Mastery in Practical Accounting 2

Partnership and Corporation- Quiz

Partnership Dissolution- Admission of a New Partner

1. Presented below is the condensed balance sheet of partnership of KK, LL, and MM who share profits and losses
in the ratio of 6:3:1, respectively:

Cash P85,000 Liabilities P80,000

Other Assets 415,000 KK,Capital 252,000
LL,Capital 126,000
________ MM, Capital 42,000
Total P500,000 Total P500,000

The partner agree to sell NN 20% of their respective capital and profit and loss interest for a total payment of
P90,000. The payment by NN is to be made directly to the individual partners. The capital balances of KK, LL and
MM respectively after admission of NN are:

2. Using the same information in No. 1, assuming that implied goodwill (or revaluation of asset) is to be recorded
prior to the acquisition by NN. The capitals of KK, LL, and MM respectively after admsion of NN are:

3. MM and OO are partners with capital balances of P50,000 and P70,000 respectively, and they share profits and
losses equally. The partners agree to take PP into the partnership for 40% interest in capital and profits while MM
and OO each retain a 30% interest. PP pays P60,000 cash directly to MM and OO for his 40% interest and goodwill
implied y PP’s payment is recognized on the partnership books. If MM and OO transfer equal amounts of capital
to PP, the capital balances after PP’s admittance will be:

4. Using the same information in Number 3, and the partner’s decided to have a cash settlement among themselves
right after the admission of PP, i.e., the capital balances shold be made in accordance with the new profit and loss
ration, what would be the capital balances after such transaction?
 5. CC and DD are partners who share profits and losses in the ratio of 7:3, respectively. On October 21, 2017, their
respective capital accounts were as follows:

CC.............................................................P35,000
DD............................................................. 30,000
P65,000

On that date they agreed to admit EE as a partner with one-third interest in the capital and profits and losses, and
upon his investment of P 25,000. The new partnership will begin with a total capital of P90,000. Immediately after
EE’s admission, what are the capital balance of CC, DD, and EE, respectively?

Partnership Dissolution-Retirement or Withdrawal of a Partner

6. On June 30, , 2015, the statement of financial position for the partnership of CC, MM and PP, together with their
respective profit and loss ratios, were as follows:
Assets, at cost..............................................................P180,000

CC, loan........................................................................ 9,000

CC, Capital (20%).......................................................... 42,000
MM, Capital (20%)....................................................... 39,000
PP, Capital(60%) .......................................................... 90,000
Total................................................................ P180,000

CC decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair market
value of P216,000 at June 30, 2015. It was agreed that the partnership would pay CC P61,200 cash for CC’s interest
in the partnership, including CC’s loan which is to be paid in full. No goodwill is to be recorded. After CC’ s
retirement, what is the balance of MM’s capital account?

7. A. Smith , a partner in an accounting firm, decided to withdraw from the partnership, Smith’s share of the
partnership profits and losses was 20%. Upon withdrawing from the partnership he was paid P88,800 in final
settlement for his interest. The total of the partners’ capital accounts before recognition of partnership goodwill
 prior to Smith’s withdrawal was P252,000. After his withdrawal the remaining partners’capital accounts, excluding
their share of goodwill, totalled P192,000. The total goodwill of the firm was:

Partnership Dissolution- Business Combination

8. The partnership of A, B, C, and D has agreed to combined with the partnership of X and Y. The individual capital
accounts and profit and loss sharing percentage of each partner follow:
P & L Sharing %
Capital Accounts Now Proposed

A............................................................ P 50,000 40 28
B............................................................. 35,000 30 21
C............................................................ 40,000 20 14
D............................................................ 25,000 10 7
P150,000 100 70

X............................................................. P 60,000 50 15
Y............................................................. 40,000 50 15
P100,000 100 30

A, B, C and D’s partnership has undervalued tangible assets of P20,000 and X and Y partnership has
undervalued tangible assetss of P8,000. All the partners agree that:
(a) partnership of A, B, C and D posseses goodwill of P30,000 and
(b) The partnership of X and Y posesses goodwill of P10,000.

The combined business will continue to use the general ledger of A, B, C, and D. Assume that tangible
assets are to be revalued and goodwill is to be recorded. compute the amount of goodwill recognized in
the partnership books:

9. Using the same information in No. 8, compute the balances of A and X, respectively.

10. Using the same information in No. 8 except that bonus method is to be used with respect to the
undervalued assets and goodwill. Compute the capital balances of A and X, respectively.
 Incorporation of a partnership
11. Partners Art and Tony, who share equally in profits and lossess, have the following balance sheet as of
December 31, 2015:
Cash.....................P120,000 A/Payable................P172,000
A/Recceivable...... 100,000 Accum.Depn............ 8,000
Inventory............. 140,000 Art, Capital.............. 140,000
Equipment........... 80,000 Tony, Capital........... 120,000
Total......................P440,000 Total.........................P440,000

They agreed to incorporate their partnership, with the new corporation absorbing the net assets after
the following adjustments: provision of allowance for bad debts of P10,000; restatement of the
inventory at its current fair value of P160,000; and recognition of further depreciation on the equipment
of P3,000. The corporation’s capital stock is to have a par value of P100, and the partners are to be
issued corresponding total shares equivalent to their adjusted capital balances. The total par value of
the shares of capital stock that were issued to partners Art and Tony was:

Partnership Liquidation
12. The partners of the M & N Partnership started liquidating their business on July 1, 2017 at which time
the partners were sharing profits and losses 40% to M and 60% to N. The balance sheet of the partnership
appeared as follows:

Assets Liabilities and Equity

Cash......................... P 8,800 A/Payable........................... P 32,000
Receivable............... 22,400 M, Capital....... P31,000
Inventory................ 39,400 M, Drawing..... ( 5,400) 25,600
Equipment....P65,200 N, Capital......... P33,200
A/Depn.......... (30,800) 34,400 N, Drawing....... ( 200) 33,000
N, Loan................................. 14,000
Total.............................P105,000 Total..................................... P105,000
During the month of July, the partners collected P600 of the receivables with no loss. The partners also
sold during the month the entire inventory on which they realized a total of P32,400. How much of the
cash was paid to M’s capital on July 31, 2017?
13. RR, SS, and TT decided to dissolve the partnership on November 30, 2017. Their capital balances and
profit ratio on this date, follow:
Capital Balances Profit Ratio
RR................................................................ P50,000 40%
SS................................................................ 60,000 30%
TT............................................................... 20,000 30%
The net income from January 1 to November 30, 2017 is P44,000. Also, on this date, cash and liablities
are P40,000 and P90,000, respectively. For RR to receive P55,200 in full settlement of his interest in the
firm, how much must be realized from the sale of the firm’s no- cash assets?

14. AA, BB, and CC are partners in ABC Partnership and share profits and losses 50%, 30%, and 20%,
respectively. The partners have agreed to liquidate the partnership and some liquidation expenses to be
incurred. Prior to the liquidation, the partnership balance sheet reflects the following book values:
Cash.....................................................P 25,200
Non-Cash Assets.................................. 297,600
Notes Payable to CC............................ 38,400
Other Liabilities................................... 184,800
AA, Capital.......................................... 72,000
BB, Capital deficit............................... ( 12,000)
CC, Capital.......................................... 39,600
Assuming that the actual expenses are P16,800 and that the non-cash assets with a book value of
P240,000 are sold for P216,000. How much cash should CC receive?

15. Arthur, Baker and Carter are partners in textile distribution business, sharing profits and losses equally.
On December 31, 2017 the partnership capital and drawings are as follows:
 Arthur Baker Carter Total
Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000

The partnership was unable to collect in trade receivables and was forced to liquidate. Operating profit
in 2017 amounted to P72,000 which was all exhausted, including the partnership assets. Unsettled
creditors’ claim at Decemberr 31, 2017 totaled P84,000. Baker and Carteer have substantial private
resources, but Arthur has no personal assets. The final cash distribution to carter was:

Corporate Liquidation

16. The following data are provided by the Troubled Company:

Assets at book value................................................P 150,000
Assets at net realizable value.................................. 105,000
Liabilities at book value:
Fully secured mortgage...................................... 60,000
Unsecured accounts and notes payable........... 70,000
Unrecorded liabilities:
Interest on Bank Notes.................................... 500
Estimate cost of administering estate............. 6,000
The court has appointed a trustee to liquidate the company. The journal entry made by the trustee to
record the assets and liabilities should include an estate deficit of:
17. Using the same information in No. 16, the statement of affairs prepared by the trustee at this time should
include an estiamted deficiency to unsecured creditors of:

18. Nah Lugi Corporation is in bankrupcy and is being liquidated by a court-appointed trustee. The financial
report that follows was prepared by the trustee just before the final cash distribution:
Assets:
Cash...................................................................................P100,000

Approved Claims:
Mortgage payable(secured by property
That ws sold for P50,000)...................................... P 80,000
Accounts payable, unsecured............................................ 50,000
Administrative expenses payable,
Unsecured............................................................. 8,000
Salaries payable, unsecured.............................................. 2,000
P140,000
The administrative expenses are for trustees and other costs of administering the debtor corporation’s
estate. How should the P100,000 be distributed to the: 1) Unsecured Creditors with priority,
2)Partially secured creditors, and 3) unsecured creditors without priority?
19. On December 18, 2017, the statement of affiars of Downside Company, which is in bankruptcy
liquidation, included the following:
Assets pledged for fully secured liabilities.............................. P100,000
Assets pledged for partially secured liabilities........................ 40,000
Free Assets.............................................................................. 120,000
Fully secured liabilities............................................................ 80,000
Partially secured liabilities...................................................... 50,000
Unsecured liabilities with priority.......................................... 60,000
Unsecured liabilities without priority..................................... 90,000

Compute the estimated amount to be paid to:

1)Fully secured liabilities
2) Unsecured liabilities with priority
3) Partially secured liabilities
4) Unsecured liabilities without priority

20. The creditors of the Rogerod Corporation agreed to a liquidation based in the statement of affairs,
suggested that unsecured creditors, without priority would receive approxiamately P.60 on the peso.
The unsecured creditors are interested in determining whether the preliminary estimate still seems
appropriate. The trustee was originally assigned non cash assets of P1,480,000 and creditors claims as
 follows: fully secured, P670,000; partially secured, P400,000; unsecured with priority, P200,000 and
unsecured without priority, P320,000. Assets with a book value of P45,000 and unsecured liabilities
(without priority) of P35,000 were subsequently discovered. Assets with a total book value of P740,000
were sold for P715,000 net. Fully secured liabilities of P410,000 and partially secured liabilities of
P280,000 were paid. Remaining liquidation expenses were estimated to be P30,000.

Assume the remaining non-cash assets have an estimated net realizable value as follows:
Assets traceable to fully secured creditors................................P240,000
Assets traceable to partially secured creditors........................ 110,000
Remaining assets...................................................................... 382,000

Determine the revised estimate of the dividend to be received by unsecured creditors without priority?

To God be all the Glory!