Chapter 1

Partnership – Part 1

PROBLEM 1-1: TRUE OR FALSE

1. TRUE 6. TRUE
2. TRUE 7. FALSE 1,000
3. TRUE 8. TRUE (1,000 + 1,000) x 70%
4. FALSE 700 9. TRUE
5. FALSE 10. FALSE

PROBLEM 1-2: THEORY & COMPUTATIONAL

1. A

2. D

3. Solution:
Requirement (a):
  Mr. A Ms. B Totals
Cash 28,000 62,000 90,000
Accounts receivable 180,000 560,000 740,000
Inventories 114,000 193,000 307,000
Land 600,000 600,000
Building 500,000 500,000
Furniture & fixtures 50,000 35,000 85,000
Intangible assets
1,350,00 2,322,00
Total assets 972,000
0 0

Accounts payable 180,000 250,000 430,000

Other liabilities 200,000 350,000 550,000
Total liabilities 380,000 600,000 980,000

1,342,00
Adjusted capital balances
592,000 750,000 0

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Requirement (b):
Cash 90,000
Accounts receivable 740,000
Inventories 307,000
Land 600,000
Building 500,000
Furniture & fixtures 85,000
Accounts payable 430,000
Other liabilities 550,000
A, Capital 592,000
B, Capital 750,000

4. Solution:
Cash 184,000
A, Capital (184,000 ÷ 2) 92,000
B, Capital (184,000 ÷ 2) 92,000

5. Solution:
Cash 184,000
A, Capital (184,000 ÷ 2) 92,000
B, Capital (184,000 ÷ 2) 92,000

The cash settlement among the partners is not recorded in the partnership’s
books because this is not a transaction of the partnership but rather a
transaction among the partners themselves.

6. Answer: None. The PFRSs permit the recognition of goodwill only when
it arises from a business combination.

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PROBLEM 1-3: EXERCISES: COMPUTATIONAL

1. Solution:
  Mr. A Ms. B
20,00
Cash 30,000
0
Inventory 15,000
Building 40,000
15,00
Furniture & equipment
0

Mortgage payable (10,000)

Adjusted capital balances 75,000
35,000

2. Solutions:
Requirement (a):
Ms.
  Mr. Ann Totals
Buoy
Cash 50,000 120,000 170,000
1,060,00
Accounts receivable 300,000 760,000
0
Inventories 216,000 340,000 556,000
1,080,00 1,080,00
Land
0 0
Building 900,000 900,000
Equipment 90,000 130,000 220,000
1,736,00 2,250,00 3,986,00
Total assets
0 0 0

Accounts payable 436,000 450,000 886,000

Mortgage payable 180,000 180,000
1,066,00
Total liabilities 616,000 450,000
0

1,120,00 1,800,00 2,920,00

Adjusted capital balances
0 0 0

Requirement (b):
Cash 170,000
Accounts receivable 1,060,000
Inventories 556,000
Land 1,080,000
Building 900,000
Equipment 220,000
Accounts payable 886,000

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 Mortgage payable 180,000
Ann, Capital 1,120,000
Buoy, Capital 1,800,000

3. Solution:
 Mr. Angot, Capital = 18,000, the sale of the land on partnership
agreement date provides information on the land’s fair value on that
date.
 M. Banglo, Capital = 40,000 cash contribution.

4. Solution:
  A B C
Cash 500,000
Land 800,000
Equipment 550,000
(350,000
Mortgage payable )
Adjusted capital balances 500,000 450,000 550,000

PROBLEM 1-4: CLASSROOM ACTIVITY

Solutions:
Requirement (a):
Partner Partner
Totals
1 2
1,800,00 2,081,25
Cash 281,250
0 0
1,230,00
Accounts receivable 430,000 800,000
0
1,500,00 1,500,00
Land
0 0
1,400,00 1,400,00
Building
0 0
3,611,25 2,600,00 6,211,25
Total assets
0 0 0

Accounts payable 330,000 400,000 730,000

Notes payable 375,657 375,657
Provision for probable loss 300,000 300,000

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 Real property tax payable 40,000 40,000
1,445,65
Total assets 670,000 775,657
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2,941,25 1,824,34 4,765,59

Adjusted capital balances
0 3 3

Requirement (b):
Cash 2,081,250
Accounts receivable 1,230,000
Land 1,500,000
Building 1,400,000
Accounts payable 730,000
Notes payable 375,657
Provision for probable loss 300,000
Real property tax payable 40,000
Partner 1, Capital 2,941,250
Partner 2, Capital 1,824,343
Variation #1:

Solutions:

Requirement (a) and (b):

Total net asset contributions 4,765,593

Divide by: 2
Equal credits to capital accounts 2,382,796

  Partner 1 Partner 2
2,382,79 2,382,79
Equal credits to capital accounts
6 6
2,941,25 1,824,34
Fair value of net asset contribution
0 3
(558,45 558,45
Bonus 4) 4

Answers: Partner 2 receives a bonus of ₱558,454.

Requirement (c): The bonus is treated as an adjustment to the equity

accounts of the partners. Partner 1’s capital shall be decreased while Partner
2’s capital shall be increased by the ₱558,454 bonus.

Requirement (d):
Cash 2,081,250
Accounts receivable 1,230,000
Land 1,500,000

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Building 1,400,000
Accounts payable 730,000
Notes payable 375,657
Provision for probable loss 300,000
Real property tax payable 40,000
Partner 1, Capital 2,382,796
Partner 2, Capital 2,382,796

Variation #2:

Solutions:
Requirement (a):
Total net asset contributions 4,765,593

Divide by: 2
Equal credits to capital accounts 2,382,796

  Partner 1 Partner 2
2,382,79 2,382,79
Equal credits to capital accounts
6 6
2,941,25 1,824,34
Fair value of net asset contribution
0 3
(558,45 558,45
(Receipt) Payment 4) 4

Answer: Partner 1 shall receive cash of ₱558,454 from Partner 2.

Requirement (b):
The cash receipt and cash payment are not recorded in the partnership
books.

Requirement (c):
Cash 2,081,250
Accounts receivable 1,230,000
Land 1,500,000
Building 1,400,000
Accounts payable 730,000
Notes payable 375,657
Provision for probable loss 300,000
Real property tax payable 40,000
Partner 1, Capital 2,382,796

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 Partner 2, Capital 2,382,796

Variation #3:

Solutions:
Requirements (a) and (b):
Total net asset contributions 4,765,593

Divide by: 2
Equal credits to capital accounts 2,382,796

Using first Partner 1’s capital, let us determine if Partner 2’s capital
contribution has any deficiency.

Partner 1, Capital 2,941,250

Divide by: Partner 1’s equity interest 50%
Total 5,882,500
Multiply by: Partner 2's interest 50%
Minimum capital required of Partner 2 2,941,250
Partner 2's capital 1,824,343
Deficiency on Partner 2's capital contribution 1,116,907

Answer: Partner 2 should provide additional cash contribution of

₱1,116,907 to make his contribution proportionate to his/her interest.

Using Partner 2’s capital, let us determine if Partner 1’s capital

contribution has any deficiency.
Partner 2, Capital 1,824,343
Divide by: Partner 2’s equity interest 50%
Total 3,648,685
Multiply by: Partner 1's interest 50%
Minimum capital required of Partner 1 1,824,343
Partner 1's capital 2,941,250
Deficiency on Partner 1's capital contribution -

Conclusion: Partner 1’s contribution is not deficient.

Variation #4:

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Solution:
Total net asset contributions 4,765,593

Divide by: 2
Equal credits to capital accounts 2,382,796

  Partner 1 Partner 2
2,382,79 2,382,79
Equal credits to capital accounts
6 6
2,941,25 1,824,34
Fair value of net asset contribution
0 3
(558,45 558,45
(Withdrawal) Additional investment 4) 4

Answer:
Partner 1 shall withdraw ₱558,454 while Partner 2 shall make an additional
investment of ₱558,454.

PROBLEM 1-5: THEORY

1. A
2. A
3. A
4. A
5. A
6. C
7. B
8. D
9. C
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D
.

PROBLEM 1-6: MULTIPLE CHOICE: COMPUTATIONAL

1. B (20K + 15K) = 35,000; (30K + 15K + 40K – 10K) = 75,000
2. C Algee = 50K; Beldger 80K – 35K = 45K; Ceda = 55K
3. B AAA 50K; BBB 80K-35= 45K; CCC = 55K

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4. C XX 75K; YY 68K; ZZ 82.5K
5. D No goodwill (‘unidentifiable asset’) is recognized under the
bonus approach
6. A (100,000 + 200,000) = 300,000
7. C (100,000 + 200,000) x 20% = 60,000
8. B

Cash 200,000
B, capital (300,000 x 20%) 60,000
A, capital (squeeze) 140,000

9. D
Solution:

  A B C Partnership

Cash 50,000 40,000 140,000 230,000

Equipment 150,000 150,000

Loan payable (40K x (20,000

½) ) (20,000)

50,000 190,000 120,000 360,000

Equal interest (210 ÷ 3) 120,000 120,000 120,000 360,000

Cash receipt (70,000

(payment) ) 70,000 - -

10. C
Solution:

Agreed initial capital 300,000

A's required capital balance (300K x 25%) 75,000

B's required capital balance (300K x 75%) 225,000

  A B Totals

Actual contributions

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 100,000 200,000 300,000

Required capital balance 75,000 225,000 300,000

Additional (Withdrawal) (25,000) 25,000 -

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