PRACTICAL ACCOUNTING 2- ANSWERS AND SOLUTIONS:Problem 1. DJMs capital balance before share in profitP21,000Cash received by JM (22,200)Share in profit P 1,200Joint Venture

Balance before adj 15,00018,600 Cost of unsold merchandise

Joint venture profit (1,200*3) 3,600

Problem 2. ACash (135,000 + 65,000 + 93,600 31,000)P262,600

AR (312,000*70%)P218,400

Merchandise (250,000 218,400)P31,600

Total assetsP512,600

AYs share in the total assets (512,600*55%)P281,930

Problem 3. DFully securedPartially securedUnsecured

Cash P124,200 P222,000 P 59,640P 360

Inventory 53,000 375,000 79,000

Receivable 13,000

Less: Unsecured with priority

Trustees salary (9,500) 58,500

Salaries payable (50,000) 80,000

Taxes (4,000)

Net free assets 126,700

Total unsecured without priority 217,860

Recovery percentage: 126,700/217,860 = 58%Partially secured: 434,640 + 79,360(58%) = P480,669Problem 4. BRecovery percentage = 25%A: P124,000 + 9,920 = 133,920; 133,920 115,000 = 18,920; 18,920 * 25% = 4,730 TOTAL PAYMENT = P119,730B: P136,000 + 13,600 = 149,600; 149,600 * 25% = P37,400C: P137,500 + 7,452 = 144,952D: P12,220A = partially secured; B = unsecured w/o priority; C = fully secured; D = unsecured with priorityProblem 5. BProblem 6. C Problem 7. AAmounts charged to patientsP384,000Contractual Adjustments (90,000)Net patient service revenueP294,000

Page 2Problem 8. BUnrestricted contributionsP250,000Contributions from a donor who stipulated that the money be spent in accordance to the wishes of the hospitals board of trusteesP 75,000Contributions used for scholarshipP 75,000Current fund revenueP400,000Problem 9. AExchange ratePeso

Net assets, 1/1/12115,00045P5,175,000

Net income, 2012 90,00043.75 3,937,500

Div. declared, 9/1/12 (15,000)40 (600,000)

Net income, 2013 22,50045 1,012,500

9,525,000

Net assets translated using the rate at the end of the year212,50047.5010,093,750

Exchange difference (Translation adjustment) 56,8750

Problem 10. C7,850 (11.50 10.75) = (5,887.50)Problem 11. BOct. 31, 2013Dec. 31, 2013Jan. 31, 2014

Intrinsic Value7,25014,50029,000

Time Value1,0002,500-

12/31/11 Time value = 1,500 gain1/31/12 Intrinsic value = 14,500 gainProblem 12. DMay 1May 31June 30

Intrinsic value012,50037,500

Time Value14,000 5,000 1,500

Equity 37,500 gainEarnings (5000 1500)3,500 lossProblem 13. D125,000 * (92.20 91.90) = 37,500 lossProblem 14. AHedged item:2,750 (48 43)13,750 gainHedging instrument:2,750 (43 49)16,500 lossNet forex loss 2,750

Page 3Problem 15. CCost of investmentYou Corp.

MV of stocks issued875,000Net assets at FV660,000

Contingent consideration 15,000

Total890,000660,000

Goodwill230,000

Assets:

Loves assets at BV900,000

Add: Goodwill230,000

Less: Cash payments(53,000)

Yous assets at FV695,000

Total assets1,772,000

Problem 16. B AyizielVianney

FV of net assets2,990,000903,000

Common stocks issued, at par2,843,750789,250

Related APIC 406,250112,750

Cost of investment3,250,000902,000

Goodwill/(income fr. acq.) 260,000(1,000)

Retained earnings:Acquirers RE + income from acquisition related costs stock issuance costs in excess of related APIC4300000 + 1000 118500 69750 = P4,112,750Problem 17. DProblem 18. DProblem 19. AProblem 20. ACost of investmentSy Corp.

Cash 2,500,000BV of net assets2,800,000

FV of NCI 685,000Inventory (90,000)

Land 50,000

Patent 125,000

Total3,185,000FV of net assets2,885,000

Goodwill 300,000

Goodwill:Controlling (2,500,000 2,308,000)192,000Non-controlling (685,000 577,000)108,000Amortization20122013

Inventory 90,000-

Patent(18,750)(25,000)

Total 71,250(25,000)

Impairment of Goodwill20122012

Controlling (192/300) * 22500 14,40014,400

Non-controlling (108/300) *22500 8,100 8,100

Total 22,50022,500

Page 4NCINAS

SHE at date of acquisition2,800,000

Excess 85,000

Net income, 2012 (from date of acq.) 485,000

Amortization 71,250

Dividends declared (35,000)

SHE as adjusted (before adj. for goodwill and impairment3,406,250

3406250 * 20% 681,250

Share in the goodwill 108,000

Share in the impairment of goodwill (8,100)

NCINAS 781,150

RE Parent, end2,460,000

Intercompany dividend (28,000)

Income from own operations (525,000)

Dividends declared 50,000

RE Parent, beg.1,957,000

NI Parent (from own operations) 525,000

NI Subsidiary 485,000

Amortization 71,250

Impairment of goodwill (22,500)

Consolidated NI1,058,750

Less: NCINIS(485,000 + 71,250) * 20% = 111,250 111,250 8,100 = 103,150(103,150)

CNI attributable to parent 955,600

RE Parent, beg.1,957,000

CNI Parent 955,600

Dividends declared (50,000)

CRE2,862,600

NI from own operations520,000

Amortization(25,000)

UPEI(45,000)

Unrealized gain(75,000)

Realized gain3,125

NI before share in the impairment of Goodwill378,125

378125 * 20%75,625

Impairment of goodwill(8,100)

NCINIS67,525

NI Parent, from own operations550,000

NI Subsidiary, from own operations520,000

Amortization(25,000)

Impairment of goodwill(22,500)

UPEI Up(45,000)

UPEI Down(22,500)

Unrealized gain(75,000)

Realized gain 3,125

Consolidated Net Income883,125

Less: NCINIS(67,525)

CNI attributable to parent815,600

Problem 21. B

Page 5Problem 22. CDirect CostP75,000

Set-up (25*7500)187,500

Utilities (7.60*15000)114,000

No. of parts (20*550) 11,000

Total Cost387,500

Cost per Unit (387500/25000) P15.50

Problem 23. DDirect materialsP42,500

Direct labor 65,250

FOH 78,300

Direct materials rework 13,550

Direct labor rework 15,250

FOH rework 18,300

Total cost233,150

Cost per unit (233150/450)P518.11

Problem 24. CDirect materialsP450,000

Direct labor 520,000

OH (5.50*120000) 660,000

Less: Disposal value (24,000)

Total cost of good units1,606,000

Problem 25. AAVERAGEUnitsMaterialsConversion

Completed and Transf.12,00012,00012,000

WIP end 7,000 7,000 4,200

Total19,00019,000 16,200

Cost per EUP2.78 (52,750/19,000)3.71 (60,025/16,200)

FIFOUnitsMaterialsConversion

WIP beg. 9,500-2,850

Started and Completed 2,5002,5002,500

WIP end 7,0007,0004,200

Total19,0009,5009,550

Cost per EUP4.50 (42,750/9,500)5.50 (52,525/9,550)

Problem 26. AProblem 27. DUnitsMaterialsConversion

WIP beg.15,000- 4,500

Started and Completed60,00060,00060,000

WIP end 3,000 3,000 1,500

Lost units 2,000 2,000 2,000

Total80,00065,00068,000

Cost per EUP1.20 (78,000/65,000)1.25 (85,000/68,000)

Total current cost per EUP2.45

Page 6Cost of WIP beg, May 1, 2013 45,000

Additional conversion cost (4,500*1.25) 5,625

Cost of started and completed units (60,000*2.45)147,000

Cost of lost units (2,000*2.45) 4,900

Total cost of completed units202,525

Cost per unit (202,525/75,000)2.70

Problem 28. B(Final selling price Selling price at split-off) Additional processing cost = Incremental profit(3 1.50) 2.50 = (1)Problem 29. CJoint cost105,000

Less: NRV of by-product (4,000*4)(16,000)

Joint cost to be allocated to joint products 89,000

ProductNRVShare in the joint costAddtl processing costTOTAL

A20,00035,6006,00041,600

B30,00053,400--

Total50,00089,000--

Problem 30. DLet x = Fixed Overhead rate per machine hour40,000x = 42,000x 28,50014.25/60% = 23.75 total OH rate per machine hour28,500 = 2,000x23.75 * 40% = 9.50 Variable overhead rate per MHx = 14.25 per machine hour Problem 31. BMaterial price variance:80,000 * (5 4.75) = 20,000 unfavorableMaterial quantity variance:4.75 * (70,000 52,500) = 83,125 unfavorable Problem 32. BGP rates:Repossessed merchandise3,4002011 = 35%Deferred gross profit 3,0002012 = 40%Loss on repossession1,1002013 = 35%Installment AR 2012(3,000/40%)7,500Realized gross profit:2011: 90,000*35% =33,2502012: (167,500-7,500)*40% = 64,0002013 = (600,000 490,000)*35% = 38,500TOTAL RGP135,750

Page 7 Problem 33. AInvoice price97,500Add: Under allowance (17,500-15,000) 2,500Adjusted Installment Sales 100,000CGS65,000Gross profit35,000 (35%)Repossessed merchandise15,000DGP 8,085Loss on repossession 15Installment AR23,100Net income:RGP [(24,750 + 17,500) + (11,550*3)] * 35%26,915Loss on repossession (15)Net income26,900Problem 34. C2011: 14,625,000/32,500,000 = 45%2011 RGP:Construction price 34,000,000Est. total cost(32,500,000)GP 1,500,000Percentage of Completion 45%RGP 675,0002012:Construction price 34,000,000Est. total cost(34,250,000)Anticipated total loss (250,000)Less: RGP, 2011 675,000RGP, 2012 (925,000)Problem 35. D2011: Anticipated total loss50,0002012: 28/35 = 80% Percentage of completionConstruction price33,600,000Estimated total cost31,900,000Gross profit 1,700,000Percentage of completion 80%RGP to date 1,360,000Less: RGP, 2010 (50,000)RGP, 2011 1,410,000Problem 36. DInitial franchise fee1,750,000Initial direct costs (912,100)Gross profit 837,900 (47.88%)RGP (850,000*47.88%) 406,980Continuing franchise fee 28,750Interest income 27,000Indirect costs (50,000)Net income 412,730

Page 8Problem 37. ADeferred revenue:500,000 * 3.60478 = 1,802,390Problem 38. CSales, net of discount 516,330CGS(393,750)Samples(42,000)Expenses(35,000)Net income 45,580Problem 39. BBranch Current ManilaBranch Current Quezon City

9/1 430000322500 9/19/1 322500

11/1 12500026300 12/112/1 24400

Bal 206200Bal 346900

Problem 40. B Branch Current ManilaHome Office Current

Unadjusted balance522,110461,490

a.- 14,500

b.- 36,000

c.(10,120)-

d.52,920 52,920

Adjusted balance564,910564,910

Problem 41. CProblem 42. C

Mark-up above cost = 25%Ending inventory, Home office630,000Ending inventory, Branch, at cost240,000Total ending inventory870,000Sales11,250,000

CGS

Beginning inventory1,100,000

Purchases7,150,000

Less: ending inventory (870,000)(7,380,000)

Expenses (570,000)

Net income 3,300,000

Problem 43. AMark-up above cost = 35%Cost of ending inventory (43,750/35%)125,000Add: mark-up 43,750Ending inventory, billed price168,750

Page 9Problem 44. D

Net investments before Quadribatchs cash investment/withdrawal203,000175,000

Capital Credit of Quadribatch (203000*1.20)243,600

Additional Cash investment 68,600

Total Cash (34,000 + 19,000 + 68,600) = 121,600Problem 45. BCYCR

Balance35,00048,000

Additional Investments30,00024,000

Withdrawals(8,000)

Ending balance before share in profit57,00072,000

Interest (7 mos.) 3,325 4,200

Salaries (7 mos.) 7,000 8,750

Remaining (53275 23275)18,00012,000

Share in profit28,32524,950

Capital balance, end85,32596,950

Problem 46. A AYAN

Salaries52,20051,800

Remaining (115,000 104,000)

Based on interest:

Aubrey 6000 (50%)5,500

Ann 6000 (50%)5,500

Share in profit57,70057,300

Problem 47. CNet assets before TDs withdrawal199,000 (450,000 251,000)

Adjustment for depreciation(15,000)

Net assets, adjusted184,000

Payment to Thaddeus(53,200)

Net assets after TDs withdrawal130,800

Problem 48. DPatricks capital before Cassys admission 75,000

Patricks capital after Cassys admission(84,250)

Increase of 9,250

Total bonus to old partners (9,250/25%) 37,000

Old partners capital, adjusted252,000

Cassys capital credit (252,000/75%)*25% 84,000

Add: bonus to old partners 37,000

Cash invested by Cassy121,000

Page 10

Problem 49. CChonas interest before liquidation225,000Cash received for settlement 52,500Total deduction from Chonas interest172,500Total loss = 172,500/50%345,000CHECK:Elaines interest 60,000Share in the total loss (69,000)Elaines interest, after loss (9,000)Beths interest 103,500Share in the total loss(103,500)Beths interest after loss 0Book value of noncash assets450,800Total loss from sale of noncash assets (345,000 9,000)336,000Cash received from sale of noncash assets114,800Problem 50. ARomaRianDina

Loss absorption potential246,800643,333 768,000

Priority I Dina Excess of loss absorption potential of Dina over Rian(124,667)

Balances246,800643,333643,333

Priority II Rian and Dina Excess of loss absorption potential of Rian and Dina over Roma(396533)(396533)

Balances246,800246,800246,800

Priority I Dina (124667 * 20%) 24,933Priority II Rian (396533 * 30%)118,960 Dina (396533 * 20%) 7,9307198,267Total223,200CASH:Let x = cash received from sale of noncash assets during January30,000 + x 80,000 223,200 = 0x = 273,200