1.

Aiden, Amelia and Madison formed a partnership on April 30, with the following assets,
measured at their fair market values, contributed by each partner:
Aiden Amelia Madison
Cash P 100,000 P 120,000 P 300,000
Automobile 85,000
Delivery trucks 280,000
Computer and printer 51,000
Office furniture 35,000 25,000
Land and building 1,500,000

P 1,685,000 P 486,000 P 325,000

Although Madison has contributed the most cash to the partnership; he did not have the
full amount of P300,000 available and was forced to borrow P200,000. The land and
building contributed by Aiden has a mortgage of P900,000 and the partnership is to
assume responsibility of the loan. Of the profit and loss sharing agreement is 40 percent,
40 percent, and 20 percent, respectively, for Aiden, Amelia and Madison, what is the total
capital investment of all the partners at the opening of business on April 30?
a. P 2,496,000 b. 1,596,000 c. 1,396,000 d. 1,644,000

2. The balance sheet as of July 31, 2016, for the business owned by Sunshine, shows the
following assets and liabilities:
Cash P 50,000 Furniture and Fixtures P 164,000
Accounts Receivable 134,000 Accounts Payable 28,800
Merchandise Inventory 220,000

It is estimated that 5% of the receivables will prove uncollectible. The cash balance
includes a 1,000 shares marketable equity securities recorded at its cost, P4,000. The
stock last sold on the market at P17.50 per share. Merchandise inventory includes
obsolete items costing P18,000 that will probably realized only P4,000. Depreciation has
never recorded; however, the furniture and fixtures are two years old, have an estimated
useful life of 10 years, and would cost P240,000 if purchased new. Prepaid items amount
to P5,000. Paulo is to be admitted as a partner upon investing P200,000 cash and
P100,000 merchandise. How much capital is to be credited to Sunshine upon formation of
partnership?
a. P539,200 b. 613,000 c. 565,000 d. 606,200

3. Paul admits Timothy as a partner in business. Accounts in the ledger for Paul on
November 30, 2016, just before the admission of Timothy, show the following balances:

Cash P 26,000 Accounts payable P 62,000

Accounts Receivable 120,000 Paul, capital 264,000
Merchandise Inventory 180,000
 It is agreed that for purposed of establishing Pauls interest the following adjustments
should be made:
1. An allowance for doubtful accounts of 2% of accounts receivable is to be
established.
2. The merchandise inventory is to be valued at P202,000.
3. Prepaid expenses of P6,500 and accrued liabilities of P4,000 are to be
established.

Timothy is to invest sufficient funds in order to receive a 1/3 interest in the partnership.
How much must Timothy contribute?
a. P132,000 b. P143,050 c. P95,360 d. P88,000

4. Shane, Pat, and Andy are new CPAs and are to form an accounting partnership. Shane is
to contribute cash of P75,000 and his computer originally bought at P80,000 but has a
second hand value of P50,000. Pat is to contribute cash of P100,000 and tables and chairs
worth P20,000 but acquired by Pat for only P18,000. Andy, whose family is selling
computers, is to contribute cash of P40,000 and a brand new computer plus printer with
regular prices at P80,000 but which cost their familys computer dealership P70,000.
Partnership agree to share profits 3:2:3. The capital balances of Shane, Pat, and Andy,
respectively upon formation are:
a. Shine, P155,000; Pat, P118,000; and Andy, P110,000
b. Shine, P143,625; Pat, P95,750; and Andy, P143,625
c. Shine, P125,000; Pat, P120,000; and Andy, P120,000
d. Shine, P136,875; Pat, P91,250; and Andy, P136,875

5. Roy admits Al as a partner in business. Balance sheet accounts of Roy on September 30,
just before admission of Al show:

Cash P 15,600
Accounts Receivable 72,000
Merchandise Inventory 108,000
Accounts payable 37,200
Paul, capital 158,400

It is agreed that for purposed of establishing Roys interest, the following adjustments
shall be made:
a. An allowance for doubtful accounts of 2% is to be established.
b. The merchandise inventory is to be valued at P121,200.
c. Prepaid expenses of P2,100 and accrued liabilities of P2,400 are to be recognized.

Al is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much must
is Als investment to the partnership?
b. P84,930 b. P105,600 c. P85,830 d. P47,520
 6. Francis, Chis, and Ivan are to form a partnership. Francis is to contribute cash of
P350,000; Chris, P35,000; and Ivan, P350,000. Francis and Ivan are not to actively
participate in the business, but will refer customers, while Chris will manage the firm.
Chris has to give up his present job, which gives him an annual income of P420,000 the
partners decided that profits % losses should be shared equally. Upon formation, partners
capital balances would respectively be:
a. P245,000; P245,000; and P245,000
b. P350,000; P35,000; and P350,000
c. P350,000; P455,000: and P350,000
d. P385,000: P385,000; and P385,000

Questions 7 and 8 are based on the following:

X and Y are partners sharing profits 60:40. A balance sheet prepared for the partnership on April
1, 2016 shows the following:

Cash P 48,000 Accounts payable P 89,000

Accounts receivable 92,000 X, capital 133,000
Inventory 165,000 Y, capital 108,000
Equipment 70,000
Accumulated depreciation ( 45,000) _________
P 330,000 P 330,000

On this date, the partners agree to admit Z as partner. The terms of the agreement is that assets
and liabilities are to be restated as follows:
a. An allowance for possible uncollectibles of P4,500 is to be established.
b. Inventories are to be restated at their present replacement values of P170,000.
c. Equipment are to be restated at a value of P35,000.
d. Accrued expenses of P4,000 are to be recognized.

X, Y, and Z will divide profits in the ratio of 5:3:2. Capital balances for the new partners are to
be in this ratio with X and Y making cash settlement outside of the partnership for the required
capital adjustment between themselves and Z investing cash in the partnership for his interest.

7. How much cash Z should contribute?

a. P61,875 b. P 49,496 c. P60,250 d. P50,625

8. What capital adjustments should be made between X and Y?

a. X must pay Y, P17,785 c. X must invest cash of P17,785
b. Y must pay X, P17,785 d. Y must invest cash of P17,785
9. The following balance sheet for the partnership of Joshua, Scarlett and Matthew were
taken the books on October 1, 2016

ASSETS LIABILITIES & CAPITAL

Cash P 100,000 Liabilities P 200,000
Other assets 400,000 Joshua, capital 120,000
Scarlett, capital 95,000
_________ Matthew, capital 85,000
Total Assets P 500,000 P 500,000

The partners agreed to distribute profits as follows:

1. Annual salaries to Joshua and Scarlett of P5,000 each
2. Annual interest of 5% on beginning capital
3. Bonus of 15% to Matthew based on income after salaries, interest and bonus
4. Remaining profit: 25% to Joshua, 35% to Scarlett and 40% to Matthew

The partnership began its operations on October 1, 2016 and net income as of December
31, 2016 is P69,500. Which of the following is true?
a. The bonus to Matthew is P5,804
b. Net income after salaries, interest and bonus is P38,696
c. Scarlett total share in the net income is P21,688
d. Matthews share on the profit after salaries, interest and bonus is P13,543

10. Jayden and Aria formed the J & A partnership several years ago. Capital account balances
on January 1, 2016 were: Jayden, P993,500; and Aria, P536,500.

The partnership agreement provides Jayden with an annual salary of P20,000 plus a
bonus of 5% of partnership net income for managing the business. Aria is provided an
annual salary of P30,000 with no bonus. The remainder is shared evenly. Partnership net
income for 2016 was P60,000, Aria and Jayden each invested an additional P10,000
during the year to finance a special purchase. Year-end drawing account balances were
P30,000 for Jayden and P20,000 for Aria. Arias capital balances of December 31, 2016
should be:
a. P560,000 b. P1,000,000 c. P998,750 d. P561,250

11. D, S, and T have capital balances of P30,000, P20,000, and P40,000, respectively. Their
P/L ratio is 10% interest on capital balances; S is entitled to a salary of P12,000; T is
guaranteed a minimum share of P24,000 and remainder is divided 30:30:40.
The minimum profit to give an aggregate of P20,000 to S is:
a. P60,000 b. P53,000 c. P56,000 d. 49,000

12. L, M, and N are partners with capital balances on January 1, 2016 of P1,200,00,
P480,000, and P240,000, respectively. They agreed to share profits and losses as follows:
 a. Salary allowances of L, P192,000; M, P240,000, and N, P240,000
b. 6% interest allowed on beginning of the years capital balances.
c. The managing partner, L, is to entitled to a 20% bonus after allowing as expenses
partners salaries, interest and bonus; and
d. Profits after partners salaries, interest, and bonus to be divided equally.

For the year 2016, the partnership reported profit before interest, salaries and bonus of
P1,176,000. For the year, the partners drawings were L, P408,000, M, P80,000 and N,
P424,000. Each partners share in the profits after salaries, interest and bonus was
a. P108,000 b. P129,600 c. P392,00 d. P103,680

13. Eddy and Freddy operate The Gourmet Restaurant as a partnership. Their partnership
agreement has the following provisions for sharing profits and losses:
a. Income is distributed only as far as it is available.
b. Available income is to be distributed in the following sequence:
1. Eddy, who is the chef, gets a salary of P50,000 a year; Freddy, who is still
learning, gets a salary of P20,000.
2. Interest is imputed on the average capital balances at 15 percent.
3. Any remaining profits and losses are to be shared equally.
The average capital balances during the year were P40,000 for Eddy and P100,000 for
Freddy. If the partnership income for the year is P35,000, it should be distributed to the
partners as follows:
a. Eddy P16,000; Freddy P19,000
b. Eddy P17,500; Freddy P17,500
c. Eddy P25,000; Freddy P10,000
d. Eddy P28,000; Freddy P7,000

Items 14 and 15 are based on the following:

Partners E, F and G have capital balances in a partnership of P70,000, P30,000, and P900,000,
respectively. The losses for the year are P120,000.

14. What will be the capital balance of F it the three partners share profits and losses at 2:2:6
ratio?
a. P6,000 credit balance c. P24,000 debit balance
b. P10,000 debit balance d. P40,000 debit balance

15. What will Fs capital be if E gets a P140,000 salary, F gets a P50,000 salary, and G gets a
10% interest on her beginning capital balance, with the remaining being divided at a 1:1:2
ratio?
a. Zero c. P10,000 debit balance
b. P20,000 debit balance d. P70,000 debit balance
16. A, B and C are partners sharing profit on a 7:2:1 ratio, respectively. On January 1, 2016,
Lexus was admitted into the partnership with a 15% share in profits. The old partners
continue to participate in the profits in their original ratios. For the year 2016, the
 partnership showed profits of P15,000. However, it was discovered that the following
items were omitted from the firms book:
Unrecorded at Year-end 2015 2016
Accrued expense P 1,050
Accrued income 875
Prepaid expense P1,400
Unearned income 1,225

The share of B in the 2016 profits should be:

a. P2,197.50 b. P2,490.50 c. P2,637.00 d. P3,149.75

17. The Samuel Partnership shows the following profit and loss ratios and capital balances:
Andrew (60%), P252,000; Mila (30%), P126,000 and Philip (10%), P42,000. The
partners decide to sell to Violet 20 percent of their respective capital and profit and loss
interests for a total payment of P90,000. Violet will pay the money directly to the other
partners. What are the capital balances of partners after Violets admission to the
partnership?
Andrew Mila Philip Violet
a. P198,000 P 99,000 P33,000 P90,000
b. P201,600 P100,800 P33,600 P84,000
c. P216,000 P108,000 P36,000 P90,000
d. P255,699 P127,800 P42,600 P84,000

18. Ruth and Jethro are partners who share income and loss in the ratio 2:3 respectively. The
partners agree to admit Samuel as a partner upon investing P150,000 cash for a one-fifth
interest. Assets of the partnership are fairly valued except for a parcel of land that is
overvalued by P150,000. Net assets of the partnership are to be revalued, and Samuel is
to be admitted. The capital accounts of Ruth and Jethro are P450,000 and P300,000,
respectively.
Determine the capital to be credited to Samuel.
a. P150,000
b. P180,000
c. P210,000
d. P120,000

Questions 19 through 21 are based on the following:

A, B and C have capital balances of P112,00, P130,000 and P58,000, respectively, and
share profits in the ratio 3:2:1. D invest cash in the partnership for a one-fourth interest.
19. Assume D receives a one-fourth interest in the assets of the partnership, which includes
credit for P25,000 of goodwill that is recognized upon admission. How much cash D
invest?
a. P100,000 b. P75,000 c. P125,000 d. P50,000

20. Assume D receives a one-fourth interest in the assets of the partnership and D is credited
with P20,000 of the bonus from the old partners that is recognized upon Ds admission.
How much cash D invest?
a. P73,333 b. P100,000 c. P93,000 d. P80,000

21. Assume D receives a one-fourth interest in the assets of the partnership and B is credited
with P15,000 of the bonus from D, how much cash D invest?
a. P115,000 b. P105,000 c. P160,000 d. P120,000

Items 22 and 23 are based on the following:

The following balances as of the end of 2016 for the partnership of X, Y, and Z, together
with their respective profit and loss percentages, were as follows:
Assets P 360,000 X, loan P 18,000
X, capital (20%) 84,000
Y, capital (20%) 78,000
_________ Z, capital (60%) 180,000
P 360,000 P 360,000

X decided to retire from the partnership. Parties agreed to adjust the assets to their fair
market value of P432,000 as of December 31, 2016. X will be paid P122,400 for X
partnership interest inclusive of X loan which is to be repaid in full. No goodwill is to be
recorded. After X, retirement.

22. What will be the balance of Y capital account?

a. P78,000 b. P72,900 c. P92,400 d. P90,900
23. Assuming that the P122,400 payment to X exclude his loan, what will be the balance of
Ys capital account, after Xs retirement?
a. P78,000 b. P92,400 c. P90,900 d. P86,400

24. X, Y, and Z are partners dividing profits and losses in the ratio 5:3:2 and whose capital
balances as of January 1, 2016 were P600,000, P400,000 and P300,000, respectively. Z is
retiring from the partnership as of July 1, 2016. The partnership agreement provides that
the books of accounts need not be closed upon retirement of a partner. Net income is to be
considered as having been realized proportionately during the period. The partnership
estimated net income for 2016, P480,000. Prior to her retirement, Z paid personal
expenses of P15,000 from the partnership funds. The partnership, on the other hand,
collected P50,000 from the personal receivable of Z and deposited the same for the
account of the partnership. How much is the total amount due to Z as of the date of
retirement?
 a. P348,000 b. P359,000 c. P383,000 d. P431,000

25. After paying all their liabilities, Mark, Lark, and Park had the following balances:
Partner Capital Loans P&L ratio
Mark P102,960 P90,000 12/25
Lark 89,040 30,000 8/25
Park 68,100 39,900 5/25
Cash available for distribution amounts to P37,800, remaining assets of P382,200 will be
realized piecemeal in the next month. How much of the P37,800 cash should Park
receive?
a. P30,600 b. P7,200 c. P7,560 d. Zero

26. The condensed balance sheet and profit and loss ratios of the partnership of Bean, Dean,
and Jean are as follows:
Cash P 1,125,000 Liabilities P 2,625,000
Rec. from Bean 375,000 Payable to Jean 500,000
Other assets 10,250,000 Bean, capital (40%) 3,750,000
Dean, capital (30%) 2,500,000
Jean, capital (30%) 2,375,000
Partners agree to liquidate and all non-cash assets were sold for P7,500,000. How much
of the available cash will go to Bean?
a. P3,750,000 b. P2,275,000 c. P2,650,000 d. P2,125,000

Items 27 to 29 are based on the following:

The balance sheet for Coney, Honey, and Money partnership shows the following
information as of December 31, 2015;
Cash P 40,000 Liabilities P 100,000
Other assets 560,000 Coney, loan 50,000
Coney, capital 250,000
Honey, capital 140,000
_________ Money, capital 60,000
P 600,000 P 600,000
Profit and loss ratio is 3:2:1 for Coney, Honey, and Money, respectively. Other assets
were realized as follows:
Date Cash Received Book Value
January 2016 P 120,000 P 180,000
February 2016 70,000 154,000
March 2016 250,000 226,000

Cash is distributed as assets are realized.

27. The total loss to Coney is:
a. P60,000 b. P40,000 c. P20,000 d. None
28. The total cash received by Honey is:
a. P40,000 b. Zero c. P100,000 d. P30,000
 29. Cash received by Money in January 2016 is:
a. P4,000 b. P20,00 c. P10,000 d. Zero

30. Dolly, Folly and Golly have capital balances of P800,000; P1,000,000; and P360,000,
respectively and profit sharing ratios of 4:2:1, respectively.

If dolly received P160,000 upon liquidation of the partnership, the total amount received
by all the partners was:
a. P2,160,000 b. P1,120,000 c. P1,040,000 d. P480,000

Items 31 and 32 are based on the following:

The following condensed balance sheet is presented for the partnership of Nick, Pick, and
Nick, who share profits and losses in the ratio 4:3:3, respectively:
Cash P 45,000 Accounts payable P 105,000
Other assets 415,000 Rick, loan 15,000
Nick, loan 10,000 Nick, capital 155,000
Pick, capital 100,000
________ Rick, capital 95,000
P 470,000 P 470,000

31. Assume that the assets and liabilities are fairly valued on the balance sheet and that the
partnership decides to admit Tick as a partner, with a 20% interest. No goodwill or bonus
is to be recorded. How much should Tick contribute in cash or other assets?
a. P70,000 b. P71,00 c. P87,500 d. P88,750

32. Assume that instead of admitting a new partner, the partners decide to liquidate the
partnership. If the other assets are sold for P350,000, how much cash should be
distributed to Nick?
a. P115,000 b. P119,000 c. P129,000 d. P155,000

33. Partners A, B, and C decided to liquidate their partnership. A balance sheet was prepared
on this date as follows:

ABC Partnership
Balance Sheet
As of March 1, 2016
Cash P 20,000 Accounts Payable P 25,000
Other assets 180,000 Loan payable, B 5,000
A, Capital 50,000
B, Capital 45,000
________ C, Capital 75,000
P 200,000 P200,000

Profits and losses are divided in the ratio of 2:3:1, respectively. The non-cash assets were
sold for P68,000. All the partners are solvent, except for B.