PRACTICAL ACCOUNTING 2- ANSWERS AND SOLUTIONS:

Problem 1. D
JMs capital balance before share in profit
P21,000
Cash received by JM
(22,200)
Share in profit
P 1,200
Balance before adj
15,000
Joint venture profit (1,200*3)
3,600

Joint Venture
18,600
merchandise

Cost of unsold

Problem 2. A
Cash (135,000 + 65,000 + 93,600
31,000)
AR (312,000*70%)
Merchandise (250,000 218,400)
Total assets
AYs share in the total assets
(512,600*55%)

P262,600
P218,400
P31,600
P512,600
P281,930

Problem 3. D
Fully secured
Cash
Inventory
Receivable
Less:
Unsecured
with priority
Trustees
salary
Salaries
payable
Taxes
Net free assets
Total
unsecured
without priority

P124,200
53,000
13,000

P222,000

Partially
secured
P 59,640
375,000

Unsecured
P

360
79,000

(9,500)

58,500

(50,000)

80,000

(4,000)
126,700
217,860

Recovery percentage: 126,700/217,860 = 58%

Partially secured: 434,640 + 79,360(58%) = P480,669
Problem 4. B
Recovery percentage = 25%
A: P124,000 + 9,920 = 133,920; 133,920 115,000 = 18,920; 18,920 * 25% =
4,730 TOTAL PAYMENT = P119,730
B: P136,000 + 13,600 = 149,600; 149,600 * 25% = P37,400
C: P137,500 + 7,452 = 144,952
D: P12,220
A = partially secured; B = unsecured w/o priority; C = fully secured; D = unsecured
with priority
Problem 5. B
Problem 6. C

Problem 7. A
Amounts charged to patients
Contractual Adjustments
Net patient service revenue

P384,000
(90,000)
P294,000

Page 2
Problem 8. B
Unrestricted contributions
P250,000
Contributions from a donor who stipulated that
the money be spent in accordance to the wishes
of the hospitals board of trustees
P 75,000
Contributions used for scholarship
P 75,000
Current fund revenue
P400,000
Problem 9. A

Net assets, 1/1/12

115,000

Net income, 2012

90,000

Exchange
rate
45

Peso
P5,175,0
00

43.75
3,937,50
0

Div. declared, 9/1/12

40
(15,000)

Net income, 2013

22,500

(600,000
)
45
1,012,50
0

Net assets translated using the rate at the end

of the year
Exchange difference (Translation adjustment)

212,500

47.50

9,525,00
0
10,093,7
50
56,8750

Problem 10. C
7,850 (11.50 10.75) = (5,887.50)
Problem 11. B
Intrinsic Value
Time Value

Oct. 31, 2013

7,250
1,000

Dec. 31, 2013

14,500
2,500

Jan. 31, 2014

29,000
-

May 31
12,500
5,000

June 30
37,500
1,500

12/31/11 Time value = 1,500 gain

1/31/12 Intrinsic value = 14,500 gain
Problem 12. D
Intrinsic value
Time Value

May 1
0
14,000

Equity
Earnings (5000 1500)

37,500 gain
3,500 loss

Problem 13. D
125,000 * (92.20 91.90) = 37,500 loss
Problem 14. A
Hedged item:
2,750 (48 43)
Hedging instrument:
2,750 (43 49)
Net forex loss

13,750 gain
16,500 loss
2,750

Page 3
Problem 15. C

MV of stocks issued
Contingent
consideration
Total
Goodwill

Cost of
investment
875,000
15,000

You Corp.
Net assets at FV

890,000

660,000

660,000
230,000

Assets:
Loves assets at BV
Add: Goodwill
Less: Cash payments
Yous assets at FV
Total assets

900,000
230,000
(53,000)
695,000
1,772,000

Problem 16. B
FV of net assets
Common stocks issued, at
par
Related APIC
Cost of investment
Goodwill/(income fr. acq.)

Ayiziel
2,990,000

Vianney
903,000

2,843,750

789,250

406,250
3,250,000

112,750
902,000

260,000

(1,000)

Retained earnings:
Acquirers RE + income from acquisition related costs stock issuance costs in
excess of related APIC
4300000 + 1000 118500 69750 = P4,112,750
Problem 17. D
Problem 18. D
Problem 19. A
Problem 20. A
Cash

Cost of investment
2,500,000

BV of net assets

Sy Corp.
2,800,000

FV of NCI
Total
Goodwill

685,000
3,185,000
300,000

Inventory
Land
Patent
FV of net assets

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

(90,000)
50,000
125,000
2,885,000

192,000
108,000

Amortization
Inventory
Patent
Total

2012
90,000
(18,750)
71,250

2013
(25,000)
(25,000)

Impairment of Goodwill
Controlling (192/300) *
22500
Non-controlling (108/300)
*22500
Total

2012
14,400

2012
14,400

8,100

8,100

22,500

22,500
Page 4

NCINAS
SHE at date of acquisition
Excess
Net income, 2012 (from date of acq.)
Amortization
Dividends declared
SHE as adjusted (before adj. for goodwill and
impairment
3406250 * 20%
Share in the goodwill
Share in the impairment of goodwill
NCINAS

2,800,000
85,000
485,000
71,250
(35,000)
3,406,250
681,250
108,000
(8,100)
781,150

RE Parent, end
Intercompany dividend
Income from own operations
Dividends declared
RE Parent, beg.

2,460,000
(28,000)
(525,000)
50,000
1,957,000

NI Parent (from own operations)

NI Subsidiary
Amortization
Impairment of goodwill
Consolidated NI
Less: NCINIS
(485,000 + 71,250) * 20% = 111,250
111,250 8,100 = 103,150
CNI attributable to parent

525,000
485,000
71,250
(22,500)
1,058,750
(103,150)

RE Parent, beg.
CNI Parent
Dividends declared
CRE

1,957,000
955,600
(50,000)
2,862,600

NI from own operations

Amortization
UPEI
Unrealized gain
Realized gain
NI before share in the impairment of

520,000
(25,000)
(45,000)
(75,000)
3,125
378,125

955,600

Goodwill
378125 * 20%
Impairment of goodwill
NCINIS

75,625
(8,100)
67,525

NI Parent, from own operations

NI Subsidiary, from own operations
Amortization
Impairment of goodwill
UPEI Up
UPEI Down
Unrealized gain
Realized gain
Consolidated Net Income
Less: NCINIS
CNI attributable to parent

550,000
520,000
(25,000)
(22,500)
(45,000)
(22,500)
(75,000)
3,125
883,125
(67,525)
815,600

Problem 21. B

Page 5
Problem 22. C
Direct Cost
Set-up (25*7500)
Utilities (7.60*15000)
No. of parts (20*550)
Total Cost
Cost per Unit (387500/25000)

P75,000
187,500
114,000
11,000
387,500
P15.50

Problem 23. D
Direct materials
Direct labor
FOH
Direct materials rework
Direct labor rework
FOH rework
Total cost
Cost per unit (233150/450)

P42,500
65,250
78,300
13,550
15,250
18,300
233,150
P518.11

Problem 24. C
Direct materials
Direct labor
OH (5.50*120000)
Less: Disposal value
Total cost of good units

P450,000
520,000
660,000
(24,000)
1,606,000

Problem 25. A
AVERAGE
Completed and
Transf.
WIP end
Total
Cost per EUP

Units
12,000

Materials
12,000

Conversion
12,000

7,000
19,000

7,000
19,000
2.78
(52,750/19,000)

4,200
16,200
3.71
(60,025/16,200)

FIFO

Units

Materials

Conversion

WIP beg.
Started and
Completed
WIP end
Total
Cost per EUP

9,500
2,500

2,500

2,850
2,500

7,000
9,500
4.50
(42,750/9,500)

4,200
9,550
5.50 (52,525/9,55
0)

Units
15,000
60,000

Materials
60,000

Conversion
4,500
60,000

3,000
2,000
80,000

3,000
2,000
65,000
1.20
(78,000/65,000)

7,000
19,000

Problem 26. A
Problem 27. D
WIP beg.
Started and
Completed
WIP end
Lost units
Total
Cost per EUP
Total current cost per
EUP

1,500
2,000
68,000
1.25
(85,000/68,000)
2.45

Page 6
Cost of WIP beg, May 1, 2013
Additional conversion cost (4,500*1.25)
Cost of started and completed units
(60,000*2.45)
Cost of lost units (2,000*2.45)
Total cost of completed units
Cost per unit (202,525/75,000)

45,000
5,625
147,000
4,900
202,525
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. C
Joint cost
Less: NRV of by-product (4,000*4)
Joint cost to be allocated to joint
products
Product

NRV

A
B
Total

20,000
30,000
50,000

105,000
(16,000)
89,000

Share in the
joint cost
35,600
53,400
89,000

Addtl
processing cost
6,000
-

TOTAL
41,600
-

Problem 30. D
Let x = Fixed Overhead rate per machine hour
40,000x = 42,000x 28,500
machine hour
28,500 = 2,000x

14.25/60% = 23.75 total OH rate per

23.75 * 40% = 9.50 Variable overhead

rate per MH
x = 14.25 per machine hour

Problem 31. B
Material price variance:
80,000 * (5 4.75) = 20,000 unfavorable
Material quantity variance:
4.75 * (70,000 52,500) = 83,125 unfavorable
Problem 32. B
GP rates:
2011 = 35%
2012 = 40%
2013 = 35%

Repossessed merchandise
3,400
Deferred gross profit
3,000
Loss on repossession
1,100
Installment AR 2012(3,000/40%)
7,500

Realized gross profit:

2011: 90,000*35% =
33,250
2012: (167,500-7,500)*40% =
64,000
2013 = (600,000 490,000)*35% =
38,500
TOTAL RGP
135,750

Page 7
Problem 33. A
Invoice price
97,500
Add: Under allowance (17,500-15,000)
2,500
Adjusted Installment Sales
100,000
CGS
65,000
Gross profit
35,000 (35%)
Repossessed merchandise
DGP
Loss on repossession
Installment AR

15,000
8,085
15
23,100

Net income:
RGP [(24,750 + 17,500) + (11,550*3)] * 35%
26,915
Loss on repossession
(15)
Net income
26,900
Problem 34. C
2011: 14,625,000/32,500,000 = 45%
2011 RGP:
Construction price
34,000,000
Est. total cost
(32,500,000)
GP
1,500,000
Percentage of Completion
45%
RGP
675,000
2012:
Construction price
Est. total cost
Anticipated total loss

34,000,000
(34,250,000)
(250,000)

Less: RGP, 2011

RGP, 2012

675,000
(925,000)

Problem 35. D
2011: Anticipated total loss
50,000
2012: 28/35 = 80% Percentage of completion
Construction price
33,600,000
Estimated total cost
31,900,000
Gross profit
1,700,000
Percentage of completion
80%
RGP to date
1,360,000
Less: RGP, 2010
(50,000)
RGP, 2011
1,410,000
Problem 36.

Initial franchise fee

Initial direct costs
Gross profit

1,750,000
(912,100)
837,900 (47.88%)

RGP (850,000*47.88%)
Continuing franchise fee
Interest income
Indirect costs
Net income

406,980
28,750
27,000
(50,000)
412,730

Page 8
Problem 37. A
Deferred revenue:
500,000 * 3.60478 = 1,802,390
Problem 38. C
Sales, net of discount
CGS
Samples
Expenses
Net income

516,330
(393,750)
(42,000)
(35,000)
45,580

Problem 39. B
Branch Current Manila
9/1
322500
430000
9/1
11/1
26300
125000
12/1
Bal
206200

Branch Current Quezon City

9/1
322500
12/1
24400
Bal
346900

Problem 40. B
Unadjusted balance
a.
b.
c.
d.
Adjusted balance
Problem 41. C

Branch Current Manila

522,110
(10,120)
52,920
564,910

Home Office Current

461,490
14,500
36,000
52,920
564,910

Problem 42. C
Mark-up above cost = 25%
Ending inventory, Home office
Ending inventory, Branch, at cost
Total ending inventory
Sales
CGS
Beginning inventory
Purchases
Less: ending inventory
Expenses
Net income

630,000
240,000
870,000
11,250,000

1,100,000
7,150,000
(870,000)

(7,380,000)
(570,000)
3,300,000

Problem 43. A
Mark-up above cost = 35%
Cost of ending inventory (43,750/35%)
Add: mark-up
Ending inventory, billed price

125,000
43,750
168,750

Page 9
Problem 44. D
Net investments before Quadribatchs cash
investment/withdrawal
Capital Credit of Quadribatch (203000*1.20)
Additional Cash investment

203,000

243,600
68,600

Total Cash (34,000 + 19,000 + 68,600) = 121,600

Problem 45. B
Balance
Additional Investments
Withdrawals
Ending balance before share in
profit
Interest (7 mos.)
Salaries (7 mos.)
Remaining (53275 23275)
Share in profit
Capital balance, end

CY
35,000
30,000
(8,000)
57,000

CR
48,000
24,000

3,325
7,000
18,000
28,325
85,325

4,200
8,750
12,000
24,950
96,950

72,000

Problem 46. A
Salaries
Remaining (115,000
104,000)
Based on interest:
Aubrey 6000 (50%)
Ann
6000 (50%)
Share in profit

AY
52,200

AN
51,800

5,500
57,700

175,000

5,500
57,300

Problem 47. C
Net assets before TDs withdrawal
Adjustment for depreciation
Net assets, adjusted
Payment to Thaddeus
Net assets after TDs withdrawal

199,000 (450,000 251,000)

(15,000)
184,000
(53,200)
130,800

Problem 48. D
Patricks capital before Cassys
admission
Patricks capital after Cassys admission
Increase of
Total bonus to old partners (9,250/25%)
Old partners capital, adjusted
Cassys capital credit
(252,000/75%)*25%
Add: bonus to old partners
Cash invested by Cassy

75,000
(84,250)
9,250
37,000
252,000
84,000
37,000
121,000

Page 10

Problem 49. C
Chonas interest before liquidation
Cash received for settlement
Total deduction from Chonas interest
Total loss = 172,500/50%
CHECK:
Elaines interest
Share in the total loss
Elaines interest, after loss
Beths interest
Share in the total loss
Beths interest after loss

225,000
52,500
172,500
345,000
60,000
(69,000)
(9,000)
103,500
(103,500)

Book value of noncash assets

450,800
Total loss from sale of noncash assets (345,000 9,000) 336,000
Cash received from sale of noncash assets
114,800
Problem 50. A
Loss absorption
potential
Priority I Dina
Excess of loss
absorption potential
of Dina over Rian
Balances
Priority II Rian and
Dina

Roma
246,800

Rian
643,333

Dina
768,000
(124,667)

246,800

643,333
(396533)

643,333
(396533)

Excess of loss
absorption potential
of Rian and Dina over
Roma
Balances

246,800

Priority I Dina (124667 * 20%)

Priority II Rian (396533 * 30%)
Dina (396533 * 20%)
Total

246,800

246,800

24,933
118,960
7,9307
198,267
223,200

CASH:
Let x = cash received from sale of noncash assets during January
30,000 + x 80,000 223,200 = 0
x = 273,200