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8/9/2019 Solutions to Chapter 3 Selected Problems
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Solutions to chapter 3 selected problems
P 3-4
1. Basa Benito Beltran Bagnes Total
Salaries P400,000 P200,000 P 600,000
Bonus 60,000 40,000 100,000*
Interest 100,000 90,000 P 40,000 P 94,000 324,000
Balance 269,000 269,000 269,000 269,000 1,076,000
Total P829,000 P599,000 P309,000 P363,000 P2,100,000
*B = 5% (P2,100,000 B) = P100,000 x 3/5 = P60,000
x 2/5 = 40,000
2. Basa Benito Beltran Bagnes Total
Salaries P 400,000 P 200,000 P 600,000
Interest 100,000 90,000 P 40,000 P 94,000 324,000
Balance (431,000) (431,000) (431,000) (431,000) (1,724,000)
Total P 69,000 P(141,000) P (391,000) (P337,000) (P800,000)
3. Basa Benito Beltran Bagnes Total
Interest P 100,000 P 90,000 P 40,000 P 94,000 P 324,000
Bonus 22,857 15,238 38,095
Salaries 291,937 145,968 437,905*
Total P 414,794 P 251,206 P 40,000 P 94,000 P 800,000
B = 5% (P800,000 B) = P38,095 x 3/5 = P22,857; P38,095 x 2/5 = P15,238
*P437,905 x 4/6 = P291,937; P437,905 x 2/6 = P145,968
P 3-5
1. Balte Bala Total
8% interest on capital P40,000 P 24,000 P 64,000
Salaries 120,000 80,000 200,000
20% bonus on net income 238,000 238,000
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Balance capital ratio 430,000 258,000 688,000
Total P828,000 P 362,000 P1,190,000
2. Sales 4,800,000
Cost of Goods Sold 2,100,000
Operating Expenses 1,000,000
Income Taxes 510,000
Income Summary 1,190,000
Income Summary 1,190,000
Balte, Capital 828,000
Bala, Capital 362,000
Balte, Capital 60,000
Bala, Capital 100,000
Balte, Drawing 60,000
Bala, Drawing 100,000
Balte and Bala Partnership
Statement of Changes in Par tners Equity
For the Year Ended December 31, 2014
Balte Bala Total
Capital balances, January 1, 2014 P 500,000 P300,000 P 800,000
Add Distribution of net income for 2014:
Interests P 40,000 P 24,000 P 64,000Salaries 120,000 80,000 200,000
Bonus 238,000 238,000
Balance - capital ratio 430,000 258,000 688,000
Total share in net income P 828,000 P 362,000 P1,190,000
Total P1,328,000 P 662,000 P1,990,000
Less Drawings 60,000 100,000 160,000
Capital balances, December 31, 2014 P1,268,000 P 562,000 P1,830,000
P 3-6
1. Net sales (P1,525,000 P25,000) P1,500,000
Cost of goods sold:
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Purchases P980,000
Less Merchandise inventory, end 305,000 675,000
Gross profit P 825,000
Operating expenses (300,000 12,500 5,000 + 17,500 + 30,000) 330,000
Income before income tax P 495,000
Income tax 148,500
Net income P 346,500
2. Brenda Brosas Total
Salaries (P150,000 x 8/12) P100,000 P100,000
Additional 10% of NI after salaries 24,650 24,650
Balance original capital 138,656 P83,194 221,850
Total P263,306 P83,194 P346,500
3. Brenda Brosas Total
Beginning capital P625,000 P375,000 P1,000,000
Add Share in net income 263,306 83,194 346,500
Total P888,306 P458,194 P1,346,500
Less Drawings 100,000 150,000 250,000
Ending capital P788,306 P308,194 P1,096,500
P 3-7
Be on Top Company
Income Statement
For the Year Ended December 31, 2014
Sales P5,100,000
Cost of goods sold:
Purchases P4,920,000
Less: Purchase returns and allowances P 99,000
Purchase discounts 138,000 237,000
Cost of goods available for sale P4,683,000
Less Merchandise inventory, December 31 1,406,000 3,277,000
Gross profit P1,823,000
Other operating income interest 27,000
Selling expenses (schedule 1) ( 530,300)
Administrative and general expenses (schedule 2) ( 801,800)
Operating income P 517,900
Interest expense ( 30,000)
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Net income before Income Tax P487,900
Income Taxes 146,370
Net Income after Income Tax P 341,530
Division of net income:
Bathan Buenas Total
Interest P 60,000 P 48,900 P108,900
Salaries 100,000 100,000
Balance divided equally 66,315 66,315 132,630
Total P226,3150 P115,215 P341,530
Schedule 1 Selling expenses Schedule 2 General and administrative expenses
Sales salaries P480,000 Taxes P 36,500
Store supplies 19,500 Doubtful accounts 9,300
Depreciation 21,300 Others 756,000
Advertising 9,500 Total P801,800
P530,300
Be on Top Company
Statement of Changes in Partners Equity
For the Year Ended December 31, 2014
Bathan Buenas Total
Original capital P600,000 P489,000 P1,089,000
Add Share in net income 226,315 115,215 341,530Total P826,315 P604,215 P1,430,530
Less Drawing 144,000 54,000 198,000
Capital, December 31, 2010 P682,315 P550,215 P1,232,530
Be on Top Company
Statement of Financial Position
December 31, 2014
Assets
Current assets:
Cash P582,750
Notes receivable 120,000
Accounts receivable P186,000
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Less Allowance for doubtful accounts 9,300 176,700
Interest receivable 6,000
Merchandise inventory 1,406,000
Prepaid taxes 10,000
Store supplies 16,500 P2,317,950
Noncurrent assets
Store furniture P222,000
Less Accumulated depreciation 21,300 200,700
Total assets P2,518,650
Liabilities and CapitalCurrent liabilities;
Notes payable P 360,000
Accounts payable 756,000
Advertising payable 9,500
Taxes payable 10,500
Interest payable 3,750
Income tax payable 146,370
Total liabilities P1,286,120
Bathan, capital P 682,315
Buenas, capital 550,215
Total partners capital 1,232,530
Total liabilities and capital P2,518,650
3. Adjusting entries
Adjustment for inventories is included in the closing entries
a. Store Supplies Expense 19,500
Store Supplies 19,500
b. Depreciation Expense 21,300
Accumulated Depreciation 21,300
c. Advertising Expense 9,500
Advertising Payable 9,500
d. Prepaid Taxes 10,000
Taxes 10,000
e. Taxes 10,500
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Taxes Payable 10,500
f. Interest Expense 3,750
Interest Payable 3,750
g. Interest Receivable 6,000
Interest Revenue 6,000
h. Doubtful Accounts Expense 9,300
Allowance for Doubtful Accounts 9,300
i. Income Tax 146,370
Income Tax Payable 146,370
Closing entries
a. Merchandise Inventory 1,406,000
Interest Revenue 27,000
Purchase Returns and Allowances 99,000
Purchase Discounts 138,000
Sales 5,100,000
Income Summary 6,770,000
b. Income Summary 6,428,470
General Expenses Others 756,000
Interest Expense 30,000
Purchases 4,920,000
Sales Salaries 480,000
Taxes 36,500
Store Supplies Expense 19,500
Depreciation Expense 21,300
Advertising Expense 9,500
Doubtful Accounts Expense 9,300
Income Taxes 146,370
c. Income Summary 341,530
Bathan, Capital 226,3150
Buenas, Capital 115,215
d. Bathan, Capital 144,000
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Buenas, Capital 54,000
Bathan, Drawing 144,000
Buenas, Drawing 54,000
P 3-8
Bacani, Badeo and Barte
Statement of Changes in Partners Equity
For the Three Years Ending December 31, 2014
Bacani Badeo Barte Total
Original capital P1,000,000 P500,000 P 400,000 P1,900,000
Less: Share in net loss 2012 (sch. 1) ( 8,000) ( 14,000) ( 20,000) ( 42,000)
Drawing (72,000) (86,800) ( 96,000) (254,800)
Capital, January 1, 2013 P 920,000 P 399,200 P 284,000 P1,603,200
Add Share in net income 2013 (sch. 2) 107,200 99,952 93,040 300,192
Total P1,027,200 P 499,152 P 377,040 P1,903,392
Less Drawing 139,600 163,200 177,200 480,000
Capital, January 1, 2014 P 887,600 P 335,952 P 199,840 P1,423,392
Add Share in net income 2014 (sch. 3) 170,855 153,656 145,489 470,000
Total P1,058,455 P 489,608 P 345,329 P1,893,392
Less Drawing 163,200 195,200 169,600 528,000
Capital, December 31, 2014 P 895,255 P 294,408 P 175,729 P1,365,392
Schedule 1 Distribution of 2012 net lossBacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 60,000 30,000 24,000 114,000
Balance equally ( 164,000) ( 164,000) ( 164,000) ( 492,000)
Total P( 8,000) P( 14,000) P(20,000) P( 42,000)
Schedule 2 Distribution of 2013 net incomeBacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 55,200 23,952 17,040 96,192
Balance equally ( 44,000) ( 44,000) ( 44,000) ( 132,000)
Total P 107,200 P 99,952 P 93,040 P300,192
Schedule 3 Distribution of 2014 net income
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Bacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 53,256 20,157 11,990 85,403
Bonus 8,100 8,100
Balance equally 13,499 13,499 13,499 40,497
Total P 170,855 P 153,656 P 145,489 P470,000
Bonus = P470,000 (P336,000 + P85,403) x 20/120 = P8,100
P 3-91. Balmes = 5/10 x 80% = 40%
Bamban = 3/10 x 80% = 24%Buela = 2/10 x 80% = 16%Bagnes 20%
2. Corrected net income = P400,000 ( P24,000 - P62,000 - P40,000 + P30,000 + P18,000x 70%) = P379,000
Balmes = P379,000 x 40% = P151,600 Buela = P379,000 x 16% = P60,640Bamban = P379,000 x 24% = P 90,960 Bagnes = P379,000 x 20% = P75