DISSOLUTION: Admission of New Partners

Johan and Stephen, owners of JS Partnership plans to recruit new partners.

The capital balances of Johan and Stephen are shown below:
Johan, Capital
Stephen, Capital

55,000
45,000

55%
45%

The following are the dependent cases of subsequent admissions of new partners.
Feb. 15
JS wants to admit Freddie. He paid 15,000 for 20% of total agreed capital of
175,000.
Mar. 22
JS wants to admit another partner, James. He paid 25,000 for 15% of total
agreed capital of 200,000.
June 11
JS wants to admit another partner, Carol. She paid 50,000 for 25% of total
agreed capitalization of 250,000.
Instructions:
a. Journalize the admission of new partners
b. Find the new profit and loss ratio of the partnership
DISSOLUTION: Withdrawal of Partner
New Life Co., co-owned by Tu, Tri and Por, share profit and losses at 3:4:3. Por will
withdraw in the partnership. The data before Pors withdrawal are as follows:
Accounts
Cash
Equipment
Tu, Capital
Tri, Capital
Por, Capital

500,000
875,000
375,000
600,000
400,000

30%
40%
30%

a. Por will sell 275,000 of his interest to Tu and 50,000 to Tri.

b. Por will sell her interest to the partnership. The equipment has a fair value of
800,000. She agreed to receive:
- 340,000
- 377,500
- 425,000

Instructions:
1. Compute the withdrawal of Por
2. Journalize the computation

DISSOLUTION: Death of a Partner

Assume the following beginning capital balances of WWM Partnership as of March 01,
200A
Wayne
25,000
25%
Will
40,000
40%
Mildred
35,000
35%
On 31 March 200A, the net income was 2,500,000. Unfortunately, Will died due to an
unexpected car accident. The partnership will pay 50% due to financial difficulties.
Equipment was undervalued by 70,000. The rest of the unpaid capital of Will will be
paid on the future.
Instructions:
1. Journalize the dissolution of the partnership
2. Compute the adjusted capital balances and new profit and loss ratios.
LIQUIDATION: Lump Sum and Installment
Calcu Co. is about to liquidate. The trial balance of Calcu are as follows:
Account
Cash
75,000
Receivables
10,000
Loans to AC
5,000
Equipment
18,000
Inventories
12,000
Accounts Payable
25,000
Loans from Del
5,000
Del, Capital
36,000
40%
AC, Capital
18,000
20%
Ans, Capital
36,000
40%

Instructions:
1. Prepare the statement of liquidation and necessary schedules (installment)
LUMP SUM
Assume that the receivables were realized at 8,000, equipment at 22,000 and inventories
at 6,000. Liquidation expenses reached 75,000.
INSTALLMENT
Safe Payments Method. Assume the following events occurred:
May 5
Inventories realized at 15,000
May 10
Liquidation expenses of 2,000
May 15
Paid liabilities from remaining cash
May 31
Distributed available cash to partners
June 1
Receivables realized at 8,000
June 2
Liquidation expenses of 1,200
June 30
Distributed available cash to partners
Aug 5
Equipment realized at 25,000
Aug 6
Liquidation expenses are 2,000
Aug 12
AC paid liability to partnership
Aug 15
Paid remaining cash to partners
Cash Distribution Program. Using the same data above, prepare the pre-distribution
plan using the P&L Agreement. Exception: Assume the following capital balances but
retain the profit and loss ratio
Del
40,000
AC
45,000
Ans
35,000

CORPORATIONS
SHARE CAPITAL: Memorandum VS Journal Entry
DongSan Inc. was organized on February 1. The following are the transactions of
DongSan
Feb 1
Authorized to issue 45,000 at P50 par value
Mar 02
Issued 3,000 at P75 per share

May 15
May 31

Subscribed 15,000 shares at P70 per share

Received 70% of May 15 subscription of which 40% is fully paid.

Instructions: Journalize the entries of DongSan Inc.

SHARE CAPITAL: Issuances and Subscriptions
Yi-jung Corporation listed the following events from its records:
a. Authorized 150,000 ordinary shares
b. Subscriptions of 45,000 at P165 per share
c. Collected 80% of subscribed shares of which 65% is fully paid. Issued certificates
Instructions: Journalize the following at:
a. P125 par value
b. P200 stated value
c. No par, no stated value
SHARE CAPITAL: Delinquent Shares
1. Shell Co. declared Uno as a delinquent subscriber. The total subscribed share of Uno
is 6,000 at P75 par. The shares are offered at public auction incurring P50,000.
There are 3 bidders during the auction:
Bidders:
Isa
Usa
One

Willing to receive:
6,000
7,000
5,000

Instructions: Journalize the delinquent subscription

2. Assume that Shell Co. has no highest bidder. Journalize the delinquent subscription.
TREASURY SHARES: Reacquisition, Reissuance and Retirement
Del Montez Corp. shareholders equity appears as follows:
Ordinary Shares, 80,000 sh, P200 par
Share Premium
Accumulated Profits

16,000,000
255,000
10,000,000

1. The corporation reacquired 30% of the ordinary shares for treasury at 210
acquisition cost.
2. The treasury shares were reissued at 4,000,000.
3. The 1,000 treasury shares were not reissued but retired
Instructions: Journalize the treasury transactions
Conversion of Preference to Ordinary Shares
Moon Corporations shareholders equity appears as follows:
Preference shares, 4,000 sh at P45
180,000
Ordinary shares, 8,000 sh at P35
280,000
Share Premium preference
100,000
Share Premium ordinary
100,000
Accumulated Profits
500,000
1. The preference shares were converted in a 2:3 basis.
2. The preference shares were converted in a 3:6 basis.
Reduction of Par Value & Stated Value
Assume the following data:
Ordinary Shares, 5,000 sh at P125 par
Premiums
Accumulated Profits

625,000
175,000
500,000

Par value was reduced as P75 par value. Journalize the reduction.
Assume the following data:
Ordinary Shares, 800 sh no par, stated value P15
Premiums
Accumulated Profits

12,000
6,000
10,000

Stated Value was reduced to P5 stated value. Journalize the reduction.

Stock Splits
Assume Bondoc Corporation has 450,000 outstanding shares at P45 par. Bondoc entered
into the following stock splits:
1. 5:1 stock split
2. 1:6 stock split
Journalize the stock split of Bondoc Corporation (memorandum method)
Retirement of Share Capital
Missionary Inc. reports the following balances:
Share Capital (5,000 shares @ P35 par)
Share Premium
Accumulated Profits

175,000
125,000
500,000

Assume that Missionary retired 90% of its capital at a retirement price of:
a. P60
b. P25
Journalize the retirement at independent cases and prices.
Accumulated Profits: Prior Period Adjustments
Dona Corporations partial trial balance as of December 31, 200B is:
Cash
553,254
Merchandise Inventory
254,652
Equipment
112,385
Supplies
22,333
Accounts Receivable
63,667
Accumulated Profits
800,000
a.
b.
c.
d.

Merchandise Inventory should be reported as 334,889.

The fair value of the equipment is 112,538
Unrecorded expense in supplies amounted 33,200
Payment received from JK Co. from loan that has been written off. Received
35,000 with 10% interest.

Required: Journalize the adjustments

Change in Accounting Estimate

1. On 2001, BC Company has a machinery acquired at a cost of 800,000 with a scrap
value of 40,000. The estimated useful life is 16 years. Using the straight line
method, BC decided to decrease the useful life into 10 years. BC decided to effect
the change on 2004.
Instructions: Journalize and compute for the revise depreciation
2. Using the same data on no. 1, assume that BC Company decided to change the
accounting estimate from SLN to Double-declining balance. The carrying value is
850,000 with salvage value of 50,000.
Instructions: Compute the depreciation on 2004 using double declining balance
method.
Revaluation Reserve
The equipment of GG has the following info:
Historical Cost
Equipment
45,000
Accumulated Depreciation
11,000

Appraised Value
68,000
23,000

Instructions: Compute for the revaluation surplus. Journalize the entry.

Foreign Currency Translation
1. The Japan operations of Malt Disney Inc. decides to transfer into the Philippines. Malt
Disney wants to translate its financial position into peso amounts. The financial position
is translated on June 200A with an exchange rate of 0.095.
Assets
Y 12,000,000
Liabilities
10,000,000
Shareholders Equity
2,000,000

Instructions: Compute the gain/loss if 1 yen is equivalent to 0.093 pesos on December

31.

2. AmEx decides to transfer its operation from California to the Philippines. The
following are the expenses incurred by AmEx before transferring.
Salaries to employees
$10,500
Bonuses to long-time employees
2,000
Federal tax
5,000
The following are AmExs balances:
Assets
$57,000
Liabilities
20,000
Share Capital
37,000
Accum. Profits
23,000
The total revenue is $17,000
Instructions: Translate the expenses to its peso amount considering that 1) on June 200A,
all expenses mentioned are incurred with an exchange rate of $1=P42 and 2) on the date
of reporting of the financial statements where the exchange rate is 1:43. Prepare the
balance sheet.
Property Dividends
On June 24, 2001, SM Co. declared inventory from its American branch as property
dividend payable on January 22, 2002. The book value of the inventory is $1,250. The
exchange rate that time is P42.50
The following are the fair values of the inventory:
June 24, 2001
P 60,000
December 31, 2001
55,000
January 22, 2002
57,500
Instructions: Prepare the pertinent entries for the dividend
----The truck of Delton Farmlands has book value of P950,000. It is declared as dividend on
March 12, 200A. The fair values at the significant dates follow:

March 12, 200A

December 31, 200A
March 13, 200B

P 1,000,000
850,000
950,000

Share Capital Dividend

Assume that HEPA Co.s records are:
Share Capital, authorized 100,000 at P50 par
Issued and subscribed, 40,000
Accumulated Profits
Treasury Shares, 10,000 shares at cost

2,000,000
6,000,000
100,000

1) Assume that 1 ordinary share for 8 share holdings was declared dividend on record
as of February 15, 200J and payable in March 16, 200K.
Feb 15, 200J
P65/share
Dec 31, 200J
P70/share
Jan 31, 200J
P75/share
Mar 16, 200J
P70/share
2) Assume the same dates and prices above. Compute if 3 ordinary share for 8 share
holdings was declared.
Fractional Shares
The holdings of Barena is 5,000 shares at P25 par. Assume that 30% share capital
dividend was declared. Prepare the pertinent journal entry.
Dividend Rights to Preference Shares
The shareholders equity of Mithubishi Co. as of Dec. 31, 2001A shows the following
balances:
12% Preference Shares, P100 par
9,000,000
Share Premium P/S
100,000
Subscribed Preference Shares
600,000
Ordinary Shares, P120 par
15,000,000
Share Premium O/S
800,000

Subscribed Ordinary Shares

300,000
Accumulated Profits
40,000,000
Treasury Shares:
Preferred
900,000
Ordinary
600,000
Dividends for 5 years are not yet paid inclusive of the current year
Unappropriated earnings is measured to be 90%
Prepare the schedule for the following conditions:
1. Noncumulative and nonparticipating
2. Cumulative and nonparticipating
3. Participating and noncumulative
4. Cumulative and participating
5. Cumulative and participating up to 20%
6. 15% preference share, 50,000 shares at P20 par, participating and 15% preference
noncumulative but participating
Book Value per Share
The shareholders equity of FRIS Corp. on December 31, 200B shows the following
balances:
15% Preference Shares, P80 par
2,400,000
Ordinary Shares, P90 par
3,000,000
Subscribed P/S
600,000
Subscribed O/S
800,000
Accumulated Profits
9,000,000
Treasury Shares Preferred
120,000
Treasury Shares Ordinary
110,000
Dividends for 4 years have not been paid excluding the current year.
Compute the book value per share if the preference share is:
a. Noncumulative and nonparticipating
b. Noncumulative and participating
c. Cumulative and nonparticipating
d. Cumulative and nonparticipating with liquidation value of P100
e. Cumulative and fully participating
f. Cumulative and participating up to 20%

FINANCIAL STATEMENT ANALYSIS

Instructions:
1. Compute for the liquidation ratios

2. Compute for the profitability ratios

3. Compute for the Solvency ratios
4. Compute for the market value ratios
Stock price per share is P2.25
Earnings per share is P0.75
Book Value per share is P1.25
Dividend per share is P3.25
24,000 shares have been declared as dividends at a price of P0.25 per
share. (Both Year 1 & 2)

FINANCIAL ANALYSIS
Sales
LESS: Cost of Goods Sold
Gross Profit
Operating Expenses
Administrative Expenses
Operating Income
Rent Revenue
Interest Income
Miscellaneous Income &
Expense
NET INCOME BEFORE
TAX
Income Tax (30%)
NET INCOME AFTER
TAX

Problem 1

?
(24,00
0)
14,00
0
?
(5,200
)

(17,00
0)
(3,000
)
?
600
400

13,00
0
?
?
7,000

Identify the missing

values

Problem 2
1. Prepare the Vertical
Analysis for 2011 and
2012
2. Prepare the Horizontal
Analysis for 2011 and
2012

Problem 3
1. Find the missing values
ASSET
S
Cash
Accounts
Receivable
Prepaid
Insurance
Land
Equipment
Machinery
TOTAL ASSETS

2012
2,500

2011
2,400

Amou
nt
?

%
0.04

7,000

1,000

3,000
?
5,000
6,000
?

?
9,000
?
6,200
?

(2,000)
1,000
2,000
?
?

-0.40
?
0.67
?
5.83%

(1,000)

25.00
%

LIABILITIES
Accounts
Payable

4,000

Notes Payable
TOTAL
LIABILITIES

50

5,000

5,950

(950)

2.56%
15.97
%

13,000
2,000

?
1,985

3,300
?

34.02
%
?

?
29,50
0

14,965

EQUITY
Share Capital
Share Premium
Accumulated
Profits
TOTAL EQUITY
TOTAL SHE &
LIAB

-3.11%

2,850

5.83%