EXERCISE 6

a. Investment Purchase Revised

Diaz 100,000 100,000 Domingo, Capital 300,000
Dizon 200,000 200,000 Mendiola, Capital 300,000
Domingo 300,000 (300,000)
Mendiola 300,000 300,000
600,000 0 600,000

b. Investment Purchase Revised

Diaz 100,000 (25,000) 75,000 Diaz, Capital 25,000
Dizon 200,000 (50,000) 150,000 Dizon, Capital 50,000
Domingo 300,000 (75,000) 225,000 Domingo, Capital 75,000
Mendiola 150,000 150,000 Mendiola, Capital 150,000
600,000 600,000

c. Investment Purchase Revised

Diaz 100,000 (50,000) 50,000 Diaz, Capital 50,000
Dizon 200,000 (100,000) 100,000 Dizon, Capital 100,000
Domingo 300,000 300,000 Mendiola,Capital 150,000
Mendiola 150,000 150,000
600,000 0 600,000

d. Land Revised Transfer Revised

Diaz 100,000 50,000 150,000 150,000 Land 200,000
Dizon 200,000 100,000 300,000 (150,000) 150,000 Diaz, Capital 50,000
Domingo 300,000 50,000 350,000 350,000 Dizon, Captl 100,000
Mendiola 150,000 150,000 Mendiola, Cap 50,000
600,000 200,000 800,000 0 800,000
150,000 / 50% = 300,000 – 200,000 Dizon, Capital 150,000
= 100,000 / .5 = 200,000 revaluation Mendiola, Capital 150,000

e. Investments Agreed
Diaz 100,000 100,000 Cash 200,000
Dizon 200,000 200,000 (600,000/.75) Mendiola, Capital 200,000
Domingo 300,000 300,000
Mendiola ? 200,000 (800,00 X 25%)
? 800,000

f. Investments Bonus Revised

Diaz 100,000 10,000 110,000 Cash 200,000
Dizon 200,000 20,000 220,000 Diaz Capital 10,000
Domingo 300,000 10,000 310,000 Dizon, Capital 20,000
Mendiola 200,000 (40,000) 160,000 20% Domingo, Capital 10,000
800,000 0 800,000 Mendiola, Capital 160,000

g. Bonus Revised
Diaz 100,000 (15,000) Cash 300,000
Dizon 200,000 (30,000) Diaz Capital 15,000
Domingo 300,000 (15,000) Dizon, Capital 30,000
Mendiola 300,000 60,000 360,000 40% Domingo, Capital 15,000
900,000 0 900,000 Mendiola, Capital 360,000
h. Asset
Revised
Rev Cash 300,000
Diaz 100,000 75,000 175,000 Asset 300,000
Dizon 200,000 150,000 350,000 Diaz Capital 75,000
Domingo 300,000 75,000 375,000 Dizon, Capital 150,000
Mendiola 300,000 300,000 25% Domingo,Capital 75,000
900,000 300,000 1,200,000 Mendiola, Capital 300,000

i. Asset Diaz, Capital 10,000

Revised
Impairment Dizon, Capital 20,000
Diaz 100,000 (10,000) 90,000 Domingo, Capital 10,000
Dizon 200,000 (20,000) 180,000 Assets 40,000
Domingo 300,000 (10,000) 290,000
Mendiola 240,000 240,000 30% Cash 240,000
840,000 (40,000) 800,000 Mendiola, Capital 240,000

EXERCISE 7
a.
Income and Expense Summary 30,000
Arman, Drawing 30,000

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 Arman, Drawing 15,000
Arman Capital 15,000

Arman, Drawing Arman, Capital

P 15,000 P30,000 P 100,000
15,000 15,000
P 115,000-
b.
1. Arman, Capital 115,000
Luis, Capital 57,500
Fatima, Capital 57,500

2. Arman, Capital 115,000

Luis, Capital 17,500
Fatima, Capital 17,500
Cash 150,000

3. Assets 425,000
Luis, Capital 170,000
Fatima, Capital 170,000
Arman, Capital 85,000
200,000 – 115,000 = 85,000/20% = 425,000

Arman, Capital 200,000

Cash 200,000
c.
Luis P 370,000
Fatima 470,000
Total P840,000

EXERCISE 8
Investments Bonus Agreed a) Income & Expense S 400,000
Lucas 700,000 55,000 755,000 Lucas, Capital 200,000
Brad 540,000 55,000 595,000 Brad, Capital 200,000
Ben 560,000 (110,000) 450,000 (1/4)
1,800,000 0 1,800,000

Cash 560,000 Lucas, Drawing 140,000

Lucas, Capital 55,000 Brad, Drawing 160,000
Brad, Capital 55,000 Cash 300,000
Ben, Capital 450,000

Lucas Brad Ben Income Summary 720,000

Capital, Jan.1 755,000 595,000 450,000 Lucas, Drawing 308,000
Salary Allow 140,000 160,000 Brad, Drawing 286,000
Profit Share 168,000 126,000 126,000 Ben, Drawing 126,000
Drawings (140,000) (160,000)
923,000 721,000 576,000 Land 40,000
Payment 733,000 Lucas, Capital 16,000
923,000 (12,000) 576,000 Brad, Capital 12,000
Share in Ben, Capital
16,000 12,000 12,000 12,000
Revaluation
Partners Equity 939,000 0 588,00 Brad, Drawing 126,000
Brad, Capital 607,000
Cash 733,000
EXERCISE 9
a. 2006
Entry for Investment
Cash 1,200,000
Ria, Capital 300,000
Celso, Capital 400,000
Mercy, Capital 500,000

Withdrawal
Ria, Drawing 30,000
Celso, Drawing 30,000
Mercy, Drawing 30,000
Cash 90,000

Distribution of Profit
Income Summary 250,000
Ria, Drawing 75,000
Celso, Drawing 83,333
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 Mercy, Drawing 96,667

Ria Celso Mercy

30,000 30,000 30,000 90,000
40,000 53,333 66,667 160,000
75,000 83,333 96,667 250,000

b. Ria - Celso - Mercy -

Beginning P 300,000 P400,000 P500,000
Share in Net Profit 75,000) 83,333 96,667
Drawings ( 30,000) ( 30,000) ( 30,000)
Capital, Ending P345,000 P453,333 P566,667

2007
a. Ria, Drawing 60,000
Celso, Drawing 60,000
Mercy, Drawing 30,000
Cash 150,000
a. Mercy, Drawing 30,000
Mercy, Capital 30,000
Mercy, Capital 566,667
Mercy Drawing 30,000
Payable to Mercy’s Estate 536,667

b. Income and Expense Summary 82,396

Payable to Mercy’s Estate 82,396
(350,000 – 155,000 salaries= 195,000 x
7/12 x 5/12)= 47,396 + salaries 35,000

c. Income and Expense Summary 46,430

Payable to Mercy’s Estate 46,430
(536,667+82,396 x .18 x 5/12)

d. Income and Expense Summary 218,985

Ria, Drawing 102,422
Celso, Drawing 116,563

Ria Celso Mercy Total

Salaries 60,000 60,000 35,000 155,000
Interest 46,430 46,430
Remainder 82,396 82,396
28,360 37,814 66,174

88,360 97,814 163,826 350,000

2008
Interest Expense (619,063 x .18 x 1/12) 9,286
Payable to Mercy’s Estate 619,063
Cash 628,349

EXERCISE 10
a. Capital Adjustment 20,000
Allowance for Bad Debts 20,000

Capital Adjustment 50,000

Inventories 50,000

Capital Adjustment 30,000

Accumulated Depreciation 30,000

Net Book Value P530,000

Market Value 500,000
Decrease by P 30,000

Partners’ Equity Per Books P2,280,000

Less: Capital Adjustments 100,000
Adjusted Partners’ Capital 2,180,000 /50 = 43,600 shares

b. Stocks of Win Corporation 2,180,000

Accounts Payable 200,000
Allowance for Bad Debts 25,000
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 Accumulated Depreciation 50,000
Cash 705,000
Accounts Receivable 500,000
Merchandise Inventory 700,000
Furniture and Equipment 550,000

c. Merly, Capital 680,000

William, Capital 580,000
Ana, Capital 920,000
Stocks of Win Corporation 2,180,000

d. Cash (2,500,000-2,180,000+705,000) 1,025,000

Accounts Receivable 500,000
Merchandise Inventory 700,000
Furniture and Equipment 500,000
Allowance for Bad Debts 25,000
Accounts Payable 200,000
Share Capital (50,000 x50) 2,500,000
Cash 320,000
Capital Stock 320,000

e. Cash 2,500,000
Capital Stock 2,500,000

CASE PROBLEM
Original Revised
P&L Ratio P&L Ratio
a. Joey 60% 40.00%
Frank 40% 26.67%
Bert - - 33.33%
100% 100 .%

b. Joey 40% x 600,000 P240,000

Frank 26.67% x 600,000 160,000
Bert 33.33% x 600,000 200,000
P600,000

c. Using Decrease in Net

Using old P/L Revised P&L Income/Share
Joey 60% x 600,000 P360,000 P240,000 P 120,000
Frank 40% x 600,000 240,000 160,000 80,000
Joey will benefit the least with the proposal.

Old Profit Share Proposed

Joey 60% x 450,000 270,000 180,000
Frank 40% x 450,000 180,000 120,000
No, Joey’s share will still decrease by P90,000.

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