1.

2.

On December 1, 2015, EE and FF formed a partnership, agreeing to share for profits and losses in
the ratio of 2:3, respectively. EE invested a parcel of land that cost him P25,000. FF invested P30,000
cash. The land was sold for P50,000 on the same date, three hours after formation of the partnership.
How much should be the capital balance of EE after formation?
a. 25,000
b. 30,000
c. 60,000
d. 50,000
On March 1, 2016, II and JJ formed a partnership with each contributing the following assets:
II
JJ
Cash
P300,000
P700,000
Machinery and equipment
250,000
750,000
Building
2,250,000
Furniture and Fixtures
100,000
-

The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership.
Agreement provides that II and JJ share profits and losses 30% and 70%, respectively. On March 1,2016
the balance in JJs capital account should be:
a. 3,700,000
b. 3,140,000
c. 3,050,000
d. 2,900,000
3.

The same information in number 2, except that the mortgage loan is not assumed by the
partnership. On march 1, 2016 that balance in JJs capital account should be:
a. 3,700,000
b. 3,140,000
c. 3,050,000
d. 2,900,000

4.

As of July 1, 2016, FF and GG decided to form a partnership. Their balance sheets on this date are:
FF
GG
Cash
15,000
37,500
Accounts Receivable
540,000
225,000
Merchandise Inventory 202,500
Machinery and Equipment
150,000
270,000
Total
705,000
735,000
Accounts Payable
FF, Capital
GG, Capital
Total

135,000
570,000
705,000

240,000
495,000
735,000

The partners agreed that the machinery and equipment of FF is underdepreciated by P15,000 and that
of GG by P45,000. Allowance for doubtful accounts is to be set up amounting to P120,000 for FF and
P45,000 for GG. The partnership agreement provides for a profit and loss ratio and capital interest of
60% to FF and 40% to GG. How much cash must FF invest to bring the partners capital balances
proportionate to their profit and loss ratio?
a. 142,500
b. 52,500
c. 172,500
d. 102,500
5.

On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their
business assets and assume the liabilities. Partners capitals are to be based on net assets transferred
after the following adjustments. (Profit or Loss are allocated equally.)
BBs inventory is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500
are to be set up in the books of AA and BB, respectively; an accounts payable of P4,000 is to be
recognized in AAs books. The individual trial balances on August 1, before adjustments, follow:
AA
BB
Assets
75,000
113,000
Liabilities
5,000
34,500
What is the capital of AA and BB after the above adjustments?
a. AA 68,750; BB 77,250
b. AA 75,000; BB 81,000
c. AA 65,000; BB 76,000
d. AA 65,000; BB 81,000

6.

CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 2015, just
before the admission of DD, show the following balances:
Cash
6,800
Accounts Receivable
14,200
Merchandise Inventory
20,000
Accounts Payable
8,000
CC, Capital
33,000
It is agreed that for purposes of establishing CCs interest, the following adjustments shall be made:
a. An allowance for doubtful accounts of 3% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at P23,000.
c. Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.
DD is to invest sufficient cash to obtain a 1/3 interest in the partnership.

Compute for: (1)CCs adjusted capital before the admission of DD; (2)The amount of cash investment
by DD.
a. (1) 35,347; (2) 11,971
b. (1) 36,374; (2) 18,487
c. (1) 35,374; (2) 17,687
d. (1) 28,174; (2) 14,087
7.

8.

MM, NN, OO are partners with capital balances on December 31, 2015 of P300,000, P300,000 and
P200,000, respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is to
take certain equipment with second-hand value of P50,000 and a note for the balance of OOs interest.
The equipment are carried on the books at P65,000. Brand new equipment may cost P80,000. Compute
for: (1) OOs acquisition of the second-hand equipment will result to reduction in capital; (2) the value
of the note that will OO get from the partnership?
a. (1) P15,000 each for MM and NN; (2) 150,000
b. (1) P5,000 each for MM, NN, and OO; (2) 145,000
c. (1) P5,000 each for MM, NN, and OO; (2) 195,000
d. (1) P7,500 each for MM and NN; (2) P145,000
Jones and Smith formed a partnership with each other partner contributing the following items:
JONES
SMITH
Cash
80,000
40,000
Building: Cost
300,000
Fair Value
400,000
Inventory: Cost
200,000
Fair Value
280,000
Mortgage Payable
120,000
Accounts Payable
60,000
Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the
Jones and Smith partnership. What is the balance in each partners capital account for financial
accounting purposes?
Jones Smith
a. P350,000 270,000
b. 260,000 180,000
c. 360,000 260,000
d. 500,000 300,000

9.

The business assets of LL and MM appear below:

LL
MM
Cash
11,000
22,354
Accounts Receivable
234,536
567,890
Inventories
120,000
260,102
Land
603,000
Building
428,267
Furniture and fixture
50,345
34,789
Other Assets
2,000
3,600
Total
1,020,916
1,317,002
Accounts payable
Notes payable
LL, capital
MM, capital
Total

178,940
200,000
641,976
1,020,916

243,650
345,000
728,352
1,317,002

LL and MM agreed to form a partnership by contributing their respective assets and equities subject to
the following adjustments:
a. Accounts Receivable of P20,000 in LLs books and P35,000 in MMs are uncollectible.

b. Inventories of P5,500 and P6,700 are worthless in LLs and MMs respective books.
c. Other assets of P2,000 and P3,600 in LLs and MMs respective books are to be written off.
The capital account of the partners after the adjustments will be:
a. LL 615,942 ; MM 717,894
b. LL 640,876 ; MM 712,345
c. LL 640,876 ; MM 683,050
d. LL 614,476 ; MM 683,052
10.

The same information in number 9, how much total assets does the partnership have after
formation?
a. 2,337,918
b. 2,237,918
c. 2,265,118
d. 2,365,218

11.

On March 1, 2016, PP and QQ decide to combine their businesses and form a partnership. Their
balance sheets on March 1, before adjustments, showed the following:
PP
QQ
Cash
9,000
3,750
Accounts Receivable
18,500
13,500
Inventories
30,000
19,500
Furniture and fixture
30,000
9,000
Office equipment
11,500
2,750
Prepaid expenses
6,375
3,000
Total
105,375
51,500
Accounts payable
Capital
Total

45,750
18,000
59,625
33,500
105,375
51,500

They agreed to have the following items recorded in their books:

a. Provide 2% allowance for doubtful accounts.
b. PPs furniture and fixtures should be P31,000, while QQs office equipment is under-depreciated
by P250.
c. Rent expense incurred previously by PP was not yet recorded amounting to P1,000, while salary
expense incurred by QQ was not also recorded amounting to P800.
d. The fair market value of inventory amounted to:
For PP
P29,500
For QQ
21,000
Compute the net (debit) credit adjustment for PP and QQ:
a. PP 2,870 ; QQ 2,820
b. PP (2,870) ; QQ (2,820)
c. PP (870) ; QQ 180
d. PP 870 ; QQ (180)
12.

The same information in Number 11, compute the total liabilities after formation:
a. 61,950
b. 63,750
c. 65,550
d. 63,950

13.

The same information in Number 11, compute total assets after formation:
a. 157,985
b. 156,875
c. 160,765
d. 152,985

14.

On April 30, 2016, XX, YY and ZZ formed a partnership by combining their separate business
proprietorships. XX contributed cash of P75,000. YY contributed property with a P54,000 carrying
amount, a P60,000 original cost, and P120,000 fair value. The partnership accepted responsibility for
the P52,500 mortgage attached to the property. ZZ contributed equipment with a P45,000 carrying
amount, a P112,500 original cost, and P82,500 fair value. The partnership agreement specifies that
profits and losses are to be shared equally but is silent regarding capital contributions. Which partner
has the largest April 20, 2016, capital balance?
a. XX
b. YY
c. ZZ
d. All capital account balances are equal

15.

JJ and KK are joining their separate business to form a partnership. Cash and non-cash assets are to
be contributed for a total capital of P300,000. The non-cash assets to be contributed and liabilities to
be assumed are:
JJ
KK
Book Value
Fair Value
Book Value
Fair Value
Accounts receivable P22,500
P22,500
Inventories
22,500
33,750
60,000
67,500
Equipment
37,500
30,000
67,500
71,250
Accounts payable
11,250
11,250
7,500
7,500

The partners capital accounts are to be equal after all contributions of assets and assumptions of
liabilities.
Determine:
a. The total assets of the partnership.
b. The amount of cash that each partner must contribute?

16.

On July 1,2016, AA and BB decided to form a partnership. The firm is to take over business assets
and assume liabilities, and capitals are to be based on net assets transferred after the following
adjustments:
a. AA and BBs inventory is to be valued at P31,000 and P22,000, respectively.
b. Accounts receivable of P2,000 in AAs books and P1,000 in BBs books are uncollectible.
c. Accrued salaries of P4,000 for AA and P5,000 for BB are still to be recognized in the books.
d. Unused office supplies of AA amounted to P5,000, while that of BB amounted to P1,500.
e. Prepaid rent of P7,000 and P4,500 are to be recognized in the books AA and BB, respectively.
f. AA is to invest or withdrew cash necessary to have a 40% interest in the firm.

Balance sheets for AA and BB on July 1 before

AA
BB
Cash
Accounts receivable
Inventory
Office supplies
Equipment
Accumulated depreciation equipment
Total assets
Accounts payable
Capitals
Total liabilities and capital

Determine:
a. The
b. The
c. The
d. The
e. The
f. The
g. The

17.

adjustments are given below:

31,000
26,000
32,000

50,000
20,000
24,000
-

5,000

20,000

24,000
(9,000)
(3,000)
100,000
120,000
28,000
72,000
100,000

20,000
100,000
120,000

net adjustments capital in the books of AA and BB.

adjusted capital of AA and BB in their respective books.
additional investment (withdrawal) made by AA.
total assets of the partnership after formation.
total liabilities of the partnership after formation.
total capital of the partnership after formation.
capital balances of AA and BB in the combined balance sheet.

Bonnie and Clyde entered into a partnership agreement in which Bonnie is to have 55% interest in
the partnership and 35% in the profit and loss and Clyde will have 45% interest in the partnership and
65% in the profit and loss.
Bonnie contributed the following:
Building
Equipment
Land

235,000
168,000
500,000

255,000
156,000
525,000

The building and the equipment had a mortgage of P50,000 and P35,000, respectively. Clyde is to
contribute P150,000 cash and an equipment. The partners agreed that only the building mortgage will
be assumed by the partnership.
a. What is the fair value of the equipment which Clyde contributed?
b. What is the amount of total assets of the partnership upon formation?

18.

Conrad and Pedro agreed to form a partnership. Conrad is to contribute P135,000 cash and an
equipment with a carrying amount of P135,000 and a fair value of P115,000.

The equipment however has a mortgage attached to it and it is agreed that the partners will assume
the mortgage.
On the other hand, Pedro contributed P240,000 cash.
The partners share profit and loss in the ratio 4:5. Furthermore, part of the agreement is to bring initial
capital in conformity with the profit and loss ratio.
What is the amount of mortgage on the equipment?