ADVANCED ACCOUNTING VOLUME 1 2011

SOLUTION MANUAL

DEAR TEACHERS,

MAY I TAKE THIS OPPORTUNITY TO THANK YOU FOR SUPPORTING AND

USING MY TEXTBOOKS. AGAIN MY APOLOGY FOR THE FOLLOWING ERRORS:

THANK YOU AND GOD BLESS US ALL

ZENY MANUEL

CHAPTER 1
EXERCISES
1. a) TIOMARE
Statement of Partners Equity
For the year ended Dec. 31, 2011
Tino Mayo Reyes Total
Jan 1 P200,000 P250,000 P300,000 P 750,000
Permanent Withdrawal (50,000) (50,000)
Share in Profit 160,000 75,000 90,000 325,000
Total P310,000 P325,000 P390,000 P1,025,000
Less Drawings 15,000 5,000 20,000
Dec. 31 P295,000 P325,000 P385,000 P1,005,000

b) Capital balances presented on the balance sheet, Dec. 31.

Tino, Capital P 295,000

Mayo, Capital P 325,000

Reyes, Capital P 385,000

c) Journal Entry:
Reyes, Drawing 85,000
Reyes, Capital 85,000

Initial capital of Reyes P 300,000

Add: Additional capital from share in the earnings
85,000
Capital, Dec. 31 P 385,000

2. a) Ignacio, Capital Mallari, Capital

1/2 50,000 10/1 20,000 1/2 100,000
1/2 43,750 12/31 41,438.85
12/31 48,561.15

Ignacio & Mallari

Statement of Partners Equity
For the year ended Dec. 31,
Ignacio Mallari Total
Partners Capital, Jan. 2 93,750.00 100,000.00 193,750.00
Capital Withdrawal 20,000.00 20,000.00
Total Capital 93,750.00 80,000.00 173,750.00
Add: Share in Net Income 48,561.15 41,438.85 90,000.00
Partners Capital, Dec. 31 142,311.15 121,438.85 263,750.00
Solution:
1) Furniture & Equipment
Book Value = 35,000 / 40%
Original Cost = 87,500
Market Value = 87,500 / 2 = 43,750
2) 93,750 / 173,750 x 90,000 = 48,561.15
80,000 / 173,750 x 90,000 = 41,438.85

b) Ignacio, Capital Mallari, Capital

1/2 50,000 1/2 100,000
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 1/2 43,750
Ignacio, Drawings Mallari, Drawings
12/31 43,548.39 10/1 20,000 12/31 46,451.61

93,750 /193,750 x 90,000 = 43,548.39

100,000 / 193,750 x 90,000 = 46, 451.61
90,000.00
3 a) Lacson Lim Total
a
)
Unadjusted Capital Contributions 160,000 115,000
Land Revaluation 45,000
Interest Payable (3,000)
Depreciation ( 15,000) _______ _______
Adjusted Capital Contributions 145,000 157,000 302,000
Agreed Capital Contributions 157,000 157,000 314,000
Additional investment 12,000 0 12,000

b) Lacson Lim Total

Adjusted Capital Contributions 145,000 160,000 305,000
Agreed Capital Contributions 152,500 152,500 305,000
Bonus to Lacson 7,500 7,500 15,000
c) If you use Lacsons contribution to compute for agreed equity = 145,000/40%= P362,500 x .6=217,500
Lims actual is 157,000-217,500 =60,500 additional adjustment
Entries:
a. Cash 22,000
Furniture and Equipment 135,000
Lacson, Capital 157,000

Cash 35,000
Land 150,000
Mortgage Payable 25,000
Lim Capital 157,000
Interest Payable 3,000

b. Cash 45,000
Furnitures 135,000
Land 150,000
Interest 3,000
Mortgage 25,000
Lacson, Capital 151,000
Lim, Capital 151,000

c)

Cash 35,000
Land 210,500
Mortgage Payable 25,000
Lim, Capital 217,500
Interest Payable 3,000
4. A. Vasquez Carlos
Unadjusted balances of capitals 33,200 32,000
a) Inventory fair value 2,000
b) Allowance for doubtful accounts established ( 900) ( 750)
c) Accrued liabilities ( 800)
d) Depreciation of equipment, 50% ( 500) (4,500)
Adjusted capital balances 31,000 28,750

Agreed capitalization (31,000 / 40%) = P77,500 x 60% = 46,500

Adjusted contribution of Carlos 28,750
Additional investment 17,750

Cash 7,500
Accounts Receivable 18,000
Inventory 16,000
Equipment 5,000
Allow. For Bad Debts 900
Accounts Payable 13,800
Accounts Payable 800
Vasquez, Capital 31,000

Cash(4,500+17,750) 22,250
Accounts Receivable 15,000
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 Inventory 14,000
Equipment 6,000
Allow. For Bad Debts 750
Accounts Payable 10,000
Carlos, Capital 46,500

5. Bautista Olano Gatdula Total

Unadjusted capital investments 72,000 58,000 47,300
a) Overstatement of Furniture & Equipment ( 700)
b) Obsolete merchandise written-off ( 6,000)
c) Doubtful accounts ( 705) ( 1,020) ( 318)
Adjusted capital balances 65,295 56,280 46,982 P168,557
Agreed 60,000 60,000 60,000 P180,000
Bonus (5,295) 3,720 575
Upward adjustment in merchandise or in 12,443 12,443
furniture

6.
Unadjusted capital of Ang, excluding cash P 136,500
a) Allowance for Bad Debts ( 5,000)
b) Inventories Revalued 500
c) Accrued interest on notes receivable 500
Adjusted capital of Ang P 132,500
Agreed capitalization (120,000 / 2/5) P 300,000

Total Ang Roxas

Agreed contributions 300,000 180,000 120,000
Actual contributions 252,500 132,500 120,000
Asset Revaluation 47,500 47,500 0

7.
Total Ang Roxes
Agreed contributions 300,000 180,000 120,000 (40%)
Actual contributions 300,000 132,500 167,500
Bonus to Ang 0 47,500 47,500
8. Santos Ramos
Unadjusted Capital 68,950 45,000
a) Inventories revaliued ( 9,000) ( 6,000)
b) Allowance for bad debts set-up ( 400) ( 700)
c) Equipment revalued 800 ( 5,000)
d) Accrued expenses ( 650)
Adjusted Capital Balances 59,700 33,300

Santos investment represents 60% interest

Total Santos Ramos
Agreed contributions 99,500 59,700 39,800
Actual contributions 93,000 59,700 33,300
Goodwill 6,500 0 6,500
9. Unadjusted capital balance of Aquino P 43,000
a) Received written off ( 1,000)
b) Furniture & Equipment, depreciation ( 3,000)
c) Accrued interest 300
Adjusted capital of Aquino 39,300
Additional cash investment 3,700
Agreed capital of Aquino P 43,000
Entry
Cash 3,700
Accrued Interest 300
Allowance for Bad Debts 5,000
Accounts Receivable 6,000
Accumulated Depreciation 3,000

Cash 64,500
Beltran, Capital 64,500
43,000/40%= 107,500 x 60%= 64,500

1 10. Alvaro Perino

a) Unadjusted capital 115,000 115,000
Appraised value of land (100,000 50,000) 50,000
Bldg. (75,000 85,000) (10,000)

3
 Inventory at Fair Market Value (10,000)
Furniture at Fair Market Value (13,750)
Adjusted Capital Balances 155,000 91,250
b) Total Alvaro Perino
Agreed contributions based on P&L ratio 246,250 98,500 147,750
Actual contributions 246,250 155,000 91,250
Additional investment/(withdrawal) 0 ( 56,500) 56,500

Perino must make an additional investment of P56,500.

c) Alvaros land or building maybe overvalued by P56,500

d) If Perinos investment represents 40%:

Perinos investment 91,250
40%
Total agreed equity 228,125

Agreed contribution 228,125

Actual contribution 246,250
Difference (18,125)

Agreement is not valid because the agreed capitalization is lower than the actual investment so
theres no need to recognize an additional intangible asset.

e) Alvaros investment represents 60% share:

Alvaros investment 155,000
60%
Agreed capitalization 258,333

Agreed capitalization 258,333

Actual contribution 246,250
Goodwill 12,083
The agreement is valid, a goodwill as an intangible asset could be recognized because the
agreed capitalization is higher than the actual contributions.

MULTIPLE CHOICE
1. A - Cash 50,000
B - Property 80,000
- Mortgage 35,000 45,000
C 55,000 Answer: C

2. Answer: D, fair value of P45,000

3. Answer: D, zero, no tangible asset since actual contribution is also the total agreed capital.
4. Total contributions 184,000
Divide equally 92,000 Answer: B
Cains contribution 84,000
Bonus from Abel 8,000

5. Unadjusted capital, Lucy 100,000

Additional depreciation ( 10,000)
Accrued interest 400
Answer: E 90,400 Answer: E

6. Total capital (120,000 /60%) 200,000

40% interest (200,000 x 40%) 80,000 Answer: D

7. Total capital 200,000

Agreed capital (100,000 / 40%) 250,000
Goodwill 50,000 Answer: A

8. Mark Matt
Agreed capital 75,000 75,000
Actual capital 100,000 50,000 Answer: C
Bonus to Matt 25,000 25,000

9. Had the mortgage been assumed by the partnership, entry will be:
Building 40,000
Joe, Capital 30,000
Mortgage Payable 10,000
If paid by Joseph:
Mortgage Payable 10,000
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 Joseph,Capital 10,000
Joseph, Capital should increase by P10,000 with a corresponding decrease in Joe, Capital.
Answer: B, P45,000 & P75,000

10. Unadjusted balance of Apacible P100,000

Understated allowance for depreciation ( 2,500)
Overstated prepaid expenses ( 800)
Adjusted capital of Apacible 96,700

Agreed capitalization (96,700 / 70%) 138,143 x 30%= 41,443 for Galang

Total Apacible Galang
Agreed capitalization 138,143 96,700 41,443
Actual capitalization 196,700 96,700 100,000
Goodwill 58,557 0 58,557