Partnership

PARTNERSHIP FORMATION

1. On Mar. 01, 2011, Sarabia and Abad decided to combine their businesses and form a partnership. Their statements of financial position on Mar. 1, before adjustments, showed the following: Sarabia Abad Cash P 9,000 P 3,750 Accounts receivable 18,000 13,500 Inventories 30,000 19,500 Furniture and Fixtures, net 30,000 9,000 Office Equipment, net 11,500 2,750 Prepaid Expenses 6,375 3,000 Total P105,375 P51,500 ======== ======= Accounts payable P 45,750 P 18,000 Capital 59,625 33,500 Total P105,375 P 51,500 ======== ======= They agreed to have the following fol lowing items recorded in their books: a. Provide 2% allowance for doubtful accounts. b. Sarabia’s furniture and fixtures should be P31,000, while Abad’s office equipment is under-depreciated by P250. c. Rent expense incurred previously by Sarabia was not yet recorded amounting to P1,000 while salary expense incurred by Abad was not also recorded amounting to P800. d. The fair market values of inventory amounted to: Sarabia, P29,500; Abad, P21,000. Compute the net (debit) credit adjustment for Sarabia and Abad: c. P (860); P 180, respectively a. P 2,870; P 2,820, respectively b. P(2,870); P(2,820), respectively d. P 860; P(180), respectively. 2. Using the same information in the previous number, what is the total assets after the formation? c. P157,495 a. P160,765 b. P152,985 d. P156,875 3. On Aug. 1, Isada and Ureta-Reyes pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partnership capitals are to be based on net assets transferred after the following adjustments. Profits and losses are allocated equally. The inventory of Ureta-Reyes is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500 are to be set up in i n the books of Isada and Ureta-Reyes, respectively; and accounts accounts payable of of P4,000 is to be recognized in Isada’s books. The individual trial balances balances on August, August, before adjustment, follow: Isada: assets, P75,000; liabilities, P5,000: Ureta-Reyes: assets, P113,000; liabilities, P34,500. What is the capital of Isada and Ureta-Reyes after the above adjustments? a. Isada, P68,750; U.Reyes, P77,250 c. Isada, P65,000; U.Reyes, P76,000 b. Isada, P65,000; U.Reyes, P81,000 d. Isada, P75,000; U.Reyes, P81,000 4. Red, White and Blue form a partnership on May 1, 2011. They agree that Red will contribute office equipment with a total fair value of P40,000; White will contribute delivery equipment with a fair value of P80,000; and Blue will contribute cash. If Blue want a one-third on e-third interest in the capital and profits, he should contribute the following cash: b. P60,000 a. P40,000 c. P120,000 d. P180,000 5. PP, RR, SS are new CPA’s and are to form a partnership. PP is to contribute cash of P50,000 and his computer originally costing P60,000 but has a second hand value of P25,000. RR is to contribute cash of P80,000. SS, whose family is selling computers, is to contribute cash of P25,000 and a brand new computer with a regular selling price of P60,000 but which cost is P50,000. Partners agree to share profits equally. The capital balances upon formation are: PP RR SS a. P 75,000 P 80,000 P 85,000 b. P110,000 P 80,000 P 75,000 c. P 80,000 P 80,000 P 80,000 d. P 83,333 P 88,333 P 88,334

PARTNERSHIP OPERATION

1. The partnership agreement of Axel, Berg and Cobb provides for the year-end allocation of net income in the following order: First, Axel is to receive 10% of net income up to P 100,000 and 20% over P 100,000. Second, Berg and Cobb each are to receive 5% of the remaining income over P 150,000. The balance of income is to be allocated equally among the three partners. The partnership’s 2010 net income was P 250,000 before any allocations to partners. What amount should be allocated to Axel?  



a. P 101,000

b. P 108,000

c. P 103,000

d. P 110,000

2. Sig and Fred agreed to share the partnership’s profit as follows: To Sig: P15,000 salary per month, 5% bonus after salary and bonus To Fred: The remaining balance What is the amount of Fred’s share from the partnership’s income of P411,000? b. P220,000 a. P385,000 c. P219,000 d. P200,000 3. Jong and Kajong are partners who share profits and losses in the ratio of 60%; 40% respectively. Jong’s salary is P120,000 and P60,000 for Kajong. The partners are also paid interest on their average capital balances. In 2010, Jong received P60,000 of interest and Kajong, P24,000. The profit and loss allocation is determined after deductions for salary and interest payments. If Kajong’s share in the residual income (income after deducting salaries and interest) was P120,000 in 2010, what was the total partnership income? b. P564,000 a. P384,000 c. P690,000 d. P774,000 4. Villena, a partner in the Dulay, Villena & Co., has a 30% participation in partnership profits and losses. Villena’s capital account has a net decrease of P120,000 during the calendar year 2011. During 2011, Villena withdraw P260,000 (charged against his capital account) and contributed property valued at P50,000 to the partnership. What was the profit of Dulay, Villena & Co., for the year 2011? d. P300,000 a. P1,100,000 b. P466,667 c. P700,000

5. The partnership agreement of Paul, Simon and Peter provides for the division of net income as follows: Simon, who manages the partnership is to receive an annual salary of P120,000. Each partner is to be allowed interest at 10% on ending capital. Balance is to be divided 40:25:35. During 2017, Paul invested an additional P90,000 in the partnership. Simon made an additional investment of P75,000 and withdrew P110,000 and Peter withdrew P60,000. No other investments or withdrawals were made during 2008. On January 1, 2017, the capital balances were Paul, P300,000; Simon, P410,000; and Peter, P220,000. Total capital at year-end was P600,000. Compute the capital balance of each partner at year-end: Paul Simon Peter a. (P176,000) P948,125 (P172,125) b. 214,000 410,250 24,250 c. 214,000 398,125 ( 12,125) d. 390,000 375,000 ( 165,000)   

PARTNERSHIP DISSOLUTION 1. Cookie and Dannie are partners who share profits and losses in the ratio of 7:3 respectively. Their respectively. Their respective capital accounts are as follows: Cookie P 6,300,000 Dannie P 5,400,000

They agreed to admit Eddie as a partner with a one-third interest in the capital and profits and losses, upon an investment of P 4,500,000. The new partnership will begin with a total capital of P 16,200,000. Immediately after Eddie’s admission, what are the capital balances of Cookie, Dannie and Eddie, respectively? a. P 5,400,000; P 5,400,000; P 5,400,000

c. P 5,670,000; P 5,130,000; P 5,400,000

b. P 5,600,000; P 5,100,000; P 5,400,000

d. P 6,300,000; P 5,400,000; P 900,000

2. Dellosa bought Longalong’s interest in the Seechua and Longalong’s Partnership by a P 600,000 direct payment to Longalong. The capital balances before the sale were P 240,000 and P 360,000, respectively. What will be the amount of Dellosa’s capital account? c. P 600,000 a. P 300,000 b. P 360,000 d. P 480,000 3. Maria, Suma and Corta were partners with capital balances of January 2, 2010 of P100,000, P150,000 and P200,000, respectively. Their profit and l oss ratio is 5:3:2. On July 1, 2010, Maria retires from the partnership. On the date of retirement the partnership net i ncome is P140,000 and the partners agreed that inventories are to be revalued at P70,000 from its original cost of P50,000. The partners agreed further to pay Maria P195,000 in settlement of his interest. What are the capital balances of the remaining partners after retirement of Maria? a. Suma, P198,000; Corta, P232,000 b. Suma, P189,000; Corta, P226,000

c. Suma, P 2017,000; Corta, P238,000 d. Suma, P 220,000; Corta, P 226,000

4. The capital balances of the partnership of X, Y and Z on June 1, 2011 are presented below with their respective profit and loss ratio: X P 139,200 ½ Y 208,800 1/3 Z 96,000 1/6 On June 1, 2011, Q is admitted to the partnership when he purchased, for P132,000, a proportionate interest form X and Z in the net assets and profits of the partnership. As a result, Q acquired a one-fifth interest in the net assets and profits of the firm. Assuming that implied goodwill is not to be recorded, what is the combined gain realized by X and Z upon the sale of a portion of their interest in the partnership to Q? a. P43,200 b. P82,000 c. P62,400 d. P0 5. The December 31, 2010, statement of financial position of the BB, CC and DD partnership is summarized as follows: Cash P 100,000 CC, Loan P 100,000 Other Asset, at cost 500,000 BB, Capital 100,000 CC, Capital 200,000 DD, Capital 200,000 Total P 600,000 P 600,000 ======= ======= The partners share profits and losses as follows: BB 20%; CC 30%; and DD 50%, CC is retiring from the partnership and the partners have agreed that “other assets” should be adjusted to their fair value of P600,000 at December 31, 2011. They further agree that CC will receive P244,000 cash for his partnership interest exclusive of the loan, which is to be paid in full. After CC’s retirement, the capital balances of BB and DD, respectively, will be: a. P 116,000; P 240,000 c. P 100,000; P 200,000 b. P 101,714; P 254,286 d. P 73,143; P 182,857 PARTNERSHIP LIQUIDATION

1. The partners Melchor Bombero, Felipe Niza, and Doris Pateño who shared profit and losses in the ratio of 4:2:2, has decided to dissolve and liquidate their partnership.In the process of liquidation, their non-cash assets of P490,000 was realized at a loss of P 340,000. however, they were able to pay their obligations to outside creditors of P105,000. the partner’s equity balance before the start of liquidation has totaled to P450,000, b roken down as follows: Bombero P180,000; Niza P150,000 Pateño P120,000 At what amount were the non-cash assets realized? a. P150,000 b. P175,000 c. P200,000 d. P225,000 2. Based on the above data, how much was the cash balance at the beginning of the liquidation process? b. P65,000 a. P60,000 d. P70,000 d. P75,000

3. Katie, Lenie and Minnie decided to liquidate their partnership on July 31, 2008. Their capital balances and profit and loss ratios on this date, before liquidation, are: Capital P&L Ratio Katie

P224,000

25%

Lenie

P288,000

30%

Minnie

P128,000

45%

The net loss from January 1 to July 31, 2008 is P48,000. Also, on this date, cash and liabilities are P136,000 and P232,000, respectively. Which of the ff. is inconsistent with the result of liquidation if Lenie received P247,200 i n full settlement of her interest in the firm? a. Total cash paid to partners, P736,000

c. Minnie received P66,800

b. Non-cash assets were sold for P600,000

d. Katie’s share in loss, P22,000

4. Partners Rose, Susan and Tina share profits and losses in the ratio of 5:3:2. At the end of a very profitable year, they decided to liquidate the firm. The partner's capital account balances at this time are as follows: Rose P 2,200,000 Susan P 2,490,000 Tina P 1,500,000 The liabilities accumulate to P 3,000,000, including a loan of P 1,000,000 from Rose. The cash balance is P 600,000. All the partners are personally solvent. The partners plan to sell the assets in instalment. If Susan received P 360,000 from the first distribution of cash, how much did Tina receive at that time? a. P 200,000 b. P 120,000 c. P 80,000 d. P 220,000 5. From the records of the DTA Partnership, Cash Other non-cash assets

P 2,000 28,000

Total

P30,000 =======

Liabilities De Mesa, Loan De Mesa, Capital Tudtud. Capital Apostol, Capital Total

P 5,000 2,500 12,500 7,000 3,000 P30,000 =======

Profit and loss ratio is 3:2:1 for De Mesa, Tudtud and Apostol, respectively. Cash is distributed as assets are realized. Other assets were realized as follows: Date Cash Received Book Value January 2011 P 6,000 P 9,000 February 2011 3,500 7,700 March 2011 12,500 11,300 How much is the total cash received by Tudtud and cash received by Apostol in January a. P2,000; P200, respectively c. P1,500; P1,000, respectively b. P5,000; P-0-, respectively d. P-0-; P500, respectively