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.

Assignment 9: Akawnting

Shareholders' Equity Section

The shareholders' equity of Moonlight Corporation at January 2, 2015, appeared below:

 8% Preference Shares, P 150 par, 100,000 shares authorized, 20,000 shares issued and outstanding P 3,000,000

Ordinary shares, P 100 par, 200,000 shares authorized, 50,000 shares issued and outstanding P 5,000,000

Share premium - preference P 300,000

Share Premium - Ordinary P 200,000

Retained Earnings P 1,500,000

During 2015 the following transactions occurred:

• Jan 5, issued 6,500 ordinary shares in exchange for a piece of land .  The land had a cost of P 500,000.  There was no available fair value of shares stock.
• Feb 10, purchased 6,000 ordinary shares for the treasury at P 90 per share.
• Feb 15 shareholders donated P 10,000 cash
• May 7, issued 10,000 preference shares for P 160 per share
• June 29, received subscription to 10,000 ordinary shares at P 120
• Aug 17, received donation from ordinary shareholders, 2,000 ordinary shares
• Sept 11, received full amount from subscribers and issued the shares
• Oct 20,  sold 3,000 treasury shares at P 160 per share
• Nov 22, retired 2,000 treasury shares.
• Dec 31, Closed profit of P 450,000

Required:

1. Prepare journal entries to record transactions (to be posted online)
2. Prepare the December 31, 2015 Shareholders' equity section (yellow paper)

Note: To be submitted on or before March 8, 2015  (8 pm)

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:

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

Partnership Formation_1

On September 1, 2015 VENTUS and FLAMMA decided to form a partnership.  Their balance sheets on this date are:

    VENTUS                FLAMMA

Cash                                        P    15,000                   P  37,500

Accounts receivable                    540,000                     225,000

Merchandise Inventory                     -                           202,500

Furniture and Fixtures (net)        150,000                     270,000

Accounts payable                    P 135,000                    P 240,000

Ventus, capital                            570,000                   

Flamma, capital                                                              495,000

They agreed to provide 10% provision for doubtful accounts of their accounts receivables.  Furniture and Fixtures of VENTUS is over depreciated by 11,500 and that of FLAMMA by P 21,000.  The partnership agreement provides for a profit and loss ratio and capital interest of 40%  to VENTUS and 60% to FLAMMA. 

Required: Compute the additional cash to be invested by FLAMMA to bring the partners’ capital balances proportionate to their profit and loss ratio.

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