Advanced Accounting by Guerrero Essay

Chapter 1 Multiple choice answers and solutions 1-1: a Jose’s capital should be credited for the market value of the computer contributed by him. 1-2: b(40,000 + 80,000) ï‚ ¸ 2/3 = 180,000 x 1/3 = 60,000. 1-2: c 1-3: a CashP100,000 Land300,000 Mortgage payable( 50,000) Net assets (Julio, capital)P350,000 1-4: b Total Capital (P300,000/60%)P500,000 Perla’s interest ______40% Perla’s capitalP200,000 Less:Non-cash asset contributed at market value LandP 70,000 Building90,000 Mortgage Payable( 40,000)_120,000 Cash contributionP 80,000 1-5: d- Zero, because under the bonus method, a transfer of capital is only required. 1-6: b ReyesSantos CashP200,000P300,000 Inventory–150,000 Building–400,000 Equipment150,000 Mortgage payable________( 100,000) Net asset (capital)P350,000P750,000 1-7: c AABBCC CashP 50,000 Property at Market ValueP 80,000 Mortgage payable( 35,000) Equipment at Market Value______________P55,000 CapitalP 50,000P 45,000P55,000 2Chapter 1 1-8: a PPRRSS CashP 50,000P 80,000P 25,000 Computer at Market Value__25,000_______ ­Ã‚ ­__60,000 CapitalP 75,000P 80,000P 85,000 1-9: c MariaNora CashP 30,000 Merchandise inventoryP 90,000 Computer equipment160,000 Liability( 60,000) Furniture and Fixtures 200,000________ Total contributionP230,000P190,000 Total agreed capital (P230,000/40%)P575,000 Nora’s interest______60% Nora’s agreed capitalP345,000 Less: investment190,000 Cash to be investedP155,000 1-10: d Roy Sam Tim CashP140,000–– Office Equipment–P220,000– Note payable_________( 60,000) ______ Net asset investedP140,000P160,000 P – Agreed capitals, equally (P300,000/3) =P100,000 1-11: a LaraMitra CashP130,000P200,000 Computer equipment–50,000 Note payable________ ­_( 10,000) Net asset investedP130,000P240,000 Goodwill (P240,000 – P130,000) =P110,000 1-12: a PerezReyes CashP 50,000P 70,000 Office Equipment30,000– Merchandise–110,000 Furniture100,000 Notes payable_______( 50,000) Net asset investedP 80,000P230,000 Partnership – Basic Considerations and Formation3 Bonus Method: Total capital (net asset invested)P310,000 Goodwill Method: Net assets investedP310,000 Add: Goodwill (P230,000-P80,000)_150,000 Net capitalP460,000 1-13: b Required capital of each partner (P300,000/2)P150,000 Contributed capital of Ruiz: Total assetsP105,000 Less Liabilities__15,000__90,000 Cash to be contributed by RuizP 60,000 1-14: d Total assets: CashP 70,000 Machinery75,000 Building_225,000P370,000 Less: Liabilities (Mortgage payable)__90,000 Net assets (equal to Ferrer’s capital account)P280,000 Divide by Ferrer’s P & L share percentage____70% Total partnership capitalP400,000 Required capital of Cruz (P400,000 X 30%)P120,000 Less Assets already contributed: CashP 30,000 Machinery and equipment25,000 Furniture and fixtures__10,000__65,000 Cash to be invested by CruzP 55,000 1-15: d Adjusted assets of C Borja CashP 2,500 Accounts Receivable (P10,000-P500)9,500 Merchandise inventory (P15,000-P3,000)12,000 Fixtures__20,000P 44,000 Asset contributed by D. Arce: CashP 20,000 Merchandise__10,000__30,000 Total assets of the partnershipP 74,000 4 Chapter 1 1-16: a Cash to be invested by Mendez: Adjusted capital of Lopez (2/3) Unadjusted capitalP158,400 Adjustments: Prepaid expenses17,500 Accrued expenses( 5,000) Allowance for bad debts (5% X P100,000)_( 5,000) Adjusted capitalP165,900 Total partnership capital (P165,900/2/3)P248,850 Multiply by Mendez’s interest â…“ Mendez’s capitalP 82,950 Less Merchandise contributed ­Ã‚ ­Ã‚ ­__50,000 Cash to be invested by MendezP 32,950 Total Capital: Adjusted capital of LopezP165,900 Contributed capital of Mendez__82,950 Total capitalP248,850 1-17: d Moran, capital (40%) CashP 15,000 Furniture and Fixtures_100,000P115,000 Divide by Moran’s P & L share percentage______40% Total partnership capitalP287,500 Multiply by Nakar’s P & L share percentage______60% Required capital of credit of Nakar:P172,500 Contributed capital of Nakar: Merchandise inventoryP 45,000 Land15,000 Building__65,000 Total assetsP125,000 Less Liabilities__30,000P 95,000 Required cash investment by NakarP 77,500 1-18: c Garcia’s adjusted capital (see schedule 1)P40,500 Divide by Garcia’s P & L share percentage ­Ã‚ ­Ã‚ ­______40% Total partnership capitalP101,250 Flores’ P & L share percentage______60% Flores’ capital creditP 60,750 Flores’ contributed capital (see schedule 2)__43,500 Additional cash to be invested by FloresP 17,250 Partnership – Basic Considerations and Formation 5 Schedule 1: Garcia, capital: Unadjusted balanceP 49,500 Adjustments: Accumulated depreciation( 4,500) Allowance for doubtful account( 4,500) Adjusted balanceP 40,500 Schedule 2: Flores capital: Unadjusted balanceP 57,000 Adjustments: Accumulated depreciation ( 1,500) Allowance for doubtful accounts( 12,000) Adjusted balanceP 43,500 1-19: d OrtizPonceTotal ( 60%)( 40%) Unadjusted capital balancesP133,000P108,000P241,000 Adjustments: Allowance for bad debts( 2,700)( 1,800)( 4,500) Inventories3,0002,0005,000 Accrued expenses_( 2,400)( 1,600)( 4,000) Adjusted capital balancesP130,900 P106,000 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% Total capital of the partnership before the admission of RoxasP296,875 Multiply by Roxas’ interest______20% Cash to be invested by RoxasP 59,375 1-20: d Merchandise to be invested by Gomez: Total partnership capital (P180,000/60%)P300,000 Gomez’s capital (P300,000 X 40%)P120,000 Less Cash investment__30,000 Merchandise to be invested by GomezP 90,000 Cash to be invested by Jocson: Adjusted capital of Jocson: Total assets (at agreed valuations)P180,000 Less Accounts payable__48,000P132,000 Required capital of Jocson_180,000 Cash to be invested by JocsonP 48,000 6Chapter 1 1-21: b Unadjusted Ell, capital (P75,000 – P5,000)P 70,000 Allowance for doubtful accounts( 1,000) Accounts payable( 4,000) Adjusted Ell, capitalP 65,000 1-22: c Total partnership capital (P113,640/1/3)P340,920 Less David’s capital_113,640 Cortez’s capital after adjustmentsP227,280 Adjustments made: Allowance for doubtful account (2% X P96,000)1,920 Merchandise inventory( 16,000) Prepaid expenses( 5,200) Accrued expenses___3,200 Cortez’s capital before adjustmentsP211,200 1-23: a Total assets at fair value P4,625,000 Liabilities (1,125,000) Capital balance of FlorP3,500,000 1-24: c Total capital of the partnership (P3,500,000 à · 70%)P5,000,000 Eden agreed profit & loss ratio30% Eden agreed capital 1,500,000 Eden contributed capital at fair value 812,000 Allocated cash to be invested by EdenP 688,000 1-25: c __Rey __Sam_ __Tim __Total_ Contributed capital (assets-liabilities)P471,000 P291,000 P195,000 P957,000Agreed 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 à · 40%)P225,000 Contributed capital of Candy (P126,000+P36,000-P12,000) 150,000 Total agreed capital (P90,000 à · 40%) 225,000 Candy, agreed capital interest 60% Agreed capital of Candy 135,000 Contributed capital of Candy 150,000 WithdrawalP 15,000 Partnership – Basic Considerations and Formation 7 1-27: a Total agreed capital (210,000 à · 70%) P300,000 Nora’s interest 30% Agreed capital of NoraP 90,000 Cash invested 42,000 Cash to be invested by NoraP 48,000 1-28: a Contributed capital of May (P194,000 – P56,000)P138,000 Agreed capital of May (P300,000 x 70%) 210,000 Cash to be invested by May P 72,000 1-29: c __Alex__Carlos___Total__ Contributed capitalP100,000P84,000P184,000 Agreed capital 92,000 92,000 184,000 Capital investedP( 8,000)P 8,000 – 8Chapter 1 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, Capital600 Merchandise Inventory600 2.Pedro Castro, Capital200 Allowance for Bad Debts200 3.Accrued Interest Receivable35 Pedro Castro, Capital35 Computation: P1,000 x 6% x 3/12=P15 P2,000 x 6% x 2/12=_20 TotalP35 4.Pedro Castro, Capital100 Accrued Interest Payable100 (P4,000 x 5% x 6/12 = P100) 5.Pedro Castro, Capital800 Accumulated Depreciation – Furniture and Fixtures800 6.Office Supplies400 Pedro Castro, Capital400 To record the investment of Jose Bunag. Cash15,067.50 Jose Bunag, Capital15,067.50 Computation: Pedro Castro, Capital (1)P600P31,400 (2)20035(3) (4)100400(6) (5)___800 P1,700P31,835 P30,135 Jose Bunag, Capital:1/2 x P30,135 = P15,067.50 Partnership – Basic Considerations and Formation 9 b.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 Payable4,000 Accounts Payable10,000 Accrued Interest Payable100 Allowance for Bad Debts1,200 Accumulated Depreciation – Furniture and Fixtures1,400 Pedro Castro, Capital30,135 Cash6,000 Notes Receivable3,000 Accounts Receivable24,000 Accrued Interest Receivable35 Merchandise Inventory7,400 Office Supplies400 Furniture and Fixtures6,000 New Partnership Books To record the investment of Pedro Castro. Cash6,000 Notes Receivable3,000 Accounts Receivable24,000 Accrued Interest Receivable35 Merchandise Inventory7,400 Office Supplies400 Furniture and Fixtures6,000 Notes Payable4,000 Accounts Payable10,000 Accrued Interest Payable100 Allowance for Bad Debts1,200 Accumulated Depreciation – Furniture and Fixtures1,400 Pedro Castro, Capital30,135 To record the investment of Jose Bunag. Cash15,067.50 Jose Bunag, Capital15,067.50 10Chapter 1 2. Castro and Bunag Partnership Balance Sheet October 1, 2008 A s s e t s CashP21,067.50 Notes receivable3,000.00 Accounts receivableP 24,000 Less Allowance for bad debts___1,20022,800.00 Accrued interest receivable35.00 Merchandise inventory7,400.00 Office supplies400.00 Furniture and fixtures6,000 Less Accumulated depreciation___1,400__4,600.00 Total AssetsP59,302.50 Liabilities and Capital Notes payableP 4,000.00 Accounts payable10,000.00 Accrued interest payable100.00 Pedro Castro, Capital30,135.00 Jose Bunag, Capital_15,067.50 Total Liabilities and CapitalP59,302.50 Problem 1 – 2 Contributed Capitals: Jose:Capital before adjustmentP 85,000 Notes Payable62,000 Undervaluation of inventory13,000 Underdepreciation( 25,000)P 135,000 Pedro:Cash28,000 Pablo:Cash11,000 Marketable securities_57,500 ­___68,500 Total contributed capitalP 231,500 Agreed Capitals: Bonus Method: Jose (P231,500 x 50%)P115,750 Pedro (P231,500 x 25%)57,875 Pablo (P231,500 x 25%)__57,875 TotalP231,500 Partnership – Basic Considerations and Formation 11 Goodwill Method. To have a goodwill, the only possible base is the capital of Pablo. The computation is: ContributedAgreed CapitalCapitalGoodwill JoseP135,000P137,000 (50%)2,000 Pedro28,00068,500 (25%)40,500 Pablo__68,500__68,500 (25%)_____– TotalP231,500274,00042,500 Total agreed capital (P68,500 ï‚ ¸ 25%) = 274,000 Jose, Pedro and Pablo Partnership Balance Sheet June 30, 2008 Bonus MethodGoodwill Method Assets: CashP 49,000P 49,000 Accounts receivable (net)48,00048,000 Marketable securities57,50057,500 Inventory85,00085,000 Equipment (net)45,00045,000 Goodwill______–__42,500 TotalP284,500P327,000 Liabilities and Capital: Accounts payableP 53,000P 53,000 Jose, capital (50%)115,750137,000 Pedro, capital (25%)57,87568,500 Pablo, capital (25%)__57,875__68,500 TotalP284,500P327,000 Problem 1 – 3 1.Books of Pepe Basco To adjust the assets. a.Pepe Basco, Capital3,200 Estimated Uncollectible Account3,200 b.Pepe Basco, Capital500 Accumulated Depreciation – Furniture and Fixtures500 12Chapter 1 To close the books. Estimated Uncollectible Account4,800 Accumulated Depreciation – Furniture and Fixtures1,500 Accounts Payable3,600 Pepe Basco, Capital31,500 Cash400 Accounts Receivable16,000 Merchandise Inventory20,000 Furniture and Fixtures5,000 2.Books of the Partnership To record the investment of Pepe Basco. Cash400 Accounts Receivable16,000 Merchandise Inventory20,000 Furniture and Fixtures5,000 Estimated Uncollectible account4,800 Accumulated Depreciation – Furniture and Fixtures1,500 Accounts Payable3,600 Pepe Basco, Capital31,500 To record the investment of Carlo Torre. Cash47,250 Carlo Torre, Capital47,250 Computation: Pepe Basco, capital (Base)P31,500 Divide by Pepe Basco’s P & L ratio___40% Total agreed capitalP78,750 Multiply by Carlo Torre’s P & L ratio___60% Cash to be invested by Carlo TorreP47,250 Problem 1 – 4 a.Roces’ books will be used by the partnership Books of Sales 1.Adjusting Entries (a)Sales, Capital3,200 Accumulated Depreciation – Fixtures3,200 (b)Goodwill32,000 Sales, Capital32,000 Partnership – Basic Considerations and Formation 13 2.Closing Entry Allowance for Bad Debts12,800 Accumulated Depreciation – Delivery Equipment8,000 Accumulated Depreciation – Fixtures91,200 Accounts Payable64,000 Notes Payable40,000 Accrued Taxes8,000 Sales, Capital224,000 Cash4,800 Accounts Inventory72,000 Merchandise Inventory192,000 Prepaid Insurance3,200 Delivery Equipment48,000 Fixtures96,000 Goodwill32,000 Books of Roces (Books of the Partnership) 1.Adjusting Entries (a)Roces, Capital1,600 Allowance for Bad Debts1,600 (b)Accumulated Depreciation – Fixtures16,000 Roces, Capital16,000 (c)Merchandise Inventory8,000 Roces, Capital8,000 (d)Goodwill40,000 Roces, Capital40,000 2.To record the investment of Sales. Cash4,800 Accounts Receivable72,000 Merchandise Inventory192,000 Prepaid Insurance3,200 Delivery Equipment48,000 Fixtures96,000 Goodwill32,000 Allowance for Bad Debts12,800 Accumulated Depreciation – Delivery Equipment8,000 Accumulated Depreciation – Fixtures91,200 Accounts Payable64,000 Notes Payable40,000 Accrued Taxes8,000 Sales, Capital224,000 14Chapter 1 b.Sales’ books will be used by the partnership Books of Roces 1.Adjusting Entries See Requirement (a). 2.Closing Entry Allowance for Bad Debts1,600 Accumulated Depreciation – Delivery Equipment12,800 Accumulated Depreciation – Fixtures64,000 Accounts Payable104,000 Accrued Taxes6,400 Roces, Capital224,000 Cash14,400 Accounts Receivable57,600 Merchandise Inventory132,800 Prepaid Insurance4,800 Delivery Equipment19,200 Fixtures144,000 Goodwill40,000 Books of Sales (Books of the Partnership) 1.Adjusting Entries See Requirement (a). 2.To record the investment of Roces. Cash14,400 Accounts Receivable57,600 Merchandise Inventory132,800 Prepaid Insurance4,800 Delivery Equipment19,200 Fixtures144,000 Goodwill40,000 Allowance for Bad Debts1,600 Accumulated Depreciation – Delivery Equipment12,800 Accumulated Depreciation – Fixtures64,000 Accounts Payable104,000 Accrued Taxes6,400 Roces, Capital224,000 Partnership – Basic Considerations and Formation 15 c.A new set of books will be opened by the partnership Books of Roces 1.Adjusting Entries See Requirement (a). 2.Closing Entry See Requirement (b). Books of Sales 1.Adjusting Entries See Requirement (a). 2.Closing Entry See Requirement (a). New Partnership Books To record the investment of Roces and Sales. Cash19,200 Accounts Receivable129,600 Merchandise Inventory324,800 Prepaid Insurance8,000 Delivery Equipment (net)46,400 Fixtures (net)84,800 Goodwill72,000 Allowance for Bad Debts14,400 Accounts Payable168,000 Notes Payable40,000 Accrued Taxes14,000 Roces, Capital224,000 Sales, Capital224,000 16Chapter 1 Problem 1 – 5 1.To close Magno’s books. Allowance for Bad Debts1,000 Accounts Payable6,000 Notes Payable10,000 Accrued Interest Payable300 R. Magno, Capital24,700 Cash5,000 Accounts Receivable13,000 Merchandise Inventory12,000 Equipment3,000 Other Assets9,000 2.To adjust the books of Lagman. Goodwill8,000 Allowance for Bad Debts210 J. Lagman, Capital7,790 3.To record the investment of Magno. Cash5,000 Accounts Receivable13,000 Merchandise Inventory12,000 Equipment3,000 Other Assets9,000 Allowance for Bad Debts1,000 Accounts Payable6,000 Notes Payable10,000 Accrued Interest Payable300 R. Magno, Capital24,700 To adjust the investments of the partners. Cash10,300 R. Magno, Capital10,300 (P35,000 – P24,700 = P10,300) J. Lagman, Capital35,790 Cash23,300 Accounts Payable to J. Lagman12,490 (P63,000 + P7,790 = P70,790 – P35,000 = P35,790) Partnership – Basic Considerations and Formation 17 4. Lagman and Magno Balance Sheet December 31, 2008 A s s e t s CashP – Accounts receivableP34,000 Less Allowance for bad debts1,21032,790 Merchandise inventory21,000 Equipment8,000 Other assets46,000 Goodwill___8,000 Total AssetsP115,790 Liabilities and Capital Accounts payableP 18,000 Notes payable15,000 Accrued interest payable300 Accounts payable to J. Lagman12,490 J. Lagman, capital35,000 R. Magno, capital__35,000 Total Liabilities and CapitalP115,790 Problem 1 – 6 1.Books of Toledo Toledo, Capital4,800 Allowance for Bad Debts (15% x P32,000)4,800 Books of Ureta Ureta, Capital2,400 Allowance for Bad Debts (10% x P24,000)2,400 Cash (90% x P12,000)10,800 Loss from Sale of Office Equipment1,200 Office Equipment12,000 Toledo, Capital (1/4 x P1,200)300 Ureta, Capital900 Loss from Sale of Office Equipment1,200 18Chapter 1 2.New Partnership Books Cash3,200 Accounts Receivable32,000 Merchandise40,000 Office Equipment10,000 Allowance for Bad Debts4,800 Accounts Payable10,000 Notes Payable2,000 Toledo, Capital68,400 To record the investment of Toledo. Cash22,800 Accounts Receivable24,000 Merchandise36,000 Toledo, Capital300 Allowable for Bad Debts2,400 Accounts Payable16,000 Ureta, Capital64,700 To record the investment of Ureta. 3.Cash3,400 Ureta, Capital3,400 To record Ureta’s cash contribution. Computation: Toledo, capital (P68,400 – P300)P 68,100 Divide by Toledo’s profit share percentage____50% Total agreed capital of the partnershipP136,200 Multiply by Ureta’s profit share percentage____50% Agreed capital of UretaP 68,100 Ureta, capital__64,700 Cash contribution of UretaP 3,400 or Toledo, capital (P68,400 – P300)P 68,100 Less Ureta, capital__64,700 Cash contribution of UretaP 3,400 Partnership – Basic Considerations and Formation 19 4. Toledo and Ureta Partnership Balance Sheet July 1, 2008 A s s e t s CashP 29,400 Accounts receivableP56,000 Less Allowance for bad debts__7,20048,800 Merchandise76,000 Office equipment__10,000 Total AssetsP164,200 Liabilities and Capital Accounts payableP 26,000 Notes payable2,000 Toledo, capital68,100 Ureta, capital__68,100 Total Liabilities and CapitalP164,200