Practical Accounting 2

Partnerships Operations and Dissolutions Practice Questions

Review Class: January 29, 2016 1:00 3:00PM

Operations

1. The partnership contract for the Jordan and Pippen Partnership provided that Jordan is to receive and
annual salary of P120,000, Pippen is to receive an annual salary of P80,000, and the remaining profit or loss
is to be divided equally between the two partners. Net income of the Jordan and Pippen Partnership for the
year ended December 31,2010 was P180,000. The closing entry for net income on December 31, 2010 is a
debit to Income Summary for P180,000 and credits to Jordan Capital and Pippen Capital,
respectively of:

a. P 108,000 and P72,000

b. P 90,000 and P90,000

c. P 120,000 and P80,000

d. P 110,000 and P70,000

2. The partnership contract of the JJ, KK and LL Partnership provided for the division of net income or
losses in the following manner:

a. Bonus of 20% of income before the bonus to JJ.

b. Interest at 15% on average capital account balances to each partner.
c. Remaining income or loss, equally to each partner.

Net income of the JJ, KK and LL Partnership for 2010 was P90,000, and the average capital account
balances for that year were JJ, P100,000; KK, P200,000; and LL, P300,000. How much of the P90,000
partnership profit for 2010 should be distributed to JJ?

a. P27,000
b. P 6,000

c. P33,000
d. P39,000

3. The partnership agreement for the partnership of May and Jun provided for salary allowances of P45,000
to May and P35,000 to June, and residual profit was allocated equally. During the year 2010 May and Jun
each withdraw cash equal to 80 percent of their salary allowances. If during 2010 the partnership had profits
in excess of P100,000 without regard to salary allowances and withdrawals, Mays capital in the partnership
would:

a. Increase more than Juns

b. Decrease more than Juns

c. Increase the same as Jim

d. Decrease the same as Juns

4. Allan and Michael arc partners. Their capital accounts during 2010 were as follows:
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Allan, Capital

8/28 P6,000

Michael, Capital

1/1

P40,000

4/3

8,000

3/5

P9.000

1/1 P60,000
7/6

10/31 18,000

7,000

10/7 12,000

Net income of the partnership is P39,500 for the year 2010. The partnership agreement provides for the
division of income as follows:
a. Each partner is to be credited 10 percent interest on his simple average capital
b. Any remaining income or loss is to be divided equally.

What is Michaels share of profit for the year?

a. P20,500
b. P14,000

c. P16,500
d. P19,000

5. Fred, Greg and Henry are partners with average capital balances during 2010 of P120,000, and P60,000,
and P40,000, respectively. Partners receive 10% interest on their average capital balances. After deducting
salaries of P 30,000 to Fred and P20,000 to Henry, the remaining profit or loss is divided equally. In 2010,
the partnership sustained a P33,000 loss before interest and salaries to partners. By what amount should
Freds capital account change?
a. P7,000
b. P11,000

increase
decrease

c. P35,000

decrease

d. P42,000

increase

6. The partnership agreement of Rey and Serg provides that interest at 10 percent is to be credited to each
partner on the basis of average capital balances. A summary of Serg Capital account for the year ended
December 31, 2010 is as follows:

Balance, January 1
Additional investment, July 1

P 140,000
40,000

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Withdrawal, August 1

15,000

What amount of interest should be credited to Serg capital account for 2010?

a. P15,250
b. P15,375

c. P16,500
d P17,250

7. JR and his very close friend AJ formed a partnership on January 1, 2010 with JR contributing P 16,000
cash and AJ contributing equipment with a book value of P6,400 and a fair value of P4,800 and inventory
items with a book value of P2,400 and fair value of P3,200. During 2010, JR made additional investment of
P1,600 on April 1 and P1,600 on June 1, and on September 1, he withdrew P4.000. AJ had no additional
investments nor withdrawals during the year. The average capital balance at the end of 2010 for JR is:

a. P16,000
b. P 8,000

c. P16,800
d. P 7,200

8. The partners of RJ and AG, share profits 3:2. However, RJ is to receive a yearly bonus of 20 percent of
the net profits after deducting said bonus, in addition to his profit share. The partnership made a net income
for the year of P24,000 before the bonus. How much profit share will RJ receive?

a. P16,000
b. P10,000

c. P15,200
d. P14,400

9. LT and AM have capital account balances at the beginning of the year of P40,000 and P45.000,
respectively. They share net income and losses as follows:

1. 8 percent interest on beginning capital balances

2. salary allowance of P15,000 to LT and P7,500 to AM
3. remainder in 3:2 ratio

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The partnership reported net income of P10,000 for the year, before interest and salary allowances to
partners. What are the profit share of LT and AM, respectively?
a. P6,620,and P3,380
b. P6,630, and P3,380

c. P6,500, and P3,500

d. P6,000, and P4,000

10. Peter and Paul formed a partnership on January 2, 2010; and agreed to share net income and losses 90
percent and 10 percent, respectively. Peter invested cash of P250,000. Paul invested no assets but had a
specialized expertise and managed the firm full time, The Partnership contract provided for the following:

1. Partners capital accounts arc to be credited annually with interest at 5 percent of beginning
capital account balances.
2. Paul is to be paid a salary of P10,000 a month.
3. Paul is to receive a bonus of 20 percent of income before deduction of salary, bonus and interest
on partners capital account balances.
4. Bonus, interest, and Paul salary are considered expenses.

The income statement for the year ended 2010 for the partnership including the following:

Revenue
Expenses (including salary, interest, and bonus to Paul)
Net Income

P964,500
497,000
P467,500

What is Pauls bonus for 2010?

a. P120,000
b. P150,000

c. P130,000
d. P93,750

11. CC, DD, and EE, doctors, agree to form a partnership and to share profits in the ratio 5:3:2. They also agreed that
EE is to be allowed a salary of Pl4,000, and that DD is to be guaranteed P 10,500 as his share of the profits. During the
first year of operation, income from fees are P90,000, while expenses total P48,000. What amount of net income should
be credited to each partners capital account?

CC

DD

EE

a.

P14,000

P8,400

P5,600

b.

P12,500

P10,500

P19,000

c.

P12.000

P11,000

P19,000

d.

P12,500

P10,500

P19,500

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12. Jose and Pedro are partners who share profits and losses in the ratio of 6:4, respectively.
Joses salary is P100,000 and Pedro is P50,000. The partners also are paid interest on their
average capital balances. In 2010, Jose received P50,000 of interest and Pedro; P20,000. The
profit and loss allocation is determined after deductions for the salary and interest payments. If
Pedros total share of partnership income was P200,000 in 2010, what was the total partnership
income?
a. P475,000

b. P500,000

c. P545,000

d. P750,000

13. JJ and RR formed the JR partnership on January 3, 2010 with cash investments of: JJ, P120,000, and
RR, P180,000. On December 31, 2010 the net income of the JR partnership was P69,600. The net income
included an extraordinary gain of P12,000.

What is the share of JJ in the net income of P69,600, if income before extraordinary items is shared equally
between JJ and RR after allowance of a 20 percent bonus to RR based on income before extraordinary items
after the bonus? Extraordinary items are shared on the basis of original investments.

a. P27,840
b. P32,640

c. P28,800
d. P24,000

14. Mel and Jay are partners with capitals of P200,000 and P 120,000, respectively. The partnership
agreement provided the following:

1. 10 percent interest on their capital investments.

2. Annual salary of P36,000 to Mel.
3. Remainder in 60:40 ratio to Mel and Jay.

What is the profit to be earned by the partnership before charges for interest, salary and the balance, so that
Jay will receive P40,000 in the remainder of the profit after salary and interest?

a. P168,000
b. P138,000

c. P136,000
d. P132,000

15. Holly and Field are partners operating a grocery Store. Their partnership agreement requires
that profits and losses be divided as follows:
Holly
Field
Salaries
P20,000
None
Commission on gross sales.
None
2%
Interest on average capital balances
8%
8%
Bonus
20% of net income
before commission, and
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interest but after salaries

and bonus
60%

Remainder

40%

Gross sales for 2010 were P1,250,000. Income before deducting amounts for salary, commission,
interest, and bonus were P200,000. Average capital balances of Holly and Field are P400,000 and
P420,000 respectively. What are the profit shares of Holly and Field, respectively?
a. P117,640 and.P82,360
b. P 35,460 and P23,760
c. P110,640 and p89,360
d. P117,460 and P82,540
Dissolutions:
Use the following information for items.1, 2, and 3:
The Gordons Partnership shows the following profit and loss ratios and capital
balances:
Aquino
Locsin
Dizon

60%
30%
10%

P25
P 12
P4

The partners decide to sell Hizon 20 percent of their respective capital and profit and
loss, interests for a total payment of P90,000. Hizon will pay the money directly to the
other partners.
1. If the partners agree that unrecognized goodwill is to be recorded prior to the sale
of Hizon, what are the capital balances of the partners after his admission?
Aquino
a.
b.
c.
d.

Locsin

P198,000
P201,600
P216,000
P255,600

Dizon

Hizon

P 99,000
P100,800
P108,000
P127,800

P33,000
P33,600
P36,000
P42,600

P90,000
P90,000
P90,000
P90,000

2. If the partners agree that the bonus method is used, what are the capital balances
of the partners after Hizons admission to the partnership?
Aquino
a.
b.
c.
d.

P198,000
P201,600
P216,000
P255,699

Locsin

Dizon

Hizon

P99,000
P100,800
P108,000
P127,800

P33,000
P33,600
P36,000
P42,600

P90,000
P84,000
P90,000
P84,000

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3. How much cash should Aquino, Locsin, and Dizon receive, respectively from Hizon?
a. P50,400, P25,200, and P8,400, if and only if no goodwill is recorded.
b. P50,400, P25,200, and P8,400, whether or not goodwill is recorded.
c. P54,000, P27,000, and P9,000, if and only if goodwill is recorded.
d. P54,000, P27,000, and P9,000, whether or not goodwill is recorded.
4. The capital accounts of Ed, Nick, and Vie are presented below with their respective
profit and loss ratio:
Ed
Nic
k
Vic

P139,000

(1/2)

209,000

(1/3)

96,000

(1/6)

Tony was admitted to the partnership when he

purchased directly, for P132,000 a proportionate interest from Ed and Nick in the net
assets and profits of the partnership. As a result, Tony acquired a one-fifth interest in
the net assets and profits of the firm. Assuming no revaluation of assets is recorded,
combined gain realized by Ed and Nick upon the sale of a portion of their interest in
the partnership to Tony?
a. P0
b. P43,200

c. P62,400
d. P82,000

5. Anson wishes to purchase one-fourth interest in the partnership of Bernal, Cuevas

and Diaz. The three partners agree to sell Anson one-fourth of their respective capital
and profit and loss interests in exchange for a total payment of P40,000. The partners'
capital accounts and the profit and loss ratio immediately before the admission of
Anson are as follows:

Bernal
Cuevas
Diaz

Capital
Accounts
P 80,000
40,000
20,000
P140,000

Profit and Loss Ratio

60%
30%
10%
100%

All assets and liabilities are (to be) fairly valued and no bonus is to be recorded upon
the admission of Anson. Immediately after Ansons admission, what should be the
capital balances of Bernal, Cuevas and Diaz respectively?
a. P60,000;.P30,000;. P15,000.
b. P69,000; P34,500; P16,500.
c. P77,000; P38,500; P19,500.
d. P92,000; P46,000; P22,000.
6. Banzon and Cortez are partners who share profits and losses in the ratio of 6:4. On
January 1, 2008 their capital balances are:
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Banzon
Cortez
Total

P 80,000
20,000
P 100,000

Dizon is to be admitted for a 20 percent interest in the partnership by direct purchase

from the partners for P30,000. How should the P30,000, cash be divided between
Banzon and Cortez?
a. Banzon, P18,000; Cortez, P12,000.
b. Banzon, P22,000; Cortez, P8,000.
c. Banzon, P20,000; Cortez, P10,000.
d. Banzon, P24,000; Cortez, P 6,000.
7. Perez contributed.P24,000 and Cadiz contributed P48,000 to form partnership, and
they agreed to share profits in the ratio of their original capital contributions. During
the first year of operations, they made a profit of P16,290; Perez withdrew P5,050 and
Cadiz P8,000. At the start of the following year, they agreed to admit Gomez into the
partnership. He was to receive a one-fourth interest in the capital and profits upon
payment of P30,000 to Perez and Cadiz, whose capital accounts were to be reduced
by transfers to Gomezs
capital account of amounts sufficient to bring them back to their original capital ratio.
How should the P30,000 paid by Gomez be divided between Perez and Cadiz.

a. Perez, P9,825; Cadiz, P 20,175.

b. Perez, P15,000; Cadiz, P 15,000.
c. Perez, P10,000; Cadiz, P 20,000.
d. Perez, P9,300; Cadiz, P 20,700.
8. The following balance sheet is for the partnership of Alice, Betty and Clara before
the admission of Diana:
Cash
Other assets
Total

P 20,000
180,000
P200,000

Liabilities
Alice, Capital (40%)
Bettv, capital (40%)
Clara, capital (20%)
Total

P 50,000
37,000
65,000
48,000
P200,000

If the assets are fairly valued on the above balance sheet and the partnership wishes
to admit Diana as a new one-sixth-interest partner without recording goodwill or
bonus, Diana should contribute cash of:
a. P30,000
b. P33,333

c. P36,000
d. P40,000

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9. On December 31, 2008, Alan and Dino are partners with capital balances of
P80,000 and P40,000, respectively. They share profits and losses in the ratio of 2:1. On
this date Steve invests P36,000 cash for a one-fifth interest in the capital and profit of
the new partnership. The partners agree that the unrecorded partnership goodwill is
to be recorded simultaneously with the admission of Steve. The total unrecorded
goodwill of the firm is:
a. P24,000
b. P30,000

c. P4,800
d. P6,000

10. Ben and Ric are partners who share profits and losses in the ratio of 6:4
respectively. On May 1, 2008, their respective capital accounts were as follows:
Ben P60,000

Ric 50,000

On that date, Lito was admitted as a partner with a one-third interest in capital and
profits for an investment of P40,000. The new partnership began with a total capital of
P 150,000. Immediately after Litos admission, Bens capital account balance should
be:
a. P50,000
b. P54,000

c. P56,667
d. P60,000

11. At December 31, Rod and Sol are partners with capital balances of P40,000 and
P20,000, and they share profits and losses in the ratio of 2:1, respectively. On this
date Pete invests P17,000 in cash for a one-fifth interest in the capital and profit of the
new partnership. Assuming that assets are not revalued, how much should be
credited to Petes capital account on December 31?
a. P12,000
b. P15,000

c. P15,400
d. P17,000

12. Fred and Raul are partners who share profits and losses in the ratio of 7:3;
respectively. Their respective capital accounts are as follows:
Fred
Raul

P35,000
30,000

They agreed to admit Lory as a partner with a one-third interest in the capital and
profits and losses, upon an investment of P25,000..The new partnership will begin
with a total capital of P90,000. Immediately after Lorys admission, what are the
capital balances of Fred, Raul, and Lory, respectively?
a. P30,000; P30,000; P30,000.
b. P31,500; P28,500; P30,000.
c. P31,667; P28,333; P30,000.
d. P35,000;-P30,000; P25,000.

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13. June and July are partners who share profits and losses equally. The capital
accounts of June and July have tripled in five years and at present have the following
balances.
June
July

P90,000
60,000

August desires to join the firm and offered to invest P50,000 for a one-third interest.
June and July declined his offer but they extended a counter-offer to August of P70,000
for a one-fourth interest in the capital and profits and losses of the firm. If August
accepted their offer and bonus is recorded, what should be the balances in the capital
accounts of June and July after Augusts admission.
June
a. P100,000
b. P120,000
c. P 97,500
d. P 90,000

July
P70,000
P90,000
P67,500
P60,000

14. Mira and Nina who share profits and losses in the ratio of 3:7, are partners with
capital balances of:
Mira
P40,000
Nina
60,000
Elma is to be admitted into the partnership for 20 percent interest in the capital of the
firm. If assets are revalued and the capital balances of Mira and Nina after recording
the admission of Elma are P52,000 and P88,000, respectively, the cash paid by Elma
is:
a. P35,000
b P20,000

c. P10,000
d. P15,000

15. Lime and Ong are partners sharing and losses in the ratio of 6:4 respectively; On
January 2, the partners decided to admit Ang as a new partner upon his investment of
P16,000. On this date, the interest in the partnership of Lim and Ong are as follows:
Lim
Ong

P23,000
18,600

Assuming that the new partner is given a 1/3 interest in the firm and the assets are
revalued.
The capital balances of the partners after admission of Ang are:

Lim
a.
b.
c.
d.

Ong
P23,000
P23,240
P23,500
P23,000

Ang
P 18,600
P18,760
P18,600
P18,600

P20,800
P16,000
P16,000
P16,000

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