AdvancedAccountingSolutionManual

AntonioJ.Dayag

Chapter1

ProblemI

Requirement1: AssumingthatAandBagreethateachpartneristoreceiveacapitalcredit
equaltotheagreedvaluesofthenetassetseachpartnerinvested:

Torecordadjustments:nothingtoadjustsincebothofthemhavenosetofbooks.
Toclosethebooks:nothingtoclosesincebothofthemhavenosetofbooks.
Torecordinvestments:

Partnershipbooks:
Cash120,000
Inventory...120,000
Equipment240,000
A,capital480,000
Initialinvestment.

Cash120,000
Land240,000
Building...480,000
Mortgagepayable..240,000
B,capital.600,000
Initialinvestment.

Requirement 2: AssumingthatAandBagreethateachpartneristoreceiveanequalcapital
interest.

Torecordadjustments:nothingtoadjustsincebothofthemhavenosetofbooks.
Toclosethebooks:nothingtoclosesincebothofthemhavenosetofbooks.
Torecordinvestments:
Partnershipbooks:

BonusApproach:

Cash120,000
Inventory120,000
Equipment240,000
 A,capital480,000

Cash120,000
Land240,000
Building480,000
Mortgagepayable.240,000
B,capital..600,000

B,capital60,000
A,capital.60,000

Totalagreedcapital(P480,000+P600,000).P1,080,000
Multipliedby:Capitalinterest(equal)..1/2
PartnersindividualcapitalinterestP540,000
Less:Ascapitalinterest.480,000
BonustoA..P60,000

Revaluation(Goodwill)Approach:

Cash120,000
Inventory120,000
Equipment.240,000
A,capital..480,000

Cash120,000
Land.240,000
Building....480,000
Mortgagepayable240,000
B,capital..600,000

Assets(orgoodwillorintangibleasset)...120,000
A,capital....120,000

Totalagreedcapital(P600,000/1/2)...P1,200,000
Less:Totalcontributedcapital(P480,000+
P600,000)....1,080,000
GoodwilltoA...P120,000

ProblemII
 Invested Invested Invested
AgreedFairValues byJohn byJeff byJane
Cash P100,000
Equipment
P110,000
Totalassets 100,000 P110,000 0
Notepayableassumedbypartnership 30,000
Netassetsinvested P100,000 P80,000 P0

1.BonusMethod 2.GoodwillMethod(RevaluationofAsset)

Cash 100,000
Cash 100,000 Equipment 110,000
Equipment 110,000 Goodwill 90,000
NotePayable 30,00 NotePayable 30,000
0
John,Capital 60,00 John,Capital 90,000
0
Jeff,Capital 60,00 Jeff,Capital 90,000
0
Jane,Capital 60,00 Jane,Capital 90,000
0

2. ThebonusmethodisusedwhenJohnandJeffrecognizethatJaneisbringingsomethingofvalueto
the firm other than a tangible asset, but they do not want to recognize an intangible asset. To
equalize thecapitalaccounts, P40,000 istransferred fromJohn'scapital account andP20,000is
transferredfromJeff'scapitalaccount.

ThegoodwillmethodisusedwhenthepartnersrecognizetheintangiblenatureoftheskillsJaneis
bringingtothepartnership.However,thecapitalaccountsareequalizedbyrecognizinganintangible
assetandacorrespondingincreaseinthecapitalaccountsofthepartners.Unlesstheintangible
assetcanbespecificallyidentified,suchasapatentbeinginvested,itshouldnotberecognized,
becauseofalackofjustificationforgoodwillinanewbusiness.

ProblemIII
1. (a) Cash 13,000
AccountsReceivable 8,000
OfficeSupplies 2,000
OfficeEquipment 30,000
AccountsPayable 2,000
Tom,Capital 51,000
 Cash 12,000
AccountsReceivable 6,000
OfficeSupplies 800
Land 30,000
AccountsPayable 5,000
MortgagePayable 18,800
Julie,Capital 25,000

(b) Tom,Drawing 15,000

Cash 15,000

Julie,Drawing 12,000
Cash 12,000

(c) IncomeSummary 50,000

Tom,CapitalP50,000 (P51,000/P76,000) 33,553
Julie,CapitalP50,000 (P25,000/P76,000) 16,447

Tom,Capital 15,000
Julie,Capital 12,000
Tom,Drawing 15,000
Julie,Drawing 12,000

2. TOMANDJULIEPARTNERSHIP
StatementofChangesinPartners'Capital
FortheYearEndedDecember31,20x4

Tom Julie Total

Capitalbalances,Jan.1 P0 P0 P0
Add:Additionalinvestments 51,000 25,000 76,000
Netincomeallocation 33,553 16,447 50,000
Totals P84,553 P41,447 P126,000
Less:Withdrawals 15,000 12,000 27,000
Capitalbalances,Dec.31 P69,553 P29,447 P99,000

ProblemIV
BookofHistoberetainedbythenewpartnership.
Thefollowingproceduresaretobefollowed:
IndividualversusSoleProprietor

Booksof *Booksof
Individual SoleProprietor
Adjustingentries N/A Yes
Closingentries(realaccounts) N/A No
Investments Yes**
BalanceSheet Yes
*BooksofH;Partnershipbooks
**Investmentsofindividual;additionalinvestmentsorwithdrawalsofsoleproprietor.

1.BooksofSoleProprietor(H):
a.Torecordadjustments:
a.H,capital1,800
Allowancefordoubtfulaccounts.1,800
Additionalprovisioncomputedasfollows:
Requiredallowance:10%xP48,000=P4,800
Less:Previousbalance3,000
AdditionalprovisionP1,800

b.Interestreceivableoraccruedinterestincome.3,600
H,capital3,600
Interestincomeforninemonthscomputedasfollows:
P60,000x8%x9/12=P3,000.

c.H,capital..6,000
Merchandiseinventory..6,000
Declineinthevalueofmerchandise.
P27,000P21,000=P6,000.

d.H,capital.4,800
Accumulateddepreciation.4,800
Underdepreciation.

e.Prepaidexpenses...2,400
H,capital2,400
Expensespaidinadvance.

H,capital7,200
Accruedexpenses.7,200
Unrecordedexpenses.
 Note: All adjustment that reflects nominal accounts should be coursed through the
capitalaccount,sinceallnominalaccountsarealreadyclosedatthetimeofformation.

b.Toclosethebooks:nothingtoclosesincethebooksofHwillberetained.

c.Torecordinvestment:
Cash.116,100
I,capital116,100

Initialinvestmentcomputedasfollows:
UnadjustedcapitalofHP246,000
Add(deduct):adjustments:
a.Doubtfulaccounts......(1,800)
b.Interestincome..3,600
c.Declineinthevalueofmerchandise.(6,000)
d.Underdepreciation.(4,800)
e.Prepaidexpenses..2,400
Accruedexpenses...(7,200)
AdjustedcapitalbalanceofH.....P232,200
Dividedby:CapitalinterestofH2/3
Totalagreedcapital..P348,300
Multipliedby:CapitalinterestofI..1/3
InvestmentofIP116,100

Note: The initial investment of H is already recorded since his books are already
retained. No further entry is required since there are no additional investments or
withdrawalsmadebyH.

2.Thebalancesheetforbothcasespresentedaboveisasfollows:

HIPartnership
BalanceSheet
November1,20x4

Assets
Cash P236,100
Accountsreceivables P48,000
Less:Allowancefordoubtfulaccounts........... 4,800 43,200
Notesreceivable................................................... 60,000
Interestreceivable.................................. 3,600
MerchandiseInventory................................................ 21,000
Prepaidexpenses.......................................... 2,400
 Equipment(net)............................................. P72,000
Less:Accumulateddepreciation........ 10,800 61,200
TotalAssets.................................................................... P427,500

LiabilitiesandCapital
Liabilities
Accruedexpenses......................................... P7,200
Accountspayable................................................... 12,000
Notespayable........................................... 60,000
TotalLiabilities................................................................ P79,200
Capital...........................................................................
H,capital.................................. P232,200
I,capital........................................... 116,100
TotalCapital.................................................................. P348,300
TotalLiabilitiesandCapital.......................................... P427,500

ProblemV
Newsetofbooks.Thefollowingproceduresaretobefollowed:

SoleProprietorversusSoleProprietor
Booksof Booksof
SoleProprietor SoleProprietor *NewSetof
(Baker) (Carter) Books
Adjustingentries Yes Yes
Closingentries(realaccounts) Yes Yes
Investments Yes**
BalanceSheet Yes

*Partnershipbooks
**Additionalinvestmentsorwithdrawalsofsoleproprietors.

1.BooksofSoleProprietor
a.Torecordadjustments:

BooksofJ BooksofK
a.J,capital12,000 a.MerchandiseInventory6,000
MerchandiseInventory12,000 K,capital6,000
Worthlessinventory. Upwardrevaluation.
b.J,capital7,200 b.K,capital..3,000
Allowancefordoubtful Allowancefordoubtful
Accounts..7,200 accounts.3,000
Worthlessaccounts. Additionalprovision.
Requiredallowance:

c.Rentreceivable12,000
J,capital.12,000 Salariespayable.9,600
Incomeearned.
e.J,capital8,400
Officesupplies.8,400
Expiredofficesupplies.
f.J,capital6,000
Accumulateddepreciation
equipment6,000
Underdepreciated.
h.J,capital.1,800
Interestpayable.1,800
Interestexpensefrom
July1toOctober1.
P60,000x12%x3/12
UnadjustedcapitalofJ..P372,000
Add(deduct):adjustments:
a.Worthlessmerchandise..(12,000)
b.Worthlessaccounts.(7,200)
c.Rentincome..12,000 c.Salaries....(9,600)
e.Officesuppliesexpense.(8,400)
f.Additionaldepreciation(6,000)
h.Interestexpense(1,800)
AdjustedcapitalofJP348,600
b.Toclosethebooks:
5%xP180,000..P9,000
Less:Previous
Balance..6,000
Additional
Provision....P3,000
c.K,capital.9,600
Unpaidsalaries.
d.Interestreceivable1,200
K,capital..................1,200
InterestincomefromAugust
17toOctober1.
P60,000x16%x45/360
g.K,capital12,000
Accumulateddepreciation
Furnitureandfixtures12,000
Underdepreciated.
i.Patent.48,000
K,capital..48,000
Unrecordedpatent.
UnadjustedcapitalofK.....P432,000
Add(deduct):adjustments:
a.Merchandiserevaluation..6,000
b.Worthlessaccounts.(3,000)
d.Interestincome..1,200
g.Additionaldepreciation(12,000)
h.Patent...48,000
AdjustedcapitalofK...P462,600
 BooksofJ BooksofK
Allowancefordoubtful Allowancefordoubtful
accounts.................................12,000 accounts.................................9,000
Accumulateddepreciation Accumulateddepreciation
equipment60,000 furnitureandfixtures.36,000
Accountspayable159,600 Accountspayable.120,000
Notespayable60,000 Salariespayable.9,600
Interestpayable.1,800 K,capital..462,600
J,capital..348,600 Cash.54,000
Cash90,000 Accountsreceivable..180,000
Accountsreceivable.216,000 Notesreceivable.60,000
Merchandiseinventory.180,000 Interestreceivable...1,200
Officesupplies.24,000 Merchandiseinventory..150,000
Equipment.120,000 Furnitureandfixtures...144,000
Rentreceivable...12,000 Patent..48,000
ClosethebooksofJ. ClosethebooksofK..

2.NewSetofBooks
Torecordinvestments:
Cash. 90,000
Accountsreceivable.. 216,000
Merchandiseinventory.. 180,000
Officesupplies.. 24,000
Equipment(net)... 60,000
RentReceivable.. 12,000
Allowancefordoubtfulaccounts. 12,000
Accountspayable.. 39,600
Notespayable. 60,000
Interestpayable.. 1,800
J,capital 468,600

Cash. 54,000
Accountsreceivable.. 180,000
Notesreceivable. 60,000
Interestreceivable.. 1,200
Merchandiseinventory.. 150,000
Furnitureandfixtures(net).... 108,000
Patent..... 48,000
Allowancefordoubtfulaccounts. 9,000
Accountspayable.. 120,000
Salariespayable.. 9,600
K,capital 462,600
3.
H I
Unadjustedcapital(referto1a) P372,000 P432,000
Adjustedcapital(referto1b) 348,600 462,600
Netadjustments(debit)/credit (P23,400) P30,600

4.Thebalancesheetafterformationisasfollows:

JandKPartnership
BalanceSheet
October1,20x4

Assets
Cash............................................................................... P144,000
Accountsreceivables................................................. P396,000
Less:Allowancefordoubtfulaccounts......... 21,000 375,000
Notesreceivable................................................... 60,000
Interestreceivable.................................. 1,200
Rentreceivable....................................... 12,000
MerchandiseInventory................................................ 330,000
Officesupplies............................................................... 24,000
Equipment(net)............................................. 60,000
Furnitureandfixtures(net)................. 108,000
Patent............................................... 48,000
TotalAssets.................................................................... P1,162,200

LiabilitiesandCapital
Liabilities
Salariespayable................................... P9,600
Accountspayable.................................................. 159,600
Notespayable.......................................... 60,000
Interestpayable.................................... 1,800
TotalLiabilities............................................................... P231,000
Capital
J,capital.................................. P468,600
K,capital......................................... 462,600
TotalCapital.................................................................. P931,200
TotalLiabilitiesandCapital.......................................... P1,162,200

ProblemVI
1.TotalassetsP1,094,000,atfairvalue
2.TotalliabilitiesP540,000,atfairvalue
3.TotalcapitalP554,000(P1,094,000P540,000)

BalanceSheet
January1,2009
Assets LiabilitiesandCapital
Cash P70,000 Liabilities
AccountReceivable(net) 108,000 AccountsPayable P190,000
MerchandiseInventory 208,000 MortgagePayable __350,000
Building(net) 600,000 TotalLiabilities P540,000
FurnitureandFixture(net) 108,000 Capital:
AccountsPayable L,Capital P260,000
MortgagePayable M,Capital ___294,000
_________ TotalCapital P554,000
_
TotalAssets P1,094,00 TotalLiabilitiesandCapital P1,094,000
0
MultipleChoiceChapter1

1.cP45,000

2.atheprevailingsellingpricewhichisalsothefairmarketvalue.

3. c Thecapitalbalancesofeachpartneraredetermined
asfollows:
Apple Blue Crown
Cash P50,000
Property P80,000
Mortgage (35,000)
assumed
Equipment P55,000
Amount
creditedto
capital P50,000 P45,000 P55,000
accounts

4.c(P190,000P160,000)x1/2=P15,000

5.dtheprevailingsellingpricewhichisalsothefairmarketvalue.

6.a
TotalAgreedCapital(P50,000/40%)............... P125,000
Less:TotalContributedCapital(P65,000+P50,000).................. 115,000
Goodwill(revaluationofassetsupward).................. P10,000

Assets,fairvalue(P20,000+P60,000+P15,000)P95,000
Less:Liabilitiesassumed..30,000
Bill,capital..P65,000

7.bP330,000=P50,000+(P310,000P30,000)

8 b The capital balances of William (WW) and Martha (MM) at the date of
. partnershipformationaredeterminedasfollows:
William Martha
Cash P20,000 P30,000
 Inventory 15,000
Building 40,000
Furnitureandequipment 15,000
Total P35,000 P85,000
Lessmortgageassumed
bypartnership (10,000)
Amountscreditedtocapital P35,000 P75,000

9.c
Evan Helen
Unadjustedcapital 59,625 33,500
Add(deduct)adjustments:
Allowance (555) (405)
Depreciation ______ (900)
Adjustedcapital 59,070 32,195

10.c:JonesP80,000+P400,000P120,00=P360,000
SmithP40,000+P280,000P60,000=P260,000

11.cP35,374refertoNo.12

12.cP17,687
UnadjustedcapitalofCC.P33,000
Add(deduct):adjustments
Allowancefordoubtfulaccounts(3%xP14,200)...(426)
Increaseinmerchandiseinventory(P23,000P20,000)3,000
Prepaidsalary....600
Accruedrentexpense(800)
AdjustedcapitalbalanceofCCP35,374
Dividedby:CapitalinterestofCC....2/3
TotalcapitalofthepartnershipP53,061
Less:AdjustedcapitalbalanceofCC..35,374
CapitalbalanceofDD..P17,687

13.a
Totalassets:
Cash P70,000
Machinery 75,000
Building 225,000 P370,000
LessLiabilities(Mortgagepayable) 90,000
Netassets(equaltoFFscapitalaccount) P280,000

14.d
FF,capital(seeno.13) P280,000
DividebyFFsP&Lsharepercentage 70%
Totalpartnershipcapital P400,000
RequiredcapitalofCC(P400,000x30%) P120,000
LessAssetsalreadycontributed:
Cash P30,000
Machineryandequipment 25,000
Furnitureandfixtures 10,000 65,000
CashtobeinvestedbyCC P55,000

15.(a)
AdjustedcapitalofLL(2/3):
Unadjustedcapital P158,400

Adjustments:
Prepaidexpenses 17,500
Accruedexpenses (5,000)
Allowanceforbaddebts(5%xP100,000) (5,000)
Adjustedcapital P165,900

Totalpartnershipcapital(P165,900/2/3) P248,850
MultiplybyMMsinterest 1/3
MMscapital P82,950
LessMerchandisecontributed 50,000
CashtobeinvestedbyMM P32,950

16.d
AdjustedcapitalofLL P165,900
ContributedcapitalofMM 82,950
Totalcapital P248,850

17.a
FF,capital:
Unadjustedbalance P57,000
Adjustments:
Accumulateddepreciation (1,500)
Allowancefordoubtfulaccount (12,000)
Adjustedbalance P43,500
GG,capital:
Unadjustedbalance P49,500
Adjustments:
Accumulateddepreciation (4,500)
 Allowancefordoubtfulaccount (4,500)
Adjustedbalance P40,500

18.c
GGsadjustedcapital(seeno.17) P40,500
DividebyGGsP&Lsharepercentage 40%
Totalpartnershipcapital P101,250
MultiplybyFFsP&Lsharepercentage 60%
FFscapitalcredit 60,750
FFscontributedcapital(seeno.1) 43,500
AdditionalcashtobeinvestedbyFF P17,250

19.d
Totalcapitalofthenewpartnership(seeno.20) P296,875
MultiplybyRRsinterest 20%
CashtobeinvestedbyRR P59,375

20.(a)
OO PP Total
(60%) (40%)
Unadjustedcapitalbalances P133,000P108,000P241,000
Adjustments:
Allowanceforbaddebts (2,700)(1,800)(4,500)
Inventories 3,0002,0005,000
Accruedexpenses (2,400)(1,600)(4,000)
Adjustedcapitalbalances P130,900P106,600P237,500

Totalcapitalbeforetheformationofthenewpartnership(seeabove) P237,500
DividebythetotalpercentageshareofOOandPP(50%+30%) 80%
TotalcapitalofthepartnershipaftertheadmissionofRR P296,875

21.a
AgreedCapital ContributedCapital Settlement
OO P148,437.50(50%xP296,875) P130,900 P17,537.50
PP 89,062.50(30%xP296,875) 106,600 (17,537.50)

Therefore,OOwillpayPPP17,537.50

22.c
Totalpartnershipcapital(P113,640/1/3) P340,920
LessDDscapital 113,640
CCscapitalafteradjustments P227,280
Adjustmentsmade:
 Allowancefordoubtfulaccount(2%xP96,000) 1,920
Merchandiseinventory (16,000)
Prepaidexpenses (5,200)
Accruedexpenses 3,200
CCscapitalbeforeadjustments P211,200

23.a
AssetsinvestedbyCC:
Cash:
Capital P211,200
AddAccountspayable 49,600
Totalassets(excludingcash) 260,800
LessNoncashassets(96,000+P144,000) 240,000P20,800
Accountsreceivable(96,000P1,920) 94,080
Merchandiseinventory 160,000
Prepaidexpenses 5,200 P280,080
CashinvestedbyDD 113,640
Totalassetsofthepartnership P393,720

24.d
Totalpartnershipcapital(P180,000/60%) P300,000

GGsCapital(P300,000x40%) P120,000
LessCashinvestment 30,000
MerchandisetobeinvestedbyGG P90,000

25.a
AdjustedcapitalofJJ:
Totalassets(atagreedvaluations) P180,000
LessAccountspayable 48,000 P132,000
RequiredcapitalofJJ 180,000
CashtobeinvestedbyJJ P48,000

Theories

1. d 6. a 11. a 16. c
2 b 7. c 12. c 17. b
.
3 c 8. a 13. b 18. b
.
4 A 9. d 14. c
.
5 B 10, b 15, d
.