Ramon Magsaysay Memorial Colleges

Bachelor of Science in Customs Administration

Pioneer Ave., General Santos City
Tel. No. 552-3348

Name: ______________________________ Date: ___________ Score: _____________

Subject : REV 1 – PRACTICAL ACCTG2 Prelim Examination
Instructor: Mrs. Marivic B. Peñaflor, CPA, MBA AY: 2016-2017 1st Semester

General Instruction: Write your final answer on the answer sheet.

1. N, X, and Y are partners sharing profits and losses in the ratio of 5:2:3, respectively. The condensed balance sheet of NXY
partnership as of December 31, 2016 is:
Cash 50,000 Liabilities 40,000
Other assets 130,000 N, capital 60,000
X, capital 40,000
Y, capital 40,000
Total 180,000 Total 180,000
======= ======

All the partners agree to admit Z as a 1/4 partner in the partnership. After Z’s admission Y received a bonus of P 15,000.
How cash should Z invest in the partnership.
2. Refer to no. 1, One year after Z’s admission, N decided to retire from the partnership and by mutual agreement the
assets are to be adjusted to their fair value of P 290,000. It was also agreed that the partnership would have to pay N P
110,000 cash for N’s interest. After N’s retirement, what are the capital balances of X, Y and Z in the partnership book,
3. What is the journal entry upon N’s Retirement?
4. Refer to no. 1 and 2, the ZXY Partnership is dissolved and liquidated by installments. The first realization of P 50,000 cash is
on the sale of other assets with a book value of P 80,000. After payment of the liabilities, P 38,000 cash is distributed to
X,Yand Z , respectively as follows:
5. What is the journal entry to record the liquidation process ?
6. The partners’ capital ( Income –sharing ratio in parentheses) of NN, OO, PP and QQ on May 31,2014, were as follows:
NN ( 20%) P60,000
OO (20%) 80,000
PP (20%) 80,000
QQ ( 40%) 40,000
Total P 260,000

On May 31.2014, with the consent of NN, OO and QQ:

a. PP retired from the partnership and was paid P 100,000 cash in full settlement of his interest in the partnership.
a) LL was admitted to the partnership with a P 30,000 cash investment for a 12% interest in the net assets of NN,OO
and QQ.
The capital balances of NN, OO, QQ and LL after LL’s admission would be?
7. JJ, RR and MM, who divide profits and losses 40%, 30%, and 30% respectively, have the following October 31,2014
account balances:
JJ, Drawing ( Dr) P 15,000
MM, Drawing ( Cr) 5,000
Accounts receivable- JJ 7,000
Loans payable- RR 16,000
JJ, capital 60,000
RR, capital 45,000
MM, capital 40,000

The partnership has a total liability of P 90,000 and a cash of P 50,000. The partnership is liquidated and MM receives P
32,000 in final settlement.(1) How much is the capital balances of JJ and RR after realization of assets and before final
settlement and (2) how much cash realized from the sale of the noncash assets?
8. Lotis and Vergel formed a partnership on July 1, 2014 to operate two stores to be managed by each of them. They
invested P 40,000 and P 30,000 and agreed to share earnings 60% and 40%, respectively. All their transactions were for
cash , and all their subsequent transactions were handled through their respective bank accounts as summarized
below:

Cash receipts 80,000 68,000

Cash disbursements 63,000 72,000

On October 31,2014, all remaining noncash assets in the two stores were sold for cash of P 75,000. The partnership was
dissolved and cash settlement was affected. In the distribution of the P 75,000 cash , Lotis and Vergel received:
9. RR and PP share profits after the provision of annual salary allowances of P 18,000 and P 16,000, respectively in the ratio
of 6:4. However , if partnership’s net income is insufficient to provide for said allowances in full amount the net income
shall be divided equally between partners. In 2014, the following errors were discovered: Depreciation is overstated by P
13,000 and the inventory on December 31, 2014 is understated by P 4,000. The partnership net income for 2014 was
reported to be P 41,000.

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 The capital accounts of the partners should be increased ( decreased) by:

10. Tim and Tom entered into a partnership on March 30, 2014 by investing P125, 000 and P75, 000, respectively. They
agreed that Tim, as the managing partner, is to receive a salary of P30, 000 per year and a bonus computed at 8% of
the net profit after adjustment for the salary; the balance of the profit was to be distributed in the ration of their original
capital balances. On December 31, 2014, account balances were as follows:

Cash P 77, 000 Accounts payable P 60, 000

Accounts receivable 67, 000 Tim, capital 125, 000
Furniture and fixtures 45, 000 Tom, capital 75, 000
Sales returns and allowances 5, 000 Tim, drawing (20, 000)
Net Purchases 196, 000 Tom, drawing (30, 000)
Operating expenses 60 000 Sales 240,000

Inventories on December 31, 2014 were as follows: supplies, P3, 500 merchandise, P74, 000. Prepaid insurance was P750
while accrued expenses were P1, 550. Depreciation rate was 12% per year.

The partners capital balances on December 31, 2014, after closing the net profit and drawing accounts were:
11. Na lugi Corporation is insolvent and its statement of affairs shows the following
Estimated gains on realization of assets P 1,500,000
Estimated losses on realization of assets 2,050,000
Additional assets 1,100,000
Capital stock 2.200,000
Deficit 1,300,000
The pro-rate payment on the peso to stockholders ( estimated amount to be recovered by stockholders) is:
12. Zero Na Corp. has been undergoing liquidation since January 1, as of March 31, its considered statement of realization
and liquidation is presented below:
Assets:
Assets to be realized P1, 375, 000
Assets acquired P750, 000
Assets realized P1, 200, 000
Assets not realized P1, 375, 000
Liabilities:
Liabilities liquidated P1, 875, 000
Liabilities not liquidated P1, 700, 000
Liabilities to be liquidated P2, 250, 000
Liabilities assumed P1, 625, 000
Revenues and expenses:
Supplementary charges P3, 125, 000
Supplementary credits P2, 800, 000

(1) The net gain (loss) for the three-month period ending March 31 and the ending cash balance assuming
that common stock and deficits are P 1,550,000 and P 508,000.

13. The following data were taken from the statement of affairs of Malakas Company:

Book value Fair value

Assets
Cash P 6,000 P 6,000
Accounts receivable 60,000 65,000
Inventories 90,000 65,000
Land 100,000 80,000
Building (net) 320,000 360,000
Equipment (net) 250,000 200,000
Liabilities
Accounts payable P 95,000
Wages payable ( all have priority 9,500
Taxes payable 14,000
Notes payable ( secured by receivables 190,000
and inventory
Interest on notes payable 8,000
Bonds payable ( secured by land and 220,000
building
Interest on bonds payable 13,000

(1) what is the estimated deficiency to unsecured creditors ? (2) what is the amount to be paid to partially secured
creditors

14. On March 1, 2011 entities A and B each acquired 30% of the ordinary shares that carry voting rights at a general
meeting of shareholders of entity Z for P 300,000. Entities A and B immediately agreed to share control over entity Z.

On December 31,2011 entity Z declared a dividend of P 100,000 for the year 2011. Entity Z reported a profit of P 60,000
for the year ended December 31,2011. AT December 31,2011 the recoverable amount of each venturer’s investment in

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 equity Z is P 292,000 ( fair value of P 295,000 less cost to sell of P 3,000 ). Entities A and B uses equity method to account
for its investment in entity Z. However, there is no published price quotation for entity Z.

On December 31,2011, entities A and B much each report its investment in entity Z at :

15. On January 1, 2013, Wilkins, Inc. and Xylo, Inc. (the parties) agreed to combine their business by establishing a separate
vehicle (Bremm, Inc.). Both parties expect the arrangement to benefit them in different ways. Wilkins believes that the
arrangement could enable it to achieve its strategic plans to increase its size, offering an opportunity to exploit its full
potential for organic growth through an enlarged offering of products and services. Xylo expects the arrangement to
reinforce its business opportunities by marketing more products.

As a result, Wilkins, Inc. acquired 21% of the outstanding common stock of Bremm, Inc. for P600,000. This investment
gave Wilkins the joint control over Bremm. Bremm’s assets on that date were recorded at P3,900,000 with liabilities of
P900,000. Any excess of book value over cost of the investment was attributed to patent having a remaining useful life
of 10 years.

In 2013, Bremm reported net income of P190,000. In 2014, Bremm reported net income of P210,000. Dividends of 70,000
were paid in each of these two years.
16. In 2013 Wilkins sells goods for P 120,000 to Bremm. On December 31, 2013, one fourth of the goods purchased from
Wilkins had been sold by Bremm at 45% above cost). Wikins sells goods at a 45 per cent mark-up on cost. The
balance of Xylo’s Investment in Bremm, Inc. at December 31, 2013?
17. The balance of Wilkin’s Investment in Bremm, Inc. at December 31, 2013?
18. Wilkins recognize income from jointly controlled entity for the year ended December 31, 2013 amounted to:
19. Xylo Wilkins recognize income from jointly controlled entity for the year ended December 31, 2013 amounted to
20. Ace Company purchases 40% of Basket Company on January 1 for P500,000 that carry voting rights at a general
meeting of shareholders of Basket Company. Ace Company and Blake Company immediately agreed to share control
(wherein unanimous consent is needed to all the parties involved) over the Basket Company. Basket reports assets on
that date of P1,400,000 with liabilities of P500,000. One building with a seven-year life is undervalued on Basket’s books
by P140,000. Also Basket’s book value for its trademark (10-year life) is undervalued by P220,000. During the year, Basket
reports net income of P94,000, while paying dividends of P35,000. What is the investment in Basket Company balance
(equity method) in Ace’s financial records as of December 31?
21. Using the same information in No. 20, the Income from Investment in Basket Company in Ace’s financial records as of
December 31?
22. Goldman Company reports net income of P145,000 each year and pays an annual cash dividend of P60,000. The
company holds net assets of P1,200,000 on January 1, 2013. On that date, Wallace Company purchases 40 percent of
the outstanding stock for P620,000, which gives it the ability to have joint control with Zimmerman Company over
Goldman. At the purchase date, the excess of Wallace’s cost over its proportionate share of Goldman’s book value
was assigned to goodwill. On December 31, 2015, what is the investment in Goldman Company balance (equity
method) in Wallace’s financial records?

23. RR and PP are combining their separate business to form a partnership. Cash and noncash assets are to be contributed
for a total capital of P 400,000. The noncash assets to be contributed and the liabilities to be assumed are:

RR PP
Book value Fair value Book value Fair value
Accounts Receivable P 20,000 P 20,000 - -
Inventories 30,000 50,000 20,000 25,000
Equipment 60,000 45,000 40,000 10,000
Accounts Payable 15,000 15,000 10,000 10,000

The partner’s capital accounts should be equal after all the contribution of assets and the assumption of liabilities. How
much cash is to be contributed by RR?
24. MM and NN entered into a partnership on March 1 , 2011 by investing the following assets:
MM NN
Cash 30,000 -
Merchandise Inventory - 90,000
Computer Equipment - 160,000
Furniture and Fixtures 200,000

The agreement between MM and NN provides that profits and losses are to be divided into 40% to MM and 60% to NN,
and that the partnership is to assume a liability on the computer equipment of P 50,000. The partners further agree that
NN is to receive a capital credit equal to her profit and loss ratio. How much cash is to be invested by NN?
25. The partnership of PP and RR was formed on March 31,2016. At that date, PP invested P 50,000 cash and office
equipment valued at P 30,000. RR invested P 70,000 cash, merchandise valued P 110,000 and furnitures valued at P
100,000, subject to a notes payable of P 50,000 ( which the partnership assumes). The partnership provides that PP and
RR 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 goodwill and the bonus method, what is the total capital of the
partnership after the formation?

26. On March 1,2016, CC and FF formed a partnership with each contributing the following assets:
CC FF
Cash 40,000 80,000
Machinery and equipment 35,000 78,000
Building - 225,000
Furniture and Fixtures 10,000 -
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 The building is subject to a mortgage loan of P 80,000, which is to be assumed by the partnership. The partnership
agreement provides that CC and FF share profits and losses 30 and 70 percent, respectively.

Assuming that the partners agreed to bring their respective capital in proportion to their respective profit and loss ratio.
How much cash is to be invested by CC?
27. CC admits DD for a partnership interest in his business. The statement of financial position of CC on November 30,2016
prior to the admission of DD shows the following :

DEBIT CREDIT
Cash P?
Accounts Receivable 96,000
Merchandise inventory 144,000
Accounts payable 49,600
CC, capital ?
It is agreed that for purposes of establishing CC’s interest, the following adjustments should be made:
a. An allowance for doubtful accounts of 2% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at P 160,000
c. Prepaid expenses of P 5,200 and accrued expenses of P 3,200 are to be recognized.
DD invested cash of P 113,640 to give him a one-third interest in the total capital of the firm. What is the capital balance
of CC before the admission of DD?

28. MM is trying to decide whether to accept a salary of P40, 000 or a salary of P28, 000 plus a bonus of 10% of net income
after salaries and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are
estimated to be P120, 000. What amount of income would be necessary so that MM would consider the choices to be
equal?
29. Adam and Eve are CPA’s who have been operating their own separate practices as sole proprietors. They decided to
combine the two firms as a partnership on January 5, 2015. The following assets were contributed by each:

Adam Eve
Cash P100, 000 P100, 000
Accounts receivables 225, 000 190, 000
Furniture and equipment 35, 000 38, 000
Computer equipment 46, 000

The partners agreed to split profits on the basis of gross cash collections from billing generated from clients. During 2015,
Adam’s clients paid the firm a total of P1, 600, 000 and Eve’s clients paid P1, 800, 000. Expenses for the year were P1,
080, 000 of which P480, 000 were attributable to Adam and P600, 000 to Eve. During 2015 Eve withdrew P750, 000 cash
for personal needs and contributed an additional computer valued at P25, 000.

What is the capital balance of Eve of December 31, 2015?

30. JJ and KK are partners sharing profits 60% and 40%respectively. The average profits for the past two years are to be
capitalized at 20% per year (for purposes of admitting a new partner) in determining the aggregate capital of JJ and
KK after adjusting the profits for the ff. items omitted from the books:

Omissions at year end 2011 2012

Prepaid expense P 1, 600 -
Accrued expense 1, 200 -
Deferred income - P1, 400
Accrued income - 1, 000

Other pertinent are as follows:

2011 2012
Net income of partnership P14, 400 P13, 600
Capital accounts end of the year
JJ 45, 400 54, 000
KK 45, 000 55, 000
The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum is:
31. MM, NN and OO partners, share profit 5:3:2 ratio. On January 1, 2012 PP admitted into the partnership with a 10% share
in profits. The old partners continue to participate in profits in their original ratio.
For the year 2012, the net income of the partnership was reported as P15, 500. However, it was discovered that the
following items were omitted in the firm’s books:

Unrecorded at the year 2011 2012

Prepaid expense P800 -
Accrued expense - P600
Unearned income 700 -
Accrued income - 500

What are the new profit and loss ratio for N, and the share of OO in the 2012 net income

32. Jaime Dizon, a partner in an accounting firm, decided to withdraw from the partnership. Dizon’s share of the
partnership profits and losses was 20%. Upon withdrawing from the partnership he was paid P74, 000 in final settlement
for his interest. The total of the partners’ capital accounts before recognition of partnership goodwill prior to Dizon’s

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 withdrawal was P210, 000. After his withdrawal the remaining partners’ capital accounts, excluding their share of
goodwill, totaled P170, 000. the implied goodwill of the firm was:

33. Cina, Doy and Eli shared profit and losses based on 5:3:2. Eli was allowed to withdraw from the partnership on 31
December 2015 with P600, 000 cash as full settlement. The condensed balance sheet of the partnership as of that date
was as follows:

Assets
Due from Eli P250, 000
Goodwill 2, 000, 000
Other assets 4, 750, 000
Total assets P7, 000, 000

Liabilities and Capital

Liabilities P2, 000, 000
Due to Doy 750, 000
Cina, capital 1, 750, 000
Doy, capital 1, 500, 000
Eli, capital 1, 000, 000
Total liabilities and capital P7, 000, 000

Using the goodwill method, the new capital balances of the remaining partners after Eli’s withdrawal are:
34. Pastor, Ramon and Sendong were partners with capital balances as of January 1, 2015, of P100, 000, P150, 000 and
P200, 000 respectively, sharing profit and losses on a 5:3:2 ratio. On July 1, 2015 Pastor withdraw form the partnership.
Partners agreed that at the time of withdrawal, certain inventories had to be revalued at P70, 000 from its cost of P50,
000. for the 6 month period ending June 30, 2015, the partnership generated a net income of P140, 000. further, partners
agreed to pay Pastor P195, 000 for his interest and that the remaining partners’ capital accounts, would be adjusted for
whatever goodwill the settlement would generate. The payment to Pastor included a goodwill of:

35. The condensed balance sheet of the partnership of Edong, Fredo and Godo with corresponding profit and loss sharing
percentage as of June 30, 2015 was as follows:

Net assets P400, 000

Edong, capital (50%) P200, 000

Fredo, capital (30%) 120, 000
Godo, capital (20%) 80, 000
P400, 000

As of said date, Edong retired from the partnership. By mutual agreement, he was paid P210, 000 for his interest in the
partnership. The total implied goodwill was to be recorded. After Edong’s retirement, the total net assets of the
partnership was:

36. Lina, Mina and Nina were partners with capital balances on January 2, 2015 of P300, 000, P200, 000 and P100, 000,
respectively. On July 1, 2015 Lina retires from the partnership. On the date of retirement the partnership net loss is P60,
000 and the partners agreed that certain asset is to be revalued at P90, 000 from its original cost of P50, 000. The
partners agreed further to pay Lina P190, 000 in settlement of her interest. The remaining partners continue to operate
under a new partnership, MN partnership.

What is the total capital of MN partnership?

37. Rita, Sisa and Tina are partners with capital balances on June 30, 2015 of P60, 000, P60, 000 and P40, 000, respectively.
Profits and losses are shared equally. Tina withdraws from the partnership. The partners agree that Tina is to take certain
furniture at their second hand value of P2, 800 and cash for the balance of her interest. The furniture is carried on the
books as fully depreciated.

The amount of cash to be paid to Tina and the capital balances of the remaining partners after the retirement of Tina
are:
Cash Rita capital Sisa capital

38. Capital balances and profit and loss sharing ratios of the partners in the BIG Entertainment Gallery are as follows:

Betty, capital (50%) P140, 000

Iggy, capital (30%) 160, 000
Grabby, capital (20%) 100, 000
Total P400, 000

Betty needs money and agrees to assigned half of her interest in the partnership to Yessir for P120, 000 cash. Yessir pays
directly to Betty. Yessir does not become a partner.

What is the total capital of the BIG Entertainment immediately after the assignment of the interest to Yessir?

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39. The partnership of AA, BB, and CC was dissolved on June 30, 2011 and account balances after non-cash assets were
converted into cash on September 1, 2011 are:

Assets Liabilities and Equity

Cash P60, 000 Accounts payable P120, 000
AA, capital (30%) 100, 000
BB, capital (30%) (60, 000)
CC, capital (40%) (100, 000)

Personal assets and liabilities of the partners at September 1, 2011 are:

Personal Personal
Assets Liabilities
AA P80, 000 P90, 000
BB 100, 000 61, 000
CC 192, 000 80, 000

If CC contributes P70, 000 to the partnership to provide cash to pay the creditors, what amount of AA’s P100, 000
partnership equity would appear to be recoverable?

40. After all partnership assets were converted into cash and all available cash was distributed to creditors, the ledger of
the Daniela, Erika, and Fredline partnership showed the following balances:

Debit Credit
Accounts payable P20, 000
Daniela, capital (40%) 10, 000
Erika, capital (30%) 70, 000
Fredline, capital (30%) P100, 000 ________
P100, 000 P100, 000
Percentages indicated are
residual profit and loss sharing ratios. Personal assets and liabilities of the partners are as follows:

Daniela Erika Fredline

Personal assets P50, 000 P50, 000 P100, 000
Personal liabilities 45, 000 40, 000 40, 000

The partnership creditors proceed against Fredline for recovery of their claims, and the partners settle their claims
against each other.

How much would Erika receive?

41. The August, Albert, and Gerry partnership became insolvent on January 1, 2011, and the partnership is being liquidated
as soon as practicable. In this respect the following information for the partners has been marshaled:

Capital Balances Personal Assets Personal Liabilities

August P70, 000 P80, 000 P50, 000
Albert (60, 000) 30, 000 50, 000
Gerry (30, 000) 70, 000 30, 000
Total P(20, 000)

Assume that residual profits and losses are shared equally among the three partners. Based on this information,
calculate the maximum amount that August can expect to receive from the partnership liquidation is:

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