AdvancedAccountingSolutionManual

AntonioJ.Dayag
Chapter1
ProblemI
Requirement1: AssumingthatAandBagreethateachpartneristoreceiveacapitalcredit
equaltotheagreedvaluesofthenetassetseachpartnerinvested:
Torecordadjustments:nothingtoadjustsincebothofthemhavenosetofbooks.
Toclosethebooks:nothingtoclosesincebothofthemhavenosetofbooks.
Torecordinvestments:
Partnershipbooks:
Cash120,000
Inventory...120,000
Equipment240,000
A,capital480,000
Initialinvestment.
Cash120,000
Land240,000
Building...480,000
Mortgagepayable..240,000
B,capital.600,000
Initialinvestment.
Requirement 2: AssumingthatAandBagreethateachpartneristoreceiveanequalcapital
interest.
Torecordadjustments:nothingtoadjustsincebothofthemhavenosetofbooks.
Toclosethebooks:nothingtoclosesincebothofthemhavenosetofbooks.
Torecordinvestments:
Partnershipbooks:
BonusApproach:

Cash120,000
Inventory120,000
Equipment240,000

A,capital480,000
Cash120,000
Land240,000
Building480,000
Mortgagepayable.240,000
B,capital..600,000

B,capital60,000
A,capital.60,000
Totalagreedcapital(P480,000+P600,000).P1,080,000
Multipliedby:Capitalinterest(equal)..1/2
PartnersindividualcapitalinterestP540,000
Less:Ascapitalinterest.480,000
BonustoA..P60,000

Revaluation(Goodwill)Approach:

Cash120,000
Inventory120,000
Equipment.240,000
A,capital..480,000
Cash120,000
Land.240,000
Building....480,000
Mortgagepayable240,000
B,capital..600,000

Assets(orgoodwillorintangibleasset)...120,000
A,capital....120,000
Totalagreedcapital(P600,000/1/2)...P1,200,000
Less:Totalcontributedcapital(P480,000+
P600,000)....1,080,000
GoodwilltoA...P120,000

ProblemII

Invested
byJohn
P100,000

100,000

P100,000

AgreedFairValues
Cash
Equipment
Totalassets
Notepayableassumedbypartnership
Netassetsinvested

Invested
byJeff

P110,000
P110,000
30,000
P80,000

Invested
byJane

P0

1.BonusMethod

2.GoodwillMethod(RevaluationofAsset)

Cash
Equipment
NotePayable

Cash
Equipment
Goodwill
NotePayable

100,000
110,000

John,Capital
Jeff,Capital
Jane,Capital

30,00
0
60,00
0
60,00
0
60,00
0

100,000
110,000
90,000

30,000

John,Capital

90,000

Jeff,Capital

90,000

Jane,Capital

90,000

2. ThebonusmethodisusedwhenJohnandJeffrecognizethatJaneisbringingsomethingofvalueto
the firm other than a tangible asset, but they do not want to recognize an intangible asset. To
equalize thecapitalaccounts, P40,000 istransferred fromJohn'scapital account andP20,000is
transferredfromJeff'scapitalaccount.
ThegoodwillmethodisusedwhenthepartnersrecognizetheintangiblenatureoftheskillsJaneis
bringingtothepartnership.However,thecapitalaccountsareequalizedbyrecognizinganintangible
assetandacorrespondingincreaseinthecapitalaccountsofthepartners.Unlesstheintangible
assetcanbespecificallyidentified,suchasapatentbeinginvested,itshouldnotberecognized,
becauseofalackofjustificationforgoodwillinanewbusiness.

ProblemIII
1. (a) Cash
AccountsReceivable
OfficeSupplies
OfficeEquipment
AccountsPayable
Tom,Capital

13,000
8,000
2,000
30,000

2,000
51,000

(b)

(c)

2.

Cash
AccountsReceivable
OfficeSupplies
Land
AccountsPayable
MortgagePayable
Julie,Capital

12,000
6,000
800
30,000

Tom,Drawing
Cash

15,000

Julie,Drawing
Cash

12,000

IncomeSummary
Tom,CapitalP50,000 (P51,000/P76,000)
Julie,CapitalP50,000 (P25,000/P76,000)

50,000

Tom,Capital
Julie,Capital
Tom,Drawing
Julie,Drawing

15,000
12,000

5,000
18,800
25,000

15,000

12,000

33,553
16,447

15,000
12,000

TOMANDJULIEPARTNERSHIP
StatementofChangesinPartners'Capital
FortheYearEndedDecember31,20x4

Capitalbalances,Jan.1
Add:Additionalinvestments
Netincomeallocation
Totals
Less:Withdrawals
Capitalbalances,Dec.31

ProblemIV

Tom
P0
51,000
33,553
P84,553
15,000
P69,553

Julie
P0
25,000
16,447
P41,447
12,000
P29,447

Total
P0
76,000
50,000
P126,000
27,000
P99,000

BookofHistoberetainedbythenewpartnership.
Thefollowingproceduresaretobefollowed:
IndividualversusSoleProprietor
Booksof
Individual
N/A
N/A

*Booksof
SoleProprietor
Yes
No
Yes**
Yes

Adjustingentries
Closingentries(realaccounts)
Investments
BalanceSheet
*BooksofH;Partnershipbooks
**Investmentsofindividual;additionalinvestmentsorwithdrawalsofsoleproprietor.
1.BooksofSoleProprietor(H):
a.Torecordadjustments:
a.H,capital1,800
Allowancefordoubtfulaccounts.1,800
Additionalprovisioncomputedasfollows:
Requiredallowance:10%xP48,000=P4,800
Less:Previousbalance3,000
AdditionalprovisionP1,800

b.Interestreceivableoraccruedinterestincome.3,600
H,capital3,600
Interestincomeforninemonthscomputedasfollows:
P60,000x8%x9/12=P3,000.

c.H,capital..6,000
Merchandiseinventory..6,000
Declineinthevalueofmerchandise.
P27,000P21,000=P6,000.
d.H,capital.4,800
Accumulateddepreciation.4,800
Underdepreciation.
e.Prepaidexpenses...2,400
H,capital2,400
Expensespaidinadvance.

H,capital7,200
Accruedexpenses.7,200
Unrecordedexpenses.

Note: All adjustment that reflects nominal accounts should be coursed through the
capitalaccount,sinceallnominalaccountsarealreadyclosedatthetimeofformation.
b.Toclosethebooks:nothingtoclosesincethebooksofHwillberetained.
c.Torecordinvestment:
Cash.116,100
I,capital116,100

Initialinvestmentcomputedasfollows:
UnadjustedcapitalofHP246,000
Add(deduct):adjustments:
a.Doubtfulaccounts......(1,800)
b.Interestincome..3,600
c.Declineinthevalueofmerchandise.(6,000)
d.Underdepreciation.(4,800)
e.Prepaidexpenses..2,400
Accruedexpenses...(7,200)
AdjustedcapitalbalanceofH.....P232,200
Dividedby:CapitalinterestofH2/3
Totalagreedcapital..P348,300
Multipliedby:CapitalinterestofI..1/3
InvestmentofIP116,100
Note: The initial investment of H is already recorded since his books are already
retained. No further entry is required since there are no additional investments or
withdrawalsmadebyH.
2.Thebalancesheetforbothcasespresentedaboveisasfollows:
HIPartnership
BalanceSheet
November1,20x4
Assets

Cash
Accountsreceivables
Less:Allowancefordoubtfulaccounts...........
Notesreceivable...................................................
Interestreceivable..................................
MerchandiseInventory................................................
Prepaidexpenses..........................................

P48,000
4,800

P236,100
43,200
60,000
3,600
21,000
2,400

Equipment(net).............................................
Less:Accumulateddepreciation........
TotalAssets....................................................................

P72,000
10,800

61,200
P427,500

LiabilitiesandCapital

Liabilities
Accruedexpenses.........................................
Accountspayable...................................................
Notespayable...........................................
TotalLiabilities................................................................
Capital...........................................................................
H,capital..................................
I,capital...........................................
TotalCapital..................................................................
TotalLiabilitiesandCapital..........................................

P7,200
12,000
60,000
P79,200
P232,200
116,100
P348,300
P427,500

ProblemV
Newsetofbooks.Thefollowingproceduresaretobefollowed:
SoleProprietorversusSoleProprietor

Adjustingentries
Closingentries(realaccounts)
Investments
BalanceSheet

Booksof
SoleProprietor
(Baker)
Yes
Yes

Booksof
SoleProprietor
(Carter)
Yes
Yes

*NewSetof
Books

Yes**
Yes

*Partnershipbooks
**Additionalinvestmentsorwithdrawalsofsoleproprietors.
1.BooksofSoleProprietor
a.Torecordadjustments:
BooksofJ
a.J,capital12,000
MerchandiseInventory12,000
Worthlessinventory.
b.J,capital7,200
Allowancefordoubtful
Accounts..7,200
Worthlessaccounts.

BooksofK
a.MerchandiseInventory6,000
K,capital6,000
Upwardrevaluation.
b.K,capital..3,000
Allowancefordoubtful
accounts.3,000
Additionalprovision.
Requiredallowance:

c.Rentreceivable12,000
J,capital.12,000
Incomeearned.

e.J,capital8,400
Officesupplies.8,400
Expiredofficesupplies.
f.J,capital6,000
Accumulateddepreciation
equipment6,000
Underdepreciated.

h.J,capital.1,800
Interestpayable.1,800
Interestexpensefrom
July1toOctober1.
P60,000x12%x3/12

UnadjustedcapitalofJ..P372,000
Add(deduct):adjustments:
a.Worthlessmerchandise..(12,000)
b.Worthlessaccounts.(7,200)
c.Rentincome..12,000
e.Officesuppliesexpense.(8,400)
f.Additionaldepreciation(6,000)
h.Interestexpense(1,800)
AdjustedcapitalofJP348,600
b.Toclosethebooks:

5%xP180,000..P9,000
Less:Previous
Balance..6,000
Additional
Provision....P3,000
c.K,capital.9,600
Salariespayable.9,600
Unpaidsalaries.
d.Interestreceivable1,200
K,capital..................1,200
InterestincomefromAugust
17toOctober1.
P60,000x16%x45/360

g.K,capital12,000
Accumulateddepreciation
Furnitureandfixtures12,000
Underdepreciated.

i.Patent.48,000
K,capital..48,000
Unrecordedpatent.
UnadjustedcapitalofK.....P432,000
Add(deduct):adjustments:
a.Merchandiserevaluation..6,000
b.Worthlessaccounts.(3,000)
c.Salaries....(9,600)
d.Interestincome..1,200
g.Additionaldepreciation(12,000)
h.Patent...48,000
AdjustedcapitalofK...P462,600

BooksofJ
Allowancefordoubtful
accounts.................................12,000
Accumulateddepreciation
equipment60,000
Accountspayable159,600
Notespayable60,000
Interestpayable.1,800
J,capital..348,600
Cash90,000
Accountsreceivable.216,000
Merchandiseinventory.180,000
Officesupplies.24,000
Equipment.120,000
Rentreceivable...12,000
ClosethebooksofJ.

BooksofK
Allowancefordoubtful
accounts.................................9,000
Accumulateddepreciation
furnitureandfixtures.36,000
Accountspayable.120,000
Salariespayable.9,600
K,capital..462,600
Cash.54,000
Accountsreceivable..180,000
Notesreceivable.60,000
Interestreceivable...1,200
Merchandiseinventory..150,000
Furnitureandfixtures...144,000
Patent..48,000
ClosethebooksofK..

2.NewSetofBooks
Torecordinvestments:
Cash.
Accountsreceivable..
Merchandiseinventory..
Officesupplies..
Equipment(net)...
RentReceivable..
Allowancefordoubtfulaccounts.
Accountspayable..
Notespayable.
Interestpayable..
J,capital
Cash.
Accountsreceivable..
Notesreceivable.
Interestreceivable..
Merchandiseinventory..
Furnitureandfixtures(net)....
Patent.....
Allowancefordoubtfulaccounts.
Accountspayable..
Salariespayable..
K,capital

90,000
216,000
180,000
24,000
60,000
12,000

54,000
180,000
60,000
1,200
150,000
108,000
48,000

12,000
39,600
60,000
1,800
468,600

9,000
120,000
9,600
462,600

3.

H
P372,000
348,600
(P23,400)

Unadjustedcapital(referto1a)
Adjustedcapital(referto1b)
Netadjustments(debit)/credit

I
P432,000
462,600
P30,600

4.Thebalancesheetafterformationisasfollows:
JandKPartnership
BalanceSheet
October1,20x4
Assets
Cash...............................................................................
Accountsreceivables.................................................
Less:Allowancefordoubtfulaccounts.........
Notesreceivable...................................................
Interestreceivable..................................
Rentreceivable.......................................
MerchandiseInventory................................................
Officesupplies...............................................................
Equipment(net).............................................
Furnitureandfixtures(net).................
Patent...............................................
TotalAssets....................................................................
LiabilitiesandCapital
Liabilities
Salariespayable...................................
Accountspayable..................................................
Notespayable..........................................
Interestpayable....................................
TotalLiabilities...............................................................
Capital
J,capital..................................
K,capital.........................................
TotalCapital..................................................................
TotalLiabilitiesandCapital..........................................

ProblemVI
1.TotalassetsP1,094,000,atfairvalue
2.TotalliabilitiesP540,000,atfairvalue

P396,000
21,000

P144,000
375,000
60,000
1,200
12,000
330,000
24,000
60,000
108,000
48,000
P1,162,200

P9,600
159,600
60,000
1,800
P231,000
P468,600
462,600
P931,200
P1,162,200

3.TotalcapitalP554,000(P1,094,000P540,000)

BalanceSheet
Assets

January1,2009
LiabilitiesandCapital

Cash

P70,000

AccountReceivable(net)
MerchandiseInventory
Building(net)
FurnitureandFixture(net)

108,000
208,000
600,000
108,000

Liabilities
AccountsPayable
MortgagePayable
TotalLiabilities
Capital:

P190,000
__350,000
P540,000

AccountsPayable

L,Capital

P260,000

MortgagePayable

M,Capital

___294,000

TotalAssets

_________
_
P1,094,00
0

TotalCapital
TotalLiabilitiesandCapital

P554,000
P1,094,000

MultipleChoiceChapter1
1.cP45,000
2.atheprevailingsellingpricewhichisalsothefairmarketvalue.

3.

c
Cash
Property
Mortgage
assumed
Equipment
Amount
creditedto

capital
accounts

Thecapitalbalancesofeachpartneraredetermined
asfollows:
Apple
Blue
Crown
P50,000
P80,000
(35,000)
P55,000
P50,000

P45,000

P55,000

4.c(P190,000P160,000)x1/2=P15,000
5.dtheprevailingsellingpricewhichisalsothefairmarketvalue.
6.a

TotalAgreedCapital(P50,000/40%)...............
Less:TotalContributedCapital(P65,000+P50,000)..................
Goodwill(revaluationofassetsupward)..................

P125,000
115,000
P10,000

Assets,fairvalue(P20,000+P60,000+P15,000)P95,000
Less:Liabilitiesassumed..30,000
Bill,capital..P65,000

7.bP330,000=P50,000+(P310,000P30,000)

8
.

The capital balances of William (WW) and Martha (MM) at the date of
partnershipformationaredeterminedasfollows:
William
Martha
Cash
P20,000
P30,000

Inventory
Building
Furnitureandequipment
Total
Lessmortgageassumed
bypartnership
Amountscreditedtocapital
9.c

15,000
P35,000

15,000
40,000

P85,000

P35,000

(10,000)
P75,000

Evan

Helen

Unadjustedcapital
Add(deduct)adjustments:

59,625

33,500

Allowance
Depreciation
Adjustedcapital

(555)
______
59,070

(405)
(900)
32,195

10.c:JonesP80,000+P400,000P120,00=P360,000
SmithP40,000+P280,000P60,000=P260,000
11.cP35,374refertoNo.12
12.cP17,687
UnadjustedcapitalofCC.P33,000
Add(deduct):adjustments
Allowancefordoubtfulaccounts(3%xP14,200)...(426)
Increaseinmerchandiseinventory(P23,000P20,000)3,000
Prepaidsalary....600
Accruedrentexpense(800)
AdjustedcapitalbalanceofCCP35,374
Dividedby:CapitalinterestofCC....2/3
TotalcapitalofthepartnershipP53,061
Less:AdjustedcapitalbalanceofCC..35,374
CapitalbalanceofDD..P17,687
13.a
Totalassets:
Cash
Machinery
Building
LessLiabilities(Mortgagepayable)
Netassets(equaltoFFscapitalaccount)
14.d
FF,capital(seeno.13)

P70,000
75,000
225,000

P370,000
90,000
P280,000

P280,000

DividebyFFsP&Lsharepercentage
Totalpartnershipcapital
RequiredcapitalofCC(P400,000x30%)
LessAssetsalreadycontributed:
Cash
Machineryandequipment
Furnitureandfixtures
CashtobeinvestedbyCC

70%
P400,000
P120,000
P30,000
25,000
10,000

15.(a)
AdjustedcapitalofLL(2/3):
Unadjustedcapital

65,000
P55,000

P158,400

Adjustments:
Prepaidexpenses
Accruedexpenses
Allowanceforbaddebts(5%xP100,000)
Adjustedcapital

17,500
(5,000)
(5,000)
P165,900

Totalpartnershipcapital(P165,900/2/3)
MultiplybyMMsinterest
MMscapital
LessMerchandisecontributed
CashtobeinvestedbyMM

P248,850
1/3
P82,950
50,000
P32,950

16.d
AdjustedcapitalofLL
ContributedcapitalofMM
Totalcapital
17.a
FF,capital:
Unadjustedbalance
Adjustments:
Accumulateddepreciation
Allowancefordoubtfulaccount
Adjustedbalance
GG,capital:
Unadjustedbalance
Adjustments:
Accumulateddepreciation

P165,900
82,950
P248,850

P57,000

(1,500)
(12,000)

P43,500
P49,500
(4,500)

Allowancefordoubtfulaccount
Adjustedbalance

(4,500)

P40,500

18.c
GGsadjustedcapital(seeno.17)
DividebyGGsP&Lsharepercentage
Totalpartnershipcapital
MultiplybyFFsP&Lsharepercentage
FFscapitalcredit
FFscontributedcapital(seeno.1)
AdditionalcashtobeinvestedbyFF

P40,500
40%
P101,250
60%
60,750
43,500
P17,250

19.d
Totalcapitalofthenewpartnership(seeno.20)
MultiplybyRRsinterest
CashtobeinvestedbyRR

P296,875
20%
P59,375

20.(a)

Unadjustedcapitalbalances
Adjustments:
Allowanceforbaddebts
Inventories
Accruedexpenses
Adjustedcapitalbalances

OO
PP Total
(60%) (40%)
P133,000P108,000P241,000
(2,700)(1,800)(4,500)
3,0002,0005,000
(2,400)(1,600)(4,000)
P130,900P106,600P237,500

Totalcapitalbeforetheformationofthenewpartnership(seeabove)
DividebythetotalpercentageshareofOOandPP(50%+30%)
TotalcapitalofthepartnershipaftertheadmissionofRR
21.a
OO
PP

AgreedCapital
ContributedCapital
P148,437.50(50%xP296,875)
P130,900
89,062.50(30%xP296,875)
106,600

P237,500
80%
P296,875

Settlement
P17,537.50
(17,537.50)

Therefore,OOwillpayPPP17,537.50
22.c
Totalpartnershipcapital(P113,640/1/3)
LessDDscapital
CCscapitalafteradjustments
Adjustmentsmade:

P340,920
113,640
P227,280

Allowancefordoubtfulaccount(2%xP96,000)
Merchandiseinventory
Prepaidexpenses
Accruedexpenses
CCscapitalbeforeadjustments

1,920
(16,000)
(5,200)
3,200
P211,200

23.a
AssetsinvestedbyCC:
Cash:
Capital
P211,200
AddAccountspayable
49,600
Totalassets(excludingcash)
260,800
LessNoncashassets(96,000+P144,000)
240,000P20,800
Accountsreceivable(96,000P1,920)
94,080
Merchandiseinventory
160,000
Prepaidexpenses
5,200
CashinvestedbyDD
Totalassetsofthepartnership

P280,080
113,640
P393,720

24.d
Totalpartnershipcapital(P180,000/60%)

P300,000

GGsCapital(P300,000x40%)
LessCashinvestment
MerchandisetobeinvestedbyGG

P120,000
30,000
P90,000

25.a
AdjustedcapitalofJJ:
Totalassets(atagreedvaluations)
LessAccountspayable
RequiredcapitalofJJ
CashtobeinvestedbyJJ

P180,000
48,000
P132,000
180,000
P48,000

Theories

1. d

6.

11.

16.

2
.
3
.
4
.
5

7.

12.

17.

8.

13.

18.

9.

14.

10,

15,