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Valuations:
1. Cash……………………………………………………………………………………….. Face Value
2. Non-cash……………………………………………………………………………….. Agreed Value
3. Liabilities (assumed if silent)………………………………………………. Face Value
4. Capital
4.1. If silent
*No recording of Unidentifiable Asset
*Total Agreed Capital = Total Contributed Capital
*Only a Transfer of Capital will happen
4.2. Goodwill Method
*Total Agreed Capital > Total Contributed Capital
Salaries
*Provided regardless of P/L Ratio
*Check if given is per Month/ Annual
Interest
*Rate is per annum (if silent)
*Based on Capital Balance (depends on the given)
**If problem states "only to the extent of earnings" and remaining balance is
not enough, pro-rate the amount/remaining balance using Salaries/Interest Ratio
depending on which must be provided first.
Dissolution
1. Admission
1.1. By Purchase
*If silent, Without Revaluation (No changes in Total Capital of All Partners,
only Partners' Capital Balances)
*With Revaluation
Amount Paid by New Partner
Divide by: New Partner's Agreed Interest %
Adjusted Capital of Old Partners
Deduct: Unadjusted Capital of Old Partners
Under (Over) valuation of Partnership Asset
**to be distributed using P/L to Old Partners
**to get the Capital Balance, End:
#Old Interest x (1 - New Partner's Interest)
Journal Entry
Revaluation of Net Assets
Dr. Cash/Asset xx
Cr. Old Partners' Capital xx
Cr. New Partners' Capital xx
Admission of New Partner
Dr. Old Partners' Capital xx
Cr. New Partners' Capital xx
2. Retirement/Withdrawal
*Update Capital, Loan Balances, Share in Net Income/Loss
*Bonus method only (no changes in total Capital), no more Goodwill method
Corporate Liquidation
1. Asset Pledged - Fully Secured 1. Liability - Fully Secured
2. Asset Pledged - Partially Secured 2. Liability - Partially Secured
3. Free Assets 3. Liability - with Priority
4. Liability - without Priority
#In General, GOODWILL, Other Intangible assets and Prepayments are DERECOGNIZED unless
stated otherwise in the problem.
Statement of Affairs
Percentage of Recovery = Net Free Assets (NFA)*
Total Unsecured Liabilities (TULI)**
*NFA
a. Excess of Total Asset Pledged - full/partially sec over Total Liab - fully/partially sec
add: b. Free Assets a+b=TOTAL FREE ASSETS
minus: c. Liabilities with Priority
**TULI
a. Excess of Total Liab - fully/partially sec over Total Asset Pledged - full/partially sec
add: b. Liabilities without Priority
Payment
1. Fully Secured Liabilities x 100% xx
2. Partially " " Full x100 % xx
Excess x % of reovery xx ---
3. Liability w/ Priority x100 % xx common question in Board Exam
4. Liability w/o Priority x % of reovery xx ---
Total Payment to Creditors* xx
*Shortcut to computing Total Payments to Creditors
> FV of NCA to be Realized + Cash Bal. Beg.
Statement of Realization
1. Assets to be Realized (exclude cash) 3. Assets Realized (proceeds of sale/collecti
2. Assets Acquired (Interest/Dividend Rec'l 4. Assets Not Realized
Credit Sales)
Total RGP
Regular Gross Profit (Reg Sales - Reg COS) xx
Installment collections for the year
Prior year (Collections x GPR that year) xx
Current year (Coll'ns x GPR this year) xx xx xx
add: Interest Income xx
less: Operating Expenses (Admin + Selling) xx
Loss on Repossession** xx
Loss on write-off (amount written-off x cost ratio) xx xx
Net Income xx
Installment Sales
Dr. Inst Accounts Rec'l xx
Cr. Cost of IS xx
Cr. DGP xx
C Collection
Dr. Cash xx
Cr. IAR xx
Dr. DGP xx
Cr. Realized GP xx
R Repossession Loss
Dr. Repo Mdse (@FV) xx
Dr. Repo Loss xx
Dr. DGP (remaining bal) xx
Cr. IAR xx
W Write-down
Dr. Loss on Write-down xx
Dr. DGP xx
Cr. IAR xx
Journal Entries
**Same under Zero Profit and % of Completion
1. Cost Incurred
CIP xx
Cash xx
2. Progress Billings
AR xx
PB xx
3. Billings Collection
Cash xx
AR xx
*Revenue Recognition
CIP xx
Construction Cost xx
Construction Revenue xx
Final Year
Same entries above
*Elimination of Inventory
PB xx
CIP xx
*Total estimated cost may exceed Total Revenue from contract in which case,
report Loss in its entirety Immediately when first anticipated whether ZPM or POC
CA/L Table
CI to date xx xx xx
add: Profit (Loss) to date xx xx xx
CIP xx xx xx
less: PB to date xx xx xx
Current Asset(Liability xx xx 0 > last yr always -0-
4 Cases
1. Notes Receivable (Interest Bearing) - Reasonably Assured
Sales (entire IFF) xx
less: Cost of Sales (Direct Cost for Intial Services only) xx
Gross Profit xx
add: Continuing Franchise Fee (stated % x Sales) xx
Total Franchise Revenue xx
add: Interest Income (check if fractional year) xx
less: Expenses (indirect costs for Initial serv, direct & indirect - continuing) xx
Net Income xx
Reminders:
1. Read the problem carefully. Beware of dates, check substantial performance,
2. Count the days of refundability.
3. Collections include principal only, don't add interest income.
Dr. Dep'n
Cr. AD - PPE
Dr. Dep'n
Cr. AD - PPE
Job-Order Costing
*Predetermined Standard OH Rate = Budgeted MOH
Budgeted/Estimated OH Rate Base
*If variances are MATERIAL, prorate to the different goods that have been worked during
the year (WIP, FG and COGS only)
4-way Variance
Units Hours
Actual Actual
Variable Spending
Actual Std.
Variable Efficiency
*Std. Std. Spending Controllable
Variance Variance
Fixed OH
Budgeted
Volume/Uncontrollable/
**Standard Capacity
#Job-order cost sheets can serve as a subsidiary ledger info for both WIP &FG
Departmentalization
Methods of distributing/reallocating Service Dept's costs to Prodcing Dept's
1. Direct method - % based on a certain allocation base (simplest method)
*No allocation between service dept's, allocate immediately to producing dept's.
2. Step method
a. Rearrange Service Dept's according to priority:
1st - # of producing dept's served
2nd - highest cost to lowest
b. Allocate cost of priority using allocation base. A service dept may allocate its
cost to another service dept's according to priority.
c. Repeat until all service dept's costs are allocated fully to the producing dept's.
3. Reciprocal method
*when there exist a relationship between service departments, their costs should
adjusted first using an algebraic expression.
example:
Service dept A = P200k + 10% of B
Service dept B = P140k + 15% of A
Service dept C = P100k + 5% of A + 9% of B
Almost the same, Main difference = no priority and a service dept may still allocate
back to another service dept until balance equals zero for reciprocal method.
2. Internal Failure
Dr. MOH *no change in unit cost
Cr. Materials
Cr. Wages Pay'l
Cr. Applied MOH
2. Abnormal
Dr. Loss Account *no change in unit cost
Cr. Materials
Cr. Wages Pay'l
Cr. Applied MOH
Process Costing
>accumulating costs of production by department/cost centers (mass production)
>commonly used by companies with large number of similar products
(e.g. oil refining, chemical/food & drinks processing)
4= 1. Beginning Cost xx
2. Additional Cost from Beg. WIP xx
3. Started & Completed xx
4. Normal Loss xx
Total Cost Transferred/
Total Manufacturing Cost xx
AVERAGE (4-2 = 2)
4 = 1. Completed & Transferred xx (100% regardless of Beg % of completion)
(Beginning Balance +
Started & Completed) 2 = Cost/Unit
2. WIP End xx (% complete) 1. Beginning Cost
3. Normal Loss xx 2. Current Cumulative Cost
4. Abnormal Loss xx (Transferred In + Placed in Process)
EUP (Average) xx EUP (Average)
*Abnormal Losses although used in EUP computation is treated as Period Cost (Expensed)
*Adjusted Cost = Cost Transferred out (including Normal Loss)
Units Transferred Out
*Transferred out = Beg. Bal WIP (% incomplete)
*Additional cost in Beg WIP incomplete = (WIP Beg. x % incomplete x Cost/EUP)
*Started & Completed [Transferred out (units)- Beg inv WIP (units)] x Total EUP (mat + conv cost + trans In, if a
*POCIDA = if Point Of Completion comes first than Inspection, Don't Allocate normal loss
e.g. % of completion = 50%;
% of inspection = 60%
**if it comes later, Allocate to Cost Transferred Out and Ending Inventory
**Normal spoilage units resulting from a Continous Process result in a higher unit cost for the
units produced.
*Regarding EUP for Transferred In, it is always Beg Inv = 0% and End Inv = 100%
Acquisition Date/Closing Date (the former may come before the latter)
>date when Control is obtained/legal transfer of consideration/written agreement
Contingent Consideration
>either a Liability (remeasured and recognized in P/L)
or Equity/Final Settlement (not remeasured)
Roll up Transactions
>all combining entities transfer their net assets to a newly formed entity
*Acquirer only recognizes the acqui date Fair Value of Contingent Consideration Pay'l
& Contingent Liability of the acquired entity But Not its Contingent Assets
Group
>a parent & all subsidiaries (Not excluded in Consolidation even if dissimilar from
other entities)
Control Premium
>should be included in GW computation, excluded in NCI computation
Computations of Consolidated Assets, Liabilities & SHE in Date of Business Combination:
ASSETS LIABILITIES SHAREHOLDERS' E
1. Book Value of Parent's Assets 1. BV of Parent's Liab 1. SHE @ BV of parent
2. + FV of Sub's Assets 2. + FV of Sub's Liab 2. + NCI (FV) first row**
3. - Purch Price (Cash/NCA) 3. + Purch Price 3. + Purchase Price
*can be ignored if assets of parent (discounted BP/NP) (FV of stocks issued w/ S
*includes PHI @ adjusted
Carrying Amt
4. + Goodwill 4. + Contingent Consid Pay'l (CCP) 4. + Gains:
*GW of parent only, disregard *adjusted only if Existed @ Bus Com a. on Bargain Purch Opti
pre-existing GW of Sub *if involves words like: a. on CCP
"target profit, market price, b. on PHI
milestone on R&D project", adjust to
P/L (expensed)
(20 - 27 Intercompany sale of Land - almost same with int. co sale of dep'l asset)
*Main Difference - realized portion
>Land - realized only when sold to 3rd party but up to the difference of Sellling Price (SP)
over Carrying amt only. Excess of SP to 3rd party over the interco SP is income of
Subsidiary.
>Dep'l Asset - unrealized portion is amortized over its remaining life & if sold to 3rd
party, recognize in that year the remaining balance of the unrealized
portion. Same rule applies on the excess of SP to 3rd over interco SP.
20. - Unrealized Gain (xx)
>Downstream
21. + Realized Gain xx
22. - Unrealized Gain (xx)
>Upstream
23. + Realized Gain xx
24. + Unrealized Loss xx
>Downstream
25. - Realized Loss (xx)
26. + Unrealized Loss xx
>Upstream
27. - Realized Loss (xx)
Consolidated Net Income xx
*Sale of Land
Unrealized Gain (xx)
Foreign Exchange
Theories:
Monetary Items = money held & assets to be received
or liabilities to be paid
Exchange difference = difference resulting from reporting the same number
of units of one currency to another
(goes to P/L during the period it arised)
Currencies:
a. Functional - primary economic environment where entity normally operates
*Normal Operation = either a) Primary driver is its Sales Price
b) Competitive forces, financing & oper activities
c) Foreign activities are an extension
(remits income and don't accumulate)
b. Presentation - used in FS, free choice but translated to Functional curr
(management's judgment to use it)
c. Foreign - other than functional
Foreign Activities:
1. Foreign currency transaction (Rec'l/Pay'l in Foreign Currency, goes to P/L)
a. Buy/Sell of goods/services denominated in FC.
b. Borrowing/Lending funds denominated in FC.
c. Acquires/Diposes Assets or Incurs/Settles Liability denom in FC.
2. Foreign operations (Branch/Divisions/Subsid./Assoc. based on another country)
*FS must be translated. If Net investment is disposed, from OCI it goes to P/L
Initial Measurement @ Spot Rate: a) Bid/Buying Rate = Seller or b) Offer/Selling Rate = Buyer
Subsequent Measurement:
a. Foreign Currency Mone. Items (@ Closing Rate)
>Exchange Differences:
1. Separate FS = P/L
2. Conso FS = OCI (but goes to P/L when Foreign Ope is disposed)
b. NonMonetary (@Historical)
c. NonMonetary (@Fair Value)
PAS 21
1. Foreign Currency Transactions
2. Foreign Exchange Transactions
3. Hedging of For Ex Risk
4. Exposed Net Asset/Liabilitiy
Journal Entries
a) Asset a) FC Rec'l
(@Spot rate) (@Forwad Rate)
AP FC Pay'l (Fixed Amt)
2. AP 2. Forward Loss****
ForEx Gain** FC Rec'l
Journal Entries
3. AR 3. Forward Loss***
ForEx Gain** FC Rec'l
Face Value
Agreed Value
Face Value
tions:
ers,
es)
Bonus/Undervaluation/
Overvaluation**
(Squeeze)
(Contributed - Agreed)
Sum of given
(Squeeze)
(Contributed - Agreed)
Capital
states so.
ent partners)
n Sale
hare
valuation+/- NI/Loss)
, do not include
bals are equal)
eceive P10K)
Withheld/Unpaid Liab/Liq Exp)
NIZED unless
ec
ec
e Liquidated
rred/Assumed
ry Credit (SOL)
erest Income, Loss on Sale)
xx
st &
xx
xx
Year
- Collections
- Repo Account
W - Write-off
Year
part of contract
ted from cost
t of contract
ould
n Cash Collection
last yr always -0-
for the yr
ces/sales
less
ed to compute
sales?)
AOBI
(mark-up)
xx
-
-
xx
xx
-
xx
xx
-
xx
-
-
xx
Branch 2
Dr. HO
Cr. Cash
r. HO***** Dr. SFHO*
Cr. SFHO* Dr. F-in****
Cr. Freight In** Cr. HO*****
Cr. Cash*** Cr. Cash***
branch
h 1 should be prorated based on
nother branch
d (branch 1) or
anch 2)
ch 2 must be the SHOULD be
ght as if mdse came from HO
h branch
in the entry)
during
d OH
ontrollable
Overhead
Variance
t's.
its
t's.
ould
Unit Cost
same as before
[COGS w/ allowance -
spoiled goods @ TMC]/
# of goods produced
)
f completion)
Cumulative Cost
Placed in Process)
P (FIFO)
ative Cost
Placed in Process)
(Average)
xpensed)
end of the
ocess)
g cost/cost transferred
(for the period)
ill in process
aluate operations
al costs completed,
.
Cost of Disposal)
cessing Cost
ct
ction",
ights
ay'l
- Control Premium
ontrolling Interest
ub (INAS))
SHAREHOLDERS' EQUITY
. SHE @ BV of parent
. + NCI (FV) first row**
. + Purchase Price
(FV of stocks issued w/ SP)
*includes PHI @ adjusted
Carrying Amt
. + Gains:
a. on Bargain Purch Option
a. on CCP
b. on PHI
. - Direct Costs
Indirect Costs
*paid/unpaid
NCI
--
--
--
xx
(xx)
(xx)
xx
--
(xx)
--
--
xx
(xx)
--
--
(xx)
xx
--
--
xx
(xx)
sset
--
--
(xx)
xx
--
--
xx
(xx)
xx
party,
ies
y)
L
yer
difference betw.
lement date and
Transaction date
difference betw.
lement date and
Transaction date