Professional Documents
Culture Documents
Partnership Exercises
Partnership Formation
[1]. Emil and Pearl form a new partnership. Emil invests P300,000 in cash for her 60 percent interest in the
capital and profits of the business. Pearl contributes land that has an original cost of P40,000 and a fair
market value of P70,000, and a building that has a tax basis of P50,000 and a fair value of P90,000. The
building is subject to a P40,000 mortgage that the partnership will assume. What amount of cash
should Pearl contribute?
a. P40,000
b. P80,000
c. P110,000
d. P15,0000
[2]. The Green and Red partnership was formed on January 2, 2011. Under the partnership
agreement, each partner has an equal initial capital balance accounted for under the goodwill
method. Partnership net income or loss is allocated 60% to Green and 40% to Red. To form the
partnership, Green originally contributed assets costing P30,000 with a fair value of P60,000 on
January 2, 2011, and Red contributed P20,000 in cash. Drawings by the partners during 2011
totaled P3,000 by Green and P9,000 by Red. The partnership’s 2011 net income was
P25,000. Red’s initial capital balance in the partnership is:
a. P20,000.
b. P25,000.
c. P40,000.
d. P60,000.
[3]. Pirante and Wilson drafted a partnership agreement that lists the following assets contributed
at the partnership’s formation:
Contributed by
Pirante Wilson
Cash P40,000 P60,000
Inventory - 30,000
Building - 80,000
Furniture and equipment 30,000 -
The building is subject to a mortgage of P20,000, which the partnership assumed. The
partnership agreement also specifies that profits and losses are to be distributed evenly. What amounts
should be recorded as capital for Pirante and Wilson at the formation of the partnership?
a. P70,000 and P170,000, respectively.
b. P70,000 and P150,000, respectively.
c. P110,000 for each partner.
d. P120,000 for each partner.
[4]. AA and Belen formed a partnership and they agreed to share initial capital equally, although AA
contributed P150,000 and Belen contributed P126,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts, Belen received (gave) a bonus equal to:
a. P24,000
b. P12,000
c. (P24,000)
d. (P12,000)
[5]. AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000;
and, CC, P100,000. AA and CC are not to actively participate in the business but will refer
customers, while BB will manage the firm. BB has to give up his present job which gives her an
annual income of P120,000. The partners decided that profits and losses shall be shared equally.
Upon formation, partners’ capital balances would be:
a. P 70,000, P 70,000, and P 70,000, respectively.
b. P100,000, P10,000, and P100,000, respectively.
c. P100,000, P130,000, and P100,000, respectively.
d. P110,000, P110,000, and P110,000, respectively.
[6]. Brenda and Cathy formed a partnership and agreed to divide initial capital equally, even though
Brenda contributed P200,000 and Cathy contributed P168,000 in identifiable assets. Under the
bonus approach to record the contributions of the partners, Cathy’s capital account should be
credited for
a. P200,000. c. P184,000
b. P168,000. d. P100,000
[7]. On May, 31, 2011, Allen, Belen, and Cenen formed a partnership by combining their businesses.
Allen give cash of P50,000. Belen gave a property with a carrying amount of P30,000, an original
cost of P40,000, and a fair market value of P80,000. Belen’s property, however, has a P35,000
mortgage for which the new partnership accepted legal responsibility. Cenen gave a delivery
equipment with a book value of P30,000, an acquisition cost of P75,000, and an appraised value
of P55,000. It was agreed that profits and losses are to be shared equally. The partner with the
biggest capital account balance as of May 31, 2011, is
a. Allen
b. Belen
c. Cenen
d. Allen have equal capital balance.
[8]. Abel and Carr formed a partnership and agreed to divide initial capital outlay equally, even
though Abel contributed P100,000 and Carr contributed P84,000 in identifiable assets. Under the
bonus approach to adjust the capital accounts, Carr’s unidentifiable asset should be debited for
a. P46,000
b. P8,0000
c. P16,000
d. P-0-
[9]. On October 1, 2011, Carla and Clara joined in a partnership. Carla contributed cash while Clara
contributed merchandise worth P25,000 and a second-hand delivery truck currently valued at
P50,000 but encumbered by a one-year chattel mortgage note for P15,000. If initial capital
balances are to conform to the profit-sharing ratio of 2:3, respectively, the amount of cash
contributed by Carla was:
a. P24,000
b. P30,000
c. P40,000
d. P50,000
[10]. AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000,
and CC, an equipment valued at P100,000. AA and CC are not to actively participate in the
business but will refer customers, while BB will manage the firm. BB has to give up her present
job which gives her an annual income of P120,000. The partners decided that profits and losses
shall be shared equally. Upon formation, assuming a chattel mortgage of P10,000 on the
equipment is assumed by the partnership, the net assets of the partnership is equal to:
a. P210,000
b. P200,000
c. P220,000
d. P330,000
[11]. On October 1, 2011, Mel and Garri pooled their assets and form a partnership, with the firm to
take over their business assets and assume their liabilities. The partner’s capitals are to be based
on net assets transferred after the following adjustments: Garri’s inventory is to be increased by
P3,000; an allowance for bad debts of P1,000 and P1,500 are to be set up in the books of Mel
and Garri, respectively; and P4,000 of accounts payable are to be recognized in Mel’s books. The
individual trial balances on October 1 show the following:
Mel Garri
Assets P113,000 P75,000
Liabilities 34,500 5,000
Capital 78,500 70,000
What is the capital balance of Mel and Garri assuming they agree to share capital equally?
a. P65,000
b. P72,500
c. P74,250
d. P80,000
[12]. Chona and Charo formed a partnership on May 31, 2011. Chona’s contribution consisted of
her proprietorship’s net assets with current fair value of P60,000. Charo contributed enough cash
to secure a one-fourth interest in the partnership. If Chona is allowed goodwill credit equal to
20% of her initial capital, Charo’s cash contribution was:
a. P15,000
b. P20,000
c. P25,000
d. P30,000
[13]. Flores, Peralta, and Jose are forming a new partnership. Flores will invest cash of P120,000 and his
office equipment costing P144,000 but has a market value of P60,000. Peralta is to invest cash of
P192,000 and Jose is to contribute P60,000 cash and a brand new delivery truck with a market value of
P144,000 although he bought it for only P120,000. The partners will share profits and losses in the ratio
of 25:25:50 for Flores, Peralta and Jose, respectively.
[14]. DJ and EJ, on May 31, 2011, pooled their net assets to form a partnership, with the new firm
taking over the business assets and assuming their liabilities. The partner’s capitals are to be
based on net assets transferred after the following adjustments: allowance for doubtful accounts
of P1,000 and P1,500 are to be set up on the books of DJ and EJ, respectively; EJ’s inventory is
to be increased by P3,000; and, accounts payable of P4,000 is to be recorded on DJ’s books.
The individual trial balances on this date show:
DJ EJ
Assets P105,000 P113,000
Liabilities 35,000 34,500
Capital 70,000 78,500
a. P77,000
b. P80,000
c. P81,500
d. P85,500
[15]. When property other than cash is invested in a partnership, at what amount should the non-
cash property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
[16]. Pula invites Puti to join his business as a partner. The capital account of Pula has a credit
balance of P300,000. Puti will invest cash of P120,000 and he will be given a capital credit of
30% of the total capital after making the following adjustments in the books of Pula: (a) The
accumulated depreciation of the equipment is to be increased by P7,500; (b) Prepaid expenses
are to be reduced by P2,400.
The capital account of Pula and Puti immediately after the formation of the partnership are:
a. P300,000 and P120,000, respectively;
b. P290,100 and P120,000, respectively;
c. P287,070 and P123,030, respectively;
d. P287,070 and P 40,000, respectively.
[17]. On March 1, 2011, Jhan and Feb formed a partnership with each contributing the following
assets:
Jhan Feb
Cash P30,000 P70,000
Machinery and Equipment 25,000 75,000
Building - 225,000
Furniture and Fixtures 10,000 -
Assuming that the partners agreed to bring their respective capital in proportion to their respective
profit and loss ratio, and using Feb’s capital as the base, how much cash is to be invested by
Jhan?
a. P19,000
b. P30,000
c. P40,000
d. P55,000
[18]. Bel, Joy, and Franco, new CPAs, are to form a partnership. Bel will contribute cash of P50,000
and his computer that originally cost P60,000 but with a second-hand value of P25,000. Joy will
contribute P80,000 in cash. Franco, whose family sells computers, will contribute P25,000 in cash
and a brand new computer with printer that cost his family’s computer dealership P50,000 but
with a regular selling price of P60,000. The three agree to share profits and losses equally. Upon
formation, capital balances are:
a. Bel, P 75,000; Joy, P80,000; and, Franco, P85,000
b. Bel, P 80,000; Joy, P80,000; and, Franco, P80,000
c. Bel, P 88,333; Joy, P88,333; and, Franco, P88,334
d. Bel, P110,000; Joy, P80,000; and, Franco, P75,000
[19]. Mark admits Jimenez as a partner in the business. Balance sheet accounts of Mark just before
the admission of Jimenez show: Cash, P26,000, accounts receivable, P120,000, merchandise
inventory, P180,000, and accounts payable P62,000. It was agreed that for purposes of
establishing Mark’s interest, the following adjustments be made:
A. An allowance for doubtful accounts of 3% of accounts receivable is to be established;
B. Merchandise inventory is to be adjusted upward by P25,000; and
C. Prepaid expenses of P3,600 and accrued liabilities of P4,000 are to be recognized.
If Jimenez is to invest sufficient cash to obtain 2/5 equity in the partnership, how much would
Jimenez contribute to the new partnership?
a. P176,000
b. P190,000
c. P 95,000
d. P113,980
[20]. The balance sheet as of July 31, 2011 for the business owned by Gloriants shows the following
assets and liabilities:
Cash P 2,500
Accounts Receivable 10,000
Merchandise Inventory 15,000
Fixtures 18,000
Accounts Payable 6,000
a. 70,500
b. 48,000
c. 67,500
d. 74,000
Selected balance sheet accounts of Silvano on December 31, 2011 are shown below:
Cash P30,000
Accounts receivable 25,000
Inventory 45,000
Furniture 32,000
Accounts payable 8,000
The following adjustments are to be made before he agree to admit Pegasus as a partner in exchange for
his investment of P20,000 cash:
[21]. After adjustment, how much capital should be reflected in the books of Silvano?
a. P115,250
b. P116,250
c. P124,000
d. P132,250
a. P116,250
b. P124,000
c. P124,250
d. P144,250
[23]. On September 30, 2011, Pain admits Gain for an interest in his business. On this date, Pain’s
capital account shows a balance of P158,400. The following were agreed upon before the
formation of the partnership:
[24]. On May 1, 2011, July and June formed a partnership and agreed to share profits and losses in
the ratio of 3:7, respectively. July contributed a computer that cost him P50,000. June
contributed P200,000 cash. The computer was sold for 55,000 on May 1, 2011 immediately after
the formation of the partnership. What amount should be recorded in July’s capital account on
formation of the partnership?
a. P55,000
b. P51,000
c. P60,000
d. P50,000
[25]. Yellow, Orange and Violet form a partnership on May 1, 2011. They agree that Yellow will
contribute office equipment with a total fair value of P40,000; Orange will contribute delivery
equipment with a fair value of P80,000; and Violet will contribute cash. If Violet wants a one-third
interest in the capital and profits, how much should she invest?
a. P 40,000
b. P 60,000
c. P120,000
d. P180,000
[26]. Wilder and Nest will pool their net assets and form a partnership, which will take over the assets
and assume the liabilities. The agreed capital of the new partnership is the total net assets to be
transferred subject to the following adjustments:
What is the capital balance of each partner assuming they agree to be equal partners?
a. P65,000
b. P72,500
c. P74,250
d. P80,000
[27]. On October 1, 2011, Clara and Maria joined in a partnership. Clara contributed cash while
Maria contributed merchandise worth P25,000 and a second–hand delivery truck currently valued
at P50,000 but encumbered by a one-year chattel mortgage note for P15,000. If initial capital
balances are to conform to the profit-sharing ratio of 2:3, respectively, the amount of cash
contributed by Clara was:
a. P24,000
b. P30,000
c. P40,000
d. P50,000
Questions 28 and 29 are based on the following information about Aga-Mata Partnership:
Aga and Mata are planning to form a partnership. Aga will invest P20,000 for a 20% interest in the new
partnership. Mata will invest cash and his equipment with a market value of P50,000. They will share
profits and losses equally.
a. P30,000
b. P50,000
c. P60,000
d. P80,000
a. P30,000
b. P50,000
c. P60,000
d. P80,000
[30]. Al and Macmod decide to form a partnership. The initial investments of the partners will include
cash of P120,000 for Al and P80,000 for Macmod. Al will transfer his office equipment with a
book value of P96,000 and a fair market value of P84,000 to the partnership. Macmod will transfer
his land fairly valued at P1,000,000 and the building thereon fairly valued at P600,000. Macmod
has just bought these at a lump sum price of P1,800,000. In addition, the partnership will assume
the mortgage of P400,000 on the building.
What will be the total capital of the partnership?
a. P1,484,000
b. P1,496,000
c. P1,684,000
d. P1,946,000
Partnership Operation
[31]. Mr. Zoom and his very close friend, Mr. Boom, formed a partnership on January 1, 2011, with
Zoom contributing P16,000 cash and Boom contributing equipment, with a book value of P6,400
and fair value of P4,800, and inventory items, with a book value of P2,400 and fair value of P3,200.
During 2011, Boom made additional investments of P1,600 on April 1 and P1,600 on June 1, and
withdrew P4,000 on September 1. Zoom had no additional investments or withdrawals during the
year. What was the average capital balance of Mr. Boom during 2011?
a. P9,600
b. P8,800
c. P8,000
d. P7,200
[32]. Dulce Martin, a partner in a partnership that carries the name of The Sweet Shop, has a 30%
participation in partnership profits. Her capital account has a net decrease of P48,000 during
2011. In the same year, she withdrew P104,000 (charged against her capital account) and
contributed property valued at P20,000 to the partnership. The net income of the partnership for
2011 was:
a. P 36,000
b. P120,000
c. P132,000
d. P440,000
[33]. Partners Jose, Luciano, and Placido have average capital balances of P240,000, P120,000,
and P80,000, respectively, during 2011. Each partner receives 10% interest on his average
capital balance. After deducting salaries of P60,000 for Jose and P40,000 for Placido, the residual
profit or loss is divided equally. In 2011, the partnership sustained a P66,000 loss before partners’
interests and salaries. By how much would Placido’s capital account change?
a. P20,000 increase
b. P22,000 decrease
c. P32,000 decrease
d. P48,000 increase
[34]. On January 1, 2011, Zeep and Beep have capital balances of P20,000 and P16,000,
respectively. On July 1, 2011, Zeep invested an additional P4,000 while Beep withdrew P1,000.
Profits and losses are divided as follows: Beep is the managing partner and as such shall receive
P16,000 as salary, with Zeep receiving P7,200; both partners should receive interest of 10%
based on their beginning capital balances, to offset whatever difference in capital investments
they have; and, any remainder shall be divided equally. The net income of the partnership for
2011 was P9,600. What was Zeep’s share in net income for 2011?
a. P9,200
b. P4,800
c. P 880
d. P 600
[35]. Red and White formed a partnership in 2011. The partnership agreement provides for annual
salary allowances of P55,000 for Red and P45,000 for White. The partners share profits equally
and losses in a 60:40 ratio. The partnership had earnings of P80,000 for 2011 before any
allowance to partners. What amount of these earnings should be credited to each partner’s
capital account?
Red White
a. P40,000 P40,000
b. P43,000 P37,000
c. P44,000 P36,000
d. P45,000 P35,000
[36]. On January 2, 2011, Bueno and Perez formed a partnership with capital distributions of
P175,000 and P25,000, respectively. They agreed to share profits and losses 80% and 20%,
respectively. Perez is the general manager and works in the partnership full time. Perez is
given salary of P5,000 a month; an interest of 5% on starting capital; and a bonus of 15% of net
profit before the salary, interest, and bonus. The condensed profit and loss statement of the
partnership, for the year ended December 31, 2011, is as follows:
a. P13,304.35
b. P18,000.00
c. P15,300.00
d. P20,700.00
Herm, Marc, and Alex formed a partnership on January 1, 2011, and contributed P150,000, P200,000,
and P250,000, respectively. The articles of co-partnership provides that the operating income be shared
among the partners as follows: as salary, P24,000 for Herm, P18,000 for Marc, and P12,000 for Alex;
interest of 12% on the average capital during 2011 of the three partners; and, the remainder in the ratio of
2:4:4, respectively.
The operating income for the year ending December 31, 2011 amounted to P176,000. Herm contributed
additional capital of P30,000 on July 1 and made a drawing of P10,000 on October 1; Marc contributes
additional capital of P20,000 on August 1 and made a drawing of P10,000 on October 1; and, Alex made
a drawing of P30,000 on November 1.
[39]. The partnership agreement of Bing and Bong provides that Bing is to receive a 20% bonus on
profits before the bonus. Remaining profits and losses are divided in the respective ratio of 2:3.
Which partner has a greater advantage when the partnership realizes a profit or when it sustains
a loss?
Profit Loss
a. Bing Bong
b. Bing Bing
c. Bong Bing
d. Bong Bong
[40]. Michelle, an active partner in the Michelle-Esme Partnership, receives an annual bonus of 25%
of the partnership income after deducting the bonus. For the year ended December 31, 2011, the
partnership income before bonus amounted to P240,000. The bonus of Michelle for the year 2011
is
a. P45,000
b. P48,000
c. P60,000
d. P80,000
[41]. Mark and Valerie are partners with capitals P200,000 and P100,000 and sharing profits and
losses at 3:1, respectively. They decided to admit Nora as a new partner with a 50% interest in
the firm. Nora invested cash of P150,000, and Mark and Valerie transferred portions of their
capitals as a bonus to Nora. After Nora’s admission, Valerie’s capital would be:
a. P 37,500 c. P 81,250
b. P 56,250 d. P100,000
[42]. Tito and Vic, partners sharing profits and losses equally, have capital balances of P90,000
each. Joey is admitted as a new partner, making cash investment of P120,000, to a one-third
interest in both capital and earnings. If Joey is credited in full for the amount of his investment,
the new capital of the partnership would be:
a. P240,000.
b. P300,000.
c. P360,000.
d. P420,000.
[43]. Moonbits Partnership had a net income of P8,000 for the month ended September 30, 2011.
Sunshine purchased an interest in Moonbits Partnership of Liz and Dick by paying Liz P32,000
for half of her capital and half of her 50% profit-sharing interest on October 1, 2011. At this time,
Liz’s capital balance was P24,000 and Dick’s capital was P56,000. Sunshine should receive
capital credit equal to:
a. P12,000
b. P16,000
c. P20,000
d. P26,667
[44]. Sarah is admitted into the firm of Joy, AA and Pilar. The old partners agreed to sell to Sarah
one-fourth of their respective equities and profit share. Sarah paid a total price of
P1,000,000. Before Sarah’s admission, Joy, AA and Pilar have capital balances of P2,000,000,
P1,000,000 and P500,000 and they share profits at the ratio of 6:3:1. Partnership assets are fairly
stated and implied goodwill is to be recognized prior to Sarah’s admission.
a. P3.5M
b. P4M
c. P5M
d. P4.5M
Mitz, Marc and Mert are partners sharing profit in a 5:3:2 ratio, and with capital balances of P95,000,
P80,000, and P60,000, respectively, on December 31, 2011. The partners decided to admit Vince as a
new partner on January 1, 2011. Vince will contribute cash of P80,000 to the partnership and also pay
P15,000 for 15% of Marc’s share. Vince is to have a 20% share in profits. After the admission of Vince,
the total capital will be P330,000 and Vince’s capital will be P70,000.
[45]. Upon the admission of Vince, the total amount of “goodwill” for the old partners would be:
a. P 7,000
b. P15,000
c. P22,000
d. P37,000
[46]. After the admission of Vince, Marc’s capital balance would be:
a. P72,600
b. P74,600
c. P79,100
d. P81,100
[47]. The admission of a new partner to a 20% interest for an investment of P18,000, with a total
agreed capital of P75,000, will result in:
[48]. Black and White are partners who have capital balances of P600,000 and P480,000, and
sharing profits in the ratio of 3:2. Blue is admitted as a partner upon investing P220,000 for a 25%
interest in the firm, and profits are to be shared equally. Given the choice between goodwill and
bonus methods, Blue would:
a. Prefer bonus method due to Blue’s gain of P105,000
b. Prefer bonus method due to Blue’s gain of P140,000.
c. Prefer goodwill method due to Blue’s gain of P140,000.
d. Be indifferent for goodwill and bonus methods are the same.
Terry and Timmy entered into a partnership on May 31, 2011, contributing cash of P48,000 and P32,000,
respectively, and agreeing to divide earnings in the ratio of their initial investments after allowing annual
salary allowance of P12,000 each. On December 31, 2011, the income summary account had a credit
balance of P34,000, while drawing accounts showed debit balances of P14,000 for Terry and P10,000 for
Timmy.
At the beginning of the next year, Tommy was admitted into the firm as a new partner with a 33-
1/3% interest for a capital credit equal to his cash investment of P60,000. Terry and Timmy then
effected a private cash settlement between themselves in order to make the capital balances
conform to a new profit-sharing ratio of 4:2:3, respectively, with salary allowances scrapped.
[49]. How much was the amount of goodwill, if any, that was recognized in connection with the
admission of the new partner?
a. P20,000
b. P24,000
c. P30,000
d. P36,000
[50]. How much was the amount of the private cash settlement effected between the old partners?
a. P5,000 c. P12,000
b. P9,000 d. P15,000
[51]. When Nena retired from the partnership of Nena, Nina, and Nona, the final settlement of Nena’s
interest exceeded her capital balance. Under the bonus method, the excess is:
a. Recorded as goodwill.
b. Recorded as an expense.
c. Of no effect to the capital accounts of Nina and Nona.
d. Deducted from the capital account balances of Nina and Nona.
[52]. Luz, Vi, and Minda are partners with capital balances, as of December 31, 2011, of P300,000,
P300,000 and P200,000, respectively, and who share profits and losses equally. Minda wishes
to withdraw, and it is agreed that she is to take certain furniture items, with second hand value of
P50,000 and a note for the balance of her interest. The furniture items are carried in the books
at P65,000; brand new, however, they would cost P80,000. the value of the note that Minda
would get is:
a. P120,000. c. P145,000
b. P135,000. d. P150,000
[53]. Juan, Pedro, and Pablo are partners who share profits and losses in a 5:3:2 ratio and, on
January 1, 2011, have capital balances of P90,000, P160,000, and P200,000, respectively. Pablo
withdrew from the partnership on July 1, 2011 and the partners agreed that, as of this date, certain
inventory items would have to be revalued at P70,000 from their recorded cost of P50,000. For
the six-month period ending June 30, 2011, the partnership realized a net income of
P130,000. The partners decided that Pablo should be paid P245,000 for his interest and the
remaining partners’ capital accounts should be adjusted for any goodwill resulting from the
settlement. The payment to Pablo included goodwill of:
a. P15,000.
b. P25,000.
c. P42,500.
d. P50,000.
[54]. Paco, Quin, and Romy are partners with capital balances on June 30, 2011 of P300,000,
P300,000 and P200,000, respectively, and sharing profits and losses equally. Romy is to retire,
and it is agreed that he is to take certain furniture (with second-hand value of P50,000) and a note
for his interest. The furniture is carried in the books at P65,000, but brand new would cost
P80,000. Romy’s acquisition of the furniture would result in:
a. Reduction in capital of P5,000 each for Raco, Quin and Romy
b. Reduction in capital of P7,500 each for Paco and Quin
c. Reduction in capital of P15,000 for Romy
d. Reduction in capital of P55,000 for Romy.
[55]. Luz, Vi, and Minda are partners with capital balances, as of December 31, 2011, of P300,000,
P300,000, and P200,000, respectively, and who share profits and losses equally. Minda wishes
to withdraw, and it is agreed that she is to take certain furniture items, with a second-hand value
of P50,000, and a note for the balance of her interest. The furniture items are carried in the books
at P65,000; brand new, however, they would cost P80,000. The value of the note that Minda
would get is:
a. P120,000 c. P145,000
b. P135,000 d. P150,000
[56]. The condensed balance sheet of the partnership of Tic, Tac and Toe as
a. P175,000
b. P200,000
c. P225,000
d. P250,000
[57]. Juan, Pedro, and Pablo are partners who share profits and losses in a 5:3:2 ratio and, on
January 1, 2011, have capital balances of P90,000, P160,000, and P200,000, respectively. Pablo
withdrew from the partnership on July 1, 2011 and the partners agreed that, as of this date, certain
inventory items would have to be revalued at P70,000 from their recorded cost of P50,000. For
the sixth month period ending June 30, 2011, the partnership realized a net income of P130,000.
The partners decided that Pablo should be paid P145,000 for his interest and the remaining
partners’ capital accounts should be adjusted for any goodwill resulting from the settlement. The
payment to Pablo included goodwill of:
a. P15,000 c. P42,500
b. P25,000 d. P50,000
[58]. Hugo, Ivan, and Juni are partners sharing profits and losses in the respective ratio of 3:3:4. Juni
is given permission to retire effective May 31, 2011, and it was agreed that settlement is to be
made by the remaining partners making payments from their personal funds. The capital balances
o this date are P30,000, P25,000 and P45,000 for Hugo, Ivan, and Juni, respectively. If Juni
received P45,000, how much did Hugo pay Juni?
a. P13,500
b. P18,000
c. P22,500
d. P45,000
[59]. Karen, Karmi, and Kathy are partners sharing profits in the respective ratio of 2:3:5. On May
31, 2011, Kathy opted to retire. The capital account balances, at this time, are P95,000, P140,000,
and P135,000, respectively. Assuming that Kathy is paid P132,000, Karen would be credited:
a. P 600
b. P 857
c. P1,200
d. P1,800
[60]. ANA, MAE, and RAE share partnership profits and losses in the ratio of 2:3:5, respectively. On
October 31, 2011, RAE was permitted to withdraw from the partnership at which time their capital
balances were:
If RAE is paid P39,000 in full payment of her interest, the capital of ANA immediately after RAE’s
withdrawal would be:
a. P22,600
b. P23,000
c. P23,400
d. P26,600
Incorporation of Partnership
[61]. The condensed balance sheet of the partnership of Ken Sy and Ben Ty as of December 31,
2011 showed the following:
On this date, the partnership was dissolved and its net assets were transferred to a newly-formed
corporation. The fair value of the assets was P24,000 more than the carrying value of the firm’s books.
Each of the partners was issued 10,000 shares of the corporation’s P1 par common stock. Immediately
after effecting the transfer of the net assets, and the issuance of stock, the corporation’s additional paid in
capital account would be credited for:
a. P136,000
b. P140,000
c. P154,000
d. P164,000
[62]. Mac, Kuh, and Nat, partners sharing profits and losses equally, decided to form a corporation.
They have capital balances, respectively, ofP100,000, P100,000, and P200,000, and all of their
assets and liabilities will be transferred to the corporation. Their net assets will be revalued from
P400,000 to P550,000, with the substantial revaluation due to land which was originally
contributed by Nat at P100,000. At P10 par value, the partners are to receive shares of stock as
follows:
a. 10,000, 10,000, and 35,000, respectively
b. 12,500, 12,500, and 30,000, respectively
c. 15,000, 15,000, and 25,000, respectively
d. 18,333, 18,333, and 18,334, respectively
[63]. Partners Rob and Roy, who share equally in profits and loses, have the following balance sheet
as of December 31, 2011:
They agreed to incorporate their partnership, with the new corporation absorbing the net assets
after the following adjustments: provision of allowance for bad debts of P10,000; statement of the
inventory at its current fair value of P160,000; and, recognition of further depreciation on the equipment of
P3,000. The corporation’s capital stock is to have a par value of P100, and the partners are to be issued
corresponding total shares equivalent to their adjusted capital balances.
The total par value of the shares of capital stock that were issued to partners Rob and Roy was:
a. P260,000
b. P267,000
c. P273,000
d. P280,000
[64]. Mac, Kuh, and Nat, partners sharing profits and losses equally, decided to form a
corporation. They have capital balances, respectively, of P100,000, P100,000, and P200,000,
and all of their assets and liabilities will be transferred to the corporation. Their net assets will be
revalued from P400,000 to P550,000, with the substantial revaluation due to land which was
originally contributed by Nat at P100,000. At P10 par value, the partners are to receive shares of
stock as follows:
a. 10,000, 10,000, and 35,000, respectively.
b. 12,500, 12,500, and 30,000, respectively.
c. 15,000, 15,000, and 25,000, respectively.
d. 18,333, 18,333, and 18,334, respectively.
[65]. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed
by each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and
40% respectively. All their transactions were for cash, and all their subsequent transactions were
handled through their respective bank accounts as summarized below:
Gardo Gordo
Cash receipts P79,100 P65,245
Cash disbursements 62,275 70,695
On October 31, 2011, all remaining noncash assets in the two stores were sold for cash of
P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution of
the P60,000 cash, Gardo received
a. P24,000
b. P26,000
c. P34,000
d. P36,000
[66]. The partner AA, Bida, Cita, and Dina, who share profits and losses in the respective ratio of
3:3:2:2, decided to liquidate their partnership. Just prior to liquidation, they prepared the following
summary balance sheet:
The noncash assets realized P800,000. If all the partners are personally solvent,
deficiency/deficiencies, resulting from the liquidation process, will require additional cash from:
a. Bida at P85,000 and Dina at P100,000
b. Bida at P85,000
c. Dina at P50,000
d. None of the above
[67]. The balance sheet of the partnership of Salve, Gilda, and Nora, who share profits and losses
in the respective ratio of 5:3:2, follows:
The partners agreed to liquidate the partnership by installments. Immediately there was a realization of
P100,000 cash from selling other assets with a book value of P150,000. Of the cash available, the priority
is the payment of the liabilities and the balance is to be distributed to the partners.
How should the remaining cash be distributed.
a. Salve, P50,000; Gilda, P30,000; and, Nora, P20,000.
b. Salve, P40,000; Gilda, P24,000; and, Nora, P16,000.
c. Salve, P---0---; Gilda, P31,000; and, Nora, P49,000.
d. Salve, P---0---; Gilda, P48,000; and, Nora, P32,000.
Questions 68 through 70 are based on the following data from the records of ABC Partnership:
ABC Partnership
Balance Sheet
December 31, 2010
Assets
Cash P 2,000
Other Noncash Assets 28,000
Total P 30,000
Profit and loss ratio is 3:2:1 for A, B, and C, respectively. The other non-cash assets were realized as
follows:
[71]. X, Y and Z have capital balances of P40,000, P50,000, and P18,000 and a profit-sharing ratio
of 4:2:1, respectively. If X received P8,000 upon liquidation of the partnership, the total amount
received by all the partners was:
a. P108,000
b. P 56,000
c. P 52,000
d. P 24,000
[72]. Assume the same facts above, except that X received P26,000 as a result of the liquidation. Z
received, as part of the liquidation, the amount of:
a. P26,000
b. P14,500
c. P18,000
d. P14,000
[73]. Sanchez and Tan are partners sharing profits equally and with capital balances, respectively,
of P750,000 and P500,000. The firm owes Tan P200,000, as evidenced by a promissory note.
Upon liquidation, cash of P300,000 becomes available for distribution to the partners. In the final
cash distribution, the respective shares of Sanchez and Tan will be:
a. P150,000 and P150,000
b. P175,000 and P125,000
c. P200,000 and P100,000
d. P275,000 and P 25,000
[74]. After operating for five years, the partnership of Remy and Martin, who share profits and loses
equally, had balances as follows:
If liquidation takes place at this time and the assets are realized at book value, Remy and Martin
would be entitled to receive:
a. P65,000 and P65,000, respectively.
b. P85,000 and P45,000, respectively.
c. P90,000 and P40,000, respectively.
d. P97,500 and P32,500, respectively.
[75]. The condensed balance sheet of Alex, Jay and John, as of March 31, 2011 follows:
The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their partnership and
liquidate by selling the other assets in installments. The amount of P70,000 was realized to the first cash
sale of other assets with a book value of P150,000. After settlement with creditors all cash available was
distributed to the partners. How much was received by John in the cash distribution?
a. P30,000 c. P21,250
b. P20,000 d. P31,250
[76]. Jo, Lee, and Vi are partners sharing profits 30%, 20%, and 50%, and with capital balances of
P350,000, P250,000, and P350,000, respectively. The partners agreed to dissolve their
partnership and, upon liquidation, all of the partnership’s assets are sold and sufficient cash is
realized to pay all claims except one for P50,000. Vi is personally insolvent, but the other two
partners are capable of meeting any indebtedness of the firm. Of the remaining claim against the
firm, Jo is to absorb:
a. P15,000
b. P25,000
c. P30,000
d. P40,000
[77]. On October 31, 2011, Ivy, Irma, and Irene, who share earnings 5:3:2 respectively, decided to
liquidate their partnership at which time their condensed balance sheet was as follows:
If the first cash sale of assets booked at P150,000 resulted in net realization of P120,000, the amount to
be distributed to Irene would be:
a. P15,000
b. P44,000
c. P51,000
d. P60,000
[lxxviii]. Dan, Ely, and Fil decided to dissolve their partnership on May 31, 2011. On this date, their
capital balances and profit-sharing per cents were as follows:
The net income from January 1 to May 31, 2011 was P44,000. Also on May 31, 2011, the partnership’s
cash and liabilities, respectively were P40,000 and P90,000. For Dan to receive P55,200 in full settlement
of his interest in the partnership, how much must be realized from the sale of the partnership’s non-cash
assets?
a. P177,000
b. P187,000
c. P190,000
d. P193,000
[lxxix]. Bach, Lizst, and Strauss, sharing profits and losses 4:4:2, decided to liquidate their partnership. Just
prior to liquidation, the partnership’s condensed balance sheet was as follows:
The other assets were sold for P247,500, and the partners agreed to make additional cash
contributions to answer for any capital deficiency. Identify the deficient partner, and indicate his
additional cash contribution to finally liquidate the partnership:
a. Bach, P 6,000
b. Bach, P16,000
c. Lizst, P30,500
d. Strauss, P44,000
[lxxx]. Tom, Umi and Vic decided to dissolve their partnership on May 31, 2011. On this date, their
capital balances were as follows:
The net income from January 1 to May 31, 2011 was P44,000. Also on May 31, 2011, the
partnership’s cash and liabilities, respectively were P40,000 and P90,000. What was the book
value of the partnership’s non-cash assets on May 31, 2011?
a. P180,000
b. P190,000
c. P220,000
d. P224,000
-END-
Pirante Wilson
Assets contributed:
Cash P40,000 P 60,000
Inventory - 30,000
Building - 80,000
Furniture and Equipment 30,000 -
Total P70,000 P170,000
Less mortgage assumed - 20,000
Net assets contributed P70,000 P150,000
Each partner values his contribution at is fair value, reduced by the amount of any liability assumed by the
partnership.
Chona’s initial capital is equal to her net assets contribution which is 80% plus her goodwill credit of 20%. Charo’s
cash contribution is equal to one-fourth (¼) of total partnership capital or 1/3 of Chona’s capital.
Sub-computation b:
Allowance for doubtful accounts [3% x P120,000] (P 3,600)
Increase in merchandise inventory 25,000
Recognition of Prepaid expenses 3,600
Recording of accrued expenses (4,000)
Net adjustment to capital of Mark P21,000
Total agreed capital is therefore equal to P475,000 (P285,000 ÷ 3/5), 2/5 of this or P190,000 (P475,000 x
2/5) belongs to Jimenez which he agreed to provide for in cash.
Computation a:
Cash P 30,000
Accounts receivable 25,000
Inventory 45,000
Furniture 32,000
Total assets P132,000
Computation b:
Provision for bad debts (3% x P25,000) P 750
Reduction in the value of furniture:
(P32,000 – 27,000) 5,000
Decrease in the value of inventory:
(P5,000 – 3,000) 2,000
Net adjustments P7,750
Computation a:
The total agreed capital of the partnership is P248,850 (P165,900 ÷ 2/3), and the capital share of gain is P82,950
(P248,850 x 1/3), hence, the cash to be invested by Gain is equal toP32,950 (P82,950 – P50,000).
Al Macmod Total
Cash P120,000 P 80,000 P 200,000
Office equipment 84,000 84,000
Land 1,000,000 1,000,000
Building 600,000 600,000
Mortgage on building (400,000) ( 400,000)
Capital P204,000 P1,280,000 P1,484,000
Total Placido
Interests:
P440,000 x 10% ; P80,000 x 10% P 44,000 P 8,000
Salaries 100,000 40,000
Balance (deficiency), equally ( 210,000) (70,000)
Net profit (loss) P(66,000) P(22,000)
[34]. Letter “D” is the correct answer.
Zeep’s share in net income for 2011 is P600, computed as follows:
Note that if the only immediate effect is considered, the “goodwill” method would be preferable; but since goodwill, by
itself, is non-realizable, the over-all effect would favor the “bonus” method.
(P45,000 x ½) P22,500
Total loss to A:
(3/6 of P6,000) P 3,000
X, capital P40,000
Less: Amount rec’d in liquidation 26,000
X’s share in liquidation loss P14,000
Z, capital P18,000
Less: Share in liquidation loss (P14,0004 x 1) 3,500
Amount received by Z in liquidation P14,500
-end of quizzer-
Posted by Accounting 2012 at 12:52 AM 1 comment:
Email ThisBlogThis!Share to TwitterShare to FacebookShare to Pinterest
Older PostsHome
Accounting 2012
View my complete profile
Blog Archive
▼ 2015 (2)
o ▼ July (1)
Partnership Exercises
o ► June (1)
o
Simple template. Powered by Blogger.