Advanced accounting by guerrero peralta CHAPTER 02

20 Chapter CHAPTER MULTIPLE CHOICE ANSWERS AND SOLUTIONS 2-1: d Jordan P120,000 Pippen P80,000 ( 10,000) ( 10,000) P110,000 P 70,000 JJ P18,000 KK – LL – P15,000 – P 30,000 –) –) P45,000) ( 6,000) ( 6,000) ( 6,000) P27,000 P 24,000 P39,000 Allan Michael Annual salary P200,000 Balance, equally ( 20,000) Total P180,000 2-2: a Bonus (.20 X P90,000) P 18,000 Interest JJ (.15 X P100,000) KK (.15 X P200,000) LL (.15 X P300,000) 90,000 Balance, equally ( 18,000) Total profit share P 90,000 2-3: a 2-4: a Interest Allan - 10 X (P40,000 + 60,000 /2) Michael - 10 X (P60,000 + 70,000/2) P 11,500 Balance, equally 28,000 Total P 5,000 ) P 6,500) _14,000 _14,000 P 19,000 P20,500 Greg P 6,000 Henry P 4,000 ,000 2-5: a Interest (.10 of average capital) P 22,000 Salaries 50,000 Balance, equally (105,000) Fred P12,000 30,000 ( 35,000) 20,000 ( 35,000) ( 35,000) Total P 7,000 ( P29,000) (P11,000) 3,000) 2-6: b Average Capital Date January July August Capital Balance 140,000 180,000 165,000 Months Unchanged 12 Peso Months P 840,000 180,000 825,000 P1,845,000 Average capital - P1,845,000/12 = P153,750 Interest = P 15,375 (P153,750 X 10%) Partnership Operations 21 2-7: c Date January April June September Capital Balance P16,000 17,600 19,200 15,200 Months Unchanged 3 12 Average Capital(P201,600/12) = Peso Months P 48,000 35,200 57,600 60,800 P201,600 P16,800 2-8: a Net profit before bonus Net profit after bonus (P24,000/120%) Bonus to RJ Balance (P24,000-P4,000)X3/5 Total profit share P 24,000 20,000 4,000 12,000 P 16,000 2-9: a AM P 3,600 7,500 ( 7,720) P 3,380 Total P 6,800 22,500 ( 19,300) P 10,000 Net income after salary, interest and bonus Add back: Salary (P10,000 X 12) P120,000 Interest (P250,000 X 05) 12,500 Net income after bonus (80%) Net income before bonus (P600,000/80%) P467,500 Interest Salaries Balance, 3:2 Total LT P3,200 15,000 (11,580) P 6,620 2-10: b _132,500 P600,000 _750,000 Paul's bonus P150,000 2-11: b CC DD EE Total P 14,000 P14,000 P 8,400 Salary 000 Balance 28,000 Additional profit to DD – Total ( 1,500) 2,100 P12,500 P10,500 Net income Fees Earned Expenses Net Income P90,000 _48,000 P42,000 5,600 ( 600) P 19,000 ,000 22 Chapter 2-12: c Interest LL P 2,000 MM P 1,250 NN Total P 750 8,500 – – 9,500 5,700 3,800 _– 7,050 _– P20,000 P14,000 P 4,550 RR SS TT P15,000 – – (P10,000) _47,500 _35,625 _11,875 P62,500 P25,625 P11,875 000 Annual Salary 8,500 Additional profit to give LL, P20,000 19,000* Additional profit to give MM, P14,000 7,050 Total 550 *(P9,500/50%) = P19,000 2-13: a Excess (Deficiency) RR (P80,000 - P95,000) SS (P50,000 - P40,000) P 5,000 Balance 4:3:1 95,000 Total P100,000 Net Income (200,000 - 100,000) = P100,000 Total –) –) 2-14: b AA - 100,000 X 10% 150,000 X 20% P 40,000 Remainder, 210,000 BB (60,000 X 05) CC (60,000 X 05) 6,000 Balance, equally _204,000 Total P250,000 AA P 10,000 30,000 BB CC Total ) ) P 3,000 ) P 3,000 68,000 _68,000 _68,000 P108,000 P71,000 P71,000 2-15: a AJ Bonus to CJ Net profit before bonus P44,000 Net profit after bonus (P44,000/110%)P40,000 – – P4,000 Interest to BJ – 1,000 Salaries P 10,000 22,000 Balance, 4:4:2 6,800 _17,000 Total P 16,800 P44,000 BJ CJ Total P4,000 P1,000 – – 12,000 _6,800 3,400 P7,800 P19,400 2-16: c Total profit share of Pedro Less: Salary to Pedro Interest Share in the balance (40%) P 50,000 20,000 P200,000 Net profit after salary and interest (130,000/40%) Add: Total Salaries Total Interest Total Partnership Income P150,000 70,000 70,000 P130,000 P325,000 _220,000 P545,000 Partnership Operations 23 2-17: c Net income before extraordinary gain and bonus (69,600-12,000) Net income after bonus (57,600/120%) Bonus to RR P 57,600 _48,000 P 9,600 Distribution of Net Income: JJ Bonus Balance, equally Net profit before extraordinary gain – P 24,000 P 24,000 RR P 9,600 24,000 P 33,600 Total P 9,600 48,000 P 57,600 Extraordinary gain Total 4,800 P 28,800 7,200 P 40,800 _12,000 P 69,600 Interest Annual Salary Remainder 60:40 Total Mel P 20,000 36,000 60,000 P116,000 Jay P 12,000 – _40,000 P 52,000 Total P 32,000 36,000 _100,000 P168,000 DV P 15,000 JE P 3,750 FR Total (P 7,500) ( 36,875) ( 22,125) ( 14,750) 2-18: a 2-19: a Interest on excess (Deficiency) P 11,250 Remainder 5:3:2 ( 73,750) Total (P 21,875) (P 18,375) (P 22,250) 2,500) 2-20: c Correction of 1998 profit: Net income per books Understatement of depreciation Overstatement of inventory, December 31 Adjusted net income P 19,500 ( 2,100) ( 11,400) P 6,000 Pete Rico Total Distribution of net income per book: Equally P 9,750 P 9,750 Distribution of adjusted net income Equally ( 3,000) ( 3,000) P 6,750 P 6,750 500 000) Required Decrease P 13,500 2-21: a Salaries P164,000 Interest 54,000 Bonus (P360,000-P54,000)X.25 76,500 Remainder, 30:70 65,500 Total P360,000 24 Chapter Tiger P 64,000 Woods Total P100,000 24,000 30,000 76,500 – 19,650 45,850 P184,150 P175,850 2-22: a Holly P 20,000 – 32,000 30,000 35,640 P117,640 Salaries Commission Interest Bonus, schedule Remainder, 60:40 Total Field – P 25,000 33,600 – _23,760 P 82,360 Schedule Net income before salary, commission, interest and bonus Less: salaries Net income before bonus Net income after bonus (P180,000/120%) Bonus Total P 20,000 25,000 65,600 30,000 59,400 P200,000 P200,000 20,000 P180,000 _150,000 P 30,000 2-23: a Capital balance, beginning P1,000,000 Additional investment 300,000 Capital withdrawal Mike P600,000 Tyson P400,000 100,000 200,000 -200,000 ( 100,000) P500,000 P500,000 P200,000 P300,000 60,000 40,000 P260,000 P340,000 P760,000 P840,000 ( 200,000) ( 300,000) P560,000 P540,000 300,000 Capital balance before profit and loss distribution P1,000,000 Net income: Salary 0,000 Balance, 3:2 100,000 Total 0,000 Total P1,600,000 Drawings 00,000) Capital balance, end P1,100,000 Average Capital - King: Date January April Capital Balance P40,000 55,000 Months Unchanged 12 Peso Months P120,000 _495,000 P615,000 Average capital – P615,000/12 = P51,250 Average Capital - Queen: Date January April Capital Balance P100,000 130,000 Months Unchanged 12 Peso Months P700,000 650,000 P1,350,000 Average capital - P1,350,000 / 12 =P112,500 Partnership Operations 25 2-24: d Distribution of Net Income - Schedule Interest Bonus, Schedule Salaries Residual, 50:50 Total King P 5,125 12,725 25,000 ( 2,050) P40,800 Queen P11,250 – 30,000 _(2,050) P39,200 Total P16,375 12,725 55,000 _(4,100) P80,000 Schedule Net income before allocation Less: Interest Net income before bonus Net income after bonus (P63,625/125%) Bonus P80,000 _16,375 P63,625 _50,900 P12,725 Capital Balance December 31: Capital balance, January Additional investment Capital balance before profit and loss distribution Net income (Schedule 2) Drawings (P400 X 52) Capital balance, December 31 King P40,000 _15,000 Queen P100,000 30,000 Total P140,000 45,000 P55,000 40,800 ( 20,800) P75,000 P130,000 39,000 ( 20,800) P148,400 P185,000 80,000 ( 41,600) P223,400 2-25: d Total receipts (P1,500,000 + P1,625,000) Expenses Net income Distribution to Partners Red – P1,500,000/P3,125,000 X P2,045,000 = Blue – P1,625,000/P3,125,000 X P2,045,000 = P3,125,000 ( 1,080,000) P2,045,000 P 981,600 (1) _1,063,400 P2,045,000 Capital balance of Blue Dec 31 Capital Balance, Jan Additional investment Capital balance before profit and loss distribution Profit share Drawings Capital balance, Dec 31 P 374,000 _22,000 P 396,000 1,063,400 ( 750,000) P 709,400 (2) 26 Chapter 2-26: a Ray P150,000 Sam P180,000 _ 60,000 150,000 240,000 15,000 20,000 51,000 34,000 66,000 54,000 Total 510,000 Salaries _42,000 216,000 294,000 _18,000 _24,000 Total 552,000 Drawings (42,000) 234,000 318,000 (18,000) (24,000) Capital balances, March P330,000 Additional investment, Nov 60,000 Capital balances before salaries, profit and Drawings 390,000 Profit share: Interest 35,000 Balance, 60:40 85,000 Total 120,000 Capital balances, Feb 28 P510,000 P216,000 P294,000 Susan P150,000 Tanny P30,000 2-27: a Capital balances, 1/1 P180,000 Additional investment, 4/1 8,000 Capital withdrawals, 7/1 8,000 _ (6,000) _(6,000) Balances before profit distribution 182,000 Profit distribution: Interest 27,450 Bonus (20% x P30,000) 6,000 Balance, equally (3,450) 158,000 24,000 23,400 4,050 6,000 Total (1,725) (1,725) 21,675 _8,325 179,675 32,325 (12,000) (12,000) 30,000 Total 212,000 Drawings (24,000) Capital balances, 12/31 P167,675 P20,325 P188,000 Partnership Operations 27 2-28: a Capital balances, beg 1st year P300,000 Loss distribution, 1st year: Salaries 30,000 Interest 30,000 Balance, 5:3:2 (80,000) Total (20,000) Total 280,000 Drawings (30,000) Sin P110,000 Tan P80,000 20,000 Uy P110,000 10,000 11,000 8,000 11,000 (40,000) (16,000) (24,000) ( 9,000) ( 8,000) ( 3,000) 101,000 72,000 107,000 (10,000) (10,000) (10,000) Capital balances, beg 2nd year 250,000 Profit distribution, 2nd year: Salaries 30,000 Interest 25,000 Balance, 5:3:2 (15,000) Total 40,000 Total 290,000 Drawings _(30,000) Capital balances, end of 2nd year P260,000 91,000 62,000 20,000 97,000 10,000 9,100 6,200 9,700 ( 7,500) ( 4,500) ( 3,000) 21,600 _1,700 16,700 112,600 63,700 113,700 _(10,000) (10,000) _(10,000) P102,600 P53,700 P103,700 Jay P30,000 Kay P30,000 Loi P30,000 _(5,000) _(4,000) 5,000 25,000 26,000 35,000 3,000 7,000 _1,000 3,000 3,000 _1,000 _1,000 36,000 30,000 39,000 5,000 _(3,000) _(8,000) 41,000 27,000 31,000 3,600 3,000 3,900 7,000 _1,500 _1,500 _1,500 53,100 31,500 36,400 _(4,000) 6,000 _(2,000) 53,100 27,500 40,400 2-29: c Capital balances, 1/1/06 P90,000 Additional investment, 2006 Capital withdrawal, 2006 _(9,000) Capital balances 86,000 Profit distribution, 2006: Interest Salary Balance, equally 3,000 Capital balances, 1/1/07 105,000 Additional investment, 2007 Capital withdrawal, 2002 (11,000) Capital balances 99,000 Profit distribution, 2007: Interest 10,500 Salary Balance, equally 4,500 Capital balances, 1/1/08 121,000 Additional investment, 2008 Capital withdrawal, 2008 _(6,000) Capital balances 121,000 Profit distribution, 2008: Interest 5,310 3,150 3,640 7,000 3,300 3,300 3,300 P68,710 P33,950 P47,340 12,100 Salary Balance, equally _9,900 Capital balances, 12/31/08 per books P150,000 Understatement of depreciation (6,000) Adjusted capital balances, 12/31/08 P144,000 (2,000) P66,710 (2,000) P31,950 (2,000) P45,340 28 Chapter 2-30: a Ken Capital balances, 1/1/07 P300,000 Additional investment, 2007 40,000 Capital withdrawal, 2007 ( 20,000) Balances 320,000 Profit distribution, 2007 (Schedule 1) Salary 60,000 Balance, beg Capital ratio 60,000 Capital balances, 1/1/08 440,000 Capital withdrawal, 2008 ( 60,000) Balances 380,000 Profit distribution, 2008: Salary 60,000 Balance, beg capital ratio 60,000 Capital balances, 12/31/08 P500,000 P100,000 Len P100,000 Mon P100,000 40,000 ( 20,000) _ _ 80,000 140,000 100,000 60,000 20,000 20,000 20,000 100,000 160,000 180,000 ( 20,000) ( 40,000) _ 80,000 120,000 180,000 60,000 13,636 21,818 24,546 P 93,636 P141,818 P264,546 Schedule – Computation of net profit: Total capital, 2008 (P647,500 – P147,500) P500,000 Total capital, 2007 (P300,000 + P40,000 – P80,000) _260,000 Total profit for years P240,000 Net profit per year (P240,000 / 2) P120,000 2-31: d Capital balance, 1/1/08 Additional investment Withdrawals Cap bal before P/L dist NP: Salary (16,500 x 12) Interest on EC (15%) Balance 25:30:45 Total Capital balance 12/31/08 _Nardo_ P280,000 96,000 376,000 42,000 ( 19,875 ) 22,125 P398,125 Orly P300,000 60,000 ( 90,000 ) 270,000 198,000 45,000 ( 23,850 ) 219,150 P 489,150 Pedro_ P170,000 ( 72,000 ) 98,000 25,500 ( 35,775 ) ( 10,275 ) P 87,72 _Total_ P750,000 156,000 (162,000) 744,000 198,000 112,500 (79,500 ) 231,000 P975,000 2-32: d Sam capital, beginning Additional investment (Land) Drawings Capital balance before net profit (loss) Capital balance, end Profit share (40%) Net profit (P50,000 ÷ 40%) P120,000 60,000 ( 80,000 ) 100,000 150,000 50,000 P125,000 Partnership Operations 29 2-33: a Joe Capital balance, 1/2/07 P 80,000 Net loss- 2007: Annual salary 96,000 10% interest on beg capital 8,000 Bal beg cap ratio: 8:4 ( 108,000) Total ( 4,000) Capital balance 76,000 Drawings ( 4,000) Capital balance, 12/31/07 72,000 Net profit- 2008: Annual salary 96,000 10% interest on BC 7,200 Bonus to Joe–NPBB – P 22000 NPAB (22000/110%)20000 2,000 Balance equally ( 67,300) Total 37,900 Total 109,900 Drawings ( 4,000) Capital balance, 12/31/08 105,900 Tom P 40,000 Total P120,000 48,000 4,000 ( 54,000) ( 2,000) 38,000 ( 4,000) 34,000 144,000 12,000 ( 162,000) ( 6,000) 114,000 ( 8,000) 106,000 48,000 3,400 144,000 10,600 ( 67,300) ( 15,900) 18,100 ( 4,000) 2,000 ( 134,600) 22,000 128,000 ( 8,000) 14,100 120,000 2-34: a Decrease in capital Drawings Contribution Profit share Net income (45,000 ÷ 30) P 60,000 ( 130,000) 25,000 45,000 P150,000 30 Chapter SOLUTIONS TO PROBLEMS Problem – 1 Castro Diaz : : (P26,000/P42,500) x (P16,500/P42,500) x P23,800 P23,800 = = P14,560 9,240 P23,800 Castro Diaz : : (P31,250/P50,000) x (P18,750/P50,000) x P23,800 P23,800 = = P14,875 8,925 P23,800 Computation of Average Capitals: Castro: Capital Date Balances 1/1 P26,000 4/10 29,000 5/1 36,000 8/1 32,000 Months Unchanged 3 12 Peso Months P 78,000 29,000 108,000 _160,000 P375,000 Average capital = P375,000  12 months = Diaz: P31,250 Capital Date Balances 1/1 P16,500 6/1 21,500 9/1 19,500 Months Unchanged 12 Average capital = P225,000 – 12 months = P18,750 Interest Salaries Balance, equally Total Castro P 7,500 36,000 ( 24,100) P19,400 Diaz P4,500 24,000 (24,100) P 4,400 Total P12,000 60,000 ( 48,200) P23,800 Bonus (a) Interest (b) Balance, 3:2 Total Castro P 4,760 1,100 _10,764 P16,624 Diaz P – – _7,176 P7,176 Total P 4,760 1,100 _17,940 P23,800 Partnership Operations 31 Computations: a Net profit before bonus Net profit after bonus (P23,800  125%) Bonus b Peso Months P 82,500 64,500 78,000 P225,000 Castro Diaz P23,800 _19,040 P 4,760 Average capital of Castro [(P26,000 + P32,000)  2] Average of Diaz [(P16,500 + P18,500)  2] Castro's excess Multiply by Interest P29,000 _18,000 P11,000 _10% P 1,100 : : P14,280 9,520 P23,800 (P3,000/P5,000) x P23,800 (P2,000/P5,000) x P23,800 = = Problem – a Average Capital: Robin: Date Balances Months Peso Jan Feb 28 Apr 30 Sept 30 P135,000 95,000 175,000 195,000 Unchanged 2 12 Months P270,000 190,000 875,000 585,000 P1,920,000 Months Unchanged 3 2 12 Peso Months P420,000 600,000 300,000 440,000 400,000 P2,160,000 Ave Capital (P1,920,000  12) = P160,000 Hood: Date Balances Jan Mar 31 June 30 Aug 31 Oct 31 P140,000 200,000 150,000 220,000 200,000 Ave Capital (P2,160,000  12) = P180,000 Profit Distribution: Robin : P160,000  P340,000 x P510,000 = Hood : P180,000  P340,000 x P510,000 = P240,000 _270,000 P510,000 32 Chapter b Interest on ave capital Salaries Bonus (P510,000 – 30,600 – 160,000) x 25%) Balance, equally Totals c Interest: Robin (P195,000 – P135,000) 10% Hood (P200,000 – P140,000) 10% Balance, equally Totals d Robin P 14,400 60,000 78,850 _119,775 P274,025 Hood P 16,200 100,000 – _119,775 P235,975 Total P 30,600 160,000 79,850 _239,550 P510,000 Robin Hood Totals P 6,000 249,000 255,000 P 12,000 498,000 510,000 Hood P120,000 Total P200,000 62,000 _248,000 P510,000 P 6,000 249,000 255,000 Robin P 80,000 62,000 _124,000 P266,000 Salaries Bonus (see computations below) Balance, equally _124,000 Totals P244,000 Bonus Computations: Net income before salaries and bonus P510,000 Less Salaries Net income before bonus Net income after bonus (P310,000  125%) Bonus 200,000 310,000 _248,000 P 62,000 Problem – a De Villa P 30,000 De Vera – P 20,000 31,200 9,818 44,182 P105,200 Salaries Commission (2% x P1,000,000) Interest of 8% on average capital 32,800 Bonus (see computations below) 9,818 Balance, equally 44,182 Total P116,800 Bonus Computations: Income before salary, commissions, interest & bonus Salary and commission (P30,000 + P20,000) Interest Income before bonus Income after bonus (P108,000  110%) Bonus b Income Summary De Villa, capital De Vera, capital Total P 30,000 20,000 64,000 19,636 88,364 P222,000 P222,000 ( 50,000) ( 64,000) 108,000 _98,182 P 9,818 P 222,000 116,800 105,200 Partnership Operations 33 Problem – a Salaries Bonus (see computation below) Interest (see computation below) Balance, 3:3:4 Total East P15,000 3,760 2,800 3,180 P24,740 North P20,000 West P18,000 4,000 3,180 P27,180 4,800 4,240 P27,040 Bonus computations: Net income before bonus Net income after bonus (P78,960  105%) Bonus Interest computations: East (10% x P28,000) North (10% x P40,000) West (10% x P48,000) Total b Interest (see computations below) East P 3,133 North P 3,633 West P 5,200 Total P53,000 3,760 11,600 _10,600 P78,960 P78,960 _75,200 P 3,760 P 2,800 4,000 4,800 P11,600 Total P11,966 Salaries Bonus (see computations below) Balance, equally Total Interest computations: Average capitals: East: Date 1/1 5/1 9/1 Balances P30,000 36,000 28,000 24,000 ( 6,056) P 21,077 21,000 4,280 ( 6,055) P 22,858 25,000 ( 6,055) P 24,145 Months Unchanged 4 12 70,000 4,280 ( 18,166) P 68,080 Pesos Months P120,000 144,000 _112,000 P376,000 Average capital (P376,000  12) P 31,333 North: Pesos Months P80,000 124,000 72,000 _160,000 P436,000 Date 1/1 3/1 7/1 9/1 Balances P40,000 31,000 36,000 40,000 Months Unchanged 4 12 Average capital (P436,000  12) 34 P 36,333 Chapter West: Date 1/1 4/1 6/1 8/1 Balances P50,000 57,000 60,000 48,000 Months Unchanged 2 12 Pesos Months P150,000 114,000 120,000 _240,000 P624,000 Ave capital (P624,000  12) P 52,000 Interest Computations: East (10% x P31,333) North (10% x P36,333) West (10% x P52,000) Total P 3,133 3,633 5,200 P 11,966 Bonus Computations: Net income Less Salary Net income before bonus Net income after bonus (P47,080  110%) P 68,000 _21,000 47,080 _42,800 Bonus to North * To Total c East West 8,990 – 5,000 8,237.50 P22,227.50 Total P 8,990 39,000 12,000 _32,950 P92,940 Bonus Computations: Net income before salaries & bonus Less Salaries (P21,000 + P18,000) Net income before bonus Net income after bonus (P53,940  120%) Bonus to West P92,940 _39,000 P53,940 _44,950 P 8,990 Bonus (see comp below) Salaries Interest on beginning capital Remainder, 8:7:5 Total North P 4,280 P P21,000 P 18,000 3,000 4,000 _13,180 _11,532.50 P37,180 P33,532.50 Problem – a Schedule of Income Distribution: Salaries Interest (see computation on p 30) Balance, equally Total Maria P12,000 7,200 3,133 P22,333 Clara P10,000 9,600 3,133 P22,733 Rita P 8,000 13,800 3,134 P24,934 Partnership Operations 35 Interest on Average Capital: Maria: P80,000 x 8% x months P100,000 x 5% x months Clara: P120,000 x 8% Rita: P180,000 x 8% x Mos P150,000 x 8% x Mos Total b Total P30,000 30,600 9,410 P70,000 P 3,200 4,000 P 7,200 9,600 P10,800 3,000 _13,800 P30,600 Statement of Partners Capital: Balances, Jan Additional Investment Capital Withdrawal Net Income Drawings Balance, Dec 31 Maria P 80,000 20,000 – 22,333 ( 10,000) P112,333 Clara P120,000 – – 22,733 ( 10,000) P132,733 Rita P180,000 – ( 30,000) 24,934 ( 10,000) P164,934 Total P380,000 20,000 ( 30,000) 70,000 ( 30,000) P410,000 Problem – Allocation of net loss for 2008: Salary to Alvin Interests on average capital: Alvin (P120,000 x 10%) Benny (P200,000 x 10%) Celia (P220,000 x 10%) Balance, 30:30:40 Total Alvin P 20,000 Benny Celia 12,000 20,000 (29,400) P 2,600 _(29,400) P( 9,400) 22,000 _(39,200) P(17,200) 54,000 _(98,000) P(24,000) Benny P180,000 60,000 240,000 (9,400) 230,600 _ P230,600 Celia P220,000 40,000 _(20,000) 240,000 _(17,200) 222,800 _ P222,800 Total P520,000 100,000 _(20,000) 600,000 _(24,000) 576,000 _(16,000) P560,000 Statement of Partnership Capital Year Ended December 31, 2008 Capitals, January 1, 2008 Additional investments Capital withdrawals Balances Net loss (see above) Balances Drawings Capitals, December 31, 2008 Alvin P120,000 _ 120,000 2,600 122,600 _(16,000) P106,600 36 Total P20,000 Chapter Correcting entry: Celia capital 2,400 Alvin capital 2,200 Benny capital 200 To correct capital accounts for error in loss allocation computed as follows: Alvin Benny Celia Correct loss allocation P2,600 P(9,400) P(17,200) Actual loss allocation (400) 9,600 14,800 Adjustment P2,200 P 200 P ( 2,400) Problem – Capital balances, 1/2/06 Additional investment, 2006 Balances Net income (Loss) - 2006, equally Withdrawals, 2006 Capital balances, 12/31/06 Dino P45,000 _15,000 60,000 (1,800) (17,000) 41,200 Nelson P45,000 _15,000 60,000 ( 1,800) ( 7,000) 51,200 Oscar P45,000 6,000 51,000 ( 1,800) ( 3,200) 46,000 Total P135,000 36,000 171,000 ( 5,400) ( 27,200) 138,400 Additional investment, 2007 _– Balances 41,200 Net income - 2007, 40: 30: 30 10,800 Withdrawals, 2007 (17,000) Capital Balances, 12/31/07 35,000 Additional investment, 2008 – Balances 35,000 Net income, 2008 (schedule 1) 56,365 Withdrawals, 2008 (19,000) Capital balances, 12/31/08 P72,365 _– 51,200 8,100 ( 7,000) 52,300 – 52,300 42,272 ( 9,000) P86,572 6,000 52,000 8,100 ( 3,200) 56,900 _6,000 62,900 20,363 ( 3,200) P80,063 _6,000 144,400 27,000 ( 27,200) 144,200 _6,000 150,200 120,000 ( 31,200) P239,000 Nelson P24,000 10,909 3,600 4,763 P43,272 Oscar P12,000 – 3,600 4,763 P20,363 Total P84,000 10,909 10,800 14,291 P120,000 Schedule 1: Annual salaries Bonus (see computations below) Interest Balance, equally Totals Dino P48,000 – 3,600 _* 4,765 P56,365 Bonus computations: Net income before bonus Net income after bonus (P120,000  110%) _109,091 Bonus to Nelson P120,000 P 10,909 * To Total Partnership Operations 37 Problem – Red, White & Blue Partnership Statement of Partners' Capital For Year Ended December 31, 2008 Balances, beginning of year Add: 20% of fees billed to personal clients Green's share of fees (Exhibit A) Remaining net income (Exhibit A) Subtotals Less: Withdrawals Uncollectible accounts identified with clients of each partner Excess rent charged to Blue Total deductions Balances, end of year Red 40,200 8,800 White 20,200 4,800 Blue 40,600 4,400 _22,800 _71,800 10,400 _22,800 _47,800 8,800 _11,400 _56,400 11,600 2,400 900 P12,800 P59,000 P 9,700 P38,100 1,800 P13,400 P43,000 Green 3,200 3,200 5,000 Total P101,000 18,000 3,200 _57,000 179,200 35,800 P 5,000 P (1,800) 3,300 1,800 P 40,900 P138,300 Red, White & Blue Partnership Exhibit A – Computation and Division of Net income For Year Ended December 31, 2008 Total revenue from fees Expenses, excluding depreciation and doubtful P120,000 accounts expense Less: Excess rent charged to N ($300 x 6) Subtotal Add: Depreciation, computed as follows: $26,000 x 0.10 $10,000 x 0.10 x 1/2 Total expenses, excluding doubtful accounts expense Add: Doubtful accounts expense ($3,000 x 0.60) Total expenses Net income for year ended Dec 31, Year P38,700 1,800 36,900 2,600 500 P40,000 1,800 41,800 Division of net income: Fees billed to personal clients: Red P44,000 x 20% White P24,000 x 2% Blue, P22,000 x 20% Green's share of fees: Gross fees from new clients after April 1, Year Less: Allocated expenses ($40,000 x $24,000/ $120,000) Net income from new clients Green's share (P16,000 x 20%) Total divided pursuant to special agreement Balance, divided in income-sharing ratio as follows: To Red, 40% To White, 40% To Blue, 20% Total 38 P 8,800 48,000 4,400 P 78,200 P18,000 24,000 8,000 P16,000 P 3,200 21,200 P 57,000 P22,800 22,800 _11,400 P57,000 Chapter Problem – Allan, Eman and Gino Partnership Statement of Profit Distribution Year Ended December 31, 2008 Allan Eman Gino Total Interest Commission (P16,120 – P5,000) x 10% Balance, equally P 4,000 – 5,926 P 750 1,112 _5,925 P 250 1,112 _5,925 P 5,000 2,224 _17,776 Total Adjustments (50% of P25,000 to Allan) P 9,926 2,574 P7,787 (1,287) P7,287 (1,287) P25,000 _ Total P12,500 P6,500 P6,000 P25,000 Problem – 10 Gary, Sonny, and Letty Partnership Statement of Partners' Capital Accounts Year Ended December 31, 2008 Gary Sonny Letty Total Capital balances, 1/1/08 Additional investments P210,000 _9,100 P180,000 _ P 90,000 _ P480,000 9,100 Total Profit distribution: Salaries Interest Bonus to Gary and Sonny (Schedule 1) Balance, equally _219,100 _180,000 _90,000 489,100 10,640 10,800 35,840 58,320 13,680 25,920 – (9,720) 11,520 21,600 – _(9,720) _(9,720)(29,160) Total 29,880 _23,400 _11,720 Total Drawings _(48,000) 248,980 _(21,000) 203,400 101,720 (18,000) (9,000) Capital balances, 12/31/08 P227,980 P185,400 P 92,720 _65,000 554,100 P506,100 Schedule 1: Computation of the bonus Net profit before interest, salaries and bonus Less:Salaries Interest P 65,000 P35,840 _58,320 Net profit (loss) before bonus 94,160 P(29,160) Therefore no bonus is to be given to Gary and Sonny Partnership Operations 39 Problem – 11 a Entries to record the formation of the partnership and the events that occurred during 2008: Cash Inventory Land Equipment Mortgage payable 1,100,000 800,000 1,300,000 1,000,000 500,000 Installment note payable Kobe, capital (P600,000 + P800,000 + P1,000,000 – P200,000) Lebron, capital (P500,000 + P1,300,000 - P500,000) (1) (2) Inventory Cash Accounts payable Mortgage payable Interest expense 200,000 2,200,000 1,300,000 300,000 240,000 60,000 50,000 20,000 Cash (3) (4) (5) (6) (7) (8) 70,000 Installment note payable Interest expense Cash 35,000 20,000 55,000 Accounts receivable Cash Sales 210,000 1,340,000 1,550,000 Selling and general expenses Cash Accrued expenses payable 340,000 Depreciation expense Accumulated depreciation 60,000 278,000 62,000 60,000 Kobe, drawing Lebron, drawing Cash 104,000 104,000 208,000 Sales 1,550,000 Income summary (9) 1,550,000 Cost of goods sold Inventory P900,000 = P800,000 beginning inventory + 300,000 purchases - 200,000 ending inventory 900,000 900,000 40 Chapter Income summary Cost of good sold Selling and general expenses Depreciation expense Interest expense 1,340,000 900,000 340,000 60,000 40,000 Income summary Kobe, capital Lebron, capital 210,000 Kobe, capital Lebron, capital Kobe, drawing Lebron, drawing 104,000 104,000 105,000 105,000 104,000 104,000 Schedule to allocate partnership net income for 2008: Profit percentage Kobe 60% Lebron 40% Total 100% Beginning capital balance P2,200,000 P3,500,000 Net income (P1,550,000 revenue - P 1,340,000 expenses) Interest on beginning capital balances (3%) 66,000 (105,000) P1,300,000 210,000 39,000 P105,000 Salaries (240,000) P(135,000) Residual deficit (135,000) Total b 120,000 120,000 (81,000) (54,000) P105,000 P105,000 -0- Kobe-Lebron Partnership Income Statement For the Year Ended December 31, 2008 Sales P1,550,000 Less: Cost of goods sold: Inventory, January Purchases Goods available for sale Less: Inventory, December 31 (900,000) Gross profit Less: Selling and general expenses Depreciation expenses Operating income Nonoperating expense- interest Net income P800,000 300,000 P1,100,000 (200,000) P650,000 340,000 60,000 400,000 P250,000 (40,000) P210,000 Partnership Operations c 41 Kobe-Lebron Partnership Balance Sheet At December 31, 2008 Assets Cash Accounts receivable Inventory Land Equipment (net) Total assets P1,589,000 210,000 200,000 1,300,000 940,000 P4,239,000 Liabilities and Capital Liabilities: Accounts payable Accrued expenses payable Installment note payable Mortgage payable Total liabilities Capital: Kobe, capital Lebron, capital Total capital Total liabilities and capital P60,000 62,000 165,000 450,000 P737,000 P2,201,000 1,301,000 3,502,000 P4239,000 ... Net income Fees Earned Expenses Net Income P90,000 _48,000 P42,000 5,600 ( 600) P 19,000 ,000 22 Chapter 2-12: c Interest LL P 2,000 MM P 1,250 NN Total P 750 8,500 – – 9,500 5,700 3,800 _– ... Interest 54,000 Bonus (P360,000-P54,000)X.25 76,500 Remainder, 30:70 65,500 Total P360,000 24 Chapter Tiger P 64,000 Woods Total P100,000 24,000 30,000 76,500 – 19,650 45,850 P184,150 P175,850... Drawings Capital balance, Dec 31 P 374,000 _22,000 P 396,000 1,063,400 ( 750,000) P 709,400 (2) 26 Chapter 2-26: a Ray P150,000 Sam P180,000 _ 60,000 150,000 240,000 15,000 20,000 51,000 34,000