PARTNERSHIP 3.

APPRAISED VALUE
1. General Principles: Partnership vs Corporation (easy) 4. BOOK VALUE
PARTNERSHIP CORPORATION LIABILITIES = = IF silent, assumed by partnership
atleast 5 persons but (contributing partner’s capital is deducted by the value of the
FORMATION atleast 2 persons not exceeding 15
assumed liab.)
EASE OF
FORMATION easier to form more processing =if not assumed, capital of contributing partner
separate juridical
is equal to the value of such asset.
PERSONALITY not separate entity personality
UNLIMITED (in case of Limited as to the 3. CAPITAL AFTER FORMATION (easy)
LIABILITY general partner) investment/shares
CASE 1: contributed capital = share in capital
MANAGEMENT all partners can be
OF BUSINESS managers vested in the BOD -no bonus/no revaluation
CHANGING mere transfer of
CASE 2: contributed capital is less than or greater than the
OWNERSHIP May cause disso ownership
share in capital
TAXABILITY taxable (excluding GPP) Taxable
BONUS METHOD
2. PARTNERSHIP FORMATION -Total asset and capital will remain unchanged
 NO EXISTING BUSINESS -CASH, NONCASH, -there is only transfer of capital from the partners
ASSUMPTION OF DEBT (easy)
REVALUATION METHOD (GOOD WILL)
VALUATION:
-total asset and capital will inc./dec.
CASH= FACE VALUE
-first is to adjust the net assets, then adjust for the sharing of
NONCASH ASSET= capital.
1. AGREED VALUE
2. FAIR VALUE
4. PARTNERSHIP OPERATIONS- basic concepts (easy) 6. PARTNERSHIP DISSOLUTION
1. SALARIES ADMISSION BY PURCHASE (medium)
- given, whether there is profit or loss Example:
2. INTEREST The capital accounts of the partnership of NN, VV, and JJ on
June 01, 2015 are presented below with their respective P/L
- given, whether there is profit or loss
ratios:
3. BONUS
NN 139,200 (1/2)
-given, if there is profit only.
VV 208,800 (1/3)
5. WEIGHTED AVERAGE CAPITAL
JJ 96,000 (1/6)
CAP. MULTIPY
DATE BAL. BY NO. OF MONTHS UNCHANGED On june 01, 2015 LL is admitted to the partnership when LL
PARTNER A purchased for 132,000 a proportionate interest from NN and
1/1/2018 300000 X 3/12 75000 JJ in the net assets and profits of the partnership. As a result
4/1/2018 360000 X 9/12 270000 of transaction LL acquired a 1/5 interest in the net assets and
WEIGHETED AVG. profits of the firm.
345000 CAPITAL
PARTNER B Balance of each partners after the admission of LL?
1/1/2018 420000 X 2/12 70000 TOTAL NN VV JJ LL
3/1/2018 390000 X 8/12 260000 BAL. B4 444000 139200 208800 96000
11/1/2018 450000 X 2/12 75000 TRANSFER OF
WEIGHETED AVG. CAPITAL 444000 -44400 -44400 88800
405000 CAPITAL BAL AFTER 444000 94800 208800 51600 88800

7. CORRECTION OF ERROR (hard) walaaaaa!!!

PARTNERSHIP LIQUIDATION Receivables 20000 loans from stac 10000
8. LUMP SUM LIQUIDATION- LOSS ABSORBED BY Inventory 40000 QUEEN 30% 45000
PARTNER (medium)
Plant asset 70000 REED 50% 30000
As of Dec. 31, 2k18 the books of TON partnership showed
Loans to reed 5000 STAC 20% 15000
capital balances of 40,000 ; 25,000 ; and 5,000 respectively.
P/L ratio is 3:2:1. The partners decide to liquidate and they Total assets 150000 TOTAL LIAB & SHE 150000
sold all noncash assets for 37,000. After settlement of
The partners decide to liquidate. First installment liquidation;
liabilities amounting 12000, they still have cash of 28000 left
70000 noncash assets were converted to 50,000, liquid
for the distribution. Assuming and capital debit bal. is
expense = 5000. 2nd liquidation; 30,000 noncash assets were
uncollectible, the share of T in the distribution 28,000 cash
converted for 25,000, liqui expense 2000 and 3rd; 45,000
would be:
noncash asset were converted to 35,000 , liquid expense
T O N 3000. Prepare a CPP.
TOTAL
BAL. BEFORE 40000 25000 5000 70000
LOSS ON REALIZATION (37,000- INTEREST PAYMENTS
79000) -21000 -14000 -7000 -42000 QUEEN REED STAC QUEEN REED STAC
BAL AFTER 19000 11000 -2000 BAL
28000 BEFORE REALIZATION
LOANS -5000 10000
LOSS ON INSOLVENCY -1200 -800 2000
CAPITAL 45000 30000 15000
CASH RECEIVED 17800 10200 0 28000
TOTAL INTERESTS
45000 30000 25000
DIVIDE BY P/L RATIO
30% 50% 20%
LOSS ABSORPTION
150000ABILITY
60000 125000
PRIORITY 1 -25000 7500
9. INSTALMENT LIQUIDATION- 2ND AND 3RD PAYMENT 125000 60000 125000
PRIORITY 2 -65000 -65000 19500 13000
(HARD)
60000 60000 60000
Example: The assets and equities of the queen reed and stac
partnership at the end of its fiscal year on Oct. 31 2015 are as
follows: Note: if may available cash na for distribution for partners sundin yung
right side “payments”. Punuin muna hanggang maubos yung priority 2.
Cash 15000 liabs 50000 After ng priority, yung sharing is based on P/L ratio na.
10. INSTALLMENT SALES a. P 4,020,500 c. P 2,490,400
b. P 3,300,000 d. P 3,216,400
MULTIPLE YEAR (medium)
Ending IAR bal x gp rate :
JRU TRADING sells locally manufactured jeepneys on the installment
basis. Information presented below relates to JR’s operation for 2017 2420 x .3 = 726
three years. 2018 7782.5 x .32 = 2490.4
2016 2017 2018
Cost of Instal. Sales 3,960, 000 6,160,000 7,012,500 Total 3216.4
GP Rate on Sales 28% 30% 32%
UIC CORPORATION, which began operation on January 1, 2017
IAR Balances at the year-end
appropriately uses the installment sales method for all its sales to
From 2016 Sales 3.050,000 1,210,000 0
customers. The following information is available for the years
From 2017 Sales 6,710,000 2,420,000
ended December 31:
From 2018 Sales 7,782,500
2017 2018
38. How much total realized gross profit will be recognized for Cost of Inst. Sales P 960,000 P 1,920,000
2018? Gross Profit realized on sales made in:
a. P 3,003,000 c. P 2,345,000 2017 144,000 86,400
b. P 5,594,600 d. P 2,435,400 2018 0 192,000
GP rate (based on sales) 30% 40%
RGP = COLLECTION X gp rate on sales
40. How much is the total balance of installment receivable at
Collections from 2016 sales (1210-0) = 1210 x .28 = 338.8 December 31, 2018?
Collections from 2017 sales (6710-2420) = 4290 x .30 = 1287 a. P 2,265,000 c. P 1,632,000
b. P 3,323,429 d. P 1,176,000
Collect fr. 2018 sales (10312.5 – 7782.5) = 2530 x .32=809.6
2017 TOTAL IAR = 960/.7 = 1371.429
Total rgp = 2435400
LESS COLLECTIONS
Total IAR= 7012500/.68 = 10312500
2017 COLLECT ( 144/.3) = 480

2018 COLLECT (86.4/.3) = 288

39. How much total deferred gross profit will be recognized at
December 31, 2018? ENDING BAL (1371.429-480-288) = 603.429
2018 TOTAL IAR= 1920/.6= 3200 a. 122625 c.156300

LESS 2018 COLLECT (192/.4) = 480 b. 100625 d. 128200

2018 IAR BAL = 3200-480 = 2720 DGP = ending bal * gp rate

TOTAL IAR ENDING BAL = 603.429 + 2720 = 3323.429 2017 ending bal ( 480-130-240) = 110 *.2 = 22

PLMUN COMPANY, a capital good manufacturing business that 2018 ending bal ( 620-160) = 460*.21875 = 100.625
started on January 4, 2017 and operates on a calendar year basis
DGP = 122625
uses the installment sales method of profit recognition in
accounting for all its sales. The following data were taken from the 11. LONG TERM CONSTRUCTION CONTRACT
2017 and 2018 records:
2017 2018 Cost recovery method
Installment sales P 480,000 P 620,000
GP rate, cost-based 25% 28%

Convert to based on sales 20%

21.875%
Cash collection on sales of:
2017 130,000 240,000
2018 - 160,000

The amounts given for cash collections exclude the amounts

collected for interest charges.
46. Compute the amount of realized gross profit to be
recognized in 2018 under installment sales method.
a. P 35,000 c. P 44,800
b. P 104,800 d. P 83,000

RGP =( 240*.20) + (160*.21875) = 83

32. solution; CIP = 1800 vs Billings 1200 = 600 asset

47. Compute the deferred gross profit (aggregated) to be
recognized in the 2018 balance sheet. Meaning mas Malaki na yung nagastos mo kesa sa sinisingil mo.
 the rest from home office) 40000

12. HOME OFFICE BRANCH ACCOUNTING 3. Calculate the company’s 2018 net income

Mayon Company and its NAGA branch on Dec. 31, 2018. Balances a. 68500 c. 181000
before adjustments;
b. (160000) d. 208500
Branch books
sales 400,000
Sales 300000 cogs: inv beg 40,000
Inventory beg. 19000 puurchases 210,000
shipments (150,000)
Purchases 20000 inventory end (50,000) 50,000
Shipment from home 180000 Gros profit 350,000
Opex 210,000
Expenses 80000 Home N.I. 140,000
Home Office Books
home NI 140,000
Sales 400000 Branch NI 41,000
Inventory beg. 40000 understatement 27,500
208,500
Purchases 210000
13. JOINT ARRANGEMENTS
Shipment to branch 150000

Expenses 210000

Allow. For overvaluatiom 31500

There are no merchandise shipments in transit as at the year end.

The ending inventories are

Home office ( all from ousiders) 50000

Brach office(40% from outsiders and

 a. statutory merger: A corp + B corp = A or B corp

14. INSURANCE CONTRACTS (PFRS 4) b. statutory consolidation: A corp + B corp = Z corp

SCOPE: Covers most motor, travel, life and property 2. stock acquisition
insurance including REINSURANCE contracts 17. STOCK ACQUISITION-PARTIAL
It DOES NOT apply to: 18. CONSOLIDATION AT DATE OF ACQUISITION-
-policies that transfer no significant insurance risk such as GOODWILL
savings and PENSION PLANS. Company Z acquires 80% of Company Y for 10,000,000
-product warranties ( PAS 39) carrying value of Company Y net assets at the time of
acquisition being 6,000,000 and the fair value of these net
-employee assets and liabs, under employee benefits plan identifiable assets being 8,000,000
(PAS19)
1.Good will arising on consolidation is to be valued on
15. Build Operate Transfer (PFRIC 12) the proportionate basis or “partial goodwill”
-Provides guidelines on the accounting by operators for 2.the amount of NCI in arising from the consolidation is
PUBLIC-to-PRIVATE service concession arrangements to be valued on the basis of “partial goodwill”
PFRIC 12 applies ONLY IF: 3. Good will arising on consolidation is to be valued on
the proportionate basis or “full goodwill”
-grantor (govt’) controls what services the operator must
provide with the infrastructure, to whom it must provide them 4. the amount of NCI in arising from the consolidation
and at what price. is to be valued on the basis of “partial goodwill”
-grantor controls- through ownership, beneficial entitlement or
otherwise any significant residual interest in the PARTIAL GOODWILL
infrastructure at the end of the term agreement. Parent (80%) subsidiary (20%)
book value 6,000,000 4,800,000 1,200,000
AFAR 2
BUSINESS COMBINATION excess of 2,000,000 2,000,000 1,600,000 400,000
fair value of subsidiary 8,000,000 6,400,000 1,600,000
16. BASIC CONCEPTS
price paid 10,000,000
1. acquisition of assets good will 3,600,000
 FULL GOODWILL 19. COMPREHENSIVE
fair value Parent (80%) subsidiary (20%)
fair value of subsidiary 12,500,000 10,000,000 2,500,000

Less: book value of interest acquired

6,000,000 6,000,000 6,000,000
0.8 0.2
book value 4,800,000 1,200,000
excess: 6,500,000 5,200,000 1,300,000
10,000,000 2,500,000
adjustment of identifiable asets
2,000,000
(from 6M to 8M)
goodwill 4,500,000

20. CORPO LIQUIDATION- sample only

First step: kunin yung free assets
San makukuha?
1. sa assets na fully pledge (116-70) = 46
2. sa assets na d naka-pledge= 80
Total free assets = 126
Bawas yung liab with priority ( 126-42) 84 net free assets
Second step: kunin yung unsecured liab without priority
San makukuha?
1. sa partially secured debts (130-50) = 80
2. sa unsecured debt na walang pledged= 200
Total unsecured without priority =280
Rate: 84/280 = .3
Partially secured creditors will received: 50 + (30% of 80) = 74 2. at each of B/S date between transaction and payment date-
record ka ng Gain/loss. Adjustment sa AP/AR
FOREIGN EXCHANGE
3. payment date- record ng gain/loss
21. FUNCTIONAL CURRENCY- the currency which the entity
normally Sample problem: purchased merchandise from a foreign
generates supplier, assume that on Nov.15, 2016 Manila Corp.
and purchased merchandise from a US firm for $10,000 and open
spends a letter of credit with BPI to cover the importation. Bank charge
cash in amount to P1500. The corporation’s fiscal year end Dec. 31.
which The selling spot rate at various dates are as follows:

transactions are normally denominated Date of arrival of the goods-Dec 15 2016 P50.50
B/S date-Dec 31, 2016 50.80
Date of receipt of importation documents
And the required payment of LOC to BPI
-Jan 10, 2017 50.90
JE’s
Nov. 15 bank charge 1500
Cash 1500
Dec 15 Purchases 505,000
Acceptancepayable 505,000

22. PURCHASE TRANSACTION- VALUE OF THE ASSET Dec 31 Forex loss$10000 x (50.80-50.50) 3,000

3 dates Acceptance payable 3,000

1. at the date the transaction is first recognized= capitalized— Jan 10 Acceptance payable 508,000
purchases/sales ito na yung fixed value nya, any subs. Forex loss 1,000
Changes sa rates sa AP/AR sya mag reflect
Cash 509,000
At the balance sheet date the value of the purchases is to be Average for 2017 .20 = 1 FC
recorded at 505,000 historical cost date of transaction!

23. FOREIGN OPERATION AND TRANSLATION-

COGS
“Translation/Closing rate Method” foreign currency is the
functional currency. – all assets are translated @ current
exchange rate= inventory end is adjusted.
COGS? = @historical rate= date of transaction; if wala;
average rate of the same year of transaction date
“temporal/remeasurement method” = peso is Foreign currency
Inventory is at LCNRV = a historical cost
COGS= At current market value (inaadjust)
Sample problem: a subsidiary of Salisbury inc. located in a
foreign country whose functional currency is the foreign
currency (not the currency of a hyperinflationary ecoomy). The @ Dec 31 2016: Inventory recorded at 17,000 (10000x0.17)
subsidiary acquires inventory on credit on Nov. 01, 2016 for
100,000 foreign currency (FC) that is sold on January 17,2017 @ Dec 31 2017 consolidated Income statement COGS=
for 130,000 foreign currencies. The subsidiary pays for the 18,000 (10000x 0.18)
inventory on January 31,2017. Currency exchange rates are
24. FIRM COMMITMENT- SAMPLE ONLY
as follows:
Nov. 01, 2016 P0.16 = 1 FC
25. CALL OPTION TOTAL GAIN/LOSS
Dec 31, 2016 0.17 = 1 FC
26. SHE- PAR VALUE
Jan. 17, 2017 0.18 = 1 FC
LEGAL CAPITAL = aggregate par value
Jan. 31, 2017 0.19 = 1FC
 Par value shares cannot be issued less than par
The corporation declared cash dividends of P1,500,000 on
27.ISSUANCE OF SHARES – SERVICES RENDERED
12.31.18. There was no dividend declaration for the past two
-shares may be issued for services as long as the services are years.
already rendered.
DIVIDENDS PREFERENCE
ORDINARY
Recognized at fair value of services at the time of rendering TOTAL DIVIDEND DECLARED 1,500,000
the service or FV of shares issued whichever is more reliably PAST PREF. DIVIDEND (480,000) 480,000
determinable.
CURRENT PREF DIV. (240,000) 240,000
28. DIVIDENDS – CUMULATIVE FULLY PARTICIPATING ORDINARY DIVIDEND (720,000) 720,000
BALANCE: PRO RATA 2/8 : 6/8 (60,000) 15,000 45,000
3 important dates:
DISTRIBUTION OF DIVIDEND - 735,000 765,000
Date of declaration- recognize na ng div. payable DIVIDE BY OUTSTANDING SHARES 40,000 200,000
Date of records DIVIDEND PER SHARE 18.3750 3.8250

Date of payment
RIGHTS OR PRIVELEGES OF PREF. SHAREHOLDERS 29. RETAINED EARNINGS BALANCE
1. Preference as to dividends- una dapat sila bago O/S Beg RE
shareholders
P/L (+/-)
2. cumulative rights- dividend in arrears
Dividends (-)
3. participating right- can receive dividend in excess of fixed
dividend rate but only after makareceive on the same rate ang Prior period errors
O/S shareholder. =RE end
SAMPLE: The shareholders equity account of A company
SAMPLE PROBLEM: Cyan co. issued 200,000 shares of P5
showed the ff balances on 12.31.18 par value at P10 per share. On Jan 01,2015, the retained
12% preference share capital par 50. earnings amounted to P3,000,000. In march 2015 the entitiy
40,000 shares issued P2,000,000 reacquired 50,000 treasury shares at P20 per share. In June
o/s par 30. 200,000 shares issued 6,000,000 2015, the entity sold 10,000 of T/S to corporate officers at P25
Ordinary share premium 600,000 per share. Net income for year ended Dec 31, 2015 was
Retained earnings 3,000,000 600,000.
R.E beg 3,000,000 Pref share premium 200,000
Net income 600,000 Ordinary share premium 400,000
TOtal RE 3,600,000 Retained earnings 3,000,000
Appropriated for T/S 800,000 Total SHE 11,100,000
Unappropriated RE 2,800,000 No dividends were declared since last year, Pref shares have
preference as to dividends and assets.
30. BOOK VALUE PER SHARE- CUMULATIVE AND FULLY
PARTICIPATING- the amount that would be paid on each
share assuming that entity is liquidated and the amount of CORPORATE SURPLUS
PREFERENCE ORDINARY
SHE is the amount available for distribution. BALANCES 3,600,000 2,500,000 5,000,000
LAST YEAR PREF, DIVIDEND (300,000) 300,000
CURRENT PREF DIV. (300,000) 300,000
1. one class of share: Total SHE/no. of outstanding share ORDINARY DIVIDEND (600,000) 600,000
BALANCES 2,400,000
2. 2 or more classes of shares: PRO RATE (25/75 : 50/75) (2,400,000) 800,000 1,600,000
-BV per share Ordinary: O/S share equity/ no. of outstanding DISTRIBUTION OF SURPLUS - 3,900,000 7,200,000
share DIVIDE BY OUTSTANDING SHARES 25,000 100,000
156 72
- BV per share preference: preference share equity/ no. of
outstanding share
Note: a. is silent, pref share is noncumulative no participating
b. dividend in arrears should be disclosed
c. in case of 2 classes of pref share of different
dividend rates and both participating lower rate ang gagamitin
as proportion para sa Ordinary share.
Sample problem:
12% PREF SHARE 100 par P2,500,000
Ordinary share 50 par 5,000,000