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January 19, 2018

PARTNERSHIP INTRODUCTION
Partnerships : 2000 BC
Corporations: Industrial Revolution (1800's)

Partnership Definition:

Art 1767: By the contract of partnership two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.

1 It is a contract
2 Two or more persons (Corporation: 5 - 15)
3 Contribute money, property, or industry
Partner must have legal capacity (i.e. 18 years old)
4 Intention of dividing the profits among themselves
Should obtain profits through legal means to be recognized by the State
If illegal, the profits are confiscated by the State

Two or more persons may also form a partnership for the exercise of a profession.
Example law firms, accounting firms, etc.

Elements of a Partnership
1 Articles of partnership
2 Contract
3 Legal capacity
4 Legal means
5 Profits

Art 1768 The partnership has a judicial personality separate and distinct from that of each of the partners, even in cas
of failure to comply with the requirements of Article 1772, first paragraph. (n)

Characteristics of a Partnership
1 Co-ownership:
They cannot exclude anyone
2 Judicial personality
* It is an accounting entity with juridical personality
* We identify partnerships in the capacity of the owners
3 Mutual Agency
The act of one partner binds the partnership
4 Unlimited liability
Creditors can go the personal assets of the partners
5 Limited life
Partnership is dissolved once there is a change in the owners

Differences between a Partnership and Corporation

1 Continuity
P Limited life
C Unlimited life (50 years - can be extended)
2 Formality
P Contract only; doesn't need a written contract; can be oral: binding if written only
C Heavily regulated
3 Liability
P Unlimited liability
C Limited liability (up to their capital contribution)
4 Management
P The partners are usually the managers
C The CEO must be a member of the BOD (i.e. must have a stock in the corporation; toke
5 Ability to attract capital
P
C More options to attract capital (e.g. stock market, banks)

Several Kinds of Partnership

1 As to object
Universal
As to all present property: you co-own everything (e.g. conjugal property)
For all profits: any income that they obtain needs to be shared among themselves
Particular - only for a single undertaking

2 As to liability

General Unlimited liability


Limited Limited liability of owners

* In taxation, partnerships in the Philippines are taxed like a corporation (except for partnership for professio
* If the income is transferred out of the partner, the income is taxed (10%) = just like dividends)

Several Kinds of Partners

1 General - liable as to personal property to meet the obligations of the partnership


2 Limited - only liable up to capital contributions
3 Industrial - only contribute their industry to the business except for bankruptcy of the business

Formation
1 Oral
2 Written need to contain name, provision, liability, rights and duties
by default, it is still okay without these provision since there are defaults in law
bute money, property, or

ch of the partners, even in case


ral: binding if written only

a stock in the corporation; token ownership - 1 stock)

ng themselves

pt for partnership for professions (i.e. general professional partnerships))


st like dividends)

cy of the business
aults in law
January 19, 2018

ACCOUNTING FOR PARTNERSHIP


Initial Measurement @FMV - if not FV, then use MV
- assessed value vs book value - follow assessment

Therefore:
1 FV
2 MV
3 AV
4 BV

Types of Partnership
1 New - starts from scratch
2 Conversion - from sole proprietorship to partnership
3 Dissolution - not necessarily to become "inexistent"; the composition of the partnership is change

Accounts that will be used:


1 Name, Capital
2 Name, Drawings
3 Name, Loan partner avails loan from one partners; for purposes of liquidation
residual owners - partners; loan from a partner is considered as liability (i.e. paid after

CASE 1 They decided to form new partnership

Cash
AR
Inv
PPE
NP
Kate, Capital
Shiella, Capital
Camille, Capital

** Record at FV
n of the partnership is changed

ered as liability (i.e. paid after external loans)

ed to form new partnership CASE 2 They decided to keep Camille's books.

500000 Cash 450000


66000 AR 58000
170000 Inv 95000
272000 PPE 237000
8000 ADA * difference between 2000
FV and BV
Kate, Capital 300000 NP 8000
Shiella, Capital 500000 Kate, Capita 300000
* initial capital contribution : 30 50 20
Camille, Capital 200000 Shiella, Capital 500000
Camille, Capital 30000

* keep the assets and liabilities at their fair market value


* aquirer - book value ; aquiree - fair value
** remeasure everything at fair value
January 24, 2018

Profit/Loss Sharing
Article 1797
1 What is written on the articles or agreed upon by the partners must be followed
2 Only profit sharing is given, we follow the same profit sharing scheme to distribute losses
3 No given at all, we will use the capital of partners (i.e. initial capital contribution)

* When a new partner is admitted, or a partner retires from the partnership (i.e. dissolution), it is not initial capital an

Example:

Camille withdraws from the partnership, and only Kate and Shiella remain as partners. At the time of withdrawal:

Kate 600000 0.42857143 * round to the nearest whole number


Shiella 800000 0.57142857
* treated as initial capital contribution

4 Loss sharing-given only, go with number (3) - capital contribution

Types of Profit Sharing Schemes in Partnership Order of Application:


1 Salaries and Allowances
1 Specified Ratio 2 Interest on Capital Balance
2 Interest on Capital Balance If profit Bonus
- incentive for the partner who gives more Last Specified Ratio
- could be initial capital contribution
- could be beginning capital for the year
- could be ending capital for the year
- weighted average capital (WAVE capital) : consider withdrawals and additional capital contributions
3 Salaries and Allowances
- compensate for the partners who run the business, contributions of the partners, etc.
- used as share in the net income; not equal to salary employees that are regular
4 Bonuses
- bonus on net income
- bonus after …
- only given if profit
5 Computation of any of the above
Case 1

K S C TOTAL
Ratio 2 3 1
0.3333333 0.5 0.16666667
NI Dist 100000 150000 50000 300000

Case 2

K S C TOTAL
Ratio 2 3 1
0.3333333 0.5 0.16666667
Net Income 300000
OCC 300000 500000 200000
Interest 27000 45000 18000 90000
210000
P&L SS 70000 105000 35000 210000
NI Dist 97000 150000 53000 0

Case 3
Kate Shiella Camille
225000 300000 500000 200000
100000 25000 35000 100000
325000 325000 535000 300000

Net Income 300000


Interest 29250 48150 27000 104400
195600
P&L SS 65200 65200 65200 195600
NI Dist 94450 113350 92200 0

Case 1
K S C

NI 300000
Salaries 80000 50000 50000 180000
Interest 27000 45000 18000 90000
30000
Bonus 45000 45000
Remainder -5000 -5000 -5000 -15000
147000 90000 63000

Case 2
K S C

NI 300000
Salaries 80000 50000 50000 180000
Interest 27000 45000 18000 90000
30000
Bonus 39130.435 39130.435 B = 15%(NI-B)
Remainder -3043.478 -3043.4783 -3043.4783 -9130.435 B=45000-0.15B
NI Dist 143087 91956.522 64956.5217 39130.435

QUESTION:
What if Bonus is based on NI after salaries and interests but after subtracting it, the balance is already negative

Case 3
K S C

NL -300000
Salaries 80000 50000 50000 180000
Interest 27000 45000 18000 90000
Remainder -190000 -190000 -190000 -570000
-83000 -95000 -122000
* by default, this is a deduction from capital unless the capital can't absorb the loss.
* if the latter is the case, the partner must pay additional capital; if she's insolvent, the other p

300000 NI overstatement

Case 1 K S C TOTAL
Ratio 2 3 1
0.3333333 0.5 0.16666667
Net Income 150000 225000 75000 450000
2009, should be 50000 75000 25000 150000
OS 100000 150000 50000

Kate, Capital 100000


Shiella, Capital 150000
Camille, Capital 50000
A/D * assumption: 300000 came from300000
unrecorded dep ex

* noncounter balancing error (unlike inventory error, etc.)


* 2:3:1 = conincidence only since this is very basic

* so change in P&L sharing schemes are not applied to errors

Case 2
K S C

NI 0 * correct net income


Salaries 80000 50000 50000 180000
Interest 27000 45000 18000 90000
Remainder -90000 -90000 -90000 -270000
17000 5000 -22000

NI Dist (before) 143087 91956.522 64956.5217

K, Cap 126087.0
S, Cap 86,956.52
C, Cap 86,956.52
A/D 300000

* Assumption is you didn't record depreciation expense


), it is not initial capital anymore.

e time of withdrawal:
B = 15%(NI-B)
B=45000-0.15B

is already negative

bsorb the loss.


he's insolvent, the other partners will absorb the balance
January 24, 2018

DISSOLUTION
1 Admission
- requires unanimous consent from all the existing partners (i.e. fiduciary relationship)
- mutual agency: actions of any partner bind the other partners

Ways of Admission

A Acquisition of existing capital


- the transaction happens between the existing and new partners

Case 1 Karla, Capital 10000


Kris, Capital 10000

* 10% P&L sharing scheme by default for Karla and Kris


* no recording of cash transfer since the transaction happened between two individua

Case 2 Karla, Capital 10000


Shiella, Capital 10000
Camille, Capital 15000
Kris, Capital 35000
* 50 000 payment : P&L sharing scheme OR ratio
* no recording of cash transfer since the transaction happened between two individua

QUESTION: What will now be the P&L SS? 2:3:5:5


Why is there no revaluation or goodwill recognized?

Case 3 100000 * this is the perceived value of the partnership from Kris' POV
70000 * book value of the partnership
30000 * there might be goodwill or revaluation

Land or Goodwill 30000


Karla, Capital 6000
Shiella, Capital 9000
Camille, Capital 15000

Karla, Capital 13000


Shiella, Capital 14500
Camille, Capital 22500
Kris, Capital 50000

B Contribution of new capital


H 45% = 0.6 * 75
I 30% = 0.4 * 75
J 25%

Case 1 Interest Got = Cash Payment

Old Capital 300000


New Capital 100000
400000 100000 * basis if there is excess or none to the new capital invested

Cash 100000
J, Capital 100000

Case 2 Interest Got < Cash Payment

Old Capital 300000


New Capital 110000
410000 102500

How to account for the excess?

A Revaluation Method
- J thinks that the 300000 old capital is undervalued, so he is willing to invest more tha

440000 - this is the amount that J thinks the firm's FV


110000
330000 - POV of J before he invested
300000 - recorded book value
30000 - because of the land that is undervalued

Land 30000
H, Capital 18000
I, Capital 12000

330000
110000
440000 110000 * now equal with what he paid

Cash 110000
J, Capital 110000

B Goodwill
- same computation as (A)

Goodwill 30000
H, Capital 18000
I, Capital 12000

Cash 110000
J, Capital 110000

C Bonus Bonus to Existing Partners


- there is no asset that is under or overvalued
- no goodwill
- excess is given to the bonus of the old partners

Old Capital 300000


New Capital 110000
410000 102500 * recorded J, Capital
7500 * excess

Cash 110000
J, Capital 102500
H, Capital 4500
I, Capital 3000

Case 3 Interest Got > Cash Payment

A Revaluation Method

Old Capital 300000


New Capital 80000
380000 95000
80000 320000 - the FV of the partnership after admission from the POV of the
25%

320000
80000
240000 FV before admission from partners' POV

H, Capital 36000
I, Capital 24000
Inventory 60000

300000
60000
240000
80000
320000

Cash 80000
J, Capital 80000

B Goodwill
- J will bring goodwill into the partnership

Old, Capital 300000 400000 - should be capital after admission of J


75%

400000
300000
100000 * should be contributed by J
80000 * contributed by J
20000

Cash 80000
Goodwill 20000
J, Capital 100000

C Bonus Bonus to the Incoming Partner

Old Capital 300000


New Capital 80000
380000 95000 * should be initial capital balance
15000 * excess

Cash 80000
H, Capital 9000 * use original ratios
I, Capital 6000 * use original ratios
J, Capital 95000

2 Withdrawal or Retirement

H 200000 50%
I 100000 30%
J 80000 20%

Case 1 Settlement = Interest


H settlement 200000

H, Capital 200000
Cash 200000

Case 2 Settlement > Interest


H settlement 210000

H, Capital 200000
H, Settlement 210000
-10000

A Revaluation

H, Capital 200000
H, Settlement 210000
-10000 * assets that are undervalued

10000 20000 * total undervaluation


*50%
p&l sharing
Land 20000
H, Capital 10000
I, Capital 6000
J, Capital 4000

H, Capital 210000
Cash 210000

B Goodwill
- since we view the partnership using the personalities of the partners (i.e. proprietary

H, Capital 200000
Goodwill 10000
Cash 210000

OR

Goodwill 20000
* to bring the capital balance of H
H, Capital 10000
I, Capital 6000
J, Capital 4000

H, Capital 210000
Cash 210000

H, Capital 200000+X(GW related to H)


Cash 210000
Goodwill X

C Bonus Bonus to the Withdrawing Partner

H, Capital 200000
I, Capital 6000
J, Capital 4000
Cash 210000

Case 2 Settlement < Interest


H, Settlement 180000

A Revaluation Method

H, Settlement 180000
H, Capital 200000
20000 * due to overvaluation

20000 40000 * total overvaluation


50%

H, Capital 20000
I, Capital 12000
J, Capital 8000
Inventory 40000

H, Capital 180000
Cash 180000

B Bonus to Remaining Partners

H, Capital 200000
I, Capital 12000
J, Capital 8000
Cash 180000

C Goodwill

* Negative goodwill : gain on bargain purchase

Partial Goodwill Method

H, Capital 200000
Cash 180000
NGW 20000

NGW 20000
I, Capital 12000
J, Capital 8000

Total Goodwill Method

H, Capital 20000
I, Capital 12000
J, Capital 8000
NGW 40000

NGW 40000
H, Capital 20000
I, Capital 12000
J, Capital 8000
* Observe that we just reversed the entries.
* Therefore, no goodwill method if settlement is less than interest.
ppened between two individuals
ppened between two individuals

ip from Kris' POV

* Goodwill
- IFRS 3: only recognized in the consolidated F/S when there is an excess of the:

Acquisition cost of the parent


+ FV of non-controlling interest * FV of the shares of the subsidiary not owned by the parent
VS
FMV of identified net assets * FV of existing assets and liabilities
+ FV of identified unrecorded assets and liabilities
o the new capital invested

he is willing to invest more that what he will get


* use old ratios
* use old ratios
dmission from the POV of the partners

e capital after admission of J

e initial capital balance


* use original ratios
* use original ratios
of the partners (i.e. proprietary as opposed to entity)

Partial goodwill method

Total goodwill method


- follows the entity theory since goodwill was not adversely affected by the withdrawal of partner/s

GW related to H) * supposed entry if we follow the proprietary principle

* use the new ratios (i.e. ratios withouth the withdrawing partner)
* use the new ratios (i.e. ratios withouth the withdrawing partner)
* recognized upon his withdrawal

* income of the partnership

* he's still part of the partnership


ed by the parent
January 26, 2018

INCORPORATION
- the conversion of a partnership into a corporation

Steps in incorporating a partnership:


1 Revalue assets & liabilities
2 Record investment in corporation
- the ownership interests of the partners are swapped with the partners' assets and liabilities
3 Derecognize assets & liabilities
- what will be left is the investment in corporation
4 Winding up of partnership

Partnership Books

Revalue Assets & Liabilities

1 Noncash Assets 50000 Cash


Liabilities 30000 Noncash
H, Capital
* when there is a revaluation, we distribute15000
the gain or loss to the partners' capital.
I, Capital
* when there is a revaluation, we distribute the
5000
gain or loss to the partners' capital.
Liabilities
Record Investment in Corporation; Derecognize A&L

2 Investment in Corporation 225000 Cash


3 Liabilities 125000 NCA
Cash 50000
Noncash Assets 300000

Winding up of Partnership
if FV of stocks NOT given
4 H, Capital 132000
I, Capital 93000 No misbalance; no GW no
Investment in Corporation 225000

If recorded at 16 per share If recorded at 16 per shar

Investment in Corporation 240000 Cash


Liabilities 125000 NCA
Cash 50000 GW
Noncash Assets 300000
H, Capital 11250
I, Capital 3750

if recorded at 14 per share If recorded at 14 per shar

Investment in Corporation 210000 Cash


Liabilities 125000 NCA
H, Capital 11250
I, Capital 3750
Cash 50000
Noncash Assets 300000
Corporation Books

50000
250000 General Rule:
300000 NCA - FV of assets
BC - FV of stocks
95000
What is BC?
Valued at vs Recorded at
50000
350000
Liabilities 125000
C/S 150000
APIC 75000

if FV of stocks NOT given

No misbalance; no GW nor GBP

If recorded at 16 per share

50000 *** FV of AC 240000 =150000+90000


300000 FMVINA 225000 =350000-125000
*** 15000 GW 15000
Liabs 125000
C/S 150000
APIC 90000

If recorded at 14 per share

50000
300000
Liabs 125000
C/S 150000
APIC 60000
Gain on BP 15000
* closed out to retained earnings
January 26, 2018

LIQUIDATION
1 Lumpsum liquidation
- all the noncash assets are sold at once
2 Installment
- all the noncash assets are sold one by one
- how we distribute or payoff the liabilites given the amount of cash available is the main concern
- noncash assets cannot be sold as one

Distribution of Cash Payments


Art 1839
1 Creditors not partners
2 Creditor partners
3 Partners capital

Partnership is Insolvent
1 Creditors not partners
2 Credtor partners

Partners Insolvent
1 Personal creditors * concerning the assets of the partner
2 Partner creditors
3 Contribute - debit (deficit)

Lumpsum Liquidation
Case 1
50% 30% 20%
Cash NCA OL Py to J J, Cap V, Cap S, Cap
50,000 700,000 350,000 60,000 150,000 100,000 90,000
Sale of NCA 500,000 (700,000) (100,000) (60,000) (40,000)
550,000 - 350,000 60,000 50,000 40,000 50,000
Other liabs (350,000) (350,000)
200,000 - - 60,000 50,000 40,000 50,000
Pay to J (60,000) (60,000)
140,000 - - - 50,000 40,000 50,000
Ret of Cap (140,000) (50,000) (40,000) (50,000)
- - - - - - -

Case 2
50% 30% 20%
Cash NCA OL Py to J J, Cap V, Cap S, Cap
50,000 700,000 350,000 60,000 150,000 100,000 90,000
Sale of NCA 280,000 (700,000) (210,000) (126,000) (84,000)
330,000 - 350,000 60,000 (60,000) (26,000) 6,000
* Additional Capital 86,000 60,000 26,000
416,000 - 350,000 60,000 - - 6,000
Other liabs (350,000) (350,000)
66,000 - - 60,000 - - 6,000
Pay to J (60,000) (60,000)
6,000 - - - - - 6,000
Ret of Cap (6,000) (6,000)
- - - - - - -
Case 3 Partnership is insolvent. One partner is insolvent

INSOLVENT
50% 30% 20%
Cash NCA OL Py to J J, Cap V, Cap S, Cap
50,000 700,000 350,000 60,000 150,000 100,000 90,000
Sale of NCA 250,000 (700,000) (225,000) (135,000) (90,000)
300,000 - 350,000 60,000 (75,000) (35,000) -
Absorption (25,000) 35,000 (10,000)
300,000 - 350,000 60,000 (100,000) - (10,000)
Additional Capital 110,000 100,000 10,000
410,000 - 350,000 60,000 - - -
Other liabs (350,000) (350,000)
60,000 - - 60,000 - - -
Pay to J (60,000) (60,000)
- - - - - - -
Ret of Cap - -
- - - - - - -

Case 4 Partnership is insolvent. One partner is insolvent WRONG!

INSOLVENT
50% 30% 20%
Cash NCA OL Py to J J, Cap V, Cap S, Cap
50,000 700,000 350,000 60,000 150,000 100,000 90,000
Sale of NCA 250,000 (700,000) (225,000) (135,000) (90,000)
300,000 - 350,000 60,000 (75,000) (35,000) -
Absorption 75,000 (45,000) (30,000)
300,000 - 350,000 60,000 - (80,000) (30,000)
Additional Capital 95,000 - 80,000 15,000
395,000 - 350,000 60,000 - - (15,000)
Additional Capital (15,000) 15,000
Other liabs (350,000) (350,000)
45,000 - - 60,000 - (15,000) -
Pay to J (60,000) (60,000)
(15,000) - - - - (15,000) -
Ret of Cap - -
(15,000) - - - - (15,000) -

Case 4 Partnership is insolvent. One partner is insovlent

100000 15000
50% 30% 20%
Cash NCA OL Py to J J, Cap V, Cap S, Cap
50,000 700,000 350,000 60,000 150,000 100,000 90,000
Sale of NCA 250,000 (700,000) (225,000) (135,000) (90,000)
300,000 - 350,000 60,000 (75,000) (35,000) -
Pay to J (60,000) 60,000
300,000 - 350,000 - (15,000) (35,000) -
Absorption 15,000 (9,000) (6,000)
300,000 - 350,000 - - (44,000) (6,000)
Additional Capital 50,000 44,000 6,000
350,000 - 350,000 - - - -
Other Liabs (350,000) (350,000)
- - - - - - -

Installment Liquidation
Assumption: We lump already the interst of the partners into one single amount (payables to)
We want to avoid the scenario we encountered in the previous case
Biggest issue: If the P has a partnership balance, who among the partners will be paid first?
* 2 all partners4 are insolvent
3
Cash NCA Other Liabs Cyn Daph Ei * Assum
Balance 10,000 490,000 165,000 100,000 160,000 75,000
Other Liabs (10,000) (10,000)
- 490,000 155,000 100,000 160,000 75,000
July 31 63,000 (90,000) (6,000) (12,000) (9,000)
63,000 400,000 155,000 94,000 148,000 66,000
Other Liabs (63,000) (63,000)
- 400,000 92,000 94,000 148,000 66,000
August 4 124,000 (205,000) (18,000) (36,000) (27,000)
124,000 195,000 92,000 76,000 112,000 39,000
Other Liabs (92,000) (92,000)
32,000 195,000 - 76,000 112,000 39,000
C&D (32,000) (24,000) (8,000)
- 195,000 - 52,000 104,000 39,000
Sept 5 60,000 (105,000) (10,000) (20,000) (15,000)
60,000 90,000 - 42,000 84,000 24,000
(60,000) (20,000) (40,000)
- 90,000 - 22,000 44,000 24,000
Oct 1 45,000 (90,000) (10,000) (20,000) (15,000)
45,000 - - 12,000 24,000 9,000
(45,000) (12,000) (24,000) (9,000)
CDE - - - - - -
* Sometimes, the litigator may not follow the cash distribution plan

2 4 3
Cash NCA Other Liabs Cyn Daph Ei
Balance 10,000 490,000 165,000 100,000 160,000 75,000
Other Liabs (10,000) (10,000)
- 490,000 155,000 100,000 160,000 75,000
July 31 63,000 (90,000) (6,000) (12,000) (9,000)
63,000 400,000 155,000 94,000 148,000 66,000
Other Liabs (63,000) (63,000)
- 400,000 92,000 94,000 148,000 66,000
August 4 124,000 (205,000) (18,000) (36,000) (27,000)
124,000 195,000 92,000 76,000 112,000 39,000
Other Liabs (92,000) (92,000)
32,000 195,000 - 76,000 112,000 39,000
C&D (32,000) (30,000) (2,000)
- 195,000 - 46,000 110,000 39,000
Sept 5 60,000 (105,000) (10,000) (20,000) (15,000)
60,000 90,000 - 36,000 90,000 24,000
(60,000) (14,000) (46,000)
- 90,000 - 22,000 44,000 24,000
Oct 1 45,000 (90,000) (10,000) (20,000) (15,000)
45,000 - - 12,000 24,000 9,000
CDE (45,000) (12,000) (24,000) (9,000)
- - - - - -
main concern
* we can only offset if the other liabilities are already paid off
* Creditors of V can run after the latter's interest in the partnership as long as other creditors and partner creditors are already

* check personal net worth of the partner


* essentially we are paying the personal creditors of J
* the effect was we absorbed the deficit of J when in fact in the end, it was V who had a deficit
Net Assets
* Excess personal 65000
15000
80000 > -15000
*** If yes, we can offset (i.e. pay the payable to the insolvent partner first
SCHEDULE OF SAFE PAYMENT CASH DISTRIBUTION PLAN

2 4 3 C 100000 2.00 450000


Aug 4 Cyn Daph Ei D 160000 4.00 360000
76000 112000 39000 E 75000 3.00 225000
43333.333 86666.667 65000 195000 335000 9.00
32666.667 25333.333 -26000 * Maximum possible abs
-8666.667 -17333.33 26000
24000 8000 0 OL C
Sept 5 42000 84000 24000 First 165000 100%
-20000 -40000 -30000 90000 Next 20000 100%
22000 44000 -6000 Next 90000 1/3
-2000 -4000 6000 Excess 2/9
20000 40000 0
Beg July 31 Aug 4
Cash 10000 63000 124000
OL 10000 63000 92000
C 20000
4000
D 8000
E
SCHEDULE OF SAFE PAYMENT CASH DISTRIBUTION PLAN

Sept 5 36000 90000 24000 C 46000 2 207000


-20000 -40000 -30000 90000 D 110000 4 247500
16000 50000 -6000 E 39000 3 117000
-2000 -4000 6000 9
14000 46000 0
OL C
Next 18000
Next 60000 1/3
Excess 2/9

C
First 18000 Sept. 5 60000 18000
Next 60000 42000 14000
14000
Oct. 1 45000 18000 6000
Excess 27000 27000 6000
12000
tner creditors are already paid
Order
1
2
3

* Maximum possible absorption

D E

2/3
4/9 3/9

Sept 5 Oct 1 Excess 16500


60000 45000 27000 OL 10000 Beg 10000 C
63000 July 31 63000
20000 6000 6000 92000 Aug 4 92000
165000
40000 12000 12000
9000
Order
2
1
3

D E
100%
2/3
4/9 3/9

D E
18000
28000
46000
12000
12000 9000
24000 9000

1
20000 90000
20000 Aug 4 112000 C 4000 Aug 4 124000 C
20000 D 8000 D
C 20000 Sept 5 60000 E
D 40000
C 6000 Oct 1 18000
D 12000
90000
27000
6000 Oct 1 45000
12000
9000
27000
February 2, 2018

QUIZ 2
PROBLEM 2
30%
* in correcting
30% the error,
40% you still use th
2007 2008 2007 C D E

44000 42000 NI
2007 A -5000 B 4400
B 3000 -3000
C 0 0 Rem 13200 13200 17600
D -2000 2000 NI Dist 17600 13200 17600
E 8400 -8400
2008 A 4000 2008 35% 35% 30%
B -8600
C -3000 NI
48400 25000 B 2272.73

Rem 7954.545 7954.545 6818.181

*** Exam: Include interest based on weighted capital

Entry for drawings:

Drawings XXX I/S


Cash XXX Capital
Capital
Drawings

* net effect is that the income allocated to the

Problem 3

BV FV
523000 437000
-323000 -329000
200000 108000

92000

S 80000 36800 43200


G 80000 36800 43200
V 40000 18400 21600

1 21600
50%
10800

2 108000
60.0%
180000
40%
72000

3 108000 S 43200
60000 2880
168000 40320
40%
67200
60000
7200

4 50000 43200
21600 14200
28400 29000

5 50000
43200
6800
0.666667
10200
43200
33000
C D E

48400 2007 25000 30000 2800


-4400 1600 1200 1600
44000
2008 -6954.55 -5409.09 -4636.36
Withdrawal -5000
12/31/08 14645.45 25790.91 -236.36

25000
-2272.73
22727.27

XXX
XXX
XXX
XXX

he income allocated to the partner is already net


February 2, 2018

COMPREHENSIVE
Exam: Middle of the year
Limit is salary
Weighted Average

08/01/10

Z Inv 300000
L Cash 250000
Land 1250000
1800000

Z 40% 720000 * always follow the ratio


L 60% 1080000

2010

Z L
NI 100000
I 15000 22500 -37500 * beginning capital for the year (not from the original formation of the par
S 40000 -40000 * if silent, annual
22500
Rem 9000 13500 -22500
64000 36000 0

* beginning capital = as of dissolution


Beg 720000 1080000
NI 64000 36000
WD 25000 25000
759000 1091000 * will be the basis for the 5% interest

2011 1st half

Z L
NI 150000 * if not distributed evenly, check if there's any way which you can trace (e.g
Interest 18975 27275 -46250
103750
S 48000 -48000
55750
R 22300 33450 -55750
89275 60725 0

Beg 759000 1091000


NI 89275 60725
WD -30000 -30000
818275 1121725 * capital balance before admission of Zalora
Land 20000 30000
838275 1151725

Old Capital 1990000


New Capital 800000
2790000
S Interest 25%
697500 vs 800000
697500
L 41000 102500
Z 61500

L 879275
Z 1213225
S 697500
2790000

2011 2nd half

45% 30% 25%


L Z S
NI 150000
Interest 21981.875 30330.625 17437.5 -69750 * will not change since basis is beginning capital
80250
S 12000 12000 12000 -36000
44250
R 19912.5 13275 11062.5 -44250
53894.375 55605.625 40500 0 #3

L Z S #4
879275 1213225 697500
NI 53894.375 55605.625 40500
WD 12000 12000 12000 -36000
921169.38 1256831 726000
e original formation of the partnership); use the latter for purposes of allocating profits

y way which you can trace (e.g. 300 000 - 2011; Zalora and Lazada Capital before partnership is dissolved)
ginning capital
February 9, 2018

HOME OFFICE AND BRANCH ACCOUNTING


A
HO BR
1 IIB 60000 Cash 60000
Cash 60000 HO

2 IIB 210000 Inventory 210000


Inventory 140000 HO
AOI 70000

Delivery Expense 7000


Cash 7000

If delivery expense is charged to the branch:

IIB 217000 Inventory 217000


Inventory 140000 HO
AOI 70000
Cash 7000

If periodic:

2 IIB 210000 Shipments from HO 210000


Shipments to B 140000 HO
AOI 70000

Delivery Expense 7000


Cash 7000

If delivery expense is charged to the branch:

IIB 217000 Shipments from HO 210000


Inventory 140000 Freight in 7000
AOI 70000 HO
Cash 7000

3 NO ENTRY F&F 45000


Payable
4 Return of STB 20000 HO 32000
AOI 10000 Return of SFHO
Expense 2000 Cash
IIB 32000

5 AR 286875
Sales

COGS 127500
Inventory

6 Cash 100000
AR

7 Operating Expenses 55000


Cash

8 AP 10000 HO 10000
IIB 10000 Cash

9 IIB 18000 Operating Expenses 18000


Operating Expenses 18000 HO

Orignally (previously recorded)


OPEX XXX
Cash/Accrued ExpensXXX

B IIB HO
283000 175000

1 75000

2 -25000

3 -10000

4 -23000
5 13000

6 8000

248000 248000
60000

210000

* normally, the receiving party pays the delivery expense (e.g. FOB shipping point)
* in this case, FOB destination

* delivery expense is capitalized in the inventory


217000

210000

* original cost plus markup (this is to maintain the cost relationship of the shipment (i.e. 150%))
* this becomes part of COGS at the end of the period; technically hindi dapat COGS sa combined since it didn't come from a 'th
217000

45000
* reduces the HO account
30000 * a yield cost (contra-account)
2000 * hindi siya expense ng branch since the defect is the fault of the HO
* return… will be 'inventory' under perpetual method

8.5T x 10 x 150% x 225%


286875

Perpetual
127500

100000

55000

10000 * if the transaction is between the HO and B, the total assets will not decrease

18000

HO B

Shipments from HO XXX


HO

IIB 25000
Cash 25000

Receivable from Vendor 25000


IIB 25000

Cash 10000 HO XXX


IIB 10000 AR

Cash XXX HO 23000


IIB XXX Cash
IIB XXX Cash 13000
AR XXX HO

Opex XXX
HO
ed since it didn't come from a 'third party' --> operating expense (since it is an avoidable cost)
XXX

XXX

23000
13000

XXX
Income Statement
HO SB E

Sales -675000
COGS 300000
OPEX 164000

Net Income 211000

Statement of RE

RE, beg -421000


NI -211000
Dividends declared 300000
RE, end -332000

Cash 125000
AR 300000
Inv
Inv in SB
Allow for overval
SB
PPE and F&F
Ac Dep
Total Assets
TAP
HO
CS
RE
Total LSHE

WPEEs* not really eliminated


Periodicin the books; the following year, these are permanen
Perpetual
accounts (i.e. they are NO

* 1 HO 248000 HO
IIB 248000

* 2 STB 120000 2&3 AOI


AOI 60000
* part of the reciprocal ledger accounts that we have to e
SFHO 180000

* 3 AOI 5000
Inv, beg 5000
* this came from the BI; we have to eliminate

4 Inv, end - IS 17500 COGS


Inv, end - BS 17500
C

248000
IIB 248000

65000
COGS 65000

17500
Inv, end - BS 17500
January 31, 2018

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