Chapter 1

Problem #1
Peter Haynes contributed land, inventory and P300,000 cash to a partnership. The land has a book value of
P450,000 and a market value of P 2,350,000. The inventory has a book value of P700,000 and a market value
of P550,000. The partnership also assumed a P250,000 note payable owed by Haynes that was used to
purchase the land. Sabio Mariano agreed to put up cash equivalent to Haynes net investment.
Required: Prepare the journal entry to record Haynes and Marianos investment in the partnership.
Problem #2
Villa and Dela Mon formed a partnership and invested the following assets and liabilities:
Fair Market Value
Villa:
Cash
Land
Dela Mon:
Cash
Building
Mortgage Payable

Carrying Value

P200,000
500,000
400,000
800,000
(450,000)

Answer key:
Problem #1
Cash 300 000
Hayne, Capital

300 000

Land 2 350 000

Hayne, Capital

2 350 000

Inventory
550 000
Hayne, Capital

550 000

Hayne, Capital
250 000
Notes Payable
250 000
Cash
300 000
Land
2 350 000
Inventory
550 000
Notes Payable
250 000
Hayne, Capital
2 950 000
Cash 2 950 000
Hayne, Capital

2 950 000

P200,000
200,000
400,000
720,000
(450,000)

Problem #2
Book of Villa
Land 300 000
Villa, Capital

300 000

Book of Dela Mon

Building
80 000
Dela Mon, Capital

80 000

Book of Villa and Dela Mon

Cash 200 000
Land 500 000
Villa, Capital
700 000
#
Cash
400 000
Building 800 000
Mortgage Payable 450 000
Dela Mon, Capital
750 000

Chapter 2
Problem #1
Anate, Ashe, and Noira agreed to share profits and losses according to the ratio of their respective
investments at the beginning of the year of P400,000, P550,000, and P250,000. Calculate the share of each
partner under the following conditions: (a) P300,000 profit; (b) P440,000 loss.
Problem #2
Riley and Chichay divide partnership profits and losses solely on the basis of their average capital balances.
Riley had P650,000 invested during all of 2016; Chichay had P400,000 invested from January 1 to September
30, and he invested another P300,000 on October 1. If profit was P3,000,000 during 2016, how much should
each partner receive?
Answer key:
Problem #1
Profit Anate 300 000 x 400 000/1200000 = 100 000
Ashe 300 000 x 550 000/1200000 = 137 500
Noira
300 000 x 250 000/1200000 = 62 500
300 000

Income summary 300 000

Anate, Drawing 100 000
Ashe, Drawing
137 500
Noira, Drawing
62 500

Loss

Anate, Capital

Anate

(440 000) x 400 000/1200000 = (146666.67)

146 666.67

Ashe
Noira

(440 000) x 550 000/1200000 = (201666.67)

(440 000) x 250 000/1200000 = (91666.67)
(440 000.01)

Ashe, Capital 201 666.67

Noira, Capital 91 666.67
Income summary 440 000.01

Problem #2
Riley, Capital

Riley

650 000 x 12/12 = 650 000

3 000 000 x 650 000/1 025 000 = 1 902 439

Chichay, Capital

Chichay

400 000 x 9/12 = 300 000

300 000 x 3/12 = 75 000
375 000

3 000 000 x 375 000/1 025 000 = 1 097 561

Income summary
3 000 000
Riley, Drawing
1 902 439
Chichay, Drawing
1 097 561

Chapter 3
Problem #1
Cordero purchases a 1/5 interest from Coloma by paying P200,000.
Problem #2
Cordero purchases 1/5 interest from the old partners by paying P30,000.
Answer key:
Problem #1
Coloma, Capital
200 000
Cordero, Capital
200 000
Problem #2
Coloma, Capital
Claudio, Capital
Cordero, Capital

Problem #4.a

20 000
10 000
30 000

Encina, Endrada, and Elina

Statement of Financial Position
December 31, 2016
Assets
Cash
Other Assets

Total Assets

Liabilities and Equity

Liabilities
Endrada, Loan
Elina, Loan
Encina, Capital
Endrada, Capital
Elina, Capital
Total Liabilities and Equity

8,000
136,000

144,000

44,800
2,000
3,200
38,000
24,000
32,000
144,000

The other assets were sold for P140,000. Profits and Losses are shared based on 4:4:2.

Problem #4.b
Elena, Reese, and Ventis
Statement of Financial Position
December 31, 2016
Assets
Cash
Non cash Assets

50 000
2 050 000

Total Assets

2 100 000

Liabilities and Equity

Liabilities
400 000
Elena, Capital
800 000
Reese, Capital
500 000
Ventis, Capital
400 000
Total Liabilities and Equity
2 100 000

The Non cash assets were sold for P2,650,000. Profits and Losses are shared equally.

Answer key:
Problem #1
Encina, Endrada, and Elina
Statement of Liquidation
December 1-31. 2016

Balance
Before
Liquidation
Sale of

Cash
Other
Assets
8,000 136,000

140,000 (136,000)

Liabilities
44,800

Loan
Endrada
2,000

Loan
Elina
3,200

Capital
Encina-40% Endrada-40% Elina-20%
38,000
24,000
32,000

1,600

1,600

800

Assets and
Distribution
of gain
Balances

148,000

44,800

Payment of
Liabilities

(44,800)

(44.800)

Balances
Payment to
Partners

2,000

3,200

39,600

25,600

32,800

103,200

2,000

3,200

39,600

25,600

32,800

(103,200)

(2.000)

(3,200)

(39,600)

(25,600)

(32.800)

Problem #2
Elena, Reese, and Ventis
Statement of Liquidation
December 1-31, 2016
Cash
Balance
Before
Liquidation

50 000

Sale of
Assets and
Distribution
of gain

2 650 000

Non cash
Assets
2 050 000

Liablilities
400 000

(2 050 000)

Balances

2 700 000

400 000

Payment of
Liabilities

(400 000)

(400 000)

Balances
Payment to
Partners

Elena
800 000

Capital
Reese
500 000

Ventis
400 000

200 000

200 000

200 000

1 000 000

700 000

600 000

2 300 000

1 000 000

700 000

600 000

(2 300 000)

(1 000 000)

(700 000)

(600 000)