CHAPTER 3
Ex. 1
a) Cash
Diaz, Capital
250,000
250,000
Equipment
Cash
Bravo, Capital
150,000
100,000
250,000
b) Service Revenue
4,970,000
Depreciation Expense
500,000
Rent Expense
1200,000
Representation Expense
480,000
Salaries Expense
850,000
Supplies Expense
250,000
Transportation Expense
675,500
Utilities Expense
475,000
Income & Expense Summary
539,500
Income & Expense Summary
Bravo, Drawing
Diaz, Drawing
Capital Jan 1
Profit share
Drawings
539,500
269,750
269,750
Diaz
P 250,000
269,750
(40,000)
P 479,750
Bravo
P 250,000
269,750
(50,000)
P469,750
Total
P 500,000
539,500
(90,000)
P 949,500
Ex. 2
Entries:
1) Gain
Sales
Sales Discount
IncomeSummary
30,000
2,498,140
11,620
2,516,520
3) Income Summary
Rent
Insurance
Other Oper Exp.
Depreciation
Bad Debts
883,050
520,350
128,500
201,700
31,000
1,500
24
2) Inventory, end
Income Summary
Inventory, beg.
Purchases
Freight In
125,800
985,130
5)Income Summary
Young, Drawings (450/1,000)
Go, Drawings (550/1,000)
4) Income Summary
Taxes Payable
537,500
545,890
27,540
194,502
194,502
453,838
204,227
249,611
d.
HYPER SUPER MART
STATEMENT OF CHANGES IN PARTNERS’ EQUITY
For the year ended, Dec. 31, 2018
YOUNG
450,000
204,227
654,227
(40,040 )
P614,187
Balances, Jan. 1
Add Share in Net Income
Total
Less: Regular Drawings
Balances, Dec. 31
e.
GO
550,000
239,611
789,611
(32,500 )
P757,111
TOTAL
1,000,000
453,838
1,453,838
(72,540)
P1,371,298
ROS (453,838 / 2,486,520) = 18.25%
ROE (453,838 / 1,371,298) = 33.095% or if you use average capital of P1,185,649= 38.28%
ROE of each partner: 204,227/(614,187+450,000) = 204,227/532,093.50= 38.38%
2
239,611/ 653,555.5 = 36.66%
Ex. 3
1. Barbie, Drawing (40,000 – 103,333)
Hannah, Drawing (60,000- 206,667)
Income & Expense Summary
63,333
146,667
2. Income & Expense Summary
720,000
Barbie, Drawing(80 + 1/3 of P520)
Hannah, Drawing(120 + 2/3 of P520)
210,000
253,333
466,667
Equity as at
Dec 31, 2015
and 2016:
Barbie 450,000 – 63,333 -40,000 = 346,667 + 253,333 – 80,000 = P 520,000
25
Hannah 900,000 – 146,667 -60,000= 693,333 + 466,667 – 120,000 = P1,040,000
Ex. 4:a) Income Summary
Valera, Drawings
Rivera, Drawings
Chan, Drawings
45,000
b) Income Summary
Valera, Drawings
Riviera, Drawings
29,250
Income Summary
Valera, Drawings
Rivera, Drawings
Chan, Drawings
24,750
20,000
15,000
10,000
16,500
12,750
12,375
8,250
4,125
c)
Total
Tax liability
For distribution
Salary for Valera
10% interest on capital
Remainder equally
Income Summary
Valera, Drawings
Rivera, Drawings
Chan, Drawings
Valera
Rivera
Chan
27,000
4,500
5,500
37,000
3,000
5,500
8,500
1,500
5,500
7,000
Total
75,000
(22,500)
52,500
(27,000)
( 9,000)
(16,500)
-
Chan
15,000
7,000
(6,000)
16,000
Total
90,000
52,500
(37,500)
105,000
52,500
37,000
8,500
7,000
D
d. Statement of partners’ equity:
Capital investment
Profit share
Drawings
Capital, Dec 31
Valera
45,000
37,000
(18,000)
64,000
Rivera
30,000
8,500
(13,500)
25,000
26
Ex. 5
a. Revenue & Expense Summary
Max, Drawing
Kenneth, Drawing
12% Interest
6,000 salary x 12 months
Remainder
b. Kenneth, Drawing
Max, Drawing
Revenue & Expense Summary
12% Interest
Salary 6,000 x 12
Remainder
170,000
127,000
43,000
Max
30,000
72,000
25,000
127,000
Kenneth
18,000
Total
48,000
72,000
50,000
170,000
25,000
43,000
78,000
162,000
240,000
Max
30,000
72,000
(180,000)
(78,000)
Kenneth
18,000
(180,000)
(162,000)
Total
48,000
72,000
(360,000)
( 240,000)
c.
Revenue & Expense Summary
Mac, Drawing
84,000
Net Income before tax
30% tax
Net Income after tax
P120,000
36,000
P 84,000
12% Interest
6,000 salary x 12 months
Remainder
d. * Revenue & Expense Summary
Kenneth, Drawing
Max, Drawing
84,000
Max
30,000
72,000
(18,000)
84,000
Kenneth
18,000
(18,000)
0
Total
48,000
72,000
(36,000)
84,000
77,175
59,587.50
17,587.50
110,250 x .7= P77,175 after tax.
27
Max
15,000.00
36,000.00
(8,587.5)
59,587.5
6% Interest
6,000 salary x 6 months
Remainder
e. Kenneth, Drawing
Max, Drawing
Revenue & Expense Summary
3% Interest
6,000 salary x 3 months
Remainder
Kenneth
9,000.00
(8,587.5)
(17,587.5)
Total
24,000.00
36,000.00
( 17,175.00)
77,175.00
48,000
27,000
75,000
Max
7,500
18,000
(52,500)
(27,000)
Kenneth
4,500
(52,500)
(48,000)
Total
12,000
18,000
( 105,000)
( 75,000)
6. a) Beg Capital ratio: 1,800/3,000 x 140,000= 84,000 1,200/3,000 x 140,000= 56,000
*Income & Expense Summary
Reina, Drawing
Ador, Drawing
140,000
84,000
56,000
b) Ending Capital ratio: 1,500/3,500 x 140,000= 60,000
2,000/3,050 x 140,000=80,000
*Income & Expense Summary
Reina, Drawing
Ador, Drawing
140,000
c) Average Capital: Reina (1,800,000 x 5)
(1,500,000 x 7)
9,000,000
10,500,000
19,500,000/12 = 1,625,000
Ador (1,200,000 x 9)
(2,000,000 x 3)
60,000
80,000
10,800,000
6,000,000
16,800,000/12 = 1,400,000
*Income & Expense Summary
140,000
Reina, Drawing (1,625/3,025)
75,207
Ador, Drawing (1,400/3,025)
64,793
28
The ending capital ratio will give Ador a higher share because of his additional investment of P80,000
resulting in a higher ending balance compared to that of Reina.
Ex. 7
Option 1
20% bonus
Remainder 2:1
Joffre
Option 2
10% interest
Salary
Remainder 1:1
Joffre
P 80,000
240,000
240,000
115,000
P195,000
Ric
90,000
120,000
210,000
Total
90,000
360,000
450,000
Ric
40,000
100,000
115,000
P255,000
Total
120,000
100,000
230,000
450,000
Considering contribution of Joffre is twice that of Ric, although Ric is a managing partner, profit should
be more or less the same, Option 1 would be better.
Ex 8. 240,000/.4= 600,000 x .6= 360,000 required capital for Bruce - P194,000 non cash investment=
Addtl cash investment required for Bruce P166,000.
a.
Cash
Accounts Receivable
Inventory
Equipment
Accounts Payable
Notes Payable
Bruce, Capital
Inventory
Cash
Rachel, Capital
166,000
30,000
138,000
240,000
200,000
14,000
360,000
146,500
93.500
240,000
240/.4= 600,000 x .6= 360,000 for Bruce.
b. Statement of Financial Position:
29
Cash
Accounts Receivable
Inventory
Equipment
Total Assets
P259,500
30,000
284,500
240,000
P814,000
Accounts Payable
Notes Payable
Bruce, Capital
Rachel, Capital
Total Liabilities & Partners’ Equity
P 200,000
14,000
360,000
240,000
P814,000
c. Table to distribute profit:
6% Interest
Salary allowance
10% charge on excess drawings
Remainder
d. Income Summary
Bruce, Drawings
Rachel, Drawings
Bruce
21,600
30,000
12,750
64,350
Rachel
14,400
30,000
(1,000)
12,750
56,150
Total
36,000
60,000
(1,000)
25,500
120,500
Rachel
240,000
56,150
(40,000
P256,150
Total
600,000
120,500
(70,000)
P650,500
Rachel
28,800
60,000
29,000
117,800
Total
72,000
120,000
58,000
P250,000
120,500
64,250
56,150
e. Statement of Partners’ Equity
Beg Capital
Profit Share
Drawings
Partners’ Equity
Bruce
360,000
64,350
(30,000)
P394,350
Ex 9.
c. Table to distribute profit:
12% Interest
Salary allowance
Remainder
Bruce
43,200
60,000
29,000
132,200
30
d.
Income Summary
Bruce, Drawings
Rachel, Drawings
250,000
132,200
117,800
e. Statement of Partners’ Equity
Bruce
394,350
132,200
(50,000)
P476,550
Beg Capital
Profit Share
Drawings
Partners’ Equity
Rachel
256,150
117,800
(60,000
P313,950
Total
650,500
250,000
(110,000)
P790,500
Ex. 10
Net income (6,750-4,050-1,012.5) = 1,687.5 x 30% = P506,250
Income & Expense Summary
Taxes Payable
506,250
*Income & Expense Summary
1,181,250
Betty, Drawing (120,000 + 439,250)
Jane, Drawing (120,000 + 502,000)
559,250
622,000
Betty
560,000
179,200
559,250
(140,000)
1,158,450
Total
1,200,000
300,000
1,181,250
( 250,000)
2,431,250
Jan. 1, Capital
Jan. 1 Drawings
Profit Share
Drawings
Dec. 31, Capital
11. b. Amber:
Berta
506,250
Jan. 1
Mar 30
Oct 30
Jan. 1
Apr 30
Oct 30
Jane
640,000
120,800
622,000
(110,000)
1,272,800
105,000 x 12 1,260,000
20,000 x 9
180,000
50,000 x 2
(100,000)
1,340,000 / 12 = 111,667
140,000 x 12 1,680,000
15,000 x 8 (120,000)
40,000 x 2 ( 80,000)
1,480,000 /12
123,333
31
Income & Expense Summary 120,000
Aubrey, Drawing
Billy, Drawing
59,417
60,583
Aubrey
11,167
48,250
59,417
Billy
12,333
48,250
60,583
10% Interest
Remainder
a. Amber:
Berta
Jan. 1
Mar 30
105,000 x 12 1,260,000
20,000 x 9
180,00 0
1,440,000/ 12= 120,000
Jan. 1
Apr 30
140,000 x 12 1,680,000
15,000 x 8 (120,000)
1,560,000/ 12= 130,000
10% Interest
Remainder
Amber
12,000
47,500
59,500
Berta
13,000
47,500
60,500
Revenue & Expense Summary
Amber, Drawing
Berta, Drawing
Ex 12.
Total
23,500
96,500
120,000
Total
25,000
95,000
120,000
120,000
59,500
60,500
Bert
Ben
Bello
Total
120,000
120,000
24,000
78,000
56,000
280,000
200,000
478,000
You don’t have to fill up completely the table.Required anyway is only to determine profit to be earned.
a) Salary 10,000 x 12
b) 12% interest
b) 2:1:2 (56,000/20%)
Ex 13.
Glas
1)
Salaries
Remainder
240000
240000
Poe
240,000
240,000
Co
Total
120,000 120,000
______
480,000
120,000
600,000
32
2) Income Summary
Glas Drawings
Poe Drawings
Co Drawings
Initial Investments
Drawings
Share in net profit
Balances Dec 31
600,000
240,000
240,000
120,000
Glas
P200,000
( 30,000)
240,000
P 410,000
Poe
P200,000
( 30,000)
240,000
P410,000
Glas
Poe
Co
(60,000)
120,000
60,000
Total
400,000
(120,000)
600,000
880,000
Co
240,000
56,800
296,800
Total
240,000
710,000
950,000
Ex 14.
b)
Salaries
Remainder
Income Summary
Glas Drawings
Poe Drawings
Co Drawings
Jan 1, 2012
Drawings
Share in net profit
Balances Dec 31,2012
326,600
326,600
950,000
326,600
326,600
56,800
Glas
P410,000
(120,000)
326,600
P 616,600
15. a) Net Income before tax
Tax of 30%
Net Income after tax
Salary
Interest
Balance
*
326,600
326,600
Poe
P410,000
(120,000)
326,600
P616,600
Co
Total
60,000
880,000
(240,000)
(480,000)
296,800
950,000
P116,800 P1,350,000
225,000
67,500
157,500
Dela Cruz
Quizon
45,000
(17,250)
P27,750
27,000
(17, 250)
P 9,750
Income Summary
Dela Cruz, Drawing
Quizon, Drawing
Ocampo, Drawing
Ocampo
120,000
P120,000
Total
120,000
72,000
(34,500)
P157,500
157,500
27,750
9,750
120,000
b)
33
Salary
Interest
Remainder
Dela Cruz
Quizon
45,000
(103,500)
,(58,500)
27,000
(103,500)
(76,500)
Dela Cruz, Drawing
Quizon, drawing
Ocampo, Drawing
Income Summary
Ocampo
60,000
60,000
Total
60,000
72,000
(207,000)
( 75,000)
58,500
76,500
60,000
75,000
Ex 16
Salary or bonus
Profit share
a)
Salary
Remainder
Total
A
60,000
60,000
120,000
A
60,000
40,000
100,000
B
C
60,000
60,000
60,000
60,000
B
C
25,000
25.000
Total
60,000
180,000
240,000
Total
60,000
90,000
150,000
25,000
25,000
17.
a. Revenue & Expense Summary
Beth, Drawing
Luz, Drawing
Ana, Drawing
a) Salaries
b) Bonus 20% of 180,000
c) 2:1:1
b. Let B
B + 0.20B
B
480,000
228,000
126,000
126,000
Beth
Luz
120,000
120,000
96,000
12,000
6,000
228,000
126,000
Ana
120,000
6,000
126,000
Total
380,000
96,000
24,000
480,000
= 20% (480,000 – 360,000 - B)
= 24,000 - 0.20 B
= 24,000
= 20,000
Beth
Luz
Ana
Total
34
Salaries
20% Bonus
Rem 2:1:1
*
120,000 120,000
20,000
50,000
25,000
190,000
145,000
Income Summary
Beth, Drawing
Luz, Drawing
Ana, Drawing
120,000
360,000
20,000
100,000
480,000
25,000
145,000
480,000
190,000
145,000
145,000
c. Beth, Drawing
Luz, Drawing
Ana, Drawing
Income Summary
90,000
45,000
45,000
180,000
18.
Luz
60,000
a) Salaries
a) Bonus 20% of 425,000
b) 2:1:1
B
=
=
=
NI =
40,000
100,000
Total
180,000
85,000
160,000
425,000
20% of (180,000 +160,000 + B)
68,000 + .2B
68,000 / .8 = 85,000
85,000 / .2 = 425,000
a) Salaries
b) 2:1:1
Luz
160,000
20,000
100,000
Ana
______
0
Total
360,000
(80,000)
280,000
No Bonus. There is no income based on remainder.
19. P222,000-111,000= net income of P111,000
a)
Appropriation Table
Zed
Wye
10% interest
15,000
14,000
Salary
12,000
Balance
40,000
30,000
Profit Share
55,000
56,000
Total
29,000
12,000
70,000
111,000
35
b)
Current Account:
Beg Balance
Profit share
Drawings
Current, End Bal
Zed
32,000
55,000
(42,000)
45,000
Wye
29,000
56,000
(37,000)
48,000
Total
61,000
111,000
( 79,000)
93,000
Zed
150,000
45,000
195,000
Wye
140,000
48,000
188,000
Total
290,000
93,000
383,000
c)
Capital accounts
Current accounts
Ending equity
20.
260000 – 180,000 = 8,000 profit
Quinlan
15% interest
7,500
Salary
70,000
Balance
(41,000)
Profit Share
36,500
21.
Alves
4,500
80,000
(41,000)
43,500
Total
12,000
150,000
(82,000)
80,000
Beg Balance
Profit share
Drawings
Current, End Bal
Quinlan
20,000
36,500
(15,000)
41,500
Alves
(40,000)
43,500
(15,000)
(11,500)
Total
( 20,000)
80,000
( 30,000)
30,000
Capital accounts
Current accounts
Ending equity
Quinlan
50,000
41,500
91,500
Alves
30,000
(11,500)
18,500
Total
80,000
30,000
110,000
Profit Sharing Table
Mel
Salaries
60,000.00
Jay
90,000.00
Total
150,000.00
36
12% interest
Rem Equally
7,200.00
121,631.50
4,800.00
53,157.75
12,000.00
243,263.00
Total
188,831.50
216,431.50
405,263.00
Worksheet is on the next page
LEGAL AND ETHICAL ISSUES
1. As a rule the industrial partner should not engage in business for himself. It is his obligation to devote
his time to the partnership where his contribution is only in the form of service. He cannot use the same
talent, or his time specially in the same line of business to the detriment of the partnership.Art 1789.
2. Yes professional ethics will be violated since there will be a conflict of interest, independence in mental attitude is
also violated.
3. The answer is the same because of the time involved and his attention which will be divided in case
he engages in another business. He needs the permission of the capitalist partners.
ACCOUNTING ISSUES
1. C gets P70,000 and the balance is divided by A and B based on capital contribution.
2. Unless stipulated, C does not share in the loss. The P350,000 is divided by A and B
Based on their P and L ratio. Art 1797.
37
Cash
Accounts Receivable
Allow. for Bad Debts
Notes Receivable
Unexpired Insurance
Furniture & Fixtures
Accum. Depn. – Furn.
Equipment
Accum. Depn. Equipt
Accounts Payable
Notes Payable
Unearned Service
Jay, Capital
Jay, Personal
Mel, Capital
Membership Fee
Service Fees
Advertising Expense
Taxes & Licenses
Rent
Sales Salaries
Office Salaries
Store Supplies
Office Supplies
Utilities
Interest Expense
Interest Income
Loss on Cash Flow Hedge
TOTAL
Bad Debts Expense
Depn. Exp. -Furn&Fix
-Equipt.
Insurance Expense
Accrued Int.
Prepaid Interest
TRIAL BALANCE
Debit
Credit
P58,850
32,400
2,500
19,000
2,575
238,000
5,950
MJ THAI SPA
WORKSHEET
FOR THE YEAR ENDED DEC. 31, 2018
ADJUSTING ENTRIES
ADJ. TRIAL BAL.
INCOME STATEMENT
Debit
Credit
Debit
Credit
Debit
Credit
Debit
58,850
32,400
1)
740
3,240
19,000
4) 1287.5
1,287.5
238,000
2)11,900
17,850
432,000
432,000
21,600
15,000
50,000
600
60,000
2) 21,600
432,000.0
43,200.0
15,000.0
50,000.0
300.0
60,000.0
3,600
40,000
945,900
1530,50
3)
300,160
108,970
644,000
346,000
150,000
3,400
2,090
310,850
10,610
5,455
5)
3,600
40,000
945,900
1530,80
300
6) 8,250
FINANCIAL POSITION
Debit
Credit
58,850.0
32,400.0
3,240.0
19,000.0
1,287.5
238,000.0
17,850.0
43,200
15,000
50,000
300
60,000
3) 300.0
3,600
15,000
2,677,505
JAY, PERSONAL MEL, PERSONAL
Credit
Debit
Credit
300,160
108,970
644,000
346,000
150,000
3,400
2,090
310,850
2,360
150
40,000.0
945,900
1530,800
300,160
108,970
644,000
346,000
150,000
3,400
2,090
310,850
2,360
5,605
5,605
7,500
7,500
2,677,505
1) 740
2)11,900
21,600
1,287.5
5) 150.0
8,250.0
_______
740
11,900
21,600
1,287.5
150
8,250
740
11,900
21,600
1,287.5
_______
_
_______
38
_______
150
8,250
44,227.5
Net inc. before tax
44,227.5
2,711,895
2,711,89 1903357.5
5
578,947.5
2,482,305
Drawing Balances
_______
2,482,305
578,947.5
30% tax
Net Income after tax
2,482,305
1,736,845
405,263
_______
578,947.5
39
173,684.5
_______
578,947.5
177,731.5
120357,75
183,831.50
216,431.50
_____
208,931.5
120357.75 147957.75
________
147957.75
_______ 386,663.0
789,937.5 789,937.5