QUIZ 1

Use the following information for the next two questions:

BC and DZ entered into a partnership on September 1, 2021 by investing the following assets:
BC DZ
Cash P 150,000
Merchandise Inventory P 450,000
Land 150,000
Building 650,000
Furniture and Fixture 1,000,000

The agreement between BC and DZ provides that profits and losses are to be divided into 40% and 60% to BC and DZ,
respectively. The partnership is to assume the P300,000 mortgage loan on the building.
1. If DZ is to receive a capital credit equal to his profit and loss ratio, how much cash must he invest?
_____________
2. Assuming the partnership agreement provides that the partners should initially have an equal interest in the
partnership capital, what is DZ’s capital upon partnership formation? ___________

Use the following information for the next question:

The partnership agreement of partners A, B and C stipulates the following:
• A shall receive a salary of ₱40,000.
• Interest of 10% shall be computed on the partners’ capital contributions of ₱40,000, ₱100,000 and ₱200,000.
• Balance is divided among the partners on a 2:3:5 ratio. However, C is guaranteed a minimum share of ₱40,000,
inclusive of interest, if the partnership earns profit.

3. How much is the minimum level of profit necessary so that A shall receive a total of ₱50,000, inclusive of salary,
interest and share in remaining profit, and C shall also receive his guaranteed minimum share? _____________

Use the following information for the next question:

ABC, a sole proprietor, agreed to form a partnership with EFG in a business. Accounts in the ledger for ABC on
September 30, 2021, just before the formation show the following balances:
Cash P 26,000 Accounts Payable P 62,000
Accounts Receivable 120,000 ABC, Capital 264,000
Merchandise Inventory 180,000

It is agreed that for purposes of establishing ABCs interest, the following adjustments should be made:
• An allowance for doubtful accounts of 2% of accounts receivable is to be established.
• The merchandise inventory is to be valued at P202,000.
• Prepaid expenses of P6,500 and accrued liabilities of P4,000 are to be established.

EFG is to invest sufficient funds in order to receive a 1/3 interest in the partnership.
4. How much must EFG contribute? __________

Use the following information for the next two questions:

A and B formed a partnership. The following are their contributions:

A B
Cash 200,000 -
Accounts receivable 100,000 -
Inventory 160,000 -
Land 100,000
Building 240,000

Total 460,000 340,000

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Additional information:
• Included in accounts receivable is an account amounting to ₱40,000 which is deemed uncollectible.
• The inventory has an estimated selling price of ₱200,000 and estimated costs to sell of ₱20,000.
• An unpaid mortgage of ₱20,000 on the land is assumed by the partnership.
• The building is under-depreciated by ₱50,000.
• The building also has an unpaid mortgage amounting to ₱30,000, but the mortgage is not assumed by the
partnership. B agreed to settle the mortgage using his personal funds.
• The note payable is stated at face amount. A proper valuation requires the recognition of a ₱30,000 discount
on note payable.
• A and B shall share in profits and losses 60% and 40%, respectively.

5. How much is B’s initial capital in the partnership books? ____________

6. Assume that a partner’s capital shall be increased accordingly by contributing additional cash to bring the
partners’ capital balances proportionate to their profit or loss ratio. Which partner should provide additional
cash and how much is the additional cash contribution? ____________

Use the following information for the next two questions:

T, B and V, a partnership formed on January 1, 2021 had the following initial investments:
T P 100,000
B 150,000
V 225,000

The partnership agreement stated that profits and losses are to be shared equally by the partners after
consideration is made for the following:
• Salaries allowed to partners: P60,000 for T; P48,000 for B and P36,000 for V.
• Average partner’s capital balances during the year shall be allowed 10%.

Additional information:
• On June 30, 2021, T invested an additional P60,000.
• V withdrew P70,000 from the partnership on September 30, 2021.
• Share on the remaining profit was P3,000 for each partner.

7. The partnership net profit for 2021 before salaries, interest and partner’s share on the remainder was
__________
8. The total partnership capital on December 31, 2021 was ____________

Use the following information for the next question:

A and B agreed to form a partnership. A shall contribute ₱80,000 cash while B shall contribute ₱200,000 cash.
However due to the expertise that A will be bringing to the partnership, the partners agreed that they should initially
have an equal interest in the partnership capital.
9. A’s cash contribution should be debited at _______________

Use the following information for the next question:

The partnership agreement of AAA, BBB and CCC provides for the year-end allocation of net income in the following
order:
• First, AAA is to receive 10% of net income up to ₱100,000 and 20% over ₱100,000
• Second, BBB and CCC each are to receive 5% of the remaining income over ₱150,000
• The balance of income is to be allocated equally among the three partners

10. The partnership’s net income was ₱250,000 before any allocations to partners. What amount should be
allocated to BBB? ______________

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Use the following information for the next question:

11. A, B, and C’s partnership agreement requires the partners to maintain average investments ₱2,500,000,
₱1,250,000, and ₱1,250,000, respectively. Six percent (6%) interest per annum is to be computed on any excess or
deficiency in the contributions. After the interest allowances, any remaining profit or loss is shared in the ratio of
5:3:2. Average amounts invested during the first six months were as follows: A, ₱3,000,000; B, ₱1,375,000; and C,
₱1,000,000. Loss of ₱62,500 was incurred for the first six months. How is the loss distributed among the
partners? A__________; B__________; C_________

Use the following information for the next question:

AJ, BJ and CJ are partners in an accounting firm. Their capital account balances at December 31, 2020 were: AJ,
P90,000; BJ, P110,000; CJ, P50,000. They share profits and losses in a 4:4:2 ratio, after the following special terms:
• Partner CJ is to receive a bonus of 10 percent of the net income after the bonus.
• Interest of 10 percent shall be paid on that portion of partners’ capital in excess of P100,000.
• Salaries of P10,000 and P12,000 shall be paid to partners AJ and CJ, respectively.

The income summary account for the year 2021 shows a credit balance of P44,000.
12. What is the profit share of partner CJ? __________

Use the following information for the next two questions:

A, B and C formed a partnership. Their contributions are as follows:

A B C
Cash 80,000 20,000 200,000
Equipment 160,000

Totals 80,000 180,000 200,000

Additional information:
• Although C has contributed the most cash to the partnership, he did not have the full amount of ₱200,000
available and was forced to borrow ₱80,000.
• The equipment contributed by B has an unpaid mortgage of ₱40,000, the repayment of which is assumed by the
partnership.
• The partners agreed to equalize their interest. Cash settlements among the partners are to be made outside the
partnership.

13. How much will C receive as cash settlement? ____________

14. Prepare simple journal entries to record the partners’ contributions

Use the following information for the next question:

AB Partnership was formed on February 28, 20x1. Partner A invested ₱150,000 cash while Partner B invested land
that he originally bought for ₱70,000 but has a current fair value of ₱180,000. Because of cash shortage, B invested
additional cash of ₱60,000 on November 1, 20x1. The partnership contract states the following:

A B

• Monthly salary (recognized as 10,000 20,000

expenses and withdrawn
periodically)
Interest on beginning capital 12% p.a. 12% p.a.
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 Bonus on profit before salaries 20%
and interest but after bonus
Remaining profit or loss 50% 50%

15. AB Partnership earned profit of 120,000 in 20x1 before deducting the bonus and interests. What is the capital
balance of A on December 31, 20x1? ____________________

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