NAME: SCORE:

SECTION: PROFESSOR:

Problem #8
Two Sole Proprietors Form a
Partnership
The business assets of Geron and Yumol
appear below:
Geron Yumol
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land
603,000
Building 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,317,002
P1,020,916

Account Payable P 178,940 P 243,650

Notes Payable 200,000 345,000
Geron, Capital 641,976
Yumol, Capital 728,352
Total
P1,020,916 P1,317,002

Geron and Yumol agreed to form a partnership contributing their

subject to the following adjustments: assets and equities
Accounts receivable of P20,000 in Geron's books and P35,000 in
uncollectible.
Yumol's are
b Inventories of P5,500 and P6,700 are worthless in Geron's and Yumol's
respective books.
C Other assets of P2,000 for Geron and P3,600 for Yumol are to be
written off.
Required:
Prepare the journal entries for the formation of the partnership as at July 1.

40 | WIN Ballada's Partnership and Corporation Accounting 2023 Edition

 NAME: SCORE:
SECTION: PROFESSOR:

Problem #9
Two Sole Proprietors Form a Partnership
Medina and Loqueloque are fierce competitors who sell hunting equipment. They
finally decided to join forces in order to increase their business and reduce costs. An
agreement is reached between the two to begin operations as a partnership on Mar. 1,
2022.

Medina and Loqueloque have decided to share profits or losses in the ratio of 60:40,
respectively.
The statementsof financial position of Medina and Loqueloque as at Mar. 1, 2022 are as
follows:

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

Total Assets P1,158,800 PS44,400

Notes Payable P 120,000

Accounts Payable 170,000 P111,600
Mortgage Payable 200,000
Medina, Capital 668,800
432,800
Loqueloque, Capital
Total Liabilities and Owners' Equity P1,158,800 P544,400

Chapter 1: Basic Considerations and Formation| 41

 Logueloque Hunting Gears. The
Tne name of the partnership will be Medina and
partners have agreed to effect the following adjustments:
The inventory of
d. Medina'smerchandise inventory isto be reduced by P105,200.
Loqueloque will be increased by P7,200.
b. The following are the fair market values of the various assets:
Medina Loqueloque
Land P108,000
Building 192,000
Office Equipment 16,000 P40,000
Repair Equipment 124,000

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

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

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

42 | WIN Ballada's Partnership and Corporation.

Accounting 2023 Edition
 NAME: SCORE:
PROFESSOR:
SECTION:

Multiple Choice
formed a partnership and agreed to share
1. On May 1, 2022, Gonzaga and Balace Gonzaga contributed a parcel of
profits and losses in the ratio of 3:7, respectively. land was sold for
contributed P40,000 cash. The
formation of the partnership. What
land that cost P10,000. Balace
P18,000 on May 1, 2022, immediately after
Gonzaga's capital account on formation of the
amount should be recorded in
partnership?
P15,000
b. P17,400
C. P10,000
d. P18,000
and form a
Z. On Mar. 1, 2022, Sarabia and Abad decided to combine their businesses
partnership. Their statements of financial position on Mar. 1, before adjustments,
showed the following:
Sarabia Abad
Cash P 9,000 P 3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and Fixtures (net) 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid Expenses 6,375 3,000
Total P105,37S P51,500
Accounts Payable P45,750 P18,000
Capital 59,625
Total
33,500
P105,375 P51,500
They agreed to have the following items recorded in their books:
1, Provide 2% allowance for doubtful accounts.
2. Sarabia's furniture and fixtures should be P31,000, while
equipment is under-depreciated by P250. Abad's office
3 Rent expense incurred previously by Sarabia was
P1,000, while salary expense incurred by Abad wasnotnotyet recorded amounting to
to P800.
also recorded amounting
4 The fair market values of inventory amounted to:
For Sarabia
For Abad P29,500
21,000

44 | WIN Ballada's Partnership and Corporation Accounting 2023 Edition

 Compute the net (debit) credit adjustment for Sarabia and Abad:
Sarabia Abad Sarabia Abad

P 2,870 P 2,820 C. P(870) P180

P(2,870) P(2,820) d. P 870 P(180)
3. Using the same information in the previous number, what is amount of total
liabilities after the formation?

a P63,950 C. P63,750
b P65,550 d. P61,950

4. Using the same information is #2, what is the amount of total assets after the
formation?

P160,765 C. P157,985
b. P152,985 d. P156,875

5. Ables and Galang executed a partnership agreement that lists the following assets
contributed at the partnership's formation:
Contributed by:
Ables Galang
Cash P20,000 P30,000
Inventory 15,000
Building 40,000
Furniture and Equipment 15,000

The building is subject to a mortgage of P10,000, which the partnership has

assumed. The partnership agreement also specified that profits and losses are to be
distributed equally. What amounts should be recorded as capital for Ables and
Galang at the formation of the partnership?
Ables Galang
a. P35,000 P85,000
b. P35,000 P75,000
C. P55,000 P55,000
d. P60,000 P60,000

P200,000.
6. Orcajada invested in apartnership aparcel of land which cost his father
The land had amarket value of P300,000 when Orcajada inherited it three years
ago. Currently, the land is independently appraised at P500,000 even though
Orcajada insisted that he "wouldn't take P900,000 for it." The land should be
recorded in the accounts of the partnership at
P300,000.
b. P500,000.

Chapter 1: BasicConsiderations and Formation | 45

 C. P900,000.
d. P200,000.
by
a partnership
7. their separate
On Apr. Yacapin, and
business proprietorships.
30, 2022, Lacson,
Bernal formed
Lacson contributed cash of P50,000,
Yacapin contributed property with a P36,000 carrying amount, a P40,000 original
combining
Cost, and P80,000 fair value. The partnership accepted responsibility for the

P35,000 mortgage attached to the property.

Bernal 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 hasthe largest Apr. 30. 2022,capital balance?
Lacson C. Bernal
b. Yacapin d. Allcapital account balances are equal

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

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

doubtful accounts of P1,000 and P1,500 are to be set up in the books of lsada and
Ureta-Reyes, respectively; and accounts payable of P4,000 is to be recognized in
Isada'sbooks. The individual trial balanceson August, before adjustments,follow:
Isada Ureta-Reyes
Assets P75,000 P113,000
Liabilities 5,000 34,500
What is the capital of Isada and Ureta-Reyes after the above
adjustments?
Isada, P68,750; U. Reyes, P77,250 C
Isada, P65,000; U. Reyes, P76,000
b.. Isada, P65,000; U. Reyes, P81,000 d. Isada, P75,000; U. Reyes, P81,000
9. Calma and Abello formed a
partnership on April 1 and contributed the following
assets:

Calma Abello
Cash P 150,000 P 50,000
Land
310,000
The land was subject t0 a
mortgage of P30,000,
nartnership. Under the partnership agreement, Calmawhich was assumed by the
and Abello will share profit
and loss in the ratio of one-third and
account at April1 should be
two-thirds, respectively.
Abello's capital
A6 | WIN Ballada'sPartnership and Corporation Accounting2023 Edition
 a. P330,000.
b. P360,000.
C. P300,000.
d. P340,000.

10. Pedernal, Pating, and Liggayu are forming a new partnership. Pedernal is to invest
cash of P100,000 and stapling equipment originally costing P120,000 but has a
second-hand market value of P50,000. Pating is to invest cash of P160,000.
Liggayu, whose family is engaged in selling stapling equipment, is to contribute cash
of P50,000 and a brand new stapling equipment to be used by the partnership with
a regular price of 120,000 but which cost their family's business P100,000. Partners
agreed toshare profits equally. Thecapital balances upon formation are
Pedernal, P220,000; Pating,P160,000; and Liggayu, P150,000.
b Pedernal, P150,000; Pating, P160,000; and Liggayu, P170,000.
C. Pedernal, P160,000; Pating; P160,000; and Liggayu, P160,000.
d. Pedernal,P176,666; Pating, P176,666; and Liggayu, P176,668.
11. Estrada and Molina formed a partnership on Mar. 1, 2022 and contributed the
following assets:
Estrada Molina

Cash P80,000
Equipment P50,000

The equipment was subject to achattel mortgageof P10,000 that was assumed by
the partnership. The partners agreed to share profits and losses equally, Molina's
capital account at Mar. 1, 2022 should be

a P50,000. C. P40,000.
b. P45,000. d. P60,000.

12. On Mar. 1, 2022, Kalaw and Borromeo formed a partnership with each contributing
the following assets:
Kalaw Borromeo

Cash P30,000 P 70,000

Machinery and Equipment 25,000 75,000
Building 225,000
Furniture and Fixtures 10,000

The building is subject to mortgage loan of P80,000, which is to be assumed by the

partnership. Agreement provides that Kalaw and Borromeo share profits and losses
30% and 70%, respectively. On Mar. 1, 2022 the balance in Borromeo's capital
account should be

Chapter 1: Basic Considerations and Formation| 47

 a. P305,000.
b.
P370,000. C.
P290,000.
P314,000. d.

the mortgage loan is not

aie inTormation in the previous number except that
Borromeo's capital
esuiied by the partnershin. On Mar 1: 2022 the balance in
account should be

b.
P370,000. C P305,000.
P314,000. d. P290,000.

14. On July 1, Faminial and Fetalvero formed a partnership, agreeing to share profits
and losses in the ratio of 4:6 respectively, Faminial contributed a parcel of land that
Cost P25,000. Fetalvero contributed P50.000 cash. The land was sold for P50,000
On July 1, three hours after formation of the partnership. How much should be
recorded in Faminial's capital account on formation of the partnership?
a. P50,000. C. P25,000.
b. P20,000. d. P10,000.

15. On Apr. 30, 2022, Foja, Lupian, and Retada formed a partnership by combining their
separate business proprietorships. Foja contributed cash of P50,000. Lupian
contributed property with a P36,000 carrying amount, a P40,000 original cost, and
P80,000 fair value. The partnershipassumed the P35,000 mortgage attached to the
property. Retada contributed equipment with a P30,000 carrying
P75,000 original cost, and P55,000 fair value. The partnership agreementamount,
a
that profits and losses are to be shared equally. Which partner has the specified
30, 2022, capital account balance?
largest Apr.

a. Foja.
b. Retada.
C. Lupian.
d. Allcapital acCount balances are equal.

16. Lacson and Solis started a partnership.

Lacson contributed a building that she
purchased 10 years ago for P100,000. The accumulated
building on the date of formation of the partnership is P25,000depreciation
and
on the
P110.000, For what amount will Lacson'S capital account be the fair value is
of the partnership?
credited on the books

a P100,000 C. P110,000
b. P75,000 d. P25,000

48 | WIN Ballada's Partnership and Corporation Accounting 2023 Edition