Partnership
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BASIC ACCOUNTING - PARTNERSHIP AND CORPORATION
Nature and Formation of Partnership
MULTIPLE CHOICE QUESTIONS. Encircle the best answer in the following questions. Show supporting computations in good form if necessary.
1.
2.
3.
Which of the following best describes the attributes of a partnership? A.
Limited life of the business and limited liability of partners
B.
Limited life of the business and unlimited liability of partners
C.
Unlimited life of the business and limited liability of partners
D.
Unlimited life of the business and unlimited liability of partners
When a partner withdraws cash or other assets, the drawing account is A.
Debited
C.
Debited and Credited
B.
Credited
D.
Not affected
All of the following affect a partner’s capital account except
A. Additional investment B. liability
Payment of
Cash Machinery and Equipment
Apple
Ayme
P 120,000
P 80,000
100,000
340,000
4. Which of the according to liability A. General partnership B.
5.
6.
C.
Partnership net income or
D.
Withdrawal of a partner
loss
following are kinds of partnerships of partners? C. D.
Industrial partnership
Both A and B
Limited partnership
Which of the following relate to the capital share of a partner in a partnership? A.
The percentage of equity that a partner has on the net assets
B.
Proportionate to a partner’s capital contribution
C.
May not be proportionate to capital contribution due to bonus
D.
All of those
On April 1, 2014, Apple and Ayme formed a partnership with each contributing the following assets:
Building
900,000
Furniture and Fixtures
40,000
The building is subject to a mortgage loan of P 300,000, which is to be assumed by the partnership. On April 1, 2014, the balance in Ayme’s capital account should be A.
7.
P 980,000
B.
P 1,020,000
C.
P 1,280,000
D.
P 1,320,000
Aster and Amie are forming a partnership by combining their businesses. Their books show the following:
It has been agreed to recognize uncollectible accounts of P 7,500 and P 5,400 to each party, respectively, and that the furniture and fixtures of Amie are under depreciated by P 9,000. If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of Aster and Amie would be A. P 489,000 and P 273,000 respectively B. P 481,500 and P 276,000 respectively
8. A business owned she decided to form a able to contribute cash new partnership. The appeared as follows position of her business: P 189,000 with allowance 6,000; merchandise equipment, P 150,000 P 15,000.
Aster Cash
Amie
P 72,000
P 30,000
Accounts Receivable
150,000
108,000
Merchandise Inventory
240,000
156,000
Furniture and Fixtures
330,000
102,000
Prepaid Expenses
63,000
21,000
Accounts Payable
366,000
144,000
Aster, Capital
489,000
Amie, Capital
273,000
C. P 481,500 and P 258,600 respectively D. P 855,000 and P 417,000 respectively
by Antonia was short of cash and partnership with Andrea, who was twice the interest of Antonia in the assets contributed by Antonia in the statement of financial cash, P 9,000; accounts receivable, for uncollectible accounts of P inventory, P 420,000; and store with accumulated depreciation of
Antonia and Andrea agreed that the allowance for uncollectible accounts was inadequate and should be P 12,000. they also agreed that the fair value for the inventory is P 460,000 and for the store equipment is P 140,000. The cash contributed by Andrea into the partnership was A.
P 747,000
B.
P 786,000
C.
P 1,572,000
D.
P 1,576,000
9.
Almeda and Asistio are combining their separate business to form a partnership. Cash and non-cash assets are to be contributed Almeda Asistio and the liabilities are to be BV FMV BV FMV assumed are as follows: Accounts Receivable Merchandise Inventory Equipment Accounts Payable
P 40,000
P 30,000
60,000
90,000
P 40,000
P 80,000
120,000
100,000
80,000
120,000
30,000
30,000
20,000
20,000
The partners’ capital accounts are to be equal after all the contribution of assets and the assumption of liabilities. The amount of cash to be contributed by Almeda is Amable Aguila A. P 100,000 C. P 210,000 Cash P 40,000 B. P 110,000 D. P 300,000 Merchandise Inventory P 90,000 Land 10. Using total assets
of
A.
P 340,000
B.
P 360,000
the the
130,000
Equipment
30,000
Furniture and Fixtures
200,000
C.
D.
P 630,000
information in no. 9, the partnership is
P 650,000
11. Using the information in no. 9, and assuming the excess capital credit over the fair value of the net assets transferred to the partnership is recognized as goodwiill, how much is the goodwill to be credited to Asistio? A.
P 120,000
B.
P 150,000
C.
P 180,000
12. Amable and Aguila entered into a partnership on February 1, 2014 by investing the following assets:
D.
P 300,000
The agreement between Amable and Aguila provides that profits and losses are to be divided 60% and 40% respectively, and that the partnership is to assume the P 100,000 mortgage on the land. If Aguila is to receive capital credit equal to the full amount of his net assets invested, how much is his capital balance upon partnership formation? A.
P 10,000
B.
P 150,000
C.
P 160,000
D.
P 400,000
13. Using the information in no. 12, and assuming that Aguila invests P 100,000 cash and the partners are to have equal interest in the partnership in the total capital of the partnership is A.
P 240,000
B.
P 250,000
C.
P 490,000
D.
P 590,000
14. Using the information in no. 12, and assuming that the capital of the partners is proportionate to their profit and loss ratio, the bonus upon partnership formation is A.
P 6,000 to Amable
C.
P 10,000 to Amable
B.
P 6,000 to Aguila
D.
P 10,000 to Aguila
15. Using the information in no. 14, the capital balances of Amable and Aguila, respectively, upon partnership formation are A.
P 245,000, P 245,000
C.
P 156,000, P 234,000
B.
P 234,000, P 156,000
D.
P 294,000, P 196,000
16. The Agulto and Acejas Partnership was formed on October 1, 2014. At that date, the following assets were contributed:
The building is subject to a mortgage loan of P 320,000 which is to be assumed by the partnership. The partnership agreement provides that Agulto and Acejas share on profit or loss of 25% and 75%, respectively. Agulto’s capitala ccount at October 1, 2014 should be A.
P 400,000
B.
P 720,000
C.
P 1,200,000
D.
P 1,520,000
17. Using the information in no. 16 and assuming the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Acejas’ capital account on October 1, 2014 should be A.
P 480,000
B.
P 720,000
C.
P 960,000
Agulto 18. Using the information recognized in the transaction A.
Zero
B.
P 200,000
C.
P 240,000
Cash
P 600,000
D.
Acejas P 280,000
Merchandise Inventory
440,000
Building
800,000
Furniture and Fixtures
120,000
P 1,200,000
in no. 17, the bonus to be is D.
P 480,000
19. Using the information in no. 17, the effect of the bonus on the capital of Agulto and Acejas, respectively, is A.
Increase, Increase
C.
Decrease, Increase
B.
Increase, Decrease
D.
Decrease, Decrease
20. Using the information in no. 16, and assuming that capital shall be proportionate to the partners’ profit or loss ratio, the required capital of Acejas is A.
P 520,000
B.
P 720,000
C.
P 1,200,000
D.
P 1,440,000
21. The Articles of Co-Partnership should contain clear provisions on all of the following except A.
Taxes paid by the partnership
C.
Withdrawals allowed to partners
B.
Causes of the partnership dissolution
D.
Profit-sharing ratio
22. The non-cash contributions of the partners to form a partnership are recorded by the partnership at their A.
Agreed value
B.
Book value
C.
Dissolution value
D.
Original value
23. When a partnership cannot pay its debt with business assets, the partners A.
Are not personally liable for the debts
C.
Must convert the partnership to a joit venture
B.
Have limited personal liability
D.
Must use their personal assets to meet the debts
24. A partner who takes active part in the business but whose connection with the partnership is concealed to the public is konwn as a (an) A.
Silent partner
C.
Nominal partner
B.
Secret partner
D.
Ostensible partner
25. A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a (an) A.
Open partnership
C.
De facto partnership
B.
De jure partnership
D.
Secret partnership
26. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the initial investment in the partnership would be recorded for financial accounting purposes at the A.
Proprietors’ book value or the fair value of the property at the date of the investment, whichever is higher
B.
Proprietors’ book value or the fair value of the property at the date of investment, whichever is lower
C.
Proprietors’ book values of the property at the date of investment
D.
Fair value of the property at the date of the investment
27. Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current value in excess of its carrying amount. Almar contributed real estate with a carrying in excess of its current market value. At what amount should the partnership record inventory and real estate? A.
Carrying amount, Market value
B.
Market value, Carriyng amount
C.
Carrying amount, Carrying amount
D.
Market value, Market value
28. A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be recorded into the partnership at the proprietor’s A.
Carrying amount or the fair market value of the property at the date of the investment, whichever is higher
B.
Fair value of the property at the date of the investment
C.
Carrying amount or the fair market value of the property at the date of the investment, whichever is lower
D.
Carrying amount of the property at the date of the investment
29. Agaton joined a partnership by contributing the following: cash, P 120,000; accounts receivable, P 4,000; land, P 240,000 at cost, P 400,000 at fair value; and accounts payable, P 16,000. What will be the initial amount recorded in Agaton’s capital account? Alonzo Amurao A. P 408,000 C. P 508,000 Cash P 300,000 P 140,000 B. P 424,000 D. P 524,000 Merchandise Inventory 220,000 Building 4,000,000 30. On October 1, 2014, Alba and Ang formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Alba contributed cash of P 100,000 and a parcel of land that cost him P 200,000. Ang contributed P 300,000 cash. The land has a quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on Octiber 1, 2014? A.
P 360,000
B.
P 460,000
C.
P 760,000
D.
P 960,000
31. On June 30, 2014, a partnership was formed by Ariston and Astoria. Ariston contributed cash,. Astoria, previously a sole proprietor, contributed non-cash assets, including a realty subject to mortgage, which was assumed by the partnership. Astoria’s capital account at June 30, 2014 should be recorded at A.
The fair value of the property less the mortgage payable at June 30, 2014
B.
Astoria’s carrying amount of the property at June 30, 2014
C.
Astoria’s carrying amount of the property less the mortgage payable at June 30, 2014
D.
The fair value of the property at June 30, 2014
32. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta contributed land costing P 600,000. the current market value of the assets are as follows: equipment, P 450,000; land, P 750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital accounts of the Abada and Acosta, respectively, will be credited as A.
P 900,000, P 450,000
C.
P 750,000, P 600,000
B.
P 300,000, P 750,000
D.
P 300,000, P 600,000
33. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contibuted:
Furniture and Fixtures
900,000
The building is subject to mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital account at April 1, 2014 should be A.
P 900,000
B.
P 1,200,000
C.
P 2,760,000
D.
P 4,360,000
34. Using the information in no. 33, and assuming that the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Alonzo’s capital account should be increased by A.
P 780,000
B.
P 900,000
C.
P 1,200,000
D.
P 1,980,000
D.
P 5,560,000
35. Using the information in no. 33, the total partnership capital on April 1, 2014 is A.
P 1,200,000
B.
P 3,960,000
C.
P 4,740,000
36. Using the information in no. 34, bonus was given by A.
Amurao to Alonzo
C.
The partnership
B.
Alonzo to Amurao
D.
Nobody
37. Using the information in no. 33, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the required capital of Alonzo is A.
P 900,000
B.
P 990,000
C.
P 1,200,000
D.
P 3,960,000
38. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli contributed cash of P 200,000. Amy contributed property with a carrying amount of P 144,000, original cost of P 160,000, and fair value of P 320,000. the partnership accepted responsibility for the P 140,000 mortgage attached to the property. Annie contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000. The partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014? A.
Aleli
C.
Annie
B.
Amy
D.
All capital accounts are equal
39. Using the information in no. 38, the property contributed by Amy is to be recorded by the partnership on April 1, 2014 at A.
P 144,000
B.
P 160,000
C.
P 180,000
40. Using the information in no. 38 and assuming capital are in the profit and loss ratio, then there is A.
P 20,000 bonus to Amy
D.
P 320,000
B.
P 20,000 bonus from Aleli
C.
No bonus to Aleli
Which is correct? A.
A only
B.
B only
C.
A and B only
D.
A, B and C only
TRUE OR FALSE. Write T if the statement is correct and F if the statement is false before each number.
1.
A written partnership contract is required to be prepared whenever a partnership is formed.
2.
All partnerships are subject to income tax.
3.
A partner’s contribution in the form of industry or service is recorded by debiting the account ‘Industry.’
4.
In the partnership books, there as many capital and drawing accounts as there are partners.
5.
A partner’s contribution in the form of non-cash assets should be recorded at its fair market value in the absence of an agreed value.
6.
A partnership is much easier and less expensive to organize than a corporation.
7.
A newly organized partnership should always open a new set of books.
8.
All partnerships have at least one general partner.
9.
Each partner generally has the authority to enter into contracts which is binding upon the partnership.
10. The property invested in a partnership by a partner becomes the property of the partnership.
11. Contra acconuts, like Allowance for Uncollectible Accounts and Accumulated Depreciation, on non-cash assets invested by partners are always carried on the partnership books.
12. The unlimited liability of partners for partnership debts makes the partnership more reliable from the point of view of creditors.
13. Goodwill may be recognized upon partnership formation when the capital credited to a partner exceeds the fair value of the net assets transferred from previous sole proprietorship business.
14. Before a partnership can operate legally, it has to first comply with registration requirements of the SEC, DTI, BIR, SSS and Mayor’s Office.
15. There is a required number of limited partners in a general co-partnership; in the same manner that, there is a required number of general partners in a limited partnership.
16. A partnership is always owned by at least two (2) individuals.
17. For financial reporting purposes, the personal assets and debts of a partner should be combined with the assets and debts of the business.
18. Partners are personally liable for the liabilities of the partnership if the partnership is unable to pay.
19. In a partnership, an owner’s equity acconut exists for each partner.
20. Net asset adjustments are made on a sole proprietor’s books, when theses are to be used as partnership books, for the purpose of arriving at agreed values.
PROBLEM SOLVING QUESTIONS.
Problem 1.
Acosta Company Statement of Financial Position December 1, 2014
Assets
Cash
P 600,000
Notes Receivable
375,000
Accounts Receivable
2,250,000
Less: Allowance for Uncollectible Accounts
150,000
Merchandise Inventory
2,100,000 600,000
Furniture and Equipment
1,800,000
Less: Accumulated Depreciation
450,000
TOTAL ASSETS
1,350,000 P 5,025,000
Liabilities and Capital
Notes Payable
P 750,000
Accounts Payable
1,575,000
Acosta, Capital
2,700,000
TOTAL LIABILITIES AND CAPITAL
P 5,025,000
Aguas offers to invest cash to give him an equity credit equal to one-half of the equity of Acosta after adjustments for the items below. Acosta accepted the offer.
a.
The merchandise is to be valued at P 650,000.
b.
The Allowance for uncollectible accounts is P 225,000.
c.
Interest is earned on notes receivable should be reflected. The note is dated September 30, 2014 and bears interest at 6%.
d.
Interest accrued on notees payable for the period September 1 to December 1, 2014 should be recognized. The interest rate on the note is 10%.
e.
The furniture and equipment are one-third depreciated.
f.
Office supplies on hand, which have been charged to expense, amounted to P 15,000. these supplies will be used by the new partnership.
Instructions: 1.
Prepare journal entries on the books of Acosta to give effect to the partnership formation.
2.
Prepare the statement of financial position for the new partnership.
Problem 2.
On October 1, 2014, April and Arias decided to pool their assets and form a partnership. The firm is to take over business assets and assume business liabilities; equities are to be based on net assets transferred after the following adjustments:
a.
Arias’ inventory is to be valued at P 350,000.
b.
An allowance for uncollectible accounts of P 9,000 and P 7,500 respectively should be set up.
c.
Accrued expenses of P 21,000 are to be recognized on April’s books.
d.
Arias is to conribute sufficient cash to give him a 60% interest in the new firm.
Statement of April and before presented
April Cash
Arias
P 187,500
P 112,500
Accounts Receivable
450,000
375,000
Merchandise Inventory
400,000
300,000
Equipment
250,000
300,000
(112,500)
(37,500)
TOTAL ASSETS
P 1,175,000
P 1,050,000
Accounts Payable
P 345,000
P 250,000
830,000
800,000
P 1,175,000
P 1,050,000
Accumulated Depreciation
Capital TOTAL LIABILITIES AND CAPITAL
financial position for Arias on October 1 adjustments are below:
Instructions: 1.
Give the entries to adjust and close the books of April.
2.
Give the entries required on the books of Arias upon the formation of the partnership.
3.
Prepare a statement of financial position for the new partnership of April and Arias.
Problem 3.
Partners Abada and Albano agreed to combine their businesses into a partnership. The statement of financial position accounts of Abada and Alabano are shown below: ABADA Book Value Cash Accounts Receivable
ALABANO
Market Value
Book Value
Market Value
P 50,000
P 50,000
P 70,000
P 70,000
460,000
460,000
490,000
490,000
Allowance Uncollectible Accounts
30,000
40,000
40,000
50,000
Merchandise Inventory
900,000
950,000
720,000
700,000
Equipment
180,000
120,000
90,000
70,000
36,000
--
9,000
--
120,000
90,000
--
--
24,000
--
--
--
540,000
540,000
360,000
360,000
Accumulated Depreciation Furniture and Fixtures Accumulated Depreciation Accounts Payable
Instructions: Give the journal entries to record the partnership formation under each of the following assumptions a.
A new set of books are to be opened for the partnership
b.
The books of Abada are to be used by the partnership
Problem 4.
On January 1, 2014, Abante, Arevalo and Almonte decided to form a partnership. Abante, a sole proprietor, will transfer to the partnership his net assets, excluding cash. Arevalo will contribute cash in an amount equal to one and one-half times the investment of Abante. Almonte will contribute a piece of land with an agreed value of P 1,800,000 subject to a mortgage of P 300,000 to be assumed by the partnership. The statement of financial position of Abante is as shown below. Abante Company Statement of Financial Position January 1, 2014
ASSETS
Cash
P 360,000
Accounts Receivable
P 840,000
Less: Allowance for Uncollebectible Accounts
90,000
Merchandise Inventory
750,000 1,200,000
Furniture and Equipment
1,050,000
Less: Accumulated Depreciation TOTAL ASSETS
210,000
840,000 P 3,150,000
LIABILITIES AND CAPITAL
Accounts Payable
P 450,000
Abante, Capital
2,700,000
TOTAL LIABILITIES AND CAPITAL
P 3,150,000
The Articles of Co-Partnership executed for the purpose calls for adjustments to the assets, as follows:
a. The Allowance for Uncollectible Accounts should be increased by P 150,000. b. The inventories should be valued at P 1,000,000. c. The furniture and equipment are underdepreciated by P 240,000. d. The new partnership is t credit Abante with a capital of P 2,000,000. The excess capital credit over the fair value of the net assets transeferred is to be recognized as goodwill.
Instructions: Prepare the entries to record the partnership formation assuming 1.
The books of Abante are to be used by the partnership.
2.
New set of books are to be opened for the partnership.
Problem 5.
The partnership of Abueva and Alano was formed on June 1, 2014, when they agreed to invest equal amount of capital into the firm. The investment by Abueva consists of P 518,000 cash and an inventory of merchandise valued at P 1,152,000. Alano agreed
to contribute the assets of his business along with the transfer to the partnership of his business liabilities. Alano was credited for goodwill for the excess of the capital credit over the agreed value of his net assets. The assets and liabilities are shown: Balances Alano’s Books Accounts Receivable
Agreed Value
P 1,792,000
P 1,792,000
76,800
150,000
Inventory
192,000
253,000
Office Equipment, net
256,000
206,000
Accounts Payable
576,000
576,000
Allowance for Uncollectible Acconuts
Instructions: 1.
Give the entries to record the investments of Abueva and Alano in the new partnership.
2.
Prepare the beginning statement of financial position of the partnership, reflecting the above transfers to the firm.
Problem 6.
The partnership of Agana and Ayesa was formed on September 1, 2014. At that date, the following assets were invested: Agana Cash
Ayesa
P 200,000
P 80,000
Inventories
---
440,000
Land
---
200,000
Building
---
600,000
920,000
---
Furniture and Equipment
The building is subject to a mortgage loan of P 240,000, which is to be assumed by the partnership. The partnership contract provides that Agana and Ayesa share earnings 40% and 60% respectively.
Instructions: Compute the amount of Ayesa’s capital account on September 1, 2014 assuming that the partnership agreement provides that:
1.
Each partner is credited for the full amount of net assets invested.
2.
The partners initially should have an equal interest in the partnership capital.
3.
The initial partnership capital is shared proportionate to the partners’ profit and loss ratio.
Problem 7.
Sole proprietors Alvis and Ancheta established a partnership on December 31, 2014 sharing profit and losses in the ratio 60% and 40%. They agreed that each would make the following contributions: Alvis
Ancheta
Cash
P 50,000
Land
375,000
Building
P 750,000
1,200,000
Furniture and Fixture
675,000
Accounts payable of Alvis totalling P 250,000 are to be assumed by the partnership.
Instructions: Prepare the entries on December 31, 2014 to record the investments in the partnership by Alvis and Ancheta under each of the following independent assumptions:
1.
Each partner is credited for the full amount of the net assets invested.
2.
Each partner initially should have an equal interest in the partnership capital.
3.
Each partner receive capital proportionate to his profit and loss ratio.
Problem 8.
On May 1, 2014, the business accounts of Ablan and Amias appear below: Ablan Cash
P 55,000
P 111,770
1,172,680
2,839,450
600,175
1,300,510
3,015,000
---
---
2,141,335
251,725
173,945
10,000
18,000
894,700
1,218,250
Notes Payable
1,000,000
1,725,000
Ablan, Capital
3,209,880
Accounts Receivable Merchandise Inventory Land Building Furniture and Fixture Other Assets Acconuts Payable Ablan and Amias agreed to contributing their respective to the following
Amias
Amias, Capital a. Accounts Ablan’s books and P 75,000 in Amias’ books are uncollectible
3,614,760
form a partnership assets and liabilities subject adjustments: receivable of P 50,000 in
b.
Inventories of P 27,000 and P 35,000 are worthless in Ablan’s and Amias’ respective books.
c.
Other assets of P 10,000 and P 18,000 in Ablan’s and Amias’ books are to be written off.
Instructions:
1.
Prepare journal entries to adjust the books of both partners.
2.
Prepare journal entries to close the books of both partners.
3.
Prepare journal entries on the new partnership books.
4.
Prepare a statement of financial position for the new partnership.
Problem 9.
The post-closing trial balance of Joel Palencia and Tommy Peñaflor Partnership as of December 31, 2014 are presented below: Post-closing Trial Balance December 31, 2014 J. Palencia Debit Cash Accounts Receivable
Credit
Interest Receivable
Debit
P 125,000
P 186,000
80,000
120,000
Allowance for Doubtful Accounts Notes Receivable
T. Peñaflor Credit
P10,000
P 12,000
50,000 1,000
Merchandise
75,000
150,000
Equipment
40,000
60,000
Accumulated Depreciation
15,000
40,000
Accounts Payable
50,000
75,000
Notes Payable
20,000
Interest Payable
500
Palencia, J.
275,500
Peñaflor, T.
389,000 P 371,000
P 371,000
P 516,000
P 516,000
Instructions:
1.
2.
J. Palencia, and T. Peñaflor agreed to combine their business to form a partnership. All of the assets and liabilities are to be taken over by the partnership. a.
Give the entries in the books of the respective single proprietorship to finally close their book.
b.
Give the journal entries to record the investments of each of the partners in the books of the partnership.
J. Palencia and T. Peñaflor have agreed to combine their business to form a partnership. All of the assets and liabilities are to be taken over by the partnership, after the following adjustments are taken in the books of the respective single proprietorship.
Allowance for Doubtful Accounts should be increased to 20% of the Accounts Receivable.
Merchandise should be reduced by 5%.
Equipment are 80% depreciated.
a.
Give the necessary journal entries in the books of the single proprietorship to adjust and close its books.
b.
Journal entries in the books of the partnership recording the investments of J. Palencia and T. Peñaflor.
MULTIPLE CHOICE - THEORY AND PROBLEM. Encircle the letter of the best answer. Show supporting computations in good form if necessary.
1.
2.
The Articles of Co-Partnership should contain clear provisions on all of the following except a.
Taxes paid by the partnership
c.
Withdrawals allowed to partnership
b.
Causes of partnership dissolution
d.
Profit-sharing ratio
The non-cash contributions of the partners to form a partnership are recorded by the partnership at their a.
3.
4.
5.
6.
Agreed value
b.
Book value
c.
Dissolution value
d.
Original cost
When a partnership cannot pay its debts with business assets, the partners a.
Are not personally liable for the debts
c.
Must convert the partnership to a joint venture
b.
Have limited personally liabity
d.
Must use their personal assets to meet to the debts
A partner who takes active part in the business but whose connection with the partnership is concealed to the public is known as a (an) a.
Silent partner
c.
Nominal partner
b.
Secret partner
d.
Ostensible partner
A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a (an) a.
Open partnership
c.
De facto partnership
b.
De jure partnership
d.
Secret partnership
Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the initial investment in the partnership would be recorded for financial accounting purposes at the a.
Proprietors’ book values or the fair value of the property at the date of the investment, whichever is higher
b.
Proprietors’ book values or the fair value of the property at the date of the investment, whichever is lower
c.
Proprietors’ book values of the property at the date of the investment
d.
7.
8.
9.
Fair value of the property at the date of the investment
Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current market value in excess of its carrying amount. Almar contributed real estate with a carrying amount in excess of its current market value. At what amount should the partnership record each of the following assets? Inventory
Real Estate
a.
Carrying amount
Market value
b.
Market value
Carrying amount
c.
Carrying amount
Carrying amount
d.
Market value
Market value
A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be recorded into the partnership at the proprietor’s a.
Carrying amount or the fair value of the property at the date of the investment, whichever os higher
b.
Fair value of the property at the date of the investment
c.
Carrying amount or the fair value of the property at the date of the investment, whichever is lower
d.
Carrying amount of the property at the date of the investment
Agaton joined a partnership by contributing the following: cash. P 120,000; accounts receivable, P 4,000; land , P240,000 cost, P 400,000 fair value; and accounts payable, P 16,000.what will be the initial amount recorded in Agaton’s capital account? a.
P 408,000
b.
P 424,000
c.
P 508,000
d.
P 524,000
10. On October 1, 2014, Alba and Ang formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Alba contributed cash of P 100,000 and a parcel of land that cost him P 360,000. Ang contributed P 300,000 cash. The land has a quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on October 1, 2014? a.
P 360,000
b.
P 460,000
c.
P 760,000
d.
P 960,000
11. On June 30, 2014, a partnership was formed by Ariston and Astoria.Ariston contributed cash. Astoria, previously a sole proprietor, contributed non-cash assets, including a realty subject to a mortgage, which was assumed by the partnership. Astoria’s capital account at June 30, 2014 should be recorded at. a.
The fair value of the property less the mortgage payable at June 30, 2014
b.
Astoria’s carrying amount of the property at June 30, 2014
c.
Astoria’s carrying amount of the property at June 30, 2014 less the mortgage payable at June 30, 2014
d.
The fair value of the property at June 30, 2014
12. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta contributed land costing P 600,000. The current market value of the assets are as follows: equipment, P 450,000; land, P 750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital acconuts of the partners will be credited as follows:
a.
Abada
Acosta
P 900,000
P 450,000
b.
P 300,000
P 750,000
c.
P 750,000
P 600,000
d.
P 300,000
P 600,000
13. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contributed: Alonzo Cash
Amurao
P 300,000
P 140,000
Merchandise Inventory
220,000
Building
4,000,000
Furniture and Equipment
900,000
The building is subject to a mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital account at April 1, 2014 should be a.
P 900,000
b.
P 1,200,000
c.
P 2,760,000
d.
P 4,360,000
14. Using the information in no. 13, and assuming that the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Alonzo’s capital acconut should be increased by a.
P 780,000
b.
P 900,000
c.
P 1,200,000
d.
P 1,980,000
d.
P 5,560,000
15. Using the information in no. 13, the total partnership capital on April 1, 2014 is a.
P 1,200,000
b.
P 3,960,000
c.
P 4,740,000
16. Using the information in no. 14, bonus was given by a.
Amurao to Alonzo
c.
The partnership
b.
Alonzo to Amurao
d.
Nobody
17. Using the information in no. 13, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the required capital of Alonzo is a.
P 900,000
b.
P 990,000
c.
P 1,200,000
d.
P 3,600,000
18. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli contributed cash of P 200,000. Amy contributed property with a carrying amount P 144,000, original cost of P 160,000, and fair value of P 320,000. The partnership accepted responsibility for the P 140,000 mortgage attached to the property. Annie contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000. The partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014? a.
Aleli
c.
Annie
b.
Amy
d.
All capital accounts are equal
19. Using the information in no. 18, the property contributed by Amy is to be recorded by the partnership on April 1, 2014 at a.
P 144,000
b.
P 160,000
c.
P 180,000
d.
P 320,000
20. Using the information in no. 18, and assuming capital are in the profit and loss ratio, then there is A.
P 20,000 bonus to Amy
B.
P 20,000 bonus to Annie
C.
No bonus to Aleli
Which
FF
is(are)
a.
A only
b.
B only
c.
A and B only
d.
GG
correct?
A, B and C
21. On December 1, 2014, EE and FF formed a partnership, agreeing to share for profit and losses in the ratio of 2:3, respectively. EE invested a parcel of land that cost him P 25,000. FF invested P 30,000 cash. The land was sold for P 50,000 on the same date, three hours after formation of the partnership. How much should be the capital balance of EE right after the formation? a.
P 25,000
b.
P 30,000
c.
P 60,000
d.
II 22. On March 1, 2014, partnership with each assets:
Cash Machinery and Equipment
Furniture and Fixtures
JJ
P 300,000
P 700,000
250,000
750,000
---
2,250,000
100,000
---
Building
P 50,000
II and JJ formed a contributing the following
The building is subject to mortgage loan of P 800,000, which is to be assumed by the partnership agreement provides that II and JJ share profits and losses 30% and 70% respectively. On March 1, 2014 the balance in JJ’s capital account should be: a.
P 3,700,000
b.
P 3,140,000
c.
P 3,050,000
d.
P 2,900,000
23. The same information in no.22, except that the mortgage loan is not assumed by the partnership. On March 1, 2014 the balance in JJ’s capital account should be a.
P 3,700,000
b.
P 3,140,000
c.
P 3,050,000
24. As of July 1, 2014, FF and GG decided to form a partnership. Their balance sheets on this date are:
d.
P 2,900,000
Cash
P 15,000
P 37,500
540,000
225,000
---
202,500
150,000
270,000
P 705,000
P 735,000
P 135,000
P 240,000
570,000
---
---
495,000
P 705,000
P 735,000
Accounts Receivable Merchandise Inventory Machinery and Equipment TOTAL Accounts Payable FF, Capital GG, Capital TOTAL
The partners agreed that the machinery and equipment of FF is underdepreciated by P 15,000 and that of GG by P 45,000. Allowance for Uncolletible Accounts is to be set up amounting to P 120,000 for FF and P 45,000 for GG. The partnership agreement provides for ap rofit and loss ratio and capital interest of 60% to FF and 40% to GG. How much cash must FF invest to bring the partners’ capital balance proportionate to their profit and loss ratio? a.
P 142,500
b.
P 52,500
c.
P 172,500
d.
P 102,500
25. On August 1, AA and BB pooled their assets to form a partnership, with the fir totake over their business assets and assume the liabilities. Partners’ capital are to be based on net assets transferred after the following adjustments. (Profit and loss are allocated equally)
BB’s inventory is to be increased by P 4,000; an allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in the books of AA and BB, respectively; and accounts payable of P 4,000 is to be recognized in AA’s books. The individual trial balances on August 1, before adjustments, follow:
AA Assets
BB
P 75,000
P 113,000
5,000
34,500
Liabilities
What is the capital of AA and BB after the above adjustments? a. b. 81,000
AA, P 68,750; BB, P 77,250
c.
AA, P 65,000; BB, P 76,000
AA, P 75,000; BB, P
26. CC admits DD as a partner in on November 30, 2014, just before balances:
d. Cash
AA, P 65,000; BB, P 81,000
P 6,800
Accounts Receivable
14,200
Merchandise Inventory
20,000
business. Accounts in the ledger for CC the admission of DD, show the following
Accounts Payable
8,000
CC, Capital
33,000
Jones Cash
P 80,000
Building - cost to Jones It is agreed that for CC’s interest, the following made: A. An allowance 3% of accounts receivable B. The is to be valued at P 23,000. C.
Smith P 40,000
300,000
- fair value
400,000
Inventories - cost to Smith
200,000
- fair value
280,000
Mortgage Payable
120,000
Accounts Payable
60,000
purposes of establishing adjustments shall be for doubtful accounts of is to be established. merchandise
inventory
Prepaid salary expenses of P 600 and accrued rent expense of P 800 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) P 35,347; (2) P 11,971
c.
(1) P 35,374; (2) P 17,687
b.
(1) P 36,374; (2) P 18,487
d.
(1) P 28,174; (2) P 14,087
27. Jones and Smith formed a partnenrship with each partner contributing the following items:
Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership. What is the balance in each of the partner’s capital account for financial accounting purposes? Jones
Smith
a.
P 350,000
P 270,000
b.
P 260,000
P 180,000
c.
P 360,000
P 260,000
d.
P 500,000
P 300,000
28. The business assets of LL and MM appear below:
LL Cash
MM
P 11,000
P 22,354
Accounts Receivable
234,536
567,890
Inventories
120,035
260,102
Land
603,000
---
---
428,267
50,345
34,789
2,000
3,600
P 1,020,916
P 1,317,002
P 178,940
P 243,650
Notes Payable
200,000
345,000
The capital account of adjustment will be
LL, Capital
641,976
---
---
728,352
a. LL, P 615,942; MM, P 717,894
TOTAL
P 1,020,916
P 1,317,002
LL and MM agreed to contributing their respective subject to the following A. Accounts in LL’s books and P uncollectible. B. Inventories of worthless in LL’s and C. Other assets of LL’s and MM’s be written off.
Building Furniture and Fixtures Other Assets TOTAL Accounts Payable
MM, Capital
b.
LL, P 640,876; MM, P 712,345
c.
LL, P 640,876; MM, P 683,050
29. The same information in no assets does the partnership have
PP
QQ
form a partnership by assets and equities adjustments: receivable of P 200,000 35,000 in MM’s are P 3,500 and P 6,700 are MM’s respective books. P 2,000 and P 3,600 in respective books are to
the partners after the d. LL, 614,476; MM, 683,052
P P
28, how much total after formation?
a.
P 2,337,918
c.
P 2,265,118
b.
P 2,237,918
d.
P 2,365,218
30. On March 1, 2014, PP and QQ decide to combine their businesses and form a partnership. Their balance sheets on March 1, before adjustments, showed the following:
Cash
P 9,000
P 3,750
Accounts Receivable
18,500
13,500
Invnetories
30,000
19,500
Furniture and Fixtures (net)
30,000
9,000
Office Equipment
11,500
2,750
Prepaid Expenses
6,375
3,000
P 105,375
P 51,500
P 45,750
P 18,000
59,625
33,500
P 105,375
P 51,500
TOTAL Accounts Payable Capital TOTAL
They agreed to have the following items recorded in their books: 1.
Provide 2% allowance for doubtful accounts.
2.
PP’s furniture and fixtures should be P 31,000, while QQ’s office equipment is underdepreciated by P 250.
3.
Rent expense incurred previously by PP was not yet recorded amounting to P 1,000, while salary expense incurred by QQ was not also recorded amounting to P 800.
4.
The fair market value of inventory amounting to: PP - P 29,500; QQ - P 21,000.
Compute the net (debit) credit adjustment for PP and QQ a.
PP, P 2,870; QQ, P 2,820
c.
PP, (P870); QQ, P 180
b.
PP, (P 2,870); QQ, (P2,820)
d.
PP, P 870; QQ, (P 180)
31. The same information in no. 30, compute the total liabilities after the formation: a.
P 61,950
b.
P 63,750
c.
P 65,550
d.
P 63,950
d.
P 152,985
32. The same information in no.30, comute the total assets after the formation: a.
P 157,985
b.
P 156,875
c.
P 160,765
33. On April 30, 2014, XX, YY and ZZ formed a partnership by combining their separate business proprietorships. XX contributed of P 75,000. YY contributed property with a P 54,000 carrying amount, a P 60,000 original cost, and P 120,000 fair value. The partnership accepted responsibility for the P 52,500 mortgage attached to the property. ZZ contributed equipment with a P 45,000 carrying amount, a P 112,500 original cost , and P 82,500 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, 2014 capital balance? a.
XX
c.
ZZ
b.
YY
d.
All capital accounts balances are equal
Nature and Formation of Partnership
MULTIPLE CHOICE QUESTIONS. Encircle the best answer in the following questions. Show supporting computations in good form if necessary.
1.
2.
3.
Which of the following best describes the attributes of a partnership? A.
Limited life of the business and limited liability of partners
B.
Limited life of the business and unlimited liability of partners
C.
Unlimited life of the business and limited liability of partners
D.
Unlimited life of the business and unlimited liability of partners
When a partner withdraws cash or other assets, the drawing account is A.
Debited
C.
Debited and Credited
B.
Credited
D.
Not affected
All of the following affect a partner’s capital account except
A. Additional investment B. liability
Payment of
Cash Machinery and Equipment
Apple
Ayme
P 120,000
P 80,000
100,000
340,000
4. Which of the according to liability A. General partnership B.
5.
6.
C.
Partnership net income or
D.
Withdrawal of a partner
loss
following are kinds of partnerships of partners? C. D.
Industrial partnership
Both A and B
Limited partnership
Which of the following relate to the capital share of a partner in a partnership? A.
The percentage of equity that a partner has on the net assets
B.
Proportionate to a partner’s capital contribution
C.
May not be proportionate to capital contribution due to bonus
D.
All of those
On April 1, 2014, Apple and Ayme formed a partnership with each contributing the following assets:
Building
900,000
Furniture and Fixtures
40,000
The building is subject to a mortgage loan of P 300,000, which is to be assumed by the partnership. On April 1, 2014, the balance in Ayme’s capital account should be A.
7.
P 980,000
B.
P 1,020,000
C.
P 1,280,000
D.
P 1,320,000
Aster and Amie are forming a partnership by combining their businesses. Their books show the following:
It has been agreed to recognize uncollectible accounts of P 7,500 and P 5,400 to each party, respectively, and that the furniture and fixtures of Amie are under depreciated by P 9,000. If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of Aster and Amie would be A. P 489,000 and P 273,000 respectively B. P 481,500 and P 276,000 respectively
8. A business owned she decided to form a able to contribute cash new partnership. The appeared as follows position of her business: P 189,000 with allowance 6,000; merchandise equipment, P 150,000 P 15,000.
Aster Cash
Amie
P 72,000
P 30,000
Accounts Receivable
150,000
108,000
Merchandise Inventory
240,000
156,000
Furniture and Fixtures
330,000
102,000
Prepaid Expenses
63,000
21,000
Accounts Payable
366,000
144,000
Aster, Capital
489,000
Amie, Capital
273,000
C. P 481,500 and P 258,600 respectively D. P 855,000 and P 417,000 respectively
by Antonia was short of cash and partnership with Andrea, who was twice the interest of Antonia in the assets contributed by Antonia in the statement of financial cash, P 9,000; accounts receivable, for uncollectible accounts of P inventory, P 420,000; and store with accumulated depreciation of
Antonia and Andrea agreed that the allowance for uncollectible accounts was inadequate and should be P 12,000. they also agreed that the fair value for the inventory is P 460,000 and for the store equipment is P 140,000. The cash contributed by Andrea into the partnership was A.
P 747,000
B.
P 786,000
C.
P 1,572,000
D.
P 1,576,000
9.
Almeda and Asistio are combining their separate business to form a partnership. Cash and non-cash assets are to be contributed Almeda Asistio and the liabilities are to be BV FMV BV FMV assumed are as follows: Accounts Receivable Merchandise Inventory Equipment Accounts Payable
P 40,000
P 30,000
60,000
90,000
P 40,000
P 80,000
120,000
100,000
80,000
120,000
30,000
30,000
20,000
20,000
The partners’ capital accounts are to be equal after all the contribution of assets and the assumption of liabilities. The amount of cash to be contributed by Almeda is Amable Aguila A. P 100,000 C. P 210,000 Cash P 40,000 B. P 110,000 D. P 300,000 Merchandise Inventory P 90,000 Land 10. Using total assets
of
A.
P 340,000
B.
P 360,000
the the
130,000
Equipment
30,000
Furniture and Fixtures
200,000
C.
D.
P 630,000
information in no. 9, the partnership is
P 650,000
11. Using the information in no. 9, and assuming the excess capital credit over the fair value of the net assets transferred to the partnership is recognized as goodwiill, how much is the goodwill to be credited to Asistio? A.
P 120,000
B.
P 150,000
C.
P 180,000
12. Amable and Aguila entered into a partnership on February 1, 2014 by investing the following assets:
D.
P 300,000
The agreement between Amable and Aguila provides that profits and losses are to be divided 60% and 40% respectively, and that the partnership is to assume the P 100,000 mortgage on the land. If Aguila is to receive capital credit equal to the full amount of his net assets invested, how much is his capital balance upon partnership formation? A.
P 10,000
B.
P 150,000
C.
P 160,000
D.
P 400,000
13. Using the information in no. 12, and assuming that Aguila invests P 100,000 cash and the partners are to have equal interest in the partnership in the total capital of the partnership is A.
P 240,000
B.
P 250,000
C.
P 490,000
D.
P 590,000
14. Using the information in no. 12, and assuming that the capital of the partners is proportionate to their profit and loss ratio, the bonus upon partnership formation is A.
P 6,000 to Amable
C.
P 10,000 to Amable
B.
P 6,000 to Aguila
D.
P 10,000 to Aguila
15. Using the information in no. 14, the capital balances of Amable and Aguila, respectively, upon partnership formation are A.
P 245,000, P 245,000
C.
P 156,000, P 234,000
B.
P 234,000, P 156,000
D.
P 294,000, P 196,000
16. The Agulto and Acejas Partnership was formed on October 1, 2014. At that date, the following assets were contributed:
The building is subject to a mortgage loan of P 320,000 which is to be assumed by the partnership. The partnership agreement provides that Agulto and Acejas share on profit or loss of 25% and 75%, respectively. Agulto’s capitala ccount at October 1, 2014 should be A.
P 400,000
B.
P 720,000
C.
P 1,200,000
D.
P 1,520,000
17. Using the information in no. 16 and assuming the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Acejas’ capital account on October 1, 2014 should be A.
P 480,000
B.
P 720,000
C.
P 960,000
Agulto 18. Using the information recognized in the transaction A.
Zero
B.
P 200,000
C.
P 240,000
Cash
P 600,000
D.
Acejas P 280,000
Merchandise Inventory
440,000
Building
800,000
Furniture and Fixtures
120,000
P 1,200,000
in no. 17, the bonus to be is D.
P 480,000
19. Using the information in no. 17, the effect of the bonus on the capital of Agulto and Acejas, respectively, is A.
Increase, Increase
C.
Decrease, Increase
B.
Increase, Decrease
D.
Decrease, Decrease
20. Using the information in no. 16, and assuming that capital shall be proportionate to the partners’ profit or loss ratio, the required capital of Acejas is A.
P 520,000
B.
P 720,000
C.
P 1,200,000
D.
P 1,440,000
21. The Articles of Co-Partnership should contain clear provisions on all of the following except A.
Taxes paid by the partnership
C.
Withdrawals allowed to partners
B.
Causes of the partnership dissolution
D.
Profit-sharing ratio
22. The non-cash contributions of the partners to form a partnership are recorded by the partnership at their A.
Agreed value
B.
Book value
C.
Dissolution value
D.
Original value
23. When a partnership cannot pay its debt with business assets, the partners A.
Are not personally liable for the debts
C.
Must convert the partnership to a joit venture
B.
Have limited personal liability
D.
Must use their personal assets to meet the debts
24. A partner who takes active part in the business but whose connection with the partnership is concealed to the public is konwn as a (an) A.
Silent partner
C.
Nominal partner
B.
Secret partner
D.
Ostensible partner
25. A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a (an) A.
Open partnership
C.
De facto partnership
B.
De jure partnership
D.
Secret partnership
26. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the initial investment in the partnership would be recorded for financial accounting purposes at the A.
Proprietors’ book value or the fair value of the property at the date of the investment, whichever is higher
B.
Proprietors’ book value or the fair value of the property at the date of investment, whichever is lower
C.
Proprietors’ book values of the property at the date of investment
D.
Fair value of the property at the date of the investment
27. Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current value in excess of its carrying amount. Almar contributed real estate with a carrying in excess of its current market value. At what amount should the partnership record inventory and real estate? A.
Carrying amount, Market value
B.
Market value, Carriyng amount
C.
Carrying amount, Carrying amount
D.
Market value, Market value
28. A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be recorded into the partnership at the proprietor’s A.
Carrying amount or the fair market value of the property at the date of the investment, whichever is higher
B.
Fair value of the property at the date of the investment
C.
Carrying amount or the fair market value of the property at the date of the investment, whichever is lower
D.
Carrying amount of the property at the date of the investment
29. Agaton joined a partnership by contributing the following: cash, P 120,000; accounts receivable, P 4,000; land, P 240,000 at cost, P 400,000 at fair value; and accounts payable, P 16,000. What will be the initial amount recorded in Agaton’s capital account? Alonzo Amurao A. P 408,000 C. P 508,000 Cash P 300,000 P 140,000 B. P 424,000 D. P 524,000 Merchandise Inventory 220,000 Building 4,000,000 30. On October 1, 2014, Alba and Ang formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Alba contributed cash of P 100,000 and a parcel of land that cost him P 200,000. Ang contributed P 300,000 cash. The land has a quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on Octiber 1, 2014? A.
P 360,000
B.
P 460,000
C.
P 760,000
D.
P 960,000
31. On June 30, 2014, a partnership was formed by Ariston and Astoria. Ariston contributed cash,. Astoria, previously a sole proprietor, contributed non-cash assets, including a realty subject to mortgage, which was assumed by the partnership. Astoria’s capital account at June 30, 2014 should be recorded at A.
The fair value of the property less the mortgage payable at June 30, 2014
B.
Astoria’s carrying amount of the property at June 30, 2014
C.
Astoria’s carrying amount of the property less the mortgage payable at June 30, 2014
D.
The fair value of the property at June 30, 2014
32. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta contributed land costing P 600,000. the current market value of the assets are as follows: equipment, P 450,000; land, P 750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital accounts of the Abada and Acosta, respectively, will be credited as A.
P 900,000, P 450,000
C.
P 750,000, P 600,000
B.
P 300,000, P 750,000
D.
P 300,000, P 600,000
33. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contibuted:
Furniture and Fixtures
900,000
The building is subject to mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital account at April 1, 2014 should be A.
P 900,000
B.
P 1,200,000
C.
P 2,760,000
D.
P 4,360,000
34. Using the information in no. 33, and assuming that the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Alonzo’s capital account should be increased by A.
P 780,000
B.
P 900,000
C.
P 1,200,000
D.
P 1,980,000
D.
P 5,560,000
35. Using the information in no. 33, the total partnership capital on April 1, 2014 is A.
P 1,200,000
B.
P 3,960,000
C.
P 4,740,000
36. Using the information in no. 34, bonus was given by A.
Amurao to Alonzo
C.
The partnership
B.
Alonzo to Amurao
D.
Nobody
37. Using the information in no. 33, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the required capital of Alonzo is A.
P 900,000
B.
P 990,000
C.
P 1,200,000
D.
P 3,960,000
38. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli contributed cash of P 200,000. Amy contributed property with a carrying amount of P 144,000, original cost of P 160,000, and fair value of P 320,000. the partnership accepted responsibility for the P 140,000 mortgage attached to the property. Annie contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000. The partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014? A.
Aleli
C.
Annie
B.
Amy
D.
All capital accounts are equal
39. Using the information in no. 38, the property contributed by Amy is to be recorded by the partnership on April 1, 2014 at A.
P 144,000
B.
P 160,000
C.
P 180,000
40. Using the information in no. 38 and assuming capital are in the profit and loss ratio, then there is A.
P 20,000 bonus to Amy
D.
P 320,000
B.
P 20,000 bonus from Aleli
C.
No bonus to Aleli
Which is correct? A.
A only
B.
B only
C.
A and B only
D.
A, B and C only
TRUE OR FALSE. Write T if the statement is correct and F if the statement is false before each number.
1.
A written partnership contract is required to be prepared whenever a partnership is formed.
2.
All partnerships are subject to income tax.
3.
A partner’s contribution in the form of industry or service is recorded by debiting the account ‘Industry.’
4.
In the partnership books, there as many capital and drawing accounts as there are partners.
5.
A partner’s contribution in the form of non-cash assets should be recorded at its fair market value in the absence of an agreed value.
6.
A partnership is much easier and less expensive to organize than a corporation.
7.
A newly organized partnership should always open a new set of books.
8.
All partnerships have at least one general partner.
9.
Each partner generally has the authority to enter into contracts which is binding upon the partnership.
10. The property invested in a partnership by a partner becomes the property of the partnership.
11. Contra acconuts, like Allowance for Uncollectible Accounts and Accumulated Depreciation, on non-cash assets invested by partners are always carried on the partnership books.
12. The unlimited liability of partners for partnership debts makes the partnership more reliable from the point of view of creditors.
13. Goodwill may be recognized upon partnership formation when the capital credited to a partner exceeds the fair value of the net assets transferred from previous sole proprietorship business.
14. Before a partnership can operate legally, it has to first comply with registration requirements of the SEC, DTI, BIR, SSS and Mayor’s Office.
15. There is a required number of limited partners in a general co-partnership; in the same manner that, there is a required number of general partners in a limited partnership.
16. A partnership is always owned by at least two (2) individuals.
17. For financial reporting purposes, the personal assets and debts of a partner should be combined with the assets and debts of the business.
18. Partners are personally liable for the liabilities of the partnership if the partnership is unable to pay.
19. In a partnership, an owner’s equity acconut exists for each partner.
20. Net asset adjustments are made on a sole proprietor’s books, when theses are to be used as partnership books, for the purpose of arriving at agreed values.
PROBLEM SOLVING QUESTIONS.
Problem 1.
Acosta Company Statement of Financial Position December 1, 2014
Assets
Cash
P 600,000
Notes Receivable
375,000
Accounts Receivable
2,250,000
Less: Allowance for Uncollectible Accounts
150,000
Merchandise Inventory
2,100,000 600,000
Furniture and Equipment
1,800,000
Less: Accumulated Depreciation
450,000
TOTAL ASSETS
1,350,000 P 5,025,000
Liabilities and Capital
Notes Payable
P 750,000
Accounts Payable
1,575,000
Acosta, Capital
2,700,000
TOTAL LIABILITIES AND CAPITAL
P 5,025,000
Aguas offers to invest cash to give him an equity credit equal to one-half of the equity of Acosta after adjustments for the items below. Acosta accepted the offer.
a.
The merchandise is to be valued at P 650,000.
b.
The Allowance for uncollectible accounts is P 225,000.
c.
Interest is earned on notes receivable should be reflected. The note is dated September 30, 2014 and bears interest at 6%.
d.
Interest accrued on notees payable for the period September 1 to December 1, 2014 should be recognized. The interest rate on the note is 10%.
e.
The furniture and equipment are one-third depreciated.
f.
Office supplies on hand, which have been charged to expense, amounted to P 15,000. these supplies will be used by the new partnership.
Instructions: 1.
Prepare journal entries on the books of Acosta to give effect to the partnership formation.
2.
Prepare the statement of financial position for the new partnership.
Problem 2.
On October 1, 2014, April and Arias decided to pool their assets and form a partnership. The firm is to take over business assets and assume business liabilities; equities are to be based on net assets transferred after the following adjustments:
a.
Arias’ inventory is to be valued at P 350,000.
b.
An allowance for uncollectible accounts of P 9,000 and P 7,500 respectively should be set up.
c.
Accrued expenses of P 21,000 are to be recognized on April’s books.
d.
Arias is to conribute sufficient cash to give him a 60% interest in the new firm.
Statement of April and before presented
April Cash
Arias
P 187,500
P 112,500
Accounts Receivable
450,000
375,000
Merchandise Inventory
400,000
300,000
Equipment
250,000
300,000
(112,500)
(37,500)
TOTAL ASSETS
P 1,175,000
P 1,050,000
Accounts Payable
P 345,000
P 250,000
830,000
800,000
P 1,175,000
P 1,050,000
Accumulated Depreciation
Capital TOTAL LIABILITIES AND CAPITAL
financial position for Arias on October 1 adjustments are below:
Instructions: 1.
Give the entries to adjust and close the books of April.
2.
Give the entries required on the books of Arias upon the formation of the partnership.
3.
Prepare a statement of financial position for the new partnership of April and Arias.
Problem 3.
Partners Abada and Albano agreed to combine their businesses into a partnership. The statement of financial position accounts of Abada and Alabano are shown below: ABADA Book Value Cash Accounts Receivable
ALABANO
Market Value
Book Value
Market Value
P 50,000
P 50,000
P 70,000
P 70,000
460,000
460,000
490,000
490,000
Allowance Uncollectible Accounts
30,000
40,000
40,000
50,000
Merchandise Inventory
900,000
950,000
720,000
700,000
Equipment
180,000
120,000
90,000
70,000
36,000
--
9,000
--
120,000
90,000
--
--
24,000
--
--
--
540,000
540,000
360,000
360,000
Accumulated Depreciation Furniture and Fixtures Accumulated Depreciation Accounts Payable
Instructions: Give the journal entries to record the partnership formation under each of the following assumptions a.
A new set of books are to be opened for the partnership
b.
The books of Abada are to be used by the partnership
Problem 4.
On January 1, 2014, Abante, Arevalo and Almonte decided to form a partnership. Abante, a sole proprietor, will transfer to the partnership his net assets, excluding cash. Arevalo will contribute cash in an amount equal to one and one-half times the investment of Abante. Almonte will contribute a piece of land with an agreed value of P 1,800,000 subject to a mortgage of P 300,000 to be assumed by the partnership. The statement of financial position of Abante is as shown below. Abante Company Statement of Financial Position January 1, 2014
ASSETS
Cash
P 360,000
Accounts Receivable
P 840,000
Less: Allowance for Uncollebectible Accounts
90,000
Merchandise Inventory
750,000 1,200,000
Furniture and Equipment
1,050,000
Less: Accumulated Depreciation TOTAL ASSETS
210,000
840,000 P 3,150,000
LIABILITIES AND CAPITAL
Accounts Payable
P 450,000
Abante, Capital
2,700,000
TOTAL LIABILITIES AND CAPITAL
P 3,150,000
The Articles of Co-Partnership executed for the purpose calls for adjustments to the assets, as follows:
a. The Allowance for Uncollectible Accounts should be increased by P 150,000. b. The inventories should be valued at P 1,000,000. c. The furniture and equipment are underdepreciated by P 240,000. d. The new partnership is t credit Abante with a capital of P 2,000,000. The excess capital credit over the fair value of the net assets transeferred is to be recognized as goodwill.
Instructions: Prepare the entries to record the partnership formation assuming 1.
The books of Abante are to be used by the partnership.
2.
New set of books are to be opened for the partnership.
Problem 5.
The partnership of Abueva and Alano was formed on June 1, 2014, when they agreed to invest equal amount of capital into the firm. The investment by Abueva consists of P 518,000 cash and an inventory of merchandise valued at P 1,152,000. Alano agreed
to contribute the assets of his business along with the transfer to the partnership of his business liabilities. Alano was credited for goodwill for the excess of the capital credit over the agreed value of his net assets. The assets and liabilities are shown: Balances Alano’s Books Accounts Receivable
Agreed Value
P 1,792,000
P 1,792,000
76,800
150,000
Inventory
192,000
253,000
Office Equipment, net
256,000
206,000
Accounts Payable
576,000
576,000
Allowance for Uncollectible Acconuts
Instructions: 1.
Give the entries to record the investments of Abueva and Alano in the new partnership.
2.
Prepare the beginning statement of financial position of the partnership, reflecting the above transfers to the firm.
Problem 6.
The partnership of Agana and Ayesa was formed on September 1, 2014. At that date, the following assets were invested: Agana Cash
Ayesa
P 200,000
P 80,000
Inventories
---
440,000
Land
---
200,000
Building
---
600,000
920,000
---
Furniture and Equipment
The building is subject to a mortgage loan of P 240,000, which is to be assumed by the partnership. The partnership contract provides that Agana and Ayesa share earnings 40% and 60% respectively.
Instructions: Compute the amount of Ayesa’s capital account on September 1, 2014 assuming that the partnership agreement provides that:
1.
Each partner is credited for the full amount of net assets invested.
2.
The partners initially should have an equal interest in the partnership capital.
3.
The initial partnership capital is shared proportionate to the partners’ profit and loss ratio.
Problem 7.
Sole proprietors Alvis and Ancheta established a partnership on December 31, 2014 sharing profit and losses in the ratio 60% and 40%. They agreed that each would make the following contributions: Alvis
Ancheta
Cash
P 50,000
Land
375,000
Building
P 750,000
1,200,000
Furniture and Fixture
675,000
Accounts payable of Alvis totalling P 250,000 are to be assumed by the partnership.
Instructions: Prepare the entries on December 31, 2014 to record the investments in the partnership by Alvis and Ancheta under each of the following independent assumptions:
1.
Each partner is credited for the full amount of the net assets invested.
2.
Each partner initially should have an equal interest in the partnership capital.
3.
Each partner receive capital proportionate to his profit and loss ratio.
Problem 8.
On May 1, 2014, the business accounts of Ablan and Amias appear below: Ablan Cash
P 55,000
P 111,770
1,172,680
2,839,450
600,175
1,300,510
3,015,000
---
---
2,141,335
251,725
173,945
10,000
18,000
894,700
1,218,250
Notes Payable
1,000,000
1,725,000
Ablan, Capital
3,209,880
Accounts Receivable Merchandise Inventory Land Building Furniture and Fixture Other Assets Acconuts Payable Ablan and Amias agreed to contributing their respective to the following
Amias
Amias, Capital a. Accounts Ablan’s books and P 75,000 in Amias’ books are uncollectible
3,614,760
form a partnership assets and liabilities subject adjustments: receivable of P 50,000 in
b.
Inventories of P 27,000 and P 35,000 are worthless in Ablan’s and Amias’ respective books.
c.
Other assets of P 10,000 and P 18,000 in Ablan’s and Amias’ books are to be written off.
Instructions:
1.
Prepare journal entries to adjust the books of both partners.
2.
Prepare journal entries to close the books of both partners.
3.
Prepare journal entries on the new partnership books.
4.
Prepare a statement of financial position for the new partnership.
Problem 9.
The post-closing trial balance of Joel Palencia and Tommy Peñaflor Partnership as of December 31, 2014 are presented below: Post-closing Trial Balance December 31, 2014 J. Palencia Debit Cash Accounts Receivable
Credit
Interest Receivable
Debit
P 125,000
P 186,000
80,000
120,000
Allowance for Doubtful Accounts Notes Receivable
T. Peñaflor Credit
P10,000
P 12,000
50,000 1,000
Merchandise
75,000
150,000
Equipment
40,000
60,000
Accumulated Depreciation
15,000
40,000
Accounts Payable
50,000
75,000
Notes Payable
20,000
Interest Payable
500
Palencia, J.
275,500
Peñaflor, T.
389,000 P 371,000
P 371,000
P 516,000
P 516,000
Instructions:
1.
2.
J. Palencia, and T. Peñaflor agreed to combine their business to form a partnership. All of the assets and liabilities are to be taken over by the partnership. a.
Give the entries in the books of the respective single proprietorship to finally close their book.
b.
Give the journal entries to record the investments of each of the partners in the books of the partnership.
J. Palencia and T. Peñaflor have agreed to combine their business to form a partnership. All of the assets and liabilities are to be taken over by the partnership, after the following adjustments are taken in the books of the respective single proprietorship.
Allowance for Doubtful Accounts should be increased to 20% of the Accounts Receivable.
Merchandise should be reduced by 5%.
Equipment are 80% depreciated.
a.
Give the necessary journal entries in the books of the single proprietorship to adjust and close its books.
b.
Journal entries in the books of the partnership recording the investments of J. Palencia and T. Peñaflor.
MULTIPLE CHOICE - THEORY AND PROBLEM. Encircle the letter of the best answer. Show supporting computations in good form if necessary.
1.
2.
The Articles of Co-Partnership should contain clear provisions on all of the following except a.
Taxes paid by the partnership
c.
Withdrawals allowed to partnership
b.
Causes of partnership dissolution
d.
Profit-sharing ratio
The non-cash contributions of the partners to form a partnership are recorded by the partnership at their a.
3.
4.
5.
6.
Agreed value
b.
Book value
c.
Dissolution value
d.
Original cost
When a partnership cannot pay its debts with business assets, the partners a.
Are not personally liable for the debts
c.
Must convert the partnership to a joint venture
b.
Have limited personally liabity
d.
Must use their personal assets to meet to the debts
A partner who takes active part in the business but whose connection with the partnership is concealed to the public is known as a (an) a.
Silent partner
c.
Nominal partner
b.
Secret partner
d.
Ostensible partner
A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a (an) a.
Open partnership
c.
De facto partnership
b.
De jure partnership
d.
Secret partnership
Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the initial investment in the partnership would be recorded for financial accounting purposes at the a.
Proprietors’ book values or the fair value of the property at the date of the investment, whichever is higher
b.
Proprietors’ book values or the fair value of the property at the date of the investment, whichever is lower
c.
Proprietors’ book values of the property at the date of the investment
d.
7.
8.
9.
Fair value of the property at the date of the investment
Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current market value in excess of its carrying amount. Almar contributed real estate with a carrying amount in excess of its current market value. At what amount should the partnership record each of the following assets? Inventory
Real Estate
a.
Carrying amount
Market value
b.
Market value
Carrying amount
c.
Carrying amount
Carrying amount
d.
Market value
Market value
A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be recorded into the partnership at the proprietor’s a.
Carrying amount or the fair value of the property at the date of the investment, whichever os higher
b.
Fair value of the property at the date of the investment
c.
Carrying amount or the fair value of the property at the date of the investment, whichever is lower
d.
Carrying amount of the property at the date of the investment
Agaton joined a partnership by contributing the following: cash. P 120,000; accounts receivable, P 4,000; land , P240,000 cost, P 400,000 fair value; and accounts payable, P 16,000.what will be the initial amount recorded in Agaton’s capital account? a.
P 408,000
b.
P 424,000
c.
P 508,000
d.
P 524,000
10. On October 1, 2014, Alba and Ang formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Alba contributed cash of P 100,000 and a parcel of land that cost him P 360,000. Ang contributed P 300,000 cash. The land has a quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on October 1, 2014? a.
P 360,000
b.
P 460,000
c.
P 760,000
d.
P 960,000
11. On June 30, 2014, a partnership was formed by Ariston and Astoria.Ariston contributed cash. Astoria, previously a sole proprietor, contributed non-cash assets, including a realty subject to a mortgage, which was assumed by the partnership. Astoria’s capital account at June 30, 2014 should be recorded at. a.
The fair value of the property less the mortgage payable at June 30, 2014
b.
Astoria’s carrying amount of the property at June 30, 2014
c.
Astoria’s carrying amount of the property at June 30, 2014 less the mortgage payable at June 30, 2014
d.
The fair value of the property at June 30, 2014
12. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta contributed land costing P 600,000. The current market value of the assets are as follows: equipment, P 450,000; land, P 750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital acconuts of the partners will be credited as follows:
a.
Abada
Acosta
P 900,000
P 450,000
b.
P 300,000
P 750,000
c.
P 750,000
P 600,000
d.
P 300,000
P 600,000
13. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contributed: Alonzo Cash
Amurao
P 300,000
P 140,000
Merchandise Inventory
220,000
Building
4,000,000
Furniture and Equipment
900,000
The building is subject to a mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital account at April 1, 2014 should be a.
P 900,000
b.
P 1,200,000
c.
P 2,760,000
d.
P 4,360,000
14. Using the information in no. 13, and assuming that the partnership agreement provides that the partners initially should have an equal interest in partnership capital, Alonzo’s capital acconut should be increased by a.
P 780,000
b.
P 900,000
c.
P 1,200,000
d.
P 1,980,000
d.
P 5,560,000
15. Using the information in no. 13, the total partnership capital on April 1, 2014 is a.
P 1,200,000
b.
P 3,960,000
c.
P 4,740,000
16. Using the information in no. 14, bonus was given by a.
Amurao to Alonzo
c.
The partnership
b.
Alonzo to Amurao
d.
Nobody
17. Using the information in no. 13, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the required capital of Alonzo is a.
P 900,000
b.
P 990,000
c.
P 1,200,000
d.
P 3,600,000
18. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli contributed cash of P 200,000. Amy contributed property with a carrying amount P 144,000, original cost of P 160,000, and fair value of P 320,000. The partnership accepted responsibility for the P 140,000 mortgage attached to the property. Annie contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000. The partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014? a.
Aleli
c.
Annie
b.
Amy
d.
All capital accounts are equal
19. Using the information in no. 18, the property contributed by Amy is to be recorded by the partnership on April 1, 2014 at a.
P 144,000
b.
P 160,000
c.
P 180,000
d.
P 320,000
20. Using the information in no. 18, and assuming capital are in the profit and loss ratio, then there is A.
P 20,000 bonus to Amy
B.
P 20,000 bonus to Annie
C.
No bonus to Aleli
Which
FF
is(are)
a.
A only
b.
B only
c.
A and B only
d.
GG
correct?
A, B and C
21. On December 1, 2014, EE and FF formed a partnership, agreeing to share for profit and losses in the ratio of 2:3, respectively. EE invested a parcel of land that cost him P 25,000. FF invested P 30,000 cash. The land was sold for P 50,000 on the same date, three hours after formation of the partnership. How much should be the capital balance of EE right after the formation? a.
P 25,000
b.
P 30,000
c.
P 60,000
d.
II 22. On March 1, 2014, partnership with each assets:
Cash Machinery and Equipment
Furniture and Fixtures
JJ
P 300,000
P 700,000
250,000
750,000
---
2,250,000
100,000
---
Building
P 50,000
II and JJ formed a contributing the following
The building is subject to mortgage loan of P 800,000, which is to be assumed by the partnership agreement provides that II and JJ share profits and losses 30% and 70% respectively. On March 1, 2014 the balance in JJ’s capital account should be: a.
P 3,700,000
b.
P 3,140,000
c.
P 3,050,000
d.
P 2,900,000
23. The same information in no.22, except that the mortgage loan is not assumed by the partnership. On March 1, 2014 the balance in JJ’s capital account should be a.
P 3,700,000
b.
P 3,140,000
c.
P 3,050,000
24. As of July 1, 2014, FF and GG decided to form a partnership. Their balance sheets on this date are:
d.
P 2,900,000
Cash
P 15,000
P 37,500
540,000
225,000
---
202,500
150,000
270,000
P 705,000
P 735,000
P 135,000
P 240,000
570,000
---
---
495,000
P 705,000
P 735,000
Accounts Receivable Merchandise Inventory Machinery and Equipment TOTAL Accounts Payable FF, Capital GG, Capital TOTAL
The partners agreed that the machinery and equipment of FF is underdepreciated by P 15,000 and that of GG by P 45,000. Allowance for Uncolletible Accounts is to be set up amounting to P 120,000 for FF and P 45,000 for GG. The partnership agreement provides for ap rofit and loss ratio and capital interest of 60% to FF and 40% to GG. How much cash must FF invest to bring the partners’ capital balance proportionate to their profit and loss ratio? a.
P 142,500
b.
P 52,500
c.
P 172,500
d.
P 102,500
25. On August 1, AA and BB pooled their assets to form a partnership, with the fir totake over their business assets and assume the liabilities. Partners’ capital are to be based on net assets transferred after the following adjustments. (Profit and loss are allocated equally)
BB’s inventory is to be increased by P 4,000; an allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in the books of AA and BB, respectively; and accounts payable of P 4,000 is to be recognized in AA’s books. The individual trial balances on August 1, before adjustments, follow:
AA Assets
BB
P 75,000
P 113,000
5,000
34,500
Liabilities
What is the capital of AA and BB after the above adjustments? a. b. 81,000
AA, P 68,750; BB, P 77,250
c.
AA, P 65,000; BB, P 76,000
AA, P 75,000; BB, P
26. CC admits DD as a partner in on November 30, 2014, just before balances:
d. Cash
AA, P 65,000; BB, P 81,000
P 6,800
Accounts Receivable
14,200
Merchandise Inventory
20,000
business. Accounts in the ledger for CC the admission of DD, show the following
Accounts Payable
8,000
CC, Capital
33,000
Jones Cash
P 80,000
Building - cost to Jones It is agreed that for CC’s interest, the following made: A. An allowance 3% of accounts receivable B. The is to be valued at P 23,000. C.
Smith P 40,000
300,000
- fair value
400,000
Inventories - cost to Smith
200,000
- fair value
280,000
Mortgage Payable
120,000
Accounts Payable
60,000
purposes of establishing adjustments shall be for doubtful accounts of is to be established. merchandise
inventory
Prepaid salary expenses of P 600 and accrued rent expense of P 800 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) P 35,347; (2) P 11,971
c.
(1) P 35,374; (2) P 17,687
b.
(1) P 36,374; (2) P 18,487
d.
(1) P 28,174; (2) P 14,087
27. Jones and Smith formed a partnenrship with each partner contributing the following items:
Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership. What is the balance in each of the partner’s capital account for financial accounting purposes? Jones
Smith
a.
P 350,000
P 270,000
b.
P 260,000
P 180,000
c.
P 360,000
P 260,000
d.
P 500,000
P 300,000
28. The business assets of LL and MM appear below:
LL Cash
MM
P 11,000
P 22,354
Accounts Receivable
234,536
567,890
Inventories
120,035
260,102
Land
603,000
---
---
428,267
50,345
34,789
2,000
3,600
P 1,020,916
P 1,317,002
P 178,940
P 243,650
Notes Payable
200,000
345,000
The capital account of adjustment will be
LL, Capital
641,976
---
---
728,352
a. LL, P 615,942; MM, P 717,894
TOTAL
P 1,020,916
P 1,317,002
LL and MM agreed to contributing their respective subject to the following A. Accounts in LL’s books and P uncollectible. B. Inventories of worthless in LL’s and C. Other assets of LL’s and MM’s be written off.
Building Furniture and Fixtures Other Assets TOTAL Accounts Payable
MM, Capital
b.
LL, P 640,876; MM, P 712,345
c.
LL, P 640,876; MM, P 683,050
29. The same information in no assets does the partnership have
PP
form a partnership by assets and equities adjustments: receivable of P 200,000 35,000 in MM’s are P 3,500 and P 6,700 are MM’s respective books. P 2,000 and P 3,600 in respective books are to
the partners after the d. LL, 614,476; MM, 683,052
P P
28, how much total after formation?
a.
P 2,337,918
c.
P 2,265,118
b.
P 2,237,918
d.
P 2,365,218
30. On March 1, 2014, PP and QQ decide to combine their businesses and form a partnership. Their balance sheets on March 1, before adjustments, showed the following:
Cash
P 9,000
P 3,750
Accounts Receivable
18,500
13,500
Invnetories
30,000
19,500
Furniture and Fixtures (net)
30,000
9,000
Office Equipment
11,500
2,750
Prepaid Expenses
6,375
3,000
P 105,375
P 51,500
P 45,750
P 18,000
59,625
33,500
P 105,375
P 51,500
TOTAL Accounts Payable Capital TOTAL
They agreed to have the following items recorded in their books: 1.
Provide 2% allowance for doubtful accounts.
2.
PP’s furniture and fixtures should be P 31,000, while QQ’s office equipment is underdepreciated by P 250.
3.
Rent expense incurred previously by PP was not yet recorded amounting to P 1,000, while salary expense incurred by QQ was not also recorded amounting to P 800.
4.
The fair market value of inventory amounting to: PP - P 29,500; QQ - P 21,000.
Compute the net (debit) credit adjustment for PP and QQ a.
PP, P 2,870; QQ, P 2,820
c.
PP, (P870); QQ, P 180
b.
PP, (P 2,870); QQ, (P2,820)
d.
PP, P 870; QQ, (P 180)
31. The same information in no. 30, compute the total liabilities after the formation: a.
P 61,950
b.
P 63,750
c.
P 65,550
d.
P 63,950
d.
P 152,985
32. The same information in no.30, comute the total assets after the formation: a.
P 157,985
b.
P 156,875
c.
P 160,765
33. On April 30, 2014, XX, YY and ZZ formed a partnership by combining their separate business proprietorships. XX contributed of P 75,000. YY contributed property with a P 54,000 carrying amount, a P 60,000 original cost, and P 120,000 fair value. The partnership accepted responsibility for the P 52,500 mortgage attached to the property. ZZ contributed equipment with a P 45,000 carrying amount, a P 112,500 original cost , and P 82,500 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, 2014 capital balance? a.
XX
c.
ZZ
b.
YY
d.
All capital accounts balances are equal
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