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[a] Prepare a memo to the partner making a recommendation as to whether Barnes and Fischer should or should not accept Ocean Manufacturing, Inc. as an audit client. Carefully justify your position in light of the information in the case. Include consideration of reasons both for and against acceptance and be sure to address both financial and nonfinancial issues to justify your recommendation.

PROBLEM 1 KUN KAYA HIT IBA, KAYA MO GEAP Company was organized the beginning of current year. The entity provided the following transactions affecting shareholders' equity: 1. The corporation was authorized to issue 100,000 ordinary shares with par value of P 100. 2. Twenty-five percent of the authorized ordinary capital was subscribed for at par value. 3. Collected twenty-five percent of the subscription. 4. Full collection was received on shares originally subscribed. 5. Issued the share certificates on the fully paid 10,000 shares. 6. Land with fair value of P800,000 and a building thereon fairly valued at P 2,500,000 were acquired for 30,000 shares. 7. Issued 10,000 shares for an outstanding bank loan of PI including accrued interest of P 200,000. On this date, shares are quoted at P 120 per share. 8. Net income for the year amounted to P3,000,000. Requirements: a. Prepare journal entries using journal entry method. b. Present shareholders' equity. PROBLEM 2 MACPA GAD KUN MANIGURO LA Company was organized at the beginning of current year. The entity provided the following transactions affecting shareholders' equity: 1. The entity was authorized to issue share capital as follows: Preference share capital, P100 par 30,000 shares Ordinary share capital, P50 par value, 100,000 shares 2. 40,000 ordinary shares were issued for cash at P60 per share. 3. 10,000 preference shares were issued at P120 for cash. 4. 10,000 preference shares were subscribed at par value. 5. P400,000 was received on the above subscription to preference shares. 6. 1,000 preference shares were issued in payment of legal fees of P100,000 in connection with the organizing the corporation. 7. 20,000 ordinary shares were issued for property, plant and equipment which had a fair value of P1,300,000. 8. 15,000 ordinary shares were subscribed for at par. 9. Forty percent of the ordinary share capital subscription was collected. 10. The balance owing on the subscription described in 4 and 5 was collected, and preference shares were issued. 11. The net income for the current year was P2,000,000. Requirements: a. Prepare journal entries to record transactions using the memorandum method. b. Present shareholders' equity