Partnership and Corporation Solution Manual Chapter 1 Review

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Partnership and Corporation

Solution Manual
2014-2015
Chapter 1
Review of the Accounting Process
** Quizzers – Problems **
I. B – 25,000 B – 100,000
II. Maria Julieta Lopez Allera-Alegrado

Assets = Liabilities + Capital
Accrued Accounts Accrued Alegado
Cash A/R Income = Payable Expense + Capital Revenue Expenses
Beg. Bal. 150,000 80,000 = 48,000 + 100,000 122,000 (40,000)
AJE 5,000 (5,000)
#1
(6,000) (6,000)
#2 (3,000) (3,000)
#3 15,000 (15,000)
8,000 8,000
149,000 72,000 8,000 42,000 15,000 100,000 130,000 (58,000)
A- 229,000 = 57,000 + 172,000
III. P. Amandoron Company

Current Assets 350,000
Property and Equipment 1,200,000 1,550,000
Less: Current Liabilities 125,000
Long Term Liabilities 575,000 700,000
Owner’s Equity 850,000 -D
IV. Ruben Realty Co.

36,000 = P3,000 x 5 = P15,000 - A
12
36,000 = P3,000 x 7 = P21,000 - B

12
V. Evelyn T. Alegre
Assets = Liability + Owner’s Equity
Cash in Bank 850,000 + 30,000
Office Equipment 300,000 1,150,000 + 30,000
Office Furniture 60,000 = 60,000
1,240,000 = 60,000 + 1,180,000 - D
VI. Raul Langbid Co.

truck – P18,000 = P1,500 x 3 = P4,500
12
building – P15,000 = P1,250 x 3 = 3,750
12 P 8,250 -A
VII. Blas Sardido Co.

Sales (250,000 x P 15) 3,750,000
Cost of Sales:
Beg. Inventory -
Purchases (400,000 x P11) 4,400,000
Available for Sale 4,400,000
Less: Ending Inventory (150,000 x P11) 1,650,000 2,750,000
Gross Profit 1,000,000 - none of the choices
VIII. Alfredo Yao Co.

ERRATUM: Available for Sale P26,000 instead of P6,000
Beg. Inventory 15,000 -D

Purchases 10,000
Freight In 1,000
Available for Sale 26,000
Ending Inventory 5,000 -D
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Cost of Sales 21,000

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IX. Rolando Ibañez Enterprises

Accounts Payable Accounts Receivable
P35,000 BB BB 350,000 5,000 Write-of
Payment 25,000 20,000 On acct. Billing 100,000 145,000 - A
30,000 - A 300,000
X. Vicente Chotangco, Jr.

Accounts Receivable
BB 50,000 36,000
60,000 4,000 - A
110,000 40,000
70,000
XI. E. Detoya & Sons

Accounts Receivable
BB 100,000 2,000
67,000
100,000 69,000
31,000
80,000 Sales
49,000 Account Sales
90,000 Cash Sales
139,000 - B
XII. L. Caminade Enterprises

Accounts Payable
20,000 70,000 BB
50,000 Account Purchases
80,000 Cash Purchases
130,000 Total Purchases - B
XIII. Laureano Cacho Trading

1,240,000 – 100,000 = 1,140,000 = 228,000
5 years 5
Cost of Machine P1,240,000

Less: Acc. Dep’n. 228,000
Net Book Value P1,012,000
Sold at 960,000
Loss on disposal (P 52,000) - A
XIV. Santos Advertising Agency
1 – 30 days 31 – 60 days 61 days and over

Gomezano 10,000 20,000
SM Marketing 15,000 30,000 20,000
Yu and Sons 35,000 45,000 5,000
60,000 95,000 25,000
x 5% x 8% x 10%
3,000 7,600 2,500 = 13,100 – 8,000 = 5,100 - A
XV. Leopoldo Medina Trading
250 units x P31 = P7,750 P27,605 ÷ 835 x 315 = P10,413.86 Average

65 x 33 = 2,145 - 9,895.00
FIFO P9,895 - C P 518.86 bigger - B
XVI. Lucky Strike Co.

Beg. Inventory P 3,450,000
Purchases 2,740,000
Freight In 20,000
Purchase Ret. & Allow. ( 25,000)
Available for Sale P 6,185,000
Cost of Goods Sold:
Sales P4,500,000
Less: Gross Profit (40%) 1,800,000 2,700,000
Estimated Inventory, end P3,485,000 - A
Less: Actual Inventory after fire 2,948,000
Damaged by fire P 537,000 - C

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XVII. Universal Financing Co.

Principal P50,000 x 15% 90 days = P 1,875
360 50,000
P 51,875 MV -C
P 1,875 ÷ 3 x 2 = P1,250 - A
Interest Expense 1,250

Accrued Interest Expense 1,250
** Quizzers **
Test III
Manufacturing Income Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr.
1) Finished Goods, Beg. √
2) Finished Goods, End √ √
3) Goods in Process, Beg. √
4) Goods in Process, End √ √
5) Raw Materials, Beg. √
6) Raw Materials, End √ √
7) Factory Supplies Inventory √
8) Factory Supplies Used √
9) Salaries - Office √
10) Salaries - Factory √
11) Repair - Office Equipment √
12) Repairs - Factory Equipment √
13) Light and Water - Office √
14) Light and Water - Factory √
15) Tools Used √
16) Patents √
17) Amortization of Patents √
18) Purchases, Raw Materials √
19) Freight In √
20) Sales √
Test IV – Multiple Choice (Problem)
1. Raw Materials, Beg. P 120,000

Purchases, Raw Materials 110,000
Freight In 5,000
Available for Sale P 235,000
Less: Raw Materials, End 105,000
Direct Materials P 130,000 (B)
2. Direct Materials P 130,000

Direct Labor 308,000
Prime Cost P 438,000 (A)
3. Manufacturing Overhead:
Indirect Labor P 45,000
Indirect Materials 65,000
Amortization of Trademark 50,000
Real Expense - Factory 25,000
Depreciation - Factory 40,000
Factory Overhead P 225,000 (A)
4. Conversion Cost:
Direct Labor P 308,000
Manufacturing Overhead 225,000
P 533,000 (A)
5. Factory Cost:
Direct Materials P 130,000
P 663,000 (C)
6. Cost of Goods Manufactured:
Direct Materials P 130,000

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Factory Cost P 663,000
Add: Work in Process, Beg. 250,000
Total cost placed in process P 913,000
Less: Work in Process, End 275,000
Cost of Goods Manufactured P 638,000 (A)
7. Cost of Goods Manufactured P 638,000

Finished Goods, Inventory 170,000
Goods Available for Sale P 808,000
Less: Finished Goods, End 290,000
Cost of Goods Manufactured and sold P 518,000 (A)
Chapter 2
Partnership – Nature and Information
** Exercises/Problems **
2-1. Sanada and Estrebilla

Requirement 1: Cash 250,000
Merchandise Inventory 160,000
Sañada, Capital 410,000
Cash 380,000
Delivery Car 950,000
Estrebilla, Capital 1,330,000
Requirement 2:
Current Assets: Partners’ Equity

Cash P 630,000
Merchandise 160,000 P 790,000 Sañada, Capital P 410,000
Estrebilla, Capital 1,330,000
Non-Current Assets:
Delivery Equipment 950,000
Total Assets P1,740,000 P1,740,000
2-2. Maula, Montecina and Maceda
Requirement 1a: Cash P200,000

Furniture and Fixtures 120,000
Transportation Equipment 850,000
Accounts Payable P 100,000
Maula, Capital 270,000
Montecina, Capital 800,000
Jeremy Maceda was admitted in the partnership as an

industrial partner with a 15% share in profit.
Requirement 1b: Cash P200,000

Maula, Capital 270,000
Montecina, Capital 900,000
** (Same notation for Maceda)
Requirement 2:
Assets Current Liabilities
Current Assets Accounts Payable 100,000
Cash 200,000
Non-Current Assets Partners’ Equity
Furniture & Fixtures 120,000 Maula, Capital 270,000
Transportation Equipment 850,000 970,00 Montecina, Capital 800,000
Maceda, Capital -
Total Partners’ Equity 1,070,000
Total Liability &
Total Assets 1,170,000 Partners’ Equity 1,170,000

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2-3. Malquisto and Rocabo

Requirement 1: Debits:
Cash P 375,000
Accounts Receivable 90,000
Merchandise 420,000
Equipment 250,000 P1,135,000
Credits:
Estimated Uncollectible P 1,000
Accumulated Depreciation 50,000
Accounts Payable 75,000 126,00
Account balance of Malquisto P1,009,000
Requirement 2: a) Malquisto, Capital 4,000

Estimated Uncollectible Account 4,000
b) Malquisto, Capital 30,000
Merchandise 30,000
c) Malquisto, Capital 20,000
d) Malquisto, Capital 1,500
Accrued Utilities 1,500
Requirement 3: Est. Uncollectible Accounts 5,000

Accounts Payable 75,000
Accrued Utilities Expense 1,500
Malquisto, Capital 953500
Cash 375,000
Merchandise 390,000
Equipment 250,000
Requirement 4:
Malquisto and Rocabo
Statement of Financial Position
As of
Assets Liabilities
Current Assets: Accounts Payable 75,000
Cash 851,750 Accrued Utilities Expense 1,500 76,500
Est. Uncollectible Account 5,000 85,000 P artners’ Equity
Merchandise 390,000 Malquisto, capital 953,500
Non-Current Assets: Rocabo, Capital 476,750 1,430,750
Equipment (Net) 180,000
Total Assets 1,506,750 Total Liabilities & Owner’s Equity 1,506,750
(the account Accumulated Depreciation is no longer carried in the book of the partnership)
2-4. Malquisto, Beringuel and Alemanza

Requirement 1:
Adjusting entries in their respective Sole Proprietorship Book
Malquisto Beringuel Alemanza
1) Malquisto, Capital 4,000 Est. Uncoll. Acct. 500 Alemanza, Capital 1,500
Est. Uncoll. Acct. 4,000 Beringuel, Capital 500 Est. Uncoll. Acct. 1,500
2) Malquisto, Capital 42,000 Beringuel, Capital 60,000 Alemanza, Capital 45,000

Merchandise 42,000 Merchandise 60,000 Merchandise 45,000
3) Malquisto, Capital 5,000 Beringuel, Capital 100,000 Alemanza, Capital 5,000

Acc. Dep’n. 5,000 Acc. Dep’n. 100,000 Acc. Dep’n. 5,000
4) Cash 50,000 Cash 150,000 Cash 250,000

Malquisto, Capital 50,000 Beringuel, Capital 150,000 Alemanza, Capital 250,000

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Requirement 2: Closing Entries in their respective sole proprietorship book.

Malquisto Beringuel Alemanza
Est. Uncoll. Acct. 7,000 Est. Uncoll. Acct. 4,500 Est. Uncoll. Acct. 3,500
Acc. Dep’n. 185,000 Acc. Dep’n. 330,000 Acc. Dep’n. 180,000
Malquisto, Capital 1,556,000 Beringuel, Capital 1,625,500 Alemanza, Capital 1,246,500
Cash 950,000 Cash 850,000 Cash 750,000
A/R 70,00 A/R 90,000 A/R 25,000
Merchandise 378,000 Merchandise 540,000 Merchandise 405,000
Equipment 350,000 Equipment 480,000 Equipment 250,000
Requirement 3: Compound Opening Journal Entry
Cash 3,000,000
Merchandise 1,323,000
Equipment 358,000
Malquisto, Capital 1,606,000
Beringuel, Capital 1,775,500
Alemanza, Capital 1,496,500
(Accumulated Depreciation-Equipment is no longer shown in the opening-entry)
2-5. Laureto and Auditor Partnership
Assumption 1
Requirement 1: Journal Entries to close their Respective Sole Proprietorships’ Book
Laureto Auditor
Accounts Payable 50,000 Accounts Payable 75,000
Notes Payable 20,000 Allow. for Doubtful Accounts 12,000
Interest Payable 500 Acc. Dep’n. – Equipment 40,000
Allow. for Doubtful Accounts 10,000 Auditor, Capital 389,000
Accumulated Depreciation 15,000 Cash 186,000
Laureto, Capital 275,500 Accounts Receivable 120,000
Cash 125,000 Merchandise 150,000
Accounts Receivable 80,000 Equipment 60,000
Notes Receivable 50,000
Interest Receivable 1,000
Merchandise 75,000
Equipment 40,000
Requirement 2: Journal Entries to record investment in the Partnership Book
Laureto Auditor
Cash 125,000 Cash 186,000
Accounts Receivable 80,000 Accounts Receivable 120,000
Notes Receivable 50,000 Merchandise 150,000
Interest Receivable 1,000 Equipment 20,000
Merchandise 75,000 Accounts Payable 75,000
Equipment 25,000 Allowance for Doubtful Accounts 12,000
Allowance for Doubtful Accounts 10,000 Auditor, Capital 389,000
Notes Payable 20,000
Interest Payable 500
Laureto, Capital 275,000
Assumption 2
Requirement 1: Adjusting Entries
Book of Laureto Book of Auditor
Laureto, Capital 6,000 Auditor, Capital 12,000
Allowance for Doubtful Acct. 6,000 Allowance for Doubtful Acct. 12,000

Merchandise 3,750 Merchandise 7,500

Acc. Dep’n. Equipment 17,000 Acc. Dep’n. Equipment 8,000

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Closing Entries in their Respective Sole Proprietorship Book

Book of Laureto Book of Auditor
Allowance for Doubtful Acct. 16,000 Allowance for Doubtful Acct. 24,000
Acc. Dep’n. Equipment 32,000 Acc. Dep’n. Equipment 48,000
Accounts Payable 50,000 Accounts Payable 75,000
Notes Payable 20,000 Auditor, Capital 361,500
Interest Payable 500 Cash 186,000
Laureto, Capital 248,750 Accounts Receivable 120,000
Cash 125,000 Merchandise 142,500
Accounts Receivable 80,000 Equipment 60,000
Notes Receivable 50,000
Interest Receivable 1,000
Merchandise 71,250
Equipment 40,000
Requirement 2: Journal Entries to record investment in the Partnership Book

Laureto Auditor
Cash 125,000 Cash 186,000
Accounts Receivable 80,000 Accounts Receivable 120,000
Notes Receivable 50,000 Merchandise 142,000
Interest Receivable 1,000 Equipment 12,000
Merchandise 71,250 Allowance for Doubtful Accts. 24,000
Equipment 8,000 Accounts Payable 75,000
Allowance for Doubtful Accts. 16,000 Auditor, Capital 361,500
Notes Payable 20,000
Interest Payable 500
Laureto, Capital 248,750
2-6. Mendez and Salazar

ERRATUM: P300,000 cost of building was Salazar’s investment
Requirement 1a: Cash 300,000

Building 300,000
Furniture 70,000
Mendez, Capital 140,000
Salazar, Capital 530,000
Requirement 1b: Cash 300,000

Building 300,000
Furniture 70,000
2-7. Dabucol and Miranda

Compound Journal Entry
Cash 220,000
Computer 550,000
Furniture & Fixtures 200,000
Prepaid Rental 6,000 566,000
Dabucol, Capital 410,000
Miranda, Capital
Computations:
Dabucol Miranda Total
Cash 100,000 120,000 220,000
Computer 300,000 250,000 550,000
Furniture & Fixtures 160,000 40,000 200,000
Prepaid Rental 6,000 - 6,000
566,000 410,000 976,000

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2-8. Torralba and Rosada

Requirement 1:
Debits:
Cash 85,000
Merchandise 120,000
Equipment 150,000 415,000
Credits:
Allow. For Doubtful Accounts 4,000
Acc. Depreciation 30,000
Accounts Payable 80,000 114,000
Torralba, Capital 301,000
Requirement 2:
Allow. for Doubtful Accounts 3,000
Merchandise 15,000
Requirement 3:
Cash 85,000
Merchandise 105,000
Equipment 150,000
Requirement 4:
Cash (85,000+1/2 of P278,000) 224,000
Merchandise 105,000
Equipment 105,000
Rosada, Capital (1/2 of P278,000) 139,000
Requirement 5:
Torralba and Rosada Partnership
As of
Assets Liabilities
Cash 224,000 Accounts Payable 76,000
Less: Allow. For Doubtful Accounts 1,000 59,000 Partners’ Equity
Merchandise 105,000 Torralba, Capital 278,000
Current Assets 338,000 Rosada, Capital 139,000 417,000
Non-Current Assets:
Equipment 105,000 Total Liability & Partners’ Equity 493,000
Total Assets 493,00
2-9. Galbog and Torrequemada

Requirement 1:
Glabog, Capital 15,000
Merchandise 30,000

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Requirement 2: Journal Entries to close the books of Glabog

Cash 320,000
Merchandise 220,000
Equipment 150,000
Requirement 3:
Assets Liability
Current Assets:
Cash (P320,000 + P500,000) 820,000 Accounts Payable 60,000
Allow. for Doubtful Accounts 15,000 60,000 Partners’ Equity
Merchandise 220,000 Glabog, Capital 670,000
Non-Current Asset: Torrequemada, Capital 500,000 1,170,000
Equipment 130,000 Total Liability &
Total Assets 1,230,000 Partners’ Equity 1,230,000
2-10. Angie Aguilon Company

Requirement 1: Capital Contribution of Zulueta
Unadjusted capital of Aguilon 267,000
Accounts Receivable to be derecognized ( 25,000 )
Recognized prepaid expenses 13,000
Revaluation of Equipment 25,000
Adjusted Aguilon Capital 280,000
Capital contribution of Zulueta is equal to P280,000,Matching the adjusted capital of Aguilon.
Requirement 2:
Angie Aguilon Company
As of June 30 _
Assets Liability
Cash 35,000 Accrued Expenses 18,000
Merchandise 185,000 Total Liabilities 63,000
Prepaid Expense 13,000 233,000
Non-Current Asset:
Equipment 120,000 Partners’ Equity
Acc. Depreciation 10,000 110,000 A. Aguilon, Capital 280,000
Total Assets 343,000 Total Liability & Partners’ Equity 343,000
2-11. Misamis Construction Supply

Requirement A: Hingco’s Capital Balance
Debits:
Cash in Bank 420,000
Equipment 130,000
Total Debit 732,000
Credits:
Total Credit 23,500
Hingco's Capital Balance 708,500
Requirement B: a) Allow. for Doubtful Accounts 8,500
Hingco,Capital
Barillo's CapitalBalance 73,500
Debits:
Allow.
Cash infor Doubtful Accounts
Bank 7,500
450,000
Barillo, Capital
60,000
Accounts Receivable
Merchandise Inventory 250,000 60,000
Total Debit
b) Hingco, Capital 760,000
10,000
Merchandidse
Credits: 10,000
Allow.
Barillo,for Doubtful Accounts
Capital 7,500
20,000
Barillo's Capital Balance
Merchandidse 752,500 20,000

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c) Acc. Depreciation 5,000

Hingco, Capital 5,000
Requirement C: Cash in Bank 420,000

Equipment 120,000
Hingco, Capital 630,000
Barillo, Capital 680,000
Requirement D: Hingco and Barillo

As of July 31 20
Assets Partners’
Equity
Cash in Bank 870,000 Hingco, Capital 630,000
Merchandise Inventory 320,000 Barillo, Capital 680,000
Equipment 120,000
Total 1,310,000 Total 1,310,000
2-12. Janulgue and Rota

Requirement 1:
Janulque's Book:
Janulgue, Capital 30,000
Rota's Book:
Rota, Capital 30,000
Merchandise 30,000
Requirement 2:
To record the contribution of Janulgue
Cash 180,000
Merchandise 500,000
Prepaid Insurance 6,000
Equipment 70,000
To record the contribution of Rota

Cash 150,000
Merchandise 620,000

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2-13. Medina and Loqueloque

Adjusting Entries in the books of Medina
Requirement 1: a) Medina, Capital 4,750
b) Medina, Capital 25,000
Merchandise 25,000
c) Acc. Depreciation 90,000
Medina, Capital 90,000
d) Medina, Capital 60,000
Accrued Rental Expense 60,000
e) Prepaid Expenses 25,000
Medina, Capital 25,000
Requirement 2: Loqueloque should contribute cash of P3,795,250 equal to the capital balance of Medina
computed as follows:
Capital balance of Medina before adjustment 3,770,000

Add: Adjustment 25,250
3,795,250
Journal Entries to open the book of the Partnership:

Requirement 3: Cash 4,845,250
Merchandise 2,325,000
Prepaid Expenses 25,000
Store Equipment 850,000
Accrued Rental Expense 60,000
Medina, Capital 3,795,250
Loqueloque, Capital 3,795,250
2-14. Pamulagan and Salec-Amer

Requirement 1: a) Amer, Capital 10,000
b) Amer, Capital 2,000
Accrued Expense Payable 2,000
c) Amer, Capital 10,000

Merchandise P10,000
Requirement 2: Cash in Bank 543,000

Pamulagan, Capital 543,000
Accrued Expense 2,000
Amer, Capital 543,000
Requirement 3:
Assets Liabilities
Cash in Bank 793,000 Accounts Payable 2,000
Accounts Receivable 100,000 Accrued Expense 20,000
Allow. for Doubtful Account 10,000 90,000 Total Liabilities 22,000
Furniture and Fixtures 130,000 Partners’
Equity
Total Assets 1,108,000 Amer, Capital 543,000
Pamulagan, Capital 543,000
Total Partners’ Equity 1,086,000
Total Liabilities and
Partners’ Equity 1,108,000
2-15. Degracia and Mascariñas Mascariñas ofered Investm
Requirement 1: 1/2 of Mascariñas ofered Investment of P280,000 140,000 Cash
Degracia's Investment 255,000
Reduction from Degracia's Investment 115,000
Cash 80,000
Merchandise 35,000
115,000
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Equipment 80,000
Total 280,000
Degracia's Adjusted Capital Balance:

Cash 80,000
Merchandise 175,000
Total 255,000
1/2 of P280,000 140,000

Degracia's adjusted investment 255,000
Reduction from Degracia's Investment 115,000
Composed of:
Cash 80,000
Merchandise 35,000
115,000
Requirement 2: Estimated Uncollectible Accounts 15,000

Degracia, Capital 85,000
Accounts Receivable 100,000 Just to comply
with the
requirements,
these adjusting
Degracia, Capital 115,000 entries were
Cash 80,000 prepared. The
Merchandise 35,000 receivable and
payable accounts
remain in the sole
Requirement 3: To record contribution of Degracia:
proprietor’s
Merchandise (175,000-35,000) 140,000 records.
To record contribution of Mascariñas:

Cash 200,000
Equipment 80,000
Mascariñas, Capital 280,000
2-16. Estalilla, Fortuna and Sonsona
Requirement A:
Capital balance prior to formation of the partnership:
Estalilla Fortuna Sonsona
Cash 30,000 70,000 40,000
Accounts Receivable 105,000 90,000 70,000
Allow. of Accounts Receivable (6,000) (4,000) (15,000)
Merchandise 150,000 280,000 120,000
Acc. Depreciation (80,000)
Building 650,000
Land 800,000
Accounts Payable (40,000) (50,000) (45,000)
Capital balances prior to formation 789,000 1,186,000 440,000
Requirement B:
The new Capital balance after the revaluation of non-cash assets:
Estalilla Fortuna Sonsona
Cash 30,000 70,000 40,000
Accounts Receivable 105,000 90,000 70,000
Allow. of Accounts Receivable (10,000) (9,000) (10,500)
Merchandise 130,000 220,000 100,000

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Building 650,000
Land 850,000
Accounts Payable (40,000) (50,000) (45,000)
Capital balances prior to formation 815,000 1,171,000 404,500
Requirement C: a) Estalilla, Capital 4,000

Fortuna, Capital 5,000
Sonsona, Capital 4,500
b) Estalilla, Capital 20,000
Merchandise 20,000
Merchandise 60,000
Merchandise 20,000
c) Sonsona, Capital 20,000
Acc. Depn.-Transportation Equipment 20,000
d) Acc. Depreciation.- Building 50,000

Estalilla, Capital 50,000
e) Land 50,000
Requirement D: Cash 140,000

Merchandise 450,000
Building 650,000
Land 850,000
Acc. Depn. –Transportation Equipment 100,000
Acc. Depreciation. –Building 50,000
Fortuna, Capital 1,171,000
Requirement E: Estalilla, Fortuna, Sonsona

As of 31 March 20A
Assets
Cash 140,000
Allow. for Doubtful Accounts 29,500 235,500
Merchandise 450,000
Acc. Depreciation - Transportation Equip. 100,000 250,000
Building 650,000
Acc. Depreciation - Building 50,000 600,000
Land 850,000
Total 2,252,000
Liabilities and Partners’ Equity
Liabilities
Partners’ Equity
Fortuna, Capital 1,171,000
Sonsona, Capital 404,500 2,390,500
Total Liabilities & Partners’ Equity 2,252,000

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** Multiple Choice (Problem) **
2-I. JJ Pawnshop
Q–1 B
Q–2 A
Solution:
Assets 100% - 800,000 ► P480,000 ÷ 60% = P800,000 (B)
Liabilities 40% - 320,000 ► P800,000 - P480,000 = P320,000 (A)
Owner's Equity 60% - 480,000
2-II. Edulan, Tabarranza and Labasan

Q–3 C
Q–4 C
Solution:
75,000 ÷1/5 = 375,000 (C) - equal to total capitalization of the partnership
- 75,000 - contribution of Tabaranza
300,000
÷ 2
150,000 (C) - each contribution of Labasan and Edulan
2-III. Santos and Bombeo
Q–5 C 350,000 - the cost of land when sold in that date is considered the fair market value
of the land
Q–6 200,000 cash

120,000 fair market value of equipment
320,000 (C)
2-IV. Kudemus and Rendon

Q–7 Kude Ren
mus don
Cash 40 600
0, ,00
00 0
0
Accounts 12
Receivable 0,
00
0
Allowance (
for Doubtful 1
Accounts ,
2
0
0
)
Merchandise 5 60
0 ,0
, 00
0
0
0
Building 1,05
0,00
0
Accounts ( 30
Payable 0,000)
Total 55 + 1,410 = 1,968, (
8, ,000 000 A
00 )
0
Q–8 Rendon
Rendon, Capital 1,410,000
Add: Liability 120000
1,710,000 (B)
2-V. Dolor and Aleman

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Q–9 The land should be valued in the partnership book at P200,000 (C)
Q – 10 Aleman’s capital account should be credited in the amount of P187,500 (B)
Q – 11 The capital account balances of Dolor’s capital account during the partnership formation would be P250,000 (D)
2-VI. Awayan and Nadua

Q – 12 Awayan Nadua
Accounts Receivable 80,000 95,000
Allowance 8,000 14,250
72,000 80,750 (A)

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Q – 13 Awayan
Cash 150,000
Merchandise 125,000
Prepaid Expense 15,000
362,000 (A)
Q – 14 Nadua
Cash 120,000
Prepaid Expense (10,000)
360,750 (A)
2-VII. Beceira and Obeso

Q – 15 Capital contribution of Obeso:
2 units Altis taxi 1,950,000
Less: Liability assumed by partnership 200,000
Obeso, capital 1,750,000
required additional contribution of Beceira x 20%
additional cash that Beceira should contribute 350,000 (C)
Q – 16 Cost of 2 units Altis 1,950,000

Less: Liability assumed by the partnership 200,000
Capital contribution of Obeso 1,750,000 (B)
Q – 17 Partner’s Capital Balances:

Cash (P350,000 + P350,000 700,000
2 units Corolla 1,340,000
2 units Altis 1,950,000
Accounts Payable (P250,000 + P200,000) 450,000
Beceira, Capital 1,790,000
Obeso, Capital 1,750,000
Beceira, Capital 1,790,000

Obeso, Capital 1,750,000
3,540,000 (D)
2-VIII. Rada and Besinan

Q – 18 Accounts Receivable 40,000
x Probability of Collection 70%
Estimated Realizable Value 28,000
Original balance of Allowance 3,000

Increased by 9,000 (A)
New balance of Allowance 12,000
Q – 19 At fair market value of P100,000 (B)
Q – 20 Cash 65,000
Laundry Equipment 100,000
Accounts Payable (15,000)
Net Assets 178,000 (A) The amount of cash to be contributed by Besinan
2-IX. Basa and Alfeche

Q – 21 429,000 (C)
Q – 22 390,000 (B)
Basa Alfeche
Cash 145,000 160,000

Accounts Receivable 64,000 45,000
Merchandise 200,000 190,000
Accrued Expense (5,000)
(C) 429,000 390,000 (B)
390,000
(39,000) Amount of cash to be deducted from Basa

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Q – 23
Cash Balance of Basa 145,000
Excess Capital Contribution of Alfeche -39,000
Cash Balance of Basa 106,000
Cash Balance of Alfeche 160,000 (D)
Chapter 3
Partnership Operations
** Exercises and Problems **
3.1 Cebu Grocers

Requirement 1
Agreed Ratio
Matero 30% x 120,000 = 36,000
Bernacer 20% x 120,000 = 24,000
Selisana 50% x 120,000 = 60,000
Profit distributed 120,000
Requirement 2
Proportional Ratio
Matero 60/160 x 120,000 = 45,000
Bernacer 80/160 x 120,000 = 60,000
Selisana 20/160 x 120,000 = 15,000
120,000
Requirement 3
Income and Expense Summary 120,000
Matero, Drawing 36,000
Bernacer, Drawing 24,000
Selisana, Drawing 60,000
3.2 Cotabato Micro-Appliance Center

Cogollo Eruela Pedrosa
P/L Ratio ( in proportion to capital) 62.5% 37.5%
Profit P80,000
Share of Pedrosa (80,000 x 8%) (2) 6,400 (1)
Share of Cogollo (80,000 – 6,400 x 62.5%) 46,000
Share of Eruela (80,000 – 6,400 x 37.5%) 27,600
Profit distributed 46,000 + 27,600 + 6,400 = 80,000 (3)
3.3 Steve and Raymund
Income & Expense Summary P450,000

Steve, Drawing P229,500
Raymund, Drawing 220,500
Steve Raymund
Bonus to Raymund P67,500
Balance:
Steve (P450,000 - 67,500 x 3/5) = P229,500
Raymund (P450,000 – 67,500 x 2/5) = 153,000
Total P229,500 P220,000
3.4 Musuan Supermarket

Requirement 1a
800,000
x 279,500 = 149,066.67
1,500
700,000 130,433.33
x 279,500 =
1,500
279,500.00
Journal Entry
Income & Expense Summary 279,500
Japad, Drawing 149,066.67
Ayuban, Drawing 130,433.33

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Requirement 1b:
810,000
x 279,500 = 149,435.64
1,515
705,000 130,064.36
x 279,500 =
1,515
279,500.00
Journal Entry
Requirement 1c:
No. of Months
Debit Credit Balances Unchanged Peso Unit
Jan. 1 800,000 x 3 2,400,000
Apr.1 820,000 x 6 4,920,000
Oct.1 10,000 810,000 x 3 . 2,430,000
12 9,750,000
÷ 12
Average Capital of Japad 812,500
No. of Months
Jan. 1 700,000 x 3 2,100,000
Apr.1 20,000 680,000 x 7 4,760,000
Nov.1 25,000 705,000 x 2 . 1,410,000
12 8,270,000
÷ 12
Average Capital of Ayuban 689,166.67
P 812,500
x P279,500 = 151,227.80
1,501.6667
P689,166.67 128,272.20
x P279,500 =
1,501.6667
279,500.00
Journal Entry
Requirement 1d:
Japad - P279,500 x 3/5 = 167,700
Ayuban - P279,500 x 2/5 = 111,800
279,500
Journal Entry
Japad, Drawing 167,700
Ayuban, Drawing 111,800
Requirement 1e:
Japad - P279,500 x ½ = 139,750
Ayuban - P279,500 x ½ = 139,750
279,500
Journal Entry
Japad, Drawing 139,750
Ayuban, Drawing 139,750
3.5 Mallari and Asuncion

Requirement 1a
Beg. Capital Ratio: Journal Entry
Mallari P 85,000 85,000/205,000 x P20,000 = P 8,292.68
Asuncion Income & Expense Summary120,000/205,000
120,000 x 20,000 =
P20,000 11,707.32
Mallari, Drawing
P205,000 8,292.68
P20,000.00
Asuncion, Drawing 11,707.32

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Requirement 1b
Ending Capital Ratio:
Mallari P100,000 100,000/195,000 x P20,000 = P10,256.41
Asuncion 95,000 95,000/195,000 x P20,000 = 9,743.59
P195,000 P20,000.00
Journal Entry
Mallari, Drawing P10,256.41
Requirement 2a:
Mallari
No. of Months
Jan.1 85,000 x 2 170,000
Mar.1 P15,000 100,000 x 10 . 1,000,000
12 1,170,000
÷ 12
97,500
Asuncion
No. of Months
Jan.1 120,000 x 9 1,080,000
Oct.1 P25,000 95,000 x 3 . 285,000
12 1,365,000
÷ 12
113,750
Mallari P 97,500 97,500/211,250 x P30,000 = P(13,846.15)

Asuncion 113,750 113,750/211,250 x P30,000 = (16,153.85)
P211,250 Loss P(30,000.00)
Journal Entry
Mallari, Drawing P13,846.15
To distribute loss.
Requirement 2b:
Mallari - P30,000 x 4/5 = P(24,000)
Asuncion - P30,000 x 1/5 = (6,000)
P(30,000)
Journal Entry
Mallari, Drawing P24,000
Asuncion, Drawing 6,000
To distribute loss.
3.6 Esmeralda and Besino

Requirement 1
Total Esmeralda Besino
Salaries 60,000 36,000 24,000
Interest on Beg. Capital 82,500 30,000 52,500
142,500
Remainder (60%-40%) 65,500 39,300 26,200
208,000 105,300 102,700

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Requirement 2
Journal Entry

Esmeralda, Drawing P 105,300
Besino, Drawing 102,700
3.7 Gabayan and Domingo

Requirement 1:
Gabayan - P150,000/P330,000 x P110,000 = 50,000
Palatino - P180,000/P330,000 x P110,000 = 60,000
110,000
Requirement 2:
Total Gabayan Palatino
Salaries P 39,000 P 24,000 P 15,000
Remainder: 3/5 – 2/5 71,000 42,600 28,400
P110,000 P 66,600 P 43,400
Requirement 3:
Total Gabayan Palatino
10% interest P33,000 P 15,000 P 18,000
Remainder, Equally 77,000 38,500 38,500
P110,000 P 53,500 P 56,500
3.8 Cebu Vintage Car

Requirement A:
Total Deriquito Searez
Annual Salaries P 75,000 P 45,000 P 30,000
Interest on Beg. Capital 114,560 60,160 54,400
P450,000 P235,380 P214,620
Requirement B:
Interest based on Ending Capital P288,400 P146,400 P142,000
Annual Salaries 70,000 50,000 20,000
P450,000 P242,200 P207,800
Requirement C:
Annual Salaries P220,000 P120,000.00 P100,000.00
Bonus to Deriquito 112,500 112,500.00
Remainder, Average Capital 117,500 58,368.08 59,131.92
P450,000 P242,200.00 P159,131.92
Average Capital - DERIQUITO

No. of Months
Jan.1 P752,000 x 9 P 6,768,000
Oct.1 P70,000 682,000 x 2 1,364,000
Dec.1 P50,000 732,000 x 1 . 732,000
12 P8,864,000
÷ 12
P738,666.67
Average Capital - SEAREZ

No. of Months
Jan.1 P680,000 x 2 P 1,360,000
Mar.1 P80,000 760,000 x 8 6,080,000
Nov.1 P10,000 750,000 x 1 750,000
Dec.1 40,000 790,000 x 1. 790,000
12 P 8,980,000
÷ 12
Average Capital P 748,333.33
Deriquito - P738,666.67 ► P738,666.67/1,487,000 x P117,500 = P 58,368.08

Searez - P748,333.33 ► P748,333.33/1,487,000 x P117,500 = 59,131.92
P117,500.00

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3.9 Universal Dry Cleaning Services

Requirements:
Case A: Total Español Rosada
Salaries Allowed P110,000 P60,000 P50,000
15% Interest 45,000 30,000 15,000
P160,000 P92,500 P67,500
Case B: Total Español Rosada

15% Interest 45,000 30,000 15,000
Remainder, Equally (25,000) (12,500) (12,500)
P130,000 P77,500 P52,500
Case C: Total Español Rosada

15% Interest 45,000 30,000 15,000
P(30,000) P(2,500) P(27,500)
Case A :
Journal Entry
Español, Drawing P92,500
Rosada, Drawing 67,500
Journal Entry
Español, Drawing P77,500
Journal Entry
Español, Drawing P 2,500
3.10 Añana, Beltran and Ventic

Total Añana Beltran Ventic
Annual Salaries P 75,000 P 30,000 P 25,000 P 20,000
20% Interest 20,000 20,000
Remainder 45,000 18,000 18,000 9,000
P140,000 P 48,000 P 43,000 P 49,000
3.11 Matuguinas and Rovelero

Total Matuguinas Rovelero
Annual Salaries P 80,000 P 30,000 P 50,000
10% Bonus after Salaries 10,000 10,000
18% Interest based on Average 101,250 17,250 84,000
P180,000 P 41,625 P138,375
Matuguinas
No. of Months
Jan.1 P100,000 x 5 500,000
June 1 P20,000 80,000 x 4 320,000
Oct.1 P30,000 110,000 x 3 . 330,000
12 1,150,000
÷ 12
95,833.33
Rovelero
No. of Months
Jan.1 P150,000 x 4 600,000
May 1 P50,000 200,000 x 6 1,020,000
Nov.1 P10,000 190,000 x 2. 3,800,000
12 5,600,000
÷ 12
466,666.67

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Matuguinas - P 95,833.33 x 18% = 17,250

Rovelero - P466,666.67 x 18% = 84,000
101,250
3.12 Robles, Saromines and Tiempo

Total Robles Saromines Tiempo
Bonus (20% of P250,000) 50,000 50,000
Interest:
10% x P100,000 10,000 10,000
10% x P300,000 30,000 30,000
10% x P200,000 20,000 20,000
Salary Allowed 38,000 38,000
148,000 98,000 30,000 20,000
Remainder: (2:3:5) 102,000 20,400 30,600 51,000
As distributed 250,000 118,400 60,600 71,000
3.13 Gadiano and Alisuag
Requirement A:
Total Gadiano Alisuag
Salary to Gadiano P20,000 P20,000
10% bonus to Alisuag (10% x P60,000) 6,000 6,000
Interest:
10% x P 85,000 8,500 8,500
10% x P150,000 15,000 15,000
Remainder: P49,500 P28,500 P21,000
Equally (Less than P30,000) 10,500 5,250 5,250
As distributed P60,000 P33,750 P26,250
Requirement B:
Total Gadiano Alisuag
Salary, Bonus and Interest
(same as in Req. A) P49,500 P28,500 P21,000
Remainders:
P30,000 (equally) 30,000 15,000 15,000
in excess of P30,000 (30%-70%) 500 150 350
3.14 Comval Supermarket

Case 1:
Separis Barroga Total
Salary Allowance P 50,000.00 P 30,000.00 P 80,000
Bonus (5% of profit after bonus) 21,428.00 21,428
Interest Allowed on Beg. Capital 45,000.00 60,000.00 105,000
Remainder: (2:3) 97,428.80 146,143.20 243,572
As distributed P213,856.80 P236,143.20 P450,000
Bonus Computation:
Profit before Bonus P450,000 ÷ 105% OR B= 5% (P - B)
Profit after Bonus P428,572 = 100%
Bonus P 21,428 = P22,500 - .05B
B + .05B = P22,500
1.05B = P22,500
B= P22,500 = P21,428
1.2
Interest on Beginning Capital Balances
Separis = 15% x P300,000 = P 45,000

Barroga = 15% x P400,000 = 60,000
P105,000
Case 2: Separis Barroga Total
Bonus (20% Profit – P140,000-Bonus) P 81,666.00 P 30,000.00 P 80,000

Salaries 60,000.00 21,428
Interest Allowed (10% of Ending
Capital Balance 28,000.00 60,000.00 105,000
Remainder: (4:3) 194,476.57 145,857.43 340,334
As distributed P364,142.57 P265,587.43 P630,000

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Bonus Computation:
Profit before Bonus P 630,000 B= .20 (630,000 - 140,000B)
Less: Salaries (60,000 + 80,000) 140,000 = .20 (490,000 - B)
Profit after Bonus P 490,000 ÷ 120% OR = P98,000 - .20B
408,334 = P98,000
Bonus P 81,666 1.2
B= P81,666
Interest on Beginning Capital Balances

Separis = 10% x P280,000 = P 28,000
Barroga = 10% x P400,000 = 40,000
P 68,000
Case 3:
Interest Allowed on Average Capital @ 10% P 30,667 P 40,833 P 71,500
Salaries Allowed 80,000 70,000 150,000
Bonus 33,636 33,636
Remainder: 50%-50% 132,432 132,432 264,864
Separis Barroga
Jan.1 P300,000 x 12 = P3,600,000 Jan.1 P400,000 x 12 = P4,800,000
May 1 40,000 x 8 = 320,000 Sept. 1 50,000 x 8 = 200,000
Sept. 1 60,000 x 4 = (240,000) Nov. 1 50,000 x 2 = (100,000)
P3,680,000 P4,900,000
÷ 12 ÷ 12
P 306,667 P 408,333
x 10% x 10%
P 30,667 P 40,833
Bonus Computation:
Profit before Salaries & Bonus P 520,000 B= 10% (P – S – B)
Less: Salaries (80,000 + 70,000) 150,000 = .10 (P520,000 – P150,000 - B)
Profit after Salaries & Bonus P 370,000 ÷ 110% OR = .10 (P370,000 – B)
336,364 = 100% = P370,000 - B
Bonus P 33,636 P370,000 – 1.1
B= P33,636
Case 4:
Bonus (20% of Profit) P 80,000 P 80,000
Salaries Allowed 50,000 50,000
Interest Allowed on Beg. Capital at 10% 30,000 30,000
Remainder: (2:8) 48,000 P192,000 240,000
3.15Ceniza, Barredo and Labata
Requirement 1:
As 30% share is given to Labata, what is left is 70% which will be shared between Ceniza
and Barredo based on their old P/L Ratios. Therefore:
New P/L
Old P/L Ratio Ratio
Ceniza (3/5) = 60% x 70% 42%

Barredo (2/5)= 40% x 70% 28%
Labata 30%
Total 100%
Requirement 2:
Reported Profit P300,000
Overstatement of Inventory End, overstates Profit (30,000)
Understatement of Prepaid Expense (asset) results to
overstatement of Expenses (P10,000 - 1,000) 9,000
Understatement of Accrued Expense (liability) results to
understatement of Expenses (P8,000 - 5,000) (3,000)
Corrected Profit P276,000
Schedule of Profit Distribution:
Ceniza = 3/5 or 60% of P276,000 = P165,600

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Barredo = 2/5 or 40% of P276,000 = 110,400

P276,000
3.16 Sorima and Magalso

Requirement 1:
Reported Profit P150,000
1) Understatement of Inventory at the end results to Profit understatement 20,000
2) Non-recognition of Accrued Expense understates Expense and overstates Profit (5,000)
3) Non-recognition of Supplies Expense overstates Profit (8,000)
Corrected Profit P157,000
Requirement 2:
Total Sorima Magalso
Partners’ Equity – Jan. 1, 2009 P450,000 P250,000 P200,000
Add: Net Interest in Equity
Share in Profit 157,000 (40%) 62,800 (60%) 94,200
P607,000 P312,800 P294,200
Less: Permanent Withdrawal (50,000) (20,000) (30,000)
Partners’ Equity – Dec. 31, 2009 P557,000 P292,800 P264,200
3.17 Dipolog Grocers

Requirement 1:
Closing Entries
Merchandise Inventory, End 480,000

Sales 960,000
Purchase Return & Allowances 6,000
Merchandise Inventory, Beg. 510,000
Sales Discount 4,000
Purchases 700,000
Freight In 3,000
Salaries Expense 50,000
Freight Out 1,000
Taxes & Licenses 7,000
Supplies Expense 10,000
Depreciation 40,000
Pugoy, Drawing 49,880
Gargar, Drawing 41,950
Anguit, Drawing 29,170
Requirement 2:
Total Pugoy Gargar Anguit
Salaries to Partners P 50,000 P 30,000 P 10,000 P 10,000
10% Bonus (P121,000 - P50,000) 7,100 7,100
Remainder:
Pugoy - 20% x P63,900 12,780 12,780
Gargar - 50% x P63,900 31,950 31,950
Anguit - 30% x P63,900 19,170 19,170
As distributed
Requirement 3: P121,000 P 49,880 P 41,950 P 29,170
Statement of Changes in Partners’ Equity
Total Pugoy Gargar Anguit
Partners’ Equity –July 1, 2009 P215,000 P 75,000 P 80,000 P 60,000
Add: Net Increase in Equity
Remainder:
Share in Profit 121,000 49,880 42,950 29,170
Less: Drawing (30,000) (15,000) (5,000) (10,000)
P 91,000 P 38,880 P 36,950 P 19,170
Partners’ Equity –June 30, 2010 P306,000 P109,880 P116,950 P 79,170
Operating Expenses 211,000

** Multiple Choice Problems **
3-I Q-1. B 32,000/80,000 = 40%

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3-II Q-2. A 3/P = 75000

P = 75,000 x 5/3= 125,000
125,000 – 75,000 = P50,000
Q-3. A 125,000
3-III Q-4. A Kenneth Peras – 120,000 x 33/3 = 40,000

Q-5. A Mark Peras – 60,000 + 40,000 = 100,000
Q-6. B Jean Pila – 120,000 x 20% (40/200) = 24,000
3-IV Q-7. A Zamora - 150,000/450,000 = 33 1/3
3-V Q-8 & 9 Torres Un Ardina

Profit 100,000 x 10% 9-B 10,000 8-B
100,000 – 10,000 x 35% 31,500
100,000 – 10,000 x 65% 58,500
3-VI Q-10. C 5,000 x 12 months = 60,000

Q-11 to Q-13 Total Diane Ysabelle
Salaries 120,000 60,000 60,000
Interest 8,400 5,250 3,150 (11 - A)
128,400 65,250 63,150
Bonus (200,000 – 128,430 x 10%) 7,160 7,160 (12 – A)
135,560 72,410 63,150
Remainder 64,440 38,664 25,776
200,000 111,074 88,926 (13 - A)
3-VII Q-14. C 98,000 + 3,000 – 5,000 = P96,000

Q-15. B 15/35 x 96,000 = P41,143
3-IV Q-16. A
Partners Salaries Interest Balance Total
Gregorio P15,000 P20,000 P 6,000 P 41,000
Jumawan 20,000 45,000 14,000 79,000
Totals P35,000 P65,000 P20,000 P120,000
Q-17. D
Gregorio P15,000 P20,000 ( 3,000) P 32,000
Jumawan 20,000 45,000 ( 7,000) 58,000
Totals P35,000 P65,000 (10,000) P 90,000
Q-18. A
Gregorio P15,000 P20,000 ( 31,500) P 3,500
Jumawan 20,000 45,000 ( 73,500) ( 8,500)
Totals P35,000 P65,000 (105,000) ( 5,000)
3.V Q-19. B
P20,000 + 30% (86,000 – 60,000)
3.VI Q-20. A
Sales P1,250,000
Inventory 100,000 P1,350,000
Cost of Sales ( 685,000)
Operating Expenses ( 450,000)
Profit P 215,000
Q-21. A
Partners
Bidad 2/10 x 215,000 = 43,000
Mondejar 5/10 x 215,000 = 107,500
Sarceno 3/10 x 215,000 = 64,500
215,000

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Q-22. D
Bidad P 60,000 P45,000 ( 4,000) P101,000
Mondejar 60,000 - ( 2,000) ( 58,000
Sarceno 60,000 - ( 4,000) 56,000
Totals P180,000 P65,000 ( 10,000) P 215,000
3.VII Q-23. C
B = 20%
B = 20% (240,000 – b)
B = 48,000 - .28
B = .2B = P48,000
B = P48,000/1.2
B = P40,000
Q-24. C
Partners Bonus Balance Total
Carpeso P 40,000 P100,000 P140,000
Cabreros - 100,000 100,000
Totals P 40,000 P200,000 P240,000
3.VIII Q-25. B
Partners P/L Before New P/L
Zabalo .60 .18 .42
Perez .40 .12 .28
Delmonte .30
Q-26. B
Understated inventories 15,000
Accrued Expense ( 5,000)
Increase in Net Income P14,000
Q-27. C
Reported Net Income P 450,000
Increase in Net Income 14,000
Corrected Net Income P464,000
Q-28. C
Partners P/L Ratio Net Income Share in Net Income
Zabalo .42 P464,000 P194,880
Perez .28 464,000 129,920
Delmonte .30 464,000 139,200
P464,000
3-IX Q-29. B
B = 25% (NI – B)
B = 25% (240,000 – B)
B = 60,000 - .25B
B = 60,000 / 1.25
B = P48,000
3-IX Q-30. A
Partners Average Capital Salaries Balance Total
Linobo P24,000 P 60,000 ( 70,000) P14,000
Manansala 12,000 - ( 70,000) ( 58,000)
Aguillon 8,000 40,000 ( 70,000) ( 22,000)
Totals P44,000 P100,000 (210,000) ( 66,000)
3-XI Q-31. C
B = 20% (NI – B)
B = 20% (240,000 – B)
B = 48,000 - .2B
B = 48,000 / 1.2
B = P40,000
3-XII Q-32. C
Reported Net Income P105,000
Understatement of Inventory End 50,000
Unrecorded Expense ( 5,000)
Corrected Net Income P150,000

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3-XIII Q-33. A
Partners Old P/L New P/L
Go .50 .10 .40
Adia .50 .10 .40
Pactana .20
Q-34. C 40% x P150,000 = P60,000
Chapter 4
Partnership Dissolution – Change in Ownership structure
4-1 Tan and Esparaguera

Esparaguera, Capital 200,000
Carreon, Capital 200,000
4-2 CSCV
Cañete, Capital 62,500
Saletrero, Capital 87,500
Cajegas, Capital 112,500
Villaplaza, Capital 262,500
4.3 Abuzo and Edulan

1. P187,500
2. Abuzo-Selling Partners
3. P12,500 personal gain
4. P187,500
5. P17,500 personal loss
Book Value of Interest Sold P187,500

Selling Price of Interest Sold 170,000
Loss on Sale of Interest P 17,500
4-4 Badoy and Yee

Total Partnership Interest P 300,000
Portion of Interest Sold 25%
1. Book Value of Interest Sold P 75,000
Selling Price of Interest Sold 85,000
2. Gain on Sale of Interest Sold P 10,000
Badoy, Capital 25,000

Yee, Capital 50,000
Gatmaitan, Capital 75,000
4.5 Hernandez and Gementiza

1. Hernandez, Capital 75,000
Santos, Capital 75,000
2. Gementiza, Capital 112,500
3. Hernandez, Capital 150,000
Gementiza, Capital 150,000
(converted into a sole-proprietorship)
4.6 JAR Partnership

Contributed Capital:
J P 250,000
A 250,000
R 500,000
Orbita 20,000
P1,200,000 x 20% = P240,000 – capital credit of Orbita
Contribution of Orbita 200,000
Bonus to New partner P 40,000
Cash P200,000
J 10,000
A 10,000
R 20,000
Orbita, Capital P246,000

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4.7 Ursua and Halangdon
Requirement 1: Ursua P 80,000

Halangdon 100,000
Gondales 70,000
Contributed Capital P 250,000
Requirement 2:
P250,000 x 40% = P100,000 – P70,000 = P30,000 bonus to new partner
(Her capital credit is bigger than her capital contribution, so bonus is given to the new partner)
Requirement 3:
Journal Entry
Cash 70,000
Ursua, Capital 9,000
Halangdon, Capital 21,000
Gondales, Capital 100,000
Requirement 4: Ursua P 80,000

Halangdon 100,000
Gondales 150,000
Contributed Capital P 330,000
P330,000 x 35% = P115,500 – P150,000 = P34,500 bonus to old partners

(His capital credit is smaller than his capital contribution, so bonus is given to the old partners)
Requirement 5:
Journal Entry
Cash 150,000
Ursua, Capital 10,350
Halangdon, Capital 24,150
Gondales, Capital 115,500
4.8 Beceira and Ytac

Requirement 1:
Casulla, Capital 120,000
Ytac, Capital 130,000
Sarno, Capital 250,000
Requirement 2:
Ytac , Capital 195,000
Requirement 3:
Requirement 4:
Requirement 5:
Requirement 6:
Requirement 7: Casulla, Capital 240,000

Contributed Capital 800,000
800,000 x 1/3 = 266,667 – 300,000 = 33,333 bonus to old partners
(Her capital credit is lesser than her capital contribution, so bonus is given to the old partners)
Cash 300,000

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Requirement 8: Contributed Capital - 800,000
Cash 300,000
Casulla, Capital (3/8 x 100,000) 37,500
Ytac, Capital (5/8 x 100,000) 62,500
Requirement 9: Contributed Capital - 800,000
800,000 x 40% = 320,000 – 300,000 = 20,000 bonus to new partners
(Her capital credit is bigger than her capital contribution, so bonus is given to the new partner)
Cash 300,000
Requirement 10: Casulla, Capital 240,000

Contributed Capital 850,000
850,000 x 30% = 255,000 – 350,000 = 95,000 bonus to old partners
Cash 350,000
4-9 San Carlos Industries

Case 1: Nemenzo 200,000
Kwan 100,000
Gimena 100,000
Total Contributed Capital 400,000
400,000 x 1/4 = 100,000 – 100,000 = No bonus
(His capital credit is equal to his capital contribution, so there’s no bonus to both)
Cash 100,000
Gimena, Capital 100,000

Kwan 100,000
Gimena 120,000

(His capital credit is less than his capital contribution, so bonus is given to the old partners)
Cash 120,000
Nemenzo, Capital 9,000
Kwan, Capital 6,000

Kwan 100,000
Gimena 100,000
400,000 x 30% = 120,000 – 100,000 = 20,000 bonus to new partner

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(His capital credit of P120,000 is greater than his capital contribution of P100,000, so, bonus is
given to the new partner)
Cash 100,000
Kwan, Capital 8,000
Case 4: Nemenzo 200,000 x 25% = 50,000

Kwan 100,000 x 25% = 25,000

Kwan, Capital 25,000
Case 5:
Kwan, Capital 50,000
4-10 Carcar Ampao Factory

Assumption 1: Lapu-lapu 180,000 x 1/3 = 60,000
Lapu-lapu, Capital 60,000

Besario, Capital 60,000
Assumption 2: Lim 140,000 x 1/8 = 17,500
Lim, Capital 17,500

Assumption 3: Lapu-lapu 180,000

Lim 140,000
Besario 160,000
(Her capital credit is lesser than her capital contribution of P100,000, so, bonus is given to the
old partners)
Cash 160,000
Lim, Capital 16,000
Assumption 4: Lapu-lapu, Capital 180,000

Lim, Capital 140,000
(Her capital credit is greater than her capital contribution of P100,000, so, bonus is given to
the new partner)
Cash 72,000
Lim, Capital 10,400
4-11 Cacdac, Lopez and Cruz

Requirement A:
1. Capital Adjustments 6,000


4. Cacdac, Capital 6,800

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Lopez, Capital 10,200

Capital Adjustments 17,000
Capital Adjustments
(1) 6,000 17,000 (4)
(2) 7,000
(3) 4,000
17,000 17,000
Requirement B:
Post-Closing Trial Balances
Debit Credit
Cash in Bank 40,000
Merchandise 63,000
Store Equipment 80,000
Cacdac, Capital 93,200
Total 233,000 233,000
Requirement C:
a) Cruz is going to pay 40,750
Computed as follows:
Refugio, Capital (P93,200 x 25%) 23,300
Berhay, Capital (P69,800 x 25%) 17,450
40,750
b) Cacdac, Capital 23,300

Cruz, Capital 40,750
4.12 Jadulco, Mabad and Anghag

Instruction No. 1:
a. Capital Adjustments 20,000
Allowance for Doubtful Accounts 20,000
b. Capital Adjustments 20,000
Merchandise 20,000
c. Capital Adjustments 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
Instruction No.2:
New Capital of the Partnership
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

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b) Cash 200,000
Anghag, capital 16,250

Total Contribution 930,000
x 25%
Capital Credit of New Partner 232,500
Capital Contribution of New Partner 200,000
Bonus to New Partner 32,500
c) Cash 200,000
Mabad, capital 2,800

Total Contribution 930,000
20%
Capital of New Partner 186,000
Capital Contribution of New Partner 200,000
Bonus to Old Partners 14,000
4.13 Bartolome, tan and de los Santos

Instruction No.1:
Inventory 10,000
2. Prepaid Insurance 7,000
3. Accumulated Depreciation 2,000
4. Bartolome, Capital (50%) 500
Tan, Capital (40%) 400
Delos Santos, Capital (10%) 100
Capital Adjustment
(1) 10,000 7,000 (2)
2,000 (3)
1,000 (4)
10,000 10,000
Instruction No.2:
2a) Adjusted Capital Account of the old partners
Bartolome (200,000 – 500) = 199,500
Tan (180,000 – 400) = 179,600
de los Santos ( 60,000 – 100) = 59,900
439,000
Bartolome, Capital 49,875

Chua, Capital 49,875
(P199,500 x ¼ = P49,875 - Interest Purchased)
2b) Bartolome 199,500

Tan 179,600
de los Santos 59,900
Chua 80,000
519,000

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(Her capital credit is bigger than her capital contribution so, bonus is given to the new partner)
Journal Entry;
Cash 80,000
Bartolome, Capital 37,850
Tan, Capital 30,280
Delos Santos, Capital 7,570
Chua, Capital 155,700
4.14 Davao Commodity Sales

Requirement 1:
a) Allowance for Doubtful Accounts 2,000
b) Capital Adjustments 8,000
Merchandise 8,000
c) Capital Adjustments 2,000
d) Accounts Payable 7,000
Cash 7,000
e) Unused Supplies 5,000
f) Capital Adjustments 100
Unearned Interest Income 100
g) Saburnido, Capital 1,550
Cervantes, Capital 1,550
Capital Adjustments
(b) 8,000 2,000 (a)
(c) 2,000 5,000 (e)
(f) 100 3,100 (g)
10,100 10,100
Requirement 2:
Assets Liabilities and Partners' Equity
Current Assets:
Cash in Bank 233,000 Liabilities
Accounts Receivable 30,000 Current Liabilities:
Allow. for Doubtful Accounts 3,000 27,000 Accounts Payable 33,000
Notes Receivable 10,000 Unearned Int. Income 100 33,100
Unused Supplies 5,000 347,000
Partners' Equity
Property And Equipment Calimpusan, Capital 178,450
Furniture and Fixture 50,000 Sala, Capital 165,450 343,900
Accu. Depreciation 20,000 30,000 Total Liabilities and
Total Assets 377,000 Partners' Equity 377,000
Requirement 3:
Banta, Capital 171,950
Computed as follows:
Saburnido, Capital (178,450 x 50%) 89,225
Cervantes, Capital (165,450 x 50%) 82,725
171,950
4.15 Ruben, Lacierda and Ordoñez

Requirement 1: V. Ruben, Capital 80,000
O. Lacierda, Capital 40,000
B. Ordoñez, Capital 30,000
150,000 x 30% = 50,000 – 30,000 = 20,000 bonus to new partner, Ordoñez

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Requirement 2:
The capital accounts of Ruben and Lacierda were decreased by P12,000 and 8,000 respectively
because of the bonus they gave to Ordoñez.
Requirement 3:
Ruben Lacierda Ordoñez
Capital 80,000 40,000 30,000
Bonus to Ordoñez ( 12,000) ( 8,000) 20,000
Balance 68,000 32,000 50,000
Requirement 4:
Cash 30,000
Ruben, Capital 12,000
Lacierda, Capital 8,000
Ordoñez, Capital 50,000
4.16 Mendez, Tirol and Lupot

Requirement 1: Mendez 200,000
Tirol 100,000
Lupot 125,000
Mendez P 40,000 x .75 = 30,000

Tirol 40,000 x .25 = 10,000
Bonus as distributed 40,000
Requirement 2:
Capital Bonus Total
Mendez 200,000 + 30,000 = 230,000
Tirol 100,000 + 10,000 = 110,000
Capital Account balance after the bonus 340,000
Requirement 3:
Mendez 200,000 + 30,000 = 230,000
Tirol 100,000 + 10,000 = 110,000
Lupot 125,000 - (40,000) = 85,000
425,000
Requirement 4:
Cash 125,000
Tirol, Capital 10,000
Lupot, Capital 85,000
4.17 Jay, Mamaril and Chung

Requirement 1: Total Contributed Capital
Jay 120,000
Mamaril 100,000
Chung 80,000
300,000 x 1/3 = 100,000 – 80,000 = 20,000 bonus to Chung
Requirement 2:
Jay Mamaril Chung
Capital 120,000 100,000 80,000
Bonus to Chung (12,000) (8,000) 20,000
Balance 108,000 92,000 100,000 = 300,000
Requirement 3:
Cash 80,000
Jay, Capital 12,000
Mamaril, Capital 8,000
Chung, Capital 100,000

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4.18 Butuan Internet Cafe

Case 1: Basarte, Capital 265,000
Silverio, Capital 185,000
Jostol, Capital 160,000
Total (3/4 capital after admission) 610,000
New capitalization after admission
(610,000/.75) 813,333
Required contribution of Balibay 203,333

Bonus 24,000
Total 634,000
÷ 75%
Share of New Partner after admission 845,333
610,000

Bonus to new partner 10,000
Total 600,000
New capital after admission 800,000
Share of new partner after bonus 200,000
Less: Bonus to new partner 10,000

Asset Revaluation 80,000
Total 690,000
Share of new partner after bonus 230,000

Assets write down (50,000)
Bonus to new partner (40,000)
Total 520,000
Share of the new partner after bonus 173,333
Less: Bonus to new partner (40,000)
Contribution of new partner 133,333
4.19 Independents Cases
Case 1
Lopez 800,000
Baya 1,200,000
Maguid 500,000
Total Contributed Capital 2,500,000
2,500,000 x 20% = 500,000 = 0 (No Bonus)
Journal Entry
Cash 500,000
Maguid, Capital 500,000
Case 2
Solis 40,000
Orbita 50,000
Tangaro 25,000

Journal Entry
Cash 25,000

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Solis, Capital 23,000

Orbita, Capital 1,000
Tangaro, Capital 1,000
Case 3
Sison 45,000
Laranjo 40000
Morales 35,000
120,000 x 30% = 36,000 – 35,000 = 1,000 bonus to new partners
Journal Entry
CashP 35,000
Laranjo, Capital 600
Sison, Capital 400
Morales, Capital 36,000
*** Multiple Choice Problems ***
Admission of a Partner in an Existing Partnership
4-I City Travel and Tours

Q-1 P800,000 x 1/4 = P200,000 (A)
Q-2 to be distributed to the selling partners (D)
Q-3 Gevera 1/5 x 75% = 15%
Tropico 2/5 x 75% = 30% (B)
Canque 2/5 x 75% = 30%
Aguilar 1/4 = 25%
= 100%
Q-4 210,000 x 25% = 52,500 - 210,000 = 157,500 (A)
4 - II Panganiban, Salisana and Berhay

Q-5 414,375 (C)
Q-6 Panganiban and Salisana (C)
Q-7 1,835,000 (B)
Solutions
a) Capital Adjustments 5,000

b) Capital Adjustments 15,000

Merchandise 15,000
c) Accumulated Depreciation 15,000

d) Panganiban, Capital 2,500

Salisana, Capital 2,500
Panganiban, Capital – 950,000 – 2,500 = 947,500 x .25 = 236,875

Salisana, Capital – 890,000 – 2,500 = 887,500 x .20 = 177,500
1,835,000 414,375 (C)
Panganiban Salisana Berhay

Capital after adjustments 947,500 887,500
Acquired by Berhay (236,875) (177,500) 414,375
710,625 P710,000 414,375 = 1,835,000 (B)
4 - III Southwxpressway Merchandising

Q-8 450,000 x 1/2 = 225,000 (B)

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Q.9 Book Value of Igao’s interest sold to Estroso 225,000

Cash proceeds from the sale 220,000
Personal loss to Igao 5,000 (C)
Q.10 Estroso should be credited by P225,000 equal to the book value of interest she acquired. (B)
4 - IV Southwxpressway Merchandising
Q.11 Espero30,000
Aduana 45,000
Gelacio 20,000
Total Contributed Capital 95,000 (B)
Q-12 95,000 x 1/5 = 19,000 – 20,000 = 1,000 bonus to old partners (B)
Q-13 Espero 1,000 x 40% = 400
Aduana 1,000 x 60% = 600 (A)
1,000
4-V Ligsay, Emperado and Balagot

Q-14 Ligsay Emperado Balagot
Capital Balances 150,000 100,000 120,000
Understatement of Inventory 4,000 4,000 2,000
Understatement of depreciation (2,400) (2,400) (1,200)
Adjusted Balance 151,600 101,600 120,800
Q-15 Selling Price of share sold 35,000

Book Value of interest purchased 30,200
Gain on sale of share sold 4,800 (A)
Q-16 Balagot will share a capital credit of P30,200 (B)
4 - VI Galos and Villarido

Q-17 Galos 200,000
Villarido 160,000
Villanueva 110,000
470,000
470,000 x 1/4 = 117,500 – 110,000 = 7,500 bonus to new partner (C)
Q-18 Galos 7,500 x 60% = 4,500

Villarido 7,500 x 40% = 3,000 (A)
7,500
** Exercise and Problems **
Retirement or Withdrawal/Death, Bankruptcy or Incapacity of a Partner
4-1 Lacson, Joe and Ajoc

Requirement 1:
a) Joel Jo, Capital 85,000
Alex Ajoc, Capital 85,000
b) Joel Jo, Capital 85,000
Heginio Lacson, Capital 63,750
Alex Ajoc, Capital 21,250
c) Joel Jo, Capital 85,000
Marco Ocenar, Capital 85,000
Requirement 2:
Heginio Lacson 60,000
Alex Ajoc 140,000
200,000

Alex Ajoc 76,250
200,000

Alex Ajoc 55,000
Marco Ocenar 85,000
200,000

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4-2 Esparaguera, Supapo and Ceniza

1. Ceniza, Capital 650,000
Cash 600,000
Esparaguera, Capital (2/6 x P 50,000) 16,667
Supapo, Capital (4/6 x P 50,000) 33,333
2. Ceniza, Capital 650,000

Esparaguera, Capital 16,667
Supapo, Capital 33,333
Cash 700,000
4-3 Tea for Snack House

Requirement 1:
Orcullo’s Withdrawal
Orcullo, Capital 80,000

Reyes, Capital 7,500
Cash 95,000
Capital Balances

175,000
Requirement 2:
Orcullo, Capital 80,000
Cash 75,000
4-4 Long Live Enterprises

Requirement 1:
Mr. Dimamatay’s interest, Dec. 31, 2009 50,000
Add: Share in Net Income from Jan. 1-Feb.29 (20,000 x ½) 10,000
60,000
Requirement 2:
Dimamatay, Capital 60,000
Cash 60,000
Requirement 3:
Dimamatay, Capital 60,000
Buhay, Capital 60,000
4-5 Walangbuhay and Maylangit
Requirement 1:
Capital Adjustment 5,000
Allow. for Doubtful Account 5,000
Inventories 15,000
Walangbuhay, Capital (60%) 30,000
Maylangit, Capital (40%) 20,000

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Requirement 2:
Efects of Adjustments:
Decrease in Account Receivable (5,000)
Increase in Inventory 15,000
Increase in Equipment 50,000
Increase in Expense (10,000)
Total 50,000
P/L Ratio of Walangbuhay x 60%
Share of Walangbuhay on the adjustments 30,000
Add: Feb. 14 balance of Walangbuhay 950,000
Walangbuhay’s adjusted capital balance 980,000
Requirement 3:
Walangbuhay, Capital 980,000

Cash 980,000
Requirement 4:
Walangbuhay, Capital 980,000
Maylangit, Capital 20,000
Cash 1,000,000
4-6 Sianosa, Rosete and Facturan

Requirement 1:
Non-Cash Assets 56,000

Gatmaitan, Capital (25%) 14,000
Barroga, Capital (25%) 14,000
Dorado, Capital (50%) 28,000
Requirement 2:
Gatmaitan, Capital 56,000
Gatmaitan, Loan 9,000
Cash 16,200
Barroga, Capital 16,267
Dorado, Capital 32,533
4-7 Lopez, Albios and Aguhob

ERRATUM: Accounts Payable should be 90,000
Requirement 1:
a) Inventory 30,000
Albios, capital 7,500
Aguhob, Capital 9,000
b) Equipment 20,000
c) Lopez, Capital 9,000
Accrued Salaries 20,000
Requirement 2:
Cash in Bank 50,000
Albios, Capital (25/55) 29,318
Aguhob, Capital (30/55) 35,182
(Note: Since this only a retirement of a partner, a partner’s deficiency will be considered as
his own loss and become the advantage of the remaining partners.)
Requirement 3:
Assets Liabilities & Partners’ Equity
Inventory 180,000 Accounts Payable 90,000

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Equipment 200,000 Accrued Salaries 20,000

Total Assets 380,000 Albios, Capital 116,818
Total Liabilities & Partners’
Equity 380,000
Chapter 5
Dissolution with Liquidation
Test I – True or False
1. True 9. True 17. False

2. False 10. False 18. True
3. True 11. False 19. True
4. True 12. True 20. True
5. True 13. True 21. False
25. True
Test II – Multiple Choice
1. C 6. B
2. B 7. C
3. B 8. C
4. A 9. A
5. A 10. A
5-1 Centerpoint Commercial

Requirement A:
Centerpoint Commercial
Statement of Partnership Liquidation
40% 20% 40%
Non- Dizon, Dizon, Tamala, Dimalanta,
Cash Cash Liabilities Loan Capital Capital Capital
Balance before realization 30,000 340,000 49,000 20,000 95,000 100,000 106,000
Realization and Gain 350,000 (340,000) - - 4,000 2,000 4,000
Balances 380,000 49,000 20,000 99,000 102,000 110,000
Payment of Liabilities (49,000) (49,000) - - - -
Balance 331,000 20,000 99,000 102,000 110,000
Payment to Partners’ Loan (20,000) (20,000) - - -
Balances 311,000 99,000 102,000 110,000
Payment to Partners’ Capital (311,000) (99,000) (102,000) (110,000)
Journal Entries
a) Cash 350,000
Dizon, Capital 4,000
Tamala, Capital 2,000
Dimalanta, Capital 4,000
b) Liabilities 49,000
Cash 49,000
c) Dizon, Loan 20,000
Cash 20,000
d) Dizon, Capital 99,000
Cash 311,000
Requirement B:
40% 20% 40%

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Realization and Loss 200,000 (340,000) - - (56,000) (28,000) (56,000)

Balances 230,000 49,000 20,000 39,000 72,000 50,000
Balance 181,000 20,000 39,000 72,000 50,000
Payment to Partners’ Loan (20,000) (20,000) - - -
Balances 161,000 39,000 72,000 50,000
Payment to Partners’ Capital (161,000) (39,000) (72,000) (50,000)
Journal Entries
a) Cash 200,000
Cash 49,000
Cash 20,000
d) Dizon, Capital 39,000
Cash 161,000
Requirement C:
40% 20% 40%
Balances 120,000 49,000 20,000 (5,000) 50,000 6,000
Balance 71,000 20,000 (5,000) 50,000 6,000
Right of Ofset - (5,000) 5,000 - -
Balance 71,000 15,000 50,000 6,000
Payment to Partners’ Loan (15,000) (15,000) - -
Balances 56,000 50,000 6,000
Payment to Partners’ Capital (56,000) (50,000) (6,000)
Journal Entries
a) Cash 90,000
Cash 49,000
d) Dizon, Loan 15,000
Cash 15,000
e) Tamala, Capital 50,000
Cash 56,000
Requirement D:
40% 20% 40%
Balances 90,000 49,000 20,000 (17,000) 44,000 (6,000)
Balance 41,000 20,000 (17,000) 44,000 (6,000)
Right of Ofset - (17,000) 17,000 - -
Balance 41,000 3,000 44,000 (6,000)

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Payment to Partners’ Loan (3,000) (3,000) - -

Balances 38,000 44,000 (6,000)
Deficiency of Dimalanta
absorbed by Tamala - (6,000) 6,000
Balances 38,000 38,000
Payment to Partners’ Capital (38,000) (38,000)
Journal Entries
a) Cash 60,000
Cash 49,000
d) Dizon, Loan 3,000
Cash 3,000
f) Tamala, Capital 38,000
Cash 38,000
Requirement E:
40% 20% 40%
Balances 70,000 Journal Entries 20,000
49,000 (25,000) 40,000 (14,000)
Payment of Liabilities (49,000)
a) Cash (49,000) -
40,000 - - -
Balance 21,000 Dizon, Capital 20,000
120,000 (25,000) 40,000 (14,000)
Right of Ofset - Tamala, Capital (20,000)
60,000 20,000 - -
Balance 21,000 Dimalanta, Capital 120,000 (5,000) 40,000 (14,000)
Deficiency of Dizon & Tamala Non-Cash Assets 340,000
absorbed by Dimalanta - 5,000 (19,000) 14,000
Balances b) Liabilities
21,000 49,000 21,000
Payment to Partners’ Capital (21,000) Cash 49,000 (21,000)
d) Tamala, Capital 19,000
Cash 21,000

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5-2 Watin – Veloso Partnership

Requirement A1:
(SOVENT)
Watin – Veloso Partnership
60% 40%
Non- Watin, Watin, Veloso,
Cash Cash Liabilities Loan Capital Capital
Balance before realization 20,000 180,000 60,000 10,000 40,000 90,000
Realization and Loss 85,000 (180,000) - - (57,000) (38,000)
Balances 105,000 60,000 10,000 (17,000) 52,000
Payment of Liabilities (60,000) (60,000) - - -
Balance 45,000 10,000 (17,000) 52,000
Right of Ofset - (10,000) 10,000 -
Balances 45,000 (7,000) 52,000
Additional Cash - Watin 7,000 7,000 -
Balances 52,000 52,000
Payment to Veloso (52,000) (52,000)
Requirement A2:
(INSOVENT)
60% 40%
Non- Watin, Watin, Veloso,
Cash Cash Liabilities Loan Capital Capital
Realization and Loss 85,000 (180,000) - - (57,000) (38,000)
Balances 105,000 60,000 10,000 (17,000) 52,000
Balance 45,000 10,000 (17,000) 52,000
Right of Ofset - (10,000) 10,000 -
Balances 45,000 (7,000) 52,000
Deficiency of Watin
Absorbed by Veloso 7,000 (7,000)
Balances 45,000 45,000
Payment to Veloso (45,000) (45,000)
Requirement B1: SOLVENT

Journal Entries
a) Cash 85,000
Watin, Capital 57,000
Veloso, Capital 38,000
b) Accounts payable 60,000
Cash 60,000
c) Watin, Loan 10,000
d) Cash 7,000
e) Veloso, Capital 52,000
Cash 52,000
Requirement B2: INSOLVENT

Journal Entries
a) Cash 85,000
Veloso, Capital 38,000
b) Accounts payable 60,000
Cash 60,000
c) Watin, Loan 10,000
d) Veloso, Capital 7,000
e) Veloso, Capital 45,000
Cash 45,000

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5-3 Sanciangko Commercial

Requirement 1:
Sanciangko Commercial
30% 30% 40%
Non- Accounts Pozon, Pozon, Selisana, Teque,
Cash Cash Payable Loan Capital Capital Capital
Customer’s Collection 50,000 (57,000) - - (2,100) (2,100) (2,800)
Balances 95,000 70,000 62,000 5,000 32,900 32,900 32,200
Sale of Mdse. at a Loss 59,500 (70,000) - - (3,150) (3,150) (4,200)
Balances 154,500 62,000 5,000 29,750 29,750 28,000
Balances 92,500 5,000 29,750 29,750 28,000
Payment to Loan (5,000) (5,000) - - -
Balance 87,500 29,750 29,750 28,000
Payment to Partners (87,500) (29,750) (29,750) (28,000)
Requirement 2:
1) Cash 50,000
Allowance for doubtful Accounts 3,000
Pozon, Capital 2,100
Selisana, Capital 2,100
Teque, Capital 2,800
To record collection from customer’s
account and charged of the balance.
2) Cash 59,000
Pozon, Capital 3,150
Merchandise 70,000
3) Accounts Payable 62,000
Cash 62,000
4) Pozon, Loan 5,000
Cash 5,000
5) Pozon, Capital 29,750
Cash 87,500
5-4 RNJ Trading

Requirement 1: RNJ Trading
50% 20% 30%
Non- Accounts Suico, Suico, Cabral, Lledo,
Realization on Loss 60,000 (80,000) - - (10,000) (4,000) (6,000)
Balances 65,000 50,000 4,000 (5,000) 13,000 3,000
Balances 15,000 4,000 (5,000) 13,000 3,000
Right of Ofset - (4,000) 4,000 - -
Balances 15,000 (1,000) 13,000 3,000
Deficiency of Suico is
absorbed by Cabral and Lledo
on the ratio of 2/5 – 3/5 1,000 (400) (600)
Balance 15,000 12,600 2,400
Payment to Partners (15,000) (12,600) (2,400)
Requirement 2:
1) Cash 60,000
Suico, Capital 10,000
Cabral, Capital 4,000
Lledo, Capital 6,000

lOMoARcPSD|6814227
Cash 50,000
3) Suico, Loan 4,000
4) Cabral, Capital 400,
Lledo, Capital 600
5) Cabral, Capital 12,600
Lledo, Capital 2,400
Cash 15,000
5-5 Capreso – Tao Partnership

Case 1:
Carpeso – Tao Partnership
Statement of Liquidation
40% 60%
Non- Carpeso, Tao,
Cash Cash Liabilities Capital Capital
Balance before realization - 120,000 40,000 60,000 20,000
Realization and Gain 130,000 (120,000) - 4,000 6,000
Balances 130,000 40,000 64,000 26,000
Payment of Liabilities (40,000) (40,000) - -
Balances 90,000 64,000 26,000
Payment to Capital (90,000) (64,000) (26,000)
Journal Entries
1) Cash 130,000
Non-Cash 120,000
Carpeso, Capital 4,000
Tao, Capital 6,000
Case 2: 2) Accounts Payable 40,000
Carpeso
Cash – Tao Partnership 40,000
3) Carpeso, Capital 64,000 40% 60%
Tao, Capital Non- 26,000 Carpeso, Tao,
Cash 90,000
Cash Cash Liabilities Capital Capital
Balance before realization - 120,000 40,000 60,000 20,000
Realization on Loss 70,000 (120,000) - (20,000) (30,000)
Balances 70,000 40,000 40,000 (10,000)
Balances 30,000 40,000 (10,000)
Contribution of Tao 10,000 - 10,000
Balances 40,000 40,000
Payment to Capital (40,000) (40,000)
3) Cash 10,000
Tao, Capital 10,000
4) Carpeso, Capital 40,000
Cash 40,000
5-6 Sambag Refrigeration Services

Requirement 1:
Sambag Refrigeration Services
Statement Journal EntriesLiquidation
of Partnership
1)Cash 70,000 20% 50% 30%
Carpeso,Non-
Capital Accounts 20,000
Delantar, Delantar, Gabriel, Padul,
Cash Tao, Capital
Cash Payable 30,000
Loan Capital Capital Capital
Balance before realization 20,000 Non-Cash
250,000 156,000 4,000 120,000
(5,000) 65,000 50,000
Sale of non-cash assets and
Distribution of loss 200,000 (250,000) - - (10,000) (25,000) (15,000)
Cash 40,000
Balances 220,000 156,000 4,000 (15,000) 40,000 35,000

lOMoARcPSD|6814227

Balance 64,000 4,000 (15,000) 40,000 35,000
Right of Ofset - (4,000) 4,000 - -
Balance 64,000 (11,000) 40,000 35,000
Deficiency of Delantar
Absorbed by Gabriel and
Padul (5/8 – 3/8) - 11,000 (6,875) (4,125)
Balances 64,000 33,125 30,875
Payment to Gabriel (33,125) (33,125)
Payment to Padul (30,875) (30,875)
Requirement 2:
Journal Entries
1) Cash 200,000
Delantar, Capital 10,000
Gabriel, Capital 25,000
Padul, Capital 15,000
Cash 156,000
3) Delantar, Loan 4,000
4) Gabriel, Capital 6,875
To record capital deficiency of
Delantar absorbed by Gabriel
and Padul.
5) Gabriel, Capital 33,125
Cash 64,000
To finally distribute cash to
partners.
5-7 Saberon and Lopez

Requirement 1:
80% 20%
Non- Accounts Saberon, Saberon, Lopez,
Cash Cash Payable Loan Capital Capital
a) Realization and Loss 40,000 (55,000) - - (12,00) (3,000)
Balances 43,000 20,000 5,000 (4,000) 22,000
b) Payment of Liabilities (20,000) (20,000) - - -
Balances 23,000 5,000 (4,000) 22,000
c) Right of Ofset - (4,000) 4,000 -
Balances 23,000 1,000 22,000
d) Payment to Loan (1,000) (1,000) -
Balances 22,000 22,000
e) Payment to Capital (22,000) (22,000)
(Note: The balancing amount of P55,000 is non-cash assets)

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Requirement 2:
Journal Entries
a) Cash 40,000
Saberon, Capital 12,000
b) Accounts Payable 20,000
Cash 20,000
c) Saberon, Loan 4,000
Saberon, Capital 4,000
d) Saberon, Loan 1,000
Cash 1,000
e) Lopez, Capital 22,000
Cash 22,000
5-8 Badoy, Licayan and Bargayo

Requirement 1:
Badoy, Licayan and Bargayo
40% 20% 40%
Non- Accounts Badoy, Badoy, Licayan, Bargayo,
Realization and Loss 10,000 (122,000) - - - (22,400) (44,800)
Balance 30,000 5,000 20,000 24,000 (6,400) (7,800)
Payment of Liability (5,000) (5,000) - - - -
Balance 25,000 20,000 24,000 (6,400) (7,800)
Right of Of-set - (4,800) (6,400) 6,400 -
Balance after the rights of ofset 25,000 15,200 17,600 (7,800)
Deficiency of Gulane
Absorbed by Badoy & Licayan - (5,200) (2,600) 7,800
Balance 25,000 10,000 15,000
Payment to Badoy and Licayan (25,000) (10,000) (15,000)
Requirement 2a:
Journal Entries
a) Cash 10,000
Gain or Loss on Realization 112,000
Equipment 95,000
Sale on non-cash assets.
b) Badoy, capital 44,800
Licayan, Capital 22,400
Bargayo, Capital 44,800
To distribute loss on realization.
c) Accounts Payable 5,000
Cash 5,000
Payment of liability.
d) Badoy, Loan 4,800
Badoy, Capital 4,800
Right of Of-set.
e) Licayan, Loan 6,400
Licayan, Capital 6,400
Right of Of-set.
f) Badoy, Loan 5,200
Licayan, Loan 2,600

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Requirement 2b: (Bargayo is solvent and pays deficiency, same entry from a to f)
g) Cash 7,800
Cash payment of deficiency.
h) Badoy, Loan 10,000
Licayan, Loan 15,000
Cash 25,000
To distribute cash to partners.
To distribute cash to partners

Badoy, Licayan, Bargayo,
Loan Loan Capital
Balance after right of Ofset 15,200 17,600 (7,800)
Cash payment to Bargayo - - 7,800
Cash payment to partners (15,200) (17,600) -0-
5-9 LJ Enterprises
Assumption 1:
LJ Enterprises
65% 35%
Caminade, Caminade, Tormis,
Cash Non-Cash Liabilities Loan Capital Capital
Balance before Liquidation - 200,000 91,000 19,000 59,000 31,000
Sale of Non-cash assets and distribution of Loss 110,000 (200,000) - - (58,500) (31,500)
Balance 110,000 91,000 19,000 500 (500)
Balance 19,000 19,000 500 (500)
Absorption of Tormis deficiency - - (500) 500
Balance 19,000 19,000
Payment to Laguna, loan (19,000) (19,000)
Journal Entries
a) Cash 110,000
Caminade, Capital 58,500
Tormis, Capital 31,500
Cash 91,000
c) Caminade, Capital 500
Tormis, Capital 500
d) Caminade, Loan 19,000
Cash 19,000
Assumption 2:
LJ Enterprises
80% 20%
Caminade, Caminade, Tormis,
Cash Non-Cash Liabilities Loan Capital Capital
Balance before Liquidation - 200,000 91,000 19,000 59,000 31,000
Sale of Non-cash assets and distribution of Loss 110,000 (200,000) - - (72,000) (18,000)
Balance 110,000 91,000 19,000 (13,000) 13,000
Balance 19,000 19,000 (13,000) 13,000
Right of Of-set - Caminade - (13,000) 13,000 -
Balances 19,000 6,000 13,000
Payment to Loan – Caminade (6,000) (6,000) -
Payment to Capital - Tormis (13,000) (13,000)
Journal Entries
a) Cash 110,000
Cash 91,000

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c) Caminade, Loan 13,000

d) Caminade, Loan 6,000
Cash 19,000
Payment of Loan to Caminade and capital to Tormis.
5 - 10 Digos Trading
Requirement 1:
Digos Trading
June 30, 20A
30% 30% 40%
Non- Apolinar, Apolinar, Guiamad, Paclijan,
Balances before liquidation 13,000 70,000 20,000 10,000 5,000 25,000 23,000
1st Installment:
a) Realization and Loss 10,000 (30,000) - - (6,000) (6,000) (8,000)
Balances 23,000 40,000 20,000 10,000 (1,000) 19,000 15,000
b) Payment of Liabilities (20,000) - (20,000) - - - -
Balances 3,000 40,000 10,000 (1,000) 19,000 15,000
c) Right of Of-set - - (1,000) 1,000 - -
Balances 3,000 40,000 9,000 19,000 15,000
d) Cash Payment (Sch.1) (3,000) - - (3,000) -
Balances 40,000 9,000 16,000 15,000
2nd Installment:
e) Realization and Loss 4,000 (6,000) (600) (6,00) (800)
Balances 4,000 34,000 (600) 15,400 14,200
f) Right of Of-set - - (600) 600 - -
Balances 4,000 34,000 8,400 15,400 14,200
g) Cash Payment (Sch.2) (4,000) - - (4,000) -
Balances 34,000 8,400 11,400 14,200
3rd Installment:
h) Realization and Loss 30,000 (34,000) - (1,200) (1,200) (1,600)
Balances 30,000 8,400 (1,200) 10,200 12,600
i) Right of Of-set - (1,200) 1,200 - -
Balances 30,000 7,200 10,200 12,600
j) Payment to Loan (7,200) (7,200) - -
Balances 22,800 10,200 12,600
k) Payment to Capital (22,800) (10,200) (12,600)
Requirement 2: (1)
Schedule of Cash Payment
30% 30% 40%
Total Apolinar Guiamad Paclijan
Balance after 1st Installment
Capital and Loan 43,000 9,000 19,000 15,000
Less: Theoretical Loss (40,000) (12,000) (12,000) (16,500)
Cash for Distribution 3,000 (3,000) 7,000 (1,000)
Deficiency of Apolinar and Paclijan
absorbed by Guiamad 3,000 (4,000) 1,000
Cash payment to Guiamad 3,000
(2)
Schedule of Cash Payment
30% 30% 40%
Total Apolinar Guiamad Paclijan
Balance after 2nd Installment
Capital and Loan 38,000 8,400 15,400 14,200
Cash for Distribution 4,000 (1,800) 5,200 600
Deficiency of Apolinar absorbed by
Guiamad and Paclijan (3/7 – 4/7) 1,800 (771.43) (1,028.57)
Balance 4,428.57 428.57
Deficiency of Paclijan absorbed by Guiamad 4,000.00 428.57

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Requirement 3:
Journal Entries
a) Cash 10,000
Apolinar, Capital 6,000
Guiamad, Capital 6,000
Paclijan, Capital 8,000
b) Accounts Payable 20,000
Cash 20,000
c) Apolinar, Loan 3,000
d) Guiamad, Loan 3,000
Cash 3,000
e) Cash 4,000
Apolinar, Capital 600
Guiamad, Capital 600
Paclijan, Capital 800
f) Apolinar, Loan 1,200
g) Guiamad, Capital 4,000
Cash 4,000
h) Cash 30,000
Guiamad, Capital 1,200
i) Apolinar, Loan 1,200
j) Apolinar, Loan 7,200
Cash 7,200
k) Guiamad, Capital 10,200
Cash 22,800
Requirement 4:
Digos Trading
Cash Priority Program
Loss Absorption Balance Cash Payment
Apolinar Guiamad Paclijan Total Apolinar Guiamad Paclijan
Capital and Loan Balances
before realization 15,000 25,000 23,000
Profit and Loss ratio 30% 30% 40%
Loss absorption ability 50,000 83,333 57,500
Excess of Guiamad over Paclijan (25,833) 7,750 - 7,750 -
Balances 50,000 57,500 57,500
Excess of Guiamad and
Paclijan over Apolinar (7,500) (7,500) 5,250 - 2,250 3,000
Balances 50,000 50,000 50,000 13,000 - 10,000 3,000
Cash available in excess of 13,000(P/L Ratio) 30% 30% 40%
5 - 11 Paramount Company
Case 1: Paramount Company
40% 40% 20%

Non- Accounts Clarin, Namoc, Clarin, Namoc, Martinez,
Cash Cash Payable Loan Loan Capital Capital Capital
Balance before Liquidation 8,000 136,000 44,800 2,000 3,200 24,000 32,000 38,000
Realization and Loss 74,000 (136,000) - - - (24,800) (24,800) (12,400)
Balances 82,000 44,800 2,000 3,200 (800) 7,200 25,600
Payment of Liability (44,800) (44,800) - - - - -
Balances 37,200 2,000 3,200 (800) 7,200 25,600
Right of Of-set - Clarin - (800) - 800 - -
Balances 37,200 1,200 3,200 7,200 25,600
Payment to Loan-Clarin & Namoc (4,400) (1,200) (3,200) - -
Balances 32,800 7,200 25,600
Payment to Capital-Namoc &
Martinez (32,800) (7,200) (25,600)
Case 2: 40% 40% 20%

lOMoARcPSD|6814227

Balances 76,000 44,800 2,000 3,200 (3,200) 4,800 24,400
Balances 31,200 2,000 3,200 (3,200) 4,800 24,400
Right of Of-set - (2,000) - 2,000 - -
Balances 31,200 3,200 (1,200) 4,800 24,400
Cash contribution by Clarin to pay of
deficiency 1,200 - 1,200 - -
Balances 32,400 3,200 4,800 24,400
Payment to Loan - Namoc (3,200) (3,200)
Martinez (29,200) (4,800) (24,400)
Case 3: 40% 40% 20%

Balances 76,000 44,800 2,000 3,200 (3,200) 4,800 24,400
Balances 31,200 2,000 3,200 (3,200) 4,800 24,400
Right of Of-set - (2,000) - 2,000 - -
Balances 31,200 3,200 (1,200) 4,800 24,400
Deficiency of Clarin absorbed by
Namoc & Martinez on a 4/6 and
2/6 basis - - 1,200 (800) (400)
Balances 31,200 3,200 4,000 24,000
Payment to Loan - Namoc (3,200) (3,200)
Martinez (28,000) (4,000) (24,000)
5 - 12 Star Hardware
Requirement 1:
Star Hardware
Cash Priority Program
Loss Absorption Balance Cash Payment
Corpuz Cuidadano Luntao Total Corpuz Cuidadano Luntao
Capital and Loan Balances
before realization 65,000 80,000 70,000
Profit and Loss ratio 30% 40% 30%
Loss absorption ability 216,667 200,000 233,333
Extinguishment: Excess of
Luntao over Corpuz - - (16,666) 5,000 - - 5,000
Balances 216,667 200,000 216,667
Excess of Luntao and Corpuz
over Cuidadano (16,667) - (16,667) 10,000 5,000 - 5,000
Balances 200,000 200,000 200,000 15,000 5,000 - 10,000
Cash available in excess of 15,000 (P/L Ratio) 30% 40% 30%
Requirement 2:
Computations: 30% 40% 30%
Corpuz Cuidadano Luntao
Cash available for distribution – P8,000:
1st cash available of P5,000 is given to Lunato 5,000
Remainder of P3,000 (P/L Ratio) 3/6 or ½ to Corpuz 1,500
3/6 or ½ to Luntao 1,500
1,500 -0- 6,500
Computations: 30% 40% 30%

Total Corpuz Cuidadano Luntao
A per program 15,000 5,000 - 10,000
Excess (P/L ratio) 5,000 1,500 2,000 1,500
Cash available for distribution 20,000 6,500 2,000 11,500

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*** Multiple Choice Problems ***
5–I Ibañez, Langbid and Pedroño

Q–1 Ibañez Langbid Pedronio
Agreed share 40% 35% 25%
Capital balance before realization 80,000 70,000 50,000
Share of realization gain of P50,000 20,000 17,500 12,500
Balance after effecting the gain 100,000 87,500 62,500 (A)
Q–2 Ibañez Langbid Pedronio

Agreed share 40% 35% 25%
x Loss on realization 30,000 30,000 30,000
Share of the realization loss 12,000 10,500 7,500 (A)
5 – II S&R trading
Q–3 Partners’ Equity
Gabuya P 105,000
Cadeleña 120,000
Total P 225,000
Less: Write-of 4,000
New Partners’ Equity P221,000 (B)
Q–4 Cash P 60,000

Add: 90% collection 36,000
Total P 96,000
Less: Payment of Liabilities 80,000
Cash Balance P 16,000 (A)
5 – III Manila and Torralba

Q–5 Total Partners’ Equity P105,000
Add: Liabilities 145,000
Total Assets P250,000 (B)
Q–6 Book Value of Non-Cash Assets P 250,000

Proceeds from Sale 180,000
Loss on Realization P 70,000
P/L Ratio x 70%
Share of Torralba on the Realization Loss P 49,000 (C)
Q–7 Rosada, Capital P 50,000

Share of the Realization Loss
of P70,000 (P70,000 x 30%) 21,000
Share of cash distribution P 29,000 (A)
5 – IV Ambrosio, Rada and Pateño

Q –8 Non-Cash Assets P 490,000
Less: Realization Loss ( 340,000)
Realization of non-cash assets P150,000 (A)
Q–9 All accounts with credit balances:

Liabilities P 105,000
Ambrosio, Capital 180,000
Rada, Capital 150,000
Pateño, Capital 120,000
P555,000
Less: Non-Cash Assets 490,000
Cash balance before realization P 65,000 (B)
Q – 10 Ans. C - P3,000 capital contribution is equal to her capital deficiency.
Q – 11 Ans. A - Ambrosio, P2,000 and Rada P1,000.
5 – V Southexpressway Hardware
Q – 12 Total partnership interest P 60,000
Less: Allow. for Doubtful Accounts 5,000 P 55,000
Merchandise 80,000
Store Furniture and Equipment 90,000
Less: Accumulated Depreciation 60,000 30,000
Book Value of non-cash assets P165,000 (C)

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Q – 13 Ans. A
Cash P 186,000
Accounts Receivable P 60,000
Merchandise 80,000
Store Furniture and Equipment 90,000
Q – 14 Realization Book Gain

Value Value (loss)
Accounts Receivable P 56,000 P 55,000 P 1,000
Merchandise 85,000 80,000 5,000
Store Furniture and Equipment 45,000 30,000 15,000
P 186,000 P 165,000 P21,000 (B)
Q – 15 Ans. A - P7,000 for Tao and P14,000 for Alegado
Q – 16 Ans. B
Gain or Loss on Realization P 21,000
Arib, Capital P 7,000
Zaragoza, Capital 14,000
Q – 17 Ans. B
Accounts Payable P 15,000
Cash P 15,000
5 – VI Miranda and Leon

Q – 18 Proceeds from sale of non-cash assets P 140,000
Non-cash assets ( 200,000)
Loss on Realization (P 60,000) (C)
Q – 19 Loss on Realization P 60,000

x P/L ratio of Leon x 40%
Share of Leon on the realization loss P 24,000 (B)
Q – 20 Miranda, Capital P 36,000

Leon, Capital 24,000
Gain on Realization P 60,000 (B)
Q – 21 Miranda, Capital P 30,000

Share of Miranda on realization loss ( 36,000)
Capital debit of Miranda (P 6,000) (B)
Q – 22 Ans. C - The amount of Miranda, loan that is of-set against capital deficiency is P6,000.
5 – VII Sabado, Gregori and Gadia

40% 20% 40%
Total Sabado Gregori Dequito
Capital balances 65,000 (4,000) 63,000 6,000
Loan balances 5,000 5,000
Combined Capital & loan balances 70,000 1,000 63,000 6,000
Less: Theoretical Loss Q – 23 (A) (20,000)
Q – 24 (A) (8,000) (4,000) (8,000)
Total 50,000 (7,000) 59,000 (2,000)
Deficiency of Sabado and Deriquito
Absorbed by Gregori 7,000 (9,000) 2,000
Q – 25 (B) 50,000
5 – VIII Espocia and Malquisto

Q – 26 Cash Non-cash Liabilities Espocia Malquito
Balances before realization - 510,000 120,000 240,000 150,000
Realization and Loss 450,000 (510,000) - (240,000) 136,000
Balances 450,000 120,000 216,000 114,000
Balance 330,000 216,000 114,000
Payment of Capital (330,000) (216,000) (114,000) (A)

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5 – IX Java and Constantino

Q – 27 Total Assets P 55,000
Less: Cash 10,000
Non-cash assets (P 45,000) (C)
Q – 28 Realization Loss (P 15,000)
Add: Non-Cash 45,000
Cash Proceeds from Sale (P 30,000) (A)
5–X Patosa, Juinio and dela Cruz

Q – 29 Other 50% 30% 20%
Cash Assets Liabilities Patosa Juinio dela Cruz
Balances before realization 60,000 540,000 140,000 280,000 160,000 20,000
Realization and Loss 400,000 (540,000) - (70,000) (42,000) (28,000)
Balances 460,000 140,000 210,000 118,000 (8,000)
Balances 320,000 210,000 118,000 (8,000)
Absorption Loss of dela Cruz (5,000) (3,000) 8,000
205,000 115,000 (D)
5 – XI Villacampa, Kudemus and Puno

Q – 30 Other 50% 25% 25%
Cash Assets Liabilities Villacampa Kudemus Puno
Balances before realization 28,000 265,000 48,000 95,000 80,000 70,000
1st Installment - - - - - -
Realization and Loss 70,000 (150,000) - (40,000) (20,000) (20,000)
Balances 98,000 115,000 48,000 55,000 60,000 50,000
Payment of Liabilities (48,000) - (48,000) - - -
Balances 50,000 115,000 55,000 60,000 50,000
SCHEDULE 1: 50% 25% 25%

Total Villacampa Kudemus Puno
Balances before realization 165,000 55,000 60,000 50,000
Cash Distribution 50,000 (2,500) 31,250 21,250
Deficiency of Villacampa absorbed
by Trinidad and Puno 2,500 (1,250) (1,250)
Cash Payment to Trinidad and Puno 30,000 20,000
Chapter 6
Corporation
(Definition, Nature and Formation)

1. true 8. false 15. true 22. False 29. true
2. true 9. true 16. false 23. true
3. true 10. false 17. true 24. true
4. false 11. true 18. true 25. false
5. false 12. false 19. true 26. true
6. true 13. true 20. true 27. true
Test I – Multiple Choice

1. D 4. A 7. A 10. A
2. C 5. D 8. C 11. B
3. B 6. A 9. B 12. A
Chapter 7
Accounting for Share Capital Transactions

1. false 7. true 13. true 19. true 25. true
2. false 8. true 14. false 20. true 26. false
3. false 9. true 15. false 21. true
4. true 10. true 16. true 22. false
5. false 11. true 17. true 23. false

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Test I – Multiple Choice
1. A 4. A 7. A 10. A
2. A 5. A 8. A 11. C
3. D 6. C 9. D
*** EXERCISES and PROBLEMS ***
7 – 1 Sarangani Marketing Corporation
Journal Entry Memorandum Entry

July 2
Ordinary Share Capital
Unissued Ordinary Share P1,000,000 Authorized to issue 10,000
Authorized Ordinary Share P1,000,000 shares at P100 par value
Subscription Receivable P 250,000 Subscription Receivable P250,000

Subscribed Ordinary Share P 250,000 Subscribed Ordinary Share P250,000
Cash P 62,500 Cash P 62,500

Subscription Receivable P 62,500 Subscription Receivable P 62,500
July 15
Organization Cost P 15,000 Organization Cost P 15,000
Cash P 15,000 Cash P 15,000
July 16
Subscribed Ordinary Share P 10,000 Subscribed Ordinary Share P 10,000
Share Premium 500 Share Premium 500
Cash P 4,500 Cash P 4,500

July 18
Share Premium 1,000 Share Premium 1,000
July 20
Cash P 15,000 Cash P 15,000
Unissued Ordinary Share P 15,000 Ordinary Share P 15,000
July 25
Cash P 15,000 Cash P 15,000

July 27
Land P 40,000 Land P 40,000
(fair market value of land is given)
July 29
Organization Expense P 35,000 Share Premium (Organization Cost) P 35,000
(par value is used)
July 30
Cash P 35,000 Cash P 35,000
P 35,000
Subscription Receivable Subscription Receivable P 35,000
July 31

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Subscribed Ordinary Share 10,000 Subscribed Ordinary Share P10,000

7 – 2 Dadiangas canning Corporation

Requirement 1:
Memorandum Entry Journal Entry
Sept. 1
Ordinary Share .
Authorized to issue 30,000 Ordinary shares Unissued Ordinary Share P3,000,000 P3,000,000
at P100 par value share Authorized Ordinary Share

Sept. 2
Cash P 187,500 Cash P 187,500
Sept. 5
Organization Expense P 20,000 Organization Expense P 20,000

P 20,000 P 20,000
Cash Cash
Sept. 10

Sept. 14
Cash P 148,500 Cash P 148,500
1,980 x 100 per share P198,000

Partial Payment 49,500
Balance Collected P148,500

Share Capital P 198,000 Unissued Ordinary Share P 198,000
Sept. 19
Cash in Bank P 50,000 Cash in Bank P 50,000
Ordinary Share P 50,000 Unissued Ordinary Share P 50,000
Sept. 24
Land P 95,000 Land P 95,000
Sept. 30
Cash P 17,600 Cash P 17,600
Subscribed Ordinary Share P 20, 000 Subscribed Ordinary Share P 20, 000

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Requirement 2-1:
Shareholder’s Equity (Memorandum Entry)

Share Capital
Ordinary Share, P100 par value, 3,620 shares issued 362,000
Subscribed Ordinary Share 552,000
Less: Subscription Receivable 414,000 138,000
Share Premium 3,000
Issued and Subscribed Ordinary Shares 503,000
Shareholder’s Equity (Journal Entry)

Share Capital
Ordinary Shares authorized, 30,000 shares at P100 3,000,000
Less: Unissued ordinary shares 2,638,000
Issued Ordinary Shares 362,000
Subscribed Ordinary Shares 552,000
Share Premium 3,000
Issued and Subscribed Ordinary Shares 503,000
Requirement 2-2:
Aug. 5 Unissued Preference Share P 1,500,000
Unissued Ordinary Share 10,000,000
Authorized Preference Share P 1,500,000
Authorized Ordinary Share 10,000,000
Subscription Receivable – Preference (14,000 x 30) P 420,000

Subscription Receivable – Ordinary (27,000 x 100) 2,700,000
Subscribed Preference Share P 420,000
Subscribed Ordinary Share 2,700,000
Cash P 3,120,000
Subscription Receivable – Preference P 420,000
Subscription Receivable – Ordinary 2,700,000
Organization Expense P 25,000

Unissued Ordinary Share P 20,000
Share Premium – Ordinary 5,000
Aug. 10 Subscribed Preference Share P 420,000

Subscribed Ordinary Share 2,700,000
Unissued Preference Share P 420,000
Aug. 15 Subscription Receivable – Preference P 7,000

Subscription Receivable – Ordinary 105,000
Share Premium – Preference 1,000
Cash P 22,400
Aug. 20 Land P 315,000
Cash P 64,000
Subscription Receivable P 64,000
Aug. 29 Cash (105,000 – 21,000) P 84,000

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Subscription Receivable – Ordinary P 84,000

Subscribed Ordinary Share P 100,000
Share Premium-Preference Share Premium-Ordinary

15)1,000 15)5,000
28)4,000 20)15,000
5,000 20,000
Share Premium:
Share Premium – Preference P 5,000
Total Shareholder’s Equity P 3,705,400
Details
Unissued – Preference Unissued - Ordinary
1,500,000 420,000 10,000,000 20,000
60,000 2,700,000
1,020,000 300,000
6,980,000
Authorized - Preference Authorized - Ordinary

1,500,000 10,000,000
Subscribed Share - Preference Subscribed Share - Ordinary

420,000 420,000 2,700,000 2,700,000
60,000 6,000 100,000
60,000 100,000
6,000
Subscription Receivable –Preference Subscription Receivable - Ordinary

420,000 420,000 2,700,000 2,700,000
7,000 6,000 105,000 21,000
64,000 60,000 84,000
5,600
Share Premium - Preference Share Premium - Ordinary

1,000
4,000 5,000
5,000 15,000
20,000
7 – 3 Cebu Centennial Hotel

Requirement 1 and 2:
Aug. 5 Unissued preference Share P 1,500,000
Authorized preference Share P 1,500,000
Authorized Ordinary Share 10,000,000
Subscription Receivable – Preference (14,000 x P300) P 420,000
Subscription Receivable – Ordinary (27,000 x P100) 2,700,000
Subscribed Share Capital – Preference P 420,000
Subscribed Share Capital – Ordinary 2,700,000
Cash P 3,120,000
Subscription Receivable – Ordinary 2,700,000
Aug. 10 Subscribed Share Capital – Preference P 420,000
Subscribed Share Capital – Ordinary 2,700,000
Subscribed Share Capital – Ordinary 100,000

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Cash P 22,400
Aug. 20 Land P 315,000


Cash P 64,000

Aug. 29 Cash (105,000 – 21,000) P 84,000

Subscription Receivable – Ordinary P 84,000
Subscribed Share Capital – Ordinary P 100,000

Requirement 3:
Shareholders’ Equity (Memo Entry)
Share Capital
10% Preference Share, P30 par, 50,000 shares authorized,
16,000 shares were issued P 480,000
Less: Subscription Receivable – Preference 5,600 400
Issued and Subscribed – Preference P 480,400
Ordinary Share, P100 par, 100,000 shares authorized

30,200 shares were issued P 3,020,000
Subscribed Share Capital – Ordinary 100,000
Issued and Subscribed – Ordinary P 3,120,000
Total Issued and Subscribed – Preference and Ordinary P 3,600,400
Share Premium – Ordinary 20,000 25,000
Total Shareholders’ Equity P 3,625,400
S hareholders’ Equity (Journal Entry)

Share Capital
10% Preference Share, 50,000 shares at 30 par value P 1,500,000
Less: Unissued Preference share, 34,000 shares 1,020,000
Issued Share Capital – Preference P 6,000
Less: Subscription Receivable – Preference 5,600 400
Ordinary Share – Authorized 100,000 shares at P100 par value P10,000,000

Less: Unissued Ordinary Shares, 69,800 shares 6,980,000
Issued Share Capital, 30,200 shares P 3,020,000
Subscribed Share capital – Ordinary 100,000
Issued and Subscribed – Ordinary P 3,120,000
Total Issued and Subscribed – Ordinary P 3,600,400

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7 – 5 Color Quick Corporation

Error: 500 shares issued instead of 50 shares
Requirement 1: Land P 45,000

Discount on Ordinary Share 5,000
Ordinary Share P 50,000
Requirement 2: Cash P 5,000

Discount on Ordinary Share P 5,000
7– S hareholders’ Equity (Memorandum Entry)

6
Share Capital
10% Preference Share at P100 par value, 10,000 shares

authorized and 3,600 shares issued P 360,000
Subscribed Preference Share 500,000
Ordinary Shares at P100 par value, 30,000 shares

authorized and 8,500 shares issued P 850,000
Subscribed Ordinary Shares 100,000
Issued and Subscribed – Ordinary P 950,000
Total Issued and Subscribed – Preference and Ordinary P 1,810,000
Share Premium:
Accumulated Profits (Losses) 85,000
7–7 Farmingstone, Inc.
Assumption 1 Organization Cost P 60,000

250,000 shares x P200 = 50,000
P 60,000 – P 50,000 = 10,000
250 shares x P250 = 62,500
250 shares x P200 = 50,000
250 shares x P50 = 12,500
7 – 8 Monte Alegre Development Corporation
Assumption 1 Land P 550,000

Preference Share (5,000 x P100) P 500,000
Share Premium – Preference (P550,000 – P500,000) 50,000
Assumption 2 Land (5,000 x P110) P 550,000
Preference Share P 500,000
Assumption 3 Land P 500,000
Preference Share P 500,000
7 – 9 Mandarin Corporation
Instruction 1 Land P 50,000

Share premium – Ordinary 2,000
Cash P 20,000

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Instruction 2 Ordinary Share P 97,000 = 970 shares

÷ par value P100
7 – 10
Assumption A
1) Cash P 15,000
Capital in Excess of Stated Value – Ordinary 5,000
2) Cash P 8,000
3) Cash P 10,000
Assumption B
1) Cash P 15,000
2) Cash P 8,000
3) Cash P 10,000
7 – 11 Diamond Corporation
Requirement 1 - Froilan Ampil
Requirement 2 - 100,000 shares
Requirement 3 - Subscription Receivable P 500,000
Cash P 200,000
Receivable from Highest Bidder P 300,000
Cash P 21,000
Cash P 321,000
40,000 shares for Ampil
60,000 shares for Lopez
100,000 shares
======
Requirement 4 - Treasury Shares P 321,000

Ordinary Share (for 100,000 shares) P 500,000
7 – 12 Raja Buayan Marketing Corporation
Requirement 1
Ordinary Share .
Authorized to issue 2,000 shares at par value

of P1,000.
March 20A
3 - Subscription Receivable P 500,000 P 500,000
Subscribed Ordinary Share
Cash P 125,000 P 125,000
Subscription Receivable
(500 x P1,000)

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5 - Cash P 225,000
Subscription Payment Balance

Tano 200 x 1,000 = P 200,000 - 50,000 = P150,000
Santos 100 x 1,000 = 100,000 - 25,000 = 75,000
P 300,000 - 75,000 = P 225,000
- Subscribed Ordinary Share P 300,000

6 - Subscription Receivable P 30,000
Cash P 6,000
August
15 - Receivable from Highest Bidder P 24,000
16 - Receivable from Highest Bidder P 5,000

Cash P 5,000
20 - Cash P 29,000
21 - Subscribed Ordinary Share P 30,000

Baugbog 25
Yao 5
30 shares
Requirement 2 - Treasury Shares P 29,000
7 – 13 Duhat Corporation
Requirement 1
a) Subscription Receivable P 10,000
b) Cash P 3,000
c) Receivable from Highest Bidder P 7,000
d) Receivable from Highest Bidder P 500
Cash P 500
e) Cash P 7,500
f) Subscribed Ordinary Share P 10,000
Sabado - 120 shares
Esparaguera - 80 shares (balance)
200 shares
Requirement 2
Receivable from Highest Bidder P 500

Cash P 500
Treasury Shares P 7,500
(100 shares are issued to the corporation)

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7 – 14 Yummy Cakes and Pastries
a) Accumulated Depreciation P 20,000

Receivable from Corporation 150,000
Cash P 40,000 No entry
Merchandise 70,000
Furniture and Equipment 100,000
To transfer the net assets of the
Partnership to the corporation.
b) Unissued Share Capital P250,000
Authorized Share Capital P250,000
No entry To record authorization
5,000 shares at P50 par
Value per share.
c) Subscription Receivable P175,000

No entry Subscribed Share Capital P175,000
To record subscription
at par value of the
following
incorporators.
Share Subscribed Amount

Casulla 1,000 P 50,000
Landicho 1,200 60,000
Supapo 800 40,000
Beltran 250 12,500
Eno 250 12,500
3,500 P 175,000
d) Cash P 40,000
d) Casulla, Capital P 50,000 Merchandise 70,000
Landicho, Cpital 60,000 Furniture and Equipment 80,000
Supapo, Capital 40,000 Accounts Payable P 40,000
Receivable from Corporation P150,000 Subscription Receivable 150,000
To finally close the partnership To record receipts of
book. assets and assumption
Of liabilities of the
partnership.
Casulla P 50,000
Landicho 60,000
Supapo 40,000
P150,000
e) Cash P 25,000
To record collection
from subscription of
the f:
Beltran P 12,500
Eno 12,500
P 25,000
f) Subscribed Ordinary Share P175,000

Unissued Ordinary Share P175,000
To record issuance of
Certificate to the
following
incorporators/
shareholders.
Paid-up
Shares Amount
Casulla 1,000 P 50,000
Landicho 1,200 60,000
Supapo 800 40,000
Beltran 250 12,500
Eno 250 12,500
P 3,500

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7 – 15 Kalahi Store
Book of Partnership
a) Corpuz, Capital P21,000

Ciudadano, Capital 21,000
Income and Expense Summary. P63,000
b) Salazar, Capital P48,467
Corpuz, Capital 48,467
Ciudadano, Capital 48,466
Allowance for Doubtful Accounts P30,000
Merchandise 95,400
c) Receivable from Corporation P521,600
Corpuz, Loan 30,000
Cash P170,000
Merchandise 381,000
d) Share of Stock-Corporation P521,600
Receivable from Corporation P521,600
Book of the Corporation
a) Subscription Receivable P521,600

Subscribed Ordinary Share P521,600
b) Cash P170,000
Merchandise 381,600
Allowance for Doubtful Accounts P60,000
Corpuz, Loan 30,000
Subscription Receivable 521,600
c) Subscribed Ordinary Share P521,600
Ordinary Share P521,600
*** Multiple Choice ***
7 – I Negros Sugar planters, Inc.

Q-1 8% Preference Share P400,000
Subscribed Preference Share P300,000
Less: Subscription Receivable-Preference 75,000 225,000
Ordinary Share 700,000
Subscription Receivable-Ordinary 50,000 50,000
Legal Capital P1,375,000 (A)
Q-2 Contributed Capital:

Share Capital
8% Preference Share P400,000
Subscribed Preference Share P300,000
Less: Subscription Receivable-Preference 75,000 225,000
Ordinary Share 700,000
Less: Subscription Receivable-Ordinary 50,000 50,000
Share Premium
Discount on Preference Share ( 2,000)
Share Premium-Ordinary 40,000 38,000
Accumulated Profits and Losses 1,835,000
Other Components of Equity
Revaluation Increment of Property 15,000
Total Shareholders’ Equity P3,263,000 (A)
Q-3 Same as in Q-1, P1,375,000 (A)


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7 – II Davao Metro Stars Corporation

Q-4 Answer (A)
Preference, 2,000 shares x P100 = P200,000 Ordinary Share, 5,000 x P150 = P750,000
Q-5 Answer (A)

Preference,2,000 x 25% = 500 shares Ordinary Share, 5,000 x 25% = 1,250 shares
Q-6 Answer (A)

Preference P2,000 x 25% x 25% = P12,500 Ordinary Share, P750,000 x 25% x 25% = P46,875
7 – III Madraza Corporation

Q-7 to Q-8
Debit Credits Cash Land
Discount on Ordinary
Organization Expense Share Capital Share Capital Share Premium
1) P11,040 P 960 P12,000
2) 50,000 38,000 P12,000
3) 25,000 20,000 5,000
Q – 7 (B) P70,000 P17,000 Q – 8 (A)
7 – IV Dumaguete Jewelry Corporation

Q-9 20,000 Shares x P100 par value = P2,000,000 (B)
Q-10 P300,000 (B)
Q-11 P1,200,000 x P100 = 12,000 shares (C)
7 – V Davao Metro Sales Corporation

Q-12 Number of shares authorized to issue 400
x par value per share P 100
Authorized Share Capital P400,000 (C)
Q-13 Authorized Ordinary Share P 400,000

x Subscription Requirement 25%
P 100,000 (A)
Q-14 100,000 x 25% = 25,000 (A)
Q-15 Equivalent to the subscribed Share Capital of P100,000 ÷ par value of P100 = 1,000 shares (A)
Q-16 1,000 shares were issued

- 970 shares outstanding
30 shares in the treasury (A)
7 – VI Dadiangas Farmingtown Corporation
Q-17 10% Preference Share authorized to issue P1,000,000

÷ par value of P 100
No. of preference share authorized to issue 10,000 shares (A)
Q-18 Authorized Ordinary Share 15,000 shares

x par value 100
Authorized Share Capital - Ordinary P1,500,000 (B)
Q-19 Preference – 10,000 shares x 25% = 2,500 shares (A)

Ordinary - 15,000 shares x 2 5% = 3,750 shares
Q-20 Preference – 2,500 shares x P100 par value = P62,500 (A)

Ordinary – 3,750 shares x P100 par value = 93,750
Q-21 Share Subscribed - 100 shares x P105 P10,500

Share Subscribed at par -100 shares x P100 10,000
Credited to share premium P 500 (A)
Q-22 Shares Subscribed – 100 shares x P105 P10,500

Less: Share Premium 500
Credited to share capital P10,000 (B)
7 – VII Valencia Fruit Processing Corporation

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Q-23 300 shares were declared delinquent (C)
Q-24 Dagohoy (C)
Q-25 Subscription of Monta (300 x P150) = P45,000

Subscription balance (unpaid) = 27,000
Payment made by Monta on her subscribed shares P18,000 (A)
Q-26 Due from Highest Bidder P27,000

Subscription Receivable P27,000 (A)
Q-27 130 for Monta and 170 for Dagohoy (A)
Q-28 Treasury Shares P27,560

Due from Highest Bidder P27,560 (A)
7 – VIII Davao Grains, Inc.

Q-29 March 10 (25,000 x P20) P500,000
March 25 (1,000 x P40) 40,000
Sept. 17 5,000 x P60) 300,000
Share Premium at Dec. 31, 20A P840,000
7 – IX
Q-30 Land P350,000
Ordinary Shares P300,000
Share Premium 50,000 (B)
7–X
Q-31 Since the cost of the service is not known, the fair value of the share is used, P130,000 (1,000 x P130) (B)
7 – XI
Q-32 Authorized Ordinary Share P5,000,000
Less: Unissued Ordinary Share 2,000,000
Issued P3,000,000
Subscribed Ordinary Share P1,000,000
Share Premium 500,000
Accumulated Profits and Losses-Unappropriated P 600,000
Accumulated Profits and Losses-Appropriated 300,000 900,000
Total P5,000,000
Less: Treasury Shares ( 100,000 )
Total Shareholders’ Equity P4,900,000 (A)
7 – XII
Q.33 Preference Share, P100 par P 2,300,000
Ordinary Share P10 par 5,250,000
Legal Capital P7,600,000 (B)
Q.34 Answer A
Preference Share, P2,550,000 ÷ P15 par = 170,000 shares
Ordinary Share 3,000 ÷ P50 par = 60,000 shares
Chapter 8
Accumulated Profits (Losses) Dividends
and
Treasury Shares

1. True 6. True 11. False 16. True 21. True 26. False
2. False 7. False 12. False 17. False 22. False 27. True
3. True 8. True 13. True 18. True 23. True 28. True
4. True 9. True 14. False 19. True 24. True 29. False
5. True 10. True 15. True 20. False 25. True 30. True
Test II – Multiple Choice
1. D 3. D 5. B 7. A 9. B 11. B
2. C 4. C 6. B 8. D 10. D 12. D

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*** EXERCISES/PROBLEMS ***
8–1
Requirement 1:
Accumulated Profits and Losses balance – Jan. 1, 20B 165,000
a) accrued salaries not recorded, understate expenses and
overstates Profit (15,000)
b) understatement of ending inventory, understates profit 4,000
c) overstatement of depreciation, understates profit 2,000
d) expense portion of prepaid insurance not recorded,
understates expense and overstates profit (5,000)
Corrected Acc. Profits and Loss-Jan. 1, 20B 151,000
Requirement 2:
a) Accumulated Profits and Losses P 15,000
Accrued Salaries P 15,000
b) Merchandise Inventory P 4,000
Accumulated Profits and Losses P 4,000
c) Accumulated Depreciation P 2,000
d) Accumulated Profits and Losses P 5,000
Prepaid Insurance P 5,000
8 – 2 Bacolod Sugarland Corporation
Requirement 1:
Income and Expense Summary P 170,000
Requirement 2:
Acc. Profits and Losses Appropriated for Plant Expenses P 260,000
Acc. Profits and Losses Appropriated for Treasury Shares 90,000
Requirement 3:
Declaration:
Cash Dividends Payable P 100,000
Payment:
Cash Dividend Payable P 100,000
Cash P 100,000
Requirement 4:
Bacolod Sugarland Corporation
Statement of Accumulated Profits and Losses
For the year ended 31 December 20A

Add: Profit for the year 170,000
Total P1,010,000
Less: Cash Dividends Declared and Paid P 100,000
Current year’s appropriation:
For Plant Expansion P 260,000
For Treasury Shares 90,000 350,000 450,000
Acc. Profits and Losses Unappropriated or Free, Dec. 31 P 670,000
Acc. Profits and Losses Appropriated:
For Plant Expansion P 260,000
For Treasury Shares 290,000 350,000
Accumulated Profits and Losses, Dec. 31, 20A P1,020,000
Requirement 5:
Acc. Profits and Losses Appropriated for Plant Expansion P 260,000

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8 – 3 Marco Polo Corporation

a) Issued and Outstanding Shares 5,000
Less: Treasury Shares 200
Issued and Outstanding after treasury shares P 4,800
P1,000 x 20% 200
Amount of Dividends Declared P 960,000

Cash P 960,000
b) Issued and Outstanding 5,000 shares

Issued and Outstanding after treasury shares 4,800 shares
x cash dividend per share P 25.00

Cash P 120,000
c) Issued and Outstanding 5,000 shares

Issued and Outstanding after Treasury Shares 4,800
10% x P1,200 P 120

Share Dividends Distributable P 576,000
Share Capital P 576,000
d) Issued and Outstanding 5,000 shares

Issued and Outstanding after Treasury Shares 4,800
20% x P1,000 P 200

8–4 Casablaca, Inc.

Aug. 1 Acc. Profits and Losses P 18,000
Sept. 1 Cash Dividend Payable P 18,000

Cash P 18,000
(1,500 x P12)
Dec. 1 Acc. Profits and Losses P 19,500
Share Dividend Distributable P 19,500

(P130 x 10% x 1,500 shares)
8 – 5 Negros Grains, Incorporated

Requirement 1:
Upon Declaration:
Acc. Profits and Losses Pxx
Cash Dividends Payable-Preference Pxx
Cash Dividends Payable-Ordinary xx

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Upon Payment:
Cash Dividends Payable-Preference Pxx
Cash Dividends Payable-Ordinary xx
Cash Pxx
Requirement 2:
a) Preference Shares are Non-Cumulative and Non-Participating
Total Preference Ordinary
Preference Dividends:
Current year: P100,000 x 7% x 1year 7,000 7,000
Ordinary Dividends:
Balance, all to ordinary 73,000 73,000
Dividends as distributed 80,000 7,000 73,000
÷ Shares issued 2,000 3,000
Dividends per share 3.50 24.33
b) Preference Shares are Cumulative and Non-Participating

Arrears: P100,000 x 7% x 2 14,000 14,000
Current: P100,000 x 7% x 1 7,000 7,000
Ordinary Dividends:
Dividends as distributed 80,000 21.000 59,000
÷ Shares issued 2.000 3,000
c) Preference Shares are Non-Cumulative and Fully-Participating

Current year: P100,000 x 7% x 1 7,000 7,000
Ordinary Dividends:
Current year: P300,000 x 7% x1 21,000 21,000
Balance for Participating, P52,000
Preference – P100,000/P400,000 x P52,000 13,000 13,000
Ordinary – P300,000/P400,000 x P52,000 39,000 39,000
Dividends per share 10,000 20,000
d) Preference Shares are Cumulative and Fully-Participating

Arrears: P100,000 x 7% x 2 14,000 14,000
Current: P100,000 x 7% x 1 7,000 7,000
Ordinary Dividends:
Current year: P300,000 x 7% x1 21,000 21,000
Balance for Participating, P52,000
Preference – P100,000/P400,000 x P38,000 9,500 9,500
Ordinary – P300,000/P400,000 x P38,000 28,500 28,500
8 – 6 Cagayan de Oro Motorama, Incorporated

Requirement A – Preference Share is Non-Cumulative and Non-Participating
Preference Share Dividends:
Current: P90,000 x 10% x 1 yr. 9,000 9,000
Ordinary Dividends:
As distributed 70,000 9,000 61,000

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Requirement B – Preference Share is Cumulative and Non-Participating

Arrears: P90,000 x 10% x 1 yr. 9,000 9,000
Current: P90,000 x 10% x 1 9,000 9,000
Ordinary Dividends:
Balance all to Ordinary Share (70,000-P18,00) 52,000 52,000
As distributed 70,000 18,000 52,000
Requirement C – Preference Share is Non-Cumulative and Fully -Participating

Current: P90,000 x 10% x 1 9,000 9,000
Ordinary Dividends:
Current Year: P100,000 x 10% x 1 10,000 10,000
Balance all to Ordinary Share, P51,000
Preference – P90,000/190,000 x P51,000 24,158 24,158
Ordinary – 100,000/190,000 x P51,000 26,842 26,842
As distributed 70,000 33,158 36,842
Requirement D – Preference Share is Cumulative and Fully-Participating

Arrears: P90,000 x 10% x 1 yr. 9,000 9,000
Current: P90,000 x 10% x 1yr. 9,000 9,000
Ordinary Dividends:
Current Year: P100,000 x 10% x 1yr. 10,000 10,000
Balance for Participation, P42,000
Preference – P90,000/190,000 x P42,000 19,895 19,895
Ordinary – 100,000/190,000 x P42,000 22,105 22,105
As distributed 70,000 37,895 32,105
8 – 7 Musuan Agro-Industrial Corporation

Requirement 1:
No. of Shares issued and outstanding 8,000 shares
x Par Value per share P 100
Par Value of issued and outstanding shares P 800,000
x Rate of Dividends declared 10%
Dividends Declared P 80,000
÷ Par Value P 100
Equivalent Share to be issued 800 shares
Requirement 2:
Dividends P 80,000
÷ No. of shares issued and outstanding 8,000
Dividends per share P 10
Requirement 3:
Upon Declaration:
Acc. Profits and Losses P 80,000
Upon Distribution:
8 – 8 Valencia Frutti Corporation

Requirement 1:
Treasury Share P 5,500
Cash P 5,500
Requirement 2:
a) Cash P 5,500
b) Cash P 6,000
Share Premium-Treasury Share 500

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c) Cash P 5,000
Share Premium-Treasury Share 500
Treasury Shares P 5,500
8 – 9 Macopa Corporation
Requirement 1:
Treasury Share (1,500 x P24) P 36,000
Cash P 36,000
Cash (900 x P30) P 27,000

Treasury Shares (900 x P24) P 21,600
Share Premium-Treasury Shares 5,400
*** MULTIPLE CHOICE PROBLEM ***
8–I Cabana Corporation

Q–1 Income and Expense Summary, credit P 1,800,000
Income and Expense Summary, debit 1,050,000
Profit P 750,000 (B)
Q–2 Income and Expense Summary P 750,000

Acc. Profits and Losses P 750,000 (B)
Q–3 Acc. Profits and Losses Balance, Jan. 1, 20A P 100,000

Add: Profit of 20A 750,000
Acc. Profits and Losses Balance, Dec. 31, 20A P 850,000 (C)
8 – II Misamis Oriental Ferries, Incorporated

Q–4 5,000 shares x P100 P 500,000 (Share Capital)
Dividends to be declared 10%
Amount of dividends declared P 50,000 (C)
Q–5 Acc. Profits and Losses P 50,000

Cash Dividends Payable P 50,000 (C)
Q–6 Prepare a list of shareholders on record (A)
Q–7 Cash Dividends Payable P 50,000

Cash P 50,000 (B)
Q–8 Current Liability (B)
Q–9 Cash Dividend P 50,000

÷ Share Outstanding 5,000
Cash Dividend per share P 10.00 (B)
Q – 10 1,000 shares x P10,000 dividend per share = P 10,000 (A) 8
– III Metro Cebu Central, Incorporated

Q – 11 Authorized Share 3,000 shares
- Issued Share 1,000
Unissued Share 2,000 (C)
Q – 12 Issued Share 1,000 shares

Less: Treasury Share 200
Outstanding Share 800 (A)
Q – 13 The free or Unappropriated portion of Accumulated Profits and Losses – P60,000 (B)
Q – 14 1,000 issued shares less 200 treasury = 800 shares outstanding x 10% = 80 shares (A)
Q – 15 Shares to be issued as share dividends 80

x Par Value (par value is to be used
because the market value is not given) P 100
Amount of Acc. Profits and Losses to be capitalized P8,000 (A)
Q – 16 Total Shareholders’ Equity before share dividends P 160,000

Less: Decrease in Acc. Profits and Losses
upon declaration of Share Dividends 8,000
Total P 152,000
Add: Increase in capital upon distribution of
share dividends 8,000
Total Shareholders’ Equity after share dividends P 160,000 (B)
(No efect on Shareholders’ Equity)

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Q – 17 Proceeds from the sale of Treasury Share (200 x P105) P 21,000

Cost of Treasury Share acquired 20,000
Gains to be credited P 1,000
8 – IV Dapitan Motors Corporation

Q – 18 Revenue P 4,500,000
Expense 3,800,000
Profit P 700,000
Acc. Profits & Losses 650,000
Profit 700,000
Total P 1,350,000
Dividends Declared and Paid ( 500,000)
Acc. Profits and Losses P 850,000 (A)
8–V Visayan Corporation

Q – 19 Under Cost Method of Accounting for treasury share, the re issuances would result in a credit to:
Cash P190,000
Treasury Share P120,000
Share Premium-Treasury Share 70,000 (D)
8 – VI Gazebo Corporation
Q – 20 Market Value (8,000 x 6% x P500) = 240,000 (C)
8 – VII Dreamboy Corporation

Q – 21 4,000 shares/20,000 = 20% share dividends
Acc. Profits and Losses before share dividends P1,500,000
Less: Share Dividends (4,000 x 100) 400,000
Acc. Profits and Losses after share dividends P1,100,000 (A)
To record the declaration of share dividend:

Accumulated Profits and Losses P400,000
Share Dividends Distributable P400,000
To record the issuance of share dividend:

Share Dividends Distributable P400,000
Ordinary Share P400,000
8 – VIII Dreamboy Corporation

Q – 22 30,000 x 15% = 4,500 x P120,000 = 540,000 (B)
(When a corporation declaring stock dividend is with listed share, we used the market value when
the declaration is less than 20%, and if the declaration is more than 20%, we used the par value.)
Q – 23 30,000 x 25% = P7,500 x P100 = P750,000 (A)
Chapter 9
Corporate Financial Statements
9–1 Beleleng Corporation

Requirement 1: Beleleng Corporation
Shareholders’ Equity
December 31, 20A
Share Capital
Preference Share, 3,000 shares issued at par, P50 P 150,000

Ordinary Share, 7,000 shares at par, P100 700,000
Share Premium
Share premium – Preference 2,000
Share premium – Ordinary 5,000
Accumulated Profits and Losses 400,000
Other Components of Equity
Revaluation Increment on Property 10,000

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Requirement 2:
Beleleng Corporation
Statement of Changes in Shareholders’ Equity
For the year ended 31 December 20A
Share Capital Share Premium Accu. Revaluation

P&L
Preference Ordinary Preference Ordinary Increment Total
Jan. 1 Balance P 150,000 P 700,000 2,000 5,000 150,000 10,000 P1,017,000
Add: Profit
for the year 250,000 250,000
Dec. 31 - Balance P 150,000 P 700,000 2,000 5,000 400,000 10,000 10,000
9–2 New Era Corporation

New Era Corporation
Shareholders’ Equity
December 31, 20A
Share Capital
10% Preference Share, P50 par value, 6,000 shares issued P 300,000
Less: Subscription Receivable – Preference 60,000 40,000
Ordinary Shares, P75 par value, 4,000 shares issued 300,000
Subscribed Share Capital – Ordinary P 37,500
Less: Subscription Receivable – Ordinary 10,000 27, 500
Share Premium:
Revaluation Increment on Property 30,000
Total Contributed Capital and Retained Earnings P 1,229,500
Less: Treasury Shares at Cost 8,000
9–5 Iligan Water Spring Resort Corporation

Requirement 1
P 400,000
Ordinary Shares at par value, P100, 4,000 shares are
issued
Share Premium 10,000

Less: Treasury Shares at cost (10,000)
Total Shareholders’ Equity P 580,000
÷ Shares Outstanding 3,900 shares
Book Value per Share P 148.72
Requirement 2
Profit P100,000
÷ Shares Outstanding 3,900 shares
Earnings per Share P 25.64
9–6 Surigao Bus Line Corporation

Requirement 1:
Ordinary Shares, par value of P100, issued share 6,000: P600,000
Subscribed Share Capital P100,000
Share Premium 4,000
Total Shareholders’ Equity P904,000
÷ Shares Outstanding 6,000
Book Value per Share P 150.67
Requirement 2:

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Profit (P250,000 – P150,000) = P100,000

= P16.67

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9–7 Metropolitan Corporation

Requirement 1:
Preference Shares Equity:
Liquidation Value, P200 x 2,400 shares P480,000
Dividends in Arrears, 6% x P360,000 x 3 64,800
Current year dividends, 6% x P360,000 x 1 21,600
Preference Shareholders’ Equity P566,400
Requirement 2:
Ordinary Shares Equity:
Total Shareholders’ Equity P883,000
Less: Preference Shares Equity 566,400
Ordinary Shareholders’ Equity P316,600
Requirement 3:
Book Value per Preference Share
Preference Share: P566,400 ÷ 2,400 = P236.00
Ordinary Share: P316,600 ÷ 2,350 = 134.72
9 –8 Metro Cebu Corporation

Requirement 1:
Preference Shares:
Liquidation Value, P180 x 5,000 shares P900,000
Current year dividend, 10% x P500,000 50,000
Preference Shareholders’ Equity P950,000
÷ Shares Outstanding ÷ 5,000
= Book Value per Preference Share P190.00
Ordinary Shares:
Total Shareholders’ Equity P1,330,000
Less: Preference Shareholders’ Equity 950,000
Ordinary Shareholders’ Equity P 380,000
÷ Shares Outstanding ÷ 5,000
= Book Value per Ordinary Share P76.00
Requirement 2:
Preference Shares:
Liquidation Value, P100 x 5,000 shares P 500,000
Current year dividend, 10% x P500,000 50,000
Preference Shareholders’ Equity P 550,000
= Book Value per Preference Share P 110.00
Ordinary Shares Equity:

Total Shareholders’ Equity P1,300,000
Less: Preference Shares Equity 550,000
Ordinary Shareholders’ Equity P 780,000
= Book Value per Preference Share P 260.00
Chapter 10
Presentation and Analysis of Financial Statements
10 – 1 RFM Corporation
Requirement 1a:
Less: Current Liabilities 130,000
Working Capital 377,000
Requirement 1b:
=
Current Liabilities 130,000
Current or Banker’s Ratio = 3.9:1

Requirement 1c:

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Quick Assets 265,000

=
Acid-Test Ratio = 2.04:1
(Mdse. Inventory is excluded because it takes time to sell and collect account sales. Prepaid expense is also
excluded because when it expires it becomes expense.)
Requirement 2:
For every one peso of obligation, it has P3.90 of current asset to pay. The same interpretation as in acid-test ratio.
10 – 2 R. Kudemus Co. and Baligala Co.

Requirement 1:
Kudamus Co. Baligala Co.
Working Capital
Current Assets 320,000 234,000
Less: Current Liabilities 50,000 40,000
Working Capital 270,000 194,000
Requirement 2:
Banker’s Ratio
Current Assets 320,000 234,000
= =
÷ Current Liabilities 50,000 40,000
Banker’s Ratio = 6.4:1 = 5.8:1
Requirement 3:
Acid Test Ratio
Quick Assets 185,000 160,000
= =
÷ Current Liabilities 50,000 40,000
Acid Test Ratio = 3.7:1 = 4:1
(Merchandise Inventory is excluded because it takes time to sell and collect the receivable. Prepaid expense is
also excluded because when it expires it becomes expense.)
10 – 3 Reyes Corporation
Reyes Corporation
Common-Size Statement of Comprehensive Income
For the year ended December 31, 20A
Sales 105%
Less: Sales Returns and Allowances 5%
Net Sales 100%
Less: Cost of Sales 75%
Gross Profit 25%
Less: Operation Expense 20%
Profit 5%
10 – 4 Vismin Jewelry Store, Inc.

Vismin Jewelry Store
Comparative Statement of Comprehensive Income
For the months ended 30 November and 31 December
Amount of
Increase % of increase
December November (Decrease) (Decrease)
Sales 100,000 90,000 10,000 11
Sales Return & allowances 1,000 2,000 (1,000) (50)
Sales Discounts 500 - 500 100
1,500 2,000 (500) (25)
Net Sales 98,500 88,000 10,500 12
Cost of Sales 45,000 50,000 (5,000) (10)
Gross Profit 53,500 38,000 15,500 41
Operating Expenses 19,000 20,000 (1,000) (5)
Profit 34,500 18,000 16,500 92

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10 – 5 S. Bolivar Enterprises
Requirement A:
Receivable Turnover = Credit Sales = 200,000 = 4 times
Average Capital 50,000
Requirement B:
Average Collection Period = 365 days = 365 = 91.25 days
Receivable Turnover 4 times
Requirement C:
Inventory Turnover = Cost of Sales = 210,000 = 3 times
Average Inventory 70,000
Requirement D:
Average Age of Inventory = 365 days = 365 = 121.66 days
Inventory Turnover 3
10 – 6 Dreamworld Corporation
Requirement 1:
Dreamworld Company
As of December 31, 20B and 20A
Amount of % of
Increase Increase
20B 20A (Decrease) (Decrease)
Cash P 150,000 P 130,000 P 20,000 15.38%
Accounts Receivable 120,000 80,000 40,000 50.00%
Inventories 90,000 70,000 20,000 28.57
Plant and Equipment (Net) 360,000 300,000 60,000 20.00%
P 720,000 P 580,000 P 140,000 24.14%
Accounts Payable P 100,000 P 80,000 P 20,000 25.00%

5% Bonds Payable 200,000 200,000 -0- .00%
Share Capital (P10 par) 260,000 200,000 60,000 30.00%
Accumulated Profit 160,000 100,000 60,000 60.00%
P 720,000 P 580,000 P 140,000 24.00%
Requirement 2:
Dreamworld Company
As of December 31, 20B and 20A
Sales 100.00% 100.00%

Cost of Goods Sold 55.56% 58.33%
Gross Profit 44.44% 41.67%
Operating and Non-Operating Expense 27.78% 25.00%
Profit before Income Tax 16.1% 16.67%
Requirement 3A:
Credit Assets 360,000
Current Ratio = = = 3.60
Requirement 3B:
Quick Assets 270,000
Acid Test Ratio = = = 2.70
Requirement 3C:
Credit Sales 360,000
Receivable Turnover = = = 3.60 times
Average Receivable 100,000
Requirement 3D:
No. of days in a year 365 days
Average Collection Period = = = 101.39 days
Receivable Turnover 3.60
Requirement 3E:
Cost of Sales 200,000
Inventory Turnover = = = 2.50 times
Average Inventory 80,000

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10 – 7 Bluemoon Trading Corporation

Requirement 1:
20A Sales and Cost of Sales
Sales = Accounts Receivable Turnover x Average Receivable
= 8 x P 80,000
= P 640,000
Cost of Sales = Inventory Turnover x Average Inventory

= 6 x P 100,000
= P 600,000
Requirement 2:
Expected Sales and Cost of Sales for 20B
Sales = Average Receivable x Receivable Turnover
= P 130,000 x 12 times
= P 1,560.00
COMPUTATION:
Average Collection Period = 365 days
Receivable Turnover
30 days = 365 days

?
Receivable Turnover = 365 days = 12 times

30
Cost of Sales = Average Inventory x Inventory Turnover

= P 100,000 x 9
= P 900,000
COMPUTATION:
No. of days Sales in Inventory = 365 days

Inventory Turnover
= 365 days
?
Inventory Turnover = 9 times
10 – 8 D&T Shafer Corporation

Requirement 1:
20B 20A
a) Gross Profit Percentage
Gross Profit 610,000 320,000
= 41.78% = 29.09%
Net Sales 1,460,000 1,100,000
b) Rate of Return on Sales

Profit 360,000 20,000
= 24.65% = .01%
Net Sales 1,460,000 1,100,000
c) Rate of Return on Investment

Profit 360,000 20,000
= 30% = .01%
Ave. Investment 1,200,000 1,500,000
d) Inventory Turnover
Cost of Sale 850,000 780,000
= 4.04 tomes = 4 times
Ave. Inventory 210,000 195,000
e) Accounts Receivable Turnover

Credit Sales 1,460,000 1,100,000
= 5.03 times = 5.78 times
Ave. Receivable 290,000 190,000

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10 – 9 Krizzie Corporation
Current Assets
a) Current Ratio =
Current Liabilities
1,080,000
= = 3.6:1
300,000
Quick Assets
b) Quick Ratio =
Current Liabilities
420,000
= = 1.4:1
300,000
c) Working Capital = Current Assets – Current Liabilities
= 1,080,000 – 300,000 = 780,000
Total Liabilities
d) Debt Ratio =
Total Assets
960,000
= = 40%
2,400,000
Accounts Receivable Credit Sales

e) =
Turnover Ave. Receivable
5,580,000
= = 18 times
310,000
Cost of Sales
f) Inventory Turnover =
Ave. Inventory
3,348,000
= = 6.2 times
540,000

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Partnership and Corporation

II. Maria Julieta Lopez Allera-Alegrado

A- 229,000 = 57,000 + 172,000

III. P. Amandoron Company

IV. Ruben Realty Co.

36,000 = P3,000 x 7 = P21,000 - B

VI. Raul Langbid Co.

VII. Blas Sardido Co.

VIII. Alfredo Yao Co.

Beg. Inventory 15,000 -D

Solution Manual in Partnership and Corporation 2014-2015 1

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Cost of Sales 21,000

Solution Manual in Partnership and Corporation 2014-2015 2

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IX. Rolando Ibañez Enterprises

X. Vicente Chotangco, Jr.

XI. E. Detoya & Sons

XII. L. Caminade Enterprises

XIII. Laureano Cacho Trading

Cost of Machine P1,240,000

XIV. Santos Advertising Agency

1 – 30 days 31 – 60 days 61 days and over

XV. Leopoldo Medina Trading

250 units x P31 = P7,750 P27,605 ÷ 835 x 315 = P10,413.86 Average

XVI. Lucky Strike Co.

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XVII. Universal Financing Co.

Interest Expense 1,250

Test IV – Multiple Choice (Problem)

1. Raw Materials, Beg. P 120,000

2. Direct Materials P 130,000

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Manufacturing Overhead 225,000

7. Cost of Goods Manufactured P 638,000

2-1. Sanada and Estrebilla

Current Assets: Partners’ Equity

2-2. Maula, Montecina and Maceda

Requirement 1a: Cash P200,000

Jeremy Maceda was admitted in the partnership as an

Requirement 1b: Cash P200,000

** (Same notation for Maceda)

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2-3. Malquisto and Rocabo

Requirement 2: a) Malquisto, Capital 4,000

Requirement 3: Est. Uncollectible Accounts 5,000

2-4. Malquisto, Beringuel and Alemanza

2) Malquisto, Capital 42,000 Beringuel, Capital 60,000 Alemanza, Capital 45,000

3) Malquisto, Capital 5,000 Beringuel, Capital 100,000 Alemanza, Capital 5,000

4) Cash 50,000 Cash 150,000 Cash 250,000

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Requirement 2: Closing Entries in their respective sole proprietorship book.

Requirement 3: Compound Opening Journal Entry

(Accumulated Depreciation-Equipment is no longer shown in the opening-entry)

2-5. Laureto and Auditor Partnership

Requirement 1: Journal Entries to close their Respective Sole Proprietorships’ Book

Requirement 2: Journal Entries to record investment in the Partnership Book

Laureto, Capital 3,750 Auditor, Capital 7,500

Multiple Choice (Problem)

Exercises and Problems