Karen and Carpenter who presently operating their hardware stores decided to combine their

business and forma a partnership to be called KC partnership. The trial balances of the two sole
proprietorships on January 2, 2023 are as follows:

Karen Co.
Trial Balance
January 2, 2023

Debit Credit
Cash P100,000
Accounts Receivable 500,000
Allowance for Bad Debts P10,000
Merchandise Inventory 1,000,000
Machinery 400,000
Accumulated Depreciation 80,000
Accounts Payable 110,000
Luther, Capital 1.800,000
Total

Carpenter Co.
Trial Balance
January 2, 2023

Debit Credit
Cash P80,000
Accounts Receivable 420,000
Allowance for Bad Debts P20,000
Merchandise Inventory 2,000,00
0
Accrued expenses 30,000
Accounts Payable 50,000
Clark, Capital 2,400,000
Total

Agreed adjustments:
1. The allowance for bad debts is to be adjusted to 10% of accounts receivable.
2. The fair value of the merchandise inventory of Karen is P850,000.
3. Inventory of Carpenter is undervalued by P250,000

Karen’s Books:

Debit Credit
Karen, Capital 40,000
Allowance for Bad Debts 40,000

Solution:
Accounts Receivable =
500,000 * 10% = 50,000
Allowance for Bad Debts =
50,000 – 10,000 = 40,000

Karen, Capital 150,000

Merchandise Inventory 150,000

1
 Solution:
MI = 1,000,000 – 850,000 = 150,000

Closing:

Allowance for Bad Debts 50,000

Accumulated Depreciation 80,000
Accounts Payable 110,000
Karen, Capital 1,610,000
100,000
Cash
500,000
Accounts Receivable
850,000
Merchandise Inventory
400,000
Machinery

= 1,850,000 = 1,850,000

Carpenter’s Book:
Debit Credit
Carpenter, Capital 22,000
Allowance for Bad Debts 22,000

Solution:
Accounts Receivable =
420,000 * 10% = 42,000
Allowance for Bad Debts =
42,000 – 20,000 = 22,000

Merchandise Inventory 250,000

Carpenter, Capital 250,000

Solution:
Inventory is undervalued by 250,000

Closing:
Allowance for Bad Debts 42,000
Accrued Expenses 30,000
Accounts Payable 50,000
Carpenter, Capital 2,628,000
80,000
Cash
420,000
Accounts Receivable
2,250,000
Merchandise Inventory

=2,750,000 = 2,750,000

2
  Open New Books – KC Company

Debit Credit
Cash 100,000
Accounts Receivable 500,000
Merchandise Inventory 850,000
Machinery 400,000
Allowance for Bad Debts 50,000
Accumulated Depreciation 80,000
Accounts Payable 110,000
Karen, Capital 1,610,000
To record investments of Karen.

Cash 80,000
Accounts Receivable 420,000
Merchandise Inventory 2,250,000
Allowance for Bad Debts 42,000
Accrued Expenses 30,000
Accounts Payable 50,000
Carpenter, Capital 2,628,000
To record investments of Carpenter.

Partnership Operation
Assume the following data of Goma Company:

Richard, Capital
May 1 P60,000 Jan 1. P50,000
July 1. 24,000

Lucy, Capital
July 31. P50,000 Jan 1. P150,000
September 30. 10,000

Juliana, Capital
Aug. 31. P40,000 Jan 1. P64,000
March 31. 60,000

Richard, Drawing
May 1 P10,000

Lucy, Drawing
July 31. P4,000

Juliana, Drawing
Aug. 31. P10,000

3
 Revenue & Expense Summary
December 31. P1,500,000

Tasks:
1. Equally
2. Arbitrary Ratios 3:6:1
3. Beginning Capital Ratios
4. Ending Capital Ratios
a. Before Drawing
b. After Drawing

1. Equally

DEBIT CREDIT

Revenue & Expense Summary 1,500,000

Richard, Capital 500,000
Lucy, Capital 500,000
Juliana, Capital 500,000

Solution:

RES = 1,500,000 / 3 = ₱ 500,000 each

2. Arbitrary Ratios – 3:6:1

DEBIT CREDIT

Revenue & Expense Summary 1,500,000

Richard, Capital 450,000
Lucy, Capital 900,000
Juliana, Capital 150,000

Solution:

Richard, Capital 30% = ₱ 450,000

Lucy, Capital 60% * 1,500,000 = 900,000
Juliana, Capital 10% = 150,000

3. Beginning Capital Ratios

DEBIT CREDIT

Revenue & Expense Summary 1,500,000

Richard, Capital 284,090.91
Lucy, Capital 852,272.73
Juliana, Capital 363,636.36

Solution:
BC Ratio
Richard, Capital 50,000 50/264 =₱ 284,090.91
Lucy, Capital 150,000 150/264 * 1,500,000 = 852,272.73

4
Juliana, Capital 64,000 64/264 = 363,636.36
264,000

4. Ending Capital Ratios

a. Before Drawing

DEBIT CREDIT

Revenue & Expense Summary 1,500,000

Richard, Capital 100,961.54
Lucy, Capital 793,269.23
Juliana, Capital 605,769.23

Solution:
EC Ratio
Richard, Capital 14,000 14/208 = ₱ 100,961.54
Lucy, Capital 110,000 110/208 * 1,500,000 = 793,269.23
Juliana, Capital 84,000 84/208 = 605,769.23
208,000

b. After Drawing

DEBIT CREDIT

Revenue & Expense Summary 1,500,000

Richard, Capital 32,608.70
Lucy, Capital 864,130.43
Juliana, Capital 603,260.87

Solution:
EC Drawing ECAD Ratio
Richard, Capital 14,000 - 10,000 = 4,000 4/184 = ₱ 32,608.70
Lucy, Capital 110,000 - 4,000 = 106,000 106/184 * 1,500,000 = 864,130.43
Juliana, Capital 84,000 - 10,000 = 74,000 74/184 = 603,260.87
184,000

Shareholders’ Equity – Dividends

On December 31, 2021, Tiger Company sowed the following shareholders’ equity
Share capital par P100, 200,000 authorized, 100,000
shares issued
Share premium 2,000,000
Retained Earnings 4,000,000
Treasury Shares, 10,000 at costs 1,200,000

5
On December 31, 2021, the company declared a share dividend P30 per share to shareholders of
record on January 15, 2022 and payable on January 31, 2022

Date of Declaration:
Debit Credit
Retained Earnings 2,700,000
Share Dividends Payable 2,700,000

Solution:

(100,000 shares – 10,000 treasury shares)

= 90,000

(90,000 shares* 100% * P30) = ₱ 2,700,000

Date of Payment:
Debit Credit
Share Dividends Payable 2,700,000
Share Capital 2,700,000

Solution:

(100,000 shares – 10,000 treasury shares)

= 90,000

(90,000 shares* 100% * P30) = ₱ 2,700,000

Tasks:
Prepare journal entry on the date of declaration and date of payment.
Basic Cost Accounting

Below are the data extracted from the Calxing Corporation’s ledger for year ending December
31, 2022:
Ending Beginning
Balance Balance
(in thousand (in thousand
pesos) pesos)
General and Administrative Costs P58,000
Marketing, Distribution costs 186,000
Repairs & Maintenance – factory 8,000
Depreciation – factory 22,000
Insurance – Factory 18,000
Indirect labor 30,000
Direct labor 50,000
Raw material purchases 150,000
Finished goods inventory 46,000 36,000
Work in process inventory 40,000 42,000
Raw materials inventory 52,000 44,000

Tasks:

1. Prepare the Schedule of Cost of Goods Manufactured for 2022

2. Prepare the Statement of Comprehensive Income assuming the Sales Revenue is P600
million.

6
 Calxing Corporation
Cost of Goods Manufactured Statement
For the Year Ended December. 31, 2022

Direct materials used:

Raw materials inventory, January. 1, 2022 ₱ 44,000
Add: Purchases of Raw Materials 150,000
Raw materials available for use 194,000
Less: Raw materials inventory, December. 31, 2022 52,000
Raw materials used ₱ 142,000
Direct labor 50,000
Factory overhead costs:
Indirect labor ₱ 30,000
Repairs & Maintenance – Factory 8,000
Depreciation – Factory 22,000
Insurance – Factory 18,000
Total Factory Overhead costs 78,000
Total manufacturing cost for the period 270,000
Add: Work in process inventory, January. 1, 2022 42,000
Total manufacturing costs 312,000
Less: Work in process inventory, December. 31, 2022 40,000
Cost of goods manufactured ₱ 272,000

Calxing Corporation
Statement of Comprehensive Income
For the Year Ended December. 31, 2022

Net sales ₱ 600,000,000

Less: Cost of goods sold
Finished goods inventory, January. 1, 2022 ₱ 36,000
Add: Cost of goods manufactured 272,000
Cost of goods available for sale 308,000
Less: Finished goods inventory, December. 31, 2022 46,000
Cost of goods sold 262,000
Gross margin 599,738,000
Expenses:
Less: General and Administrative Costs 58,000
Marketing, Distribution costs 186,000 244,000
Net Income ₱ 599,494,000