Partnership Formation Mc
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Review Problems on Partnership Formation 1.
Lacson and Bernal started a partnership. Lacson contributed a building that she purchased 10 years ago for P 100,000. The accumulated depreciation on the building on the date of formation of the partnership is P 25,000 and the fair value is P110,000. For what amount will Lacson’s capital account be credited on the books of the partnership? A. P 100,000 C. P 25,000 B. P 75,000 D. P 110,000
2.
Red, White, and Blue form a partnership on May 1, 2005. They agree that Red will contribute office equipment with a total fair value of P 40,000; White will contribute delivery equipment with a fair value of P 80,000; and Blue will contribute cash. If Blue want a one third interest in the capital and profits, he should contribute cash of: A. P 40,000 C. P 120,000 B. P 60,000 D. P 180,000
3.
Mateo and Julio formed a partnership on April 1 and contributed the following assets: Mateo Julio Cash P 300,000 P 100,000 Land P 300,000 The land was subject to a mortgage of P 50,000, which was assumed by the partnership. Under the partnership contract, Mateo and Julio will share profit and loss in the ratio of one-third and two-thirds respectively. Julio’s capital account at April 1 should be: A. P 350,000 C. P 400,000 B. P 300,000 D. P 450,000
4.
On April 30, 2005, AA, BB and CC formed a partnership by combining their separate business proprietorships. AA contributed cash of P 50,000. BB contributed property with a P 36,000 book value, a P 40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for the P 35,000 mortgage attached to the property. CC contributed equipment with a P 30,000 book value, a P 75,000 original cost and P 55,000 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 April 30, 2005, capital balance? A. AA C. CC B. BB D. All capital account balances are equal
5.
PP, RR, and SS are new CPA’s and are to form partnership. PP is to contribute cash of P 50,000 and his computer originally costing P 60,000 but has a second hand value of P 25,000. RR is to contribute cash of P 80,000. SS, whose family is selling computers, is to contribute cash of P 25,000 and a brand new computer with a regular selling price of P 60,000 but which cost is P 50,000. Partners agree to share profits equally. The capital balances upon formation are: PP RR SS A. P 75,000 P 80,000 P 85,000 B. P110,000 P 80,000 P 75,000 C. P 80,000 P 80,000 P 80,000 D. P 83,333 P 88,333 P 88,334
6.
Elsa and Pearl form a new partnership. Elsa invests P 300,000 in cash for her 60 percent interest in the capital and profits of the business. Pearl contributes land that has an original cost of P 40,000 and a fair market value of P70,000, and a building that has a tax basis of P 50,000 and a fair market value of P 90,000. The building is subject to a P 40,000 mortgage that the partnership will assume. What amount of cash should Pearl contribute? A. P 40,000 C. P 110,000 B. P 80,000 D. P 150,000
7.
On April 1, 2006, Ell and Emmy pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partners capitals are to be based on net assets transferred after the following adjustments: a) Emmy inventory is to be increased by P 3,000; b) An allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in books of Ell and Emmy, respectively; and c) Accounts payable of P 4,000 is to be recognized on Ell’s books. The individual trial balances on April 1, 2006, before adjustments follow: Ell Emmy Assets P75,000 P113,000
Liabilities 5,000 34,500 Capital 70,000 78,500 How much is the capital of Ell after the above adjustments to his book? A. P 70,000 C. P 68,500 B. P 65,000 D. P 66,000 8.
On September 30, 2005, Lopez admits Mendez for an interest in his business. On this date, Lopez’s capital account shows a balance of P 158,400. The following were agreed upon before the formation of the partnership: a) Prepaid expenses of P 17,500 and accrued expenses of P 5,000 are to be recognized. b) 5% of the outstanding accounts receivable of Lopez amounting to P 100,000 is to be recognized as uncollectible. c) Mendez is to be credited with a one-third interest in the partnership and is to invest cash aside from the P50,000 worth of merchandise. The amount of cash to be invested by Mendez and the total capital of the partnership are: A. P 32,950 and P 248,850 respectively B. P 82,950 and P 248,850 respectively C. P 55,300 and P 221,200 respectively D. P 32,950 and P 171,200 respectively
9.
Ruiz and Pena are combining their separate businesses to form a partnership. Cash and noncash assets are to be contributed for a total capital of P 300,000. The noncash assets to be contributed and the liabilities to be assumed are: Ruiz Pena Book Value Fair Value Book Value Fair Value Accounts receivable P20,000 P20,000 Inventories 30,000 40,000 P20,000 P25,000 Equipment 60,000 45,000 40,000 50,000 Accounts payable 15,000 15,000 10,000 10,000 The partner’s capital accounts should be equal after all the contribution of assets and the assumptions of liabilities. How much cash is to be contributed by Ruiz? A. P 150,000 C. P 210,000 B. P 60,000 D. P 85,000
10.
On July 1 of the current year, Jobson and Gomez form a partnership. Jobson is to invest certain business assets at values which are yet to be agreed upon. He is to transfer his business liabilities and is to contribute sufficient cash to bring his total capital to P 180,000, which is 60% of the total capital as had been agreed upon. Details regarding the book values of Jobson’s business assets and liabilities and their corresponding valuation follow: Book Value Agreed Valuations Accounts Receivable P 54,000 P 54,000 Allowance for doubtful accounts 3,600 6,000 Merchandise inventory 96,600 105,000 Store equipment 27,000 Accumulated depreciation-Store equipment 18,000 13,200 Office equipment 18,000 Accumulated depreciation-Office equipment 9,600 4,800 Accounts payable 48,000 48,000 Gomez agrees to invest cash of P 30,000 and merchandise valued at current market price. The value of the merchandise to be invested by Gomez and the amount of cash to be invested by Jobson are: A. P 120,000 and P 48,000 respectively B. P 210,000 and P 49,200 respectively C. P 105,000 and P 50,000 respectively D. P 90,000 and P 48,000 respectively
Lacson and Bernal started a partnership. Lacson contributed a building that she purchased 10 years ago for P 100,000. The accumulated depreciation on the building on the date of formation of the partnership is P 25,000 and the fair value is P110,000. For what amount will Lacson’s capital account be credited on the books of the partnership? A. P 100,000 C. P 25,000 B. P 75,000 D. P 110,000
2.
Red, White, and Blue form a partnership on May 1, 2005. They agree that Red will contribute office equipment with a total fair value of P 40,000; White will contribute delivery equipment with a fair value of P 80,000; and Blue will contribute cash. If Blue want a one third interest in the capital and profits, he should contribute cash of: A. P 40,000 C. P 120,000 B. P 60,000 D. P 180,000
3.
Mateo and Julio formed a partnership on April 1 and contributed the following assets: Mateo Julio Cash P 300,000 P 100,000 Land P 300,000 The land was subject to a mortgage of P 50,000, which was assumed by the partnership. Under the partnership contract, Mateo and Julio will share profit and loss in the ratio of one-third and two-thirds respectively. Julio’s capital account at April 1 should be: A. P 350,000 C. P 400,000 B. P 300,000 D. P 450,000
4.
On April 30, 2005, AA, BB and CC formed a partnership by combining their separate business proprietorships. AA contributed cash of P 50,000. BB contributed property with a P 36,000 book value, a P 40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for the P 35,000 mortgage attached to the property. CC contributed equipment with a P 30,000 book value, a P 75,000 original cost and P 55,000 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 April 30, 2005, capital balance? A. AA C. CC B. BB D. All capital account balances are equal
5.
PP, RR, and SS are new CPA’s and are to form partnership. PP is to contribute cash of P 50,000 and his computer originally costing P 60,000 but has a second hand value of P 25,000. RR is to contribute cash of P 80,000. SS, whose family is selling computers, is to contribute cash of P 25,000 and a brand new computer with a regular selling price of P 60,000 but which cost is P 50,000. Partners agree to share profits equally. The capital balances upon formation are: PP RR SS A. P 75,000 P 80,000 P 85,000 B. P110,000 P 80,000 P 75,000 C. P 80,000 P 80,000 P 80,000 D. P 83,333 P 88,333 P 88,334
6.
Elsa and Pearl form a new partnership. Elsa invests P 300,000 in cash for her 60 percent interest in the capital and profits of the business. Pearl contributes land that has an original cost of P 40,000 and a fair market value of P70,000, and a building that has a tax basis of P 50,000 and a fair market value of P 90,000. The building is subject to a P 40,000 mortgage that the partnership will assume. What amount of cash should Pearl contribute? A. P 40,000 C. P 110,000 B. P 80,000 D. P 150,000
7.
On April 1, 2006, Ell and Emmy pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partners capitals are to be based on net assets transferred after the following adjustments: a) Emmy inventory is to be increased by P 3,000; b) An allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in books of Ell and Emmy, respectively; and c) Accounts payable of P 4,000 is to be recognized on Ell’s books. The individual trial balances on April 1, 2006, before adjustments follow: Ell Emmy Assets P75,000 P113,000
Liabilities 5,000 34,500 Capital 70,000 78,500 How much is the capital of Ell after the above adjustments to his book? A. P 70,000 C. P 68,500 B. P 65,000 D. P 66,000 8.
On September 30, 2005, Lopez admits Mendez for an interest in his business. On this date, Lopez’s capital account shows a balance of P 158,400. The following were agreed upon before the formation of the partnership: a) Prepaid expenses of P 17,500 and accrued expenses of P 5,000 are to be recognized. b) 5% of the outstanding accounts receivable of Lopez amounting to P 100,000 is to be recognized as uncollectible. c) Mendez is to be credited with a one-third interest in the partnership and is to invest cash aside from the P50,000 worth of merchandise. The amount of cash to be invested by Mendez and the total capital of the partnership are: A. P 32,950 and P 248,850 respectively B. P 82,950 and P 248,850 respectively C. P 55,300 and P 221,200 respectively D. P 32,950 and P 171,200 respectively
9.
Ruiz and Pena are combining their separate businesses to form a partnership. Cash and noncash assets are to be contributed for a total capital of P 300,000. The noncash assets to be contributed and the liabilities to be assumed are: Ruiz Pena Book Value Fair Value Book Value Fair Value Accounts receivable P20,000 P20,000 Inventories 30,000 40,000 P20,000 P25,000 Equipment 60,000 45,000 40,000 50,000 Accounts payable 15,000 15,000 10,000 10,000 The partner’s capital accounts should be equal after all the contribution of assets and the assumptions of liabilities. How much cash is to be contributed by Ruiz? A. P 150,000 C. P 210,000 B. P 60,000 D. P 85,000
10.
On July 1 of the current year, Jobson and Gomez form a partnership. Jobson is to invest certain business assets at values which are yet to be agreed upon. He is to transfer his business liabilities and is to contribute sufficient cash to bring his total capital to P 180,000, which is 60% of the total capital as had been agreed upon. Details regarding the book values of Jobson’s business assets and liabilities and their corresponding valuation follow: Book Value Agreed Valuations Accounts Receivable P 54,000 P 54,000 Allowance for doubtful accounts 3,600 6,000 Merchandise inventory 96,600 105,000 Store equipment 27,000 Accumulated depreciation-Store equipment 18,000 13,200 Office equipment 18,000 Accumulated depreciation-Office equipment 9,600 4,800 Accounts payable 48,000 48,000 Gomez agrees to invest cash of P 30,000 and merchandise valued at current market price. The value of the merchandise to be invested by Gomez and the amount of cash to be invested by Jobson are: A. P 120,000 and P 48,000 respectively B. P 210,000 and P 49,200 respectively C. P 105,000 and P 50,000 respectively D. P 90,000 and P 48,000 respectively
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