = P321,950 10. Roxas = (P590,700 + P321,950) x 60% = P547,590 Bernardo = (P590,700 + P321,950) x 40% = P365,060 11. Roxas = P650,000 – P590,700 = P59,300 Bernardo = P400,000 – P321,950 = P78,050 12. Bruno = P150,000 - P90,000 = P60,000 13. Total assets = Total liab. + Total capital

= P25,000 + P300,000 = P325,000

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

15 Total capital = (P158,400 + P17,500 – P5,000 – P5,000) ÷ 2/3 = P248,850 16. Required capital of Esteban (P287,500 x 60%) P172,500

Non-cash contributions of Esteban (P125,000 – P30,000) 95,000

Cash contribution P 77,500

17. Contribution of Diaz P115,000

Contribution of Esteban (P125,000 – P30,000 + P50,000) 145,000

Total partnership capital P260,000

18. C P115,000 + P95,000 = P210,000/2 P105,000

19. A Net increase (decrease) in capital (P120,000)

Add Withdrawals 260,000

Total (P140,000)

Less Additional investments 50,000

Profit share P 90,000

Profit share percentage ÷ 30%

Total partnership net profit P300,000

20. C 21. B

22. C Net profit (exclusive of salary, interest and bonus) P 93,500

Salary (P2,000 x 12) 24,000

Interest (P50,000 x 5%) 2,500

Net profit after deduction of bonus P120,000

Bonus = .20 (P120,000 + Bonus) = P24,000 + .20 Bonus = P24,000/.80 = P30,000

(20)

23. D

24. C Alberto Bustos Cancio Total

10% x P1,000,000 P 100,000 P 100,000

20% x P1,500,000 300,000 300,000

5% (P1M – P400,000) P30,000 P30,000 60,000

Balance – equally 680,000 680,000 680,000 2,040,000

Net income P1,080,000

25. A Ramos Campos Ocampo Total

Interest P24,000 P12,000 P 8,000 P 44,000

Salaries 60,000 40,000 100,000

Balance – equally ( 70,000) (70,000) ( 70,000) ( 210,000) P14,000

26. C Sison Torres Velasco Total

Bonus - 10%(P44,000 - B) P 4,000 P 4,000 Interest on capital in excess of P100,000 P 1,000 1,000 Salaries to partners P10,000 12,000 22,000 Balance - 4:4:2 6,800 6,800 3,400 17,000 P19,400 P44,000

27. B Sison Torres Velasco Total

Bonus - 10%(P22,000 - B) P 2,000 P 2,000 Interest on capital in excess of P100,000 P 1,000 1,000 Salaries to partners P10,000 12,000 22,000 Balance - 4:4:2 (1,200) (1,200) (600) (3,000) P13,400 P22,000

28. D Sison Torres Velasco Total

Bonus - 10%(P22,000 - B) P 2,000 P 2,000

Interest on capital

in excess of P100,000 P 1,000 1,000

Balance – Salary ratio P8,636 10,364 19,000

P12,364 P22,000 29. A Average capital of Tamayo Average capital of Vidal

P100,000 x 6 = P 600,000 P225,000 x 9 = P2,025,000 160,000 x 6 = 960,000 155,000 x 3 = 465,000

P1,560,000/12 P2,490,000/12

P130,000 P207,500

Average capital of Banson - P150,000

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

(21)

30. D Interest on ave. capital P 48,750

Salaries to partners 144,000

Balance - divided equally 9,000

P 201,750 31. B Total capital before net income

(P475,000 + P60,000 – P70,000) P465,000

Add Net profit 201,750

Total capital, Dec. 31, 2008 P666,750

32. D Andal Briones Camba Total

Int. on average capital P 47,250 P 23,865 P 16,235 P 87,350

Salaries to partners 122,325 82,625 204,950

Balance - equally (139,308) (139,308) (139,308) (417,924) Net increase (decrease) P 30,267 P(115,443) P( 40,448) P(125,624) 33. C Net income = Net sales - CGS - Depr. - Oper. exp. Others)

= P228,000 - P123,000 - P7,500 - P58,100 x 65% P25,610

Mariano Lucas total

Salary to partner for 10 mos. P10,000 P 10,000

Bonus to managing partner 1,561 1,561

Balance – based on orig. cap. 8,781 P 5,268 14,049

TOTAL share in profit P 20,342 P 5,268 P 25,610

34. A TOTAL share in profit P 20,342 P 5,268 P 25,610

Add Capital, beginning 125,000 75,000 200,000

TOTAL P145,342 P 80,268 P 225,610

Less Withdrawals 20,000 30,000 50,000

Capital, end P125,342 P 50,268 P 175,610

35. D Belen Lorna Ursula Edna Total

36. A Interest P 5,000.00 P 2,500.00 P 2,500.00 P2,000.00 P12,000.00 37. A Salaries 10,000.00 6,000.00 16,000.00 Balance 10,000.00 10,000.00 6,666.67 6,666.67 33,333.34 Add’l profit for Edna ________ ________ _________ 3,333.33 3,333.33 Net profit P25,000.00 P18,500.00 P9,166.67 P12,000.00 P64,666.67

38. B Puno Quirino Romero Total

Salaries P40,000 P36,000 P13,650 P 89,650

Bonus 13,000 13,000

Interest 1,000 750 4,600 6,350

Balance 7,000 7,000 7,000 21,000

(22)

Computation of average capital: Puno, capital Jan. 1 – P10,000 x 3 P 30,000 Apr 1 - 9,000 x 3 27,000 July 1 - 11,000 x 3 33,000 Oct. 1 - 10,000 x 3 30,000 P120,000 / 12 P10,000 Quirino, capital Jan. 1 – P 6,000 x 6 P 36,000 July 1 - 10,000 x 3 30,000 Oct. 1 - 8,000 x 3 24,000 P 90,000 / 12 P 7,500 Romero, capital Jan. 1 – P40,000 x 3 P120,000 Apr. 1 - 38,000 x 3 114,000 July 1 - 53,000 x 6 318,000 P552,00 / 12 P46,000 Let X = Net Income

P40,000 + 10% X + P1,000 + 1/3 (X – P89,650 – 10% X – P6,350 = P61,000 P40,000 + 10% X + P1,000 + 1/3 (90% X – P96,000) = P61,000 P40,000 + 10% X + P1,000 + 30% X – P32,000 = P61,000 10% X + 30% X = P61,000 – P40,000 – P1,000 + P32,000 40% X = P52,000 X = P130,000 39. D Legarda- 5/10 x 80% = 40% Sotto - 2/10 x 80% = 16% Madrigal-3/10 x 80% = 24% Pimentel - 20% 40. C Share of Legarda = P25,000 – ( P1,200 - P3,100 - P2,000 + P1,500 + P 900 x 65%) = P24,025 x 40% = P9,610 41. C Serrano Toledo 2008 Net income (P50,000 – P8,000) P42,000 Salary to Serrano ( 36,000) P36,000 Remainder P 6,000 Divided equally ( 6,000) 3,000 P 3,000 Understatement in 2007 NI P8,000 Divided 60:40 ( 8,000) 4,800 3,200 Income allocation P43,800 P 6,200

(23)

1 CHAPTER 2 Partnership Dissolution EXERCISES Exercise 2 – 1 1. Sales, Capital 140,000 Rosales, Capital 140,000 2. P280,000 + P320,000 + P200,000 = P800,000 Exercise 2 –2 1. Total capital (P3,000,000 / 80%) P3,750,000

Capital interest of Fidel x 20%

Cash to be contributed by Fidel P 750,000

2. Cash 750,000 Fidel, Capital 750,000 Exercise 2 – 3

1.

Centeno, Capital 40,000 Corales, Capital 40,000 2. Other Assets 80,000 Cortes, Capital 50,000 Centeno, Capital 20,000 Claudio, Capital 10,000 P140,000/ ¼ = P560,000 – (P200,000 + P 160,000 + P120,000) Cortes, Capital P200,000 + P50,000 x 1/4 62,500 Centeno, Capital P160,000 + P20,000 x 1/4 45,000 Claudio, Capital P120,000 + P10,000 x 1/4 32,500 Corales, Capital 140,000 3. Cash 230,000 Cortez, Capital 32,812 Centeno, Capital 13,125 Claudio, Capital 6,563 Corales, Capital 177,500 AC CC Bonus_ old (3/4) P532,500 P480,000 P52,500 new (1/4) 177500 230,000 (52,500) P710,000 P710,000

(24)

P---0---AA 1 - Chapter 2 (2008 edition) page 2 Exercise 2 – 4

1.

Conde, Capital 90,000 Cuenco, Capital 60,000 Catral, Capital 150,000 2. Other Assets 360,000 Conde, Capital 270,000 Cuenco, Capital 90,000 Conde, Capital P270,000 + 270,000 x 1/3 180,000 Cuenco, Capital P180,000 + P90,000 x 1/3 90,000 Catral, Capital 270,000 3. Cash 270,000 Conde, Capital 67,500 Cuenco, Capital 22,500 Catral, Capital 180,000 AC CC Bonus_ old (3/4) P540,000 P450,000 P90,000 new (1/4) 180,000 270,000 (90,000) P720,000 P720,000 P---0---4. Cash 270,000 Other Assets 360,000 Conde, Capital 270,000 Cuenco, Capital 90,000 Catral, Capital 270,000 AC CC Asset Re old (3/4) P 810,000 P450,000 P360,000 new (1/4) 270,000 270,000 P1,080,000 P720,000 P360,000 5. Cash 270,000 Conde, Capital 67,500 Cuenco, Capital 22,500 Catral, Capital 360,000 Exercise 2-5

1a. Bonus Method

Cash 180,000 Alba, Capital 6,000 Medel, Capital 9,000 Almeda, Capital 195,000 AC CC Bonus_ old (3/4) P585,000 P600,000 P(15,000) new (1/4) 195,000 180,000 15,000 P780,000 P780,000

(25)

P---0---AA 1 - Chapter 2 (2008 edition) page 3

1b. Revaluation of Assets Method (AC = P180,000÷ 1/4 = P720,000)

Alba, Capital (P60,000 x 40%) 24,000

Medel, Capital (P60,000 x 60%) 36,000

Other Assets (P780,000 - P720,000) 60,000

To record revaluation of assets

Cash 180,000

Almeda, Capital 180,000

2. Alba Medel Almeda

Balances under the bonus method P194,000 P391,000 P195,000

Balances under the asset rev. method P200,000 P400,000 P200,000

Additional depreciation ( 6,666) ( 6,667) ( 6,667)

Balances after depreciation P193,334 P393,333 P193,333

Net advantage to Medel using the asset revaluation method P 2,333 Exercise 2 - 6 1. Garces, Capital 60,000 Kalaw, Capital 60,000 P120,000 x 1/2 = P60,000 2. Cash 60,000 Other Assets (P400,000 – P320,000) 80,000 Kalaw, Capital 40,000 Garces, Capital (P100,000 x 3/8) 37,500 Hilario, Capital (P100,000 x 3/8) 37,500 Juan, Capital (P100,000 x 2/8) 25,000

Total agreed capital P400,000

Total capital contribution 320,000

Asset revaluation P 80,000

Interest acquired from Garces P 60,000

Cash invested in the partnership 60,000

Total P 120,000

Capital credit of Kalaw 100,000

Bonus to old partners P 20,000

Exercise 2 – 7 Bonus method

Sabado Galman Estacio Total

Capital before admission of Estacio P1,000,000 P800,000 P1,800,000

Contribution of Estacio P500,000 500,000

Bonus to old partners 24,000 16,000 ( 40,000)

(26)

Asset Revaluation method

Sabado Galman Estacio Total

Capital before admission of Estacio P1,000,000 P800,000 P1,800,000

Contribution of Estacio P500,000 500,000

Adjustment of fixed assets to fair value 120,000 80,000 200,000

Capital after admission of Estacio P1,120,000 P880,000 P500,000 P2,500,000 Exercise 2 – 8

1. Bonus method

Noble Calma Reyes Naval Total

Capital balances before admission

of new partners P64,000 P136,000 P200,000

Contributions of new partners P110,000 P120,000 230,000

Bonus to old partners 10,950 25,550 ( 24,000) ( 12,500)

Capital balances after admission

of new partners P74,950 P161,550 P86,000 P107,500 P430,000 Cash 130,000 Equipment 100,000 Noble, Capital 10,950 Calma, Capital 25,550 Reyes, Capital 86,000 Naval, Capital 107,500

2. Asset Revaluation method

Noble Calma Reyes Naval Total

Capital balances before admission

of new partners P64,000 P136,000 P200,000

Adjustment of assets to FV 9,000 21,000 30,000

Contributions of new partners P110,000 P120,000 230,000

of new partners P73,000 P157,000 P110,000 P120,000 P460,000 Cash 130,000 Equipment 84,000 Inventory 14,000 Land 80,000 Building 48,000 Noble, Capital 9,000 Calma, Capital 21,000 Reyes, Capital 110,000 Naval, Capital 120,000 Exercise 2 - 9 1a. Bonus Method

Songco, Capital 200,000

Bueno, Capital 60,000

Manzano, Capital 40,000

(27)

1b. Asset Revaluation Method

Songco, Capital 200,000

Other Assets (P10,000÷ 1/6) 600,000

Bueno, Capital (P50,000 x 3/5) 300,000

Manzano, Capital (P50,000 x 2/5) 200,000

Cash/ Payable to Songco 300,000

2. The bonus method will be preferred by Manzano

Bonus Method Asset Rev

Capital of Manzano after retirement P260,000 P500,000

Additional depreciation 300,000

Capital of Manzano after additional depreciation P260,000 P200,000 Net advantage to Manzano with the use of the bonus

method P60,000 Exercise 2 – 10

1.

Delfin, Capital 400,000 Damian, Capital 200,000 Dencio, Capital 200,000 2. Delfin, Capital 400,000 Cash 320,000 Damian, Capital 40,000 Dencio, Capital 40,000 3. Other Assets 180,000 Delfin, Capital 400,000 Cash 460,000 Damian, Capital 60,000 Dencio, Capital 60,000 P460,000 – P400,000 = P60,000/ 1/3 = P180,000 Exercise 2 – 11

1. Guzman, Capital January 1

P100,000

Drawing

(16,000)

Share in net profit

24,000

Interest of Guzman upon retirement

P108,000

Other Assets 40,000 Guzman, Capital 108,000 Cash 120,000 Jorge, Capital 12,000 Lopez, Capital 16,000 P120,000 – P108,000 = P12,000/ 30% = P40,000

(28)

AA 1 - Chapter 2 (2008 edition) page 6 2. Guzman, Capital 108,000 Jorge, Capital 5,143 Lopez, Capital 6,857 Cash 120,000 Exercise 2 – 12 1. Building 200,000 Villa, Capital 60,000 Belen, Capital 40,000 Marcos, Capital 80,000 Cordero, Capital 20,000 Belen, Capital 140,000 Cash 140,000 2. Villa, Capital 15,000 Belen, Capital 100,000 Marcos, Capital 20,000 Cordero, Capital 5,000 Cash 140,000

Exercise 2 - 13

1. Galang, Capital 12,000 Henio, Capital 8,000 Israel, Capital 140,000 Cash 160,000 2. Israel, Capital 140,000 Galang, Capital 140,000 3. Israel, Capital 140,000 Cash 130,000 Galang, Capital 6,000 Henio, Capital 4,000 4. Other Assets 48,000 Israel, Capital 140,000 Cash 148,000 Galang, Capital 24,000 Henio, Capital 16,000 5. Israel, Capital 140 000 Galang, Capital 60,000 Henio, Capital 40,000 Cash 120,000 Other Assets 120,000

(29)

AA 1 - Chapter 2 (2008 edition) page 7 6. Israel, Capital 140,000 Henio, Capital 140,000 PROBLEMS Problem 2 - 1 1. Locsin, Capital (P240,000 x 1/4) 60,000 Montes, Capital (P120,000 x 1/4) 30,000 Nava, Capital 90,000 2. Locsin, Capital (P240,000 x 1/3) 80,000 Montes, Capital (P120,000 x 1/3) 40,000 Nava, Capital 120,000 3. Other Assets 180,000 Locsin, Capital (P180,000 x 3/4) 135,000 Montes, Capital (P180,000 x 1/4) 45,000 P540,000 – P360,000 = P180,000 Locsin, Capital [(P240,000 + P135,000) 1/3] 125,000 Montes, Capital [(P120,000 + P45,000) 1/3] 55,000 Nava, Capital 180,000 4. Cash 180,000 Locsin, Capital (P90,000 x 3/4) 67,500 Montes, Capital (P90,000 x 1/4) 22,500 Nava, Capital 270,000 AC CC Bonus old (1/2) 270,000 360,000 (90,000) new (1/2) 270,000 180,000 90,000 540,000 540,000 ---5. Cash 180,000 Other Assets 180,000 Nava, Capital 180,000 Locsin, Capital (P60,000 x 3/4) 135,000 Montes, Capital (P60,000 x 1/4) 45,000 AC CC Asset Rev old (3/4) 540,000 360,000 180,000 new (1/4) 180,000 180,000 ---720,000* 540,000 180,000 *180,000÷ 1/4 = 720,000 6. Cash 240,000 Nava, Capital 180,000 Locsin, Capital (P60,000 x 3/4) 45,000 Montes, Capital (P60,000 x 1/4) 15,000

(30)

AA 1 - Chapter 2 (2008 edition) page 8 7. Cash 240,000 Locsin, Capital 54,000 Montes, Capital 18,000 Nava, Capital 312,000 8. Cash 150,000 Locsin, Capital (P22,500 x 3/4) 16,875 Montes, Capital (P22,500 x 1/4) 5,625 Nava, Capital (P510,000 x 1/4) 127,500 9. Cash 165,000 Other Assetsl (P660,000 – P525,000) 135,000 Locsin, Capital (P135,000 x 3/4) 101,250 Montes, Capital (P135,000 x 1/4) 33,750 Nava, Capital (P660,000 x 1/4) 165,000 10 Cash 144,000 Locsin, Capital (P24,000 x 3/4) 18,000 Montes, Capital (P24,000 x 1/4) 6,000 Nava, Capital (P504,000 x 1/3) 168,000 Problem 2 - 2 1. a. Ponce, Capital (P300,000 x ½) 150,000 Anton, Capital 150,000 b. Ponce, Capital (P300,000 x ¼) 75,000 Salva, Capital (P200,000 x ¼) 50,000 Victa, Capital (P100,000 x ¼) 25,000 Anton, Capital 150,000 c. Cash 220,000 Ponce, Capital 7,500 Salva, Capital 4,500 Victa, Capital 3,000 Anton, Capital 205,000 AC CC Bonus Ponce P307,500 P300,000 P 7,500 Salva 204,500 200,000 4,500 Victa 103,000 100,000 3,000 Anton 205,000 220,000 ( 15,000) P820,000 P820,000 ---2. a. Other Assets 360,000 Ponce, Capital 180,000 Salva, Capital 108,000 Victa, Capital 72,000 P960,000 – P600,000 = P360,000

(31)

AA 1 - Chapter 2 (2008 edition) page 9 Ponce, Capital 240,000 Anton, Capital 240,000 b. Other Assets 120,000 Ponce, Capital 60,000 Salva, Capital 36,000 Victa, Capital 24,000 P180,000/ 25% = P720,000 – P600,000 = P120,000 Ponce, Capital 90,000 Salva, Capital 59,000 Victa, Capital 31,000 Anton, Capital 180,000 c. Other Assets 60,000 Ponce, Capital 30,000 Salva, Capital 18,000 Victa, Capital 12,000 P220,000/ 25% = P880,000 – P820,000 = P60,000 Cash 220,000 Anton, Capital 220,000 Problem 2-3 1.a Cash 90,000 Cabral, Capital 22,500 Corpus, Capital 18,000 Carlos, Capital 4,500 Other Assets 45,000 Camus, Capital 90,000 AC CC Asset Rev old (3/4) 630,000 675,000 (45,000) new (1/4) 90,000 90,000 ---720,000* 765,000 (45,000) b. Cash 90,000 Cabral, Capital 2,813 Corpus, Capital 2,250 Carlos, Capital 562 Camus, Capital 95,625 AC CC Bonus old (1/2) 669,375 675,000 (5,625) new (1/2) 95,625 90,000 5,625 765,000 765,000

---2.a Cabral, Capital 40,500

Corpus, Capital 27,000

Carlos, Capital 16,875

(32)

AA 1 - Chapter 2 (2008 edition) page 10 b. Other Assets 45,000 Cabral, Capital 22,500 Corpus, Capital 18,000 Carlos, Capital 4,500 P90,000/ 1/8 = P720,000 – P675,000 = P45,000 Cabral, Capital 43,312 Corpus, Capital 29,250 Carlos, Capital 17,438 Camus, Capital 90,000 Problem 2 - 4 1. a. Inventories 5,625

Accumulated Depreciation – Equipment 7,500

Allowance for Doubtful Accounts 3,450

Accrued Liabilities 2,925 Roces, Capital (P6,750 x 60/100) 4,050 Lapuz, Capital (P6,750 x 40/100) 2,700 b. Cash 46,875 Doria, Capital 46,875 P187,500/80% = P234,375 x 20% = P46,875 c. Lapuz, Capital 13,388 Roces, Capital 13,388 Roces = (P234,375 x 50%) – P103,800 = P13,388 Lapuz = (P234,375 x 30%) - P83,400 = (P13,388) 2.

Roces, Lapuz and Doria Statement of Financial Position

April 1, 2008

ASSETS LIABILITIES and PARTNERS’ CAPITAL

Cash P 82,875 Payables P66,750

Receivables P69,000 Accrued Liabilities 2,925

Less Allow. for DA 3,450 65,550 Roces, Capital P117,188

Inventories 129,375 Lapuz, Capital 70,312

Equipment P52,500 Doria, Capital 46,875 234,375

Less Acc. Depr. 26,250 26,250 ________

TOTAL LIABILITIES and

TOTAL ASSETS P304,050 PARTNERS’ CAPITAL P304,050

Problem 2 -5

Roldan Angeles Lazaro Moreno Total

Bal.before admission of Moreno P150,000 P180,000 P300,000 P630,000

Transfer of 1/6 int. to Moreno (30,000) P 30,000

Investment of Moreno 150,000 150,000

Asset revaluation 6,000 6,000 8,000 20,000

Bonus to old partners 6,000 6,000 8,000 (20,000)

(33)

AA 1 - Chapter 2 (2008 edition) page 11 2. Roldan 30% x 75% = 22.5% Angeles 30% x 75% = 22.5% Lazaro 40% x 75% = 30% Moreno 25% Problem 2 – 6 1. Lazo, Capital 19,000 Madrid, Capital 19.000 Buildings 8,000

Allowance for Valuation of Investments 10,000

Lazo, Capital 60,000

Madrid, Capital 45,333

Nuguid, Capital 105,333

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

2. Lazo Madrid Total

Capital balances before admission of Nuguid P199,000 P155,000 P354,000

Revaluation of assets ( 19,000) ( 19,000) ( 39,000)

Capital balances after revaluation P180,000 P136,000 P316,000

Fraction of interest transferred to Nuguid x 1/3 x 1/3 x 1/3

Interest transferred to Nuguid P 60,000 P 45,333 P105,333

Gain on transfer 31,138 23,529 54,667

Cash distribution to partners P 91,138 P 68,862 P160,000

3. Lazo Madrid Nuguid

Capital balances before admission of Nuguid P199,000 P155,000

Revaluation of assets ( 19,000) ( 19,000)

Interest transferred to Nuguid ( 60,000) ( 45,333) 105,333

Balances P120,000 P 90,667 P105,333

Share in net profit 18,000 18,000 18,000

Drawings ( 15,000) ( 12,000) ( 28,000)

Capital balances, December 31, 2008 P123,000 P 96,667 P 95,333

4. Cash 66,000 Accounts Receivable 40,000 Investments 20,000 Accounts Payable 41,000 Osorio, Capital 85,000 Lazo, Capital 5,000 Madrid, Capital 5,000 Nuguid, Capital 5,000 Osorio, Capital 15,000 P315,000 + P85,000 = P400,000 x 1/4 P100,000 – P85,000 = P15,000

(34)

AA 1 - Chapter 2 (2008 edition) page 12 Problem 2 - 7 1. Montero, Capital 100,000 Concio, Capital (P8,000 x 3/5) 4,800 Domino, Capital (P8,000 x 2/5) 3,200 Cash 108,000 2. Montero, Capital 100,000 Concio, Capital (P10,000 x 3/5) 6,000 Domino, Capital (P10,000 x 2/5) 4,000 Cash 90,000 3. Montero, Capital 100,000 Concio, Capital (P60,000 x 3/6) 30,000 Domino, Capital (P60,000 x 2/6) 20,000 Cash 90,000 Other Assets (P10,000÷ 1/6) 60,000 4. Montero, Capital (P6,000 x 1/6) 1,000 Concio, Capital (P6,000 x 3/6) 3,000 Domino, Capital (P6,000 x 2/6) 2,000 Equipment [(P60,000 x 40%) – P18,000] 6,000 Montero, Capital (P100,000 – P1,000) 99,000 Equipment 18,000 Cash 81,000 Problem 2-8

1. Damaso Dangwa Datu

Capital, January 1, 2008 P120,000 P 70,000 P 80,000

Share in net loss ( 9,600) ( 6,400) ( 16,000)

Drawings ( 24,000) ( 24,000) ( 24,000)

Capital balances, December 31, 2008 P 86,400 P 39,600 P 40,000

2. Dangwa, Capital 39,600 Dmaso, Capital 14,400 Datu, Capital 24,000 Cash 30,000 Inventory 48,000 P39,600 – P30,000 = P9,600 / 20% = P48,000 3. a Other Assets 42,000 Dangwa, Capital 39,600 Cash 48,000 Damaso, Capital 12,600 Datu, Capital 21,000 P48,000 – P39,600 = P8,400/ 20% = P42,000

(35)

AA 1 - Chapter 2 (2008 edition) page 13 Dangwa, Capital 39,600 Damaso, Capital 3,150 Datu, Capital 5,250 Cash 48,000 Problem 2 - 9 1. Cash 120,000 Luna, Capital 2,000 Matias, Capital 2,000 Noble, Capital 2,000 Guzman, Capital 126,000 AC CC Bonus Old P294,000 P300,000 P( 6,000) New 126,000 120,000 6,000 P420,000 P420,000 ----2. Cash 60,000 Luna, Capital 20,000 Matias, Capital 20,000 Noble, Capital 20,000 Other Assets 60,000 Guzman, Capital 60,000 AC CC Asset Rev Old P240,000 P300,000 (P60,000) New 60,000 60,000 P300,000 P360,000 (P60,000) 3. Matias, Capital 36,000 Guzman, Capital 36,000 P120,000 x 30% = P36,000 4. Luna, Capital 80,000 Matias, Capital 8,000 Noble, Capital 8,000 Cash 96,000 5. Luna, Capital 80,000 David, Capital 80,000 6. Luna, Capital 80,000 Matias, Capital 40,000 Noble, Capital 40,000

(36)

Problem 2 -10

Canda, Pardo and Andres

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

Canda Pardo Andres Total

Original capital, January 1, 2006 P 62,500 P 25,000 P 12,500 P 100,000

Corrected 2006 net profit 26,375 10,550 5,275 42,200

Drawings (15,000) ( 7,800) ( 5,200) ( 28,000)

Corrected 2007 net profit 10,875 4,350 2,175 17,400

Drawings (15,000) ( 7,800) ( 5,200) ( 28,000)

Corrected 2008 net loss ( 6,750) ( 2,700) ( 1,350) ( 10,800)

Drawings (10,000) ( 5,200) ( 5,200) ( 20,400)

Schedule of computation of corrected net profit

2006 2007 2008

Reported net profit (loss) P 44,000 P 18,500 P (10,500 )

Understatement of accrued expenses 2006 ( 400 ) 400

2007 ( 500 ) 500

2008 ( 650 )

Understatement of accrued revenues 2006 250 ( 250 )

2007 100 ( 100 )

2008 150

Overstatement of inventories 2006 ( 1,500 ) 1,500

2007 ( 2,000 ) 2,000

2008 ( 2,000 )

Understatement of depreciation exp. ( 150 ) ( 350 ) ( 200 )

Corrected net profit (loss) P 42,200 P 17,400 P (10,800 )

2. a. Revenue Receivable 150 Canda, Capital 2,000 Pardo, Capital 800 Andres, Capital 400 Expenses Payable 650 Merchandise Inventory 2,000 Accumulated Depreciation 700 b. Canda, Capital (P3,000 x 625/1000) 1,875 Pardo, Capital (P3,000 x 250/1000) 750 Andres, Capital (P3,000 x 125/1000) 375 Furniture (P4,500 - P1,500) 3,000 c. Andres, Capital 2,625 Furniture 1,500 Cash 1,125

(37)

Problem 2 -11

Abelar and Berces

Statement of Changes in Partners’ Equity For the Period January 1, 2007 to January 15, 2009

Abelar Berces Custodio Total

Capital balances before closing the

books, December 31, 2007 P 50,000 P 30,000 P 80,000

Net profit for 2007 (Sch 1) 6,600 7,400 14,000

Drawing (8,200) (6,800) (15,000)

Capital, December 31, 2007 P 48,400 P 30,600 P 79,000

Admission of Custodio (Sch. 2) (7,800) (5,200) P 33,000 20,000

Net loss for 2008 (5,250) (3,750) (6,000) (15,000)

Drawings (7,500) (5,000) (6,800) (19,300)

Capital, December 31, 2008 P 27,850 P 16,650 P 20,200 P 64,700

Loss on realization on Jan. 15, 2009 (16,520) (11,800)` (18,880) (47,200)

Final cash distribution P 11,330 P 4,850 P 1,320 P 17,500

Abelar_ Berces Total

Salaries P 9,000 P 9,000 P 18,000

Balance - 60%, 40% (2,400) (1,600) ( 4,000)

Total P 6,600 P 7,400 P 14,000

Schedule 2 - Admission of Custodio

Total capital contribution (P79,000 + P20,000) P 99,000

Interest to be credited to Custodio 1/3__

Capital credit of Custodio P 33,000

Capital contribution of Custodio 20,000

Bonus to Custodio from Abelar and Berces P 13,000

MULTIPLE CHOICE

1. B 2. A 3. B P264,000 – [(P278,000 + P418,000 + P192,000) x 1/5] = P86,400 4. A Lima = P100,000 x 80% = P80,000 Mitra = P 50,000 x 80% = P40,000 5. A Asset revaluationP60,000/20% = P300,000 - P150,000 P150,000 Lima = [P100,000 + (P150,000 x 75%)] x 80% P170,000 Mitra = [P 50,000 + (P150,000 x 25%)] x 80% P 70,000 Nova P 60,000

(38)

6. D Felix Elias Total

Original investment P 24,000 P 48,000 P 72,000

Net profit 5,430 10,860 16,290

Drawings ( 5,050) ( 8,000) ( 13,050)

Capital bal . before transfer to Desta P 24,380 P 50,860 P 75,240 Required capital based on orig. capital

ratio after transfer to Desta of 1/4 int. 18,810 37,620 56,430 Capital to be transferred to Desta P 5,570 P 13,240 P 18,810 Excess cash to be dist. based on orig.

capital ratio (P30,000 - P18,810) 3,730 7,460 11,190

Distribution of cash to Felix and Elias P 9,300 P 20,700 P 30,000

7. D

8. C

9. C P90,000 – P75,000 = P15,000

10. A Capital of Mison prior to admission of Zamora P105,000

Share in the bonus from Zamora [(P90,000 – P75,000) 1/2) 7,500

Capital of Mison in the new partnership P112,500

11. C AC CC Asset Rev Voltaire P180,000 P150,000 P30,000 Asuncion 210,000 180,000 30,000 Leonor 195,000 195,000 P585,000 P525,000 P60,000 12. D P195,000 – (P525,000 x 1/3 = P175,000) = P20,000

13. A Old partners’ capital contribution P600,000

Percentage of interest of old partners ÷ 75%

Total agreed capital of the new partnership P800,000

Percentage of interest of Sison x 25%

Capital credit of Sison P200,000

Bonus to Sison 70,000

Cash to be contributed by Sison P130,000

14. C Rivera Sanchez Torres

Capital balances before adm. of Vidal P504,000 P252,000 P 84,000 Asset revaluation

(P180,000/20% ) – P840,000 = P60,000 36,000 18,000 6,000

Adjusted capital balances P540,000 P270,000 P 90,000

Percentage of unsold interest x 80% x 80% x 80%

Capital balances after adm. of Vidal P432,000 P216,000 P 72,000 15. D Total capital of the new partnership (P840,000/75%) P1,120,000

Percentage of interest x 25%

Amount to be invested by Vidal in the partnership P 280,000

16. B Agreed capital P330,000

Capital contribution = P95,000 + P80,000 + P60,000 + P80,000 = 315,000

(39)

17. A P80,000 + P12,000 – P70,000 = P22,000

18. C Capital balance before admission of Manalo P 80,000

Interest sold to Manalo (P80,000 x 15%) (12,000)

Share in the recorded asset revaluation (P15,000 x 3/10) 4,500 Share in the bonus from Manalo

[(P80,000 + P12,000) - P70,000] x 3/10 6,600

Capital balance after admission of Manalo P 79,100

19. B Juan Cosme Luna Magno

Capital balances, April 30, 2008 P 360,000 P 225,000 P 135,000

1/6 Interest transferred to Magno ( 60,000) ( 37,500) ( 22,500) P 120,000

Balances P 300,000 P 187,500 P 112,500 P 120,000

Cash transfers to equalize investment ( 100,000) 12,500 87,500

Balances P 200,000 P 200,000 P 200,000 P 120,000

Distribution of net profit -equally 3,150 3,150 3,150 3,150

Withdrawals ( 1,500) ( 2,000) ( 1,500) ( 2,000)

Capital, June 30, 2008 P 201,650 P 201,150 P 201,650 P121,150

20. A Agreed capital = (P201,650 + P201,150 + P201,650)÷ 3/4 = P805,933

Interest of Magno 1/4___

Required capital credit of Magno P201,483

Capital balance of Magno before investing cash 121,150

Cash to be invested by Magno P 80,333

21. A Galang Hizon Isleta

Asset revaluation method:

Capital contributions of partners P600,000 P480,000 P500,000

Asset revaluation 252,000 168,000

Additional depreciation ( 140,000) ( 140,000) ( 140,000)

Capital balances P712,000 P508,000 P360,000

Bonus method:

Capital contributions of partners P600,000 P480,000 P500,000 Bonus to old partners from new partner 63,000 42,000 ( 105,000)

Net advantage of bonus method to Isleta P 35,000

22. A Campos Centeno

Capital balance 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

P1,297,528 23. C Total capital P614,476 +P683,052

Total liabilities 967,590

(40)

AA 1 - Chapter 2 (2008 edition) page 18 24. D Total capital P1,297,528 / 80% P1,621,910 Interest of Coronel x 20% Contribution of Coronel P 324,382 25. D Campos Centeno Capital balances P614,476 P683,052 Required capital P1,297,528/2 648,764 648,764

Cash paid (received) P 34,288 (P34,288)

26. B Campos Centeno Coronel

Cash paid (received) 34,288 (34,288)

Net profit 130,000 130,000 65,000

Drawings (50,000) (65,000) (28,000)

P728,764 P713,764 P361,382

27. C The capital balances would be the same as the balances prior to sale of interest.

28. C

29. D

30. D P4,000 x 2/5 = P1,600 31. D P3,000 / 40% = P7,500

32. A P12,000/3 = P4,000

33. C Yumul Yason Ylagan

Interest before retirement P103,000 P 77,000 P180,000

Adjustment of assets to FMV 12,000 12,000 24,000

P115,000 P 89,000 P204,000

Retirement of Yumul (115,000) ( 2,000) ( 4,000)

Capital balance of Ylagan P200,000

34. A Amount paid to retiring partner P28,000

Capital of retiring partner

Total capital before retirement P110,000

Total capital after retirement 90,000 20,000

Asset revaluation to retiring partner P 8,000

Fraction of interest of retiring partner ÷ 2/10

(41)

CHAPTER 3 Partnership Liquidation

EXERCISES

Exercise 3 - 1

Aguilar Benito Casimiro David

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 --- --- 6,567 5,433

Exercise 3 - 2

Duque Espino Felipe Total

Original investments P 50,000 P 22,500 P 20,000 P 92,500

Net income for 2007 15,000 7,500 7,500 30,000

Drawings in 2007 ( 15,000) ( 10,000) ( 10,000) ( 35,000)

Total partners’ interest before dissolution P 50,000 P 20,000 P 17,500 P 87,500 Net assets distributed to partners ( 32,500) ( 16,250) ( 16,250) ( 65,000)

Balances P 17,500 P 3,750 P 1,250 P 22,500

Loss to partners distributed 2:1:1 ( 11,250) ( 5,625) ( 5,625) ( 22,500) Cash settlement among partners P 6,250 P( 1,875) P( 4,375) ---Exercise 3 - 3

1. Guarin, Capital 1,500

Receivable from Guarin 1,500

To offset receivable from Guarin against his capital.

2. Salary Payable to Henson 500

Henson, Capital 500

To include salary payable to Henson to his interest.

3. Henson, Capital (P24,500 x 40%) 9,800

Guarin, Capital (P24,500 x 60%) 14,700

Loss from Liquidation 24,500

To distribute loss from liquidation to partners.

4. Henson, Capital (P9,500 + P500 - P9,800) 200

Guarin, Capital (P18,000 - P1,500 - P14,700) 1,800

(42)

AA1 - Chapter 3 (2008 edition) page 2

Exercise 3 - 4

1. Ibarra Javier Katindig

Original investment P 60,000 P 54,000 P 16,000

Net loss for six months* (18,000) (12,000) ( 6,000)

Loss on realization (P121,000 - P49,000 = P72,000) (36,000) (24,000) (12,000)

Balances P 6,000 P 18,000 P( 2,000)

Additional loss to partners ( 1,200) ( 800) 2,000

Cash distribution to Ibarra ( 4,800)

* Total capital, March 1 (P60,000 + P54,000 + P16,000) P130,000 Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) 94,000

Net loss P 36,000

2. Book value of other assets P121,000

Total loss on realization

Capital balance of Katindig after dist. of net loss P 10,000 Excess of personal liabilities over personal assets ( 5,000) Maximum amount of loss that can be absorbed by Katindig P 5,000

Fractional share of Katindig 1/6__ ( 30,000)

Cash that must be realized on sale of other assets P 91,000

1. Book value of other assets (P459,000 – P3,000) P456,000

Cash realized:

Accounts receivable [P180,000 – (P60,000 x 20%)] P168,000

Merchandise inventory 75,000

Prepaid advertising 2,400

Machinery and equipment (P120,000 x 60%) 72,000 317,400

Loss on realization P138,600

Lesaca – Manalo Partnership Statement of Liquidation

December 31, 2008

Other Liabilities Capital

Cash Assets AP NP Lesaca Manalo

Balances before liquidation P 3,000 P456,000 P60,000 P258,000 P90,000 P 51,000 Sale of assets and distribution

of loss 317,400 ( 456,000) ( 55,440) ( 83,160) Balances P320,400 P60,000 P258,000 P34,560 (P32,160) Payment of liabilities ( 320,400) ( 59,400) ( 258,000) ( 1,200) ( 1,800) Balances P600 P33,360 (P33,960) Additional investment by Manalo 12,000 12,000 Balances P 12,000 P 600 P33,360 (P21,960) Payment of liabilities ( 600) ( 600) Balances P 11,400 P33,360 (P21,960)

Additional loss to Lesaca ( 21,960) 21,960

(43)

Nocum Oliva Pascua Quinto

Capital balances before liquidation P180,000 P300,000 P240,000 (P 33,000) Restricted interest – possible loss

Non-cash assets P600,000 Liquidation expenses 9,000 Unrecorded liabilities 15,000

Total P624,000 ( 156,000) ( 156,000) ( 156,000) ( 156,000)

Balances P 24,000 P144,000 P 84,000 (P189,000)

Restricted interest – possible loss to Nocum, Oliva and Pascua for the

deficiency of Quinto ( 63,000) ( 63,000) ( 63,000) 189,000

Balances (P 39,000) P 81,000 P 21,000

-Restricted interest – possible loss to Oliva and Pascua for the deficiency of

Nocum 39,000 ( 19,500) ( 19,500)

(44)

-AA1 - Chapter 3 (2008 edition) page 4

Exercise 3 - 8

Rama, Sison and Toledo Cash Priority Program PAYMENTS

Rama Sison Toledo Rama Sison Toledo

Add Loan balances 20,000 20,000 30,000

Total partners’ interest P50,000 P90,000 P70,000

Profit and loss ratio 40% 40% 20%

Loss absorption balance P125,000 P225,000 P350,000

Allocation I – Cash to Toledo reducing LAB to an amount reported for Sison

(P125,000 x 20%) (125,000) P25,000

Balances P125,000 P225,000 P225,000

Allocation II - Cash to Sison & Toledo reducing LAB to an amount

reported for Rama

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

Exercise 3-9

1. Julian, Lagman and Magno

Cash Priority Program January 1, 2008

PAYMENTS

Julian Lagman Magno Julian Lagman Magno

Capital balances before liquidation P 36,000 P 54,000 P18,000

Add Note payable to Magno 14,000

Total partners’ interest P 36,000 P 54,000 P 32,000

Profit and loss ratio 3/10 3/10 4/10

Loss absorption balances P120,000 P180,000

(60,000)

P80,000 Allocation I – Cash to Lagman reducing

LAB to an amount reported for Julian

(P60,000 x 3/10) P18,000

Balances P120,000 P120,000 P80,000

Allocation II – Cash to Julian & 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

(45)

2. Julian, Lagman and Magno

Statement of Liquidation January to March, 2008

Other NP to PAYMENTS

Cash Assets Liabilities Magno Julian 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) Payment of liabilities ( 36,000) (36,000) 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) Schedule 1

Installment Liquidation January 31, 2008

Amount Julian Lagman Mango

Cash available P2,400

Allocation I – Payable to Lagman P2,400 P2,400

Schedule 2 Installment Liquidation

February 29, 2008

Amount Julian Lagman Mango

Cash available P2,400 Allocation I – Balance Payable to Lagman P2,400 P20,000 P10,000 P2,400 10,000 Allocation II – Payable to Julian and

Lagman

(46)

-AA1 - Chapter 3 (2008 edition) page 6 3. Journal entries January Cash 30,000 Julian, Capital 2,400 Lagman, Capital 2,400 Magno, Capital 3,200 Other Asset 38,000 Julian, Capital 1,080 Lagman, Capital 1,080 Magno, Capital 1,440 Cash 3,600 Liabilities 36,000 Cash 36,000 Lagman, Capital 2,400 Cash 2,400 February Cash 44,000 Other assets 35,000 Julian, Capital 2,700 Lagman, Capital 2,700 Magno, Capital 3,600 Julian, Capital 2,520 Lagman, Capital 2,520 Magno, Capital 3,360 Cash 8,400 Julian. Capital 10,000 Lagman, Capital 25,600 Cash 35,600 March Cash 36,000 Julian, Capital 11,100 Lagman, Capital 11,100 Magno, Capital 14,800 Other assets 73,000

Note Payable to Magno 1,200

Magno, Capital 1,200

Note Payable to Magno 12,800

Julian, Capital 11,600

Lagman, Capital 11,600

(47)

Exercise 3 - 10

U, V and W Co. Cash Priority Program

PAYMENTS

Urbe Villa Waldo Urbe Villa Waldo

Capital balances P 11,200 P13,000 P 5,800

Profit and loss ratio 4/7 2/7 1/7

Loss absorption balance P 19,600 P 45,500 P 40,600

Allocation I - Cash to Villa reducing LAB to an amount reported for

Waldo (P4,900 x 2/7) ( 4,900) P 1,400

Balances P 19,600 P 40,600 P 40,600

Allocation II - Cash to Villa & Waldo reducing LAB to an amount reported for Urbe

P21,000 x 2/7 ( 21,000) 6,000

P21,000 x 1/7 (21,000) P 3,000

Balances P 19,600 P 19,600 P 19,600 P 7,400 P 3,000

Allocation III - Further cash distribution may be made in the P & L ratio

2. Book value of assets P 30,000

Loss on realization:

Capital balance of Urbe prior to realization P 11,200

Cash to be received by Urbe 10,000

Share of Urbe in the loss on realization P 1,200

Fractional share of Urbe 4/7_ 2,100

Cash to be realized of the sale of assets P 27,900

3. Allocation III - P3,200÷ 4/7 = P5,600 x 1/7 P 800

Allocation II 3,000

Total cash received by Waldo 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 = P400÷ 2/3 600 2,000 Loss on liquidation P 28,000 Exercise 3 – 11 Partnership Books 1. Inventories 90,000

Capital Adjustment Account 90,000

2. Accumulated Depreciation 160,000

Equipment 80,000

3. Goodwill 56,000

(48)

4. Capital Adjustment Account 226,000

Belen, Capital (3/4) 169,500

Bgnes, Capital (1/4) 56,500

5. Colored Co. Stocks 980,000

Accounts Payable 104,000 Accounts Receivable 124,000 Inventories 296,000 Equipment 520,000 Goodwill 156,000 6. Belen, Capital 563,500 Bagnes, Capital 458,500 Cash 42,000

Colored Co. Stocks 980,000

New Corporation’s Books

1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital.

2. Cash 700,000

Ordinary Share Capital 500,000

PIC in Excess of Par 200,000

3. Accounts Receivable 124,000

Inventories 296,000

Equipment 520,000

Goodwill 156,000

Ordinary Share Capital 700,000

(49)

Problem 3 – 2 (Case 3 – cont.)

Calma, Daza and Esteban

Schedule of Cash Distribution to Partners

Calma Daza Esteban

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 Calma and Esteban

in the ratio of 2:1 if Daza 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

(50)

AA1 - Chapter 3 – Partnership Liquidation (2005)

Suggested Answers page

Problem 3 – 2 (Case 4 – cont.)

Calma, Daza and Esteban

Schedule of Cash Distribution to Partners

Calma Daza Esteban

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 Calm and Esteban in

the ratio of 2:1 if Daza fails to pay his deficiency (14,000) 21,000 ( 7,000)

Balances P( 5,000) - P 38,000

Restricted interest - possible loss to Esteban if Calma fails

to pay his deficiency 5,000 - ( 5,000)

Free interests - amounts to be paid to partners - -

-Payment to apply on:

Loan P 8,000

Capital 25,000