Lupisan-Baysa 2008 Edition Answer Key and Explanation PDF

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CHAPTER 1 Partnership Formation and Operations EXERCISES Exercise 1 1 Campos, Capital Allowance for Uncollectible Accounts Goodwill Campos, Capital Accumulated Depreciation Campos, Capital Furniture and Fixtures 1 6,500 Campos, Capital Cash Cash (P83,500 x Tomas, Capital To record contributions of T...

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CHAPTER 1 Partnership Formation and Operations EXERCISES Exercise 1 –1 1.a

Campos, Capital Allowance for Uncollectible Accounts

14,000

Goodwill Campos, Capital

30,000

14,000

30,000

Accumulated Depreciation Campos, Capital Furniture and Fixtures

1.b

6,000 6,500 12,500

Campos, Capital Cash

40,000

Cash (P83,500 x 1/2) Tomas, Capital To record contributions of Tomas

41,750

40,000

41,750

Req. 2. Campos and Tomas Partnership Statement of financial Position July 1, 2008 Assets Cash Accounts Rec’l Less Allowance for Uncol Accts. Inventory Furniture Goodwill TOTAL ASSETS

Liabilities & Owners’ Equity P41,750 P60,000 24,000

Accounts Payable Campos, Capital Tomas, Capital

P90,000 83,500 41,750

36,000 100,000 7,500 30,000 P215.250

________ TOTAL LIABILITIES & OWNERS’ EQUITY

P215,250

Exercise 1-2 1.

Cash Accounts Receivable Merchandise Inventory Equipment Allowance for Uncollectible Accounts Accounts Payable Notes Payable Bernal, Capital

90,000 36,000 54,000 25,000 2,000 21,000 18,000 164,000

AA 1 - Chapter 1 (2008 edition) page 2

2.

Cash Camino, Capital

100,000 100,000

Exercise 1 –3 1.

2.

Cash Land Building Legaspi, Capital Sabino, Capital

800,000 540,000 900,000

Cash Land Building Legaspi, Capital Sabino, Capital

800,000 540,000 900,000

800,000 1,440,000

1,120,000 1,120,000

Exercise 1 - 4 1.

2.

Income Summary Santos, Capital (P238,000 x 260/425) Abad, Capital (P238,000 x 165/425)

238,000

Income Summary Santos, Capital (P238,000 x 3,125/5,000) Abad, Capital (P238,000 x 1,875/5,000)

238,000

Santos: Jan. 1 – Mar. 31 Apr. 1 – Apr. 30 May 1 – July 31 Aug. 1 – Dec. 31

Abad: Jan. 1 – May 31 June 1 – Aug. 31 Sept.1 – Dec. 31

3.

P260,000 x 3 290,000 x 1 360,000 x 3 320,000 x 5

P165,000 x 5 215,000 x 3 195,000 x 4

145,600 92,400

148,750 89,250

P780,000 290,000 1,080,000 1,600,000 P3,750,000/12

P825,000 645,000 780,000 P2,250,000/12

Income Summary Santos, Capital Abad, Capital Interest on ave. capital Salaries to partners Balance - equally Net Profit

P312,500

P187,500 238,000 147,750 90,250

Santos P 18,750 150,000 ( 21,000) P 147,750

Abad 11,250 100,000 ( 21,000) P 90,250 P

Total P 30,000 250,000 (42,000) P238 000

AA 1 - Chapter 1 (2008 edition) page 3

4.

Income Summary Santos, Capital Abad, Capital

238,000 164,840 73,160 Santos

Bonus to Santos 25% (P238,000 - B) Interest of 6% on excess average investment 6% (P312,500 - P187,500) Balance - 3:2 Net Profit

5.

Abad

P 47,600

7,500 109,740 P 164,840

Total P 47,600

73,160 P73,160

Income Summary Santos, Capital (P238,000 x 15/25) Abad, Capital (P238,000 x 10/25)

7,500 182,900 P238,000

238,000 142,800 95,200

Exercise 1 – 5 Sanchez and Gomez Schedule of Distribution of Net Profit December 31, 2008 Sanchez Gomez 6% interest on average capital P 6,246 P 14.440 10% bonus on net profit after interest 8,331 Salaries 20,000 30,000 Balance – 70%, 30% 17,488 7,495 Net Profit P52,065 P51,935 Computation of average capital: Sanchez, Capital Jan. 1 P81,600 x 3 P 244,800 Apr. 1 P111,600 x 9 1,004,400 P1,249,200 Ave. capital (P1,249,200/12)

P104,100

Jan. 1 Aug. 1

Total P 20,686 8,331 50,000 24,983 P104,000

Gomez, Capital P224,000 x 7 P1,568,000 P264,000 x 5 1,320,000 P2,888,000

Ave. capital (P2,888,000/12)

P240,667

Computation of bonus: P160,000 x 65%= P104,000– P20,686 x 10% = P8,331 2. Sanchez and Gomez Statement of Partners’ Capital For the Year Ended December 31, 2008

Capital, January 1 Additional investment Net profit Drawings Capital, December 31

Sanchez P 81,600 30,000 52,065 ( 41,600) P122,065

Gomez P224,000 40,000 51,935 ( 41,600) P274,335

Total P305,600 70,000 104,000 ( 83,200) P396,400

AA 1 - Chapter 1 (2008 edition) page 4

3.

Sanchez P 6,246 8,331 34,083 P48,660

Gomez P14.440 40,000 P 55,340

Total P 20,686 8,331 74,983 P104,000

8% interest on beg capital Salaries Balance 3:2 Net Profit

Mercado P 48,000 225,000 ( 38,700) P234,300

Puzon P 54.000 112,500 ( 25,800) P140,700

Total P102,000 337,500 ( 64,500) P375,000

8% interest on beg capital Balance – Salary ratio Net Profit

Mercado P 48,000 182,000 P230,000

Puzon P 54.000 91,000 P145,000

Total P102,000 273,000 P375,000

6% interest on average capital 10% bonus on net profit after interest Balance – Salary ratio Net Profit Exercise 1-6 1.

2.

3.

Puzon P375,000 x 2/3 = P150,000; however, minimum guaranteed amount is P160,000 Mercado P375,000 – P160,000 = P215,000

Exercise 1 – 7 Net profit after salary, interest and bonus Interest P200,000 x 10% Salary P8,000 x 12 Net profit before interest and salary Bonus rate Amount of bonus to Lirio Exercise 1 – 8 1.

B = .25 x P500,000 = P125,000

2.

B = .25 x P500,000 = P100,000 1.25

3.

B T B B

= .25 (P500,000 - Tax) = .35 x P500,000 = P175,000 = .25 (P500,000 – P175,000) = P 81,250

4.

B B B B B

= .25 (P500,000 - B - Tax) = .25 (P50,0000 - B - P175,000) = P81,250 - .25B = P81,250/1.25 = P65,000

P374,000 P20,000 96,000

116,000 P490,000 x 25% P122,500

AA 1 - Chapter 1 (2008 edition) page 5

Exercise 1 - 9 1. Salary Bonus Interest Balance Total

Estrella Felipe P40,000 P20,000 6,000 4,000 10,000 9,000 26,900 26,900 P82,900 P59,900 *B = 5% (P210,000 – B) = P10,000

Garcia

P 4,000 26,900 P30,900

Jimenez

P 9,400 26,900 P36,300

Total P 60,000 10,000* 32,400 107,600 P210,000

2. Estrella P40,000 10,000 ( 43,100) P 6,900

Salary Interest Balance Total

Felipe P20,000 9,000 ( 43,100) (P 14,100)

Garcia

Jimenez

P 4,000 ( 43,100) (P39,100)

P 9,400 ( 43,100) (P33,700)

Total P 60,000 32,400 (172,400) (P 80,000)

3. Interest Bonus Salary Total

Estrella P10,000 6,000 25,067 P41,067 *P37,600 x 4/ 6 = P25,067;

Felipe Garcia P 9,000 P 4,000 4,000 12,533 _______ P25,533 P 4,000 P37,600 x 2/ 6 = P12,533

Jimenez P 9,400 ________ P 9,400

Total P 32,400 10,000 37,600* P 80,000

Exercise 1-10 1.

2.

Fees Earned Joseph, Capital Luis, Capital Operating Expenses Income Summary

750,000 50,000

Income Summary Joseph Capital Luis, Capital Nicolas, Capital

500,000

200,000 100,000 500,000

150,000 250,000 100,000

Exercise 1 – 11 1. Capital balances before payment of cash Required capital balances based on on profit and loss ratio Cash received (paid)

Benito

Cabral

Duenas

Total

P120,000

P100,000

P100,000

P320,000

128,000 (P 8,000)

112,000 (P 12,000)

80,000 P 20,000

320,000 -

AA 1 - Chapter 1 (2008 edition) page 6

Journal entry on the partnership books Duenas, Capital Benito, Capital Cabral, Capital

20,000 8,000 12,000

2. Benito Cabral Duenas Total Capital balances before additional cash investment P120,000 P100,000 P100,000 P320,000 Required capital balances based on lowest possible cash investment* 160,000 140,000 100,000 400,000 Required additional cash investment P 40,000 P 40,000 P 80,000 * P120,000/40% = P300,000; P100,000/35% = P285,174; P100,000/25% = P400,000

Journal entry on the partnership books Cash Benito, Capital Cabral, Capital

80,000 40,000 40,000

3. Capital balances Required capital Additional investment(withdrawals)

Benito P120,000 120,000 --------

Cabral P100,000 105,000 5,000

Duenas, Capital Cash Cabral, Capital

Duenas Total P100,000 P320,000 75,000 300,000 (P 25,000) P 20,000 25,000 20,000 5,000

Exercise 1 – 12 Enriquez and Flores Schedule Showing Adjustments in Capital For the Year Ended December 31, 2008 Reported net profit Adjustments: Equipment purchased charged to expense Depreciation on equipment Overstatement of 2008 ending inventory

Corrected net profit

P400,000 P200,000 ( 20,000) ( 24,000) P156,000 x 65%

101,400 P501,400

AA 1 - Chapter 1 (2008 edition) page 7

Distribution of 2008 net profit Salaries Interest Balance

Distribution of 2008 corrected net profit Salaries Interest Balance Adjustments 2.

Enriquez P120,000 30,000 51,000 P201,000

Flores P120,000 45,000 34,000 P199,000

Total P240,000 75,000 85,000 P400,000

P120,000 30,000 111,840 P261,840 P 60,840

P120,000 45,000 74,560 P239,560 P 40,560

P240,000 75,000 186,400 P501,400 P101,400

Equipment Enriquez, Capital Flores, Capital Accumulated Depreciation Inventory Income Tax Payable

200,000 60,840 40,560 20,000 24,000 54,600 PROBLEMS

Problem 1 – 1 1.

a.

b.

c.

d.

e.

f.

g.

Merchandise, Inventory Ruiz, Capital

60,000

Ruiz, Capital Allowance for Uncollectible Accounts

30,000

60,000

30,000

Interest Receivable Ruiz, Capital P150,000 x 6% x 2/12 = P1,500

1,500

Ruiz, Capital Interest Payable P300,000 x 10% x 3/12 = P7,500

7,500

Accumulated Depreciation Ruiz, Capital Furniture and Fixtures Office Supplies Ruiz, Capital Cash Santos, Capital

1,500

7,500

180,000 60,000 240,000 5,000 5,000 524,500 524,500

AA 1 - Chapter 1 (2008 edition) page 8

Ruiz and Santos Statement of Financial Position December 1, 2008 Assets Cash Notes Receivable Accounts Receivable Less Allowance for Uncollectible Accounts Interest Receivable Merchandise Inventory Office Supplies Furniture and Fixtures Total Assets Liabilities and Capital Notes Payable Accounts Payable Interest Payable Total Liabilities Ruiz, Capital Santos, Capital Total Capital Total Liabilities and Capital

P 764,500 150,000 P900,000 90,000

810,000 1,500 300,000 5,000 480,000 P2,511,000

P300,000 630,000 7,500 P 937,500 P1,049,000 524,500 1,573,500 P2,511,000

Problem 1-2 1.

2.

Cash Merchandise Inventory Tomas, Capital

518,000 1,152,000

Accounts Receivable Merchandise Inventory Office Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Vicente, Capital

1,792,000 256,000 160,000 198,000

1,670,000

160,000 576,000 1,670,000

Tomas and Vicente Statement of Financial Position June 1, 2008 Assets Cash Accounts Receivable Less Allowance for Uncollectible Accounts Inventories Office Equipment Goodwill Total Assets

P 518,000 P1,792,000 160,000

1,632,000 1,408,000 160,000 198,000 P3,916,000

AA 1 - Chapter 1 (2008 edition) page 9

Liabilities and Capital Accounts Payable Tomas, Capital Vicente, Capital Total Liabilities and Capital

P 576,000 P1,670,000 1,670,000

3,340,000 P3,916,000

Problem 1 – 3 1.

2.

Merchandise Inventory Goodwill Accumulated Depreciation Allowance for Uncollectible Accounts Equipment Rosas, Capital

3,000 3,000 900

Cash Accounts Receivable Merchandise Inventory Equipment Furniture and Fixtures Goodwill Allowance for Uncollectible Accounts Accounts Payable Perlas, Capital

5,000 46,000 108,000 12,000 9,000 3,000

Cash Accounts Receivable Merchandise Inventory Equipment Furniture and Fixtures Goodwill Allowance for Uncollectible Accounts Accounts Payable Perlas, Capital

5,000 46,000 108,000 12,000 9,000 3,000

Cash Accounts Receivable Merchandise Inventory Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Rosas, Capital

7,000 49,000 75,000 7,000 3,000

Problem 1 – 4 1. Cash Inventories Equipment Notes Payable Serrano, Capital

1,000 2,000 3,900

4,000 54,000 125,000

4,000 54,000 125,000

5,000 36,000 100,000

900,000 1,500,000 3,000,000 1,050,000 4,350,000

AA 1 - Chapter 1 (2008 edition) page 10

Cash Land Mortgage Payable Torres, Capital

600,000 6,000,000 1,950,000 4,650,000

Torres, Capital Serrano, Capital

150,000

Purchases Accounts Payable

900,000

Accounts Payable Cash

720,000

Mortgage Payable Interest Expense Cash

300,000 120,000

Notes Payable Interest Expense Cash

225,000 75,000

150,000

900,000

720,000

420,000

300,000

Accounts Receivable Sales

3,450,000

Cash Accounts Receivable

3,150,000

3,450,000

3,150,000

Selling and General Expenses Cash Accumulated Depreciation Accrued expenses

870,000

Serrano, Drawing Torres, Drawing Cash

351,000 351,000

Income Tax Income Tax Payable

204,750

Inventories, end Sales Inventories, beginning Purchases Selling and General Expenses Interest Expense Income Tax Income Summary

630,000 150,000 90,000

702,000

204,750 600,000 3,450,000 1,500,000 900,000 870,000 195,000 204,750 380,250

AA 1 - Chapter 1 (2008 edition) page 11

Income Summary Serrano, Capital Torres, Capital

380,250 192,150 188,100

Interest on beginning capital Salaries Remainder – 60%, 40% Net Profit

Serrano

Torres

Total

P180,000 150,000 ( 137,850) P192,150

P180,000 100,000 ( 91,900) P188,100

P360,000 250,000 ( 229,750) P380,250

Serrano, Capital Torres, Capital Serrano, Drawing Torres, Drawing

351,000 351,000 351,000 351,000

Serrano and Torres Partnership Statement of Recognized Income and Expenses For the Year Ended December 31, 2008 Sales Cost of Goods Sold: Inventories, beginning Purchases Cost of Goods Available for Sale Less Inventories, end Gross Profit Selling and General Expenses Operating Income Interest Expense Net Profit before Income Tax Income Tax Net Profit

P3,450,000 P1,500,000 900,000 P2,400,000 600,000

1,800,000 P1,650,000 870,000 P 780,000 195,000 P 585,000 204,750 P 380,250

Serrano and Torres Partnership Statement of Financial Position December 31, 2008 Assets Current Assets: Cash Accounts Receivable (P3,450,000 – P3,150,000) Inventories Property, Plant and Equipment: Land Equipment P3,000,000 Less Accumulated Depreciation 150,000 Total Assets

P1,878,000 300,000 600,000

P 2,778,000

P6,000,000 2,850,000

8,850,000 P11,628,000

AA 1 - Chapter 1 (2008 edition) page 12

Liabilities Current Liabilities: Accounts Payable (P900,000 – P720,000) Accrued Expenses Income Tax Payable Long-term Liabilities: Notes Payable (P1,050,000 – P225,000) Mortgage Payable (P1,950,000 – P300,000) Total Liabilities

P180,000 90,000 204,750 P 825,000 1,650,000

P

474,750

2,475,000 P 2,949,750

Capital Serrano, Capital Torres, Capital Total Capital

P4,341,150 4,337,100 8,678,250 P11,628,000

Total Liabilities and Capital Problem 1 - 5

1. P2,700,000 (P200,000 + P1,100,000 + P500,000 + P1,500,000 – P600,000 = P2,700,000) 2 P2,600,000. (P2,500,000 + P2,700,000) / 2 = P2,600,000 Problem 1 – 6 1.

Income Summary Bernabe, Capital Burgos, Capital Interest on beg. capital Balance – 3:1 Net Profit

2.

505,800 194,200 Bernabe P 28,800 477,000 P 505,800

Burgos 35,200 159,000 P 194,200 P

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on end capital Balance – Equally Net Profit

3.

700,000

700,000 284,000 416,000 Bernabe P 140,000 48,000 96,000 P 284,000

Burgos P 260,000 60,000 96,000 P 416,000

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on average. cap Balance – 3:1 Net Profit

Total P 64,000 636,000 P700 000

Total P400,000 P108,000 96,000 P700 000 700,000 394,150 305,850

Bernabe P 90,000 49,000 255,150 P 394,150

Burgos P 170,000 50,800 85,050 P 305,850

Total P260,000 99,800 340,200 P700 000

AA 1 - Chapter 1 (2008 edition) page 13

Bernabe: Jan. 1 – May 31 June 1 – Oct. 31 Nov, 1 – Dec. 31

Burgos: Jan. 1 – June 30 July 1 – Oct. 31 Nov.1 – Dec. 31

4.

P440,000 x 6 360,000 x 4 500,000 x 2

P1,800,000 2,300,000 800,000 P4,900,000/12

P408,333

P2,640,000 1,440,000 1,000,000 P5,080,000/12

P423,333

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on average. cap Balance – 40%, 60% Net Profit

5.

P360,000 x 5 460,000 x 5 400,000 x 2

700,000 267,567 432,433 Bernabe P 100,000 40,833 126,734 P 267,567

Burgos P 200,000 42,333 190,100 P 432,433

Income Summary Bernabe, Capital Burgos, Capital Salaries Interest on beg. cap Bonus Balance – 2:3 Net Profit B = 10%(NI –S – I)

Total P300,000 83,166 316,834 P700 000 700,000 329,360 370,640

Bernabe P 100,000 28,800 43,600 156,960 P 329,360

Burgos P 100,000 35,200 235,440 P 370,640

Total P220,000 64,000 43,600 392,400 P700 000

Problem 1 – 7 1.

2.

3.

6% interest on capital Salaries Balance – 5:3:2 Net Profit

Sandy P 16,800 ( 74,500) P(57,700)

6% interest on capital Salaries Balance – 5:3:2 Net Profit

P 16,800

6% interest on capital Salaries Bonus Balance – 5:3:2 Net Profit

P 16,800

( 32,000) P( 15,200)

56,250 P 73,050

Tammy P 12,000 48,000 ( 44,700) P 15,300

Manny P 7,200 40,000 ( 29,800) P 17,400

Total P 36,000 88,000 (149,000) P(25,000)

P 12,000 48,000 ( 19,200) P 40,800

P 7,200 40,000 ( 12,800) P 34,400

P 36,000 88,000 ( 64,000) P 60,000

P 12,000 48,000 13,500 33,750 P107,250

P 7,200 40,000

P 36,000 88,000 13,500 112,500 P250,000

22,500 P 69,700

AA 1 - Chapter 1 (2008 edition) page 14

B = (P250,000 – P36,000 – P88,000 – P72,000)25% = P13,500...