On July 1, 2015, A and B decided to form a partnership.

The firm is to take over the business assets and

assume liabilities, and the capitals are to be based on net assets transferred after the ff. adjustments:

 A and B’s inventory is to be valued at 31,000 and 22,000 respectively.

 Accounts receivable of 2,000 in A’s book and 1,000 in B’s books are uncollectible.
 Accrued salaries of 4,000 for A and 5,000 for B are still to be recognized in the books.
 Unused office supplies of A and B amounted to 5,000 and 1,500.
 Prepaid rent of 7,000 and 4,500 are to be recognized in the books A and B, respectively.
 A is to invest or withdraw cash necessary to have a 40% interest in the firm.

Balance sheet for A and B before adjustments

A B

Cash ₱ 31,000 ₱ 50,000

Accounts receivable 26,000 20,000

Inventory 32,000 24,000

Office supplies 5,000

Equipment 20,000 24,000

Accum. Depreciation- Equipment (9,000) (3,000)

Total Assets ₱ 100,000 120,000

Accounts Payable ₱ 28,000 20,000

Capitals 72,000 100,000

Total Liabilities and Capital ₱ 100,000 ₱ 120,000

1. The additional investment (withdrawal) made by A:

2. The total assets of the partnership after formation:
3. The total liabilities of the partnership after formation:
4. The total capital of the partnership after formation:
5. The total capital balances of A and B in the combined balanced sheet:

On June 1, 2015, T, U and V formed a partnership by combining their separate business proprietorships.
T contributed cash of ₱100,000. U contributed property with a ₱80,000 carrying amount, a ₱95,000
original cost, and ₱120,000 fair value. The partnership accepted the responsibility for the ₱55,500
mortgage attached to the property. V contributed equipment with a ₱65,000 carrying amount, a ₱90,000
original cost, and ₱78,000 fair value. The partnership agreement specifies that P & L are to be shared
equally but is silent regarding capital contributions.

6. Which partner has the largest capital balance at the beginning of the partnership?
Cat admits Dog as partner in business. Accounts in the ledger for Cat on November 30, 2015, just before
the admission of Dog, show the following balances:
Cash P6,800
Accounts Receivable P14,200
Merchandise Inventory P20,000
Accounts Payable P8,000
Cat, capital P33,000

It is agreed that or the purposes of establishing Cat’s interest the following adjustments shall be made:
a. An allowance for doubtful accounts of 3% of accounts receivable is to be established
b. The merchandise inventory is to be valued at P23,000
c. Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.

7. Dog is to invest sufficient cash to obtain a 1/3 interest in the partnership. Cat’s adjusted capital
before the admission of Dog
8. The amount of cash investment by Dog

MM, NN, and OO are partners with capital balances on December 31, 2012 of P300,000, P300,000 and
P200,000, respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is
taken certain equipment with second-hand value of P50,000 and a note for the balance of OO’s interest.
The equipment are carried on the books at P65,000. Brand new equipment may cost P80,000. Compute
for:

9. OO’s acquisition of the second-hand equipment will result to reduction in capital;

10. the value of the note that will OO get from the partnership’s liquidation

On March 1, 2017, Z Roxas and B. Poe decided to combine their business and form a partnership. The
balance sheet of Roxas and Poe on March 1, before adjustment is presented below.

Roxas Poe

Cash P 9,000 P 3,750

Accounts Receivable 18,500 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

P105,375 P51,500

Accounts Payable P 45,750 P 18,000

Z. Roxas, Capital 59,625

B. Poe, Capital 33,500

P105,375 P 51,500

They agreed to provide 3% for doubtful accounts on their accounts receivable and found Poe’s furniture
to be under depreciated by P900.

11. If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of
Roxas and Poe would be:

12. Jamby and Minam just formed a partnership. Jamby contributed cash of P2,205,000 and office
equipment that cost P945,000. The equipment had been used in her sole proprietorship and had
been 70% depreciated, the appraised value of the equipment is P630,000. Jamby also
contributed a note payable of P210,000 to be assumed by the partnership. Jamby is to have
60% interest in the partnership. Miriam contributed only P1,575,000 merchandise inventory at
fair market value. Assume the use of bonus method, the partners’ capital must be in conformity
with their profit and loss ratio upon formation.
In the formation of a partnership, which of the following is true?

A. The agreed capital of Jamby upon formation is P2,625,000

B. The total agreed capital of the partnership is P4,375,000
C. The capital of Miriam will increase by P105,000 as a result of the transfer of capital
D. There is either an investment or withdrawal of asset under the bonus method

13. Alley and Barvey established a partnership on December 1, 20x4. They agreed that Alley will
contribute cash of P20,000; Land of P15,000 and Building of P50,000. Alley’s accounts payable
of P10,000 is to be assumed by the partnership. Barvey will contribute cash of P30,000 and
furniture and fixtures of P25,000.
Assume that each partner initially should have an equal interest in partnership capital with no
contribution of intangible asset (bonus method). How much are the capital balances of each
partner?
a. P85,000 for Alley and P55,000 for Barvey
b. P65,000 for Alley and P65,000 for Barvey.
c. P75,000 for Alley and P55,000 for Barvey
d. P75,000 for Alley and P75,000 for Barvey.

14. The partnership agreement is an express contract among the partners (the owners of the
business). Such an agreement generally does not include
a. A limitation on a partner’s liability to creditors.
b. The rights and duties of the partners.
c. The allocation of income between the partners.
d. The rights and duties of the partners in the event of partnership dissolution

On May 1, 2015, the business assets of Jessyreen and Leilani appear below:
Jessyreen Leilani
Cash P 11, 000 P 22, 354
Accounts receivable 234, 536 567, 890
 Inventories 120, 035 260, 102
Land 603, 000
Building 428, 267
Furniture and fixtures 50, 345 34,789
Other assets _ _2, 000__ __ 3,600_
Total P 1,020,916 P 1,317,002

Accounts payable P 178,940 P 243,650

Notes payable 200,000 345,000
John, capital 641,976
Paul, capital ________ 728, 352
Total P 1,020,916 P1,317,002

Jessyreen and Leilani agreed to form a partnership contributing their respective assets and equities
subject to the following adjustments:
a. Accounts receivable of P20,000 in Jessyreen’s books and P35,000 in Leilani’s are uncollectible
b. Investors of P5,500 and P6,700 are worthless in Jessyreen’s and Leilani’s respective books
c. Other assets of P2,00 and P3,600 in Jessyreen’s and Leilani’s respective books are to be
written off
E. The capital accounts of the partner’s after adjustments will be:
15. How much assets does the partnership have?
16. Shamira offered to join for a 20% interest in the firm. How much cash should he contribute?
17. After Shamira’s admission, the profit and loss sharing ratio was agreed to be 40:40:20, based on
capital
18. During the first year of their operations, the partnership earned P325,000. Profits were
distributed in the agreed manner. Drawings were made in these amounts: Jessyreen, p50,000;
Leilani, 65,000; Shamira, P28,000.How much are the capital balances after the first year?
19. A partner who is entitled to a share of the profits from a partnership is known as:
a) A salaried partner.
b) A managing partner.
c) An equity partner.
d) A limited liability partner.

20. The maximum number of persons who are legally allowed to operate in a partnership is:
a) 2
b) 20
c) There is no legal limit
d) 100
 21. Sparkle Ltd is a private limited company limited by shares. It has one director. How many
shareholders does the law require it to maintain?
a) One provided it is a different person from the director.
b) Five.
c) Two.
d) One which can be the same person as the director.
22. Which one of the following statements about limited liability partnerships (LLPs) is incorrect?
a) An LLP has a legal personality separate from that of its members.
b) The liability of each partner in an LLP is limited.
c) Members of an LLP are taxed as partners.
d) A limited company can convert to an LLP.

23. An organisation running a business has the following attributes: the assets belong to the
organisation, it can create a floating charge over its assets, change in membership does not alter
its existence, and members cannot transfer their interests to others. What type of organisation is
it?
a) A private limited company
b) A limited liability partnership
c) A general partnerships
d) A private limited company