THEORY OF ACCOUNTS — RD (February 15 and 16, 2014) poce eet Frotessional Services, inc. AI ‘OPEN ist PREBO, i LETTER ANSWER spe Bo ao0Ve ’ Allowance before adjustment (TGAS from HO) P 48,000 Less allowance on current shipment (P192,000 x 20%) 38,400 Allowance on the beginning inventory from HO) P 9,600 B Allowance before adjustment (TGAS from HO) ° 48,000 Less allowance on the branch ending inventory (from HO) { (940,000 - 16,000)/120%) x 20% 4,000 Realized allowance (Overstatement of cost of sales in the branch) 44,000 8 Marco Marvin Balances, June 1 22,500 17,500 Soncadol (P4,000) ( 2,400) (2,600) TPL (P33,000 + P1,000) (20,00) (13,600) Additional possible loss 300 (300) Free interest Pp P 2,000 ‘ 2 A 8 c Balances, July 1 P 32,000 52,000 P 38,400 Soncadol (12,800) (12,800) (6,400) Balances P 19,200. P39,200 P 32,000 TPL (28,800) (28,800) ( 14,400) Balances (9,00) 10,400 P 17,600 APL 9,600 (6,400) ( 3,200) Free interests Ps P4000 P 14,400 A ‘Adjusted capital (P26,400 ~ P240 + P2,200 + P3S0~ P400) P 28,310 Multiply by 9333/6667 P 14,155 Kyle Martin’s investment34.C y Total cash to become availabe (P71,000+ P12,500+P11,000) 94,500 3 Total liabilities upon liquidation (P3,000 + P69,000 + P20,000 + 1 18,000) 110,000 * Estimated deficiency to unsecured creditors (15,500) 35.4 i ‘The depreciation expense on branch fixed assets is always chargeable to the branch i Operations and the accumulated depreciation account is set up in the books where the 3 Branch fixed asset is being carried. s 4 36.D é Franchise Revenue — IFF (P1,000,000 + P3,000,000) 4,000,000 Franchise Revenue ~ CFF (P2,702,500 x 0.05) 135,125 Total Franchise Revenues 4,135,125. 37.C t Franchise Revenue — |FF P 500,000 Franchise cost ( 20,000) Franchise Revenue-CFF (P400,000 x 10%) 40,000 Net income P 520,000 38.8 Amount paid by Choco P 132,000 Interest acquired by Choco (P444,000 x 1/5) 88,800 Combined gain realized by Van and Hou P 43,200 “ 39.€ Cash to become available (P116,000 + P50,000 + P80,000) P 246,000 Less Priortized claims: 3 Fully secured creditors P 70,000 Partially secured creditors (secured portion) 50,000 e Liabilities with priority 42,000 162,000 Est amount available for unsecured amounts P 84,000 Unsecured amounts: Partially secured (unsecured portion) P 80,000 Unsecured creditors 200,000 280,000 Estimated deficiency to unsecured creditors wo priority P (196,000) Estimated Recovery Rate (P84,000 / P280,000) 30% ‘Total book value P 130,000 7 Less secured portion 50,000 x 100% P 50,000 Unsecured portion P 80,000 x 30% 24,000 P - 74,000 3 40. B . Z Total cash available (P105,000 + 500,000) P 605,000 £ . Less Payments (P280,000 + P12,000 + 120,000) 412,000 Total cash withheld’ P 193,000 Less unpaid liabilities (P460,000 = 280,000) 180,000 Cash withheld for future liquidation expenses P 13,000a. 42. 43. 45. A Perez Reyes. Suarez_—_Total Balances 100,000 150,000 200,000 P 450,000 Adjustment, P160,000 80,000 48,000 32,000 160,000 Total interest P180,000 °P198,000 232,000 P 610,000 Cash paid to Perez (195,000) (195,000) Bonus to Perez 15,000 (9,000) ( 6,000) - Ending balances P= 189,000 P226,000 P 415,000 , 8 Franchise Revenue — IFF . P-500,000 Less Franchise cost 150,000 Franchise profit P 350,000 RGP {P200,000 x 70%) 140,000 A ‘The franchisor used the accrual method because of (1) substantial performance, combined with (2) collection of the note being reasonably assured, hence, no unrealized profit by year-end . RGP: P8,400,000 x %) = P6,300,000 - (P4,200,000 + P1,000,000) P1,100,000 8 RGP: (P8,400,000 x 0.742857} = 6,240,000 - 5,200,000 1,040,000