Professional Documents
Culture Documents
*NOTES:
Quick Notes in AFAR To transfer the
the depreciable
depreciable asset, it should
should be in net amount.
amount.
To transfer the accounts receivable to the new book, it should not be in net
I. PARTNER
PARTNER SHIP amount.
₱3000 PURPOSE: To engage other party
PARTNERSHIP FORMATION The juridical personality of
of the partnership
partnership arises from the meeting of minds.
minds.
VALUATION: Partnership by Estoppel – legally binding the partnership but no formal
agreement
1. Cash – Face Value Limited Partnership – two or m ore general partners and one or more limited
2. Land, Depreciable
Depreciable Asset, & NCA partners
a. Agreed Value Particular Partnership – single transaction
b. Fair Value
c. Appraised Value
PARTNERSHIP OPERATION
d. Carrying Value/Book Value
3. Liabilities – are considered assumed if the problem is silent 1. Salaries
4. Inventory – Lower of Cost and Net Realizable Value (LCNRV) This could
could be fractional year
5. Capital Given, regardless
regardless of the result of operation
5.1. Bonus Method
5.2. Investment/Withdrawal
Investment/Withdrawal Method 2. Interest
This could
could be in
in fractional
fractional year
BONUS METHOD Given, regardless
regardless whether
whether there is profit or
or loss
(*The problem is silent) (*Use the salary/interest ratio if the problem states that the amount to be
1. There would be a transfer of capital. distributed to the partners is up to the extent of profit only or the profit is
2. There is no recognition
recognition of goodwill. distributed based on the priority.)
3. The total asset and capital will remain unchanged.
3. Bonus
INVESTMENT/WITHDRAWAL This is given ifif there is a profit only
Bonus is not always
always given
given if there is profit
1. Agreed Capital is more than Unadjusted Capital = Investment
Unadjusted Capital
2. Agreed Capital is less than Unadjusted Capital = Withdrawal
Unadjusted Capital CASE 1 : Net Income of ₱500000 before salaries of ₱55000, interest of
₱13000, and bonus of 15%
ADJUSTING ENTRIES
(*Use contra-asset)
contra-asset)
B=
1. Building – Carrying Value: ₱10M, Agreed Value: ₱15M
Accumulated Depreciation
Depreciation ₱5M
Capital ₱5M
B=
2. Accounts Receivable – Cost: ₱10000, NRV: ₱ 9000 B=
Capital ₱1000
Allowance for Doubtful Accounts
Accounts ₱1000 B = ₱56, 347.83
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
CASE 2: Net Income of ₱100000 before salaries of ₱5000, interest of ₱3000, and 2. Admission by
by Purchase
Purchase with Revaluation
bonus of 10% Two Steps to be followed:
Determined the asset
asset revaluation
B=
Distribute the interest to the buying
buying partner
TCC TAC Bonus / UVA / OVA
B=
*TAC=TCC *TAC>TCC *TAC<TCC
0 + −
B=
B = ₱12,000 Purchase Price ₱xx
Divided by: New Interest of New Partner xx
*NOTES: Advances made by the partnership to a partner are included in capital Adjusted Capital
Capital xx
interest but shall not affect the capital balance of a partner. Add: Unadjusted
Unadjusted xx
Undervalued Asset (UVA) xx
PROFIT RATIO LOSS RATIO Multiply: Percentage %
1. Profit Ratio, Loss Ratio _ xx
2. Profit Ratio, Profit Ratio x _ Add: Capital xx
3. Original Capital Ratio, Loss ratio x _ xx
4. Original Capital Ratio, Original Capital Ratio x x _ Multiply: (100% - New Partner %) xx
₱xx
EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL:
1. 1/1 ₱1000 × 6/12 = ₱ 500 2. ₱500 × 12/12 = ₱500 RETIREMENT
7/1 800 × 3/12 = 200 100 × 9/12 = 75 1. Compute the capital balance
balance before retirement
10/1 1500 × 3/12 = 375 (200) × 3/12 = (50) a. Capital balance
₱1075 ₱525 b. Share in net income/net loss
c. Drawings
*NOTE: d. Additional investment
P/L = Silent Original Capital e. Revaluation of UVA
Interest = Silent Average Capital f. Revaluation of OVA
Net income after interest
interest and salary
salary but before
before bonus
bonus g. Condonation of the partnership
partnership liability/receivable
liability/receivable of your
your debtor
Formula: Net Income – Total Interest – Total Salary = Bonus
Interest = Bonus to the retiring partner
2. Settlement is more than Capital Interest
PARTNERSHIP DISSOLUTION If the Settlement is less than Capital Interest = Bonus to the remaining
partner
- Change in numbers of partners.
STEPS IN LUMP SUM LIQUIDATION If A received ₱35500, how much was given to J?
1. Realization of Non-cash Asset (Profit/Loss)
2. Payment of liabilities and liquidation expense A G J Total
Priority 1 ₱ -0- ₱30000 ₱ -0- ₱ 30000
Liability ₱xx Capital ₱xx Priority 2 -0- 10000 15000 25000
Cash ₱xx Cash ₱xx NPP 35500 14200 21300 71000
₱35500 ₱54200 ₱36300 ₱126000
3. Elimination of deficiencies
4. Distribution
SAFE PAYMENTS Capital Beginning ₱xx
1. Determine the capital interest Gain/Loss +/- xx
INSTALLMENT LIQUIDATION
2. Deduct the Maximum Possible Maximum Possible Loss - xx
Cash beginning ₱xx Loss Elimination Deficiency - xx
Add: Proceed xx 3. Absorb deficiency Condonation +/- xx
Minus: Liabilities xx Total 4. Distribute Cash Distribution ₱xx
Liquidation Expense xx Total
Distribution ₱xx
II. CORPOR ATE LIQUIDATION
Maximum Possible Loss (MPL): Three (3) years to liquidate
The extinguishment of juridical personality happens in dissolution
1. Unsold Non- cash Asset ₱xx
2. Anticipated Liquidation Expense (future LE) xx Unpaid
VALUATION:
₱xx
1. Asset – Fair Value
2. Liabilities – Maturity Value (Principal + Interest)
CASH PRIORITY PROGRAM
*(Receive cash-given)
CLASSIFICATION (Statement of Affairs):
1. Determine the capital interest 1. ASSETS
2. Compute loss absorption balance (LAB): Capital Interest ÷ P/L Ratio Assets Pledge with Fully Secured Creditors
3. Equalize the LAB – deduct the second highest from the highest until equal Assets Pledge with Partially Secured Creditors
4. Distribution: Difference in LAB × P/L Ratio Free Assets assets that are not originally pledge to any liabilities
When to use Cash Priority Program? 2. LIABILITIES
- When the problem says, what amount should be distributed to the partners Fully Secured Liabilities
Partially Secured Liabilities
EXAMPLE: Unsecured Liabilities with Priority
* Salaries
A G J * Taxes
Capital Interest ₱100000 ₱ 80000 ₱ 75000 * Administrative Expense (Liquidation Expense)
P/L % ÷ 50% ÷ 20% ÷ 30% * Customer Deposit
LAB ₱200000 ₱400000 ₱250000
Unsecured Liabilities without Priority (no collateral)
Priority 1 _______ 150000 _______
₱200000 ₱250000 ₱250000
Priority 2 _______ 50000 50000 Percentage of Recovery (POR) =
₱200000 ₱200000 ₱200000
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
IV. LONG TE RM CONSTRUCTION CONTRACTS (IAS 11) COMPUTATION OF ADJUSTED PRICE BILLING (APB):
Contract Price ₱xx
1. PERCENTAGE OF COMPLETION METHOD + EC (↑ in certain cost) xx
- outcome can be estimated reliably − DC (↓ in certain cost) xx
- if the problem is silent − Penalty Clause (due to late turnover) xx
1.1. INPUT MEASURE (Cost to Cost) + IP (due to early turnover) xx
Cost Incurred To Date ÷ Total Cost +/− Modification / Change Order / Variation xx
1.2. OUTPUT MEASURE ADJUSTED PRICE BILLING (CP = APB) ₱xx
Total Units Prod. ÷ Total Units Expected Prod.
2. COST RECOVERY METHOD YEAR 1 YEAR 2 YEAR 3
- outcome cannot be estimated reliably CITD ₱xx ₱xx ₱xx
+ PTD-LTD xx xx xx
CONTRACT RETENTION CIP ₱xx ₱xx ₱xx
receivables
− APB xx xx xx
does not the an income element
(Due to)/Due from ₱xx ₱xx ₱xx = 0 → CIP @
reduces collection
↓ ↓ the end of the
PRO-FORMA ENTRY: Liability Asset year of contract.
Cash ₱xx
Contract Retention xx CONSTRUCTION IN PROGRESS:
Accounts Receivable ₱xx
(1) If Profit: Contract Price × Percentage of Completion = CIP
UPON COMPLETION OF PROJECT: (2) If Loss: [(C P × PO C ) – LTD × (1 − POC)] = CIP
Cash ₱xx (3) [(T C × PO C ) – LTD] = CIP
Contract Retention ₱xx
COMPUTATION OF ADJUSTED CONTRACT PRICE: COMPUTATION OF DUE FROM / (DUE TO) CUSTOMER – Y2:
Contract Price ₱xx Year 1 Billings ₱xx
Variable Price xx Year 2 Billings xx
Bonus xx Mobilization Fee (xx)
Adjusted Contract Price ₱xx Year 1 Collection [(Y1B × customer payment % of amount billed) ×
(100% - Retention Fee %)] (xx)
COMPUTATION OF CIP: Year 2 Collection [(Y2B × customer payment % of amount billed) ×
(100% - Retention Fee %)] (xx)
Cost Incurred to Date ₱xx Due from / (Due to) Customers – Y2 ₱xx
Realized Gross Profit – to date xx
Construction in Progress ₱xx
V. IAS 18 – REVENUE
COMPUTATION OF REALIZED GROSS PROFIT – CURRENT YEAR: CRITERIA TO RECOGNIZE REVENUE:
1ST YEAR 2ND YEAR LAST YEAR 1. Receivables (*silent)
Contract Price ₱xx ₱xx ₱xx - reasonably assured
CITD (Prior Year + Current Year) ₱xx ₱xx ₱xx
Estimated Costs xx xx xx 2. Cash as Down Payment (*silent)
Total Costs (₱xx) (₱xx) (₱xx) - nonrefundable
Total Estimated Gross Profit ₱xx ₱xx ₱xx
Multiply: Percentage of Completion % % % 3. Franchise Revenue
Total Realized Gross Profit – To Date ₱xx ₱xx ₱xx - substantial performance
Realized Gross Profit – Prior Year (+/−) xx xx xx
Realized Gross Profit – Current Year ₱xx ₱xx ₱xx NOTE:
These conditions shall meet to recognize revenue.
IFRS 15 Contingent Franchise Fee = IAS 18 Continuing Franchise Fee
COMPUTATION OF CIP, net of PB (ZPM/CRM):
CASE 1 CASE 2 CASE 3
Cost Incurred To Date ₱xx ₱xx ₱xx
R x
Total Estimated Gross Profit X (₱xx) (₱xx)
C x
Multiply: Percentage of Completion -_ 100% 100%
F
Total Realized Gross Profit – To Date ₱-0- (₱xx) (₱xx)
₱xx ₱xx ₱xx
IFF = Revenue IFF = Deferred Cash ₱xx
Progress Billings (PY + CY) (xx) (xx) (xx)
Revenue NR xx
Construction in Progress, net of PB ₱+/− ₱+/− ₱-0-
Discount ₱xx
Franchise Revenue xx
Deferred Revenue xx
RECOGNITION OF REVENUE
over time EXCEPTION TO THE RULE:
at a point in time
Down payment still considered as revenue if the DP is nonrefundable and
DP represents fair measure of services already rendered.
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
CASE 1 CASE 4
R – Interest Bearing (Accrual Method) R x – Non-interest Bearing
C C
F F
Revenue (IFF) ₱xx Down Payment ₱xx
Cost of Sales (Direct Cost for Initial Services) (xx) Collection, net of interest income xx
Gross Profit ₱xx Total Collection ₱xx
Continuing Franchise Fee (Sales × %) xx Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = DP + PV %
Interest Income (Face Amount × Interest Rate × ?/12) xx Realized Gross Profit ₱xx
Expense (IC for IS + IC for CS + DC for SC) (xx) Continuing Franchise Fee xx
NET INCOME ₱xx Interest Income (PV × IR × ?/12) xx
Expenses (xx)
CASE 2 NET INCOME ₱xx
R x – Non-interest Bearing (Installment Method)
C TOTAL REVENUE OF THE FRANCHISOR
F Down payment ₱xx
Collection xx
Down Payment – Cash ₱xx
CFF xx
Collection during the period xx Interest Income xx
Total Collection ₱xx TR-F ₱xx
Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = IFF %
Realized Gross Profit ₱xx TOTAL REVENUE FROM F.F.
Continuing Franchise Fee xx Down payment ₱xx
Collection xx
Interest Income xx
CFF xx
Expenses (xx) TR from FF ₱xx
NET INCOME ₱xx
*NOTE:
Beginning Inventory – HO
(a) In transit – prior year
(b) Freight Charges
Ending Inventory – HO
(a) In transit – current year (SFHO is < its true amount)
(b) Freight Charges
FREIGHT FREIGHT
PREPAID COLLECT
EXAMPLE:
Freight Charges
Home Office to Branch 1 ₱10
Branch 1 to Branch 2 5
Home Office to Branch 2 (4)
(Excess Freight) Expenses ₱11
FORMULAS EXAMPLE:
Share Premium from issuance ₱ 50
Share Premium from original issuance 30
CTIR 100
ENTRY:
Share Premium ₱50
Share Premium 30
SIC 20
Cash /Payable ₱100
PRESENTATION OF NCI
* × PHI% = ₱xx 1. FV of NCI / Full Goodwill
If the fair value is unknown compute the implied fair value
FORMULA:
EXAMPLE:
Purchase Price ₱1000 NA@BV – 12/31 ₱xx
NA@BV (SHE) (700) Net Income (xx)
Excess ₱ 300 Dividend xx 2. Proportionate Share / Relevant Share / Interest in the Net Asset of Subsidiary
OVA (50) NA@BV – BC ₱xx (INAS)
UVA (100) FORMULA:
Goodwill ₱ 250 FV of Net Assets × NCI% = INAS
UNREALIZED GAIN
Gain ₱7
Equipment ₱7
*(it depends upon the Selling Price)
YEAR 2 YEAR 3
Unrealized RE ₱7
NO ENTRY
Gain Equipment ₱7
Realized Acc. Dep. ₱2 RE ₱5
EXAMPLE: Intercompany Sale of Inventory Gain Dep. Exp. ₱1 Dep. Exp. ₱1
Sales ₱1000 Ending Inventory (1000 ×50%) ₱500 RE 1 Gain 4
Cost of Sales (700) GPR × 30%
Gross Profit ₱300 UPEI (12/31/16) ₱150
Ending Inventory % × 50% EXAMPLE: Intercompany Sale of Land
UPEI ₱150 RPBI (01/01/17) ₱150 Land (selling price) - ₱100
CL - 80
Working Paper Eliminating Entries Sale to third party - 150
DOWN UP
UPEI: COS ₱xx COS ₱xx
Inventory ₱xx Inventory ₱xx YEAR 1 YEAR 2 YEAR 3 Recorded – Subsidiary ₱50
UG ₱(20) -0- -0- Not yet recorded 20
RPBI: RE, beg. ₱xx RE, beg. ₱xx RG -0- -0- ₱20 ₱70
COS ₱xx NCI xx
COS ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
ENTRIES: A = L + C
$ 10M $ 8M $ 2M
BUYING OF INVENTORY BUYING OF F.C.
× ₱1 × ₱1 × ₱0.5
Purchases ₱xx FCR ₱xx ₱ 10M = ₱ 8M + ₱ 1M + ₱ 1M Translation Adjustment
Accounts Payable ₱xx FCP (fixed) ₱xx
Credit
$ 10M $ 8M $ 2M
Forex Loss ₱xx FCR ₱xx
× ₱1 × ₱1 × ₱2
Accounts Payable ₱xx Forex Gain ₱xx
₱ 10M = ₱ 8M + ₱ 4M + ₱ 2M Translation Adjustment
Accounts Payable ₱xx Forex Loss ₱xx Debit
Forex Gain ₱xx FCR ₱xx
NA, ending @ CR > NA, ending @ RF = Translation Adjustment Credit
Accounts Payable ₱xx FCP (fixed) ₱xx NA, ending @ CR < NA, ending @ RF = Translation Adjustment Debit
Cash ₱xx Cash xx
FCR ₱xx NA, beg. OS × HR ₱xx
RE, beg. xx (translated amount)
SELLER OF MERCHANDISE SELLER OF F.C.
Net Income @ Average xx
Accounts Receivable ₱xx FCR (fixed) ₱xx Dividend @ SR (xx)
Sales ₱xx FCR ₱xx NA, end @ RF ₱xx
Accounts Receivable ₱xx Forex Loss ₱xx QUOTATION:
Forex Gain ₱xx FCP ₱xx
1. DIRECT – Foreign Currency to Philippine Peso
2. INDIRECT – Philippine Peso to Foreign Currency
Forex Loss ₱xx FCP ₱xx
Accounts Receivable ₱xx Cash xx
SPOT RATE:
FCR (fixed) ₱xx
1. BUYER – Selling Spot Rate / Offer Rate / Asking
2. SELLER – Buying Spot Rate / Bid Rate
FOREX TRANSLATION
only reflected in consolidated FS
FIRM COMMITMENT
an Other Comprehensive Income component
(1) The hedge is perfect when the company acquired a forward contract for
OCI:
the same amount of the same currency in which the firm commitment is
1. Forex Translation (IAS 21)
(2) Under perfect hedging, the amount of forex gain from hedging instrument
2. Effective Portion of Cash Flow Hedge (IFRS 7/9)
is equal to firm commitment as liability
3. Revaluation Surplus (IAS 16)
(3) The amount of forex loss from hedging instrument is equal to firm
4. Remeasurement G/L related to employee benefit (IAS 19R)
commitment as asset
5. Estimated Unrealized G/L on FA at FVTOCI (IFRS 7/9) (4) TYPES OF FIRM COMMITMENT
6. Risk G/L on credit risk for financial liability designated to P/L 4.1. Sales Commitment
4.2. Purchase Commitment
RECLASSIFIED TO P/L:
(5) The asset sold or purchased is recorded at the date of settlement based
1. Forex Translation
on the forward rate on the date of commitment
2. Effective portion of Cash Flow Hedge
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)