Accounting For Special Transactions

Partnership Formation
Problem 1
Individual versus Individual
The following items are being invested by Delta and Lambda to form DL
Partnership:
Agreed Values
Contributed Contributed
by Delta by Lambda
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 200,000 P200,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 -
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 200,000
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 450,000
Machineries and 300,000 -
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 600,000 P 850,000
Mortgage on building assumed by the partnership. . . . - _150,000
P 600,000 P 700,000
Required:
1. Prepare entries to record the formation of partnership if A and B agree that each
partner is to receive a capital equal to the agreed values of the net assets each
partner invested.
2. Prepare entries to record the formation of partnership if A and B agree that each
partner is to receive an equal capital interest.
Problem II
Partnership Formation: Bonus and Goodwill Methods
Jose, Roever, and Gudz decided to engage in a construction venture as a partnership. Jose
invested P1,500,000 cash and Roever provided construction equipment that is carried on
his books at P1,600,000. The partners agree that the construction equipment has a fair
value of P1,450,000. There is a P150,000 note payable remaining on the equipment to be
assumed by the partnership. Although Gudz has no physical assets to invest in the
partnership, both Jose and Roever believe that his experience as an engineer is a valuable
skill needed by the partnership and is a basis for granting him a capital interest in the
partnership.
Required: Assuming that each partner is to receive an equal capital interest in the
partnership,
1. Record the partnership formation under the bonus method.
2. Record the partnership formation under the goodwill (revaluation of asset) method.
3. Discuss the appropriateness of using either the bonus or goodwill methods to
record the formation of the partnership.
Problem III
Partnership Formation: Bonus and Goodwill Methods
assumed by the partnership. Gudz will contribute cash to give him 30% interest in the
partnership.
Required:
1. Record the partnership formation
Problem IV
assumed by the partnership. Gudz will contribute office supplies valued at P350,000 plus
cash to give him 30% interest in the partnership. How much is the cash contribution of
Gudz? P850,000
Required:
1. Record the partnership formation
Problem V
Partnership Formation - Individual versus Sole Proprietor
The balance sheet of H on November 30, 2020 before accepting I as his partner to form HI
Partnership is presented below:
H
Balance Sheet
November 30, 2020
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P120,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P 48,000
Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . 3,000 45,000
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 72,000
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 6,000 66,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P318,000
Liabilities and Capital

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P . 12,000
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
H, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,000
Total liabilities and P 318,000
capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
It is agreed that for purposes of establishing H’s interest the following adjustments shall be
made:
a. The accounts receivable is estimated to be 90% realizable.
b. Interest at 8% on notes receivable dated March 1, 2020 is to be accrued.
c. The merchandise inventory is to be valued at P21,000.
d. The equipment is under-depreciated by P4,800.
e. Prepaid expenses of P2,400 and accrued expenses of P7,200 are to be recognized.
I is to invest cash to obtain a one-third interest in the partnership.
Required:
1. Prepare the following entries in the books of H, as to:
a. Adjustments
b. Closing
c. Investments
2. Prepare the balance sheet after the formation of the partnership.
Problem VI
Partnership Formation - Sole Proprietor versus Sole Proprietor
On October 1, 2020, Justin and Kyle decided to pool their assets and form a partnership.
They allocate profit and loss in the ratio of 40:60 for Justin and Kyle, respectively. The firm
is to take over business assets and assume business liabilities. Capital of the partners are to
be based on net assets transfered1 after the following adjustments:
a. Justin’s inventory amounting to P45,000 is worthless, while Kyles’s agreed value of
inventory amounted to P400,000.
b. Uncollectible accounts of 10% of accounts receivable for Justin and Kyle is to be
provided.
c. Accrued rent income of P15,000 on Justin, and accrued salaries of P10,000 on Kyle
should be recognized on their respective books.
d. Interest at 16% on Notes Receivable dated August 17, 2020 should be accrued.
e. The office supplies un2used amounted to P24,000.
f. The equipment’s agreed value is 50% of cost.
g. The furniture and fixtures has a fair market value of 60% of cost.
h. Interest at 12% on Notes Payable dated July 1, 2020 should be accrued.
i. Kyle has an unrecorded patent amounting to P48,000 and is to invest the additional
cash necessary to have a 60% interest in the new firm.
In cases, wherein days are considered, use 360 days as the basis.
Balance sheets for J and K on October 1, 2020 before adjustments are given below:
Required:
1. Prepare the following entries in the books of Justin and Kyle:
a. Adjusting
b. Closing
2. Prepare the opening entries in the new set of books, as to the investments (or
withdrawal, if any) made by the respective partners.
3. Determine the following:
a. Net adjustments in the books of Justin and Kyle (identify net debit or net cEzrait
adjustments).
b. The adjusted capital of Justin and Kyle in their respective books.
c. The additional investment made by Kyle.
4. Prepare the balance sheet after the formation of the partnership.
Problem VIII
Paolo and Sim are successful owners of merchandising stores Business is good and they
have agreed to pool their business together to gain competitive advantage over other
merchandising stores in the area. As of August 1, 2021, the following balance sheet of Paolo
and Sim are available:
They agreed to the following adjustments:

a. Allowance for uncollectible accounts must be set up at 10% of the accounts
receivable of Paolo and Sim.
b. Paolo’s merchandise inventory is undervalued by P2,500 while Sim’s inventory is
overvalued by P1,000.
c. The furniture and fixtures of Paolo is under-depreciated by P3,000 while Sim’s
furniture and fixtures is over-depreciated by 2,500.
d. Paolo has unused office supplies of P2,000.
e. Sim has unrecorded rent expense of P4,000 that is to be assumed by the
partnership.
f. The partners agreed for a 40:60 sharing of profit or loss for Paolo and Sim,
respectively.
g. Beginning capital ratio must be in accordance with their P&L ratio with Sim
contributing additional cash.
Give the following:

1. Adjusted capital of Paolo.
2. Adjusted capital of Sim.
3. Cash contribution of Sim.
4. How much should the furniture and fixtures be carried in the partnership books?
5. How much should the merchandise inventory be carried in the partnership books?
6. Total assets of the partnership.
7. Total capital of the partnership.
8. Total liabilities of the partnership.
Partnership Operations
Problem 1
The capital accounts of Jinjer and Jackie show the following facts for the fiscal year ended December 31,
2020:
Jinjer Jackie
Jan. 1 Balance P26,000 Jan. 1 Balance P16,500
Mar. 30 Investment 3,000 May 18 Investment 5,000
May 10 Investment 7,000 Aug. 24 Withdrawal 2,000
July 25 Withdrawal 4,000 Dec. 21 Balance 19,500
Dec. 31 Balance 32,000
The profit and loss account shows a cEzrait balance of P23,800 on December 31.
RequiEzra: Prepare a schedule of profit distribution under the following independent agreements on the
division of profits:
1. In the ratio of investments at the beginning of the fiscal period.
2. The partners do not have agreement on how profits and losses must be distributed.
3. In the ratio of average capitals, investments and withdrawals are to be consideEzra as made at
the beginning of the month if made before the middle of the month, and are to be consideEzra
as made at the beginning of the following month if made after the middle of the month.
4. Interest of 24% on average capitals, salaries to Jinjer and Jackie of P36,000 and P24,000.,
respectively, and any balance equally. Investments and withdrawals are to be consideEzra as in
(2).
5. Allowance to Jinjer of a bonus of 25% of the net profit after bonus; interest of 10% to be allowed
on the excess of the average investment (simple average) of one partner over that of the other,
and any balance in the ratio of 3:2 to Jinjer and Jackie, respectively.
Problem 2 (Adapted)
The net income of A and B Partnership for 20x4 amounted to P504,000. A, is the managing partner.
Assume that the partners agreed on the allocation of net income as follows:
 Bonus of 20% to A;
 Salaries to A, P48,000 and B, P72,000;
 Interest on average capital balances – A, P14,400 and B, P9,600.
 Residual balance in net income be allocated to A and B in the ratio of 2:1 ratio.
RequiEzra: Prepare a schedule to allocate net income, assuming:

1. Bonus is based on net income before bonus, salaries and interest.
2. Bonus is based on net income after bonus but before salaries and interest.
3. Bonus is based on net income after bonus and salaries but before interest.
4. Bonus is based on net income after bonus, salaries and interest.
5. Bonus is based on net income after salaries but before bonus and interest.
6. Bonus is based on net income after interest but before bonus and salaries.
7. Bonus is based on net income before bonus but after income tax (tax rate is 35%).
8. Bonus is based on net income, that is, after bonus and income tax of 35%:
Problem 3
Shaddae, Alyssa, and Aprilene are manufacturers’ representative in the architecture business. Their
capital accounts in the ENW Partnership for 2020 were as follows:
Shaddae Alyssa
Aprilene
January 1, Balances P30,000 P40,000 P50,000
March 1, Withdrawal 9,000
April 1, Investment 7,000
May 1, Investment 6,000
June 1, Investment 3,000
July 1, Investment 5,000
August 1, Withdrawal 12,000
September 1, Withdrawal 8,000
September 1, Investment 4,000
RequiEzra: For each of the following independent income-sharing agreements, prepare an income
distribution schedule then compute for the ending capital of each partner.
a) Salaries are P15,000 to Shaddae, P20,000 to Alyssa and P18,000 to Aprilene. Shaddae receives a
bonus of 5 percent of net income after deducting her bonus. Interest is 10 percent of ending
capital balances. Any remainder is divided by Shaddae, Alyssa, and Aprilene in a 3:3:4 ratio. Net
income was P78,960.
b) Interest is 10 percent of weighted average capital balances. Salaries are P24,000 to Shaddae,
P21,000 to Alyssa, and P25,000 to Aprilene. Alyssa receives a bonus of 10 percent of net income
after deducting the bonus and her salary. Any remainder is divided equally. Net income was
P68,080.
c) Aprilene receives a bonus of 20 percent of net income after deducting the bonus and the
salaries. Salaries are P21,000 to Shaddae, P18,000 to Alyssa, and P15,000 to Aprilene, Interest is
10 percent of beginning capital balances. Any remainder is divided by Shaddae, Alyssa, and
Aprilene in an 8:7:5 ratio. Net income was P92,940.
Problem 4
LL, MM, and PP are partners with capitals of P40,000, P25,000, and P15,000 respectively. The
partnership agreement provides that each partner shall be allowed 5 percent interest on his capital, that
LL shall be allowed an annual salary of P8,500, and that MM shall be entitled to a minimum of P14,000
per annum including amounts allowed be entitled on capital and as share of profit. Profit after interest
and salary allowances is to be divided between LL, MM, and PP 5:3:2 respectively. What amount must
be earned by the partnership during 2020 before charges for interest or salary if LL is to receive an
aggregate of P20,000 to include interest, salary, and share of profit?
Problem 5
Peter and Von are partners who share profits and losses in the ratio of 6:4, respectively. Peter’s salary is
P100,000 and Von is P50,000. The partners also are paid interest on their average capital balances. In
2020, Peter received P50,000 of interest and Von, P20,000. The profit and loss allocation is determined
after deductions for the salary and interest payments. If Von’s total share of partnership income was
P200,000 in 2020, what was the total partnership income?
Problem 6
U,V and W, a partnership formed on January 1,2017 had the following initial investment:
U P500,000
V 750,000
W 1,125,000
The partnership agreement states that profits and losses are to be shaEzra equally by the partners after
consideration is made for the following:
 Salaries allowed to partners: P300,000 for U; P240,000 for V; and P180,000 for W.
 Average partner’s capital balances during the year shall be allowed 10% interest.
 On June 30, 2017, U made an additional investment of P300,000.
 On September 30,2017, W withdrew P350,000 form the partnership.
 Share on the remaining partnership profit was P25,000 for each partner.
What is the total interest on average capital balances of the partners?

Problem 7
Sophia, Kahle, and Glayn own a consulting business organized as a partnership. Glayn is considering
retirement form the partnership. IN order to more fairly measure Glayn’s interest in capital, an audit of
the company’s first two years of operations was performed in early 2016. The original partnership
agreement called for Sophia to receive 10% bonus on income after the bonus, with the remaining profits
or losses to be divided as follows: Sophia, 30%, Kahle, 30%; and Glayn, 40%. Reported income for 2019
was P44,000. In the second year of operations, the agreement called for Sophia still to receive 10%
bonus on income after the bonus, but it altered the allocation of remaining amounts as follows: Sophia,
35%; Kahle, 35%; and Glayn, 30%. Reported income for 2020 was P42,000. The partners had always
agreed that any adjustment to reported amounts would be allocated based on the profit and loss
agreement in effect during the period to which the adjustments relates. The audit indicated that the
following items were not properly accounted for.
1. 2019:
a)Failed to amortize (in 2020 as well) the business name contributed by Sophia. The fair
value of the intangible was P50,000 and should have been amortized over a 10-year life
using straight-line amortization.
b)Failed to defer prepaid 2020 insurance premiums of P3,000.
c)A capital withdrawal of P5,000 made by Sophia on July 1, 2019, was classified incorrectly
as a note receivable.
d)Failed to accrue P2,000 of employee wages on December 31, 2019.
e)Failed to record consulting fees of P8,400 earned in 2019 but billed in 2020.
2. 2020:
a)Purchase of inventory included a computer invoiced on December 31, 2020, for P4,000
but not yet received. Terms were f.o.b. destination. The item was not included in the
year-end physical inventory.
b)Failed to accrue P8,600 of rent expense on December 31,2020.
c)Failed to reverse P3,000 of interest income properly accrued at the end of 2019, resulting
in income recognition in both years.
Partners’ unadjusted December 31, 2020 capital account balances are: Sophia, P25,000; Kahle, P30,000;
and Glayn, P28,000.
What is partner Sophia’s adjusted capital balances as of December 31, 2020?

Problem 8
The partnership of Mark, Artem, and Christian was organized on January 2, 2018, with each of the
partners contributing cash of P30,000. Reported profits, withdrawals, and additional investments were
as follows:
Reported Net Additional

Income Withdrawals Investments
2018 P19,000 P 4,000 Artem P5,000 Christian
5,000 Mark
2019 P22,000 P8,000 Christian P5,000 Mark
3,000 Artem
2020 P29,000 P2,000 Christian P6,000 Christian
4,000 Artem
The partnership contract states that partners are to be allowed 10% interest on the beginning of your
capital balances, that Mark is to receive a P7,000 salary allowance, and that remaining profits are to be
divided equally.
After the books were closed on December 31, 2020, it was discovered that depreciation had been
understated by P2,000 each year and that the inventory taken at December 31, 2018 was understated
by P8,000. What should be the capital balances of the partners on December 31, 2020?
Problem 9
Ezra, Zeus and Juz, who are accountants, agreed to combine their individual practices into a partnership
as of January 2, 2016. The partners reach agreement on the following matters.
1. Each partner’s capital contribution was the net amount of assets and liabilities taken over by
the partnership which were as follows:
Ezra P40,200
Zeus 20,200
Juz 40,600
Each partner guaranteed the collectability of their receivable from their clients:
2. The partners decided to occupy Juz’s office space until the lease expired on June 30. The
monthly rental was P1,200, but the partners agreed that this was an excessive rate for the
space provided and that P900 monthly would be reasonable. They agreed that the excess
rent would be charged to Juz at the end of the year. When the lease expired on June 20,
2016, the partnership moved to new office with a monthly rental of P1,000.
3. No salaries are to be paid to the partners. The individual partners are to receive 20 percent
of the gross fees billed to their respective clients during the first year of the partnership.
After deducting operating expenses (excluding the excess rent), the residual profit should be
credited to partners’ Capital accounts in the following ratios: Ezra, 40 percent; Zeus, 40
percent; and Juz 20 percent.
4. On April 1, 2016, Green was admitted to the partnership, Green is to receive 20 percent of
the fees from new business obtained after April 1, after deducting expenses applicable to
the new business. Expenses (excluding the excess rent) are to be apportioned to the new
business in the same ratio that total expenses for the entire year, other than bad debt
losses, bore to the total gross fees.
5. The following information pertains to the partnership’s activities in 2016
a) Fees were billed as follows:

Ezra’s clients P44,000
Zeus’s clients 24,000
Juz’s clients 22,000
New clients acquired after January 2, 2016

Before April 1 6,000
After April 1 24,000
b) Total expenses for 2016 were P38,700, excluding depreciation and uncollectible
accounts expenses but including the total amount paid for rent. Depreciation was to
be computed at the rate of 10 percent on original cost of the following depreciable
assets invested by the partners on January 2, 2016.
Ezra P8,600
Zeus 5,000
Juz 12,400
Depreciable assets were purchased during 2016 for P10,000, on which one half
year’s depreciation was to be taken.
c) Cash withdrawals charge to the partners’ accounts during the year were:
Ezra P10,400
Zeus 8,800
Juz 11,600
Green 5,000
d) Of Ezra’s and Zeus’s receivables, P2,400 and P900, respectively, proved to be

uncollectible. A new client billed in March for P3,000 had been adjudged bankrupt,
and a settlement of 40 cents on the peso was made.
Required: Prepare a Statement of Changes in Partners’ Equity for the year ended December 31, 2016.
Show supporting computations.
Problem 10
Maxwell is trying to decide whether to accept a salary of P60,000 or a salary of P25,000 plus a bonus of
20% of net income after the bonus as means of allocating profit among the partners. What amount of
income would be necessary so that Maxwell would consider the choices equal?
Partnership Dissolution
Problem 1
Admission by Purchase of an Interest
Assume that after operations and partners’ withdrawals during 20x2 and 20x3. DE Partnership has a book value of
P120,000 and profit and loss (P&L) percentage on January 1, 20x4 as follows:
Capital P&L
Balances Percentage
D.......................... P 72,000 70
E.......................... 48,000 30
Total . . . . . . . . . . . . . . . . . . . . . . . P 120,000 100
On this date, F is admitted to the partnership.
Required:
1. Prepare journal entries to record the admission of F, assuming:
a. Purchase of Interest from One Partner. F paid P28,800 directly to D in exchange for one-third (1/3)
interest.
b. Purchase of Interest from All Partners. This situation gives rise to three assumptions:
b.1. Purchase at Book Value. F purchases a one-fourth (1/4) interest in the firm. One-fourth of each
partner’s capital is to be transferred to the new partner. F pays the partner’s P30,000.
b.2. Purchase at More than Book Value. F purchased one-fourth of D’s interest for P21,600 and one-
fourth of F’s interest for P14,400, making payment directly to D and E. The new partner will
have a ¼ profit and loss ratio and the old partners continue to use their old profit and loss ratio.
b.2.1. Book value (BV) approach
b.2.2. Revaluation (goodwill) approach
b.3 Purchase at Less than Book Value. F purchased one-fourth of D’s interest by paying P26,400
directly to D and E. The new partner will have a ¼ profit and loss ratio and the old partners
continue to use their old profit and loss ratio.
b.3.1. Book value (BV) approach
b.3.2. Revaluation (goodwill) approach
c. Admission by purchase of interest and revaluation of asset (implied goodwill). Purchase 1/3 interest
from D and E by paying P50,000. The partnership Land was understated and was agreed that it should
be revalued before the admission of F.
2. What are the capital balances of the partners immediately after admission?
Problem 2
Admission by Investment
Assume the following data for GH Partnership had the following condensed balance sheet:
Assets Liabilities and Capital
Cash . . . . . . . . . . . . . . . . . . . . P 3,000 Liabilities . . . . . . . . . . . . . . . . . . . . . P 9,000
Noncash assets . . . . . . . . . . . 39,000 G, capital 60%) . . . . . . . . . . . . . . . 24,000
G, loan . . . . . . . . . . . . . . . . . . 3,000 H, capital(40%) . . . . . . . . . . . . . . . 12,000
Total . . . . . . . . . . . . . . . . . . . . P45,000 Total . . . . . . . . . . . . . . . . . . . . . . . . P45,000
The percentages in parentheses after the partner’s capital balances represent their respective interests in profits and
losses. The partners agree to admit J as a member of the firm.
Required:
1. Prepare journal entries to record the admission of J, assuming:
a. No Bonus or No Revaluation. J invests P12,000 for a ¼ interest in the firm. The total firm capital is to
be P48,000.
b. Bonus to New Partner. J invests P12,000 for a 35% interest in the firm. The total agreed capital after
admission is P48,000.
c. Revaluation (Goodwill) to New Partner. J invests P12,000 for a 1/3 interest in the firm and is allowed
a credit of P18,000 for his capital.
d. Bonus to Old Partners. J conveyed a tangible assets with a fair value of P30,000 with an assumed
mortgage of P6,000 in exchange for a 30% interest in capital with bonus being to be recognized,
keeping in mind that J would be acquiring a 1/4 interest in profits. Before the admission of J, GH
Partnership had an equipment of P4,800 with a fair value of P8,400.
e. Revaluation (Goodwill) to Old Partners. J must invest or contribute cash of P28,800 equivalent to
37.50% interest in a total agreed capital of P76,800. Included in the noncash assets is an equipment
undervalued by P8,400.
f. Bonus and Revaluation (Goodwill) to New Partner. J invests P12,000 for a 45% interest in the firm.
The total agreed capital after admission is P60,000.
g. Bonus and Revaluation to Old Partners. J invests P18,000 for a 20% interest in the firm. The total
agreed capital after admission is P72,000.
h. Revaluation (Goodwill) to New and Old Partners. J invests P18,000 for a 30% interest in the firm. The
total agreed capital after admission is P72,000.
i. Bonus to Old Partners with Bonus Amount Given. J invests P24,000 in the firm. P6,000 is considered
a bonus to Partners G and H. The book values of partnership assets and liabilities are equal to fair
values, except for a machinery with a book value of P3,600 and a fair value of P8,400.
j. Bonus to New Partner with an Indication of Bonus. J invests P7,200 for a 30% interest in the firm. G
and H transfer part of their capitals to that of J as a bonus. An equipment used in the business with a
book value of P6,000 and a fair value of P3,600.
k. Revaluation (Goodwill) to Old Partners with an Indication of a Revaluation (Goodwill). J invests
P18,000 for a ¼ interest in the firm. GH Partnership’s had other assets with a book value of P6,600 and
a fair value of P12,600. Revaluation (goodwill) approach is recorded on the firm books prior to J’s
admission.
l. Revaluation (Goodwill) to New Partner with Revaluation Amount Given. J invests P24,000 in the firm
and is allowed a credit of P7,200 for revaluation (goodwill).
m. Withdrawals Instead of Revaluation. J invests P24,000 for a 50% interest in the firm. The total firm
capital is to be P48,000 and partners agreed that their capital balances should made to equal to their
new profit and loss ratio.
n. Bonus and Revaluation (Goodwill) When Not Specifically Stated.
n.1. Revaluation (Goodwill) or Bonus to New Partner. J invests P18,000 for a 40% capital interest and
a 25% interest in profits.
n.1.1. Bonus Approach
n.1.2. Revaluation (Goodwill) Approach.
n.2. Revaluation (Goodwill) or Bonus to Old Partners. J invests P18,000 for a 30% capital interest and
a 40% interest in profits.
n.2.1. Bonus Approach
n.2.2. Revaluation (Goodwill) Approach.
Problem 3
In the CLK partnership. Clarisse’s capital is P50,000. Loverren’s is P30,000 and Kimberly’s is P40,000.
They share income in a 3:1:1 ratio. Kimberly is retiring form the partnership.
Required: Prepared journal entries to record Kimberly’s withdrawal according to each of the following
independent assumptions:
a) Kimberly’s is paid P48,000, and no goodwill is recorded.
b) Kimberly’s is paid P50,000, and only his share of the goodwill is recorded.
c) Kimberly’s is paid P45,000 and implied goodwill is recorded.
Problem 4
The partnership of Jelwyn, Nicole, and Jemy has been in business for 25 years. On December 31,2016.
Jemy decided to retire from the partnership. The partnership reported the following capital balances for
each partner at December 31,2016.
Jelwyn, Capital P150,000

Nicole, Capital 200,000
Jemy, Capital 120,000
The partners allocate partnership income and loss in the ratio 20:30:50.
Required: Record the withdrawal of Jemy under each of the following independent situations.
a) Jemy’s capital interest was acquired for P150,000 by Nicole in a personal transaction. Partnership
assets were not revalued, and partnership goodwill was not recognized.
b) Assume the same facts as in (a) above except that partnership goodwill applicable to the entire
business was recognized by the partnership.
c) Jemy was given P180,000 of partnership cash upon retirement. Capital of the partnership after
Jemy’s retirement was P290,000.
d) Jemy was given P60,000 of cash and partnership land with a fair value of P120,000. The carrying
amount of the land on the partnership books was P100,000. Capital of the partnership after
Jemy’s retirement was P310,000.
e) Jemy was given P150,000 of partnership cash upon retirement. The portion of goodwill
attributable to Jemy was recorded by the partnership.
f) Assume the same facts as in (e) above except that partnership goodwill attributable to all the
partners was recorded.
g) Due to limited cash in the partnership, Jemy was given land with a fair value of P100,000 and a
note payable for P50,000. The carrying amount of the land on the partnership books was P60,000.
Capital of the partnership after Jemy’s retirement was P360,000.
Problem 5
Assume that AA and BB, partners of AB Partnership (who share net income and loss in 80%:20%) organize A & B
Corporation to take over the net assets of the partnership. The balance sheet of the partnership on June 31, 2021, the
date of incorporation, is as follows:
AB Partnership
Balance Sheet
June 30, 2021
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 14,400
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 33,720
Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 33,000
Inventories, first in, first out cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,600
Equipment at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 72,000
Less: Accumulated depreciation of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 31,200 _ 40,800
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 118,800
Liabilities and Partner’s Capital
Liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 42,000
Partner’s capital:
AA, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 57,588
BB, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,212 __76,800
Total liabilities and partner’s capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. P118,800
After an appraisal of the equipment and an audit of the partnership’s financial statements, the partners agree that the
following adjustments are required to restate the net assets of the partnership to current fair value:
 Increase the allowance for doubtful accounts to P1,200.
 Increase the inventories to current replacement cost of P36,000.
 Increase the equipment to its reproduction cost new, P84,000, less accumulated depreciation on this basis,
P36,600; that is, to current fair value, P 47,400.
 Recognize accrued liabilities of P1,320.
 Recognize goodwill of P12,000.
A & B Corporation is authorized to issue 12,000 shares of P10 par common stock. It issues 9,000 shares of common
stock valued at P11 a share to the partnership in exchange for the net assets of the partnership.
Required: Prepare the required entries to incorporate a new corporation assuming:
1. Partnership books are retained
2. New books are opened for the A & B Corporation.
Problem 6
The balance sheet of Sade & Tipp LLP on April 30, 20x4, was as follows:
Cash . . . . . . . . . . . . . . . . . . . . . P 8,700 Notes payable . . . . . . . . . . . . P 10,000
Accounts receivable . . . . . . . 13,250 Accounts payable . . . . . . . . 9,800
Inventories . . . . . . . . . . . . . . . . 21,760 Sade, capital . . . . . . . . . . . . . 25,110
Equipment . . . . . . . . . . . . . . . . 32,400 Tipp, capital . . . . . . . . . . . . . . 20,000
Less: Accumulated
depreciation . . . . . . . . . . (11,200) ________
Total . . . . . . . . . . . . . . . . . . . . . P 64,910 Total . . . . . . . . . . . . . . . . . . . . . P 64,910
The partnership was converted to S & T Corporation, with new accounting records. Sade and Tipp received a total
of 10,000 shares of P1 par common stock in exchange for the net assets of the partnership. The accounting records
of the partnership had been maintained in accordance with generally accepted accounting principles, except that an
allowance for doubtful accounts of P800 had not been provided. The current fair values of the inventories and
equipment were P28,000 and P35,000, respectively. Sade and Tipp shared net income and losses in a 3:2 ratio,
respectively.
Required: Prepare journal entries for S & T Corporation on April 30, 20x4, to record the transfer of net assets from
the partnership and the issuance of common stock to the partners.
Partnership Liquidation
Problem 1 (Lump Sum)
Assume the following data for QRS Partnership had the following condensed balance sheet just before
liquidation on November 1, 20x4, reports the following balances:

Cash . . . . . . . . . . . . . . . . . . . . . . . P 24,000 Liabilities . . . . . . . . . . . . . . . . . .P 12,000
Noncash assets . . . . . . . . . . . . . . 84,000 Q, loans . . . . . . . . . . . . . . . . . . 2,400
Q, capital(30%) . . . . . . . . . . . . 9,600
R, capital (50%) . . . . . . . . . . . . 48,000
________ S, capital (20%) . . . . . . . . . . . . 36,000
P108,000 P108,000
Required: Prepare statement of liquidation, assuming:
1. The noncash assets were realized at P96,000.

3. The noncash assets were realized at P36,000. The personal assets and liabilities of the partners on
this date are as follows:
Personal Assets Personal Liabilities
Q………………………………… P 288,000 P240,000
R…………………………………. 216,000 228,000
S…………………………………. 108,000 108,000
5. The noncash assets were realized at P24,000. The personal assets and liabilities of the partners on
this date are as follows:

Q………………………………… P 288,000 P284,400
R…………………………………. 216,000 228,000
S…………………………………. 117,600 108,000
6. The noncash assets includes goodwill of P54,000 and prepaid expenses of P18,000. The partners
agreed to write-off these accounts since they are valueless. The remaining noncash assets were
realized at P1,200 with liquidation expenses paid amounting to P14,400. The personal assets and
liabilities of the partners on this date are as follows:

Q………………………………… P 240,000 P204,000
R…………………………………. 216,000 192,000
S…………………………………. 108,000 112,800
7. Following are the data available before liquidating the partnership:

a. Prepaid expenses amounted to P8,400 were refunded to the partnership with the exception of
P1,440 that was forfeited.
b. R agreed to personally take certain equipment having a P6,000 book value. (The partners
estimated its current value at P7,200)
c. S agreed to personally take certain furniture having a P3,600 book value. ((The partners
estimated its current value at P3,000)
d. The remaining noncash assets were realized at P32,400.
Problem 2
Amp, Volt and Watt are partners in the Electric Company and share profits in a 5:3:2 ratio. The statement
of financial position on June 30, 2016 when they decide to liquidate the business, is as follows:
Assets Liabilities and Partner’s Equity

Cash P20,000 Liabilities P30,000
Amp, Loan 15,000 Volt, Loan 10,000
Noncash Assets 135,000 Amp, Capital 80,000
Volt, Capital 36,000
________ Watt, Capital __14,000
Total Assets P170,000 Total Liabilities & Equity P170,000
The noncash assets are sold for P25,000. Rather than require payments, all partners agree to offset the
receivable form Amp against his capital credit.
Required
a) Prepare a statement of partnership realization and liquidation.
b) Prepare the required journal entries to account for the liquidation of the Electric.
Problem 3
Aida, Bina and Celia are partners with a profit and loss ratio of 5:4:1. The partnership was liquidated, and
prior to the liquidation process, the partnership statement of financial position was as follows:
ABC Partnership
Statement of Financial Position
January 1, 2016
Assets
Cash P 80,000
Other assets 720,000
Total assets P800,000
Equity
Aida-capital P320,000
Bina-capital 320,000
Celia-capital 160,000
Total equity P800,000
After the partnership was liquidated and the cash was distributed, Bina received P128,000 in cash in full
settlement of his interest.
Required:
a) Compute the amount of the realization loss on the sale of the other assets.
b) Prepare a statement of partnership liquidation.
Problem 4 (Installment Liquidation)

Assume T, U, V, and W are partners sharing profits 40%: 20%: 20%: 20%, respectively. On January 1, 20x4, they
agree to liquidate. A balance sheet prepared on this date is shown as follows:

Noncash assets . . . . . . . . . . . P 181,800 Liabilities . . . . . . . . . . . . . . . . . P 84,000
A, loan . . . . . . . . . . . . . . . . . . . 6,000
D, loan . . . . . . . . . . . . . . . . . . . 3,000
A, capital . . . . . . . . . . . . . . . . . 26,400
B, capital . . . . . . . . . . . . . . . . . 25,800
C, capital . . . . . . . . . . . . . . . . . 20,400
_________ D, capital . . . . . . . . . . . . . . . . ___16,200
Total . . . . . . . . . . . . . . . . . . . . P 181,800 Total . . . . . . . . . . . . . . . . . . . . . P 181,800
The results of liquidation are summarized below:

Cash
proceeds on Book value Costs of
Sale of of Noncash liquidation Payment
Noncash Assets expenses to Cash Payment to
20x4 Assets Sold paid Creditors withheld Partners
January . . . . . . . . . . . P 72,000 P 90,000 P 1,200 P 66,000 P4,800
February . . . . . . . . . . 21,600 30,000 1,320 18,000 1,800 P 5,280
March . . . . . . . . . . . . 19,200 24,000 1,440 1,200 18,360
April . . . . . . . . . . . . . . 6,000 19,800 4,800 600 1,800
May . . . . . . . . . . . . . 2,400 18,000 960
Distributions of cash to partners are normally done at month-end.

Required:
1. Prepare statement of liquidation for the month of January to May 20x4.
2. Prepare schedule of safe payments to support the distribution of cash payment for the month of January to
May 20x4.
3. Prepare cash payment (pre-distribution) priority program indicating the cash payment to each partner for
the month of January to May 20x4.
4. Using the cash payment priority program indicate the vulnerability rankings for each in the event of loss
suffered by the partnership.
Problem 5 (Installment Liquidation)
Red, White and Blue are partners sharing profits in the ratio of 40:35:25. On December 31, 2016, they
agree to liquidate. A statement of financial position prepared on this date follows:
Assets Liabilities & Equity

Cash P 2,000 Liabilities P 6,000
Other Assets 46,000 White, loan 5,000
Blue, loan 2,500
Red, capital 14,450
White, capital 12,550
_______ Blue, capital __7,500
Total Assets P48,000 Total Liabilities & Equity P48,000
The results of liquidation are summarized below:
Cash withheld at
Assets End of Month for
Cash Liquidation Estimated Future
Realizations Book Value Realized Expenses Expense
January P 12,000 P 10,500 P 500 P 2,500

February 7,000 6,000 750 1,250
March 15,000 10,000 600 500
April 12,000 4,000 400 _
All cash available, except the amount withheld future expenses, is distributed at the end of each month.
Instruction:
1. Prepare a statement of partnership liquidation with supporting schedule of safe
payments.
2. Prepare a cash distribution program with supporting schedule of payments.
Problem 6
Following is the stamen of financial of ABCD partnership at March 31, 2016, when the partnership is to
be liquidated:
Assets Liabilities and Equity

Cash P 6,000 Liabilities P 12,400
Other Assets 126,000 A, loan 12,000
B, loan 14,400
D, loan 9,600
A, capital (25%) 16,200
B, capital (25%) 12,000
C, capital (25%) 37,700
______ D, capital (25%) _17,700
Total Assets P 132,000 Total Liabilities & Capital P 132,000
During the month of April 2016, assets having a book value of P 18,000 are sold at a loss of P 2,400.
Liquidation expenses of P600 are paid as well as P 7,200 of the liabilities. Of the liabilities shown in the
balance sheet, P240 represents salary payable to D and P160 represents salary payable to C. On April 30,
2016, how should the available cash be distributed to A, B, C and D?
Problem 7
A statement of financial position for the partnership of Dy, Sy and Lee, who share profits in the ratio of
2:1:1, shows the following balances just before liquidation:
Cash P 12,000
Other Assets 59,500
Liabilities 20,000
Dy, capital 22,000
Sy, capital 15,500
Lee, capital 14,000
On the first month of the liquidation, certain assets are sold for P32,000. Liquidation expenses of P1,000
are paid, and additional liquidation expenses are anticipated. Liabilities are paid amounting to P5,400, and
sufficient cash is retained to insure the payment to creditors before making payments to partners. On the
first payment to partners, Dy receives P6,250.
Requirements:
1. The total cash distributed to the partners in the first installment is__________________.
2. The amount of cash withheld for anticipated liquidation expenses and unpaid liabilities is
_______________.
Problem 8
JNA Partnership is entering into liquidation and as the liquidator you are given the following account
balances:
Cash P 775,000 Liabilities P 1,100,000

Noncash assets 6,750,000 Loan from A 150,000
J, Capital (20%) 1,275,000
N, Capital (20%) 1,625,000
_________ A, Capital (60%) _3.375,000
Total assets P7,525,000 Total liabilities & capital P7,525,000
During June, noncash assets with a book value of P 1,875,000 were sold for P 1,600,000. JNA paid P
175,000 for the liquidation expenses it incurred and it also paid its liabilities to outside creditors.
However, creditors whose account balances amount to P 150,000 decided to condone JNA’s liabilities.
Three fourths of the cash received from the sale of noncash assets were distributed to the partners.
Requirements:
1. What is the cash withheld by the liquidator?
2. What is J’s share in the maximum possible loss?
3. What is A’s interest after the first cash distribution?

Problem 9
Following is the statement of financial position for Art, Bea and Cid Partnership on July 4, 2016,
immediately before its liquidation:
Art, Bea and Cid Partnership

Statement of Financial Position
July 3, 2016
Assets
Cash P 6,000
Other assets _94,000
P100,000
Liabilities and Partners’ Equity

Liabilities P20,000
Loan Payable to Beas 4,000
Art, capital 27,000
Bea, capital 39,000
Cid, capital _10,000
P100,000
The partners shared net income and losses as follows: Art, 40%; Bea, 40%; and Cid 20%. On July 4,
2016, the other assets realized P30,700, and P20,500 had to be paid to liquidate the liabilities because of
an unrecorded trade accounts payable of P500. Art and Beas were solvent, but Cid’s personal liabilities
exceeded personal assets by P5,000.
Requirements:
a) Prepare a statement of liquidation for Art, Bea and Cid Partnership on July 4, 2016. Combine
Bea’s loan and capital account balances.
b) How much cash would other assets have to realize on liquidation in order for Cid to receive
enough cash form the partnership to pay personal creditors in full? Assume that P20,500 is
required to liquidate the partnership liabilities.
Problem 10
Nory and Oscar started a partnership some years ago and managed to operate profitably for several years.
Recently, however, they lost a substantial legal suit and incurred unexpected losses on accounts
receivable and inventories. As a result, they decided to liquidate. They sold all assets and only P18,000
was available to pay liabilities, which amounted to P33,000. Their capital account balances before the
state of liquidation and their sharing ratios are shown below:
Capital account balances Profits-sharing ratio

Nory P23,000 60%
Oscar P13,500 40%
Nory is personally insolvent after paying the unpaid creditors, but Oscar has personal assets in excess of
P100,000. In the settlement of partners, how much cash should Nory receive?
Corporate Liquidation
Problem 1
Serena Corporation is experiencing difficulty in paying its bills and is considering filing for bankruptcy.
Current data show:
Expected
Book Realizable
Assets Value Value
Cash P 4,000 P 4,000
Accounts Receivable 40,000 30,000
Inventory-Materials 36,000 27,000
Inventory- Finished Goods 50,000 55,000
Prepaid Expenses 1,000 0
Land 10,000 42,000
Building 70,000 60,000
Trucks 20,000 6,000
Equipment 45,000 25,000
Intangibles 16,000 0
P292,000
Liabilities Secured by
Accounts Payables P 77,000
Bank Loan 25,000 80% of receivables
Wages Payable 12,000
Taxes Payable 8,000
Truck Loan 5,000 Truck with P12,000
BV & P3,500 ERV
Mortgage Payable 43,000 Land and building
Loan Payable 50,000 Finish goods
Stock holder Loan 110,000 Not subordinated to
other debt
Stockholder’s Equity (38,000)
Total P292,000
Requirements:
1. Prepare Statement of Affairs.
2. Compute the percentage of recovery.
3. Determine how much will be received by the creditors with priority from Serena Corporation.
4. Determine how much will be received by the creditors without priority from Serena Corporation.
5. Determine how much will be received by the fully secured creditors from Serena Corporation.
6. Determine how much will be received by the partially secured creditors from Serena Corporation.
Problem 2
On January 1, 2016, the records of Michael Anthony, trustee in bankruptcy for VC Corporation,
showed the following:
Cash P 8,200
Assets Not Realized:
Land 10,000
Buildings 43,000
Equipment 28,000
Patents 4,400
Liabilities Not Liquidated:
Accounts Payable 80,000
Loans Payable 40,000
Estate Deficit 26,400
During January, Michael sold equipment having a book value of P15,000 for P8,800 and sold the
patents for P12,000. Michael was paid P1,300 as trustee fee and P21,000 was distributed
proportionately to the creditors.
Required: Prepare a statement of realization and liquidation for January and statement of
financial position and statement of estate deficit as of January 31, 2016.
Problem 3
The Moon Company has the following:
Unsecured creditors P 230,000

Liabilities with priority 110,000
Secured liabilities:
Debt one, P 210,000; value of pledged asset 180,000
Debt two, P 170,000; value of pledged asset 100,000
Debt three, P 120,000; value of pledged asset 140,000
The company also has a number of other assets that are not pledged in any way. The creditors
holding debt two want to receive at least P 142,000. For how much do these free assets have to
be sold so that debt two would receive exactly P 142,000?
Problem 4
ABC Corporation has filed for voluntary insolvency and is about to liquidate its business. ABC
Corporation’s statement of financial position immediately prior to the liquidation process is
shown below:
Additional information:
a. Only 76% of the accounts receivable is collectible
b. The note receivable is fully collectible. An accrued interest receivable of P10,000 was not
yet recorded.
c. The inventory has an estimated selling price of P420,000 and estimated cost to sell of
P10,000.
d. The prepaid assets are not refundable.
e. The land and building have fair values of P2,000,000 and P800,000, respectively. However,
ABC Corporation expects to sell both the land and building for a total selling price of
P2,600,000. Costs to sell the land and building are negligible as the prospective buyer
agrees to shoulder all necessary costs of transferring title to the property.
f. The equipment is expected to be sold at a net selling price of P200,000.
g. Administrative expenses expected to be incurred during the liquidation process is P30,000.
This amount is not yet reflected on the statement of financial position.
h. Accrued expenses includes accrued salaries of P25,000.
i. Accrued interest on the loan payable amounting to P15,000 was not reflected in the
statement of financial position.
j. All of the other liabilities are stated at their expected settlement amounts.
Instruction 1.1
Prepare a Statement of Affairs.
Assume that the corporation is entrusted to a receiver and the following information is available:
The Securities and Exchange Commission assigned a receiver and the following transactions
transcribed during the winding up process.
a. An accrued interest receivable of P10,000 was not yet recorded.
b. Administrative expenses expected to be incurred during the liquidation process is P30,000.
This amount is not yet reflected on the statement of financial position.
c. Accrued interest on the loan payable amounting to P15,000 was not reflected in the
statement of financial position.
d. Of the total accounts receivable, only P165,000 have been collected. The remaining balance
was written off.
e. Only 90% of the notes receivable was collected. The remaining balance was written off.
All of the accrued interest was collected.
f. Half of the inventory was sold for P300,000. Actual costs to sell were P5,000.
g. The balance of the prepaid assets account was written off.
h. The land and building were sold for P2,600,000 as expected.
i. The equipment was sold for P220,000.
j. Of the total accrued expenses, only the accrued salaries of P25,000 were paid.
k. The current tax payable was paid in full.
l. The loan payable and interest payable were paid in full.
m. P220,000 was paid for the notes payable. The lender waived payment for the balance.
n. Actual administrative expenses paid amounted to P27,000.
Instruction 1.2
a. Journal entries under receivership.
b. Statement of Realization and Liquidation.
Revenue Recognition:
Long-term Construction
Problem 1
Beavis Construction Company was the low bidder on a construction project to
build an earthen dam for P1,800,000. The project was begun in 20x4 and
completed in 20x5. Cost and other data are presented below:
20x4 20x5
Cost incurred during the year . . . . . . . . . . . . . . . . . P 450,000 P1,100,000
Estimated costs to complete . . . . . . . . . . . . . . . . . . 1,200,000
0
Billings during the 400,000 1,400,000
year . . . . . . . . . . . . . . . . . . . . . . .
Cash collections during the year . . . . . . . . . . . . . . 300,000 1,500,000
Required: Compute the amount of gross profit recognized during 20x4 and 20x5.
1. Assume that Beavis uses the overtime (percentage-of-completion) method
for revenue recognition.
2. Assume that Beavis uses the point-in-time (cost recovery) method for
revenue recognition.
Problem 2
Hong Banjang Construction Company was the low bidder on specialized
equipment contract. The contract bid was P6,000,000 with an estimated cost to
complete the project of P5,500,000. The contract period was 33 months, beginning
January 1, 2017. The company uses the cost-to-cost method to estimate profits.
A record of construction activities for the years 2017-2020 follows:
Actual Cost- Progress Cash

Year Current Year Billings Receipts
2017 P 3,400,000 P 3,200,000 P 3,000,000
2018 2,550,000 2,000,000 2,000,000
2019 200,000 800,000 600,000
2020 -0- -0- 400,000
The estimated cost to complete the contract at the end of each accounting period is:
2017 P 2,100,000
2018 150,000
2019 -0-
Required:
1. What is the revenue, cost, and gross profit recognized for each of the years
2017-2019 under the percentage-of-completion method?
2. What is the revenue, cost, and gross profit recognized for each of the years
2017-2019 under the completed contract method?
3. Give the journal entries for each of the years 2017-2020 to record the
information from (1 and 2).
4. Give the journal entries in 2021 to record any collections and to close out all
construction accounts.
Problem 3
Beck Construction Company began work on a new building project on January 1,
20x4. The project is to be completed by December 31, 20x6, for a fixed price of
P108 million. The following are the actual costs incurred and estimates of
remaining costs to complete the project that were made by Beck's accounting staff:
Estimated remaining costs to

Actual Costs complete the project measured at
Years incurred in Dec. 31 of each year)
each year
20x4 . . . . . . . . . . . . . . . . . . . . P30,000,000 P60,000,000
20x5 . . . . . . . . . . . . . . . . . . . . P45,000,000 P45,000,000
20x6 . . . . . . . . . . . . . . . . . . . . P35,000,000 P0
Required:
1. What amount of gross profit (or loss) would Beck record on this project in
each year under the overtime (percentage-of-completion) method?
2. What amount of gross profit (or loss) would Beck record on this project in
each year under the point-in-time (cost recovery) method?
Problem 4
DJD Builders has a fixed price contract to build a waiting shed. The initial amount
of revenue agreed is P528,000. At the beginning of the contract on January 1, 20x3
the initial estimate of the construction costs is P480,000. By the end of 20x3 the
estimate of the total costs has risen to P484,800.
During 20x4 the customer agrees to a variation with increases expected revenue
from the contract by P12,000 and causes additional costs of P7,200. At the end of
20x4 there are materials stored on site for use during the following period which
cost P6,000.
DJD Builders have decided to determine the stage of completion of the contract by
calculating the proportion that contract costs incurred for work to date bear to the
latest estimated total contract costs. The contract costs incurred at the end of each
year (costs incurred to date), billings and collections for each year were as follows:
Year Direct and Allocable Costs to date Billings Collections

20x3 P126,048 P144,000 P120,000
20x4 370,080 (including materials in store) 240,000 228,000
20x5 492,000 156,000 192,000
Required:
1. Prepare the journal entries, under:
a. Over Time/Percentage-of-completion method using cost-to-cost method
b. Point-in-Time/Cost recovery method (also known as zero-profit
approach)
2. Compute the Current asset – Contract Asset/Current liability – Contract
Liability:
approach)
3. Compute the gross profit.
approach)
Problem 5
In 2017, ABC Corporation entered into a fixed price contract with XYZ Inx. to
construct a building for P10,000,000. In 2018, the design of the building was
changed. As a result, the initial price is decreased by P2,000,000. The
construction was started in 2017 and was completed in 2018. Additional
information on the construction is provide below:
The cost incurred in 2018 included costs of variations in contract work

amounting to P50,000. These costs were due to XYZ’s fault and it is currently
being disputed by ABC. Negotiations with XYZ have reach an advanced stage
such that it is probable that XYZ will accept the claim for the P50,000
reimbursement. The claim is expected to be received in 2020.
Instruction: Compute for the profit/(loss) to be recognized each year under

Percentage of completion method
Zero profit method
Problem 6
On July 1, 2017, ABC Co. was contracted by XYZ Inc. to construct a subway.
Information on the contract are: Estimated duration of the contract – 3 years;
Date of commencement – September 1, 2017; Total contract price –
P60,000,000; Estimated total costs – P30,000,000.
An independent surveyor certified cumulative value of the work in progress as

follows: AS of December 31, 2017 – P15,000,000; As of December 31, 2018 –
P52,500,000.
Total cost incurred to date are: As of December 31, 2017 – P8,000,000; As of

December 31, 2018 – P22,500,0000. Progress billings to date are: As of
December 31, 2017 – P10,000,000; As of December 31, 2018 – P48,000,000.
On January 1, 2018, ABC agreed to a contract variation that involves an

additional fee of P10,000,000 with associated additional estimated costs of
P4,000,000.
The cost incurred during 2018 include P3,000,000 cost of rectification work
relating to the replacement of electric wires which had been made from material
that had been incorrectly specified by the firm of electrical engineers who were
subcontracted by ABC to design the subway’s wirings. These costs were not
included in the original estimates, and although reimbursement for rectification
work is not included in the contract with the subcontractor, ABC is hopeful that
these costs will be recovered from the electrical engineers.
ABC uses the percentage of completion based on the value of the work certified
to date compared to the total contract price.
Instruction: compute for the profit/(loss) and revenue recognized for 2017 and
2018.
Problem 7
ABC has started construction work on a project with fixed contract price of
P2,000,000. ABC expects to incur total contract costs of P1,500,000 on this
project. ABC uses cost to cost method in determining the stage of completion of
its projects. The actual cost incurred during the first year of the project are
shown below. All costs are expected to be recoverable except when stated
otherwise. Disbursements on these expenditures were made evenly during the
construction period.
Costs of materials, labor, and overhead used in the
work………………………………………………….P1,200,000
Cost of materials purchased but set aside for use in a future date (these
materials are purchased specifically for the project, P100,000
Rectification work not expected to be recovered, P130,000
General and administrative costs (reimbursement not stated in the contract),
P50,000
Selling costs, P30,000
Incidental income from the sale of surplus materials amounted to P20,000.
The original estimate of costs did not include expected warranty costs of
P100,000
ABC obtained a 12%, P6,000,000 loan and an 8%, P2,000,000 loan, generally,
to finance the construction of its various projects. These loans were outstanding
all throughout the construction period.
Instruction: compute for the profit from construction for the first year of the
contract described above.
Problem 8
ABC Corporation started work on a construction contract in 2018. The
contract price is P10,000,000, however, if the cumulative inflation reaches or
exceeds 26%, the contract price shall be adjusted upward by 10%. Costs
escalations on the contract are provable as to recovery. Additional information
on the contract is shown below:
2018 2019
2,400,000. 4,500,000.
Costs incurred to date 00 00
Estimated costs to 3,600,000. 1,500,000.
complete 00 00
Cumulative inflation rate 18% 27%
Instruction: Compute for the profit to be recognized in 2019.
Problem 9
ABC Corporation started work on a construction contract in 2017. The contract
price is P10M. Information on the contract is shown below:
In 2018, ABC assessed that it cannot collect 10% of the total contract price.
Instruction: Compute for the profit to be recognized in 2018.
Problem 10
In 2017, ABC Corporation was contracted to build a railroad. The project was
initially estimated to have a completion period of four years. If the project is to
be completed within the budgeted construction period, an incentive payment of
P200,000 shall be provided to ABC. Information on the project is shown
below:
As of December 2019, ABC assessed that the project will be completed earlier
than expected and, thus, ABC will be entitled to the incentive payment. It is
probable that ABC will realized the incentive payment. All costs are expected
to be recoverable.
Instruction: Compute for the contract revenue, cost of construction, and profit
for years 2017 to 2019 under each of the following independent assumptions
The final contract price will be billed at cost plus 20%
The final contract price will be billed at cost plus a fixed fee of P1.2M
Problem 11
Kris Construction Co. has used the cost-to-cost percentage-of-completion method of recognizing
revenue, Kris assumed the presidency of the company after the death of his father, Ninoy. In
reviewing the records, Kris finds the following information regarding a recently completed
building project for which the total contract was P2,000,000.
2014 2015 2016

Gross profit (loss) P 40,000 P 140,000 P (20,000)
Cost incurred each year 360,000 ? 820,000
Kris wants to know how effectively the company operated during the three (3) years on this
project and, since the information is not complete, has asked for answers to the following
questions:
1. How much cost was incurred in 2015?

2. What percentage of the project was completed by the end of 2015?
3. What was the total estimated gross profit on the project by the end of 2015?
4. What was the estimated cost of complete the project at the end of 2015?
Revenue Recognition – Franchise

Problem 1
On January 2 2016, Mr. A. Cion entered into a franchise agreement with Jobili Inc, to sell Jolibi products.
The agreement provides of an initial franchise fee of P20,000,000, payables as follows: P12,000,000 cash
to be paid upon signing of the contract and the balance in four equal annual payments every December
31, MR. A. Cion signs 10% interest-bearing note for the balance The agreement further provides that the
franchisor will assist the franchisee in locating the business site, designing and supervision in the
construction of the building. And training of management and employee. The agreement also provides
that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross sales.
On July 31, 2016, the franchisor completed the initial services required in the contract at a costs of
P2,000,000. The franchisee commenced business operations on November 2, 2016. The gross sales
reported by the franchisee to the franchisor are: November sales, P580,000; And December sales
P720,000.
Required: Prepare all entries for 2016 in the books of the franchisor under the following assumptions:
a. The collection of the note is reasonably assured.
b. The collection of the note is not reasonably assured.
Problem 2
On January 5, 2016, Ms. Nancy Lee signed an agreement to operate as a franchisee of Street Pizza, Inc.
for an initial franchise fee of P1,600,000. Of this amount P600,000 was paid when the agreement was
signed and the balance payable in five annual payments of P200,000 beginning December 31, 2016. Ms.
Lee signed a non-interest bearing note for the balance. Ms. Lee’s credit rating indicates that it can borrow
money at 20% interest for a loan of this type. The present value of an annuity of P1 at 20% for 5 periods
is 2.9906. The contract includes a continuing franchise fees of 5% of the franchisee’s gross sales, to be
collected monthly.
On November 25, 2016, the franchisor substantially performed the initial services provided in the contract
at a cost of P179,718. The franchisee commenced operations on December 1, 2016. The gross sales of
Ms. Lee for the month of December is P80,000.
Required: Prepare all entries on the books of the franchisor for 2016:
a. Assuming the collection of the note reasonably assured.
b. Assuming the collection of the note is not reasonably assured.
Problem 3
On January 2, 2016, JJG Company signed an agreement to operate as a franchisee of Figaro, Inc. for an
initial franchise fee of P3,125,000 for 10 years. Of this amount, 40% was paid when be agreement was
signed and the balance payable in four semi-annual payments beginning June 30,2016, JJG Company
signed a non-interest bearing note for the balance. JJG’s credit rating indicates that it can borrow money
at 24 percent on the loan of this type. Substantial services costing P802,500 have been rendered by Figaro
Inc. The present value of an annuity of P1 at 12% for 4 periods is P3.04.
IF the collection of the note is not reasonable assured, what is the realized gross profit for the year ended
December 31, 2016.
Problem 4
On December 1, 2021, ABC Co. enters into a franchise agreement with XYZ, Inc.
The franchise provides XYZ, Inc. with the right to use ABC’s trade name and sell
ABC’s products for five years. The contract requires an initial franchise fee of
P120,000 and a continuing franchise fee of 3% of XYZ’s sales payable at the end
of each month.
The P120,000 initial franchise fee is non-refundable and payable in full at contract
inception. ABC Co., as a franchisor, has developed a customary business practice
to undertake the following opening activities:
a. Assistance in site selection, lease negotiations, and fitting-out of the
premises.
b. Initial training in all facets of operating the business.
c. Assistance with staff recruitment and training.
d. Advertisement and promotion.
e. Preparations for and professional execution of the grand opening.
ABC does not provide the activities above separately from the granting of the
franchise right.
The new franchise business started operations in December and as of December

31, 2021, ABC has no remaining obligation or intent to refund any of the cash
received and all of the services (i.e., the pre-opening activities) required under the
franchise agreement have been performed.
XYZ reports total sales of P2,000,000 in December 2021.
Requirement: Prepare the journal entries on December 1 and December 31, 2021,
respectively.
Problem 5
On December 31, 2021, Mr. ABC enters a contract with TFC Company to transfer a license
for a fixed fee of P100,000 payable as follows:
 20% is payable upon signing of the contract.
 80% is represented by a note receivable collectible in 4 equal annual installments
starting December 31, 2022. The appropriate discount rate is 12%.
Instruction: Provide the entries to the following independent cases.

A. The license provides TFC Company the right to use Mr. ABC’s patented secret
formula for a burger patty. TFC continues to operate using its trade name and has
the discretion of developing a new product name for the products using the secret
formula. The license does not explicitly require Mr. ABC to undertake activities that
will significantly affect the intellectual property to which TFC has rights. Neither
TFC expect that Mr. ABC will undertake such activities. Mr. ABC provides the secret
formula to TFC on December 31, 2021.
B. The license provides TFC Company the right to use Mr. ABC’s patented secret
formula for a burger patty. The agreement requires TFC to discontinue using its
trade name and instead use Mr. ABC’s trade name. TFC is bound by the terms of the
contract to abide with Mr. ABC’s policies on the use of the secret formula but is given
the right to any subsequent modification to the secret formula.
C. In addition to Case B, the contract requires Mr. ABC to undertake pre-opening

activities of training to TFC in operating the new business, assisting in the
recruitment, and training of staff, and assisting in the grand opening the new
business. The P20,000 cash down payment is non-refundable and represents a fair
measure of services already performed as of December 31, 2021.
D. In addition to Case B, the contract requires Mr. ABC to undertake pre-opening

activities of training to TFC in operating the new business, assisting in the
recruitment, and training of staff, and assisting in the grand opening the new
business. The P20,000 cash down payment is non-refundable and represents a fair
measure of services already performed as of December 31, 2021. The cost of
services already rendered as of December 31, 2021 is P15,000.
E. Using the same information in Case B, assume that the contract does not require Mr.
ABC to undertake pre-operating activities. Mr. ABC has no past practice voluntarily
undertaking such activities. The P20,000 down payment received in non-refundable
and the collectability of the note is reasonably assured.
Problem 6
Juz Coffee Company charges an initial franchise fee of P1,500,000 to Mr. Zeus for the right
to operate as a franchisee of Juz Coffee. Of this amount, P180,000 is payable when the
agreement is signed and the balance is payable in four equal installment payments. In
return for the payment of initial franchise fee, the franchisor will assist the franchisee to
locate site, supervise the construction activity and provide bookkeeping services. The
credit rating of the franchisee indicates that money can be borrowed at 10%. The present
value of an ordinary annuity factor is 3.16987.
Answer the following:

a. How much is the franchise revenue if the down payment is refundable, the
collectability of the note is reasonably assured but substantial services remained to
be performed.
b. How much is the franchise revenue if the down payment is non-refundable, the
collectability of the note is reasonably assured and there is substantial performance
of services from the franchisor?
c. How much is the franchise revenue if the down payment is non-refundable, the
collectability of the note is not reasonably assured, and substantial services have
been performed by the franchisor?
d. How much is the franchise revenue if the down payment is non-refundable, the
collectability of the note is reasonably assured and there is substantial performance
of services?
Problem 7
Claire Company sells franchise with initial franchise fee of P400,000. A down payment of
P20% cash is required, with the balance covered by issuance of 10% notes payable in five
equal annual installments. If all material services have been substantially performed,
collectability of the note is reasonably assured, and the refund period has expired, what is
the journal entry to record the transaction?
Problem 8
On January 2, 2019, Jia entered into a franchise agreement with James to sell their
products. The agreement provides for an initial franchise fee of P2,750,000, payable as
follows: P770,000 cash to be paid upon signing of the contract, and the balance is six equal
annual payments every December 31, starting December 31, 2019. James signs a non-
interest-bearing note for the balance. The franchisee’s credit rating indicates that it can
borrow at f18% effective interest rate for similar tpe of loans. The agreement further
provides that te franchisee must pay a continuing franchise fee equal to 6% of its monthly
gross sales. On September 21, the franchisor completed the initial services required in the
contract at a costs of P1,347,500 and incurred indirect initial service cost of P168,080. The
franchisee commenced business operations on October 5, 2019. The gross sales reported to
the franchisor are October sales, P1,380,000; November sales, P1,588,000; and December
sales, P1,040,000. The franchisor incurred a total cost related to continuing services in the
amount of P113,400 (40% of which is indirect cost). The first intallment payment was
made in due date. Compute the net income for 2019 under the following conditions:
a. Collection of the note is reasonably assured.
b. Collection of the note is not reasonably assured (use a 3.5 present value factor).
REVENUE RECOGNITION: FIVE-STEP

MODEL
PFRS 15
Revenue Recognition
Step 1: Identify the contract with the The contract is with a customer and
customer (among other things) the collectability of
the consideration is probable.
Step 2: Identify the performance Each promise to deliver a distinct good or
obligations in the contract. service in the contract is treated as a
separate performance obligation.
A promised good or service is distinct if:

a. The customer can benefit from the
good or service either on its own or
together with other resources.
b. The promise to transfer the good or
service is separately identifiable
from other promises in the contract.
Step 3: Determine the transaction price. The transaction price is the amount that
the entity expects to be entitled to in
exchange for satisfying a performance
obligation.
Step 4: Allocate the transaction price to the The transaction price is allocated to the
performance obligations. performance obligations based on the
relative stand-alone prices of the distinct
goods or services.
Step 5: Recognize revenue when (or as) a - If satisfied over time, revenue is
performance obligation is satisfied. recognized as the entity progresses
towards the complete satisfaction of the
performance obligation.
- If satisfied at a point in time, revenue is

recognized when the entity completely
satisfies the performance obligation.
- Revenue is measured at the amount of

transaction price allocated to the
performance obligation satisfied.
Problem 1
On December 1, 2021, ABC Company enters into a contract to deliver Product 1 and
Product 2 to Mr. Akin for P300,000. The contract requires that Product 1 be delivered first
and payment is conditional on the delivery of Product 2. The relative standalone selling
prices of Products 1 and 2 are P140,000 and P60,000, respectively. The consideration of
P300,000 is due only after the entity has transferred both Products 1 and 2.
Requirements:
1. What is the entry in the book of ABC to record the satisfaction of the performance
obligation to deliver product 1 to Mr. Akin?
2. What is the entry in the book of ABC Company upon performance of the obligation
to deliver Product 2 and to recognize unconditional right to consideration?
Problem 2
Global Telco agrees to sell to customer A voice minutes over a period of one year. Customer
A promises to pay P0.25 per minute for the first 100,000 minutes. If the minutes purchased
exceeded 100,000 minutes, then the price falls to P0.20 per minute for all minutes
purchased. If voice minutes exceeded 150,000, then the price falls to P0.15 per minute for
all purchased. In effecting the agreement, price shall be reduced retrospectively. Based on
Global Telco’s experience with similar agreements, it estimates the following outcome:
 Less than 100,000, 60%;
 100,000 up to 150,000, 30%; and
 Exceeding 150,000, 10%.
What is the estimated transaction price under expected value method?
Problem 3
Global Telco enters into business with Company C to build a call center. Global Telco will
receive payment of P250,000 if completed on time or P210,000 if delayed. Global Telcom
estimated the following with respect to timely completion of the asset:
 Project is completed within the time agreed, 95%; and
 Project completion is delayed, 5%.
1. What is the estimated transaction price?
Problem 4
On December 1, 2020, ABC Company enters into a cancellable contract to transfer Product
1 to Mr. Yeubo on February 1, 2021. The contract requires Mr. Yeubo to pay the
consideration of P5,000 in advance on December 15, 2020. Mr. Yeubo pays the
consideration on January 1, 2021, then ABC Company delivered the product on February 1,
2021.
1. What is the entry prepared on December 15, 2020?

2. What is the entry to record the receipt of P5,000 cash on January 1, 2021?
3. What is the entry prepared on February 1, 2021?
Problem 5
Mr. ABC enters into franchise agreement on June 1, 2020 with Mr. Siomai for a package
with a total fee of P650,000. The right granted is to operate the business for four years. The
terms of payment provide that a down payment of P180,000 shall be paid and balance is
payable in four years. Mr. ABC issued a non-interest bearing note for the balance (PV of
ordinary annuity is 3.31212 at 8%). The agreement provides for a royalty payment of 2%
of gross sales. The total fee of P650,000 includes the following with their standalone
prices:
 Rights to trade name and market area, P320,000
 Machinery and equipment (cost, P100,000), P150,000
 Site location, feasibility studies, training of employees, etc., P10,000.
All the services in the package were performed as of October 1, 2020 while the equipment
was installed on January 1, 2021. The franchise commenced operations on January 20,
2021. The total gross sales in 2021 amounted to P2,000,000.
1. If Mr. Siomai satisfied the obligation at a point in time as when Mr. ABC has obtained
control of the rights, how much of the total contract price is allocated to transfer of
rights, sale of equipment, and services applying IFRS 15?
2. If Mr. Siomai satisfied the obligation at a point in time, how much revenue shall be
recognized in December 31, 2020?
3. If Mr. Siomai satisfied the obligation at a point in time, how much revenue shall be
recognized in December 31, 2021?
4. If Mr. Siomai satisfied the obligation and provides access to the rights and must
continue to perform updates and services, how much revenue must be recognized in
December 31, 2020?
5. If Mang Siomai satisfied the obligation and provides access to the rights and must
continue to perform updates and services, how much revenue must be recognized in
December 31, 2021?
Home Office and Branch Accounting
Problem 1
The Home Office consistently bills its branch for shipments at 120% of cost. the following selected information was
taken from the records of the home office and the branch:
Home Office Books:
Sales 1,600,000.00
Inventory, beginning 50,000.00
Purchases 850,000.00
Freight In 30,000.00
Shipments to branch 300,000.00
Mark-up of shipments to branch during the period 60,000.00
Inventory, ending 320,000.00
Operating Expenses 120,000.00
Investment in branch - end (before year-end closing entries) 640,000.00
Branch Books:
Inventory end:
From outside purchases 18,000.00
From home office (at billed price excluding freight in) 120,000.00
Cash sales 300,000.00
Collections on receivables 200,000.00
Disbursements for purchases from unrelated parties 40,000.00
Disbursement for operating expenses 60,000.00
Remittances of collections to home office 25,000.00
 Accounts receivable has a net increase of P80,000 while accounts payable has a net decrease of P10,000.
 Accrued expenses has an ending balance of P5,000. Not included in this amount is a P2,000 allocated
expense from the home office. There were no accrued expenses as of the beginning of the period.
 As at year-end, a shipment from the home office with a billed price of P12,000 was in transit. Normally, the
home office pays 5% freight based on the billed price of the goods shipped to the branch.
 The realized mark-up is P41,000 while the combined profit of the home office and the branch is P1,441,700.
Give the following:

_________1. True profit of the branch.
_________2. Beginning inventory of the branch from outside purchases.
_________3. Beginning balance of the “Home Office” account.
Problem 2
The home office consistently bills its branch for shipments at 120% of cost. However, shipments to branch are subject
to 5% freight cost on billed price, which the home office prepays before shipment. The following information was
taken from the records of the branch:
Cash and cash equivalents - January 1 22,000.00
Inventory (January 1):
From home office (at billed price including freight in) 126,000.00
Equipment, net - January 1 400,000.00
Accounts receivable, January 1 86,000.00
Accounts Payable, January 1 120,000.00
Sales 600,000.00
Shipments from home office, excluding freight in 360,000.00
Purchases 50,000.00
Inventory, December 31
From home office, including freight-in 176,400.00
Give the following:

1. Beginning balance of the home office account.
2. Beginning and ending balances of inventory at cost.
3. Understatement or overstatement of the cost of goods sold of the branch as far as the home office is
concerned.
Problem 3
The following information was taken from the records of the branch:
 Sales by branch P 700,000
 Billings to branch by the home office 625,000
 Operating expenses 100,000
 Ending inventory at billed price 250,000
The following information was also taken from the records of the home office:
 Branch current account P650,000
 Shipments to branch 500,000
 Allowance for mark-up (unadjusted) 125,000
Compute the following:

1. Billing rate to the branch at cost.
2. Sales of branch to be included in the combined income statement.
3. Realized mark-up from intercompany transfer of merchandise.
4. Cost of goods sold to be included in the combined income statement.
5. Ending inventory of the branch at cost.
6. Reported profit of the branch.
7. Income of the branch in so far as the home office is concerned.
8. Adjusted balance of the branch current account.
Problem 4
The following information is available for Araso Company:
Compute the following:

1. Combined cost of sales.

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Partnership Formation

Liabilities and Capital

I is to invest cash to obtain a one-third interest in the partnership.

They agreed to the following adjustments:

Give the following:

1. In the ratio of investments at the beginning of the fiscal period.

RequiEzra: Prepare a schedule to allocate net income, assuming:

What is the total interest on average capital balances of the partners?

What is partner Sophia’s adjusted capital balances as of December 31, 2020?

Reported Net Additional

5. The following information pertains to the partnership’s activities in 2016

a) Fees were billed as follows:

New clients acquired after January 2, 2016

d) Of Ezra’s and Zeus’s receivables, P2,400 and P900, respectively, proved to be

Jelwyn, Capital P150,000

Assets Liabilities and Capital

Required: Prepare statement of liquidation, assuming:

1. The noncash assets were realized at P96,000.

4. The noncash assets were realized at P42,000.

Personal Assets Personal Liabilities

Personal Assets Personal Liabilities

7. Following are the data available before liquidating the partnership:

Assets Liabilities and Partner’s Equity

Problem 4 (Installment Liquidation)

Assets Liabilities and Capital

The results of liquidation are summarized below:

Distributions of cash to partners are normally done at month-end.

Assets Liabilities & Equity

The results of liquidation are summarized below:

January P 12,000 P 10,500 P 500 P 2,500

Assets Liabilities and Equity

Cash P 775,000 Liabilities P 1,100,000

2. What is J’s share in the maximum possible loss?

3. What is A’s interest after the first cash distribution?

Art, Bea and Cid Partnership

Liabilities and Partners’ Equity

Capital account balances Profits-sharing ratio

Unsecured creditors P 230,000

A record of construction activities for the years 2017-2020 follows:

Actual Cost- Progress Cash

Estimated remaining costs to

Year Direct and Allocable Costs to date Billings Collections

The cost incurred in 2018 included costs of variations in contract work

Instruction: Compute for the profit/(loss) to be recognized each year under

An independent surveyor certified cumulative value of the work in progress as

Total cost incurred to date are: As of December 31, 2017 – P8,000,000; As of

On January 1, 2018, ABC agreed to a contract variation that involves an

Instruction: Compute for the profit to be recognized in 2018.

2014 2015 2016

1. How much cost was incurred in 2015?

Revenue Recognition – Franchise

The new franchise business started operations in December and as of December

XYZ reports total sales of P2,000,000 in December 2021.

Instruction: Provide the entries to the following independent cases.

C. In addition to Case B, the contract requires Mr. ABC to undertake pre-opening

D. In addition to Case B, the contract requires Mr. ABC to undertake pre-opening

Answer the following:

REVENUE RECOGNITION: FIVE-STEP

A promised good or service is distinct if: