CHAPTER 1

Review of the Accounting Process

E 1-1
1. Unearned Revenue 11. Accrued Expense
2. Prepaid Expense 12. Accrued Revenue
3. Accrued Expense 13. Prepaid Expense
4. Accrued Expense 14. Unearned Revenue
5. Prepaid Expense 15. Accrued Expense
6. Unearned Revenue
7. Accrued Revenue
8. Accrued Expense
9. Unearned Revenue
10. Accrued revenue

E 1-2
1. Allowance for Uncollectible Accounts
2. Rent Expense
3. Office Supplies Expense
4. Salaries Payable
5. Prepaid Insurance
6. Interest Revenue
7. Interest Payable
8. Unearned Rent
9. Accumulated Depreciation
10. Income Summary

E 1-3
1. a. Unearned Rent 25,000
Rent Revenue 25,000
P300,000 x 1/12 = P25,000

No reversing entry

b. Insurance Expense 75,000

Prepaid Insurance 75,000
P90,000 x 10/12 = P75,000

No reversing entry

2. a. Rent Revenue 275,000

Unearned Rent 275,000
P300,000 x 11/12 = P275,000

Unearned Rent 275,000

Rent Revenue 275,000

b. Prepaid Insurance 15,000

Insurance Expense 15,000
P90,000 x 2/12 = P15,000
PC – Chapter 2 page 2

Insurance Expense 15,000

Prepaid Insurance 15,000

E 1-4
1. a. Interest Expense 40,000
Interest Payable 40,000
P2,000,000 x 6% x 4/12 = P40,000

b. Prepaid Insurance 50,000

Insurance Expense 50,000
P72,000 x 25/36 = P50,000

c. Prepaid Rent 330,000

Rent Expense 330,000
P360,000 x 11/12 = P330,000

d. Uncollectible Accounts Expense 60,000

Allowance for Uncollectible Accounts 60,000

e. Salary Expense 180,000

Salaries Payable 180,000
P450,000 x 2/5 = P180,000

f. Depreciation Expense – Office Equipment 106,000

Accumulated Depreciation – Office Equipment 106,000
P480,000  5 = P96,000 +
P120,000  5 x 5/12 = P10,000

g. Supplies on Hand 4,500

Supplies Expense 4,500

h. Rental Revenue 120,000

Unearned Rent 120,000
P180,000 x 4/6 = P120,000

i. Income Summary 180,000

Merchandise Inventory 180,000

Merchandise Inventory 220,000

Income Summary 220,000

2. a, b, c, e, g & h

E 1-5
1. a. Income Summary 50,000
Inventory, beg. 50,000

Inventory, end 140,000

Income Summary 140,000
PC – Chapter 2 page 3

b. Inventory, end 140,000

Purchases Returns 20,000
Cost of Goods Sold 2,000,000
Purchases 2,100,000
Freight-in 10,000
Inventory, beg. 50,000

2. Approach 2
a. Sales 5,000,000
Interest Revenue 25,000
Income Summary 5,025,000
b. Income Summary 2,980,000
Inventory, end 140,000
Purchases Returns and Allowances 20,000
Inventory, beg. 50,000
Purchases 2,100,000
Freight-In 10,000
Administrative Expense 500,000
Sales Returns 5,000
Sales Discounts 10,000
Selling Expenses 450,000
Interest Expense 15,000

c. Income Summary 2,045,000

Castro, Capital 2,0450,000

d. Castro, Capital 500,000

Castro, Drawing 500,000

E 1-6
1. A 6. B or C 11. B 16. B
2. A 7. A 12. A 17. A
3. A 8. C 13. A 18. C
4. A 9. A 14. A 19. B
5. B 10. B 15. C 20. B
P 1-1
1. a. Insurance Expense 12,000
Prepaid Insurance 12,000
P48,000 x 3/12 = P12,000

No reversing entry

b Rent Revenue 210,000

Unearned Rent 210,000
P270,000 x 7/9 = P210,000
PC – Chapter 2 page 4

Unearned Rent 210,000

Rent Revenue 210,000

c. Supplies 4,500
Supplies Expense 4,500
P12,000 – P3,000 = P9,000

Supplies Expense 4,500

Supplies 4,500

d. Depreciation Expense 52,500

Accumulated Depreciation 52,500
P350,000/5 x 9/12 = P52,500

no reversing entry

e. Uncollectible Accounts Expense 8,000

Allowance for Uncollectible Accounts 8,000

no reversing entry

f. Interest Receivable 1,500

Interest Revenue 1,500
P150,000 x 12% x 30/360 = P1,500

Interest Revenue 1,500

Interest Receivable 1,500

g. Salary Expense 155,000

Salaries Payable 155,000

Salaries Payable 155,000

Salary Expense 155,000

h. Merchandise Inventory 122,000

Income Summary 122,000

P 1-2
a. Income Summary 120,000
Merchandise Inventory 120,000

b. Merchandise Inventory 150,000

Income Summary 150,000

c. Sales 5,700,000
Purchase Returns & Allowance 90,000
Income Summary 5,790,000
PC – Chapter 2 page 5

d. Income Summary 4,029,000

Sales Returns and Allowance 150,000
Purchases 3,000,000
Freight-in 120,000
Supplies Expense 18,000
Insurance Expense 27,000
Salary Expense 540,000
Depreciation Expense 24,000
Office Expense 150,000

e. Income Summary 1,791,000

Olson, Capital 1,791,000

f. Olson, Capital 180,000

Olson, Drawing 180,000

P 1-3

Adjusting Income Statement Statement of Financial Position

Entry Revenue Expenses Net Income Assets Liabilities Capital
a. NE + - NE + -
b. + NE + + NE +
c. NE + - - NE -
d. NE + - - NE -
e. NE + - - NE -
f. + NE + NE - +
g. NE + - NE + -

P 1-4
1. a. Commissions Receivable 7,200
Commissions Income 7,200

b. Rent Expense 36,000

Prepaid Rent 36,000

c. Office Supplies Expense 6,600

Office Supplies 6,600

d. Depreciation Expense
Accumulated Depreciation 2,400
2,400
e. Salaries Expense 4,800
Salaries Payable 4,800

f. Unearned Commissions 8,000

Commissions Income 8,000

g. Interest Expense 1,200

Interest Payable 1,200
PC – Chapter 2 page 6

2. a. Income Summary 111,000

Salaries Expense 64,800
Rent Expense 36,000
Office Supplies Expense 6,600
Depreciation Expense – Office Equipment 2,400
Interest Expense 1,200

b. Commissions Income 175,200

Income Summary 175,200

c. Income Summary 64,200

Valdez, Capital 64,200

d. Valdez, Capital 32,000

Valdez, Drawing 32,000

3. Net Income = P64,200

P 1-5
1. Insurance Expense 30,000
Prepaid Insurance 30,000

2. Depreciation Expense – Office Equipment 75,000

Depreciation Expense – Automobile 260,000
Accumulated Depreciation – Office Equipment 75,000
Accumulated Depreciation - Automobile 260,000

3. Unearned Management Fees 80,000

Management Fees Earned 80,000
P120,000 x 4/6 = P80,000

4. Prepaid Advertising 40,000

Advertising Expense 40,000
P100,000 x 2/5 = P40,000

Multiple Choice
1. C 4. C 7. D 10. B 13. B
2. D 5. B 8. C 11. A 14. A
3. C 6. D 9. A 12. C 15. C
TM 1
1. T 6. F 11. F 16. F 21. T
2. T 7. F 12. F 17. T 22. T
3. T 8. F 13. F 18. F 23. T
4. T 9. T 14. F 19. T 24. F
5. F 10. T 15. T 20. T 25. F
TM 2
1. D 6. B 11. B 16. B
2. C 7. C 12. A 17. D
3. C 8. C 13. D 18. B
4. B 9. B 14. C 19. B
5. A 10. B 15. C 20. C
PC – Chapter 2 page 7

TM 3
1. B 6. D 11. B 16. A 21. B
2. D 7. C 12. C 17. D 22. C
3. D 8. C 13. A 18. A 23. A
4. B 9. A 14. C 19. C 24. D
5. D 10. A 15. C 20. D 25. B

TM4
1. N 5. N 9. N 13. Y 17. Y
2. Y 6. N 10. Y 14. Y 18. Y
3. N 7. Y 11. N 15. Y 19. Y
4. N 8. Y 12. N 16. Y 20. Y

TM 5
1. O 6. F 11. P 16. Q
2. B 7. E 12. T 17. V
3. H 8. A 13. M 18. W
4. N 9. I 14. G 19. S
5. K 10. X 15. Z 20. D
 CHAPTER 2
Nature and Formation of a Partnership

E 2-1
a. Cash 400,000
Alonzo, Capital 400,000

b. Accounts Receivable 500,000

Allowance for Uncollectible Accounts 50,000
Alonzo, Capital 450,000

c. Inventories 240,000
Alonzo, Capital 240,000
P300,000 x 80% = P240,000

d. Equipment 540,000
Alonzo, Capital 540,000
P900,000 x 6/10 = P540,000
E 2-2
1. Cash 450,000
Accounts Receivable 180,000
Merchandise Inventory 270,000
Equipment 125,000
Allowance for Uncollectible Accounts 10,000
Accounts Payable 105,000
Notes Payable 90,000
Aquino, Capital 820,000

Cash 410,000
Asuncion, Capital 410,000
P820,000 X 3/2 = P1,230,000 X 1/3 = P410,000

2. Allowance for Uncollectible Accounts 5,000

Aquino, Capital 5,000

Merchandise Inventory 30,000

Aquino, Capital 30,000

Accumulated Depreciation 30,000

Aquino, Capital 25,000
Equipment 55,000

Allowance for Uncollectible Accounts 10,000

Accounts Payable 105,000
Notes Payable 90,000
Cash 450,000
Accounts Receivable 180,000
Merchandise Inventory 270,000
Equipment 125,000
E 2-3
1. a. Amores, Capital 25,000
Allowance for Uncollectible Accounts 25,000

b. Merchandise Inventory 160,000

Amores, Capital 160,000

c. Amores, Capital 30,000

c. Prepaid Expenses 72,000
Accounts Payable 102,000

d. Cash 1,717,000
Andrada, Capital 1,717,000
(P1,612,000 – P25,000 + P160,000 + P30,000 = P1,717,000

2. a. Cash 208,000
Accounts Receivable 460,000
Merchandise Inventory 1,600,000
Prepaid Expenses 72,000
Allowance for Uncollectible Accounts 25,000
Accounts Payable 598,000
Amores, Capital 1,717,000

b. Cash 1,717,000
Andrada, Capital 1,717,000

Amores and Andrada Company

Statement of Financial Position
January 1, 2014

Assets
Cash P1,925,000
Accounts Receivable P460,000
Less Allowance for Uncollectible Accounts 25,000 435,000
Merchandise Inventory 1,600,000
Prepaid Expenses 72,000
Total Assets P4,032,000

Liabilities and Capital

Accounts Payable P598,000
Amores, Capital P1,717,000
Andrada, Capital 1,717,000 3,434,000
Total Liabilities and Capital P4,032,000

E 2-4
1. Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,000,000
Aranas, Capital 1,200,000
2. Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,100,000
Aranas, Capital 1,100,000

P 2-1
1. a. Merchandise, Inventory 50,000
Acosta, Capital 50,000
b. Acosta, Capital 75,000
Allowance for Uncollectible Accounts 75,000
c. Interest Receivable 3,750
Acosta, Capital 3,750
P375,000 x 6% x 2/12 = P3,750
d. Acosta, Capital 18,750
Interest Payable 18,750
P750,000 x 10% x 3/12 = P18,750
e. Accumulated Depreciation 450,000
Acosta, Capital 150,000
Furniture and Fixtures 600,000
f. Office Supplies 15,000
Acosta, Capital 15,000
g. Cash 1,262,500
Aguas, Capital 1,262,500
P2,700,000 + 50,000 – 75,000 + 3,750 – 18,750 -150,000 + 15,000 = 2,525,000/2 = 1,262,500

Acosta and Aguas

Statement of Financial Position
December 1, 2014

Assets
Cash P 1,862,500
Notes Receivable 375,000
Accounts Receivable P 2,250,000
Less Allowance For Uncollectible Accounts 225,000 2,025,000
Interest Receivable 3,750
Merchandise Inventory 650,000
Office Supplies 15,000
Furniture And Fixtures 1,200,000
Total Assets P 6,131,250
Liabilities and Capital
Notes Payable P 750,000
Accounts Payable 1,575,000
Interest Payable 18,750
Total Liabilities P 2,343,750
Acosta, Capital P 2,525,000
Aguas, Capital 1,263,500
Total Capital 3,787,500
Total Liabilities and Capital P 6,131,250

P 2-2
1. a. April, Capital 9,000
Allowance for Doubtful Accounts 9,000

b. April, Capital 21,000

Accrued Expenses 21,000

c. Accumulated Depreciation 112,500

Accounts Payable 345,000
Accrued Expenses 21,000
Allowance for Doubtful Accounts 9,000
April, Capital 800,000
Cash 187,500
Accounts Receivable 450,000
Merchandise Inventory 400,000
Equipment 250,000

2. a. Merchandise Inventory 50,000

Arias, Capital 50,000

b. Arias, Capital 7,500

Allowance for Doubtful Accounts 7,500

c. Cash 357,500
Arias, Capital 357,500
P800,000  40% x 60% = P1,200,000 - (800,000 + 50,000 – 7,500) = 357,500
d. Accumulated Depreciation 37,500
Equipment 37,500
e. Cash 187,500
Accounts Receivable 450,000
Merchandise Inventory 400,000
Equipment 137,500
Allowance for Doubtful Accounts 9,000
Accounts Payable 345,000
Accrued Expenses 21,000
April, Capital 800,000
April and Arias
Statement of Financial Position
October 1, 2014
Assets
Cash P 657,500
Accounts Receivable P 825,000
Less Allowance For Doubtful Accounts 16,500 808,500
Merchandise Inventory 750,000
Equipment 400,000
Total Assets P2,616,000
Liabilities and Capital
Accounts Payable P 595,000
Accrued Expenses 21,000
Total Liabilities P 616,000
April, Capital P 800,000
Arias, Capital 1,200,000
Total Capital 2,000,000
Total Liabilities and Capital P2,616,000

P 2-3
1. Cash 70,000
Accounts Receivable 490,000
Merchandise Inventory 700,000
Equipment 70,000
Allowance for Doubtful Accounts 50,000
Accounts Payable 360,000
Albano, Capital 920,000

Cash 50,000
Accounts Receivable 460,000
Merchandise Inventory 950,000
Equipment 120,000
Furniture and Fixtures 90,000
Allowance for Doubtful Accounts 40,000
Accounts Payable 540,000
Abada, Capital 1,090,000

2. Abada, Capital 10,000

Allowance for Uncollectible Accounts 10,000

Merchandise Inventory 50,000

Abada, Capital 50,000

Accumulated Depreciation 36,000

Abada, Capital 24,000
Equipment 60,000

Accumulated Depreciation 24,000

Abada, Capital 6,000
Furniture and Fixtures 30,000

Cash 70,000
Accounts Receivable 490,000
Merchandise Inventory 700,000
Equipment 70,000
Allowance for Uncollectible Accounts 50,000
Accounts Payable 360,000
Albano, Capital 920,000
P 2-4
1. Abante, Capital 150,000
Allowance for Doubtful Accounts 150,000

Abante, Capital 200,000

Merchandise Inventory 200,000

Accumulated Depreciation 210,000

Abante, Capital 240,000
Furniture and Equipment 450,000

Goodwil 250,000
Abante, Capital 250,000
P2,000,000 – (P2,700,000 -150,000 – 200,000 – 240,000 –
360,000 = P1,750,000) = P250,000

Cash 3,000,000
Arevalo, Capital 3,000,000

Land 1,800,000
Mortgage Payable 300,000
Almonte, Capital 1,500,000

2. Accounts Receivable 840,000

Merchandise Inventory 1,000,000
Furniture and Equipment 600,000
Goodwill 250,000
Allowance for Uncollectible Accounts 240,000
Accounts Payable 450,000
Abante, Capital 2,000,000

Cash 3,000,000
Arevalo, Capital 3,000,000

Land 1,800,000
Mortgage Payable 300,000
Almonte, Capital 1,500,000

P 2-5
1. a. Cash 518,000
Merchandise Inventory 1,152,000
Abueva, Capital 1,670,000

b. Accounts Receivable 1,792,000

Merchandise Inventory 253,000
Office Equipment 206,000
Goodwill 145,000
Allowance for Doubtful Accounts 150,000
Accounts Payable 576,000
Alano, Capital 1,670,000
 Abueva and Alano Partnership
Statement of Financial Position
June 1, 2014
Assets
Cash P 518,000
Accounts Receivable P 1,792,000
Less Allowance For Doubtful Accounts 150,000 1,642,000
Merchandise Inventory 1,405,000
Office Equipment 206,000
Goodwill 145,000
Total Assets P 3,916,000
Liabilities and Capital
Accounts Payable P 576,000
Abueva, Capital P 1,670,000
Alano, Capital 1,670,000 3,340,000
Total Liabilities and Capital P 3,916,000

P 2-6
1. P1,080,000 P80,000 + P440,000 + P200,000 + P600,000 – P240,000 = P1,080,000
2. P1,100,000 (P1,080,000 + P1,120,000) / 2 = P1,100,000
3. P1,320,000 P2,200,000 x 60% = P1,320,000

Multiple Choice
1. B
2. A
3. B
4. D
5. D
6. B (P80,000 + P340,000 + P900,000) – P300,000 = P1,020,000
7. C Aster = P489,000 – P7,500 = P481,500
Amie = P273,000 - P9,000 – P5,400 = P258,600
8. C P9,000 + (P189,000 – P12,000) + P460,000 + P140,000 = P786,000 x 2 = P1,572,000
9. B (P600,000 x 1/2) – (P220,000 – P30,000) = P110,000
10. D Total partnership capital + Total partnership liabilities = Total partnership assets
P600,000 + (P30,000 + P20,000) = P650,000
11. A P600,000/2 = P300,000- (200,000-20,000)= P120,000.
12. B P90,000 + P30,000 + P130,000 – P100,000 = P150,000
13. C P240,000 + (P150,000 + P 100,000 = P250,000) = P490,000
14. B (P240,000 + P150,000) x 60% = P234,000
(P240,000 + P150,000) x 40% = P156,000- P150,000 =P6,000
15. B
16. B P600,000 + P120,000 = P720,000
17. C P720,000 + P1,200,000/2 = P960,000
18. C P960,000 – P720,000 = P240,000
19. B
20. D P720,000 + P1,200,000 = P1,920,000 x 75% = P1,440,000
TM 6
1. F 5. T 9. T 13. T 17. F
2. F 6. T 10. T 14. T 18. T
3. F 7. F 11. F 15. F 19. T
4. T 8. T 12. T 16. T 20. T
TM 7
1. Limited partnership 9. Agreed value
2. Industry, skill, talent or service 10. Nominal partner
3. Capitalist industrial partner 11. Articles of Co-Partnership
4. Mutual agency 12. Secret partner
5. De facto partnership 13. Securities and Exchange Commission
6. Memorandum entry 14. Limited or LTD.
7. Nontrading partnership 15. Limited partner
8. Partnership 16. Loan Payable
17. Capital share
18. Bonus
19. Arrive at Agreed value or FMV
20. General professional partnership

TM 8
1. A 5. C 9. C 13. C 17. B
2. A 6. D 10. C 14. A 18. C
3. D 7. D 11. A 15. B 19. D
4. B 8. B 12. C 16. A 20. D

TM 9
Problem A
1. Cash 800,000
Land 375,000
Building 1,200,000
Furniture and Fixtures 675,000
Accounts Payable 250,000
Alvis, Capital 1,375,000
Ancheta, Capital 1,425,000

2. Cash 800,000
Land 375,000
Building 1,200,000
Furniture and Fixtures 675,000
Accounts Payable 250,000
Alvis, Capital 1,400,000
Ancheta, Capital 1,400,000

3. Cash 800,000
Land 375,000
Building 1,200,000
Furniture and Fixtures 675,000
Accounts Payable 250,000
Alvis, Capital 1,680,000
Ancheta, Capital 1,120,000

Problem B

1. a. Ablan, Capital 50,000

Accounts Receivable 50,000
 b. Ablan, Capital 27,000
Inventories 27,000

c. Ablan, Capital 10,000

Other Assets 10,000

a. Amias, Capital 75,000

Accounts Receivable 75,000

b. Amias, Capital 35,000

Inventories 35,000

c. Amias, Capital 18,000

Other Assets 18,000

2. a. Accounts Payable 894,700

Notes Payable 1,000,000
Ablan, Capital (P3,209,880 – P50,000 – P27,000 – P10,000) 3,122,880
Cash 55,000
Accounts Receivable 1,122,680
Inventories 573,175
Land 3,015,000
Furniture and Fixtures 251,725

b. Accounts Payable 1,218,250

Notes Payable 1,725,000
Amias, Capital (P3,641,760 – P75,000 – P35,000 – P18,000) 3,513,760
Cash 111,770
Accounts Receivable 2,764,450
Inventories 1,265,510
Buildings 2,141,335
Furniture and Fixtures 173,945

3. a. Cash 55,000
Accounts Receivable 1,122,680
Inventories 573,175
Land 3,015,000
Furniture and Fixtures 251,725
Accounts Payable 894,700
Notes Payable 1,000,000
Ablan, Capital 3,122,880

b. Cash 111,770
Accounts Receivable 2,764,450
Inventories 1,265,510
Buildings 2,141,335
Furniture and Fixtures 173,945
Accounts Payable 1,218,250
Notes Payable 1,725,000
Amias, Capital 3,513,760
 Ablan and Amias Partnership
Statement of Financial Position
May 1, 2014
Assets
Current Assets
Cash P 166,770
Accounts Receivable 3,887,130
Inventories 1,838,685 P 5,892,585
Noncurrent Assets
Land P 3,015,000
Buildings 2,141,335
Furniture and Fixtures 425,670 5,582,005
Total Assets P 11,474,590
Liabilities and Capital
Notes Payable P 2,725,000
Accounts Payable 2,112,950
Total Liabilities P 4,837,950

Ablan, Capital P 3,122,880

Amias, Capital 3,513,760
Total Capital 6,636,640
Total Liabilities and Capital P 11,474,590
 CHAPTER 3
Partnership Operations

E 3-1
1. Borres = 250/500 x P600,000 = P300,000
Buendia = 150/500 x P600,000 = P180,000
Bustos = 100/500 x P600,000 = P120,000

2. Borres = 3 / 6 x P600,000 = P300,000

Buendia = 1 / 6 x P600,000 = P100,000
Bustos = 2 / 6 x P600,000 = P200,000

E 3-2
Income Summary 250,000
Banal, Capital 112,250
Benson, Capital 137,750
Banal Benson Total
10% Interest on average capital P 89,000 P114,500 P203,500
Remainder – divided equally 23,250 23,250 47,500
Total P112,250 P137,750 P250,000

Computation of average capital

Banal 1/01 - 3/31 P800,000 x 3 P 2,400,000
4/01 - 8/31 960,000 x 5 4,800,000
9/01 – 10/31 840,000 x 2 1,680,000
11/01 – 12/31 900,000 x 2 1,800,000
P10,680,000 / 12 P890,000

Benson 1/01 - 2/28 P1,200,000 x 2 P 2,400,000

3/01 - 6/30 1,020,000 x 4 4,080,000
7/01 - 9/30 1,160,000 x 3 3,480,000
10/01 – 12/31 1,260,000 x 3 3,780,000
P13,740,000 / 12 P1,145,000

E 3-3
Benito Bunye Total
a. Interest of 10% on excess average capital P 40,000 P 40,000
Salaries 300,000 P200,000 500,000
Remainder – divided in the ratio of 70:30 112,000 48,000 160,000
Total P452,000 P248,000 P 700,000

b. Interest of 10% on excess average capital P 40,000 P 40,000

Salaries 300,000 P200,000 500,000
Remainder –divided in the ratio of 70:30 ( 98,000) ( 42,000) ( 140,000)
Total P242,000 P158,000 P 400,000

E 3-4
1. Blanco = 120/300 x P120,000 = P48,000; Banda = 180/300 x P120,000 = P72,000

2. Blanco = 120/300 x P120,000 = P48,000; Banda = 180/300 x P120,000 = P72,000

3. Blanco Banda Total
Interest of 8% on original investment P 9,600 P14,400 P 24,000
Balance – divided equally 48,000 48,000 96,000
Total P57,600 P62,400 P120,000

4. Blanco Banda Total

Salaries to partners P 54,000 P 45,000 P 99,000
Balance – divided equally 10,500 10,500 21,000
Total P 64,500 P 55,500 P120,000

5. Blanco = 50/125 x P120,000 = P48,000; Banda = 75/125 x P120,000 = P72,000

E 3-5
1. Bueno Beran Total
Interest of 8% on beginning capital P 48,000 P 54,000 P102,000
Salaries to partners 225,000 115,000 340,000
Balance – divided 3:2 (40,200) (26,800) (67,000)
Total P232,800 P142,200 P375,000

2. Beran = P375,000 x 2/5 = P150,000; however, minimum guaranteed amount to Beran is P175,000
Bueno = P375,000 – P175,000 = P200,000

E 3-6
Net income after salaries, interest and bonus P322,000
Interest (P200,000 x 10%) P20,000
Salaries (8,000 x 12) 96,000 116,000
Net income before interest and salaries P438,000
Bonus rate x 25%
Amount of bonus to be credited to Basco P109,500

E 3-7
Income before income tax = P650,000 / 70% = P928,571

1. B = .05 x P928,571 = P46,428

2. B = .05 (P928,571 – B)
= P46,428 / 1.05
= P44,217

3. B = .05 (P928,571 – T)
T = .30 (P928,571) = P278,571
B = .05 (P928,571 – P278,571)
= .05 (P650,000)
= P32,500

4. B = .05 (P928,571 – B – T)
T = .30 (P928,571) = P278,571
B = .05 (P928,571 – B – P278,571)
= .05 (P650,000 – B)
= P32,500 / 1.05
= P30,952
E 3-8
1. Balbin Bagtas Banta Total
Capital balances P240,000 P200,000 P200,000 P 640,000
Required capital 256,000 224,000 160,000 640,000
Cash received (paid) (P 16,000) (P 24,000) P 40,000 ----

Banta, Capital 40,000

Balbin, Capital 16,000
Bagtas, Capital 24,000

2. Balbin Bagtas Banta Total

Capital balances P240,000 P200,000 P200,000 P 640,000
Required capital 320,000 280,000 200,000 800,000
Additional investment P 80,000 P 80,000 -------- P 160,000

P240,000 / 40% = P600,000; P200,000 / 35% = P571,428; P200,000 / 25% = P800,000

Cash 160,000
Balbin, Capital 80,000
Bagtas, Capital 80 000

3. Balbin Bagtas Banta Total

Capital balances P240,000 P200,000 P200,000 P640,000
Required capital 240,000 210,000 150,000 600,000
Additional investment(withdrawals) -------- 10,000 (P50,000) P 40,000

Banta, Capital 50,000

Bagtas, Capital 10,000
Cash 40,000

E 3-9
Drawings charged against capital P520,000
Less Additional investment 100,000
Decrease in capital P420,000
Less Net decrease in capital 240,000
Share in net income P 180,000
Profit share  25%
Net income of the partnership P720,000

P 3-1
1. Income Summary 300,000
Bondoc, Capital 180,000
Barba, Capital 120,000
Bondoc = P300,000 x 60% = P180,000
Barba = P300,000 x 40% = P120,000

2. Income Summary 300,000

Bondoc, Capital 175,000
Barba, Capital 125,000
Bondoc = P300,000 x 210/360 = P175,000
Barba = P300,000 x 150/360 = P125,000
3. Income Summary 300,000
Bondoc, Capital 200,000
Berba, Capital 100,000
Bondoc = P300,000 x 255,000/382,500* = P200,000
Barba = P300,000 x 127,500/382,500** = P100,000

* Jan. 1 – Apr. 30 P210,000 x 4 = P 840,000

May 1 – Sept. 30 300,000 x 5 = 1,500,000
Oct. 1 - Dec. 31 240,000 x 3 = 720,000
P3,060,000 / 12 P255,000

**Jan. 1 – Mar. 31 P150,000 x 3 = P 450,000

Apr. 1 – Dec. 31 120,000 x 9 = 1,080,000
P1,530,000 / 12 127,500
P382,500

4. Income Summary 300,000

Bondoc, Capital 155,100
Barba, Capital 144,900
Bondoc Barba Total
8% interest on ave. cap. P 20,400 P 10,200 P 30,600
Balance – equally 134,700 134,700 269,400
P155,100 P144,900 P300,000

5. Income Summary 300,000

Bondoc, Capital 188,000
Barba, Capital 112,000
Bondoc Barba Total
Salaries P 60,000 P 48,000 P108,000
Bal. – ending cap. ratio 128,000 64,000 192,000
P188,000 P112,000 P300,000

6. Income Summary 300,000

Bondoc, Capital 225,000
Barba, Capital 75,000
Bondoc Barba Total
Bonus P 75,000 P 75,000
Bal. – ave. capital ratio P150,000 75,000 225,000
P225,000 P 75,000 P300,000
Bonus P300,000 x 1/3 divided by 1 1/3 = P75,000

P 3-2
1. Income Summary 350,000
Bernal, Capital 243,300
Burgos, Capital 106,700
Bernal Burgos Total
8% int. on beg. capital P 28,800 P 35,200 P 64,000
Balance – 3: 1 214,500 71,500 286,000
P243,300 P106,700 P350,000
2. Income Summary 350,000
Bernal, Capital 139,000
Burgos, Capital 211,000
Bernal Burgos Total
Salaries P 70,000 P130,000 P200,000
12% int. on ending capital 48,000 60,000 108,000
Balance – equally 21,000 21,000 42,000
P139,000 P211,000 P350,000

3. Income Summary 350,000

Bernal, Capital 184,150
Burgos, Capital 165,850
Bernal Burgos Total
Salaries P 45,000 P 85,000 P130,000
12% int. on ave. cap.* 49,000 50,800 99,800
Balance – 3:1 90,150 30,050 120,200
P184,150 P165,850 P350,000

* Jan. 1 – May 31 P360,000 x 5 = P1,800,000

June 1 – Oct. 31 460,000 x 5 = 2,300,000
Nov. 1 – Dec. 31 400,000 x 2 = 800,000
P7,900,000 / 12 P408,333

Jan. 1 – June 30 P440,000 x 6 = P 2,640,000

July 1 – Oct. 31 360,000 x 4 = 1,4400,000
Nov. 1 – Dec. 31 500,000 x 2 = 1,000,000
P5,080,000 / 12 P423,333

4. Income Summary 350,000

Bernal, Capital 137,567
Burgos, Capital 212,433
Bernal Burgos Total
Salaries P 50,000 P100,000 P150,000
10% int. on ave. capital 40,833 42,333 83,166
Balance – 40%, 60% 46,734 70,100 116,834
P137,567 P212,433 P350,000

5. Income Summary 350,000

Bernal, Capital 164,360
Burgos, Capital 185,640
Bernal Burgos Total
Salaries P50,000 P50,000 P100,000
8% int. on beg. capital 28,800 35,200 64,000
Bonus -.10 (NI – S – I ) 18,600 18,600
Balance – 2:3 66,960 100,440 167,400
P164,360 P185,640 P350,000
P 3-3
Bilbao Bertol Borja Total
1. 6% interest on capital P 33,600 P 24,000 P 14,400 P 72,000
Salaries 96,000 80,000 176,000
Balance – [Link] (149,000) ( 89,400) ( 59,600) (298,000)
Total P(115,400) P 30,600 P 34,800 P(50,000)

2. 6% interest on capital P 33,600 P 24,000 P ,14400 P 72,000

Salaries 96,000 80,000 176,000
Balance – [Link] ( 64,000) ( 38,400) ( 25,600) (128,000)
Total P( 30,400) P 81,600 P 68,800 P120,000

3. 6% interest on capital P 33,600 P 24,000 P 14,400 P 72,000

Salaries 96,000 80,000 176,000
Bonus 27,000 27,000
Balance – [Link] 112,500 67,500 45,000 225,000
Total P 146,100 P214,500 P 139,400 P500,000

P 3-4

1. Basa Benito Beltran Bagnes Total

Salaries P400,000 P200,000 P 600,000
Bonus 60,000 40,000 100,000*
Interest 100,000 90,000 P 40,000 P 94,000 324,000
Balance 269,000 269,000 269,000 269,000 1,076,000
Total P829,000 P599,000 P309,000 P363,000 P2,100,000

*B = 5% (P2,100,000 – B) = P100,000 x 3/5 = P60,000

x 2/5 = 40,000

2. Basa Benito Beltran Bagnes Total

Salaries P 400,000 P 200,000 P 600,000
Interest 100,000 90,000 P 40,000 P 94,000 324,000
Balance (431,000) (431,000) (431,000) (431,000) (1,724,000)
Total P 69,000 P(141,000) P (391,000) (P337,000) (P800,000)

3. Basa Benito Beltran Bagnes Total

Interest P 100,000 P 90,000 P 40,000 P 94,000 P 324,000
Bonus 22,857 15,238 38,095
Salaries 291,937 145,968 437,905*
Total P 414,794 P 251,206 P 40,000 P 94,000 P 800,000

B = 5% (P800,000 – B) = P38,095 x 3/5 = P22,857; P38,095 x 2/5 = P15,238

*P437,905 x 4/6 = P291,937; P437,905 x 2/6 = P145,968
P 3-5
1. Balte Bala Total
8% interest on capital P40,000 P 24,000 P 64,000
Salaries 120,000 80,000 200,000
20% bonus on net income 238,000 238,000
Balance – capital ratio 430,000 258,000 688,000
Total P828,000 P 362,000 P1,190,000

2. Sales 4,800,000
Cost of Goods Sold 2,100,000
Operating Expenses 1,000,000
Income Taxes 510,000
Income Summary 1,190,000

Income Summary 1,190,000

Balte, Capital 828,000
Bala, Capital 362,000

Balte, Capital 60,000

Bala, Capital 100,000
Balte, Drawing 60,000
Bala, Drawing 100,000

Balte and Bala Partnership

Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014

Balte Bala Total

Capital balances, January 1, 2014 P 500,000 P300,000 P 800,000
Add Distribution of net income for 2014:
Interests P 40,000 P 24,000 P 64,000
Salaries 120,000 80,000 200,000
Bonus 238,000 238,000
Balance - capital ratio 430,000 258,000 688,000
Total share in net income P 828,000 P 362,000 P1,190,000

Total P1,328,000 P 662,000 P1,990,000

Less Drawings 60,000 100,000 160,000
Capital balances, December 31, 2014 P1,268,000 P 562,000 P1,830,000

P 3-6
1. Net sales (P1,525,000 – P25,000) P1,500,000
Cost of goods sold:
Purchases P980,000
Less Merchandise inventory, end 305,000 675,000
Gross profit P 825,000
Operating expenses (300,000 – 12,500 – 5,000 + 17,500 + 30,000) 330,000
Income before income tax P 495,000
Income tax 148,500
Net income P 346,500
2. Brenda Brosas Total
Salaries (P150,000 x 8/12) P100,000 P100,000
Additional 10% of NI after salaries 24,650 24,650
Balance – original capital 138,656 P83,194 221,850
Total P263,306 P83,194 P346,500

3. Brenda Brosas Total

Beginning capital P625,000 P375,000 P1,000,000
Add Share in net income 263,306 83,194 346,500
Total P888,306 P458,194 P1,346,500
Less Drawings 100,000 150,000 250,000
Ending capital P788,306 P308,194 P1,096,500

P 3-7
Be on Top Company
Income Statement
For the Year Ended December 31, 2014

Sales P5,100,000
Cost of goods sold:
Purchases P4,920,000
Less: Purchase returns and allowances P 99,000
Purchase discounts 138,000 237,000
Cost of goods available for sale P4,683,000
Less Merchandise inventory, December 31 1,406,000 3,277,000
Gross profit P1,823,000
Other operating income – interest 27,000
Selling expenses (schedule 1) ( 530,300)
Administrative and general expenses (schedule 2) ( 801,800)
Operating income P 517,900
Interest expense ( 30,000)
Net income before Income Tax P487,900
Income Taxes 146,370
Net Income after Income Tax P 341,530

Division of net income:

Bathan Buenas Total
Interest P 60,000 P 48,900 P108,900
Salaries 100,000 100,000
Balance – divided equally 66,315 66,315 132,630
Total P226,3150 P115,215 P341,530

Schedule 1 – Selling expenses Schedule 2 – General and administrative expenses

Sales salaries P480,000 Taxes P 36,500
Store supplies 19,500 Doubtful accounts 9,300
Depreciation 21,300 Others 756,000
Advertising 9,500 Total P801,800
P530,300
 Be on Top Company
Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014

Bathan Buenas Total

Original capital P600,000 P489,000 P1,089,000
Add Share in net income 226,315 115,215 341,530
Total P826,315 P604,215 P1,430,530
Less Drawing 144,000 54,000 198,000
Capital, December 31, 2010 P682,315 P550,215 P1,232,530

Be on Top Company
Statement of Financial Position
December 31, 2014
Assets
Current assets:
Cash P582,750
Notes receivable 120,000
Accounts receivable P186,000
Less Allowance for doubtful accounts 9,300 176,700
Interest receivable 6,000
Merchandise inventory 1,406,000
Prepaid taxes 10,000
Store supplies 16,500 P2,317,950
Noncurrent assets
Store furniture P222,000
Less Accumulated depreciation 21,300 200,700
Total assets P2,518,650
Liabilities and Capital
Current liabilities;
Notes payable P 360,000
Accounts payable 756,000
Advertising payable 9,500
Taxes payable 10,500
Interest payable 3,750
Income tax payable 146,370
Total liabilities P1,286,120

Bathan, capital P 682,315

Buenas, capital 550,215
Total partners’ capital 1,232,530
Total liabilities and capital P2,518,650
3. Adjusting entries
Adjustment for inventories is included in the closing entries

a. Store Supplies Expense 19,500

Store Supplies 19,500

b. Depreciation Expense 21,300

Accumulated Depreciation 21,300
c. Advertising Expense 9,500
Advertising Payable 9,500

d. Prepaid Taxes 10,000

Taxes 10,000

e. Taxes 10,500
Taxes Payable 10,500

f. Interest Expense 3,750

Interest Payable 3,750

g. Interest Receivable 6,000

Interest Revenue 6,000

h. Doubtful Accounts Expense 9,300

Allowance for Doubtful Accounts 9,300

i. Income Tax 146,370

Income Tax Payable 146,370

Closing entries
a. Merchandise Inventory 1,406,000
Interest Revenue 27,000
Purchase Returns and Allowances 99,000
Purchase Discounts 138,000
Sales 5,100,000
Income Summary 6,770,000

b. Income Summary 6,428,470

General Expenses – Others 756,000
Interest Expense 30,000
Purchases 4,920,000
Sales Salaries 480,000
Taxes 36,500
Store Supplies Expense 19,500
Depreciation Expense 21,300
Advertising Expense 9,500
Doubtful Accounts Expense 9,300
Income Taxes 146,370

c. Income Summary 341,530

Bathan, Capital 226,3150
Buenas, Capital 115,215

d. Bathan, Capital 144,000

Buenas, Capital 54,000
Bathan, Drawing 144,000
Buenas, Drawing 54,000
P 3-8
Bacani, Badeo and Barte
Statement of Changes in Partners’ Equity
For the Three Years Ending December 31, 2014

Bacani Badeo Barte Total

Original capital P1,000,000 P500,000 P 400,000 P1,900,000
Less: Share in net loss – 2012 (sch. 1) ( 8,000) ( 14,000) ( 20,000) ( 42,000)
Drawing (72,000) (86,800) ( 96,000) (254,800)
Capital, January 1, 2013 P 920,000 P 399,200 P 284,000 P1,603,200
Add Share in net income – 2013 (sch. 2) 107,200 99,952 93,040 300,192
Total P1,027,200 P 499,152 P 377,040 P1,903,392
Less Drawing 139,600 163,200 177,200 480,000
Capital, January 1, 2014 P 887,600 P 335,952 P 199,840 P1,423,392
Add Share in net income – 2014 (sch. 3) 170,855 153,656 145,489 470,000
Total P1,058,455 P 489,608 P 345,329 P1,893,392
Less Drawing 163,200 195,200 169,600 528,000
Capital, December 31, 2014 P 895,255 P 294,408 P 175,729 P1,365,392

Schedule 1 – Distribution of 2012 net loss

Bacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 60,000 30,000 24,000 114,000
Balance – equally ( 164,000) ( 164,000) ( 164,000) ( 492,000)
Total P( 8,000) P( 14,000) P(20,000) P( 42,000)

Schedule 2 – Distribution of 2013 net income

Bacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 55,200 23,952 17,040 96,192
Balance – equally ( 44,000) ( 44,000) ( 44,000) ( 132,000)
Total P 107,200 P 99,952 P 93,040 P300,192

Schedule 3 – Distribution of 2014 net income

Bacani Badeo Barte Total
Salaries P 96,000 P 120,000 P 120,000 P336,000
Interest on beginning capital 53,256 20,157 11,990 85,403
Bonus 8,100 8,100
Balance – equally 13,499 13,499 13,499 40,497
Total P 170,855 P 153,656 P 145,489 P470,000
Bonus = P470,000 – (P336,000 + P85,403) x 20/120 = P8,100

P 3-9
1. Balmes = 5/10 x 80% = 40%
Bamban = 3/10 x 80% = 24%
Buela = 2/10 x 80% = 16%
Bagnes 20%
2. Corrected net income = P400,000 – ( P24,000 - P62,000 - P40,000 + P30,000 + P18,000
x 70%) = P379,000

Balmes = P379,000 x 40% = P151,600 Buela = P379,000 x 16% = P60,640

Bamban = P379,000 x 24% = P 90,960 Bagnes = P379,000 x 20% = P75,800

Multiple Choice
1. C Jan. 1 – Mar. 31 P 80,000 x 3 = P 240,000
Apr. 1 – May 31 96,000 x 2 = 192,000
June 1 – Aug. 31 112,000 x 3 = 336,000
Sept. 1 – Dec. 31 72,000 x 4 = 288,000
P1,056,000 / 12 = P88,000

2. B Bañas Belda
Capital beg. P 120,000 P 118,000
Share in net loss (32,000) (16,000)
P88,000 P102,000

3. A Bernardo Belo
Salaries P 110,000 P 90,000
Balance – 60:40 (12,000) (8,000)
P98,000 P82,000

4. D Bustos
Net Profit P220,000
Bonus P220,000 x 10%/110% (20,000) 20,000
Interest P220,000 – P200,000 = P20,000 x 10% (2,000)
Salaries ( 44,000) 24,000
Balance P 154,000
Share of Bustos x 2/10 30,800
Total profit share of Bustos P74,800
5. B Banta:
Jan. 1 – June 30 P200,000 x 6 = P 1,200,000
Jul. 1 - Dec. 31 320,000 x 6 = 1,920,000
P 3,120,000 / 12 = P260,000 x 10% = P26,000

Berba: P300,000 x 10% = 30,000

Borja:
Jan. 1 – Sept. 30 P450,000 x 9 = P4,050,000
Oct. 1 – Dec. 31 310,000 x 3 = 930,000
P4,980,000/12 = P415,000 x 10% = 41,500
P97,500

6. C Salaries = P120,000 + P96,000 + P72,000 P 288,000

Interest 97,500
Balance = P10,000 x 3 30,000
Total P 415,500
7. C Original capital P 950,000
Additional investment 120,000
Withdrawals ( 140,000)
Net income 415,500
Total partnership capital P1,345,500
8. B Besa Basco Buan Baduel Total
Interest P 7,500 P3,750 P3,750 P3,000 P18,000
Salaries 15,000 9,000 24,000
Add’l profit to Baduel 5,000 5,000
Balance 15,000* 15,000 10,000 10,000 50,000
P37,500 P27,750 P13,750 P18,000 P97,000
*P37,500 – P7,500 – P15,000 = P15,000/30% = P50,000
9. B
10. C

11. C try distributing any profit or loss amount

12. C Bulan Bustos Bucao Total

Salaries P24,000 P18,000 P12,000 P 54,000
Interest 19,500 24,700 29,400 73,600
Balance – [Link] 10,480 20,960 20,960 52,400
Total P53,980 P63,660 P62,360 P180,000
Bulan
Jan. 1 – July 1 P150,000 x 6 = P 900,000
July 1 – Oct. 1 180,000 x 3 = 540,000
Oct. 1 – Dec. 31 170,000 x 3 = 510,000
P1,950,000 / 12 = P162,500
Bustos
Jan. 1 – Aug. 1 P200,000 x 7 = P1,400,000
Aug. 1 – Oct. 1 220,000 x 2 = 440,000
Oct. 1 – Dec. 31 210,000 x 3 = 630,000
P2,470,000 / 12 = P205,833
Bucao
Jan. 1 – Nov. 1 P250,000 x 10 = P2,500,000
Nov. 1 – Dec. 31 220,000 x 2 = 440,000
P2,940,000 / 12 = P245,000

13. A Bulan Bustos Bucao

Original capital P150,000 P200,000 P250,000
Additional investment 30,000 20,000
Withdrawals ( 10,000) ( 10,000) ( 30,000)
Share in net income 53,980 63,660 62,360
Capital, Dec. 31, 2005 P223,980 P273,660 P282,360
14. D Briones Balen Burgos Total
Interest P 94,500 P 47,730 P 32,470 P174,700
Salaries 244,650 165,250 409,900
Balance –Equally (278,616) (278,616) (278,616) (835,848)
Total P 60,534 (P80,896) (P251,248)

TM 10
1. F 5. T 9. F 13. T 17. T
2. F 6. F 10. T 14. T 18. F
3. T 7. T 11. T 15. F 19. T
4. T 8. T 12. T 16. T 20. T

TM 11
1. L 4. J 7. E 10. N 13. I
2. B 5. M 8. A 11. P 14 Q
3. K 6. D 9. O 12. G 15. C

TM 12
1. D
2. B
3. B
4. C
5. C
6. C Beltran Barba Total
Capital beginning P400,000 P500,000 P900,000
Share in net income-equally 200,000 200,000 400,000
Share in net loss – 2:1 ( 160,000) ( 80,000) ( 240,000)
Capital, end P440,000 P620,000 P1,060,000

7. C P2,500,000 + (P1,800,000 + P400,000) = P4,700,000 – P2,000,000 = P2,700,000

8. B Beran and Banda = 300/1,100 x P1,100,000 = P300,000;

Banjo = 500/1,100 x P1,100,000 = P500,000

9. B Banzon Borja Total

Salaries P160,000 P200,000 P360,000
Interest on beginning capital 36,000 60,000 96,000
Remainder – equally 72,000 72,000 144,000
Total P268,000 P332,000 P600,000

10. B P520,000 – P100,000 – P240,000 = P180,000 / 20% = P900,000

11. D Jan. 1 – June 30 P 840,000 x 6 = P5,040,000

July 1 – July 31 1,080,000 x 1 = 1,080,000
Aug. 1 – Dec. 31 990,000 x 5 = 4,950,000
P11,070,000/12 = P922,500 x12%=P110,700

12. D Basilio Bituin Total

Salaries P220,000 P 180,000 P400,000
Remainder – Equally ( 20,000) ( 20,000) ( 40,000)
Total P 200,000 P 160,000 P360,000
13. A P1,000,000 + (P900,000 x 20%) – P200,000 = P980,000
14. C P600,000 + P200,000 = P800,000/2 = P400,000
15. B P400,000 – P30,000 + (P450,000 x 60%) = P640,000

TM 13
Problem A

Beltran, Bernal and Basco Partnership

Schedule of the Distribution of Partnership Profit

Beltran Bernal Basco Total

Salaries P57,600 P48,000 P38,400 P144,000
Interest 34,560 46,080 66,240 146,880
Balance – equally 53,040 53,040 53,040 159,120
Total distribution of net income P145,200 P147,120 P157,680 P450,000

Beltran, Bernal and Basco Partnership

Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014

Beltran Bernal Basco Total

Original capital P384,000 P576,000 P864,000 P 1,824,000
Add: Additional investment 96,000 96,000
Share in net income 145,200 147,120 157,680 450,000
Total P625,200 P723,120 P1,021,680 P2,370,000
Less Drawing ( 48,000) ( 48,000) (192,000) ( 288,000)
Capital, December 31, 2014 P577,200 P675,120 P829,680 P2,082,000

Problem B
1.
Double B Partnership
Income Statement
For the Year Ended December 31, 2014

Sales P1,800,000
Cost of goods sold:
Inventory, January 1 P 800,000
Purchases 1,200,000
Cost of goods available for sale P2,000,000
Less Inventory, December 31 1,050,000 950,000
Gross profit P850,000
Operating expenses:
Depreciation – building P30,000
Depreciation – furniture and fixtures 30,000
Other operating expenses 300,000 360,000
Net income before Income Tax P490,000
Income Tax 147,000
Net Income after Income Tax P343,000
2. Net income is allocated as follows:
Bilbao Bragas Total
Salaries P240,000 P240,000 P480,000
Interest on beginning capital 75,000 62,000 137,000
Remainder -2:3 (109,600) (164,400) (274,000)
Total P205,400 P137,600 P343,000

Income Summary 343,000

Bilbao, Capital, 205,400
Bragas, Capital 137,600

3. Bilbao, Capital 200,000

Bragas, Capital 240,000
Bilbao, Drawing 200,000
Bragas, Drawing 240,000

Double B Partnership
Statement of Changes in Partners’ Equity
For the Year Ended December 31, 2014

Bilbao Bragas Total

Capital, January 1 P1,300,000 P1,240,000 P2,540,000
Add: Additional investment 200,000 200,000
Share in net income 205,400 137,600 343,000
Total P1,705,400 P1,377,600 P3,083,000
Less Drawing 200,000 240,000 440,000
Capital, December 31 P1,505,400 P1,137,600 P2,643,000
 CHAPTER 4
Partnership Dissolution

EXERCISES

Exercise 4-1
1. Camus, Capital (90,000 x 1/3) 30,000
Cuenco, Capital (60,000 x 1/3) 20,000
Cerda, Capital 50,000

2. Other Assets 120,000

Camus, Capital (P120,000 x 75%) 90,000
Cuenco, Capital (P120,000 x 25%) 30,000

Camus, Capital [(P90,000 + P90,000) x 1/3] 60,000

Cuenco, Capital [(P60,000 + P30,000) x 1/3] 30,000
Cerda, Capital 90,000

3. Cash 90,000
Cerda, Capital 60,000
Camus, Capital (P30,000 x 60%) 18,000
Cuenco, Capital (P30,000 x 40%) 12,000

4. Cash 90,000
Other Assets 120,000
Camus, Capital (P120,000 x 60%) 72,000
Cuenco, Capital (P120,000 x 40%) 48,000
Cerda, Capital 90,000
AC CC Asset Rev
Old P270,000 P150,000 P120,000
New 90,000 90,000 ------
P360,000 P240,000 P120,000

5. Cash 90,000
Camus, Capital (P30,000 x 60%) 18,000
Cuenco, Capital (P30,000 x 40%) 12,000
Cerda, Capital 120,000

Exercise 4-2
1. Cular, Capital 20,000
Canda, Capital 20,000

2. Other Assets 40,000

Capco, Capital 20,000
Cular, Capital 12,000
Cruz, Capital 8,000
P70,000  ¼ = P280,000 – (P100,000 + P80,000 + P60,000) = P40,000

Capco, Capital (P100,000 + P20,000) x ¼ 30,000

Cular, Capatil (P80,000 + P12,000) x ¼ 23,000
Cruz, Capital (P60,000 + P8,000) x ¼ 17,000
Canda, Capital 70,000

3. Cash 115,000
 Canda, Capital 88,750.00
Capco, Capital P26,250 x 50% 13,125
Cular, Capatil P26,250 x 30% 7,875
Cruz, Capital P26,250 x 20% 5,250
AC CC Bonus
Old P266,250 P240,000 P26,250
New 88,750 115,000 (26,250)
P355,000 P355,000 P ------
Exercise 4-3
1. Catral, Capital 160,000
Conti, Capital 160,000
P480,000 x 1/3 = P160,000

2. Clemente, Capital 120,000

Conti, Capital 120,000
P360,000 x 1/3 = P120,000

3. Catral, Capital P336,000 x ¾ 252,000

Clemente, Capital P336,000 x ¼ 84,000
Other Assets 336,000
P126,000 1/4 = P504,000 – P840,000 = P336,000

Catral, Capital 57,000

Clemente, Capital 69,000
Conti, Capital 126,000
(P480,000 – P252,000) x 1/4 = P57,000
(P360,000 - P84,000 ) x 1/4 = P69,000

Exercise 4-4
1a. Carlos, Capital (P200,000 x ¼) 50,000
Cruz, Capital (P300,000 x 1/3) 100,000
Caparas, Capital 150,000

1b. Cash 120,000

Carpio, Capital 120,000

2. Carlos (P200,000 – 50,000 = P150,000) 150,000

Cruz (P300,000 – 100,000 = P200,000) 200,000
Caparas 150,000
Carpio 120,000

Exercise 4-5
1. Bonus Method
Cash 200,000
Cuenca, Capital (P25,000 / 2) 12,500
Claudio, Capital (P25,000 / 2) 12,500
Cabral, Capital 175,000
AC CC Bonus
Old P525,000 P500,000 P25,000
New 175,000 200\,000 (P25,000)
P700,000 P700,000 -----

2. Asset Revaluation Method

Cash 200,000
 Other Assets 100,000
Cuenca, Capital (P100,000 / 2) 50,000
Claudio, Capital 50,000
Cabral, Capital 200,000
AC CC Asset Rev.
Old P600,000 P500,000 P100,000
New 200,000 200,000 ------
P800,000 P700,000 P100,000

Exercise 4-6
1. Cash 120,000
Choy, Capital (P21,000 x 3/7) 9,000
Chua, Capital (P21,000 x 2/7) 6,000
Cheng, Capital (P21,000 x 2/7) 6,000
Chiu, Capital 99,000
AC CC Bonus
Old P396,000 P375,000 P21,000
New 99,000 120,000 (21,000)
P495,000 P495,000 -------

2. Other Assets 105,000

Choy, Capital (P105,000 x 3/9) 45,000
Chua, Capital 30,000
Cheng, Capital 30,000

Cash 120,000
Chiu, Capital 120,000
AC CC Asset Rev
Old P480,000 P375,000 P105,000
New 120,000 120,000 -
P600,000 P495,000 P105,000

Problem 4-1
1. Carmen, Capital 40,000
Centeno, Capital 20,000
Corrales, Capital 60,000

2. Other Assets 120,000

Carmen, Capital 72,000
Centeno, Capital 48,000
P120,000  1/3 = P360,000 – P240,000 = P120,000

Carmen, Capital ([P160,000 + P72,000] x 1/3) 77,333

Centeno, Capital [(P80,000 + P48,000) x 1/3] 42,667
Corrales, Capital 120,000

3. Other Assets 120,000

Cash 120,000
Carmen, Capital 72,000
Centeno, Capital 48,000
Corrales, Capital 120,000

AC CC Asset Rev
Old P360,000 P240,000 P 120,000
New 120,000 120,000 -----
 P480,000 P360,000 P 120,000

4. Cash 120,000
Carmen, Capital (P60,000 x 60%) 36,000
Centeno, Capital (P60,000 x 40%) 24,000
Corrales, Capital 180,000
AC CC Bonus
Old P180,000 P240,000 P(60,000)
New 180,000 120,000 60,000
P360,000 P360,000 --------

5. Cash 160,000
Corrales, Capital 120,000
Carmen, Capital 24,000
Centeno, Capital 16,000

6. Cash 160,000
Corrales, Capital 140,000
Carmen, Capital 12,000
Centeno, Capital 8,000

7. Cash 100,000
Corrales, Capital 85,000
Carmen, Capital 9,000
Centeno, Capital 6,000
AC CC Bonus
Old P255,000 P240,000 P15,000
New 85,000 100,000 (15,000)
P340,000 P340,000 --------

8. Cash 110,000
Other Assets 90,000
Corrales, Capital 110,000
Carmen, Capital 54,000
Centeno, Capital 36,000
AC CC Asset Rev
Old P330,000 P240,000 P90,000
New 110,000 110,000 --------
P440,000 P350,000 P90,000

9. Cash 96,000
Carmen, Capital (P16,000 x 60%) 9,600
Centeno, Capital (P16,000 x 40%) 6,400
Corrales, Capital 112,000

10. Cash 60,000

Corrales, Capital 60,000
P240,000  4/5 = P300,000 x 1/5 = P60,000

Problem 4-2
1. Cash 150,000
Calma, Capital 150,000

AC CC
 Old P300,000 P300,000
New 150,000 150,000
P450,000 P450,000

2. Cash 120,000
Calma, Capital 105,000
Coral, Capital 12000
Corpuz, Capital 3000
AC CC Bonus
Old (3/4) P315,000 P300,000 P15,000
New (1/4) 105,000 120,000 (15,000)
P420,000 P420,000 ------

3. Cash 60,000
Coral, Capital 24,000
Corpuz, Capital 6,000
Calma, Capital 90,000
AC CC Bonus
Old P270,000 P300,000 (P30,000)
New 90,000 60,000 30,000
P360,000 P360,000 -

4. Coral, Capital (P180,000 x ¼) 45,000

Corpuz, Capital (P120,000 x ¼) 30,000
Calma, Capital 75,000

5. Other Assets 30,000

Coral, Capital 24,000
Corpuz, Capital 6,000

Coral, Capital [(P180,000 + P24,000) ¼] 51,000

Corpuz, Capital [(P120,000 + P6,000) ¼] 31,500
Calma, Capital 82,500

6. Cash 90,000
Other Assets 60,000
Calma, Capital 90,000
Coral, Capital 48,000
Corpuz, Capital 12,000
AC CC Asset Rev.
Old P360,000 P300,000 P 60,000
New 90,000 90,000 ------
P450,000 P390,000 P 60,000

Problem 4-3
1. a. Cash 350,000
Coloma, Capital 350,000

b. Cash 500,000
Castillo, Capital (P25,000 x 70%) 17,500
Cordova, Capital (P25,000 x 30%) 7,500
Coloma, Capital 475,000
AC CC Bonus
Old P1,425,000 P1,400,000 P25,000
New 475,000 500,000 ( 25,000)
 P1,900,000 P1,900,000 -----------

c. Cash 700,000
Other Assets 700,000
Castillo, Capital (P700,000 x 70%) 490,000
Cordova, Capital (P700,000 x 30%) 210,000
Coloma, Capital 700,000
AC CC Asset Rev
Old P2,100,000 P1,400,000 P700,000
New 700,000 700,000 -----------
P2,800,000 P2,100,000 P700,000

d. Castillo, Capital 140,000

Cordova, Capital 210,000
Coloma, Capital 350,000

e. Castillo, Capital 112,000

Cordova, Capital 168,000
Coloma, Capital 280,000

Problem 4-4
1. Total capital of old partners P690,000
Fraction of interest of old partners  4/5
Total partnership capital after admission of Cruz P862,500
Interest of Cruz x 1/5
Required contribution of Cruz P172,500

2 a. Bonus method
AC CC Bonus
Cortes P435,000 P420,000 P15,000
Canda 250,000 240,000 10,000
Cena 35,000 30,000 5,000
Cruz 180,000 210,000 ( 30,000)
P900,000 P900,000 -------

2b. Asset Revaluation method

AC CC Asset Rev
Cortes P495,000 P420,000 P75,000
Canda 290,000 240,000 50,000
Cena 55,000 30,000 25,000
Cruz 210,000 210,000 -
P1,050,000 P900,000 P 150,000

Problem 4-5
1. a. Asset Revaluation method
Cash 90,000
Ciara, Capital 18,000
Cora, Capital 18,000
Celia, Capital 9,000
Other Assets 45,000
Carla, Capital 90,000
AC CC Asset Rev
 Old P 630,000 P 675,000 (P45,000)
New 90,000 90,000 -
P720,000 P765,000 (P45,000)

b. Bonus method
Cash 90,000
Ciara, Capital 2,250
Cora, Capital 2,250
Celia, Capital 1,125
Carla, Capital 95,625
AC CC Bonus
Old P669,375 P675,000 (P5,625)
New 95,625 90,000 5,625
P765,000 P765,000 -----

Ciara Cora Celia Carla

Capital balances – Bonus method P321,750 P213,750 P134,875 P95,625
Capital balances – Asset Revaluation method P306,000 P198,000 P126,000 P90,000
Reduction in depreciation due to asset revaluation 11,250 11,250 11,250 11,250
Capital balances after reduction in depreciation P 317,250 P209,250 P137,250 P101,250
Net advantage (disadvantage) of bonus over asset rev. P 4,500 P4,500 (P 3,375) (P5,625)

Celia will prefer the asset revaluation method over the bonus method because of the P3,375 advantage over the
bonus method.

2. a. Ciara, Capital 40,500

Cora, Capital 27,000
Celia, Capital 16,875
Carla, Capital 84,375

b. Other Assets 45,000

Ciara, Capital 18,000
Cora, Capital 18,000
Celia, Capital 9,000
P90,000  1/8 = P720,000 – P675,000 = P45,000

Ciara, Capital (P324,000 + P18,500) x 1/8 42,750

Cora, Capital (P216,000 + P18,000) x 1/8 29,250
Celia, Capital (P135,000 + P9,000) x 1/8 18,000
Carla, Capital 90,000

Problem 4-6
1. Cabal Cadiz Caldea Camo Total
Capital balances before the admission of Camo P150,000 P180,000 P300,000 P630,000
Purchase of 1/6 interest of Cadiz (30,000) 30,000 -----
Contribution to the partnership 150,000 150,000
Asset revaluation to old partners 4,000 6,000 10,000 20,000
Bonus to old partners 4,000 6,000 10,000 (20,000) ------
Capital balances after the admission of Camo P158,000 P162,000 P320,000 P160,000 P800,000

2. Cabal = 20% x 80% = 16% Caldea = 50% x 80% = 40%

Cadiz = 30% x 80% = 24% Camo = 20%
Problem 4-7
Corona Calderon Calixto Total
Capital balances Dec. 31, 2013 before closing P250,000 P150,000 P400,000
Distribution of 2013 profit:
Salaries P45,000 P45,000 P90,000
Balance (12,000) (8,000) (20,000)
Share in 2013 profit P33,000 P37,000 P70,000
Total P283,000 P187,000 P470,000
Drawing (41,000) (34,000) (75,000)
Capital balances, January 1,2014 P242,000 P153,000 P395,000
Investment of Calixto P100,000 100,000
Bonus to Calixto (39,000) (26,000) 65,000
Capital balances after the admission of Calixto P203,000 P127,000 P165,000 P495,000
Share in 2014 loss (26,250) (18,750) (30,000) (75,000)
Drawing (37,500) (25,000) (34,000) (96,500)
Capital balances, January 1, 2015 P139,250 P83,250 P101,000 P323,500
Loss on sale of the partnership business (82,600) (59,000) (94,400) (236,000)
Cash Settlement to partners P56,650 P24,250 P6,600 P87,500

MULTIPLE CHOICE
1. C
2. C
3. A
4. B

5. B Chan Ching Chen Total

Capital bal. before admission of Chat P250,000 P150,000 P100,000 P500,000
Asset Revaluation 30,000 18,000 12,000 60,000
Balances P280,000 P168,000 P112,000 P560,000
Interest sold to Chat (25%) ( 70,000) ( 42,000) ( 28,000) ( 140,000)
Balances after the admission of Chat P210,000 P126,000 P 84,000 P420,000

6. B

7. B Total partnership capital before the admission of Co P280,000

Fraction of interest of old partners  5/6
Total partnership capital after the admission of Co P336,000
Fraction of interest of Co x 1/6
Required contribution of Co P 56,000

8. A Cordova Constancio
Capital balances before adjustment P641,976 P728,352
Uncollectible accounts ( 20,000) ( 35,000)
Worthless inventories ( 5,500) ( 6,700)
Other assets written off ( 2,000) ( 3,600)
Adjusted capital P614,476 P683,052

9. B Total capital (P614,476 + P683,052) P1,297,528

Total liabilities (P178,940 + P200,000 + P243,650 + P345,000) 967,590
Total assets P2,265,118

10. A Total capital (P1,297,528 / 80%) P1,621,910

Interest acquired by Cuyugan x 20%
 Cash to be contributed by Cuyugan P 324,382

11. D Cordova Constancio

Capital balances P614,476 P683,052
Required capital (P1,297,528 / 2) 648,764 648,764
Cash paid (received) P 34,288 (P 34,288)

12. B Cordova Constancio Cuyugan

Capital balances P614,476 P683,052 P324,382
Cash paid (received) 34,288 ( 34,288)
Net income 130,000 130,000 65,000
Drawings ( 50,000) ( 65,000) ( 28,000)
Capital balances, end of first year P728,764 P713,764 P361,382

13. C Conrado = ½ x 2/3 2/6

Cosio = 1/4 x 2/3 1/6
Cosme = 1/4 x 2/3 1/6

14. B Agreed capital P 750,000

Contributed capital (P500,000+P200,000) 700,000
Asset Revaluation P 50,000

15. B Conrado Cosio Cosme Cueto Total

Capital bal. before the
admission of Cueto P250,000 P150,000 P100,000 P500,000
Transfer of 1/3 interest ( 50,000) P 50,000 ------
Investment of Cueto 200,000 200,000
Asset Revaluation 25,000 12,500 12,500 50,000
Capital bal. after the
admission of Cueto P275,000 P112,500 P112,500 P250,000 P750,000

TEST MATERIALS
Test Material No. 14 Test Material No. 15
1. T 6. F 11. F 1. Positive Asset Revaluation 11. Admission by investment
2. F 7. T 12. F 2. Agreed capital 12. Bonus to old partners
3. T 8. F 13. F 3. Bonus 13. Liquidation
4. T 9. F 14. T 4. Total contributed capital 14. Capital credit
5. F 10. T 15. T 5. Dissolution 15. When AC is not given
16. T 6. Interest 16. Old partners’ capital
17. T 7. Dissolution 17. Fraction of interest
18. F 8. Admission by purchase/Sale of 18. Negative Asset
interest Revaluation
19. T 9. Agreed capital 19. Personal gain or loss
20. F 10 Admission by purchase 20. Net advantage
Test Material No. 16
1. B
2. C
3. A
4. B
5. B
6. D
7. A
8. B P190,000 x 2 = P380,000 + P160,000 = P540,000 x 1/5 = P108,000
9. C
10. D P180,000 + (P20,000 x 2/5) = P188,000
AC CC Bonus
Old partners P420,000 P400,000 P20,000
New partner 140,000 160,000 (20,000)
P560,000 P560,000 ------
11. A P480,000 X 1/6 = P80,000
12. C (P100,000 + P200,000)  2/3 = P450,000 x 1/3 = P150,000
13. B Cariaso Carino Carillo
Capital balances before admission of Cardel P400,000 P200,000 P100,000
Asset Revaluation
(P200,000  1/4) - P700,000 = P100,000 60,000 30,000 10,000
Capital balances after asset revaluation P460,000 P230,000 P110,000
Fraction of remaining interest ¾ ¾ ¾
Capital balances after admission of Cardel P345,000 P172,500 P82,500
14. A P400,000 x 3/4 = P300,000; P200,000 x 3/4 = P150,000; P100,000 x 3/4 = P75,000
15. B
16. C AC CC Bonus
Cariaso P385,000 P400,000 (P15,000)
Carino 192,500 200,000 (7,500)
Carillo 97,500 100,000 (2,500)
Cardel 225,000 200,000 25,000
P900,000 P900,000 -
17. B Coral Camus Cerda Cordero Total
Capital bal. bef. adm P190,000 P160,000 P120,000 P470,000
Transfer of 15% int. ( 24,000) P 24,000 ------
Investment of Cordero 160,000 160,000
Asset Revaluation 15,000 9,000 6,000 30,000
Bonus to old partners 22,000 13,200 8,800 (44,000) ------
Capital bal. after the
admission of Cordero P227,000 P158,200 P134,800 P140,000 P660,000
18. A
19. B
20. C Coral 40% x 80% = 32%
Camua 40% x 80% = 32%
Cerda 20% x 80% = 16%
Cordero 20%

Test Material No. 17

Problem A

1. Asset revaluation to old partners - P100,000; no bonus

AC CC Asset Rev
Old P600,000 P500,000 P100,000
New 150,000 150,000 -------
 P750,000 P650,000 P100,000

2. No asset revaluation; bonus to old partners - P20,000

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 -------

3. No asset revaluation;, bonus to new partner - P45,000

AC CC Bonus
Old P455,000 P 500,000 (P45,000)
New 195,000 150,000 45,000
P650,000 P650,000 ------

4. Asset revaluation to old partners - P100,000; bonus to old partners - P37,500

AC CC Asset Rev Bonus
Old P637,500 P500,000 P100,000 P 37,500
New 112,500 150,000 ------- ( 37,500)
P750,000 P650,000 P100,000 -------

5. No asset revaluation; bonus to old partners - P20,000.

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 --------

Problem B
Total capital of the partnership [(P148,000 + P260,000 + P192,000)  80%] P750,000
Interest of Cinco x 20%
Contribution of Cinco P150,000

Problem C

Carandang Cojuangco Capistrano

Capital balances before the admission of Canete P240,000 P120,000 P60,000
Asset revaluation [(P120,000  1/4) - P420,000] 36,000 18,000 6,000
Capital balances after asset revaluation P276,000 P138,000 P66,000
Remaining interest x 3/4 x 3/4 x 3/4
Capital balances after the admission of Canete P207,000 P103,500 P49,500
 CHAPTER 5
Change in Capital Structure by Withdrawal, Retirement, Death or Incapacity of a Partner

Exercise 5-1
1.a. Bonus method
Dee, Capital 20,000
Dantes, Capital (P5,000 x 3/5) 3,000
Dungca, Capital (P5,000 x 2/5) 2,000
Cash 25,000

1.b Asset Revaluation method

Other Assets (P5,000  1/6) 30,000
Dee, Capital 20,000
Cash 25,000
Dantes, Capital (P30,000 x 3/6) 15,000
Dungca, Capital (P30,000 x 2/6) 10,000

2. Asset Rev. Dantes Dungca

Capital balances after retirement of
Dee under the bonus method P47,000 P28,000

Balances after retirement of Dee

under asset revaluation method P30,000 P65,000 P40,000
Depreciation on asset rev. – equally (30,000) ( 15,000) ( 15,000)
Balances after depreciation ------ P50,000 P25,000

Dantes will prefer the asset revaluation method. The gain is P3,000 under the asset
revaluation method compared with the bonus method.

Exercise 5-2
1. Diesta, Capital 80,000
Dayrit, Capital (P10,000 x3/4) 7,500
Dayag, Capital (P10,000 x 1/4) 2,500
Cash 96,000

2. Other Assets (P16,000  1/5) 80,000

Diesta, Capital 80,000
Dayrit, Capital (P80,000 x 3/5) 48,000
Dayag, Capital (P80,000 x 1/5) 16,000
Cash 96,000

Exercise 5-3
Daria, capital, January 1 P25,000
Drawing ( 4,000)
Share in net income (P20,000 x 40%) 8,000
Interest of Daria upon retirement P29,000

1. Other Assets (P33,000 – P29,000 = P4,000 / 40%) 10,000

 Daria, Capital 29,000
Cash 33,000
Ditas, Capital (P10,000 x 30%) 3,000
Dulce, Capital (P10,000 x 30%) 3,000

2. Ditas, Capital (P4,000/2) 2,000

Dulce, Capital (P4,000/2) 2,000
Daria, Capital 29,000
Cash 33,000

Exercise 5-4
1. Dolor, Capital 40,000
Damian, Capital 20,000
Damaso, Capital 20,000

2. Dolor, Capital 40,000

Cash 32,000
Damian, Capital 3,000
Damaso, Capital 5,000

3. Other Assets (P46,000 – P40,000 = P6,000/ 20%) 30,000

Dolor, Capital 40,000
Cash 46,000
Damian, Capital 9,000
Damaso, Capital 15000

Exercise 5-5
1. Domingo, Capital 70,000
Dizon, Capital 70,000

2. Dencio, Capital 10,000

Doctor, Capital 5,000
Dizon, Capital 5,000
Domingo, Capital 70,000
Cash 90,000

3. Other Assets (P90,000 – P70,000 = P20,000 / 20%) 100,000

Domingo, Capital 70,000
Notes Payable 90,000
Dencio, Capital 40,000
Doctor, Capital 20,000
Dizon, Capital 20,000

Exercise 5-6
1. Dimla, Capital 1,440
Distor, Capital 960
Daza, Capital 12,000
Cash 14,400

2. Daza, Capital 12,000

Cash 9,600

37
 Dimla, Capital 1,440
Distor, Capital 960

PROBLEMS

Problem 5-1
1. Delfin, Capital 200,000
Cash 200,000

2. Delfin, Capital 200,000

Diokno, Capital (P60,000 x ½) 30,000
Decena, Capital (P60,000 x ½) 30,000
Cash 260,000

3. Other Assets (P6,000  1/3) 180,000

Delfin, Capital 200,000
Cash 260,000
Diokno, Capital (P180,000 x 1/3) 60,000
Decena, Capital (P180,000 x 1/3) 60,000

4. Delfin, Capital 200,000

Cash 160,000
Diokno, Capital (P40,000 x 1/2) 20,000
Decena, Capital (P40,000 x 1/2) 20,000

5. Delfin, Capital 200,000

Diokno, Capital (P75,000 x 1/3) 25,000
Decena, Capital (P75,000 x 1/3) 25,000
Cash 175,000
Other Assets (P25,000  1/3) 75,000

Problem 5-2
1. Merchandise Inventory 7,000
Capital Adjustment Account 7,000

Allowance for Doubtful Accounts 1,000

Capital Adjustment Account 1,000

Capital Adjustment Account 8,000

Danao, Capital 4,000
Daylan, Capital 2,000
Dahlia, Capital 2,000

2. Dahlia, Capital 27,000

Cash 2,000
Notes Payable 25,000

Problem 5-3
1 Damo Dayan Datu
Capital, January 1, 2015 P120,000 P 70,000 P 80,000

38
 Net loss ( 12,000) ( 8,000) ( 20,000)
Drawing ( 25,000) ( 25,000) ( 25,000)
Capital upon retirement of Dayan P 83,000 P 37,000 P 35,000

2. Damo, Capital 10,500

Datu, Capital 17,500
Dayan, Capital 37,000
Cash 30,000
Inventory 35,000
P37,000 – P30,000 = P7,000  20% =P35,000

3a. Other Assets (P10,000 / 20%) 50,000

Dayan, Capital 37,000
Cash 47,000
Damo, Capital (P50,000 x 30%) 15,000
Datu, Capital (P50,000 x 50%) 25,000

b. Dayan, Capital 37,000

Damo, Capital 3,750
Datu, Capital 6,250
Cash 47,000

Problem 5-4
1. Daet, Capital 12,000
Dais, Capital 8,000
Dancel, Capital 140,000
Cash 160,000

2. Dancel, Capital 140,000

Daet, Capital 140,000

3. Dancel, Capital 140,000

Cash 130,000
Daet, Capital 6,000
Dais, Capital 4,000

4. Other Assets 68,000

Dancel, Capital 140,000
Cash 168,000
Daet, Capital 24,000
Dais, Capital 16,000

5. Other Assets 40,000

Dancel, Capital 140,000
Cash 80,000
Daet, Capital 60,000
Dais, Capital 40,000
6. Dancel, Capital 140,000
Dais, Capital 140,000

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7. Dancel. Capital 140,000
Delia, Capital 140,000

Problem 5-5
1. Books 72,000
Other Assets 48,000
Dizon, Capital 240,000
Cash 288,000
David, Capital 36,000
Duque, Capital 36,000

2. Dizon, Capital 240,000

Cash 120,000
Notes payable 108,000
David, Capital 6,000
Duque, Capital 6,000

3a. Dizon, Capital 240,000

David, Capital 24,000
Duque, Capital 24,000
Cash 180,000
Notes payable 108,000

b. Other Assets (P288,000 – P240,000 = P48,000/40%) 120,000

Dizon, Capital 240,000
Cash 180,000
Notes Payable 108,000
David, Capital (P120,000 x 30%) 36,000
Duque, Capital (P120,000 x 30%) 36,000

Problem 5-6
Danao, Diaz, Dolor and Dungca Partnership
Statement of Partners' Equity
For the Year Ended December 31, 2014

Danao Diaz Dolor Dungca Total

Capital, January 1 P 84,000.00 P 75,000.00 P 48,000.00 P45,000.00 P252,000.00
Distribution of net income:
Jan. 1 - Sept. 30 13,500.00 10,125.00 5,062.50 5,062.50 33,750.00
Oct. 1 - Dec. 31 4,705.15 3,528.86 1,764.43 9,998.44*
Transfer of Dungca capital to (50,062,50) ( 50,062.50)
his estate
Retirement of Dolor 7,832.42 5,874.31 ( 54,826.93) ( 41,120.20)
Capital, December 31 P110,037.57 P 94,528.17 --------- --------- P204,565.74
* P45,000 – P33,750 – (P50,062.50 x 10% x 3/12)) = P9,998.44

Income Summary 33,750.00

Danao, Capital 13,500.00
Diaz, Capital 10,125.00

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 Dolor, Capital 5,062.50
Dungca, Capital 5,062.50

Dungca, Capital 50,062.50

Payable to the Estate of Dungca 50,062.50

Income Summary 1,251.56

Payable to the Estate of Dungca 1,251.56

Income Summary 9,998.44

Danao, Capital 4,705.15
Diaz, Capital 3,528.86
Diaz Costa, Capital 1,764.43

Dolor, Capital 54,826.93

Notes Payable 41,120.20
Danao, Capital 7,832.42
Diaz, Capital 5,874.31

MULTIPLE CHOICE
1. C
2. A
3. C
4. A
5. A
6. C Amount paid by the partnership P 71,000
Capital of Dayrit
Total capital before withdrawal of Dayrit P210,000
Total capital after withdrawal of Dayrit 160,000 50,000
Asset Revaluation to Dayrit P 21,000
Profit share of Dayrit  30%
Total asset revaluation P 70,000
7. B Capital of Dino before purchasing interest from Dolor P 35,000
Interest of Dolor transferred to Dino 25,000
Capital of Dino P 60,000
8. D Doctor's capital before the withdrawal of Dolor P 45,000
Share in the bonus given to Dolor
(P33,000 - P25,000) x 3/6 4,000
Doctor's capital after the withdrawal of Dolor P 41,000
9. A The same as the capital before the withdrawal of Dolor, P35,000
10. C Dino’s capital before the withdrawal of Dolor P 35,000
Share of Dino in the revaluation of assets
Excess payment to Dolor P8,000
Profit share of Dolor  40%
Increase in asset per revaluation P20,000
Share of Dino in the asset revaluation x 30% 6,000
Dino’s capital after the withdrawal of Dolor P 41,000
11. C
12. B Dizon Dionisio Divino
Loan and capital balances P206,000 P154,000 P360,000
Revaluation of assets 24,000 24,000 48,000

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 Bonus to Dizon 12,000 ( 4,000) ( 8,000)
P242,000 P174,000 P400,000
13. B P180,000 + P10,000 – P220,000 = (P30,000)/40% = (P75,000)
14. D P60,000 + (20,000 x 20%) - P15,000 - P80,000 = P31,000
15. D P31,000/20% = P155,000 x 40% = P62,000

TEST MATERIALS

Test Material No. 18

1. F 5. F 9. T 13. T 17. T
2. T 6. T 10. F 14. T 18. T
3. T 7. F 11. T 15. F 19. F
4. F 8. T 12. F 16. T 20. F

Test Material No. 19

1. B
2. C
3. A
4. A
5. C
6. B P160,000 - (P30,000 x 1/2) = P145,000
7. B P30,000  40% = P75,000 x 30% = P22,500 + P160,000 = P182,500
8. C
9. B P80,000 + P160,000 – P30,000 = P130,000
10. D

Test Material No. 20

1. Diones, Capital 56,000
Donato, Capital 42,000
Dulay, Capital 14,000

2. Diones, Capital 56,000

Dumlao, Capital 56,000

3. Diones, Capital 56,000

Inventories 12,000
Equipment 26,000
Allowance for Uncollectible Accounts 8,000
Cash 62,000
Donato, Capital 15,000
Dulay, Capital 9,000

4. Diones, Capital 56,000

Donato, Capital 5,000
Dulay, Capital 3,000
Cash 64,000

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5. Diones, Capital 56,000
Donato, Capital 10,000
Dulay, Capital 6,000
Cash 20,000
Equipment 52,000

43