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Advanced Accounting Vol 2 2014 Edition Baysa Lupisan PDF Free
Advanced Accounting Vol 2 2014 Edition Baysa Lupisan PDF Free
SUGGESTED ANSWERS
EXERCISES
Exercise 1 - 1
1. Direct cost Expense
2. Direct cost Expense
3. Indirect cost Expense
4. Cost of issuing and registering securities Reduction in additional paid in capital
5. Cost of issuing and registering securities Reduction in additional paid in capital
6. Cost of arranging and registering debt Bond issue cost
7. Cost of arranging and registering debt Bond issue cost
8. Indirect cost Expense
9. Direct cost Expense
10. Indirect cost Expense
Exercise 1 - 2
Consideration transferred (10,000 sh x P120) P1,200,000
Fair value of net assets acquired 450,000
Goodwill P 750,000
Exercise 1 - 3
1. Consideration transferred P 500,000
FMV of net assets acquired 600,000
Gain on Bargain Purchase/Negative Goodwill P 100,000
Exercise 1 - 4
1. Assets 6,000,000
Goodwill 550,000
Liabilities 1,675,000
Ordinary Share Capital (325,000 x P10) 3,250,000
Paid-In Capital in Excess of Par (325,000 x P5) 1,625,000
Consideration transferred (325,000 x P15) P4,875,000
FMV of net assets acquired (P6,000,000 - P1,675,000) 4,325,000
Goodwill P 550,000
2. Assets 10,000,000
Goodwill 225,000
Liabilities 4,525,000
Ordinary Share Capital (475,000 x P5) 2,375,000
Additional Paid-in Capital (475,000 x 7) 3,325,000
Exercise 1 -5
Requirement 1
Accounts Receivable 120,000
Inventories 140,000
Property. Plant, and Equipment 300,000
Goodwill 40,000
Cash 550,000
Current Liabilities 50,000
Requirement 2
Cash 550,000
Current Liabilities 50,000
Accounts Receivable 120,000
Inventories 100,000
Property, Plant, and Equipment 280,000
Retained Earnings 100,000
Exercise 1 – 6
1. Accounts Receivable 120,000
Inventories 140,000
Property Plant and Equipment 300,000
Goodwill 60,000
Cash 550,000
Current Liabilities 50,000
Estimated Liability for contingent Consideration 20,000
3. Goodwill 15,000
Chapter 1 – AA2 (2014 edition) page 3
Exercise 1 – 7
1. Current Assets 575,000
Plant Assets 1,200,000
Patent 50,000
Current Liabilities 300,000
Long term Liabilities 450,000
Cash 300,000
Ordinary Share Capital 50,000 x 5 par 250,000
Additional Paid in Capital 50,000 x P9 450,000
Gain on Bargain Purchase 75,000
Consideration transferred:
Cash P 300,000
Ordinary Share Capital 50,000 x P14 700,000
Total P1,000,000
FMV of net assets acquired 1,075,000
Gain in Bargain Purchase P 75,000
Consideration transferred:
Cash P 300,000
Ordinary Share Capital 50,000 x P14 700,000
Total P1,000,000
FMV of net assets acquired 1,375,000
Gain in Bargain Purchase P 375,000
Consideration transferred:
Cash P 300,000
Ordinary Share Capital 50,000 x P14 700,000
Stock Contingent Consideration 30,000
Total P1,030,000
FMV of net assets acquired 1,075,000
Gain in Bargain Purchase P 45,000
Prior to the termination of the contingency, the stock contingency is described through a
footnote.
Prior to the termination of the contingency, the stock contingency is described through a
footnote.
Exercise 1- 8
No. 1 No. 2
Consideration transferred P50,000,000 P50,000,000
Non-controlling interest
P42,500,000 x 20% 8,500,000
P50,000,000 – P12,000,000/80% x 20% 9,500,000
Total P58,500,000 P59,500,000
Fair market value of net assets acquired 42,500,000 42,500,000
Goodwill P16,000,000 P17,000,000
Exercise 1 – 9
1. P4,800,000/60% x 20% = P1,600,000
Exercise 1 - 10
1. Assets, other than goodwill 550,000
Goodwill 196,000
Liabilities 230,000
Ordinary Share Capital 516,000
2. Assets 550,000
Liabilities 230,000
Ordinary Share Capital 320,000
Co. A 142,000/516,000 x 32,000 sh 8,806 sh
Co. B 176,000/516,000 x 32,000 sh 10,915 sh
Co. C 198,000/516,000 x 32,000 sh 12,279 sh
Exercise 1 - 11
Total contribution (P50,000 / 10%) P500,000
Net asset contribution equal to preference shares issued 400,000
Goodwill contribution equal to ordinary shares issued P100,000
Exercise 1 - 12
1. 1,500 shares/2,000 shares x 100 shares = 75 shares
2. 1,500 shares x P150 = P225,000
3. 1,000 shares x P150 = P150,000
4. P500,000/2,000 shares x 100 shares = P 25,000
PROBLEMS
Problem 1 - 1
1. Cash 100,000
Accounts Receivable 150,000
Inventory 140,000
Goodwill 35,000
Land 120,000
Long-term Investment in Marketable Securities 140,000
Equipment 180,000
Accounts Payable 115,000
Ordinary Share Capital (6,000 @ 50) 300,000
APIC 450,000
Problem 1 - 2
1. Land 30,000
Goodwill 30,000
2. Cash 100,000
Accounts Receivable 150,000
Inventory 140,000
Land 120,000
Long term Investment 140,000
Equipment 180,000
Goodwill 135,000
Accounts Payable 115,000
Chapter 1 – AA2 (2014 edition) page 7
Prior to the termination of the contingency, the stock contingency is described through a footnote.
Prior to the termination of the contingency, the stock contingency is described through a footnote.
Problem 1 - 3
1. Investment in Share Capital (75,000 @ P14) 1,050,000
Ordinary Share Capital (75,000 @ P10) 750,000
Ordinary Share Premium(75,000 x P4) 300,000
Problem 1 - 4
1. Cash 3,000
Accounts Receivable 8,000
Inventories 20,000
Non Current Marketable Securities 55,000
Property Plant and Equipment 50,000
Land 28,000
Goodwill 52,000
Current Liabilities 4,000
Chapter 1 – AA2 (2014 edition) page 8
Consideration transferred:
Cash P160,000
Contingent Consideration P80,000 x 40% 32,000
Total P192,000
FMV of net assets acquired 140,000
Goodwill P 52,000
2. Goodwill 18,000
Estimated Liability for Contingent Consideration 18,000
3. Goodwill 5,000
Estimated Liability for Contingent Consideration 5,000
4. Goodwill 5,000
Estimated Liability for Contingent Consideration 5,000
Problem 1 - 5
1 FMV of net assets of Commander Co. [(P200,000 + P800,000) - P200,000] P800,000
MV of share capital of General Co. ÷ P40
No. of shares to be issued 20,000 sh
Share exchange ratio (20,000 sh/10,000 sh) 2:1
Plan B
Assets, other than Goodwill 6,000,000
Goodwill 2,000,000
Preference Share Capital, P10 par 6,000,000
Ordinary Share Capital, P10 par 2,000,000
Requirement 2
Plan A
Co. D 350,000/700,000 x P600,000 P300,000
Co. E 187,500/700,000 x P600,000 160,714
Co. F 162,500/700,000 x P600,000 139,286
P600,000
Plan B
Preference Ordinary Total
Regular dividends at 6% P450,000 P 30,000 P480,000
Balance – P120,000 x 7,500/8,000 112,500 112,500
P120,000 x 500/8,000 7,500 7,500
Total P562,500 P37,500 P600,000
Dividends per share P .75 P .75
Co. D Co. E Co. F TOTAL
Preference Share Capital P281,250.00 P154,687.50 P126,562.50 P562,500.00
Ordinary Share Capital 18,750.00 10,312.50 8,437.50 37,500.00
Total P300,000.00 P165,000.00 P135,000.00 P600,000.00
MULTIPLE CHOICE
1- A. 1. A 6. A 11. D 16. C
2. B 7. A 12. C 17. A
3. C 8. A 13. A 18. B
4. C 9. D 14. C 19. B
5. D 10. C 15. C 20. C
1–E 1. C Retained Earnings of the surviving company remains the same since no
part of the acquired company’s Retained Earnings is recorded upon
combination.
1-H 1. B
1- L 1. B P200 – P145 = P55 million. The P160 million fair value is beyond the one
year measurement period.
EXERCISES
Exercise 2 - 1
a. Ordinary Share Capital, Sing Co. 100,000
Additional Paid-in Capital, Sing Co. 20,000
Retained Earnings, Sing Co. 25,000
Goodwill 15,000
Investment 160,000
Exercise 2 – 2
1. Case A
Ordinary Share Capital, Soya Co. 100,000
Additional Paid-in Capital, Soya Co. 30,000
Retained Earnings, Soya Co. 20,000
Goodwill 5,000
Investment 125,000
Chapter 2 – AA2 (2014 edition) page 2
2. Case A
Ordinary Share Capital, Soya Co. 100,000
Additional Paid-in Capital, Soya Co. 30,000
Retained Earnings, Soya Co. 20,000
Goodwill 5,000
Investment 125,000
Non-controlling Interest 30,000
Case B
Ordinary Share Capital, Soya Co. 50,000
Additional Paid-in Capital, Soya Co. 20,000
Retained Earnings, Soya Co. 10,000
Investment 58,000
Chapter 2 – AA2 (2014 edition) page 3
Exercise 2 - 3
Case A
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Investment 140,000
Retained Earnings, Say Co. 10,000
Case B
Ordinary Share Capital, Say Co. 100,000
Additional Paid-in Capital, Say Co. 50,000
Plant and Equipment 20,000
Investment 144,000
Retained Earnings, Say Co. 10,000
Non-controlling Interest (160,000 x 10%) 16,000
Exercise 2 - 4
a. Investment in Sax Co. (4,000 @ P120) 480,000
Ordinary Share Capital 400,000
Additional Paid-in Capital 80,000
Exercise 2 – 5
1. Non-controlling interest (P90,000 – (P50,000 x 10%=P5,000) P 85,000
Percentage of non-controlling interest ÷ 10%
Total Shareholders’ Equity of Sand P 850,000
Less Ordinary Share Capital and APIC (P800,000 + P400,000) 1,200,000
Deficit of Sand P( 350,000)
Exercise 2 - 6
Chapter 2 – AA2 (2014 edition) page 6
Exercise 2 - 7
1. Total current assets of Seeda = (P146,000 + P2,000) - P106,000 P 42,000
Exercise 2 – 8
1. Palomar Inventory P1,100,000
Samar Inventory at FMV 1,700,000
Consolidated inventory P2,800,000
Exercise 2 - 9
Inventories 20,000
Plant Assets 80,000
Ordinary Share Capital, Santa Co. 200,000
Paid-In Capital in Excess of Par - Santa Co. 210,000
Investment in Subsidiary 420,000
Retained Earnings, Santa Co. 90,000
PROBLEMS
Problem 2 - 1
Prime Inc. and Subsidiary Slime Corp.
Working Paper for Consolidated Statement of Financial Position
January 1, 2014
Consolidated
Prime Slime Eliminations Statement of
Inc. Corp. Dr. Cr. Finl Position
Debits
Cash and Other Current Assets 400,000 300,000 700,000
Plant, Property, and Equipment 200,000 250,000 450,000
Investment in Slime Corp. 380,000 a 380,000 ------
Chapter 2 – AA2 (2014 edition) page 8
Problem 2 - 2
Requirement 1
Consideration transferred P950,000
Book value of interest acquired:
Ordinary Share Capital P200,000
Additional paid-in capital 100,000
Retained earnings 400,000 700,000
Excess of cost over book value P250,000
Allocation of excess:
Inventory P 30,000
Land 50,000
Equipment 130,000 210,000
Goodwill P 40,000
Requirement 2
Pole Co. and Subsidiary Sole Co.
Working Paper for Consolidated Statement of Financial Position
January 2, 2014
Pole Sole Eliminations Consolidated
Co. Co. Dr. Cr. St. of Fin Pos.
Debits
Cash 300,000 50,000 350,000
Accounts Receivable 200,000 100,000 300,000
Inventory 150,000 60,000 a. 30,000 240,000
Land 70,000 a. 50,000 120,000
Equipment 600,000 470,000 a. 130,000 1,200,000
Investment in Sole Co. 950,000 a. 950,000
Goodwill a. 40,000 40,000
2,200,000 750,000 2,250,000
Credits
Accounts Payable 100,000 50,000 150,000
Ordinary Share Capital, Pole Co. 600,000 600,000
Retained Earnings, Pole Co. 1,500.000 1,500,000
Chapter 2 – AA2 (2014 edition) page 9
Requirement 3a
Consideration transferred P810,000
Book value of interest acquired:
Ordinary Share Capital P200,000
Additional paid-in capital 100,000
Retained earnings 400,000 P700,000 x90% 630,000
Excess of cost over book value P180,000
Allocation of excess:
Inventory P 30,000
Land 50,000
Equipment 130,000 P210,000x90% 189,000
Negative Goodwill P 9,000
Requirement 3b
Non controlling interest P700,000 + P210,000 P910,000 x 10% = P91,000
Allocation of excess:
Inventory P 30,000
Land 50,000
Equipment 130,000 P210,000x40% 84,000
Negative Goodwill P 36,000
Problem 2 - 3
1. Inventory 30,000
Plant and Equipment 100,000
Patents 50,000
Goodwill 50,000
Ordinary Share Capital, Stork 100,000
Retained Earnings, Stork 250,000
Investment 464,000
Non-controlling Interest (P464,000/80% x 20% = P116,000) 116,000
2. Inventory 30,000
Plant and Equipment 100,000
Patents 50,000
Ordinary Share Capital, Stork Co. 100,000
Retained Earnings, Stork Co. 250,000
Profit or Loss / Gain on Bargain Purchase 187,500
Investment 274,000
Non-controlling Interest (P274,000/80% x 20% ) 68,500
Consideration transferred P274,000
Non controlling Interest 68,500
Total P342,500
Fair value of net assets 530,000
Gain on bargain purchase P187,500
Problem 2 - 4
1. Investment in Stride Co. (20,000 sh @ P10) 200,000
Ordinary Share Capital (20,000 sh @ P2) 40,000
Paid-In Capital in Excess of Par 160,000
MULTIPLE CHOICE
Goodwill P 500,000
4. D
Chapter 2 – AA2 (2014 edition) page
14
2-O 1. D
July June
Currently issued shares 1,500,000 60% 600,000
Additional shares issued 1,000,000 40% 400,000
Total shares 2,500,000 100% 1,000,000
15/25 = 60%
AA2 - CHAPTER 3
SUGGESTED ANSWERS
EXERCISES
Exercise 3 -1
1. Investment in Stun Corp.
Consideration transferred (800 shares @ P200) P160,000
Book value of interest acquired as of July 1, 2014
Ordinary Share Capital (1,000 shares x P100 x 80%) P80,000
Retained Earnings [(P50,000 + 1/2 of P30,000) 80%] 52,000 132,000
Goodwill P 28,000
Exercise 3 - 2
Cost Method
a. Investment in Stark Co. 1,500/2,000 = 75% 240,000
Cash 240,000
b. no entry
d. no entry
Exercise 3 –3
1. Investment in Saturn Co. 800,000
Cash 800,000
Exercise 3 – 4
b. No entry
c. Received 75 shares from Saloon Corp. as share capital dividend. Shares now owned and held are
825 shares.
d. Cash 4,125
Dividend Revenue 4,125
825 shares @ P5 = P4,125
e. No entry
Exercise 3 – 5
Exercise 3 - 6
Case A Case B Case C
Net income (loss) from own operations:
Pastel Corp. P 80,000 P(20,000) P40,000
Sly Corp. (90%-owned) (13,500) 45,000 27,000
Sty Corp. (70%-owned) 31,500 49,000 24,500
Depreciation:
Excess of cost over book value of
investment in Sly (P9,000/90%/5 yrs.) ( 2,000)
Excess of book value over cost of
investment in Sty (P3,500/70%/5 yrs.) ________ ________ 1,000
Consolidated net income P 98,000 P 74,000 P90,500
Chapter 3 – AA2 (2014 edition) page 3
Exercise 3 – 7
1. a. Investment in Sat Co. 16,000
Retained Earnings, Pat Co. 16,000
To record the share of Pat in the net increase
in the retained earnings of Sat.
(P70,000 - P50,000) 80% = P16,000
3.
Pat Co. and Subsidiary Sat Co.
Consolidated Income Statement
For the Year Ended December 31, 2014
Sales (P500,000 + P300,000) P800,000
Cost of Sales (P300,000 + P200,000) 500,000
Gross Profit P300,000
Operating Expenses (P90,000 + P50,000 + P1,000) 141,000
Consolidated Net Income P159,000
Less Non-controlling Interest net income 9,800
Net Income Attributable to Pat Co. P149,200
4.
Pat Co. and Subsidiary Sat Co.
Consolidated Statement of Financial Position
December 31, 2014
Assets Liabilities and Shareholders’ Equity
Cash and Other Assets P899,000 Liabilities P270,000
Ordinary Share Capital, P100 par 300,000
Retained Earnings 263,200
Non-controlling Interest 65,800
Total Assets P899,000 Total liabilities and shareholders’ Equity P899,000
Exercise 3 - 8
a. Advances from Pallet Co. 15,000
Advances to Stall Co. 15,000
PROBLEMS
Problem 3 – 1
1. Investment in Stow Co. 280,000
Cash 280,000
Allocation of excess:
Plant and equipment P 50,000
Inventory 20,000 70,000x 80% 56,000
Goodwill P104,000
Expenses on the adjustment
2014 2015
Plant and equipment (P50,000/5 yrs.) P10,000 P10,000
Goodwill impairment 5,000 4,000
Inventories 20,000 ---__
Total P35,000 P14,000
Problem 3 - 2
Consideration transferred P2,280,000
Book value of interest acquired:
Ordinary Share Capital (P1,000,000 x 80%) P 800,000
Retained Earnings (P1,600,000 x 80%) 1,280,000 2,080,000
Goodwill P 200,000
Sales P6,000,000
Cost of Sales 2,800,000
Gross Profit P3,200,000
Operating Expenses 2,010,000
Consolidated Net Income P1,190,000
Non-controlling Interest net income P 72,000
Net Income Attributable to Peach Co. P1,118,000
Assets
Cash P 800,000
Accounts Receivable 790,000
Inventories 1,400,000
Land 1,200,000
Building (net of accumulated depreciation) 800,000
Equipment (net of accumulated depreciation) 4,456,000
Goodwill 190,000
Total Assets P9,636,000
Liabilities and Shareholders’ Equity
Problem 3 – 3
Requirement No. 1
Consideration transferred P1,512,000
Book value of interest acquired:
1,400,000 x 80% 1,120,000
Excess of cost over book value of acquired investment P 392,000
Allocation of excess:
Chapter 3 – AA2 (2014 edition) page 8
Inventories P 60,000
Land 100,000
Building 200,000
Equipment (150,000)
Patent 80,000 290,000 x 80% 232,000
Goodwill P 160,000
Requirement No. 2
Prose Co. and Subsidiary Slope Co.
Consolidated Working Paper
For the Year Ended December 31, 2014
Requirement No. 3
Prose Co. and Subsidiary Slope Co.
Consolidated Income Statement
For the Year Ended December 31, 2014
Sales P3,000,000
Cost of sales 1,160,000
Gross Profit P1,840,000
Expenses 1,238,000
Consolidated Net Income P 602,000
Non-controlling Interest net income P 47,400
Net Income Attributable to Prose P 554,600
Patents 72,000
Goodwill 155,000
Total Assets P3,748,000
Liabilities and Shareholders’ Equity
Accounts Payable and Accrued Expenses P628,000
Ordinary Share Capital, P100 par 400,000
Additional Paid-in Capital 800,000
Retained Earnings (P1,200,000 + P554,600 - P200,000) 1,554,600
Non-controlling Interest 365,400
Total Liabilities and Shareholders’ Equity P3,748,000
Problem 3 - 4
1. a. Notes Payable - Palma Corp. 10,000
Notes Receivable - Salman Co. 10,000
2. Sales P 70,000
Interest revenue 600
Expenses ( 53,000)
Interest expense ( 600)
Consolidated Net income P 17,000
Non-controlling Interest net income [(P20,000 - P17,000 - P600) x 10%] ( 240)
Net income attributable to Palma Corp. P 16,760
Problem 3 – 5
1. Non-controlling interest net income (400,000-240,000-60,000 x 20%) P 20,000
5. None, since the dividend revenue received from Stadium is closed to RE.
MULTIPLE CHOICE
Change 3-A No. 20 from 30% to 70%
3-A 1. C 5. C 9. A 13. B 17. B
2. B 6. A 10. C 14. D 18. C
3. B 7. C 11. D 15. B 19. B
4. A 8. A 12. C 16. C 20. A
3-C A Net income from own operations of Parker Co.100,000 - 8,500 P 91,500
Starter Co. net income 40,000
Consolidated net income P131,500
3-R 1. A P1,000,000
2. A P1,000,000
2. D
AA2 - CHAPTER 4
SUGGESTED ANSWERS
EXERCISES
Exercise 4 – 1
1. 2014 Sales 60,000
Cost of Sales 60,000
Exercise 4 - 2
1. 2014, 2015 and 2016 no entry under the cost method.
Exercise 4 – 3
a. Sales 200,000
Cost of Sales P40,000/P200,000 = 20% 200,000
Exercise 4 – 4
a. Dividend Revenue 192,000
Dividends 192,000
Exercise 4 -5
Pasay Santolan Cons. NI
Net income from own operations P400,000 P360,000 P760,000
Impairment loss on goodwill ( 4,000) ( 4,000)
Unrealized profit on ending inventory
P32,000 x 33 1/3%/133 1/3% ( 8,000) ( 8,000)
Realized profit on beginning inventory
P227,500 x 40%/140% 65,000 65,000
Consolidated net income P461,000 P352,000 P813,000
Chapter 4 – AA2 (2014 edition) page 3
2. Elimination entries
a. Gain on Sale of Equipment 300,000
Equipment 200,000
Accumulated Depreciation – Equipment 500,000
Exercise 4 - 7
a. Sales 100,000
Cost of Sales 100,000
Exercise 4 - 8
Requirement 1 and 2 Non-controlling
Consolidated interest
net income net income
Net income from own operations:
Princess Inc. P 800,000
Stella Co. 1,000,000 P200,000
Unrealized gain on sale of machine ( 240,000)
Realized gain on sale of machine P240,00/6 40,000 ______
Total P1,600,000 P200,000
3. Book value of the machine to Princess Inc. at the time of sale P960,000
Less Depreciation for 2014 based on original book value P960,000/6 160,000
Book value of equipment as of December 31, 2014 P800,000
Exercise 4 - 9
1. Porter Sultan Cons. NI
Net income from own operation P8,000,000 P4,000,000 P12,000,000
Chapter 4 – AA2 (2014 edition) page 4
Exercise 4 - 10
a. Dividend Revenue 60,000
Dividends 60,000
b. Sales 400,000
Cost of Sales 400,000
f. Equipment 10,000
Operating Expenses P80,000/8 10,000
Exercise 4 -11
Net income from own operations:
Pomelo Corp. P240,000
Santol Co. (P140,000 x 90%) 126,000
Singkamas Corp. (P160,000 x 60%) 96,000
Unrealized gross profit on ending inventory of
Pomelo Corp. - seller Singkamas Corp. (P50,000 x 25% x 60%) ( 7,500)
Santol Co. - seller Pomelo Corp. (P100,000 x 30%) ( 30,000)
Unrealized gain on sale of machinery to Singkamas Corp. by Santol Co.
(P80,000 x 90%) ( 72,000)
Net income attributable to parent P352,500
PROBLEMS
Problem 4 - 1
Platinum Corp. and Subsidiary Silver Co.
Consolidated Income Statement
For the Year Ended December 31, 2014
Sales (P6,000,000 – P800,000) P5,200,000
Chapter 4 – AA2 (2014 edition) page 5
Problem 4 - 2
1. Non-controlling interest net income P 26,180
Unrealized gross profit on ending inventory of Pedrito Co.
purchased from Salome Co. (P22,000 x 25%/125% x 20%) 880
Unadjusted share in net income of Salome Co. P 27,060
Non-controlling interest percentage ÷ 20%
Net income of Salome Co. P135,300
Problem 4 -3
a. Sales 700,000
Cost of Sales 700,000
Problem 4 - 4
Pentagon Co. and Subsidiary Sexagon Co.
Consolidated Income Statement
For the Year Ended December 31, 2014
Problem 4 - 5
Consideration transferred P1,200,000
Book value of interest acquired:
Chapter 4 – AA2 (2014 edition) page 7
Problem 4 -6
Palladium Co. and Subsidiary Stadium Co.
Consolidated Working Paper
For the Year Ended December 31, 2016
Palladium Stadium Adj. & Eliminations Non-con. Consolidated
Company Company Debit Credit Interest Statements
Income Statement
Sales 1,000,000 500,000 1,500,000
Cost of sales 400,000 300,000 700,000
Gross margin 600,000 200,000 800,000
Expenses 400,000 140,000 e) 5,000 535,000
Operating income 200,000 60,000 265,000
Gain on sale of equip 25,000 e) 25,000
Dividend Revenue 24,000 c) 24,000
Net income 249,000 60,000 265,000
Non-cont. Int. NI 12,000 12,000
NI (loss)- carried forw. 249,000 60,000 253.000
Problem 4 - 7
Cost of investment P360,000
Book value of acquired investment:
Ordinary Share Capital (P300,000 x 80%) P240,000
Retained earnings (P90,000 x 80%) 72,000 312,000
Goodwill P 48,000
Problem 4 - 8
Net income from own operations:
Paloma P240,000
Selma (100% x P120,000) 120,000
Solita (90% x P96,000) 86,400
Sandara (80% x P80,000) 64,000
Realized gross profit on beginning inventory of Paloma, seller- Sandara
(P6,400 x 80%) 5,120
Unrealized gross profit on ending inventory of
Paloma, seller - Sandara (P4,000 x 80%) ( 3,200)
Sandara, seller - Selma (P640,000 x 20% x 25% x 100%)) ( 32,000)
seller - Solita (P40,000 x 20% x 20% x 90%) ( 1,440)
Net income attributable to Paloma P478,880
Problem 4 - 9
Polaroid Co. and Subsidiary Solar Co.
Consolidated Working Paper
For the Year Ended December 31, 2015
Polaroid Solar Adj. & Eliminations Non-con Consolidated
Company Company Debit Credit Interest Financial Statem
Income Statement
Sales 1,000,000 500,000 e) 250,000 1,250,000
Cost of sales 400,000 300,000 g) 60,000 e) 250,000 480,000
f) 30,000
Gross margin 600,000 200,000 770,000
Expenses 390,000 140,000 d) 2,500 532,500
Operating income 210,000 60,000 237,500
Dividend Revenue 24,000 c) 24,000
Net income 234,000 60,000 237,500
Non-cont. Int. NI 12,000 12,000
NI (loss)- carried forward 234,000 60,000 225,500
Retained Earnings Statem
Computation of goodwill
Consideration transferred P370,000
Book value of acquired investment (P400,000 x 80%) 320,000
Goodwill P 50,000
Chapter 4 – AA2 (2014 edition) page 13
MULTIPLE CHOICE
4-C 1. B
2. A
3. D P150,000 – P80,000 = P70,000
2. C to parent Interest NI
3. C Net income from own operations:
Pancho P120,000
Sanchez 56,000 P14,000
Realized gross profit on beginning invty.
of Pancho 640 160
Unrealized gross profit on ending invty. of
Pancho (P40,000 x 20% x 25%/125%) ( 1,280) ( 320)
Sanchez (P100,000 x 20% x 25%/125%) ( 4,000) ______
Consolidated net income P185,200 P171,360 P13,840
NI attributable Non-cont
4- O 1. A to Parent interest N I
Net income from own operations:
2. B Pateros Co. P120,000
Santiago Co. 67,200 P16,800
Unrealized gain on sale of machinery to
Pateros by Santiago (P300,000 - P250,000) ( 40,000) ( 10,000)
Realized gain on sale of machinery
(P50,000/8 years = P6,250) 5,000 1,250
Consolidated net income P160,250 P152,200 P 8,050
NI attributable Non-cont
4-P 1. D to parent interest N I
Net income from own operations:
Portero P 80,000
2. D Sotero 80,000 P 20,000
Unrealized gain on sale of machine ( 30,000)
Realized gain on sale of machine
(P30,000/6 years) 5,000 _______
Consolidated net income P155,000 P 135,000 P 20,000
NI attributable Non-cont
4-Q 1. B to parent interest NI
Net income from own operations:
2. B Pedro Co. P 800,000
Sixto Co. 320,000 P 80,000
3. B Impairment of goodwill ( 16,000)
Unrealized gain on sale of equipment ( 80,000)
Realized gain on sale of equipment
(P80,000/5 x 9/12) 12,000 ______
Consolidated net income P1,116,000 P 1,036,000 P 80,000
AA2 - CHAPTER 5
SUGGESTED ANSWERS
EXERCISES
Exercise 5 - 1
Exercise 5 - 2
Exercise 5 - 3
Exercise 5 - 4
1. no entry
Total future cash payments:
Face value P7,500,000
Interest (P7,500,000 x 5% x 5 years) 1,875,000
Total P9,375,000
Total future cash payments is greater than carrying value; hence no entry.
Books of Creditor
Exercise 5 - 5
Exercise 5 - 6
When there are mutual debts between a bankrupt and a creditor, one balance is set off against the other and
only the difference is recognized for purpose of settlement. Therefore:
(1) Under the heading "Unsecured Creditors", the cash in the savings account with AB Bank,
P70,000, will be applied against the cash overdraft in the checking account with AB Bank,
P90,000, and the overdraft excess of P20,000 will be extended to the "Amount Unsecured"
column;
(2) Under the heading "Free Assets", the cash overdraft in the checking account with CD
Bank, P30,000, will be applied against the cash balance representing sinking fund
accumulation with CD Bank, P330,000, and the sinking fund excess of P300,000 will be
extended to the "Estimated Amount Available" column.
Book values of the asset and liability items would be listed in the "Book Value" columns within the sections
indicated above, with subtraction items being reported as negative balances in the "Book Value" columns.
Exercise 5 - 7
Free assets:
40,000 (a) Mercury stock (400 shares) P22,000 22,000 ( 2,000)
40,000 (b) Work in process:
Est. value upon completion P36,000
Materials ( 1,000)
Labor ( 4,000) 31,000 31,000 9,000
24,000 (c ) Materials
Chapter 5 – AA2 (2014 edition) page 5
Book Amount
Value Liabilities and Stockholders' Equity Unsecured
P21,000 Fully secured creditors:
Claims (deducted contra) P21,000
Exercise 5 - 8
Cameron Company, Debtor
Deficiency Statement
Exercise 5- 9
Clippers Company, Debtor
Statement of Affairs
November 30, 2014
Creditors
With Fully Partly
Liabilities Priority Secured Secured Unsecured
Mortgage payable P200,000
Notes payable P 80,000 P 20,000
Liabilities with priority P 30,000
Unsecured liabilities 210,000
Totals P 30,000 P200,000 P 80,000 P230,000
PROBLEMS
Problem 5 -1
1.
Books of Mahina Co.
Mortgage Note Payable 6,000,000
Land 2,500,000
Gain on Transfer of Land 2,250,000
Chapter 5 – AA2 (2014 edition) page 7
2.
Books of Mahina Co.
Mortgage Note Payable 6,000,000
Ordinary Share Capital 2,000,000
Ordinary Share Premium 2,500,000
Gain on Extinguishment of Liability 1,500,000
3.
Books of Mahina Co.
No entry
4.
Books of Mahina Co.
Mortgage Note Payable 6,000,000
Restructured Obligation 4,720,000
Gain on Extinguishment of Liability 1,280,000
Problem 5 -2
Broadway
Statement
January
Estimated Loss (Gain)
Book Appraised Amount on
Value Assets Value Available Realization
Assets pledged with fully secured creditors:
P60,000 Merchandise inventory P P
42,000 18,,000
Less Claim: Note payable and accrued interest
(see contra) 40,400 P 1,600
Assets pledged with partly secured creditors:
36,000 Delivery equipment (deducted contra) P 8,000
28,000
Free assets:
9,700 Cash 9,700 9,700
41,000 Notes receivable and accrued interest 26,800 26,800 14,200
87,000 Accounts receivable 75,000 75,000 12,000
20,000 Merchandise inventory 14,000 14,000 6,000
8,000 Furniture and fixtures 9,000 9,000 (1,000)
50,000 Goodwill 0 0 50,000
1,000 Prepaid insurance 0 0 1,000
P 108,200
Estimated amount available P136,100
Creditors with priority (see contra) 12,800
Estimated amount available to unsecured creditors
without priority (approximately P.71 on the peso) P123,300
Estimated deficiency to unsecured creditors 49,900
P312,700 P173,200
Chapter 5 – AA2 (2014 edition) page 9
Company
of Affairs
31, 2014
Book Amount
Value Liabilities and Stockholders' Equity Unsecured
Creditors with priority:
Estimated liquidation expenses P12,000
P 800 Accrued salaries and wages 800
Total (deducted contra) P12,800
Fully secured creditors:
40,000 Notes payable P40,000
400 Add Accrued interest on notes payable 400
Total (deducted contra) P40,400
Partly secured creditors:
30,000 Notes payable P30,000
900 Add Accrued interest on notes payable 900
Total P30,900
Less security; Delivery equipment (see contra) 28,000 P 2,900
Unsecured creditors:
30,000 Notes payable P30,000
300 Add accrued interest on notes payable 300 30,300
136,000 Accounts payable 136,000
Notes receivable discounted 4,000
Shareholders' equity:
100,000 Share capital
10,000 Premium on share capital
(35,700) Deficit
P312,700 Total unsecured liabilities P173,200
Chapter 5 – AA2 (2014 edition) page 10
Problem 5 – 2 – Req. 2
Company
of Affairs
1, 2014
Book Amount
Value Liabilities and Stockholders' Equity Unsecured
Creditors with priority:
Estimated liquidation expenses P 25,000
P 7,700 Accrued wages 8,500
Total (deducted contra) P 33,500
Fully secured creditors:
120,000 First mortgage bonds P120,000
3,000 Add Accrued interest on mortgage bonds 3,000
Total (deducted contra) P123,000
Partly secured creditors:
50,000 Notes payable P 50,000
1,200 Add Accrued interest on notes payable 1,200
P 51,200
Less security: Finished goods (see contra) 36,000 P 15,200
Unsecured creditors:
77,000 Notes payable P 77,000
3.600 Accrued interest on notes 3,600 80,600
180,000 Accounts payable 180,000
Shareholders" equity:
200,000 Share capital
Chapter 5 – AA2 (2014 edition) page 13
_______ _______
P553,102 Total unsecured liabilities P275,800
Crooked Company
Deficiency Statement
July 1, 2014
Additional liabilities:
Estimated liquidation expenses P25,000
Accrued wages 800 25,800
Deduct:
Chapter 5 – AA2 (2014 edition) page 14
Problem 5 – 3 (Req. 3)
Crooked Company
Summary of Estimated Payments to Creditors
July 1, 2014
Percentage Amount to
Payment Claim be Paid
Creditors with priority:
Estimated liquidation expenses 100% P 25,000 P 25,000
Accrued wages 100 8,500 8,500
P 33,500
Fully secured creditors:
First mortgage bond 100% P120,000 P120,000
Accrued interest on bonds 100 3,000 3,000
P123,000
Partly secured creditors:
Notes payable ----- P 50,000 --------
Accrued interest on notes payable ----- 1,200 --------
P 51,200
Secured 100% 36,000 P 36,000
Chapter 5 – AA2 (2014 edition) page 15
Note relative to "Summary of Estimated Payments to Creditors": Estimated payment on the unsecured
portion of the notes of P11,400, and on the remaining unsecured liabilities, P195,450, results in a total of
206,850, which is p750 less than the estimated amount to become available to unsecured creditors as
reported by the statement of affairs. The discrepancy emerges because the estimated amount available as
determined by the statement is actually slightly more than the 75% figure and the resulting discrepancy is
not objectionable, however, in view of the fact that the data are presented as estimates and a refinement of
such data would suggest a degree of accuracy that is not attainable.
Problem 5 - 4
Payless
Statement
June
Estimated Loss (Gain)
Book Appraised Amount on
Value Assets Value Available Realization
Assets pledged with fully secured creditors:
P 80,000 Accounts receivable P 80,000
Less claim; Notes payable (see contra) 60,000 P20,000
26,000 Land P 50,000 (P 24,000)
180,000 Buildings 200,000 ( 40,000)
240,000 Machinery 150,000 90,000
Total P420,000
Less claim: Mortg.and accrued int. (see contra) 264,800 155,200
Free assets:
4,000 Cash P 3,000 3,000 1,000
60,000 Accounts receivable P60,000
Add credit balance (see contra) 10,000 70,000 70,000
120,000 Finished goods 100,000 100,000 20,000
80,000 Materials, expected to be realized as
finished goods P140,000
Less cost to complete 20,000 120,000 120,000 ( 40,000)
40,000 Goodwill 0 40,000
10,000 Prepaid expenses 0 ______ 10,000
P 58,600
Estimated amount available P468,200
Creditors with priority 83,000
Estimated amount available to unsecured creditors P385,200
w/o priority
_______ Estimated deficiency to unsecured creditors 36,400
P880,000 P421,600
(2) Estimated settlement per peso of unsecured liabilities: estimated amount available, P385,200,
divided by total unsecured liabilities, P421,600, 91% or P0.91 on the peso.
Corporation
of Affairs
30, 2014
Book Amount
Value Liabilities and Stockholders' Equity Unsecured
Creditors with priority:
P 30,000 Withheld taxes payable P 30,000
Employer payroll taxes payable 1,000
30,000 Accrued wages 30,000
Estimated liquidation expenses 20,000
Auditor's fee for liquidation work 2,000
Total (deducted contra) P 83,000
Unsecured creditors:
130,000 Accounts payable 130,000
170,000 Notes payable 170,000
Accounts receivable (credit balances) 10,000
Unbilled auditor's fee 10,000
Estimated liability on pending damage suit 100,000
Shareholders' equity:
200,000 Share capital
(40,000) Retained earnings (deficit)
________ _______
P880,000 Total unsecured liabilities P421.600
Problem 5 – 5
Mackintosh
Statement
November
Estimated Loss (Gain)
Book Appraised Amount on
Value Assets Value Available Realization
Assets pledged with fully secured creditors:
P105,000 Land P250,000 (P 15,000)
130,000 Buildings
Less claim, mort. payable, and accrued interest
(see contra) 205,000 P 45,000
Assets pledged with partly secured creditors:
90,000 Investments (deducted contra) 55,000 35,000
Chapter 5 – AA2 (2014 edition) page 18
Free assets:
31,500 Cash 31,500 31,500
125,000 Accounts receivable 106,500 106,250 18,750
230,000 Inventories 145,000 145,000 85,000
110,000 Machinery and equipment (net) 30,000 30,000 80,000
100,000 Goodwill 0 0 100,000
303,750
Estimated amount available P357,750
Creditors with priority (see contra) 35,700
Estimated amount available to unsecured creditors P322,050
w/o priority
_______ Estimated deficiency to unsecured creditors 40,450
P921,500 P362,500
(2) Estimated amount available, P322,050, divided by total unsecured liabilities, P362,500, equals
estimated amount payable on claims, 89% or 89 centavos on the dollar.
Company
of Affairs
01, 2014
Book Amount
Value Liabilities and Stockholders' Equity Unsecured
Creditors with priority:
Estimated liquidation expenses P 30,000
Taxes payable 4,000
Wages payable 1,700
Total (deducted contra) P 35,700
Fully secured creditors:
Chapter 5 – AA2 (2014 edition) page 19
2.
Mackintosh Company
Deficiency Statement
November 1, 2014
Additional liabilities:
Estimated liquidation expenses P 30,000
Taxes payable 4,000
Wages payable 1,700
Accrued interest on notes payable 2,500
Accrued interest on mortgage 5,000 43,200
Estimated gross loss P361,950
Deduct:
Estimated gains on realization of assets:
Land and buildings 15,000
Estimated net loss P346,950
Loss to be borne by owners:
Share capital P400,000
Additional paid-in capital 50,000
P450,000
Less deficit 143,500 306,500
Estimated deficiency to unsecured creditors P 40,450
1
AA2 - CHAPTER 6
SUGGESTED ANSWERS
EXERCISES
Exercise 6-1
Trustee's Books
a. Purchases 30,000
Trustee's Certificates Payable 30,000
e. Cash 28,000
Allowance for Doubtful Accounts, Old* 3,000
Accounts Receivable, Old 31,000
f. Cash 92,000
Allowance for Doubtful Accounts* 1,300
Accounts Receivable 93,300
h. Cash 11,200
Accumulated Depreciation - Furniture and Fixtures 8,000
Corporation - Loss on Sale of Furniture and Fixtures 800
Furniture and Fixtures 20,000
Exercise 6 - 2
It is assumed in the following solution that all expenses and losses of the debtor are to be reflected
on the debtor's books. It is further assumed that the debtor recognized the liquidation of liabilities
of P30,000 by the trustee at the time such debt was paid.
Trustee's Books
a. Rowina Co. - Debtor 32,000
Rowina Co. - Loss on Sale of Investments 32,000
b. Sales 160,000
Cost of Goods Sold 112,000
Operating Expenses 28,000
Income Summary 40,000
Company's Books
a. Loss on Sale of Investments 32,000
Henry Ly, Trustee 32,000
Exercise 6 - 3
Trustee's Books
b. Cash 60,000
Investments 45,000
Golden City, Debtor 15,000
Chapter 6 – AA2 (2014 edition) page 3
Company's Books
a. Notes Payable 40,000
Accrued Interest on Notes Payable 300
Interest Expense 700
Trustee 41,000
b. Trustee 15,000
Gain on Sale of Investments 15,000
e. Trustee 12,400
Profit from Trusteeship Operations 12,400
Exercise 6 - 4
Assignee's Books
Company's Books
a. Trade Accounts Payable 70,000
Mortgage Note 80,000
E. Baylor, Assignee 150,000
PROBLEMS
Problem 6 –1
a. Cash 11,500
Notes Receivable, Old 50,000
Accounts Receivable, Old 130,000
Accrued Interest on Notes Receivable, Old 800
Merchandise Inventory 80,000
Furniture and Fixtures 30,000
Dick Corp. Stock 30,000
Allowance for Uncollectible Accounts, Old 2,600
Accumulated Depreciation – Furniture and Fixtures 7,500
Slowly Corp., Debtor 322,200
Corporation's Books
(The transactions on the corporation's books are numbered to correspond
with the transactions on the trustee's books)
d. Cash 59,220
Accounts Receivable 110,000
Merchandise Inventory 66,500
Furniture and Fixtures 30,000
Dick Corp. Stock (500 shares) 10,000
Allowance for Doubtful Accounts 2,200
Accumulated Depreciation - Furniture and Fixtures 9,500
Notes Payable 36,000
Accounts Payable 94,000
Accrued Selling Expenses 500
Chapter 6 – AA2 (2014 edition) page 8
Problem 6 -1
Requirement 2 (a)
Slowly Corporation, Debtor
AC Maayos, Trustee
Statement of Financial Position
December 31, 2014
Assets
Current assets:
Cash P59,220
Accounts receivable P110,000
Less Allowance for doubtful accounts 2,200 107,800
Merchandise inventory 66,500 P233,520
Furniture and fixtures P30,000
Less Accumulated depreciation 9,500 20,500
Investments:
Dick Corporation stock 10,000
Total assets P264,020
Shareholders' equity:
Ordinary share capital P100,000
Retained earnings (P20,100 - P7,880) 12,220 112,220
Problem 6 -1
Requirement 2(b)
Slowly Corporation, Debtor
AC Maayos, Trustee
Income Statement
For the Period May 1 to December 31, 2014
Problem 6 -2
Requirement 1
Trustee's Books
a. Cash 8,000
Notes Receivable, Old 7,500
Accounts Receivable, Old 56,900
Merchandise Inventory 35,200
Furniture and Fixtures 3,600
Cash Surrender Value of Life Insurance 9,400
Accumulated Depreciation - Furniture and Fixtures 600
Cory and Fidel, Debtors 120,000
b2 Cash 28,800
Interest and Finance Charges 1,200
Loan from Acro Finance Company 30,000
Loan: P28,800/(100% - 4%) = P30,000
Partnership Books
(The transactions on the partnership books are numbered to correspond with
the transactions on the trustee's books)
a. Ferdinie, Trustee 120,000
Accumulated Depreciation - Furniture and Fixtures 600
Cash 8,000
Notes Receivable 7,500
Accounts Receivable 56,900
Merchandise Inventory 35,200
Furniture and Fixtures 3,600
Cash Surrender Value of Life Insurance 9,400
d. Cash 18,520
Accounts Receivable 27,200
Merchandise Inventory 33,000
Furniture and Fixtures 3,600
Cash Surrender Value of Life Insurance 9,400
Allowance for Doubtful Accounts 1,360
Accumulated Depreciation - Furniture and Fixtures 960
Accounts Payable 24,000
Installment Notes Payable 3,200
Accrued Interest on Installment Notes 160
Accrued Operating Expenses 1,520
Due to Ferdie, Trustee 6,000
Ferdinie, Trustee 54,520
Assets
Current assets:
Cash P 18,520
Accounts receivable P27,200
Chapter 6 – AA2 (2014 edition) page 14
Sales P150,000
Cost of goods sold:
Merchandise inventory, July 1, 2014 P 35,200
Purchases 80,000
Merchandise available for sale P115,200
Less Merchandise inventory, June 30, 2005 33,000 82,200
Gross profit P67,800
Operating expenses 41,240
Operating income P26,560
Other expenses:
Interest and finance charges 1,500
Income from trustee's operations P25,060
Partnership revenue and expense items:
Uncollectible accounts expense P 4,400
Interest expense on notes, old 100
Interest expense on installment notes 1,040 5,540
Chapter 6 – AA2 (2014 edition) page 15
Problem 6 - 3
Winala Stores, Inc. Debtor
Pamana, Trustee
Income Statement
For Six Months Ended December 31, 2014
Sales P401,000
Cost of goods sold:
Merchandise inventory, July 1 P 50,600
Purchases 252,800
Merchandise available for sale P303,400
Less Merchandise inventory, December 31 41,500 261,900
Gross profit P139,100
Operating expenses:
Selling expenses P 45,600
General expenses 28,220
Depreciation 10,980
Trustee's expenses 3,000 87,800
Income from trustee's operations P 51,300
Corporation revenue and expense items:
Corporation expenses:
Interest expense P 8,000
Uncollectible accounts expense 15,000
Total corporation expenses 23,000
Increase in retained earnings P 28,300
Assets
Current assets:
Cash P 56,840
Accounts receivable, old 75,600
Accounts receivable, new 79,360
Merchandise inventory 41,500 P253,300
Fixtures P183,000
Less Accumulated depreciation 35,000 148,000
Intangible asset:
Trademark 25,000
Total assets P426,300
Liabilities
Accounts payable, new P 39,200
Mortgage payable 100,000
Total liabilities P139,200
Chapter 6 – AA2 (2014 edition) page 16
Shareholders' Equity
Share capital P300,000
Less Deficit 12,900
Total shareholders' equity 287,100
Total liabilities and shareholders' equity P426,300
Problem 6-4
Assets
Cash P268,400
Accounts receivable P800
Less Allowance for doubtful accounts 800 ------
Total assets P268,400
Liabilities
Bank overdraft P 2,000
Accounts Payable 226,000
Bank loans 210,000
Poker, Inc. 60,000
Acceptances 46,000
Total liabilities P544,000
Sales P150,000
Cost of goods sold 120,000
Gross profit P 30,000
Operating and general expenses (including materials and
Chapter 6 – AA2 (2014 edition) page 17
Problem 6 -4
Universal company, Debtor
P. Cesar, Trustee
Work Sheet
April 28 - November 20, 2014
AA2 - CHAPTER 7
SUGGESTED ANSWERS
Exercise 7 - 1
Assets
Liabilities
Cash
20___ 20__
Dec. 1 Balance P 60,000 Dec. 1-31 (4) Payments for
1-31 (1) Cash sales of merchandise
merchandise 120,000 purchased P 3,750
(2) Collections of (5) Payment of expenses 7,000
receivables 94,750 Dec. 31 Balance 264,000
P274,750 P274,750
20__
Jan. 1 Balance P264,000
Chapter 7 – AA2 (2014 edition) page 2
Share Capital
20__
Dec. 1 Balance P250,000
Retained Earnings
20____ 20____
Dec. 1 Balance P 10,000 Dec. 31 Net gain for December P26,250
Exercise 7 -2
No entry is needed for the accounts written off; the balance of accounts receivable of ___
is reduced by P2,500 and is entered in the "Assets to be realized" section.
f. No entry is needed for the depreciation; the balance of furniture and fixtures is reduced by
P1,375 and is entered in the "Assets to be realized" section.
Chapter 7 – AA2 (2014 edition) page 3
Exercise 7 - 3
Liabilities
Unsecured
Assets Fully Partially With Without Owners'
Cash Noncash Secured Secured Priority Priority Equity
Beg. Balances 12,000 590,000 200,000 175,000 54,000 150,000 23,000
2.
Estimated Dividend
Liabilities and Owner’s Equity Book Value Distribution Payout %
Fully secured liabilities
(50,000 – 36,000 = 14,000) 113,000 113,000 100%
Partially secured liabilities 175,000 175,000 100%
Unsecured liabilities:
With priority 83,000 83,000 100%
Without priority 150,000 39,000 26%
410,000 410,000
1
AA2 - CHAPTER 8
SUGGESTED ANSWERS
Exercise 8 - 1
Exercise 8 -2
Exercise 8 - 3
30 Cash 8,540
Foreign Exchange Gain or Loss 24
Accounts Receivable 8,516
Exercise 8 -4
Jack Company
Income Statement
For the Year Ended December 31, 2014
Jack Company
Statement of Financial Position
December 31, 2014
Assets
Italian Translation Philippine
Lira Rate Peso
Cash 9,500 .51278 4,872
Accounts receivable 25,000 .51278 12,820
Inventories 30,000 .51278 15,383
Land 40,000 .51278 20,511
Building, net 85,500 .51278 43,843
Machinery, net 22,500 .51278 11,538
Total assets 212,500 108,967
Supporting computations:
B. Retained earnings
Italian Translation Philippine
Lira Rate Peso
Beginning balance ------ --------
Profit 45,000 .51168 23,026
Dividends (12,500) .51155 ( 6,394)
Ending balance 32,500 16,632
B. Translation adjustment
Italian Translation Philippine
Lira Rate Peso
Net assets, beginning 110,000 .50859 55,945
Add (deduct):
Profit 45,000 .51168 23,026
Dividends ( 12,500) .51155 ( 6,394)
Ordinary shares issued 5,000 .50732 2,537
Net assets, end - before adjustment 147,500 75,114
Net assets, end - after adjustment 147,500 .51278 75,636
Translation adjustment 522
Exercise 8 - 5
Gold Company
Statement of Financial Position
December 31, 2014
Assets
US Translation Philippine
Dollars Rate Peso
Cash 105,000 55.50 5,827,500
Accounts receivable 170,000 55.50 9,435,000
Land 100,000 55.50 5,550,000
Building, net 50,000 55.50 2,775,000
Total assets 425,000 23,587,500
Gold Company
Income Statement
For the Year Ended December 31, 2014
US Translation Philippine
Dollars Rate Peso
Revenue 355,000 56.00 19,880,000
Operating expenses 250,000 56.00 14,000,000
Profit 105,000 5,880,000
B. Retained earnings
US Translation Philippine
Dollars Rate Peso
Beginning balance ------ --------
Profit 105,000 56.00 5,880,000
Dividends (70,000) 55.75 ( 3,902,500)
Ending balance 35,000 1,977,500
B. Translation adjustment
US Translation Philippine
Dollars Rate Peso
Net assets, beginning 225,000 56.50 12,712,500
Add (deduct):
Profit 105,000 56.00 5,880,000
Dividends ( 70,000) 55.75 ( 3,902,500)
Net assets, end - before adjustment 260,000 14,690,000
Net assets, end - after adjustment 260,000 55.50 14,430,000
Translation adjustment 260,000
MULTIPLE CHOICE
8-A 1. A 5. C
2, A 6. D
3. A 7. D
4. B (all are dated 2014) 8. B