PROBLEM 01: The following transactions of Pizza Parlor, owned by Del Rivera, Candice Ortega and Gloria Tan,

took place July 1 to December 31,

2004:
a. Rivera who owns an ice cream parlor, invested cash of P81,000 and merchandise inventory costing P125,000 but which value was agreed
upon by the partners to be P100,000. Customers’ accounts of P55,000 were also turned over to the partnership which was credited to the
partner at its realizable value of 80%.
b. Ortega invested cash of P40,000 and pieces of furniture and equipment costing P500,000 but already 30% depreciated. Market value of
the furniture and equipment at the date of investment was equal to 75% of its book value. Ortega still owes Fair Mart P52,500 for the
pieces of furniture purchased. It was agreed that the partnership will assume the liability.
c. Tan, an Italian culinary expert, aside from his expertise, invested land costing P350,000 but which market value increased by 100%.
d. Half of the cash invested by Rivera and Ortega was used as a 10% down payment for the delivery panel bought by the partners for home
deliveries to customers. This was supported by a five-year, 18% note.
e. Tan extended a cash loan to the partnership on July 1 amounting to P250,000 payable after one year at 12%.
f. Ortega made a cash withdrawal of P15,000.
g. Rivera issued a 90-day, 12% note to the parlor for a cash loan of P10,000 extended by the parlor.
h. A net profit of P300,000 was earned at the end of the year. Profits are to be divided 1:1:2 respectively by Rivera, Ortega, and Tan.
Required:
1. Prepare the journal entries to record the above transactions in the partnership books.
2. What are the partners’ equity as at December 31? Support by constructing the capital and drawing T accounts with appropriate captions.
3. Prepare a statement of partners’ equity for six months ended December 31, 2004.

PROBLEM 02: Willy owns a bookstore and Rick owns a beauty shop. They decided to combine their businesses and call it the Beauty and Brain
Store. Prior to the combination, they agreed to adjust some of their assets and liabilities. The following accounts are found in their balance sheets:
Willy’s Ricky’s
Bookstore Beauty Shop
Cash P 25,000 P 11,000
Accounts receivable 25,000
Merchandise inventory 80,000
Supplies inventory 15,000 25,000
Furniture and equipment 50,000 85,000
Total 195,000 121,000

Accounts payable 20,000 5,000

Notes payable 30,000
Capital 145,000 116,000
Total 195,000 121,000
The partners agreed to the following conditions:
a. P5,000 doubtful accounts should be recognized.
b. Furniture and equipment should be at market value of P25,000 for the bookstore and P76,500 for the beauty shop.
c. P10,000 obsolete books should be written off.
d. Beauty supplies should be P15,000 only.
e. Accrued interest should be recognized for P2,500.
Required:
1. List down the adjusted assets and liabilities of each partner.
2. Record the investments in the partnership books.
3. Make an additional entry assuming that they agreed on recognizing bonus so that they will be credited equally based on total adjusted
contributions.
4. Prepare a balance sheet just after formation.

PROBLEM 03: The capital accounts of Fe and Lani showed the following information for the period ending December 31, 2004:
Fe Lani
Jan 1 Balance P 270,000 Jan 1 Balance P 90,000
May 10 Investment 45,000 Mar 18 Investment 45,000
July 25 Withdrawal 67,500
The revenue and expense summary showed a credit balance of P135,000 after tax. Give the entries to record the distribution (with supporting
distribution schedules) based on the following independent cases:
1. In the ratio of average capital considering all changes, where investments and withdrawals are considered as made at beginning of the
year if made before the middle of the month, and are considered as made at the beginning of the following month, if made after the middle
of the month.
2. 12% interest based on ending capital balances considering all changes, annual salaries to Fe and Lani in the amount of P50,000 and
P100,000 respectively, balance to be divided equally.

PROBLEM 04: Dennis, Larry and Greg divide profit and loss in the ratio of 2:1:1 respectively, after giving a bonus of 20% to Dennis. Determine the
share of the partners in each of the following independent cases:
1. Net income for the year was P180,000 with bonus based on net income before bonus.
2. Net income for the year was P180,000 with bonus based on net income after bonus.
3. If Larry received a profit share of P50,000, how much did Dennis receive if bonus is based on net income before bonus?
4. If Larry received a profit share of P50,000, how much did Dennis receive if bonus is based on net income after bonus?