Professional Documents
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Lupisan-Baysa PDF
Lupisan-Baysa PDF
EXERCISES
Exercise 1 –1
Goodwill 30,000
Campos, Capital 30,000
Req. 2.
Campos and Tomas Partnership
Statement of financial Position
July 1, 2008
Exercise 1-2
1. Cash 90,000
Accounts Receivable 36,000
Merchandise Inventory 54,000
Equipment 25,000
Allowance for Uncollectible Accounts 2,000
Accounts Payable 21,000
Notes Payable 18,000
Bernal, Capital 164,000
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
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
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
2.
Sanchez and Gomez
Statement of Partners’ Capital
For the Year Ended December 31, 2008
Exercise 1-6
Exercise 1 – 7
Exercise 1 – 8
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.
Estrella Felipe Garcia Jimenez Total
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.
Estrella Felipe Garcia Jimenez Total
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
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
Cash received (paid) (P 8,000) (P 12,000) P 20,000 -
AA 1 - Chapter 1 (2008 edition)
page 6
2.
Benito Cabral Duenas Total
Capital balances before additional
cash investment P120,000 P100,000 P100,000 P320,000
Required capital balances based on
lowest possible cash investment* 160,000 140,000 100,000 400,000
Required additional cash investment P 40,000 P 40,000 - P 80,000
* P120,000/40% = P300,000; P100,000/35% = P285,174; P100,000/25% = P400,000
Cash 80,000
Benito, Capital 40,000
Cabral, Capital 40,000
3.
Benito Cabral Duenas Total
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
Exercise 1 – 12
Enriquez and Flores
Schedule Showing Adjustments in Capital
For the Year Ended December 31, 2008
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
g. Cash 524,500
Santos, Capital 524,500
AA 1 - Chapter 1 (2008 edition)
page 8
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
Furniture and Fixtures 480,000
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
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
Total Assets P3,916,000
AA 1 - Chapter 1 (2008 edition)
page 9
Problem 1 – 3
Cash 5,000
Accounts Receivable 46,000
Merchandise Inventory 108,000
Equipment 12,000
Furniture and Fixtures 9,000
Goodwill 3,000
Allowance for Uncollectible Accounts 4,000
Accounts Payable 54,000
Perlas, Capital 125,000
2. Cash 5,000
Accounts Receivable 46,000
Merchandise Inventory 108,000
Equipment 12,000
Furniture and Fixtures 9,000
Goodwill 3,000
Allowance for Uncollectible Accounts 4,000
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
Allowance for Uncollectible Accounts 5,000
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
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
Purchases 900,000
Accounts Payable 900,000
Cash 3,150,000
Accounts Receivable 3,150,000
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
Selling and General Expenses 870,000
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
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
Total Assets P11,628,000
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
Problem 1 – 6
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
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)
Problem 1 - 8
2. Sales 480,000
Cost of Goods Sold 210,000
Operating Expenses 100,000
Income Taxes 59,500
Income Summary 110,500
Problem 1 - 9
Problem 1 -10
Robles, Bernal and Reyes
Statement of Partners’ Capital
For the Year Ended December 31, 2008
Problem 1 - 11
Chavez, Roman, and Valdez
Statement of Changes in Partners’ Capital
January 1 to November 1, 2008
Problem 1 - 12
Canlas, David, Estrella and Fajardo
Statement of Changes in Partners’ Capital Accounts
For the Year Ended December 31, 2008
Supporting computations:
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
Profit and Loss 12,150
AA 1 - Chapter 1 (2008 edition)
page 18
Problem 1-14
MULTIPLE CHOICE
1. D
2. D
3. A
4. C Abena Buendia
Total (60%) (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
Total capital contributions P230,000
AA 1 - Chapter 1 (2008 edition)
page 19
x 60%
Capital credit of Molina P 138,000
Contribution of Molina 130,000
Bonus to Molina P 8,000
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
AA 1 - Chapter 1 (2008 edition)
page 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
33. C Net income = Net sales - CGS - Depr. - Oper. exp. Others)
= P228,000 - P123,000 - P7,500 - P58,100 x 65% P25,610
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
CHAPTER 2
Partnership Dissolution
EXERCISES
Exercise 2 – 1
Exercise 2 –2
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)
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
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 P---0---
AA 1 - Chapter 2 (2008 edition)
page 3
Cash 180,000
Almeda, Capital 180,000
Exercise 2 - 6
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
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)
Capital after admission of Estacio P1,024,000 P816,000 P460,000 P2,300,000
AA 1 - Chapter 2 (2008 edition)
page 4
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
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
Cash/Payable to Songco 300,000
AA 1 - Chapter 2 (2008 edition)
page 5
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
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
Exercise 2 - 13
PROBLEMS
Problem 2 - 1
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
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
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
AA 1 - Chapter 2 (2008 edition)
page 9
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 -----
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
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)
Capital balances after admission
of Moreno P162,000 P162,000 P316,000 P160,000 P800,000
AA 1 - Chapter 2 (2008 edition)
page 11
Problem 2 – 6
4. Cash 66,000
Accounts Receivable 40,000
Investments 20,000
Accounts Payable 41,000
Osorio, Capital 85,000
Problem 2 - 7
Problem 2-8
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)
Problem 2 -10
Canda, Pardo and Andres
Statement of Changes in Partners’ Equity
For the Period January 1, 2006 to January 1, 2009
Problem 2 -11
MULTIPLE CHOICE
1. B
2. A
3. B P264,000 – [(P278,000 + P418,000 + P192,000) x 1/5] = P86,400
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
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
EXERCISES
Exercise 3 - 1
Exercise 3 - 2
Exercise 3 - 3
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)
Exercise 3 – 5
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
Exercise 3 – 6
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)
Safe payment - P 61,500 P 1,500 -
AA1 - Chapter 3 (2008 edition) page
4
Exercise 3 - 8
Rama, Sison and Toledo
Cash Priority Program
PAYMENTS
Rama Sison Toledo Rama Sison Toledo
Capital balances P30,000 P70,000 P40,000
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 P80,000
Allocation I – Cash to Lagman reducing
LAB to an amount reported for Julian
(P60,000 x 3/10) (60,000) 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
AA1 - Chapter 3 (2008 edition) page
5
Schedule 1
Installment Liquidation
January 31, 2008
Schedule 2
Installment Liquidation
February 29, 2008
3. Journal entries
January Cash 30,000
Julian, Capital 2,400
Lagman, Capital 2,400
Magno, Capital 3,200
Other Asset 38,000
Liabilities 36,000
Cash 36,000
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
Exercise 3 – 11
Partnership Books
1. Inventories 90,000
Capital Adjustment Account 90,000
3. Goodwill 56,000
Capital Adjustment Account 56,000
P980,000 – P924,000 = P56,000
AA1 - Chapter 3 (2008 edition) page
8
2. Cash 700,000
Ordinary Share Capital 500,000
PIC in Excess of Par 200,000
Problem 3 - 3
1. a. Cash 48,000
Accumulated Depreciation 25,000
Fuentes, Capital (P72,000 x 5/15) 24,000
Goco, Capital (P72,000 x 5/15) 24,000
Herrera, Capital (P72,000 x 3/15) 14,400
Isla, Capital (P72,000 x 2/15) 9,600
Merchandise Inventory 55,000
Accounts Receivable 60,000
Store Fixtures 30,000
f. Cash 6,000
Fuentes, Capital 1,000
Herrera, Capital 5,000
Problem 3 – 3 (cont.)
L O A N C A P I T A L
Fuentes Isla Fuentes Goco Herrera Isla
Balances before liquidation P 2,000 P 5,000 P27,000 P15,000 P10,000 P 9,000
Distribution of loss ( 24,000) ( 24,000) ( 14,400) ( 9,600)
Balances P 2,000 P 5,000 P 3,000 P( 9,000) P( 4,400) P( 600)
Additional loss for the
deficiency of Goco ( 4,500) 9,000 ( 2,700) ( 1,800)
Balances P 2,000 P 5,000 P( 1,500) - P( 7,100) P( 2,400)
Additional loss for the
deficiency of Herrera ( 1,500) 2,100 ( 600)
Balances P 2,000 P 5,000 P( 3,000) - P( 5,000) P( 3,000)
Offset against debit balance
in capital account ( 2,000) ( 3,000) 2,000 - 3,000
Balances - P 2,000 P( 1,000) P( 5,000) -
Additional investment by
partners 1,000 5,000
Payment to Isla - P 2,000 - - - -
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 -5
Payment to apply on
Loan P 7,980
Capital P 49,770 P 62,310 -
Total cash distribution P 7,980 P 49,770 P 62,310 -
Problem 3 – 6
QRS Partnership
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
July 31, 2008
Quizon Roman Silva
Balances before cash distribution P116,250 P159,750 P151,500
Add Loan balance 150,000
Total partners’ interest P116,250 P309,750 P151,500
Restricted interest – possible loss of P480,000
on remaining unsold assets and cash
withheld of P30,000 ( 255,000) ( 153,000) ( 102,000)
Balances ( P138,750) P156,750 P 49,500
Restricted interest – possible loss of P138,750
to Roman and Silva 138,750 ( 83,250) ( 55,500)
Balances - P 73,500 (P 6,000)
Restricted interest – possible loss to Roman ( 6,000) 6,000
Payment to Roman to apply on loan P 67,500
QRS Partnership
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
August 31, 2008
Quizon Roman Silva
Balances before cash distribution P 93,000 P145,800 P142,200
Add Loan balance 82,500
Total partners’ interest P 93,000 P228,300 P142,200
Restricted interest – possible loss of P375,000
on remaining unsold assets and cash
withheld of P30,000 ( 202,500) ( 121,500) ( 81,000)
Balances ( P109,500) P106,800 P 61,200
Restricted interest – possible loss of P109,500
to Roman and Silva 109,500 ( 65,700) ( 43,800)
Payment to Roman to apply on loan and to Silva
to apply on capital - P 41,100 P 17,400
AA1 -Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 - 7
Requirement 1
Tabora, Ureta and Veloso
Cash Priority Program
January 1, 2008
PAYMENTS
Tabora Ureta Veloso Tabora Ureta Veloso
Capital balances P120,000 P 90,000 P 40,000
Loan balances 45,000 30,000 13,000
Total partners’ interest P165,000 P120,000 P 53,000
Profit and loss ratio 50% 30% 20%
Loss absorption balance P330,000 P400,000 P265,000
Allocation I - Cash to Ureta to
reduce LAB to amount
reported for Tabora ( 70,000) P21,000
Balances P330,000 P330,000 P265,000
Allocation II - Cash to Tabora
and Ureta to reduce LAB to
amount reported for Veloso ( 65,000) ( 65,000) P32,500 19,500
Balances P265,000 P265,000 P265,000 P32,500 P40,500
Allocation III - Further cash
distribution may be made
based on P & L ratio
Requirement 2
Amount Tabora Ureta Veloso
January:
Cash available P15,000
Allocation I - payable to Ureta 15,000 P15,000
February:
Cash available P40,000
Allocation I - Bal. payable to Ureta 6,000 P 6,000
Allocation II - Payable to Tabora and
Ureta in the ratio of 50:30 P34,000 P21,250 12,750
P21,250 P18,750
March:
Cash available P90,000
Allocation II - Balance 18,000 P11,250 P 6,750
Allocation III - Based on P & L ratio P72,000 36,000 21,600 P14,400
P47,250 P28,350 P14,400
April:
Cash available P30,000
Allocation III - Based on P & L ratio 30,000 P15,000 P 9,000 P 6,000
AA1 -Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 – 8 (cont.)
Requirement 1
January: a. Cash 112,000
Accounts Receivable 112,000
Problem 3 - 9
Problem 3 – 9 Requirement No 2
Wilson, Yuson and Zapata
Cash Distribution Schedule
July 1 - September 30, 2008
Problem 3 - 9 - Requirement 3
Amount Wilson Yuson Zapata
Cash available in September P76,500
Allocation I – Balance 1,500 P 1,500
Allocation II 32,000 P 20,000 12,000
Balance - Allocation III P43,000 21,500 12,900 P 8,600
P 41.500 P 26,400 P 8,600
Problem 3 -10
Arceo, Basco and Cervo
Statement of Changes in Partners’ Capital
For the Period January 1, 2006 to May 31, 2008
Problem 3-11
Partnership Books
1. Inventories 60,000
Prepaid Expenses 3,000
Goodwill 243,000
Accrued Expenses 6,000
Leony, Capital 200,000
Espie, Capital 100,000
Corporation’s Books
1. Cash 450,000
Accounts Receivable 660,000
Inventories 1,350,000
Prepaid Expense 3,000
Furniture and Equipment 2,520,000
Goodwill 243,000
Allowance for Uncollectible Accounts 120,000
Accounts Payable 600,000
Accrued Expenses 6,000
Ordinary Share Capital 4,500,000
2. Land 3,600,000
Cash 1,500,000
Pre-Operating Expenses 450,000
Ordinary Share Capital 4,800,000
PIC in Excess of Par 750,000
Rover Corporation
Statement of Financial Position
July 1, 2008
MULTIPLE CHOICE
1. D
2. D
3. C
4. C Share on loss on realization
(P39,000 + P4,800 – P33,000) P10,800
Percentage ownership of Imperial ÷ 20%
Total loss on realization P54,000
10 C Doria Elma
Capital balances before liquidation P 24,500 P 15,500
Loan balances 4,000 3,500
Total partners’ interest P 28,500 P 19,000
Loss on realization ( 23,100) ( 15,400)
Balances – cash to be paid to partners P 5,400 P 3,600
15 A
16 A
17 B Esper Ester Ethel Elmer
Capital balances P 50,000 P50,000 P50,000 P 75,000
Loss on realization (112,000) ( 56,000) ( 56,000) ( 56,000)
P(62,000) P(6,000) P(6,000) P19,000
Additional loss (3,000) 6,000 ( 1,500) (1,500)
Amt to be rec.from the part. P 17,500
200,000
P217,500
18 D Urbe Viray
Initial investment P 137,500,000 P 137,500,000
Purchases ( 1,237,500,000) ( 495,000,000)
Sales 1,339,250,000 462,000,000
Interest ( 2,200,000) ( 1.375,000)
Dividends 1,100,000 2,750,000
Cash held P 238,150,000 P 105,875,000
Equal share 172,012,500 172,012,500
Cash received (paid) (P 66,137,500) P 66,137,500
PAYMENTS
29 D Aguila Balweg Corpuz Aguila Balweg Corpuz
Capital balances P 25,000 P 50,000 P 60,000
Drawing (10,000)
Net loss ( 12,000) ( 5,000) ( 3,000)
Total partners’ interest P 13,000 P 45,000 P 47,000
Profit and loss ratio ÷ 60% ÷ 25% ÷ 15%
Loss absorption bal. P 21,667 P180,000 P313,333
Alloc. I - Cash to Corpuz (133,333) P 20,000
Balances P 21,667 P180,000 P180,000
Alloc. II -Cash to Balweg
and Corpuz (158,333) (158,333) P 39,583 23,750
Balances P 21,667 P 21,667 P 21,667 P 39,583 P43,750
Alloc. III - Based on
P & L ratio
Cash received by Corpuz P 33,000
Cash received from Allocation I ( 20,000)
Cash received from Allocation Ii P 13,000
Fractional share (B – 25% and C -15%) ÷ 15/40
Total cash distributed P 34,667
Fractional share of Balingit x 25/40
Cash received by Balingit P 21,667
30 B Vulnerability
Ranking
Nera - P450,000 / 30% = P150,000 3
Ochoa - P250,000 / 50% = P 50,000 1
Perez - P250,000 / 20% = P125,000 2
41 C Roldan Moises
Capital balances before incorporation P94,800 P214,200
Adjustment in assets ( 11,800) ( 23,600)
Adjusted capital P83,000 P190,600
Ordinary Share Capital (720 @P10) 7,200 7,200
Preference Share Capital P75,800 P183,400
Exercise 3 – 7
PROBLEMS
Problem 3-1
Problem 3 – 2 (Case 1)
Calma, Daza and Esteban
Statement of Liquidation
January, 2009
Other L O A N C A P I T A L
Cash Assets Liabilities Daza Esteban Calma Daza Esteban
(2/5) (2/5) (1/5)
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)
Payment of to partners P 158,000 - - P 5,000 P 8,000 P 59,000 P 24,000 P 62,000
Problem 3 – 2 (Case 2)
Calma, Daza and Esteban
Statement of Liquidation
January, 2009
Other L O A N C A P I T A L
Cash Assets Liabilities Daza Esteban Calma Daza Esteban
(2/5) (2/5) (1/5)
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 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
Payment of liabilities ( 112,000) (112,000)
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 account (2,000) 2,000
Payment to partners P 93,000 - - P 3,000 P 8,000 P 33,000 - P 49,000
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 – 2 (Case 3)
Problem 3- 2 (Case 4)
Calma, Daza and Esteban
Statement of Liquidation
January, 2009
Other L O A N C A P I T A L
Cash Assets Liabilities Daza Esteban Calma Daza Esteban
(2/5) (2/5) (1/5)
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 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 P(26,000) P 37,000
Payment of liabilities ( 112,000) (112,000)
Balances P 33,000 - - P 5,000 P 8,000 P 9,000 P(26,000) P 37,000
Offset of loan against debit balance in the
capital account (5,000) 5,000
Balances P 33,000 - - - P 8,000 P 9,000 P(21,000) P 37,000
Payment to partners ( 33,000) ( 8,000) (25,000)
Balances - - - - - P 9,000 P(21,000) P 12,000
Additional investment by Daza 21,000 21,000
Payment to partners P 21,000 - - - - P 9,000 - P 12,000
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 – 2 (Case 5)
Problem 3-4
2.
Eugenio , Esteban and Estrella
Statement of Liquidation
January 1 – 31, 2008
CAPITAL
Other Esteban, Eugenio Esteban Estrella
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
Payment of liabilities (200,000) ( 200,000)
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)
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 - 6
QRS Partnership
Statement of Liquidation
July to September, 2008
Accounts Roman, C A P I T A L
Cash Other Assets Payable Loan Quizon Roman Silva
Balances before liquidation P 150,000 P2,010,000 P1,215,000 P150,000 P300,000 P270,000 P225,000
July: Sale of assets 1,170,000 ( 1,530,000) ( 180,000) ( 108,000) ( 72,000)
Payment of liabilities ( 1,215,000) ( 1,215,000)
Payment of liquidation expenses ( 7,500) ( 3,750) ( 2,250) ( 1,500)
P 97,500 P 480,000 - P150,000 P116,250 P159,750 P151,500
Payment of loan ( 67,500) ( 67,500)
Balances P 30,000 P 480,000 - P 82,500 P116,250 P159,750 P151,500
August: Sale of assets 66,000 ( 105,000) ( 19,500) ( 11,700) ( 7,800)
Payment of liquidation expenses ( 7,500) ( 3,750) ( 2,250) ( 1,500)
P 88,500 P 375,000 - P 82,500 P 93,000 P145,800 P142,200
Payment of loan and capital ( 58,500) ( 41,100) ( 17,400)
Balances P 30,000 P 375,000 - P 41,400 P 93,000 P145,800 P124,800
Sept.: Sale of assets 165,000 ( 375,000) ( 105,000) ( 63,000) ( 42,000)
Payment of liquidation expenses ( 7,500) ( 3,750) ( 2,250) ( 1,500)
P 187,500 - - P 41,400 (P 15,750) P 80,550 P 81,300
Additional loss to Roman & Silva 15,750 ( 9,450) ( 6,300)
Payment to partners P 187,500 - - P 41,400 - P 71,100 P 75,000
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 - 5
JKLM Trading
Statement of Liquidation
February 1 - March 31, 2008
Other Jocson C A P I T A L
Cash Assets Liabilities Loan Jocson Kaimo Legarda Manabat
Balances before liquidation P 100,320 P 193,530 P 21,360 P 15,000 P 24,120 P 96,480 P 109,020 P 27,870
February:
Sale of assets & distribution of loss 49,320 ( 66,060) ( 3,348) ( 5,022) ( 5,022) ( 3,348)
Payment of liabilities ( 17,750) ( 17,750)
Payment of liquidation expenses ( 8,220) ( 1,644) ( 2,466) ( 2,466) ( 1,644)
Balances P 123,670 P 127,470 P 3,610 P 15,000 P 19,128 P 88,992 P 101,532 P 22,878
Payment to partners (sch. 1) ( 120,060) ( 7,980) (49,770) ( 62,310)
Balances P 3,610 P 127,470 P 3,610 P 7,020 P 19,128 P 39,222 P 39,222 P 22,878
March:
Sale of assets & distribution of gain 48,330 ( 44,850) 696 1,044 1,044 696
Payment of liabilities ( 3,610) ( 3,610)
Payment of liquidation expenses ( 7,380) ( 1,476) ( 2,214) ( 2,214) ( 1,476)
Balances P 40,950 P 82,620 p -------- P 7,020 P 18,348 P 38,052 P 38,052 P 22,098
Payment to partners (sch. 2) ( 40,950) 7,020 ( 1,824) (13,266) ( 13,266) ( 5,574)
Balances, March 31 P --------- P 82,620 P -------- P ------- P 16,524 P 24,786 P 24,786 P 16,524
Chapter 3 – Partnership Liquidation
Suggested Answers page
Problem 3 - 8
Req. 2
Neri, Ordan and Pacia
Statement of Liquidation
January 1 - March 31, 2008
Problem 3 -8
Requirement No 1 Neri, Ordan and Pacia
Cash Priority Program
January 1, 2008
Problem 3 - 7
Requirement 3
Tabora, Ureta and Veloso
Statement of Liquidation
January 1 to April 30, 2008
Other L O A N C A P I T A L
Cash Assets Tabora Ureta Veloso Tabora Ureta Veloso
Balances before liquidation - P 338,000 P 45,000 P 30,000 P 13,000 P 120,000 P 90,000 P 40,000
January:
Sale of assets 15,000 ( 15,000)
Payment to partners (15,000) (15,000)
Balances - P 323,000 P 45,000 P15,000 P 13,000 P 120,000 P 90,000 P 40,000
February:
Sale of assets 40,000 ( 40,000)
Payment to partners ( 40,000) ( 21,250) (15,000) ( 3,750)
Balances P 283,000 P 23,750 - P 13,000 P 120,000 P 86,250 P 40,000
March:
Sale of assets 90,000 ( 90,000)
Payment to partners ( 90,000) (23,750) (13,000) ( 23,500) ( 28,350) ( 1,400)
Balances - P 193,000 - - - P 96,500 P 57,900 P 38,600
April:
Sale of assets & distribution of loss 30,000 ( 193,000) ( 81,500) ( 48,900) (32,600)
Balances P 30,000 - - - - P 15,000 P 9,000 P 6,000
Payment to partners (30,000) - - - - P 15,000 P 9,000 P 6,000
Chapter 3 – Partnership Liquidation
Suggested Answers page
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 4
Exercise 4-2
15 Cash 9,000
Larry 7,500
Joint Venture 16,500
20 Cash 3,000
Joint Venture 3,000
20 Cash 2,287.50
Larry 2,287.50
Books of Larry
Feb. 12 Joint Venture 10,000
Alvin 10,000
15 Cash 7,500
Alvin 9,000
Joint Venture 16,500
20 Alvin 3,000
Joint Venture 3,000
20 Alvin 2,287.50
Cash 2,287.50
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 5
Problem 4-2
Requirement 1
Books of Roland, Managing Partner
7. Greg 21,481,333
Medel 15,471,333
Joint Venture Cash 36,952,666
Final cash settlement
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 6
Books of Greg
1. Joint Venture 40,300,000
Land 19,500,000
Medel 13,000,000
Roland 7,800,000
3. Roland 35,400,000
Joint Venture 35,400,000
Sales by venturers.
4. Roland 14,300,000
Joint Venture 14,300,000
Sales by salesmen
7. Cash 21,481,333
Medel 15,471,333
Roland 36,952,666
Final cash settlement
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 7
Books of Medel
1. Joint Venture 40,300,000
Greg 19,500,000
Land 13,000,000
Roland 7,800,000
3. Roland 35,400,000
Joint Venture 35,400,000
Sales by venturers.
4. Roland 14,300,000
Joint Venture 14,300,000
Sales by salesmen
7. Greg 21,481,333
Cash 15,471,333
Roland 36,952,666
Final cash settlement
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 8
Problem 4-2
Requirement 2
2. Land 3,000,000
Roland, Capital 3,000,000
3. Cash 35,400,000
Sales 35,400,000
4. Cash 14,300,000
Sales 14,300,000
5. Expenses 684,000
Cash 684,000
6. Sales 49,700,000
Land 43,300,000
Expenses 684,000
Income Summary 5,716,000
Books of Greg
1. Investment in Joint Venture 19,500,000
Land 19,500,000
3. Cash 21,481,333
Investment in Joint Venture 21,481,333
Books of Medel
1. Investment in Joint Venture 13,000,000
Land 13,000,000
3. Cash 15,471,333
Investment in Joint Venture 15,471,333
Books of Roland
1. Investment in Joint Venture 7,800,000
Land 7,800,000
4. Cash 12,063,334
Investment in Joint Venture 12,063,334
Problem 4-3
Books of Marissa
1. Joint Venture 104,000
Yolly 44,000
Beth 60,000
5. Yolly 10,000
Beth 7,500
Joint Venture 17,500
9. Yolly 40,306
Beth 59,047
Cash 13,647
Joint Venture Cash 113,000
Books of Yolly
1. Joint Venture 104,000
Merchandise Inventory 44,000
Beth 60,000
2. Marissa 160,000
Joint Venture 160,000
9. Cash 40,306
Beth 59,047
Marissa 99,353
Books of Beth
1. Joint Venture 104,000
Yolly 44,000
Merchandise Inventory 60,000
2. Marissa 160,000
Joint Venture 160,000
5. Yolly 10,000
Merchandise Inventory 7,500
Joint Venture 17,500
9. Yolly 40,306
Cash 59,047
Marissa 99,353
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 12
Requirement 2
3. Cash 153,000
Uncollectible Accounts Expense 4,300
Sales Discount 2,700
Accounts Receivable 160,000
4. Expenses 40,000
Cash 40,000
6. Sales 160,000
Merchandise 86,500
Sales Discounts 2,700
Doubtful Accounts Expense 4,300
Expenses 40,000
Income Summary 26,500
Books of Yolly
1. Investment in Joint Venture 44,000
Merchandise Inventory 44,000
4. Cash 40,306
Investment in Joint Venture 40,306
Books of Beth
1. Investment in Joint Venture 60,000
Merchandise Inventory 60,000
4. Cash 59,047
Investment in Joint Venture 59,047
Books of Marissa
1. Investment in Joint Venture 13,647
Income from Joint Venture 13,647
P8,000 + P5,647 = P13,647
2. Cash 13,647
Investment in Joint Venture 13,647
Problem 4-4
3. Santi 22,863.60
Romy 18,628.24
Cash 41,491.84
Final cash settlement.
AA1 - Chapter 4 – Joint Ventures (2005)
Suggested Answers page 14
Problem 4-5
Books of Leo
1. Joint Venture 4,000
Income from Joint Venture 4,000
Bonus = 20% (NI – B)
Bonus = 20% (P24,000 – B) = P4,000
Books of Mandy
1. Joint Venture 4,000
Leo 4,000
2. Leo 600
Income from Joint Venture 300
Joint Venture 300
Books of Niel
1. Joint Venture 4,000
Leo 4,000
2. Leo 600
Mandy 300
Joint Venture 300
MULTIPLE CHOICE
3. A The account of Melissa has a debit balance, thus, she has to make payment..
The account of Nancy has a debit balance, thus, she has to make payment.
The account of Olivia has a credit balance, thus, she has to receive payment.
Sales revenue is a credit entry in the Joint Venture account. The total of the
purchases, expenses and the ending balance is equal to total sales revenue. The
ending balance is the sum of the credit balances of Marc and Martin of P120,000
and P105,000.
20.
23. B Loss upon the investment of shares (8,000 shares @ P10) P 80,000.00
Share in JV loss 31,592.50
Loss of Cruz on the disposition of Palawan Oil Co. shares P 111,592.50
Loss on the disposition of the shares of Cruz is the total of the loss upon
investment of the shares (i.e. P45 – P55 = P10 per share) and the share on the net
loss of the dissolved joint venture.
Dividend revenue
Number of shares after stock dividend 18,600
Less shares sold on November 5 5,000
Shares entitled to cash dividend 13,600
Dividend per share x P1 13,600
Net loss P 37,100
x 6/20
Share of Roxas on the venture loss P11,130
29. A Loss upon contribution of the shares [(P40 – P62) x 4,000] P88,000
Share on the JV loss (P37,100 x 4/20) 7,420
Tan’s loss on disposition of his investment in Golden Copper P95,420
CHAPTER 4
SUGGESTED ANSWERS
EXERCISES
Exercise 4 - 1
Exercise 4 – 3
To recognize gain or loss, Joint Venture 160,000 Joint Venture 160,000 Joint Venture 160,000
shared 4:2:2 Income from JV 80,000 Jolly 80,000 Jolly 80,000
NI=P50,000 + P110,000 Bernie 40,000 Income from JV 40,000 Bernie 40,000
Sonny 40,000 Sonny 40,000 Income from JV 40,000
The bonus to Jolly and Bernie represents a gain to them and a loss to Sonny. The P15,600 bonus shall be shared by Jolly and Bernie in the ratio of 4:2. The, the
sharing is as follows: Jolly – P15,600 x 4/6 = P10,400; Bernie – P15,600 x 2/6 = P5,200.
AA1 - Chapter 4 (2008 edition) page 3
Problem 4-1
EXERCISES
Exercise 5 – 1
1. Inventory on Consignment 90,000
Merchandise Inventory 90,000
To record transfer of merchandise to consignee.
or
2. Commission Expense 3,120
Cash 28,080
Consignment Sales Revenue 31,200
Exercise 5 – 2
1. Consignor Books:
Inventory on Consignment 500,000
Finished Goods Inventory 500,000
Cash 278,000
Consignee Payable 10,000
Consignee Receivable 288,000
2. Consignee Books:
Memorandum entry to record receipt of goods on consignment.
Cash 420,000
Consignor Payable 420,000
Exercise 5-3
Requirement 1 – Consignment profits calculated separately
Books of Consignor
1. Consignment –Out 7,000
Merchandise Shipment on Consignment 7,000
AA1 - Chapter 5 (2008 edition) page 3
2. Cash 3,500
Consignment-Out 2,500
Consignment-Out 6,000
3. Consignment-Out 1,300
Consignment Income 1,300
Sales (4 sets @P1,500) P6,000
CGS (4 sets @P700) ( 2,800)
Freight-in (4/10 x P1,000) ( 400)
Commission (25% x P6,000) ( 1,500)
Consignment income P1,300
Books of Consignee
1. Received 10 sets of electric fan from Ledesma …………
2. Consignment-In 1,000
Cash 1,000
3. Cash 6,000
Consignment-In 6,000
4. Consignment-In 1,500
Consignment Income 1,500
5. Consignment-In 3,500
Cash 3,500
2. Cash 3,500
Freight 400
Commission Expense 1,500
Merchandise on Consignment 600
Sales 6,000
Books of Consignee
1. Received 10 sets of electric fan from Ledesma, a consignor.. ………………..
2. Ledesma 1,000
Cash 1,000
3. Cash 6,000
Sales 6,000
AA1 - Chapter 5 (2008 edition) page 4
5. Ledesma 3,500
Cash 3,500
Exercise 5 – 4
1. Sales of laser discs, net of commissions and cartage P181,800
Less: Cost P180,000
Freight and handling 5,400 185,400
Loss on laser discs consignment P 3,600
2. Sales of TV sets, net of commissions and delivery & installation costs P173,250
Less: Cost (15 x P9,000) P135,000
Freight and handling [(15 + 3*)/24** x P10,800] 8,100
Freight on return of defective units 1,080 144,180
Profit on TV sets on consignments P 29,070
** Units shipped to consignee = Total cost of TV sets shipped / Cost per unit
= P216,000 / P9,000
= 24
Exercise 5 – 5
1. Sales (300 x P1,000) + (100** x P1,100) P410,000*
Cost of sales (400 x P600) 240,000
Gross profit P170,000
Expenses:
Freight (400/500 x P5,500) P 4,400
Safety devices (100/200 x P10,000) 5,000
Commission (P410,000 x 10%) 41,000
Delivery cost 4,500 54,900
Consignment profit P115,100
*Consignee remitt6ance and charges represent only 90% of sales in as much as the 10% commission
of the consignee has not yet been included among the charges (P364,500 + P4,500 = P369,000 /
90% = P410,000)
** The 100 units with safety device sold at P1,100 is computed as follows:
Sales P410,000
Sales of units without safety device (300 x P600) 300,000
Sales of units with safety device P110,000
Units sold (P110,000 / P1,100) 100
AA1 - Chapter 5 (2008 edition) page 5
PROBLEMS
Problem 5-1
Req. 1. Books of consignee; consignment sales merged with regular sales
Purchases 20,000
CCM Corp. 20,000
Cash 10,000
Accounts Receivable 10,000
Purchases 15,000
CCM Corp. 15,000
Cash 15,000
Accounts Receivable 15,000
Cash 5,000
Consignment – Out 1,750
Receivable – Consignee 13,250
Consignment – Out 20,000
April May
Total Sales Inventory Sales Inventory
Charges by consignor:
Cost of consigned goods P36,000 P14,400 P21,600 P10,800 P10,800
Charges by consignee
Freight-in 1,000 400 600 300 300
Cartage-in 750 300 450 225 225
Total P37,750 P15,100 P22,650 P11,325 P11,325
Sales price 20,000 15,000
Consignment profit P 4,900 P 3,675
Problem 5-2
Books of consignor
3. Cash 5,000
Consignment – Out 10,600
Receivable – Consignees 16,400
Consignment – Out 32,000
Books of consignee
1. Received 50 cordless phones………….
3. Cash 15,600
Accounts Receivable 15,600
P32,000 – P16,400 (collectible) = P15,600
5. Consignment – In 15,600
Delivery and Installation Expense 1,600
Commission on Consignment 8,000
Cash 5,000
Remittance
Problem 5-3
Correcting entry to bring accounts with Alejo up to date
Entry that should have been made for transactions of Alejo on the books of consignor:
Cash 187,900
Consignment Commission 58,500
Freight on Consignment Shipments 1,690
Prepaid Expenses on Consigned Merchandise 910
Consignment Sales 234,000
Alejo 15,000
Net effect of entries already made with Alejo for transfer of merchandise and remittance
Cash 187,900
Alejo 52,100
Consignment Sales 240,000
Entry that should have been made for transactions of Burgos on the books of consignor:
Cash 11,500
Consignment Commission 13,500
Freight on Consignment Shipments 750
Prepaid Expenses on Consigned Merchandise 1,250
Burgos 27,000
Consignment Sales 54,000
Net effect of entries already made with Burgos for transfer of merchandise and remittance
Cash 11,500
Burgos 84,500
Consignment Sales 96,000
Problem 5-4
Entries to bring account with Domingo up to date
AA1 - Chapter 5 (2008 edition) page 9
1. Cash 5,100
Operating Expenses 900
Receivables-Consignees 6,000
Remittance for 10 sets less charges
2. Sales 3,000
Receivables – Consignees 3,000
Unsold units previously recognized as sales.
2. Sales 9,000
Receivables – Consignees 9,000
2. Sales 2,400
Receivables – Consignees 2,400
Closing Entries
1. Sales 715,600
Cost of Goods Sold 420,100
Operating Expenses 89,160
Income Summary 206,340
2.
Moonstar Company
Statement of Financial Position
December 31, 2008
Current Liabilities:
Accounts Payable P25,360
Income Tax Payable 72,219
Ordinary Share Capital, P100 par P200,000
Retained Earnings
Balance, beginning P 57,000
Net income for 2008 134,121 191,121
Total Shareholders’ Equity 391,121
Total Liabilities and Shareholders’ Equity P488,700
MULTIPLE CHOICE
1. A
2 C
3. A
4. A P180,000 + P9,000 = P189,000
12 D Sales P28,000
Cost (4 x P4,000) 16,000
Gross profit P12,000
Less: Commission P5,600
Freight (P1,600 x 4/10) 640 6,240
Net profit on consignment P 5,760
*Sales P79,800
Less Sales of units with defects (200 x P300) 60,000
Sales of repaired units P19,800
Selling price of repaired units ÷ P330
Number of repaired units that were sold 60
Units sold without repairs 240
Total number of units sold 300
Unit cost x P200
Cost of sales P52,000
AA1 - Chapter 5 (2008 edition) page 12
16 C Sales P72,000
Cost and expenses:
Cost (6 x P7,200) P43,200
Freight (P4,800 x 6/10) 2,880
Cartage (P600 x 6/10) 360
Advertising 3,600
Delivery and installation 2,400
Commission (15% x P72,000) 10,800 63,240
Consignment income P 8,760
18 A Sales P90,000
Cost of sales (6 x P9000) 54,000
Gross profit P36,000
Expenses:
Commission (P90,000 x 15%) P13,500
Freight-out (P6,000 x 6/10) 3,600
Marketing expense 4,500
Delivery and installation 3,000
Cartage (P750 x 6/10) 450 25,050
Net profit from the sale of consigned goods P10,950
21 C Sales P4,800
Cost of sales ( 3 x P800) 2,400
Gross profit P2,400
Expenses:
Trucking (P200 x 3/5) P120
Delivery 170
Commission 720 _____
Profit resulting from consignment P1,390
22 B Sales P21,000
Cost (7 x P2,000) 14,000
Gross profit P 7,000
Expenses:
Advertising P1,000
Commission 4,200
Freight (P600 x 7/10) 420 5,620
Net income on the consignment P 1,380
24 D Remittance P3,750
Charges by consignor
Cost (P3,840 x 30/48) P2,400
Freight and handling (P1,000 x 30/48) 625
Freight and handling charged by consignee 75 3,100
Net income P 650
25 C T-shirts:
Cost (P3,840 x 18/48) P1,440
Freight and handling (P1,000 x 18/48) 375 P1,815
Baby dresses:
Cost (P2,400 x 4/24) P 400
Freight and handling (P540 x 4/24) 90 490
Cost of the inventory in the hands of consignee P2,305
30 A Sales P22,500
Less Cost (15 x P900) P13,500
Expenses (P2,250 + P1,125 + P3,375) 6,750 20,250
Consignment profit P 2,250
31 D Sales P10,800
Less: Cost (P8,400 x 9/12) P6,300
Freight-out (P720 x 9/12) 540
Delivery 450
Commission 2,160
Advertising 500 3,650
Net income P 850
38 B Sales P4,200
Cost of sales (7 x P300) 2,100
Gross profit P2,100
Expenses:
Freight ( 7/10 x P150) P 105
Commission (4,200 x 20%) 840
Advertising ( P120 x 7/10) 84
Delivery 75 1,104
Net income on the consignment P 996
40 D Sales P120,000
Cost of sales (80 x P500) 40,000
Gross profit P 80,000
Expenses:
Transportation (90/120 x P1,500) P 1,125
Insurance 900
Cost of returning defective units 100
Transportation of consignee (90/120 x P350) 265
Insurance – consignee (90/120 x P200) 150
Insurance loss (P500 x 10% x 10) 500
Commission 24,000
Reconditioning cost 150 27,190
Profit on consignment P 52,810
CHAPTER 6
SUGGESTED ANSWERS
EXERCISES
Exercise 6-1
2006 sales 2007 sales
Installment Accounts Rec’l, Jan. 1 P 400,000 P 200,000
Less Installment Accounts Rec’l, Dec. 31 100,000 40,000
Collections P 300,000 P 160,000
Gross profit rate (10,000/40,000; 4,400/20,000) 25%__ 22%__
Realized Gross Profit P 75,000 P 35,200
Exercise 6-2
Deferred Gross Profit – 2006 [(P150,000 - -0- ) x 42%] 63,000
Deferred Gross Profit – 2007 [(P480,000 - P120,000) x 37.5%] 135,000
Deferred Gross Profit – 2008 [(P750,000 - P650,000) x 40%]* 40,000
Realized Gross Profit 238,000
* 66 2/3 ÷ 166 2/3 = 40%
P300,000 ÷ 40% = P750,000
Exercise 6-3
(G) (1) P50,000 - P11,000 P 39,000
(E) (2) P10,500 - (25% of P20,000) = P5,500/P25,000 22%
(F) (3) P50,000 x 22% P 11,000
(H) (4) P1,100/22% P 5,000
(B) (5) P80,000 x 75% P 60,000
(A) (6) P80,000 x 25% P 20,000
(C) (7) P28,200 + P91,800 P120,000
(D) (8) P28,200/P120,000 23.5%
(9) 2006 = P10,000 x 22% = P 2,200
2007 = P50,000 x 25% = 12,500
2008 = P45,000 x 23.5% = 10,575 P 25,275
Exercise 6-4
1. Deferred Gross Profit – 2006 4,500
Deferred Gross Profit – 2007 14,000
Deferred Gross Profit – 2008 69,000
Realized Gross Profit 87,500
2006 2007 2008
Deferred gross profit before adj. P 8,000 P26,000 P105,000
Deferred gross profit after adj.
(Inst. contract rec’l x GP rate) __3,500 _12,000 __36,000
Realized gross profit P 4,500 P14,000 P 69,000
AA1 - Chapter 6 (2008 edition)
page 2
2. Cash collections
2006 sales - P4,500 /35% P 12,857
2007 sales - p14,000/30% 46,667
2008 sales - P69,000/40% 172,500
Total P232,024
Exercise 6-5
a. Installment Contracts Receivable 250,000
Installment Sales 250,000
b. Cash 120,000
Installment Contracts Receivable 120,000
e. Expenses 16,000
Cash 16,000
Exercise 6-6
a. Installment Contracts Receivable 600,000
Installment Sales 600,000
c. Cash 360,000
Installment Contracts Receivable 360,000
Exercise 6-7
Requirement 1
a. Cash 1,400
Installment Contracts Receivable 1,240
Interest Revenue 160
Requirement 2
a. Repossessed Merchandise 2,000
Deferred Gross Profit 1,600
Loss on Defaults 3,600
Exercise 6-8
Repossessed Merchandise (P13,500/120%) 11,250
Deferred Gross Profit (P15,000 x 20%/120%) 2,500
Loss on Repossession 1,250
Installment Contracts Receivable 15,000
Exercise 6-9
a. Trade-In Merchandise 180,000
Installment Contracts Receivable 420,000
Installment Sales 600,000
AA1 - Chapter 6 (2008 edition)
page 4
Exercise 6 - 10
Correct entry
Allowance for Doubtful Installment Contract Rec’l 1,450
Deferred Gross Profit ( P 10,000 x 25/125 ) 2,000
Repossessed Merchandise 6,550
Installment Contract Receivable 10,000
Correcting Entry
Deferred Gross Profit 2,000
Repossessed Merchandise 6,550
Allowance for Doubtful Accounts 8,550
Exercise 6-11
Requirement 1
Oct. 31 Cash 200,000
Installment Contracts Receivable 550,000
Real Estate 600,000
Deferred Gross Profit 150,000
GP rate = P150,000/P750,000 = 20%
Exercise 6-12
Recovery of cost Realized gross profit
a. 2008 P400,000 none
2009 25,000 P 75,000
2010 – 2014 100,000/year
Exercise 6-13
1. Installment payment = P1,260,000/5.6502 = P223,000
2. Journal entries
Jan. 1 Cash 140,000
Notes Receivable (P223,000 x 10) 2,230,000
Real Estate Sales 1,400,000
Discount on Notes Receivable 970,000
Exercise 6-14
Requirement 1
a. Land 13,440,000
Land Improvements 3,360,000
Cash 16,800,000
b. Cash 750,000
Installment Contract Receivable 4,250,000
Installment Sales 5,000,000
A – 5 @ P400,000 = P2,000,000
B – 8 @ P300,000 = 2,400,000
C – 3 @ P200,000 = 600,000
Total P5,000,000
d. Cash 1,400,000
Installment Contract Receivable 1,300,000
Interest Revenue 100,000
Requirement 2
a. Installment Sales 5,000,000
Cost of Installment Sales 3,000,000
Deferred Gross Profit 2,000,000
GP rate = 2,000,000/5,000,000 = 40%
b. Deferred Gross Profit 820,000
Realized Gross Profit 820,000
(P750,000 + P1,300,000) x 40% = P820,000
AA1 - Chapter 6 (2008 edition)
page 7
Exercise 6-15
2005 Installment Accounts Receivable 4,700,000
Installment Sales 47,000
Cash 2,585,000
Installment Accounts Receivable 2,585,000
Cash 3,885,000
Installment Accounts Receivable – 2005 1,410,000
Installment Accounts Receivable – 2006 2,475,000
Cash 5,010,000
Installment Accounts Receivable – 2005 470,000
Installment Accounts Receivable – 2006 1,350,000
Installment Accounts Receivable – 2007 3,190,000
Cash 5,545,000
Installment Accounts Receivable – 2006 450,000
Installment Accounts Receivable – 2007 1,740,000
Installment Accounts Receivable – 2008 3,355,000
Exercise 6-16
2006 2007 2008
Installment sales P 400,000 P 475,000 P 525,000
Cost of Installment sales 248,000 280.250 341,250
Gross profit percentage 38% 41% 35%
Cash collections:
2006 Sales 128,000 232,000 28,000
2007 Sales 114,000 218,500
2008 Sales 162,750
Realized gross profit on installment sales 112,000 80,250
COMPUTATIONS :
1 P 341,250 / . 65 = P 525,000
2 P 400,000 x . 62 = P 248,000
Exercise 6-17
Requirement 1
2007
Jan. 1 Cash 1,500,000
Notes Receivable (2,197,100 x 10) 21,971,000
Real Estate Sales 15,000,000
Discount on Notes Receivable (2,347,100 - 1,500,000) 8,471,000
31 Cash 2,197,100
Notes Receivable 2,197,100
2008
Dec. 31 Cash 2,197,100
Notes Receivable 2,197,100
Exercise 6-18
Selling Price P 10,000,000
Cost of Land 4,000,000
Gross Profit P 6,000,000
b) Installment method
Collections Cost Recovery Gross Profit
2008 P 400,000 P 160,000 P 240,000
2009 300,000 120,000 180,000
2010 ___300,000 ___120,000 ___180,000
P1,000,000 P 400,000 P 600,000
PROBLEMS
Problem 6-1
1. 2007 - (P12,000* + P228,000) ÷ (P240,000 + P520,000 + P40,000) 30%
2008 - (P1,500,000 - P975,000) ÷ P1,500,000 35%
*P40,000 – P24,000 – P4,000 = P12,000
2.a. Installment Sales 1,500,000
Cost of Installment Sales 975,000
Deferred Gross Profit – 2008 525,000
c. Sales 2,120,000
Realized Gross Profit 415,000
Cost of Sales 1,650,000
Gain or Loss on Repossession 4,000
Selling and Administrative Expenses 660,000
AA1 - Chapter 6 (2008 edition)
page 11
Sales P 2,120,000
Cost of Sales _1,650,000
Gross Profit P 470,000
Realized Gross Profit on Installment Sales __415,000
Total Realized Gross Profit P 885,000
Less Loss on Repossession ____4,000
Realized Gross Profit after Loss on Repossession P 881,000
Selling and Administrative Expenses __660,000
Net Income before Income Tax P 221,000
Income Tax 77,350
Net Income P143,650
Problem 6-2
Requirement 1 Computation of gross profit rates
Regular Installment
Sales Sales Total
Sales P 192,000 P 500,000 P 692,000
Cost of Sales:
Inventory, January 1 P 30,000
Purchases 455,000
Repossessed Mdse. __10,000
Cost of Goods Available
for Sale P495,000
Less Inventory, Dec. 31 __35,000 150,000 310,000 460,000
Gross Profit P 42,000 P 190,000 P 232,000
AA1 - Chapter 6 (2008 edition)
page 12
Problem 6-3
1 Schedule of Cost of Goods Sold
.
Inventory, January 1 P 240,000
Purchases, including freight-in 1,250,000
Repossessed Merchandise 70,000
Cost of Goods Available for Sale P1,560,000
Less Inventory, December 31 260,000
Cost of Goods Sold P1,300,000
AA1 - Chapter 6 (2008 edition)
page 13
Problem 6-4
1. Computation of gross profit rates
2006 sales 160,000/400,000 40%
2007 sales 167,200/440,000 38%
2008 sales 163,800/420,000 39%
2. Adjusting entries
a. Installment Sales 420,000
Cost of Installment Sales 256,200
Deferred Gross Profit – 2008 163,800
3. Correcting entries
a. Deferred Gross Profit – 2006 (9,000 x 40%) 3,600
Deferred Gross Profit - 2007 (2,800 x 38%) 1,064
AA1 - Chapter 6 (2008 edition)
page 14
4. Closing entries
a. Realized Gross Profit 157,156
Operating Expenses 94,336
Income Summary 62,820
Problem 6-5
(1) Sept. 30 Cash 48,000
Installment Contract Receivable 432,000
Piano 300,000
Deferred Gross Profit 180,000
60/160 = 37.5%
Principal Principal
Date Collection Interest Reduction Balance
480,000
Sept. 30 48,000 48,000 432,000
Oct. 31 48,000 432,000 x .005 = 45,840 386,160
2,160
Nov. 30 48,000 386,160 x .005 = 46,069 340,091
1,931
Dec. 31 48,000 340,091 x .005 = 46,300 293,791
1,700
AA1 - Chapter 6 (2008 edition)
page 15
Balance P5,966.70
Less: DGP 5,966.75 x 37.75% 2,252.45
Repossessed Sales 2,300.00
Repossessed Inventory 1,800.00 P6,352.45
Net gain on defaults P 385.75
Problem 6-7
1. Total installment sales P3,450,000
Less Installment Receivable - Dec. 31 1,594,600
Total Collections in Sales P1,855,400
2. Collections P1,855,400
GPR:
Total Selling price P9,500,000
Total Cost 5,225,000
GP P4,275,000
Total sales ÷9,500,000 45%__
RGP P 834,930
Problem 6-8
Sales (Schedule 1) P 8,060,000
Cost of Sales (43% of Sales, Schedule 2) 3,465,800
Gross Profit P 4,594,200
Less Sales Commission 221,000
Gross profit excluding Commission P 4,373,200
AA1 - Chapter 6 (2008 edition)
page 17
Schedule 1 – Sales
Total Sales Cash Installment
Price Received NR Balance
A 26 @ 150,000 P3,900,000 P1,650,000 2,250,000
B 32 @ 100,000 3,200,000 800,000 2,400,000
C 12 @ 80,000 960,000 240,000 720,000
P8,060,000 P2,690,000 5,370,000
Problem 6 - 9
2007 Inventory 45,200
Cash 45,200
Cash 35,600
Notes Receivable - 2007 (32,000 + 3,600) 35,600
AA1 - Chapter 6 (2008 edition)
page 18
Cash 55,500
Notes Receivable – 2008 (89,500 - 60,000) 29,500
Notes Receivable – 2007 (62,000 - 36,000) 26,000
Problem 6-10
2005
Jan. 1 Cash 2,000,000
Notes Receivable 5,000,000
Idle Plant 5,000,000
Deferred Gross Profit 2,000,000
AA1 - Chapter 6 (2008 edition)
page 19
2006
July 1 Cash 1,900,000
Notes Receivable 1,000,000
Deferred Gross Profit 900,000
2007
Dec. 31 Cash 2,250,000
Deferred Gross Profit 400,000
Notes Receivable 1,500,000
Interest. Revenue 1,150,000
2,250,000 - (5,000,000 - 2,000,000 - 1,900,000) = 1,150,000
2008
Feb. 1 Cash 2,825,000
Notes Receivable 2,500,000
Interest Revenue 325,000
MULTIPLE CHOICE
2 A
3 B
4 C
10 C
Exercise 7-1
1. 2006 2007 2008
Contract price P50,000,000 P50,000,000 P50,000,000
Cost incurred to date P 7,500,000 P34,500,000 P40,800,000
Est. cost to complete 30,000,000 8,625,000 -
__________
Total estimated cost 37,500,000 P43,125,000 P40,800,000
Total estimated gross profit P12,500,000 P 6,875,000 P 9,200,000
Percentage of completion 20% 80% 100%
e. Progress Billings on
Construction Contracts 50,000,000
Construction In Progress 50,000,000
3.
Statement of Financial Position
Current Assets:
Accounts Receivable P5,500,000
Current Liabilities:
Progress Billings on Construction Contracts P44,000,000
Less Construction in Progress 40,000,000 P4,000,000
Exercise 7-2
2006 2007 2008
a. Construction in Progress 32,000,000 43,000,000 15,500,000
Cash, Materials, etc. 32,000,000 43,000,000 15,500,000
Exercise 7-3
Exercise 7-4
2006 2007 2008
Contract price P35,000,000 P35,000,000 P35,000,000
Cost incurred to date P17,500,000 P29,250,000 P31,000,000
Estimated cost to complete 10,500,000 3,250,000 -
Total estimated cost P28,000,000 P32,500,000 P31,000,000
Total estimated gross profit P 7,000,000 P 2,500,000 P 4,000,000
Percentage of completion 62.5% 90% 100%
Exercise 7-5
Revenue recognized in 2008 (P26,000,000 x 40%) P10,400,000
Gross profit/income recognized in 2008 (P3,120,000 - P1,300,000) 1,820,000
Cost incurred in 2008 P 8,580,000
AA1 - Chapter 7 (2008 edition) page 6
Exercise 7-6
Binondo Project Pasig Project
Revenue (CP x % of work done in 2007) P12,000,000 P1,290,000
Cost of revenue 12,400,000 1,400,000
Gross profit (loss) P (400,000) P( 110,000)
Exercise 7-7
1. Contract revenue/price P10,000,000
Less Total profit 800,000
Total cost incurred P 9,200,000
Less Cost incurred in 2006 and 2008 5,900,000
Cost incurred in 2007 P 3,300,000
Exercise 7-8
Cash 500,000
Notes Receivable 1,000,000
Discount on Notes Receivable 207,540
Unearned Franchise Fees 1,292,460
AA1 - Chapter 7 (2008 edition) page 7
Exercise 7-9
1. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable 513,200
Unearned Franchise Fees 6,486,800
2. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable
(3,000,000-(2.48685 x 1,000,000) 513,200
Revenue from Franchise Fees 6,486,800
3. Cash 4,000,000
Unearned Franchise Fees 4,000,000
4. Cash 4,000,000
Notes Receivable 3,000,000
Discount on Notes Receivable 513,200
Revenue from Franchise Fees 4,000,000
Unearned Franchise Fees (1,000,000 x 2.48685) 2,486,800
Exercise 7-10
2007
July 1 - Cash 1,200,000
Notes Receivable 3,200,000
Discount on Notes Receivable 644,100
Unearned Franchise Fee 3,735,900
P800,000 x 3.1699 = P2,535,900
P3,200,000 - P2,535,900 = P664,100
2008
Jan. 10 - Deferred Franchise Cost 100,000
Cash 100,000
Problem 7-1
2007 2008
a. Construction in Progress 11,000,000 4,800,000
Cash, Materials, etc. 11,000,000 4,800,000
Problem 7-2
Statement of Recognized Income and Expenses:
Income: 2007 P2,750,000
2008 1,450,000
Problem 7-3
Year Income (loss) Recognized Rec’l ending balance CIP Invty. ending balance Cost in excess of billings
2006 1,000,000 380,000 5,000,000 1,200,000
2007 1,000,000 940,000 12,000,000 2,600,000
2008 1,000,000 - - -
Problem 7-4
PROJECT A PROJECT B PROJECT C PROJECT D
2007 2008 2007 2008 2007 2008 2008
Contract price P29,000,000 P29,000,000 P34,000,000 P34,000,000 P17,000,000 P17,000,000 P2,000,000
Cost incurred to date P16,800,000 P26,400,000 P14,400,000 P21,200,000 P 3,200,000 P11,830,000 P 5,600,000
Estimated cost to complete 11,200,000 ------------- 17,600,000 13,000,000 9,600,000 1,170,000 10,400,000
Total estimated cost P28,000,000 P26,400,000 P32,000,000 P34,200,000 P12,800,000 P13,000,000 P16,000,000
Total estimated gross profit (loss) P 1,000,000 P 2,600,000 P 2,000,000 P( 200,000) P 4,200,000 P 4,000,000 P 4,000,000
Percentage of completion 60% 100% 45% 25% 91% 35%
Gross profit (loss) to date P 600,000 P 2,600,000 P 900,000 P( 200,000)* P 1,050,000 P 3,640,000 P 1,400,000
Less gross profit recognized in prior year ------- 600,000 ------ 900,000 ---- 1,050,000 -----
Gross profit - current year P 600,000 P 1,000,000 P 900,000 P(1,100,000) P 1,050,000 P 2,590,000 P 1,400,000
2007 2008
Gross profit P2,550,000 P3,890,000
Operating expenses 1,200,000 1,200,000
Net income P1,350,000 P2,690,000
Problem 7-5
1. (a) 2006 2007 2008 2009
Contract price P120,000,000 P120,000,000 P120,000,000 P120,000,000
Cost incurred to date P 24,000,000 P60,500,000 P90,000,000 P105,000,000
Estimated cost to complete 76,000,000 49,500,000 10,000,000 --------
Total estimated cost P100,000,000 P110,000,000 P100,000,000 P105,000,000
Total estimated gross profit P 20,000,000 P 10,000,000 P 20,000,000 P 15,000,000
Recognized in To be
recognized
To date prior year in current year
2006-Revenue P28,800,000 ------ P28,800,000
Cost of revenue 24,000,000 ------ 24,000,000
Gross profit P 4,800,000 ------ P 4,800,000
To be
Recognized in recognized
To date prior year in current year
2007-Revenue P66,000,000 P28,800,000 P37,200,000
Cost of revenue 60,500,000 24,000,000 36,500,000
Gross profit P 5,500,000 P 4,800,000 P 700,000
Problem 7-6
2006 2007 2008
Contract price P14,000,000 P14,000,000 P13,000.000
Cost incurred to date P 5,000,000 P11,475,000 P12,295,000
Estimated cost to complete 7,500,000 1,275,000 -------
Total estimated cost P12,500,000 P12,750,000 P12,295,000
Total estimated gross profit P 1,500,000 P 1,250,000 P 705,000
Percentage of completion 40% 90% 100%
Gross profit to date P 600,000 P 1,125,000 P 705,000
Less Gross profit recognized in prior year ------ 600,000 1,125,000
Gross profit - current year P 600,000 P 525,000 P (420,000)
Problem 7-7
2006 2007 2008 Total
1. Recognized revenue P 1,100,000 P1,300,000 (2) P1,100,000 (3) P3,500,000
Cost of revenue 1,000,000 1,250,000 1,150,000 (4) 3,400,000 –(5)
Gross Profit (loss) P 100,000 – (1) P 50,000 P (50,000) P 100,000
2006 2007
2. Contract-price P3,500,000 P3,500,000
Cost incurred to date 1,000,000 2,250,000
Estimated cost to complete P2,250,000 P 950,000
Total estimated cost P3,250,000 P3,200,000
Total estimated gross profit 250,000 300,000
Percentage of completion 30.77% 70.3125%
Gross profit to date P 76,925 P 210,938
Less GP recognized in prior year/s - 76,925
GP to be recognized this year P 76,925 P 134,013
AA1 - Chapter 7 (2008 edition) page 13
Problem 7-8
Franchise A:
The circumstances imply that the full accrual method could be used.
Franchise revenue P3,578,000*
Franchise cost 1,400,000 P2,178,000
Interest revenue (P2,178,000 x 4%) 87,200
Income from Franchise A P2,265,200
Franchise B:
Because of the doubtful collection and only partial completion, the deposit method should be used. No revenue or income would be
recognized in 2008 from the franchise fee. However, because the first payment of P600,000 was made, interest revenue of P87,200 would
be recognized.
Franchise C:
Because of the doubtful collection but substantial completion, either the installment sales or cost recovery method could be used. If the
installment sales method is used, gross profit of P843,600* would be recognized in 2008 plus interest revenue of P87,200.
Collections in 2008:
Initial fee P1,400,000
First payment:
Interest P 87,200
Principal 512,800 512,800
Total P 600,000 P1,912,800
Gross profit recognized – 2008: P1,912,800 x 44.1% = P843,600
AA1 - Chapter 7 (2008 edition) page 14
If the cost recovery method is used, no revenue or income would be recognized, because the P2,000,000 collections are exactly offset by
the P2,000,000 costs.
Problem 7-9
2007
July 1 Cash 7,000,000
Notes Receivable 8,000,000
Unearned Franchise Fee 15,000,000
2008
Jan. 1 Cash 2,400,000
Notes Receivable 2,000,000
Interest Receivable 400,000
Problem 7-10
1. Downpayment made on 1/1/ 07 P 800,000.00
Present value of an ordinary annuity (P240,000 x 3.69590) 887,016.00
Total revenue recorded by Triple Eight P1,687.016.00
3. Cash 800,000.00
Notes Receivable 1,200,000.00
Discount on Notes Receivable 312,984.00
Unearned Franchise Fees 1,687,016.00
4. a. P800,000 cash received from downpayment. (P887,016.00 is recorded as unearned revenue from franchise fees).
b. P800,000 cash received from downpayment
c. None. (P 800,000 is recorded as unearned revenue from Franchise fees).
MULTIPLE CHOICE
1. C 6. B
2. B 7. D
3. D 8. D
4. A 9. D
5. C 10. C
18 A Cubao Marikina
Contract price P16,200,000 P25,200,000
Total estimated cost 14,400,000 23,100,000
Total est. gross profit P 1,800,000 P 2,100,000
Percentage-of-completion 83 1/3% 100%
Gross profit to date P 1,500,000 P 2,100,000
Less GP recognized in 2007 750,000 1,872,000
GP to be recognized In 2008 P 750,000 P 228,000
25. B
26 A
27 B
28 C
29
30 A Downpayment P 50,000
First installment payment 50,000
Add’l fee (P1,000,000 x 3%) 30,000
Earned Franchise Fees P130,000
33 C Downpayment P 100,000
PV of installment payment 199,650
Additional fee ( P 9,000,000 x 5% ) 450,000
Earned franchise fee P 749,650
CHAPTER 8
SUGGESTED ANSWERS
EXERCISES
Exercise 8 - 1
Exercise 8- 2
Exercise 8-3
Home Office Books
Exercise 8-4
Home Office Books
(a)
(1) Dagupan Branch 300,000
Shipments to Branch 300,000
(b)
Merchandise Inventory 60,000
Sales 390,000
Shipments from Home Office 300,000
Expenses 82,000
Sales Discounts 6,000
Income Summary 62,000
(c)
Honda Sales, Inc.
Statement of Recognized Income and Expenses - Branch
For the Year Ended December 31,2008
Sales P 390,000
Less: Sales Discount 6,000 P384,000
Cost of sales:
Shipment to Home Office P 300,000
Less: Inventory, end 60,000 240,000
Gross Profit P 144,000
Expenses 82,000
Net Profit P 62,000
(d)
Honda Sales, Inc.
Statement of Financial Position - Branch
December 31,2008
Assets
Liabilities
Exercise 8- 5
Exercise 8-6
30 Expenses 800
Home office 800
Exercise 8 -7
Honda Company
Reconciliation of Home Office and Branch Accounts
December 31,2008
HO Books Branch
Books
Branch Acct. HO Acct.
Unadjusted balances P 8,400 P 9,735
Adjustments;
(a) Merchandise in transit 615
(b) Collection of home office accounts rec’l 2,500
(c) Error in recording the net income of branch
(P1,215 - P1,125) 90
(d) Merchandise returned by branch still in
transit ( 640) _______
Adjusted balances P 10,350 P 10,350
Requirement 2
(c) Branch 90
Branch Income 90
Branch Books
Exercise 8-8
Home Office Books
Branch Books
(c) No entry
PROBLEMS
Problem 8-1
Problem 8- 2
Home Office Books
(c) No entry
(e) No entry
Branch Books
Cash 100,000
Accounts Receivable 100,000
(f) No entry
Problem 8-3
Requirement 1
b. Purchases 21,000
Accounts Payable 21,000
d. Cash 76,000
Accounts Receivable 76,000
h. Expenses 24,800
Cash 24,800
I. Expenses 1,600
Home Office 1,600
Requirement 2
Volvo Company
Statement of Recognized Income and Expenses - Branch
For the Year Ended December 31, 2008
Sales P80,000
Cost of goods sold:
Inventory, January 1 P33,000
Purchases 21,000
Shipments from home office 40,000
Cost of goods available for sale P94,000
Less Inventory, December 31 38,800 55,200
Gross profit P24,800
Operating expenses 28,100
Net loss P 3,300
Volvo Company
Statement of Financial Position - Branch
December 31, 2008
Assets
Volvo Company
Statement of Changes in Home Office Account
For the Year Ended December 31, 2008
Requirement 3
g. Cash 30,000
Davao Branch 30,000
Problem 8-4
Requirement 1
Branch Books
a. Cash 15,000
Shipments from Home Office 102,000
Accounts Receivable 26,000
Home Office 143,000
c. Cash 26,000
Accounts Receivable 26,000
d. Purchases 30,000
Accounts Payable 30,000
f. Expenses 12,500
Cash 12,500
g. Cash 16,000
Home Office 1,500
Accounts Receivable 17,500
c. Cash 400,000
Accounts Receivable 400,000
d. Purchases 316,000
Accounts Payable 316,000
f. Expenses 89,500
Accrued Expenses 2,500
Cash 92,000
I. Cash 10,000
Bacolod Branch 10,000
AA1- Chapter 8 (2008 edition) page
14
Requirement 2
Jazz Company
Statement of Recognized Income and Expenses - Bacolod Branch
For the Month Ended January 31, 2008
Sales P 62,000
Cost of goods Sold:
Shipments from Home Office (102,000 + 12,500 + 6,000) P120,500
Purchases 30,000
Cost of Goods Available for Sale P150,500
Less Merchandise Inventory, December 31 (9,800 + 600) 104,000 46,500
Gross Profit P 15,500
Expenses (12,500 + 4,750 + 350+ 3,500) 21,100
Net Loss P 5,600
Jazz Company
Statement of Financial Position - Bacolod Branch
January 31, 2008
Assets
Cash (15,000 - 9,000 + 26,000 - 14,500 - 12,500 + 16,000 - 10,000) P 11,000
Accounts Receivable (62,000 + 26,000 - 26,000 – 17,500) 44,500
Merchandise Inventory (98,000 + 6,000) 104,000
Total Assets P159,500
Liabilities
Accounts Payable (30,000 - 14,500) P 15,500
Accrued Expenses 3,500
Home Office (143,000-9,000-1,500+12,500-10,000+6,000+4,750+350 -5,600) 140,500
Total Liabilities P159,500
Jazz Company
Statement of Recognized Income and Expenses - Home Office
For the Month Ended January 31, 2008
Sales P346,000
Cost of Goods Sold:
Merchandise Inventory, January 1 P460,000
Purchases 316,000
Cost of Goods Available for Sale P776,000
Less Shipments to Branch (102,000 + 12,500 + 6,000) 120,500
Cost of Goods Available for Own Sale P655,500
Less Merchandise Inventory, December 31 445,000 210,500
Gross Profit P135,500
Expenses (89,500 - 4,750 + 1,000 + 7,500) 93,250
Net Income from Own Operations P 42,250
Less Branch Net Loss 5,600
Net profit P 36,650
Income Tax 12,828
Net Profit P23,822
AA1- Chapter 8 (2008 edition) page
15
Jazz Company
Statement of Financial Position - Home Office
January 31, 2008
Assets
Requirement 3
Jazz Company
Combined Statement of Recognized Income and Expenses for Home Office and Branch
For the Month Ended January 31, 2008
Sales P408,000
Cost of Goods Sold:
Merchandise Inventory, January 1 P460,000
Purchases 346,000
Cost of Goods Available for Sale P806,000
Less Merchandise Inventory, December 31 549,000 257,000
Gross Profit P151,000
Expenses 114,350
Net Profit P 36,650
Income Tax 12,828
Net profit P 23,822
AA1- Chapter 8 (2008 edition) page
16
Jazz Company
Combined Statement of Financial Position for Home Office and Branch
January 31, 2008
Assets
Cash P 102,000
Accounts Receivable P384,500
Less Allowance for Uncollectible Accounts 10,500 374,000
Merchandise Inventory 549,000
Store Furniture and Fixtures P159,000
Less Accumulated Depreciation 47,350 111,650
Total Assets P1,136,650
Requirement 4
Branch Books
b. Expenses 4,750
Home Office 4,750
c. Expenses 350
Home Office 350
P22,500 + P9,000 = P31,500/7.5 yrs x 1/12
d. Expenses 3,500
Accrued Expenses 3,500
e. Sales 62,000
Merchandise Inventory, end 104,000
Income Summary 5,600
Shipments from Home Office 120,500
Purchases 30,000
Expenses 21,100
c. Expenses 1,000
Bacolod Branch 350
Accumulated Depreciation 1,350
( 150,000 - 30,000 = 120,000 x 10% x 1/12 = 1,000 )
d. Expenses 7,500
Accrued Expenses 7,500
f. Sales 346,000
Shipments to Branch 120,500
Merchandise Inventory, end 445,000
Income Summary 36,650
Merchandise Inventory, beg. 460,000
Purchases 316,000
Expenses 93,250
Branch Income 5,600
Problem 8-5
Requirement 1
Feroza Company
Working Paper for Combined Financial Statement
For the Year Ended December 31,2008
Requirement 2
a. Sales 151,650
Income Summary 9,900
Cost of Goods Sold 128,700
Operating Expenses 32,850
Requirement 3
Problem 8-6
Requirement 1
Isuzu Company
Reconciliation of Home Office and Branch Accounts
January 31, 2008
Requirement 2
a. Cash 16,000
Retained Earnings 540
Accounts Receivable 750
Iloilo Branch 15,790
Branch Books
Problem 8-7
Requirement 1
b. Sales 778,200
Merchandise Inventory, end 122,180
Income Summary 116,990
Merchandise Inventory, beg. 47,800
Shipments from Home Office 680,800
Operating Expenses 54,790
Requirement 2
a. Freight-Out 470
Branch Current 470
b. Cash 19,200
Branch Current 19,200
Requirement 3
Ford Company
Reconciliation of Current Account
December 31,2008
Problem 8-8
Requirement 3
MULTIPLE CHOICE
1. B
2. A
3. A Sales P400,000
Cost of sales ( 400,0000 - 70,000) 330,000
Gross profit 70,000
Expenses [30,000 + 10,000 + (10,000 - 6,000) + 5,000] 49,000
Net profit P 21,000
4. A Sales P46,500
x 70%
Cost of sales w/o freight P32,550
Add freight 1,100
Cost of sales w/ freight P33,650
AA1- Chapter 8 (2008 edition) page
22
5. Sales P46,500
Less Sales Discount (39,690 / 98%) - 39,690 810 P45,690
Cost of sales 33,650
Gross Profit P12,040
Expenses:
Selling P 2,820
Administrative (46,500 x 5%) 2,325
Samples Expenses 1,900 7,045
Net Profit P 4,995
7. C Sales P176,000
Cost of sales 105,000
Gross Profit P 71,000
Expenses 39,750
Net Income P 31,250
10 A
11 C
12 B
13 A Sales P74,000
Cost of sales
Shipments P67,680
Less Inventory, end 9,180 58,500
Gross Profit P15,500
Expenses 6,820
Net Profit P 8,680
18 B Sales P112,500
Cost of Sales:
Shipments from home office P120,000
Less Inventory, Dec. 31 30,000 90,000
Gross profit P 22,500
Expenses 8,100
Net Profit P 14,400
26 C Branch A Branch B
Imprest branch fund P 2,000 P 1,500
Accounts Receivable, Jan.1 55,000 43,500
Inventory, Jan.1 21,000 19,000
Home Office account P 78,000 P 64,000
27 B
29 D Sales P 80,000
Cost of sales
Inventory, Jan.1 P 19,000
Merchandise from Home office 47,000
Merchandise available for sale P 66,000
Less Inventory, Dec.31 12,000 54,000
Gross profit P 26,000
Operating Expenses 14,300
Net profit of Branch B P 11,700
30 D HO Account. Branch
Acct.
Beg. Balances P 30,670 P 30,670
1. Branch remittances (55,000) (47,800)
2. Shipment to branch 138,000 160,000
3. Home office expense paid by branch (5,700)
4. Branch receivable collected by branch (8,900)
P 107,970 P 133,970
34 D.
Branch Account Home Office
Account
Unadjusted balances P165,920 P111,170
EXERCISES
Exercise 9 - 1
Books of Branch R
Home Office 15,000
Cash 15,000
Books of Branch S
Cash 15,000
Home Office 15,000
Exercise 9 - 2
Books of Branch No. 1
Home Office 1,950
Shipments from Home Office 1,600
Freight-In 350
2. Branch 360,000
Shipments to Branch 240,000
Allowance for Markup in Branch Inventory 120,000
120,000/240,000 = 50%
3. no entry
4. Branch 134,000
Advertising Expense 40,000
Depreciation Expense 70,000
Utility Expense 24,000
AA1- Chapter 9 (2008 edition)
page 2
5. no entry
Cash 360,000
Branch 360,000
6. no entry
7. Branch 58,000
Branch Income 58,000
Branch Books
1. Purchases 160,000
Accounts Payable 160,000
5. Cash 470,000
Accounts Receivable 470,000
Exercise 9 - 4
a. Merchandise inventory, beg. P150,000
Less Merchandise from home office at billed price
Markup on merchandise shipped to branch P 36,000
Markup on current shipment (P96,000 – P80,000) 16,000
Markup on beginning inventory P 20,000
x 120/20 120,000
Merchandise purchased from outsiders P 30,000
Exercise 9 – 5
Home Office Books
1. Branch 450,000
Shipments to Branch 300,000
Allowance for Markup in Branch Inventory 150,000
150,000/300,000 = 50%
2. no entry
Branch Books
1. Shipments from Home Office 450,000
Home Office 450,000
3. no entry
Exercise 9 – 6
1. Branch 820,000
Cash 80,000
Shipments to Branch 240,000
AA1- Chapter 9 (2008 edition)
page 4
Land 300,000
Allowance for Markup in Branch Inventory 120,000
Allowance on Transfer of Land 80,000
120,000/240,000 = 50%
2. Branch 560,000
Shipments to Branch 400,000
Allowance for Markup in Branch Inventory 160,000
160,000/400,000 = 40%
3. Branch 130,000
Branch Income 130,000
Exercise 9 - 7
Required balance of allowance (markup on branch ending inventory)
P9,600 x 20/120 P 1,600
Adjustment for realized markup 36,400
Balance of allowance before adjustment P38,000
Allowance on current shipment (P160,000 x 20%) 32,000
Allowance on branch beginning inventory P 6,000
Markup rate ÷ 20%
Branch beginning inventory, at cost P30,000
Exercise 9 - 8
a. Merchandise available for sale at billed price (P16,200 + P20,250) P36,450
Merchandise available for sale at cost (P36,450/135%) 27,000
Unrealized intercompany inventory profit balance before adjustment P 9,450
Branch Books
Home Office 540
Shipments from Home Office 540
Exercise 9 – 9
1. P20,000 ÷ 25/125 = P100,000
Exercise 9 - 10
Separate cost of goods sold of the home office:
Inventory, beginning P 252,000
Purchases 2,800,000
Shipments to branch ( 600,000)
Cost of goods available for sale P2,452,000
Less Inventory, end 240,000 P2,212,000
Separate cost of goods sold of the branch:
Inventory, beginning
From outside purchases P 12,000
From home office (P36,000 / 120%) 30,000
Total P 42,000
Purchases 96,000
Shipments from home office (P720,000 / 120%) 600,000
Cost of goods available for sale P 738,000
Less Inventory, end:
From outside purchases P10,000
From home office (P42,000 / 120%) 35,000 45,000 693,000
Combined cost of goods sold P2,905,000
Exercise 9– 11
1. Total Resold On Hand
Shipments from home office P450,000 P360,000 P90,000
Shipments to branch 375,000 300,000* 75,000**
Markup P 75,000 P 60,000 P15,000
Exercise 9 - 12
a. Merchandise Inventory, January 1 P26,400
Add Shipments from Home Office 20,000
Cost of Goods Available for Sale P46,400
Cost of Goods Sold
Sales, net of Sales Returns (P15,000 - P2,000) P13,000
Sales rate 125% 10,400
Merchandise destroyed by fire at billed price P36,000
÷ 120%
Merchandise destroyed by fire at cost P30,000
b. Home Office Books
Branch Loss from Fire 30,000
Allowance for Markup in Branch Inventory 6,000
Branch 36,000
Branch Books
Home Office 36,000
Merchandise Inventory 36,000
Exercise 9 – 13
1. Branch Income 50,000
Cost of Goods Sold P230,000 x 15/115 30,000
Branch 20,000
PROBLEMS
Problem 9 – 1
Billed Price Cost Markup
Beginning inventory:
Acquired from vendors P100,000 P100,000 -
Acquired from home office 40,000 32,000 P 8,000
Purchases from vendors 240,000 240,000 -
Shipments from Home Office P180,000 + P30,000 210,000 168,000 42,000
Total inventory available for sale P590,000 P540,000 P50,000
Less Ending inventory:
Acquired from vendors 40,000 40,000 -
Acquired from home office P60,000 + P30,000 90,000 72,000 18,000
Cost of goods sold P460,000 P428,000 P32,000
AA1- Chapter 9 (2008 edition)
page 7
Problem 9 – 2
Home Office Books
a. Dagupan Branch 10,000
Cash 10,000
d. Expenses 800
Dagupan Branch 800
c. no entry
e. no entry
AA1- Chapter 9 (2008 edition)
page 8
h. Expenses 1,800
Home Office 1,800
c. no entry
d. no entry
e. Cash 29,400
Home Office 29,400
f. Cash 15,000
Home Office 15,000
g. no entry
i. no entry
Problem 9 – 3
Requirement 1
Home Office Books
1. Baguio Branch 20,000
Cash 20,000
AA1- Chapter 9 (2008 edition)
page 9
3. Cash 245,000
Baguio Branch 245,000
5 – 7 - no entry
4. Expenses 7,000
Home Office 7,000
5. Cash 247,400
Accounts Receivable 40,600
Sales 288,000
6. Expenses 21,000
Cash 21,000
Requirement 2
Baguio Branch 15,000
Branch Income 15,000
Requirement 3
Cash 2,000
Home Office 2,000
Problem 9 - 4
Requirement 1
Triple D Bookstore
Statement of Recognized Income and Expenses - Quezon City Branch
For the Year Ended December 31, 2008
Sales P192,690
Cost of Goods Sold:
Merchandise Inventory, beginning P 31,500
Shipments from Home Office 128,000
Cost of Goods Available for Sale P159,500
Less Merchandise Inventory, end 22,750 136,750
Gross Profit P 55,940
Operating Expenses:
Advertising and Promotion P 6,400
Depreciation 2,400
Uncollectible Accounts Expense 1,250
Others 36,600 46,680
Net income P 9,260
Requirement 2
Branch 9,260
Branch Income 9,260
Problem 9 - 5
Branch Books
a. Sales 78,000
Merchandise Inventory, end 12,000
Income Summary 10,000
Merchandise Inventory, beginning 10,000
Shipments from Home Office 80,000
Selling Expenses 4,000
Administrative Expenses 6,000
AA1- Chapter 9 (2008 edition)
page 11
Problem 9 - 6
Requirement 1
Triple F Products Inc. - Branch
Trial Balance
December 31, 2008
Debit Credit
Cash 12,800
Accounts Receivable 48,160
Merchandise Inventory 27,280
Accounts Payable 2,040
Home Office 68,900
Sales 256,000
Cost of Sales 191,620
Operating Expenses 47,080 _______
326,940 326,940
AA1- Chapter 9 (2008 edition)
page 12
Requirement 2
Home Office Books
a. Sales 640,600
Income Summary 41,360
Cost of Sales 452,840
Operating Expenses 146,400
b. Branch 17,300
Branch Income 17,300
Branch Books
a. Merchandise Inventory P202,400 – P189,200 13,200
Home Office 13,200
b. Sales 256,000
Income Summary 17,300
Cost of Sales 191,620
Operating Expenses 47,080
Problem 9 - 7
Triple G Company
Combined Statement of Recognized Income and Expenses
for Home Office and Branch
For the Year Ended December 31, 2008
Sales P325,000
Cost of goods sold:
Merchandise inventory, beginning P107,500
Purchases 215,000
Cost of goods available for sale P322,500
Less Merchandise inventory, end 81,300 241,200
Gross profit P 83,800
Operating expenses 50,000
Net income before Income Tax P 33,800
Income Tax 11,830
Net Income P 21,970
c. Sales 250,000
Shipments to Branch 30,000
Merchandise Inventory, end 55,000
Income Summary 15,000
Purchases 200,000
Expenses 40,000
Merchandise Inventory, beginning 80,000
Problem 9 – 8
Requirement 2
a. Plant Assets 4,000
Branch 4,000
c. Cash 5,000
Branch 5,000
d. Expenses 1,000
Home Office 1,000
h. Sales 48,000
Shipments from Home Office 48,000
AA1- Chapter 9 (2008 edition)
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AA1- Chapter 9 (2008 edition)
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AA1- Chapter 9 (2008 edition)
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MULTIPLE CHOICE
1. B 3. C 5. D 7. D
2. B 4. D 6. B 8. D
9 A
10 C
11 C
12 D P13,200 + P350 = P13,550
13 C P11,000 + P350 = P11,350
17 C Sales P141,000
Cost of goods sold (P120,000 x 3/4 x 125%) 112.500
Gross profit P 28,500
Operating expenses 27,000
Net income reported by the branch P 1,500
18 A P50,400/120% P42,000
27 B Sales P 292,500
Cost of goods sold (P180,000 + P45,000 - P60,000) (165,000)
Operating expenses ( 72,000)
Realized markup [(P180,000 x 20/120) - P7,500 22,500
True net income of the branch P 78,000
29 D Sales P540,000
Cost of goods sold
(P54,600 + P390,000 + P144,600 - P48,750) (540,450)
Operating expenses ( 51,000)
Realized markup [P99,900 - (P39,000 x 30/130)] 90,900
True net income of the branch P 39,450
33 C Sales P 37,400
Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) ( 28,900)
Operating expenses ( 3,000)
Realized markup [P2,800 – (P3,960 x 10/110)] 2,440
True profit of Cebu branch P 7,940
34 D Sales P110,000
Cost of goods sold
(P16,000 + P80,000 – P24,000 – P20,000) ( 52,000)
Operating expenses ( 10,000)
Net income of the home office P 48,000
Net income of the branch 7,940
Combined net income of the home office and branch P 55,940
35 C Sales P155,000
Cost of sales:
Inventory, beginning P 23,000
Purchases 190,000
Goods available for sale P213,000
Shipments to branch (P110,000/110%) 100,000
Goods available for own sale P113,000
Less Inventory, end 30,000 83,000
Gross profit P 72,000
Expenses 52,000
Net income P 20,000
36 A Sales P140,000
Cost of sales:
Inventory, beginning (P11,550 – P1,000) P 10,550
Shipments from HO, including freight-in 105,750
Goods available for sale P116,300
Less Inventory, end
[(P10,400 + P5,000)/110%] + P520 + P250 14,770 101,530
Gross profit P 38,470
Expenses 28,400
True branch net income P 10,470
39 C Sales P400,000
Cost of goods sold (P37,500 + P250,000 - P40,000) (247,500)
Operating expenses (100,000)
Net income reported by branch P 52,500
47 D Sales P 600,000
Cost of goods sold (P75,000 + P444,000 - P84,000) (435,000)
Operating expenses (200,000)
Realized markup [P72,500 - (P84,000 x 20/120)] 58,500
Adjusted profit of the branch P 23,500
Problem 9 – 8
Triple J Wholesale Company
Work Sheet for Combined Financial Statements
For the Year Ended December 31, 2008
Adjustments and
Trial Balance Eliminations Income Statement Balance Sheet
Debits Home Office Branch Debit Credit Debit Credit Debit Credit
Cash 36,000 8,000 (c ) 5,000 49,000
Accounts Receivable 35,000 12,000 (b) 2,000 45,000
Inventory 70,000 15,000 (f) 2,500 82,500 74,500 74,500
Plant Assets, net 90,000 (a) 4,000 94,000
Branch 20,000 (a) 4,000
(c ) 5,000
(g) 11,000
Purchases 290,000 24,000 314,000
Shipments from Home Office 45,000 (e) 3,000 (h) 48,000
Expenses 44,000 16,000 (d) 1,000 61,000
Income Tax (i) 36,400 36,400
585,000 120,000
Credits
Accounts Payable 36,000 13,500 49,500
Accrued Expenses 14,000 2,500 16,500
Income Tax Payable (i) 36,400 36,400
Home Office 9,000 (b) 2,000 (d) 1,000
(g) 11,000 (e) 3,000
Ordinary Share Capital 50,000 50,000
Retained Earnings 45,000 (f) 2,500 42,500
Problem 9 – 9
Triple M Company
Work Sheet for Combined Financial Statements
For the Year Ended December 31, 2008
Adjustments and Combined
Trial Balance Eliminations Cost of Goods Sold Income Statement Balance Sheet
Debits HO Branch Debit Credit Debit Credit Debit Credit Debit Cred8t
Cash 17,000 200 a. 1,700 20,700
b. 1,800
Inventory 23,000 11,550 e. 1,000 33,550 44,770 44,770
Sundry Assets 200,000 48,450 248,450
Investment in Branch 60,000 a. 1,700
g. 58,300
Purchases 190,000 190,000
Shipment from Home Office 105,000 c. 5,000 f. 110,000
Freight-in from Home Office 5,500 d. 250 5,750
Sundry Expenses 42,000 24,300
Income Tax h. 15,460 15,460
532,000 195,000 66,300
Credits
Sundry Liabilities 35,000 3,500 d. 250 38,750
Income Tax Payable h. 15,460 15,460
Ordinary Share Capital 200,000 200,000
Retained Earnings 31,000 31,000
Home Office Equity 51,500 g. 58,300 b. 1,800
c. 5,000
Sales 155,000 140,000 295,000
Shipments to Branch 110,000 f. 110,000
Allowance for Markup in BI 1,000 e. 1,000
532,000 195,000 193,510 193,510 229,300 44,770
Cost of Goods Sold 184,530 184,530
229,300 229,300 266,290 295,000
Net income 28,710 28,710
295,000 295,000 313,920 313,920
Merchandise inventory, end:
Home office P30,000
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 14,770
Total P44,770
AA1-Chapter 9 (2008 edition) page3
AA1 - Chapter 9 (2008 edition) page 19
Problem 9 – 10
Triple N Commercial
Working Paper for Combined Financial Statements for Home Office and Branch
For the Year Ended December 31, 2008
Inventory, end:
Home Office P 70,000
Branch [(P21,420 + P14,000) / 110%] 32,200
Total P102,200
AA1 - Chapter 9 (2008 edition) page 19