Partnership Formation

On April 1, 2019, Peter and James formed a partnership, agreeing to share for profits and losses in the ratio of 2:3, respectively. Peter
invested land costing P25,000. The fair value of land is P50,000. James invested P30,000 cash.
1. Under Full Accounting Method, how much should be the capital balance of Peter and James after the formation?
a. P25,000 ; 30,000 c. P50,000 ; 55,000
b. P75,000 ; 30,000 d. P50,000 ; 30,000

2. Under Bonus Method, how much should be the capital balance of Peter and James after the formation?
a. P50,000 ; 30,000 c. P32,000 ; 30,000
b. P50,000 ; 25,000 d. P32,000 ; 48,000

3. On March 1, 2019, Mary and Joy formed a partnership with each contributing the following assets:
Mary Joy
Cash…..…………………………………………….. P300,000 P 700,000
Machinery and equipment………………. 250,000 750,000
Building …………………………………………… --- 2,250,000
Furniture and Fixtures…………………….. 100,000 ---
The building is subject to mortgage of P800,000, which is to be assumed by the partnership. The partnership also agreed that Mary
and Joy share profits and losses 30% and 70%, respectively. After the formation, the balance of Joy’s Capital should be:
a. P3,700,000 c. P3,050,000
b. P3,140,000 d. P2,900,000

4. Same information in number 3, assumed that the mortgage is not assumed by the partnership. After the formation, the total
partnership capital should be:
a. P4,350,000 c. P4,300,000
b. P3,550,000 d. P3,500,000

The partnership of Luke and James was formed on January 1, 2019. On this date, Luke invested P150,000 cash and office equipment
with a fair value of P30,000. James invested P170,000 cash, merchandise valued at P100,000, and furniture valued at P100,000 subject
to notes payable of P50,000, which the partnership assumes. The partnership agreements provides Luke and James share profits and
losses 25:75, respectively. The agreement further provides that the partners should have a capital credit equal to P/L ratio.
5. How much will be credited to Luke and James, respectively upon formation?
a. P412,400 ; 137,500 c. P125,000 ; 375,000
b. P180,000 ; 320,000 d. P375,000 ; 125,000

On April 1, 2019, Shania and Lawrence decided to combine their businesses and form a partnership. Their balance sheet on this date,
before adjustments, is given below:
Shania Lawrence
Cash………………………………. P180,000 P70,500
Accounts Receivable …….. 370,000 270,000
Inventory………………………. 600,000 390,000
Furniture and fixtures- net.. 600,000 180,000
Office Equipment………….. 230,000 50,500
Prepaid expenses …………. 12,750 6,000
TOTAL…………………………… P1,992,750 P967,000

Accounts Payable ……….. P911,500 P360,000

Capital ………………………… 1,081,250 607,000
TOTAL………………………….. P1,992,750 P967,000

Shania and Lawrence agreed the necessary adjustment stated below:

a) Provides 5% allowance for doubtful accounts on each Accounts Receivable.
b) Inventories should be recognized only at at 80% of their book values.
c) Furniture and Fixtures of Shania is overvalued by P25,000 while the Equipment of Lawrence is overvalued by P11,500.
d) Prepaid expenses of P6,000 for Shania and P2,000 for Lawrence is to be recognized.
e) Accrued expenses of P3,000 for Shania and P1,000 for Lawrence is to be recorded.

6. Assumed that the parties agreed that Lawrence will make additional cash investment to give her 50% interest in the firm, how much
is the total assets after the formation of the partnership?
a. P2,697,000 c. P3,117,000
b. P3,113,000 d. P3,117,000

7. Assumed that Shania and Lawrence agreed that their Profits and Losses ratio is 60:40 respectively. They also agreed that their capital
credit should be equal to P/L ratio. What must be the capital of Lawrence. (Use Transfer of Capital Method)
a. P855,450 c. P570,300
b. P505,000 d. P920,750

On August 1, 2018, Renzo and Zoren decided to combine their businesses and form a partnership. Their balance sheets on this date
before adjustments follow:
Renzo Zoren
Cash P18,000 P7,500
Accounts Receivable 37,000 27,000
Inventories 60,000 39,000
Furniture & Fixtures (net) 60,000 18,000
Office Equipment 23,000 5,500
Prepaid expenses 12,750 6,000
TOTAL P210,750 P103,000

Accounts Payable P91,500 P36,000

Capital 119,250 67,000
TOTAL P210,750 P103,000

The parties agreed that profit and loss be shared 40:60, and that the following adjustments should be considered prior to formation.
a. Provides 5% allowance for doubtful accounts on each Accounts Receivable.
b. Inventories should be recognized only at at 80% of their book values.
c. Furniture and Fixtures of Renzo is undervalue by P25,000 while the Equipment of Zoren is undervalued by P3,500.
d. Prepaid expenses of P6,000 for Renzo and P2,000 for Zoren is to be recognized.
e. Accrued expenses of P3,000 for Renzo and P1,000 for Zoren is to be recorded.

The first 5-month of operation was successful and each partner withdraw P20,000 on December 1, 2018 in anticipation of profit. The
operation resulted to a profit of P165,000.
8. The capital balance of Zoren and Renzo on December 31, 2018 is:
a. P124,300 ; 196,450 c. P179,400 ; 141,350
b. P141,350 ; 179,400 d. P156,400 ; 135,850
Partnership Operation

9. The Partnership has the following accounting amounts:

Sales: P70,000
Cost of Goods Sold: P40,000
Operating Expenses: P10,000
Salary allocations to partners: P13,000
Interest paid to banks: P2,000
Partners’ withdrawals: P8,000
The partnership net income (loss) is?
a. P20,000 c. 5,000
b. 18,000 d. (3,000)

Genesis, Exodus and Leviticus formed a partnership on January 1, 2019 with the following investment:
Genesis - P500,000 Exodus - P600,000 Leviticus - P900,000
During the year, the following transactions took placed:
Additional Investment:
April 1: Genesis - P100,000
Withdrawals:
October 1: Exodus - P200,000
October 31: Leviticus - P100,000
The Partnership reported net income of P120,000 in 2019.

10. Assumed that the partners agreed to allocate net income based on their Initial Investment, How much is the share of Genesis,
Exodus and Leviticus in the net income?
a. Genesis - P30,000; Exodus - P36,000; Leviticus - P60,000
b. Genesis - P30,000; Exodus - P40,000; Leviticus - P50,000
c. Genesis - P36,000; Exodus - P50,000; Leviticus - P44,000
d. Genesis - P30,000; Exodus - P36,000; Leviticus - P54,000

11. Assumed that the parties agreed to allocate net income based on their Ending Capital, How much are capital balances of Genesis,
Exodus and Leviticus.
a. Genesis - P40,000; Exodus - P26,667; Leviticus - P53,333
b. Genesis - P640,000; Exodus - P426,667; Leviticus - 853,333
c. Genesis - P630,000; Exodus - 520,000; Leviticus - P820,000
d. Genesis - P30,000; Exodus - P36,000; Leviticus - P54,000

12. Assumed that the parties agreed to allocate net income based on their Weighted Average Capital, How much is the share of
Genesis, Exodus and Leviticus in the net income?
a. Genesis - P30,000; Exodus - P36,000; Leviticus - P60,000
b. Genesis - P30,000; Exodus - P40,000; Leviticus - P50,000
c. Genesis - P36,157; Exodus - P28,297; Leviticus - P44,000
d. Genesis - P36,157; Exodus - P28,297; Leviticus - P55,546

Peter, James and John formed a partnership July 1, 2019 with the following investment:
Peter P 200,000
James 300,000
John 450,000
The partnership agreements are as follows:
 Annual salaries to partners: P60,000 for Peter, P48,000 for James and P36,000 for John
 10% interest on average capital
 10% bonus for Peter based on net income after salaries and interest
Additional information:
 On October 1, 2019, Peter made an additional investment of P60,000
 John invested P30,000 on December 1, 2019.
The Partnership Results a net loss of P300,000 at the end of the year.

13. How much is the share of Peter, James and John in the net loss?
a. P 88,684.21 ; P 133,026.32 ; P 199,539.47
b. P(47,184) ; P(94,026) ; P(158,789)
c. P(56,000) ; P(94,026) ; P(111,122)
d. P(46,021) ; P(95,092) ; P(121,222)

On January 1, 2019, Merylle and Ellaine are partners who agreed to share profits and losses in the following manner:

Merylle Ellaine
Annual Salaries P 25,000 P 15,000
Interest on average capital 5% 10%
Bonus (Based on net income
After salaries & interest) 10%
Remainder 50% 50%

During the the current year, the partnership’s result of operation was P275,000 profit before any deduction. Merylle and Ellaine
average capital balances for the year are P600,000 and P300,000, respectively.
14. Determine the share of Merylle and Ellaine in the net income?
a. P197,500 ; 77,500 c. P151,250 ; 123,750
b. P205,000 ; 70,000 d. P147,875 ; 127,125

On December 31, 2018, Joshua and Caleb have capital balances of P40,000 and P32,00, respectively. On April 1, 2019, Joshua invested
an additional P40,000 while she withdraw P10,000 at the beginning of 4th quarter. Caleb also made an additional invesment of P30,000
and withdrew P2,000 on May 1. Joshua is the managing partner and she will receive a bonus equal to 10% of reported net income.
Both partners shall receive 10% interest n their beginning capital, after which, any remainder shall be divided in the ratio of capital
before distribution of net income. The net income of the partnership for 2019 is P60,000.
15. Determine the capital of Joshua and Caleb after distribution of net income?
a. P105,200, P84,800, respectively c. P98,347, P74,820, respectively.
b. P104,818, P87,182, respectively d. P106,000, P112800, respectively

16. Majoy is trying to decide whether to accept the salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after
salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be
P100,000. What amount of income would be necessary so that Majoy would consider the choices to be equal?
a. P165,000 c. P265,000
b. P290,000 d. P305,000

17. Assumed that the Bonus is based of net income after salaries but before bonus, what amount of income would be necessary so
that Majoy would consider the choices to be equal?
c. P275,000 c. P285,000
d. P290,00 d. P305,000

18. Jolly, a partner in the Mcdolly Partnership, has a 30% participation In partnership profits and losses. Jolly’s capital account has a
net decrease of P1,200,000 during the calendar year 2018. During 2018, Jolly withdrew P2,600,000 (charged against his capital account)
and contributed property valued at P500,000 to the partnership. What was the net income of the Mcdolly Partnership for the year
2018?
a. P900,000 c. P3,000,000
b. P4,666,667 d. P11,000,000
19. Abraham, Joshua and Moses are partners with average capital balances during 2019 of P360,000, P180,000 and P120,000,
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P90,000 to Abraham and
P60,000 to Moses, the residual profit or loss is divided eqully. In 2019, the partnership sustained a P99,000 loss before interest and
salaries to partners. By what amount should Abraham’s capital account change?
a. P21,000 increase c. P105,000 decrease
b. P33,000 decrease d. P126,000 increase

20. MM, NN and OO are partners with average capital balances during 2019 of P472,500, P238,650 and P162,350, respectively. The
partners receive 10% interest on their average capital balances. After deducting salaries of P122,325 to MM and P82,625 to OO, the
residual profits or losses is divided equally.
In 2019, the partnership had a net loss of P125,624 before the interest and salaries to partners.
By what amount should MM’s and OO’s capital account change? – Increase (decrease)
MM OO MM CC
a. P30,627 P(40,448) c. P(40,844) P31,235
b. P29,476 P17,536 d. P28,358 P32,458

21. The same information in Number 20, except the partnership had a net loss of P125,624 after the interest and salaries to partners,
by what amount should NN’s capital account change – increase (decrease)?
a. P(115,443) c. P(41,875)
b. P23,865 d. P(18,010)

Partnership Dissolution
22. On June 30, 2108, the capital balances of MacDoh Partnership is summarized below:
Mac Capital P 90,000
Doh Capital 60,000
Mac and Doh share profit and losses at a 60:40 ratio, respectively. They agreed to admit Nald as a new partner, who purchases 1/8 of
Mac and Doh for P25,000. What is the amount of Nald’s capital to be taken up after the admission?
a. P18,750 c. P25,000
b. P12,500 d. P31,250

23 The same information in Number 22, the personal gain (loss) of Mac through admission is ?
a. P3,125 c. P3,750
b. P2,500 d. P6,250

24. The same information in Number 22, how should the P25,000 paid by Nald be divided between Mac and Doh?
a. Mac – P15,000 ; Doh – P10,000 c. Mac – P10,000 ; Doh- P15,000
b. Mac – P12,500 ; Doh – P12,500 d. Mac – P11,250 ; Doh – P7,500

25. The same information in Number 22, assumed that the asset will be revalued. How much is the capital balance of Mac after the
admission?
a. P70,000 b. P105,000 c. P25,000 d. P100,625

26. Ja , Lee and Bi are partners in a JaLeeBi Partneship and divide profits and losses in the ratio of 6:3:1, respectively. Their capital
balances at December 31, 2018 are as follows:

Ja Capital P 252,000
Lee Capital 126,000
Bi Capital 42,000
The partners agree to sell to Bida the 20% of their respective capital and profit and loss interest for a total payment of P90,000. The
payment by Bida is to made directly to the individual partners. The capital balances of Ja, Lee and Bi, respectively after the admission
of Bida are:
a. P198,000; P99,000; P33,000 c. P216,000; P108,000; P36,000
b. P210,600; P100,800; P33,600 d. P255,600 P127,800; P42,600

27. Ruth and Jethro are partners who share income and loss in the ratio 2:3 respectively. The partners agree to admit Samuel as a
partner upon investing P150,000 cash for a one-fifth interest. Assets of the partnership are fairly valued except for a parcel of land
that is overvalued by P150,000. Net assets of the partnership are to be revalued, and Samuel is to be admitted. The capital accounts
of Ruth and Jethro are P450,000 and P300,000, respectively.
Determine the capital to be credited to Samuel.
a. P150,000 c. P210,000
b. P180,000 d. P120,000

28. What is the new Profit and Loss ratio of Ruth, Jethro and Samuel?
a. 2:3:1 c. 1.6:2.4:5
b. 1.6:2.4:1 d. 2:3:5
Questions for number 29 & 32
A, B and C have capital balances of P112,000, P130,000 and P58,000, respectively, and share profits in the ratio 3:2:1. D invest cash in
the partnership for a one-fourth interest.

29. Assume D receives a one-fourth interest in the assets of the partnership and D is credited with P20,000 of the bonus from the old
partners that is recognized upon D’s admission. How much cash D invest?
a. P73,333 c. P93,000
b. P100,000 d. P80,000

30. Assume D receives a one-fourth interest in the assets of the partnership and B is credited with P15,000 of the bonus from D, how
much cash D invest?
a. P115,000 c. P160,000
b. P105,000 d. P120,000

31. Assume that D contributed P90,000 cash in the partnership for one-fourth interest. How much are the capital balances of A, B, C
and D after the admission D?
a. A- P108,250 ; B – P127,500 ; C – P56,750 ; D – P97,500
b. A – P112,000 ; B – P130,000 ; C – P58,000 ; D – P90,000
c. A- P108,250 ; B – P127,500 ; C – P56,750 ; D – P90,000
d. A – 112,000 ; B – P127,500 ; C – P56,750 ; D – P97,500

32. Assume that D invested P90,000 cash in the partnership for one-fourth interest. The parties also agreed that assets will be revalued.
How much is the capital of C after the admission of D?
a. P63,000 c. P53,000
b. P58,000 d. P120,000
On June 1, 2018, the statement of financial position for the partnership of Keigh, Ef and Sy, together with their respective profit and
loss ratios, we as follows:

Assets P 180,000 Keigh, loan P 9,000

Keigh, capital (20%) 42,000
Ef, capital (20%) 39,000
Sy, capital (60%) 90,000
P 180,000
Keigh decided to retire from the partnership. It was agreed that the partnership would pay Keigh P61,200 cash for Keigh’s partnership
interest, including loan which is to be repaid in full.

33. What is the balance of Sy’s capital account after the retirement of Keigh?
a. P82,350 b. P36,450 c. P84,900 d. P87,960

On June 1, 2018, the statement of financial position for the partnership of Keigh, Ef and Sy, together with their respective profit and
loss ratios, we as follows:

Assets P 180,000 Keigh, capital (20%) 42,000

Ef, capital (20%) 39,000
Sy, capital (60%) 90,000
P 180,000
Keigh decided to retire from the partnership. It was agreed that the partnership would pay Keigh P50,000 cash for Keigh’s partnership
interest.

34. Assumed that there is asset revaluation. After the retirement of Keigh, what is the balance of Ef’s capital account?
a. P31,000 b. P47,000 c. P32,000 d. P40,000

35. Assumed that the assets are to be adjusted to their fair value of 216,000 at June 1, 2018. What is the balance of Sy’s capital account,
after the retirement of Keigh?
a. P89,400 b. P38,800 c. P89,600 d. P90,000

Partnership Liquidation:
Questions for Number 36 - 39
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash P 16,000 Liabilities P 100,000
Noncash assets 434,000 Abrams, capital (30%) 80,000
Bartle, capital (30%) 120,000
Creighton, capital (40%) 150,000
TOTAL P 450,000 P 450,000
All noncash assets was sold for P134,000. And also, liquidation expenses was paid for P10,000

36. How much is the loss in realization?

a. P400,000 b. P290,000 c. P300,000 d. P310,000
37. How much cash is available to partners for distribution?
a.P40,000 b. P150,000 c. P214,000 d. P134,000

38. Assumed that all partners is solvent, how much cash will received by Bartle and Creighton?
a. P27,000 ; P26,000 b. P21,429 ; P18,571 c. P9,000 ; P12,400 d. P0 ; P26,000

39. Assumed that all partners is insolvent , how much cash will received by Bartle and Creighton?
a. P27,000 ; P26,000 b. P21,429 ; P18,571 c. P9,000 ; P12,400 d. P0 ; P26,000

The balance sheet of Carlos, Prankie and Ariel, partners in Merchandising business, before liquidation is given below:

Cash P 360,000
Noncash assets 1,785,000
Liabilities 1,000,000
Carlos Capital (50%) 460,000
Prankie Capital (30%) 365,000
Ariel Capital (20%) 320,000
On the first month of liquidation, certain assets with a book value of P1,200,000 were sold for P960,000. Liquidation expenses of
P30,000 were paid, and additional expenses were anticipated. Liabilities amounting to P362,000 were paid, and suffiecient cash was
retained to insure the payment to creditors before making payments to partners. In the first payment of cash to partners, Prankie
received P107,000.
40. The total cash distributed to the partners in the first settlement and the amount of cash withheld for anticipated expenses and
unpaid liabilities amount to:
a. P290,000 ; P368,000 c. P285,000 ; P638,000
b. P290,000 ; P643,000 d. P285,000 ; P643,000

On December 31, 2018, the Partnership of Michael, Raffy and Reymark have the following accounts with their balances:

Michael Capital, 50% P 250,000

Raffy Capital, 30% 200,000
Reymark Capital, 20% 195,000
Loans Payable- Raffy 20,000
Accounts Receivable- Michael 25,000
Loans Payable- Reymark 36,000
Because of unsuccessful operation for the last 2 years, the partners decided to liquidate after closing the books in December 31,
2018. On this date, total assets amounted to P1,256,000 including cash of P81,000. During liquidation process, all the non-cash
assetes were taken by its competitors. Liabilities were settled, liquidation expenses of P15,000 were paid and the balance was
distributed to the partners. Ultimately, Robert received P175,000 in the final settlement.
41. How much was the total liabilities of the partnership to outsiders?
a. P611,000 b. P672,000 c. P555,000 d. P580,000

Hara, Ives, and Jack are in the process of liquidating their partnership. Since it may take several months to convert the other assets
into cash, the partners agree to distribute all available cash immediately, except for P10,000 that is set aside for contingent
expenses. The balance sheet and residual profit and loss sharing percentages are as follows:

Cash P 400,000 Accounts Payable P 200,000

Other Assets 200,000 Hara, Capital (40%) 135,000
Ives, Capital (30%) 216,000
Jack Capital (30%) 49,000
TOTAL ASSETS P 600,000 TOTAL LIAB/EQUITY P 600,000
42. How much cash should Ives receive in the first distribution?
a. P146,000 c. P153,000
b. P147,000. D. P156,000

Jade, Kahl, and Lane are in the process of liquidating their partnership. Lane has agreed to accept the inventory, which has a fair value
of P60,000, as part of her settlement. A balance sheet and the residual profit and loss sharing percentages are as follows:

Cash P 198,000 Accounts Payable P 149,000

Inventory 80,000 Jade, Capital (40%) 79,000
Plant assets 230,000 Kalh, Capitaal (40%) 140,000
Lane, Capital (20%) 140,000
TOTAL ASSETS P 508,000 TOTAL LIAB/EQUITY P 508,000

43. If the partners then distribute the available cash, Lane will receive?
a. P23,000. c. P30,000
b. P29,000 d. P34,000.

The condensed balance sheet and profit and loss ratios of the partnership of Bean, Dean, and Jean are as follows:
Cash P 1,125,000 Liabilities P 2,625,000
Receivable from Bean 375,000 Payable to Jean 500,000
Other assets 10,250,000 Bean, Capital (40%) 3,750,000
Dean, Capital (30%) 2,500,000
Jean, Capital (30%) 2,375,000
44. Partners agree to liquidate and all non-cash assets were sold for P7,500,000. How much of the available cash will go to Bean?
a. P3,750,000 b. P2,275,000 c. P2,650,000 d. P2,125,000

Dolly, Folly and Golly have capital balances of P800,000; P1,000,000; and P360,000, respectively and profit sharing ratios of 4:2:1,
respectively.
45. If dolly received P160,000 upon liquidation of the partnership, the total amount received by all the partners was:
a. P2,160,000 b. P1,120,000 c. P1,040,000 d. P280,000

The following condensed balance sheet is presented for the partnership of Nick, Pick, and Nick, who share profits and losses in the
ratio 4:3:3, respectively:
Cash P 45,000 Accounts Payable P 105,000
Other assets 415,000 Rick, loan 15,000
Nick, loan 10,000 Nick, Capital 155,000
Pick, Capital 100,000
Rick, Capital 95,000
P 470,000 P 470,000
.
46. Assume that the assets and liabilities are fairly valued on the balance sheet and that the partnership decides to admit Tick as a
partner, with a 20% interest. No goodwill or bonus is to be recorded. How much should Tick contribute in cash or other assets?
a. P70,000 b. P71,00 c. P87,500 d. P88,750

47. Assume that instead of admitting a new partner, the partners decide to liquidate the partnership. If the other assets are sold for
P350,000, how much cash should be distributed to Nick?
a. P115,000 b. P119,000 c. P129,000 d. P155,000
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash P 16,000 Liabilities P 150,000
Noncash assets 434,000 Abrams, capital 80,000
Bartle, capital 90,000
Creighton, capital 130,000
TOTAL P 450,000 P 450,000
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be P12,000.

48. After the liquidation expenses of P12,000 had been paid and the noncash assets sold, Creighton had a deficit of $8,000. For what
amount were the noncash assets sold?
a. P170,000 b. P264,000 c. P134,000 d. P190,000