BSA-3
1. The existing partnership of Ang, Bat, and Choy reported the following immediately before the retirement of Choy:
Amount Profit and Loss ratio
Cash ₱150,000.00
Equipment 300,000.00
Accounts payable 150,000.00
Ang, capital 75,000.00 25%
Bat, capital 100,000.00 30%
Choy, capital 125,000.00 45%
The partners had agreed that the equipment is overstated by 50,000. Accrued salaries of 10,000 is to be recognized.
Choy is to be paid by the partnership at book value of his adjusted interest after the agreed adjustment of its assets and liabili
A. Make the journal entries for the
1. Adjustment and
Date Account Tittles Debit Credit
20XX
/ Ang, Capital (50K x 25%) ₱12,500.00
Bat, Capital (50K x 30%) 15,000.00
Choy, Capital (50K x 45%) 22,500.00
Equipment ₱50,000.00
To record the adjustment of the overstated equipment.
#
/ Salaries Expense 10,000.00
Salaries Payable 10,000.00
To record the recognition of the accrued salaries.
#
2. Retirement of Choy
Date Account Tittles Debit Credit
20XX
/ Choy, Capital ₱98,000.00
Cash ₱98,000.00
To record Choy's retirement pay.
#
Adjustment for Accrued Salaries: The ₱10,000 accrued salaries will also be allocated among the partner
Ang (₱10,000 × 25%) ₱2,500.00
Bat (₱10,000 × 30%) 3,000.00
Choy (₱10,000 × 45%) 4,500.00
Total Accrued Salaries ₱10,000.00
Computation: Choy's Capital
Original capital ₱125,000.00
Less: Equipment adjustment 22,500.00
Accrued salary adjustment 4,500.00
Adjusted Choy's Capital ₱98,000.00
B. Compute the following:
1. The total asset of the partnership after the agreed adjustment before retirement of Choy.
Cash ₱150,000.00
Equipment (300K - 50K) 250,000.00
Total Asset ₱400,000.00
2. The adjusted total capital of the partnership after the agreed adjustment before the retirement of Choy.
Unadjusted Ang, capital ₱75,000.00
Less: Loss on Adjustment-Equipment 12,500.00 (50K x 25%)
Accrued Salaries 2,500.00 (10K × 25%)
Adjusted Ang, capital ₱60,000.00
Unadjusted Bat, capital ₱100,000.00
Less: Loss on Adjustment-Equipment 15,000.00 (50K x 30%)
Accrued Salaries 3,000.00 (10K × 30%)
Adjusted Bat, capital ₱82,000.00
Unadjusted Choy, capital ₱125,000.00
Less: Loss on Adjustment-Equipment 22,500.00 (50K x 30%)
Accrued Salaries 4,500.00 (10K × 30%)
Adjusted Choy, capital ₱98,000.00
Adjusted Ang, capital ₱60,000.00
Adjusted Bat, capital 82,000.00
Adjusted Choy, capital 98,000.00
Total Adjusted Capital ₱240,000.00
3. The amount of payment to Choy for his retirement.
Original capital of Choy ₱125,000.00
Less: Equipment adjustment 22,500.00 (50K x 45%)
Accrued salary adjustment 4,500.00 (₱10K × 45%)
Adjusted Choy's Capital ₱98,000.00
4. The total capital of the partnership after the retirement of Choy.
Adjusted Ang, capital ₱60,000.00
Adjusted Bat, capital 82,000.00
Total Capital After Retirement of Choy ₱142,000.00
5. The new profit and loss ratio of Ang and Bat after the retirement of Choy in the absence of specific agreement.
(a) (b)
Partners Adjusted Capital Total Capital
Ang 60,000.00 142,000.00
Bat 82,000.00 142,000.00
Thus, the new profit and loss ratio is 42.25% for Ang and 57.75% for Bat.
re the retirement of Choy:
,000 is to be recognized.
adjustment of its assets and liabilities.
so be allocated among the partners.
tirement of Choy.
e of specific agreement.
(a/b x 100)
New Ratios
42.25352113
57.74647887
BSA-3
Incorporation of a partnership
Amount Profit and Loss Ratio
Cash ₱100,000.00 Common Stock
Accounts receivable 300,000.00 Par Value
Accounts payable 50,000.00
Xiamen capital 50,000.00 25%
Yemen capital 100,000.00 30%
Zmen capital 200,000.00 45%
Total Capital 350,000.00
Suppose that the partnership is to be incorporated with two other incorporators, and the partnership’s assets and liabilities
are to be recorded at book value. The new corporation is authorized to issue 10,000 common shares with P50 par value.
A. Compute the following:
1. Total ordinary shares to be issued to each of the original partners.
Cash ₱100,000.00
Accounts Receivable 300,000.00
Total Assets 400,000.00
Less: Accounts Payable 50,000.00
Total Capital 350,000.00
Divided by Par value per share 50.00
Shares to be distributed 7,000
Alternative Solution: (a) (b)
Partners Capital Par Value
Xiamen ₱50,000.00 ₱50.00
Yemen 100,000.00 50.00
Zmen 200,000.00 50.00
Total Shares
2. The total interest in % of Xiamen in the newly formed corporation if the remaining shares of total authorized were all is
Xiamen Capital - Ordinary Shares 1,000
Divided by Common Shares 10,000
Xiamen’s Interest (%) 10%
3. The total assets of the newly formed corporation, if the two other incorporators paid in cash for the total shares issued
Cash ₱250,000.00
Accounts receivable 300,000.00
Total Assets ₱550,000.00
4. The stockholder’s equity of the newly formed corporation, considering the contributions in number 3.
Xiamen capital ₱50,000.00
Yemen capital 100,000.00
Zmen capital 200,000.00
Incorporators 150,000.00
Total Stockholders' equity ₱500,000.00
B. Prepare the complete journal entries supposing that the old partnership books are to be used as a corporation’s books in
1. Investments of the partners.
Date Account Tittles Debit Credit
20XX
/ Accounts payable ₱50,000.00 Book of the
Partnership
Xiamen capital 50,000.00
Yemen capital 100,000.00
Zmen capital 200,000.00
Cash ₱100,000.00
Accounts receivable 300,000.00
To close the partnership book.
#
/ Cash 100,000.00 Book of the
Corporation
Accounts receivable 300,000.00
Accounts payable 50,000.00
Share capital 350,000.00
To record the contributions of the original partners for the incorporation.
#
2. Cash contribution of the two incorporators pertaining the full payment of the remaining common shares.
Date Account Tittles Debit Credit
20XX
/ Cash (3,000 shares x ₱50) ₱150,000.00
Share Capital ₱150,000.00
To record the cash contribution of the two new incorporators.
#
10,000
₱50.00
ership’s assets and liabilities
hares with P50 par value.
(a /b)
Distributed Shares
1,000
2,000
4,000
7,000 Ordinary Shares
of total authorized were all issued to the two other stockholders.
ash for the total shares issued to them.
n number 3.
ed as a corporation’s books in recording the
Book of the
Partnership
Book of the
Corporation
ommon shares.
