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Chapter 1 Formation
Problem 1
Suggested Solution:
Andres Bonifacio
Unadjusted Capital 2,625,000.00 2,056,250.00
a. Equipment (87,500.00) 131,250.00
b. Allowance for doubtful accounts (297,500.00) (196,875.00)
c. Inventories (21,875.00) (15,312.50)
Adjusted Capital 2,218,125.00 1,975,312.50

Chapter 2 Operation
Problem 1
Req. B
RONALD GINO RIZA Total
Interest 10% 16,950 16,725 9,375 43,050
Salaries 480,000 630,000 510,000 1,620,000
Bonus 84,000 84,000
Balance 2:3:4 (154,900) (232,350) (309,800) (697,050)
Profit Share 342,050 498,375 209,575 1,050,000

Problem 14
Mr. P Ms. M
Jan. 1: 36,000 x 5 180,000 Jan. 1 24,000 x 5 120,000
June 1: 21,600 x 2 43,200 June 1: 9,600 x 2 19,200
Aug 1: 45,600 x 4 182,400 Aug 1: 7,200 x 5 36,000
Dec. 1: 39,600 x 1 39,600 Total 175,200
Total 445,200 Divide by 12
Divide by 12 Average Capital 14,600
Average Capital 37,100

Problem 16
On Jan 1, 2030, A, B, C and D formed Butuan Trading Co., a partnership, with contributions as follows:
A, P50,000, B P25,000; C, Php25,000 and D, Php20,000. The partnership contract provided that each
partner shall receive a 5% interest on contributed capital, and that A and D shall receive salaries of
P5,000 and P3,000, respectively.

The contract also provided that C shall receive a minimum of P2,500 per annum, and B a minimum of
P6,000 per annum, which is inclusive of amounts representing interest and share of remaining profits.
The balance of the profits shall be distributed to A, B, C and D in a ratio 3:3:2:2.

What amount must be earned by the partnership, before any change for interest and salaries, so that A
may receive an aggregate of P12,500 including interest, salary and share of profits?

Problem 23
J, A and O agree to form the partnership name JAO Co. and to share profits in the ratio of 5:3:2. They
also agreed that O is to be given a salary allowance of P28,000 and that A is to be guaranteed P21,000 as
his share in profits. During the 2030, the total revenues are P180,000 and total expenses are P96,000.
How much is the net income to be allocated to each partner?
Problem 24
On January 1, 2018, Allan, Bruce and Cassy formed ABC Partnership with original capital contribution of
P600,000, P1,000,000 and P400,000. A is appointed as managing partner.

During 2018, Allan, Bruce and Cassy made additional investments of P1,000,000, P400,000 and
P600,000, respectively. At the end of 2018, Allan, Bruce and Cassy made drawings of P400,000,
P200,000 and P800,000, respectively. At the end of 2018, the capital balance of Cassy is reported at
P600,000. The profit or loss agreement of the partners is as follows:

Capital of Cassy:
Beginning Capital (400,000)
Additional Investment (600,000)
Permanent Drawings 800,000
Ending Capital 600,000
Share in Net Income 400,000

Chapter 3 Dissolution
Problem 26
Req. 1 D F L
Capital Interest 273,000 253,500 585,000
Loan 58,500
Adjustment: Revaluation
(1,404,000 - 1,170,000) 46,800 46,800 140,400
Total interest 378,300 300,300 725,400
Payment 397,800
Excess: Bonus to D 19,500 (4,875) (14,625)
Capital Balance 295,425 710,775

Req. 2 D F L
Capital Interest 273,000 253,500 585,000
Adjustment: Revaluation
(1,404,000 - 1,170,000) 46,800 46,800 140,400
Total interest 319,800 300,300 725,400
Payment 397,800
Excess: Bonus to D 78,000 (19,500) (58,500)
Capital Balance 280,800 666,900

Chapter 5 Corporate Liquidation


Problem 11: BBB owns 80% of CCC. During the year CCC filed for bankruptcy and is about to enter into
liquidation. BBB has an outstanding unsecured receivables of P4,000,000 from CCC together with an
investment in a subsidiary of P20,000,000. The statement of affairs of CCC shows a 100% recovery for
outside creditors and a 20% recovery for inside creditors.

Chapter 6 Installment Sales


Problem 12: REYES Co. accounts for its sales on the installment sales basis. At the beginning of 2032,
the ledger accounts include the following account balances:

Installment Accounts Receivable, 2030 180,000


Installment Accounts Receivable, 2031 576,000
Deferred Gross Profit, 2030 75,600
Deferred Gross Profit, 2031 216,000

At the end of 2032 account balances before adjustment for unrealized gross profit on installment sales
are:

Problem 21
IAR Jan. 1, 2032 for 2030 sales 660,800
Less: IAR Dec. 31, 2032 for 2030 sales -
Repossessed Account 128,000
Collection for 2030 sales 532,800
x Gross profit rate 20%
RGP 106,560

Chapter 7 Long Term Construction Contracts


Problem 16
1,386,000 + 82.5% x = 840,000 + x

17.5% x = 546,000

17.5% 17.5%

x= 3,120,000

Problem 40
Req. 1
Contract Price 2,000,000
Total Estimated cost to complete
Cost incurred prior years -
Cost incurred current year 400,000
Cost incurred to date 400,000
Estimated cost to complete 2,000,000 2,400,000
Estimated Gross Profit (400,000)
x % of completion 100%
RGP to date - 2020 (400,000)

Chapter 8 Franchise
Problem 1
Req. 1: What is the total revenue to be recognized on December 31, 2025?
a. P20,000 c. P52,000
b. P50,000 d. P41,000

Req. 2: Assume that the license provides Irvin the right to access the secret formula to produce healthy
juice. Irvin is bound by the terms of the contract to follow with the policies on the use of the secret
formula by Ivonne but is given the right to any subsequent modifications to the secret formula.

What is the total revenue to be recognized on December 31, 2025?


a. P27,000 c. P50,000
b. P25,000 d. P21,000

Req. 1
Cash Down payment 30,000
Notes receivable 20,000
Interest Income (20,000 x 10%) 2,000
Total Revenue 52,000

Req. 2
Cash Down payment 30,000
Notes receivable 20,000
Total 50,000
Divide by 2 years
Revenue - 2025 25,000
Interest Income (20,000 x 10%) 2,000
Total Revenue 27,000

Chapter 11 Business Combination Date of Acquisition


Problem 1
Req. 9.
Share premium of Fred before business
combination 1,000,000
Issuance of share (20,000 sh. X 17.5 excess of par) 350,000
Share issuance cost (355,400)
Total Share capital 994,600

Chapter 12 Subsequent to Date


Problem 36
Req. 1
Sales 690,000
Book Value (600,000)
Gain on Sale of Equipment - Downstream Aug. 31, 2022 90,000

Sales 168,000
Book Value (210,000)
Loss on Sale of Machinery - Upstream Apr. 30, 2022 42,000

Parent Net Income operations 720,000


Parent Share in Dividend (105,000 x 80%) (84,000)
Subsidiary Net Income (P310,000 x 80%) 248,000
Realized Gain on sale equipment - downstream (90,000/8yrs. X 4/12) 3,750
Unrealized loss on sale machinery - upstream (P42,000 x 80%) 33,600
Unrealized gain on sale of equipment - downstream (90,000)
Realized loss on sale of furniture -upstream
(42,000/5 yrs x 8/12 = 5,600x 80%) (4,480)
CNI attributable to Parent 826,870

Subsidiary Net Income P310,000 x 20% 62,000


Unrealized loss on sale machinery - upstream P42,000 x 20% 8,400
Realized loss on sale of furniture -Upstream (1,120)
(42,000/5yrs x 8/12 = 5,600 x 20%)
NCINIS 69,280
Problem 41
NCINAS date of acquisition (BV of net assets 600,000 x 40%) 240,000
Unrealized Profit ending inventory - upstream
(84,000 x 30% x 25/125 = 5,040 x 40%) (2,016)
Net Income of Subsidiary (87,500 x 40%) 35,000
Dividend of Subsidiary (70,000 x 40%) (28,000)
Total NCINAS - December 31, 2022 244,984

Chapter 14 Foreign Currency Transaction


Problem 2
On December 31, 2030, the building revaluation amount was determined at net appraised value of
$120,000. The relevant exchange rates are as follows:

January 1, 2030 $1 = P30


December 31, 2030 $1 = P32
Problem 23
P68.70 x 50,320 = 3,456,984. Use the spot rate on the date of transaction which is the shipping date.
However if shipping date is not given use the invoice date.

Problem 100
Answer C

Suggested Solution
P0.90 – P0.93 = Gain P0.03 x 375,000 = 11,250 Gain