UNIVERSITY OF CEBU-BANILAD

COLLEGE OF ACCOUNTANCY
BANILAD, CEBU CITY
SEMI-FINAL EXAMINATION
Accounting 111B (Partnership-Corporation)
Name ________________________________ Course & yr. _______ Schedule ________________ Score ___________
I – Write TRUE if the statement is correct and FALSE if incorrect.
1. _____ The retirement of a partner by payment from partnership assets may cause the other partner’s capital accounts to
increase.
2. _____ If a partner withdraws by selling his equity interest to the partnership in exchange for an amount greater than the
balance in his capital account, the excess payment will be treated as a bonus to the continuing partner.
3. _____ When a partner withdraws from a partnership and the value of the assets paid to the partner by the partnership is
less than his partnership interest, in effect, paying the withdrawing partner a bonus.
4. _____ The withdrawal of a partner from a partnership is a type of dissolution.
5. _____ When a bonus is allowed to a new partner, part of the entry to record his admission to a business increases the
capital accounts of the old partners.
6. _____ When new partners invest more than the equity interest they receive in the assets of an existing partnership, part
of the entry to record the new partner’s investments is an increase in the capital accounts of the old partners.
7. _____ In admission by investment, when the total agreed capital is more than the total contributed capital it is a
goodwill.
8. _____ Capital credit is the equity of a partner in the new partnership and is obtained by multiplying the total contributed
capital by the corresponding percentage interest of the partner.
9. _____ Bonus is the amount of capital or equity transferred by one partner to another partner.
10._____Total contributed capital is the sum of capital balances of the old partners and the actual investment of the new
partner. It should always equal to the new partnership capital.
11._____ Partner Francis has a P15,000 credit balance in her capital account in the firm of Francis and Dale. If Grea
purchased Francis equity interest in the firm for P20,000, the entry on the partnership books to record the transfer would
credit Grea’s capital account for P20,000.
12._____ The assets invested into the partnership and not given to the individual partners increase the total assets of the
partnership.
13._____ In admission by purchase, payment is personally made to the partner from whom the interest is obtained resulting
to mere transfers among capital accounts.
14._____ The dissolution of the partnership discharges the existing liability of any partner.
15._____ On dissolution, the partnership is not terminated but continues until winding up of partnership affairs is
completed.
16._____ A person admitted as a partner into an existing partnership is liable for obligations of the partnership contracted
before his admission.
17._____ A new partner can already be admitted into a partnership with the consent of one of the continuing partners.
18._____ A partnership may be dissolved at any time by any of the partners.
19._____ A partnership may be dissolved without being liquidated.
20._____ Partnership dissolution is basically the same as partnership liquidation.
21._____ A corporation is created by operation of law. It cannot come into existence by mere agreement of the parties as in
the case of partnerships.
22._____ A corporation has continuity of existence which permits the business to continue regardless of changes in
ownership or the death of a stockholder.
23._____ A corporation is created by agreement of the stockholders.
24._____ Any individual stockholder in a corporation may personally be held liable for all debts incurred by the
corporation.
25._____ A corporation cannot be held liable for personal indebtedness of a stockholder even if he is its president.
26._____ The liability of the stockholders for the payment of corporate debts is limited to the value of their shares.
27._____ Death of a stockholder will not dissolve the corporation.
28._____ Shares of stock can be transferred even without the consent of the other stockholders.
29._____ A de jure corporation is a corporation existing in fact and in law.
30._____ The President is responsible for the formulation and implementation of the overall policies for the corporation.
31._____ The records of all business transactions of the corporation and minutes of any meeting shall be open to the
inspection of any director, trustee, stockholder or member of the corporation at reasonable hours on business days.
32._____ Contributed capital has two major components – legal capital and additional paid in capital. In case of par value
shares, legal capital is the aggregate par value of all issued and subscribed shares.
33._____ When shares with par value are sold, the proceeds should be credited to the share capital account in full.
34._____ When shares without par value are sold, the proceeds should be credited to the share capital account.
35._____ When share capital is sold for a price higher than par value, the share capital account is credited only for the par
value of the shares sold.
36._____ In reference to the previous question, any amount received in excess of the par value of the shares sold is
recorded as a credit to the retained earnings account.
37._____ Treasury shares refer to shares reacquired by the issuing corporation.
38._____Treasury shares shall have no voting right as long as they remain in the treasury.
39._____Treasury shares are part of the outstanding share capital.
40._____ Assets received from stockholders as donations should be recorded at the fair market value of the items received,
with the credit going to retained earnings.
II – Problem Solving. Give the requirements accordingly with supporting computation.

A. Francis and Dominic are partners who share profits and losses in the ratio of 6:4. On January 1, 2020, their capital
accounts are:
Francis P320,000
Dominic 80,000
Total P400,000
John is to be admitted for a 20 percent interest in the partnership by direct purchase from the partners for P120,000.
Required:
1. Determine the book value of Francis and Dominic interest acquired by John.
Francis _____________ Dominic ________________
2. How should the P120,000 cash be divided between Francis and Dominic?
Francis _____________ Dominic ________________
3. Determine each partner capital balances after the admission of John.
Francis _____________ Dominic ________________ John ______________
4. Prepare the journal entry upon purchase of John.
-

B. Capital balances and profit and loss percentages for the partnership of Alvin, Sani and Tony on January 1, 2020 are as
follows:
Alvin (40%) P480,000
Sani (20%) 320,000
Tony (40%) 560,000
Total P1,360,000

On January 3, 2020, the partners agreed to admit Bart into the partnership for a 25% interest in capital and profits for his
investment in the partnership of P440,000 for an agreed capitalization of P1,800,000.
Required: Determine the following:
1. Total contributed capital ______________
2. Capital credit of Bart in the new partnership ____________
3. Bonus to _____________ (if any), Amount _____________
4. Capital credit of Alvin in the new partnership ___________
5. Journal entry to record the admission of Bart.
_

C. Mar, Dom and San are partners with the following capital balances: Mar, P240,000; Dom, P200,000; and San P160,000.
They shared profits and losses in the ratio of 3:2:5, respectively. Dom decided to withdraw from the partnership by
selling his interest to the business for cash.
Required:
1. The capital balance of the partnership before the withdrawal of Dom ______________
2. The capital balance of the partnership after the withdrawal of Dom ________________
3. The book value of Dom’s interest acquired by the partnership _________________
4. Assuming the partnership pays Dom P120,000, how much is the capital balance of San after the
withdrawal of Dom? ________________
5. Assuming that the firm pays Dom P240,000, how much is the capital balance of Mar after the
withdrawal of Dom? _______________

D. Mr. Jackie Chan and Mr. James Bond are partners who shared profit and losses on an arbitrary ratio of 3:2. Mr. Jet Lee
was admitted in the partnership by buying ¼ and ½ of the respective old partners interests in the partnership. The
partners’ capital balances before the purchase were as follows:
J. Chan P800,000
J. Bond 1,000,000
Required:
1. Determine each of the partners’ capital balances after the admission assuming Jet Lee pays P800,000.
Chan ____________ Bond ____________ Lee ____________
2. Prepare the journal entry upon payment of Jet Lee, P600,000.
_

E. The assets and equities of the Perdales, Ceballus and Bandonell partnership at the end of its fiscal year ended Oct. 31,
2018 are as follows:
ASSETS EQUITIES
Cash P15,000 Liabilities P50,000
Receivable – Net 20,000 Loan from Bandonell 10,000
Inventory 40,000 Perdales, Capital (30%) 45,000
 Property and Equipment 70,000 Ceballus, Capital (50%) 30,000
Loan to Ceballos 5,000 Bandonell, Capital (20%) 15,000
P150,000 P150,000
The partners decided to liquidate the partnership. They estimated that the non-cash assets, other than the loan to
Ceballus, can be converted into P100,000 cash over the two-month period ending Dec. 31, 2018. Cash is to be
distributed to the appropriate parties as it becomes available during the liquidation process.

Required:
1. The partner most vulnerable to partnership losses on liquidation is _______________
2. If P65,000 is available for the first distribution, it should be paid to -
Priority Creditors ____________ Perdales ___________ Ceballus _____________ Bandonell __________
3. If a total amount of P7,500 is available for distribution to partners after all outside liabilities are paid, it should
be paid as follows: Perdales ______________ Ceballus ____________ Bandonell ____________

F. The statement of financial position for Paraiso and Ligeralde Partnership on June 1, 2018 before liquidation is as
follows:
Assets Liabilities & Capital
Cash P50,000 Liabilities P200,000
Other Assets 550,000 Paraiso, Capital 225,000
______ Ligeralde, Capital 175,000
Total Assets P600,000 Total Liabilities & Capital P600,000

Partners Paraiso and Ligeralde share profits and losses 60:40, respectively. In June, assets with a book value of
P220,000 were sold for P180,000, creditors were paid in full, and P20,000 was paid to partners. In July, assets with
book value of P100,000 were sold for P120,000, liquidation expenses of P5,000 were paid and cash of P125,000 was
paid to partners. In August, the remaining assets were sold fo P225,000.
Required:
1. How much cash should Ligeralde receive in June? _____________
2. How much cash should Paraiso receive in July? _______________
3. How much cash should Ligeralde and Paraiso receive in August?
Ligeralde _______________ Paraiso ______________
G. Colacola Corporation is authorized by its charter to issue 5,000 ordinary shares at P100 par value.

Required:
1. How much of the authorized share capital should be subscribed upon its incorporation?
Answer (number of shares and in pesos) ________________
2. How much of the subscribed share capital is required by SEC to be paid up upon its incorporation?
Answer _________________
3. If Mr. Ronald Desierto subscribes 500 shares at P110 per share but did not make any down payment, how much
amount will be charged to “Premium on share capital” account? ________________
4. If Ronald Desierto makes full payment of his subscription, at what amount should Share Capital be credited
upon issuance of certificates? _________________
5. Marilli Salva has subscribed for 100 shares and after paying the half price of her subscriptions, she has
defaulted. How many shares are considered “delinquent”? ______________
6. (Refer to data No. 5). Assume that the following persons bid for he delinquent shares and are willing to pay the
subscription balance plus incidental expenses of P250:
Carlos Dalumpines 80 shares
Gemma Goyha 85 shares
Josephine Lada 70 shares
Who is the highest bidder? ________________
7. (Refer to data No. 6). After the highest bidder pays the price, the certificate of stock will then be issued.
How many shares can Salva be entitled to receive? _____________

H. The Rainbow Corporation is authorized by its charter to issue 5,000 ordinary shares with a par value of P100 per share.
Shown below are the names of the incorporators with their corresponding subscriptions and payments:
At Par Value
Incorporators No. of Shares Subscribed Payments
Doroteo Amora 800 P20,000
Conrado de los Reyes 600 15,000
Emilio Palma Gil 400 16,000
Cristina Pendor 500 15,000
Zenia Manapat 700 21,000
3,000 P87,000
Sept. 1 Emilio Palma Gil paid his subscription balance in full and a Stock Certificate was issued.
7 Teresita Salang subscribed to 200 shares at P110 and made a partial payment of P8,000.
9 Teresita Salang paid in full her subscription balance and a stock certificate was issued.
11 Issued 20 shares for cash at P105.
15 Issued 50 shares of stocks to Atty. Garcia in payment for his professional services in the incorporation
process.
29 Zenia Manapat offered her brand new unit of computer in payment for her subscription balance and was
 accepted.
Required: Prepare all the necessary journal entries of the above transactions.
Key :

I – False 2, 3,5, 7, 11, 14, 17, 20, 23,2 4, 30, 33, 36, 39 & 40

II –
A. 1. 64,000 16,000
2. 88,000 32,000
3. 256,000 64,000 80,000
4.
– Francis, Capital 64,000
Dominic, Capital 16,000
John, Capital 80,000
#
B. 1. 1,800,000
2. 450,000
3. Bart/New 10,000
4. 476,000
5.
- Cash 440,000
Alvin, Capital 4,000
Sani, Capital 2,000
Tony, Capital 4,000
Bart, Capital 450,000
#

C. 1. 600,000
2. 400,000
3. 200,000
4. 210,000
5. 225,000

D. 1. 600,000 500,000 700000

2.
_ Chan, Capital 200,000
Bond, Capital 500,000
Lee, Capital 700,000
#

E. Cash Priority Program Cash Priority Payments to

Perdales Ceballus Bandonell Perdales Ceballus Bandonell Total
Capital Balances 45,000 30,000 15,000
Add: Loan from (to) Partner (5,000) 10,000
Total Interests 45,000 25,000 25,000
Divide by P/L ratio 30% 50% 20%
Loss absorption balances 150,000 50,000 125,000
Priority I – to Penales (25,000) ___ 7,500 7,500
125,000 50,000 125,000
Priority II – to Perdales & Ban (75,000) (75,000) 22,500 15,000 37,500
50,000 50,000 50,000 30,000 15,000 45,000
Priority III – P/L ratio in excess of P40,0000.

1. Ceballus
2. Priority Creditors P50,000 Perdales P12,000 Ceballus P0 Bandonell P3,000
3. Perdales P7,500 Ceballus P 0__ Bandonell P 0 __

F. 1. P20,000
2. P72,000
3. Ligeralde P90,000 Paraiso P135,000
Cash Priority Program Cash Priority Payments to
Paraiso Ligeralde Paraiso Ligeralde Total
Capital Balances 225,000 175,000
Loan ______ _______
Total Interests 225,000 175,000
Divide P/L Ratio 60% 40%
Loss absorption 375,000 437,500
Priority I – Ligeralde ______ (62,500) _______ 25,000 25,000
375,000 375,000 25,000 25,000
P/L ratio in excess of P25,000.
G. 1. 1,250 shares, P125,000
2. P31,250
3.P5,000
4. P50,000
5.100 shares
6. Josephine Lada
7. 30 shares

H. Sept 1 Memo: Authorized to issue 5000 shares of P100 per share, P500,000.

- Cash 87,000
Subscription Receivable 213,000
Subscribed Share Capital 300,000
#
- Cash 24,000
Subscription Receivable 24,000
#
- Subscribed Share Capital 40,000
Share Capital 40,000
#
7 Cash 8,000
Subscription Receivable 14,000
Subscribed Share Capital 20,000
Premium on Share Capital 2,000
#
9 Cash 14,000
Subscription Receivable 14,000
#
- Subscribed Share Capital 20,000
Share Capital 20,000
#
11 Cash 2,100
Share Capital 2,000
Premium on Share Capital 100
#
15 Legal Fees Expense 5,000
Share Capital 5,000
#
29 Office Equipment 49,000
Subscription Receivable 49,000
#
- Subscribed Share Capital 70,000
Share Capital 70,000
#