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Baccay, Eric A. To 'rabinoclaudine@yahoo.

com' Today at 4:47 PM

From: Baccay, Eric A. Sent: Wednesday, October 16, 2013 8:38 AM To: 'claudine_rabino@yahoo.com'; 'akuhsiorven@yahoo.com' Cc: 'claudine_rabino@yahoo.com.ph'; 'akuhsiorven@yahoo.com.ph' Subject: Emailing: Solutions to Selected Problems

Claudine, Orven and To all of you, Kindly share this with your classmate and if need be, please charge me the cost of printing this out Always take a portion of your time atleast 3 hours everyday to read your lesson and review your previous topics I know I havent imparted a greater part of the topics nor given you points to ponder, but I hope with the little time that I meet you I know somehow over that rainbow ahead of you, you will recall my advices. Please let me know if along the way, you may need my help I'll be happy to assist you to the best I could. Dont just be a BSA graduate but be a CPA!!! And Always remember to PRAY The Secret: I'm always doing this, PRAY before taking my books to review Thank you eric

PROBLEMS
Problem 13 - 1 Platinum Corp. and Subsidiary Silver Co. Consolidated Income Statement For the Year Ended December 31, 2010 Sales (P6,000,000 P800,000) Cost of Sales* Gross Margin Expenses Consolidated Profit Non-controlling Interest Profit** Profit Attributable to parent * Combined cost of sales Realized gross profit on beginning inventory (P80,000 x 33 1/3%/133 1/3%) Unrealized gross profit on ending inventory (P120,000 x 33 1/3%/133 1/3%) Intra-group sales Consolidated cost of sales Non-controlling interest profit (P360,000 + P20,000 P30,000) x 20% P2,600,000 ( 20,000) 30,000 ( 800,000) P1,810,000 P 70,000 P5,200,000 1,810,000 P3,390,000 2,080,000 P1,310,000 70,000 P1,240,000

**

Problem 13 - 2 1. Non-controlling interest profit Unrealized gross profit on ending inventory of Pedrito Co. purchased from Salome Co. (P22,000 x 25%/125% x 20%) Unadjusted share in profit of Salome Co. Non-controlling interest percentage Profit of Salome Co. 2. Non-controlling interest, December 31, 2008 Add Unrealized gross profit on ending inventory of Pedrito Co. purchased from Salome Co. Total Non-controlling interest percentage Net assets of Salome Co., December 31, 2008 3. Net assets of Salome Co., December 31, 2008 Less: Net income for 2008 Net assets of Salome Co., January 1, 2008 Book value (80%) Excess due to undervaluation of land Consideration transferred/cost of investment

P 26,180 880 P 27,060 20% P135,300 P82,420 880 P83,300 20% P416,500 P416,500 135,300 P281,200 P224,960 25,000 P249,960

Problem 13 -3 a. Sales Cost of Sales b. Retained Earnings, Pamela Co. Cost of Sales (P24,000 x 25/125 = P4,800) Retained Earnings, Pamela Co. Retained Earnings, Salve Co. Cost of Sales P15,000 x 33 1/3%/133 1/3% = P3,750 c. Cost of Sales Inventory P30,000 x 25%/125% = P6,000 P20,000 x 33 1/3%/133 1/3% = P5,000 P6,000 + P5,000 P11,000

700,000 700,000 4,800 4,800

3,375 375 3,750

11,000 11,000

Problem 13 - 4 Pentagon Co. and Subsidiary Sexagon Co. Consolidated Income Statement For the Year Ended December 31, 2010 Sales (P4,600,000 - P1,000,000) Cost of Sales* Gross Margin Expenses (P1,664,000 - P6,000) Consolidated Net Income Non-controlling net income** Profit attributable to parent P3,600,000 1,002,000 P2,598,000 1,658,000 P 940,000 P 46,400 P 893,600

Combined cost of sales Unrealized gross profit on ending inventory of Pentagon (P40,000 x 50%) Sexagon (P100,000 x 60%) Realized gross profit on beginning inventory of Pentagon (P60,000 x 50%) Sexagon (P80,000 x 60%) Intra-group sales Consolidated cost of sales Share in net income of Sexagon (P276,000 x 20%) Realized gross profit on beginning inventory of Pentagon (P30,000 x 20%) Unrealized gross profit on ending inventory of Pentagon (P20,000 x 20%) Unrealized gain of sale of equipment by Sexagon (P60,000 x 20%) Realized gain on sale of equipment by Sexagon (P6,000 x 20%) Non-controlling interest profit

P2,000,000 20,000 60,000 ( 30,000) ( 48,000) ( 1,000,000) P1,002,000 P55,200 6,000 ( 4,000) ( 12,000) 1,200 P46,400

**

Problem 13 7 Cost of investment Book value of acquired investment: Ordinary Share Capital (P300,000 x 80%) Retained earnings (P90,000 x 80%) Goodwill Impairment of goodwill Adjusting and elimination entries a. Investment Retained Earnings, Pluto Co. To record share in the net increase in retained earnings of Saturn Inc. P225,000 + (9% of P300,000) - P80,000 = P172,000 P172,000 - P90,000 = P82,000 x 80% = P65,600 b. Ordinary Share Capital, Saturn Co. Retained Earnings, Saturn Co. Goodwill Investment Non-controlling Interest To eliminated subsidiary stockholders' equity accounts Retained Earnings, Pluto (P2,400 x 3 years) Expenses Goodwill To record amortization of goodwill inlc. prior years Sales Cost of Goods Sold To eliminate intra-group sale of merchandise. Retained Earnings, Pluto Corp. Cost of Goods Sold To record realized gross profit on beginning inventory of Saturn Inc. P90,000 - P30,000 = P60,000 x 25% = P15,000 Cost of Goods Sold Inventories To eliminate unrealized gross profit on ending inventories of Saturn, Inc. P90,000 x 25% = P22,500 Accounts Payable Accounts Receivable To eliminate intercompany receivable and payable. P63,000 + P45,000 = P108,000 Retained Earnings, Pluto Plant and Equipment To eliminate unrealized gain on sale of building. Accumulated Depreciation Building Expenses Retained Earnings, Pluto (P1,800 x 2.5 yrs.) To record amortization of unrealized gain on sale of building of prior years and current year. P36,000 / 20 yrs. = P1,800 per year P360,000 P240,000 72,000

312,000 P 48,000 P 2,400

65,600 65,600

300,000 172,000 48,000 425,600 94,400 7,200 2,400 9,600 300,000 300,000

c.

d.

e.

15,000 15,000

f.

22,500 22,500

g.

108,000 108,000

h.

36,000 36,000

i.

6,300 1,800 4,500

j.

Notes Payable Notes Receivable To eliminate intercompany note receivable and payable. Other Current Liabilities Other Current Assets To eliminate intercompany interest receivable and payable. P24,000 x 12% x 6/12 = P1,440 Dividends Payable Retained Earnings, Saturn Inc. P300,000 x 9% x 80% = P21,600

24,000 24,000

k.

1,440 1,440

l.

21,600 21,600

Problem 13 - 8 Profit from own operations: Paloma Selma (100% x P120,000) Solita (90% x P96,000) Sandara (80% x P80,000) Realized gross profit on beginning inventory of Paloma, seller- Sandara (P6,400 x 80%) Unrealized gross profit on ending inventory of Paloma, seller - Sandara (P4,000 x 80%) Sandara, seller - Selma (P640,000 x 20% x 25% x 100%)) seller - Solita (P40,000 x 20% x 20% x 90%) Profit attributable to Paloma

P240,000 120,000 86,400 64,000 5,120 ( 3,200) ( 32,000) ( 1,440) P478,880

Exercise 14 - 4
Cameron Company, Debtor Deficiency Statement Estimated losses on realization of assets: Accounts receivable Inventories Prepaid insurance and other prepaid expenses Machinery and equipment Goodwill and patents Additional liabilities: Liquidation costs Contingent liabilities Estimated gross loss Deduct: Estimated gains on realization of assets: Land and buildings Estimated net loss Loss to be borne by owners: Capital stock Less deficit Estimated deficiency to unsecured creditors Exercise 14 - 5 Clippers Company, Debtor Statement of Affairs November 30, 2008 Creditors With Priority Fully Secured Partly Secured P200,000 P 80,000 P 30,000 P 30,000 P200,000 P 80,000 P13,200 48,000 1,200 40,000 90,000 P10,000 15,000

P192,400

25,000 P217,400

45,000 P172,400 P200,000 31,000

169,000 P 3,400

Liabilities Mortgage payable Notes payable Liabilities with priority Unsecured liabilities Totals

Unsecured P 20,000 210,000 P230,000

Assets Land and buildings Furniture and equipment Other assets Creditors with priority Totals

With Priority

Assets Available to Creditors Fully Secured Partly Secured P200,000 P 80,000

Unsecured P120,000 90,000 ( 30,000) P180,000

P 30,000

P200,000

P 80,000

Total unsecured creditors Estimated amount available to unsecured creditors without priority Estimated deficiency to unsecured creditors Estimated amount payable per peso of unsecured liability (P180,000/P230,000)

P230,000 180,000 P 50,000 P .78

Problem 15 -2 Requirement 2(a)


Cory and Fidel, Debtor Ferdie, Trustee Balance Sheet June 30, 2010 Assets Current assets: Cash Accounts receivable Less Allowance for doubtful accounts Merchandise inventory Long-term investment: Cash surrender value of life insurance Furniture and fixtures Less Accumulated depreciation Total assets P 18,520 P27,200 1,360 25.840 33,000

P 77,360 9,400

P 3,600 960

2,640 P 89,400

Liabilities and Partners' Capital Liabilities: Accounts payable Installment on notes payable Accrued interest on installment notes Due to Ferdie, Trustee Total liabilities Partners' capital: Cory, capital Fidel, capital Total partners' capital Total liabilities and partners' capital Problem 15 - 2 (Req. 2b) Cory and Fidel, Debtor Ferdie, Trustee Income Statement For the Fiscal Year Ended June 30, 2010 Sales Cost of goods sold: Merchandise inventory, July 1, 2004 Purchases Merchandise available for sale Less Merchandise inventory, June 30, 2005 Gross profit Operating expenses Operating income Other expenses: Interest and finance charges Income from trustee's operations Partnership revenue and expense items: Uncollectible accounts expense Interest expense on notes, old Interest expense on installment notes Increase in partners' capital Problem 15 - 3 DEF Stores, Inc. Debtor ABC, Trustee Income Statement For Six Months Ended December 31, 2010 Sales Cost of goods sold: Merchandise inventory, July 1 Purchases Merchandise available for sale P401,000 P 50,600 252,800 P303,400 P150,000 P 35,200 80,000 P115,200 33,000 P 24,000 3,200 160 6,000 P 34,880 P 31,154 23,366 54,520 P 89,400

82,200 P67,800 41,240 P26,560 1,500 P25,060

P 4,400 100 1,040

5,540 P19,520

Less Merchandise inventory, December 31 Gross profit Operating expenses: Selling expenses General expenses Depreciation Trustee's expenses Income from trustee's operations Corporation revenue and expense items: Corporation expenses: Interest expense Uncollectible accounts expense Total corporation expenses Increase in retained earnings DEF Stores, Inc., Debtor ABC, Trustee Balance Sheet December 31, 2010 Assets Current assets: Cash Accounts receivable, old Accounts receivable, new Merchandise inventory Fixtures Less Accumulated depreciation Intangible asset: Trademark Total assets Liabilities Accounts payable, new Mortgage payable Total liabilities

41,500

261,900 P139,100

P 45,600 28,220 10,980 3,000

87,800 P 51,300

P 8,000 15,000 23,000 P 28,300

P 56,840 75,600 79,360 41,500 P183,000 35,000

P253,300 148,000 25,000 P426,300 P 39,200 100,000 P139,200

Shareholders' Equity Share capital Less Deficit Total shareholders' equity Total liabilities and shareholders' equity P300,000 12,900 287,100 P426,300

Problem 15 -4 Universal Company, Debtor P. Cesar, Trustee Balance Sheet November 20, 2010 Assets Cash Accounts receivable Less Allowance for doubtful accounts Total assets Liabilities Bank overdraft Accounts Payable Bank loans Poker, Inc. Acceptances Total liabilities P 2,000 226,000 210,000 60,000 46,000 P544,000 Shareholders' Equity (Deficiency) Contributed capital: Preference shares Ordinary shares Total contributed capital Retained earnings - deficit Total shareholders' equity (deficiency) Total liabilities and shareholders' equity P200,000 200,000 P400,000 675,600 (275,600) P268,400 P268,400 P800 800 -----P268,400

Universal Company, Debtor P. Cesar, Trustee Income Statement For the Period April 28 to November 20, 2010 Sales Cost of goods sold Gross profit Operating and general expenses (including materials and supplies used, P18,000) Operating loss Other revenue: Rental income Unclaimed wages Interest income Loss from trustee's operations Corporation revenue and expense items: Corporation losses: Loss on cancellation of insurance Loss on realization of goods and supplies Loss on sale of machinery and equipment Interest on city taxes Corporation expenses: Interest on mortgage Uncollectible accounts expense Less Corporation gains: Proceeds from surrender of insurance policy on life of manager Gain from reduction of accounts payable Gain on machinery lease settlement Decrease in retained earnings Exercise 16 - 1 Watson Co., Debtor C. Gonzales, Trustee Statement of Realization and Liquidation For the Month Ended December 31, 200__ Assets Assets realized: (2) Receivables, old (2) Receivables, new Assets not realized: Receivables, old Receivables, new Merchandise inventory, Dec. 31 Furniture and fixtures Liabilities Liabilities to be liquidated: Accounts payable P150,000 120,000 P 30,000 140,000 P110,000 P 2,000 1,000 400

3,400 P106,600

1,400 42,000 540,000 800 P584,200 4,000 800 P589,000

P2,000 14,000 4,000

20,000

569,000 P675,600

Assets to be realized: Receivables, old Merchandise inventory, Dec. 1 Furniture and fixtures Assets acquired: (3) Receivables, old

P180,000 200,000 75,000 9,000

P 92,500 2,250

84,250 6,750 112,500 73,750

Liabilities not liquidated: Accounts payable, old

275,000

275,000

Supplementary charges: (4) Purchases (5) Expenses Net gain Total

Revenues and Expenses Supplementary credits: 3,750 (1) Sales for cash 7,000 (3) Sales on account P749,750 26,250 P776,000 Total

120,000 9,000

P776,000

Cash
200___ Dec. 1 1-31 Balance (1) Cash sales of merchandise (2) Collections of receivables P 60,000 120,000 94,750 P274,750 Dec. 31 200__ Dec. 1-31 (4) Payments for merchandise purchased (5) Payment of expenses Balance

3,750 7,000 264,000 P274,750

200__ Jan. 1

Balance

P264,000

Share Capital
2000___ Dec. 1 Balance P250,000

Retained Earnings
200____ Dec. 1 Balance P 10,000 200____ Dec. 31 Net gain for December P26,250

Watson Co., Debtor Balances per Statement of Realization and Liquidation December 31, 200__
Assets Cash Assets not realized P264,000 277,250 _______ P541,250 Liabilities and Shareholders' Equity Liabilities not liquidated P275,000 Share capital 250,000 Retained earnings 16,250 Total liabilities and shareholders' equity P541,250

Total assets

Exercise 16 -2 a. Dr. Accounts Receivable - "Assets acquired" Cr. Sales - "Supplementary credits" b. Dr. Cash - Cash Schedule Cr. Accounts Receivable - "Assets realized"

125,000 125,000 67,500 67,500

No entry is needed for the accounts written off; the balance of accounts receivable of ___ is reduced by P2,500 and is entered in the "Assets to be realized" section.

c.

Dr. Cash - Cash Schedule Cr. Securities - "Assets realized" Dr. Purchases - "Supplementary charges" Cr. Accounts Payable - "Liabilities assumed" Dr. Accrued Selling Expenses - "Liabilities liquidated" Dr. Selling Expenses - "Supplementary charges" Cr. Cash

82,000 82,000 87,500 87,500 4,000 19,750 23,750

d.

e.

f.

No entry is needed for the depreciation; the balance of furniture and fixtures is reduced by P1,375 and is entered in the "Assets to be realized" section. Dr. Truck - "Assets acquired" Cr. Cash - "Cash schedule" Cr. Truck - "Assets realized" Dr. Accounts Payable - "Liabilities liquidated" Cr. Cash - Cash Schedule
Exercise 16-3 Liabilities Unsecured Assets Cash Beg. Balances Sale of inventory Collection of rec'l Payment of loan 12,000 30,000 39,000 (12,000) Noncash 590,000 (25,000) (54,000) (12,000) Fully Secured 200,000 Partially Secured 175,000 With Priority 54,000 Without Priority 150,000 Owners' Equity 23,000 (5,000) (19,000)

11,000 6,000 5,000 49,000 49,000

h.

Equipment rental Sale of securities Depreciation on mach. Payment of accounts pay Sale of machinery Payment of loan Reclassification of loan Balances 66,500 444,800 (25,000) 36,000 (36,000) (45,000) (36,000) (14,000) 113,000 175,000 22,500 (18,000) (3,200) (25,000)

15,000

(15,000) 4,500 (3,200) (9,000)

14,000 83,000 150,000 (23,700)

Exercise 17 - 1
Jan. 5 Purchases Accounts Payable 70,000 x P25.56 Purchases Accounts Payable 100,000 x P.1678 Accounts Payable Foreign Exchange Gain or Loss Cash 70,000 x P25.60 = P1,792,000 Accounts Payable Foreign Exchange Gain or Loss Cash 100,000 x P.1550 1,789,200 1,789,200

Mar.

16,780 16,780

May

10

1,789,200 2,800 1,792,000

16

16,780 1,280 15,500

Exercise 17 -2
Mar. 14 Merchandise Inventory Accounts Payable 20,000 x P52.85 Merchandise Inventory Accounts Payable 60,000 x P.7637 Accounts Payable Foreign Exchange Gain or Loss Cash 20,000 x P52.75 Accounts Payable Foreign Exchange Gain or Loss Cash 1,057,000 1,057,000

Apr.

10

45,822 45,882

14

1,057,000 2,000 1,055,000

May

10

45,822 2,928 48,750

Exercise 17 - 3
May 22 Accounts Receivable Sales 10,000 x P5.4085 Accounts Receivable Sales 40,000 x P.2129 Cash Foreign Exchange Gain or Loss Accounts Receivable 10,000 x P5.5015 = P55,015 Cash Foreign Exchange Gain or Loss Accounts Receivable 54,085 54,085 8,516 8,516

31

June

22

55,015 930 54,085

30

8,540 24 8,516