SOLUTIONS MANUAL for use with volume 1advanced ACCOUNTING PRINCIPLES AND PROCEDURAL APPLICATONS2011 EDITION

SOLUTIONS MANUAL for use withvolume 1advanced ACCOUNTING PRINCIPLES AND PROCEDURAL APPLICATONS 2011 EDITION Contents CHAPTER 1: Partnership – Basic Considerations and Formation CHAPTER 2: Partnership Operations CHAPTER 3: Partnership Dissolution – Changes in Ownership CHAPTER 4: Partnership Liquidation CHAPTER 5: Partnership Liquidation by Installment CHAPTER 6: Joint Venture (PAS 31) CHAPTER 7: Corporation in Financial Difficulty – Liquidation CHAPTER 8: Reorganization and Troubled Debt Restructuring CHAPTER 9: Installment Sales CHAPTER 10: Long-Term Construction Contracts (PAS 11) CHAPTER 11: Franchise Accounting Partnership – Basic Considerations and Formation 1 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)  2/3 = 180,000 x 1/3 = 60,000. 1-3: a Cash P100,000 Land 300,000 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 capital P200,000 Less:Non-cash asset contributed at market value Land P 70,000 Building 90,000 Mortgage Payable ( 40,000) _120,000 Cash contribution P 80,000 1-5: d - Zero, because under the bonus method, a transfer of capital is only required. 1-6: b Reyes Santos Cash P200,000 P300,000 Inventory – 150,000 Building – 400,000 Equipment 150,000 Mortgage payable ________ ( 100,000) Net asset (capital) P350,000 P750,000 1-7: c AA BB CC Cash P 50,000 Property at Market Value P 80,000 Mortgage payable ( 35,000) Equipment at Market Value _______ _______ P55,000 Capital P 50,000 P 45,000 P55,000 2 Chapter 1 1-8: a PP RR SS Cash P 50,000 P 80,000 P 25,000 Computer at Market Value __25,000 _______ __60,000 Capital P 75,000 P 80,000 P 85,000 1-9: c Maria Nora Cash P 30,000 Merchandise inventory P 90,000 Computer equipment 160,000 Liability ( 60,000) Furniture and Fixtures 200,000 ________ Total contribution P230,000 P190,000 Total agreed capital (P230,000/40%) P575,000 Nora's interest ______60% Nora's agreed capital P345,000 Less: investment 190,000 Cash to be invested P155,000 1-10: d Roy Sam Tim Cash P140,000 – – Office Equipment – P220,000 – Note payable ________ _( 60,000) ______ Net asset invested P140,000 P160,000 P – Agreed capitals, equally (P300,000/3) = P100,000 1-11: a Lara Mitra Cash P130,000 P200,000 Computer equipment – 50,000 Note payable ________ _( 10,000) Net asset invested P130,000 P240,000 Goodwill (P240,000 - P130,000) = P110,000 1-12: a Perez Reyes Cash P 50,000 P 70,000 Office Equipment 30,000 – Merchandise – 110,000 Furniture 100,000 Notes payable _______ ( 50,000) Net asset invested P 80,000 P230,000 Partnership – Basic Considerations and Formation 3 1-12: Continued Bonus Method: Total capital (net asset invested) P310,000 Goodwill Method: Net assets invested P310,000 Add: Goodwill (P230,000-P80,000) _150,000 Net capital P460,000 1-13: b Required capital of each partner (P300,000/2) P150,000 Contributed capital of Ruiz: Total assets P105,000 Less Liabilities __15,000 __90,000 Cash to be contributed by Ruiz P 60,000 1-14: d Total assets: Cash P 70,000 Machinery 75,000 Building _225,000 P370,000 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 capital P400,000 Required capital of Cruz (P400,000 X 30%) P120,000 Less Assets already contributed: Cash P 30,000 Machinery and equipment 25,000 Furniture and fixtures __10,000 __65,000 Cash to be invested by Cruz P 55,000 1-15: d Adjusted assets of C Borja Cash P 2,500 Accounts Receivable (P10,000-P500) 9,500 Merchandise inventory (P15,000-P3,000) 12,000 Fixtures __20,000 P 44,000 Asset contributed by D. Arce: Cash P 20,000 Merchandise __10,000 __30,000 Total assets of the partnership P 74,000 4 Chapter 1 1-16: a Cash to be invested by Mendez: Adjusted capital of Lopez (2/3) Unadjusted capital P158,400 Adjustments: Prepaid expenses 17,500 Accrued expenses ( 5,000) Allowance for bad debts (5% X P100,000) _( 5,000) Adjusted capital P165,900 Total partnership capital (P165,900/2/3) P248,850 Multiply by Mendez's interest ⅓ Mendez's capital P 82,950 Less Merchandise contributed __50,000 Cash to be invested by Mendez P 32,950 Total Capital: Adjusted capital of Lopez P165,900 Contributed capital of Mendez __82,950 Total capital P248,850 1-17: d Moran, capital (40%) Cash P 15,000 Furniture and Fixtures _100,000 P115,000 Divide by Moran's P & L share percentage ______40% Total partnership capital P287,500 Multiply by Nakar's P & L share percentage ______60% Required capital of credit of Nakar: P172,500 Contributed capital of Nakar: Merchandise inventory P 45,000 Land 15,000 Building __65,000 Total assets P125,000 Less Liabilities __30,000 P 95,000 Required cash investment by Nakar P 77,500 1-18: c Garcia's adjusted capital (see schedule 1) P40,500 Divide by Garcia's P & L share percentage ______40% Total partnership capital P101,250 Flores' P & L share percentage ______60% Flores' capital credit P 60,750 Flores' contributed capital (see schedule 2) __43,500 Additional cash to be invested by Flores P 17,250 Partnership – Basic Considerations and Formation 5 1-18: Continued Schedule 1: Garcia, capital: Unadjusted balance P 49,500 Adjustments: Accumulated depreciation ( 4,500) Allowance for doubtful account ( 4,500) Adjusted balance P 40,500 Schedule 2: Flores capital: Unadjusted balance P 57,000 Adjustments: Accumulated depreciation ( 1,500) Allowance for doubtful accounts ( 12,000) Adjusted balance P 43,500 1-19: d Ortiz Ponce Total ( 60%) ( 40%) Unadjusted capital balances P133,000 P108,000 P241,000 Adjustments: Allowance for bad debts ( 2,700) ( 1,800) ( 4,500) Inventories 3,000 2,000 5,000 Accrued expenses _( 2,400) ( 1,600) ( 4,000) Adjusted capital balances P130,900 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 Roxas P296,875 Multiply by Roxas' interest ______20% Cash to be invested by Roxas P 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 Gomez P 90,000 Cash to be invested by Jocson: Adjusted capital of Jocson: Total assets (at agreed valuations) P180,000 Less Accounts payable __48,000 P132,000 Required capital of Jocson _180,000 Cash to be invested by Jocson P 48,000 6 Chapter 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, capital P 65,000 1-22: c Total partnership capital (P113,640/1/3) P340,920 Less Divino's capital _113,640 Cortez's capital after adjustments P227,280 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 admission of Divino P211,200 1-23: a Total assets at fair value P4,625,000 Liabilities (1,125,000) Capital balance of Flora P3,500,000 1-24: c Total capital of the partnership (P3,500,000 ÷ 70%) P5,000,000 Eden agreed profit & loss ratio 30% Eden agreed capital 1,500,000 Eden contributed capital at fair value 812,000 Allocated cash to be invested by Eden P 688,000 1-25: c __Rey __Sam_ __Tim __Total_ Contributed capital (assets-liabilities)P471,000 P291,000 P195,000 P957,000 Agreed 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 ÷ 40%) P225,000 Contributed capital of Candy (P126,000+P36,000-P12,000) 150,000 Total agreed capital (P90,000 ÷ 40%) 225,000 Candy, agreed capital interest 60% Agreed capital of Candy 135,000 Contributed capital of Candy 150,000 Withdrawal of Candy P 15,000 Partnership – Basic Considerations and Formation 7 1-27: a Total agreed capital (210,000 ÷ 70%) P300,000 Nora’s interest 30% Agreed capital of Nora P 90,000 Cash invested 42,000 Merchandise to be invested by Nora P 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: d Zero, because the bonus method involves only a transfer of capital. 1-30: b Noy Bi Cash P 10,000 P 14,000 Accounts receivable- Net 92,000 92,000 Merchandise inventory 216,000 150,000 Computer equipment 24,000 14,000 Furniture and fixtures 18,000 ---- Total assets at fair value 360,000 270,000 Accounts payable (108,000) (72,000) Net assets invested 252,000 198,000 Agreed capital 250,000 200,000 Goodwill (withdrawal) P (2,000) P 2,000 1-31: c Villar Roxas Cash P 2,205,000 P - Office equipment 630,000 - Merchandise inventory - 1,575,000 Notes payable ( 210,000) - Contributed capital 2,625,000 1,575,000 Agreed capital 2,520,000 1,680,000 Bonus to Roxas P( 105,000) P 105,000 1-32: b Total capital before adjustments (P210,750 + P103,000) P313,750 Allowance for doubtful accounts ( 10,000) Accumulated depreciation (P1,000 – P500) 500 Obsolete inventory ( 3,500) Total assets of the partnership P300,750 8 Chapter 1 1-33: b Gibo Edu Cash P 19,200 P136,800 Accounts receivable 163,200 129,600 Merchandise inventory 240,000 216,000 Equipment 60,000 - Accounts payable (60,000) (96,000) Notes payable (12,000) - Contributed capital 410,400 386,400 Loss on sale of equipment (1,800) 1,800 Net assets 408,600 388,200 Additional investment by Edu - 20,400 Agreed capital P408,600 P408,600 1-34: a Garnet