FINANCIAL ACCOUNTING AND REPORTING

SOLUTION MANUAL

WEEK 5

TEXTBOOK

ADMISSION OF A PARTNER IN AN EXISTING PARTNERSHIP

CHAPTER 18 TRUE OR FALSE

1. T
2. T
3. T
4. F
5. T
6. T
7. T
8. T
9. T
10. T
11. T
12. T
13. T
14. T

CHAPTER 18 MULTIPLE CHOICE

1. D
2. C
3. A
4. A
5. D
6. B/C

WITHDRAWAL OR RETIREMENT/DEATH, BANKRUPTCY OF A PARTNER

CHAPTER 18 TRUE OR FALSE

1. T
2. T
3. T

CHAPTER 18 MULTIPLE CHOICE

1. A
2. D
3. D

PROBLEM 18-3
PROBLEM 18-6

Instruction No. 1

a. Capital Adjustments 20,000

Allowance for Doubtful Accounts 20,000

b. Capital Adjustments 20,000

Inventories 20,000

c. Capital Adjustments 50,000

Accumulated Depreciation 50,000

d. Capital Adjustments 10,000

Accrued Expenses 10,000

e. Jadulco, Capital (30%) 30,000

Mabad, Capital (20%) 20,000
Anghag, Capital (50%) 50,000
Capital Adjustments 100,000

Instruction No. 2

New Capital of the Partnership (After adjustment)

Jadulco, Capital (P400,000 – 30,000) = 370,000
Mabad, Capital (P280,000 – 20,000) = 260,000
Anghag, Capital (P150,000 – 50,000) = 100,000
730,000

a. P730,000 x 1/3 = P243,333

Jadulco, Capital 123,333

Mabad, Capital 86,667
Anghag, Capital 33,333
Cañete, Capital 243,333

b.

TCC TAC Bonus

Jadulco 370,000 360,250 (9,750)
Mabad 260,000 253,500 (6,500)
Anghag 100,000 83,750 (16,250)
Total 730,000 697,500 (32,500)
Cañete 200,000 *232,500 32,500
Total 930,000 930,000 P-0-

*930,000 x ¼ = 232,500

Cash 200,000
Jadulco, Capital 9,750
Mabad, Capital 6,500
Anghag, Capital 16,250
Cañete, Capital 232,500
 c.

TCC TAC Bonus

Jadulco 370,000 374,200 4,200
Mabad 260,000 262,800 2,800
Anghag 100,000 107,000 7,000
Total 730,000 744,000 14,000
Cañete 200,000 *186,000 (14,000)
Total 930,000 930,000 P-0-

*930,000 x 1/5 = 186,000

Cash 200,000
Jadulco, Capital 4,200
Mabad, Capital 2,800
Anghag, Capital 7,000
Cañete, Capital 186,000

PROBLEM 18-7

David

David

David, Capital
PROBLEM 18-8

TCC TAC Bonus

Limbago 80,000 71,000 (9,000)
Pabriga 100,000 79,000 (21,000)
Total 180,000 150,000 (30,000)
Ogatis 70,000 *100,000 30,000
Total 250,000 250,000 P-0-

*250,000 x 40% = 100,000

1. P250,000
2. P30,000 – Ogatis (new partner)
3. Cash 70,000
Limbago, Capital 9,000
Pabriga, Capital 21,000
Ogatis, Capital 100,000

TCC TAC Bonus

Limbago 80,000 90,350 10,350
Pabriga 100,000 124,150 24,150
Total 180,000 214,500 34,500
Ogatis 150,000 *115,500 (34,500)
Total 330,000 330,000 P-0-

*330,000 x 35% = 115,500

4. P34,500 – Limbago and Pabriga (old partners)

5. Cash 150,000
Limbago, Capital 10,350
Pabriga, Capital 24,150
Ogatis, Capital 115,500

CHAPTER 19 TRUE OR FALSE

1. T
2. F
3. T
4. T
5. T
6. T
7. T
8. T
9. T
10. T
11. T
12. T
13. F
14. T

CHAPTER 19 MULTIPLE CHOICE

1. C
2. B
3. A
4. A
5. C
6. C
PROBLEM 19-1

A.

B.
C.

D.
E.

PROBLEM 19-4
EXERCISE 5-1

Paraiso and Ligeralde Partnership

Cash Priority Program
June 1, 2020

Loss Absorption Balances Cash Payments

Paraiso Ligeralde Total Paraiso (60%) Ligeralde (40%)

Capital 225,000 175,000
÷ P/L Ratio 60% 40%
Loss Absorption Ability 375,000 437,500
Excess of Ligeralde (62,500) 25,000 25,000
Balance 375,000 375,000

Partners
Cash Available to Paraiso (60%) Ligeralde (40%)
Partners
1st installment 20,000 - 20,000
June
2nd installment 125,000 72,000 53,000
July (120,000 x 60%) [5,000 + (120,000 x 40%)]

3rd installment 225,000 135,000 90,000

August (225,000 x 60%) (225,000 x 40%)

Answers:
1. P20,000
2. P72,000
3. Ligeralde – P90,000; Paraiso – P135,000
EXERCISE 5-2

Loss Absorption Balances Cash Payments

Bernardino Lee Ong Total Bernardino Lee Ong

4 4 2
Capital 150,000 350,000 200,000
Loan 100,000 100,000 150,000
Total Interest 250,000 450,000 350,000
÷ P/L Ratio 4/10 4/10 2/10
Loss Absorption Ability 625,000 1,125,000 1,750,000
Excess of Ong over Lee (625,000) 125,000 125,000
Balance 625,000 1,125,000 1,125,000
Excess of Ong and Lee
over Bernardino (500,000) (500,000) 300,000 200,000 100,000
Balance 625,000 625,000 625,000

Assume that P250,000 cash is available for initial distribution, prepare the entries to record the distribution to the partners.

Partners
Total Bernardino Lee Ong
4 4 2
125,000 125,000

125,000 83,333 41,667

[125,000 x (200K/300K)] [125,000 x (100K/300K)]

250,000 0 83,333 166,667