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Partnership Problem Set
Partnership Problem Set
Partnership Problem Set
Heisenberg and Jesse formed MET Company. Heisenberg and Jesse contributed their business
in the partnership. Heisenberg and Jesse agreed on 6:4 profit and loss ratio, respectively.
Heisenberg Jesse
Cash 350,000
Accounts Receivable 175,000
Inventory 280,000
Land 175,000
Building 420,000
Total 805,000 595,000
Additional Information:
a. The accounts receivable amounting to P25,000 is written-off.
b. The inventory has a net realizable value of 270,000.
c. The unpaid mortgage of the land is assumed by the partnership.
d. The building is over-depreciated by P52,500
e. The building has an unpaid mortgage of P20,000, the mortgage is assumed by the
partnership.
f. Recognition of discount on note payable amounting to P10,000.
Required:
1. Compute the adjusted capital of the partners.
2. Using the capital balance of partner Heisenberg, how much is the additional cash
contribution/withdrawal of Jesse to bring the partners’ capital in conformity to their profit and
loss ratio?
3. How much is the Total Assets?
4. Using bonus method and using their profit and loss ratio to bring the partners’ capital in
conformity to their profit and loss ratio, how much is the capital of Heisenberg after
formation?
PROBLEM 2
On June 30, 2030 TONY, the sole proprietor of the TONY Company, expands the company and
establish a partnership with STEVE and BRUCE. The partners plan to share profits and losses as
follows: TONY, 50%; STEVE, 25% and BRUCE, 25%. They also agree that the beginning capital
balances of the partnership will reflect this same relationship.
TONY asked STEVE to join the partnership because his many business contacts are expected to
be valuable during the expansion. STEVE is also contributing P70,000 cash and a building that has
an original cost of P910,000, book value of P735,000, tax basis of P542,500 and a fair market
value of P647,500. The building is subject to a P423,500 mortgage that the partnership will
assume. BRUCE is contributing P115,500 cash and marketable securities costing P441,000 to
BRUCE but are currently worth P603,750.
TONY’s investment in the partnership is the TONY Company. He plans to pay off the notes with
his personal assets. The other partners have agreed that partnership will assume the accounts
payable. The balance sheet for the TONY Company follows:
TONY Company
Statement of Financial Position
June 30, 2030
The partners agree that the inventory is worth P892,500, and the equipment is worth half its
original cost, and the allowance established for doubtful accounts is correct.
1. How much is the agreed capital of TONY if the partners agree to use the bonus method to
record the formation?
2. If the partners agree to use the revaluation to record the formation?
PROBLEM 3
Ryan and Kelly formed a partnership on April 1, 2020. Ryan invested P500,000 and
Kelly invested P300,000. On September 10, 2020, Ryan invested additional cash of
P100,000. The partnership has the following agreements:
- Monthly salary allowance of P5,000 and P15,000 to Ryan and Kelly, respectively.
The salary allowance is recognized as an expense.
- 25% bonus on income before salaries and interest but after bonus to Kelly.
- 10% interest on beginning capital of Ryan.
- Balance equally
The partnership had net sales of P1,000,000 and cost of sales of P400,000 and operating
expense of 200,000. The partners’ salaries had been recorded as part of the operating
expense.
The income summary account shows a credit balance of P450,000 on December 31, 2020.
The profit and loss of the partnership shall be distributed in the following manner:
- Salary allowance of P200,000 to Jim and P230,000 to Pam.
- Interest allowance of 12% on average capitals
- Bonus of 10% on net income after salary and interest but before bonus to Pam.
- Balance divided equally.
The net income is allocated up to the extent of earnings only by giving first priority to
salary, then interest and then to bonus.