Advanced Accounting Guerrero Peralta Volume 1 Solution Manual PDF

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Partnership – Basic Considerations and Formation 1CHAPTER 1MULTIPLE CHOICE ANSWERS AND SOLUTIONS1-1: a Jose's capital should be credited for the market value of the computer contributed by him. 1-2: b (40,000 + 80,000) ÷ 2/3 = 180,000 x 1/3 = 60,.1-3: a Cash P100, Land 300, Mortgage payable ( 50,000...

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Partnership – Basic Considerations and Formation

1

CHAPTER 1 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 1-1:

a

1-2:

Jose's capital should be credited for the market value of the computer contributed by him. b (40,000 + 80,000) ÷ 2/3 = 180,000 x 1/3 = 60,000.

1-3:

a

1-4:

Cash Land Mortgage payable

P100,000 300,000 ( 50,000)

Net assets (Julio, capital)

P350,000

Total Capital (P300,000/60%) Perla's interest

P500,000 ______40%

Perla's capital Less:Non-cash asset contributed at market value Land P 70,000 Building 90,000 Mortgage Payable ( 40,000)

P200,000

Cash contribution

P 80,000

b

_120,000

1-5:

d - Zero, because under the bonus method, a transfer of capital is only required.

1-6:

b

1-7:

Reyes

Santos

Cash Inventory Building Equipment Mortgage payable

P200,000 – – 150,000 ________

P300,000 150,000 400,000 ( 100,000)

Net asset (capital)

P350,000

P750,000

AA

BB

CC

Cash Property at Market Value Mortgage payable Equipment at Market Value

P 50,000

_______

P 80,000 ( 35,000) _______

P55,000

Capital

P 50,000

P 45,000

P55,000

c

2

1-8:

1-9:

Chapter 1

a PP

RR

Cash Computer at Market Value

P 50,000 __25,000

P 80,000 _______

P 25,000 __60,000

Capital

P 75,000

P 80,000

P 85,000

Maria

Nora

c Cash Merchandise inventory Computer equipment Liability Furniture and Fixtures

P 30,000

Total contribution

1-10:

1-12:

200,000

P 90,000 160,000 ( 60,000) ________

P230,000

P190,000

Total agreed capital (P230,000/40%) Nora's interest

P575,000 ______60%

Nora's agreed capital Less: investment

P345,000 190,000

Cash to be invested

P155,000

d Roy

1-11:

SS

Sam

Tim

Cash Office Equipment Note payable

P140,000 – ________

– P220,000 _( 60,000)

– – ______

Net asset invested

P140,000

P160,000

P

Agreed capitals, equally (P300,000/3) =

P100,000

Lara

Mitra

Cash Computer equipment Note payable

P130,000 – ________

P200,000 50,000 _( 10,000)

Net asset invested

P130,000

P240,000

Goodwill (P240,000 - P130,000) =

P110,000

a

a Perez

Reyes

Cash Office Equipment Merchandise Furniture Notes payable

P 50,000 30,000 – _______

P 70,000 – 110,000 100,000 ( 50,000)

Net asset invested

P 80,000

P230,000

–

Partnership – Basic Considerations and Formation

3

1-12: Continued Bonus Method: Total capital (net asset invested)

P310,000

Goodwill Method: Net assets invested Add: Goodwill (P230,000-P80,000)

P310,000 _150,000

Net capital 1-13:

1-14:

b Required capital of each partner (P300,000/2) Contributed capital of Ruiz: Total assets P105,000 Less Liabilities __15,000

__90,000

Cash to be contributed by Ruiz

P 60,000

P150,000

d Total assets: Cash Machinery Building Less: Liabilities (Mortgage payable)

1-15:

P460,000

P 70,000 75,000 _225,000

P370,000 __90,000

Net assets (equal to Ferrer's capital account) Divide by Ferrer's P & L share percentage

P280,000 ____70%

Total partnership capital

P400,000

Required capital of Cruz (P400,000 X 30%) Less Assets already contributed: Cash P 30,000 Machinery and equipment 25,000 Furniture and fixtures __10,000

P120,000

Cash to be invested by Cruz

P 55,000

__65,000

d Adjusted assets of C Borja Cash P 2,500 Accounts Receivable (P10,000-P500) 9,500 Merchandise inventory (P15,000-P3,000) 12,000 Fixtures __20,000 Asset contributed by D. Arce: Cash P 20,000 Merchandise __10,000

__30,000

Total assets of the partnership

P 74,000

P 44,000

4

1-16:

Chapter 1

a Cash to be invested by Mendez: Adjusted capital of Lopez (2/3) Unadjusted capital Adjustments: Prepaid expenses Accrued expenses Allowance for bad debts (5% X P100,000)

P158,400 17,500 ( 5,000) _( 5,000)

Adjusted capital

P165,900

Total partnership capital (P165,900/2/3) Multiply by Mendez's interest

P248,850 ⅓

Mendez's capital Less Merchandise contributed

P 82,950 __50,000

Cash to be invested by Mendez

P 32,950

Total Capital: Adjusted capital of Lopez Contributed capital of Mendez

P165,900 __82,950

Total capital 1-17:

P248,850

d Moran, capital (40%) Cash Furniture and Fixtures Divide by Moran's P & L share percentage

P 15,000 _100,000

Total partnership capital Multiply by Nakar's P & L share percentage Required capital of credit of Nakar: Contributed capital of Nakar: Merchandise inventory Land Building Total assets Less Liabilities Required cash investment by Nakar 1-18:

P115,000 ______40% P287,500 ______60% P172,500

P 45,000 15,000 __65,000 P125,000 __30,000

P 95,000 P 77,500

c Garcia's adjusted capital (see schedule 1) Divide by Garcia's P & L share percentage

P40,500 ______40%

Total partnership capital Flores' P & L share percentage

P101,250 ______60%

Flores' capital credit Flores' contributed capital (see schedule 2)

P 60,750 __43,500

Additional cash to be invested by Flores

P 17,250

Partnership – Basic Considerations and Formation

5

1-18: Continued Schedule 1: Garcia, capital: Unadjusted balance Adjustments: Accumulated depreciation Allowance for doubtful account

P 49,500 ( 4,500) ( 4,500)

Adjusted balance

P 40,500

Schedule 2: Flores capital: Unadjusted balance Adjustments: Accumulated depreciation Allowance for doubtful accounts

P 57,000 ( 1,500) ( 12,000)

Adjusted balance 1-19:

P 43,500

d Ortiz

Ponce

Total

( 60%) ( 40%) P133,000 P108,000 P241,000

Unadjusted capital balances Adjustments: Allowance for bad debts Inventories Accrued expenses

( 2,700) 3,000 _( 2,400)

Adjusted capital balances

P130,900

( 1,800) 2,000 ( 1,600) P106,000

( 4,500) 5,000 ( 4,000) P237,500

Total capital before the formation of the new partnership (see above) P237,500 Divide by the total percentage share of Ortiz and Ponce (50% + 30%) ______80%

1-20:

Total capital of the partnership before the admission of Roxas Multiply by Roxas' interest

P296,875 ______20%

Cash to be invested by Roxas

P 59,375

d Merchandise to be invested by Gomez: Total partnership capital (P180,000/60%)

P300,000

Gomez's capital (P300,000 X 40%) Less Cash investment

P120,000 __30,000

Merchandise to be invested by Gomez

P 90,000

Cash to be invested by Jocson: Adjusted capital of Jocson: Total assets (at agreed valuations) Less Accounts payable Required capital of Jocson Cash to be invested by Jocson

P180,000 __48,000

P132,000 _180,000 P 48,000

6

Chapter 1

1-21:

b

1-22:

1-23:

1-24:

1-25:

Unadjusted Ell, capital (P75,000 – P5,000) Allowance for doubtful accounts Accounts payable

P 70,000 ( 1,000) ( 4,000)

Adjusted Ell, capital

P 65,000

Total partnership capital (P113,640/1/3) Less Divino's capital

P340,920 _113,640

Cortez's capital after adjustments Adjustments made: Allowance for doubtful account (2% X P96,000) Merchandise inventory Prepaid expenses Accrued expenses

P227,280

Cortez's capital before admission of Divino

P211,200

c

1,920 ( 16,000) ( 5,200) ___3,200

a Total assets at fair value Liabilities Capital balance of Flora

P4,625,000 (1,125,000) P3,500,000

c Total capital of the partnership (P3,500,000 ÷ 70%) Eden agreed profit & loss ratio Eden agreed capital Eden contributed capital at fair value Allocated cash to be invested by Eden

P5,000,000 30% 1,500,000 812,000 P 688,000

c __Rey __Sam_ __Tim __Total_ Contributed capital (assets-liabilities)P471,000 P291,000 P195,000 P957,000 Agreed capital (profit and loss ratio) 382,800 382,800 191,400 957,000 Capital transfer (Bonus) P 88,200 P(91,800) P 3,600 -

1-26:

d Total agreed capital (P90,000 ÷ 40%) Contributed capital of Candy (P126,000+P36,000-P12,000) Total agreed capital (P90,000 ÷ 40%) Candy, agreed capital interest Agreed capital of Candy Contributed capital of Candy Withdrawal of Candy

P225,000 150,000 225,000 60% 135,000 150,000 P 15,000

Partnership – Basic Considerations and Formation

1-27:

1-28:

a Total agreed capital (210,000 ÷ 70%) Nora’s interest Agreed capital of Nora Cash invested Merchandise to be invested by Nora

P300,000 30% P 90,000 42,000 P 48,000

a Contributed capital of May (P194,000 - P56,000) Agreed capital of May (P300,000 x 70%) Cash to be invested by May

P138,000 210,000 P 72,000

1-29:

d

1-30:

b

Zero, because the bonus method involves only a transfer of capital.

Cash Accounts receivable- Net Merchandise inventory Computer equipment Furniture and fixtures Total assets at fair value Accounts payable Net assets invested Agreed capital Goodwill (withdrawal) 1-31:

Noy 10,000 92,000 216,000 24,000 18,000 360,000 (108,000) 252,000 250,000 P (2,000) P

Bi P 14,000 92,000 150,000 14,000 ---270,000 (72,000) 198,000 200,000 P 2,000

c Cash Office equipment Merchandise inventory Notes payable Contributed capital Agreed capital Bonus to Roxas

1-32:

7

Villar P 2,205,000 630,000 ( 210,000) 2,625,000 2,520,000 P( 105,000)

b Total capital before adjustments (P210,750 + P103,000) Allowance for doubtful accounts Accumulated depreciation (P1,000 – P500) Obsolete inventory Total assets of the partnership

Roxas P

1,575,000 1,575,000 1,680,000 P 105,000 P313,750 ( 10,000) 500 ( 3,500) P300,750

8

1-33:

Chapter 1

b Cash Accounts receivable Merchandise inventory Equipment Accounts payable Notes payable Contributed capital Loss on sale of equipment Net assets Additional investment by Edu Agreed capital

1-34:

1-36:

Edu P136,800 129,600 216,000 (96,000) 386,400 1,800 388,200 20,400 P408,600

Garnett P2,443,364 ( 80,000) ( 108,000) 2,255,364 2,255,364 P -

Bryant P3,097,528 200,000 ( 140,000) 3,157,528 1,503,576* P 1,653,952

a Unadjusted capital Accumulated depreciation Accounts receivable written off Adjusted capital contributed Agreed capital Capital withdrawal

1-35:

Gibo P 19,200 163,200 240,000 60,000 (60,000) (12,000) 410,400 (1,800) 408,600 P408,600

* Total agreed capital (P2,255,364 / 60%) Bryant’s interest Agreed capital of Bryant

P3,758,940 40% P1,503,576

a Total capital Total liabilities Total assets

P3,758,940 4,299,396 P8,058,336

a Unadjusted capital Undervaluation of inventory Allowance for doubtful accounts Accrued expenses Contributed capital Agreed capital of Gordon (P285,000/75%) x 25% Capital withdrawal by Gordon

Gordon P220,000 11,000 (2,750) 228,250 133,250 P 95,000

Fernando P309,375 ( 4,125) (20,250) 285,000 285,000 P -

Partnership – Basic Considerations and Formation

9

SOLUTIONS TO PROBLEMS Problem 1 – 1 1.

a. Books of Pedro Castro will be retained by the partnership To adjust the assets and liabilities of Pedro Castro. 1. Pedro Castro, Capital ............................................................. Merchandise Inventory ......................................................

600

2. Pedro Castro, Capital ............................................................. Allowance for Bad Debts ..................................................

200

3. Accrued Interest Receivable .................................................. Pedro Castro, Capital.........................................................

35

Computation: P1,000 x 6% x 3/12 = P2,000 x 6% x 2/12 =

600

200

35

P15 _20

Total ......................... ...... P35 4. Pedro Castro, Capital ............................................................. Accrued Interest Payable ................................................... (P4,000 x 5% x 6/12 = P100)

100

5. Pedro Castro, Capital ............................................................. Accumulated Depreciation – Furniture and Fixtures ........

800

6. Office Supplies ...................................................................... Pedro Castro, Capital.........................................................

400

100

800

400

To record the investment of Jose Bunag. Cash.. ........................................................................................... 15,067.50 Jose Bunag, Capital ............................................................... Computation: Pedro Castro, Capital (1) P600 P31,400 (2) 200 35 (3) (4) 100 400 (6) (5) ___800 P1,700 P31,835 P30,135 Jose Bunag, Capital : 1/2 x P30,135 = P15,067.50

15,067.50

10

b.

Chapter 1

A new set of books will be used Books of Pedro Castro To adjust the assets and liabilities. See Requirement (a). To close the books. Notes Payable ............................................................................... Accounts Payable ......................................................................... Accrued Interest Payable .............................................................. Allowance for Bad Debts ............................................................. Accumulated Depreciation – Furniture and Fixtures ................... Pedro Castro, Capital ................................................................... Cash ....................................................................................... Notes Receivable ................................................................... Accounts Receivable ............................................................. Accrued Interest Receivable .................................................. Merchandise Inventory .......................................................... Office Supplies ...................................................................... Furniture and Fixtures............................................................

4,000 10,000 100 1,200 1,400 30,135 6,000 3,000 24,000 35 7,400 400 6,000

New Partnership Books To record the investment of Pedro Castro. Cash ........................................................................................... Notes Receivable .......................................................................... Accounts Receivable .................................................................... Accrued Interest Receivable......................................................... Merchandise Inventory................................................................. Office Supplies ............................................................................. Furniture and Fixtures .................................................................. Notes Payable ........................................................................ Accounts Payable................................................................... Accrued Interest Payable ....................................................... Allowance for Bad Debts....................................................... Accumulated Depreciation – Furniture and Fixtures............. Pedro Castro, Capital .............................................................

6,000 3,000 24,000 35 7,400 400 6,000 4,000 10,000 100 1,200 1,400 30,135

To record the investment of Jose Bunag. Cash .. ........................................................................................... 15,067.50 Jose Bunag, Capital ...............................................................

15,067.50

Partnership – Basic Considerations and Formation

2.

11

Castro and Bunag Partnership Statement of Financial Position October 1, 2011 Assets

Cash ..... ...... ... ........................................................................................... Notes receivable .......................................................................................... Accounts receivable .................................................................................... P 24,000 Less Allowance for bad debts...................................................................... ___1,200 Accrued interest receivable ......................................................................... Merchandise inventory ................................................................................ Office supplies ........................................................................................... Furniture and fixtures .................................................................................. 6,000 Less Accumulated depreciation ................................................................... ___1,400 Total Assets ........................................................................................

P21,067.50 3,000.00 22,800.00 35.00 7,400.00 400.00 __4,600.00 P59,302.50

Liabilities and Capital Notes payable ........................................................................................... Accounts payable ........................................................................................ Accrued interest payable ............................................................................. Pedro Castro, Capital................................................................................... Jose Bunag, Capital ..................................................................................... Total Liabilities and Capital ..............................