UM Tagum College

Arellano Street, Tagum City, 8100 Philippines

PARTNERSHIP PROF. JON D. INOCENTES , CPA

1. Andro and Bino have just formed a partnership. Andro contributed cash of P 782,000 and office equipment that
cost P 390,000. The equipment had been used in sole proprietorship and had been 80% depreciated. The current
fair value of the equipment is P252,000. An unpaid mortgage loan on the equipment of P84,000 will be assumed
by the partnership. Andro is to have a 60% interest in the partnership net assets.Bino is to contribute only
merchandise with a fair value of P630,000. Both partners agreed on profit and loss ratio of 55% to Andro and the
balance to Bino. To finalize the partnership agreement, Andro should make additional investment (withdrawal) of
cash in the amount of
a. P(12,000) b. P(180,000) c. P88,000 d. P(5,000)

2. CC and DD as a partner in business. Accounts in the ledger for CC on November 30, 2011, just before the
admission of DD, show the following balances:

Cash P 6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Accounts Payable 8,000
CC, Capital 33,000
It is agreed that for purposes of establishing CC’s interest, the following adjustment shall be made:
a) An allowance for doubtful accounts of 3% of accounts receivable is to be established.
b) The merchandise inventory is to be valued at P23,000.
c) Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.

DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. Compute for (1) CC’s adjusted capital before
the admission of DD; and (2) the amount of cash investment by DD:
a. (1) P35,347; (2) P11,971 c. (1) P35,374; (2) P17,687
b. (1) P36,374; (2) P18,487 d. (1) P28,174; (2) P14,087

3. On January 1, 2010, A,B, C and D formed Bakya Trading Co., a partnership, with capital contributions as follows:
A, P 50,000; B, P25,000; C, P25,000; and D, P20,000. The partnership contract provided that each partner shall
receive a 5% interest on contributed capital, and that A and B shall receive salaries of P5,000 and P3,000,
respectively. The contract also provided that C shall receive minimum of P2,500 per annum, and D a minimum of
P6,000 per annum, which is inclusive of amounts representing interest and share of remaining profits. The
balance of the profits shall be distributed to A, B, C and D in a ratio of 3:3:2:2 ratio.

What amount must be earned by the partnership before any charge for interest and salaries, so that A may receive an
aggregate of P12,500 including interest, salary and share in profits?
a. P 16,667 b. P 30,000 c. P 30,667 d. P 32,333

4. The partnership of X, Y, Z was formed on January 1, 2009. The original investments were as follows: X, P
7,200,000; Y, P 10,800,000; Z, P 16,200,000. According to the partnership agreement, net income or loss will be
divided among the respective partners as follows: (1) salaries of P 1,080,000 for X, P 900,000 for Y, P 720,000 for
Z. (2) Interest of 8% on the average capital balance during the year to each partner. (3) Remainder is divided
equally. Additional information is as follows:

a. Net income of the partnership for the year ended December 31, 2006 was P 6,300,000.
b. X invested an additional p 1,800,000 in the partnership on July 1 2009.
c. Z withdraw P 2,700,000 from the partnership on October 1, 2009
d. X, Y and Z made regular drawings against their shares of net income during 2009 of P900,000 each.
The partner’s capital balances as of December 31, 2009 are:
X Y Z
a. P 11,010,000 11,946,000 14,844,000
b. 10,110,000 11,946,000 14,844,000
c. 9, 210,000 11,046,000 13,944,000
d. 8,280,000 9,180,000 12,144,000
5. Cookie and Dannie are partners who share profits and losses in the ratio of 7:3 respectively. Their respectively.
Their respective capital accounts are as follows:

Cookie P 6,300,000 Dannie P 5,400,000

They agreed to admit Eddie as a partner with a one-third interest in the capital and profits and losses, upon an
investment of P 4,500,000. The new partnership will begin with a total capital of P 16,200,000. Immediately after
Eddie’s admission, what are the capital balances of Cookie, Dannie and Eddie, respectively?
a. P 5,400,000; P 5,400,000; P 5,400,000 c. P 5,670,000; P 5,130,000; P 5,400,000
b. P 5,600,000; P 5,100,000; P 5,400,000 d. P 6,300,000; P 5,400,000; P 900,000

6. Maria, Suma and Corta were partners with capital balances of January 2, 2010 of P100,000, P150,000 and P200,000,
respectively. Their profit and loss ratio is 5:3:2. On July 1, 2010, Maria retires from the partnership. On the date of
retirement the partnership net income is P140,000 and the partners agreed that inventories are to be revalued at
P70,000 from its original cost of P50,000. The partners agreed further to pay Maria P195,000 in settlement of his
interest. What are the capital balances of the remaining partners after retirement of Maria?
a. Suma, P189,000; Corta, P226,000 c. Suma, P 2017,000; Corta, P238,000
b. Suma, P198,000; Corta, P232,000 d. Suma, P 220,000; Corta, P 226,000

7. On June 30, 2011, the balance sheet of Western Marketing, a partnership, is summarized as follows:
Assets P 600,000 West, Capital P360,000 Tern, Capital P240,000

West and Tern share profits and losses at a 60:40 ratio, respectively. They agreed to take in Cuba as a new partner,
who purchases 1/8 interest of West and Tern for P100,000. What is the amount of Cuba’s capital to be taken up in the
partnership books if book value method is used?
a. P50,000 b. P75,000 c. P100,000 d. P125,000

The following statement of financial position was prepared for the Tan, Lim and Wan partnership on march 31, 2011.
Cash P 25,000 Liabilities P 52,000
Other Assets 180,000 Tan, Capital (40%) 40,000
Lim, Capital (40%) 65,000
Wan, Capital (20%) 48,000
Total Assets P205,000 Total P205,000
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The partnership is being liquidated by the sale of assets in installments. The first sale of non-cash assets having a book
value of P90,000 realizes P50,000.

8. The amount of cash each partner should receive in the first installment is:
a. Tan, P0; Lim, P5,000; Wan, P18,000 c. Tan, P27,000; Lim, P5,000; Wan, P18,000
b. Tan, P12,000; Lim, P13,000; Wan, P22,000 d. Tan, P0; Lim, P5,000; Wan, P22,000

9. Using the data above, if P3,000 cash is withheld for possible liquidation expenses, how much cash should Wan
receive?
a. P21,000 b. P17,000 c. P3,000 d. P15,000

10. Manny, Nonoy and Oscar decided to dissolve the partnership on July 31, 2009. The capital balances and profit
ratio on this date, follow:
Capital balances Profit Ratio
Manny P 1,890,000 40%
Nonoy P 2,430,000 30%
Oscar 1,080,000 30%

The net income from January 1 to July 31, 2009 is P 1,728,000. Also, on this date, cash and liabilities are P 1,350,000
and P 2,160,000 respectively. For Manny to receive P 2,273,000 in full settlement of her interest in the firm, how
much must be realized from the sale of the firm’s non-cash assets?
a. P 8,518,000 b. P 7,168,500 c. P 8,707,000 d. P 5,548,500