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An amount of R370 appears on the business bank statement for interest charged on the unfavourable bank balance of SA Attorneys. In which book of original entry will it be recorded?
Draw a Chequers for a personal user
Explain what debit balance on the capital account indicate and
the action need to be taken to resolve upon winding up a partnership.
1. The trading account section of a manufacturing business would include:
a. Production cost; opening stock of finished goods ; selling expenses
b. Production cost; opening stock of finished goods; sales
c. Production cost; closing stock of finished goods; distribution expenses
d. Production cost; closing stock of finished goods; sales; net profit
2. A partner’s private petrol bills have been treated as part of the partnership’s motor vehicle expense. Which of the following entries is necessary to correct the error?
a. Debit Drawings accounts.
Credit Motor vehicle expense account
b. Debit Capitalaccount
Credit Motor vehicle expenses account
c. Debit Motor vehicle expense account
Credit Capital account
d. Debit Motor vehicle account
Credit Drawings account
1. The partnership Act governs partnerships and states the rights and duties of partners. The Act includes the following provision which is important and apply to partnerships unless the partners have agreed to vary the terms
a. All partners are entitled to contribute equally to the capital of the partnership
b. Partners are entitled to interest on the capital they have contributed
c. Partners are to be charged interest on their drawings.
d. Partners are not entitled to interest on loans they make to the partnership
On January 1,2020, Ex-B Co. acquired 25% interest in the ordinary shares of KZ Inc. for ₱3,000,000 which reflected book value as of that date. KZ Company reported net income and paid dividends for 2020 and 2021 as follows:
2020 2021
Net income ₱1,000,000 ₱1,500,000
Dividend declared 400,000 700,000
Assume the tax rate is 30% and the inventory is an ordinary asset (i.e., not subjected to final tax).
Case No. 1: On November 20,2020 Ex-B Company sold inventory costing ₱60,000 to KZ Co. for ₱110,000, 60% of which was still unsold on December 31,2020.
1. Investment income in 2020
2. Investment income in 2021
Case No. 2: On November 20,2020 KZ Company sold inventory costing ₱70,000 to Ex-B for ₱120,000, 60% of which was still unsold on December 31,2020.
3. Investment income in 2020
4. Investment income in 2021
On January 1,2018 Solenn Company acquired as a long-term investment for ₱1,400,000 a 40% interest in Lovie Company when the fair value of Love’s net assets was ₱3,500,000. Lovie Company reported the following net losses:
2018 ₱1,000,000
2019 1,4000,000
2020 1,600,000
2021 800,000
On January 1,2020 Solenn company made cash advances of ₱400,000 to Lovie Company. On December 31,2021 it is not expected that solenn company will provide further financial support for lovie company.
What amount should Solenn Company report in 2021 as loss from investment?
On January 1,2021, Krizelle Company acquired 30% of the outstanding ordinary shares of Arah Company for ₱6,000,000. This investment gave Krizelle the ability to exercise significant influence over Arah. The book value of the acquired shares was ₱5,000,000. The excess of the cost over book value was attributed to a depreciable asset which was undervalued on Arah statement of financial position and which had a remaining useful life of eight years.
For the year ended December 31,2021. Arah’ share capital outstanding is as follows:
10% cumulative preference share capital ₱3,000,000
Ordinary share capital 6,000,000
Arah reported net income of ₱2,500,000 for the year ended December 31,2021
CASE NO. 2: assuming the cumulative preference share is accounted as financial liability by Arah, answer the following:
1. What amount should krizelle record as investment income for the year ended December 31,2021?
2. What amount should krizelle record as investment in associate for the year ended December 31,2021?
On January 1,2021, Krizelle Company acquired 30% of the outstanding ordinary shares of Arah Company for ₱6,000,000. This investment gave Krizelle the ability to exercise significant influence over Arah. The book value of the acquired shares was ₱5,000,000. The excess of the cost over book value was attributed to a depreciable asset which was undervalued on Arah statement of financial position and which had a remaining useful life of eight years.
For the year ended December 31,2021. Arah’ share capital outstanding is as follows:
10% cumulative preference share capital ₱3,000,000
Ordinary share capital 6,000,000
Arah reported net income of ₱2,500,000 for the year ended December 31,2021
CASE NO. 1: Assuming the cumulative preference share is accounted as equity by Arah and that Arah declared dividends of ₱450,000 on the preference shares answer the following:
2. What amount should krizelle record as investment in associate for the year ended December 31,2021?
