Advanced Accounting Volume 3 Solution Manual

Chapter 8. Cooperatives

Review of Terms 1. f 5. q 9. m 2. l 6. b 10. o 3. k 7. a 11. n 4. g 8. i 12.p Questions: 1. Types of cooperatives: a) Credit cooperative promotes thrift among members, creates funds for lending for productive and provident purposes b) Consumer cooperative procures and distributes commodities to members and nonmembers c) Service cooperative engages in medical and dental care, hospitalization, communication, transportation, insurance, and other services to members d) Producers cooperative undertakes joint production both agricultural and industrial e) Marketing cooperative engages in supply of production inputs to members and markets their products f) Multi-purpose cooperative combines 2 or more of the business activities of the different types of cooperative 2. Categories of cooperatives: a) primary members are individuals b) secondary members are primaries c) tertiary members are secondaries d) federation members are primaries and/or secondaries 3. The code requires the establishment of statutory reserves such as general reserve fund, cooperative education and training fund (local and due to Apex), and optional fund which are each equivalent to at least 10% of net surplus. 4. They are shown as part of the equity section of the statement of financial position. The amount due to Apex for education and training is shown as current liability. 5. The Damayan fund is set aside to take care of defraying expenses of deceased members, to help the family of deceased members, while the Loan protection fund is set aside to take care of any unpaid loan balance of a deceased member. 6. In almost all transactions accrual basis is used except in the computation of interest on share capital. This is based on the actual collections of interest on loans (cash basis). No accrual is made for interest already due but not yet collected as provided for in the Code. Because of this, cooperative accounting is not really in accordance with the Philippine Financial Reporting Standards. 7. Once modified accrual basis is allowed to be used for cooperatives, then a clean opinion may be made by accredited practitioners in the audit of cooperatives. 8. Since loans receivable are aged, those that are over 360 days old must be provided with 100% provision for loss on uncollectibility. 9. If a grant/endowment is for general purpose, the cooperative may use it for its normal operations. If restricted, the grant/endowment may be used only for the purpose specified in the deed. 10. a) Cash on hand xxx Official receipt Members contribution xxx b) No journal entry, BODs approval only c) Equipment xxx Deed of donation Donated surplus xxx d) Cash in bank xxx Deposit slip Cash on hand xxx e) Cash on hand xxx Official receipt Fixed deposits xxx f) Operating expenses xxx Cash voucher Cash in bank xxx 11. a) cost of raw materials used part of cost of goods manufactured statement b) democratic governance cost part of operating expenses c) gain from foreign exchange transaction part of other operating income d) inventory loss part of cost of goods sold

Advanced Accounting Volume 3 Solution Manual e) membership fees part of revenues in statement of operations 12.

Chapter 8. Cooperatives

a) Cash in other cooperatives Current asset b) Spare parts & other goods inventory Current asset c) Petty cash fund Current asset d) Cash on hand Current asset e) Accrued expenses Current liability f) Investments (temporary) Current asset g) Franchise cost Non-current asset h) Land & building Non-current asset i) Optional fund Equity j) Retirement fund payable Current liability k) Prepaid expenses Current asset l) Vat payable Current liability m) Deposits from customers Current liability n) Due to Apex (CETF) Current liability 13. Cooperatives use fund accounting only if donations or endowment received are with restrictions. 14. The equity of a cooperative will consist of the a) share capital which will reflect shares issued, subscribed for, or reacquired as treasury stocks; b) statutory funds which will be comprised of General reserve fund, CETF, and Optional fund and, c) donated surplus, if any. 15. Cooperatives are required to use control and subsidiary accounts. Each member will have a record of his initial contributions, additional contributions, withdrawals which will be used as basis for the computation of his average month share. It is the total average share months which is used as denominator to the amount set aside by the Board for such particular purpose. Loans, accounts receivable and payable shall be supported by individual accounts; expenses and revenues are also supported by subsidiary accounts. Control expenses take the form of transport service cost, financing cost, administrative cost and democratic governance cost. Exercises 1. Account title a) Cash and cash equivalent b) Loans receivable c) Loans payable d) Advances to officers and employees e) Prepaid expenses f) Trade and other receivables g) Investments h) Franchise cost i) Property and equipment j) Unearned interest income k) Share capital l) Statutory reserves m) Interest on share capital n) Patronage refund payable o) Savings deposit p) Due to CETF q) Trade and other payables 2. a) b) c) Cash Share capital Cash Savings deposits Loan receivable Unearned interest income Cash 15,000 15,000 5,000 500 4,500 Loan contract/ Note Cash voucher 25,000 25,000 Deposit slip Official receipt

Caption of SFP Current asset Current asset Current liabilities Current asset Current asset Current asset Non-current asset Non-current asset Non-current asset Current liability equity equity Current liability Current liability Current liability Current liability Current liability

amount P 8.00 6.00 1.00 .20 .30 .40 .05 .50 7.50 .02 10.00 1.80 .20 .10 10.00 .60 .40

Advanced Accounting Volume 3 Solution Manual d) Salaries and wages SSS premiums payable Withholding taxes payable Cash Savings deposits Cash Cash Donated capital/Surplus b) Cash 30,000 1,200 1,000 27,800 10,000 10,000 25,000 25,000

Chapter 8. Cooperatives Payroll Cash voucher Withdrawal slip Official receipt

e) 3. a)

4. 5. 6.

7. 8.

100,000 OR/note Loans payable 100,000 c) Equipment 50,000 Cash voucher Cash 50,000 d) Cash 10,000 Official receipt Passengers fees 10,000 e) Equipment 200,000 Journal voucher Accounts payable 200,000 A) d B) b C) c D) a E) a A) a B) c C) c D) b A) Credit cooperative Transport cooperative 1. interest on loans 1. passengers fees 2. fines 2. service income 3. service fees 3. management fees B) 1. cash on hand 2. cash in bank 3. change fund/petty cash fund C) 1. interest on investments 2. interest on bank deposit 3. miscellaneous income D) Patronage refund & interest on share capital are shown as current liabilities E) Building fund balance is a noncurrent asset, but if it is part of optional fund, then it is shown under equity among the statutory reserves. Aside from the beginning balance, the notes to financial statement should show : additions, disposals, depreciation/impairment. a) Examples of cash flows from financing activities are: 1. shares issued for cash 2. money borrowed from the bank 3. deposits received from members for stock subscription 4. cash paid for treasury stocks 5. loan from the bank paid. b) Examples of cash flows from operating activities: 1. loan given to members 2. cash received from passengers 3. loan payments collected from members 4. savings deposit received from member 5. operating expenses paid c) Examples of cash flows from investing activities: 1. an equipment bought 2. invested in government bonds 3 sold a used equipment 4. invested in stocks of Petron 5. sold Union Bank stocks 9. a) revenues of transport cooperative 1. passengers fees 2. service income 3. seminar fees b) administrative cost 1. salaries and wages

Advanced Accounting Volume 3 Solution Manual 2. taxes and licenses 3. amortization of intangibles c) financing cost 1. bank charges 2. other financing charges 3. interest on borrowings d) transport service cost 1. repairs and maintenance 2. toll fees 3. depreciation e) other income 1. miscellaneous income 2. membership fees 3. interest from investments 10. A) a B) b C) d D) c E) c Problems P8-1 Silang Cooperative Statement of Consumer Store Operations For years ended December 31, 20X7 and 20X6

Chapter 8. Cooperatives

20X6 Sales 25.00 Less- Cost of sales Beginning inventory 20.00 34.00 Less- Ending inventory 9.00 11.00 20.00 14.00 Gross profit 9.00 11.00 Add- Other operating income Miscellaneous income .10 .25 Interest on bank deposit .50 .65 .90 1.15 Total income 9.65 12.15 Less-Operating expenses Store and office expenses .20 .31 Miscellaneous expenses .30 .50 .45 .76 Net Profit 9.15 11.39 P8-2. 1. A) Transport service cost: a) toll fees , b) depreciation , c) gas, oil, and lubricant d) repairs and maintenance B) Cooperative revenue: a) Service income, b) Passenger fees, c) management fees, d) Income from lease agreement C) Democratic governance cost: a) General assembly cost, b) Affiliation fees, c) Members benefit expense D) Administrative cost: a) Salaries and wages, b) Training, seminar and conferences, c) Taxes and licenses, d) Amortization of intangibles E) Other operating income: a) Interest from investments, b) membership fees, c) Gain on sale of property and equipment, d) miscellaneous income 2. Name of cooperative Address Registration/confirmation No. Statement of Transport Operations For the year ended, December 31, 20XX Revenues Passenger fees Xxx Service income Xxx Management fees Xxx Income from lease agreement Xxx Total revenue Xxx Other operating income Membership fees Xxx

(in P000) 20X7 20.00

Advanced Accounting Volume 3 Solution Manual Income from investments Miscellaneous income Total Less-Operating expenses (Schedules..) Finance cost Transport service cost Administrative cost Democratic governance cost Net surplus before other items Project subsidy Subsidized expenses Gain on sale of property and equipment Gain on foreign exchange transactions Net surplus (for allocation) P8-3

Chapter 8. Cooperatives Xxx xxx Xxx Xxx Xxx Xxx xxx (xxx) xxx xxx Xxx Xxx

Xxx xxx

Xxx xxx

(1) Imus Cooperative Address Registration/Confirmation No. Statement of Revenue and Expenditures For the year ended, December 31, 20X9 and 20X8 (in million pesos) 20X9 Revenues 8.6 Add- Other income 3.8 Total revenues 12.4 Less- Expenses (including depreciation of P1.9M) 10.2 Net surplus 2.2 (2) A) d B) b C) a D) b E) b P8-4 (1) Bulacan Credit cooperative Address Registration/Confirmation No. Statement of Operations For The Year Ended, December 31, Current year, Prior year (in 000) Current Revenues Interest on loans 1,200.0 Services fees 390.0 Fines 134.0 Seminar fees 2.6 Membership fees 6.2 Total 1,732.8 Add- Other operating income Income from consumer store operation 5.5 Miscellaneous income 32.2 Interest on bank deposits 49.7 Interest on investments 28.7 116.1 Total revenue 1,848.9 Less-expenses Interest on savings deposit 85.6 Salaries and wages 348.3 Officers honorarium and allowances 62.5 SSS, Philhealth, EC contributions 82.5 General assembly expenses 103.7

20X8 7.9 4.5 12.4 11.0 1.4

Prior 1,100.0 400.0 140.0 2.5 4.2 1,646.7 6.0 31.2 48.9 29.1 115.2 1,761.9 83.2 344.0 58.1 81.5 100.5

Advanced Accounting Volume 3 Solution Manual Meetings and conferences Seminars Repairs and maintenance Taxes and Licenses Professional fees Depreciation- Property and equipment Total expenses Net surplus (2) Net surplus for allocation Statutory reserve General reserve Education and Training Local (5%) Apex (5%) Optional Fund Net Divided into Interest on share capital Patronage refund P8-5 Lucita Cooperative Address Registration/Confirmation No. Statement of Financial Position As of Current and Prior Years Assets Current Assets Cash and cash equivalents Loans receivable Trade and other receivables Advances to employees Prepaid expenses Merchandise inventory Total current assets Non-current assets Investments Property and equipment Other non-current assets Total Assets Liabilities and Equity Current liabilities Savings deposits Trade and other payables Unearned interest income Patronage refund payable Interest on share capital Due to CETF Cooperative guarantee fund Community development fund Total current liabilities Non-current liabilities Loan protection fund Damayan fund (in million pesos) Current Year 8.6 6.9 .4 .03 .2 .4 16.53 .07 7.6 1.1 24.0 11.0 18.0 27.2 52.2 233.7 1,048.7 800.2 (in 000) 800.2 80.02 80.02 80.02 392.10 168.04 240.06 560.14

Chapter 8. Cooperatives 25.0 14.0 20.0 27.2 50.0 230.5 1,034.0 727.9 727.9 72.79 72.79 72.79 355.97 152.56 218.37 508.53

Prior Year 7.9 7.0 .5 .04 .3 .3 16.04 .04 6.6 1.0

8.77 25.33

7.64 23.68

10.2 .4 .54 .11 .26 .06 .15 .04 11.76 .34 1.0 1.34

9.5 .3 .6 .09 .23 .04 .10 .03 10.89 .59 .5 1.09

Advanced Accounting Volume 3 Solution Manual Total Liabilities Equity Share capital Statutory fund Total Liabilities Reserves and Equity P8-6 Bataan Credit Cooperative (1) A) a B) b C) c Computations: GRF 13.10 10.5 1.7 12.20 25.30

Chapter 8. Cooperatives 11.98 10.5 1.2 11.7 23.68

15,000 CETF 7,500 Due to Apex 7,500 is CL OP 15,000 37,500 (2) c (150,000 37,500) 200,000 = 112,500; 112,500 x 50% 200,000 = 28.125% (3) d Lorenzo: ave share months = 33,333 x 28125 = P9,375 (1) Subic Credit cooperative Address Registration/Confirmation No. Comparative Statement of Operations For the Current and Prior Years (in P000) Current Year

P8-7

Prior Year Revenues Interest on loans 1,200.0 1,000.0 Service fee 390.0 365.0 Fines 134.0 135.0 Membership fee 6.2 7.0 Seminar fees 2.6 1,732.8 2.0 1,509.0 Other income Income from consumer store operation 5.5 6.0 Miscellaneous income 32.2 30.0 Interest on bank deposit 49.7 50.0 Interest on investments 28.7 116.1 30.0 116.0 Total Revenues 1,848.9 1,625.0 Less expenses Interest on savings deposits 85.6 86.0 Salaries and wages 348.3 349.0 SSS, Philhealth, EC contributions 82.5 82.5 General assembly 103.7 102.5 Meetings and conferences 24.0 23.0 Seminars 11.0 12.1 Repairs and Maintenance 18.0 16.0 Officers honorarium and allowances 62.5 60.0 Taxes and licenses 27.2 27.2 Professional fees 52.2 50.0 Depreciation-property and equipment 233.7 1,048.7 233.7 1,042.0 Net surplus 800.2 583.0 Distribution of Net surplus 800,200 583,000 (2) Statutory reserves: General reserve fund (10%) 80,020 58,300 Cooperative Education and training fund (local) 40,010 29,150 Due to Apex 40,010 29,150 Optional fund 80,020 58,300 Sub-total 240,060 174,900 (3) Balance 560,140 408,100 Interest on share capital (70%) 392,098 285,670 Patronage refund (30%) 168,042 122,430 P8-8.

Advanced Accounting Volume 3 Solution Manual The Sonic Credit Cooperative Address Registration/Confirmation No. Comparative Statement of Financial Position For The Years Ended, December 31, 20X9 and 20X8 Assets Current assets Cash and cash equivalents Loans receivable Trade and Other receivables Advances to employees Prepaid expenses Merchandise inventory Total current assets Non-current assets Investments Property and equipment Other non-current assets Total non-current assets Total assets Liabilities and Equity Current liabilities Savings deposits Trade and other payables Due to CETF Community development fund Cooperative guarantee fund Interest on share capital Patronage refund payable Unearned interest income Total current liabilities Non-current liabilities Loan Protection fund Damayan fund Total non-current liabilities Total liabilities Members equity Share capital Statutory funds Total liabilities and members equity P8-9 Assets shown in the Statement of Financial Position Current assets Cash in BDO Cash on hand Petty cash fund Cash in other cooperatives Loans receivable Trade and other receivables Revolving fund Advances to officers and employees Deposits with suppliers Raw materials inventory (In Pmillion) 20X9 7.90 8.00 .50 .04 .30 .30 17.04 .04 7.60 1.00 8.64 25.68 9.50 .50 .04 .03 .10 .23 .09 60 11.09 .29 50 .79 11.88 12.50 1.30 13.80 25.68

Chapter 8. Cooperatives

20X8 8.60 6.90 .40 .03 .20 .40 16.53 .07 7.60 1.10 8.77 25.30 10.20 .40 .06 .04 .15 .26 .11 54 11.76 .34 1.00 1.34 13.10 10.50 1.70 12.20 25.30

P6, 812,000 25,000 5,000 20,000 8,694,000 120,000 10,000 3,000 150,000 50,000

Advanced Accounting Volume 3 Solution Manual Work in process inventory Finished goods inventory Biological assets inventory Total current assets Non-current assets Investment in cooperative federation Property, plant, and equipment Investment property Nursery/greenhouse Franchise Total non-current assets Total assets Liabilities Current liabilities Deposits from customers Savings deposits Trade and other payables Unearned interest income Due to CETF Interest on share capital Patronage refund Total current liabilities Non-current liabilities Loans payable in 2 years Loan protection fund Damayan fund Total non-current liabilities Total liabilities Members equity Share capital Deposit on share capital subscription Donated capital General reserve fund Education and training fund - local Optional fund Total equity Total liabilities and equity

Chapter 8. Cooperatives 15,000 150,000 100,000 P16,154,000

50,000 2,000 100,000 50,000 100,000 P 302,000 P 16,456,000

50,000 8,000,000 446,000 54,000 26,000 268,000 111,000 P 8,955,000

P 200,000 337,000 990,000 P1,527,000 P 10,482,000 P 5,789,000 5,000 50,000 52,000 26,000 52,000 P 5,974,000 P 16,456,000

P8-10 (1) Samson Transport Cooperative Address Registration/Confirmation No. Statement of Operations For The Year Ended, December 31, Current Year (in P000) Revenues Passenger fees Service income Management fees Interest on lease agreements P 2,000 100 150 50

Advanced Accounting Volume 3 Solution Manual Add- Gain on investment Total revenues Less-Expenses Transport service cost Administrative cost Financing cost Democratic governance cost Loss on sale of equipment Loss on foreign currency transactions Total expenses Net surplus before project subsidy Add- Project subsidy Less-subsidized expenses Net surplus for allocation (2) Statutory reserves: General reserve fund (10%) Cooperative education and training fund local CETF due to Apex Optional fund Total 3

Chapter 8. Cooperatives P 2,303 P 1,000 800 200 50 2 25 P P 50 30 P 2,107 196 20 216

21,600 10,800 10,800 shown as current liability 21,600 64,800