P/L Distribution

N IS BoB

(N) IS B

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“In excess of…”

Example:

Alice, Capital, beginning: P 50,000

Carroll, Capital, beginning: P30,000

“Interest of 10% shall be paid on partner’s beginning capital in excess of P40,000.

> This means that the interest will only apply to Alice, because her beginning capital is P50,000, and therefore exceeds P40,000.

> Computation should be as follows: P50,000 – P40,000 = P10,000

> P10,000 will be the amount that you will multiply to 10%, to obtain the interest allowance Alice will get.

> P10,000 x 10% = P1,000

FMV

Scenario: Mr. X has a business (sole prop). However, when he met Mr. Y and Mr. Z, they all decided to join forces and form XYZ Company. All the partners agreed that Mr. X will invest equipment in the firm.

How do you record this transaction?

Remember: When a non-cash asset like equipment is transferred to the XYZ Company from Mr. X’s (sole prop) business, its fair market value will be used in recording the investment.

Review Q’s

If you still remember lessons from ACC10, you should be able to answer the following:

1. Can you find accrued expense and deferred expense in the income statement? Why or why not?

2. Why is accrued income not synonymous to service income?

3. How do you journalize this scenario: Rendered service on account for P100.

4. When do you record unearned income or deferred income?

5. If revenues and expenses are reported in the income statement, __________, ___________, and ___________ are reported in the balance sheet.

6. T or F: The normal balance of Accumulated Depreciation is debit.