fits NAME: SECTION: Problem #23 Correction of Errors SCORE: PROFESSOR: The partnership agreement of Gascon, Pahilagao, and Nolasco written in 2000 specifies that profits and losses are determined on the accrual basis and are divided as follows: Salary allowances an Gascon Pahilagao P150,000 P150,000 Nolasco Total P50,000 P350,000 Bonuses (percentage of profits in excess of P900,000) 20% 20% Residual profit or loss 40% 40% 20% of d On Jan. 1, 2019, the partnership agreement was revised to provide for the sharing of profits or losses in the following manner: Salary allowances Gascon Pahilagao Nolasco P200,000 Total P200,000 P150,000 P550,000 Bonuses (percentage of profits in excess of P1,100,000) 20% 20% 10% Residual profit or loss 35% 35% 30% The partnership books showed a profit of P1,450,000 for 2019 before the following errors were discovered: a. Inventory at Dec. 31, 2017 was overstated by P70,000. b. Inventory at Dec. 31, 2018 was understated by P80,000. c. Inventory at Déc. 31, 2019 was understated by P180,000. d. Depreciation expense for 2019 was understated by P50,000. Required: 1. Divide the profits among the partners for 2019, with the effects of prior years' errors to be treated as adjustments to beginning capital balances. 2. Assume that the reported profits for 2017 and 2018 were P850,000 and P1,100,000, respectively, prepare the correcting entry on Jan. 1, 2019. The old profit-sharing agreement is used for these items. Chapter 2: Partnership Operations and Financial Reporting | 2-59
fits NAME: SECTION: Problem #23 Correction of Errors SCORE: PROFESSOR: The partnership agreement of Gascon, Pahilagao, and Nolasco written in 2000 specifies that profits and losses are determined on the accrual basis and are divided as follows: Salary allowances an Gascon Pahilagao P150,000 P150,000 Nolasco Total P50,000 P350,000 Bonuses (percentage of profits in excess of P900,000) 20% 20% Residual profit or loss 40% 40% 20% of d On Jan. 1, 2019, the partnership agreement was revised to provide for the sharing of profits or losses in the following manner: Salary allowances Gascon Pahilagao Nolasco P200,000 Total P200,000 P150,000 P550,000 Bonuses (percentage of profits in excess of P1,100,000) 20% 20% 10% Residual profit or loss 35% 35% 30% The partnership books showed a profit of P1,450,000 for 2019 before the following errors were discovered: a. Inventory at Dec. 31, 2017 was overstated by P70,000. b. Inventory at Dec. 31, 2018 was understated by P80,000. c. Inventory at Déc. 31, 2019 was understated by P180,000. d. Depreciation expense for 2019 was understated by P50,000. Required: 1. Divide the profits among the partners for 2019, with the effects of prior years' errors to be treated as adjustments to beginning capital balances. 2. Assume that the reported profits for 2017 and 2018 were P850,000 and P1,100,000, respectively, prepare the correcting entry on Jan. 1, 2019. The old profit-sharing agreement is used for these items. Chapter 2: Partnership Operations and Financial Reporting | 2-59
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:fits
NAME:
SECTION:
Problem #23
Correction of Errors
SCORE:
PROFESSOR:
The partnership agreement of Gascon, Pahilagao, and Nolasco written in 2000 specifies
that profits and losses are determined on the accrual basis and are divided as follows:
Salary allowances
an
Gascon Pahilagao
P150,000 P150,000
Nolasco
Total
P50,000 P350,000
Bonuses (percentage of profits
in excess of P900,000)
20%
20%
Residual profit or loss
40%
40%
20%
of
d
On Jan. 1, 2019, the partnership agreement was revised to provide for the sharing of
profits or losses in the following manner:
Salary allowances
Gascon Pahilagao Nolasco
P200,000
Total
P200,000
P150,000
P550,000
Bonuses (percentage of profits
in excess of P1,100,000)
20%
20%
10%
Residual profit or loss
35%
35%
30%
The partnership books showed a profit of P1,450,000 for 2019 before the following
errors were discovered:
a. Inventory at Dec. 31, 2017 was overstated by P70,000.
b. Inventory at Dec. 31, 2018 was understated by P80,000.
c. Inventory at Déc. 31, 2019 was understated by P180,000.
d. Depreciation expense for 2019 was understated by P50,000.
Required:
1. Divide the profits among the partners for 2019, with the effects of prior years' errors
to be treated as adjustments to beginning capital balances.
2. Assume that the reported profits for 2017 and 2018 were P850,000 and P1,100,000,
respectively, prepare the correcting entry on Jan. 1, 2019. The old profit-sharing
agreement is used for these items.
Chapter 2: Partnership Operations and Financial Reporting | 2-59
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