1

Bargain purchase option
1. Cherry Inc. charges an initial franchise fee of 115,000 with 25,000 paid when the
agreement is signed and the balance in five annual payments. The present value of the
future payments, discounted at 10% is 68,234. The franchisee has the options to
purchase 15,000 of equipment for 12,000 from the
franchisor. Cherry has substantially provided all initial services required and collectability
of the payments is reasonably assured. The amount of revenue from franchise fees is:
90,234
2. Laica authorized Dashon to operate as her franchisee. The agreement included a
provision whereby Dashon may acquire equipment directly from Laica at a price
materially lower than prevailing price for an equivalent unit in the market. How should
Laica account for this component of the franchise agreement?
The price difference must be deducted from the initial franchise fee and deferred for
revenue recognition
3.
Option to purchase franchisee
1. Saisaki Corp granted a franchise to Mity for an initial franchise fee of 1,000,000. The
agreement provides that Saisaki has the options within one year to acquire franchisee
business, and it seems certain that Saisaki will exercise this options. On Saisaki's books,
how should the initials fee be recorded?
Deferred and treated as reduction in Saisaki investments when the options is exercise
2. At the beginning of the year, TMT got the franchise of Lindon's, a known steakhouse of
upscale patronage. The franchise agreement required a P500,000 franchise fee payable
P100,000 upon signing of the agreement and the balance in four annual installments
starting the end of the current year. At present value using 12% as discount rate, the four
installments would approximate P199,650. The fees once paid are not refundable.
Lindon has the option to purchase the franchise operation after ten years. The franchise
maybe cancelled subject to the provision of the agreement. Should there be unpaid
franchise fee attributable to the balance of main fee (P500,000), same would become
due and demandable upon cancellation. Further, the franchisor is entitled to a 5% fee on
gross sales payable monthly within the first ten days of the following month.
The Credit Bureau rated TMT as AAA credit rating. The balance of the franchise fee was
guaranteed by a commercial bank.
If the franchise's first year of operation yielded gross sales of P9,000,000, Lindon's
earned franchise fees of the first year is
P 450,000
3.
Installment recognition of Franchise gross profit
1. On January 2, 2018, JERICHO Company signed an agreement to operate as a
franchisee of CONVERSE PRODUCTS, INC., for an initial franchise fee of P10, 000,
000 for 10 years. Of this amount, P2, 000, 000 was paid when the agreement was
signed and the balance payable in four annual payments beginning on December 30,
2018. JERICHO signed a non-interest bearing note for the balance.
JERICHO's rating indicates that it can borrow money at 24% for the loan of this type.
Present value of an annuity of 1 for 4 periods at 24% is 2. 40. Assume that substantial
services amounting to P1, 020, 000 had already been rendered by CONVERSE
PRODUCTS. Indirect franchise cost paid amounted to P272,000.
Calculate the realized gross profit for 2018 assuming collection of the note is not
reasonably assured
P2, 420,800
2. On January 1, 2018, Ghastly entered into a franchise agreement with Abra Inc. to sell
their products. The agreement provides for an initial franchise fee of P7,500,000 which is
payable as follows: P2,500,000 cash to be paid upon signing the contract, and the
balance in four equal annual installments every December 31, starting December 31,
2018. Ghastly signs a non interest bearing note for the balance. The credit rating of the
franchisee indicates that the money can be borrowed at 10%. The present value factor
of an ordinary annuity at 10% for 4 periods is 3.1698. the agreement further provides
that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross
sales. Abra incurred direct cost of P2,326,410 and indirect costs of P418,500. The
franchisee started business operations on July 1, 2018 and was able to generate sales
of P3,100,000 as of the end 2018. The first installment payment was made in due date.
Assuming that the collectability of the note is not reasonably assured, how much is the
net income of the franchisor for the year end December 31, 2018?
1,882,915
3.
Franchise fee revenue
1. Shake Inc. franchisor, enters into a franchising agreement with Sha, franchisee, on June
30, 2018. The agreement calls for a total franchise fee of 1,000,000 of which 100,000 is
payable upon signing of the contract and the balance in four equal semi-annual
installments. It is agreed that the down payment is non-refundable not withstanding the
lack of substantial performance of initial services by the franchiser.
When Shake Inc, prepares it financial statement as of June 30, 2018, the unearned
franchise fee to be reported is:
1,000,000
2. On December 31, 2017, RR Inc. authorized GG to operate as a franchisee for an initial
franchise fee of 150,000. Of his amount, 60,000 was received upon signing the
agreement and the balance, represented by a note, is due in three annual payment of
30,000 beginning December 31, 2018. The present value on December 31, 2017. The
three annual payment appropriately discounted is 72,000. According to the agreement,
the non-refundable down payment represents a fair measure of the services already
performed by RR, however substantial future services are required of RR. Collectibility of
the notes is reasonably certain. In RR December 31, 2017, statement of financial
position, unearned franchise fees from GG FRANCHISE should be reported as
72,000
3.
Penalty provisions
1. Litangfan, Inc. began operation of its construction division on October 1, 2017, and
entered into contracts, one of which is Project Pulag with contract price of P600,000 and
provided for penalties of P10,000 per week for late completion. Project Pulag was two
weeks behind schedule as of 2017, and it was completed five weeks late in August
2018. The following data pertains to the separate long-term construction projects in
progress:
How much must be the gross profit to be reported at the end of the first
year?
180,000
2.
Changes in contract affecting the contract Price - Assessment
1. Mountain Province, Inc. began operation of its construction division on October 1, 2017,
and entered into contracts, one of which is Project Kiltepan with original contract price
was P800,000. Change orders during 2018 added P40,000 to the original contract price.
The following data pertains to the construction project:
How much shall be reported as realized gross profit at the end of the 2nd
year?
(20,000)
2. Kamote Corporation. entered into a construction agreement in 2017 that called for a
contract price of 9,600,000. At the beginning of 2018, a change order increased the
initial contract price by 480,000. The company uses the percentage of completion basis
of revenue recognition, in relation to the project,the following data are obtained:
What gross profit (loss) should Kamote Corp. recognized in 2018?

480,000 gross profit
3.
Repossession
1. Wood Corp. has a normal gross profit on installment sales of 30%. A 2017 sale resulted
in a default early in 2018. At the date of default, the balance of the installment receivable
was P8,000, and the repossessed merchandise had a fair value of P4,500. Assuming
the repossessed merchandise is to be recorded at fair value, the gain or loss on
repossession should be
1,100 loss
2. Gentry Co. uses the installment sales method. When an account had a balance of
P3,500, no further collections could be made and the dining room set was repossessed.
At that time, it was estimated that the dining room set could be sold for P1,000 as
repossessed, or for P1,300 if the company spent P125 reconditioning it. The gross profit
rate on this sale was 70%. What is the gain or loss on repossession?
125 gain
3.
Realized and deferred gross profit
1. The Zonyo Company on October 1, 2018, sold article "A" for P4,000, costing P2,700.
Article "B", a used article was accepted as down payment and the balance on a monthly
installment payment of P220 starting November 1, 2018. P1,200 was allowed on the
article traded-in. The company estimates reconditioning cost of P80 on this article and a
sales price of P1,100 after such reconditioning. The company normally expect 20%
gross profit on sale of used articles. The company employs the perpetual method of
inventory.
The amount of realized gross profit in 2018 is:
300
2. Since there is no reasonable basis for estimating the degree of collectibility, Astor Co.
uses the instalment method of revenue recognition for the following sales:
What amount should Astor report as deferred gross profit in its December 31, 2017
balance sheet for the 2016 and 2017 sales?
250,000
3.
Gross profit rate
1. Blue Inc had total sales and cost of goods sold of 1,000,000 and 450,000, respectively,
for the current year. Blue Inc's trade activities show that sales are made 50% on cash
and 50% on instalment basis. The instalment basis sales prices are 20% higher than that
of the cash sales.
What is Blue Inc's gross profit rate on instalment sales (rounded)?
59%
2. Adawiya Corp regularly makes sales on instalment. During 2017, one of Adawiya's sales
amounted to 500,000, costing 300,000, with 20% downpayment received upon approval
by the credit department. To induce the customer, Adawiya offered to grant a 20,000
discount for a trade-in of a competitor's old model currently held by the buyer, and which
was availed. Adawiya does not intend to sell the old model as a whole but shall dispose
it as scrap with estimated recoverable value of 15,000 only. For Gross profit recognition,
what gross profit rate based on sales should be used by Adawiya for this transaction?
39%
3.
Installment liquidation
1. In preparing a cash distribution plan, the partner's capital and loan accounts should be-
combined
2. under liquidation by installment, the partner who receives cash when there is cash
available is the one-
who can absorb the greatest share of theoretical or possible loss

3. Jade, Kahl, and Lane are in the process of liquidating their partnership. Lane has agreed
to accept the inventory, which has a fair value of 60,000, as part of her settlement. A
balance sheet and the residual profit and loss sharing percentages are as follows:
If the partners then distribute the available cash, Lane will receive
23,000
4. Hara, Ives, and Jack are in the process of liquidating their partnership. Since it may take
several months to convert the other assets into cash, the partners agree to distribute all
available cash immediately, except for 10,000 that is set aside for contingent expenses.
The balance sheet and residual profit and loss sharing percentages are as follows:
How much cash should Ives receive in the first distribution?

147,000.
5. In dissolution by installment, final cash settlement among the partner's are based on the-
partner's capital balance

6. The ABC Partnership has assets with book value of P240,000 and a market value of
P195,000, outside liabilities of P70,000, loans payable to Partner Able of P20,000, and
capital balances for Partners Able, Baker, and Chapman of P70,000, P30,000, and
P50,000, respectively. The partners share profits and losses equally.
If all outside creditors and loans to partners had been paid. How would be balance of the
asssets be distributed assuming Chapman has already received assets with a value of
P30,000?
Able: P55,000, Baker: P15,000, Chapman: P5,000.

7. After incurring losses resulting from every unprofitable operations, the Goh Kong Wie
Partnership decided to liquidate when the partners' capital balances were:
The non-cash assets were sold in installment. Available cash were distributed to
partners in every sale of non-cash assets. After the second sale of non-cash assets, the
partners received the same amount of cash in the distribution. And from the third sale of
non-cash assets, cash available for distribution amounts to P28,000, and unsold
non-cash assets has a book value of P12,500. Using cash priority program, what amount
did Wei received in the third installment of cash?
5,600
8. Jen, Nil, and Lyn are in the process of liquidating their partnership. Lyn has agreed to
accept the inventory, which has a fair value of 75,000, as part of her settlement. A
balance sheet and the residual profit and loss sharing percentages are as follows:
If the partners then distribute the available cash, Lyn will receive
11,000.
9. The A, B, and C Partnership have not been successful. Hence, the partners have sadly
concluded that operations must be terminated and their partnership liquidated. Profits
and losses are shared as follows: A, 45 percent; B, 35 percent; and C, 20 percent. As
the accountant placed in charge of this partnership, you have responsibility for the
liquidation and distribution of assets. When you assume your responsibilities, the
partnership balance sheet is as follows:
How much cash A should receive?
26,250
10.
Loss absorption capacity
1. The following is the priority sequence in which liquidation proceeds will be distributed for
a partnership:
Partnership liabilities, partnership loans, partnership capital balances

2. Partners Almond, Barney, and Colors have capital balances of P20,000, P50,000, and
P90,000, respectively. They split profits in the ratio of 2:4:4, respectively. Under a safe
cash distribution plan, one of the partners will get the following total amount in liquidation
before any other partners get anything:
40,000
3. The following condensed balance sheet is presented for the partnership of Alfa and
Beda, who share profits and losses in the ratio of 60:40,
respectively:
Alfa and Beda decide to liquidate the partnership. If the other assets are sold
forP500,000, what amount of the available cash should be distributed to Alfa?
273,000
4. Sanchez and Tan are partners sharing profits equally and with capital balances,
respectively, of 750,000 and P500,000. The firm owes Tan 200,000, as evidenced by a
promissory note. Upon liquidation, cash of 300,000 becomes available for distribution to
the partners. In the final cash distribution, the respective shares of Sanchez and Tan will
be:
175,000 and 125,000

5.
Lump-sum liquidation
1. The following condensed balance sheet is presented for the partnership of Axel, Barr,
and Cain, who share profits and losses in the ratio of 4:3:3, respectively:
The partners agreed to dissolve the partnership after selling the other asset for
P200,000. Upon dissolution of the partnership, Axel should have received
0
2. The following condensed balance sheet is presented for the partnership of Smith and
Jones, who share profits and losses in the ratio of 60:40,
respectively:
The partners have decided to liquidate the partnership. If the other assets are sold for
385,000, what amount of the available cash should be
distributed to Smith?
136,000
Beda, who share profits and losses in the ratio of 60:40,
respectively:
Alfa and Beda decide to liquidate the partnership. If the other assets are sold for
P500,000, what amount of the available cash should be distributed to Alfa?
273,000
4.
Determination of distributable asset
1. When the partnership's non-cash assets are realized at less than its book value during
the liquidation process, it results to a-
loss on realization
2. When a partner develops a debit balance in his capital, but such partner has a loan to
the partnership, he may exercise the doctrine of-
right of offset
3. When a partnership is liquidated, it is usually focused on the following activities?
terminal activities
4. HM, CM and DM of The M3 Partnership has the following account balances before
liquidation:
If the partners undertake an instalment liquidation, how much cash may be distributed
immediately to the partners?
0
5. The following are the causes of partnership's dissolution with liquidation, except-
when a partners dies

6. The first priority to be paid when there is cash available in the liquidation process, be it in
lump sum or installment type-
outside creditors
7. The process of winding-up the business activity that includes converting non-cash assets
into cash, paying its liabilities and distribution of cash and the remaining assets to
individual partners-
liquidation
8. D, E and F are partners sharing profits in the ratio of 40:35:25, respectively. On
December 31, 2016, they agree to liquidate. A balance sheet prepared on this date
follows:
If cash id distributed at the end of each month of liquidation, how much is the total asset
to be distributed to partners at the end of March?
10,150
9.
Incorporation of a partnership
1. Jay & Kay partnership's balance sheet at December 31, 2018, reported the following:
On January 2, 2019, Jay and Kay dissolved their partnership and transferred all assets
and liabilities to a newly formed corporation. At the date of incorporation, the fair value of
the net assets was 12,000 more than the carrying amount on the partnership's books, of
which 7,000 was assigned to tangible assets and 5,000 was assigned to goodwill. Jay
and Kay were each issued 5,000 shares of the corporation's 1 par value common stock.
Immediately following incorporation, additional paid-in capital in excess of par should be
credited for
82,000
2. Jay & Kay partnership's balance sheet at December 31, Year 1, reported the following:
On January 2, Year 2, Jay and Kay dissolved their partnership and transferred all assets
and liabilities to a newly formed corporation. At the date of incorporation, the fair value of
the net assets was 12,000 more than the carrying amount on the partnership's books, of
which 7,000 was assigned to tangible assets and 5,000 was assigned to goodwill. Jay
and Kay were each issued 5,000 shares of the corporation's 1 par value common stock.
Immediately following incorporation, additional paid-in capital in excess of par should be
credited for
82,000
3. The condensed balance sheet of A and B Partnership, together with their P/L ratio at
Dec. 31, Year 2, follows:
On December 31, Year 2, the fair values of the assets and liabilities were appraised at
240,000 and 20,000, respectively, by an independent appraiser. On January 2, Year 2,
the partnership was incorporated and 12,000 shares of P5 par value common stock were
issued to A and B. Immediately after the incorporation, how many shares will be issued
to A?
7,418 shares
4. The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2017,
follows:
On December 31, 2017, the fair values of the assets and liabilities were appraised at
P240,000 and P20,000, respectively, by an independent appraiser. On January 2, 2018,
the partnership was incorporated and 1,000 shares of P5 par value common stock were
issued. Immediately after the incorporation, what amount should the new corporation
report as additional paid in capital?
215,000
5.
Reduction of partner by retirement/withdrawal/death
1. Cina, Doy and Dali share profits and losses based on 5:3:2. Eli was allowed to withdraw
from the partnership on 31 December 31 with 600,000 cash as full settlement. The
condensed statement of financial position of the partnership as of that date was as
follows:
Using the goodwill method, the new capital balances of the remaining partners after Eli's
withdrawal are:
Cina, 1,375,000 and Doy, 1,275,000

2. On July 10, 20CY Lolo wants to retire from JKL Partnership. The statement of financial
position for the JKL Partnership before closing on that date shows the following:
Jose, Kiko and Lolo shares profits and losses in the ratio of 5:3:2, respectively. The
partners agreed to write off the goodwill and to adjust the equipment to their fair market
values of 230,000. Lolo is paid 110,000 cash for his total interests.
Assuming the use of the total goodwill method the total assets of the new partnership
after the retirement of Lolo is:
490,000
3. On June 30, 20CY, the condensed balance sheet for the partnership of Eddy, Fox, and
Grimm together with their respective profit and loss sharing percentage, was as follows:
Eddy decided to retire from the partnership and by annual mutual agreement is to be
paid 180,000 out of partnership funds for his interest. Total goodwill implicit in the
agreement is to be recorded. After Eddy's retirement, what are the capital balances of
the other partners?
__Fox____Grimm__
108,000 72,000
4. On June 30, 20CY the balance sheet for the partnership of Cruz, Merced and Prieto,
together with their respective profit and loss ratio, were as follows:
Cruz had decided to retire from the partnership. By mutual agreement, the assets are to
be adjusted to their fair value of 216,000 at June 30, 20CY. It was agreed that the
partnership would pay Cruz 61,200 cash for Cruz's partnership interests, including
Cruz's loan which is to be repaid in full. No goodwill is to be recorded. After Cruz's
retirement, what is the balance of Merced capital account?
45, 450
5. Dizon's share of the partnership profit and losses was 20%. Upon withdrawing from the
partnership he was paid 74,000 in final settlement for his interests. The total of the
partner's capital account before recognition of partnership goodwill prior to Dizon's
withdrawal was 210,000. After his withdrawal the remaining partner's capital accounts,
excluding their share of goodwill, totalled 160,000. The implied goodwill of the firm was:
120,000
6. In the RST partnership, Ron's capital is 80,000, Stella's is 75,000, and Tiffany's is
50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the
partnership.
Refer to the above information. Tiffany is paid 60,000, and no goodwill is recorded. What
is the Ron's capital balance after Tiffany withdraws from the partnership?
74,000
7. Lina, Mina and Nina were partners with capital balances on January 2, Year 4 of
300,000, 200,00 and 100,000 respectively. On July 1, Year 4 Lina retires from the
partnership. On that date of retirement the partnership net loss is 60,000 and the
partners agreed that certain assets is to be revalued at 80,000 from its original cost of
50,000. The partners agreed to further to pay Lina 225,000 in settlement of her interests.
The remaining partners continue to operate under a new partnership, MN partnership.
What is the total capital of MN partnership?
345,000
8. When a partner retires from a partnership and the retiring partner is paid more than the
capital balance in her account, which of the following explains the difference?
I. The retiring partner is receiving a bonus from the other partners.
II. The retiring partner's goodwill is being recognized.
Either I or II
9. Davis has decided to retire from the partnership of Davis, Eiser, and Foreman. The
partnership will pay Davis P200,000. Goodwill is to be recorded in the transaction as
implied by the excess payment to Davis. A summary balance sheet for the Davis, Eiser,
and Foreman partnership appears below. Davis, Eiser, and Foreman share profits and
losses in a ratio of 1:1:3, respectively.
What partnership capital will Foreman have after Davis retires?
360,000
What goodwill will be recorded?
200,000
11. Which of the following will cause the partnership to be dissolved but will continue to
operate?
all of the above

12. In May 20CY, Imelda, a partner of an accounting firm, decided to withdraw when the
partners' capital balances were: Mikee, 600,000; Raul, 600,000; and Imelda. 400,000. It
was agreed that Imelda is to take the partnership's fully depreciated computer with a
second hand value of 24,000 that cost the partnership 36,000. If profits and losses are
shared equally, what would be the capital balances of the remaining partners after the
retirement of Imelda?
__Mikee____Raul__
608,000 608,000
13. Which of the following results in dissolution of a partnership?
The withdrawal of a partner from a partnership.

14. On October 31, Year 1, Morris retire from the partnership of Morris, Philip, and Marl.
Morris received 55,000 representing final settlement of his interest in the amount of
50,000. Under the bonus method,
Charged 5,000 against the capital balances of Philip and Marl.

15. The condensed statement of financial position of the partnership of Edong, Fredo and
Godo with corresponding profit and loss sharing percentage as of June 30, 2013 was as
follows:
As of said date, Edong retired from the partnership. By mutual agreement, he was paid
225,000 for his interests in the partnership. The total implied goodwill was to be
recorded. After Edong's retirement, the total asset of the partnership was:
225,000
16. Rita, Sisa and Tina are partners with capital balances on June 30, Year 4 of 60,000,
60,000 and 40,000, respectively. Profits and losses are share equally. Tina withdraws
from the partnership. The partners agree that Tina is to take certain furniture at their
hand value of 2,400 and cash for the balance of her interests. The furniture is carried on
the books as fully depreciated.
The amount of cash to be paid to Tina and the capital balances of the remaining
parftners after the retirement of Tina are:
Cash Rita Capital Sisa Capital
38,400 60,800 60,800

17. On June 30, 20CY the balance sheet for the partnership of Cruz, Merced and Prieto,
together with their respective profit and loss ratio, were as follows:
Cruz had decided to retire from the partnership. By mutual agreement, the assets are to
be adjusted to their fair value of 216,000 at June 30, 20CY. It was agreed that the
partnership would pay Cruz 61,200 cash for Cruz's partnership interests, including
Cruz's loan which is to be repaid in full. No goodwill is to be recorded. After Cruz's
retirement, what is the balance of Merced capital account?
45, 450
18. Which of the following activity will result to partnership liquidation?
winding-up of partnership affairs

19. Maxwell is trying to decide whether to accept a salary of 40,000 or salary of 25,000 plus
a bonus of 10% of net income after salaries and bonus as a means of allocating profit
among partners. Salaries traceable to the other partners are estimated to be 100,000.
What amount of income would be necessary so that Maxwell would consider choices to
be equal?
290,000
20. Cen, Deng and Lala are partners with capital balances on 31 December 20CY of
300,000, 300,000 and 200,000 respectively. Profits are shared equally. Lala wishes to
withdraw and it is agreed that she is to take certain furniture and fixture with second
hand value of 50,000 and a note for the balance of her interests. The furniture and
fixtures are carried in the books at 65,000. Brand new, the furniture and fixtures may cost
80,000. Lala's acquisition of the second-hand furniture will result to:
Reduction in capital of 5, 000 each for Cen, Deng and Lala

21. On June 30, Year 2, the balance sheet for the partnership of Coll, Maduro, and Prieto,
together with their respective profit and loss ratios, were as follows:
Coll decided to retire from the partnership. By mutual agreement, the assets are to be
adjusted to their fair value of 216,000 at June 30, Year 2. It was agreed that the
partnership would pay Coll 61,200 cash for Coll's partnership interest, including Coll's
loan which is to be repaid in full. After Coll's retirement, what is the balance of Maduro's
capital account?
45,450
22. The trial balance of Nimpha, Esther, and Rebecca, on December 31, Year
4, is as follows:
Merchandise inventory on December 31, Year 4, amounts to 9,100; accrued interest on

the note payable to Nimpha is to be recognized as of December 31. Nominal accounts
are closed and 31,500 is paid for Nimpha's net interest in the firm (capital, receivable,
and payable balances). A few days later, Esther accepts a personal check for 32,000
from Rebecca to quit the business and allow Rebecca to continue operations as a sole
proprietor. The partners share profit and losses equally.
Compute the ending capital balance of Rebecca immediately after Esther's withdrawal
56,490
23. When a partner retire, the book of the partnership should be adjusted to as of:
the date of retirement
24. In the RST partnership, Ron's capital is 80,000, Stella's is 75,000, and Tiffany's is
50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the
partnership.
Refer to the above information. Tiffany is paid 60,000, and no goodwill is recorded. In the
journal entry to record Tiffany's withdrawal:
Stella, Capital will be debited for 4,000.

25. Which of the following could be possible cause for dissolution with liquidation of the
partnership business?
insolvency of the partnership

26. Pastor, Ramon and Sendong were partners with capital balances as of January 1, 20CY
of 100,000, 150,000 and 200,000 respectively, sharing profit and losses on a 5:3:2 ratio
On July 1, 20CY Pastor withdraw from the partnership. Partners agreed that at the time
of withdrawal, certain inventories had to be revalued at 70,000 from its cost of 50,000.
For the six month period ending June 30, 20CY, the partnership generated a net income
of 140,000. Further, partners agreed to pay Pastor 195,000 for his interests and that the
remaining partner's capital account would be adjusted for whatever goodwill the
settlement would generate. The payment to Pastor included a goodwill of:
15,000
27. Which of the following adjustments in the partnership books are needed in an event the
partner dies?
all of the above
What partnership capital will Eiser have after Davis retires?
180,000
29. When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill's
interest exceeded Mill's capital balance. Under the bonus method, the excess
Reduced the capital balances of Yale and Lear.

30. Peter, Queen, and Roy are partners with capital balances of 300,000, 300,000, and
200,000, respectively; and sharing profits and losses equally. Roy is to retire and it is
agreed that he is to take certain office equipment with second hand value of 50,000 and
a note for his interest. The office equipment carried in the books at 65,000 but brand new
would cost 80,000. Roy's acquisition of the office equipment would result in
Reduction in capital of 5,000 each for Peter, Queen, and Roy.
31. On December 31, 20CY the condensed statement of financial position of ABC
Partnership is presented below:
Amy, Bea and Cat share profits and losses in the ratio of 3:2:1, respectively. It was
agreed among the partners that Amy retires from the partnership and the partnership's
assets to be adjusted to their fair value of 210,000. The partner's further agreed to pay
Amy 64,000 cash for the total interests in the partnership.
What is the capital balance of Cat after the retirement of Amy?
92,000
32.
Addition by investment
1. When a new partner is admitted into a partnership and the new partner receives a capital
credit greater than the tangible assets contributed, which of the following explains the
difference?
I.The old partners' goodwill is being recognized.
II.The new partner's goodwill is being recognized.
II only
2. In the AD partnership, Allen's capital is 140,000 and Daniel's is 40,000 and they share
income in a 3:1 ratio, respectively. They decide to admit David to the partnership.
Refer to the information provided above. David invests 40,000 for a one-fifth interest in
the total capital of 220,000. What are the capital balances of Allen and Daniel after David
is admitted into the partnership?
137,000 39,000
3. A condensed statement of financial position for Alba, Barba and Clara appears below.
For Alba, Barba and Clara share profits and losses in ratio of 2:3:5, respectively.
The partners agreed to admit Darna. The fair market value of the land is appraised at
200,000 and the market value of the marketable securities is 250,000. The assets are to
be revalued prior to the admission of Darna and there is 30,000 goodwill that attaches to
the old partnerships
How much cash will Darna have to invest to acquire a (1) one-fifth interest or a (2) four-
fifth interest?
1) 301,250; 2) 4,820,000
4. Partners Chito and Ditas share profits in the ratio of 6:4 respectively. On December 31,
20CY their respective capital balances were Chito, 120,000 and Ditas, 100,000. On that
date Meng was admitted as partner of 80,000. The partnership began in 20CY with total
capital of 300,000. Immediately after Meng's admission, Chito's capital should be:
108,000
Refer to the information provided above. Allen and Daniel agree that some of the
inventory is obsolete. The inventory account is decreased before David is admitted.
David invests 40,000 for a one-fifth interest. What are the capital balances of Allen and
Daniel after David is admitted into the partnership?
125,000 35,000
6. Partners Alba, Basco and Castro share profits and losses 50:30:20, respectively. The
statement of financial position at April 30, 2013 follows:
The assets and liabilities are recorded and presented at their respective fair values,
Jocson is to be admitted as a new partner with a 20% capital interests and a 20% share
of profits and losses in exchange for a cash contribution. No goodwill or bonus is to be
recorded. How much cash should Jocson contribute?
75,000
7. Fernando and Jose are partners with capital balances of 30,000 and 70,000,
respectively. Fernando has a 30% interest in profits and losses. All assets of the
partnership are at fair market value except equipment with book value of 300,000 and
fair market value of 320,000. At this time, the partnership has decided to admit Rosa and
Linda as new partners. Rosa contributes cash of 55,000 for a 20% interest in capital and
a 30% interest in profits and losses. Linda contributes cash of 10,000 and an equipment
with a fair market value of 50,000 for a 25% interest in capital and a 35% interest in
profits and losses. Linda is also bringing special expertise and clients contact into the
new partnership.
Using the bonus method, what is the amount of bonus?
18,250
8. Mitz, Marc, and Mart are partners sharing profits in the ratio of 5:3:2, respectively. As of
December 31, Year 1, their capital balances were 95,000 for Mitz, 80,000 for Marc, and
60,000 for Mart. On January 1, Year 2, the partners admitted Vince as a new partner and
according to their agreement, Vince will contribute P80,000 in cash to the partnership
and also pay 10,000 for 15% of Marc's share. Vince will be given a 20% share in profits,
while the original partners' share will be proportionately the same as before. After the
admission of Vince, the total capital will be 330,000 and Vince's capital will be 70,000.
The total amount of goodwill to the old partners, upon the admission of Vince would be:
15,000
9. The capital account for the partnership of Lucas and Mateo at October 31, 20CY are as
follows:
The partners share profits and losses in the ratio of 6:4 respectively.
The partnership is in desperate need of cash, and the partners agree to admit Naron as
a partner with one-third in the capital and profits and losses upon his investment of
30,000. Immediately after Naron's admission, what should be the capital balance of
Lucas, Mateo and Naron respectively. Assuming goodwill is not to be recognized?
68,000 32,000 50,000

10. When bonus is given to the old partners-
all the choices are correct

11. When the bonus formula indicates that there is bonus to be given to old partners-
the new partners' capital account will be debited

12. Kern and Pate are partners with capital balances of 60,000 and 20,000, respectively.
Profits and losses are divided in the ratio of 60:40. Kern and Pate decided to form a new
partnership with Grant, who invested land valued at 15,000 for a 20% capital interest in
the new
partnership. Grant's cost of the land was 12,000. The partnership elected to use the
bonus method to record the admission of
Grant into the partnership. Grant's capital account should be credited for
19,000
13. Carlos and Deo are partners who share profits and losses ratio of 7:3, respectively. On
October 5, 20CY, their respective capital accounts were as follows:
On that date they agreed to admit Sotto as a partner with a one-third interests in the
capital and profits and losses, and upon his investment of 25,000. The new partnership
will begin with a total capital of 90,000. Immediately after Sotto's admission, what are the
capital balances of Carlos, Deo and Sotto, respectively?
31,500 28,500 30,000

14. Partners Alba, Basco and Castro share profits and losses 50:30:20, respectively. The
statement of financial position at April 30, 2013 follows:
The assets and liabilities are recorded and presented at their respective fair values,
Jocson is to be admitted as a new partner with a 20% capital interests and a 20% share
of profits and losses in exchange for a cash contribution. No goodwill or bonus is to be
recorded. How much cash should Jocson contribute?
75,000
15. A summary balance sheet for the McCune, Nall, and Oakley partnership appears below.
McCune, Nall, and Oakley share profits and losses in a ratio of 2:3:5, respectively.
The partners agree to admit Pavic for a one-fifth interest. The fair market value of
partnership land is appraised at 100,000 and the fair market value of inventory is 87,500.
The assets are to be revalued prior to the admission of Pavic and there is unrcorded
asset amounting to 15,000.
By how much will the capital accounts of McCune, Nall, and Oakley increase,
respectively, due to the revaluation?
18,000, 27,000, and 45,000

16. The partnership of Cat and Dog provides for 3:2 sharing in profits and losses. Prior to the
admission of a third partners Elf, the capital accounts are Cat, 120,000 and Dog, 80,000.
Elf, 50,000 for a 75,000 interests and partners agreed that the net assets of the new
partnership would be 300,000.
How much is Dog's capital in the new partnership?
90,000
Refer to the information provided above. David directly purchases a one-fifth interest by
paying Allen 34,000 and Daniel 10,000. The land account is increased before David is
admitted. By what amount is the land account increased?
40,000
18. In the partnership of ABC, B sold his partnership interest share to D. who will receive the
cash payment made by D?
partner B
19. In the ABC partnership (to which Daniel seeks admittance), the capital balances of
Albert, Bert, and Connell, who share income in the ratio of 5:3:2 are:
Based on the preceding information, if no goodwill or bonus is recorded, how much

should Daniel invest for a 20 percent interest?
P250,000
20. Mitz, Marc, and Mart are partners sharing profits in the ratio of 5:3:2, respectively. As of
December 31, Year 1, their capital balances were 95,000 for Mitz, 80,000 for Marc, and
60,000 for Mart. On January 1, Year 2, the partners admitted Vince as a new partner and
according to their agreement, Vince will contribute P80,000 in cash to the partnership
and also pay 10,000 for 15% of Marc's share. Vince will be given a 20% share in profits,
while the original partners' share will be proportionately the same as before. After the
admission of Vince, the total capital will be 330,000 and Vince's capital will be 70,000.
The balance of Marc's capital, after the admission of Vince would be:
79,100
How much cash must Pavic invest to acquire a one-fifth interest?
150,625
If A is the total capital of a partnership before the admission of a new partner, B is the
total capital of the partnership after the admission of the new partner, C is the amount of
the new partner's investment, and D is the amount of capital credited to the new partner,
then there is:
a bonus to the new partner if B = A + C and D > C.

23. Fernando and Jose are partners with capital balances of 30,000 and 70,000,
respectively. Fernando has a 30% interest in profits and losses. All assets of the
partnership are at fair market value except equipment with book value of 300,000 and
fair market value of 320,000. At this time, the partnership has decided to admit Rosa and
Linda as new partners. Rosa contributes cash of 55,000 for a 20% interest in capital and
a 30% interest in profits and losses. Linda contributes cash of 10,000 and an equipment
with a fair market value of 50,000 for a 25% interest in capital and a 35% interest in
profits and losses. Linda is also bringing special expertise and clients contact into the
new partnership.
Using the goodwill method, what is the amount of goodwill traceable to the original
partners (this is for reference purposes only, the goodwill method in partnership is no
longer allowed)?
31,250
Refer to the information provided above. David directly purchases a one-fifth interest by
paying Allen 34,000 and Daniel 10,000. The land account is increased before David is
admitted. What are the capital balances of Allen and Daniel after David is admitted into
the partnership
Allen Daniel
170,000 50,000
25. In the ABC partnership (to which Daniel seeks admittance), the capital balances of
Albert, Bert, and Connell, who share income in the ratio of 5:3:2 are:
Based on the preceding information, what amount of goodwill will be recorded if Daniel
invests P450,000 for a one-third interest?
50,000
Refer to the information provided above. David invests 50,000 for a one-fifth interest.
What amount of goodwill will be recorded?
20,000
27. On June 30, 20CY, the condensed balance sheet for the partnership of Eddy, Fox, and
Grimm together with their respective profit and loss sharing percentage, was as follows:
Assume that Hamm is admitted as a new partner with a 25% interest in the capital of the
new partnership for a cash payment of 140,000, total goodwill implicit in the transaction
is to be recorded.
Immediately after admission of Hamm, Eddy's capital account balance should be
210,000
What will the profit and loss sharing ratios be after Pavic's investment?
4:6:10:5
29. Ell and Emm are partners sharing profits 60% and 40% respectively. On January 1, Ell
and Emm decided to admit Enn as a new partner upon his investment of 8,000. On this
date, their interests in the partnership are as follows: Ell, 11,500; Emm, 9,300.
Assuming that the new partner is given a 1/3 interests in the firm, with bonus being
allowed the new partner, the new capital balances of Ell, Emm and Enn, respectively
would be:
10,540 8,660 9,600

30. Partners Jay and Kay share profits in the ratio of 6:4 respectively. On December 31,
20CY, their respective accounts were Jay, 120,000 and Kay, 100,000. On that date, Loi
was admitted as partner with 1/3 interests in capital and profits for an investments of
80,000. The partnership began in 20CY with a total capital of 360,000. Immediately after
Loi's admission:
Amount of goodwill to be credited to Loi Jay's capital account would be
40,000 132,000
31. The following is the condensed statement of financial position of the partnership Jo, Li
and Bi who share profits and losses in the ratio of 4:3:.3
Assume that the assets and liabilities are fairly valued on the balance sheet and the
partnership decides to admit Mac as a new partner, with a 20% interests. No goodwill or
bonus is to be recorded. How much Mac should contribute in cash or other assets?
350,000
32.
Addition by purchase
1. Ranken purchases 50% of Lark's capital interest in the K and L partnership for 22,000. If
the capital balances of Kim and Lark are 40,000 and 30,000, respectively. Ranken's
capital balance following the purchase is?
15,000
2. If revaluation is traceable to the previous partners, it is
Allocated among the previous partners according to their original profit and loss sharing
percentages.
Beda, who share profits and losses in the ratio of 60:40, respectively:
The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to
admit Capp as a new partner with a 20% interest. No goodwill or bonus is to be
recorded. What amount should Capp contribute in cash or other assets?
145,000
4. The following balance sheet is presented for the partnership of A, B, and C, who share
profits and losses in the respectively ratio of 5:3:2.
Assume that the assets and liabilities are fairly valued on the balance sheet, and the
partnership decided to admit D as a new partner with a one-fifth interest and no goodwill
or bonus is to be recorded. How much should D contribute in cash or other assets?
230,000
5. When a new partner is admitted to a partnership, an original partner's capital account
may be adjusted for
His or her share of previously unrecorded intangible assets traceable to the original
partners.
6. In the partnership of A and B with capital balances of 50,000 and 75,000 respectively
and C is admitted by buying 1/2 of B's interest for 36,000.
B, suffered a personal loss of 1,500
7. admission of a partner by purchase of interest is a-
personal transaction between the selling partner and the buying partner
8. The following information pertains to ABC Partnership of Amor, Bing, and Cora:
On this date, the partners agreed to admit Dolly into the partnership.
Assuming Dolly purchased fifty percent of the partners' capital and pays 500,000 to the
old partners, how would this amount be distributed to them?
130,000 145,000 225,000

9. A, B and C are partners who shares profits and losses in ratio of 5:3:2, respectively.
They agree to sell D 25% of their respective capital and profits and losses ratio for a total
payment directly to the partners in the amount of 140,000. They agree that goodwill of
60,000 is to be recorded prior to admission of D. the condensed statement of financial
position of the ABC Partnership is presented in the next page.
The capital of A, B and C, respectively after the payment and admission of D are:
A B с
210,000 126,000 84,000

10. The following instances may dissolve the partnership except-
change in partnership name
11. admission of a partner by purchase of interest is a-
personal transaction between the selling partner and the buying partner
12. When a new partner is admitted in an existing partnership either by purchase of interest
or by investment, which of the following statement is true?
the partnership's non-cash assets should be adjusted to conform with their fair market
values
13. Moonbits partnership had a net income of 8,000 for the month ended September 30,
20CY.
Sunshine purchased an interest in the Moonbits partnership of Liz and Dick by paying
Liz 32,000 for half of her capital and half of her 50% percent profits shares interests on
October 1, 20CY. At this time Liz capital balance was 24,000 and Dick capital balance
was 56,000. Liz should receive a debit to her capital account of:
12,000
14. Presented below is the condensed statement of financial position of the partnership of
Go, Lee and Mao who share profits and losses in the ratio of 6:3:1 respectively:
The partners agree to sell Gaw 20% of their respective capital and profit and losses
interests for a total payment of 90,000. The payment by Gaw is to be made directly to
the individual partners. The partners agree that implied goodwill is to be recorded prior to
the acquisition by Gaw. The capital balance of Go, Lee and Mao respectively after
admission of Gaw are:
216,000 108,000 36,000

15. Partnership is said to be dissolved when a-
any of the above

16. Partners Andy, Boy and ken sharing profit and loss based on 4:3:2 ratio have the
following condensed statement of financial positions:
Dondon will be admitted as a new partner for 20% interests after he pays the three
partners with a minimum of 10%. Thus, the old partner will have to transfer to Dondon
20% of their interests.
280,000
17. In admission by purchase of interest, the selling partners may sell their share of
partnership's interest to the incoming partner at -
any of the other choices

18. If a new partner acquires a partnership interest directly from the partners rather than
from the partnership itself,
The existing partner's capital accounts should be reduced and the new partner's account
increased.
19.
Profit or loss distribution with industrial partner
1. Alder, Benson, and Carl are capitalist partners and Denver, an industrial partner. The
partnership reported a net loss of P100,000. How much is the share of Denver in the
reported net loss?
0
2. The partnership agreement of Donn, Eddy, and Farr provides for annual distribution of
profit and loss on the following sequence:
What portion of the 100,000 partnership profit for 20CY should be allocated to Farr?
28,600
3. Partners R and S share profits 3:1 after annual salary allowances of 40,000 and 60,000,
respectively; however, if profits are not adequate to meet the salary allowances, the
entire profit is to be divided in the salary ratio. Profits of 90,000 were reported for the
year Year 2. In Year 1, it is ascertained that in calculating net income for the year ended
December 31, Year 2, depreciation was overstate by 36,000 and ending inventory was
overstated by 8,000.
The adjustment to the capital of R and S amounted to
P17,500 and P10,500

4. Alder, Benson, and Carl are capitalist partners and Denver, an industrial partner. The
partnership reported a net loss of 100,000. How much is the share of Denver in the
reported net loss?
0
5. During 2018, Calcium, Zinc, and Iron maintained average capital balances in their
partnership of P160,000, P100,000, and 20,000, respectively. Iron is an industrial
partner. The partners receive 10% interest on average capital balances, and residual
profit or loss is divided equally. Partnership profit before interest was P4,000. By what
amount should Zinc's capital account change for the year?
2,000 increase
6. Next Two Questions are based on the following:
. Assuming a profit of 40,000, how would this amount be distributed to them given the
following order of priority: Interest on invested capital, then bonuses, then salary, and
then according to profit and loss percentage?
Hanz Ivy Jasper Kelly
20,740.00 12,560.00 2,000.00 4,700.00

7.
Other profit distribution provisions
1. Henry, Marta and Nestor are partners with average capital balance in 20CY of 240,00,
120,000 and 80,000 respectively. Partners receive 10% interests on their average capital
balances. After deducting salaries of 60,000 to Henry and P40,000 to Nestor, the
residual profits or loss is divided equally. In 20CY, the partnership sustained a 66,000
losses before interests and salaries to partners. By what amount should Nestor's capital
account change?
22,000 decrease
2. The partnership agreement of Eve and Fred provides that interest at 10% per year is to
be credited to each partner on the basis of weighted-average capital balance. A
summary of Fred's capital account for the year ended 31 December 20CY is as follows:
The amount of interests that should be credited to Fred's capital account for 20CY is
30, 750
3. Fox, Greg, and Howe are partners with average capital balances during 20CY of
120,000, 60,000, and 40,000, respectively. Partners receive 10% interest on their
average capital balances. After deducting salaries of 30,000 to Fox and 20,000 to Howe,
the residual profit and loss is divided equally. In 20CY, the partnership sustained a
33,000 loss before interest and salaries to partners. Bu what amount should Fox's
capital account change?
7,000 increase
4. The partnership agreement of Eve and Fred provides that interest at 10% per year is to
be credited to each partner on the basis of weighted-average capital balance. A
summary of Fred's capital account for the year ended 31 December 20CY is as follows:
The amount of interests that should be credited to Fred's capital account for 20CY is
30, 750
5. FF, GG and HH form a partnership and agree to maintain average investments of
2,500,000, 1,250,000 and 1,250,000, respectively. Interests on the excess or deficiency
in a capital contribution is to be computed at 6% per annum. After the interest
allowances, FF, GG and HH are to share any balance in the ratio of 5:3:2. Average
amounts invested during the first six months were as follows: FF, 3,000,000; GG,
1,375,000; and HH, 1,000,000. A loss from operations of 62,500 was incurred for the first
six months. How is this loss distributed among the partners?
FF GG НН
21,875 18,375 22,250
6. Hanz, Ivy, Jasper, and Kelly own a publishing company that they operate as a
partnership. Their agreement includes the following:
Hanz will receive a salary of 20,000 and a bonus of 3% of income after all the bonuses.
Ivy will receive a salary of 10,000 and a bonus of 2% of income after all the bonuses. All
partners are to receive the following: Hanz - 5,00; Ivy - 4,500; Jasper - 2,000; and Kelly -
4,700, representing 10% interest on their average capital balances.
Any remaining profits are to be divided equally among the partners.
How would a net loss of 40,000 would be allocated among the partners? Ivy Jasper
Hanz Kelly
3,450.00 (7,050.00) (19,550.00) (16,850.00)

7. KK, SS and WW formed a partnership on January 1, 20CY. Each contributed 144,000.
Drawings were equal to salaries and be taken out evenly throughout the year.
With sufficient partnership net income, KK and SS could split a bonus equal to 25% of
partnership net income after salaries and bonus (in no event could the bonus go below
zero)
Remaining profits were to be divided as follows: 30% for KK, 30% for SS, and 40% for
WW.
For the year, partnership total comprehensive income was 144,000.
What are the capital balances of the partners on December 31, 20CY.
KK 150,120 SS 150,120 WW 149,760
8. TM partnership begins its first year of operations with the following capital balances:
Each partner is allowed to withdraw up to 10,000 a year.

Assume that the net loss for the first year of operations is 15,000 with net income of
55,000 in the subsequent year. Assume further that each partner withdraws the
maximum amount from the business each period.
What is the balance of Tan's capital account at the end of the second year?
264,750
9. The APB partnership agreement specifies that partnership net income be allocated as
follows:
Average capital balances for the current year were 50,000 for A, 30,000 for P, and
20,000 for B.
Refer to the information given. Assuming a current year net income of 50,000, what
amount should be allocated to each partner?
Partner A Partner B Partner C
19,000 (3,000) 34,000

10. Herm, Mar and Ama formed a partnership on January 1, 20CY and contributed 150,000,
200,000 and 250,000, respectively. The Articles of Co-partnership provides that the
operating income be shared among the partners as follows: As salary, for Herm in the
amount of 24,000, for Mar, 18,000 and for Ama, 12,000. Interests of 12% on the average
capita during 20CY of the three (3) partners and the remainder in the ratio 2:4:4
respectively.
Additional information:
Operating income for the year ended December 31, 20CY, 176,000.
Herm contributed additional capital on July 1, 30,000 and made a drawing on October 1,
10,000, Mar contributed additional capital on August 1, 20,000 and made a drawing on
October 1, 10,000, and Ama made a drawing of 30,000 on November 1
The partners' capital balances on December 31, 20CY are:
Herm, 223,180; Mar, 272,060; Ama, 280,760

11. 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 the salary allowance. If income is 150,000, the bonus should be:
20,000
12. Luis and David are in partnership sharing profits and losses in the ratio 3:2. David is
entitled to a salary of 9,000 and interest on capital is paid at a rate of 8% per annum.
The partners' capital balances are:
Luis 75,000
David 60,000
The partnership statement of profit or loss for the year shows a profit of 58,500.
How much of the total profit is Luis entitled to?
29,220
13. The Articles of Partnership of Adam and Eve the following provisions were stipulated:
A. Annual salary of 60,000 each.

B. Bonus to Adam of 20% of the net income after partner's salaries, the bonus being
treated as an expense.
C. Balance to be divided equally.
The partnership reported a net income of 360,000 after partners' salaries but before
bonus. How much is the share of Eve in the profit?
210,000
14. K, L and M are partners with average capital balances during 20CY of 472,500, 238,650
and 162,350, respectively. The partners receive 10% interests on their average capital
balances; after deducting salaries of 122,325 to K and 82,625 to M, the residual profits
or loss is divided equally.
In 20CY, the partnership had a net loss of 125,624 before the interests and salaries to
partners.
By what amount should K's and M's capital account change?
K's capital Account M's capital account
30, 267 increase 40, 448 decrease

15. Albion and Blaze share profits and losses equally. Albion and Blaze receive salary
allowances of 20,000 and 30,000, respectively, and both partners receive 10% interest
on their average capital balances. Average capital balances are calculated at the
beginning of each month balance regardless of when additional capital contributions or
permanent withdrawals are made subsequently within the month. Partners' drawings are
not used in determining the average capital balances. Total net income for 20CY is
120,000.
73,100.
16. Luz, Vi, and Minda are partners when the partnership earned a profit of 30,000. Their
agreement provides the following regarding the allocation of profits and losses"
a. 8% interest on partner's ending capital in excess of 75,000.
b. Salaries of 20,000 for Luz and 30,000 for Vi.
C. Any balance is to be distributed 2:1:1 for Luz, Vi, and Minda, respectively. Assume
ending capital balances of 60,000, 80,000, and 100,000 for partners Luz, Vi, and Minda,
respectively. What is the amount of profit allocated for Minda, if each provision of the
profit and loss agreement is satisfied to whatever extent possible using the priority order
shown above?
2,000
17. Garcia and Henson formed a partnership on January 2, 20CY and agreed to share
profits 90%, 10%, respectively. Garcia contributed capital of 25,000. Henson contributed
no capital but has a specialized expertise and manages the firm full time. There were no
withdrawals during the year. The partnership agreement provides for the following:
What is Henson's 20CY bonus?
15,000
18. The APB partnership agreement specifies that partnership net income be allocated as
follows:
Average capital balances for the current year were 50,000 for A, 30,000 for P, and
20,000 for B.
Refer to the information given. Assuming a current year net income of 150,000, what
amount should be allocated to each partner?
Partner A Partner B Partner C
59,000 37,000 54,000

19. In the calendar year 20CY, the partnership of A and B realized a net profit of 240,000.
The capital accounts of the partners show the following postings:
If 20% interest based on the capital at the end of the year is allowed and given and the
balance of the P240,000 profit is divided equally, the total share of A and B, respectively
are:
121,500 118,500
20. Which of the following is not a component of the formula used to distribute income?
Interest on notes to partners.
21. If a partnership has net income of 44,000 and Partner X is to be allocated bonus of 10%
of income after the bonus. What is the amount of bonus Partner X will receive?
4,000
22. The DEF partnership reported net income of 130,000 for the year ended December 31,
20CY. According to the partnership agreement, partnership profits and losses are to be
distributed as follows:
How should partnership net income for 20CY be allocated to D, E, and F?

D E F
72,200 37,100 20,700

23. On October 31, 20CY, Zita and Jones formed a partnership by investing cash of 300,000
and 200,000, respectively. The partners agreed to receive an annual salary allowance of
360,000, and to give Zita a bonus of 20% of the net income after partners' salaries, the
bonus being treated as an expense. If the profits after salaries and bonus are to be
divided equally, and the profits on December 31, 20CY after partners' salaries but before
bonus of Zita is 360,000, how much is the share of Zita in the profit?
270,000
24. In its first year of operations, Alba and Company, a partnership, made a net income of
20,000 before providing for salaries of 5,000 and 3,000 per annum for Alba and Bana,
respectively, as stipulated in the partnership agreement. Capital contributions are as
follows:
Assuming that no profit and loss ratios are provided in the partnership agreement and
that there has been no change in the capital contributions during the year, how much
profit share would Alba is entitled to receive?
11,000
25. Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and
Carnes receive salary allowances of 10,000 and 20,000, also respectively, and both
partners receive 10% interest based upon the balance in their capital accounts on
January 1. Partners' drawings are not used in determining the average capital balances.
Total net income for 20CY is 60,000. If net income after deducting the interest and salary
allocations is greater than 20,000, Carnes receives a bonus of 5% of the original amount
of net income.
If the partnership experiences a net loss of 20,000 for the year, what will be the final
amount of profit or (loss) closed to each partner's capital account?
(10,000) to Bloom and (10,000) to Carnes.

26. Tim and Tom entered into a partnership on March 1, 20CY by investing 125,000 and
75,000, respectively. They agreed that Tim, as the managing partner, is to receive a
salary of 30,000 per year end a bonus computed at 10% of the net profit after
adjustment for the salary and bonus; the balance of the profit was to be distributed in the
ratio of their original equity balances. On December 31, 20CY, account
balances were as follows:
Inventories on December 31, 20CY were as follows: supplies, 2,500; merchandise,

73,000. Prepaid insurance was 950 while accrued expenses were 1,550.
The partner's Equity balances on December 31, 20CY, after closing the net profit and
drawing accounts, were:
Tim Tom
139,491 49,909
27. A, B and c are partners in the accounting firm. Their capital account balances at year-
end were: A, 90,000; B, 110,000; C, 50,000. They share profits and losses in a 4:4:2
ratio, after the following special terms:
1) Partner C is to receive a bonus of 10% of the net income after bonus.
2) Interests of 10% shall be paid on that portion of a partner's capital in excess of
100,000.
3)Salaries of 10,000 and 12,000 shall be paid to partners A and C, respectively.
Assuming a net income of 44, 000 for the year, the total profit share of partner C would
be:
19,400
28. On January 1, 20CY, David and Enrile decided to form a partnership. At the end of the
year, the partnership.
Assuming that an interest of 20% per annum is given on average capital and the balance
of the profits is divided equally, the sharing of the profits shall be:
David, 61,200 Enrile, 58,800

29. Partners AA and BB have profit and loss agreement with the following provisions:
salaries of 30,000 and 45,000 for AA and BB, respectively; a bonus to AA of 10% of net
income after salaries and bonus; and interest of 10% on average capital balances of
20,000 and 35,000 for AA and BB, respectively. One-third of any remaining profits will be
allocated to AA and the balance to BB. If the partnership had net income of 102,500,
how much should be allocated to Partner AA?
41,000
30. The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership
income, after deduction of the bonus. If the partnership's income is 121,000, how much
is Partner Y's bonus allocation?
11,000.
31. The partnership of Gary, Jerome and Paul was formed on January 1, 20CY. The original
investments were as follows:
According to the partnership agreement, net income or loss will be divided among the
respective partners as follows:
Salaries of 12,000 for Gary, 10,000 for Jerome, and 8,000 for Paul
Interests of 8% on the average capital balance during the year of Gary, Jerome, and
Paul
Remainder divided equally.
Additional information:
Net income of the partnership for the year ended December 31, 20CY was 70,000. Gary
invested an additional 20,000 in the partnership on July 1, 20CY
Paul withdrew 30,000 from the partnership on October 1, 20CY.
Gary, Jerome, and Paul made regular drawings against their share of net income during
20CY of 10,000 each.
The partner's capital balances as of December 31, 20CY are:
Gary Jerome Paul
112, 333 132, 733 164, 934
32. A, B, and C are partners and share profits and losses as follows: Salaries of 20,000 to A;
15,000 to B; and none to C. If net income exceeds salaries, then a bonus is allocated to
A. The bonus is 5 percent of net income after deducting salaries and the bonus.
Residual profits or residual losses are allocated 10 percent to A, 20 percent to B, and 70
percent to C. If net income after salaries and bonus is 70,000 how much is the total
share of A?
30,500
33. MM is trying to decide whether to accept a salary of 40,000 or a salary of 25,000 plus a
bonus of 10% of net income after salaries and bonus as a means of allocating profit
among the partners. Salaries traceable to the other partners are estimated to be
100,000. What amounts of income would be necessary so that MM would consider the
choices to be equal?
290,000
34. During 20CY, Young and Zinc maintained average capital balances in their partnership of
160,000 and 100,000, respectively. The partners receive 10% interest on average capital
balances, and residual profit or loss is divided equally. Partnership profit before interest
was 4,000. By what amount should Zinc's capital account change for the year?
1,000 decrease
35. Dexter and Joliver are partners agreeing to allow monthly salaries (6,000 and 5,000
respectively), 6% interests on the capital investment at the beginning of the year
(300,000 and 230,000 respectively) and on the remaining balance, to the equally share.
the first year registered a net income of 100,000 profits share of the partners are:
Dexter, 58,100 and Joliver, 41,900
36. On January 1, 20CY A, B, C and D formed Bekha Trading Co. a partnership with capital
contributions as follows: A, 50,000; B, 25,000; C, 25,000; and D, 20,000. The
partnership contract provided that each partner shall receive a 5% interests on
contributed capital, and that A and B shall receive a salaries of 5,000 and 3,000,
respectively. The contract is also provided that C shall receive a minimum of 2,500 per
annum, and D a minimum of 6,000 per annum, which is inclusive of amounts
representing interests and share of remaining profits. The balance of the profits shall be
distributed to A, B, C and D in a 3:3:2:2 ratios.
What amount must be earned by the partnership, before any charge for interests and
salaries, so that A may receive an aggregate of 12,500 including interests, salary and
share of profits?
32, 333
37. ABC'c partnership provided for the following distribution of profits and losses; "First" A to
receive 10% of the net income up to 1,000,000 and 20% on the amount of excess
thereof:
"Second" B and C each are to receive 5% of the remaining income in excess of
1,500,000 after A's share as per above and:
"The balance to be divided equally among the partners"
For the year just ended, the partnership realized net income of 2,500,000 before
distribution to partners. The share of A is:
1,080,000
38. The partners, A and B, share profits 3:2. However, A is to receive a yearly bonus of 20%
of the profits, in addition to his profit share. The partnership made a net income for the
year of 24,000 before the bonus. Assuming A's bonus is computed on profit after
deducting said bonus, how much profit share will B receive?
8,000
39. If the partnership agreement provides a formula for the computation of a bonus to the
partners, the bonus would be computed?
in any manner agreed to by the partners.

40. The JPB partnership reported net income of 160,000 for the year ended December 31,
20CY. According to the partnership agreement, partnership profits and losses are to be
distributed as follows:
How should partnership net income for 20CY be allocated to J, P, and B?

J P B
60,000 60,000 40,000

41. Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and
Carnes receive salary allowances of 10,000 and 20,000, also respectively, and both
partners receive 10% interest based upon the balance in their capital accounts on
January 1. Partners' drawings are not used in determining the average capital balances.
Total net income for 20CY is 60,000. If net income after deducting the interest and salary
allocations is greater than 20,000, Carnes receives a bonus of 5% of the original amount
of net income.
What are the total amounts for the allocation of interest, salary, and bonus, and, how
much over-allocation is present?
80,000 and 20,000

42. Albion and Blaze share profits and losses equally. Albion and Blaze receive salary
allowances of 20,000 and 30,000, respectively, and both partners receive 10% interest
on their average capital balances. Average capital balances are calculated at the
beginning of each month balance regardless of when additional capital contributions or
permanent withdrawals are made subsequently within the month. Partners' drawings are
not used in determining the average capital balances. Total net income for 20CY is
120,000.
What is the weighted-average capital for Albion and Blaze in 20CY?
110,667 and 119,583

43. Michelle, an active partner in the Michelle-Esme partnership receives an annual bonus of
25% of the partnership income after deducting the bonus. For the year ended,
December 31, 20CY, partnership income before the bonus amounted to 240,000. The
bonus of Michelle for the year 20CY is:
48,000
44. On January 1, 20CY, Zeep and Beep have a capital balance of 20,000 and 16,000
respectively. On July 1, 20CY Zeep invests and additional 4,000 and Beep withdraws
1,600. Profits and losses are divided as follows: Beep is the managing partner and as
such shall receive P16, 000 salaries and Zeep shall receive 7,200; both partners shall
receive interests of 10% on their beginning capital balances to offset whatever difference
in capital investments they have and any remainder shall be divided equally.
Income of the Zeep-Beep partnership for the year 20CY is 9,600. Zeep's share in the net
income is
600
45. The partnership agreement of Reid and Simm provides that interest at 10% per year is to
be credited to each partner on the basis of weighted-average capital balances. A
summary of Simm's capital account for the year ended December 31, 20CY, is as
follows:
What amount of interest should be credited to Simm's capital account for 20CY?
15,375
46. Roy and Sam was organized and began operations on March 1, 20CY. On that date,
Roy invested 150,000 and Sam invested computer equipment with current fair value of
180,000. Because of shortage of cash, on November 1, 20CY Sam invested additional
cash of P60, 000 in the partnership. The partnership contract includes the following
remuneration plan:
The salary was to be withdrawn by each partner in monthly instalments. The partnership
net profit for 20CY is 120,000.
What are the capital balances of the partners on December 31, 20CY?
Roy Sam
243,000 266,500
47. A and B entered into a partnership as of March 1, 20CY by investing 125,000 and
75,000, respectively, they agreed that A, as the managing partner, was to receives a
salary; 30,000 per year and a bonus computed at 10% of the net profit after adjustments
for the salary; the balance of the profit was to be distributed in the ratio of their original
capital balances. On December 31, 20CY account balances were as follows:
Inventories on December 31, 20CY were as follows: supplies, 2,500,
merchandise, 73,000, prepaid insurance was 950 while accrued expense were 1,150.
Depreciation rate was 20% per year.
The partner's capital balances on December 31, 20CY, after closing the net profit and
drawing accounts, were
AB
139,540 49,860
48. On January 2, 20CY, Bueno and Perez formed a partnership. Bueno contributed capital
of 175,000 and Perez, 25,000. They agreed to share profits and losses 80% and 20%,
respectively. Perez is the general manager and works in the partnership in full time.
Perez is given a salary of 5,000 a month; interests of 5% of the starting capital (of both
partners) and a bonus of 15% of net profit before the salary, interests and the bonus.
The condensed statement of comprehensive income of the partnership for the year
ended December 31, 20CY is as follows:
The bonus of Perez in 20CY is:
18,000.00
49. On January 2, 20CY Phil, Art and Rey formed the PAR partnership contributing cash as
follows:
Income before partners' salaries and interests for the year ended December 31, 20CY
was 184,160. Phil invested additional cash of 48,000 to the partnership on July 1, 20CY.
Rey withdrew 72,000 from the partnership on October 1, 20CY. The partners also
withdrew 1,500 monthly against their share of net income for the year.
What is the capital balance of Phil on October 31, 20CY?
274,320
50.
Profit or loss distribution by mere ratio
1. The fact that salaries paid to partners are not a component of partnership income is
indicative of
Being characteristic of the proprietary

2. If the partnership agreement does not specify how income is to be allocated, profits and
loss should be allocated
In accordance with their capital contribution.

3. On May 1, CY, the business assets of John and Paul appear below:
How much are the capital balances after the first year?
John, capital 728,764

Paul, capital 713,764
Peter, capital 361,382
4. Mr. Zoom and his very friend Mr. Boom formed a partnership on January 1, 20CY with
Zoom contributing 16,000 cash and Boom contributing equipment with a a partbook
value of 6,400 and a fair value of 8,000. During 20CY Boom made additional
investments of 1,600 on April 1 and 1,600 o June 1, and on September 1, he withdrew
4,000. Zoom had neither additional investments nor withdrawals during the year.
The average capital balance at the end of 20CY for Mr. Boom is?
8,800
5. Which of the following is not considered a legitimate expense of a partnership?
Interest paid to partners based on the amount of invested capital.
6. 1 Drawings
are the same nature as withdrawals.
7. The ABC Partnership reports net income of P60,000. If partners A, B, and C have
income ratio of 50%, 30%, and 20%, respectively. What is the share of Partner C from
the net income of the partnership, if he was given a capital ratio of 25%?
12,000
8. Which of the following accounts could be found in the PQ partnership's general ledger?
I. Due from P
II. P, Drawing
III. Loan Payable to Q
I, II, and III

9. Jones and Smith formed a partnership with each partner contributing the following items:
tax
Refer to the above information. What is each partner's tax basis in the Jones and Smith
partnership?
Jones Smith
350,000 270,000
10. Downs, Frey, and Vick formed the DFV general partnership to act as manufacturer's
representatives. The partners agreed Downs would receive 40% of any partnership
profits and Frey and Vick would each receive 30% of such profits. It was also agreed that
the partnership would not terminate for 5 years. After the fourth year, the partners agreed
to terminate the partnership. At that time, the partners capital accounts were as follows:
Downs, P20,000; Frey, P15,000; and Vick P10,000. There also were undistributed
losses of P30,000.
Vick's share of the undistributed losses will be
9,000
11. Red and White formed a partnership in CY. The partnership agreement provides for
annual salary allowances of 55,000 for Red and 45,000 for White. The partners share
profits equally and losses in a 60/40 ratio. The partnership had earnings of 80,000 for
CY before any allowance to partners. What amount of these earnings should be credited
to each partner's capital account?
Red White
43,000 37,000
12. Maxwell is trying to decide whether to accept a salary of 40,000 or salary of 25,000 plus
a bonus of 10% of net income after salaries and bonus as a means of allocating profit
among partners. Salaries traceable to the other partners are estimated to be 100,000.
What amount of income would be necessary so that Maxwell would consider choices to
be equal?
290,000
13. 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 CY. During CY, 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 20CY?
P300,000
14. A partnership has the following accounting amounts:
What is the partnership net income (loss)?
180,000
15. Jones and Smith formed a partnership with each partner contributing the following items:
Refer to the above information. What is the balance in each partner's capital account for
financial accounting purposes?
Jones Smith
360,000 260,000
16. Partnerships
are required to file income tax returns but do not pay Federal taxes.
17. Arturo Perez, a partner in the AP partnership, has a 30% participation in partnership
profits and losses. Perez's capital account has a net decrease of 60,000 during the
calendar year 20CY. During 20CY, Perez withdrew 130,000 (charged against his capital
account) and contributed property valued at 25,000 to the partnership. What was the net
income of the AP Partnership for 20CY?
150,000
18. Adam and Eve are CPA's who have been operating their own separate practices as sole
proprietors. They decided to combine the two firms as a partnership on January 5, 20CY.
The following assets were contributed by each:
The partners agreed to split profits on the basis of gross cash collections from billings
generated from clients. During 20CY, Adam's clients paid the firm a total of 1,500,000
and Eve's clients paid 1,625,000. Expenses for the year were 1,080,000 of which
480,000 were attributable to Adam and 600,000 to Eve. During 20CY Eve withdrew
750,000 cash for personal needs and contributed an additional computer valued at
22,000.
What is the capital balance of Eve at December 31, 20CY?
709,400
19. Which of the following accounts could be found in the general ledger of a partnership?
Income Tax Expense Interest Expense on Partner Loans
No Yes
20. Partner Ae first contributed P50,000 of capital into existing partnership on March 1, CY.
On June 1, CY, said partner contributed another P20,000. On September 1, CY, he
withdrew 15,000 from the partnership. Withdrawal in excess of 10,000 are charged to the
partner's capital accounts.
What is the annual weighted average capital balance of Partner Ae?
51,667
21. 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 CY, partnership net income was double X's withdrawals.
Assume X's beginning capital balance was 80,000, and ending capital balance (after
closing) was 140,000. Partnership net income for the year was:
600,000.
22. Abe, Bert and Carl are partners sharing profits on a 7:2:1 ratio. On January 1, Year 3,
Dave was admitted into the partnership with 15% share in profits. The old partners
continue to participate in profits in their original ratios
The share of partners Bert in Year 3 net profit is:
2,490.50
23. Which of the following accounts could be found in the PQ partnership's general ledger?
I. Due from P
I. P, Drawing
III. Loan Payable to Q
I, II, and III

24. In the calendar year CY, the partnership of A and B realized a net profit of 240,000. The
capital accounts of the partners show the following postings:
If the profits are to be divided based on average capital, the share of A and B,
respectively are:
136,543 103,457
25. On January 2, CY, Abel, Cain, and Joshua formed a partnership. Abel contributed cash
of 100,000 and a delivery equipment that originally costs him 120,000 but with a second
hand value of 50,000. Cain contributed 160,000 in cash. Joshua, whose family sells
office equipment, contributed 50,000 in cash and office equipment that cost his family's
dealership 100,000 but with a regular selling price of 120,000. In CY, the partnership
reported net income of 120,000.
On December 31, CY, what would be the capital balance of the partners? Abel Cain
Josuah
187,500 200,000 212,500

26. The inexperienced accountant for Jack, Kiel and Luck partnership prepared the following
journal entries during the year ended August 31, 20CY:
What should be the adjusted capital balances of old and new partner(s), respectively, at
August 31, 20CY.
192,000 & 88,00
27. A partner's tax basis in a partnership is comprised of which of the following items?
I. The partner's tax basis of assets contributed to the partnership.
II. The amount of the partner's liabilities assumed by the other partners.III. The partner's
share of other partners' liabilities assumed by the partnership.
I minus II plus III

28. Transferable interest of a partner includes all of the following except:
the authority to transact any of the partnership's business operations.

29. Griffin and Rhodes formed a partnership on January 1, CY. Griffin contributed cash of
120,000 and Rhodes contributed land with a fair value of 160,000. The partnership
assumed the mortgage on the land which amounted to 40,000 on January 1. Rhodes
originally paid 90,000 for the land. On July 31, CY, the partnership sold the land for
190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the
gain from sale of land should be credited to Griffin for financial accounting purposes?
15,000
30. A partner assigned his partnership interest to a third party. Which statement best
describes the legal ramifications to the assignee?
The does not become a partner but has the right to share in future partnership profits
and to receive the proper share of partnership assets upon liquidation.
31.
Bonus in partnership formation
1. A=The amount of tangible assets contributed by the new partner into the partnership
B=The amount of capital credited to the new partner
C=Total capital of the partnership before the admission of a new partner
D=Total capital of the partnership after the admission of a new partner
Refer to the above information. Which statement below is correct if the old partners
receive a bonus upon the contribution of assets into the partnership by a new partner?
B< A and D = C+A

Refer to the above information. Which statement below is correct if goodwill of the old
partners is recognized upon the contribution of assets into the partnership by a new
partner?
B = A and D > C+A

3. The Grey and Redd Partnership was formed on January 2, CY, Under the partnership
agreement, each partner has an equal initial capital balance. Partnership net income or
loss is allocated 60% to Grey and 40% to Redd. To form the partnership, Grey originally
contributed assets costing 30,000 with a fair value of 60,000 on January 2, CY, and
Redd contributed 20,000 cash. Drawings by the partners during CY totaled 3,000 by
Grey and P9,000 by Redd. The partnership net income in CY was 25,000.
Under the bonus method, what is the amount of bonus?
20,000 bonus to Redd

4. The Grey and Redd Partnership was formed on January 2, CY, Under the partnership
contributed assets costing 30,000 with a fair value of 60,000 on January 2, CY, and
Redd contributed 20,000 cash. Drawings by the partners during CY totaled 3,000 by
Grey and P9,000 by Redd. The partnership net income in CY was 25,000.
Under the goodwill method, what is Redd's initial capital balance in the partnership?
60,000
D=Total capital of the partnership after the admission of a new partner Refer to the
above information. Which statement below is correct if a new partner's goodwill is
recognized upon contributing assets into the partnership?
B>A and D > C+A

6. RD formed a partnership on February 10, CY. R contributed cash of 150,000, while D
contributed inventory with a fair value of P120,000. Due to R's expertise in selling, D
agreed that R should have 60 percent of the total capital of the partnership. What is the
total capital of the RD partnership and the capital balance of R after the formation?
Total Capital R Capital
270,000 162,000
7. The partnership of Perez and Reyes was formed on March 31, CY. On this date, Perez
invested 50,000 cash and office equipment valued at 30,000. Reyes invested 70,000
cash, merchandise valued at 110,000 and furniture valued at 100,000, subject to a notes
payable of 50,000 (which the partnership assumes). The partnership provides that Perez
and Reyes shares profits and losses 25:75, respectively. The agreement further provides
that the partners should initially have an equal interest in the partnership capital. Under
the bonus method, what is the total capital of the partners after the formation?
310,000
8. The Grey and Redd Partnership was formed on January 2, 2018, Under the partnership
contributed assets costing P30,000 with a fair value of P60,000 on January 2, 2018, and
Redd contributed P20,000 cash. Drawings by the partners during 2018 totaled P3,000
by Grey and P9,000 by Redd. The partnership net income in 2018 was P25,000.
What is the amount of bonus?
20,000 bonus to Redd

9. Aldo, Bert, and Chris formed a partnership on April 30, with the following asset,
measured at their fair values, contributed by each partner.
Although Chris contributed the most cash to the partnership, he did not have the full
amount of 30,000 available and was forced to borrow 20,000. The delivery truck
contributed by Aldo has a mortgage of 90,000 and the partnership is to assume
responsibility for the loan. The partners agreed to equalize their interests. Cash
settlement among the partner is to be made outside the partnership. Using the Bonus
method:
Bert and Chris should pay Aldo, 4, 600 and 20, 700 respectively
10. RD formed a partnership on February 10, CY. R contributed cash of 150,000, while D
contributed inventory with a fair value of P120,000. Due to R's expertise in selling, D
agreed that R should have 60 percent of the total capital of the partnership. What is the
total capital of the RD partnership and the capital balance of R after the formation?
Total Capital R Capital
270,000 162,000
Refer to the above information. Which statement below is correct if a new partner
purchases an interest in capital directly from the old partners?
C=D
12. Adawiya and Shon formed a partnership and agreed to divide initial capital equally, even
though Adawiya contributed 100,000 and Shon contributed 84,000 in identifiable assets.
Under the bonus approach to adjust the capital accounts, Shon's equity should be
credited a bonus of:
8,000
13. Abel and Carr formed a partnership and agreed to divide initial capital equally, even
though Abel contributed 100,000 and Carr contributed 84,000 in identifiable assets.
Under the bonus approach to adjust the capital accounts, Carr's unidentifiable asset
should be debited for?
8,000
14. On September 1, CY, the business assets and liabilities of Amor and Bhea were as
follows:
Amor and Bhea agreed to form a partnership contributing their respective assets and
liabilities subject to the following agreements:
Accounts receivable of 20,000 in Amor's books and 40,000 in Bhea's books are
uncollectible.
b.Inventories of 6,000 and 7,000 are obsolete in Amor's and Bhea's respective books.
C. Other assets of 2,000 and 3,000 in Amor's and Bhea's respective books are to be
written off.
d. Accrued expenses of 2,000 and 5,000 in Amor's and Bhea's books are to be
recognized.
e. Goodwill is to be recognized to equalize their capital accounts after the above
adjustments.
The amount of goodwill to be recognized is:
155,000
15. A =The amount of tangible assets contributed by the new partner into the partnership
B =The amount of capital credited to the new partner
C =Total capital of the partnership before the admission of a new partner
D =Total capital of the partnership after the admission of a new partner
Refer to the above information. Which statement below is correct if a new partner
receives a bonus upon contributing assets into the partnership?
B > A and D = C + A
16.
Valuation of contribution
1. An advantage of the partnership as a form of business organization would be?
A partnership is created by mere agreements of the partners.

2. In the Partnership Act, partners have
I. mutual agency.
II.unlimited liability
I and II.
3. On March 1, CY, Eva and Helen decide to combine their business and form a
partnership. Statement of financial position on March 1, before adjustments, showed the
following:
They agreed to provide 3% for doubtful accounts receivable, and also agree that Helen's
furniture and fixtures are under-depreciated by 900.
If each partner's share in equity is to be equal to the net assets invested, the capital
accounts of Eva and Helen would be:
59,070 and 32,195, respectively

4. Partnership capital and drawings accounts are similar to the corporate?
Paid in capital, retained earnings, and dividends accounts.
5. On May 1, Year 2, the business assets of John and Paul appear below:
John and Paul agreed to form a partnership contributing their respective assets and
equities subject to the following adjustments:
a. Accounts receivable of P20,000 in John's books and P35,000 in Paul's are
uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John's and Paul's respective
books.
C. Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be
written off.
Peter offered to join for a 20% interest in the firm. How much cash should he contribute?
324,382
6. Which of the following is not a characteristic of the proprietary theory that influences
accounting for partnerships?
A general partner may be a secured creditor of the limited partnership.

7. On March 1, CY, Santos and Pablo formed a partnership with each contributing the
following
The building is subject to a mortgage loan of P80, 000, which is to be assumed by the
partnership. The partnership agreement provides that Santos and Pablo share profits
and losses 30% and 70%, respectively. On March 1, CY the balance in Pablo's capital
account should be:
P290,000
8. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership's formation:
The building is subject to a mortgage of 10,000, which the partnership has assumed.
The partnership agreement also specifies that profits and losses are to be distributed
evenly.
What amounts should be recorded as capital for Roberts and Smith at the formation of
the partnership?
Roberts Smith
35,000 75,000
9. Ben, Joe and Fortune are new CPA's and are to form a partnership. Ben is to contribute
cash of P50, 000 and his computer originally costing P60, 000 but has a second hand
value of P25, 000. Joe is to contribute cash of P80, 000. Fortune, whose family is selling
computers, is to contribute cash of P25, 000 and a brand new computer plus printer with
regular price at P60, 000 but which cost their family's computer dealership, P50, 000.
Partners agree to share profits equally. The capital balances upon formanot a chahow
tion are:not a
Ben, P75, 000; Joe, P80, 000; and Fortune, P85,000
10. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership's formation:
The building is subject to a mortgage of 10,000, which the partnership has assumed.
The partnership agreement also specifies that profits and losses are to be distributed
evenly. What amounts should be recorded as capital for Roberts and Smith at the
formation of the
partnership?
1) Roberts 2) Smith
1) 35,000 2) 75,000
11. When property other than cash is invested in a partnership, at what amount should the
noncash property be credited to the contributing partner's capital account?
Fair value at the date of contribution.
12. Which of the following is not a characteristic of most partnership?
Limited liability
13. Red, White, and Blue form a partnership on May 1, CY. They agree that Red will
contribute office equipment with a total fair value of P40, 000; White will contribute
delivery equipment with a fair value of P80, 000; and Blue will contribute cash. If Blue
wants a one third interests in the capital and profits, he should contribute cash of:
P60, 000
14. On April 30, Year 1, Al, Ben, and Ces formed a partnership by combinipaulng their
separate business proprietorships. Al contributed cash of P50,000. Ben contributed
property with a P36,000 carrying amount, a P40,000 original cost, and P80,000 fair
value. The partnership accepted responsibility for the P35,000 mortgage attached to the
property. Ces contributed equipment with a P30,000 carrying amount, a P75,000 original
cost, and P55,000 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 capital account balance at April 30, Year 1?
Ces
Accounts receivable of P20,000 in John's books and P35,000 in Paul's are uncollectible.
Inventories of P5,500 and P6,700 are worthless in John's and Paul's respective books.
Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be
written off. After Peter's admission, the profit and loss sharing ratio was agreed to be
40:40:20, based on capital credits. How much should the cash settlement be between
John and Paul?
34,288
16. Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just
before the admission of Jane show: Cash, 26,000, Accounts receivable, 120,000,
Merchandise inventory, 180,000, and Accounts payable, 62,000. It was agreed that for
purposes of establishing Mary's interest, the following adjustments be made:
1.) an allowance for doubtful accounts of 3% of accounts receivable is to be established;
2.)merchandise inventory is to be adjusted upward by 25,000; and
3.) prepaid expenses of 3,600 and accrued liabilities of 4,000 are to be recognized.
If Jane is to invest sufficient cash to obtain 2/5 interest in the partnership, how much
would Jane contribute to the new partnership?
190,000
17. On March 1, CY Jose and Kiko decides to combine their business to form a partnership.
Statement of financial position on March 1 before the formation, showed the following:
They agreed to following adjustments before the formation:

A.Provide 2% allowance for doubtful accounts.
B.Jose's furniture should be valued at 31,000, while Kiko's office equipment is
under-depreciated by 250.
C.Rent expense incurred previously by Jose was not yet recorded amounting to 1,000,
while salary expense incurred by Kiko was not also recorded amounting to 800.
d.The fair value of inventories amounted to 29,500 for Jose and 21,000 for Kiko.
The net (debit) credit adjustment to partner's capital accounts are:noncash
Jose Kiko
(870) 180
18. In a limited partnership, a general partner
has unlimited liability for partnership debit.

19. Red, White, and Blue form a partnership on May 1, CY. They agree that Red will
contribute office equipment with a total fair value of P40, 000; White will contribute
delivery equipment with a fair value of P80, 000; and Blue will contribute cash. If Blue
wants a one third interests in the capital and profits, he should contribute cash of:
P60, 000
20. When a partnership is formed, noncash assets contributed by partners sjohnehould be
recorded:
I.at their respective book values for income tax purposes
II.at their respective fair values for financial accounting purposes.
Both I and II
John and Paul agreed to form a partnership contributing their respective assets and
equities subject to the following adjustments:
a. Accounts receivable of P20,000 in John's books and P35,000 in Paul's are
uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John's and Paul's respective
books.
C. Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be
written off.
How much assets does the partnership have?
2,265,118
22. Under the Partnership Act, loans made by a partner to the partnership are treated as?
Accounts Payable of the partnership for which interest is paid.

23. On May 1, Year 1, Cobb and Mott formed a partnership and agreed to share profits and
losses in the ratio of 3:7, respectively. Cobb contributed a parcel of land that cost him
P10,000. Mott contributed P40,000 cash. The land was sold for P18,000 on May 1, Year
1, immediately after formation of the partnership. What amount should be recorded in
Cobb's capital account on formation of the partnership?
18,000
24. On April 30, CY, Alex, Benjie, and Cesar formed a partnership by combining their
separate business proprietorships. Alex contributed cash of P500,000. Benjie
contributed property with a P360,000 carrying amount, a P400,000 original cost, and
P800,000 fair market value. The partnership accepted responsibility for the P350,000
mortgage attached to the property. Cesar contributed equipment with a P300,000
carrying amount, a P750,00 original cost, and P550,000 fair value. The partnership
agreement specifies that profits and losses are to be shared equally but is silent
regarding capital contributions. What are the capital balances of the partners at April 30,
CY?
__Alex____Benjie__ __Cesar___
500,000 450,000 550,000

25. A limited liability company (LLC):
I.is governed by the laws of the country in which it is formed.
II.provides liability protection to its investors.
III. does not offer pass-through taxation benefits of partnerships.
Both I and II
26. On January 1, CY, Atta and Boy agreed to form a partnership contributing their
respective assets and equities to adjustments. On that date, the following were provided:
a. Accounts receivable of P20,000 and P40,000 are uncollectible in A's and B's
respective books.
b. Inventories of P6,000 and P7,000 are worthless in A's and B's respective books.
Intangible assets are to be written off in both books.
C.What will be the capital balances of the partners after adjustments?
Atta Boy
592,000 750,000
27. On June 1, CY, May and Nora formed a partnership. May is to invest assets at fair value
which are yet to be agreed upon. She is to transfer her liabilities and is to contribute
sufficient cash to bring her total capital to P210, 000 which is 70% of the total capital of
the partnership.
Data is regarding the book valued of May's business and liabilities and their
corresponding
valuations are:
Nora agrees to invest cash of 42,000 and merchandise valued at current market price.
The value of the merchandise to be invested by Nora and the cash to be invested by
May are:
48,000 and 72,000 respectively

28. Cong and Dong have just formed a partnership. Cong contributed cash of 126,000 and
computer equipment that cost 54,000. The computer had been used in his sole
proprietorship and had been depreciated to 24,000. The fair value of the equipment is
36,000. Cong also contributed a note -payable of 12, 000 to be assumed by the
partnership. Cong is to have 60% interests in the partnership. Dong contributed only 90,
000 cash.
Cong should make an additional investment (withdrawal) of?
(15,000)
29. Which of the following statements is correct with respect to a limited partnership?
A general partner may be a secured creditor of the limited partnership.

30. A partnership is a(n):
I. accounting entity.
II. taxable entity.
Both I and II
31. On July 1, CY, Monuz and Pardo form a partnership, agreeing to share profits and losses
in the ratio of 4:6, respectively. Monuz contributed a parcel of land that cost him P25,
000. Pardo contributed P50, 000 cash. The land was sold for P50, 000 on July 1, CY
four hours after formation of the partnership. How much should be recorded in Monuz
capital account on formation of the partnership?
P50, 000
32. Langley invests his delivery van in a computer repair partnership with McCurdy. What
amount should the van be credited to Langley's partnership capital?
The fair value at the date of contribution.
33.
34.

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Bargain purchase option

What gross profit (loss) should Kamote Corp. recognized in 2018?

who can absorb the greatest share of theoretical or possible loss

How much cash should Ives receive in the first distribution?

partner's capital balance

Able: P55,000, Baker: P15,000, Chapman: P5,000.

Partnership liabilities, partnership loans, partnership capital balances

175,000 and 125,000

when a partners dies

Cina, 1,375,000 and Doy, 1,275,000

What partnership capital will Foreman have after Davis retires?

all of the above

The withdrawal of a partner from a partnership.

Charged 5,000 against the capital balances of Philip and Marl.

38,400 60,800 60,800

winding-up of partnership affairs

Reduction in capital of 5, 000 each for Cen, Deng and Lala

Merchandise inventory on December 31, Year 4, amounts to 9,100; accrued interest on

Stella, Capital will be debited for 4,000.

insolvency of the partnership

Reduced the capital balances of Yale and Lear.

68,000 32,000 50,000

all the choices are correct

the new partners' capital account will be debited

31,500 28,500 30,000

18,000, 27,000, and 45,000

Based on the preceding information, if no goodwill or bonus is recorded, how much

a bonus to the new partner if B = A + C and D > C.

10,540 8,660 9,600

130,000 145,000 225,000

210,000 126,000 84,000

216,000 108,000 36,000

any of the above

any of the other choices

P17,500 and P10,500

20,740.00 12,560.00 2,000.00 4,700.00

3,450.00 (7,050.00) (19,550.00) (16,850.00)

Each partner is allowed to withdraw up to 10,000 a year.

19,000 (3,000) 34,000

Herm, 223,180; Mar, 272,060; Ama, 280,760

A. Annual salary of 60,000 each.

30, 267 increase 40, 448 decrease

59,000 37,000 54,000

How should partnership net income for 20CY be allocated to D, E, and F?

72,200 37,100 20,700

(10,000) to Bloom and (10,000) to Carnes.

Inventories on December 31, 20CY were as follows: supplies, 2,500; merchandise,

David, 61,200 Enrile, 58,800

in any manner agreed to by the partners.

How should partnership net income for 20CY be allocated to J, P, and B?

60,000 60,000 40,000

80,000 and 20,000

What is the weighted-average capital for Albion and Blaze in 20CY?

110,667 and 119,583

The bonus of Perez in 20CY is:

Being characteristic of the proprietary

In accordance with their capital contribution.

John, capital 728,764