Partnership 7

i
Partnership Formation:

1. On December 1,2015, EE and FF formed a partnership, agreeing to share

for profits and losses in the ratio of 2:3, respectively. EE invested a parcel of
land that cost him P25,000. FF invested P30,000 cash. The land was sold for
P50,000 on the same date, three hours after formation of the partnership.
How much should be the capital balance of EE right after formation?
a. P25,000 c. P60,000
b. 30,000 d. 50,000
(AICPA)

2. On March 1,2015, II and J J formed a partnership with each contributing ■

the following assets:
// JJ
Cash P300,000 P 700,000
Machinery and equipment 250,000 750,000
Building „ - 2,250,000
Furniture and fixtures 100,000
The building is subject to mortgage loan of P800,000, which is to be assumed
by the partnership agreement provides that II and JJ share profits and
losses 30% and 70%, respectively. On March 1, 2015 the balance in JJ's
capital account should be:
a. P3,700,000 c. P3,050,000
b. 3,140,000 d. 2,900,000
(AICPA)
3. The same information in Number 2, except that the mortgage loan is not
assumed by the partnership. On March 1,2015 the balance in JJ's capital
account should be:
a. P3,700,000 c. P3,050,000
b. 3,140,000 d. 2,900,000
(Adapted)

4. As of July 1,2015, FF and GG decided to form a partnership. Their balance

sheets on this date are:
•
FF GG
Cash ........................................ .......... P 15,000 P 37,500
Accounts receivable.... ................ .......... 540,000 225,000
Merchandise Inventory.................. 202,500
Machinery and equipment.......... .......... 150,000’ 270,000
Total............................... ........ .......... P705,000 P735,000

I
 Chapter I
Partnership 9

Accounts Payable P 135,000 P240.000

FF. capital -...................... 570,000 It is agreed that tor purposes of establishing CCs interest, the following
GG, capital adjustments shafi be mode:
^?1QOQ
(a) An allowance for doubtful accounts of 3% of accounts
Total - P705.00Q P735.000 receivable is to be established
(b) The merchandise inventory « to be valued at P23.000.
The partners agreed that the machinery and equipment of FF is (c) Prepaid salary expenses of P600 and accrued rent expense of
underdepreciated by PI5.000 and that of GG by P45.000. Allowance lor P800 are to be recognized
doubtful accounts is to be set up amounting to P120,000 for FF and P45.000
for GG. The partnership agreement provides for a profit and loss ratio and DD is to invest sufficient cash to obtain a 1/3 interest in the partnership.
capital interest of 60% to FF and 40% to GG. How much cash must FF invest Compute for: (1) CC’s adjusted capital before the admission of DD: and
to bring the partners’ capital balances proportionate to their profit and (2) the amount of cash investment by DD:
loss ratio?
a. (1) P35.347; (2) Pl 1.971 C. (1) P35374; (2) P17.687
a. PI 42500 c. Pl 72.500 b. (1) 36374; (2) 18.487 d. (1) 28.174; (2) 14,087
b. 52500 d. 102.500 (Adopted)
(Adapted) 7. MM, NN, and OO are partners with capital balances on December 31,
2015 of P300.000. P300.000 and P200.000. respectively. Profits are shared
5. On August 1. AA and BB pooled their assets to form a partnership, with the equally. OO wishes to withdraw and it is agreed that OO is to take certain
firm to take over their business assets and assume the liabilities. Partners equipment with second-hand value of P50.000 and a note for the balance
capitals are to be based on net assets transferred after the following
adjustments. (Profit and loss are allocated equally.) of OO's interest. The equipment are earned on the books at P65,000 Brand
new equipment may cost P80.000. Compute foe (1) OO’s acquisition of
BB's inventory is to be increased by P4.000; an allowance for doubtful the second-hand equipment will result to reduction in capital; (2) the value
accounts of P1.000 and P1.500 are to be set up in the books of A A and BB, of the note that will OO get from the partnership s liquidation.
respectively; and accounts payable of P4.000 is to be recognized in AA s
books. The individual trial balances on August 1, before adjustments, follow. a. (1) Pl5.000 each for MM and NN. (2) Pl50,000.
b. (1) P5.000each for MM, NN and OO. (2) Pl45,000.
AA Bfi c. (1) P5.000 each for MM, NN and OO. (2) Pl95.000.
P75.000 Pl 13,000 d. (1) P7.500 each for MM and NN. (2) Pl45,000.
Assets (Adapted)
5.000 34.500
Liabilities ..........................
8. Jones and Smith formed a partnership with each partner contributing the
What is the capital of AA and BB after the above adjustments? following items:
c AA, P65.000; BB, P76.000
a. AA. P68.750; BB, P77.25O a AA, P65.O0O; BB, P81,000 Jone? Smith
b. AA, P75.000: BB. P8T ,000 (Adapted) Cash....................................... ...... P 80,000 P 40.000
Building - cost to Jones....... ...... 300,000
6. CC admits DD as a partner in business. Accounts jpjhejedf^e^ - fair value.................... ...... 400,000
CC admits DD as a partner # in _business
A admission or du, snu
XUthe following
November 30. 2015, just before Inventory - cost to Smith . ... 200,000
balances: - fair value................... 280,000
P 6,800 Mortgage payable.............. 120 XXX)
Cash 14.200 Accounts payable....... 60.000
Accounts receivable 20,000
Merchandise inventdry 8,000
Accounts payable............ * 33,000
CC, capital
 //

Assume that for tax purposes Jones and Smith agree to shnr« ~
the toO»W assumed by She Jones and Smi>h p«fnen?o wnm ?. m2
The capital account of the partners after the adjustments w« be
Monce in each podne.'s capita! accoun! !o. Sn ’ncyS account^
Parinerthip
purposes? a. LU P615.942 MM, P717394 c. LL P540376; MM. P683.050
b. LL, P640376; MM, P712,345 d. LL, P614.476; MM. P683,052
Jones Smith (PhdCPA)
A. P350.000 P270.000
B. P260.000 Pl 80.000 10. The same information in Number 9, how much total assets does the
C. P360.000 P260.000 partnership have after formation?
D. P500.000 P300.000
a. P2.337.918 c. P2.265.1 18
a. Option A c. Option C b. 2237 918 d. 2,365.218
b. Option B d. Option D (PhlCPA)

9. The business assets of LL ond MM appear below: 11. On March 1. 2015. PP ond QQ decide to combine thek businesses ond
form a partnership. Their balance sheets on March 1. before adjustments,
LL MM showed the following:
Cash............................................... .............. P 11,000 P 22,354 PP QQ
Accounts receivable.................. .............. 234,536 567,890
Inventories.................................... .............. 120,035 260,102 Cash P 9.000 P 3,750
Land............................................... .............. 603,000 - Accounts receivable ........... 18.500 13.500
Building.......................................... ............... 428,267 Inventories - :----------- 30.000 19.500
Furniture and fixture.................... .............. 50,345 34,789 Furniture and fixtures (net) 30.000 9,000
Other assets................................... ............... 2.000 3,600 Office equipment (net)......... - 11500 2750
Total ................................... ............... Pl.020,916 Pl,317,002 Prepaid expenses ........................... 6375 3,000
Total ----- --------- Pl 05375 P51,500
Ar mt infs navable .................. ............. P 178,940 P 243,650
Notes payable ...................... ......... 200,000 345,000
641,976 - Accounts payable — P 45750 Pl 8.000
11 rnnitnl ............... 33.500
- 728,352 Capital .................. — 59,625
mm capital ...................
.... Pl.020,916 Pl 317,002 Total ................ Pl 05375 P51.500

LL and MM agreed to form a partnership by contributing their respective They agreed to have the following items recorded in their books:
assets and equities subject to the following adjustmen s. 1. Provide 2% allowance for doubtful accounts.
2. PP’s furniture and fixtures should be P31,000, while QQ's office
a. Accounts receivable of P20.000 in LL’s books and P35.OOO in MM’s equipment is under-depreciated by P250.
are uncollectible. 3. Rent expense incurred previously by PP was not yet recorded
b. Inventories of P5.5OO and P6.700 are worthless in LL’s and MM’s amounting to Pl,000 while salary expense incurred by QQ was
not also recorded amounting to P800.
respective books. 4. The fair market value of inventory amounted to:
c. Other assets of P2,000 and P3.600 in LL’s and MM’s respective
For PP ~........................... P29.500
books are to be written off. For QQ a............................ 21,000
 Chapter / Partnership !3

Compute the net (debit) credit adjustment tor pp and QQ:

16. The Partnership has the foMowmg accounting amounts
PP PP QQ (1) Sales = P70,000
a. P 2,870 P 2,820 c. P(870) (2) Cost of Goods Sold « P40,000
(2870) (2,820) P 180
b. d. 870 (3) Operating Expenses « P10.000
(180)
(Adapted) (4) Salary allocations to partners « P13,000
(5) Interest paid to banks « P2.000
12. The same information in Number 11, compute the (6) Portners’ withdrawals = P8.000
total liabilities after
formation:
The partnership net income (loss) s:
a. P61,950 c. P65,550
b. 63,750 d. 63.950 a. P20.000 C. P 5,000
b. 18,000 d. (3,000)
13. The same information in Number 11, compute the total assets after
formation: (Adapted)

a. Pl 57,985 c. Pl 60.765 17. Lancelot is trying to decide whether to accept a salary of P40.000 or a
b. ] 56875 d. 15Z985 salary of P25.000 plus a bonus of 10% of net income after salary and bonus
as a means of allocating profit among the partners. Salaries traceable to
14. On April 30. 2015. XX. YY and ZZ formed a partnership by combining their the other partners are estimated to be P 100.000 What amount of income
separate business proprietorships. XX contributed cash of P75.000. YY would be necessary so that Lancelot would consider the choices to be
contributed property with a P54.000 carrying amount, a P60.000 original equal?
cost, and Pl20,000 fair value. The partnership accepted responsibility for
the P5Z500 mortgage attached to the property. ZZ contributed equipment a. Pl 65.000 C. P265.000
with a P45.000 carrying amount, a Pl 12.500 original cost, and P82.500 fair b 290.000 d. 3O5XXX)
value. The partnership agreement specifies that profits and losses are to (Adapted)
be shared equally but is silent regarding capital contributions. Which
partner has the largest April 30. 2015, capital balance? 18. Cab and Jo are considering forming a partnership whereby profits will be
c. ZZ allocated through the use of salaries and bonuses Bonuses will be 10% ot
a. XX
d. All capital account balances net income after total salaries and bonuses. Cob will receive a salary of
b. Tf P30.000 and a bonus. Jo has the option of receiving a salary df P40.000
are equal
’(AICPA) and a 10% bonus or simply receiving a salary of P52.000 Both partners will
receive the same amount of bonus.
Partnership Operations:
Determine the level of net income that would be necessary so that Jo
15. Jrespectively
J and KK areJJ^s
partners share would be indifferent to the profit sharing option selected.
salarywho
is P60.000and partnerscue
P30.000 for KK. Thenahners also
arealso
paid interest on their average capital balances. In 20 , determined a. P240.000 C. P 94.000
of interest and KK, Pl2.000. The profit and loss aHocaton is determined
b. 300.000 d. 334.000
after deductions for the salary and interest poyme interest) was P60 000
residual income (income after deducting salaries and interest) was rau.uuu
in 2015, what was the total partnership icomer
c P282.000
a Pl 92,000 d 387,000
b. 345,000 (Adapted)
14 Partnership
Partnership

19. T(w partnership agreement of XX, YY & U provides for the vear-end 22. AA and DD created a partnership to own and operate a neaith-food
allocation of net income in the following order. store. The partnership ogrcement provided that aa receive a salary of
P 10,000 and DD a salary of P5,000 to recognize the* relative time spent in
operating the store Remaining profits and losses were divided 60:40 to AA
• First, XX is to receive 10% of net income up to P200 000 and 20%
and DD, respectively. Income for 2015. the first year of operations, of P13.000
over P20C.000.
was allocated P8.800 to AA and P4.200 to DD.
Second, YY and ZZ each are to receive 5% of the remaining
income over P300.000. On January 1, 2016, the partnership agreement was changed to reflect
the fact that DD could no longer devote any time to the store 's operations.
• The balance of income is to be allocated equally among the The new agreement allows AA a salary of P18.000, and the remaining profits
three partners. and losses ore divided equally In 2016 an error was discovered such that
the 2015 reported income was understated by P4.000. The partnership
The partnership’s 2011 net income was P500.000 before any allocations to income of P25.OOO for 2016 included the P4 000 related to year 2015.
partners. What amount should be allocated to XX?
In the reported net income of P25,000 for rhe year 2016. A A and DD would
a. P202,000 C. P206.000 have:
b. 216,000 d. 220,000
(AICPA) AA DD AA DD
a. P21.900 P 3,100 c. P 0 P 0
20. The partnership agreement of RR and SS provides that interest at 10% per b. 17,100 17,100 d. 12,500 12,500
year is to be credited to each partner on the basis of weighted-average (Adopted)
capital balances. A summary of the capital-account of SS for the year
ended December 31,2015, is as follows: 23. On January 1. 2015, DD and EE decided to form o partnership At the end
of the year, the partnership made a net income qf Pl20,000. The capital
P420.000 accounts of the partnership show the folowing transactions
Balance, January 1
Additional investment, July 1 ............................ '• 120,000
DD. Caprtot EE. Capital
( 45,000)
Withdrawal, August 1 *.......................
495,000
Dr. a. Dr. Cr.
Balance, December 31 - P40.000 - P25.000
January 1 ............
What amount of interest should be credited to SS s capital account for April 1................... P5.000 - - -
June 1 .................. - - - 10000
2015? August 1 .............. - 10.000 - -
c. P46.125 September 1....... - - P3.000 •
a. P45.750 October 1 ........... - 5.000 1,000 -
d. 51,750
b. 49,500 (AICPA) - - 5.000
December 1 ....... 4.000
Assuming that an interest of 20% per annum is given on average capital
21. AA, BB, and CC are partners with avera9? interest and the balance of the profits is allocated equally, the allocation of profits
P360.000. P180,000, and P120,000, respectively.Partners rec^ve iu^
or. their average capital balances. After d®duc divided equally In 2015 should be:
AA and P60,000 to CC the residualproM or loss is divided equaly |q
the partnership sustained a P99,000 loss before a. DD. P60.000: EE P59.400 c. DD. P67.200: EE P52.800
partners. By what amount should AA’s capital account change* b. DD. P61.200: EE, P58.800 d. DD, P68.800: EE. P51,200
(PhflCPA)
c Pl05,000 decrease
a. P21,000 increase d. 126,000 increase
b. 33,000 decrease (AICPA)
 ____ C'htpttr I PuriHtnhip

24 The partnership of DDand BB was formed and commenced operations on The partnership s profit and loss agreement provides for a salary of which
March 1.2015. with DD contributing P30.000 cash and BB rnvestina cash of P30.000 was paid to each partner for 2015 AA is to receive a bonus of 10%
16 Pl0.000 and equipment with an agreed upon valuation of P20 000 On
Ju)y 1.2015. BBinvesfedori'Optional P)0.000m<he partnership. DD made on net income after salaries and bonus The partners ore oho to receive
o capital withdraw^ of P4.000 on May 2. 2015 but reinvested the P4.000 interest of 8% on average annual capital balances affected by both
on October 1.2015. During 2015. DD withdrew P800 per month and BB the investments and drawings. Any rerrxjining profits are to be allocated
managing partner, withdrew Pl.000 per month. These drawings were equally among the partners
charged to salary expense. A preclosing trial balance taken at December
31, 2015 is as follows: Assuming net income of P60,000 before salaries and bonus, determine how
the income would be allocated among the partners:
Debit Credit
Cash........................................................ a. AA, P31.138; BB, P28.862 C. AA. P30.633. BB. P29.367
P 9.000
Receivable - net......... _.............. 15000 b. AA, P33.537; BB. P26.463 d AA. P30.684. BB. P29.316
Equipment - net............................. 50000 (Adapted: Fischer & Taylor)
Other assets....................................... 19 000
Liabilities.................................................... P 17,000 26. Partner A first contributed P50.000 of capital into an existing partnership
DD, capital................................................ 30,000 on March 1,2015. On June 1,2015. the partner contributed another P20.000.
BB, capital................................................. 40,000 On September 1,2015, the partner withdrew Pl 5.000 from the partnership,
Service revenue................................ ........ 50,000 Withdrawals in excess of Pl0,000 are charged to the partners capital
Supplies expense................... 17000 account. The annual weighted-average capital balance is
Utilities expense......................................... 4,000
Salaries to partners..................... ............ ....... 18,000 a. P62.000 c. P60.000
Other miscellaneous expenses.............. ....... 5,000 b. 51,667 d. 48,333
Total Pl37,000 Pl37,000 (Adopted - Fischer & Taylor)

Compute for the share of DD and BB in the partnership net income 27. WW and RR share profits and losses equally. WW and RR receive salary
assuming monthly salary allowances P800 and Pl,000 for DD and BB, allowances of P20.000 and P30.Q00, respectively and both partners receive
respectively; interest allowance at a 12% annual rate on average capital 10% interest on their average capital balances Average capital balances
balances; and remaining profits allocated equally. are calculated at the beginning of eoch month regardless of when the
capital contributions and capital withdrawals were made, and partners
a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200 drawings are not used in determining the averoge capital balances. Total
b. DD Pl2,000; BB, Pl2,000 d. DD, Pl0,600; BB, Pl3,400 net income for 2015 is P120,000.
(Adapted)
WW RR
25. AA and BB formed a partnership in 2015 and made the following January 1 capital balances P100.000 PI20.000
investments and capital withdrawals during the year. Yearly drawings (Pl.500 a month) 18,000 18,000
Permanent withdrawals of capital:
________ BB _ June 3 . .......................... (12,000)
AA______
Investments Prows May 2 (15000)
Investments Prows
March 1 P30.000 P20.000
Junel PI 0,000 PI 0,000 Additional investments of capital:
2,000 July 3......................................................... 40.000
October 2 50,000
August 1 ..........................
December 1 20,000 5,000
 ----------- - ————
Partnership
What is the weighted average capital for ww and RR tester-♦ 19
2015? mcc lively for
The profit and Ioh statement of the partnership for the year ended
a. Pl 10,667 and P) 19.583 c. P100.000 and P120 onn December 31.2015 is os follows
b. Pl05.333and Pl26.667 d P126.667 and P105 333
Net Sales....
(Adapted - Patterson/Shoulders) P875 000
Cost of goods sold........... 700,000
28 HH. MM. and A A formed a partnership on January 1.2015 and contrihi Gross profit............................. PI 75.000
P150,00. P200.000, and P250.000. respectively. Their articles of co-partne/S Expenses (including the solar/ interest and the bonus) 143,000
provide that the operating income be shared among the partners as Net income............. P 32,000
follows: as salary, P24 000 for HH. P18.000 for MM, and P12.000 for aa interest
of 12% on the average capital during 2015 of the three partners; and the The amount of bonus to PP in 2015 amounted to:
remainder in the ratio of 2:4:4. respectively.
a. P13304 c Pl 8.000
The operating income for the year ending December 31.2015 amounted b. 16.456 d 20.700
to PI76.000. HH contributed additional capital of P30.000 on July 1 and (PhilCPA)
made a drawing of P10.000 on October I: MM contributed additional
capital of P20.000 on August 1 and made a drawing of P10.000 on October 31. On January 1.2015, A, B. C and D formed Bakyo Troding Co., a partnership,
I: and, AA made a drawing of P30.000 on November 1. with capital contributions as follows: A. P50.000: B. P25.000: C. P25.OOO:
and D, P20.006. The partnership contract provided that each partner shall
receive a 5% interest on contributed capital, and that A and B shall receive
The partners' capital balances on December 31.2015 are:
salaries of P5.000 and P3.000, respectively. The controct also provided that
C shall receive a minimum of P2.500 per annum, and D a minimum of
a. HH. Pl 79,680; MM, P229.360: and. AA, P239.36O P6.000 per annum, which is inclusive of amounts representing interest and
b. HH. Pl79 760; MM. P229.520; and, AA, P239.520 share of remaining profits. The balance of the profits shall be distributed to
c. HH, P189.680; MM, P239.360; and, AA, P269.360 A. B. C. and D in a 33:2:2 ratio.
d. HH, P223,180; MM. P272.060; and, AA, P280.760
(PhilCPA) What amount must be earned by the partnership oetore any charge for
interest and salaries, so that A may receive an aggregate of Pl 2.500
29. Merlin, a partner in the Camelot Partnership, has a 30% participation in including interest, salary and share of profits?
partnership profits and losses. Merlin’s capital account has a net c^e9r^ase
of Pl ,200.000 during the calendar year 2015. During 2015, Merlin withdrew a. Pl 6,667 c. P3P.667
P2,600,000 (charged against his capital account) and contributed y b. 30.000 d. 32.333
valued at P500.000 to the partnership. What was the net income or (PMCPA)
Camelot Partnership for year 2015? 32. AA. BB and CC are partners with average capital balances during 2015 of
P472.5OO, P238.650. and Pl62.350 respectively. The partners receive 1Q%
a. P3.000.000 c. P 7,000,000 interest on their average capital balances: after deducting salaries of
b 4.666,667 d. 11,000,000 Pl22,325 to AA and P82.625 to CC. the residual profits or loss is divided
equally.
30. On January 2.2015. BB and PP formed a partnership. BB contributed c^P^ In 2015, the partnership had a net loss of Pl25,624 before the interest and
of P175.000.00 and PP, P25,000.00. They agreed to share profits ar.a o salaries to partners.
80% and 20%. respectively. PP is the general manager and works ' j
partnership full time and is given a salary of P5,000.00 a month; an in j
of 5% of the beginning capital (of both partner) and a bonus of I °
income before the salary, interest and the bonus.
 Parturrihip 21

By what amount shouid AA $ and CCs capri at account change increase

(decease)? 35. CC. PP. ond AA accountants agree to form a partnership and to share
profits m the ratio of 5 3 2 They abo ogreed that AA rs to be attowed a
AA CC AA CC salary of P28.000 and that PP is to be guaranteed P2I 000 as hrs
the profits During the ftrst year of operator income from fees are PI80 toQ
a. P30.267 P(40.448) C. P(40 844)
P31.235 while expenses total P96.000 What amount of net income shoukJ b0
b 29476 17.536 d. 28.35832.458 credited to each padner s coprtcf occount?
(PhilCPA)
33. The same information in Number 32. except the partnership had a loss of a. CC.P28.000. PP. PI6.800. AA, PI 1.200
PI25 624 after the interest and salaries to partners, by what amount should b. CC.P25.000. PP. P21.000. AA. P38 000
BB $ capital account change - increase (decrease)? C. CC. P24.000, PP. P22.000. AA P38.000
d. CC.P25.000. PP. P2I .000. AA P39 000
a. P( 115.443) C. P(41375) (Adapted)
b. 23865 d. (18.010)
36. Hunt. Rob. Turman, and Kety own a pubfahrtg company that they operate
34 XX YY and U formed a partnership on January 1.2015. Each contributed as a partnership. The partnership agreement includes the following
PI20X100.
• Hunt receives a salary of P20.000 ond a bonus of 3% of income
Salaries were to be alloc a ted as foBows: after aB bonuses.
• Rob receives a salary of Pl0.000 and bonus of 2% of income
after all bonuses.
XX YY ZZ
• All partners are to receive 10% interest on the* ave'age capital
P30.000 P30,000 P45.000 balances.

Drawings were equal to salaries and be taken out evenly throughout the The average capital balances are as toBows
year
Hunt ............ P50.000
With sufficient partnership net income. XX and YY could split a bonus equal Rob .. 45.000
to 25 percent of partnership net income after salaries and bonus (in no Turman ..................... 20000
Kelly................................. 47.000
event could the bonus go below zero).

Remaining profits were to be split as follows: 30% for XX; 30% for YY, and Any remaining profits and loss are to be drv»ded equally among the partners
40% for ZZ.
Determine how a profit of P105.000 wouio be allocated among the partners.
For the year, partnership net income was P120.000.
a. Hunt. P41.450; Rob. P29 950: Turman.P 15.450;KeBy P18.I50
b. Hunt. P28.000: Rob. Pl 6 500; Turman.P 2.000;Kely, P 4.700
Compute the ending capital for each partner: c. Hunt. P39.700: Rob. P29.200 Turman.P16 700; Kely P19.400
d. Cannot be determined
a. XX. Pl55.100; YY, Pl55.100; ZZ. Pl69.800 (Adapted)
b XX. Pl26.000: YY, Pl26,300: ZZ. PI24.500
c. XX. P125.100; YY. P125.100: ZZ, P124.800
d. XX. P125.500; YY. Pl25.500; ZZ. Pl24.000
(Adapted)
22
Wcr /
Partncnhip
37 RR and PP share profits after the provision of annual sat™
PU400andPI3.200.-eipeU..W,.,tle,oteo)<;4,^^^^;<>,
net income is insufficient to provide for said allowances in t,,n « ships 39 MM. NN and OO partners, share profits on a 5:3:2 ratio. On January 1.2016.
the net income shall be divided equally between the partners In 20T5TL PP admitted into the partnership with a 10% share in profits The old partners
following errors were discovered Depreciation for 2015 is understated b! continue to participate in profits in their original ratio.
PZ.lOa ana the inventory on December 31. 2015 is overstated by P H 400
For the year 2016. the net income of the partnership was reported as PI 2.500
The partnership net income for 2015 was reported to be P19 500 However, it was discovered that the following items were omitted in the
firm’s books:
The capital accounts of the partners should be increased (decreased} by
Unrecorded at year end 2015 2016
a. RR. P(6.540); PP. P(6.540) C. RR. PI6.960): PP. P 6.540 Prepaid expense.................... P800
b. RR, P 3.000; PP P 3.000 d. RR. P(6.750k PP. P( 6.750) Accrued expense.................. P600
(Adapted) Unearned income.................. ....... 700
Accrued income................... 500
38. JJ and KK are partners sharing profits 60% and 40% respectively. The average
(1) The new profit and loss ratio for N, and (2) the shore of partner OO in
profits for the past two years are to be capitalized at 20% per year (for the 2016 net income:
purposes of admitting a new partner) in determining the aggregate capital
of JJ and KK, after adjusting the profits for the following items omitted a. (1) 30%. (2) P2.214 c. (I) 27%, (2) P2.286
from the books: b. (1) 27%; (2) P2,214 d. (I) 30%: (2) P2.286
(PhftCPA)
Omissions at Year-End 2015 20/6
40. A. B. and C are partners in an accounting firm. Their capiial account
Prepaid Expense Pl,600 balances at year-end were A P90.000; B Pl 10.000 and C P50.000. They share
Accrued Expense ... 1,200 profits and losses on a 4:4:2 ratio, after the toftowing special terms:
Deferred Income Pl ,400
1. Partner C is to receive a bonus of 10% of net income after the
Accrued Income ...................................... 1,000 bonus.
2. Interests of 10% shall be paid on that portion of a partner's capital
Other pertinent information are as follows: in excess of Pl00,000.
3. Salaries of Pl0,000 and Pl2.000 shaft be paid to partners A & C
2015 2016 respectively.
Net income of partnership ............... P14.400 P13.600
Assuming a net income of P44.000 for the year, the total profit share of
Capital accounts, end of the year: Partner C was:
45,400 54,000
45,000 55,000
a. P 7,800 c. P19.400
JJ .................................
The aggregate capital of JJ and KK after capitalizing the average profi s b. 16,800 d. 19,800
..................................................................
(PhftCPA)
at 20% per annum is:
C. P69,000 41. X, Y and Z, a partnership formed on January 1, 2015 had the following
a. P67,765 initial investments:
b. 72,105 d. 71,000
(PhilCPA)
X Pl00,000
Y 150,000
I 225,000
 Partncnhlp 25
24 < hapter I

43. S and I are partnership and prepare the* accounts to 31 December

The partnership agreement states that profits and losses ore to be shared each year On I July 2015, U |<xned the partnership Profit sharing
equally by the partners after consideration is made for the following arrangements are

- Salaries allowed to partners: P60.000 for X. P48.000 for Y and 36.000 6 months to 6 months to 31
30 June 2015 December 2015
- Average partner’s capital balances during the year shall be Salary 5 PI 5,000 P25000
allowed 10%. Share of balance m profit S 60% 40%
T 40% 40%
Additional information: U 20%

The partnership profit for the year ended 31 December 2015 was P350 000
On June 30, 2015 X invested an additional P60.000 accruing evenly over the year What are the partners total profit shares
Z withdrew P70.000 from the partnership on September 30, 2015. for the year ended 31 December 2015?
Share in the remaining partnership profit was P5.000 for each
partner. S T U
a. Pl 96.000 Pl 24,000 P30000
The total partnership capital on December 31. 2015 was: b. 217,000 106.000 25.000
c. 155,000 130,000 65.000
d. 175,000 145,000 35000
a. P405,000 c. P480.000 (ACCA)
b. 67.1,500 d. 67Z750
(PhilCPA) 44. AA and BB entered into a partnership as of March 1. 2015 by investing
P125,000 and P75,000, respectively. They ogreed that AA, as the managing
42. X and Y are in partnership, sharing profits equally and preparing their partner, was to receive a salary of P30.000 per year and a bonus computed
accounts to 31 December each year. On 1 July 2015, Z joined in the at 10% of the net profit after adjustment for the salary; the balance of the
partnership, and from that date profits are shared X 40%, Y 40%, and Z 20%. profit was to be distributed in the ratio of ther anginal capital balances
On December 31.2015, account balances were as follows:
In the year ended 31 December 2015, profits were:
Cash ...... P70.000 Accounts payable P 60,000
Accounts receivable . 67,000 AA, capital 125000
6 months to 31 June 2015 P200.000
Furniture and fixtures . 45.000 BB. capital 75,000
6 months to 31 December 2015 300,000 Sales returns 5.000 AA. drawing--------- '( 20,000)
Purchases 196,000 BB. drawing ( 30.000)
It was agreed that X and Y only should bear equally the expense for a bad Operating expenses... 60,000 Sates 233.000
debt of P40,000 written-off in the six months to 31 December 2015 in arriving
at the P300.000 profit. Inventories on December 31, 2015 were as follows supplies. P2.500,
merchandise. P73.000. Prepaid insurance was P950 while occrued expenses
Which of the following correctly states X's profit share for the year? were P1.550. Depreciation rate was 20% per year.

The partners' capital balances on December 31, 2015, after closing the
a. P216.000 c. P220.000
net profit and drawing accounts, were:
b. 200.000 d. 224,000
(ACCA)
AA 66 AA BB
a. Pl 35.940 P47.960 C. P 139,600 P48 680
b. Pl 39.540 P49.860 d. Pl 42.350 P47.670
(PhICPA)
 < hupttr
Partnership 27

45 There and Craig are partners. Their current profit and loss ratios (70/301 Of*
being changed to (60/40). The partners decide to adjust then capd^ Partnership Dissolution: Admission of a New Partner - Purchase or Investment
accounts at the date of the change in the profit and loss ratios to reflect
the difference between market value and book value of assets and 49. Presented below is the condensed balance sheet of the partnership of KK.
liabilities. At the date of the change, land has a market value of P25O 000 LL and MM who share profits ond losses m the ratio of 6:3:1. respectively
and a book value of Pl20.000. How much will Craig's capital account be
adjusted at the date of the change in the profit and loss ratios? liabilities..................... P 80.000
Cosh — P 85,000
Qther assets 415,000 KK. capital ..... 252.000
a. P52.OOO increase c. P52.OOO decrease 11. capital ...... 126.000
b. PI 3.000 increase d. Pl 3.000 decrease
mm. capital 42,000
46. James and Bruce are partners. They have shared profits and losses 70/30 Total P500 000
for several years. The partnership profit allocation agreement is currently Total P500.000
being modified to 60/40. At the date of the change, the partners choose The partner agree to sell NN 20% of the* respective capital and profit and
to revalue assets with market value different from book value. One asset loss interests for a total payment of P90.000 The payment by NN is to be
revalued is a building with a book value of P370.000 and a market value made directty to the individual partners. The capital balances of KK. LL
of P520.000. One year after the profit and loss ratio is changed the building and MM. respectively after admission of NN are:
is sold for P650.000. What is the amount of change to Bruce s capital
account at the date the building is revalued? P33.000
a. Pl 98.000: P 99.000:
b. P201,600: Pl 00.800: P33 600
a. P 105,000 c. P45.000
c. P24 6.000: Pl 08.000: P36.000
b. P 91.000 d. P39.000
d. P255.6OO; PI 27,800: P4Z600.
(AICPA)
47. Using the same information in No. 46, what is the amount of change to
Bruce s capital account at the date the building is sold? 50. Using the same information in No. 49. assuming that implied goodwill (or
revaluation of asset) is to be recorded poor to the acquisition by NN The
a. P91.000 c. P39.000 capitals of KK. LL. and MM. respectively after odmtssion of NN are
b. P78.000 d. P52,000
a. P198.000; P 99.000: P33.000 c. P216,000; Pl08,000: P36.000
Assignment of Interest to a Third Party: b. P201.600; Pl00.800: P33 600 d. P255.600. P127B00; P42.600
48. Capital balances and profit and loss sharing ratios of the partners in the 51. XX. YY and ZZ are partners who share profits ond losses in the ratio of 5:3:2,
BIG Entertainment Gallery are as follows: respectively. They agree to sell a 25% of the* respective capital and profits
and losses ratio for a total payment directty to the partners in the amount
Betty, capital (50%) PI 40,000 of P140.000.00. They agree that goodwA or revaluation of assets of P60,000
Iggy, capital
160.000 is to be recorded prior to admission of AA The condensed balance sheet
100,000 of the XYZ partnership is as follows:
Grabby, capital (20%)
P4O0.0Q0 Cash P 60.000 Liabilities P100.000
Total... - -................................................ Non-cash assets 540 000 XX. Capitol 250000
Betty needs money and agrees to assign half of her interest in the YY, Capital 150,000
to Yessir for P90.000 cash. Yessir pays directly to Betty. Yessir does not become ZZ. Capital 100,000
a partner. Total P600000 Total P600.000
What is the total capital of the BIG Partnership immediately after the The capital of XX. YY and ZZ respectively after the payment and admission
assignment of the interest to Yessir? of AA are:
c. P490.000 a. P 187.500. PI 12.500; ond P75.000 c P280,000 PI68,000: and PI 12.000
a. P310.000 b. P210 000: PI26.000 and P84.000 d P250.000: P150.000: ond P100 000
b. 200.000 d. 400,000
(Adapted)
 28 Ckapttr I

52. On June 30, 2015, the balance sheet of Western Marketing, a partnersNn Partntrihip
£• summarized rK
t$ M as foUfNA/V
follows:

* Sundry assets Pl 50.000 55. On January 31. 2015. partners of Lon, Mac & Nan. LLP. hod the toMowmg
West, capital 90.000 loan and capital account balances (after closing entries tor January)
Tern, capital 60.000
Loan receivable from Lon P 20 000 dr
West and Tern share profit and losses at a 60:0 ratio, respectively They Loan payable to Nan — 60000 a
agreed to take in Cuba as a new partner, who purchases 1/8 interest of Lon, capital---------------- — 30.000 dr
West and Tern for P25.000. What is the amount of Cuba's capital to be Mac, caprial 120.000 a
taken up in the partnership books if book value method is used? Nan. capital—.------------- 70,000 a

a. Pl 2.500 c. P25.000 The partnership's income sharing ratio was Lon. 50% Mac. 20% and Nan.
b. 18.750 d. 31.250 30%. On January 31, 2015, Ole was odmrtted to the partnership tor a 20%
interest in total capital of the partnership n exchange tor an investment
(Adapted) of P40.000 cosh. Prior to Ole's odmtssion. the existing partners ogreed to
increase the carrying amount of the partnership s inventories to current
53. PP contributed P24.000 and CC contributed P48.000 to form a partnership fair value, a P60.000 increase. The coprial occount to be credited to Ole
and they agreed to share profits in the ratio of their original capital
contributions. During the first year of operations, they made a profit of a. P60.000 c. P52OOO
PI6,290; PP withdrew P5.O5O and CC P8.000. At the start of the following b. P40.000 d P46.000
year, they agreed to admit GG into the partnership. He was to receive a (Adapted)
one-fourth interest in the capital and profits upon payment of P30.000 to
PP and CC. whose capital accounts were to be reduced by transfers to 56. MM and OO are partners with capital batonces of P50,000 and P70.000
GG's capital account of amounts sufficient to bring them back to their respectively, and they share profits and losses equally The partners agree
original capital ratio. to take PP into the partnership for a 40% interest m capital and profits
while MM and OO each retain a 30% interest PP pays P60.000 cash drectly
How should the P30.000 paid by GG be divided between PP and CC? to MM and OO for his 40% interest, and goodwill implied by PP's payment
is recognized on the partnership books. It mm and OO transfer equal
a. PP.P 9,825; CC. P20,175. c.. PP.P10.000; CC. P20.000. amounts of capital to PP, the capital balances after PP s admittance wiU
b. PP,PI5,000; CC. Pl5.000 d. PP.P 9,300: CC. P20.700 be:
(Adapted)
a. MM. P35.000: OO, P55.000: PP P60 000
54. The capital accounts of the partnership of NN, VV, and JJ on June 1.2015 b. MM, P45.000; OO. P45.000: PP P60.000
are presented below with their respective profit and loss ratios: C. MM. P36.000; OO, P36.000: PP. P48 000
d. MM, P26.000; OO. P46.000: PP P48 000
NN P139.200 1/2 57. Using the same information in Number 56 and the partner's decided to
W .................................. 208.800 1/3 have a cash settlement among themselves right after the admission of
JJ 96.000 1/6 PP, i.e., the capital balance should be mode in accordance with the new
profit and loss ratio, what would be the capital balances after such
On June 1.2015, LL is admitted to the partnership when LL purchased, for transaction?
Pl 32.000, a proportionate interest from NN and J J in the net assets and
profits of the partnership. As a result of a transaction LL acquired a one- a. MM P35.000: OO P55 000 PP. P60.000
fitth interest in the net assets an J profits of the firm. What is the combined b. MM. P45.000: OO P45 000: PP P60.000
gain realized by NN and JJ upon the sale of a portion of their interest in C. MM. P36.000 OO. P36 000: PP P48,000
the partnership to LL? d. MM. P26.OOO; OO. P46 000: PP. P48.000
(Adapted)
a. P 0 C. P62.400
b. 43,200 d. 82,000
(AICPA)
 Parlntrthi^ 3J
58 The foMowmg condensed balance sheet is pxejented tor the portnenh.^ .
LL. PP. and QQ. who share profits and losses m the ratio ot 4:3:3. respechvety 60 The capital accounts for the partnership of ll and MM ot October 31.2015
are as follow*
Cash...
P.90.000 11, capital ~~~~~ P 80.000
Other assets
830.000 MM, capital -~ 40.000
U.. loa'i.......
20,000 Pl 20.000
^QQQ
The partners share profits and tosses m the ratio of 3:2 respectively
P210.000 The partnership ts in desperate need of cash and the partners ogree to
30.000 admit NN as a partner with one-ttwd m tte capital and profits and losses
310.000
upon his investment of P30.000. immeOatety ahe< nn s admission what
200.000 should be the capital balances of LL MM and nn respectively assuming
190.000 bonus is to be recognized?
P940,000 a. P50.000; P50.000: P50.000 c. P66.667; P33.333. P50.000
b. P60,000; P60.000: P60.000 d P68 000: P32.000. P50.000
Assume that the assets and liabilities are toirty valued on the balance sheet (AICPA)
and that the partnership decides to admit FF os a new partner, with a 20%
interest. No goodwill or bonus is to be recorded 61. OO and TT are partners with capital bdonces P60 000 ond P20.000.
respectively. Profits and tosses are drvtoed «"»the ratio of 60:40 OO ond TT
decided to form a new partnership with GG who invested land valued at
How much should FF contribute in cash or other assets? P15.000 for a 20% capital interest in the new partnership GG’s cost of the
land was PI2 000. The partnership ejected to use the bonus method to
a. P 140.000 c. Pl75.000 record the admission of GG into the par*nenrup GG’s capital account
b. 142X100 d. 177,500 should be credited for:
(AICPA)
a. Pl 2.000 c. PI6.COO
b. 15,000 d. 19X00
59. CC and DO are partners who share profits and losses in the ratio of 7:3. (AICPA)
respectively. On October 21,2012, their respective capital accounts were
as follows: 62. The partnership of Marissa and Chga is beog dasolved. ond the assets and
equities at book value ond fair value and profit and toss ratios at January
CC .. .......................................................... R35.000 1,2015 are as follows:
DD 30.000 Book Value For Value
P65.000 P 20,000 P 20 000
Accounts receivable - net----------------- 100,000 100,000
On that date they agreed to admit EE as a partner with a one-third interest Inventories _________ — 50,000 200 000
in the capital and profits and losses, and upon his investment of P25.000 Plant assets - net 100X00 120.000
The new partnership will begin with a total capital of P90.000. Immediately P270.000 P440 000
after EE’s admission, what are the capital balance of CC, DD, and EE.
respectively? Accounts payable P 50.000 P 50.000
120,000
Marissa, capital (50%) 100,000
a. P30.000; P30.000; P30.000: c. P31.667; P28.333; P30.000;
b. P31.500: P28.500; P30.000; d. P35.000; P30.000; P25.000; Olga, capital (50%)
P27O.OOO
(AICPA)
 Ckoptffi

Partnership ____ ___ __ ______________________________________________ H

Manna and Oigo agree to admit I rent into the partnership for a one-third
interest Trent invests P95.000 cash and a building to be used in the business
with a book value to Trent for Pl00.000 and a fair value of Pl20.000. 65 The following are capital occount balances and profit and loss ratios of
the partners m Precious Company.
Compute the capital balance of Olga after the admission, assuming that
the assets are revalued and goodwill is recognized. PAL
Capital Kat*
j. Pl 75,000 C. Pl 95.000
P2.250.000 2
b. 155.000 d. 205.000 OO ............................... ’-------- 750,000 I
(Adapted)
They agree to admit RR as a partner with a 25% interest in capital upon her
63 AA and BB entered into a partnership on May 31. 2015. contributing cash investment of Pl.000.000. LI. OO and RR ore to share profits 5:3:2,
of P48.000 and P32.000. respectively, and agreeing to divide earnings in respectively.
the ratio of their initial investments after allowing annual salary allowance
of Pl2.000 each. On December 31. 2015. the Income Summary account Subsequently. TT joins the partnership by nvestmg Pl.200.000 for a 20%
had a credit balance of P34.000. while the drawing accounts showed interest in profits and capital.t he old partners are to share profits in the#
debit balances of P14.000 for AA and P10.000 for BB. original ratio.

At the beginning of the next year. CC was admitted into the firm as a new Assuming the goodwill method is used, how much is the goodw* to be
partner with* a 33-1/3% interest for a capital credit equal to his cash recorded upon the admission of TT?
investment of P60.000. AA and BB then effected a private cash settlement
a. P800.000 C. P400000
between themselves in order to make the capital balances conform to a
b. 600.000 d 240BOO
new profit-sharing ratio of 4:2:3. respectively, with salary allowances (PhICPA)
scrapped.
66. RR and XX formed a partnership and agreed to divide initial capital equaly,
How much of the amount of the private cash settlement effected between even though RR contributed P25.000 and XX contributed P21.000 in
the old pamers? identifiable assets Under the bonus approach to adjust the capital
accounts XX s unidentifiable assets should be debited for.
a. P5.000 c. Pl 2.000
b. 9,000 d. 15.000 a Pl 1.500 c. P2.000 > /
(Adapted) b. 4.000 d. 0
(AICPA)
64. AA, BB. and CC are partners sharing profits in a 5:3:2 ratio, and with capital
balances of P95.000, P80.000. and P60.000, respectively, on December 3L 67. In the AD partnership, Alien's capital rs Pl 40,000 and Daniel's is P40.000
2015. The partners decided to admit DD as a new partner on January b and they share income in a 3:1 ratio respectively. They decide to odmit
2016. DD will contribute cash of P80.000 to the partnership and also pay David to the partnership. Each of the following questions is independent
Pl0,000 for 15% of BB's share. DD is to have a 20% share in profits. After the o’ the others.
admission of DD, the total capital will be P330.000 and DD’s capital v/ill
be P70.000. Allen and Daniel agree that some of the inventory is obsolete. The inventory
account is decreased before David ts admitted. David invests P40 000 for
After the admission of DD. BB s capital balance would be. a one-fifth interest What is the amount of inventory written down?

a. P72.600 a. P 4.000 c. Pl 5,000

C. P79.I00 d. P20.000
b. 74,600 b. P10.000
d. 31,100
(Adapted)
34
68 j«ng the same tnformahon in No 67 Dav nd directly purchases a r ..k
interest by paying Allen P34.000 and Danrel PIO000 The land acerT n *2
mcreased before Davtd is odrmtted By what amount is the land accent CC decided to retre from the partnership By mutual agreement the assets
»nCT€?Q$€?<J? ore to be adjusted to the* far value of P216 000 at June 30. 2015. it was
agreed that the partnership would pay CC P6I.200 cash for CC’s
a. P40.000 c. P20 000 partnership interest, inciudmg CC’s loan which ts to be repaid in Ml No
b. P36.000 d PI0.000 goodwill is to be recorded After CC's retirement, what is the balance of
MM s capital account?
69 MM and NN are portnen who have capitals of P6.000 and P4 800 and
share profitsin the ratio of 3:2. OO rs admitted as a partner upon investing a. P36.450 C. P45.450
cash of P5.000. with profits to be shared equally y b 39.000 d. 46.200
(AICPA)
Assume that OO is allowed a 25% interest mt he firm. (1) the capital balance
of MM after the admission of OO using goodwill method, and (2) how 72. The December 31.2015, statement of finance* position of the BB. CC. and
much will NN gain or lose by the use of bonus method over goodwill DO partnership is summarized as fotows
method.
Cash ................. . P 100.000 CC. loon............. Pl 00,000
a. (I) P7.120: (2) NN wiM lose PI40 Other assets, at cost.... . 500.000 BB capital--------- 100.000
b. (1) P7,120; (2) NN will gain P1.260 CC. capital......... 200.000
c. (1) P8.520; (2) NN will lose Pl.260 DO. capital------- 200,000
d. (1Y P8.520: (2) NN will gain P140 P600 000
P600.000
(Adapted)
The partners share profits and losses as fofiows: BB 20%: CC. 30%: ond DD.
70. AA and BB are partners who have capital of P600 000 and P480.000 sharing 50%. CC is retiring from the partnership ana the partners have agreed that
profits in the ratio of 3:2. CC admitted as a partner upon investing P500.000 "other assets" should be adjusted to the< far vdue of P600 000 at December
for 25% interest in the firm, prtoits to be shared equally. Given the choice 31. 2015. They further agree that CC wit receive P244.000 cash tor his
between goodwill and bonus method, CC will partnership interest exclusive of the loan, which ts to be paid in fun No
a. Prefer bonus method due to CC's gam of P35.000. goodwill implied by CC's payment w* be recorded
b. Prefer bonus method due to CC’s gain of P140.000
c. Prefer goodwill method due to CC’s gain of pl40.000 After CC's retirement, the capital balances of BB and DD. respectively w>H
d Be indifferent for the goodwill and bonus methods are the same be:
(Adapted)
a. Pl 16.000 and P240.000 c. Pl 00 000 and P200.000
b. P101.714andP254.286 d P 73.143and PI82.857
Retirement or Withdrawal of a Partner (Adopted)
71. On June 30, 2015. the statement of financial position for the partnership of 73. On June 30. 2015. the condensed balance sheet for the partnership of DD.
CC, MM, and PP, together with their respective profit and loss ratios, we FF. and GG. together with their respective profit and loss sharing
as follows: percentages was as follows:
Pl 80,000 Assets, net of liabilities — - P320.000
Assets, at cost
9,000 DD. coital (50%) Pl 60 000
42.000 FF. capital (30%) 96.000
39.000 GG. capital (20%) .MO00
90.000 P320.000
PI 80.000
M DO decided to retire from the podnershtp and by mutual aareemant ,<
be paid P180.000 out of partnership funds for his interest lotal qoodwdl ™ 76 Using the same information in Number 75. except that total goodwill or
adjustment in assets implicit in the agreement it to be recorded Att~ adjustments n assets wos to be recorded What wW be the total net assets
of the partnership after EE s retirement?
DD s retirement, what are the caprtal balances of the other partners?
FF GG FF a. P300,000 C. P240.000
GG
a. P 84,000 P56.000 c b. 210.000 d 270.000
Pl 08.000 P72.000 (Adapted)
b. 102000 68.000 d. 120.000 80.000
(AICPA) 77. A. Smith, a partner in an accounting firm decided to withdraw from the
partnership. Smith s share of the partnershp profits and losses was 20%
74. PP, RR and SS were partners with capital balances as ot January 1 2015 of Upon withdrawing from the partnership he was paid P88.800 in final
P20.000. P30.000 and P40,000 respectively, sharing profit and losses on a settlement for his interest The total of the partners capital accounts before
5:3:2 ratio. recognition of partnership goodwill prior to Smith s withdrawal was
P252.000. After his withdrawal the remarvog partners capital accounts,
the firm was:
On July 1,2015 PP withdraw from the partnership. Partners agreed that at excluding their share of goodwil, totaled Pl 92X300 The total goodwill of
the time of withdrawal, certain inventories had to be revalued at PI4.000 a. Pl 44.000 C- PI 92X300
from its cost of Pl0.000. For the six month period ending June 30. 2015. the b. 168.000 d 300 000
partnership generated a net income of P28.000. Funner, partners agreed (AICPA)
to pay PP. P39.000 for his interest and that the remaining partners' capital
accounts, would be adjusted for whatever goodwill the settlement would 78. CC. DD and EE shared profit and losses based on 532 EE was allowed to
generate. The payment of PP included a goodwill of: withdraw from the partnership on 31 December 2015 with P600,000 cash
as full settlement. The condensed balance sheet of the partnership as of
that date was as folows:
a. P3X3OO c. Pl 0.000
b. 5.000 d. 8.500 Assets
(Adapted) Due from EE P 250,000
Goodwill 2.000.000
75. The condensed balance sheet of the partnership of EE. FF and GG with Other assets 4.750.000
corresponding profit and loss sharing percentage as of June 30. 2015 was Total assets-----------------------------------------------------------P7.QQ0.QQ0
as follows.
Liabilities and Capital
Net assets .................................. ........................... P480.000 Liabilities . ............... ................ P2.000.000
i , Due to DD , 750,000
EE. capital (50%) ....................................................... P240.000 CC. capital 1,750 000
FF, capital (30%) ..... 144,000 DD, capital 1.500 000
GG. capital (20%) •. 96,000 EE, capital 1,000 000
P480,000 Total liabilities and capital ..... P7,000,000

As of said date, EE retired from the partnership. By mutual agreement, he Using the partial adjustment of goodwfl method, the new capital balances
was paid P270.000 for his interest in the partnerhsip. Partial goodwill or of the remaining partners after EE:s withdrawal are
adjustment in assets was to be recorded. After EE’s retirement, the total
a. CC. Pl.842750 and DO. PI.556.250
net assets of the partnership was: b. CC. PI,375.000 and DO, Pl,275,000
c. CC. P2.000.000 and DO. Pl .650.000
a. P300.000 c. P240.000 d. CC. Pl750.000 and DD. Pl 500.000
b. 210X100 d 270,000 (Adapted)
(Adapted)
 M ______ ■——————.— _____ Partnerslup Paftntf\hi£ 3

79 Using the some information in Number Z8 except that the entire shnnkaae •utin«»» Combination tach Partn«r»h»p Has Und«<valu»d Tongibl* Ajjeti and
in asset method or total adjustment in goodwill i$ used the new capital Goodwill
balance of the remaining partners oftei EE's withdrawal are:
82 The partnership of A, B C, and D has agreed to combine with the
a. CC. PI.843,750 and DD. Pl.556 250 partnership of X and Y The individual capttai accounts and profit and loss
b. CC, PI.375.000 and DD. PI.275.000 sharing percentage of each partner fotow
q. CC. P2.000.000 and DD. P1.650.000
d. CC. Pl.750.000 and DD. Pl.500.000 Capttai Accounts
(Adapted) P 50,000 40 28
80. The partners' capital (income-sharing ratio in parentheses) of Nunn. Owen. 35 000 30 21
40,000 20 14
Park & Quan LLP on May 31. 2015. were as follows: 25 ax 10 7
C...............
Nunn (20%) .................................................. p 60.000 D 150,000 Jfip JO
Owen (20%) .............................. 80.000
Park (20%) ............................. ........................ 70.000 X P 60.000 50 15
Quan (40%) 40,000 Y----------------------------------- 40.000 S _L5
Total partners capital (20%) P250.000 PIOC-DOO

On May 31.2015. with the consent of Nunn, Owen, and Quan: A. B. C, and D s partnership has undervalued tangible assets of P20.000
a. Sam Park retired from the partnership and was paid P50.000 cash and X and Y partnership has undervalued tangible assets of P8.000. Al the
in fu8 settlement of his interest in the partnership. partners agree that:
b. Lois Reed was admitted to the partnership with a P20.000 cash
investment for a 10% interest in the net assets of Nunn. Owen (a) the partnership of A, B. C. and D possesses goodwii of P30.000 and
and Quan. (b) the partnership of X and Y possesses goodwill of P10 000.

The capital account to be credited to Reed is: The combined businesses will continue to use the general ledger of A. B. C,
and D.
a. P22.000 c. P20.000
b. 27,000 d. 25.000
(Adapted) Assume that tangible assets are to be revofued and goodwill is to be
recorded. Compute the amount of goodwi recognized in the partnership
ri a a rr nnri are oartners sharina profits in the ratio of 3:2:1. respectively. books:
Coi^FoioccourMS are?50^)?r30.0<£ ond P20.000 on 3^20'
when CC decides to withdraw. It is agreed to> pay P30.000for CC s interes a. Zero a P40.000
Profits aftei the retirement of CC are to be shared equally. b. P30.000 d 68000
(Adapted: Advanced Accounting by Pahler)
(1) The capital balance of BB after retirement of CC, goodwill
approach, and (2) assume the usage of bonusjPar ia • Dreferred by 83. Using the same information in No 82 compute the capital balances of A
approach for the retirement, which of these methods P and X. respectively:
BB?
a. A. P70.000: X. P69 000 C. A, P58.000; X. P64.000
a (1) P50.000: (2) Bonus method b. A, P62.000: X P65.000 d. A, P50.000, X. P60,000
b. (1) P20.000: (2) Bonus method
c (1) P30.000: (2) Partial goodwill
d (1) P50,000: (2) Total goodwill (Adapted)
 41

The RAG Corporation was aufhonzed to issue P100 par preference^ shares
4t__________ —--------------------------------------------- - ----------- Cfcyr / and P10 par ordinary snare Roy and Gil ogreed to receive for the* equity
Partwrihip
m the partnership 720 orcSnary share eoch. pKn even multipies of 10 shares
for the* remaining interest
84 Using the some information in No. 82 except that bonus method is to be
used with respect to undervalued assets and goodwill Compute the The total number of shares of preference and ordnary share issued by the
amount of goodwill recognized m the books Corporation in exchange of the assets and babAhes of the portnersNp
a. Zero c. P40,000 are:
tj. P30.000 d. 68.000 Preference Share e Shore Ordngry Shore

a. 2.540 shares 1.500 shares c. 2-642 shares 1.440 shares

85. Using the same information in No 82 except that bonus method is to be
b. 2.592 shares 1,440 shares d 2-642 shares 1,550 shares
used with respect to undervalued assets and goodwill. Compute the (PhiCPA)
capital balances of a and X respectively:
87. Partners Art and Tony, who share equally m profits ana losses have the
a. A, P70.000: X, P69.000 c. A, P58.000; X, P64.000 following balance sheet as of December 31. 2015
b. A, P50,000: X. P60.000 d. A. P50.960: X. P58.800
Cash ............ PI20.000 A/payabte-------------PI72.000
Incorporation of a Partnership A/Receiyabie 100,000 Accixn dep’n------- 8000
Inventory .......... 140.000 Art capital ........... 140.000
Equipment 80 000 Tony, capital--------- 120,000
86. Roy and Gil are partners shoring profits and losses in the ratio of 1:2,
respectively.-On July 1.2015, they decided to form the RIG Corporation Total ________ P440.000 Total P440,000
by transferring the assets and liabilities from theDebit partnership to the
Credit
They agreed to incorporate their partnership with the new corporation
Corporation in exchange of its shares. The following is the post-closing absorbing the net assets after the foftowmg adjustments provision of
Cash of the partnership:
trial balance -................. ..... P 45,000
allowance for bad debts of Pl 0,000: restatement of the inventory at its
Accounts Receivable (net) 60,000 current fair value of PI60.000; and. recognition of further depreciation on
Inventory - 90,000 the equipment of P3.000. The corporation s capital stock is to have a par
Fixed Assets (net) -...... 174,000 value of P100. and the partners are to be issued corresponding total shares
liabilities —— P 60,000 equivalent to their adjusted capital balances.
Roy, Capital ..................................... 94,800 >
Gil, Capital .................................. 214,200 The total par value of the shares of capital stock that were issued to partners
Art and Tony was:
P369.000 P369,000
a. P260.000 c. P273000
It was agreed that adjustments be made to the following assets to be b. 267.000 d. 280.000
transferred to the corporation: (PhbCPA)

Accounts Receivable P 40,000 88. JJ & KK partnership's balance sheet at December 31.2015. reported the
Inventory 68,000 following:
Fixed Assets . 180,600
Total assets P 100.000
Total liabilities 20,000
JJ. capital ........................... 40.000
KK. capital ..................... ............ .. ..... .. ....... .......... _ ~ 40,000
 90 w x, and r are partners sharing profits and losses m me ratx> <rf
respectively The condensed balance sheet of He*o Partnersho as o<
December 31, 2015 e
He«db Partnership
Balance Sheet
December3i 2015
On January 2 2016. JJ and KK dosolved the* partnership and transferred
al assets and babAties to a newly-formed corporation At the dote of tosh------------------------------------------- P 50000
incorporation. the fa< value of the net assets was P12.000 more than the Other assets--------------------------- - 130W0
carrying amount on the partnership s books, of which P7.000 was assigned Total assets----------------------------- Pl 80,000
to tangible assets and P5.000 was assigned to goodwill J J and KK were
each issued 5.000 shores of the corporation’s Pt par value ordinary share Liabilities--------------------------------------- P 40.000
immediately following incorporation, shore premium/addihonoi patd-in- w. capital 60000
capitol in excess of par should be credited for X. capital-------------------- ----------------- 40.000
Y. capital-------------------------------------- 40XXX)
a. P68.000 c. P77.OOO Total labilities and capital------------- Pl 80 000
b. 70,000 d. 82,000
(AKZPA) Assume instead that the Heidi Partnership ts atsvOved and Uqu»dated by
instalments.-and the first reaization of P40.000 cash e on the sale of other
assets with book value of P80.000 Afte* the payment of bobMies the
Partnership Liquidation
Cash .. ~~ ...................................... P160,000 available cash shal be distributed to w X. and Y respectively as to*ows
Other assets -........................................................ 320,000
89 The following condensed balance sheet is presented for the partnership of a. P36.000: P27.000: and. P27OOO
AA, BB. and CC. who share ..profits and losses- in the ratio
Total P480.000
of 4:3:3, b. P44.000; P28.000: and. P28.000
respectively c. Pl6.000. PI 2,000: and. PI2,000
Liabilities Pl 80,000 d P24.000: PI3.000: and. Pl3.000
AA, capital — -.................... 48,000 (PhICPA)
BB, capital ». 216,000
CC, capital -...................... 36,000 91. The partners of the M&N Partnership storied kquidotng the< business on
July 1,2015, at which time the partners were shamg profits and losses 40%
to M and 60% to N. The balance sheet of the partnership appeared as
Total....... ........................................................................ fjgftQQQ follows:
The partners agreed to dissolve the partnership after selling the other assets
for P200.000. Upon dissolution of the partnership. AA should have received. M&N PartnersNp
Balance Sheet - July I 2015
a. P 0 c. P72.000
b, 48,000 d. 84,000 Assets aobrkfres A Equity
(AICPA) Cash.................. p 8 800 Accounts payable ........ P 32,400
Receivable 22.400 M. capital........ P31.000
Inventory 39.400 M. drawing__ ( 5.400) 25,600
Equipment P65.200 N, capital____ P33.200
Accumulated N drawing__ ( 200) 33.000
depreciation (30.800) 34 400 N loan 14 000
Total P 105,000 Total..................... ........ ...... Pt05.000
44

Dunng the month of Jufy the partners collected P600 of the mr

with no toss The potnen also sow dunng the month the em»e mve£k£
on wtvch they reakzed a total of P32.400 inventory Th<? net income from January I to November 30 2015 is P44 000 AKo, on
this dote, cosh and habits ore P40.000 onq P90.00C respectively For RR
to receive P55.2OO n M settlement of no interest in the firm, how much
How much of the cash was paw to M'$ capital on My 31. 2015? must be realized from the sate of the firm’s non-cosn assets?
a P25.600 c. P320
b. 5.400 q 0 o. Pl 96.000 c. P193.000
b? 177.000 d 187,000
(PhKPA) (Adapted)
92. Lorry. Marsha, and Natalie are partners in a company that is oeina
liquidated They shore profits and losses 55 percent. 20 percent and 25 95. Sitveno. Domingo, Reyes, and Poster ore partners. sharing earnings m the
percent respectively When the liquidation begins they have caDitai ratio of 3/21.4/21.6/21 and 8/21. respectively The baksnees of their capital
account alances of PI08.000. P62.000. and P56.000. respectively The accounts on December 31. 2015 are as foiows
partnership just sold equipment with q historical cost and accumulated
depreciation of P25 000 and PI8.000. respectively for P10.000 What is the Siverio P 1,000
balance in Marsha s capital account after the transaction is completed? Domingo , 25.000
Reyes 25,000
a. P62.000 c. P62.600
Pastor__________ ___________________ __ - 9.000
b. P61.400 d. P65.000 P60p00

93. After operating for five years, the books of the partnership of Bo and By The partners decide to liquidate and they occordrigty convert the non­
showed the following balances: cash assets into P23.200 of cash. After paying the liabilities amounting Io
P3.000. they hove P22.200 to efivide Assume that a debt balance in any
Net asset: Pl69.000 partner’s capital is uncoHectibe.
Bo, capital....................................................... 110.500
By. capital 58.500 After the P22.200 was divided, the capital Ddance of Domingo was

If liquidation takes piece at this point and the net assets are realized at a. P3.200 c P 4500
book value, the partners are entitled to: b. 3.920 d 17 BOO
(PhiCPA)
a. Bo to receive P117.000 & By to receive P52.000
b. Bo to receive P126.750 & By to receive P42.250 96. As of December 31. 2015 the books of Ton Partnership showed capital
c. Bo to receive P84.500 & By to receive P84.500 balances of: T P40.000- O. P25.000. N P5.000 The partners profit and loss
d Bo to receive PI 10,500 & By to receive P58.500 ratio was 3:2:1. respectively The partners decided to liquidate and they
(PhilCPA)
sold all non-cash assets for P37.OOO After settlement of all teabiiities
amounting Pl2.000. they sfifi have cash of P28.000 left tor distribution.
94. RR, SS and TT decided to dissolve the partnership on November 30. 2015.
Assuming that any capital debt balance ts uncotectible the share of T in
The* capital balances and profit ratio on this date, follow: the distribution of the P28.000 cash would be:
Capital Profit
Balances Ratio a. P17.800 C PI9.000
b. 18.000 d 17,000
RR ._________________ _ ____ ___ ____ P50.000 40% (PhiCPA)
SS ______________ __ .. ____ _____ 60.000 30%
n _ 20.000 30%
 Partrutrikip

Perry. Quincy ond Renquet hod shared profits and losses m a ratio of 2 4 4
liquidation expenses were expected to be P8 000 Al partners were solvent
What would be the minimum amount tor which the non cosh assets must
hove been sold tor. in order tor Qumcy to receive some cosh from the
Ong. capital ......................................................... P 60,000 liquidation?

97 Laure:. copital ........................... ....................

A local partnership was considering the possibility of hquidation 67.000 since one
Ezzard. capital .................... .......................... a Any amount in excess ot p175,000
of tne partners i$ solvent (Tiflmon) and the others ore17.000 insolvent Capital b Any amount in excess o< Pl 17.000
Tilman.
balances that time were..........................................
at capital as follows Profits and losses 96.000
were divided on c. Any amount in excess of P183 000
a 4 2 2 2 basis, respectively d Any amount in excess ot P198.667
Ong's creditors fifed a P25.OOO claim against tne partnership’s assets Al
that time, the partnership held assets reported at P360.000 and liabilities
100. AA. 88. and CC are partners n ABC Partnersho ond share profits and losses
of Pl20,000. If the assets could be sold for P228.000. what is the minimum
50%. 30% and 20%. respectively The partners have agreed to liquidate the
amount that Ding’s creditors would hove received? partnership and some liquidation expenses to be incurred. Prior to tne
a. P 0 c. P36.000
liquidation, the partnership balance sheet reflects the following book
b. P 2,500 d. P38.720 values:
Cash------- - ------------------------------------------------- - ---------- P 25.200
98. The Keaton, Lewis and Meodor partnership had the tollowing balance
Non-cash assets .......--------------------------------------------- - 297 600
sheet just before entering liquidation: 38 400
Notes payable to CC--------------------------------------------
Other booties-------------------------------------------- ----------- 184,800
Cash ....................... P 10,000 Liabilities Pl30,000 AA. captai------------------------------------------------------------ 72000
Non-cash assets 300,000 Keaton, capital 60,000 BB. capital deficit_________ ;---------------------------- ...... ( 12,000)
Lewis, capital 40,000 CC. capital------------------------------------------------------------ 39.600
Meador, capital 80,000
P310,000 P310,000 Assuming that the octual Sqmdation expenses oe Pl 6 800 and that the
non-cash assets with a book value of P24COOO ore sold for P216.000
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Non­
cash assets were sold for PI80,000. Liquidation expenses were Pl0.000 How much cash should CC receive?
Assume that Keaton was personally insolvent with assets of P8.000 and
liabilities of P60.000. Lewis and Meador were both solvent and able to a. P46.457 c. P74^71
cover deficits in ther capital occounts, if any. What amount of ccph could b. 39,600 d. -0-
Keaton’s personal creditors have expected to receive from partnership (Adopted)
assets? 101. After all noncash assets have been converted into cash in the liquidation
c. P30.000 of the AA and JJ partnership, the ledger contains the following occount
a. P 0
d. P34.000 balances:
b. P26.000
99. The following account balances were available for the Perry, Quincy and Debit Credrf
Renquist partnership just before it entered liquidation: Cash ................ P34.000
Accounts payable P25.000
Cash P 90,000 Liabilities P1 70.000
Loan payable to AA 9,000
Non-cash assets 300.000 Perry, capital 70,000 AA. capital 8.000
Quincy, capital 50.000
JJ. capital 8000
Renquist, capital ... 100.000
P390.000
P390,000
4g Chapter I 49

Avcx*ot>*e cosh shoUd be distributed P25.000 to occounts poyabte and •

104. When M«kk» and Mytene. partners who share earnings equally were
incapacitated m an arpkxie accident, a kjutdator was appointed to
a p? ,000 loan payable to AA c P) .000 to AA and P8 000 to JJ wind up their buvness The accounts showed cash. P35.000 other assets.
b. P4.500 each to AA and JJ d. P8.000 to AA and Pl'ooo to JJ Pl 10.000; liabAtie-, P20XXX) capital. P7I.000: and Myiene capital.
(Adapted) P54.000 Because of highly specialized nature of the noncash assets, the
liquidator anticipated that considerable time would be reamed to dispose
102. Arthur ^aker and Carter are partners m textile distribution business shanna them. The expenses of bquKkJtmg the business (advertising rent travel,
profits and losses equally On December 31. 2015 the partnership caoitcd etc.) are estimated at PI0,000
and partners drawings were as toMows:
How much cosh con be dhtnbvted safety to eoch partner at this pent?
Arthur Baker Carter total a. P5.000 to Mikki; and PO to Myiene
Capital P 100,000 P80.000 P300.000 P480.000 b. P5,000 to Mikki. and P500 to Myiene
Drawing 60.000 0.000 20.000 120.000 c. P3XXX) to Mtkxi. and P0 to Mytene
d. P5.000 to Mtkkj. and P1.000 to Myiene
The partnership was unable to colect on trade receivables and was forced (Adapted)
to liquidate. Operating profit in 2015 amounted to P72.000 which was all
exhausted, including the partnership assets. Unsettled creditors’ claims at 105. A balance sheet for the partnersno of ML LI and MM who share profits
December 31, 2015 totalled P84.000. Baker and Carter have substantial 21:1 respectively shows the foBowng balances Mt before liquidation
private resources, but Arthur has no personal assets.
Cosh Other Assets bob. KJC Cap LL Cop. MM. Cop.
The final cash distribution to Carter was: P48.000 P238.000 P80.000 P88000 P62000 P56.000

a. P78.000 C. Pl 06.000 In the first month of fcquidation. P128.000 was received on the sale of certain
b. 84.000 d. 162000 assets Liquidation expenses of P4.000 we<e pod. and oddtional hqcxdahor
(PhilCPA) expenses of P3.200 are anticipated before bQuidation is completed
Creditors were paid P22.400. The avaitabie cash was dtstnbuted to the
103. Jar, Ram, and Millo, who divide profits and losses 50%. 30%. and 20%. partners
respectively, have the following October 31,2015 account balances:
The cash to be received by each partner based on the above data

Jar, drawing (Dr.) - - Pl 2,000

KK LL MM KK U MM
4,800
Mino, drawing (Cr.) —
7,200 P56.600 P28.300 P28.300 c. P29 400 P32700 P26 700
Accounts receivable - Jar - -....................... 56.000
14.400 86,000 61.000 55.000 d 88000 62 000
loans payable - Ram............................................... *— (Adapted)
59.400
Jar, cqpital w -
44.400
Ram, capital...................................................... •• 106 NN. OO. PP. and GG. partners to a law firm, shares profits at the ratio of
39,000
Millo. capital 5:3:1 :l. On June 30, relevant partners' accounts foltaw:
The partnership s assets are P211.200 (including cash of P64^»). The toons Capitol
Advances
partnership is liquidated and Millo receives P33.000 in final se e Dr. Cr. Cr.
much is the total loss on realization? P20.000 Pl 60.000
NN ...........
OO........... 40,000 120.000
a. P10.800 C. P54.000 Pl 8.000 * 60.000
PP............
b. 31,200 d. 64,200 10,000 - 100000
(Adapted) GG..........
 On me day cash of P72.000 <s dec tar ec q, avertable •«, ....
Wh° °m°"9 Percentages rxScQted ore residual profit and k>ss shanng ratios Personal
a PP and GG C. AU. equally assets and labilities of the partners are as totows Enko
Pomelo Redine
b OOondGG d NN and OO Personal assets P50.000 P50.000 P 100,000
Personal iaM ties 45.000 40.000 40000
(Adopted)
The partnership creditors proceed ooonst Redbne for recovery of the*
clams, and the partners settle the* clams ago n$t eoch other
How much would Erika recede?
o. Equity
Liabilities and P -0- c. P47.143
b. 45.000 d Cannot be determined
Cash —------------------- P50.000 Accounts payable . P120.000 (Adapted)
AA. capital (30%)............ 90.000 109. The August. Albert and Gerry partnenho become nsohent on January I
BB. capital (30%) (60.000) 2015. and the partnership a being bQuOated as soon as practicable m
CC. capital (40%) (100.000) this respect the following information for the partners has been marshaled
Copttal Balances Persona/ Assets Personal Uabifches
Personal assets and babiities of the partners at September 1.2015 are:
August ...... P 70.000 P80 000 P40.000
Personal Personal Albert.... ...... (60.000) 30000 50000
Assets Liabilities Gerry....... ...... (30.000) 70000 30.000

P90.000 P80.000 Total___ ___ P(20.000)

68________ 100.000 61.000 Assume that residual profits and losses are snared equaky among the three
CC 192.000 80.000 partners. Based on this information. cascukrie the maximum amount that
August can expect to receive from the partnership toqmdation is:
If CC contributes P70.000 to the partnership to provide cash to pay the
a. P20.000 c P70.000
creditors, what amount of AA’s P90.000 partnership equity would appear b. 40.000 d IMW00
to be recoverable? (Adapted)

C. P79.000 110. Gordo and Gordo formed a pcrtnenhc on July I, 2015 to operate two
a. P90.000 stores to be managed by eoch of them They invested P30 000 and P20.000
b. 81W0 d. None
(Adapted) and agreed to snare earnings 60% and 40%. respectively All the*
transactions were for cosh and at thee subsequent transactions were
handled through their respective bonk occounts as summarized below
106 After at partnership assets were converted into cash and alL
Gordo Gordo
distributed to creditors, the ledger of the Daniela. Erika, a
cosh was----------------- ,
Rectine partnership showed the following balances. Cash receipts---- ------- ------- ~------------------------ - P79.100 P65.245
Cash disbursements ——-------------- 62.275 70 695 f
Debit Credit
On October 31 2015 aU remom«ng noncash, assets in the two stores were
P20.000 sold for cash of P60.000 The partneoNp was dissolved and cash $eElement
Accounts payable was effected, in the distribution of the P60.000 cash. Gordo received
10.000
Daniela, capital (40%) 60.000
Erika, capital (30%) .... a. P24.000 c. P34.000
Rectine, capital (30%) P90.000 _______ b. 26.000 d 36000
(PhUCPA)
 ££____ - -——--------------------------- --------------------- CMrht /
Pari**"hip H
Hl PP QU. and partners to a f*m. have capital balances of Pl I Too
PI 3.000, and P5.8OO. respectively, and shore profits m the ratio of 4 2 I 114 Scott. Joe, and Ed are bqmdohng the# partnership AT the date the
Prepare a schedule showing how available cosh will be given to the iquidofion be<jns Scott. Joe <x*d Ed hove capital account tx^kjnces o<
partners os it becomes avertable Who among the partners shall be paid P162,000, PI 92,500. and P215,000 respective*/ and the pa tnen shore priori
Mt with an avariable cash of PI 400? and losses 40%. 35% and 25% respectively n addrtion. the partnership
has a P36.000 Notes Payable to Scott and a P20.U0C Notes Receivable
а. GQ c. RR from Ed. When the rtqmdofion begm -mot is the loss absorprtor power
б. No one d. PP with respect to Joe?
(Adopted)
a PI92.500 C. PSuO.OOO
111 The PQR Partnership is being dkSSOhred Al babrtities hove been paid and b. P 67.375 d P7TOXJOO
the remaining assets are being realized graauaty The equity of the partners
is as fortows 115 The assets and equities of the Queen, Reed and Stoc Partnership at the
end of its fiscal year on October 31, 2015 are as k4ows
Loans to
Partners* (from) Asets Uabrtrhes ord Equity
Profit and
Cosh____________ P 15 000 Uabiriies ---- ---- —------ P 50.000
Accounts Partnership Loss Ratio
Receivables - net... 20.00) Loon trom Stoc-------- 10,000
P P24000 6.000 3 Inventory...... ........ 4C.OOG Queen. capita - 30% —45.000
Q 36.000 - 3 Plant assets - net— 70.0CC Reed, capital - 50% 30 OCO
R 60.0TJ ( 10,000) 4 Loan to Reed......... 5.000 Stoc. caprial - 20% —.... — 15,000
Total Assets.......... — p 150,000 Iota Uab*t«es and Equity PI50000
The second cash payment to any Portner(s) under a program of priorities
$ho« be mode thus. The partners decide 1o bqadote the partnershp They estmate that the
noncash assets, other than the loan to Reed car. t>e converted into
a. To R, P2.000 C. To R. P8.000 PI00.000 cash over the two-months penod ercfrng December 31 2015
b, To Q. P6.000 d. To Q, P6.000 & R, P8.000 Cosh is to be distributed to the appropriate pomes as H becomes available
(PhilCPA)
dunng the liquidation process.
113 A cash distribution pton (payment priority program) for the Matthew, Norell,
The partner most vulnerable to partnershp losses on liquidation ts
and Reams partnership appears below:
a. Queen C Reed and Queen equaty
Priority
Matthew Norell Reams b. Reed d Stoc
Creditors (Adapted)
First P300.000.............. 100%
7CO> 30% 116. Using the same information in No. 96 and P65 000 is available for first
Next P80.000..............
3/7 4/7 distribution, it should be paxf to:
Next P70.000..............
22% 34% 44%
Remainder.................
Priority
tf P550.000 of cash is to be distributed, how much will be received by the Creditors Queen Reed Stoc
priority creditors, Matthew, Norell and Reams? P 0 P 0
a. P60,000 P 5 000
Priority Creditors Matthew Norell Reams b. 60.000 1 500 2.500 i.ooo
c. 50.000 5.000 0 10000
a P 0 P 0 P 0 3.000
P 0 d. 50.000 12.000 0
121.000 187 £00 242,000
b 0 (Adapted)
85,000 110,000
c 300,006 55,000
d 58.000 84,000
300000 1 Ofc,(XX) (Adapted)
Corporate Liquidation 97

multiple choice questions

1. Philippine National Bank holds a P500,000 note secured by a building owned

by Luigi Software, which has filed for bankruptcy. If the property has a book
value of P600,000 and a fair market value of P450,000, what is the best way to
describe the notes held by Philippine National Bank? The bank has

a. A secured claim of P500,000.

b. An unsecured claim of P500,000.
c. A secured claim of P450,000 and an unsecured claim of P50,000
d. A secured claim of P50,000 and an unsecured claim of P50,000.
(Adapted)

2. X and Y Inc. owes the Xylo Corporation P60,000 on account, which is secured
by accounts receivable with a book value of P50,000. The unsecured portion
is considered a claim under the bankruptcy law, X and Y has filed for
bankruptcy. Its statement of affairs lists the accounts receivable securing
the Xylo account with an estimated realizable value of P45,000. If the
dividend to general unsecured creditors is 80%, how much can Xylo expect
to receive?

a. P60,000 ' c. P57,000

b. 58,000 d. 48,000
(Adapted)

3. P Corporation is a parent, having purchased 60% of S Company's common

stock at par value for P600,000. S Company is in financial difficulty. The
parent granted an unsecured loan of P200,000 to the subsidiary. An
accounting statement of affairs for S Company shows a dividend of 30%. P
Corporation can expect to receive on the loan of appropriately:

a. Pl 20,000 c. P36,000'
b. 60,000 d. 0
(Adapted)

4. P Corporation is a parent, having purchased 60%ofS Company's common

stock at par value for P600,000. S Company is in financial difficulty. The
parent granted as unsecured loan of P200,000 to the subsidiary. An
accounting statement of affairs for S Company shows a dividend of 30%. P
Corporation can expect to receive payment for its Investment in S Company
of approximately:

a. P600,000 c. Pl 08,000
b. 180,000 d. o
(Adapted)
 Chapter 2 Corporate Liquidation
98
99
, r<=nt inc has forced into bankruptcy and has begun to liquidate. Unsecured
Ha ms will be paid at the rate of 40 cents on the peso. Apex Co. holds a 9. Erap Co. filed a voluntary bankruptcy petition on August 15, 2015. and the
non interest bearing note receivable from Kent in the amount of Pl00,000
statement of affairs reflects the following amounts:
Materialized by machinery with a liquidation value of P25,000. The total
amount to be realized by Apex on thjs note receivable is:
a
g: P25.000
40:000 c.
d. P55.000
65,000 Estimated
Book current
value value
(AICPA) Assets;
6. Seco Corp, was forced into bankruptcy and is in the nrocecc h i;™ w *• Assets pledged with fully secured creditors
assets and paying claims. Unsecured claims will be pa?d°a the P 300,000 P370,000
Assets pledged with partially secured
cents on the peso. Hale holds a P30,000 noninteresbbearino n7Lrate of fort7
creditors 180,000
from Seco collateralized by an asset with a book value o P35 120,000
liquidation value of P5.000. The amount to be realized by HaleS tt?s noteg Free assets . .................... 420,000 320,000
a. P5,000 c Pl 5,000 P 900,000 P810,000
b. 12,000 d. 17,000
Liabilities:
(AICPA)
liabilities with priority P70,000
7. Blueprint, Inc. signed a note payable to its bank for P10,000. Accrued interest Fully secured creditors . 260,000
on the note on February 28, 2015 amounts to P250. The note is secured by
inventory with a book value of P12,000. The inventory is sold for P8,000 and Partially secured creditors :...... 200,000
unsecured creditors receive 30 percent of their claims. The bank should Unsecured creditors 540,000
receive the following amount in settlement of the note and interest:
Pl,070,000
a. Pl 0,250 c. P8.675
b. 10,000 d. 8,000 Assume that the assets are converted to cash at the estimated current
(Adapted) values and the business is liquidated. What amount of cash will be available
to pay unsecured nonpriority claims?
8. The trust for Ardolio, Inc. prepares a statement of affairs which shows that
unsecured creditors whose claims total P60.000 may expect to receive
approximately P36.000 if assets are sold for the benefit of creditors. a. P240,000 c. P320,000
b. 280,000 d. 360,000
• Michael is an employee who is owed’P750. (AICPA)
• Meldcan holds a note for Pl,000 on which interest of P50 is
accrued; nothing has been pledged on the note. 10. Zamora and Co., Inc. purchased a Cadillac automobile with'little cash
• Compboy holds a note of P6,000 on which interest of P300 is down and signed a note, secured by the Cadillac, for 48 easy monthly
accrued: securities with a book value of P4,500 and a present payments. When the company files for bankruptcy, the balance due on
market value of P5,000 are pledged on the note. the Cadillac amount to P6,000X)00. The car has a book value of P8,000,000
• Serpor holds a note for P2,500 on which interest of P150 is accrued
and a net realizable value of P4,000,000. The unsecured creditors of Zamora
property with a book value of P2,000 and a present market value
of P3,000 is pledged on the note. and Co. can expect to receive 50 percent of their claims. In the liquidation,
the bank that holds the note on the Cadillac should receive:
How much may each of the following creditors hope to receive?

a. P6,000,000 c. P4,000,000
Michael Meldcan Compboy Serpor
b. 5,000,000 d. 3,000,000
a. P 0 P 0 (AICPA)
b. P 0 P 0
90 0 6,300 2,390
c. 350
H 1,050 5,780 0
750 630 5,780 2,650
(Adapted)
 Corporate Liquidation 101
Chapter 2

The administrative expenses are for trustees and other costs of administering
11. The folowing data are provided by the Troubled Company:
the debtor corporation’s estate.
Assets at book value ~ ....................... ... p]50,000
How should the P100,000 be distributed to the following creditors?
Assets at net realizable value 105,000
uabities at book value:
Unsecured Partially Unsecured
Ft Jy secured mortgage.................. ............................... 60,000
Creditors Secured Creditors
Unsecured accounts and notes payable 70,000
with Priority Creditors without Priority
Unrecorded liabffities:
Interest on bank notes ................................ . 500 a. P P80.000 P20,000
Estimated cost of administering estate 6,000 b. 10,000 80,000 10,000
c. 5,000 65,000 25,000
The court has appointed a trustee to liquidate the company. d. 10,000 65,000 25,000
(Adapted)
The journal entry made by the trustee to record the assets and liabilities
should include an estate deficit of: 14. On December 18, 2015, the statement of affairs of Downside Company,
which is in bankruptcy liquidation, included the following:
a. P31.500 c. P25.500
Assets pledged for fully secured liabilities ............... Pl 00,000
b. 31,000 d. 25,000
Assets pledged for partially secured liabilities 40,000
(Adapted) 120,000
Free assets ...........................
80,000
12. Using the same information in Number 11, the statement of affairs prepared Fully secured liabilities
50,000
by the trustee at this time should include an estimated deficiency to Partially secured liabilities ..................
Unsecured liabilities with priority ............. 60,000
unsecured creditors of: •
Unsecured liabilities without priority 90,000
a. P45,000 c. P31,500
b. 39,000 d. 25,000 Compute the estimated amount to be paid to:
(Adapted)
Unsecured Partially Unsecured
Fully
13. Nah Lugi Corporation is in bankruptcy and is being liquidated by a court- Liabilities Secured Liabilities
Secured
appointed trustee. The financial report that follow was prepared by the w/ Priority Liabilities without priority
Liabilities
trustee just before the final cash distribution:
a. P80,000 P60,000 P50.000 P70.000
b. 64,000 60,000 48,000 88,000
Assets:
Cash .................................................... Pl 00,000 c. 80,000 48,000 60,000 72,000
d. 80,000 60,000 48,000 72,000
Approved Claims: (Adapted)
Mortgage payable (secured by property
that was sold for P50,000) P 80,000
Accounts payable, unsecured.............. ..................... 50,000
Administrative expense s payable,
unsecured ................................................ 8,000
Salaries payable, unsecured 2,000

Pl 40,000
102 Corporate Liquidation 103
Chapter 2

15. The following data were taken from the statement of affair, w h 17. The creditors if the Rogerod Corporation agreed to a liquidation based on
Company: 5 TOr L,cluo the statement of affairs, suggested that unsecured creditors, without priority
would receive approximately P.60 on the peso, lhe unsecured creditors
Assets pledged for fully secured liabilities are interested in determining whether the preliminary estimate still seems
(fair value, P75,000) appropriate. The trustee was originally assigned noncash assets of P1,480,000
P 90,000 and creditors claims as follows: fully secured, P670,000; partially secured,
Assets pledged to partially secured liabilities
P400,000; unsecured with priority, P200,000, and unsecured without priority,
(fair value, P52,000) ............................ P320,000. Assets with a book value of P45,000 and unsecured liabilities
74,000
Free assets (fair value, P40,000) (without
70,000 *----- - - ipriority)
.. of P35,000 were subsequently discovered. Assets with a
Unsecured liabilities with priority total book value of P740,000 were sold for P715,000 net. Fully secured liabilities
7,000
Fully secured liabilities of P410,000 and partially secured liabilities of P280,000 were paid. Remaining
30,000
Partially secured liabilities ............................................... liquidation expenses were estimated to be P30,000.
60,000
Unsecured liabilities without priority 112,000 Assume the remaining noncash assets have an estimated net realizable
Compute the: (1) total estimated deficiency to unsecured creditors, and value as follows:
(2) the expected recovery per peso of unsecured claims. Assets traceable to fully secured creditors P240,000
Assets traceable to partially secured creditors 110,000
a. (1) 42,000; (2) P.65 c. (1) P 0; (2) Pl.00 Remaining assets 382000
b. (1) 3,000; (2) P.98 d. (1) P42,000; (2) P .70
Determining the revised estimate of the dividend to be received by
(Adapted)
unsecured creditors without priority:
16. Katherine, a CPA, has prepared a statement of affairs. Assets which there
a. 100.00% c. 45.97%
are no claims or liens are expected to produce P70,000, which must be b. 66.17% d. Cannot be determined
allocated to unsecured claims of all classes totaling Pl05,000. The following
are some of the claims outstanding: 18. Palubog Co. is insolvent and its statement of affairs shows the following

1. Accounting fees for Katherine, P1,500. information:

2. An unrecorded note Tor Pl,000, on which P60 of interest has Pl,440,000
Estimated gains on realization of assets
accrued, held by Angie. 2,000,000
Estimated losses on realization of assets .....................
3. A note for P3,000 secured by P4,000 receivables, estimated to be 1,280,000
60% collectible held by Joy. Additional assets............................................................ 960,000
4. API ,500 note, on which P30 of interest has accrued, held by Joyots. Additional liabilities 2,000,000
Property with a book value of P1,000 and a market value of P1,800 Capital stock .................................................................... 1,200,000
is pledged to guarantee payment of principal and interest. Deficit
5. Unpaid income taxes of P3,500. The pro-rate payment on the peso to stockholders (estimated amount to

Compute the estimated payment to partially secured creditors: be recovered by stockholders) is:

a. P.30 c. P.57
a. Pl,060 C. P2,490
b. 1,950 b. .43 d. .70
d. 2,790 (Adapted)
104 Chapter 2
105
Corporate Liquidation
19 Zero Na Corp, has been undergoing liquidation since January 1. As of Ma^h
31, its condensed statement of realization and liquidation is presented The equipment loan payable is secured by specific plant assets having a book
below: value of P300,000 and a realizable value of P350,000. Of the accounts payable,
P40,000 is secured by inventory which has a cost of P40,000 and a Liquidation
Assets to be realized ........................................... P1,375,000 value of P44,000. The balance of the inventory has a realizable value of P3Z000.
Assets acquired 750,000 Receivables with a book value and market value of Pl00,000 and P80,000
Assets realized 1,200,000 respectively have been pledged as collateral on the business loan payable. The
Assets not realized 1,375,000 balance of the receivables have a realizable value of Pl50,000.
(Adapted)
Liabilities:
Liabilities liquidated P1,875,000
Liabilities not liquidated ................ 1,700,000 21. Assuming trustee expenses of P12,000 in addition to recorded liabilities, which
Liabilities to be liquidated 2,250,000 of the remaining unsecured creditors has the next highest order of priority.
Liabilities assumed .................... 1,625,000
a. Accrued payroll c. Loan from officer
Revenues and Expenses:
Supplementary charges P3,125,000 b. Equipment loan payable d. Business loan payable
Supplementary credits 2,800,000
22. The realizable value of assets pledged with fully secured creditors is:
The net gain (loss) for the three-month period ending March 31 is:
a. P459,000 c. P40,000
a. P250,000 c. P425,000
b. (325,000) d. 750,000 b. 44,000 d. 489,000
(Adapted).
23. Of those creditors who are partially secured, their unsecured amounts are:
20. Using the same information on No. 19, compute the ending cash balance
of cash account assuming that common stock and deficits are Pl ,500,000 a. P430,000 c. P540,000
and P500,000, respectively.
b. 110,000 d. 120,000
a. P425,000 c. Pl,325,000
b. P575,000 d. Pl,375,000 24. The total realizable value of free assets to unsecured creditors before
unsecured creditors with priority is:
Items 21 through 33 are based on the following data:

The Palubog Company has decided to seek liquidation after previous a. P628,000 c. P220,000
restructuring and quasi-reorganization attempts failed. The company has b. 232,000 d. 198,000
the following condensed balance sheet as of May 1,2015:
25. The dividend to unsecured creditors or the expected recovery percentage
Assets Liabilities and Stockholders' Equity of unsecured creditors (rounded) is:
Cash............................ p ]2,000
Accrued payroll P 40,000
Receivables (net) 280,000 Loans from officer ....... 50,000 a. ’ 90% c. 88%
70.000 Accounts payable 60,000 b. 100% d. 76%
&aaS!'^enses....
Equipment loan payable. 360,000
Business loan payable 180,000 26. Estimated deficiency to unsecured creditors is:
Common stock................ 60,000
Deficit ( 48 000)
T°,al.................... P702.000 a. P -0- c. P 2,000
Total................ ............... P702,000) d. 12,000
b. 22,000
........
 Chapter 2

27 Estimated loss on asset disposition is:

a. P51,000 c. P5L000
b. 89,000 d. 90,000

28. Estimated gain as asset disposition is:

a. P56,000 c. P52,000
b. 54,000 d. 6,000

29. Estimated amount paid to unsecured creditors with priority is:

a. Pl0,000 c. P 40,000
b. 30,000 d. 110,000

30. Estimated amount paid to fully secured creditors is:

a. P40,000 c. P47O,OOO
b. 390,000 d. 430,000

31. Estimated amount paid to unsecured creditors without priority is:

a. P70,000 c. P20,000
b. 61,600 d. 50,000

32. Estimated payment to partially secured creditors is:

a. P358,800 c. Pl 68,000
b. 516,800 d. 430,000

33. Estimated payment to creditors is (discrepancy is expected due to rounding

off).

a. P580,000 c. P571,000
b. 659,600 d. 668,400