ANSWERS PARTNERSHIP EXERCISES

1.    Letter “B” is the correct answer.

The problem implies that the contribution of Emil is already adequate to entitle him to a 60% share in the
total agreed capital of the partnership.  Hence, the total agreed capitalization shall be based on his
contribution of P300,000 or P500,000 (P300,000 ÷ 60%).  The agreed capital of Pearl is 40% of P500,000
or P200,000 and her cash contribution shall be equal to the difference between this amount (P200,000)
and the net fair value of the noncash assets she invested. The net fair value of the other assets
contributed by Pearl is equal to P120,000,  (P70,000 + P90,000 – P40,000). Therefore, her cash
contribution should be equal to P80,000 (P200,000 – P120,000).

[2].          Letter “D” is the correct answer.

Under the goodwill method, the total agreed capital should be more than the total contributed capital. 
Total agreed capital will be more than the total contributed capital only if the contribution of Green is used
as the basis of the total agreed capitalization.  Since the fair value of the contribution of Green amounts to
P60,000, then the total agreed capital must be P120,000 (P60,000  50%).  The initial capital of Red
therefore amounted to P60,000 or 50% of P120,000 as agreed by the partners.
 
[3].          Letter “B” is the correct answer.
The amount to be recorded as capital of the partners should be based on the fair value of the net asset
(total assets – total liabilities) contributed by each of them.  Hence, the capital balances for Pirante and
Wilson should be P70,000 and P150,000, respectively.  These amounts are computed as follows:

                                                Pirante           Wilson
Assets contributed:
      Cash                                   P40,000       P  60,000
      Inventory                                    -               30,000
      Building                                      -               80,000
      Furniture and Equipment           30,000              -    
Total                                         P70,000       P170,000
Less mortgage assumed                    -               20,000
Net assets contributed                 P70,000       P150,000

[4].          Letter “B” is the correct answer.

Under the bonus method, a portion of the capital of one partner is transferred to another partner.  In this
case, the total agreed capital is assumed to be equal to the total contributed capital, P276,000 (P150,000
+ P126,000), and each partner shall be credited one-half (according to agreement) or P138,000.  The
partner who contributed more than his agreed capital credit is the one who gave a bonus while the one
who contributed capital less than his agreed capital credit is the one who received it.  Belen contributed
P126,000 but received P138,000 (50% x P276,000) capital credit, hence, he received bonus equal to
P12,000 (P138,000-P126,000) from AA who contributed P150,000 but received only P138,000 capital
credit.

[5].          Letter “B” is the correct answer.

            The partners’ capital balances upon formation would be P100,000, P10,000, and P100,000,
respectively.

[6].          Letter “C” is the correct answer.

Kathy’s capital account should be credited for the 50% of the total agreed capital which is assumed to be
equal to the actual capital contributed by the partners or P184,000 [50% x (P200,000 + P168,000)]

[7].          Letter “C” is the correct answer.

The partner with the biggest capital account balance as of May 31, 2011 is Cip, computed as follows:

                                                   Allen           Belen         Cenen
Cash                                         P50,000       P   -            P  -
Non cash asset                                -              80,000        55,000
Mortgage                                        -             (35,000)         -      
Capital account balances             P50,000       P45,000       P55,000
             Each partner values his contribution at is fair value, reduced by the amount of any liability
assumed by the partnership.

[8].          Letter “D” is the correct answer.

            Under the bonus method, goodwill is not recognized; thus, there would be no unidentifiable asset
to be recorded.

[9].          Letter “C” is the correct answer.

            The amount of cash contributed by Carla, if initial balances are to conform to the profit-sharing
ratio of 2:3, respectively was P40,000, computed as follows:

Capital contributed by Clara:

Merchandise at fair value                                                 P 25,000
Delivery truck at fair value                                                   50,000
Mortgage note payable assumed                                      ( 15,000)
Clara’s contribution                                                         P 60,000
Divided by profit share of Clara                                                3/5   
Total agreed capital                                                        P100,000      
Multiplied by Carla’s profit share ratio                                      2/5     
Carla’s cash contribution                                                  P40,000

[10].         Letter “B” is the correct answer.

            Upon formation, the net assets of the partnership is equal to the total fair value of the assets contributed
less any amount of liabilities assumed by the partnership, hence the net assets of the partnership is equal
to P, computed as follows:

Assets contributed by:

AA                                                                           P100,000
BB                                                                               10,000
CC                                                                             100,000
Total                                                                       P210,000
Less liabilities assumed                                                10,000
Net assets contributed by the partners                        P200,000
           
[11].         Letter “B” is the correct answer.
            The capital balance of Mel and Garri assuming they agree to share their capital equally would be
P72,500, computed as follows:

Unadjusted capital (P78,500 + P70,000)         P148,500

   Inventory write-up                                            3,000
               Allow. for bad debts (P1,000 + P1,500)                          ( 2,500)
   Increase in accounts payable                          (4,000)
Adjusted capital                                            P145,000
   Divide by                                                           2
Capital balance of each partner                       P72,500

[12].         Letter “C” is the correct answer.

If Chona is allowed goodwill credit equal to 20% of her initial capital, Charo’s cash contribution was
P25,000, computed as follows:

Chona’s initial capital (P60,000/80%)                                P  75,000

Divided by Chona’s capital share                                       ¾ or 75%
Total agreed capital of the partners                                   P100,000
   Multiplied by  Chona’s capital share                                ¼ or 25%
Charo’s cash contribution                                                 P   25,000

Chona’s initial capital is equal to her net assets contribution which is 80% plus her goodwill credit of 20%.
Charo’s cash contribution is equal to one-fourth (¼) of total partnership capital or 1/3 of Chona’s capital.
 [13].         Letter “B” is the correct answer.
The capital balances of the partners upon formation are P180,000, P192,000, and P204,000, respectively,
computed as follows:

Investments:                  Flores           Peralta                Jose
   Cash                      P120,000         P192,000        P   60,000
   Equipment                   60,000    
   Truck                                                                      144,000
Capital balances         P180,000         P192,000         P204,000

[14].         Letter “B” is the correct answer.

            EJ’s adjusted capital balance is P80,000 computed as follows:

EJ’s capital before adjustment (given)                         P78,500

Add (deduct) adjustment for:
                  Allowance for doubtful accounts              P(1,500)
      Inventory increase                                     3,000
      Net adjustment                                                       1,500
EJ’s adjusted capital balance                                     P80,000

[15].         Letter “A” is the correct answer.

Non-cash assets contributed to an entity should be recorded at fair market value at the date of
contribution. The creation of a new entity creates a new accountability for these assets.
[16].         Letter “C” is the correct answer.
The capital account of Pula and Puti immediately after the formation of the partnership would have
balances equal to P287,070 and P123,030, respectively. These amounts were computed as follows:

Capital of  Pula before adjustments                               P300,000

Add (deduct) adjustments:
Increase in depreciation                                              (7,500)
Reduction in prepaid expenses                                     (2,400)
Adjusted capital of Pula                                                P290,100
Add cash contributed by Puti                                           120,000
Total agreed capital                                                     P410,100  

Share of Pula (70% x P410,100)                                    P287,070

Share of Puti (30% x P410,100)                                    P123,030

[17].         Letter “D” is the correct answer.

The capital contributed by Feb is P280,000 (P70,000 + P75,000 + P225,000 – P90,000), the total agreed
capital is therefore equal to P400,000 (P280,000/70%), 30% of which or P120,000 should be credited to
Jhan.  Since his initial capital contribution is P65,000 (P30,000 + P25,000 + 10,000) only, he needs to
invest P55,000 more (P120,000-P65,000).

[18].         Letter “A” is the correct answer.

Partners’ capital balances upon formation are Bel, P75,000; Joy, P80,000, and Franco, P85,000,
respectively, computed as follows:
Bel Joy Franco
Cash P50,000 P80,000 P25,000
Non-cash assets 25,000 - - - - - -- 60,000
Initial capital balances P75,000 P80,000 P85,000

[19].         Letter “B” is the correct answer.

If Jimenez is to invest cash for a 2/5 interest in the partnership, it means that the adjusted capital of Mark
is 3/5 of the total agreed capital.  The adjusted capital of Mark is computed as follows:
 Capital before adjustments (Sub-computation a)                  P264,000
Add net adjustments (Sub-computation b)                               21,000
Adjusted Capital of Mark                                                    P285,000
Sub-computation a:
Cash                                                     P 26,000
Accounts receivable                                  120,000
Inventory                                                 180,000
Accounts payable                                       (62,000)
Unadjusted Capital of Mark                      P264,000

Sub-computation b:
Allowance for doubtful accounts [3% x P120,000]              (P 3,600)
Increase in merchandise inventory                                       25,000
Recognition of Prepaid expenses                                           3,600
Recording of accrued expenses                                           (4,000)
            Net adjustment to capital of Mark                                     P21,000

Total agreed capital is therefore equal to P475,000 (P285,000 ÷ 3/5), 2/5 of this or P190,000 (P475,000 x
2/5)  belongs to Jimenez which he agreed to provide for in cash.

[20].         Letter “D” is the correct answer.

The total assets of the partnership is equal to P74,000, computed as follows:
Cash (P2,500 + P20,000)                                                   P22,500
Accounts receivable (P10,000 – P500)                                      9,500
Merchandise Inventory:
      (P15,000 – P3,000 + P10,000)                                        22,000
Fixtures (fair market value)                                                   20,000
Total assets                                                                      P74,000
[21].         Letter “B” is the correct answer.
The adjusted capital of Silvano is P116,250, computed as follows:
Total Assets (computation a)                               P132,000
Less accounts payable (given)                                   8,000
Capital before adjustments                                  P124,000
Less net adjustments (computation b)                        7,750
Adjusted capital of Silvano                                   P116,250
                                                                       
Computation a:
      Cash                                         P  30,000
      Accounts receivable                        25,000
      Inventory                                       45,000
      Furniture                                        32,000   
Total assets                                     P132,000        
Computation b:
Provision for bad debts (3% x P25,000)                 P  750
Reduction in the value of furniture:
   (P32,000 – 27,000)                                            5,000
Decrease in the value of inventory:
   (P5,000 – 3,000)                                               2,000
Net adjustments                                                 P7,750

[22].         Letter “D” is the correct answer.

The total assets of the new partnership is equal to P144,250, computed as follows:
Adjusted capital of Silvano                                               P116,250
Add accounts payable                                                           8,000
Total adjusted assets                                                      P124,250
Add cash investment of Pegasus                                          20,000
Total assets of the new partnership                                  P144,250

[23].         Letter “A” is the correct answer.

Because gain is to invest cash aside from P50,000 worth of merchandise it is assumed  that the adjusted
capital of Pain is equal to his 2/3 capital share ( 1 less 1/3 agreed share of Gain).  Hence, to compute the
total agreed capital of the partnership as well as the cash to be invested by Gain, Pain’s adjusted capital
should be computed first.  The adjusted capital of Pain is equal to P165,900, computed as follows:

Capital before adjustments (given)                             P158,400

Add net adjustment (computation a)                                 7,500
Adjusted capital of Pain                                             P165,900

Computation a:

Increase in capital due to rec. of prepaid exp.                        P17,500

Decrease in capital due to rec. of accrual                                  (5,000)
Decrease in capital due to provisions for bad debts                    (5,000)
Net adjustment to capital of Pain                                          P  7,500

The total agreed capital of the partnership is P248,850 (P165,900 ÷ 2/3), and the capital share of gain is
P82,950 (P248,850 x 1/3), hence, the cash to be invested by Gain is equal to P32,950 (P82,950 –
P50,000).

[24].         Letter “A” is the correct answer.

Non-cash assets contributed to the partnership should be recorded at fair market value at the date of
contribution. The fact that the computer was sold for P55,000 immediately after the formation of the
partnership indicates that it is its fair market value on the date of the formation of the partnership.

[25].         Letter “B” is the correct answer.

The amount of assets to be contributed by Violet to have a one-third interest in capital and profit should
be equal to one-half of the combined contribution of Yellow and Orange.  The total contribution of Yellow
and Orange is P120,000 (P40,000 + P80,000), therefore, to have one-third interest in the partnership,
Violet should contribute P60,000 or one-third of a total capitalization of P180,000 (P120,000 + P60,000).

[26].         Letter “B” is the correct answer.

The capital balance of each partner shall be equal to P, computed as follows:
                                                              Wilder           Nest
Capital before adjustments                      P78,500       P70,000
Add (deduct) adjustments:
Increase in inventory                             3,000
Receivables written off                         (1,000)       (1,500)
Accrued expenses recorded                   (4,000)                   
Adjusted capital balance                          P76,500       P68,500

Total capital  (P76,500 + P68,500)                    P145,000

Divided by                                                                2   
Capital balance of each partner                         P  72,500

[27].         Letter “C” is the correct answer.

The amount of cash to be contributed by Clara is equivalent to 2/5 of the total agreed capital of the
partnership which is to be based on the contribution of Maria.  The capital contributed by Maria is P60,000
(P25,000 + P50,000 – P15,000), the total agreed capital is P100,000 (P60,000 ÷ 3/5), hence Clara should
contribute cash equal to P40,000 (2/5 x P100,000).
[28].         Letter “A” is the correct answer.
If Aga invests P20,000 for a 20% interest, then total partnership capital must be based on Aga’s
investment or P100,000 (P20,000/20%) and the capital to be credited to Mata is P80,000 (P100,000 –
P20,000).  If Mata contributes an equipment worth P50,000, then he should invest additional cash
amounting to P30,000 (P80,000 – P50,000).

[29].         Letter “B” is the correct answer.

The cash invested by the partners is equal to P20,000 contributed by Aga and the P30,000 invested by
Mata or a total of  P50,000.
 [30].         Letter “A” is the correct answer.
The capital of Al and Macmod shall be equal to P, and P, respectively.  These amounts are computed as
follows:

                                             Al            Macmod              Total      

Cash                                P120,000      P    80,000       P   200,000
Office equipment                   84,000                                    84,000
Land                                                     1,000,000          1,000,000
Building                                                    600,000             600,000
Mortgage on building                                  (400,000)        ( 400,000)
Capital                              P204,000      P1,280,000       P1,484,000          

[31].         Letter “B” is the correct answer.

The average capital balance of Mr. Boom during 2011, is P8,800, computed as follows:
   January 1 Investment:              P8,000 x 12/12               P8,000
   April     1 Investment                 1,600  x   9/12               1,200
   June      1 Investment                1,600 x   7/12                  933
   Sept.     1 Investment              (4,000) x   4/12               (1,333)
   Mr. Boom’s average capital balance during 2011          P  8,800

[32].         Letter “B” is the correct answer.

The net income of the partnership for 2011 was P120,000, computed as follows:
   Withdrawal                                                              P104,000
   Additional investment                                              (  20,000)
   Net decrease in capital                                            (  48,000)
   Dulce’s share in net income                                       P 36,000
      Divide by Dulce’s P&L ratio                                             30%
   Partnership’s net income for the year 2011                     P120,000

[33].         Letter “B” is the correct answer.

            Placido’s capital account balance would decrease in the amount of P22,000, computed as follows:

                                                                        Total          Placido
Interests:
P440,000 x 10% ; P80,000 x 10%               P 44,000       P  8,000
Salaries                                                             100,000        40,000
Balance (deficiency), equally                              ( 210,000)    (70,000)
Net profit (loss)                                               P(66,000)      P(22,000)

[34].         Letter “D” is the correct answer.

Zeep’s share in net income for 2011 is P600, computed as follows:

Beep Zeep Total

Salary P16,000 P7,200 P23,200
10% interest on beg. cap. 1,600 2,000 3,600
Remainder: equally (8,600) (8,600) (17,200)
Net income P  9,000 P   600 P  9,600

[35].         Letter “B” is the correct answer.

            The amount of earnings that should be credited to each partner’s account are P43,000 and
P37,000, for Red and White, respectively, computed as follows:

                                                Red             White          Total
Salary allowances                       P55,000       P45,000       P100,000
Loss after allowances (60:40)      ( 12,000)     (  8,000)     (  20,000)
Earnings credited to partners        P43,000       P37,000       P  80,000

[36].         Letter “B” is the correct answer.

The bonus to Perez in 2011 is P18,000, computed as follows:

   Net profit after salary, interest, and bonus          P  32,000

   Salary of Perez (P5,000 x 12)                                 60,000
   Interest on starting capitals (P200,000 x 5%)         10,000
   Net profit before salary and interest,
        but before bonus                                        P102,000
   Divide by                                                                85%
   Net profit before salary, interest, and bonus        P120,000

   Bonus of Perez in 2011 (P120,000 x 15%)          P  18,000

[37].         Letter “D” is the correct answer.

The P176,000 operating income is divided as Herm, P53,180; Marc, P62,060; and Alex, P60,760,
respectively, computed as follows:

   Herm: P150,000 x 12/12              P150,000

                  30,000 x   6/12                15,000
                (10,000) x  3/12                  (2,500)
               Average Capital              P162,500

   Marc: P200,000 x 12/12               P200,000

                  20,000 x  5/12                   8,333
                (10,000) x  3/12                  (2,500)
               Average capital               P205,833

   Alex: P250,000 x 12/12               P250,000                   

               (30,000) x  2/12                   (5,500)
               Average capital               P245,000

Herm Marc Alex Total

Salary allowances P24,000 P18,000 P12,000 P54,000
12% interest on
average capital 19,500 24,700 29,400 73,600
Remainder, 2:4:4     9,680 19,360 19,360 48,400
Division of ope. inc. P53,180 62,060 P60,670 P176,000

[38].         Letter “D” is the correct answer.

            The partners’ capital balances on December 31, 2011 are Herm, P223,180; Marc, P272,060; and
Alex, P280,760, respectively, computed as follows:
Herm Marc Alex
Capital balances, Jan. 1 P150,000 P200,000 P250,000
Additional contributions 30,000 20,000     -
Drawings (10,000) (10,000) (30,000)
Share in operating income (6)   53,180   62,060   60,760
Capital balances, Dec. 31, 2011 P223,180 P272,060 P280,760

[39].         Letter “B” is the correct answer.

In case of a profit, Bing’s share will be 20% plus 40% of the remaining 80%, or a total of 52%; in case of
a loss, Bing’s share will only be 40%.

[40].         Letter “B” is the correct answer.

            The bonus of Michelle for the year 2011 is P48,000, computed as follows:
            Michelle’s bonus (P240,000  125%) x 25%                      P48,000

[41].         Letter “C” is the correct answer.

                                  Mark            Valerie         Nora            Total
Contributed capital    P200,000     P100,000     P150,000     P450,000
Bonus (3:1)
  Nora’s AC  P225,000
  Nora’s CC    150,000
                 P  75,000                 
From Mark      x ¾      (56,250)                          56,250
From Valerie    x ¼                      (  18,750)       18,750               
            Agreed capital          P143,750     P  81,250     P225,000     P450,000          

[42].         Letter “C” is the correct answer.

            Contribution of Joey                    P120,000

            Agreed capital ratio                           1/3
            Total agreed capital                    P360,000
[43].         Letter “A” is the correct answer.
            Capital of Liz                               P24,000
            Interest purchased                           1/2 
            Capital credit of Sunshine             P12,000

[44].         Letter “A” is the correct answer.

            Sarah’s contribution            P1,000,000
            Divided by interest bought   one-fourth
            Total agreed capital           P4,000,000                                  

[45].         Letter “B” is the correct answer.

The total amount of “goodwill” for the old partners is P15,000, computed as follows:

Total agreed capital upon Vince’s admission                      P330,000

            Less: Net Assets after Vince’s investment:
            Total old partners capital                   P235,000
            Vince’s cash investment                         80,000
            Total net assets                                                     315,000
   Total “goodwill” for the old partners                               P   15,000

[46].         Letter “C” is the correct answer.

            Marc’s capital balance, after Vince admission is P79,100, computed as follows:
   *Marc’s interest purchased
         by Vince (P80,000 x 15%)              P 12,000
   Vince’s cash investment                          80,000
   Vince capital credit                               (  70,000)
   Bonus to old partners                           P 22,000

   Marc’s capital (before Vince admission)                             P80,000

   Interest purchased by Vince                                             ( 12,000)
   Share in goodwill (P15,000 x 30%)                                       4,500
   Share in bonus (*P22,000 x 30%)                                        6,600
   Marc’s capital (after Vince admission)                               P79,100

[47].         Letter “C” is the correct answer.

            The admission of a new partner to a 20% interest in a partnership for an investment of P18,000,
with total agreed capital to be P75,000 resulted to a bonus to old partners of P3,000 computed as follows:

   New partner’s investment                                             P18,000

   Less: New partner’s capital credit (P75,000 x 20%)                        15,000
   Bonus to old partners                                                   P  3,000

[48].         Letter “A” is the correct answer.

             Given the choice between goodwill and bonus methods, Blue will prefer bonus method due to
Blue’s gain of P105,000, computed as follows:
                                                            G-Method        B-Method
   Blue’s capital credit:
      (P1,080,00075%) x 25%                 P360,000
      (P1,080,000P220,000) x 25%                                P325,000
   Less: Blue’s investment                           220,000          220,000
   Goodwill/Bonus for Blue                        P140,000        P105,000
   Less: Share in subsequent GW
             write-off (1/3)                               46,667               -     
   Blue’s gain                                          P  93,333        P105,000

Note that if the only immediate effect is considered, the “goodwill” method would be preferable; but since
goodwill, by itself, is non-realizable, the over-all effect would favor the “bonus” method.

[49].         Letter “C” is the correct answer.

The amount of goodwill that was recognized in connection with the admission of the new partner was
P30,000, computed as follows:

New capital implied from new partner’s investment:

P60,000/ 33 1/3%                                                          P180,000
Less: Resulting assets after new partner’s investment:
      Original partners’ investment                    P80,000
      Net income                                              34,000
      Drawings                                               ( 24,000)
      New partner’s investment                          60,000         150,000
Implied goodwill (for original partners)                              P  30,000

[50].         Letter “B” is the correct answer.

            The amount of the private cash settlement effected between the old partners was P9,000,
computed as follows:

                                       Total             Terry        Timmy       Tommy
May 31 investments        P 80,000                  P48,000            P32,000                   P     -
Net income:
 Salaries                           14,000                     7,000               7,000                     -
 Balance at 3:2                  20,000             12,000                     8,000                     -
Drawings                       (  24,000)    ( 14,000)     (10,000)             -  
December 31 balances    P 90,000                  P53,000             P37,000       P    -
 Investment                      60,000             -                -           60,000
 Implied goodwill               30,000                   18,000              12,000                  -          
Balances after
 admission of new
 partner                         P180,000     P71,000 P49,000       P60,000
Desired balances, 4:3:2      180,000      80,000        40,000        60,000
Private settlement                             P  9,000      P( 9,000)

Timmy will transfer P9,000 of his capital to Terry.

[51].         Letter “D” is the correct answer.

            Conceptual question.

[52].         Letter “C” is the correct answer.

            Capital of Minda                             P200,000
            Loss on furniture impairment:
                  Book value               P65,000
                  Fair value                   50,000
            Minda’s share (1/3)         P15,000         5,000
            Adjusted capital                             P195,000
            Less fair value of furniture                           50,000
            Value of note issued to Minda         P145,000

[53].         Letter “A” is the correct answer.

           
            Capital of Pablo                                            P200,000
            Add share on revaluation of inventory:
                  Book value                           P50,000
                  Fair value                               70,000
                                                            P20,000
                                                               x 20%           4,000
            Total                                                           P204,000
            Add share in net income:
               P130,000 x 20%                                            26,000
            Adjusted capital                                            P230,000
            Payment made to Pablo                                  245,000
            Goodwill included in the payment                   P  15,000
           
[54].         Letter “D” is the correct answer.
Romy’s acquisition of the furniture would result in Romy’s reduction in capital of P55,000, computed as
follows:
                                                       Paco          Quin          Romy
Charge for furniture taken,
   at second-hand value               P                P                  P50,000
Share in realization loss,
  P65,000 – P50,000                     5,000           5,000              5,000
Reduction in capital incident to
  Romy’s acquisition of the
  Furniture                                  P5,000        P5,000           P55,000

[55].        Letter “C” is the correct answer.

The value of the note that Minda would get is P145,000, computed as follows:
Minda’s capital                                                               P200,000
Less: Charges for:
      Second-hand value of asset taken            P50,000
      Share of loss on asset taken:
      (P65,000 – P50,000) x 1/3                           5,000
      Total charges against Minda’s capital                              55,000
Value of the note to be issued to Minda                             P145,000

[56].         Letter “C” is the correct answer.

After Tic’s retirement, the partnership’s “net assets” was P225,000, computed as follows:

Net assets, before Tic’s retirement                  P400,000

Implied goodwill:
      (P225,000 – P200,000) / 50%                       50,000
Adjusted net assets                                      P450,000
Less: Payment to Tic                                        225,000
Net assets, after Tic’s retirement                    P225,000

[57].         Letter “A” is the correct answer.

            The payment to Pablo included a goodwill of P15,000, computed as follows:

Payment for Pablo’s interest                                                P245,000

Less: Pablo’s interest just his withdrawal:
         January 1 Capital                                       P200,000
         Add: Share in:
               Inventory write-up: P20,000 x 20%                4,000
               Net income to 6/30: 130,000 x 20%          26,000
         July 1 capital just before withdrawal                               230,000
Goodwill included in payment to Pablo                                 P  15,000
 [58].         Letter “C” is the correct answer.
            If Juni received P45,000, Hugo pay Juni the amount of P22,500, computed as follows:

            (P45,000 x ½)                                        P22,500

[59].         Letter “C” is the correct answer.

            Assuming the Kathy is paid P132,000, Karen would be credited in the amount of P1,200,
computed as follows:
            (P135,000 –P132,000) x 2/5                    P1,200

[60].         Letter “C” is the correct answer.

            If Rae is paid P39,000 in full payment of her interest, the capital of Ana immediately after Rae’s
withdrawal would be P23,400, computed as follows:

Amount paid to Rae                                P39,000

Less: Rae’s capital balance                        35,000
Bonus to Rae from Ana and Mae               P  4,000
Ana’s capital balance before Rae’s retirement                    P25,000
Less: Share in bonus to Rae (P4,000 x2/5)                             1,600
Ana’s capital balance after Rae’s retirement                       P23,400

[61].         Letter “D” is the correct answer.

            Immediately after effecting the transfer of the net assets, and the issuance of stock, the
corporation’s additional paid-in capital account would be credited for P164,000, computed as follows:
Fair value of partnership’s net assets:
   P224,000 – P40,000                                         P184,000
Less: Par value of stock issued to partners:
   (10,000 x P1) x 2                                                  20,000
Additional paid-in capital in excess of par              P164,000

[62].         Letter “C” is the correct answer.

The partners are to receive shares of stock, at P10 par value, equal to 15,000, 15,000, and 25,000,
respectively, computed as follows:
                                                                        Mac             Kuh             Nat
Reported capital balances                                                   P100,000        P100,000           P200,000
Share in assets write-up, P150,000, equally            50,000        50,000            50,000
Total par value of shares to be
   received by each partner                               P150,000     P150,000         P250,000
Shares to be received by each
   partner, at P10 par value/share                                            15,000           15,000               25,000

[63].         Letter “B” is the correct answer.

            Capital of partnership before adjustment   P260,000

            Add (deduct) adjustments:
              Bad debts provision                               (   10,000)
              Increase in inventory                                 20,000
              Depreciation                                         (    3,000)
            Adjusted capital equal to shares’ par value            P267,000
[64].         Letter “A” is the correct answer.
                                                                  Mac          Kuh          Nat          Total
            Capital before adjustment               P100,000  P100,000  P200,000  P400,000
Add adjustment for increase in net  assets (P550,00-P400,000)/3                                   50,000    
50,000                                          50,000   150,000
Capital after adjustment                 P150,000                                               
P150,000                                                P250,000                                                P550,000
Divided by peso par value per share       10          10           10                                                   10  
Number of shares received                 15,000     15,000                                          25,000     55,000
 [65].        Letter “B” is the correct answer.
            In the distribution of the P60,000 cash, Gardo received P26,000, computed as follows:
                                                   Total           Gardo          Gordo
Initial contributions                        P 50,000      P30,000       P20,000
Equiv. Investments (payments)                          132,970        62,275                       70,695
Equiv. Withdrawals (receipts)          (144,345)    (79,100)     (65,245)
Balances before profit share           P  38,625      P13,175       P25,450
Profit (P60,000-P38,625), 6:4             21,375       12,825          8,550
Distribution of P60,000 cash            P 60,000      P26,000       P34,000

[66].        Letter “C is the correct answer.

If all the partners are personally solvent, deficiency/deficiencies resulting from the liquidation process, will
require additional cash from Dina in the amount of P50,000, computed as follows:

                                        AA                Bida            Cita        Dina

Capital balances             P420,000     P215,000     P205,000  P100,000
Loan balances                       -             160,000           -             50,000
Total interests                P420,000     P375,000     P205,000   P150,000
Less: share in realization
  Loss of P1,000,000 at
   3:3:2:2                          300,000     300,000       200,000   200,000
Balance (deficiency)        P120,000  P  P 75,000     P    5,000 P(50,000)

[67].         Letter “C” is the correct answer.

The remaining cash is distributed as Salve, P0; Gilda, P31,000; and, Nora, P49,000, respectively,
computed as follows:
                                                   Salve           Gilda           Nora
   Capital balances                      P 80,000      P115,000     P105,000
   Realization loss ( 5:3:2)
      (P150,000–P100,000)             (25,000)    (  15,000)   (  10,000)
   Theoretical loss on other
      asset(P320,000-P150,000)       (85,000)    (  51,000)   (  34,000)
   Balances before distribution      P(30,000)    P  49,000     P  61,000          
   Salve’s deficiency at 3:2              30,000     (   18,000)   (   12,000)
   Cash distribution                      P   - 0 -        P  31,000     P  49,000

[68].         Letter “A” is the correct answer.

            The total loss to A is, P3,000, computed as follows:
            Total book value of non-cash assets realized:
      (P9,000 + P7,700 + P11,300)                        P28,000
   Less: Total cash received:
      (P6,000 + P3,500 + P12,500)                          22,000
   Total realization loss                                        P  6,000

   Total loss to A:
      (3/6 of P6,000)                                              P  3,000

[69].         Letter “C” is the correct answer.

            Total cash received by B is P5,000, computed as follows:
B, capital                                                     P7,000
            Less: Share in total realization loss:
      (2/6 x P6,000)                                           2,000
   Total cash received by B                             P5,000

[70].         Letter “D” is the correct answer.

            The cash received by C in January is P0, computed as follows:
   C, capital                                                  P3,000
   Less: Share in:
               Realization loss in January:
      (P9,000 – P6,000) x 1/6              P  500
      Theoretical loss on
           remaining non-cash assets:
      (P19,000 x 1/6)                            3,167
      Total                                                     P3,667
   Cash received by C in January                     P – 0 –

[71].         Letter “C” is the correct answer.

            The total amount received by all of the partners, if X received P8,000 upon liquidation of the
partnership was P52,000, computed as follows:
   X, capital                                            P40,000
   Less: Amount rec’d in liquidation               8,000
   X’s share in liquidation loss                   P32,000
   Total capital of the three partners                                P108,000
   Less: Total liquidation loss (P32,000  4 x 7)                    56,000
   Total amount received by all of the partners                P  52,000

[72].         Letter “B” is the correct answer.

            Assuming the facts given in No. 17, except that X received P26,000 as a result of the liquidation,
as part of the liquidation Z received the amount of P14,500, computed as follows:

   X, capital                                            P40,000

   Less: Amount rec’d in liquidation             26,000
   X’s share in liquidation loss                   P14,000

   Z, capital                                                              P18,000
   Less: Share in liquidation loss (P14,0004 x 1)              3,500
   Amount received by Z in liquidation                          P14,500

[73].         Letter “B” is the correct answer.

            The respective shares of Sanchez and Tan in the final cash distribution will be P175,000 and
P125,000, respectively, computed as follows:
                                                   Total          Sanchez         Tan     
Capital balances                      P1,250,000     P750,000     P500,000
Note payable to Tan                       200,000          -              200,000
Total interest                           P1,450,000     P750,000     P700,000
Realization loss, equally:
   P1,450,000 – P300,000         (P1,150,000)   (575,000)   (575,000)
Share in final distribution          P    300,000    P175,000     P125,000

[74].         Letter “B” is the correct answer.

            If liquidation takes place and assets are realized at book value, the partners would receive cash
distributions equal to their recorded capital balances in final liquidation.

[75].         Letter “B” is the correct answer.

John received total cash distribution of P20,000, computed as follows:
                                                   Alex            Jay              John
   Capital balances                      P95,000       P80,000       P70,000
   Loss on realization of other
       assets at 2:1:1 
       (P150,000 – P 70,000)         (40,000)     (20,000)     (20,000)
   Theoretical loss on
       remaining other assets
       (P265,000-P150,000)           (57,500)     (28,750)     (28,750)
   Adjusted capital balances         P( 2,500)     P31,250       P21,250
   Deficiency of Alex                         2,500     (   1,250)     (   1,250)
   Cash distribution basis              P   - 0 -        P30,000       P20,000

[76].         Letter “D” is the correct answer.

            Jo should absorb P40,000 of the remaining claim against the firm computed as follows:
                                       Total                Jo            Lee            Vi
Capital balances            P  950,000      P350,000   P250,000     P350,000
Realization loss             (1,000,000)    (300,000)   (200,000)    (500,000)
                                   P(  50,000)     P  50,000 P  50,000P     (150,000)
Vi’s deficiency, 3:2               -               (  90,000) (60,000)       150,000
Liability for unpaid
    Claim                       P( 50,000)      P( 40,000)  P( 10,000)   P –0-

[77].         Letter “B” is the correct answer.

            If the first cash sale of assets booked at P150,000 resulted in net realization of P120,000, the
amount to be distributed to Irene would be P44,000, computed as follows:

            Irene’s capital                                                                P70,000

            Less: Share in:
              Realization loss:
               (P150,000 – P120,000) x 20%                       P  6,000
              Possible loss on remaining other assets:
      (P250,000 – P150,000) x 20%                                  20,000     26,000
Irene’s share in first cash distribution                                P 44,000

[lxxviii].      Letter “D” is the correct answer.

            For Dan to receive P55,200 in full settlement of his interest in the partnership, P193,000 must be
realized from the sale of the partnership’s non-cash assets, computed as follows:

Partners’ capital                          P130,000

Liabilities                                        90,000
Cash                                         (   40,000)
Non-cash assets                         P180,000

Dan’s desired share in settlement                   P55,200

Less: Dan’s capital balance                              50,000
Dan’s share in estimated realization gain         P  5,200     

Non-cash assets                                                             P180,000

Estimated realization gain (P5,200  40%)                             13,000
Estimated realization from sale of non-cash asset                           P193,000

[lxxix].       Letter “A” is the correct answer.

The deficient partner is Bach and his additional cash contribution to finally liquidate the partnership is
P6,000, computes as follows:
                                                       Bach          Lizst           Strauss
Total interest (capital and
     loan balances)                      P55,000       P105,000     P200,000
Realization loss, at 4:4:2
     P400,000 – P247,500             ( 61,000)     (  61,000)   (  30,500)
Balance (deficiency)                    P( 6,000)     P  44,000     P169,500
  
[lxxx].       Letter “A” is the correct answer.
The book value of the partnership’s non-cash assets on May 31, 2011, was P180,000, computed as
follows:

Partners’ capital (assumed to be after

   considering the net income)                        P130,000
Liabilities                                                          90,000
Total assets                                                                   P220,000
Less: Cash                                                                          40,000
Book value of non-cash assets on May 31, 2011                               P180,000
-end of quizzer-