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Chapter 12 FAR Millan

Financial Accounting (Polytechnic University of the Philippines)

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CHAPTER 12

PROBLEM 1

1. FALSE
2. FALSE
3. FALSE
4. TRUE
5. TRUE
6. TRUE
7. FALSE
8. FALSE
9. FALSE
10. TRUE

PROBLEM 3:

1. A.

A B Total
Amount being allocated 1,200,000
Allocation:
1. Salaries 80,000 20,000 100,000
2. Bonus 110,000 110,000
3. Allocation of remaining profit
(1.2M-100k-110k) = 990,000
(990K x 70%); (990K x 30%) 693,000 297,000 990,000
As Allocated 883,000 317,000 1,200,000

Profit before salaries 1,200,000

Salaries 100,000
Profit after salaries but before deduction of bonus 1,100,000
Multiply: Bonus rate 0.1
110,0
Bonus 00

1.B.

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Closing entry Income Summary 1,200,000

A, Capital 883,000
B, Capital 317,000

2. A.

A B Total
Amount being allocated 60,000
Allocation:
1. Salaries 80,000 20,000 100,000
2. Bonus -
3. Allocation of remaining profit
(1.2M-100k-110k) = (160,000)
(160K x 70%); (160K x 30%) (112,000 ) ( 48,000 ) (160,000 )
As Allocated (32,000) (28,000) (60,000)

2. B.

Closing entry A, Capital 32,000

B, Capital 28,000
Income Summary 60,000

3. A.

A B Total
Amount being allocated 1,200,000
Allocation:
1. Salaries 100,000 20,000 120,000
2. Bonus 108,000 108,000
3. Interest on weighted ave. Capital 70,000 70,000
4. Allocation of remaining profit
(1.2M - 120k - 108k - 70k) = 902,000
(902K x 70%); (902K x 30%) 631,400 270,600 902,000
As Allocated 839,400 360,600 1,200,000

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Profit before salaries 1,200,000

Salaries 120,000
Profit after salaries but before deduction of bonus 1,080,000
Multiply: Bonus rate 0.1
Bonus 108,000

Months
Balances outstanding/12 weighted average
beg. Balance 400,000 12/12 400,000
April 30 investment 300,000 8/12 200,000
May 31 investment 200,000 7/12 116,667
Aug. 1 withdrawal (100,000) 5/12 (41,667)
Dec. 1 investment 300,000 1/12 25,000
weighted ave. Capital balance 700,000
multiply: interest rate 0.1
Interest on weighted ave. Capital 70,000

Closing entry Income Summary 1,200,000

A, Capital 839,400
B, Capital 360,600

3. B.

PROBLEM 4:

1. C
2. B
3. B
4. A
5. A
6. C
7. D
8. A
9. B
10. A

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