PARTNERSHIP

PARTNERSHIP FORMATION
Valuation of contribution
1. On March 1, CY, Santos and Pablo formed a partnership with each contributing the
following assets.
Santos Pablo
Cash P30, 000 P70, 000
Machinery and equipment 25, 000 75, 000
Building - 225, 000
Furniture and fixtures 10, 000 -
The building is subject to a mortgage loan of P80, 000, which is to be assumed by the
partnership. The partnership agreement provides that Santos and Pablo share profits and
losses 30% and 70%, respectively. On March 1, CY the balance in Pablo’s capital
account should be:
General Feedback
P290, 000
2. On May 1, Year 2, the business assets of John and Paul appear below:
John Paul
Cash 11,000 22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture & fixtures 50,345 34,789
Other assets 2,000 3,600
Total 1,020,916 1,317,002

Accounts payable 178,940 243,650
Notes payable 200,000 345,000
John, capital 641,976
Paul, capital 728,352
Total 1,020,916 1,317,002
John and Paul agreed to form a partnership contributing their respective assets and
equities subject to the following adjustments:
a. Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are
uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John’s and Paul’s respective
books.
c. Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to be
written off.
After Peter’s admission, the profit and loss sharing ratio was agreed to be 40:40:20,
based on capital credits. How much should the cash settlement be between John and
Paul?
3. Partnership capital and drawings accounts are similar to the corporate?
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Paid in capital, retained earnings, and dividends accounts.
4. Which of the following is not a characteristic of the proprietary theory that influences
accounting for partnerships?
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A general partner may be a secured creditor of the limited partnership.
5. Which of the following statements is correct with respect to a limited partnership?
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A general partner may be a secured creditor of the limited partnership.
6. Ben, Joe and Fortune are new CPA’s and are to form a partnership. Ben is to contribute
cash of P50, 000 and his computer originally costing P60, 000 but has a second hand
value of P25, 000. Joe is to contribute cash of P80, 000. Fortune, whose family is selling
computers, is to contribute cash of P25, 000 and a brand new computer plus printer with
regular price at P60, 000 but which cost their family’s computer dealership, P50, 000.
Partners agree to share profits equally. The capital balances upon formation are:
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Ben, P75, 000; Joe, P80, 000; and Fortune, P85, 000
7. On January 1, CY, Atta and Boy agreed to form a partnership contributing their
respective assets and equities to adjustments. On that date, the following were provided:
Atta Boy
Cash 28,000 62,000
Land 600,000
Building 500,000
Intangible assets 2,000 3,000
Other liabilities 200,000 350,000
Capital 620,000 800,000
The following adjustments were agreed upon:

a. Accounts receivable of P20,000 and P40,000 are uncollectible in A’s and B’s respective
books.
b. Inventories of P6,000 and P7,000 are worthless in A’s and B’s respective books.
c. Intangible assets are to be written off in both books.
What will be the capital balances of the partners after adjustments?

Atta Boy
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750,000
592,000
8. On May 1, Year 1, Cobb and Mott formed a partnership and agreed to share profits and
losses in the ratio of 3:7, respectively. Cobb contributed a parcel of land that cost him
P10,000. Mott contributed P40,000 cash. The land was sold for P18,000 on May 1, Year
1, immediately after formation of the partnership. What amount should be recorded in
Cobb’s capital account on formation of the partnership?
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18,000
John Paul
Cash 11,000 22,354
Land 603,000
Building 428,267
Total 1,020,916 1,317,002
Total 1,020,916 1,317,002

John and Paul agreed to form a partnership contributing their respective assets and equities
subject to the following adjustments:
uncollectible.
books.
c. Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to
be written off.
How much assets does the partnership have?
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SOLUTION John Paul Total
Total Assets
Contributed, Book
Value 1,020,916.00 1,317,002.00 2,337,918.00
Adjustments:
Uncollectible
Accounts (55,000.00)
Receivable (20,000.00) (35,000.00)
Worthless
Inventories (5,500.00) (6,700.00) (12,200.00)
Written off Other

Assets (2,000.00) (3,600.00) (5,600.00)
Adjusted Total
Assets 993,416.00
1,271,702.00 2,265,118.00
10. On April 30, CY, Alex, Benjie, and Cesar formed a partnership by combining their
separate business proprietorships. Alex contributed cash of P500,000. Benjie contributed
property with a P360,000 carrying amount, a P400,000 original cost, and P800,000 fair
market value. The partnership accepted responsibility for the P350,000 mortgage attached
to the property. Cesar contributed equipment with a P300,000 carrying amount, a
P750,00 original cost, and P550,000 fair value. The partnership agreement specifies that
profits and losses are to be shared equally but is silent regarding capital contributions.
What are the capital balances of the partners at April 30, CY?
__Alex __Benjie __Cesar
__ __ __
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550,000
500,000 450,000
11. When property other than cash is invested in a partnership, at what amount should the
noncash property be credited to the contributing partner’s capital account?
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Fair value at the date of contribution
12. A limited liability company (LLC):

I. is governed by the laws of the country in which it is formed.
II. provides liability protection to its investors.
III. does not offer pass-through taxation benefits of partnerships.
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Both I and II
13. Red, White, and Blue form a partnership on May 1, CY. They agree that Red will
contribute office equipment with a total fair value of P40, 000; White will contribute
delivery equipment with a fair value of P80, 000; and Blue will contribute cash. If Blue
wants a one third interests in the capital and profits, he should contribute cash of:
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P60, 000
14. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership’s formation:
Contributed by
Rob Smit
erts h
Cash 20, 30,

00 000
0
Inventory -- 15,
000
Building -- 40,
000
Furniture & 15, --

equipment 00
0
The building is subject to a mortgage of 10,000, which the partnership has assumed. The
partnership agreement also specifies that profits and losses are to be distributed evenly. What
amounts should be recorded as capital for Roberts and Smith at the formation of the partnership?
1) Roberts
2) Smith
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1) 35,000 2) 75,000
15. In the Partnership Act, partners have

I. mutual agency.
II.unlimited liability
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I and II.
16. In a limited partnership, a general partner
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has unlimited liability for partnership debit.
17. On March 1, CY Jose and Kiko decides to combine their business to form a partnership.
Statement of financial position on March 1 before the formation, showed the following:
Jose Kiko
Cash 9,000 3,750

Furniture and Fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
Total 105,375 51,500
Capital 59,625 33,500
Total 105,375 51,500
They agreed to following adjustments before the formation:

a. Provide 2% allowance for doubtful accounts.
b. Jose’s furniture should be valued at 31,000, while Kiko’s office equipment is under-
deprecia
c. Rent expense incurred previously by Jose was not yet recorded amounting to 1,000, while
salary expense incurred by Kiko was not also recorded amounting to 800.
d. The fair value of inventories amounted to 29,500 for Jose and 21,000 for Kiko.
The net (debit) credit adjustment to partner’s capital accounts are:

Jose Kiko
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(870) 180
18. When a partnership is formed, noncash assets contributed by partners should be recorded:
I. at their respective book values for income tax purposes.
II. at their respective fair values for financial accounting purposes.
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Both I and II
19. Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before
the admission of Jane show: Cash, 26,000, Accounts receivable, 120,000, Merchandise
inventory, 180,000, and Accounts payable, 62,000. It was agreed that for purposes of
establishing Mary’s interest, the following adjustments be made:
1.) an allowance for doubtful accounts of 3% of accounts receivable is to be established;
2.) merchandise inventory is to be adjusted upward by 25,000; and
3.) prepaid expenses of 3,600 and accrued liabilities of 4,000 are to be recognized.
If Jane is to invest sufficient cash to obtain 2/5 interest in the partnership, how much would
Jane contribute to the new partnership?
General Feedback
190,000
20. Langley invests his delivery van in a computer repair partnership with McCurdy. What
amount should the van be credited to Langley’s partnership capital?
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The fair value at the date of contribution.
21. Ben, Joe and Fortune are new CPA’s and are to form a partnership. Ben is to contribute
cash of P50, 000 and his computer originally costing P60, 000 but has a second hand
value of P25, 000. Joe is to contribute cash of P80, 000. Fortune, whose family is selling
computers, is to contribute cash of P25, 000 and a brand new computer plus printer with
regular price at P60, 000 but which cost their family’s computer dealership, P50, 000.
Partners agree to share profits equally. The capital balances upon formation are:
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Ben, P75, 000; Joe, P80, 000; and Fortune, P85, 000
22. On June 1, CY, May and Nora formed a partnership. May is to invest assets at fair value
which are yet to be agreed upon. She is to transfer her liabilities and is to contribute
sufficient cash to bring her total capital to P210, 000 which is 70% of the total capital of
the partnership.
Data is regarding the book valued of May’s business and liabilities and their corresponding
valuations are:
Book Agreed
Values valuations

Allowance for doubtful accounts 4,200 5,000
Merchandise inventory 98,400 107,000
Store equipment 32,000 32,000
Accumulated depreciation- Store equipment 19,000 16,400
Office equipment 27,000 27,000
Accumulated depreciation- Office equipment 14,200 8,600
Nora agrees to invest cash of 42,000 and merchandise valued at current market price. The
value of the merchandise to be invested by Nora and the cash to be invested by May are:
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48,000 and 72, 000 respectively
23. In a limited partnership, a general partner
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has unlimited liability for partnership debit.
John Paul
Cash 11,000 22,354
Land 603,000
Building 428,267
Total 1,020,916 1,317,002

Total 1,020,916 1,317,002
uncollectible.
books.
be written off.
The capital accounts of the partners after the adjustments will be:
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John's 614,476
Paul's 683,052
John Paul
Cash 11,000 22,354
Land 603,000
Building 428,267

Total 1,020,916 1,317,002
Total 1,020,916 1,317,002
uncollectible.
books.
be written off.
Peter offered to join for a 20% interest in the firm. How much cash should he
contribute?
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324,382
26. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership’s formation:
Contributed by
Roberts Smith
Cash 20,000 30,000
Inventory -- 15,000
Building -- 40,000
Furniture & equipment 15,000 _
The building is subject to a mortgage of 10,000, which the partnership has assumed. The
partnership agreement also specifies that profits and losses are to be distributed evenly.
What amounts should be recorded as capital for Roberts and Smith at the formation of the
partnership?
Roberts Smith
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35,000 75,000
27. Red, White, and Blue form a partnership on May 1, CY. They agree that Red will
contribute office equipment with a total fair value of P40, 000; White will contribute
delivery equipment with a fair value of P80, 000; and Blue will contribute cash. If Blue
wants a one third interests in the capital and profits, he should contribute cash of:
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P60, 000
28. On March 1, CY, Eva and Helen decide to combine their business and form a partnership.
Statement of financial position on March 1, before adjustments, showed the following:
Eva Hel
en
Cash 9,000 3,75

0

0 00

0 00
Furniture and Fixtures 30,00 9,00

(net) 0 0
Office equipment (net) 11,50 2,75

0 0
Prepaid expenses 6,375 3,00
0
Total 105,3 51,5

75 00

0 00
Capital 59,62 33,5

5 00
Total 105,3 51,5

75 00
They agreed to provide 3% for doubtful accounts receivable, and also agree that Helen’s
furniture and fixtures are under-depreciated by 900.
If each partner’s share in equity is to be equal to the net assets invested, the capital accounts
of Eva and Helen would be:
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59,070 and 32,195, respectively
John Paul
Cash 11,000 22,354
Land 603,000
Building 428,267

Total 1,020,916 1,317,002
Total 1,020,916 1,317,002
uncollectible.
books.
be written off.
After Peter’s admission, the profit and loss sharing ratio was agreed to be 40:40:20, based
on capital credits. How much should the cash settlement be between John and Paul?
General Feedback
34,288
30. On April 30, Year 1, Al, Ben, and Ces formed a partnership by combining their separate
business proprietorships. Al contributed cash of P50,000. Ben contributed property with a
P36,000 carrying amount, a P40,000 original cost, and P80,000 fair value. The
partnership accepted responsibility for the P35,000 mortgage attached to the property.
Ces contributed equipment with a P30,000 carrying amount, a P75,000 original cost, and
P55,000 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 capital account balance at April 30, Year 1?
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Ces
31. An advantage of the partnership as a form of business organization would be?
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A partnership is created by mere agreements of the partners.
32. Under the Partnership Act, loans made by a partner to the partnership are treated as?
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Accounts Payable of the partnership for which interest is paid.
33. On July 1, CY, Monuz and Pardo form a partnership, agreeing to share profits and losses
in the ratio of 4:6, respectively. Monuz contributed a parcel of land that cost him P25,
000. Pardo contributed P50, 000 cash. The land was sold for P50, 000 on July 1, CY four
hours after formation of the partnership. How much should be recorded in Monuz capital
account on formation of the partnership?
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P50, 000
34. Which of the following is not a characteristic of most partnership?
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Limited liability
35. On July 1, CY, Monuz and Pardo form a partnership, agreeing to share profits and losses
in the ratio of 4:6, respectively. Monuz contributed a parcel of land that cost him P25,
000. Pardo contributed P50, 000 cash. The land was sold for P50, 000 on July 1, CY four
hours after formation of the partnership. How much should be recorded in Monuz capital
account on formation of the partnership?
General Feedback
P50, 000
36. Cong and Dong have just formed a partnership. Cong contributed cash of 126,000 and
computer equipment that cost 54,000. The computer had been used in his sole
proprietorship and had been depreciated to 24,000. The fair value of the equipment is
36,000. Cong also contributed a note –payable of 12, 000 to be assumed by the
partnership. Cong is to have 60% interests in the partnership. Dong contributed only 90,
000 cash.
Cong should make an additional investment (withdrawal) of?
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(15, 000)
Bonus: contribution vs. capital credit
1.
A= The amount of tangible assets contributed by the new partner into the partnership
B= The amount of capital credited to the new partner
C= Total capital of the partnership before the admission of a new partner
D= Total capital of the partnership after the admission of a new partner
Refer to the above information. Which statement below is correct if goodwill of the old
partners is recognized upon the contribution of assets into the partnership by a new partner?
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B = A and D > C + A
2. Brand, Inc. provides incentive compensation plan under which its president receives a
bonus equal to 10% of the corporation’s income in excess of P600,000 before income tax
but after deduction of the bonus. If income before income tax and bonus is P1,920,000
and the tax rate is 32%, the amount of the bonus would be
General Feedback
120,000
3. Adawiya and Shon formed a partnership and agreed to divide initial capital equally, even
though Adawiya contributed 100,000 and Shon contributed 84,000 in identifiable assets.
Under the bonus approach to adjust the capital accounts, Shon’s equity should be credited
a bonus of:
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8,000
4. Abel and Carr formed a partnership and agreed to divide initial capital equally, even
though Abel contributed 100,000 and Carr contributed 84,000 in identifiable assets.
Under the bonus approach to adjust the capital accounts, Carr’s unidentifiable asset
should be debited for?
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A. 0
5. A = The amount of tangible assets contributed by the new partner into the partnership
D = Total capital of the partnership after the admission of a new partner
Refer to the above information. Which statement below is correct if the old partners
receive a bonus upon the contribution of assets into the partnership by a new
partner?
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B < A and D = C + A
6. The partnership of Perez and Reyes was formed on March 31, CY. On this date, Perez
invested 50,000 cash and office equipment valued at 30,000. Reyes invested 70,000 cash,
merchandise valued at 110,000 and furniture valued at 100,000, subject to a notes
payable of 50,000 (which the partnership assumes). The partnership provides that Perez
and Reyes shares profits and losses 25:75, respectively. The agreement further provides
that the partners should initially have an equal interest in the partnership capital. Under
the bonus method, what is the total capital of the partners after the formation?
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310, 000
7. The Grey and Redd Partnership was formed on January 2, CY, Under the partnership
agreement, each partner has an equal initial capital balance. Partnership net income or
loss is allocated 60% to Grey and 40% to Redd. To form the partnership, Grey originally
contributed assets costing 30,000 with a fair value of 60,000 on January 2, CY, and Redd
contributed 20,000 cash. Drawings by the partners during CY totaled 3,000 by Grey and
P9,000 by Redd. The partnership net income in CY was 25,000.
Under the bonus method, what is the amount of bonus?
General Feedback
20,000 bonus to Redd
8.
Refer to the above information. Which statement below is correct if a new partner
purchases an interest in capital directly from the old partners?
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C=D
A= The amount of tangible assets contributed by the new partner into the
partnership
Refer to the above information. Which statement below is correct if the old
partners receive a bonus upon the contribution of assets into the partnership by
a new partner?
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B < A and D = C + A
9.
Refer to the above information. Which statement below is correct if a new partner's
goodwill is recognized upon contributing assets into the partnership?
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B > A and D > C + A
10. RD formed a partnership on February 10, CY. R contributed cash of 150,000, while D
contributed inventory with a fair value of P120,000. Due to R's expertise in selling, D
agreed that R should have 60 percent of the total capital of the partnership. What is the
total capital of the RD partnership and the capital balance of R after the formation?
Total R Capital
Capital
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SOLUTION:
Contribution - R: Cash
150,000.00
Contribution - D: Inventory
120,000.00
Total contribution --> Total Equity
270,000.00
Equity Allocation: 60% to R, 40% to D, therefore:
R, Equity
162,000.00
D, Equity
108,000.00
The increase in Partner R's equity of 12,000 is accounted for as bonus

(transfer of equity) from partner D.
11. The Grey and Redd Partnership was formed on January 2, CY, Under
the partnership agreement, each partner has an equal initial capital
balance. Partnership net income or loss is allocated 60% to Grey and
40% to Redd. To form the partnership, Grey originally contributed
assets costing 30,000 with a fair value of 60,000 on January 2, CY,
and Redd contributed 20,000 cash. Drawings by the partners during
CY totaled 3,000 by Grey and P9,000 by Redd. The partnership net
income in CY was 25,000.
Under the goodwill method, what is Redd’s initial capital balance in
the partnership?
General Feedback
60,000
12.
A= The amount of tangible assets contributed by the new partner
into the partnership
C= Total capital of the partnership before the admission of a new
partner
D= Total capital of the partnership after the admission of a new
partner
Refer to the above information. Which statement below is correct if a new
partner receives a bonus upon contributing assets into the partnership?
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B > A and D = C + A
13. On September 1, CY, the business assets and liabilities of Amor and
Bhea were as follows:
Amor Bhea
Cash 28,000 62,000
Accounts 200,000 600,000

receivable
Land 600,000 -
Building - 500,000
Furniture and 50,000 35,000

Fixtures
Accounts 180,000 250,000

payable
Amor and Bhea agreed to form a partnership contributing their respective

assets and liabilities subject to the following agreements:
a. Accounts receivable of 20,000 in Amor’s books and 40,000 in Bhea’s

books are uncollectible.
b. Inventories of 6,000 and 7,000 are obsolete in Amor’s and Bhea’s
respective books.
c. Other assets of 2,000 and 3,000 in Amor’s and Bhea’s respective
books are to be written off.
d. Accrued expenses of 2,000 and 5,000 in Amor’s and Bhea’s books are
to be recognized.
e. Goodwill is to be recognized to equalize their capital accounts after the
above adjustments.
The amount of goodwill to be recognized is:
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155,000
14.
Refer to the above information. Which statement below is correct if the old partners
receive a bonus upon the contribution of assets into the partnership by a new partner?
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B < A and D = C + A
15. Brand, Inc. provides incentive compensation plan under which its president receives a
bonus equal to 10% of the corporation’s income in excess of P600,000 before income tax
but after deduction of the bonus. If income before income tax and bonus is P1,920,000
and the tax rate is 32%, the amount of the bonus would be
General Feedback
120,000
16. Aldo, Bert, and Chris formed a partnership on April 30, with the following asset,
measured at their fair values, contributed by each partner.
Aldo Bert Chris
Cash 10, 000 12, 000 30, 000
Delivery 150, 000 28,000 -

trucks
Compute 8, 500 5, 100 -

rs
Office 3, 500 2, 500

furniture
Totals 168, 500 48, 600 32, 500
Although Chris contributed the most cash to the partnership, he did not have the full amount
of 30,000 available and was forced to borrow 20,000. The delivery truck contributed by Aldo
has a mortgage of 90,000 and the partnership is to assume responsibility for the loan. The
partners agreed to equalize their interests. Cash settlement among the partner is to be made
outside the partnership. Using the Bonus method:
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Bert and Chris should pay Aldo, 4, 600 and 20, 700 respectiv
PARTNERSHIP OPERATIONS
Profit or loss distribution by mere ratio
1. Red and White formed a partnership in CY. The partnership agreement provides for
annual salary allowances of 55,000 for Red and 45,000 for White. The partners share
profits equally and losses in a 60/40 ratio. The partnership had earnings of 80,000 for CY
before any allowance to partners. What amount of these earnings should be credited to
each partner’s capital account?
Red White
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Red White Total
Salary allowances 55,000 45,000 100,000
Loss after
allowances (60:40) (12,000) (8,000) (20,000)
Earnings credited to
partners 43,000 37,000 80,000
The earnings before any allowance of P80,000 is reduced by the salary allowances in the
total amount of P100,000 which resulted to a loss after allowances of P20,000, because
credits to partners capital accounts are based on earnings after allowances (e.g.,
interest, salary, and bonus). It should be pointed out that per partnership agreement
profits should be shared equally and losses in a 60/40 ratio, thus the loss of P20,000 was
shared at 60/40 ratio.
2. In the calendar year CY, the partnership of A and B realized a net profit of 240,000. The
capital accounts of the partners show the following postings:
A, capital B, capital
Debit Credit Debit Credit
120,00
Jan. 1 0 80,000
20,00
May 1. 0 10,000
July 1. 20,000
Aug. 1 10,000
Oct. 1 10,00 5,000

0
If the profits are to be divided based on average capital, the share of A and B, respectively
are:
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A, capital:
Months
Unchange
Date Balances d Total
January 1. P 120,000 4 P 480,000
May 1. 100,000 3 300,000
Aug. 1 110,000 2 220,000
Oct. 1 100,000 3 300,000
Total 12 P1,300,000
Average capital - A = P1,300,000/12 = P108,333
B, capital:
Months
Date Balances Unchanged Total
January 1. P80,000 4 P320,000
May 1. 70,000 2 140,000
July 1 90,000 3 270,000
Oct. 1 85,000 3 255,000

Total 12 P985,000
Average capital - B = P985,000/12 = P82,083
P240,000 x
A (108,333/190,417) P136,543
B 240,000 x (82,083/190,417) 103,457
P240,000
Total
3. Partner Ae first contributed P50,000 of capital into existing partnership on March 1, CY.
On June 1, CY, said partner contributed another P20,000. On September 1, CY, he
withdrew 15,000 from the partnership. Withdrawal in excess of 10,000 are charged to the
partner’s capital accounts.
What is the annual weighted average capital balance of Partner Ae?
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Months
Date Balances Unchanged Total
March 1 P50,000 3 P 150,000
June 1 70,000 3 210,000
September 1 65,000 4 260,000
Total 12 P 620,000
Annual weighted average capital (1,845,000/12 months) P 51 ,667
The partnership agreement should provide how invested capital is to be determined.

Since each partner’s equity is a combination of capital and drawing account balances,
partner’s drawings may be offset against their respective capital accounts for purposes
of allocating income based on invested capital. However, the agreement may also
provide that only withdrawals more than a certain limit are to be viewed as offset against
capital balances. Thus, only P5,000 excess of P10,000 limit is viewed as deduction from
the capital balance.
4. 1Drawings
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are the same nature as withdrawals.
5. Adam and Eve are CPA’s who have been operating their own separate practices as sole
proprietors. They decided to combine the two firms as a partnership on January 5, 20CY.
The following assets were contributed by each:
Adam Eve
Cash 100,000 100,000
Accounts receivables 225,000 190,000
Furniture and Fixtures 35,000 38,000
Computer equipment 46,000
The partners agreed to split profits on the basis of gross cash collections from billings
generated from clients. During 20CY, Adam’s clients paid the firm a total of 1,500,000 and
Eve’s clients paid 1,625,000. Expenses for the year were 1,080,000 of which 480,000 were
attributable to Adam and 600,000 to Eve. During 20CY Eve withdrew 750,000 cash for
personal needs and contributed an additional computer valued at 22,000.
What is the capital balance of Eve at December 31, 20CY?
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Eve's capita balance, January 1 P374, 000
Additional investment 22, 000
Profit share (Schedule 1) 1, 063, 400

Drawings (750, 000)
Eve's capital balance, December 31 P709, 400
Schedule 1:
Total receipts (P1, 500, 000 + P1, 625, 000) P3, 125, 000
Expenses 1, 080, 000
Comprehensive income P2, 045, 000
Distributed as follows:
Adam (P1, 500, 000 /P3, 125, 000 x P2, 045, 000) P981, 600
Eve (P1, 625, 000 / P3, 125, 000 x P2, 045, 000) P1, 063, 400
6. The ABC Partnership reports net income of P60,000. If partners A, B, and C have income
ratio of 50%, 30%, and 20%, respectively. What is the share of Partner C from the net
income of the partnership, if he was given a capital ratio of 25%?
General Feedback
Partnership net income or loss is shared based on capital contribution of the partners, unless the
partnership contract specifically indicates otherwise. As a result, it is customary to refer to the
basis as the income ratio, income and loss ratio, or the profit or loss ratio. Thus, the share of
Partner C, should be P12,000 (60,000 x 20%).
7. Griffin and Rhodes formed a partnership on January 1, CY. Griffin contributed cash of
120,000 and Rhodes contributed land with a fair value of 160,000. The partnership
assumed the mortgage on the land which amounted to 40,000 on January 1. Rhodes
originally paid 90,000 for the land. On July 31, CY, the partnership sold the land for
190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the
gain from sale of land should be credited to Griffin for financial accounting purposes?
General Feedback
15,000
8. Downs, Frey, and Vick formed the DFV general partnership to act as manufacturer’s
representatives. The partners agreed Downs would receive 40% of any partnership profits
and Frey and Vick would each receive 30% of such profits. It was also agreed that the
partnership would not terminate for 5 years. After the fourth year, the partners agreed to
terminate the partnership. At that time, the partners capital accounts were as follows:
Downs, P20,000; Frey, P15,000; and Vick P10,000. There also were undistributed losses
of P30,000.
Vick’s share of the undistributed losses will be
General Feedback
9,000
Vick's share of undistributed losses (30% x 30,000) 9,000
If the partners agree to distribute profits based on profit sharing ratio but are silent on loss
sharing, partnership losses will be divided based on the agreed profit sharing proportions.
[1] Partnerships have been affected by the proprietary theory, which looks at the entity through
the eyes of the owners. Characteristics of a partnership that emphasizes that the entity is viewed
as the individual owners include the following:
a. Salaries to partners are viewed as distributions of income rather than a component of
income;
b. Unlimited liability of general partners extends beyond the entity to the individual
partners;
c. Income of partnership is not taxed at the partnership level but rather than, is included as
part of the partners’ individual taxable income;
An original partnership is dissolved upon admission or withdrawal of a partner.
9. Which of the following accounts could be found in the general ledger of a partnership?
Income Tax Expense Interest Expense on Partner Loans
General Feedback
No Yes
10. On May 1, CY, the business assets of John and Paul appear below:
John Paul
Cash 11,000 22,354
Land 603,000
Building 428,267
Total 1,020,916 1,317,002
Total 1,020,916 1,317,002
a. Accounts receivable of 20,000 in John’s books and 35,000 in Paul’s are
uncollectible.
b. Inventories of 5,500 and 6,700 are worthless in John’s and Paul’s respective
books.
c. Other assets of 2,000 and 3,600 in John’s and Paul’s respective books are to be
written off.
During the first year of their operations, the partnership earned 325,000. Profits were
distributed in the agreed manner. Drawings were made in these amounts: John, 50,000; Paul,
65,000; Peter, 28,000.
How much are the capital balances after the first year?
General Feedback
John Paul Peter
Capital balances
at
40:40:20 ratio P648,764 P648,764 P324,382
Drawings (50,000) (65,000) (28,000)
Share in profit
(40:40:20) 13,000 130,000 65,000
Capital balances P728,764 P713,764 P361,382
11. If the partnership agreement does not specify how income is to be allocated, profits and
loss should be allocated
General Feedback
In accordance with their capital contribution.
In the event that the profit distribution is not agreed upon by the partners, the profit shall be
distributed in the ratio of their Average Capital during the period.
The average capital may be determined using the "months-to-yearend" or "months unchanged"
method.
12. The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and
40 percent to Y. For the year CY, partnership net income was double X's withdrawals.
Assume X's beginning capital balance was 80,000, and ending capital balance (after
closing) was 140,000. Partnership net income for the year was:
General Feedback
600,000.
13. Which of the following is not considered a legitimate expense of a partnership?
General Feedback
Interest paid to partners based on the amount of invested capital.
14. Partnerships
General Feedback
are required to file income tax returns but do not pay Federal taxes.
15. Shue, a partner in the Financial Brokers Partnership, has a 30 percent share in partnership
profits and losses. Shue's capital account had a net decrease of 100,000 during CY.
During CY, Shue withdrew 240,000 as withdrawals and contributed equipment valued at
50,000 to the partnership. What was the net income of the Financial Brokers Partnership
for 20CY?
General Feedback
P300,000
16. A partnership has the following accounting amounts:
Sales 700,000
Cost of goods sold 400,000
Operating expenses 100,000
Salary allocations to partners 130,000
Interest paid to banks 20,000
Partners' drawings 80,000
What is the partnership net income (loss)?
General Feedback
Sales 700,000
Less cost of goods sold 400,000
Gross profit 300,000
Less operating expenses 100,000
Operating profit 200,000
Less interest paid to banks 20,000
Net income 180,000
Salaries, like interest on capital investments, are viewed as a means of allocating income
rather than as an expense. The drawing account is a temporary account and is
periodically closed to the partners’ capital account, and has nothing to do with the
computation of net income.
17. A partner assigned his partnership interest to a third party. Which statement best
describes the legal ramifications to the assignee?
General Feedback
The does not become a partner but has the right to share in future partnership profits and to
receive the proper share of partnership assets upon liquidation.
18. Jones and Smith formed a partnership with each partner contributing the following items:
Jones Smith
Cash 80,000 40,000
Building - Cost to Jones 300,000
- Fair Value 400,000
Inventory - Cost to Smith 200,000
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.
Refer to the above information. What is the balance in each partner's capital account for
financial accounting purposes?
Jones Smith
General Feedback
360,000 260,000
19. Jones and Smith formed a partnership with each partner contributing the following items:
Jones Smith
Cash 80,000 40,000
Building - Cost to Jones 300,000
Inventory - Cost to Smith 200,000
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.
Refer to the above information. What is each partner's tax basis in the Jones and Smith
partnership?
Jones Smith
General Feedback
350,000 270,000
20. Which of the following accounts could be found in the PQ partnership's general ledger?
I. Due from P
II. P, Drawing
III. Loan Payable to Q
General Feedback
I, II, and III
21. Mr. Zoom and his very friend Mr. Boom formed a partnership on January 1, 20CY with
Zoom contributing 16,000 cash and Boom contributing equipment with a book value of
6,400 and a fair value of 8,000. During 20CY Boom made additional investments of
1,600 on April 1 and 1,600 o June 1, and on September 1, he withdrew 4,000. Zoom had
neither additional investments nor withdrawals during the year.
The average capital balance at the end of 20CY for Mr. Boom is?
General Feedback
Date Capital Months Peso Months

Balances Unchanged
January. 1 P8, 000 3 P24, 000
April. 1 9, 600 2 19, 200
June. 1 11, 200 3 33, 600
September. 1. 7, 200 4 28, 800
12 P105, 600
Average Capital of Boom (105, 600 ÷ 12) = P8, 800
22. Transferable interest of a partner includes all of the following except:
General Feedback
the authority to transact any of the partnership's business operations.
23. A partner's tax basis in a partnership is comprised of which of the following items?
I. The partner's tax basis of assets contributed to the partnership.
II. The amount of the partner's liabilities assumed by the other partners.
III. The partner's share of other partners' liabilities assumed by the partnership.
General Feedback
I minus II plus III
24. The fact that salaries paid to partners are not a component of partnership income is
indicative of
General Feedback
Being characteristic of the proprietary
Partnerships have been affected by the proprietary theory, which looks at the entity
through the eyes of the owners. Characteristics of a partnership that emphasizes that the
entity is viewed as the individual owners include the following:
a. Salaries to partners are viewed as distributions of income rather than a
component of income;
b. Unlimited liability of general partners extends beyond the entity to the
individual partners;
c. Income of partnership is not taxed at the partnership level but rather than, is
included as part of the partners’ individual taxable income;
An original partnership is dissolved upon admission or withdrawal of a partner.

25. Abe, Bert and Carl are partners sharing profits on a 7:2:1 ratio. On January 1, Year 3,
Dave was admitted into the partnership with 15% share in profits. The old partners
continue to participate in profits in their original ratios
For the year Year3, the partnership showed a profit of P15, 000. However, it was discovered
that the following items were omitted in the firm’s book:
Unrecorded at year end Year 1 Year 2
Accrued expenses 1,050
Accrued income 875
Prepaid expense 1,400
Unearned income 1,225
The share of partners Bert in Year 3 net profit is:
General Feedback
Before computing the share of Bert in the 2013 net profit, the said profit must be corrected:
Profits per books, 2013 P15, 000
Unrecorded:
Accrued expenses -2013 (1, 050)
Accrued income- 2013 875
Prepaid expenses- 2012 (1, 400)
Unearned income- 2012 1, 225
Corrected profit, 2013 P14, 650
Bert’s share in the 2013 net profit: 17% x P14, 650= P2, 490.50
26. The inexperienced accountant for Jack, Kiel and Luck partnership prepared the following
journal entries during the year ended August 31, 20CY:
20CY
September. 1 Cash 50,0
Goodwill 150,
000
Jack, capital (150,000 x 0.25) 37,500
Kiel, capital (150,000 x 0.75) 112,500
Luck, capital 50,000
To record admission of Luck for a 20% interests in net assets, with

goodwill credited to Kiel in their former income sharing ratio. Goodwill
is computed as follows:
Implied total capital based on Luck's P250,00

investment (50, 000 x 5)
Less: net assets prior to Luck's admission 100,000
Goodwill P150,000
August. 31 Income Summary

000
Jack, capital (30,000 x .20) 6,000
Kiel, capital (30,000 x .60) 18,000
Luck, capital (30,000 x .20) 6,000
To divide net income for the year in the residual income-sharing ratio of
Jack, 20%, Kiel, 20%. Provision in partnership contract requiring
40,000 annual salary allowances to Luck is disregard because income
before salary is only 30, 000.
What should be the adjusted capital balances of old and new partner(s), respectively, at
August 31, 20CY.
General Feedback
Old New
Partners Partner
Capital balance before admission P100,000 P-
Admission of Luck:
Investment 50, 000
Goodwill to old partners (Sch. 1) 100, 000 -
Balances before distribution of profit 200, 000 50, 000
Comprehensive income, P30, 000:
Salary to Luck (new partner) 40, 000
Balances, (P10, 000), 2:6:2 (8, 000) (2, 000)
Capital balances, Aug. 31, 2013 P192, 000 P88, 000
Schedule 1:
Total agreed capital (P50, 00 /20%) P250, 000
Total contributed capital (P100, 000 + P50, 000) 150, 000
Goodwill to old partners P100, 000
27. Maxwell is trying to decide whether to accept a salary of 40,000 or salary of 25,000 plus
a bonus of 10% of net income after salaries and bonus as a means of allocating profit
among partners. Salaries traceable to the other partners are estimated to be 100,000. What
amount of income would be necessary so that Maxwell would consider choices to be
equal?
General Feedback
290,000
28. On January 2, CY, Abel, Cain, and Joshua formed a partnership. Abel contributed cash of
100,000 and a delivery equipment that originally costs him 120,000 but with a second
hand value of 50,000. Cain contributed 160,000 in cash. Joshua, whose family sells office
equipment, contributed 50,000 in cash and office equipment that cost his family’s
dealership 100,000 but with a regular selling price of 120,000. In CY, the partnership
reported net income of 120,000.
On December 31, CY, what would be the capital balance of the partners?
Abel Cain Josuah
General Feedback
__Abel __Cain__ __Josuah__
Cash contributed P100,000 P160,000 P 50,000
Noncash contributed 50,000 120,000
Capital balances beginning 150,000 160,000 1,700,000
Distribution of net income:
(150/480 x 120,000) 37,500
(160/480 x 120,000) 40,000
(170/480 x 120,000) 42,500
Capital balances, 12/31/06 P187,500 P200,000 P212,500
29. The ABC Partnership reports net income of P60,000. If partners A, B, and C have income
ratio of 50%, 30%, and 20%, respectively. What is the share of Partner C from the net
income of the partnership, if he was given a capital ratio of 25%?
General Feedback
12,000
Partnership net income or loss is shared based on capital contribution of the partners, unless the
partnership contract specifically indicates otherwise. As a result, it is customary to refer to the
basis as the income ratio, income and loss ratio, or the profit or loss ratio. Thus, the share of
Partner C, should be P12,000 (60,000 x 20%).
Other profit distribution provisions
TM partnership begins its first year of operations with the following capital balances:
Tan, capital 200,000
May, capital 100,000
According to the partnership agreement, all profits will be distributed as follows:

a. Tan will be allowed a monthly salary of 20,000 with 10,000 assigned to May.
b. The partners will be allowed with interests equal to 10 percent of the capital balance as of
the first day of the year.
c. Tam will be allowed a bonus of 10 percent of the net profit after bonus
d. The remainder will be divided on the basis of the beginning capital for the first year and
equally for the second year.
e. Each partner is allowed to withdraw up to 10, 000 a year.
Assume that the net loss for the first year of operations is 15,000 with net income of 55,000
in the subsequent year. Assume further that each partner withdraws the maximum amount
from the business each period.
What is the balance of Tan’s capital account at the end of the second year?
General Feedback
Tan May Total
Capital balances, P200, 000 P100, 000

beginning- 1st year P300, 000
Net loss:
Annual salary 240, 000 120, 000 360, 000
Interests 20, 000 10, 000 30, 000
Balance, beg capital ratio (270, 000) (135, 000) (405, 000)
Total (10, 000) (5, 000) (15, 000)
Total 190, 000 95, 000 285, 000

Drawings (10, 000) (10, 000) (20, 000)
Capital balances, P180, 000 P85, 000

beginning- 2nd year P265, 000
Total comprehensive
income:
Annual salary 240, 000 120, 000 360, 000
Interest 18, 000 8, 500 26, 500
Bonus 5, 000 5, 000
Balance, equally (168, 250) (168, 250) (336, 500)
Total 94, 750 (39, 750) 55, 000
Total 274, 750 45, 250 320, 000
Drawings (10, 000) (10, 000) (20,000)
Capital balances, end of P264, 750 P35, 250

2nd years P300, 000
1. The partnership of Gary, Jerome and Paul was formed on January 1, 20CY. The original
investments were as follows:
Gary 80, 000
Jerom 120, 000

e
Paul 180, 000
According to the partnership agreement, net income or loss will be divided among the
respective partners as follows:
· Salaries of 12, 000 for Gary, 10,000 for Jerome, and 8,000 for Paul
· Interests of 8% on the average capital balance during the year of Gary, Jerome, and Paul
· Remainder divided equally.
Additional information:
· Net income of the partnership for the year ended December 31, 20CY was 70,000.
· Gary invested an additional 20,000 in the partnership on July 1, 20CY
· Paul withdrew 30,000 from the partnership on October 1, 20CY.
· Gary, Jerome, and Paul made regular drawings against their share of net income during
20CY of 10, 000 each.
The partner’s capital balances as of December 31, 20CY are:

Gary Jerome Paul
General Feedback
Gary Jerome Paul Total
Balances at January 1, 2013 P80, 000 P120, 000 P180, 000 P380, 000
Additional Investment 20, 000 - - 20, 000
Withdrawal - - (30, 000) (30, 000)
Net income (Sch. 1) 22, 333 22, 733 29, 934 70, 000
Regular drawings (10, 000) (10, 000) (10, 000) 30,000
Balances at December 2013 P112, 333 P132, 733 P164, 934 P410, 000
Schedule 1 Gary Jerome Paul Total
Salaries P12, 000 P10, 000 P8, 000 P30, 000
Interests on average capital 7, 200 9, 600 13, 800 30,600

balance (sch.2)
Total 19, 200 19, 600 21, 800 60, 600
Remainder divided equally 3, 133 3, 133 3, 134 9, 400
Division of comprehensive P22, 333 P22, 733 P24, 934 P70, 000
income
Schedule 2:
Gary: P80, 000 x 8% x 6/12 P3, 200
P100, 000 x 8% x 6/12 4, 000 P7, 200
Jerome: P120, 000 x 8% 9, 600
Paul: P180, 000 x 8% x 9/12 10, 800
P150, 000 x 8% x 3/12 3, 000 13, 800
Total P30, 600
2. In the calendar year 20CY, the partnership of A and B realized a net profit of 240,000.
The capital accounts of the partners show the following postings:
A, capital B, capital
Debit Credit Debit Credit
Jan. 1 P120,000 P80,000
May 1. P20,000 P10,000
July 1. 20,000
Aug. 1 10,000
Oct. 1 10,000 5,000
If 20% interest based on the capital at the end of the year is allowed and given and the
balance of the P240,000 profit is divided equally, the total share of A and B, respectively are:
General Feedback
A B Total
Interest on ending
capital:
(100,000 x 20%) P20,000

(85,000 x 20%) P17,000 P37,000
Balance (equally) 101,500 101,500 203,000
Total P121,500 P118,500 P240,000
3. Albion and Blaze share profits and losses equally. Albion and Blaze receive salary
allowances of 20,000 and 30,000, respectively, and both partners receive 10% interest on
their average capital balances. Average capital balances are calculated at the beginning of
each month balance regardless of when additional capital contributions or permanent
withdrawals are made subsequently within the month. Partners’ drawings are not used in
determining the average capital balances. Total net income for 20CY is 120,000.
Albion Blaze
January 1 capital balances 100,000 120,000
Yearly drawings (p1,500 a 18,000 18,000

month)
Permanent withdrawals of
capital:
June 3 ( 12,000 )
May 2 ( 15,000 )
Additional investments of
capital:
July 3 40,000
October 2 50,000
If the average capital for
Albion and Blaze from the
above information is
112,000 and 119,000,
respectively, what will be
the total amount of profit
allocated after the salary and
interest distributions are
completed?
General Feedback
Capital: ($112,000 + $119,000)x(10%) = $23,100
Salary: ($20,000 + $30,000) = $50,000
Total: $23,100 + $50,000 = $73,100
4. A, B, and C are partners and share profits and losses as follows: Salaries of 20,000 to A;
15,000 to B; and none to C. If net income exceeds salaries, then a bonus is allocated to A.
The bonus is 5 percent of net income after deducting salaries and the bonus. Residual
profits or residual losses are allocated 10 percent to A, 20 percent to B, and 70 percent to
C. If net income after salaries and bonus is 70,000 how much is the total share of A?
General Feedback
A,B, and C Partners
A B C Total
Allowances 20,000 15,000 35,000
Bonus (70,000*5%) 3,500 3,500
Balance 7,000 14,000 49,000 70,000
Profit Distribution 30,500 29,000 49,000 108,500
5. Garcia and Henson formed a partnership on January 2, 20CY and agreed to share profits
90%, 10%, respectively. Garcia contributed capital of 25,000. Henson contributed no
capital but has a specialized expertise and manages the firm full time. There were no
withdrawals during the year. The partnership agreement provides for the following:
· Capital accounts are to be credited annually with interests at 5% of beginning capital.

· Henson is to be paid salary of 1,000 a months
· Henson is to receive a bonus of 20% of income calculated deducting his salary and
interests on both capital accounts.
· Bonus, interests, and Henson’s salary are to be considered partnership expenses.
The partnership 20CY income statement follows:
Revenues 96,450
Expenses( including salary, interests and 49,700

bonus)
Net income 46,750
What is Henson’s 20CY bonus?
General Feedback
Comprehensive income P46, 750
Add: Salary (P1, 000 x 12 Mo.) 2, 000
Interests (P25, 000 x 5%) 1, 250
Comprehensive income before salary and interests P60, 000
Divide by ÷ 80%
Comprehensive income before salary, interests and bonus P75, 000
Less income before salary and interests 60, 000
Bonus to Henson P15, 000
* Since P60, 000 is the total comprehensive income before salary and interests and the
bonus is 20% before deducting salary and interests, then P60, 000= 80% of the income base
to be used for computing the bonus.
6. Roy and Sam was organized and began operations on March 1, 20CY. On that date, Roy
invested 150,000 and Sam invested computer equipment with current fair value of
180,000. Because of shortage of cash, on November 1, 20CY Sam invested additional
cash of P60, 000 in the partnership. The partnership contract includes the following
remuneration plan:
Roy Sam
Monthly salary (recognized as expense) 10,000 20,000

Annual interests on beginning capital 12% 12%
Bonus on the net profit before salaries and interests but after 20% -
bonus
Balance equally
The salary was to be withdrawn by each partner in monthly instalments. The partnership net
profit for 20CY is 120,000.
What are the capital balances of the partners on December 31, 20CY?
Roy Sam
General Feedback
Roy Sam
Capital balances, March 1.2013 P150,000 P180, 000
Additional investment, Nov. 1 - 60, 000
Total P150, 000 P240, 000
Total comprehensive income, P120, 000

distributed as follows:
Interests (10 months) 15, 000 18, 000
Bonus (Schedule 1) 70, 000
Balance, P17, 000 equally 8, 500 8, 500
Salaries (10 months) 100, 000 200, 000
Total P343, 500 P466, 500
Drawings (100, 000) (200, 000)
Capital balances, December 31, 2013 P243, 500 P266, 500
Schedule 1:
Total comprehensive income before salaries, interests and bonus P420, 000
(P120, 000 + P300,000)
Total comprehensive income after bonus (P420, 000 / 120%) 350, 000
Bonus P70, 000
7. Dexter and Joliver are partners agreeing to allow monthly salaries (6,000 and 5,000
respectively), 6% interests on the capital investment at the beginning of the year (300,000
and 230,000 respectively) and on the remaining balance, to the equally share. the first
year registered a net income of 100,000 profits share of the partners are:
General Feedback
Dexter Joliver Total
Annual salary P72, 000 P60, 000 P132, 000
Interest 18, 000 13, 800 31, 800
Balance, equally (31, 9000 (31, 900) (63, 800)
P58, 100 P41, 900 P100, 000

Total
8. Fox, Greg, and Howe are partners with average capital balances during 20CY of 120,000,
60,000, and 40,000, respectively. Partners receive 10% interest on their average capital
balances. After deducting salaries of 30,000 to Fox and 20,000 to Howe, the residual
profit and loss is divided equally. In 20CY, the partnership sustained a 33,000 loss before
interest and salaries to partners. Bu what amount should Fox’s capital account change?
General Feedback
Fox Greg Howe Total
10%
interest on
average
capital 12,000 6,000 4,000 22,000
Salaries 30,000 20,000 50,000
Bal.
(equally) (35,000) (35,000) (35,000) (105,000)
Total inc. (33,000)

(dec.) 7,000 (29,000) (11,000)
9. Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and
Carnes receive salary allowances of 10,000 and 20,000, also respectively, and both
partners receive 10% interest based upon the balance in their capital accounts on January
1. Partners’ drawings are not used in determining the average capital balances. Total net
income for 20CY is 60,000. If net income after deducting the interest and salary
allocations is greater than 20,000, Carnes receives a bonus of 5% of the original amount
of net income.
Bloom Carnes
Yearly drawings (p1,500 a month) 18,000 18,000
What are the total amounts for the allocation of interest, salary, and bonus, and, how much over-
allocation is present?
General Feedback
Interest: ($500,000 x 10%) = $50,000
Salary: ($10,000 + $20,000) = $30,000
Bonus: Condition not met = $0
Total allocations = $80,000 and over-allocations =
$80,000 - $60,000 = $20,000

10. Herm, Mar and Ama formed a partnership on January 1, 20CY and contributed 150,000,
200,000 and 250,000, respectively. The Articles of Co-partnership provides that the
operating income be shared among the partners as follows: As salary, for Herm in the
amount of 24,000, for Mar, 18,000 and for Ama, 12,000. Interests of 12% on the average
capita during 20CY of the three (3) partners and the remainder in the ratio 2:4:4
respectively.
Additional information:
Operating income for the year ended December 31, 20CY, 176,000.
Herm contributed additional capital on July 1, 30,000 and made a drawing on October 1,
10,000, Mar contributed additional capital on August 1, 20,000 and made a drawing on
October 1, 10,000, and Ama made a drawing of 30,000 on November 1
The partners’ capital balances on December 31, 20CY are:
General Feedback
To compute the answer a statement of partner’s capital should be prepared as follows:
Herm Mar Ama Total
Capital balances, 1/1/2013 P150, 000 P200,000 P250, 000 P600, 000
Additional investment 30, 000 20, 000 - 50, 000
Drawing (10, 000) (10, 000) (30, 000) (50, 000)
Net income (sch. 1) 53, 180 62, 060 60, 760 176, 000
Capital balances, 12/31/2013 P233, 180 P272, 060 P280, 760 P776, 000
Schedule 1- Distribution of Net income:

Salaries P24, 000 P18, 000 P12, 000 P54, 000
Interests (Sch.2) 19, 500 24, 700 29, 400 73, 600
Remainder, 2:4:4 9, 680 19, 360 19, 360 48, 400

Total P53, 180 P62, 060 P60, 760 P176, 000
Schedule 2- Computation of Interests:

Herm: P150, 000 x 12% x 6/12= P9, 000
180, 000 x 12% x 5, 400

3/12=
170, 000 x 12% x 5, 100

3/12=
Total P19, 500
Mar. 200, 000 x 12% x 7/12 = 14, 000
220, 0000 x 12% x 4, 440

2/12 =
210, 000 x 12% x 3/12 6, 300

=
Total P24, 700
Ama: 250, 000 x 12 x 10/12 = 25, 000
220, 000 x 12 x 2/12 = 4, 400
Total P29, 400
11. The APB partnership agreement specifies that partnership net income be allocated as
follows:
Partner A Partner B Partner C
Allowance 30,000 10,000 40,000
Interest on average capital balances 10% 10% 10%

Remainder 40% 40% 20%
Average capital balances for the current year were 50,000 for A, 30,000 for P, and 20,000 for B.
Refer to the information given. Assuming a current year net income of 50,000, what amount
should be allocated to each partner?
General Feedback
19,000 (3,000) 34,000
12. The Articles of Partnership of Adam and Eve the following provisions were stipulated:
a. Annual salary of 60,000 each.
b. Bonus to Adam of 20% of the net income after partner’s salaries, the bonus being
treated as an expense.
c. Balance to be divided equally.
The partnership reported a net income of 360,000 after partners’ salaries but before bonus.
How much is the share of Eve in the profit?
General Feedback
Adam Eve Total
120,00
Salaries 60,000 60,000 0
Bonus to Adam:
NY before bonus P360,000
–NY after bonus (360,000/

120%) 300,000 60,000 60,000
150,00
Balance (equally) 300,000 150,000 0 300,000
Total 270,000 210,00 480,00

0 0
It should be pointed out that it was clearly mentioned in the problem that the P360,000
net income is after salaries but before bonus, therefore, the net income before salaries
and bonus should be P480,000 (120,000 + 360,000).
13. K, L and M are partners with average capital balances during 20CY of 472,500, 238,650
and 162,350, respectively. The partners receive 10% interests on their average capital
balances; after deducting salaries of 122,325 to K and 82,625 to M, the residual profits or
loss is divided equally.
In 20CY, the partnership had a net loss of 125,624 before the interests and salaries to
partners.
By what amount should K’s and M’s capital account change?

K's capital M's capital
Account account
General Feedback
Total K L M
10% interests on P87, 350 P47, 250 P23, 865 P16, 235
average capital
balances
Salary allowances 204, 950 122, 325 - 82, 625
Balance (deficit), (417, 924) (139, 308) (139, 308) (139, 308)
equally
Total P(125, 624) P30, 267 P(115, 443) P(40, 448)
follows:
Allowance 30,000 10,000 40,000
General Feedback
59,000 37,000 54,000
15. In its first year of operations, Alba and Company, a partnership, made a net income of
20,000 before providing for salaries of 5,000 and 3,000 per annum for Alba and Bana,
respectively, as stipulated in the partnership agreement. Capital contributions are as
follows:
Alba 30, 000
Bana 20, 000
Cada 10, 000
Assuming that no profit and loss ratios are provided in the partnership agreement and that
there has been no change in the capital contributions during the year, how much profit share
would Alba is entitled to receive?
General Feedback
Alba Bana Cada Total
Salaries P5, 000 P3, 000 - P8, 000
Balance, capital 6, 000 4, 000 2, 000 12, 000

ratio
P11, 000 P7, 000 P2, 000 P20, 000
Total
16. Hanz, Ivy, Jasper, and Kelly own a publishing company that they operate as a
partnership. Their agreement includes the following:
· Hanz will receive a salary of 20,000 and a bonus of 3% of income after all the
bonuses.
· Ivy will receive a salary of 10,000 and a bonus of 2% of income after all the bonuses.
· All partners are to receive the following: Hanz – 5,00; Ivy – 4,500; Jasper – 2,000; and
Kelly – 4,700, representing 10% interest on their average capital balances.
· Any remaining profits are to be divided equally among the partners.
How would a net loss of 40,000 would be allocated among the partners?
Hanz Ivy Jasper Kelly
General Feedback
3,450.00 (7,050.00) (19,550.00) (16,850.00)
17. KK, SS and WW formed a partnership on January 1, 20CY. Each contributed 144,000.
Salaries were to be allowed as follows:

KK 36,000
SS 36,000
WW 54,000
Drawings were equal to salaries and be taken out evenly throughout the year.
With sufficient partnership net income, KK and SS could split a bonus equal to 25 % of
partnership net income after salaries and bonus (in no event could the bonus go below zero)
Remaining profits were to be divided as follows: 30% for KK, 30% for SS, and 40% for
WW.
For the year, partnership total comprehensive income was 144,000.
What are the capital balances of the partners on December 31, 20CY.
General Feedback
KK SS WW Total
Capital balances, Jan. 1, P144, 000 P144,000 P432, 000

2011 P144, 000
Net profit:
Salaries 36, 000 36, 000 54, 000 126, 000
Bonus (Schedule 1) 1, 800 1, 800 - 3, 600
Balance, 3:3:4 4, 320 4, 320 5, 760 14, 400
Total 42, 120 42, 120 59, 760 144, 000
Total 186, 120 186, 120 203, 760 576, 000
Drawings 36, 000 36, 000 54, 000 126, 000
Capital balances, Dec. 31, P150, 120 P150, 120 P450, 000
2013 P149, 760
Schedule 1:
Total comprehensive income before bonus and salaries P144, 000
Less salaries 126, 000
Total comprehensive income before bonus 18, 000
Total comprehensive income after bonus (P18, 000 /125%) 14, 400
Bonus P3, 600
18. The partnership agreement of Reid and Simm provides that interest at 10% per year is to
be credited to each partner on the basis of weighted-average capital balances. A summary
of Simm’s capital account for the year ended December 31, 20CY, is as follows:
Balance, January 1 140,000
Additional investment, July 40,000

1
Withdrawal, August 1 (15,000)
Balance, December 31 165,000
What amount of interest should be credited to Simm’s capital account for 20CY?
General Feedback
15,375
19. During 20CY, Young and Zinc maintained average capital balances in their partnership
of 160,000 and 100,000, respectively. The partners receive 10% interest on average
capital balances, and residual profit or loss is divided equally. Partnership profit before
interest was 4,000. By what amount should Zinc’s capital account change for the year?
General Feedback
Young Zinc Total
10% interest on
ave. capital:
(10% x 160,000) P16,000
(10% x 100,000) P10,000 P26,000
Balance (equally) (11,000) (11,000) (22,000)
Total P 5,000 (P1,000) P 4,000
The partnership profit before interest was P4,000, however, it resulted to a loss of
P22,000 after interest. Thus, the capital balance of Zinc decreases by P1,000.
20. If a partnership has net income of 44,000 and Partner X is to be allocated bonus of 10%
of income after the bonus. What is the amount of bonus Partner X will receive?
General Feedback
4,000
21. Partners AA and BB have profit and loss agreement with the following provisions:
salaries of 30,000 and 45,000 for AA and BB, respectively; a bonus to AA of 10% of net
income after salaries and bonus; and interest of 10% on average capital balances of
20,000 and 35,000 for AA and BB, respectively. One-third of any remaining profits will
be allocated to AA and the balance to BB. If the partnership had net income of 102,500,
how much should be allocated to Partner AA?
General Feedback
AA BB Total
Salaries
Bonus (after bonus)
NY before Bonus 27,500
NY after Bonus (27,500/110%) 25,000 2,500 2,500
10% interest 2,000 3,500 5,500
Balance (1/3:2/3) 6,500 13,000 19,500
Total 41,000 61500 102,500
One of the Alternatives in profit allocations if the net income is not sufficient is to
completely satisfy all provision of the profit and loss agreement and use the profit and
loss ratios to absorb any deficiency or additional loss caused by such action.
22. 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, 20CY, partnership income before the bonus amounted to 240,000. The bonus of
Michelle for the year 20CY is:
General Feedback
Comprehensive income before bonus P240, 000
Comprehensive income after bonus (240, 000 ÷ 125%) 192, 000
Bonus P48, 000
23. A and B entered into a partnership as of March 1, 20CY by investing 125,000 and
75,000, respectively, they agreed that A, as the managing partner, was to receives a
salary; 30,000 per year and a bonus computed at 10% of the net profit after adjustments
for the salary; the balance of the profit was to be distributed in the ratio of their original
capital balances. On December 31, 20CY account balances were as follows:
Cash 700,000 Accounts 60,000
payable
Accounts 67,000 A, Capital 125,000

receivable
Furniture and 45,000 B, Capital 75,000

Fixtures
Sales returns 5,000 A, drawing (20,000)
Purchases 196,000 B, drawing (30,000)
Operating 60,000 Sales 233,000

expenses
Inventories on December 31, 20CY were as follows: supplies, 2,500, merchandise, 73,000,
prepaid insurance was 950 while accrued expense were 1,150. Depreciation rate was 20% per
year.
The partner’s capital balances on December 31, 20CY, after closing the net profit and
drawing accounts, were
General Feedback
Schedule 1- Computation and Distribution of Net Profit
Net sales (P233, 000 - P5, 000) P228,

000
Cost of Sales (P196, 000 - P73, 000) P123,

000
Expenses:
Operating expenses P60,

000
Supplies (2,
500)
Prepaid Insurance (950)
Accrued expenses 1, 550
Depreciation (45, 000 x 20% x 10/12) 7, 500 65, 600 (188,

600)
Comprehensive income P39, 400
Distribution Total A B
Salary: (P30, 000 x 10/12) P25, 000 P25, 000 P-
Bonus: (P39, 400 - P25, 000) x 10% 1, 440 1, 440 -
Remainder, at 5:3 12, 960 8, 100 4, 860
Total P39, 400 P34, 540 P4, 860
Partners' capital balances. Dec. 31, 2013: A B
Initial investments P125, 000 P75, 000
Share in profits (Schedule 1) 34, 540 4, 860
Drawing (20, 000) (30, 000)

Dec. 31, 2013 capital balances P139, 540 P49, 860
24. If the partnership agreement provides a formula for the computation of a bonus to the
partners, the bonus would be computed?
General Feedback
in any manner agreed to by the partners.
25. Luz, Vi, and Minda are partners when the partnership earned a profit of 30,000. Their
agreement provides the following regarding the allocation of profits and losses”
a. 8% interest on partner’s ending capital in excess of 75,000.
b. Salaries of 20,000 for Luz and 30,000 for Vi.
c. Any balance is to be distributed 2:1:1 for Luz, Vi, and Minda, respectively.
Assume ending capital balances of 60,000, 80,000, and 100,000 for partners Luz, Vi, and
Minda, respectively. What is the amount of profit allocated for Minda, if each provision of
the profit and loss agreement is satisfied to whatever extent possible using the priority order
shown above?
General Feedback
Luz Vi Minda Total
Interest
8% x 80,000 - 75,000 400
8% x 100,000 - 75,000 2,000 2400
Salary (20:30) 11,040 16,560 27600
30,000
Total 11,040 16,960 2,000
26. The partnership agreement of Eve and Fred provides that interest at 10% per year is to be
credited to each partner on the basis of weighted-average capital balance. A summary of
Fred’s capital account for the year ended 31 December 20CY is as follows:
Balance, 1 January 280, 000
Additional Investment, July 1 80, 000
Withdrawal, 1 August (30, 000)
Balance, 21 December 330, 000.00
The amount of interests that should be credited to Fred’s capital account for 20CY is
Date Capital Balances Months Peso Months

Unchanged
January. 1 P280, 000 6 P1, 680, 000
July. 1 360, 000 1 360, 000
August. 1 330, 000 5 1, 650, 000
P3, 690, 000
Average capital (P3, 690, 000 ÷ 12) P307, 500
Interests (307, 500 x 10%) P30, 750
27. On January 2, 20CY Phil, Art and Rey formed the PAR partnership contributing cash as
follows:
Phil 192,000
Art 288,00
Rey 432,000
The partnership contract provides the following provisions in respect with partner’s
remuneration:
1. Interests of 12% on average capital balances
2. Annual salaries as follows:
Phil 28,800
Art 24,000
Rey 27,200
3. Remainder of the net income divided 40%, 30% and 30% to Phil, Art, and Rey,
respectively.
Income before partners’ salaries and interests for the year ended December 31, 20CY was
184,160. Phil invested additional cash of 48,000 to the partnership on July 1, 20CY. Rey
withdrew 72,000 from the partnership on October 1, 20CY. The partners also withdrew 1,500
monthly against their share of net income for the year.
What is the capital balance of Phil on October 31, 20CY?

General Feedback
Phil Capital, January 2, 2013 P192, 000
Additional Investment 48, 000
Profit share, (Schedule 1) 52, 320
Drawings (P1, 500 x 12) (18, 000)
Phil Capital balance, December 31, 2013 P274, 320
Schedule 1:
Phil Art Rey Total
Interests, (Schedule 2) P25, 920 P34, 560 P49, 680 P110, 160
Salaries 28, 800 24, 000 27, 200 80, 000
Remainder, 4:3:3 (2, 400) (1, 800) (1, 800) (6, 000)
Total P52, 320 P56, 760 P75, 080 P184, 160
Schedule 2:
Phil: P192, 000 x 6/12= P96, 000
1/1
240, 000 x 6/12= 120, 000
7/1
P216, 000 x 12%= P25, 920
Art: 1/1 P288, 000 x 12%= P34, 560
Rey: P432, 000 x 9/12= P324, 000

1/1
10/1 360, 000 x 3/12= 90, 000
P414, 000 x 12%= P49, 680
28. The partners, A and B, share profits 3:2. However, A is to receive a yearly bonus of 20%
of the profits, in addition to his profit share. The partnership made a net income for the
year of 24,000 before the bonus. Assuming A’s bonus is computed on profit after
deducting said bonus, how much profit share will B receive?
General Feedback
A B Total
Bonus to A [P24, 000 ÷ 120%) x 20%] P4, 000 P4, 000
Balance, 3:2 12, 000 8, 000 20, 000
Total P16, 000 P8, 000 P24, 000
On January 1, 20CY, David and Enrile decided to form a partnership. At the end of the year,
the partnership.
David, Capital Enrile, Capital
Dr. Cr. Dr. Cr.
January. 1 - 40,000 - 25,000
April. 1 5,000 - - -
June. 1 - - - 10,000
August. 1 - 10,000 - -
September. 1 - - 3,000 -
October.1 - 5,000 1,000 -
December. 1 - 4,000 - 5,000
Assuming that an interest of 20% per annum is given on average capital and the balance of
the profits is divided equally, the sharing of the profits shall be:
General Feedback
Before computing how profits shall be distributed, first compute average capitals as follows:
Capital Months Peso Months

Balances Unchanged
David
January.1 P40, 000 3 P120, 000
April. 1 35, 000 4 140, 000
August. 1 45, 000 2 90, 000
October. 50, 000 2 100, 000

1
Decembe 54, 000 1 54, 000

r. 1
P224, 000 12 P504, 000
Enrile
January. P25, 000 5 P125, 000

1
June. 1 35, 000 3 105, 000

Septembe 32, 000 1 32, 000
r. 1
October.1 31, 000 2 62, 000
Decembe 36, 000 1 36, 000

r. 1
P139, 000 12 P360, 000
Average Capital:
David: P504, 000 ÷ 12 = P42, 000
Enrile: P360, 000 + 12 = P30, 000
Then distribute the profits as follows:

David Enrile Total
20% interest on Average

capital
David: 20% x P42, 000 P8, 400
Enrile: 20% x P30, 000 P6, 000 P14, 400
Balance, equally 52, 800 52, 800 105, 600
Total P61, 200 P58, 800 P120, 000
29. The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership
income, after deduction of the bonus. If the partnership's income is 121,000, how much is
Partner Y's bonus allocation?
General Feedback
B = .1x($121,000 - B)
B = $12,100 - .1B
1.1B = $12,100
B = $11,000
30. ABC’c partnership provided for the following distribution of profits and losses; “First” A
to receive 10% of the net income up to 1,000,000 and 20% on the amount of excess
thereof:
“Second” B and C each are to receive 5% of the remaining income in excess of 1,500,000
after A’s share as per above and:
“The balance to be divided equally among the partners”
For the year just ended, the partnership realized net income of 2,500,000 before distribution
to partners. The share of A is:
General Feedback
A B C Total
To A (P1, 000, 000 x 10%) P100, 000
(1, 500, 000 x 20%) 300, 000 P400, 000
To B & C (2, 500, 000 - 400, 000 - P30, 000 P30, 000 60, 000
1, 500, 000= 600, 000 x 5%)
Balance, equally 680, 000 680, 000 680, 000 2, 040, 000
Total P1, 080, 000 P710, 000 P710, 000 P2, 500, 000
31. The terms of a partnership agreement provide that one of the partners is to receive a
salary allowance of 30,000, plus a bonus of 20 percent of income after deduction of the
bonus and the salary allowance. If income is 150,000, the bonus should be:
General Feedback
20,000
32. On January 2, 20CY, Bueno and Perez formed a partnership. Bueno contributed capital of
175,000 and Perez, 25,000. They agreed to share profits and losses 80% and 20%,
respectively. Perez is the general manager and works in the partnership in full time. Perez
is given a salary of 5,000 a month; interests of 5% of the starting capital (of both
partners) and a bonus of 15% of net profit before the salary, interests and the bonus.
The condensed statement of comprehensive income of the partnership for the year ended
December 31, 20CY is as follows:
Net sales 875,000
Cost of sales 700,000
Gross profit on sales 175,000
Expenses (including salary, interests and the bonus) 143,000
Total comprehensive income 32,000
The bonus of Perez in 20CY is:
General Feedback
Total comprehensive income after P32, 000

salaries, interests & bonus
Add back:
Salaries (P5, 000 x 12) P60, 000
Interests:
Bueno (P175, 000 x 5%) P8, 750
Perez (P25, 000 x 5%) 1, 250 10, 000 70, 000
Total comprehensive income after bonus P102, 000

(85%)
Total comprehensive income before 120, 000

bonus (102, 000÷ 85%)
Bonus to Perez P18,000

33. Luis and David are in partnership sharing profits and losses in the ratio 3:2. David is
entitled to a salary of 9,000 and interest on capital is paid at a rate of 8% per annum. The
partners’ capital balances are:
Luis 75,000
David 60,000
The partnership statement of profit or loss for the year shows a profit of 58,500.
How much of the total profit is Luis entitled to?
General Feedback
29,220
follows:
Allowance 30,000 10,000 40,000
General Feedback
59,000 37,000 54,000
35. Tim and Tom entered into a partnership on March 1, 20CY by investing 125,000 and
75,000, respectively. They agreed that Tim, as the managing partner, is to receive a salary
of 30,000 per year end a bonus computed at 10% of the net profit after adjustment for the
salary and bonus; the balance of the profit was to be distributed in the ratio of their
original equity balances. On December 31, 20CY, account balances were as follows:
Cash 70,000 Accounts payable 60,000
Accounts receivable 67,000 Tim, Equity 125,000
Furniture and Fixtures 45,000 Tom, Equity 75,000
Sales returns and allowances 5,000 Tim, drawing (20,000)
Net purchases 196,000 Tom, drawing (30,000)
Operating expenses 60,000 Sales 233,000
Inventories on December 31, 20CY were as follows: supplies, 2,500; merchandise, 73,000.
Prepaid insurance was 950 while accrued expenses were 1,550.
The partner’s Equity balances on December 31, 20CY, after closing the net profit and
drawing accounts, were:
Tim Tom
General Feedback
Tim Tom
Capital balances before closing P125, 000 P75, 000
Comprehensive income, P39, 400 (Sch.

1):
Salaries (P30, 000 x 10/12) 25, 000 -
Bonus (P39, 400 - P25, 000) ÷ 10% x 1, 309 -

10%
Balance, 125:75, P12, 60 8, 182 4, 909
Total P159, 491 79, 909
Drawings (20, 000) (30, 000)
Capital balances, Dec. 31, 2013 P139, 491 P49, 909
Schedule 1:
Sales P233, 000
Sales returns and allowances 5,000
Net Sales 228, 000
Cost of Sales:
Purchases P196, 000
Merchandise inventory, Dec. 31 73, 000 123, 000
Gross income 105, 000
Operating expenses:
Unadjusted P60, 000
Supplies (2, 500)
Prepaid expenses -950
Accrued expenses 1, 550
Depreciation (P45, 000 x 20% x 10/12) 7, 500 65, 600
Total comprehensive income P39, 400
36. Which of the following is not a component of the formula used to distribute income?
General Feedback
Interest on notes to partners.
37. Albion and Blaze share profits and losses equally. Albion and Blaze receive salary
allowances of 20,000 and 30,000, respectively, and both partners receive 10% interest on
their average capital balances. Average capital balances are calculated at the beginning of
each month balance regardless of when additional capital contributions or permanent
withdrawals are made subsequently within the month. Partners’ drawings are not used in
determining the average capital balances. Total net income for 20CY is 120,000.
Albion Blaze

Yearly drawings (p1,500 a month) 18,000 18,000
Permanent withdrawals of capital:
June 3 ( 12,000 )
May 2 ( 15,000 )
Additional investments of capital:
July 3 40,000
October 2
If the average capital for
Albion and Blaze from the
above information is 112,000
and 119,000, respectively, what
will be the total amount of
profit allocated after the salary
and interest distributions are
completed?
General Feedback
Capital: ($112,000 + $119,000)x(10%) = $23,100
Salary: ($20,000 + $30,000) = $50,000
Total: $23,100 + $50,000 = $73,100
38. On January 1, 20CY, Zeep and Beep have a capital balance of 20,000 and 16,000
respectively. On July 1, 20CY Zeep invests and additional 4,000 and Beep withdraws
1,600. Profits and losses are divided as follows: Beep is the managing partner and as such
shall receive P16, 000 salaries and Zeep shall receive 7,200; both partners shall receive
interests of 10% on their beginning capital balances to offset whatever difference in
capital investments they have and any remainder shall be divided equally.
Income of the Zeep-Beep partnership for the year 20CY is 9,600. Zeep’s share in the net
income is
General Feedback
Zeep Beep Total
Salaries P7, 200 P16, 000 P23, 200
Interests 2, 000 1, 600 3, 600
Balance, equally (8, 600) (8, 600) (16, 600)
Total P600 P9, 000 P9, 600
39. If the average capital balances for Albion and Blaze are 100,000 and 120,000, what will
the final profit allocations for Albion and Blaze in 20CY?
General Feedback
Albion: ($100,000 x 10%) + $20,000 + $24,000 = $54,000
Blaze: ($120,000 x 10%) + $30,000 + $24,000 = $66,000
40. On January 1, 20CY A, B, C and D formed Bekha Trading Co. a partnership with capital
contributions as follows: A, 50,000; B, 25,000; C, 25,000; and D, 20,000. The partnership
contract provided that each partner shall receive a 5% interests on contributed capital, and
that A and B shall receive a salaries of 5,000 and 3,000, respectively. The contract is also
provided that C shall receive a minimum of 2,500 per annum, and D a minimum of 6,000
per annum, which is inclusive of amounts representing interests and share of remaining
profits. The balance of the profits shall be distributed to A, B, C and D in a 3:3:2:2 ratios.
What amount must be earned by the partnership, before any charge for interests and salaries,
so that A may receive an aggregate of 12,500 including interests, salary and share of profits?
General Feedback
Total A B C D
Salaries P8, 000 P5, 000 P3, 000 - -
Interest 6, 000 2, 500 1, 250 1, 250 1, 000

Additional profits to 16, 666 5, 000 5, 000 3, 333 3, 333
give A a total of P12,
500 (5, 000 ÷ 30%)
Additional profit to 1, 667 - - - 1, 667

Meet the minimum
requirement to D
Amount to be earned P32, 333 P12, 500 P9, 250 P4, 583 P6, 000
41. The partnership agreement of Donn, Eddy, and Farr provides for annual distribution of
profit and loss on the following sequence:
· Donn, the managing partner, receives a bonus of 10% of profit.
· Each partner receives 6% interest on average capital investment.
· Residual profit or loss is divided equally.
Average capital investments for Year 2 were:
Donn 80,000
Eddy 50,000
Farr 30,000
What portion of the 100,000 partnership profit for Year 2 should be allocated to Farr?
General Feedback
28,600
42. Henry, Marta and Nestor are partners with average capital balance in 20CY of 240,00,
120,000 and 80,000 respectively. Partners receive 10% interests on their average capital
balances. After deducting salaries of 60,000 to Henry and P40,000 to Nestor, the residual
profits or loss is divided equally. In 20CY, the partnership sustained a 66,000 losses
before interests and salaries to partners. By what amount should Nestor’s capital account
change?
General Feedback
Total Henry Marta Nestor

Interests P44, 000 P24, 000 P12, 000 P8, 000
Salaries 100, 000 60, 000 - 40, 000
Balance, equally (210, 000) (70, 000) (70, 000) (80, 000)
P(66, 000) P(14, 000) P(58, 000) P(22, 000)

Total
43. MM is trying to decide whether to accept a salary of 40,000 or a salary of 25,000 plus a
bonus of 10% of net income after salaries and bonus as a means of allocating profit
among the partners. Salaries traceable to the other partners are estimated to be 100,000.
What amounts of income would be necessary so that MM would consider the choices to
be equal?
General Feedback
Bonus required (P40, 000 - P25, 000) P15, 000
Divided by 10%
Total comprehensive income after bonus and 150, 000

salaries
Add back: Salaries (P25, 000 + P100, 000) P125, 000
Bonus 15, 000 140, 000
Net profit before bonus and salaries P290, 000
44. The JPB partnership reported net income of 160,000 for the year ended December 31,
20CY. According to the partnership agreement, partnership profits and losses are to be
distributed as follows:
J P B
Salaries 50,000 60,000 30,000
Bonus on net 10% 5% 10%

income
Remainder(if 60% 30% 10%
positive)
Remainder (if 30% 40% 30%

negative)
How should partnership net income for 20CY be allocated to J, P, and B?

J P B
General Feedback
60,000 60,000 40,000
Profit or loss distribution with industrial partner
1. Partners R and S share profits 3:1 after annual salary allowances of 40,000 and 60,000,
respectively; however, if profits are not adequate to meet the salary allowances, the entire
profit is to be divided in the salary ratio. Profits of 90,000 were reported for the year Year
2. In Year 1, it is ascertained that in calculating net income for the year ended December
31, Year 2, depreciation was overstate by 36,000 and ending inventory was overstated by
8,000.
The adjustment to the capital of R and S amounted to
General Feedback
Profit Reported for Year 1 90,000.00
Adjustments determined in
Year 2
Overstatement 36,000.00
of Depreciation
Overstatement (8,000.00)
of Ending
Inventory
Correct Profit for Year 1 118,000.00
Profit Distribution Made (using

reported profit)
Partner R Partner S Total
Based on 36,000.00 54,000.00 90,000.00

Salary Ratio*
*the allocation was made using the salary ratio of 40:60 since the total profit is
not sufficient to cover the total salary.
Should be Distribution (per Adjusted/Correct profit)
Salary / 40,000.00 60,000.00 100,000.00

Allowances
Balance 13,500.00 18,000.00

4,500.00
Total 53,500.00 64,500.00 118,000.00
Adjustment to Partner's Equity (to be made in Year

2)
Increase 17,500.00 10,500.00 28,000.00

(Decrease)
2. During 2018, Calcium, Zinc, and Iron maintained average capital balances in their
partnership of P160,000, P100,000, and 20,000, respectively. Iron is an industrial partner.
The partners receive 10% interest on average capital balances, and residual profit or loss
is divided equally. Partnership profit before interest was P4,000. By what amount should
Zinc’s capital account change for the year?
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Calcium Zinc Iron Total
Interest on
average capital 10,000.00 28,000.00
16,000.00 2,000.00
Allocation of
balance (8,000.00)
(8,000.00) (8,000.00) (24,000.00)
Share in Profit
2,000.00 4,000.00
8,000.00 (6,000.00)
3. Alder, Benson, and Carl are capitalist partners and Denver, an industrial partner. The
partnership reported a net loss of 100,000. How much is the share of Denver in the
reported net loss?
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0
In case there is an industrial partner, and there is no profit and loss sharing agreement, an
industrial partner shall not be liable for the losses. As to profit, the share of an industrial
partner shall be that which is just and equitable under the circumstances. In order for an
industrial partner be liable for the losses, there should be an expressed stipulation to that effect.
4. Next Two Questions are based on the following:

Hanz, Ivy, Jasper, and Kelly own a publishing company that they operate as a partnership. Their
agreement includes the following:
· Hanz will receive a salary of 20,000 and a bonus of 3% of income after all the
bonuses.
· Ivy will receive a salary of 10,000 and a bonus of 2% of income after all the bonuses.
· All partners are to receive the following: Hanz – 5,00; Ivy – 4,500; Jasper – 2,000; and
Kelly – 4,700, representing 10% interest on their average capital balances.
· Any remaining profits are to be divided equally among the partners.
Assuming a profit of 40,000, how would this amount be distributed to them given the
following order of priority: Interest on invested capital, then bonuses, then salary, and then
according to profit and loss percentage?
Hanz Ivy Jasper Kelly
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Hanz Ivy Jasper Kelly Total
Interest 5,000 4,500 2,000 4,700 16,200
Bonus
(3:2) 1,146 762 1,905
Salaries
(20:10) 14,597 7,298 21,895
Total 20,740 12,560 2,000 4,700 40,000
Net income before bonuses 40,000
Net income after bonuses (40,000/105%) 38,095
1,905
Bonuses
5. Alder, Benson, and Carl are capitalist partners and Denver, an industrial partner. The
partnership reported a net loss of P100,000. How much is the share of Denver in the
reported net loss?
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0
The partnership agreement of Donn, Eddy, and Farr provides for annual distribution of profit
and loss on the following sequence:
· Donn, the managing partner, receives a bonus of 10% of profit.
· Each partner receives 6% interest on average capital investment.
· Residual profit or loss is divided equally.
Average capital investments for 20CY were:
Donn P80,000
Eddy 50,000
Farr 30,000
What portion of the 100,000 partnership profit for 20CY should be allocated to Farr?
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28,600
6. Partners R and S share profits 3:1 after annual salary allowances of 40,000 and 60,000,
respectively; however, if profits are not adequate to meet the salary allowances, the entire
profit is to be divided in the salary ratio. Profits of 90,000 were reported for the year Year
2. In Year 1, it is ascertained that in calculating net income for the year ended December
31, Year 2, depreciation was overstate by 36,000 and ending inventory was overstated by
8,000.
The adjustment to the capital of R and S amounted to
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P17,500 P10,500
PARTNERSHIP DISSOLUTION
Addition by purchase
1. The following information pertains to ABC Partnership of Amor, Bing, and Cora:
Amor, capital (20%) 200,000
Bing, capital (30%) 200,000
Cora, capital (50%) 300,000
On this date, the partners agreed to admit Dolly into the partnership.
Assuming Dolly purchased fifty percent of the partners’ capital and pays 500,000 to the
old partners, how would this amount be distributed to them?
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Amor Bing Cora
Interest purchased (1/2) 100,000 100,000 150,000
Excess payment (150,000)

P&L 30,000 45,000 75,000
Total 130,000 145,000 225,000
A new partner may be admitted to the partnership by acquiring all or part of the capital
interest of one or more existing partners in exchange for some consideration. The
partnership records the redistribution of capital interest by transferring all or a portion
of the seller’s capital to the new partner’s capital account but does not record the
transfer of any asset. Any difference between the amounts paid by the new partner, which
is not recorded in the books of the partnership is allocated to the selling partners based
on their profit or loss ratio.
2. Ranken purchases 50% of Lark’s capital interest in the K and L partnership for 22,000. If
the capital balances of Kim and Lark are 40,000 and 30,000, respectively. Ranken’s
capital balance following the purchase is?
General Feedback
15,000
When a new partner deals directly with an existing partner or partners rather than with the
partnership entity, the acquisition price is paid to the selling partner/s and not to the partnership
itself. The partnership records the redistribution of capital interests by transferring all or a
portion of the seller’s capital to the new partner’s capital account but does not record the
transfer of any asset or consideration.
3. admission of a partner by purchase of interest is a-
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personal transaction between the selling partner and the buying partner
4. Partnership is said to be dissolved when a-
new partners is admitted in an existing partnership

partner dies
partner retires
any of the above
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any of the above
5. The following instances may dissolve the partnership except-
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change in partnership name
6. When a new partner is admitted in an existing partnership either by purchase of interest

or by investment, which of the following statement is true?
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the partnership’s non-cash assets should be adjusted to conform with their fair market
values
7. If revaluation is traceable to the previous partners, it is
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Allocated among the previous partners according to their original profit and loss sharing
percentages.
8. The following balance sheet is presented for the partnership of A, B, and C, who share
profits and losses in the respectively ratio of 5:3:2.
_____Assets_____ Liabilities and Capital
Cash 120,000 Liabilities 280,000
Other
assets 1,080,000 A, capital 560,000
B, capital 320,000
C, capital 40,000
Total 1,200,000 Total 1,200,000
Assume that the assets and liabilities are fairly valued on the balance sheet, and the
partnership decided to admit D as a new partner with a one-fifth interest and no goodwill or
bonus is to be recorded. How much should D contribute in cash or other assets?
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Total capital of the old partnership

(560,000 + 320,000 + 40,000) 920,000
Divide by profit and loss (old partnership) 4/5
Total capital of the new partnership 11,500
Multiply by profit and loss of D 1/5
Required contribution by D 230,000
If the book value of the original partnership’s net assets approximates fair market value
or no bonus, no goodwill to be recognized, the incoming partner’s contribution would be
expected to be equal to the portion of the equity that the new partner is acquiring.
\
9. Ranken purchases 50% of Lark’s capital interest in the K and L partnership for P22,000.
If the capital balances of Kim and Lark are P40,000 and P30,000, respectively. Ranken’s
capital balance of following the purchase is
General Feedback
15,000
10. A, B and C are partners who shares profits and losses in ratio of 5:3:2, respectively. They
agree to sell D 25% of their respective capital and profits and losses ratio for a total
payment directly to the partners in the amount of 140,000. They agree that goodwill of
60,000 is to be recorded prior to admission of D. the condensed statement of financial
position of the ABC Partnership is presented in the next page.
Cash 60, 000
Non-cash 540, 00
assets
Total 600,000
Liabilities 100, 000
A, Capital 250, 000
B, Capital 150, 000
C, Capital 100, 000
Total 600, 000
The capital of A, B and C, respectively after the payment and admission of D are:
A B C
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A B C
Capital before goodwill P250, 000 P150, 000 P100, 000
Goodwill recorded (60, 000) P/L ratio, 5:3:2 30, 000 18, 000 12,000
Capital after goodwill 280, 000 168, 000 112, 000
Less: 25% purchased by D 70, 000 42, 000 28, 000
Capital after admission of D P210, 000 P126, 000 P84, 000
11. The following condensed balance sheet is presented for the partnership of Alfa and Beda,
who share profits and losses in the ratio of 60:40, respectively:
Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000
Accounts payable 120,000
Alfa, capital 348,000
Beda, capital 232,000
700,000
The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to admit
Capp as a new partner with a 20% interest. No goodwill or bonus is to be recorded. What amount
should Capp contribute in cash or other assets?
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Total capital [(348,000 + 232,000)/80%] 725,000
Capp's interest x 20%
Cash or other assets to be contributed by Capp 145,000
It should be pointed out that the problem clearly state that no bonus or goodwill is to be
recognized, thus the total capital of the old partners was used as the basis in computing
the total capital of the partnership.
12. Presented below is the condensed statement of financial position of the partnership of Go,
Lee and Mao who share profits and losses in the ratio of 6:3:1 respectively:
Cash 85,000
Total 500,000
Liabilities 80,000
Go, Capital 252,000
Lee, capital 126,000

Mao, capital 42,000
Total 500,000
The partners agree to sell Gaw 20% of their respective capital and profit and losses interests
for a total payment of 90,000. The payment by Gaw is to be made directly to the individual
partners. The partners agree that implied goodwill is to be recorded prior to the acquisition by
Gaw. The capital balance of Go, Lee and Mao respectively after admission of Gaw are:
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First compute the implied goodwill as follows:
Total implied goodwill (P90, 000 ÷ 20%) P450, 000
Total capital before admission 420, 000
Goodwill to old partners, 6:3:1 P30, 000
The computation of the capital balances of the old partners are as follows:
Go (P252, 000 + 18, 000) - (20% x 270, 000) = P216, 000
Lee (126, 000 + 9, 000) - (20% x 135, 000) = 108, 000
Mao (42, 000 + 3, 000) - (20% x 45, 000) = 36, 000
13. Partners Andy, Boy and ken sharing profit and loss based on 4:3:2 ratio have the
following condensed statement of financial positions:
Total assets 1,880,000
Liabilities 480,000
Andy, Capital 620,000
Boy, Capital 400,000
Ken, Capital 380,000
Total Liabilities and 1, 880,000

capital
Dondon will be admitted as a new partner for 20% interests after he pays the three partners
with a minimum of 10%. Thus, the old partner will have to transfer to Dondon 20% of their
interests.
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The old partner will have to transfer to Dondon 20% of their total capital of P1, 400, 000 or
P280, 000.
14. N, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The
condensed balance sheet of NXY Partnership as of December 31, Year 1 is:
Cash P 50,000 Liabilities P 40,000
Other
assets 130,000 N, capital 60,000
X, capital 40,000
Y, capital 40,000
Total P180,000 Total P 180,000
All the partners agree to admit Z as a 1/5 partner in the partnership without any bonus. Z
shall contribute assets amounting to
General Feedback
Total partnership capital (140,000/

4/5) 175,000
Multiply by 1/5
Assets to be contributed by Z 35,000
Again, if there is no bonus or goodwill to be recognized, total partnership capital may be

computed using the capital accounts of the old partners as the base, as shown above.
15. Moonbits partnership had a net income of 8,000 for the month ended September 30,
20CY.
Sunshine purchased an interest in the Moonbits partnership of Liz and Dick by paying Liz
32,000 for half of her capital and half of her 50% percent profits shares interests on October
1, 20CY. At this time Liz capital balance was 24,000 and Dick capital balance was 56,000.
Liz should receive a debit to her capital account of:
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Under admission by purchase only the transfer of the capital purchase by the selling partner
(Liz) to the buying partner (sunshine) is recorded. Therefore 50% of the capital of Liz (P24,
000) or P12, 000 is to be debited to her capital account.
16. In admission by purchase of interest, the selling partners may sell their share of
partnership’s interest to the incoming partner at –
book value
less than book value
more than book value
any of the other choices
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any of the other choices
17. In the partnership of A and B with capital balances of 50,000 and 75,000 respectively and
C is admitted by buying 1/2 of B’s interest for 36,000.
General Feedback
B, suffered a personal loss of 1,500
18. When a new partner is admitted to a partnership, an original partner’s capital account
may be adjusted for
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His or her share of previously unrecorded intangible assets traceable to the original
partners.
Accounting changes in the ownership of a partnership is influenced heavily by the legal

concept of dissolution. When there is a change in the ownership structure, the original
partnership is dissolved and most often a new partnership is created. This dissolution
and subsequent creation of a partnership indicate that a new legal entity has been
created and accounting should measure properly the initial contributions of capital
being made to the new partnership.
19. If a new partner acquires a partnership interest directly from the partners rather than from
the partnership itself,
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The existing partner’s capital accounts should be reduced and the new partner’s account
increased.
When a new partner deals directly with an existing partner or partners rather than with the
partnership entity, the acquisition price is paid to the selling partner/s and not to the partnership
itself. The partnership records the redistribution of capital interests by transferring all or a
portion of the seller’s capital to the new partner’s capital account but does not record the
transfer of any asset or consideration.
Addition by investment
1.
Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On
May 1, 2017, their respective capital accounts were as follows:
Blau 60,000
Rubi 50,000
On that date, Lind was admitted as a partner with a one-third interest in capital and profits for
an investment of 40,000. The new partnership began with total capital of 150,000.
Immediately after Lind’s admission, Blau’s capital should be
General Feedback
54,000
2.
In the AD partnership, Allen's capital is 140,000 and Daniel's is 40,000 and they share income in
a 3:1 ratio, respectively. They decide to admit David to the partnership.
Refer to the information provided above. David invests 50,000 for a one-fifth interest. What
amount of goodwill will be recorded?
General Feedback
20,000
3.
Pol and Mall are partners with capitals of 200,000 and 100,000 and sharing profits and losses
3:1 respectively. They agree to admit Kent as partner, Kent invests 150,000 for a 50%
interests in the firm. Pal and Mall transfer part of their capitals to Kent as a bonus.
The capital balances of the partners after Kenth’s admission are:
General Feedback
Total agreed capital (20, 0000 + P100, 000 + P150, 000) P450, 000
Agreed capital of Kent (450, 000 x 50%) P225, 000
Contributed capital of Kent 150,000
Bonus from Pal & Mall, 3:1 to Kent P75, 000
Therefore the capital balances of the partners after admission of Kent are:
Pol (200, 000 - 56, 250) P143, 750
Mall (100, 000 - 18, 750) 81, 250
Kent 225,000
4.
Refer to the information provided above. Allen and Daniel agree that some of the inventory is
obsolete. The inventory account is decreased before David is admitted. David invests 40,000 for
a one-fifth interest. What is the amount of inventory written down?
General Feedback
20,000
5.
The following is the condensed statement of financial position of the partnership Jo, Li and
Bi who share profits and losses in the ratio of 4:3:.3
Cash 180, 000
Other assets 1, 660, 000
Jo, receivables 40, 000
Total 1, 880, 000
Accounts 420, 000

payable
Bi, Loan 60, 000
Jo, capital 620, 000
Li, capital 400, 000
Bi, capital 380, 000
Total 1, 880, 000
Assume that the assets and liabilities are fairly valued on the balance sheet and the
partnership decides to admit Mac as a new partner, with a 20% interests. No goodwill or
bonus is to be recorded. How much Mac should contribute in cash or other assets?
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Total agreed capital of the new partnership (P1, 400, 000 ÷ 80%) P1, 750, 000
Total contributed capital of the old partners 1, 400, 000
Mac's contribution P350, 000
6.
Refer to the information provided above. David directly purchases a one-fifth interest by paying
Allen 34,000 and Daniel 10,000. The land account is increased before David is admitted. By
what amount is the land account increased?
General Feedback
40,000
7.
A summary balance sheet for the McCune, Nall, and Oakley partnership appears below.
McCune, Nall, and Oakley share profits and losses in a ratio of 2:3:5, respectively.
Assets
Cash 50,000
Inventory 62,500
Marketable securities 100,000
Land 50,000
Building-net 250,000
Total assets 512,500
Equities
McCune, capital 212,500
Nall, capital 200,000
Oakely, capital 100,000
Total equities 512,500
The partners agree to admit Pavic for a one-fifth interest. The fair market value of partnership
land is appraised at 100,000 and the fair market value of inventory is 87,500. The assets are to be
revalued prior to the admission of Pavic and there is unrcorded asset amounting to 15,000.
By how much will the capital accounts of McCune, Nall, and Oakley increase, respectively, due
to the revaluation?
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The assets will be valued upward by $90,000 which, allocated on a 2:3:5 basis,
yields $18,000 to McCune, $27,000 to Nall, and $45,000 to Oakely.
8.
Partners Chito and Ditas share profits in the ratio of 6:4 respectively. On December 31, 20CY
their respective capital balances were Chito, 120,000 and Ditas, 100,000. On that date Meng was
admitted as partner of 80,000. The partnership began in 20CY with total capital of 300,000.
Immediately after Meng’s admission, Chito’s capital should be:
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Agreed capital of Meng (300, 000 x 1/3) P100, 000
Contributed capital of Meng 80, 000
Bonus to Meng from Chito & Ditas, 6:4 P20, 000
Therefore, Chito’s capital now would be P108, 000 (120, 000 – 12, 000).
9.
Partners Jay and Kay share profits in the ratio of 6:4 respectively. On December 31, 20CY,
their respective accounts were Jay, 120,000 and Kay, 100,000. On that date, Loi was
admitted as partner with 1/3 interests in capital and profits for an investments of 80,000. The
partnership began in 20CY with a total capital of 360,000. Immediately after Loi’s
admission:
Amount of goodwill to be credited to Loi Jay's capital account would be
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Agreed capital of old partners (P360, 000 x 2/3) P240, 000
Contributed capital of old partners (P120, 000 + P100, 000) 220, 000
Goodwill to old partners, 6:4 P20, 000

Agreed capital of new partner (P360, 000 x 1/3) P120, 000
Contributed capital of new partner 80, 000
Goodwill to new partner P40, 000 (1)
Jay's capital before goodwill P120, 000
Goodwill (P20, 000 x 60%) 12, 000
Jay's capital P132, 000 (2)
10.
Refer to the information provided above. David invests 40,000 for a one-fifth interest in the total
capital of 220,000. What are the capital balances of Allen and Daniel after David is admitted into
the partnership?
General Feedback
137,000 39,000
11.
In the ABC partnership (to which Daniel seeks admittance), the capital balances of Albert,
Bert, and Connell, who share income in the ratio of 5:3:2 are:
Albert 500,000
Bert 300,000
Conell 200,000
Based on the preceding information, what amount of goodwill will be recorded if Daniel
invests P450,000 for a one-third interest?
General Feedback
50,000
12.
Kern and Pate are partners with capital balances of 60,000 and 20,000, respectively. Profits and
losses are divided in the ratio of 60:40. Kern and Pate decided to form a new partnership with
Grant, who invested land valued at 15,000 for a 20% capital interest in the new partnership.
Grant’s cost of the land was 12,000. The partnership elected to use the bonus method to record
the admission of
Grant into the partnership. Grant’s capital account should be credited for
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19,000
13.
a 3:1 ratio, respectively. They decide to admit David to the partnership
Refer to the information provided above. David invests P40,000 for a one-fifth interest in the
total capital of 220,000. The journal to record David's admission into the partnership will
include:
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a debit to Allen, Capital for 3,000.
14.
Admission of a new partner by investment will
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increase both the asset and capitalization of the partnership
15.
When a new partner is admitted into a partnership and the new partner receives a capital
credit greater than the tangible assets contributed, which of the following explains the
difference?
I. The old partners' goodwill is being recognized.
II. The new partner's goodwill is being recognized.
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II only
16.
May 1, 20CY, their respective capital accounts were as follows:
Blau P60,000
Rubi 50,000
On that date, Lind was admitted as a partner with one-third interest in capital, and profits for
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Contributed Agreed Increase

Capital Capital (Decrease)
Old
partners P 110,000 P 100,000 (P10,000)
New
partner 40,000 (1/3) 50,000 10,000
Total P 150,000 P 150,000 –
Blau's capital before admission of Lind P 60,000
Less share in bonus to Ling (10,000 x 60%) 6,000
Blau's capital after admission of Lind P 54,000
When a partnership is in urgent need of additional funds or the partners may desire the
services of a certain individual, a new partner may be admitted with the provision that
(a) part of the capitals of the old partners shall be allowed as a bonus to the new partner,
or (b) goodwill shall be established and credited to the new partner.
When the total contributed capital is equal to the agreed capital, there is bonus. In this
case, the amount by which the interest allowed to the new partner exceeds his investment
may be considered as bonus contributed by the old partners. The bonus is deducted from
the capitals of the old partners based in their original profit and loss ratio.
17.
May 1, 2017, their respective capital accounts were as follows:
Blau 60,000
Rubi 50,000
On that date, Lind was admitted as a partner with a one-third interest in capital and profits for
General Feedback
54,000
18.
In the ABC partnership (to which Daniel seeks admittance), the capital balances of Albert,
Bert, and Connell, who share income in the ratio of 5:3:2 are:
Albert 500,000
Bert 300,000
Conell 200,000
Based on the preceding information, if no goodwill or bonus is recorded, how much should
Daniel invest for a 20 percent interest?
General Feedback
P250,000
19.
The capital account for the partnership of Lucas and Mateo at October 31, 20CY are as
follows:
Lucas, 80, 000
capital
Mateo, 40, 000

capital
The partners share profits and losses in the ratio of 6:4 respectively.
The partnership is in desperate need of cash, and the partners agree to admit Naron as a
partner with one-third in the capital and profits and losses upon his investment of 30,000.
Immediately after Naron’s admission, what should be the capital balance of Lucas, Mateo
and Naron respectively. Assuming goodwill is not to be recognized?
General Feedback
Under the bonus method the total contributed capital (P120, 000 + 30, 000) is equal to the
total agreed capital after admission of Naron therefore:
Total agreed capital P150, 000
Naron's interests 1/3
Agreed capital of Naron P50, 000
Contributed capital of Naron 30, 000
Bonus to Naron from Lucas and Mateo, 6:4 P20, 000
The new capital balances now would be:

Lucas (80, 000 - 12, 000) P68, 000
Mateo (40, 000- 8, 000) 32, 000
Naron 50, 000
20.
Partners Alba, Basco and Castro share profits and losses 50:30:20, respectively. The
statement of financial position at April 30, 2013 follows:
Cash 40, 000
Other assets 360, 000
Total 400, 000
Accounts 100, 000

payable
Alba, 74, 000

Capital
Basco, 130, 000

Capital
Castro, 96, 000

Capital
Total 400, 000
The assets and liabilities are recorded and presented at their respective fair values, Jocson is
to be admitted as a new partner with a 20% capital interests and a 20% share of profits and
losses in exchange for a cash contribution. No goodwill or bonus is to be recorded. How
much cash should Jocson contribute?
General Feedback
Total agreed capital (300, 000 ÷ 80%) P375, 000
Total contributed capital of the old partners 300, 000
Jocson contribution P75, 000
21.
Dunn and Grey are partners with capital account balances of 60,000 and 90,000, respectively.
They agree to admit Zorn as a partner with one-third interest in capital and profits, for an
investment of 100,000, after revaluing the assets of Dunn and Grey. Under the Goodwill method,
goodwill to the original partners should be
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Old partners P 150,000 P 200,000 P 50,000
New partner 100,000 (1/3) 100,000 –
Total P 250,000 P 300,000 P 50,000

When partnership has operated with considerable success, the partners may admit a new
partner with the provision that (a) part of the new partners’ investment shall be allowed
as a bonus to the old partners, or (b) partnership goodwill shall be established and
credited to the old partners. When the total agreed capital is more than the contributed
capital, there is goodwill. Since the combined capitals of the old partners was increase to
P200,000, the increase in capital of P50,000 should be recognized as goodwill and
distributed to them using their original profit and loss ratio.
22.
Assets
Cash 50,000
Inventory 62,500
Land 50,000
Equities
How much cash must Pavic invest to acquire a one-fifth interest?
General Feedback
After the revaluation, the assets will be recorded at $602,500. If Pavic is admitted for a one-fifth
interest, the $602,500 represents 80% of the total implied capital. Dividing $602,500 by 80%
gives a total capitalization of $753,150 for which $150,625 is required from Pavic for a 20%
interest.
23.
Roy admits Al as a partner in the business. Balance sheet accounts of Roy on September 30,
just before admission of Al show:
Cash 15, 600
Accounts Receivable 72, 000
Merchandise Inventory 108, 000
Accounts Payable 37, 200
Roy, Capital 158, 400
It is agreed that for purposes of establishing Roy’s interest, the following adjustments shall
be made:
· An allowance for doubtful accounts of 2% is to be established
· Merchandise inventory is to be valued at 121,200
· Prepaid expenses of 2,100 and accrued expenses of 2,400 are to be recognized.
Al is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Al’s
investment to the partnership?
General Feedback
84,930
24.
Carlos and Deo are partners who share profits and losses ratio of 7:3, respectively. On
October 5, 20CY, their respective capital accounts were as follows:
Carlos 35, 000
Deo 30, 000

On that date they agreed to admit Sotto as a partner with a one-third interests in the capital
and profits and losses, and upon his investment of 25,000. The new partnership will begin
with a total capital of 90,000. Immediately after Sotto’s admission, what are the capital
balances of Carlos, Deo and Sotto, respectively?
General Feedback
The requirement is the balances in the capital accounts of a partnership after the admission of
a new partner. In this case the new partner is investing P25, 000 for a one-third interests in
the new capital of P90, 000. This means that a bonus of P5, 000 [(1/3) (P90, 000) – 25, 000]
being credited to the new partner for contribution of some intangible element in addition to
his tangible contribution. The bonus to the new partner is charged to the old partner in their
profit and loss ratio.
Carlos [P35, 000 - 7/10 (P5, 000] P31, 500
Deo [P30, 000 - 3/10 (P5, 000] 28, 500
Sotto [ P90, 000 ÷ 3)] 30, 000
25.
Refer to the information provided above. David directly purchases a one-fifth interest by paying
Allen 34,000 and Daniel 10,000. The land account is increased before David is admitted. By
what amount is the land account increased?
General Feedback
40,000
26.
Refer to the information provided above. What amount will David have to invest to give him
one-fifth percent interest in the capital of the partnership if no goodwill or bonus is recorded?
General Feedback
45,000
27.
A condensed statement of financial position for Alba, Barba and Clara appears below. For
Alba, Barba and Clara share profits and losses in ratio of 2:3:5, respectively.
Assets
Cash 100,000
Inventory 125,000
Marketable 200,000
Securities
Land 100,000
Building- net 500,000
Equities
Alba, capital 425,000
Barba, capital 400,000
Clara, capital 200,000
The partners agreed to admit Darna. The fair market value of the land is appraised at 20,000
and the market value of the marketable securities is 250,000. The assets are to be revalued
prior to the admission of Darna and there is 30,000 goodwill that attaches to the old
partnerships
How much cash will Darna have to invest to acquire a (1) one-fifth interest or a (2) four-fifth
interest?
General Feedback
Total capital before adjustments P1, 025, 000
Adjustments:
Land P100, 000
Marketable securities 50, 00
Goodwill 30, 000 180, 000
Total capital before admission P1, 205, 000

1) (P1, 025, 000 ÷ 4/5) x 1/5= P301, 250
P4, 280, 000

2) (P1, 025, 000 ÷ 1/5) x 4/5=
28.
Pol and Loc are partners with capitals of 200,000 and 100,000 and sharing profits and losses
3:1 respectively. They agree to admit Chic as partners. Chic invests 125,000 for a 25%
interests in the firm. Parties agree that the total firm capital after Chic’s admission is to be
425,000.
The capital balances of the partners after Chic’s admission are:
General Feedback
Agreed capital of chic (425, 000 x 25%) P106, 250
Contributed capital of Chic 125, 000
Bonus to Pol and Loc, 3:1 P18, 750
Therefore the capital balances of the partners after admission of Chick are:
Pol (P200, 000 + 14 , 062.50) P214, 062.50
Loc (P100, 000 + 4, 687.50) 104, 687.50
Chic 106, 250.00
29.
Fernando and Jose are partners with capital balances of 30,000 and 70,000, respectively.
Fernando has a 30% interest in profits and losses. All assets of the partnership are at fair market
value except equipment with book value of 300,000 and fair market value of 320,000. At this
time, the partnership has decided to admit Rosa and Linda as new partners. Rosa contributes cash
of 55,000 for a 20% interest in capital and a 30% interest in profits and losses. Linda contributes
cash of 10,000 and an equipment with a fair market value of 50,000 for a 25% interest in capital
and a 35% interest in profits and losses. Linda is also bringing special expertise and clients
contact into the new partnership.
General Feedback

Old partners P 100,000 P 151,250 P 51,250
(45%)123,
New partners 115,000 750 8750
Total P 215,000 P 275,000 P 60,000
Total increase in capital 60,000
Less undervalued equipment (320,000 - 300,000) 20,000
Balance 40,000
Goodwill to Linda 8,750
Goodwill to original partners 31,250
Again, when there is a difference between the book value and fair market value of the
partnership when new partners are admitted, the goodwill method revalues assets to
market value. Ordinarily, to determine the new capital of the partnership, capital of the
partnership, contributed capital of the new partner may be divided by his interest in
capital. In this case, where Linda will be provided with goodwill for bringing her
expertise and clients contact to the partnership, the capital of Rosa was used instead,
because it serves as concrete basis with no goodwill involved, in determining the new
capital of the partnership. Thus, the new capital of the partnership is P275,000
(55,000/20%).
30.
Assets
Cash 50,000
Inventory 62,500
Land 50,000
Equities
What will the profit and loss sharing ratios be after Pavic’s investment?
General Feedback
Each of the original partners has given up 20% of their interest to Pavic. Their
profit and loss sharing ratios will therefore be 80% of what they were before
the admission of Pavic.
McCune 20% x 80% = 16%
Nall 30% x 80% = 24%
Oakely 50% x 80% = 40%
Pavic = 20%
Expressed as: 4:6:10:5
31.
When a new partner is admitted into a partnership and the new partner receives a capital
credit greater than the tangible assets contributed, which of the following explains the
difference?
1. I. The old partners' goodwill is being recognized.
II. The new partner's goodwill is being recognized.
General Feedback
II only
32.
Mitz, Marc and Mart are partners sharing earnings in the ratio of 5:3:2 respectively. As of
December 31, Year 1, their capital balance showed P95, 000 for Mitz, P80, 000 for Marc,
P60, 000 for Mart.
On January 1, Year 2 the partnership admitted Vince as a partner and according to the
partnership agreements, Vince will contribute P80, 000 in cash to the partnership and will
also pay P10, 000 for 15% of Marc’s share. Vince will share 20% in the earnings while ratio
of the original partners will remain proportionately the same as before Vince admission.
After Vince’ admission, the total capital of the partnership will be P330, 000 while Vince’
capital account will be P70, 000.
The balance of Marc’s capital account after the admission of Vince would be:
General Feedback
Mitz Marc Mart Vince
Capitals before admission P95, 000 P80, 000 P60, 000 -
Admission of Vince:
By purchased (80, 000 x 15%) - (12, 000) - P12, 000
By investment - - - 80, 000
Capital balances 95, 000 68, 000 P60, 000 92, 000
Goodwill to old partners, 5:3:2 7, 500 4, 500 3, 000 -

(P330, 000 - 315 , 000)
Bonus to old partners, 5:3:2 11, 000 6, 600 4, 400 (22, 000)
(P92, 000 - 70, 000)
Capital after admission P113, 500 P79, 100 P67, 400 P70, 000
33.
The capital balances in DEA Partnership are: D, capital 60,000; E, capital 50,000; and A, capital
40,000 and income ratios are: 5:3:5, respectively. The DEAR Partnership is formed by admitting
R to the firm with cash investment of 60,000 for a 25% interest in capital. What is the amount of
bonus to be credited to A capital in admitting R?
General Feedback
Contribut
ed Agreed Increase
Old
partners 150,000 157500 7,500
New
partners 60,000 52,500 (7,500)
Total 210,000 210,000 –
Bonus to A (7,500 x 20%) 1,500
Under the bonus method of admitting a new partner into the partnership, the total
contributed capital (including that of the new partner) is equal to the new partnership
capital. Accordingly, any bonus to the old partners shall be allocated using their old
profit and loss ratio.
34.
When bonus is given to the old partners-
old partners’ capital accounts are credited
the bonus is divided based on p/l ratio
new partners’ capital account is debited
General Feedback
all the choices are correct
35.
On June 30, 20CY, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm
together with their respective profit and loss sharing percentage, was as follows:
Assets, net of
liabilities 320,000
Eddy, capital (50%) 160,000
Fox, capital (30%) 96,000
Grimm, capital (20%) 64,000
320,000
Assume that Hamm is admitted as a new partner with a 25% interest in the capital of the new
partnership for a cash payment of 140,000, total goodwill implicit in the transaction is to be
recorded.
Immediately after admission of Hamm, Eddy’s capital account balance should be
General Feedback

Old partners P 320,000 P 420,000 P 100,000
New partner 140,000 (25%) 140,000
Total P 460,000 P 560,000 P 100,000
Eddy's capital
before goodwill P 160,000
Share in goodwill 50,000

(50% x 100,000)
Eddy's capital after

goodwill P 210,000
Again, goodwill is the excess of total agreed capital over the contributed capital. In this
case, the amount of P100,000 represents goodwill to old partners, which will be divided
based on their respective profit and loss ratio.
36.
Ell and Emm are partners sharing profits 60% and 40% respectively. On January 1, Ell and
Emm decided to admit Enn as a new partner upon his investment of 8,000. On this date, their
interests in the partnership are as follows: Ell, 11,500; Emm, 9,300.
Assuming that the new partner is given a 1/3 interests in the firm, with bonus being allowed
the new partner, the new capital balances of Ell, Emm and Enn, respectively would be:
General Feedback
Total agreed capital (11, 500+ 9, 300 + 8, 000) P28, 800
Enn's interests 1/3
Agreed capital of Enn P9, 600
Contributed capital of Enn 8, 000
Bonus to Enn from Ell & Emm, 6:4 P1, 600
The new partner’s capital balances are:

Ell (P11, 500 - 960) P10, 540
Emm (9, 300 - 640) 8, 660
Enn 9, 600
37.
Which of the following best characterizes the bonus method of recording a new partner’s
investment in a partnership?
General Feedback
Under the bonus method, total contributed capital of the old and new partner is equal to
the total agreed capital (total capital of the new partnership).
Assuming that recorded assets are properly valued, the book value of the new partnership
is equal to the book of the previous partnership and the investment of the new partner.
38.
When a new partner is admitted into a partnership and the capital of the old partners
decreases, which of the following explains the reason for the decrease?
I. Undervalued liabilities were written up to their fair values.
II. II. Undervalued assets were written up to their fair values.
General Feedback
I only
39.
When the old partners receive a bonus upon admission of a new partner into a partnership,
the bonus is allocated to:
I. all the partners in their profit and loss sharing ratio.
II. the existing partners in their profit and loss sharing ratio.
General Feedback
II only
40.
Refer to the information provided above. Allen and Daniel agree that some of the inventory is
obsolete. The inventory account is decreased before David is admitted. David invests 40,000 for
a one-fifth interest. What are the capital balances of Allen and Daniel after David is admitted
into the partnership?
General Feedback
125,000 35,000
41.
NN, OO and PP are partners with present capital balances of 50,000, 60,000 and 20,000,
respectively. The partners share profits and losses according to the following percentages;
60% for NN, 20% for OO, and 20% for PP, QQ is to join the partnership upon contributing
20,000 cash, plus a machine with a fair market value of 40,000 to the partnership in exchange
for a 25% interests in the capital and a 20% interests in the profits and losses. The existing
assets of the original partnership are undervalued by 22,000. The original partners will share
the balances of profits and losses in their original ratios.
Calculate the capital balances of each partner in the new partnership using goodwill method.
NN OO PP QQ
General Feedback
Total capital before adjustments P130, 000
Under evaluation of assets 22, 000
Total capital before admission P152, 000
Contributed capital of QQ 60, 000
Total contributed capital 212, 000
Total agreed capital (P60, 000 /25%) 240, 000
Goodwill P28, 000
NN OO PP QQ
Capital balances before adjustments P50, 000 P60, 000 P20, 000 P-
Under evaluation of assets, P22, 000 13, 200 4, 400 4, 400
QQ's contribution (P20, 000 + P40, 000) 60, 000
Goodwill to old partners, P28, 000 16, 800 5, 600 5, 600 -
Capital balances after admission P80, 000 P70, 000 P30, 000 P60, 000
42.
In the AD partnership, Allen's capital is
140,000 and Daniel's is 40,000 and they
share income in a 3:1 ratio, respectively.
They decide to admit David to the
partnership.
If A is the total capital of a partnership

before the admission of a new partner, B
is the total capital of the partnership
after the admission of the new partner, C
is the amount of the new partner's
investment, and D is the amount of
capital credited to the new partner, then
there is:
General Feedback
a bonus to the new partner if B = A + C
and D > C.
43.
partnership.
Refer to the information provided

above. David directly purchases a one-
fifth interest by paying Allen 34,000 and
Daniel 10,000. The land account is
increased before David is admitted.
What are the capital balances of Allen
and Daniel after David is admitted into
the partnership
Allen Daniel
General Feedback
170,000 50,000
44.
partnership.
Refer to the information provided

above. Allen and Daniel agree that some
of the inventory is obsolete. The
inventory account is decreased before
David is admitted. David invests 40,000
for a one-fifth interest. What are the
capital balances of Allen and Daniel
after David is admitted into the
partnership?
General Feedback
125,000 35,000
45.
Ace, Boy and Cid are partners sharing profits in the ratio of 3:3:2. On July 31, their capital
balances are as follows:
Ace 700, 000
Boy 500, 000
Cid 400, 000
The partners agree to admit Doe on the following agreement:

1. Deo is to pay Ace 500,000 for ½ interests of Ace’s interests.
2. Deo is also to invest 400,000 in the partnership
3. The total capital of the partnership is to be 2,400,000 of which Deo’s interests is to be 25%
What are the capital balances of the partners after the admission of Deo?
Ace Boy Cid
General Feedback
Ace Boy Cid Deo

Capital balances before P700, 000 P500, 000 P400, 000 P-
admission of Deo
Admission of Deo:
By purchase from Ace (1/2) (350, 000) 350, 000
By investment
Capital balances P350, 000 P500, 000 400, 000 750, 000
Goodwill to old partners, 3:3:2, 206, 250 206, 250 137, 500 -
P550, 000
Goodwill to net partner, P200, 200, 00

000
Capital balances after admission P556, 250 P706, 250 P537, 500 P950, 000
Goodwill computation:
Total agreed capital of the new partnership P2, 400, 000
Total contributed capital (P350, 000 + P500, 000 + 400, 000 + 750, 000) 1, 650, 000
Goodwill P750, 000
To new partner [P2, 400, 000 x 1/4) - P400, 000] 200, 000
P550, 000
To old partner
46.
Partnership A has an existing capital of 70,000. Two partners currently own the partnership and split profits 50/50. A
new partner is to be admitted and will contribute net assets with a fair value of 90,000. For no goodwill or bonus
(depending on whichever method is used) to be recognized, what is the interest in the partnership granted the new
partner?
General Feedback
Capital contributed by the new partner 90,000
Divide by total contributions (70,000 +

90,000) 160,000
New Partner's interest 56.25%
47.
Kern and Pate are partners with capital balances of 60,000 and 20,000, respectively. Profits and losses are divided in
the ratio of 60:40. Kern and Pate decided to form a new partnership with Grant, who invested land valued at 15,000
for a 20% capital interest in the new partnership. Grant’s cost of the land was 12,000. The partnership elected to use
the bonus method to record the admission of
Grant into the partnership. Grant’s capital account should be credited for
General Feedback
19,000
48.
A condensed statement of financial position for Alba, Barba and Clara appears below. For
Alba, Barba and Clara share profits and losses in ratio of 2:3:5, respectively.
Assets
Cash 100,000
Inventory 125,000
Marketable 200,000
Securities
Land 100,000
Building- net 500,000
Equities
Alba, capital 425,000
Barba, capital 400,000
Clara, capital 200,000
The partners agreed to admit Darna. The fair market value of the land is appraised at 20,000
and the market value of the marketable securities is 250,000. The assets are to be revalued
prior to the admission of Darna and there is 30,000 goodwill that attaches to the old
partnerships
How much cash will Darna have to invest to acquire a (1) one-fifth interest or a (2) four-fifth
interest?
General Feedback
Total capital before adjustments P1, 025, 000
Adjustments:
Land P100, 000
Marketable securities 50, 00
Goodwill 30, 000 180, 000
Total capital before admission P1, 205, 000
1) (P1, 025, 000 ÷ 4/5) x 1/5= P301, 250
P4, 280, 000

2) (P1, 025, 000 ÷ 1/5) x 4/5=
49.
If A is the total capital of a partnership before the admission of a new partner, B is the total
capital of the partnership after the admission of the new partner, C is the amount of the new
partner's investment, and D is the amount of capital credited to the new partner, then there is:
General Feedback
a bonus to the new partner if B = A + C and D > C.
50.
When the bonus formula indicates that there is bonus to be given to old partners-
General Feedback
the new partners’ capital account will be debited
Reduction of partner by retirement/withdrawal/death
Lina, Mina and Nina were partners with capital balances on January 2, Year 4 of 300,000,
200,00 and 100,000 respectively. On July 1, Year 4 Lina retires from the partnership. On that
date of retirement the partnership net loss is 60,000 and the partners agreed that certain assets
is to be revalued at 80,000 from its original cost of 50,000. The partners agreed to further to
pay Lina 225,000 in settlement of her interests. The remaining partners continue to operate
under a new partnership, MN partnership.
What is the total capital of MN partnership?

P345, 000
Lina Mina Nina
Capital balances P300, 000 P200, P100, 000

000
Net loss (30, 000) (20, 000) (10, 000)
Under evaluation of asset, 15, 000 10, 000 5, 000

P30, 000
Total 285, 000 190, 000 95, 000
Settlement (225, 000)
Bonus to Mina and Nina, 2:1 (60, 000) 40, 000 20, 000
Capital balances P230, P115, 000

000
Total capital (P230, 000 + P345,

P115, 000) 000
1.
Dizon’s share of the partnership profit and losses was 20%. Upon withdrawing from the partnership he was paid
74,000 in final settlement for his interests. The total of the partner’s capital account before recognition of partnership
goodwill prior to Dizon’s withdrawal was 210,000. After his withdrawal the remaining partner’s capital accounts,
excluding their share of goodwill, totalled 160,000. The implied goodwill of the firm was:
General Feedback
Partnership capital before withdrawal by Dizon P210, 000
Less partnership capital after withdrawal (excluding goodwill) 160, 000
Book value of Dizon's interest P50, 000
Price paid Dizon for 20% interests P74, 000
Less book value of interest 50, 000
Implied goodwill on 20% interest P24, 000
Implied goodwill on entire firm (P24, 000 ÷ 20%) P120, 000
2.
On June 30, Year 2, the balance sheet for the partnership of Coll, Maduro, and Prieto,
together with their respective profit and loss ratios, were as follows:
Assets, at cost 180,000
Coll, loan 9,000
Coll, capital (20%) 42,000
Maduro, capital (20%) 39,000
Prieto, capital (60%) 90,000
Total 180,000
Coll decided to retire from the partnership. By mutual agreement, the assets are to be
adjusted to their fair value of 216,000 at June 30, Year 2. It was agreed that the partnership
would pay Coll 61,200 cash for Coll’s partnership interest, including Coll’s loan which is to
be repaid in full. After Coll’s retirement, what is the balance of Maduro’s capital account?
General Feedback
Coll Maduro Prieto
Capital balances before Retirement of Coll P42,000 P39,000 P 90,000
Coll, loan 9,000
Adjustment of assets 2:2:6 (216,000 - 180,000) 7,200 7,200 21,600
Total interest 58,200 46,200 111,600
Less payment to Coll 61,200
Balance (3,000) 46,200 111,600
Bonus to Coll 2:6 3,000 (750) (2,250)
Capital balances after Retirement of Coll P 0 P45,450 P109,350
Again, when partner withdraws from a partnership, adjustment of assets to its fair
market value should be made. Total interest of the withdrawing partner must be
determined and be compared with the amount paid. Since the problem stated that the
withdrawing partner is selling his interest to the partnership and no goodwill is to be
recorded, the resulting difference between the total interest and the amount paid
represents the bonus provided by the remaining partners to the withdrawing partner.
3.
Which of the following could be possible cause for dissolution with liquidation of the partnership business?
General Feedback
insolvency of the partnership
4.
Rita, Sisa and Tina are partners with capital balances on June 30, Year 4 of 60,000, 60,000
and 40,000, respectively. Profits and losses are share equally. Tina withdraws from the
partnership. The partners agree that Tina is to take certain furniture at their hand value of
2,400 and cash for the balance of her interests. The furniture is carried on the books as fully
depreciated.
The amount of cash to be paid to Tina and the capital balances of the remaining parftners
after the retirement of Tina are:
Cash Rita Sisa
Capital Capital
General Feedback
Rita Sisa Tina
Capital balances P60, 000 P60, 000 P40, 000
Adjustment of furniture, P2, 400 800 800 480
Total interest P60, 800 P60, 800 P40, 800
Settlement: Furniture (2, 400)
Cash P38, 400
5.
The trial balance of Nimpha, Esther, and Rebecca, on December 31, Year 4, is as follows:
Cash 54,990
Other assets 25,000
Receivable from Nimpha 2,500
Merchandise inventory, Jan 1 Year 4 10,500
Purchases 33,500
Expenses 13,510
6% Note payable to Nimpha, dated June 1 Year

4 6,000
Sales 66,000
Rental income 1,100
Nimpha, capital 23,220
Esther, capital 26,780
Rebecca, capital 16,900
Total 140,000 140,000
Merchandise inventory on December 31, Year 4, amounts to 9,100; accrued interest on the
note payable to Nimpha is to be recognized as of December 31. Nominal accounts are closed
and 31,500 is paid for Nimpha’s net interest in the firm (capital, receivable, and payable
balances). A few days later, Esther accepts a personal check for 32,000 from Rebecca to quit
the business and allow Rebecca to continue operations as a sole proprietor. The partners
share profit and losses equally.
Compute the ending capital balance of Rebecca immediately after Esther’s withdrawal
General Feedback
56,490
6.
Maxwell is trying to decide whether to accept a salary of 40,000 or salary of 25,000 plus a bonus of 10% of net
income after salaries and bonus as a means of allocating profit among partners. Salaries traceable to the other partners
are estimated to be 100,000. What amount of income would be necessary so that Maxwell would consider choices to
be equal?
General Feedback
290,000
7.
Cen, Deng and Lala are partners with capital balances on 31 December 20CY of 300,000, 300,000 and 200,000
respectively. Profits are shared equally. Lala wishes to withdraw and it is agreed that she is to take certain furniture
and fixture with second hand value of 50,000 and a note for the balance of her interests. The furniture and fixtures are
carried in the books at 65,000. Brand new, the furniture and fixtures may cost 80,000. Lala’s acquisition of the second-
hand furniture will result to:
General Feedback
Book value of the furniture and fixtures P65, 000

Second hand value 50, 000
Loss (reduction) to be shared by Cen, Deng, Lala, equally P15, 000
Reduction in capital of 5, 000 each for Cen, Deng and Lala
8.
In May 20CY, Imelda, a partner of an accounting firm, decided to withdraw when the
partners’ capital balances were: Mikee, 600,000; Raul, 600,000; and Imelda. 400,000. It was
agreed that Imelda is to take the partnership’s fully depreciated computer with a second hand
value of 24,000 that cost the partnership 36,000. If profits and losses are shared equally, what
would be the capital balances of the remaining partners after the retirement of Imelda?
__Mikee __Raul_
__ _
General Feedback
Mikee Raul
Capital balances before withdrawal 600,000 600,000
Distribution of gain or realization

(24,000/3) 8,000 8,000
Capital balances after withdrawal 608,000 608,000
When a partner withdraws, he may receives an amount equal, more than or less than his
interest. The interest of the withdrawing partner is measured by his capital balances
adjusted by the distribution of profit or loss from operations, and changes in valuation of
all assets and liabilities. Thus, their capital balances will be increased by their respective
share in the realization of noncash asset with a fair value different from its book value at
the date of withdrawal.
9.
Which of the following will cause the partnership to be dissolved but will continue to operate?
when a partner dies

when a partner retires
when a partner withdraws
General Feedback
all of the above
10.
Pastor, Ramon and Sendong were partners with capital balances as of January 1, 20CY of
100,000, 150,000 and 200,000 respectively, sharing profit and losses on a 5:3:2 ratio
On July 1, 20CY Pastor withdraw from the partnership. Partners agreed that at the time of
withdrawal, certain inventories had to be revalued at 70,000 from its cost of 50,000. For the
six month period ending June 30, 20CY, the partnership generated a net income of 140,000.
Further, partners agreed to pay Pastor 195,000 for his interests and that the remaining
partner’s capital account would be adjusted for whatever goodwill the settlement would
generate. The payment to Pastor included a goodwill of:
General Feedback
Pastor's capital before his retirement P100, 000
Under evaluation of Inventory (P20, 000 x 50%) 10, 000
Profit share (P140, 000 x 50%) 70, 000
Pastor's interest P180, 000
Settlement 195, 000
Goodwill P15, 000
11.
When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill’s interest exceeded
Mill’s capital balance. Under the bonus method, the excess
General Feedback
Reduced the capital balances of Yale and Lear.
12.
Which of the following adjustments in the partnership books are needed in an event the
partner dies?
fair value of the non-cash asset at the time of death
accrued items for both receivable and payable
prepayment of expenses and pre-collection of income
General Feedback
all of the above
13.
Dizon’s share of the partnership profit and losses was 20%. Upon withdrawing from the partnership he was paid
74,000 in final settlement for his interests. The total of the partner’s capital account before recognition of partnership
goodwill prior to Dizon’s withdrawal was 210,000. After his withdrawal the remaining partner’s capital accounts,
excluding their share of goodwill, totalled 160,000. The implied goodwill of the firm was:
General Feedback
Partnership capital before withdrawal by Dizon P210, 000
Less partnership capital after withdrawal (excluding goodwill) 160, 000
Book value of Dizon's interest P50, 000
Price paid Dizon for 20% interests P74, 000
Less book value of interest 50, 000
Implied goodwill on 20% interest P24, 000
Implied goodwill on entire firm (P24, 000 ÷ 20%) P120, 000
14.
Davis has decided to retire from the partnership of Davis, Eiser, and Foreman. The partnership
will pay Davis P200,000. Goodwill is to be recorded in the transaction as implied by the excess
payment to Davis. A summary balance sheet for the Davis, Eiser, and Foreman partnership
appears below. Davis, Eiser, and Foreman share profits and losses in a ratio of 1:1:3,
respectively.
Assets
Cash 75,000
Inventory 82,000

Land 150,000
Equities
Davis, capital 160,000
Eiser, capital 140,000
Foreman, capital 300,000
What partnership capital will Eiser have after Davis retires?
General Feedback
180,000
15.
On June 30, 20CY the balance sheet for the partnership of Cruz, Merced and Prieto, together
with their respective profit and loss ratio, were as follows:
Assets, at cost 180, 000
Cruz, loan 9, 000
Cruz, capital (20%) 42, 000
Merced, capital (20%) 39, 000
Prieto, capital (60%) 90, 000
180, 000
Cruz had decided to retire from the partnership. By mutual agreement, the assets are to be
adjusted to their fair value of 216,000 at June 30, 20CY. It was agreed that the partnership
would pay Cruz 61,200 cash for Cruz’s partnership interests, including Cruz’s loan which is
to be repaid in full. No goodwill is to be recorded. After Cruz’s retirement, what is the
balance of Merced capital account?
General Feedback
The requirement is the balance is Merced’s capital account after Cruz’s retirement. When a
partner withdraws from a partnership a determination of a fair market value of the entity
must be made. Since it is stated in the problem that the withdrawing partner is selling his
interest to the partnership and that no goodwill is to be recorded, the bonus method must be
employed after restatement of assets to FMV. The capital accounts after restatement to FMV
would be:
Cruz [P42, 000 + 20% (P216, 000 - P180, 000)] = P49, 200
Merced [P39, 000 + 20% (P216, 000 - P180,000)] = P46, 200
Prieto [P90, 000 + 60% (P216, 000 - P180, 000)]= P111, 600
The bonus is paid to Cruz is the difference between the cash paid to him for his partnership
interests and the balance of that interest plus his loan balance:
Bonus = [P61, 200 – (P49, 200 + P9, 000)] = P3, 000
Merced’s capital account would be reduced by his proportionate share of the bonus, based on
the profit and loss ratio of the remaining partners [20% ÷ (20% + 60%) = 25%]
Merced’s capital [P46, 200 – (25% x P3, 000)] = P45, 450
16.
On June 30, 2018, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm
Assets, net of liabilities P320,000
Eddy, capital (50%) P160,000
P320,000
Eddy decided to retire from the partnership and by annual mutual agreement is to be paid
P180,000 out of partnership funds for his interest. Total goodwill implicit in the agreement is to
be recorded. After Eddy’s retirement, what are the capital balances of the other partners?
1) Fox
2) Grimm
General Feedback
2)
1) 72,000
108,000
17.
The condensed statement of financial position of the partnership of Edong, Fredo and Godo
with corresponding profit and loss sharing percentage as of June 30, 2013 was as follows:
Net assets 400,000
Edong, capital 200, 000

(50%)
Fredo, capital 120, 000

(30%)
Godo, capital 80, 000

(20%)
400, 000
As of said date, Edong retired from the partnership. By mutual agreement, he was paid
225,000 for his interests in the partnership. The total implied goodwill was to be recorded.
After Edong’s retirement, the total asset of the partnership was:
General Feedback
Edong's capital P200, 000
Settlement 225, 000
Goodwill (50%) P25, 000
Net assets before settlement with Edong P400, 000

Total implied goodwill (P25, 000 ÷ 50%) 50, 000
Net assets after Edong's retirement P225, 000
18.
On December 31, 20CY the condensed statement of financial position of ABC Partnership is
presented below:
Total assets 180, 000
Amy loan 10, 000
Amy 45, 000

capital
Bea capital 40, 000
Cat capital 85, 000
Total 180, 000
Amy, Bea and Cat share profits and losses in the ratio of 3:2:1, respectively. It was agreed
among the partners that Amy retires from the partnership and the partnership’s assets to be
adjusted to their fair value of 210,000. The partner’s further agreed to pay Amy 64,000 cash
for the total interests in the partnership.
What is the capital balance of Cat after the retirement of Amy?
General Feedback
Cat's capital balance before Amy's retirement P85, 00
Share in adjustment of assets (P30, 000 x 1/6) 5, 000
Share in the bonus from Amy [(P55, 000 + P15, 000) - P64, 000] x 1/3 2, 000
Cat's capital balance after Amy's retirement P92, 000
19.
Which of the following could be possible cause for dissolution with liquidation of the partnership business?
General Feedback
insolvency of the partnership
20.
On July 10, 20CY Lolo wants to retire from JKL Partnership. The statement of financial
position for the JKL Partnership before closing on that date shows the following:
Receivables, 72,000 Jose capital 200,000

net
Equipment, net 270,000 Kiko capital 96,000
Goodwill 60,00 Lolo capital 84,000
Income 80,000
summary
Total 550,000 Total 550,00
Jose, Kiko and Lolo shares profits and losses in the ratio of 5:3:2, respectively. The partners
agreed to write off the goodwill and to adjust the equipment to their fair market values of
230,000. Lolo is paid 110,000 cash for his total interests.
Assuming the use of the total goodwill method the total assets of the new partnership after
the retirement of Lolo is:
General Feedback
Cash (P148, 000 -P110, 000) P38, 000
Receivables, net 72,000
Equipment, net 230, 000
Goodwill (Schedule 1) 150, 000
Total assets P490, 000

Schedule 1: Computation of the total goodwill (new)
Lolo capital before his retirement P84, 000
Profit share (P80, 000 x 20%) 16,000
Goodwill written off (P60, 000 x 20%) (12, 000)
Under evaluation of equipment (P40, 000 x 20%) (8, 000)

Total interest P80, 000
Goodwill to Lolo (20%) P30, 000
21.
When a partner retire, the book of the partnership should be adjusted to as of:
General Feedback
the date of retirement
22.
Cina, Doy and Dali share profits and losses based on 5:3:2. Eli was allowed to withdraw
from the partnership on 31 December 31 with 600,000 cash as full settlement. The condensed
statement of financial position of the partnership as of that date was as follows:
Assets
Due from Eli 250,000
Goodwill 2,000,000
Other assets 4,750,000
Total assets 7,000,000
Liabilities and Capital
Liabilities 2,000,000
Due to Doy 750,000
Cina, capital 1,750,000
Doy, capital 1,500,000
Eli, capital 1,000,000
Total liabilities and 7,000,000

Capital
Using the goodwill method, the new capital balances of the remaining partners after Eli’s
withdrawal are:
General Feedback
Cina Coy Eli
Capital balances before withdrawal P1, 750, 000 P1, 500, 000 P1, 000,
of Eli 000
Due from Eli (250, 000)
Goodwill written off (2, 000, 000) (1, 000, 000) (600, 000) (400, 000)
Capital balances before settlement 750, 000 900, 000 350, 000
Settlement with Eli (600, 000)
Total goodwill, 1, 250, 000 (250, 625, 000 375, 000

000 ÷ 20%) 250, 000
New capital balances after P1, 375, 000 P1, 275, 000
withdrawal -
23.
On October 31, Year 1, Morris retire from the partnership of Morris, Philip, and Marl. Morris received 55,000
representing final settlement of his interest in the amount of 50,000. Under the bonus method,
General Feedback
Under the bonus method, the excess of the amount paid by the partnership to the retiring
partner shall be absorbed by the remaining partners based on their existing profit and loss
ratio.
Charged 5,000 against the capital balances of Philip and Marl.
24.
Which of the following results in dissolution of a partnership?
General Feedback
Dissolution is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding up of the business. Generally, a
partnership is dissolved upon the death, withdrawal, admission, or bankruptcy of an individual
partner (owner).
The withdrawal of a partner from a partnership.
25.
In the RST partnership, Ron's capital is 80,000, Stella's is 75,000, and Tiffany's is 50,000. They
share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership.
Refer to the above information. Tiffany is paid 60,000, and no goodwill is recorded. In the
journal entry to record Tiffany's withdrawal:
General Feedback
Stella, Capital will be debited for 4,000.
26.
In the RST partnership, Ron's capital is 80,000, Stella's is 75,000, and Tiffany's is 50,000. They
share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership.
Refer to the above information. Tiffany is paid 60,000, and no goodwill is recorded. What is the
Ron's capital balance after Tiffany withdraws from the partnership?
General Feedback
74,000
27.
On June 30, 20CY, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm
Assets, net of
liabilities 320,000
Eddy, capital (50%) 160,000
320,000
Eddy decided to retire from the partnership and by annual mutual agreement is to be paid
180,000 out of partnership funds for his interest. Total goodwill implicit in the agreement is
to be recorded. After Eddy’s retirement, what are the capital balances of the other partners?
__Grim
__Fox__ m__
General Feedback
Goodwill to be paid to Eddy (P180,000 - 160,000) P20,000
Divide by Eddy's P & L 50%
Total goodwill P40,000
Fox Grimm
Capital balance before goodwill P 96,000 P64,000
Goodwill: (40,000 x 30%) 12,000
(40,000 x 20%) 8,000
Capital balance after goodwill P108,00 P72,000
Since the problem identified that total goodwill implicit in the agreement is to be
recorded, the excess of the amount received by Eddy over his capital balance represent
his share in the total goodwill to be recognized. Accordingly, Fox and Grimm will share
in the total goodwill based on their respective profit and loss percentage.
28.
respectively.
Assets
Cash 75,000
Inventory 82,000
Land 150,000
Equities
What partnership capital will Foreman have after Davis retires?
General Feedback
360,000
29.
Peter, Queen, and Roy are partners with capital balances of 300,000, 300,000, and 200,000, respectively; and sharing
profits and losses equally. Roy is to retire and it is agreed that he is to take certain office equipment with second hand
value of 50,000 and a note for his interest. The office equipment carried in the books at 65,000 but brand new would
cost 80,000. Roy’s acquisition of the office equipment would result in
General Feedback
Peter Queen Roy
Second hand value taken 50,000
Loss on realization (65,000 - 50,000) (equally) 5,000 5,000 5,000

55,000
Total reduction in capital 5,000 5,000
Reduction in capital of 5,000 each for Peter, Queen, and Roy.
30.
Which of the following activity will result to partnership liquidation?
General Feedback
winding-up of partnership affairs
31.
Pastor, Ramon and Sendong were partners with capital balances as of January 1, 20CY of
100,000, 150,000 and 200,000 respectively, sharing profit and losses on a 5:3:2 ratio
On July 1, 20CY Pastor withdraw from the partnership. Partners agreed that at the time of
withdrawal, certain inventories had to be revalued at 70,000 from its cost of 50,000. For the
six month period ending June 30, 20CY, the partnership generated a net income of 140,000.
Further, partners agreed to pay Pastor 195,000 for his interests and that the remaining
partner’s capital account would be adjusted for whatever goodwill the settlement would
generate. The payment to Pastor included a goodwill of:
General Feedback
Pastor's capital before his retirement P100, 000
Under evaluation of Inventory (P20, 000 x 50%) 10, 000
Profit share (P140, 000 x 50%) 70, 000
Pastor's interest P180, 000
Settlement 195, 000
Goodwill P15, 000
32.
respectively.
Assets
Cash 75,000
Inventory 82,000
Land 150,000
Equities
What goodwill will be recorded?
General Feedback
200,000
Incorporation of a partnership
1.
Jay & Kay partnership’s balance sheet at December 31, Year 1, reported the following:
Total liabilities 20,000

Jay, capital 40,000
Kay, capital 40,000
On January 2, Year 2, Jay and Kay dissolved their partnership and transferred all assets and
liabilities to a newly formed corporation. At the date of incorporation, the fair value of the
net assets was 12,000 more than the carrying amount on the partnership’s books, of which
7,000 was assigned to tangible assets and 5,000 was assigned to goodwill. Jay and Kay were
each issued 5,000 shares of the corporation’s 1 par value common stock. Immediately
following incorporation, additional paid-in capital in excess of par should be credited for
General Feedback
82,000
2.
The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2017,
follows:
Current assets P 250,000
Equipment (net) 30,000
Total assets P 280,000
Liabilities 20,000
Adams, capital 160,000
Gray, capital 100,000
Total liabilities and capital P 280,000
On December 31, 2017, the fair values of the assets and liabilities were appraised at
P240,000 and P20,000, respectively, by an independent appraiser. On January 2, 2018, the
partnership was incorporated and 1,000 shares of P5 par value common stock were issued.
Immediately after the incorporation, what amount should the new corporation report as
additional paid in capital?
General Feedback
215,000
3.
Jay & Kay partnership’s balance sheet at December 31, 2018, reported the following:
Total liabilities 20,000
Jay, capital 40,000
Kay, capital 40,000
On January 2, 2019, Jay and Kay dissolved their partnership and transferred all assets and
liabilities to a newly formed corporation. At the date of incorporation, the fair value of the
net assets was 12,000 more than the carrying amount on the partnership’s books, of which
7,000 was assigned to tangible assets and 5,000 was assigned to goodwill. Jay and Kay were
each issued 5,000 shares of the corporation’s 1 par value common stock. Immediately
following incorporation, additional paid-in capital in excess of par should be credited for
General Feedback
82,000
4.
The condensed balance sheet of A and B Partnership, together with their P/L ratio at Dec. 31,
Year 2, follows:
Current 250,0 Liabilitie 20,00
assets 00 s 0
Equipmen 30,00 A, 160,0

t, net 0 Capital 00
(60%)
B, 100,0
Capital 00
(40%)
Total 280,0 Total 280,0

00 00
On December 31, Year 2, the fair values of the assets and liabilities were appraised at
240,000 and 20,000, respectively, by an independent appraiser. On January 2, Year 2, the
partnership was incorporated and 12,000 shares of P5 par value common stock were issued to
A and B. Immediately after the incorporation, how many shares will be issued to A?
General Feedback
A B Total
Unadjusted equity balance 160,000 100,000 260,000
Decrease in Assets (24,000) (16,000) (40,000)
Adjusted equity balances 136,000 84,000 220,000
Divide by cost/share (220,000/12,000sh) 18 18 18
12,000
Number of Shares issued 7,418 4,582
Partnership Liquidation
Determination of distributable asset
1.
D, E and F are partners sharing profits in the ratio of 40:35:25, respectively. On December
31, 2016, they agree to liquidate. A balance sheet prepared on this date follows:
DEF Partnership
Balance Sheet
As of December 31, 2016
Cash P 2,000 Liabilities P 6,000
Other Assets 46,000 E, Loan 5,000
F, Loan 2,500
D, Capital 14,450
E, Capital 12,550
F, Capital 7,500
Total P48,000 P48,000
The results of liquidation are summarized below:

Book Cash Exp. of Cash Liabilit
Realization Value Realize Realizati withheld y paid
s d on for estd.
exps.
January P12,00 P10,500 P500 P2,000 P4,000

0
February 7,000 6,000 750 1,250 2,000
March 15,000 10,000 600 500 ---
April 12,000 4,000 400 --- ---
If cash id distributed at the end of each month of liquidation, how much is the total asset to
be distributed to partners at the end of March?
General Feedback
10,150
2.
HM, CM and DM of The M3 Partnership has the following account balances before
liquidation:
Cash P420,000 Liabilities P524,000
Noncash assets 3,880,000 Loan from DM 100,000
Loan to CM 192,000 HM, Capital (25%) 1,120,000
Receivable from 44,000 CM, Capital (15%) 1,624,000

HM
Expenses 2,556,000 DM, Capital 2,256,000

Revenues 1,468,000
If the partners undertake an instalment liquidation, how much cash may be distributed
immediately to the partners?
General Feedback
0
3.
The first priority to be paid when there is cash available in the liquidation process, be it in lump sum or installment
type-
General Feedback
outside creditors
4.
When the partnership’s non-cash assets are realized at less than its book value during the liquidation process, it
results to a-
General Feedback
loss on realization
5.
When a partnership is liquidated, it is usually focused on the following activities?
General Feedback
terminal activities
6.
The following are the causes of partnership’s dissolution with liquidation, except-
General Feedback
when a partners dies
7.
When a partner develops a debit balance in his capital, but such partner has a loan to the partnership, he may
exercise the doctrine of-
General Feedback
right of offset
8.
The process of winding-up the business activity that includes converting non-cash assets into cash, paying its
liabilities and distribution of cash and the remaining assets to individual partners-
General Feedback
liquidation
Installment liquidation
1.
The ABC Partnership has assets with book value of P240,000 and a market value of P195,000, outside liabilities of
P70,000, loans payable to Partner Able of P20,000, and capital balances for Partners Able, Baker, and Chapman of
P70,000, P30,000, and P50,000, respectively. The partners share profits and losses equally.
If all outside creditors and loans to partners had been paid. How would be balance of the asssets
be distributed assuming Chapman has already received assets with a value of P30,000?
General Feedback
Able: P55,000, Baker: P15,000, Chapman: P5,000.
2.
Jen, Nil, and Lyn are in the process of liquidating their partnership. Lyn has agreed to accept
the inventory, which has a fair value of 75,000, as part of her settlement. A balance sheet and
the residual profit and loss sharing percentages are as follows:
Inventory 80,000 Jen, capital (40%) 79,000
Plant assets 230,000 Nil, capital (40%) 140,000
Lyn, capital (20%) 140,000
Total assets 508,000 Total liab./equity 508,000

If the partners then distribute the available cash, Lyn will receive
General Feedback
JenNilLyn Partnership Jen Nil Lyn Total
140,000.0 140,000.0 359,000.0

Partners' Interest 79,000.00 0 0 0
(94,000.0 (94,000.0 (47,000.0 (235,000.0

Estimated Loss (squeeze) 0) 0) 0) 0)
Balance after Estimated Loss | Distributable (15,000.0 124,000.0

Asset 0) 46,000.00 93,000.00 0
(14,000.0 (7,000.00
Absorption of Estimated Deficiency 21,000.00 0) )
Distribution after est. Loss and Deficiency 6,000.00 32,000.00 86,000.00
(75,000.0
Non-cash payment received 0)
Cash Distribution 12,000.00 32,000.00 11,000.00
3.
In dissolution by installment, final cash settlement among the partner’s are based on the-
General Feedback
partner’s capital balance
4.
Jade, Kahl, and Lane are in the process of liquidating their partnership. Lane has agreed to
accept the inventory, which has a fair value of 60,000, as part of her settlement. A balance
sheet and the residual profit and loss sharing percentages are as follows:
Inventory 80,000 Jade, capital (40%) 79,000

Plant assets 230,000 Kahl, capital (40%) 140,000
Lane, capital (20%) 140,000
If the partners then distribute the available cash, Lane will receive
General Feedback
Jade Kahl Lane Total
Partners' Interest 79,000 140,000 140,000 359,000
Allocation of actual and potential loss

(squeeze) (100,000) (100,000) (50,000) (250,000)
Balance (21,000) 40,000 90,000 109,000 Distributable asset
Absorption of deficit 21,000 (14,000) (7,000)
Settlement - 26,000 83,000
Inventory (60,000)
Cash - 26,000 23,000
5.
under liquidation by installment, the partner who receives cash when there is cash available is the one-
General Feedback
who can absorb the greatest share of theoretical or possible loss
6.
The A, B, and C Partnership have not been successful. Hence, the partners have sadly
concluded that operations must be terminated and their partnership liquidated. Profits and
losses are shared as follows: A, 45 percent; B, 35 percent; and C, 20 percent. As the
accountant placed in charge of this partnership, you have responsibility for the liquidation
and distribution of assets. When you assume your responsibilities, the partnership balance
sheet is as follows:
Other assets 540,000 Loan from A 180,000
A, Capital 60,000
B, Capital 300,000
C, Capital 60,000
During the first two months of your duties, the following events occur:
1. Assets having a book value of 400,000 are sold for 120,000 cash.
2. Previously unrecorded liabilities of 10,000 are recognized.
3. Before distributing available cash balances to creditors and partners, you conclude that a
cash reserve of 10,000 should be set aside for future potential expenses.
4. Remaining cash balances are distributed to creditors and partners.
How much cash A should receive?
General Feedback
A, B, and C Partnership
A B C Total
Partners' Interest 240,000 300,000 60,000 600,000
Allocation of actual and potential

loss (198,000) (154,000) (88,000) (440,000)
Balance 42,000 146,000 (28,000) 160,000
Absorption of Defit balance (15,750) (12,250) 28,000
Settlement 26,250 133,750 -
7.
In preparing a cash distribution plan, the partner’s capital and loan accounts should be-
General Feedback
combined
8.
Hara, Ives, and Jack are in the process of liquidating their partnership. Since it may take
several months to convert the other assets into cash, the partners agree to distribute all
available cash immediately, except for 10,000 that is set aside for contingent expenses. The
balance sheet and residual profit and loss sharing percentages are as follows:
Other assets 200,000 Hara, capital (40%) 135,000
Ives, capital (30%) 216,000
Jack, capital (30%) 49,000
How much cash should Ives receive in the first distribution?
General Feedback
Hara Ives Jack Total
135,000.0 49,000.0
Partners' Interest 0 216,000.00 0 400,000.00
(84,000.0 (63,000.00 (63,000.0 (210,000.0

Distribution of Estimated Loss 0) ) 0) 0)
(14,000.0
Balance after Estimated Loss 51,000.00 153,000.00 0) 190,000.00
(8,000.00 14,000.0
Absorption of Loss ) (6,000.00) 0
First Distribution 43,000.00 147,000.00 - 190,000.00
**Distributable Asset Computation

Total Cash 400,000.00
Cash Withheld for Contingent

expenses (10,000.00)
(200,000.0
Cash withheld/paid for liabilities 0)
Distributable Asset 190,000.00
9.
After incurring losses resulting from every unprofitable operations, the Goh Kong Wie
Partnership decided to liquidate when the partners’ capital balances were:
P80
,00
Goh, capital (40%)
130
,00
Kong, capital (40%)
96,
Wei, capital (20%) 000
The non-cash assets were sold in installment. Available cash were distributed to partners in
every sale of non-cash assets. After the second sale of non-cash assets, the partners received
the same amount of cash in the distribution. And from the third sale of non-cash assets, cash
available for distribution amounts to P28,000, and unsold non-cash assets has a book value of
P12,500. Using cash priority program, what amount did Wei received in the third installment
of cash?
General Feedback
5,600
The Flat and Iron partnership agreement provides for Flat to receive a 20% bonus on profits
before bonus. Remaining profits and losses are divided between Flat and Iron in the ratio of
2:3, respectively. Which partner has a greater advantage when the partnership has a profit or
when it has a loss?
__Profit__ __Loss_
General Feedback
Flat
Flat
Mitz, Marc, and Mart are partners sharing profits in the ratio of 5:3:2, respectively. As of
December 31, Year 1, their capital balances were P95,000 for Mitz, P80,000 for Marc, and
P60,000 for Mart. On January 1, Year 2, the partners admitted Vince as a new partner and
according to their agreement, Vince will contribute P80,000 in cash to the partnership and also
pay P10,000 for 15% of Marc’s share. Vince will be given a 20% share in profits, while the
original partners’ share will be proportionately the same as before. After the admission of Vince,
the total capital will be P330,000 and Vince’s capital will be P70,000.
The total amount of bonus to the old partners, upon the admission of Vince would be:
General Feedback
15,000
Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring P200,000 when liquidated.
At the same time, Morgan has a credit capital balance in the partnership of P120,000. The capital amounts of the other
partners total a credit balance of P250,000. Under the doctrine of marshalling of assets, how much the personal
creditors of Morgan can collect?
General Feedback
320,000
The following condensed balance sheet is presented for the partnership of Axel, Barr, and
Cain, who share profits and losses in the ratio of 4:3:3, respectively:
Cash P100,000
Total P400,000
Liabilities P150,000
Axel, capital 40,000
Barr, capital 180,000
Cain, capital 30,000
Total P400,000
The partners agreed to dissolve the partnership after selling the other asset for P200,000.
Upon dissolution of the partnership, Axel should have received
General Feedback
0
On December 31, Year 5, the partners of MNP Partnership decided to liquidate their business.
Immediately before liquidation, the following condensed balance sheet was prepared:
P P375,0
Cash 50,000 Liabilities 00
800,00
Noncash assets 900,000 Nieva, loan 0
Perez, loan 25,000
Munoz, capital 312,50

(50%) 0
107,50
Nieva, capital (30%) 0
Perez, capital (20%) 50,000
P950,00 P950,0
Total 0 Total 00
The noncash assets were sold for P400,000. Assuming Perez is the only solvent partners, what
amount of additional cash will be invested by Perez? (Rounded to the nearest peso)
General Feedback
25,000

PARTNERSHIP

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PARTNERSHIP

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PARTNERSHIP FORMATION

Cash P30, 000 P70, 000

Machinery and equipment 25, 000 75, 000

Building - 225, 000

Furniture and fixtures 10, 000 -

Cash 11,000 22,354

Accounts receivable 234,536 567,890

Inventories 120,035 260,102

Furniture & fixtures 50,345 34,789

Other assets 2,000 3,600

Total 1,020,916 1,317,002

Notes payable 200,000 345,000

John, capital 641,976

Paul, capital 728,352

Total 1,020,916 1,317,002

3. Partnership capital and drawings accounts are similar to the corporate?

5. Which of the following statements is correct with respect to a limited partnership?

Cash 28,000 62,000

Accounts receivable 200,000 600,000

Inventories 120,000 200,000

Furniture & fixtures 50,000 35,000

Intangible assets 2,000 3,000

Accounts payable 180,000 250,000

Other liabilities 200,000 350,000

Capital 620,000 800,000

The following adjustments were agreed upon:

What will be the capital balances of the partners after adjustments?

Cash 11,000 22,354

Accounts receivable 234,536 567,890

Inventories 120,035 260,102

Furniture & fixtures 50,345 34,789

Other assets 2,000 3,600

Total 1,020,916 1,317,002

Accounts payable 178,940 243,650

Notes payable 200,000 345,000

John, capital 641,976

Paul, capital 728,352

Total 1,020,916 1,317,002

SOLUTION John Paul Total

Written off Other

12. A limited liability company (LLC):

Cash 20, 30,

Furniture & 15, --

15. In the Partnership Act, partners have

16. In a limited partnership, a general partner

Cash 9,000 3,750

Accounts receivable 18,500 13,500

Inventories 30,000 19,500

Office equipment (net) 11,500 2,750

Prepaid expenses 6,375 3,000

Total 105,375 51,500

Accounts payable 45,750 18,000

Capital 59,625 33,500

Total 105,375 51,500

They agreed to following adjustments before the formation:

The net (debit) credit adjustment to partner’s capital accounts are:

Accounts receivable 58,000 58,000

Merchandise inventory 98,400 107,000

Store equipment 32,000 32,000

Accumulated depreciation- Store equipment 19,000 16,400

Office equipment 27,000 27,000

Accumulated depreciation- Office equipment 14,200 8,600

Accounts payable 56,000 56,000