ADVANCED ACCOUNTING (REVPRAB)

APRIL 2016 BATCH

BRIAN LIM

PARTNERSHIP ACCOUNTING

Formation

Problem 1. On July 1, 2012, Tom and Jerry form a partnership, agreeing to share profits and losses in
the ratio of 2:3 respectively. Tom contributed a parcel of land that cost him P250,000. Jerry contributed
P500,000 cash. The land was sold for P500,000 on July 1, 2012 six hours after formation of the
partnership. How much should be recorded in Tom capital account on formation of the partnership?

A. P100,000 B. P200,000 C. P250,000 D. P500,000

Problem 2.The partnership of John and Peter was formed on March 31, 2012. At that date, John invested
P150,000 cash and office equipment valued at P90,000. Peter invested P210,000 cash, merchandise
valued at P330,000, and furniture valued at P300,000, subject to a mortgage payable of P150,000 (which
the partnership assumes). The partnership provides that John and Peter share profits and losses 25:75,
respectively. The agreement further provides that the partners should initially have an equal interest in the
partnership capital. Under the bonus method, what is the total capital of the partners after the formation?

Bonus
A. P930,000
B. P1,080,000
C. P900,000
D. P1,050,000

Problem 3. Wade, a sole proprietor, agreed to form a partnership with James in a business. Accounts in
the ledger for Wade on November 30, 2012, just before the formation show the following balances:

Cash P26,000 Accounts Payable P62,000

Accounts Receivable 120,000 Wade, Capital 264,000
Merchandise Inventory 180,000

It is agreed that for purposes of establishing Wade’s 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.

James is to invest sufficient funds in order to receive a 1/3 interest in the partnership. How much must
James contribute?

A. P132,000 B. P143,050 C. P95,360 D. P88,000

Problem 4. Bonnie and Clyde entered into a partnership agreement in which Bonnie is to have
55% interest in the partnership and 35% in the profit and loss and Clyde will have 45% interest
in the partnership and 65% in the profit and loss.

Bonnie contributed the following:

Cost Fair Value
Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000
The building and the equipment had a mortgage of P50,000 and P35,000, respectively. Clyde
is to contribute P150,000 cash and an equipment. The partners agreed that only the building
mortgage will be assumed by the partnership.
1. What is the fair value of the equipment which Clyde contributed?
a. 615,818
b. 989,143
c. 546,273
d. 574,909
2. What is the amount of total assets of the partnership upon formation?
a. 1,892,143
b. 1,701,818
c. 1,660,909
d. 1,632,273

Operations

Problem 1. Perez, Solis, and Ilumin have the following capital accounts in their partnership for
2011:
Perez Solis Ilumin
Jan. 1, Balance P 80,000 P 100,000 P 60,000
Feb. 28 Investment 30,000 75,000
April 14 Withdrawal 10,000 40,000
July 1 Withdrawal 25,000
Sept. 23 Investment 22,000 20,000 36,000

Before any allocation, net income for the year was P169,400. Interest for each partner amounts
to 10% of the weighted average capital balances. Annual salaries of Perez, Solis, and Ilumin are
P15,000, P25,000, and P10,000 respectively. Solis receives a bonus of 20% of net income after
deducting the bonus, Ilumin’s interest and Perez’ salary. Any remainder is divided in a 2:2:1
ratio by Perez, Solis and Ilumin, respectively.How much of the net income was distributed to
Ilumin?
 A. P82,630 B. P86,770 C. P51,680 D. P35,090

Problem 2. Hans, Lance, Arthur and Sidd own a publishing company that they operate as a partnership.
Their agreement includes the following:
 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 Lance’s 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. The following information relates to the capital accounts of partners Dan and Don
for fiscal year ending June 30:

Dan Don
Balance, July 1 432,000 576,000
Add: Additional investment, January 192,000 96,000
Net income for the year:
Salaries 102,500 72,500
Interest 39,600 46,800
Bonus 18,600 -
Remainder 74,400 49,600
Total 859,100 840,900
Deduct: Drawings
Monthly amounts 75,350 75,300
Additional drawings, June 30 12,000 2,015
Balance, June 30 771,750 763,585

Bonus is based on net income after salaries, interest and bonus. The net income remains the
same the following fiscal year. There is no change in the partnership agreement. No
additional investment is made by the partners.

What is the total share of Don in the net income in the following year?

a. 167,885
 b. 168,900
c. 169,370
d. 168,480

Problem 4.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 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. P171,000 C. P108,000
B. P129,600 D. P136,200

Dissolution

Problem 1. German contributed P72,000 and De Jesus contributed P144,000 to form

partnership, and they agreed to share profits in the ratio of their original capital contributions.
During the first year of operations, they made a profit of P48,870; German withdrew P15,150
and De Jesus P24,000. At the start of the following year, they agreed to admit Pogi into the
partnership. He was to receive a one fourth interest in the capital and profits upon payment of
P90,000 to German and De Jesus, whose capital accounts were to be reduced by transfers of
Pogi’s capital account of amounts sufficient to bring them back to their original capital ratio.

How should the P90,000 paid by Pogi be divided between German and De Jesus, respectively?

A. 30,000;60,000 B. 27,900;62,100
C. 29,475;60,525 D. 45,000;45,000

Problem 2. PJ, SR and MJ are partners sharing profits and losses of 5:3:2, respectively. As of
Dec 31, 2011, their capital balances were P997,500, P840,000 and P630,000 respectively. On
January 1, 2012, the partners admitted AX as a new partner and according to their agreement
AX will contribute P840,000 in cash to the partnership and also pay P105,000 for 15% of SR’s
share. AX will be given a 20% share in profits, while the original partners’ share will be
proportionately the same as before. After admission of AX, the total capital will be P3,465,000
and AX capital will be P735,000. The amount of asset revaluation is:

A. P231,000 C. P157,500
B. P73,500 D. P388,500

Problem 3. PV, BK and TF were partners with capital balances on January 2, 2012 of
P350,000, P525,000 and P700,000, respectively. Their profit ratio is 5:3:2 while their capital
interest ratio is 4:4:2. On July 1, 2012, JP was admitted by the partnership for 20% interest in
capital and 25% in profits by contributing P87,500 cash, and the old partners agree to bring their
interest to their old capital and profit interest sharing ratio. The partnership had net income of
P210,000 before admission of JP and the partners agree to revalue its overvalued equipment by
P35,000. The capital balance of PV after admission of JP is:

A. P297,500 C. P354,200
B. P588,000 D. P470,400

Problem 4. Lopez, Endaya and Gonzaga are partners with capital balances of P336,000,
P540,000 and P190,000 respectively, sharing profits and losses in the ratio of 2:5:1. Sevilla is
admitted as a new partner bringing with him expertise and is to invest cash for a 15% interest
in the partnership considering the transfer of capital from him of P90,000 upon his admission.

Upon admission of Sevilla, how much is the increase in cash?

A. 204,000 B. 294,000 C.114,000 D.159,900

Problem 5. CK, a partner of AX and DG, decided to withdraw from the ACD partnership. CK’s
share in the profits and losses was 25%, while that of AX and DG are 50% and 25%
respectively. In the final settlement of his interest, he was paid P95,000, although the capital
balance before his retirement was only P85,000. The P10,000 difference implied that an
equipment of the partnership was undervalued. Prior to recording CK’s withdrawal, adjustment
was made by the partnership to bring the equipment to its fair value. The total of partners’
capitals before any adjustments and before CK’s withdrawal was P340,000.

What would be the partnership’s net assets after the withdrawal of CK?

A. P295,000 C. P285,000
B. P245,000 D. P325,000

Problem 6. The balance sheet as of September 30, 2011, for the partnership of A, B and C
shows the following information:
Assets P360,000 A, loan P 18,000
A, capital 84,000
B, capital 78,000
_______ C, capital 180,000
Total P360,000 Total P 360,000
====== =======

It was agreed among the partners that A retires from the partnership, and it was also further
agreed that the assets should be adjusted to their fair value of P432,000 as of September 30,
2011. The partnership is to pay A P122,400 cash for A's partnership interest, which would
include the payment of his loan. No goodwill is to be recorded. A, B and C share profit 20%,
20% and 60% respectively.

After A's retirement, how much would B's capital balance be?
a. P90,900 b. P92,400 c. P72,900 d. P78,000

Liquidation

Problem 1. The partnership of MM, NN, and OO was dissolved on October 31, 2010, and the
account balances after all noncash assets are converted to cash on November 1, 2010, along
with residual P/L sharing ratios, are:

Cash P125,000 Accounts payable P300,000

NN, Capital (30%) 150,000 MM, Capital (30%) 225,000
OO, Capital (40%) 250,000

Personal assets and liabilities of the partners at November 1, 2010 are:

Personal Assets Personal Liabilities
MM P200,000 P225,000
NN 250,000 152,500
OO 475,000 200,000

If OO contributed P175,000 to the partnership to provide cash to pay the creditors, what amount
of M’s P225,000 partnership equity would appear to be recoverable:
A. P197,500 C. P225,000
B. P202,500 D. P0

Problem 2. Capital balances of partners after exhausting their non-cash assets are as follows:
Abad (20%) Belen (10%) Cruz (10%) Dy (10%) Elar (20%) Fu (10%) Gan (20%)
P(94,500) P35,000 P(115,500) P(21,000) P61,250 P17,500 P(70,000)

Partners Belen, Dy, Elarand Fu are personally solvent. How much cash must Fu contribute to the
partnership?
A. P50,750 B. P21,000 C. P0 D. P38,500

Problem 3. N, O, and P are partners sharing profits and losses in the ratio of 5:3:2. During the
year their investments and withdrawals are as follows:

Investment Withdrawals

N P 100,000 P 62,500
O 87,500 31,250
P 187,500 31,250
 On December 31,2010, the partners decided to liquidate the business. After exhausting
partnership assets, liabilities of P62,500 remain unpaid. N is personally insolvent.

The gain (loss) on realization and the amount of cash P will receive upon liquidation are:

A. P(62,500) and P93,750, respectively.

B. P(62,500) and P46,250, respectively.
C. P(312,500) and P93,750, respectively.
D. P(312,500) and P46,250, respectively.

Problem 4. JDA Partnership has the following account balances before liquidation:

Cash P350,000 Liabilities P1,125,000

Noncash assets 7,375,000 Loan from A50,000
Loan to D150,000 J, Capital (40%) 1,250,000
Receivable from J 20,000 D, Capital (40%) 1,900,000
Expenses 2,230,000 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 D to receive P555,550?

A. P2,375,000 C. P2,130,000
B. P2,328,875 D. P2,083,875

Problem 5.J, S and H are partners sharing net income and losses in the ratio of 5:3:2. The
partners decided to liquidate the partnership. Their statement of financial position prior to
liquidation is:
Cash 40,000 Liabilities 60,000
Noncash assets 210,000 J, Loan 8,000
` J, Capital (20%) 40,000
A, Capital (20%) 72,000
C, Capital (60%) 70,000
Total Assets 250,000 Total liabilities and capital 250,000

The partnership is to be liquidated by installment. The first sale of non-cash assets with a
carrying amount of P120,000 realized P90,000. Liquidation expenses paid amounted to P2,000.
How much cash should be distributed to S?
 A. P9,600 B. P35,400 C. P62,400 D. P27,600

Problem 6.JFK partnership engaged in steel manufacturing business had the following
condensed financial position prior to liquidation:

Assets Liabilities and Capital

Cash P 120,000 Liabilities P 350,000
Noncash assets 1,800,000 Loan payable to J 150,000
J, Capital (50%) 450,000
F, Capital (30%) 700,000
_____ _ __ K, Capital (20%) 270,000
Total P1,920,000 Total P1,920,000

Assuming assets with a book value of P700,000 were sold for P500,000 and that all available
cash was distributed.

For what amount would the remaining assets have to be sold in order for Partner F to receive a
total of P790,000 cash after liquidation.

A. P1,550,000 C. P1,500,000
B. P1,600,000 D. P1,650,000

Problem 7. LGM Partnership provided the following account balances on December 31, 2015
before the retirement of Lee:

Cash 390,000 Liabilities 310,000

Noncash assets 1,100,000 Loan from David 25,000
Loan to Adam 10,000 David, Capital (20%) 450,000
Lee, Capital (20%) 325,000
Adam, Capital (60%) 390,000

On December 31, 2015, Lee decided to leave the partnership and got paid 80% of his capital
balance.
After four months of attempt to carry on with the partnership, David and Adam decided to
enter into liquidation. A net loss amounting to P124,000 was incurred during this period.
In this connection, the net cash inflow during the first four months of 2016 was P84,000. and
the partnership’s liabilities increased by P40,000. Half of the noncash assets was sold at a
loss of P120,000.
Liquidation expenses of P35,000 are expected to be incurred in due course of liquidating the
partnership. Total liabilities of P275,000 to outside creditors were paid. Available cash was
distributed to the partners.

What is the total interest of David after the first cash distribution?
 a. 279,250
b. 364,250
c. 255,250
d. 125,250

Problem 8. A statement of financial position for the partnership of Tom, Jack and Cris, who
share profits in the ratio of 2:1:1, shows the following balances just before liquidation:

Cash P12,000 Liabilities 20,000

Other assets 59,500 Tom, capital 22,000
Jack, capital 15,500
Cris, capital 14,000

On the first month of the liquidation, certain assets are sold for P32,000. Liquidation expenses
of P1,000 are paid, and additional liquidation expenses are anticipated. Liabilities are paid
amounting to P5,400, and sufficient cash is retained to insure payments to creditors before
making payments to partners. On the first payment to partners, Tom receives P6,250.

The amount of cash withheld for anticipated expenses is:

A. P16,600 B. P2,000 C. P3,000 D. P17,600

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