Assignment in akawnting

BSA 1A and 1B:

...please solve the following akawnting problems.  Assignment will be submitted on February 2, 2015

Chapter 4

Problem # 1
Problem # 3
Problem # 8
Problem # 11

Answer to Akawnting Mid-term

Answer - Mid-term Exam: Partnership and Corporation

 

Please  click below for the Answers (Part I):

http://akawnting.blogspot.com/2015/01/answer-mid-term-partenrship-corporation.html

Answer - Mid-term: Partenrship & Corporation Akawnting

Answer: Akawnting for Partnership and Corporation

Test I Identification

1.  Mutual Agency
2.  Articles of Partnership
3. Fair value or fair market value or market value
4. Dormant partner
5. Silent partner
6. Limited partner
7. Secret partner
8. Nominal partner or partner by estoppel
9. Dissolution
10. Bonus

Test II True or False

1. True
2. True
3. False
4. False
5. True
6. True
7. True
8. False
9. True
10. False

Partnership Dissolution

Akawnting Exercise 1: Admission, Operations & Retirement

1.         On April 30, 2014, the partnership of Ventus, Unda, and Terra presented the following data from its statement of financial position:

Cash                   P 21,000                      Accounts payable                    P   15,000 
Other assets         744,000                      Mortgage payable                         30,000
                                                                Ventus, capital (40%)                 360,000 
                                                                Unda, capital (35%)                   225,000
                                                                Terra, capital (25%)                   135,000 
                        P 765,000                                                                       P 765,000
                        =======                                                                       =======

            On this date Flamma was admitted to the firm when she purchased a one-sixth interest in the firm for P 132,500.  The partners agreed to use the revaluation approach in the admission of Flamma into the partnership.  Patent was increased accordingly.  Afterwards, all the partners agreed to divide profits and losses equally after considering the following:

a.       Salary of P 5,000 per month to Ventus, Unda and Flamma

b.      20% bonus to Flamma.  The bonus is based on net income after salary and bonus.

Akawnting Exercise/Lesson: Business Combinations

Akawnting for Business Combinations

1.       On December 31, 2015, Patrick Corporation purchased 18,000 shares of stock to Santiago Company by paying P 250,000 cash and issuing its 10,000 shares, P 20 par ordinary shares.  The current market value of shares of stock of Patrick and Santiago were P 25 and P 20 per share respectively.  At that time the book value of the shares of stock of Santiago was P 15 per share.  In addition, a contingent payment of P 200,000 cash on January 1, 2018 was to be made, if the average income during the 2-year period of 2016-2017 exceeds P 300,000 per year. Patrick estimated that there was a 50% chance or probability that the P 200,000 payment would be required.

In addition, Patrick paid the following at the time of the business combination:  

·         Finder’s fee, P 25,000

·         Accounting fees, P20,000

·         Legal fees to arrange the business combination P25,000

·         Cost of SEC registration, including cost of printing and issuing stock certificates, accounting and legal fees P19,600

·         Indirect costs of combining, including allocated overhead and executive salaries P 10,400

Akawnting: Position Paper sample

 

Akawnting 521: Synthesis 

Attention:  BSA 5A

What:  Outline for your Position Paper

________________________________________________

You are hereby requested to write your position paper following the format.  The Executive Summary will be submitted after you have finished Chapter/Unit II, III and Iv.  (as indicated in the attached sample format of your position paper.)  Follow the outline as follows:

I Executive Summary

RPCPA Adapted Problems

These problems are lifted from the actual CPA Board Exam.

Problem I

Mark, Nark and Oark are partners sharing profit in a 5:3:2 ratio, and with capital balances of P 95,000, P 80,000, and P 60,000, respectively, on December 31, 2015.  The partners decided to admit Park as a new partner on January 1, 2016.  Park will contribute cash of P 80,000 to the partnership and also pay P 15,000 for 15% of Nark's share.  Park is to have a 20% interest share in profits.  After the admission of Park, the total capital will be P 330,000 and Park's capital will be P 70,000

Assignment for January 21, 2015

Chapter 3 Dissolution of Partnership

Please answer the following problems:

1. Problem # 16
2. Problem #21
3. Multiple choice problems 1-16 on pp. 3-45 to 3-50

Partnership Dissolution_Admission of a partner_1

Admission of a new Partner

The admission of a partner into the partnership depends on the following:

• the purchase of capital interest from one or more partners.
• the investment of assets into the partnership in exchange for an interest.

Admission by Purchase

The admission of a partner through the purchase of interest takes place when an interested person pays an amount directly to the selling partner/s for an interest in the partnership.  This becomes a personal transaction between them.  Any cash or non-cash transferred will not affect the total assets of the partnership unless a revaluation is required prior to the admission of the said person.  Only the capital structure of the partners' capital will be affected.  Below are sample problems with corresponding solutions to illustrate the said concept.

Illustrative Problem 1:

On January 1, 2015, the balance sheet of ADVANCED partnership is summarized below:

Business Combination_exercise

1.       On December 31, 2015, Honest Corporation enters into a business combination by acquiring the assets and assuming the liabilities of Kind corporation.  In effect Kind corporation will be dissolved. Honest transferred the following to Kind Corporation:

a.       20,000 unissued shares of its P10 par common stock, with a market value of P25 per share;

b.      P180,000 in long-term 8% notes payable, and

c.       A contingent payment of P 120,000 cash on January 1, 2018, if the average income during the 2-year period of 2016-2017 exceeds P 300,000 per year. Honest estimate that there is a 60%  chance or probability that the P 120,000 payment will be required.

In addition, Honest pays the following at the time of the merger:  

Partnership accounting_formation and operation

Americano admits Pinoy as a partner in the business.  Accounts in the ledger for Americano on January 31, 2014, just prior the admission of Pinoy, show the following balances:

Cash                                                    P 16,800

Accounts receivable                               15,000

Merchandise Inventory                          39,200

Accounts payable                                   26,000

Americano, capital                                 45,000

            It is agreed the following items must be taken into account:

a.       An allowance for doubtful accounts of 10% of accounts receivable is to be established.

b.      The merchandise inventory is overstated by 3,000

c.       Prepaid expense of P 2,600 and accrued expense of P 1,800 are to be recognized

Pinoy is to invest sufficient cash to obtain a 1/5 interest in the partnership.  They have agreed to follow the following scheme in distributing the profit:

Business Combinations

10 Basic important things that you need to know about BUSINESS COMBINATIONS

1.  Legal basis:      IFRS/PFRS #3 2004 and 2008 (Revised)
2. Definition: An event where the acquirer obtains control of one or more businesses.
3. Core  Concept: Acquisition of Control  
4. How control is achieved?  a. Acquisition of net assets     b. Acquisition of stocks
5. Accounting Method:   Purchase method/Acquisition method
6. Steps In applying the acquisition method:
       1.) Identify the acquirer            2.) Determine the acquisition date            3.) Determine the considerations given (Price paid) by the acquirer     4.) Recognize and measure the following:    
   
   • Identifiable assets acquired  Liabilities assumed
   •  Non-controlling interest in the acquired company
   • Any resulting goodwill or gain from a bargain purchase.
   
   
7.  Identifying the acquirer: The one transferring the cash or other assets or assuming the liabilities is the acquiring company
8. When is the Acquisition date?   
•  The date the acquirer obtains control of the acquired company
•  The date on which the acquirer legally transfers the considerations or acquired the assets and assumes the liabilities.
9.    Considerations and acquisition costs:    To get considerations given, get the sum of the following:
•  Assets transferred of the acquirer either, cash, NCA, contingent consideration, equity instruments, options or warrants
• Liabilities incurred of the acquirer
• Equity instruments issued by the acquirer
10.  Net Assets recognition and measurement:    Follow the simple principles below
•  The fair values of all identifiable assets and liabilities of the acquired company are measured and recorded.  
•  The identifiable assets should never include goodwill that may exist in the books of the acquired company
• The excess of the price paid over the values assigned to net assets is the goodwill
• The excess of the fair value assigned to the net assets over the price paid is recorded as gain from bargain purchase. 

Note: Acquisition-related costs are costs by the acquirer to effect a business combination such as broker’s fees, accounting, legal and   other professional fees and  general administrative costs. These costs are recorded as expenses. Where the consideration given is stock of the acquirer the issue costs are usually deducted from the value assigned to Additional Paid In Capital/Share Premium.

Partnership Formation_2

On October 1, 2015 MONA, NONA and OLGA decide to combine their business and form a partnership.  The financial conditions of the partners on the date before adjustments follow:

                                                  MONA                       NONA             OLGA
 Cash                                        P   10,000                    P 14,500          P 23,750 
Inventories                                   30,000                       20,000             15,000 
Office Equipment (net)                71,500                       72,750             75,000 
Accounts Payable                   P    25,750                   P 23,000          P 30,000

The partners agreed to receive an equal capital interest in the partnership.  They also agreed the following items:

• The partners have used the LIFO; however, they decided to use FIFO because it reflects the current market value which is 25% more than the value of LIFO.

•  The partnership has to assume liabilities on the office equipment of P 20,000, P 20,000 and 25,000 to MONA, NONA and OLGA respectively.

• All accounts payable are assumed except for a P 5,000 accounts payable which will be paid by the personal asset of Mona

Required:  Compute the capital balance of each partner assuming the bonus method is used. 


Please email your answer at :      timoleon.lianza@gmail.com