Solution manual Advanced Accounting by Guerrero & Peralta Chapter-2 PDF

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20 Chapter 2

CHAPTER 2 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 2-1: d Annual salary P200,000 Balance, equally ( 20,000) Total P180,000

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)

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

P27,000

P 24,000

P39,000

Allan

Michael

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)

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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 1 July 1 August 1

Capital Balance 140,000 180,000 165,000

Months Unchanged 6 1 5 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 1 April 1 June 1 September 1

Capital Balance P16,000 17,600 19,200 15,200

Months Unchanged 3 2 3 4 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

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_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

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

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) =

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Total

P15,000 –

– (P10,000)

–) –)

_47,500

_35,625

_11,875

P62,500

P25,625

P11,875

P100,000

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

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– 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

( 36,875)

( 22,125)

2-18: a

2-19: a Interest on excess (Deficiency) P 11,250 Remainder 5:3:2 ( 73,750) Total

(P 21,875)

FR Total (P 7,500) ( 14,750)

(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 2

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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 1 Remainder, 60:40 Total

Field – P 25,000 33,600 – _23,760 P 82,360

Schedule 1 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 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

Total P1,600,000 Drawings

P760,000

P840,000

( 200,000)

( 300,000)

Capital balance, end P1,100,000

P560,000

P540,000

Capital balance, beginning P1,000,000 Additional investment 300,000 Capital withdrawal 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

00,000)

Average Capital - King: Date January 1 April 1

Capital Balance P40,000 55,000

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Months Unchanged 3 9 12

Peso Months P120,000 _495,000 P615,000

Average capital – P615,000/12 = P51,250 Average Capital - Queen: Date January 1 April 1

Capital Balance P100,000 130,000

Months Unchanged 7 5 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 1

Interest Bonus, Schedule 2 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 2 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 1 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 =

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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. 1 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

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 1 P330,000 Additional investment, Nov. 1 __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

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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

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)

(20,000) Total 280,000 Drawings (30,000)

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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

5,310

3,150

3,640

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

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12,100 Salary Balance, equally ___9,900

7,000 __3,300

__3,300

__3,300

Capital balances, 12/31/08 per books P150,000 Understatement of depreciation (6,000) Adjusted capital balances, 12/31/08 P144,000

P68,710

P33,950

P47,340

(2,000)

(2,000)

(2,000)

P66,710

P31,950

P45,340

Ken

Len

Mon

28 Chapter 2

2-30: a

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

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 1 – Computation of net profit: Total capital, 2008 (P647,500 – P147,500) Total capital, 2007 (P300,000 + P40,000 – P80,000)

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P100,000

P500,000 _260,000

Total profit for 2 years

P240,000

Net profit per year (P240,000 / 2)

P120,000

2-31: d _Nardo_ Capital balance, 1/1/08 P280,000 Additional investment 96,000 Withdrawals Cap. bal. before P/L dist. 376,000 NP: Salary (16,500 x 12) Interest on EC (15%) 42,000 Balance 25:30:45 ( 19,875 ) Total 22,125 Capital balance 12/31/08 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

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P 60,000

Drawings Contribution Profit share Net income (45,000 ÷ 30)

( 130,000) 25,000 45,000 P150,000

30

Chapter 2

SOLUTIONS TO PROBLEMS Problem 2 – 1

1.

Castro Diaz

: :

(P26,000/P42,500) x (P16,500/P42,500) x

P23,800 P23,800

= =

P14,560 __9,240 P23,800

2.

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 Capital...