Assignment 10: Akawnting

Retained Earnings

Problem # 1.

 Lam-ang's board of directors declared a P 710,000 cash dividend on October 5, 2015.  The board decided to include all shareholders as of November 5, 2015, beyond the date would no longer entitle the shareholder to receive any dividend declared on October 5, 2015.  On December 20, 2015, the shareholders received their share of the profit.

Required:

Prepare the necessary journal entries to record the above transactions.

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