Name _______________________________________ Student Number ______________________

I. Jose and Mario begin a partnership on January 1, 2001. Jose invest P 400,000 as well as inventory costing P 150,000 but with a
current appraisal of only P 120,000. Mario contributes a building with a P 400,000 book value and a P 480,000 fair market value. The
partnership also accepts responsibility for a P 100,000 notes payable owed in connection with this building.

The partners agree to begin operation with equal capital balances. The articles of Partnership also provide that at the end
of each year profit and losses are allocated as follows:

1. For managing the business, Jose is credited with a bonus of 10 percent of partnership income after subtracting the bonus.
No bonus is accrued if the partnership records a loss
2. Both partners are entitled to interest equal to 10 percent of the average capital balances for the year without regard for the
income or drawing of that year
3. Any remaining profit or loss is divided 60 percent to Jose and 40 percent to Mario
4. Each partner is allowed to withdraw P 8,000 per month in cash from the business.

On October 1, 2001, Jose invests an additional P 120,000 cash in the business. For 2001 the partnership report income of P 330,000.
All allowed drawings were taken by partners.

Romeo, an employee, is allowed to join the partnership on January ,1 2002. The new partner invests P 660,000 into the
business for a one third interest in the partnership property. The revised partnership agreement still allows for both the bonus to
Jose as well as 10 percent interest, but all remaining profits and losses are now split 40 percent to Jose and Romeo with the
remaining 20 percent of Mario. Romeo is entitled to P 8,000 per month drawings.

Mario chooses to withdraw form the partnership a few years later. After negotiations, all parties agree that Mario should
be paid a P 900,000 settlement. The capital balances on that date were as follows:

Jose Capital P 880,000 ; Mario Capital P 780,000 ; Romeo capital P 720,000

Part A: Assuming that the bonus method is used exclusively by this partnership, compute the answer for question 1 through 4

1. The amount of capital credited to Jose upon formation must be:

a. 550,000
b. 520,000
c. 450,000
d. 380,000

2. The share of Mario on the partnership net income must be:

a. 202,200
b. 127,800
c. 120,800
d. 209,200

3. The capital credited to Romeo must be:

a. 660,000
b. 606,000
c. 630,000
d. 566,000

4. The capital balances of Jose immediately after the withdrawal of Mario

a. 820,000

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 b. 880,000
c. 660,000
d. 1,120,000

Part B: Assuming that the goodwill/asset revaluation method is used exclusively by this partnership, determine the answer for
question 5 through 8

5. The capital credited to Mario upon formation must be:

a. 550,000
b. 520,000
c. 450,000
d. 380,000

6. The share of Jose on the partnership net income must be

a. 202,200
b. 127,800
c. 200,800
d. 209,200

7. The capital credited to Romeo must be:

a. 660,000
b. 615,000
c. 630,000
d. 566,000

8. The capital balance of Romeo immediately after Mario’s withdrawal

a. 720,000
b. 840,000
c. 960,000
d. 660,000

II. The partnership of Arroyo and Bush began business on January 1, 2005. The following assets were contributed by each partner
(the non cash assets are stated at their fair values on January 1, 2005)
Arroyo Bush
Cash 30,000 20,000
Inventories 50,000 -
Land - 200,000
Equipment 100,000 -

The land was subject to a P 65,000 mortgage, which the partnership assumed on January 1, 2005. The equipment was
subject to an installment note payable that had an unpaid balance of P 35,000 on January 1, 2005. The partnership also assumed this
notes payable. According to the partnership agreement, each partner was to have a 50 percent capital interest on January 1, 2005
with total partnership capital being P 300,000. Arroyo and Bush agreed to share partnership income and losses in the following
manner:

Arroyo Bush
Interest on beginning capital 4% 4%
Salaries 15,000 10,000
Remainder 60% 40%
During 2005, the following events occurred:

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  Inventory was acquired at a cost of P 30,000. At December 31, 2005, the partnership owed P 6,000 to its supplier
 Principal of P 10,000 was paid on the mortgage. Interest expense incurred on the mortgage was P 4,000 all of
which was paid by December 31, 2005.
 Principal of P 7,500 was paid on the installment note. Interest expense incurred on the mortgage was P 2,500 all of
which was paid by December 31, 2005.
 Sales on account amounted to P 115,000. At December 31, 2005, customers owed the partnership P 10,000
 The partnership inventory at December 31,2005 was P 20,000
 Selling and general expenses, excluding depreciation amounted to P 21,000. At December 31, 2005, the
partnership owed P 3,000 of accrued expenses. Depreciation expense was P 5,000
 Each partner withdrew P 225 per week in anticipation of partnership profit
 The partners allocated the net income for 2005 and closed the accounts

Additional information:
On January 1, 2006, the partnership decided to admit Clinton to the partnership. On that date Clinton invested P 100,900 of
cash into the partnership for a 20 percent capital interest.

9. The capital credited to Arroyo on January 1, 2005 at the formation of the partnership must be
a. 150,000
b. 145,000
c. 155,000
d. 115,000

10. The share of Bush on the net income of 2005 must be

a. 29,000
b. 40,500
c. 10,200
d. 42,300

11. The capital credited to Clinton upon his admission must be

a. 90,000
b. 100,900
c. 88,000
d. 80,000

12. The capital balance of Arroyo after Clinton’s admission must be:
a. 167,300
b. 175,040
c. 163,140
d. 181,340
III. Ester, Josie and Eve open an accounting practice on January 1, 2001. The business is to be operated as a partnership with Ester
and Josie serving as the senior partner because of their years of experience. To establish the business, Ester, Josie and Eve
contribute cash and other properties valued at P 210,000, P 180,000 and P 90,000 respectively. A partnership agreement is drawn up
that carries the following stipulations:

 Personal drawings are allowed annually up to an amount equal to 10 percent of the beginning capital balance of the year:
 Profits and losses are allocated according to the following plan:
1. A salary allowance is credited to each partner in an amount equal to P 8 per billable hour worked y that individual
during the year
2. Interest is credited to the partner’s capital accounts at the rate of 12 percent of the average monthly balance for the
year (computed without regard for current income or drawings)

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 3. An annual bonus is to be credited to Ester and Jose. Each bonus is to be 10 percent of net income after subtracting the
bonus, the salary allowance and the interest. Also included in the agreement is the provision that the bonus cannot be
a negative amount
4. Any remaining partnership profit or loss is to be divided equally evenly among all partners.

Because of monetary problems encountered in getting the business started. Ester invests an additional P 15,000 on May 1, 2001. On
January 1, 2002, the partners allow Danny to buy into the partnership. Danny contributes cash directly to the business in an amount
equal to 20 percent interest in the book value of the partnership property subsequent to this contribution. The partnership
agreement as to splitting profits and losses is not altered of Danny’s entrance into the firm; the general provisions continue to be
applicable.

The billable hours for the partners during the first two years of operation are as follows:
2001 2002
Ester 1,710 1,800
Josie 1,440 1,500
Eve 1,300 1,380
Danny -0 - 1,190

The partnership reports net income for 2001 and 2002 as follows:
2001 P 65,000
2002 (20,400)

Each partner withdraws the maximum allowable amount each year.

13. The share of Ester on the net income of 2001 must be

a. 30,280
b. 23,320
c. 11,400
d. 36,780

14. The capital credited to Danny must be

a. 128,000
b. 140,000
c. 124,250
d. 123,750

15. The share of Josie on the net loss must be

a. 6,474
b. 1,802
c. 13,912
d. 11,160

16. The capital balance of Eve on December 31, 2002 must be

a. 217,326
b. 164,986
c. 69,248
d. 104,040

IV. Kulas and Juan form a partnership on May 1, 2011. Kulas contributes cash of P 500,000; Juan conveys title to the following
properties to the partnership:
Book Value Fair Market Value

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Land P 150,000 P 280,000
Building & Equipment 350,000 360,000

According to the Articles of Partnership written by the partners, profits and losses are allocated based on the following formula:
 Kulas receives a compensation of P 10,000 per month
 All remaining profits and losses are split 60:40 to Juan and Kulas, respectively
 Annual drawings of P 50,000 can be made by each partner beginning 2002

Net Income of P 110,000 is earned by the business during 2001.

Takio is invited to join the partnership on January 1, 2002. Because Takio’s business reputation and expertise. Takio is given
a P 20,000 compensation allowance per month and an annual cash drawing of P 100,000. Remaining profits are now allocated: Juan
48%; Kulas, 12%; Takio, 40%.
All drawings are taken by the partners during 2002. At the end of that year, the partnership reports on earned net income
of P 280,000.
On January 1, 2003, Juan elects to withdraw from the business for personal reason. The articles of partnership contain a
provision stating that any partner may leave the partnership at any time and is entitled to receive cash in an amount to the recorded
capital balances at that time plus 10 percent.

17. The capital credited to Juan at the time of formation must be:
a. 500,000
b. 640,000
c. 570,000
d. 684,000

18. The share of Kulas on the net income of 2001 must be:
a. 92,000
b. 116,000
c. 18,000
d. 55,000

Jose and Jesse formed a partnership on January 1, 2009, to operate a beauty parlor. To begin the partnership, Jose transferred
cash totaling P 116,000 and office equipment with a book value of P 90,000 and a fair value of P 84,000. Jesse transferred cash of P
56,000, land valued at P 36,00 and a building valued at P 300,000. Jesse bought these at a lump sum price of P 250,000. In addition,
the partnership assumed the mortgage of P 232,000 on the building.

19. The amount of capital to be credited to Jose and Jesse on January 1, 2009 are
a. 206,000 and 160,000
b. 200,000 and 160,000
c. 200,000 and 74,000
d. 206,000 and 74,000

The partnership reported a loss of P 16,000 on December 31, after its first year of operation. In the partnership agreement, the
owners had specified the distribution of income and losses by allowing interest of 10 percent on beginning capital, salaries of P
20,000 to Jose and P 48,000 to Jesse, the remaining profit amount to be divided in the ratio of 3:2.

20. The share of Jesse on the 2009 net loss is:

a. (37,560)
b. 26,640
c. (28,800)

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 d. 16,000

On January1, 210, the partners brought Eve, who has experience in this kind of business, into the partnership. Eve invested P
56,000 in the partnership for a 20 percent interest. The bonus to Eve was transferred from the original partners account in the ratio
of 3:2
21. The amount of bonus credited to Eve is
a. 24,000
b. 19,200
c. 30,400
d. 12,800

22. The capital balances of Jose and Jesse after Eve’s admission are:
a. 153,600 and 166,400, respectively
b. 168,960 and 176,640, respectively
c. 176,640 and 168,960, respectively
d. 160,320 and 170,880, respectively

During 2010, the partnership earned an income of P 108,000. The new partnership agreement required that income and losses
be divided by providing interest of 10 percent on beginning capital balances and salaries of P 20,000, P 48,000 and P 60,000 for Jose,
Jesse and Eve, respectively. Remaining amounts were to be divided equally.

23. The share of each partner on the year 2010 net income are:
a. 15,289; 44,597; 47,573 respectively
b. 15,360; 44,640; 48,000 respectively
c. 18,453; 42,453; 47,093 respectively
d. 15,360; 44,597; 48,000 respectively

Because of lack of sufficient income, the partners decided to liquidate the partnership on January 1, 2011. On that date, the
asset and liabilities of the partnership were as follows:
Cash P 244,000 Accounts payable P 108,000
Account Receivable 152,000 Mortgage payable 204,000
Land 36,000
Building (net) 280,000
Office equipment, (net) 108,000

The office equipment was sold for P 72,000, and the account receivables were valued at P 128,000. The resulting losses
were distributed equally to partner’s capital account, and the accounts payable were paid. Jose agreed to accept the account
receivable plus cash payment for her partnership interest. Jesse accepted the land, building and mortgage payable at book value
plus cash for his share in the liquidation. Eve was paid in cash.

24. The total liquidation loss is

a. 24,000
b. 36,000
c. 60,000
d. 12,000

25. The remaining cash was distributed to Jose, Jesse and Eve, respectively as follows:
a. 12,160 79,840 116,000
b. 44,789 97,237 121,973
c. 28,960 87,040 116,000
d. 20,960 79,040 108,000

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Aiza, Bobby and Cely who divide profits and losses 4:4:2, respectively, have the following balances on June 30, 2012:

Account Receivable – Aiza P 24,000

Account Receivable –Cely 9,600
Loan Payable – Bobby 28,800
Aiza, Capital 118,800
Bobby Capital 88,800
Cely, Capital 78,000

On this date, the partnership’s assets are P 534,400 including the receivable from partners and cash of P 28,000. The partnership
was liquidated and they distributed the remaining cash after paying outside creditor amounting to P 220,00 and liquidation expense
of P 12,000.

26. How much will the non cash assets to be realized in order for Cely to receive P 30,000
a. 292,800
b. 280,800
c. 252,800
d. 320,800

27. How much did Aiza and Bobby receive in the final settlement?
a. 94,800 117,000
b. 22,800 45,600
c. 18,000 40,800
d. 42,000 12,000

AA, BB, CC and DD are partners, sharing earning in the ratio of 3:4:6:8, respectively. The balances of their capital accounts on March
31, 2012 are as follows:

AA P 30,000
BB 75,000
CC 25,000
DD 90,000

The non cash assets of the partnership include Receivable from BB in the amount of P 5,000. The partnership decided to
liquidate and they accordingly converted non cash assets into P 237,000 cash. After paying the liabilities amounting to P 153,000 and
liquidation expenses of P 15,000, they have P 72,000 to divide.

28. The loss on realization is

a. 43,000
b. 128,000
c. 136,000
d. 133,000

Partners A, B, D K who share profits 5:3;1:1 respectively, decide to dissolve their partnership. Capital balances at this time are P
60,000; P 40,000; P30,00; P 10,000 respectively. Additional information:
 Cash on hand at the beginning is P2,500
 Partnership furniture with a book value of P12,000 is to be taken over by Partner A at price of P 10,000 in full settlement of
a loan payable to A
 Partnership creditor’s claims of P 20,000 and liquidation expenses of P 3,000 are to be paid off and the balance of cash
amounting to P 56,000 was paid to partners.

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 29. What amount was received by Partner A from the P 56,000 cash distributed?
a. 11,667
b. 21,667
c. 10,000
d. 18,000

The statement of financial position of Kaycie, Showie and Francky,partners in Theater Arts Training School before liquidation is given
below:

Cash P 360,000
Non Cash Assets 1,785,000
Liabilities 1,000,000
Kaycie Capital; 5 460,000
Showie capital; 3 365,000
Franckie, Capital;2 320,000

On the first month of liquidation, certain assets with a book value of P 1,200,000 are sold for P 960,000. Liquidation expenses of P
30,000 are paid, and additional expenses are anticipated. Liabilities are paid amounting to P 362,000, and sufficient cash is retained
to insure the payment to creditors before making payments to partners. In the first payment of cash to partners, Showie received P
107,000.

30. The total cash distributed to the partners in the first settlement and the amount of cash withheld for anticipated expenses
and unpaid liabilities amount to:
a. 290,000; 638,000
b. 290,000; 643,000
c. 285,000; 638,000
d. 285,000; 643,000

On December 6, 2012, The GAR Partnership of Gary, Aubrey and Rolly have the following accounts with their balances:

Gary Capital 50% P 297,000

Aubrey Capital, 30% 222,000
Rolly capital 20% 195,000
Loan payable- Aubrey 72,000
Account receivable – Garry 36,000
Rolly Drawing 36,000

Because of unsuccessful operation for the last 2 years, the partners decided to liquidate after closing the books on December
31, 2012. On this date, the total assets amounted to P 1,056,000, including cash of P 321,000. During the liquidation process, all
the non cash assets were taken by its competitor. Liabilities were settled, liquidation expenses of P 15,000 were paid and the
balance was distributed to the partners. Ultimately, Rolly received P 125,000 in the final settlement.

31. The amount realized from the sale of non cash assets is:
a. 529,000
b. 580,000
c. 565,000
d. 544,000

32. The amount received by Aubrey as return on her capital is

a. 171,000

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 b. 175,000
c. 222,000
d. 243,000

Relly, Solly and Teddy who divide profits and losses, 50%, 30% and 20%, respectively, have the following account balances on March
31, 2012:
Relly Drawing (Dr) P 144,000
Teddy Drawing(Cr) 57,600
Loan to Relly 86,400
Loan from Solly 172,800
Relly capital 712,800
Solly Capital 532,800
Teddy Capital 468,000
On this date, the partnership assets are P 2,534,400 (including cash of P 772,800). The partnership was liquidated, liquidation
expenses of P 15,000 was paid and finally Teddy received P 396,000.

33. The loss absorption balances of Relly, Solly and Teddy is

a. 1,310,400; 1,200,000; 2628,000
b. 964,800; 2,352,000; 2,628,000
c. 1,425,600; 1,776,000; 2,340,000
d. 964,800; 2,352,000; 2,052,000

34. The total loss on realization is

a. 129,600
b. 648,000
c. 633,000
d. 770,400
TLE Partnership is winding up its affairs and submitted the following trial balances at September 30, 2012:

Current Assets including cash of P 60,000 P 420,000

Non Current assets 990,000
Tomas Loan 120,000
Eggie Loan 75,000
Liabilities 470,000
Letty Loan 70,000
Tomas capital (50%) 400,000
Letty capital (30%) 400,000
Eggie capital (20%) 265,000

Total 1,605,000 1,605,000

The partners were able to complete the liquidation in two months time only and all cash available for distribution to partners are
distributed at the end of each month. Summary transactions for the two months follow:
 65% of the current assets were realized in the 1st month at 70% of their carrying values while the balance was realized at a
loss of P 20,000 in the 2nd month

 The non current assets were realized as follows:
a. 50% was purchased by a competitor at a loss of P 95,000 in the first month
b. 10% was taken by Letty in the 2nd month at an agreed amount of P 70,000 in partial settlement of her account
c. The balance was realized at 80% of its carrying value in the 2nd month

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 Liquidation expenses paid:
1 st month – P 15,000
2 nd month – P 12,000

 Payment of liabilities
1 st month – P 270,000
2 nd month – P 270,000

 Cash withheld by the partner was P 8,000 in the 1 st month

 Payment to parners:
1 st month – ?
2 nd month – P 418,800

35. The total loss resulting from the realization of the non cash asset is
a. 273,400
b. 305,100
c. 293,400
d. 276.100

36. The total amount paid to partners at the end of 1 st month is

a. 330,800
b. 338,800
c. 380,000
d. 130,800

37. The amount received by Tomas, Letty and Eggie in the cash distributed at the end of the 1 st month is
a. 0, 152,480,21,680
b. 0, 130,800,0
c. 0, 185,000, 0
d. 0, 302,000, 78,000

38. The loss absorption balances of Tomas, Letty and Eggie is

a. 800,000; 1,333,333, 1,325,000 respectively
b. 400,000; 400,000; 265,000 respectively
c. 280,000; 470,000; 190,000 respectively
d. 560,000; 1,566,667; 950,000 respectively

39. How much will Letty received before Tomas receive any cash?
a. 185,000
b. 117,000
c. 302,000
d. 380,000

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