FORMATION It is agreed that for purposes of establishing Pedro’s interest, the following adjustments should

be made:
At cost, with mortgage loan  An allowance for doubtful accounts of 2% of accounts receivable is to be established.
1. The partnership of Allen and Baden was formed on February 28, 2017. At that date the  The merchandise inventory is to be valued at P404,000.
following assets were invested:
 Prepaid insurance of P13,000 and Utilities payable of P8,000 are to be established.
Allen Baden
Cash $ 90,000 $150,000
Merchandise -0- 240,000 Tonyo is to invest sufficient funds in order to receive 1/3 interest in the partnership. How
Building -0- 630,000 much must Tonyo contribute?
Furniture and equipment 150,000 -0-
a. P286,100 c. P176,000
b. P191,200 d. P264,000
The building is subject to a mortgage loan of $210,000, which is to be assumed by the
partnership. The partnership agreement provides that Allen and Baden share profits or losses
30% and 70%, respectively. Baden's capital account at February 28, 2017 should be: Straight Problem: Formation
a. $810,000. c. $882,000. 4. Dona and Telo are forming a partnership by combining their businesses. Their books show
b. $1,020,000. d. $714,000. the following:
Dona Telo
2. C, P, and A re new CPAs and are to form and accounting partnership. C is to contribute cash of
P180,000 and his computers originally bought at P192,000 but has a second hand value of Cash 36,000 15,000
P120,000. P is to contribute cash of P240,000, and tables and chairs worth P48,000 but Accounts Receivable 75,000 54,000
acquired by P for only P43,200. A, whose family is selling computers, is to contribute cash of
Mdse. Inventory 120,000 78,000
P96,000 and brand new computers plus printer with regular price at P192,000 but which cost
their family’s computer dealership P168,000. Partners agree to share profits 3:2:3. The capital Furniture & Fixtures 165,000 51,000
balances of C, P, A, respectively, upon formation are: Prepaid Expenses 31,500 10,500
a. 344,700; 229,800; 344,700 c. 328,500; 219,000; 328,500
Accounts Payable 183,000 72,000
b. 300,000; 288,000; 288,000 d. 372,000; 283,200; 264,000
It has been agreed to provide for doubtful accounts equal to 5% of the receivables of each partner
and that the furniture and fixtures of Telo are over-depreciated by P5,000 and the fair value of the
3. Pedro admits Tonyo as a partner in business. Accounts in the ledger for Pedro on October 31, equipment of Dona is P150,000. The profit and loss ratio for Dona and Telo is 3:2, respectively.
2016, just before the admission of Tonyo, show the following balances :
a. Using the bonus method, what is the capital to be credited to Telo if they agree to have
Cash P 52,000
equal capital balance? _________
Accounts receivable 240,000
b. Assuming no bonus, what is the adjusted total assets of the partnership? _______
Merchandise inventory 360,000
c. Assuming goodwill method is to be used and the partners agreed to have a total agreed
Accounts payable 124,000
capital of P500,000, what is the capital to be credited to Dona? ___________
Pedro, capital 528,000
Partnership income
5. Shue, a partner in the Financial Brokers Partnership, has a 30 percent share in partnership
profits and losses. Shue's capital account had a net decrease of $100,000 during 2018. During

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 2018, Shue withdrew $240,000 as withdrawals and contributed equipment valued at $50,000
to the partnership. What was the net income of the Financial Brokers Partnership for 2018? 10. Ace & Barnes partnership has income of $110,000 and Partner A is to be allocated a bonus of
A. $633,334 C. $300,000 10% of income after the bonus, Partner A's bonus would be ______________.
B. $466,666 D. $190,000 a. $11,000 c. $9,091
b. $10,00 d. $9,000
6. The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40
percent to Y. For the year 2018, partnership net income was double X's withdrawals. Assume 11. The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership
X's beginning capital balance was $80,000, and ending capital balance (after closing) was income, after deduction of the bonus. If the partnership's income is $121,000, how much is
$140,000. Partnership net income for the year was: Partner Y's bonus allocation?
A. $120,000. C. $500,000. a. $11,000. c. $11,650.
B. $300,000. D. $600,000. b. $11,450. d. $12,100.

OPERATION: PROFIT DISTRIBUTION Bonus based on income before income tax but after bonus
12. Able Co. provides an incentive compensation plan under which its president receives a bonus
Weighted-average capital balance equal to 10% of the corporation's income before income tax but after deduction of the bonus. If
7. Partner A first contributed $20,000 of capital into an existing partnership on February 1, 2017. the tax rate is 40% and net income after bonus and income tax was $360,000, what was the
On June 1, 2017, the partner contributed another $20,000. On September 1, 2017, the partner amount of the bonus?
withdrew $15,000 from the partnership. Withdrawals in excess of $5,000 are charged to the a. $36,000 c. $66,000
partner's capital account. The partnership's fiscal year end is December 31. The annual b. $60,000 d. $90,000
weighted-average capital balance is ______________.
a. $25,000 c. $28,334 Bonus based on income after bonus & salary allowance
b. $26,667 d. $30,000 13. The terms of a partnership agreement provide that one of the partners is to receive a salary
allowance of $30,000, plus a bonus of 20 percent of income after deduction of the bonus and
Required income the salary allowance. If income is $150,000, the bonus should be:
8. Maxwell is trying to decide whether to accept a salary of $60,000 or a salary of $25,000 plus a A. $18,000 C. $24,000
bonus of 20% of net income after salaries and bonus as a means of allocating profit among B. $20,000 D. $30,000
the partners. Salaries traceable to the other partners are estimated to be $75,000. What
amount of income would be necessary so that Maxwell would consider the choices to be Bonus as a percent of income after bonus, salaries, and interest
equal? 14. The partnership agreement of Foley, Gier, and Hill allows Gier a bonus of 10% of income after
a. $175,000 c. $285,000 the bonus, salaries of $20,000 per partner and interest of 6% on average capital balances of
b. $210,000 d. $310,000 $80,000, $100,000, and $120,000 for Foley, Gier and Hill, respectively. The amount of Gier’s
bonus, assuming income before bonus, salaries, and interest of $210,000, is
Bonus a. $12,000. c. $13,200.
Bonus based on income after bonus b. $14,667. d. $21,000.
9. If a partnership has income of $63,000 and Partner A is to be allocated a bonus of 5% of
income after the bonus, Partner A's bonus would be ______________. Partners’ salary
a. $3,150 c. $2,857
b. $3,000 d. none of the above

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15. Chuck and Bobby are partners operating an electronics repair shop. For 2018, net income each for Wasser and Nolan. Net income was $150,000 in 2017 and $180,000 in 2018. Each
was $30,000. Chuck and Bobby have salary allowances of $54,000 and $36,000, partner withdrew $1,000 for personal use every month during 2017 and 2018.
respectively, and remaining profits and losses are shared 4:6. The division of profits would be
A. $12,000 and $18,000 C. $18,000 and $12,000 19. What was Wasser's share of income for 2017?
B. $30,000 and $-0- D. $15,000 and $15,000 A) $63,000. D) $29,000.
B) $53,000. E) $51,000.
16. Chuck and Bobby are partners operating an electronics repair shop. For 2018, net income C) $58,000.
was $30,000. Chuck and Bobby have salary allowances of $54,000 and $36,000,
respectively, and remaining profits and losses are shared 4:6. If their agreement specifies that 20. What was Nolan's share of income for 2017?
salaries are allowed only to the extent of income, based on a pro-rata share of their salary A) $63,000. D) $29,000.
allowances, the division of profits would be: B) $53,000. E) $51,000.
A. $12,000 and $18,000 C. $18,000 and $12,000 C) $58,000.
B. $30,000 and $ -0- D. $15,000 and $15,000
21. What was Cleary's share of income for 2017?
Partners’ salary, interest on beginning capital balance A) $63,000. D) $29,000.
17. Baskin, Wynn and Morton are partners in a janitorial service. The business reported net B) $53,000. E) $51,000.
income of $27,000 for 2018. The partnership agreement provides that profits and losses are C) $58,000.
to be divided equally after Wynn receives a $30,000 salary, Morton receives a $12,000 salary,
and each partner receives 10% interest on his beginning capital balance. Beginning capital 22. What was Nolan's capital balance at the end of 2017?
balances were $20,000 for Baskin, $24,000 for Wynn, and $16,000 for Morton. Morton's share A) $200,000. D) $246,000.
of partnership income for 2018 is: B) $224,000. E) $254,000.
a. $34,400 c. $15,600 C) $238,000.
b. $18,000 d. $13,600
23. What was Wasser's capital balance at the end of 2017?
18. Carlin, Vick and Horton are partners in a janitorial service. The business reported net income A) $150,000. D) $213,000.
of $81,000 for 2018. The partnership agreement provides that profits and losses are to be B) $160,000. E) $201,000.
divided equally after Vick receives a $45,000 salary. Horton receives a $18,000 salary, and C) $165,000.
each partner receives 10% interest on his beginning capital balance. Beginning capital
balances were $30,000 for Carlin, $36,000 for Vick, and $24,000 for Horton. Horton’s share of 24. What was Cleary's capital balance at the end of 2017?
partnership income for 2018 is: A) $100,000. D) $129,000.
a. $51,600. c. $23,400. B) $117,000. E) $153,000.
b. $27,000. d. $20,400. C) $119,000.

For Nos. 19 – 30 (Long-problem) 25. What was Wasser's share of income for 2018?
Cleary, Wasser, and Nolan formed a partnership on January 1, 2017, with investments of A) $34,420. D) $70,040.
$100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) B) $75,540. E) $61,420.
interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to C) $65,540.
Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40%

JASRAD PAGE 3
26. What was Nolan's share of income for 2018? average capital balance was $60,000 and Drum's average capital balance was $90,000, How
A) $34,420. D) $70,040. should the $50,000 of earnings be divided if an order of priority was in the partnership
B) $75,540. E) $61,420. agreement whereby salary allowances have a higher priority than interest on capital
C) $65,540. allocations?
A. B. C D.
27. What was Cleary's share of income for 2018? Tuba $26,000 $27,000 $25,000 $27,500
A) $34,420. D) $70,040. Drum $24,000 $23,000 $25,000 $22,500
B) $75,540. E) $61,420.
C) $65,540. Partners salary, partner bonus based on net income after salaries & bonus
33. Partners A, B, and C have the following profit and loss agreement:
28. What was Nolan's capital balance at the end of 2018? (1) Partners A and B receive salaries of $40,000 each
A) $139,420. D) $279,440. (2) Partner C gets a bonus of 10 percent of net income after salaries and bonus (the bonus is
B) $246,000. E) $304,040. zero if salaries exhaust net income)
C) $276,540. (3) Remaining profits are shared by A, B, and C in the following ratios respectively: 3:4:3.
The partnership had a net income of $91,000. How much should be allocated to partner C?
29. What was Wasser's capital balance at the end of 2018? a. $3,300 c. $27,300
A) $201,000. D) $304,040. b. $10,300 d. $4,000
B) $263,520. E) $313,780.
C) $264,540. Partners salary, bonus based on net income after bonus, interest based on average capital
balance
30. What is Cleary's capital account balance at the end of 2018? 34. Partners A and B have a profit and loss agreement with the following provisions: salaries of
A) $163,420. D) $100,000. $20,000 and $25,000 for A and B, respectively; a bonus to A of 10% of net income after
B) $151,420. E) $142,000. bonus; and interest of 20% on average capital balances of $40,000 and $50,000 for A and B,
C) $139,420. respectively. Any remainder is split equally. If the partnership had net income of $88,000, how
much should be allocated to Partner A?
Partners’ salary, interest based on average capital balance a. $36,000 c. $50,000
31. Partners Tuba and Drum share profits and losses of their partnership equally after 1) annual b. $44,500 d. $43,500
salary allowances of $25,000 for Tuba and $20,000 for Drum and 2) 10% interest is provided
on average capital balances. During 2017, the partnership had earnings of $50,000; Tuba's 35. Partners A and B have a profit and loss agreement with the following provisions: salaries of
average capital balance was $60,000 and Drum's average capital balance was $90,000. $41,600 and $38,400 for A and B, respectively; a bonus to A of 10% of net income after
How should the $50,000 of earnings be divided? salaries and bonus; and interest of 10% on average capital balances of $20,000 and $35,000
A. B. C D. for A and B, respectively. One-third of any remaining profits are allocated to A and the balance
Tuba $26,000 $27,000 $25,000 $27,500 to B. If the partnership had a net income of $36,000, how much should be allocated to Partner
Drum $24,000 $23,000 $25,000 $22,500 A, assuming that the provisions of the profit and loss agreement are ranked by order of priority
starting with salaries?
32. Partners Tuba and Drum share profits and losses of their partnership equally after 1) annual a. $12,000 c. $18,720
salary allowances of $25,000 for Tuba and $20,000 for Drum and 2) 10% interest is provided b. $18,000 d. $41,600
on average capital balances. During 2017, the partnership had earnings of $50,000; Tuba's

JASRAD PAGE 4
36. Partners A and B have a profit and loss agreement with the following provisions: salaries of
$40,000 and $45,000 for A and B, respectively; a bonus to A of 10% of net income after
salaries and bonus; and interest of 15% on average capital balances of $40,000 and $60,000
for A and B, respectively. One-third of any remaining profits or losses are allocated to B and
the balance to A. If the partnership had net income of $52,000, how much should be allocated
to Partner A?
a. $14,000 c. $38,000
b. $30,000 d. None of the above

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