Pre-week vo comand & Wer ie vich The Review School of Accountancy ‘Mel. Nos. 735-9807 & 734-3989 Advanced Financial Accounting and Reporting Note: Revielt (Quiz 1; Quiz 2; First Preboard and Final Preboard Exams) Partnership "che following Information for question 1 and 2: CC admits DD 08 a partner in business. Accounts in the ledger for CC on November 30, 20x4, just mission of DD, show the folowing balonces: Delete ne agmsion of DD, snow he olen nai ecounis receivable vx oschonde ventory po00 | Accouns poyobie : a0 Seco ceelecctinaes 33000) 11 agreed that for purpose: of eslobishing CC's inferest the folowing odjustments shat be mode: ©. Anallowance for doubtful accounis of 3% of accounts receivable is to be estabished. 1b. The merchandise inventory iso be valved ot P23.000. ©. Prepaid salary expenses of Pé00 and accrued rent expense of PBOD are to be recognized. }. DD is fo invest sufficient cash to obtain a 1/3 interest in the partnership. CC's adjusted capital before the admission of CC: 0. P28,174 c. P35374 b. P35347 d P36.374 2. The amount of cash investment by DD: o. PIL97) c. PI7.687 b. P14087 a P1847 Answers: 1, ¢-P35,374-~refer to No. 2 2. G~PI7.687 Unadjusted capital of CC. ‘Add (deduct): adjustments ‘Allowance for doubtful accounts (3% x P4200}. Increase in merchandise inventory (P23,000 ~ P20,000). Prepaid salary... dasa Accrued rent expense. L800) ‘Adjusted capital bolance of CC.. 35374 Divided by: Capital interest of CC.. cot 21S tonsP 53,061 Total capital of the partnership... Less: Adjusted capital balance of CC. Capital bolance of DD. nee 3.A partnership begins is fist year with the following capital balances: 35,374 B.12.687 ‘Arthur, copital P 60,000 Baxter. copital ‘80,000 100,000 Cortwright, capital The articles of partnership stipulate that profits and losses be assigned in the following sesemanner: ‘= Each partners allocated inferest equa! fo 10 percent of the beginning capital balance. ‘= Boxleris olocated compensation of P20,000 per year. ‘+ Any remaining profits and losses are allocated on 0 3:3:4 basis, respectively. + Each partner's alowed fo withdraw up to P5000 cash per yeor. ‘Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed, what is the balance in Cartwright's copital account ai the end of that year? A. P105,800. C.P 106,900 ‘B. P106,200 D.P 107,400 “answer: 3d Allocation’ of Net Income: ARTHUR BAXTER CARTWRIGHT TOTAL Tnterest-10% of ie os beginning capital 6,000 P 6,000 P10, 000. P24, 000 Salary 20,000 20, 000 Balance/Renainder (3:3:4) _1,800__“1,800 2,400 6,000 Totals E2800" 29,800 Bi2, 400 P50,,000 260% : eee y a ae iReSA: The Review School of Accountancy vege? STATEMENT OF CAPITAL! THUR THRIONT OTA Beginning capita 66, 000 100,006. ¥240,000 Net income (above) 7,800 12,400 $0,000 Drawings (given) (5,000) —{54900)__{8, 00) 115,990) Ending capital ucitv0 F104, woo Fig) 49 Bz 15.000 4. A.B. and C are partners in an accounting frm. The capital account balances at year-end ‘were A, P90,000: B, P110,000 and C, P50,000. They share protits and lowes on a 442. ater the following special terms: 1. Partner Cis to receive a bonus of 10% of net income atter the bonus, 2, Interest of 10% shall be paid on that portion of a partners capital in excess of F'100,000. 3. Salaries of P10,000 and P12,000 shall be paid 10 partners A & C, respectivety. ‘Assuming a net income of P44,000 for the year, the total profit share of partner C was: ‘A. P 7,800 C.P19,400 8. 16,800 1. P19,800 Answers: c - [a P< Bonua™ a 4,000. Interestar =a 3,000. ‘Salaries 72, 066. Balance (4472) 6,800, 3,400 = i202 | ¥B = 100 (a-B) in excess of P100,00 = 108 (p44,000 - By (P110,000 ~ 100,000) = 108 = P4,400 -".10B 1.108 = P4,400 Items 5 and 6 are based on the following information: Rosa, Susan, and Tine are partners sharing profits on a 5:3:2 ratio. on January 1, 2011, Vida was admitted into the partnership with a 20% srace Profits. The old partners continue to participate in profits in original ratios. their For the year 2011, the partnership book showed a net income of 25,000. it Was disclosed, however, that the following errors were commirtea. 2010 PIE Accrued expenses not recorded at year-end P 1,200, Inventory overstated P3100, Purchases not recorded, for which goods have bean received and inventories 2,000 Income received in advance not adjusted 7,500, Unused supplies not taken up at year-end 300 5. The new profit and loss ratio of Rosa, Susan, Tina, and Vida, respectively for 2011 is: A. 408; 25%; 158; and 208 Cc. 458; 3087 15%; and 208 B. 504; 208; 108; and 208 —D. 40%; 248; 168; and 208 Answer: D Rosa: S08 x 808 = 408, Susan: 208 x 808 = 24% Tina: 208 x 808 = 168 Vida 208 6. The share of partner Rosa in the 2011 corrected net income is: A. P 9,400 . P 12,750 B. 10,000 D. 12,500 Anewer:| 4 Met Income Per DOOKS nmin he ite a P 25,000 Add (deduct): adjustments 3. Accrued expenses not recorded at the end of 2010..... 1,200 bs Inventory overstatement ‘at the ‘end of 2012s (3,508) +1) & Purchases not recorded ip 201k. e mun. a tncone’eeceivedin sovance no Saqumea oe The WRT? OO 8M of 2010... ne 1,500 e. Unused supplies not taken up at the end of 2011... 900 Adjusted Net 116M enna P 23,500 P&L ratio. “10t tein: P DTRaR4 partnership and B 7. cc, PP, and AA, accountants agree to form ts in the ratio of 5:3:2. They also agreed that AA is to be allowea 2 Salary o€ 728,000, and that PP is to be guaranteed 006 as his share 9: fees are profits. ‘During the year of operation, income from 30,000, while expenses total, 96,000. What amount of net income ecited to each partner's capital ac 'P2E,000: PP, P16,800; AA, Pil, 2 225,000; PP, P21,000; AA, P36, 00C *c)P24/000; BP, "P22, 0007" AA, P38, 090 25,0007 PP, P21,000; AA, P33,000 irst 8. The capital accounts for the parinesship of LL and MM at October 31, 20x5 are os fovews U-copital....... 2. < MM, copital....... Sypris : 40,000 2.120.000 The partners share profits and losses in the ratio of 3:2 respectively. The partnership is in desperate need of cash, and the pariners agree to admit NN os o partner with one-third in the capital and profits and losses upon his investment of P30,000. Immediately after N's admission. what should be the capital balances of LL, MM and NN respectively, assuming bonus is to be recognized? ae ‘A. 50,000: P50,000; PS0,000. C. P66,667; P33,333: P50,000. 40S B. P60,000: P60,000; P60.000. D. P48,000: P32,000; P50.000. 4, ee CC % On June 30, 20x5, the condensed bolance sheet for the partnership of DDS FF, an&GG, together with their respective profit and loss sharing percentages was as follows: Assets, net of liabilities P'160,000 F qo4}2 2108 DD, copital (50%) FF, copital (30%) . 96,000 & Gy GG. capital (20%) . 64,000 ‘320.000 DD decided to retire from the partnership and by mutual agreement is to be paid P180,000 (out of partnership funds for his interest. Total goodwill or adjustment in assets implicit in the ‘agreement is to be recorded. Alter DD's retirement, what are the capital balances of the other partners? ded @D cE GG fF GG wus). Wo 0. P-84,000 56,000 cc. P108,000 72,000 0 P92 20 b, 102,000 68,000 d. 120,000 80,000 why of wh IF 10%, 1% Abalance sheet for the partnership of KK, LL, and wy, who share protits respectively, shows the following balances just before Liquidat Gash Other Assets Liabilities KK, Capital LL, Capital MM, Capital 48,000 P238,000 P80, 000 P88, 900, P62, 000 P56, 000 the first month of liquidation, P129,000 was received on the sale of in agsete. Liquidation expenses of P4 were paid, and additional idation expenses of P3,200 are antiSlited before liquidation is ted. Creditors were paid P22,400. Available cash is distributed to etners. The cash to be received by each partner based on the above KL OM pl oe LL, P28, 300; mM, P28, 300 B62 56 dog fe E 61,000; MM, P55, 000 24) (ot) 2) (WHA) Fi ac 232,700; mt, 226,700 aq RF AEA 2) 62,000; M4, PS6,000 20> condensed balance sheet of the pa ember 31, 20x8 showed the following Total assets. Total liabilitses.... China,. capital, Japan, capital. On this date, the partnership was dissolved and its net assets wore sferred to a newly-formed corporation. The fair value of the assets P24y000 more than the carrying value on the firm's books. Each of “ne fers was issued 10,000 shares of the corporation's Pi par connor we Immediately after’ affecting the cransfer of the net assets, and the ssuanco of stocks, the corporation's additional paid-in capital account would be credited for: Sey ee le Ti a aR A MS ERY SS