l NAME: SCORE:

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Problem #1
:::::,
Partner's Original Investment

Froilan Labausa' contributed land, inventory, and P280,000 cash to a partnership.

The land has a book value of P650,000 and a market value of Pl,350,000. The
inventory has a book value of P600,000 and a market value of PSl0,000. The
partnership also
assumed a P350,000note payable owed by Labausathat was used to purchasethe
land.
RosalieBalhagagreed to put up cashequivalent to Labausa'snet

investment. Required:

Prepare the journal entry to record Labausa's and Balhag's investment in the
partnership.
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1-34 I WIN Bal/ado's Partnership and Corporation Accounting
 I PIIO~: J
ftdllie!D 12
s:..m:IMllll:inof a Par1nership

-ginaJ investment in the firm of Sabio and Mariano, contributed

ad been recorded in the books of her own business as costing
cumulated depreciation of P620,000. The partners agreed on a
ac
113lt:ra:Onn of ?400,000. They afso agreed to accept Sabio's accounts receivable of
e to the extent of 85%.

entry to record Sabio's investment in the partnership on June 13.

c

Prollmnl3
ForlmlilOrlof a Partnership •
ave just formed a partnership. Gogola contributed cash of
er equipment that cost P540,000. The fair value of the
mniputer is P360,000. Gogola has notes payable on the computer of P120,000 to be
e partnership. Gogola is to have 60% capital i nterest in the partnership .
....... 1"Y"1· ,h, uted only P900,000. The partners agreed to share profit and loss

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ChDpter 1: Basic Co tderations and For. tion 1-3 S
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Problem#4
Two Sole Proprietors Form a Partnership

'
Calaguas and Dela Cruz formed a partnership and invested the following assets and
liabilities:

Fair Market Value Carrying Value

Calaguas:
Cash P300,000 P300,000
land 450,000 280,000

Dela Cruz:
Cash 100,000 100,000
Building 600,000 520,000
Mortgage Payable (400,000) (400,000)

The partners wiU share profits and losses equally.

Required:

Prepare the opening journal entry in the books of the partnership.

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l •3 I 1 8a/1oda's Pott rship ond Corporation Accountmg
 I PROfESSOR: J

kf113ft1[]11 operated a specia shop that so d fishing equipment and accessories. Her
· ba ance on Dec. 31, 2018 is as fotlows:

Fi
Post-Oosi e
{
Debit Credit
P 36,000
150,000
A£cou ts P 16,000 I
.U0.000
135,000
' • J
75,000
30,000
640,000
P761,000 P761,000

rs ip sted assoda e, Qui o, e ective Jan. 1,

s ared equal . Espanol is to transfer all assets and
rs p after reval ation.

sp nor's in trnent aft r re alua on. The agreed

-··-.v::anH• (n l), Pl40,000; tn n.to~, P460,000; and
jp _ II o t _ nd r t busin ss name of

2 dal pos o as a da of forma io

 I SCORE:
I
NAME: ~
LS~E~CT~l~O~N~: ._PR_O_F_E_SS_O_R_: =-..::i
Problem #6
A Sole Proprietor and an Individual with No Business Form a Partnership

On Apr. 8, 2019, Tolentino who has her own retail business and Tan, decided to forrn
partnership wherein they will divide profits in the ratio of 40:60, respectively. Th
a statement of financial posttlon of Tolentino is as follows:
e

Tolentino Marketing
Statement of Financial Position
April 8, 2019
Assets

Cash P 4,000
Accounts Receivable P160,000
Less: Allowance for Uncollectible Accounts 16,000 144,000
Inventory 200,000
Equipment P 50,000
Less: Accumulated Depreciation 10,000 40,000
Total Assets P388,000

Liabilities and Capital

Accounts Payable P 36,000
Tolentino, Capital 352,000
Total Liabilities and Capital P388,000

Conditions agreed upon before the formation of the partnership:

a. The accounts receivable of Tolentino is estimated to be 70% realizable.

b. The accumulated depreciation of the equipment will be increased by Pl0,000.
c. The accounts payable will be assumed by the partnership.
d. The capital of the partnership is based on the adjusted capital balance of Tolentino.
Tan is to contribute cash in order to make the partner's capital balances
proportionate to the profit and loss ratio.

Required:

1. Prepare the necessaryjournal entries in the books of Tolentino.

2. Prepare the opening journal entries ln the books of the partnership.

1-38 / WIN Ballada's Partnership and Corporation Accounting

~AME:
;ECTION:
I
SCORE:
~ROFESSOR:

problem #7 .
A Sole Proprietor and an Individual with No BusinessForm a
Partnership

Mulles, the owner of a successful fertilizer business felt that it is time to expand
operations. Mulles offered to form a partnership with Lucena, the owner of a nearby
warehouse. The partnership would be called Mulles & Lucena Storage and Sales.
Lucena accepted Mulles' offer and the partnership was formed on July 1, 2019.

Presented below is the trial balance for Mulles Fertilizer Supply on June 30,
2019:
Cash
P 229,500
Accounts Receivable
2,103,000
Allowance for Uncollectible Accounts P 117,000
Inventory 1,012,500
Prepaid Rent 29,250
Store Equipment 390,000
Accumulated Depreciation 97,500
Notes Payable 330,000
Accounts Payable 505,500
Mulles, Capital 2,714,250
Totals P3,764,250 P3,764,250

T-he partners agreed to share profits and losses equally and decided to invest an equal
amount in the partnership. Lucena and Mulles agreed that Lucena's land is worth
PS00,000 and his building Pl,450,000. Lucena is to contribute cash in an. amount
sufficient to make his capital account balance equal to ~ulles.

An agreement is reached by the two partners on the following items:

a. The accounts receivable are to be valued at Pl, 799,000 and the allowance for
uncollectible accounts will be eliminated.
b. Inventory is to be decreased by Pll2,500.
c. The prepaid rent is for the warehouse used by Mulles. All merchandise will be
transferred to Lucena's building. No refund will be received on the unused rent
paid in advance.
d. The store equipment has a fair value of P300,000.
e. All the other assets and liabilities are to be transferred at their book
values.

Required:
Prepare the necessary journal entries in the books of Mu lies. Also, record ~he
formation of the partnership in a new set of books.
Chapter 1: Basic Considerations and Formation I 1-39
 I~S~E~CT~l~O~N-:
NAME: , ·SCORE:
=i ;..._ +~PR~O~F~E~SS~O~R~:---------------_. J

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Problem #8
Two Sole Proprietors Form a Partnership

The business assets of Geron and Yumol appear below:

Geron Yumol
p 11,000 p 22,354
Cash
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
428,267
Building
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total Pl,020,916 Pl,317,002

p 178,940 p 243,650
Account Payable
Notes Payable 200,000 345,000
Geren, Capital 641,976
Yumol, Capital 728,352
Total Pl,020,916 Pl,317,002

Geren and Yumol agreed to form a partnership contributing their assets and equities
subject to the following adjustments:
a. Accounts receivable of P20,000 in Geron's books and P35,000 in Yurnol's are
uncollectible.
b. Inventories of PS,500 and PG, 700 are worthless in Gero n's and
Yumol's respective books.
c. Other assetsof P2,000 for Geron and P3,600 for Yumol are to be written off.

Required:

Prepare the journal entries for the formation of the partnership as at July 1.

1-40 I WIN Ba/Jada's Partnership and CorporationAccounting .

 I SCORE:
~F£SSOR: I
p,oblemfl
TWO Sole Proprietors Form a Partnership

edina and Loqueloque are fierce competitors who sell hunting equipment. They
finally decided to join forces in order to increasetheir businessand reduce costs.
An
agreement is reached between the two to begin operations as a partnership on Mar. 1,
2019.

Medina and loqueloque have decided to share profits or losses in the ratio of 60:40,
respectivety.

The statements of financial position of Medina and Loqueloqueas at Mar. 1, 2019 are as
follows:

Medina Loqueloque
Cash p 42,000 P 30,000
Accounts Receivable 389,200 169,200
Allowance for Uncollectible Accounts (22,400) (14,400)
Merchandise Inventory 461,600 300,800
Prepaid Rent 6,000
Office Supplies 30,400 4,000
Land 40,000
Building 128,000
Accumulated Depreciation (32,000)
Office Equipment 24,000 62,000
Accumulated Depreciation (6!000) (13,200)
Repair Equipment 172,000
Accumulated Depreciation (68,000).

Total Assets Pl,158,800 PS44,400

Notes Payable p 120,000

Accounts Payable 170,000 Plll,600
Mortgage Payable 200,000
Medina, Capital 668,800
Loqueloque, Capital 432,800

Total Liabilities and Owners' Equity Pl,158,800 PS44,400

Chapter 1: Basic Considerations and Formation I 1-41

 The name of the partnership will be Medina and Loquek,que Hunting Gears
partners have agreed to effect the following adjustments: · Tht
a. Medina's merchandise inventorv is to be reduced by PlOS,200. The inventory of
Loqueloque will be increased by P7,200.

b. The following are the fair market vaJues of the various assets:
Medjna
land P108,000
Buildi~ 192,000
Office Equipment 16,000 P40,000
Repair Equipment U4,000

c. One-haft of the notes payable of Medina are personal notes. All other liabilities
of the partners are assumed by the partnership.

d. The prepaid rent in the books of Loqueloque will be consumed by the

partnership.

Required:
Prepare the journal entries to ~ the formation of the partnership.

1-42 I w, Ballodtrsi'artnff'ship and Corporation Accounting

 I SCORE:
: PROFESSOR:
.
I
Probfem #lO
rwo ol Proprietor, Form a Partnership
Ori Oct. 31, 2019, ApalJsoc and Tuddao agreed to combine their proprietorships as a
partnership. Their statements of flnanctal position are as follows:
Apalsoc's Business Tuddao'S Business
Sook Current Book Current
Assets Va.lue Market Value Value Market
Value
Ca$h p 37,000 p 37,000 p 80,000 p 80,000
Acco.Un Recervab (net) 220,000 202,000 80,000 63,000
tnven ory 510,000 460,000 340,000 351,000
Prop rty and Equipment (net) 1,218,000 1,235,000 535,000 574,000
Total MS . Pl,985,000 Pl,934,000 Pl,035,000 Pl,068,000

L1 bil' and Capital

Accounts Payable P 236,000 P 236,000 p 91,000 P 91,000

AI;cru d Exp ns 22,000 22,000 14,000 14,000
Not< Payabl 750,000 750,000
Apahsoc, Caprtal 977,000
Tuddao, Capital 930,000
Total Ltab1liti,es & Caprtal Pl,985,000 Pl,934,000 Pl,035,000 Pl,068,000

Required:
1. Record the partnership formation.
2. Prepare the partnership's statement of financial position as at Oct. 31, 2019.

Cha"Pfer 1: Basic COnsidtmltionsand Formation I 1-43

 I
I
NAME: SCORE· . ::,
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Multiple Choice

1. on May l, 2019, Gonzaga and Balace form~ a partnership and agreed to share
profits and losses in the ratio of 3:7, respectively. Gonzaga contributed a partcel
of land that cost Pl0,000. Balace contributed P40,000 cash. The land was sold
for P18,000 on May 1, 2019, immediately after formation of the partnership.
What amount should be recorded in Gonzaga's capital account on formation of
the
partnership?

a. PlS,000
b. Pl7,400
c. Pl0,000
~ Pl.8,000

2. On Mar. 1, 2019, Sarabia and Abad decided to combine their businesses and form a
partnership. Their statements of financial position on Mar. 1, before adjustments,
showed the following:
Sarabia Abad (

Cash p 9,000 P 3,750

Accountsreceivable 18,500 13,500
Inventories 30,000 19,500
Furniture and Rxtures (net) 30,000 9,000
Office Equipment(net) 11,500 2,750
PrepaidExpenses 6,375 3,000
Total PlOS,375 P51,500

Accounts Payable P 45,750 P18,000

Capital 59,625 33,500
Total PlOS,375 P51,500

They agreed to have the following items recorded in their books:

1. Provide2% allowance for doubtful accounts.

2. Sarabia's furniture and fixtures should be P31,000, while Abad's office
equipment is under-depreciated by P250.
3. Rent expense incurred previously by Sarabia was not yet recorded amounting
to Pl,000, while salary expense incurred by Abad was not also recorded
amounting to P-800.
4. The fair market values of inventory amounted to:
For P29,500
Sarabia
21,000
For Abad
1-44 I .WIN Bal/ado's Partnership and Corporation Accounting
 compute the net (debit) credit adjustment for Sarabiaand Abad:
Sarabia Abad Abad
Sarabia
P 2,870
•
a. P 2,820 P{870) P 180
P(2,870)
{l P{2,820) P870 P{180)

3. Using the same information in the previous number, .what is amount of total
liabilitiesafter the formation?
a. P63,950
D PGS,550
.c,
d.
P63,7SP
PGl,950

4. Using the same information is #2, what is the amount of total assets after the
formation?
a. P160,765 fc\ . P157,985
b. P152,985 ¥, PlSG,875
.
S. Ables and Galang executed a partnership agreementthat lists the following assets
contributed at the partnership's formation:

Contributed by:
Ables Galang
Cash P20,000 P30,000
Inventory 15,000
Building 40,000
Furniture and Equipment 15,000

The building is subject to a mortgage of Pl0,000, which the partnership

has assumed. The partnership agreement also specifiedthat profits and lossesare
to be distributed equally. What amounts should be recorded as capital for
Ables and
Galang at the formation of the partnership?

Ables Galang
a. P35,000 PBS,000
b. P35,000 P75,000
c. PSS,000 P55,000
d. P60,000 PG0,000

6. Orcaja<;fa invested in a partnership a parcel of land which cost his father P200,000.
The land had a market value of P300,000 when Orcajada inherited_ it three years
ago. Currently, the land is independently appraised at PS00,000 even though
Orcajada insisted that he "wouldn't take P900,000 for it. n The land should
be t"eCorded in the accounts of the partnership at
a. Pl00,000.
, PS00,000.

Chapter 1: Basicumsiderotionsand Formation i 1-45

 c. P900,000.
d. P200,000.

7. on Apr. 30, 2019, Lacson, Yaca~in, an~ Bernal formed a ~artnership by combini
• their separate business proprietorships. Lacson contributed cash of Pso ng
Yacapin contributed property with a P36,000 carrying amount, a P40
' I
or:~Oo.
1gina1
ooo
cost, and PS0,000 fair value. The partnership accepted responsibility for ·the
P35,000 mortgage attached to the property.

Bernal contributed equipment with a P30,0?0 carrying amoun~,. a P75,000 original

cost, and PSS,000 fair value. The partnership agreement specifies that profits and .
losses are to be shared equally but is silent regarding capital contributions. Which
partner has the largest Apr. 30, 2019, capital balance?
a. Lacson c. Bernal
b. Yacapin d. All capital account balances are equal

8. On Aug. 1, lsada and Ureta-Reyes pooled their assets to form a partnership, with the
firm to take over their business assets and assume the liabilities. Partnership
capitals are to be based on net assets transferred after the following adjustments.
Profits and losses are allocated equally.

The inventory of Ureta-Reyes is to be increased by P4,000; an allowance for

doubtful accounts of Pl,000 and Pl,~00 are to be set up in the books of lsada and
Ureta-Reyes, respectively; and accounts payable of P4,000 is to be recognized in
lsada's books. The individual trial balances on August, before adjustments, follow:

lsada Ureta-Reyes
Assets P75,000 P113,000
Liabilities 5,000 34,500

What is the capital of lsada and lJreta-Reyes after the above adjustments?
a. lsada, P68, 750; U. Reyes, P77,250 c. lsada, P65,000; u. Reyes, P76,000
b. lsada, P65,000; U. Reyes, P81,000 d. lsada, P75,000; u. Reyes, P81,000

9. Calma and Abella formed a partnership on April 1 and contributed the following
assets:
Calma Abello
Cash P 150,000 P 50,000
Land 310,000

The land was subject to a mortgage of P30,000, which was assumed by the
partnership. Under the partnership agreement, Calma and Abella will share profit
and loss in the ratio of one-third and two-thirds, respectively. Abello's capital
account at April 1 should be

1-46 I WIN Bal/ado's Partnership and Corporation Accountfng

 a. P330,000. b.
P360,000. c.
P300,000. d.
P340,000.

10. Pedernal, Pating, and Liggayu are forming a new partnership. Pedernal is to invest
cash of Pl00,000 and stapling equipment originally costing P120,000 but has a
second-hand market value of PS0,000. Pating is to invest cash of PlG0,000.
Liggayu,whose family is engaged in selling stapling equipment, is to contribute _cash
of PS0,000 and a brand new stapling equipment to be used by the partnership with
a regular pric~ of 120,000 but which cost their family's business Pl00,000. Partners
agreed to share profits equally. The capital balan~es upon formation are

a. Pedernal, P220,000; Pating, PlG0,000; and Uggayu, PlS0,000.

b. Pedernal, PlS0,000; Pating, Pl60,000; and liggayu, P170,000.
c. Pedernal, Pl60,000; Pating, PlG0,000; and liggayu, PlG0,000.
d. Pedernal, Pl76,666; Pating, Pl76,666; and liggayu, P176,668.

11. Estrada and Molina formed a partnership on Mar. 1, 2019 and contributed the
following assets:
Estrada Molina

Cash P80,000
Equipment P50,000

The equipment was subject to a chattel mortgage of Pl0,000 that was assumed by
the partnership. The partners agreed to share profits and losses equally, Molina's
capital account at Mar. l, 2019 should be
a. PS0,000. c. P40,000.
b. P45,000. d. PG0,000.

12. On Mar. 1, 2019, Kalaw and Borromeo formed a partnership with each contributing
the following assets:
Kai aw Borromeo
Cash P30,000 P 70,000
Machinery and Equipment 25,000 75,000
Building 225,000
Furniture and Fixtures 10,000

The building is subject to mortgage loan of PS0,000, which is to be ass.urned by the

partnership· . Agreemen t pro vides that Kalaw and Borromeo sh. are profits an, d
loss. es
30% and 70%, respectiv· I on Mar · 1 , 2019 the balance m Borromeo s capital
e account should be y.

Chapter 1: Basic Considerations and Formation I 1-47

 a. P370,000. c. P305,000.
b. P314,000. d. P290,000.
'

l3. The same Information in the previous number except that the mortgage .
assumed by the partnership. On Mar. 1, 2019 the balance in Borron,e1 ~an ,s
"tot
o s ca,
account should be Plfal
a. P370,000. c. P305,000.
b. P314,000. d. P290,000.

14. on July 1, Faminial and Fetalvero f~rmed a P~~nership: agreeing to share Profits
and tosses in the ratio of 4:6 respectively. Famm,al contributed a parcel of land tha
cost P25,000. Fetalvero contributed PS0,000 cash. The !and was sold for PSO,~
on July 1, three hours after formation of the partnership. How much should be
recorded in Faminial's capital account on formation of the partnership?
a. PS0,000. c. P25,000.
b. P20,000. d. Pl0,000.

15. On Apr. 30, 2019, Foja, Lupian, and Retada formed a partnership by combining their
separate business proprietorships. Foja contributed cash of P50,000. Lupian
contributed property with a P36,000 carrying amount, a P40,000 original cost, and
P80,000 fair value. The partnership assumed the P35,000 mortgage attached to the
property. Retada contributed equipment with a P30,000 carrying amount, a.
P75,000 original cost, and PSS,000 fair value. The partnership agreement specified
that profits and losses are to be shared equally. Which partner has the largest Apr.
30, 2019, capital account balance?

a. Foja.
b. Retada.
c. Lupian.
d. All capital account balance~ are equal.

16. Lacson and Solis started a partnership. Lacson contributed a building that she
pu:c~ased 10 years ago for Pl00,000. The accumulated depreciation on th_e
bu,ld.mg ?n the date of forma.tion of the partnership is P25,000 and the fair value 15
Pll0,000. For what amount will Lacson's capital account be credited on the bookS
of the partnership?
a. Pl00,000
c. Pll0,000
b. P75,000
d. P25,000

1-48 I WIN Bolloda's Partnership and Corporation Accounting