1

RETENTION EXAMINATION
TUTORIAL ON PARTNERSHIP ACCOUNTING
Problem 1. Janet, Lee, Noy are partners sharing profits 30%, 20% and 50%, and with capital
balances of P1,050,000, P750,000 and P1,050,000, respectively. The partners agreed to
dissolve their partnership and upon liquidation, all of the partnerships assets are sold and
sufficient cash is realized to pay all claims except one for P150,000. Of the three partners,
Noy is personally insolvent. In the remaining claim against the partnership, Janet is to
absorb:
A. P75,000

B. P90,000

C. P120,000

D. P45,000

Problem 2. Hans, Lance, Arthur and Sidd own a publishing company that they operate as a
partnership. Their agreement includes the following: Distribution is to the extent of the
earnings only.

Hans will receive a salary of P20,000 and a bonus of 3% of income after all the
bonuses
Lance will receive a salary of P10,000 and a bonus of 2% of income after all the
bonuses
All the partners are to receive the following: Hans P5,000; Lance P4,500; Arthur
P2,000; and Sidd P4,700, representing 10% interest on their average capital
balances.
Any remaining profits are to be divided equally among the partners
Partnership reports a profit of P40,000

How much is Lances share in the profit if profit is distributed in the following order of
priority: Interest on invested capital, then bonuses, then salary, and then according to
profit and loss percentage?
A. P12,560

B. P13,235.75

C. P12,433

D. P12,830.75

Problem 3. Vida, Vina, and Vita, sharing profits and losses 50%, 30% and 20%, have capital
credit balances of P400,000, P300,000 and P200,000, respectively. They decided to admit a
new partner, Vera to a 30% interest in the partnership upon Veras investment of an amount
equal to five-sixths of her capital credit with no asset adjustment recognized. Immediately
after the admission of Vera, the capital credit balance of Vina will be:
A. P300,000

B. P330,000

C. P318,000

D. P282,000

Problem 4. Ester, Judith and Martha were partners with capital balances on January 2, 2013
of P70,000, P84,000 and P56,000, respectively. Their loss sharing ratio is 3:5:2. On July 1,
2013, Ester retires from the partnership. On the date of retirement the partnership net profit
from operations is P48,000. The partners agreed further to pay Ester P76,560 in settlement
of her interest. How much will be the capital of Judith after retirement of Ester?
a. P103,200

b. P114,743

c. P108,864

d. P107,904

Problem 5. A, B and C are partners in a business being liquidated. The partnership has
cash of P22,000, noncash assets with a book value of P264,000 and liabilities of P173,250.
The following data relates to the partners as of June 1, 2013:
(a) A has capital balance of P129,250, personal assets of P27,500, personal liabilities of
P13,750.

2
(b) B extended a loan to the partnership in the amount of P13,750, deficit of P38,500,
personal assets of P41,250, personal liabilities of P16,500.
(c) C has a capital balance of P8,250, personal assets of P68,750 and personal liabilities
of P41,250.
(d) Their profit and loss ratio is 3:1:1, A, B and C, respectively.
On June 12, 2013, assets with a book value of P82,500 were sold for P55,000 cash. The
proceeds were used to pay off liabilities of the partnership. During the remainder of June, no
additional assets were realized and outside creditors began to pressure the partnership for
payment.
On July 3, the partners agreed to contribute personal assets, to whatever extent possible, in
order to eliminate their respective deficits. Shortly thereafter, assets with book value of
P55,000 and a fair value of P63,250 were distributed to A.
Assuming additional noncash assets with book value of P110,000 were sold in July for
P148,500.
How much cash would be distributed to C?
A. P12,650

B. P3,850

C. P8,800

D. P550

Problem 6. SCA Partnership has the following account balances before liquidation:
Cash
350,000
Noncash assets
7,375,000
Loan to C
150,000
Receivable from S
20,000
Expenses
2,230,000

Liabilities
1,125,000
Loan from A
50,000
S, Capital (40%)
1,250,000
C, Capital (40%)
1,900,000
A, Capital (20%)
1,000,000
Revenues
4,800,000

During June, some noncash assets were sold that resulted to a loss of P46,125. Liquidation
expenses of P175,000 were paid and additional expenses amounting to P90,000 were
expected to be incurred through the following months of liquidation the partnership.
Liabilities to outsiders amounting to P875,000 were paid.
What is the book value of the noncash assets which were sold for C to receive
P555,550?
A. P2,375,000
P2,083,875

B. P2,130,000

C. P2,328,875

D.

Problem 7.
o On June 1, 2012, L and M formed a partnership with cash investments of P330,000
and P420,000, respectively. Upon formation, the partners agreed to bring their
capital ratio in proportion with their profit and loss ratio which is L ; (30%) and M ;
(70%) and M is the partner who has to invest or withdraw sufficient amount of cash to
conform with the agreement.
o

Profit allocation were as follows : monthly salaries, L ; P36,000 and M ; P30,000. The
partners will be allowed with interest of 12% on their capital balances at the end of
the year before closing the income summary account and any distribution against net
income. M receives a bonus of 20% of net income after deducting the bonus and his
salary.

3
o

On August 1, 2012, L invested additional P80,000 cash and withdrew P30,000 on

October 1, 2012. On September 1, 2012, M invested additional P48,000 cash and
withdrew P18,000 on December 1, 2012.

In 2012, the partnership reported net income of P450,000 before any deductions and
each partner has drawings of P150,000 distributed at year-end against share in net
income.

On January 1, 2013, N was admitted as a partner by purchasing 1/3 interest of M,

paying the selling partner the amount of P276,000. N also invested P230,000 cash
for a total interest of 20% in capital of the partnership.

Capital balance of L immediately after admission of N

A
B

P498,294
P541,340

C. P512,290
D. P529,798

Capital balance of M immediately after admission of N

A
B

P718,202
P724,306

C. P702,220
D. P698,440

Problem 8.
TM and SJ, having capital balances of P980,000 and P525,000 respectively, decided to admit
GD into their partnership. GD is to invest sufficient amount in order to have a 25% interest
in the partnership. If TM and SJ share profit in a proportion of 3:1, respectively, and SJs
capital balance after GDs investment is P589,750,
How much was invested by GD?
A
B

P848,750
P1,174,250

C. P588,000
D. P847,000

Problem 9.
The partnership of D, T, and I was formed on January 1, 2013. The original investments were
as follows: D, P240,000; T, P360,000; I, P540,000. According to the partnership agreement,
net income or loss will be divided among the respective partners as follows: (1) salaries of
P80,000 for D, P70,000 for T, and P48,000 for I. (2) Interest of 9% on the original capital
balance for each partner. (3) Remainder is divided equally.
For D to receive P80,700 as his share in the profit of the partnership, how much is the net
income that must be generated by the partnership?
A
B

P363,300
P300,600

C. P237,900
D. P381,300

For T to receive P121,000 as his share in the profit of the partnership, how much is the
net income that must be generated by the partnership?
A
B

P356,400
P319,200

C. P403,000
D. P300,600

For I to receive P39,600 as his share in the loss of the partnership, how much is the net
loss that must be generated by the partnership?
A
B

P171,000
P129,600

C. P108,000
D. P136,200

Problem 10.
On January 1, 2013, L, M, and N formed a partnership with capital contributions of

4
P625,000; P750,000; and P937,500, respectively. The partners agreed that profit and loss
would be allocated as follows: P75,000 salary to each partner, 3% interest on initial capital
contributions, the remainder divided in the ratio 2:4:4, respectively to L, M, and N. The
partnership generated income amounting to P375,000 for the year 2013. During 2013, the
following partnership errors were discovered before the distribution of profit:
o In 2013, a purchase of piece of equipment costing P50,000 was expensed. The
equipment has an estimated life of ten years with equal service potential each
year.
o

On December 31, 2013, ending inventory was understated by P50,000.

On January 1, 2014, N decided to retire from the partnership.

If the balance of the capital of L after retirement amounts to P770,000, how much is the
settlement to N for his retirement?
A
B

P1,120,000
P1,085,000

C. P1,062,500
D. P1,110,875

If the balance of the capital of M after retirement amounts to P890,000, how much is the
settlement to N for his retirement?
A

P1,127,500

C. P1,090,500

B P1,231,500

D. P1,152,500