1

a.
Income Summary ₱250,000.00
Ben, Drawings ₱125,000.00
Bob, Drawings ₱125,000.00
profit sharing

Ben, Capital ₱36,000.00

Bob, Capital ₱36,000.00
Acc depre ₱ 72,000.00

Ben, Drawings ₱65,000.00

Bob, Drawings ₱5,000.00
Ben, Capital ₱65,000.00
Bob, Capital ₱5,000.00
close

b. Revaluation Capital
Ben (240k + 65k - 36k) ₱269,000.00
Bob (260k + 5K - 36k) ₱229,000.00

c. Ben, Capital ₱134,500.00

Ted, Capital ₱134,500.00

d. Partners Existing Equity Transfer of Interest Revised Interest

Bob ₱229,000.00 ₱229,000.00
Ben ₱269,000.00 -₱134,500.00 ₱134,500.00
Ted ₱134,500.00 ₱134,500.00
Total ₱498,000.00 0 ₱498,000.00

e. Partner Orig P and L Transfer Revised P and L

Bob 50% 50%
Ben 50% -25% 25%
Ted 25% 25%
Total 100% 0 100%
 2
a. Partners Drawings Profit sharing Tax
Bob ₱ 120,000.00 ₱ 250,000 ₱ 50,000.00
Ben ₱ 60,000.00 ₱ 125,000 ₱ 25,000.00
Ted ₱ 60,000.00 ₱ 125,000 ₱ 25,000.00
₱ 240,000.00 ₱ 500,000.00 ₱ 100,000.00

Bob, Capital ₱ 120,000.00

Ben, Capital ₱ 60,000.00
Ted, Capital ₱ 60,000.00
Bob, Drawings ₱ 120,000.00
Ben, Drawings ₱ 60,000.00
Ted, Drawings ₱ 60,000.00

b. Income Summary ₱ 100,000.00

Income tax Payable ₱ 100,000.00

c. Income Summary ₱ 500,000.00

Bob, Drawings ₱ 250,000.00
Ben, Drawings ₱ 125,000.00
Ted, Drawings ₱ 125,000.00

d. Partners Existing Equity Drawings Tax

Bob ₱229,000.00 ₱ 120,000.00 ₱ 50,000.00
Ben ₱134,500.00 ₱ 60,000.00 ₱ 25,000.00
Ted ₱134,500.00 ₱ 60,000.00 ₱ 25,000.00
Total ₱498,000.00 ₱ 240,000.00 ₱ 100,000.00

Profit sharing Revised Equity Revised Equitybbefore tax

₱ 250,000.00 ₱309,000.00 ₱359,000.00
₱ 125,000.00 ₱174,500.00 ₱199,500.00
₱ 125,000.00 ₱174,500.00 ₱199,500.00
₱ 500,000.00 ₱658,000.00 ₱758,000.00
 3

a. Daisy, Capital ₱ 160,000.00

Maggie, Capital ₱ 160,000.00

b. Bonnie, Capital ₱ 200,000.00

Maggie, Capital ₱ 200,000.00

c. willing to pay/ interest ₱ 400,000.00

Book value per share ₱ 320,000.00
Share of Daisy Revaluation ₱ 80,000.00
2/3 ₱ 120,000.00

Existing PE Asset Reval PE after reval Transfer Revised PE

Daisy ₱ 400,000.00 ₱ 80,000.00 ₱ 480,000.00 -₱ 240,000.00 ₱ 240,000.00
Bonnie ₱ 320,000.00 ₱ 40,000.00 ₱ 360,000.00 ₱ 360,000.00
Maggie ₱ - ₱ 240,000.00 ₱ 240,000.00
Total ₱ 720,000.00 ₱ 120,000.00 ₱ 840,000.00 ₱ - ₱ 840,000.00

Asset ₱ 120,000.00
Daisy, Capital ₱ 80,000.00
Boonie, Capital ₱ 40,000.00

Daisy, Capital ₱ 240,000.00

Maggie, Capital ₱ 240,000.00

d. willing to pay/ interest ₱ 600,000.00

Book value per share ₱ 720,000.00
-₱ 120,000.00
1 -₱ 120,000.00

Existing PE Asset Reval PE after reval Transfer Revised PE

Daisy ₱ 400,000.00 -₱ 80,000.00 ₱ 320,000.00 ₱ 320,000.00
Bonnie ₱ 320,000.00 -₱ 40,000.00 ₱ 280,000.00 -₱ 140,000.00 ₱ 140,000.00
Maggie ₱ - ₱ 140,000.00 ₱ 140,000.00
Total ₱ 720,000.00 -₱ 120,000.00 ₱ 600,000.00 ₱ 140,000.00 ₱ 600,000.00

Daisy, Capital -₱ 80,000.00

Boonie, Capital ₱ 40,000.00
Asset ₱ 120,000.00

Daisy, Capital ₱ 140,000.00

Maggie, Capital ₱ 140,000.00
 4
Case 1 Partners Existing Equity Transfer Revised Equity
Edgar 30% -9% 21%
Paz 40% -11% 29%
Emy 30% 30%
Georgina 20% 20%
100% 0% 100%

Edgar 133,333.33 0.088888889

Paz 166,666.67 0.111111111
300,000.00 0.2

Edgar, Capital 133,333.33

Paz, Capital 166,666.67
Georgina, Capital 300,000.00

Case 2 Partners Existing Equity Addition Revised Equity Interest

Edgar ₱ 400,000.00 ₱ 400,000.00 27%
Paz ₱ 500,000.00 ₱ 500,000.00 33%
Emy ₱ 300,000.00 ₱ 300,000.00 20%
Georgina ₱ 300,000.00 ₱ 300,000.00 20%
₱ 1,200,000.00 ₱ 300,000.00 ₱ 1,500,000.00 100%

Cash ₱ 300,000.00
Georgina, Capital ₱ 300,000.00
5
a Partners AE AC Difference
Edgar ₱ 360,000.00 ₱ 400,000.00 -₱ 40,000.00
Paz ₱ 480,000.00 ₱ 500,000.00 -₱ 20,000.00
Emy ₱ 360,000.00 ₱ 300,000.00 ₱ 60,000.00
₱ 1,200,000.00 ₱ 1,200,000.00 ₱ -

b Emmy should give Edgar and Paz 40,000 and 20,000, respectively

c Edgar, Capital 40,000.00

Paz, capital 20,000.00
Emy, Capital 60,000.00

Cash 1,200,000.00
Edgar, Capital 360,000.00
Paz, Capital 480,000.00
Emy, Capital 360,000.00
6
a Book Value Market Value Loss
AR 120,000.00 102,000.00 18,000.00
Inventory 200,000.00 258,000.00 - 58,000.00

Pen, Capital 7,200.00

May, Capital 10,800.00
AR 18,000.00

Inventory 58,000.00
Pen, Capital 23,200.00
May, Capital 34,800.00

Inventory 58,000.00
Pen, Capital 16,000.00
May, Capital 24,000.00
AR 18,000.00

b Partners Existing Capital Transfer Revised Capital

Pen 466,000.00 466,000.00
May 674,000.00 - 269,600.00 404,400.00
Wen 269,600.00 269,600.00
1,140,000.00 - 1,140,000.00

40% of May's Capital:

269,600.00 15,000.00 284,600.00
Markup

c May, Capital 284,600.00

Wen. Capital 284,600.00

d Income Summary 1,140,000.00

Pen, capital 466,000.00
May, Capital 404,400.00
Wen, Capital 269,600.00

e Partners Existing Capital Transfer Revised Capital

Pen 40% 40%
May 60% -40% 20%
Wen 40% 40%
100% - 100%

Taxable Profit earned: 320,000.00

Income Summary 320,000.00
Pen, capital 128,000.00
May, Capital 64,000.00
Wen, Capital 128,000.00
7
b Partners AE
Pen 466,000.00
May 674,000.00
Wen 760,000.00
1,900,000.00

a 1,140,000.00 /60% 1,900,000.00

c Cash 760,000.00
Wen, Capital 760,000.00

d Partners Existing Capital Admission Revised Capital

Pen 466,000.00 466,000.00
May 674,000.00 674,000.00
Wen 760,000.00 760,000.00
1,140,000.00 760,000.00 1,900,000.00

e Partners Revised Capital P or L ratio

Pen 466,000.00 25%
May 674,000.00 35%
Wen 760,000.00 40%
1,900,000.00 100%
 8
Option 1 Partners AE AC Bonus Notes:
Pen 466,000.00 36,000.00 TAE=TAC
May 674,000.00 54,000.00 AE = TAE*interest
Wen 410,000.00 500,000.00 90,000.00
1,640,000.00 1,640,000.00 -

Option 2 Partners AE AC Asset Revaluation

Pen 466,000.00 - 96,000.00 Notes:
May 674,000.00 - 144,000.00 AE=AC
Wen 300,000.00 300,000.00 TAE= AE/interest
1,200,000.00 1,440,000.00 - 240,000.00

a. 2 Cash 500,000.00
Wen, Capital 500,000.00

Wen, Capital 90,000.00

Pen, Capital 36,000.00
May, Capital 54,000.00

Pen and May will be credited for bonus since the Ac is greater than AE of wen.

b. 2 Pen, Capital 96,000.00

May, Capital 144,000.00
Non-current asset 240,000.00

DOWNWARD revaluation/adjustment
 9
a
Option 1 Partners AE AC Asset Revaluation
Athena 110,000.00 48,000.00
Apollo 90,000.00 32,000.00
Titus 120,000.00 120,000.00
400,000.00 320,000.00 80,000.00

Option 2 Partners AE AC Asset Revaluation

Athena 110,000.00 - 15,000.00
Apollo 90,000.00 - 10,000.00
Titus 75,000.00 75,000.00
250,000.00 275,000.00 - 25,000.00

b
Option 1 Asset 80,000.00
Athena, Capital 48,000.00
Apollo, Capital 32,000.00

Cash 120,000.00
Titus, Capital 120,000.00

Option 2 Athena, Capital 15,000.00

Apollo, Capital 10,000.00
Asset 25,000.00

Cash 75,000.00
Titus, Capital 75,000.00