JPIA-HAU

4. As to law of creation
PARTNERSHIP AND
CORPORATE ACCOUNTING a. Domestic corporation
Accounting for Corporation, Financial Reporting b. Foreign corporation
and Analysis, and Introduction to Cost Accounting
5. As to extent of membership
Overview of the Handouts:
1. Organization and Formation of a a. Open corporation
Corporation b. Closely-held corporation or family
2. Operations, Dividends, Book Value per corporation
Share, and Earnings per Share
3. Share Capital Transactions Subsequent
COMPONENTS OF A CORPORATION:
to Original Issuance
4. Financial Reporting and Analysis 1. Incorporators – they are the persons
5. Introduction to Cost Accounting who originally formed the corporation and
whose names appear in the Articles of
Incorporation
1 ORGANIZATION AND FORMATION OF A
CORPORATION 2. Corporators – they are the persons who
compose the corporation whether as
shareholders of members
1.1 CORPORATION is an artificial being
created by operation of law, having the right of 3. Stockholders – they are the corporators
succession and the powers, attributes and of a stock corporation
properties expressly authorized by law or
incident to its existence. (Section 1, 4. Members – they are the corporators of a
Corporation Code of the Philippines) non-stock corporation
5. Promoters – they are the persons who
CHARACTERISTICS OF A CORPORATION undertake to form a company based on a
given project, set it going, and take
1. Separate legal entity necessary steps to accomplish the
purpose for which the corporation is
2. Created by operation of law
organized
3. Right of succession
6. Subscribers – they are the persons who
4. Powers, attributes, properties authorized have agreed to take original, unissued
by law shares but will pay at a later date
5. Ownership divided into shares 7. Underwriters – they are those who
undertake to dispose of the shares to the
6. Board of directors
general public

CLASSES OF CORPORATION
1.2 SHARE CAPITAL – a.k.a. capital stock;
Corporation is classified according to
membership holdings, purpose, compliance of - the amount fixed by the corporate charter to
law, law of creation, and extent of membership. be subscribed and paid in or secured to be
paid in by the shareholders of a corporation
1. As to membership holdings
either in money or in property, labor or services
a. Stock corporation upon the organization of the corporation or
afterwards; and upon which it is to conduct its
b. Non-stock corporation operations
2. As to purpose
CLASSES OF SHARE CAPITAL
a. Public corporation
1. Ordinary share capital (common stock)
b. Private corporation
- Single class of share capital is issued
c. Quasi-public corporation
- Entitles the holder to an equal division of
3. As to compliance of law
profits without any preference or
a. De jure corporation advantage over any class of shares
b. De factor corporation

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
 JPIA-HAU
2. Preference share capital
- Entitles the holder to enjoy priority as to MEMORANDUM ENTRY METHOD
distribution of dividends and distribution
of assets upon corporate liquidation Authorized to issue xxx shares of
(preference/ordinary) share capital with a par
A par value share capital has a nominal or value of P xxx.
face value stated on the face of the stock
certificate and in the articles of incorporation
1.3 ISSUANCE OF SHARE CAPITAL
A no par but with stated value share capital
has a nominal value stated in the articles of For cash
incorporation but not on the face of the stock Example: Happy Corporation was organized on
certificate January 1, 2014 and is authorized to issue
A no par, no stated value share capital has 100,000 shares of P10 par value ordinary
no nominal value stated either in the articles of shares. Subsequently, 25,000 shares were
incorporation nor on the face of the stock sold. (the issuance price is P10)
certificate
Cash 25,000

A corporation may issue more than one class Unissued ordinary share capital 25,000
of preference shares. This type of shares may
be classified as follows:
For non-cash assets
1. Cumulative preference shares – entitle
the holders to the receipt of previous Example: the Happy Corporation issued
years’ unpaid dividends before any 10,000 shares of its P10 par ordinary share
payment can be made to ordinary capital in exchange for land. (the land has a
shareholders upon dividend declaration fair value of P175,000)
2. Non-cumulative preference shares – Land 175,000
entitle the holders to the receipt of current
dividends but not on the previous years’ Unissued ordinary share capital 100,000
unpaid dividends Ordinary share premium 75,000
3. Participating preference shares –
entitle the holders to the receipt of
additional dividend after holders of both For services rendered
preference and ordinary shares have
Example: the Happy Corporation issued 1,000
been paid up to the current year’s
shares of P10 par ordinary share capital in
dividend
payment for the services of the lawyer
4. Nonparticipating preference shares – rendered during incorporation. (the services of
entitle the holders to the receipt of the lawyer is valued at P25,000)
dividends up to the current period only
Pre-operating expenses 25,000
AUTHORIZED SHARES Unissued share capital 10,000
- The maximum number of shares that a Ordinary share premium 15,000
corporation may issue
- Is determined by multiplying the
authorized shares by the par or stated
value of the share capital 2 OPERATIONS, DIVIDENDS, BOOK VALUE
PER SHARE, AND EARNINGS PER SHARE
- May be recorded under the journal entry
method or the memorandum entry method 2.1 DIVIDENDS are distribution to
shareholders of corporate earnings in
proportion to the number of shares held by
them.
JOURNAL ENTRY METHOD
It may take the form of: (1) cash; (2) non-cash
Unissued XXX share capital xxx assets; (3) notes or other evidence of
Authorized XXX share capital xxx corporate indebtedness; and (4) shares of the
company’s own share capital.

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
 JPIA-HAU
The following dates are essential in formal For large share
dividend announcement or statement.
Retained earnings xxx
1. Date of declaration – this is the date
when the board of directors approved the Share capital dividends distributable xxx
resolution to distribute dividends. The
liability of the corporation to the Share capital dividends distributable xxx
shareholders is recorded on this date. Share capital xxx
2. Date of shareholders of record – this is
the date when the company determines
the shareholders who are entitled to the DIVIDENDS ON PREFERENCE SHARES
receipt of declared dividends.
When dividends are paid, the dividend
3. Date of payment or distribution – this is requirements on preference shares must be
the date when dividends declared are paid before any payment can be made to
paid or distributed to the shareholders. ordinary shareholders.
The preference shares may be:
CASH DIVIDENDS
1. Cumulative – preference shareholders
Retained earnings xxx are entitled to the payment of past years’
unpaid dividends before the payment of
Cash dividends payable xxx current year’s dividends.

Cash dividends payable xxx 2. Noncumulative – preference

shareholders are entitled to current year’s
Cash xxx dividends only.
3. Participating – preference shareholders
SCRIP DIVIDENDS are entitled to additional dividends after
the payment of regular dividends to both
Retained earnings xxx the preference and ordinary shareholders.
Scrip dividends payable xxx 4. Nonparticipating – preference
shareholders are not entitled to any
Scrip dividends payable xxx dividend in excess of the regular rate.
Interest expense xxx
Cash xxx 2.2 BOOK VALUE PER SHARE – the amount
that would be paid on each share owned by a
shareholder in case of corporate liquidation
PROPERTY DIVIDENDS assuming the amount available to shareholders
is exactly the same as the total shareholders’
Retained earnings xxx equity.
Property dividends payable xxx
The calculation of book value per share
Property dividends payable xxx depends on how many classes of share capital
are outstanding.
Assets xxx
One Class

SHARE CAPITAL DIVIDENDS Book value per share is calculated by dividing

the total shareholders’ equity by the number of
For small share shares outstanding.
Retained earnings xxx
More Than One Class
Share capital dividends distributable xxx
Paid-in capital from share capital dividends xxx The rights of the different classes of
shareholders should be taken into
consideration. (preference shareholders have
Share capital dividends distributable xxx
priority over ordinary shareholders)
Share capital xxx

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
 JPIA-HAU
share information is presented in the
statement of comprehensive income, even
if the amount is negative.

COMPUTATION FOR BASIC EARNINGS

Equity Identified with Preference Share PER SHARE
Capital
1. If there is only one class of share
Consists of the liquidation value, the amount capital outstanding (that is, ordinary
payable to preference shareholders for every shares)
share owned in case of corporate liquidation,
and any claim on dividends. It is usually equal
to or more than the par value of the share
capital.
Equity Identified with Ordinary Share 2. If there are two classes of share capital
Capital outstanding (that is, ordinary shares and
Also known as residual equity. It is the excess preference shares)
of total shareholders’ equity over the equity Profit or loss per income
identified with preference share capital. statement xxx

Example: On December 31, 2014, the Less: Dividends on

shareholders’ equity section of the statement of preference shares xxx
financial position of Lucky Corp. appears as Profit Attributable to
follows: Ordinary Shares xxx
10% preference share capital, Divided by: Outstanding shares
P100 par, 50,000 shares 5,000,000
Earnings per Share xxx
Ordinary share capital, P20
par, 200,000 shares 4,000,000
Preference share premium 1,500,000 3 SHARE CAPITAL TRANSACTIONS
Ordinary share premium 1,200,000 SUBSEQUENT TO ORIGINAL ISSUANCE

Retained earnings 5,800,000 When a share capital is fully paid, a stock

Total shareholders’ equity
The preference shares are noncumulative;
liquidation value is P110 per share
Total shareholders’ equity
Less: Equity identified with
preference shares
Equity Identified with Ordinary
Shares
Book value per share:
Preference:
5,500,000/50,000 = P110
Ordinary:
12,000,000/200,000 = P60
2.3 EARNINGS PER SHARE (EPS) – the
amount earned during a given period on each
ordinary share outstanding. The earnings per
certificate is issued to the shareholder and the
17,500,000 stock becomes outstanding. Subsequent to the
original issuance, various capital share
transactions may take place. These
transactions may cause a change in total
shareholders’ equity of the company or in the
17,500,000
number of shares outstanding.
5,500,000
TYPES OF SHARE CAPITAL
TRANSACTIONS
12,000,000
1) SHARE CAPITAL RETIREMENT
Share capital may be reacquired and formally
retired by the issuing corporation. Such
retirement calls for the cancellation of the stock
certificate, cancellation of the share capital
account, and the cancellation of the related
additional paid-in capital from the original
issuance of the stock. Retirement of the share
capital will reduce both the number of shares
issued and the number of shares outstanding.
 if the retirement price is greater than the
original issuance price, retained earnings is
debited.

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting

 if the retirement price is less than the
original issuance price, paid-in capital from
the retirement of share capital is credited.
2) SHARE CAPITAL REACQUISITION
a) reacquisition by purchase
The reacquisition will be accounted for using
the cost method. Under this method, the
reacquired shares are viewed as capital
elements awaiting ultimate disposition.
Treasury shares are recorded at cost.
 if the shares are reissued at more than
cost, the indicated gain is credited to and
additional paid-in capital account
 if the shares are reissued at less than cost,
the indicated loss is debited to the following
accounts: a. additional paid-in capital from
treasury share transactions of the same
class of share capital b. retained earnings
b) reacquisition by donation
This practice is done by shareholders to enable
the company to increase its working capital
and at the same time maintain their
proportionate ownership interests.
3) CONVERSION OF PREFERENCE
SHARES INTO ORDINARY SHARES
Convertible preference shares can be
converted into ordinary shares at the option of
the holder. This type of preference share
capital can be sold at a higher price but a lower
dividend rate because of its conversion
privilege. The accounting for conversion of
preference shares into ordinary shares is
similar to retirement of share capital. Account
balances related to the preference shares
converted are cancelled and the issuance of
ordinary shares is recorded.
 an indicated gain from conversion is
credited to paid-in capital from conversion
of preferences shares into ordinary shares
 an indicated loss from conversion is debited
to retained earnings
4) SHARE SPLIT
When the market price of the shares is high
and the corporation feels that a lower price will
result in a wider distribution of ownership, it
may authorize the replacement of outstanding
shares by a larger number of shares. The
increase in the number of shares outstanding
in this manner is called share split or share
Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
JPIA-HAU
split-up. For instance, 10,000 ordinary
shares with a par value of P10 are replaced
by 20,000 ordinary shares with a par value
of P5.
The reverse procedure which is the
replacement of shares outstanding by a
smaller number of shares with an increase
in the par value is called reverse split share
or a share split down. For instance, 10,000
ordinary shares with a par value of P10 are
replaced by 5,000 ordinary shares with a par
value of P20.
5) RECAPITALIZATION
Takes place when an entire issue of share
capital is changed by appropriate action of the
corporation.
TYPES OF RECAPITALIZATION:
1. Change from par to no-par share capital
and vice-versa
2. Reduction in the par or stated value of
share capital
4 FINANCIAL REPORTING AND ANALYSIS
TWO MAIN GROUP OF USERS
1. Internal User (special purpose)
2. External Users (general purpose)
4.1 FINANCIAL STATEMENTS
- provide information about financial position,
financial performance and cash flows of an
entity that is useful to a wide range of users in
making economic decisions.
- structured representation of the financial
position and financial performance of an entity.
- the end product of the accounting process.
- show the results of the management’s
stewardship of the resources entrusted to it.
- the means by which the information
accumulated and processed in financial
accounting is periodically communicated to
those who use it.
4.2 COMPONENTS OF FINANCIAL
STATEMENTS (5)
1. STATEMENT OF FINANCIAL POSITION
- describes the resources of the entity that
are available sources of future cash flow,
 JPIA-HAU
such as short-term investments, receivables, - cumulative amount of investments and
and inventories. profit from operations, less any
withdrawals or distribution of dividends
Three Primary Elements and losses from operations.

A) ASSETS
- resources controlled by the entity as a result 2. STATEMENT OF COMPREHENSIVE
of past events and from which future INCOME
economic benefits are expected to flow to the A) INCOME STATEMENT
entity.
a. INCOME
a. Current Assets
- increases in economic benefits during the
- Cash and cash equivalents accounting period in the form of inflows or
- Short-term investments enhancements of asset or decrease of
liabilities that result in increase in equity,
- Trade notes and accounts receivables other than those relating to contributions from
- Nontrade notes and accounts receivables equity participants.

- Inventories * Revenue arises in the course of the

ordinary activities of an entity and is referred
-Prepaid expense to by a variety of different names including
sales, fees, interest, dividends, royalties, and
b. Non-current assets rent.
- Long-term investments * Gains are increases in economic benefits
arising from peripheral or incidental activities,
- Property, plant, and equipment such as those arising from sale of plant
- Intangible assets assets and sale of investments.

- Investment property b. EXPENSE

- Other non-current assets - decrease in economic benefits during the
accounting period in the form of outflows or
B) LIABILITY depletions of assets or incurrences of liability
- presents obligations of an entity arising from that result in decrease in equity; Other than
past events, the settlement of which is those relating distributions to equity
expected to result in an outflow from the participants.
entity of resources embodying economic EXPENSE RECOGNITION PRINCIPLES
benefits.
1. Direct matching- costs can be associated
a. Current Liabilities with revenue, such costs are charged to
- Trade notes and accounts payable expense in the period in which the related
revenue is recognized.
- Nontrade notes and accounts payable
2. Systematic and rational allocation- costs
- Unearned revenues
cannot be associated with revenue but can
- Accrued liabilities be associated with future periods, such
costs are charged to expense over the
- Currently maturing portion of long-term periods benefited.
debt
3. Immediate recognition- an expense
b. Non-current Liabilities produces no future economic benefits.
- all liabilities that do not qualify as current
* Nature of expense method - expenses are
liabilities.
aggregated in the income statement according
to their nature and are not reallocated among
C) EQUITY various functions within the entity.
- the residual interest in the assets of the * Function of expense/cost of sales method -
entity after deducting all its liabilities expenses are classified according to their
function as part of cost of sales, cost of

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting

distribution or administrative activities.
(provides more relevant information than the
nature of expense method).
B) STATEMENT OF COMPREHENSIVE
INCOME
- Reports items of income and expenses
which are not required to be recognized in
profit or loss.
* PAS 1 permits the presentation of
comprehensive income in a single statement of
comprehensive income (combined income
statement and statement of comprehensive
income)
3. STATEMENT OF CHANGES IN EQUITY
4. STATEMENT OF CASH FLOW
- provides information about the cash
receipts and cash disbursements of an entity
that occurred during a period.
Classification of Cash Flows
A) Operating activities- derived from the
principal revenue-producing activities of the
entity.
a. Direct Method- major classes of gross
receipts and gross cash payments are
disclosed in the statement.
b. Indirect Method- net cash flow from
operating activities id determined by
adjusting profit or loss.
B) Investing activities- includes cash
inflows and outflows of cash related to the
acquisition and disposition of long-term asset
used in the operations of the business and
investment assets.
C) Financing activities- includes cash
inflows from borrowings and contributions by
investors and cash outflows for repayment of
loans, retirement of share capital, acquisition
of treasury shares and payment of cash
dividends.
5. NOTES TO FINANCIAL STATEMENTS
- includes narrative descriptions or more
detailed analysis of amounts shown on the
face of the financial statements.
- includes information required and
encouraged to be disclosed and other
Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
JPIA-HAU
disclosures necessary to achieve fair
representation.
4.3 EIGHT BASIC CONSIDERATION
WHEN PREPARING AND PRESENTING
FINANCIAL STATEMENT
1. Fair Presentation and compliance
with PFRSs/IFRSs
This requires the faithful representation of
the effects of transaction, other than events
and conditions in accordance with the
definition and recognition criteria for assets,
liability, income, and expense set out in the
framework.
2. Going Concern
An entity is assumed to have a continuity of
life unless there is evidence to the contrary.
3. Accrual Basis of Accounting
Income and expenses are recognized in the
period in which they relate rather than when
the cash is received or paid.
4. Frequency of Reporting
An entity shall present a complex set of
financial statements at least annually.
5. Materiality and Aggregation
Each material class of similar items shall be
presented separately in the financial
statements. Items of dissimilar nature or
functions shall be presented separately
unless they are immaterial.
6. Offsetting
Deducting the balance of an asset account
from the balance of a liability account and
reporting only the net amount in the
statement of financial position.
Deducting the balance of an income account
from the balance of an expense account and
reporting only the amount in the statement of
comprehensive income.
7. Consistency of Presentation
To aid the comparability of financial
statements of one period with other periods
(intra comparability), or of one entity with
other entities (inter comparability).
8. Comparative Information
This shall be included for narrative and
descriptive information when it is relevant to
an understanding of the current period’s
financial statements.
 JPIA-HAU
4.4 FINANCIAL STATEMENT ANALYSIS 3. Profitability ratio measure the profit or
operating success of an entity for a given
RATIO ANALYSIS period of time.
1. Liquidity ratios measure the short-term
ability of the entity to pay its maturing Profit
= Profit
obligations and to meet unexpected needs for Margin on
cash. Sales Net sales

Current = Current assets

Ratio Current liabilities Rate of Profit
Return on =
Average total assets
Assets
Quick or Cash, short-term investment,
Acid Test = net receivables Rate of
Profit
Ratio Current liabilities Return on =
Owners’ Average owners’ equity
Equity
Current Net cash provided by
Cash Debt = operating activities Profit – earnings attributed to
Ratio Average current liabilities Earnings = preference shares
per Share Average outstanding ordinary
shares
Receivable Net credit sales
Turnover = Average trade receivables
Ratio (net) Price- Market price of share capital
earnings =
Earnings per share
Ratio
Ave. 365 days
Collection =
Receivable turnover ratio Payout Cash dividends
Period =
Ratio Profit
Inventory Cost of goods sold
Turnover = Asset
Average inventory Net sales
Ratio Turnover =
Average total assets
Ratio
Number of 365 days
days in =
Inventory turnover ratio
inventory
5 INTRODUCTION TO COST ACCOUNTING

2. Solvency ratios measure the ability of entity COST ACCOUNTING

to survive over a long period of time, that is, its
- measuring the resources used to complete
ability to pay interest as it come due and to
repay the face value of obligations or debt at an activity or unit of output (Cost
maturity. determination/Product costing)

Debt to Total liabilities - Management’s way of dealing with the

Total =
Total assets activities that incur costs (Cost control)
Assets
- Field of accounting that measures, records,
Debt to Total liabilities
= and reports information about costs.
Equity
Total owners’ equity
Ratio
5.1 COMPARISON OF FINANCIAL,
Cash Debt Net cash provided by MANAGERIAL, AND COST ACCOUNTING
Coverage = operating activities
Ratio Ave. total liabilities Financial Accounting

 use of accounting information for reporting

Times Profit before interest charges to external parties, including investors and
Interest = and taxes
creditors
Earned Interest charges
 information may be historical, quantitative,
monetary and verifiable
Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting

Cost Accounting
 intersection between
managerial accounting
 information is needed and used by both
financial and managerial accounting.
 provides product cost information to
external parties for credit and investment
decisions
 provides product cost information to
internal parties for planning and
controlling.
Managerial Accounting
 focuses on the needs of parties within the
organization (internal), rather than
interested parties outside the
organization.
 addresses individual
concerns rather than
enterprise as a whole
 information may be current or forecasted,
quantitative or qualitative, monetary or
non-monetary
5.2 DETERMINING PRODUCT COST
1. Determine the selling price of a product
2. Meeting Competition
3. Bidding on Contracts
4. Analyzing Profitability
5.3 PLANNING AND CONTROL
Planning - process of establishing objectives
or goals for the firm and determining the
means by which the firm will attain them.
A) Strategic Planning- setting long range
goals and objectives to determine the
overall direction of the company.
B) Tactic Planning- plans for shorter range
and emphasizes plans to achieve the
strategic goals.
C) Operations Planning- relates to the day to
day implementations of tactical plans and
Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
JPIA-HAU
it emphasizes the coordination of the
major factors of production.
financial and
Control - process of monitoring the
company’s operations and determining
whether the objectives identified in the
planning process are being accomplished.
5.4 TWO BASIC PRODUCT-COSTING
SYSTEMS
Job Order Costing
 unique jobs are worked on during a period
of time
costs are accumulated by individual job
Process Costing
 homogeneous units pass through a series
of similar processes.
or divisional  cost are accumulated by processing
those of the department
5.5 ELEMENTS OF MANUFACTURING COST
A) Direct Materials - all materials that form an
integral part of the finished product whose
value is relatively high and that can be included
directly in calculating the cost of product.
* Indirect Materials- materials cannot be
readily identified with any particular item
manufactured.
B) Direct Labor- cost of labor for those
employees who worked directly on the product
manufactured.
* Indirect Labor- wages and salaries of
employees who do not work directly on the
units being manufactured.
C) Factory Overhead- all cost related to
manufacturing of a product except direct
materials and direct labor. (Indirect Materials,
Indirect Labor, Depreciation- Machinery and
Building, Utilities, Repair and Maintenance,
etc.,)
Prime Cost = Direct Material + Direct Labor
Conversion Cost = Direct Labor + Factory
Overhead
 JPIA-HAU
Period Cost = Marketing/Selling Expense + Statement COGS for Manufacturing
General/Administration Expense Company

Direct Materials xxx

Manufacturing/Product Cost = Direct
Direct Labor xxx
Material + Direct Labor + Factory Overhead
Factory Overhead xxx

Total Manufacturing Cost xxx

5.6 INVENTORIES IN MANUFACTURING
FIRM Add: Work in Process, beginning xxx
A) Material Inventory - yet-to-be used Cost of goods put into process xxx
materials
Less: Work in Process, end xxx
B) Work in Process Inventory - partially
completed products Cost of goods manufactured xxx

C) Finished Goods Inventory - completed Add: Finished Goods, beginning xxx

and ready-to-sell products Total Goods Available for Sale xxx

Less: Finished Goods, end xxx

5.7 COST FLOW- MANUFACTURING FIRMS
Cost of Goods Sold xxx
Direct Material

Direct Labor Work in Process

Factory Overhead

Finished Goods

COGS

Statement of COGS for Merchandising

Company

Beginning Merchandising Inventory xxx

Plus: Total Purchases xxx

Cost of Goods available for sale xxx

Less: Ending Merchandising Inventory xxx

Cost of Goods Sold xxx

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
 JPIA-HAU
EXERCISES The JPIA Company showed the following
balances related to an issuance of ordinary
Problem 1. Issuance of par value share capital share capital:
for cash, services, and non-cash assets
Ordinary share capital,
Prepare journal entries to record authorized P50 par, 200,000 shares 10,000,000
share capital and the subsequent transactions.
Ordinary share premium 4,000,000
The JPIA Corporation was organized on April
1, 2020 with authorized share capital of The company retired 2,000 shares of
500,000 ordinary shares, par value of P20. ordinary share capital.
Thereafter, the following transactions took
place:
Problem 4. Dumbledore Company’s trial
April 1 the incorporators acquired 200,000 balance include the following account balances
shares at P36 per share. at December 31, 2019, the end of its fiscal
year:
25 issued 5,000 shares for the services
rendered by the lawyer during the period of Cash 420 000
incorporation. The fair value of such services is
Inventories 625 000
P150,000.
Accounts Payable 200 500
May 28 issued 15,000 shares in exchange for
equipment valued at P400,000. Interest Payable 45 000
Ordinary shares 1 000 000
Problem 2. Cash dividends
Accounts receivable 250 000
Prepare necessary journal entries to record the
declaration and distribution of cash dividends. Equipment 1 650 000

The shareholders’ equity section of the Wages payable 170 000

financial position of JPIA Company shows the Notes payable (due in 2 yrs) 480 000
following as of January 1, 2019:
Ordinary share capital, P100 Compute for the following:
stated value, 100,000 shares
1. Total current assets
authorized, 40,000 shares
outstanding 4,000,000 2. Total current liabilities
Ordinary share premium 2,000,000 3. Total assets
Retained earnings 1,500,000 4. Retained earnings

During the year, the corporation had declared Problem 5. Potter company reported a profit of
the following dividends: 450,000 in 2019. The following information
were provided by the company in relation to
Mar 1 declared a cash dividend of P10
the preparation of the statement of cash flows.
per share payable on April 15 to
shareholders of record of March Depreciation- P40 000
31.
Decrease in accounts receivable- P 65 000
Sept 1 declared a cash dividend of P20
per share payable on Sept. 30 to Decrease in accounts payable- P 50 000
shareholders of record of Sept. 15. Loss on sale of equipment- P 5 000

Problem 3. Retirement of share capital Compute the net cash provided by operating
activities using the indirect method.
Record the retirement of the 2,000 ordinary
shares under each of the following
Problem 6. The following data were taken from
assumptions:
the financial statements of Hermione
1. The retirement price is P45 Company:
2. The retirement price is P60 2019 2018
Net Sales P 5,000,000 P 4,500,000
Cost of goods 4,500,000 3,800,000

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting
 JPIA-HAU
sold ____5. Managerial Accounting information
Net Profit 200,000 150,000 generally pertains to an entity as a whole
Receivables, net 60,000 70,000 and is highly aggregated.
Merchandise
Inventory 1,500,000 1,350,000 MULTIPLE CHOICE
Total Assets 3,000,000 2,500,000 1. Planning is a function that involves
Total Ordinary
Shareholders’ a. Hiring the right people for a particular
Equity 1,150,000 1,050,000 job
b. Coordinating the accounting information
Compute for the following
system
1. Profit margin on sales
c. Setting goals and objectives for an entity
2. Rate of return on total assets
d. Analyzing financial statements
3. Asset turnover ratio
4. Rate of return on ordinary shareholders’ 2. Which of the following statements about cost
equity accounting is not true?

5. Gross profit rate a. Is the intersection between financial and

management accounting
6. Receivable turnover ratio
b. Information generated by cost accounting
7. Average collection period is used by both financial and managerial
accounting.
Problem 7. The financial statements of Junior c. Cost accounting provides product cost
Sevi Company included these items: information to internal parties only such as
Marketing Costs P 110,000 managers for planning and controlling.
Direct Materials, used 295,000
Administrative Costs 130,000 3. Management accounting information is
Direct Labor 230,000 generally prepared for
Fixed Factory Overhead
a. creditors
Costs 180,000
Variable Factory b. stockholders
Overhead Costs 145,000
c. regulatory agencies
Compute for the following
d. managers
1. Prime Cost
2. Conversion Cost 4. Which of the following is not an internal
user?
3. Product Cost
a. controller
4. Period Cost
b. cost accountant
TRUE OR FALSE c. creditor
____1. Managerial accounting internal reports d. department manager
are prepared more frequently than are
classified financial statements. 5. Management accountants would not
____2. Process costing is used by companies a. be concerned with the impact of cost and
making one-of-a-kind products. volume on profits
____3. Determining the unit cost of b. prepare reports primarily for external users
manufacturing a product is an output of
financial reporting. c. determine cost behavior

____4. Cost accounting procedures help d. assist in budget planning

management in gathering the data needed to
determine product costs and thus generate
meaningful financial statements and other
reports.

Partnership and Corporate Accounting Handout #1 - Accounting for Corporation, Financial Reporting
and Analysis, and Introduction to Cost Accounting