PARCOR 1. Partners A and B have a profit and loss agreement with the following provisions: salaries of P30,000and P45,000 for A and B, respectively; a bonus to A of 10% o f net income after salaries and bonus; and interest of 10% on of P20,000 and P35,000 for A and B, B , respectively. One-third of any remaining profits are allocated to A and the balance to B. If the partnership had net income of P53,000, how much should be allocated to partner A? a. 18250 b. 22833 c. 21833 d. None 2. Mark and Jeff form a partnership. Mark contributes into the partnership personal equipment that he used at home in business-related activities. He paid P10,000 for the equipment two years ago. Mark claimed P1,250 depreciation expense e ach year on his personal tax re turn. Its replacement cost (and fair market value) is P9 ,000. The partners, after reviewing BIR rules, assigned the equipment a remaining life of six years. For financial reporting purposes, at what amount should the equipment be recorded in the partnership's general ledger? a. 6750 b. 9000 c. 7500 d. 10000 3. Max, Alfred and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is P10,000, P30,000 and P50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be P 200,000. Land with a book value of P30,000 has a fair value of P45,000. Max has agreed to receive P20,000 in exchange for her partnership interest. What amount should land be recorded on the partnership books? a. 20,000 b. 30,000 c. 45000 d. 50000 4. James, Aljohn, and Jane formed a partnership on January 1, 2013, with investments of P100,000, P150,000, and P200,000, respectively. For division of income, they agreed to (1) interest o f 10% of the beginning capital balance each year, (2) annual compensation of P10,000 to Aljohn, and (3) sharing the remainder of the income or loss in a ratio of 20% for James, and 40% each for Aljohn and Jane. Net income was P150,000 in 2 013 and P180,000 in 2014. Each partner withdrew P1,000 for personal use every month during 2013 and 2014. What was James's share of income for 2013? a. b. c. d.
29K 53K 58K 63K
5. At the beginning of the current year, Sol Company declared a 10% stock dividend. The market price of the entity’s 30,000 outstanding shares of 20par value was 90 per share on that date. The stock dividend was distributed on July 1 when the mar ket price was 100. What amount should be credited to share premium? a. 210K b. 240K c. 270K d. 300K 10% x 30,000 = 3,000 x 90 = 270,000 3,000 x 20 = (60,000) 210,000
6. Rudd Company had 700K ordinary shares authorized and 300K shares outstanding on January 1, 2016
Jan 31 – Declared 10% stock dividend
June 30 – Purchased 100K shares
Aug 1 – Reissued 50K shares
Nov 30 – Declared 2-for-1 share split
On December 31, 2016, how many shares are outstanding? a. b. c. d.
560K 600K 630K 660K
300K + 30K (stock dividend) – 50K (TS) x 2 = 560K 7. Lime Company received a donation of 2K shares with 50 par value from a shareholder. On t hat date, the share market value was 350. The shares were originally issued for 250 per share. What is the decrease in shareholders’ equity as a result of the donation? a. 700K b. 500K c. 200K d. 0 8. Mara Company reported the following:
Authorized Share Capital
5,000,000
Unissued Share Capital
2,000,000
Share Premium
500,000
Retained Earnings appropriated
600,000
Retained Earnings unappropriated
300,000
Treasury Shares (at cost)
100,000
What is the total SHE? a. b. c. d.
7,700,000 8,500,000 8,300,000 4,300,000
5M – 2M + 500K + 600K + 300K – 100K = 4.3M 9. Arzadon, Ballada, and Castro are partners. Their contributions are as follows: Arzadon, 600K; Ballada, 400K; and Castro, services. They agreed to divide profits and losses in the ratio of 35:25:40. How should a profit of 100K be shared by the partners? a. A- 30K; B- 20K; C- 50K b. A- 35K; B- 25K; C- 40K c. A- 35K; B- 35K; C- 30K d. A- 60K; B- 40K; C- none
10. Jose, Maria, and Jenny are in the process of liquidating their partnership. Jenny 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
198,000
Accounts payable
149,000
Inventory
80,000
Jose, capital (40%)
79,000
Plant assets
230,000
Maria, capital (40%)
140,000
Jenny, capital (20%)
140,000
Total liab./equity
508,000
Total assets
508,000
If the partners then distribute t he available cash, Jenny will receive a. b. c. d.
23,000 34,000 30,000 29,000
11. XX, YY and ZZ are partners who share profits and losses in the ratio of 5:3:2, respectively. They agree to sell a 25% of their respective capital and profits and losses ratio for a toal payment directly to the partners in the amount og P140,000. They agree that goodwill of P60,000 is to be recorded prior to admission of AA. The condensed balance sheet of the XYZ partnership is as follows: Cash
60,000
Liabilities
100,000
Non cash assets
540,000
XX, capital
250,000
YY, capital
150,000
ZZ, capital
100,000
Total
600,000
Total
600,000
The capital of XX, YY and ZZ r espectively after the payment and admission of AA are: a. b. c. d.
280,000, 168,000 and 112,000 250,000, 150,000 and 100,000 187,500,112,500 and 75,000 210,000, 126,000 and 84,000
12. On June 30, 2006, the Garry, Michi, and George partnership had the following fiscal year-end balance sheet: Cash
4,000
Accounts payable
7,000
Accounts receivable
6,000
Loan from Michi
5,000
Inventory
14,000
Garry, capital(20%)
14,000
Plant assets-net
12,000
Michi, capital(30%)
10,000
Loan to Garry
6,000
George, capital(50%)
6,000
Total assets
42,000
Total liab./equity
42,000
The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2006,. and began t he liquidation process. During July the following events occurred: A
Receivables of P3,000 were collected.
B
The inventory was sold for P4,000.
C
All available cash was distributed on
D
July 31, except for P2,000 that was set aside for contingent expenses.
How much cash would George rece ive from the cash that is available for distribution on July 31? a. b. c. d.
1,000 2,000 600 0
13. The partnership of AA, BB and CC was dissolved on June 30, 2010 and account balances after non cash assets were converted into cash on September 1, 2010 are: Assets Cash
Liabilities 50,000
Accounts payable
120,000
AA, capital (30%)
90,000
BB, capital (30%)
(60,000)
CC, capital (40%)
(100,000)
Personal assets and liabilities of the partners at September 1, 2010 are: Personal assets
Personal liabilities
AA
80,000
90,000
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 P90,000 would appear would appear to be recoverable? a. b. c. d.
81,000 79,000 90,000 None
14. Presented below is the condensed balance sheet of the partnership of KK, LL and MM who share profits and losses in the ratio of 6:3:1, r espectively: Cash
85,000
Liabilities
80,000
Other assets
415,000
KK, capital
252,000
LL, capital
126,000
MM, capital
42,000
Total
500,000
Total
500,000
The partnership agree to sell NN 20% of their respective capital and profit and loss interest for a total payment of P90,000. The payment by NN is to be made directly to the individual partners. The capital balances of KK, LL and MM respect ively after admission of NN are: a. b. c. d.
216,000, 108,000, 36,000 255,600, 127,800, 42,600 198,000, 99,000, 33,000 201,600, 100,800, 33,600
15. On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partners capitals are to based o n net assets transferred after the following adjustments. Profit & loss are allocated equally. BB’s inventory is to be increased by P4,000, an allowance for doubtful account of P1,000 and P1,500 are to be set up in books of AA and BB, respectively; and accounts payable of P4,000 is to be recognized in AA’s books. The individual trial balances on August , before adjustments, follow: AA
BB
Assets
75,000
113,000
Liabilities
5,000
34,500
What is the capital of AA and BB after the above adjustments? a. b. c. d.
AA (75,000); BB (81,000) AA (65,000); BB (81,000) AA (68,750); BB (77,250) AA (65,000); BB (76,000)
16. On June 30, 2006, the Garry, Michi, and George partnership had the following fiscal year-end balance sheet: Cash
4,000
Accounts payable
7,000
Accounts receivable
6,000
Loan from Michi
5,000
Inventory
14,000
Garry, capital(20%)
14,000
Plant assets-net
12,000
Michi, capital(30%)
10,000
Loan to Garry
6,000
George, capital(50%)
6,000
Total assets
42,000
Total liab./equity
42,000
The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2006,. and began t he liquidation process. During July the following events occurred: a
Receivables of P3,000 were collected.
b
The inventory was sold for P4,000.
c
All available cash was distributed on
d
July 31, except for P2,000 that was set aside for contingent expenses.
The cash available for distribution to the partners on July 31, 2006 is a. b. c. d.
4,000 2,000 7,000 11,000
17. Michael, Gabriel, and Raphael are partners sharing profits on a 5:3:2 ratio. On January 1, 2014, Joshua was admitted into the partnership with a 20% share in profits. The old partners continue to participate in profits in their original ratios. For the year 2014, the partnership book showed a net income of P2 5,000. It was disclosed, however, that the following errors were committed: 2013 Accrued expenses not recorded at year-end
1,200
2014
Inventory overstated
3,100
Purchases not recorded, for which goods have been received inventories
2,000
Income received in advance not adjusted
1,500
Unused supplies not taken up at year-end
900
The share of partners Michael in the 2014 corrected net income is: a. b. c. d.
11,750 10,000 12,500 9,400
18. NN, OO, PP and GG, partners to a law firm, shares profits at the ratio of 5:3:1:1. On June 30, relevant partners’ accounts follow: Advances (DR)
Loans (CR)
Capital (CR)
NN
-
20,000
160,000
OO
-
40,000
120,000
PP
18,000
-
60,000
GG
10,000
-
100,000
On this day, cash of P72,000 is declared as available for distribution to partners as profits. Who among the partners will benefit from the P72,000 cash distribution? a. b. c. d.
OO and GG NN and OO PP and GG All equally
19. PP, QQ and RR, partners to a firm, have capital balances of P11,200, P13,000 and
P5,800, respectively, and share profits in the ratio of 4:2:1. Prepare a schedule showing how available cash will be given to the partners as it becomes available. Who among the partners shall be paid first with an available cash of P1,400? a. b. c. d.
PP QQ RR No one
20. A partner has a capital balance of 400,000 from Jan 1 – May 31, 500,000 from June 1 – Sept 30, and 600,00 ‘til the end of December. The average capital balance is? a. 483,333
b. 485,000 c. 491,600 d. 500,000 (400K x 5/12) + (500K x 4/12) + (600K x 3/12) = 483,333 21. If a partnership has a profit of 44K and Partner Garcesa is to be allocated a bonus of 10% of profit after bonus. His bonus would be? a. 3,600 b. 4,400 c. 4,000 d. 0 44K / 110% x 10% = 4K 22. a. b. c. d. 23.
A 1:3:2 ratio is the same as 10%;30%;20% 1/10;3/10;2/10 20%;50%30% 1/5;3/5;2/5 Digao Corp. declared the regularly quarterly dividends of P2 per share. Digao issued 12K shares and subsequently reacquired 2K shares. What is the amount of dividends? a. 24K b. 20K c. 28K d. 4K 12K – 2K x 2 = 20K 24. If Win Corporation has 80K ordinary shares authorized, 3 0K unissued ordinary shares, and holds 4K as treasury shares. What is the total number of shares outstanding? a. 46,000 b. 26,000 c. 34,000 d. 30,000 80K – 30K – 4K = 46K 25. The partnership agreement of Flynn, Gant, and Hill allows G ant a bonus of 10% of income after the bonus, salaries of P30,000 per partner and interest of 6% on average capital balances of P120,000, P150,000, and P180,000 for Flynn, Gant, and Hill, respectively. The amount of Gant’s bonus, assuming income before bonus, salaries, and interest of P315,000, is a. 18K b. 31.5K c. 19.8K d. 22K 26. Candice is trying to decide whether to accept a salary of P60,000 or a salary of P25,000 plus a bonus of 20% of net income after the bonus as a means of allocating profit among the partners.
a. b. c. d. 27.
a. b. c. d. 28.
What amount of income would be necessary so that Candice would consider the choices to be equal? 35K 85K 145K 210K Steve and Robby are partners operating an electronics repair shop. For 2014, net income was P50,000. Steve and Robby have salary allowances of P90,000 and P60,000, respectively, and remaining profits and losses are shared 4:6. How much would Robby get 20K 30K 25K 0 A, B, and C decide to dissolve their partnership on May 31, 2013. On this date their capital balances and profit percent were as follows: A
P150,000
40%
B
P180,000
30%
C
P60,000
30%
The net income from Jan. 1 to May 31, 2013 was P132,000. Also on May 31, 2013, the partnership cash and liabilities, respectively, were P120,000 and P270,000. For A to receive P165,600 in full settlement of his interest in the partnership., how much must be realized from the sale of t he partnership's non cash assets from the division of profits? a. b. c. d.
579,000 633,000 243,000 189,000
29. Partners Able, Joshua, and Diane have the following personal assets, personal liabilities, and partnership capital balances: Able
Joshua
Diane
Personal assets
30,000
80,000
60,000
Personal liabilities
25,000
50,000
72,000
Capital balances
50,000
(32,000)
70,000
Assume profits and losses are allocated equally. After applying the doctrine of marshaling of assets, the capital balances for Able is
a. b. c. d. 30.
48K 49K 34K 50K The partnership contract for Josh and Alfred LLP provides that Josh is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is P57,600, Josh’ share of this pre -bonus income is: a. 34,560 b. 43,200 c. 28,800 d. 33,600 Bonus = .20(NI-Bonus) = .20NI – .20Bonus
