Name: Date:

Subject: Section and time:

Problem 1
Cortez admits Divino for a partnership interest in his business. The statement
of financial position of Cortez on November 30, 2013 prior to the admission of
Divino shows the following:
Accounts Debit Credit
Cash P?
Accounts receivable 96,000
Merchandise inventory 144,000
Accounts payable P49,600
Cortez, capital ?
It is agreed that for purpose of establishing cortez’s interest, the following
adjustment should be made:
a) An allowance for doubtful accounts of 2% of accounts receivable should
be established.
b) The merchandise inventory is to be valued at P160,000.
c) Prepaid expenses of P5,200 and accrued expenses of P3,200 are to be
recognized.
Divino invested cash of P113,640 to give him a one-third interestin the total
capital of the firm. What is the capital balance of cortez before the
admission of Divino?

Problem 2
The income statement of King and Queen partnership of the year ended December
31, 2008 show a net income of P80,000. The capital accounts of the partners
for 2008 shows the following:
a. King began the year with a capital balance of P40,000.
b. Queen began the year with a capital balance of P100,000.
c. On April 1, King invested an additional P15,000 into the partnership.
d. On August 1, Queen invested an additional P30,000 into the partnership.
e. Throughout 2008, each partner withdrew P400 per week in anticipation of
partnership net income. The partners agreed that these withdrawals are
not to be included in the computation of average capital balances for
purposed of income distributions.
King and Queen have agreed to distribute partnership net income according to
the following plan.

Allocation King Queen

Interest on average capital balances 10% 10%
Bonuses on net income before salaries,
but after interest and bonuses 25% None
Salaries P25,000 P30,000
Residual (if positive) 70% 30%
Residual (if negative) 50% 50%
What are the capital balances of the partners on December 31, 2008?

Problem 3
The following are the capital account balances and the profit and loss ratio
of the partners in PME Company on December 31, 2001:
Capital Account Profit and Loss
Porschia P240,000 25%
Montero 320,000 50%
Ellen 800,000 25%
On January 1, 2002, Lani is admitted to the partnership under the following
agreement:
a) Lani is to share 1/3 in the profits and loss while the other partners

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

continue to participate in profits and loss in their original ratio.

b) Lani is to pay Montero, P96,000 for a 1/4 of the latter’s equity in the
partnership net assets and is to invest P560,000 cash in the
partnership.
c) The total capital after Lani’s admission is to be P2,080,000 of which
Lani’s capital account is to show P600,000.
The capital account balances of the partners after Lani’s admission are:

Problem 4
Perez contributed P24,000 and Cadiz contributed P48,000 to form partnership,
and they agreed to share profits in the ratio of their original capital
contributions. During the first year of operations, they made a profit of
P16,290; Perez withdrew P5,050 and Cadiz P8,000. At the start of the following
year, they agreed to admit Gomez in the partnership. He was to receive a one-
fourth interest in the capital and profit upon payment of P30,000 to Perez and
Cadiz, whose capital accounts were to be reduced by transfer to Gomez’s
capital account of amounts sufficient to bring them back to their original
capital ratio.
How should the P30,000 paid by Gomez be divided between Perez and Cadiz?

Problem 5
On april 27, 2011, the capital accounts of Gee Ann, Jerlin Mae, and Wingelfeb
shows the following balances:

Gee Ann P360,000

Jerlin Mae 225,000
Wingelfeb 135,000
At this time, Carlo Amarto is admitted to the firm when he purchase a one-
sixth interest in the firm for P82,500. The old prtners equalized their
capital investments. Afterwards, all the partners agree to divide profits and
losses equally. The new partnership closes its books on June 30, 2011
reporting a profit a profit of P12,600 for two months. The partners made the
following withdrawals: Gee Ann and Wingelfeb, P750 per month; Jerlin Mae and
Carlo Amarto, P1,000 per month. On June 30,2011, Carlo Amarto invest cash
enough cash to increase his capital to a one-third interest in the
partnership. How much cash is to be invested by Carlo Amarto?

Problem 6
Deita, Duculan and Francisco were partners with capital balances on January 2,
2011 of P100,000, P150,000 and 200,000, respectively. Their profit and loss
ratio is 15:9:6. On July 1, 2011, Deita retires from partnership. On the date
of retirement the partnership income is P140,000 and the partners agreed that
inventories are to be revalued at P70,000 from its original cost of P50,000.
The partners agreed further to pay Deita P195,000 in settlement of his
interest. What are the capital balances of the remaining partners after the
retirement of Deita?

Problem 7
Malino, Marapo and Mesa are partners sharing profits and losses in the ratio
of 20:12:8. During the year their investment and withdrawals are as follows:
Partners Investment Withdrawals
Malino P40,000 P25,000
Marapo 35,000 12,500
Mesa 75,000 12,500

On December 31, 2011, the partners decided to liquidate the business. After

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

exhausting partnership assets, liabilities of P25,000 remain unpaid. Malino is

personally insolvent. The gain or (loss) on realization and the amount of cash
Mesa will receive upon liquidation are:

Problem 8
On December 31, 2011, the accounting records of Louie, Louis and Louella
partnership included the following ledger account balance:
Receivable from Louie P232,320 Louie, Capital P974,160
Loan to Louella 70,400 Louis, Capital 796,400
Salary payable to Louie 237,600 Louella, Capital 855,360

Total assets include cash amounting to P412,720. The partnership was

liquidated on December 31, 2011, and Louie receive P618,640 cash pursuant to
the liquidation. Louie, Louis and Louella shared net income and losses in a
8.8:5.28:3.52 ratio respectively. In the settlement to partners, how much cash
is paid to Louis?

Problem 9
When Allan and Mahalaleel, partners who share profit equally, were
incapacitated due to an airplane accident, a liquidator was appointed to wind
up their partnership. Their statement of financial position before liquidation
is as follows:
Assets Liabilities and Capital
Cash P61,950 Liabilities P33,630
Other assets 177,000 Allan, Capital 127,440
Goodwill 17,700 Mahalaleel, capital 95,580
Total assets P256,650 Total liabilities and capital P256,650

The liquidator anticipates that considerable time would be required to dispose

the assets. The expenses expected to be incurred in liquidating the
partnership are estimated at P17,700. At this time the amounts of cash to be
distributed safely to each partner are:

Problem 10
The statement of financial position for Celso and Jufel partnership on June 1,
2011 before liquidation is as follows:
Assets Liabilities
Cash P5,000 Liabilities P20,000
Other assets 55,000 Celso, Capital (60%) 22,500
Staple wire 0 Jufel, Capital (40%) 17,500
Total assets P60,000 Total P60,000

In June, assets with a book value of P22,000 are sold for P18,000, creditor
are pain in full, and P2,000 is paid to partners. In July, asset with book
value of P10,000 are sold for P12,000, liquidation expenses of P500 are paid
and cash of P12,500 is paid to partners. In August the remaining assets are
sold for P22,500. In July, Celso should receive:

Problem 11
PapuaPerez contributed P24,000 and Cadiz contributed P48,000 to form
partnership, and they agreed to share profits in the ratio of their original
capital contributions. During the first year of operations, they made a profit
of P16,290; Perez withdrew P5,050 and Cadiz P8,000. At the start of the
following year, they agreed to admit Gomez in the partnership. He was to
receive a one-fourth interest in the capital and profit upon payment of
P30,000 to Perez and Cadiz, whose capital accounts were to be reduced by
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

transfer to Gomez’s capital account of amounts sufficient to bring them back

to their original capital ratio.
How should the P30,000 paid by Gomez be divided between Perez and Cadiz?

Problem 12
On april 27, 2011, the capital accounts of PapuaGee Ann, Jerlin Mae, and
Wingelfeb shows the following balances:
Gee Ann P360,000
Jerlin Mae 225,000
Wingelfeb 135,000

At this time, Carlo Amarto is admitted to the firm when he purchase a one-
sixth interest in the firm for P82,500. The old prtners equalized their
capital investments. Afterwards, all the partners agree to divide profits and
losses equally. The new partnership closes its books on June 30, 2011
reporting a profit a profit of P12,600 for two months. The partners made the
following withdrawals: Gee Ann and Wingelfeb, P750 per month; Jerlin Mae and
Carlo Amarto, P1,000 per month. On June 30,2011, Carlo Amarto invest cash
enough cash to increase his capital to a one-third interest in the
partnership.
How much cash is to be invested by Carlo Amarto?

Problem 13
C and M formed a partnership on January 2, 2005, and agreed to share profits
90%, 10% respectively. C contributed capital of P 25,000. M contributed no
capital but has specialized expertise and manages the firm full time. There
were no withdrawals during the year. The partnership agreement provides for
the following:
 Capital accounts are to be credited annually with interest at 5% of
beginning capital.
 M is to be paid a salary of P 1,000 a month.
 M is to receive a bonus of 20% on income calculated before deducting his
salary and interest on both capital accounts.
 Bonus, interest, and M’s salary are to be treated as expense.
The partnership’s 2005 net income statement showed the following:
Revenue P 96,450
Expenses (including salary, interest, and bonus) 49,700
Net income P 46, 750
Requirement: compute the share of M

Problem 14
A, B and C became partners on January 1, 2001. There was a provision in their
original agreement that profits will be shared equally. The capital
contributions were: A- P 20,000, B- P 30,000, and C- P 50,000.
As of January 1, 2004 the partnership agreement was amended to provide
thereafter for distribution of profits in the original capital ratios. This
agreement is still in effect.
You have been called in as of December 31, 2008, to review their books and
records and to advise them of their proper capital balances.
An examination of their records disclosed the following:
 Assets per book 12/31/08 – P 270,000 ; liabilities- P 95,000
 Capital balances on 12/31/08
A- P 70,000
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

B- 50,000
C- 55,000

Profit per book:

2001 P18,000 2005 P16,000
2002 14,000 2006 20,000
2003 16,000 2007 18,000
2004 14,000 2008 22,000
The review of the principal records revealed that some materials errors had
been made at various times. These errors were as follows:
a. December 31,2001 inventory was overstated by P 15,000
b. December 31, 2001 depreciation was overstated by P 3,000
c. December 31, 2003 inventory was overstated by P 8,000
d. December 31, 2006 depreciation was understated by P 3,000
e. December 31, 2008 inventory was understated by P 20,000

Requirement: what are the adjusted capital balances of the partners on

December 31, 2008?

Problem 15
NN, OO and PP form a partnership on July 1, 2010, each invest cash of P
25,000. On August 1, 2010. NN was advance P 10,000 by the firm. On September
1, 2010, OO made a P 20,000 loan to the firm. Interest is to be charged on
advances to partners and credited on loan by partners at the rate of 6%.
Business is unsatisfactory and the partners decide to liquidate the firm. PP
is allowed a special compensation of P 2,500 for managing the sale of assets
and settlement with creditors. On December 31, 2010, all assets have been
sold. Outside creditors have been paid, and cash of P 35,000 is distributed to
partners. All partners are personally solvent and final settlement is made
among the partners on February 10, 2011. In the final settlement who will
receive cash from the other partner and how much?

Problem 16
Aa and BB formed a partnership in 2012 and made the following investment and
capital withdrawals during the year:

AA BB
Investment Drawing Investment Drawing
March 1 P30,000 P20,000
August 1 20,000 P2,000
December 1 5,000
June 1 10,000 10,000

The partnership profit and loss agreement provides for a salary which P30,000
was paid to each partner for 2012. AA is to receive a bonus of 10% on net
income after salaries and bonus. The partners are also to receive interest of
8% on average annual capital balances affected by both investment and
drawings. Any remaining profits are to be allocated equally among the
partners.
Assuming net income of P60,000 before salaries and bonus, determine how the
income would be allocated among the partners.

Problem 17
The Philippines was in agricultural crisis in this current year. Many
businesses were closing and others try to stay, however, they have to combine

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

with other businesses in order to avoid capital deficits. With regards to this
situation, Mario and Luigi decided to consolidate their businesses into RICE
Partnership on July 2, 2001 wherein they will participate in the profits in
the ratio of 40% and 60%, respectively. Their balances on this date are:

Mario Company
Balance Sheet
July 1, 2001

Assets
Cash P 2,900
Accounts Receivable P 116,000
Less: Allowance for Doubtful Accounts 11,600 104,400
Merchandise Inventory 8,700
Furniture and Fixtures P 36,250
Less: Accumulated Depreciation 7,250 29,000
Total Assets P 145,000

Liabilities and Capital

Accounts Payable P 58,000
Mario, Capital 87,000
Total Liabilities and Capital P 145,000

Luigi Company
Balance Sheet
July 1, 2001

Assets
Cash P 36,250
Accounts Receivable P 43,500
Less: Allowance for Doubtful Accounts 4,350 39,150
Merchandise Inventory 14,500
Delivery Equipment P 65,250
Less: Accumulated Depreciation 13,050 52,200
Total Assets P 142,100

Liabilities and Capital

Accounts Payable P 42,050
Luigi, Capital 100,050
Total Liabilities and Capital P 142,100

Conditions agreed upon before the formations are:

a. The accounts receivable of both parties are estimated to be 20%
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

uncollectible.
b. The furniture and fixtures of Mario is under depreciated by P 2,900.
c. The delivery equipment of Luigi should be depreciated by P 8,700 more.
d. The new capital of the partnership is based on the adjusted capital
balance of Luigi so that Mario may either withdrew or contribute
additional cash in order to make the partner’s capital balance
proportionate to their profits and loss ratio. This is not recorded in
the books of Mario.
e. A new set of books will be used by the partnership.

REQUIRED:
1) Prepare the required journal entries:
A. In the books of Mario and Luigi showing the adjustments of assets and
the closing of the books.
B. In the new partnership books to record the investment of the
partners.
2) After formation, compute the:
A. Total assets of the partnership
A. Total capital of the partnership
3) Prepare journal entries and compute the capital balances of the partners if
capital balances are to be made proportional to the Profit and Loss Ratio and
no partner will withdrew nor invest cash, under both the Bonus and Goodwill
methods.
4) Prepare journal entries and compute capital balances if capital balances
are to be made proportional to Profit and Loss Ratio, with an agreed capital
of P 174,000.

Problem 18
Smile Company sells appliances on the regular and on installment basis. Below
are information for the past three years:
2012 2013 2014
Installment sales (list price) ? P220,000 ?
Regular sales 1,500,000 1,200,000 800,000
Cost of installment sales 450,000 ? 260,000
Cost of regular sales 1,200,000 900,000 560,000
Deferred gross profit (beg)- ? 190,000 ?
2012 sales
Deferred gross profit (beg)- 51,700 ?
2013 sales
Deferred gross profit (beg)- ?
2014 sales
Gross profit of installment 40% ? 35%
sales
Installment receivable, end- 475,000 200,000 0
2012
Installment receivable, end- 100,000
2013
Installment receivable, end- 100,000
2014
Receivable, end- 2012 1,000,000 500,000 0
Receivable, end- 2013 ? ?
Receivable, end- 2014 500,000
 On 2013, repossession on defaulted accounts included one made on a 2012
sale for which the unpaid balance amounted to P10,000. The fair value of

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

the repossessed merchandise after the reconditioning cost is P5,500.

 On 2014, P15,000 of account receivable from 2012 installment sales was
written-off.
 On beginning of 2013, Smile grant an allowance of P85,000 for an old car
as trade-in, the current value of which was estimated to be P81,700.
Cash at the time of purchase P35,000, balance was payable in four years
installment payment with 12% interest applicable to unpaid balance.
First payment was made on January 1, 2014. (use two decimal places for
gross profit percentage)
Requirement: Prepare all the necessary entries

Problem 19
The trial balance of PapuaAT-1 Appliance Corporation as of the end of the
fiscal year on September 30, 2012 is:
Accounts Debit Credit
Accounts receivable P200,000
Accounts payable P200,000
Allowance for depreciation 67,500
Capital stock 250,000
Cash 92,500
Deferred gross profit- 2011 100,000
Equipment 225,000
Installment contract receivable- 25,000
2011
Installment contract receivable- 300,000
2012
Installment sales 750,000
Inventory, Sept. 30,2011 125,000
Loss on repossessions 7,500
Prepaid expenses 7,500
Purchases 870,000
Repossessions 5,000
Retained earnings 60,000
Sales 625,000
Selling and administrative 195,000
expenses
Total P2,052,500 P2,052,500
The post-closing trial balance on September 30, 2011 shows the following
balances of certain accounts:
Installment contract receivable- P200,000
2011
Deferred gross profit- 2011 100,000
The gross profit percentage on regular sales during the year was 30%.
The accountant made the following entry for repossession on a sale of 2011
towards the end of fiscal year:
Repossessions P5,000
Loss on repossessions 7,500
Installment contract receivable- 2011 P12,500
The inventory of new and repossessed merchandise on September 30, 2012
amounted to P150,000. Compute the realized gross profit for the fiscal year
September 30, 2012:
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

Problem 20
PapuaAnne Lee purchased two adjoining 75-foot business lots in 2001. Lot No.
1 was purchased early in that year for P360,000 and Lot No. 2 was purchased
later in the same year for P240,000. Anne made three 50-foot lots out of the
original two by taking 25 feet from each to made Lot No. 3. The cost of the
lot was determined by allocating a portion of the cost of the original two
lots to it. Anne then built a store in Lot No. 3 at a cost of P360,000. It
was completed on June 30, 2002, and had an estimated life of 20 years. The
three pieces of property were sold during 2002 on the following terms:

Date
Sales
of Equal Installment
Lot No. Price
Sale Down payment Payments
Oct.
1 P360,000 31 P72,000 P12,000 every 2 months
Mar.
2 400,000 31 36,000 16,000 every 3 months
June
3 840,000 30 120,000 40,000 every 6 months
Each installment payment is to be first applied to accrued interest on the
principal amount owed at the rate of 6%, the balance to the principal’s
reduction.
Compute the gross profit rate of each lot and the realized gross profit for
2002.

Problem 21
PapuaMercy Sales Company employs the perpetual inventory basis in its
accounting for new cars. On August 15, 2011, a new car was sold to Rose Castro
with a list price of P440,000 costing P330,000. It granted Ms. Castro an
allowance of P170,000 for her old car as trade-in, the current value of which
was estimated to be P163,400. The balance of P270,000 was payable as follows:
cash at time of purchase P70,000 balance in 20 monthly payment of P10,000,
first payment being made on September 1, 2011. On April 1, 2012, Ms. Casto
defaulted in the payment of March 1, 2012 installment. The new car sold was
repossessed; its value to the seller is P80,000. (Use two decimal places for
gross profit percentage). The total realized gross profit on installment sales
in 2011 and the gain or (loss) on repossession in 2012.

Problem 22
PapuaGowipe Motor sells cars both on installment and cash basis. On March 30,
2011, Gowipe Motors sold a car to Mr. Gowiwi for P525,000 costing P414,000. A
used car is accepted as down payment, P128,000 being allowed on the trade-in.
the used car can be resold of P160,200 after reconditioning cost of P7,660.
The company expects to make 20% a gross profit on the sale of used car. The
balance of the sale is to be paid on a 10-month installment basis starting May
1, 2011. Mr. Gowiwi defaulted payment starting November 1, 2011 and the car
was immediately repossessed. The repossessed car was appraised at a value of
P93,750 at the time of repossession. Gowipe Motors had to incur additional
cost of repair amounting to P9,250 before the car was subsequently resold on
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

December 1, 2011 for P128,750 cash to Mr. Barcher.

What is the net income for the year ended December 31, 2011?

Problem 23
PapuaBanog Video Company sells Betamax equipment. It maintains its accounting
records on a calendar year basis. On October 1, 2010, Banog Video Company sold
a Beta-Hifi set to Mr. Hubag. The cost of the set was P36,000, and the set was
sold for P48,000. A down payment of P12,000 was received along with a contract
calling for the subsequent payment of P2,000 on the first day of each month
starting on the following month. No interest was added to the contract. Mr.
Hubag paid monthly installments promptly on November 1 and December 1 in 2010.
He also made seven installment payments in 2011 after which he defaulted on
the contract. The set was then repossessed on November 1, 2011.
Assuming the repossessed set has a fair value of P8,000, what is the gain
(loss) on repossession to be recognized?

Problem 24
PapuaAcne Company, which began operations on January 2, 2011 appropriately,
uses the installment method of accounting. The following data pertains to 2011
operations:
Installment sales P1,800,000
Regular sales 750,000
Cost of regular sales 430,000
Cost of installment sales 1,260,000
Fair value of repossessed merchandise 108,000
Operating expense 144,000
Collection (including interest of 624,000
P48,000)
Installment accounts written-off due to 88,000
defaults
Repossessed accounts 200,000
Reconditioning cost 8,000
What is the net income for the year ended December 31, 2011?

Problem 25
On December 31, 2001, Kays, Inc. authorized by PapuaManny to operate as a
franchise for an initial franchise fee of P 142,500. Of this amount, P57,000
was received upon signing the agreement and the balance represented by a note,
is due in three annual payments of P 28,500 each beginning December 31, 2002.
The present value on December 31, 2001, for three annual payments
appropriately discounted is P 68,400. According to the agreement, the
nonrefundable down payment represents a fair measure of the services already
performed by Manny and substantial future services are still to be rendered.
However, the collectability of the note is not reasonably assured.
Manny’s December 31, 2001, balance sheet, unearned franchise fee from Manny’s
franchise should report as?

Problem 26
On December 31, 2002, PapuaJude Inc. signed an agreement authorizing Jack
Company to operate as a franchise for an initial franchise fee of P47,500. Of
this amount, P 19,000 was received upon signing of the agreement and the
balance is due in three annual payment of P 9,500 each credit rating is such
that collection of the note is reasonably assured. The present value at
December 31, 2002 of the three annual payments discounted at 14% (the implicit

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

rate for a loan of this type) is P 22,059. Prepare all the necessary
journal entries.

Problem 27
On December 31, 2002, PapuaJerwin Company signed an agreement to operate as
franchise of Jeffrey for a franchise fee of P 76,000. Of this amount, P28,500
was paid upon signing of the agreement and the balance is payable in five
annual payment of P 9,500 each beginning December 31, 2002. The present value
of the five payments, at an appropriate rate of interest, is P 34,200 at
December 31, 2002. The agreement provides that the down payment is not
refundable and no future services are required of the franchiser. The
collection of the note receivable is reasonably certain.
Jeffrey Company should report unearned revenue from franchise fee in its
December 31, 2002 balance sheet at:

Problem 28
Each of PapuaBilly Pan Pizza Company’s 20 new franchises contracted to pay an
initial franchise fee of P 28,500. By December 31, 2000, each franchise had
paid a nonrefundable P 9,500 fee and signed a note to pay P 9,500 principal
plus the market rate of interest on December 31, 2001, and December 31, 2002.
Experience indicates that five franchises will default on the additional
payments. What amount of earned franchise fees would Billy Pan Pizza Company
report at December 31, 2000:

Problem 29
Halong Co. sold ten computers on installment basis on August 31, 2011. The
unit cost to the company was P6,840, but the installment selling price was set
at P12,240 per unit. Terms of payment included the acceptance of used
refrigerators with a trade-in allowance of P43,200. Cash of P7,200 was paid as
down payment in addition to the trade-in refrigerators with the balance to be
paid in 10 monthly installments due at the end of each month starting
September 30, 2011.
It would require P900 to recondition the used refrigerators. After the
reconditioned of trade–in, Halong was able to sell the used refrigerators with
15% gross profit to Engat for P42,000 accounted on installment basis. Total
collection of sold refrigerators were P20,000.
On November 31, the customer defaulted the first two months for four computer
and when no further collection could be made, the four computer sold was
repossessed. The fair value of each repossessed computer is P4,500 after
reconditioning cost of P200.
Except of repossessed computer, the installment receivable from computers were
collected on due time. The total operating expense (excluding loss on
repossession) was P11,120.
Compute the (1) net income for the year 2011 (2) the gross profit rate from
installment sales-computer (base on sale) (3) and the realized gross profit
from installment sales-computer.

Problem 30
A balance sheet for the Chaves Company as of January 1, 2000, is given below:
Balance Sheet
Assets | Liabilities & Stockholders’ Equity
|
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

Cash P 15,000| Accrued Expenses P 250

|
Accounts Receivable P42,000 | Accounts Payable 33,750
|
Less: Allowance for | Capital Stock 50,000
Bad Debts 1,200 40,800| Retained Earnings
28,200 Merchandise Inventory 46,000|
Furniture & Fixture P15,000 |
Less: Accu. Dep’n 4,600 10,400 |
___________
P 112,200| P
112,200 ======= |
========
On this date a branch sales office is established in Cotabato. The Branch was
sent the following assets by the home office upon its organization.

1. Cash, P 1,500.

2. Merchandise at cost, P10,200.

3. Furniture & Fixtures previously used by the home office cost, P

3,000; age 2.5 years; depreciation rate used in the past, 10% a
year. The fixed assets accounts are to be carried on the books of
the home office.

4. Accounts receivable, P 2,600. Accounts arose from sales by the

home office to customers in Cotabato. The branch is authorized to
take over the accounts and make collections.

Home office and branch transactions with outsiders during January were:

H.O. Branch

5. Sales on account. . . . . . . . . . P 34,600 P 6,200

6. Collection on own accounts. . . . . . 40,000 2,600

7. Purchases on account . . . . . . . . .31,600 3,000

8. Payments of accounts . . . . . . . . .36,200 1,450

9. Payments of expenses(including accruals as of Jan

1) . . . . . . . . . . . 9,200 1,250

10. The following took place with respect to accounts received by the
branch from the home office; collections of P 1,600 were made;
accounts of P 150 were uncollectible and were written-off; it is
believed that the remaining accounts of P 850 are collectible.

Interoffice transactions during January were:

11. shipments to branch, cost, P 1,200.

12. Cash remittance to home office, P 1,000.

The following information is to be recorded on January 31:

a. Merchandise costing P 600 was shipped by the home office to the

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

branch on January 31; this merchandise is in transit and will not

reach the branch until February 2. (This shipment is not included
in transfers previously mentioned.)

b. Expenses paid by the home office during the month that are
chargeable to the branch total P 475. (These are included in the P
9,200 amount.)

c. Depreciation on furniture & fixtures is recorded at the rate of

10% a year.

d. Accrued expenses are: home office, P 750; branch, P 350.

e. Merchandise inventories, excluding merchandise in transit are:

home office, P 44,500; branch, P 9,800.

REQUIRED:

1. Prepare journal entries to record the foregoing transactions in

the books of (a) the Branch and (b) the Home Office.

2. Prepare individual statements for the branch and for the home
office.

3. Prepare the combined statements for the branch and for the home
office.

4. Prepare journal entries to adjust and close the books at the end
of the month for (a) the Branch and (b) the Home Office.

Problem 31
Entries on the books of the Home Office have been made correctly but some have
not yet been recorded. Reconcile the following reciprocal account to the
correct balances as of June 30, 2000:
(Home office Books) (Branch Books)

Branch Current Home Office Current

Balance Balance
brought brought
Forwarded P 15,000 Forwarded P 15,000

6/12 4,650 6/16 P 9,400 6/16 P 940 6/12

4,650

6/21 1,500 6/16 4,500 6/16 5,400 6/21

1,500

6/28 6,000 6/18 3,200 6/18 3,200 6/27

1,100

6/28 6,400 6/20 1,200

Problem 32
On December 31, 2000, the Branch Current account on the Home Office books
shows a balance of P 45,000. The following facts are ascertained:
When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

a. Merchandise billed at P 4,500 is in transit on December 31, 2000 from the

Home Office to the Branch.

b. The Branch collected a Home Office account received for P 1,800. The
branch did not notify the Home Office of cash the collection.

c. On December 30, the Home Office mailed a check of P 9,000 to the Branch
but the bookkeeper charged the check to the General Expense; the branch
has not received the check as of December 31, 2000.

d. Branch profit for December was recorded by the Home Office at P8,010
instead of P 8,820.

e. The Branch returned supplies of P 900 to the Home Office but the home
office has not yet recorded the receipt of the supplies.

Assume all other transactions have been properly recorded.

REQUIRED:

1. Compute the balance of the Home Office Current account on the Branch
books as of December 31, before its adjustments.

2. Prepare a reconciliation statement to compute the adjusted balances

on December 31, 2000.

3. Prepare adjusting entries on the book of the Home Office and the
Branch.

Problem 33
A1. Kim Corporation has been operating a Branch in Bukidnon for a year.
Shipments are billed to the branch at cost. The Branch carries its own
accounts receivable, makes its own cash collections, and pays its own
expenses. The transactions for the year 2000 are given effect in the trial
balance below:

Debits Credits

Cash P 7,650
Home office current P 31,500
Shipments from home office 121,500
Accounts Receivable 22,500
Sales 132,300
Expenses 12,150 _________
P 163,800 P 163,800
======== ========

The branch inventory on December 31, 2000 is P 16,650.

1. On December 31,2000, the Branch Current account on the books of the

home office should have a balance of:

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

2. On December 31, 2000, the Shipment to Branch account on the home

office books should have a balance of:

Problem 34
On May 31, 2000, the branch manager of Trux Company in the Tuguegarao region
submitted the following data to the home office in Manila:

Petty cash fund P 1,350

Sales 178,848
Sales returns 3,240
Accounts write-off 1,728
Shipments from home office 122,400 Accounts
receivable, May 31, 1999 39,420 Accounts receivable,
May 31, 2000 44,226 Inventory, May 31, 1999
33,453 Inventory, May 31, 2000
37,233 Expenses (charged by home office) 52,137

All cash collected on accounts receivable are remitted to the home office.

1. The balance of the Home Office Current account on May 31, 1999 is

2. The net income of the Tuguegarao branch for the fiscal period ending
May 31, 2000 would be:

3. The total remittance for the fiscal period would be:

4. On June 1, 2000, the Branch Current account on the Home Office books
would show a balance of:

A reconciliation of the Branch Current account in the head office of Mike

Company and the Home Office Current account carried on the branch books
showed the following discrepancies at December 31, 2000:

a. Collection of branch accounts receivable by the home office, P 720.

The branch was not notified.

b. Shipment in transit to branch on December 31, 2000, P 2,880.

c. Acquisition of Furniture account by the branch, P 1,080. The furniture

account is to be maintained on the home office books. The home office
had not been notified of the acquisition.

d. Return of excess merchandise by the branch but not received yet by the
home office, P 1,350.

e. Cash remittance by the branch on December 31, 2000, P 450. This was
still in transit.

The Home Office Current account on the branch books has a credit balance of
P 39,600 at December 31, 2000. Compute: (1) the unadjusted balance of the
Branch Current account on the home office books at December 31, 2000; (2)
the adjusted balance of the reciprocal accounts on December 31, 2000:

Problem 35
The Branch Current account on the home office books of the Tuazon Company and
the Home Office Current account on the branch books on January 31, 2000 are as

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4
Name: Date:
Subject: Section and time:

follows:

Branch Current

2000 | 2000
Jan. 1 Balance P 50,252 | Jan. 15 Remittance P 8,480
Merchandise | 22 Merchandise
Shipments: 100 | returns
328 units of Product A |
at P 30.28 3,028 |
12 Merchandise |
Shipments: 200 |
units of Product A |
at P 30.28, and 200 |
units of Product B |
at P 25.96 11,248 |
15 Advertising |
chargeable to the Branch 480 |
29 Merchandise |
shipments 3,520 |

Home Office Current

2000 | 2000
Jan. 13 Remittance P 8,480 | Jan. 1 Balance
P 50,252 18 Merchandise | 8 Merchandise
returns 328 |
shipments 3,028 22 understatement of |
16 Merchandise depreciation in |
shipments 11,428 1999 432 |
20 Collection of 31 Remittance 12,800 |
HO-Accounts R’Ble 600

The adjusted balance of the reciprocal account as of January 31, 2000 is:

When thou vowest a vow unto God, defer not to pay it; for he hath no pleasure in fools: pay that which thou hast
vowed
Ecclesiastes 5:4