Chapter 1: Partnership

1. On March 1, 2011, Santos and Pablo formed a partnership with each contributing the following assets.
Santos Pablo
Cash P30,000 P70,000
Machinery 25,000 75,000
Building - 225,000
Furniture and fixtures 10,000 -

The building is subject to a mortgage loan of P80,000, which is to be assumed by the partnership. The
partnership agreement provides that Santos and Pablo share profits and losses 30% and 70%,
respectively. On March 1, 2011 the balance in Pablo’s capital should be:

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

2. On March 1, 2011, Eva and Helen decides to combine their businesses and form a partnership.
Statement of financial position on March 1, before adjustments, showed the following:

Eva Helen
Cash P9,000 P3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
______ _ ______
Total P105,375 P51,500

Accounts payable 45,750 18,000

Capital 59,625 33,500
_______ ______
Total P105,375 P51,500

They agreed to provide 3% for doubtful accounts receivable, and also agree that Helen’s furniture and
fixtures are underdepreciated by P900.

If each partners share in equity is to be equal to the assets invested, the capital accounts of Eva and
Helen would be:

a. P104,820 and P50,195, respectively

b. P50,070 and P32,195, respectively
c. P58,320 and P32,945, respectively
d. P58,170 and P33,095, respectively
3. On July 1, 2011, Monuz and Pardo form a partnership, agreeing to share profits and losses in the ratio
of 4:6, respectively. Monuz contributed a parcel of land that cost him P25,000 four hours after formation
of the partnership. How much should be recorded in Monuz capital account on formation of the
partnership?

a. P10,000
b. P20,000
c. P25,000
d. P50,000

4. the business assets and liabilities of John and Paulnappear below:

John Paul
Cash P11,000 P22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -
Building - 428,267
Furniture and fixtures 50,345 34,789
Other assets 2,000 3,600
______ __ ________
Total P1,020,916 P1,317,002

Accounts payable P178,940 P243,6050

Notes payable 200,000 345,000
John, capital 641,976 -
Paul, capital - 728,352
________ ________
Total P1,020,916 P1,317,002

John and Paul agreed to form a partnership contributing their respective assets and equities subject to
the following adjustments:

a. Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John’s and Paul respective books.
c. Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to be written off.

The capital account of the partners after the adjustments will be:
a. John’s P614,476
Paul’s P683,052
b. John’s P615,942
Paul’s P717,894
c. John’s P649,876
Paul’s P712,345
d. John’s P613,576
Paul’s P683,350
5. Red, White and Blue form a partnership on May 1,2011. They agree that Red will contribute office
equipment with a total fair value of P40,000; White will contribute delivery equipment with a fair value
of P80,000; and Blue will contribute cash. If Blue wants a one third interest in the capital and profits, he
should contribute cash of:

a. P40,000
b. P120,000
c. P60,000
d. P180,000

6. The partnership of Perez and Reyes was forms on March 31, 2011. On this date, Perez invested
P50,000 cash and office equipment valued at P30,000. Reyes invested P70,000 cash, merchandised
valued at P110,000, and furnitures valued at P100,000, subject to a notes payable of P50,000 (which the
partnerships assumes). The partnership provides that Perez and Reyes share profits and losses 25:75,
respectively. The agreement further provides that the partners should initially have, an equal interest in
the partnership capital. Under the goodwill and the bonus method, what is total capital of the partners
after the formation?

Bonus Goodwill Method

a. P310,000 P460,000
b. P360,000 P510,000
c. P300,000 P410,000
d. P350,000 P400,000

7. Aldo, Bert and Chris formed a partnership on April 30, with the following assets, measured at their fair
values, contributed by each partner:

Aldo Bert Chris

Cash P10,000 P12,000 P30,000
Delivery trucks 150,000 28,000 -
Computers 8,500 5,100 -
Office furniture - 3,500 2,500
______ ______ ______
Total P168,500 48,600 P32,500

Although Chris has contributed the most cash to the partnership, he did not have the full amount of
P30,000 available and was forces to borrow P20,000. The delivery truck contributed by Aldo has a
mortgage of P90,000 and the partnership is to assume responsibility for the loan. The partners agreed to
equalize their interest. Cash settlement among the partners are to be made outside the partnership.
Using the bonus method:

a. Bert and Chris should pay aldo, P4,600 and P20,700 respectively
b. Aldo should pay Bert and Chris, P25,300
c. Bert should pay aldo, P25,300 and Chris, P20,700
d. Chris should pay Aldo, P25,300 and Bert P4,600

8. Cong and Dong have just formed a partnership. Cong contributed cash of P126,000 and computer
equipment that cost P54,000. The computer had been used in his sole proprietorship and had been
depreciated to P24,000. The fair value of the equipment is P36,000. Cong also contributed a note
payable of P12,000 to be assumed by the partnership. Cong is to have 60% interest in the partnership.
Dong contributed only P90,000 cash.

Cong should make an additional investment (withdrawal) of:

a. P96,000
b. P84,000
c. (P76,800)
d. (P15,000)

9. On Sept 1,2011, the business assets and liabilities of Amor and Bhea were as follows:

Amor Bhea
Cash P28,000 P62,000
Accounts receivable 200,000 600,000
Investments 120,000 200,000
Land 600,000 -
Building - 500,000
Furniture and fixtures 50,000 35,000
Other assets 2,000 3,000
Accounts payable 180,000 250,000
Notes payable 200,000 350,000

Amor and Bhea agreed to form a partnership contributing their respective assets and liabilities subject
to the following agreements:
a. Accounts receivable of P20,000 in Amor’s books and P40,000 in Bhea’s books are uncollectible
b. Inventories of P6,000 and P7,000 are absolete in Amor’s and Bhea’s respective books.
c. Other assets of P2,000 and P3,000 in Amor’s and Bhea’s respective books are to be written off.
d. Accrued expenses of P2,000 and P5,000 in Amor’s and Bhea’s books to be recognized.
e. Goodwill is to be recognized to equalize their capital accounts after the above adjustments.

The amount of goodwill to be recognized is:

a. P155,000
b. P158,000
c. P151,000
d. P159,000

10. On March 1, 2011, Jose and Kiko decides to combine their business to form a partnership. Statement
of financial position on March 1 before the formation showed the followimg:

Jose Kiko
Cash P9,000 P3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and Fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
______ ______
Total P105,375 P51,500

Accounts payable P45,750 P18,000

Capital 59,625 33,500
_______ _______
Total P105,375 P51,500

They agreed to following adjustments before the formation:

a. Provide 2% allowance for doubtful accounts.
b. Jose’s furniture should be valued at P31,000, while Kiko’s office equipment is underdepreciated by
P250.
c. Rent expense incurred previously by Jose was not yet recorded amounting to P1,000, while salary
expense incurred by Kiko was not also recorded amounting to P800.
d. the fair value of inventories amounted to 29,500 for Jose and P21,000 for Kiko.

The net (debit) credit adjustment to partners capital accounts are:

Jose Kiko
a. (P2,870) (P2,820)
b. P1,870 P2,820
c. P870 (P180)
d. (P870) P180

11. On June 1, 2011, May and Nora formed a partnership. May is to invest assets at fair value which are
yet to be agreed upon. She is to transfer her liabilities and is to contribute sufficient cash to bring her
total capital to P210,000 which is 70% of the total capital of the partnership.

Details regarding the books values of May’s business assets and liabilities and their corresponding
valuations are:
Book Values Agreed valuations
Accounts receivable P58,000 58,000
Allowance for doubtful accounts 4,200 5,000
Merchandise inventory 98,400 107,000
Store equipment 32,000 32,000
Accumulates depreciation-store equipment 19,000 16,400
Office equipment 27,000 27,000
Accumulated depreciation- office equipment 14,200 8,600
Accounts payable 56,000 56,000

Nora agrees to invest cash of P42,000 and merchandise valued at current market price . The value of the
merchandise to be invested by Nora and the cash to be invested by May are:

a.P90,000 and P62,000 respectively

b. P252,000 and P138,000 respectively
c. P48,000 and P138,000 respectively
d. P 48,000 and P62,000 respectively

12. The capital accounts of the partnership of Nakpil, Ortiz and Perez on June 1, 2011 are presented
below with their respective profits and loss ratios:
Nakpil P139,200 1/2
Ortiz P208,800 1/3
Perez P96,000 1/6

On June 1,2011, Quizon is admitted to the partnership when he purchased, for P132,000, a a
proportionate interest from Nakpil and Ortiz in the net assets and profits of the partnership. As a result
of transaction, Quizon acquired a one-fifth interest in the net assets and profits of the firm. Assuming
that implied goodwill is not to be recorded, what is the combined gain realized by Nakpil and Ortiz upon
the sale of a portion of their interest in the partnership to Quizon?

a. P 0
b. P43,200
c. P62,400
d. P82,000

13.Moonbits partnership had a net income of P8,000 for the month ended Sept. 30, 2011.

Sunshine purchased an interest in the Moonbits partnership of Liz and Dick

By paying Liz P32,000 for half of her capital and half of her 50% percent profit sharing interest on
October 1, 2011. At this time Liz capital balance was P24,000 and Dick capital balance was 56,000. Liz
should receive a debit to her capital account of:

a. P12,000
b. P20,000
c. P16,000
d. P26,667

14. Partners Andy, Boy and Ken sharing profit and loss based on 4:3:2 ratio have the following
condensed statement of financial position:

Total Assets P1,880,000

Liabilities P480,000
Andy, capital 620,000
Boy, capital 400,000
Ken, capital 380,000
__________
Total liabilities and capital P1,880,000

Dondon will be admitted as a new partner for 20% interest after he pays the three partners with a
minimum of 10%. Thus, the old partner will have to transfer to Dondon 20% of their interest.

a. P376,000
b. P280,000
c. P350,000
d. P200,000

15. A, B and C are prtners who are share profits and losses in the ratio of 5:3:2, respectively. They agree
to sell D 25% of their respective capital and profits and losses ratio for a total payment directly to the
partners in the amount of P140,000. They agree that goodwill of P60,000 is to be recorded prior to
admission of D. The condensed statement of financial position of the ABC partnership is:

Cash P60,000 Liabilities P100,000

Non-cash assets 540,000 A, capital 250,000
B, capital 150,000
C, capital 100,000
________ ________
Total P600,000 Total P600,000

The capital of A, B and C, respectively after the payment and admission of D are:
A B C
a. P187,500 P112,500 P75,000
b. P210,000 P126,000 P84,000
c. P280,000 P168,000 P112,000
d. P250,000 P150,000 P100,000

16. Partners Alba, Basco and Castro share profits and losses 50:30:20, respectively. The statement of
financial position at April 30,2011 followa:

Cash P40,000 Accounts payable P100,000

Other assets 360,000 Alba, capital 74,000
Basco, capital 130,000
Castro, capital 96,000
________ ________
Total P400,000 Total P400,000

The assets and liabilities are recorded and presented at their respective fair values, Jocson is to be
admitted as a new partner with a 20% capital interest and a 20% share of profits and losses in exchange
for a cash contribution. No goodwill or bonus is to be recorded. How much cash should Jocson
contribute?

a. P60,000
b. P72,000
c. P75,000
d. P80,000

17. The following is the condensed statement of financial position of the partnership Jo, Li and Bi who
share profits and losses in the ratio of 4:3:3

Cash P180,000 Accounts payable P420,000

Other assets 1,660,000 Bi, loan 60,000
Jo, receivable 40,000 Jo, capital 620,000
Li, capital 400,000
Bi, capital 380,000
_________ _________
Total P1,880,000 Total P1,880,000
Assume that the assets and liabilities are fairly valued on the balance sheet and the partnership decides
to admit Mac as a new partner, with a 20% interest. No goodwill or bonus is to be recorded. How much
Mac should contribute in cash or other assets?

a. P350,000
b. P280,000
c. P355,000
d. P284,000

18. Carlos and Deo are partners who share profits and losses in a ratio of 7:3, respectively. On Oct
5,2011, their respective capital accounts were as follows:

Carlos P35,000
Deo 30,000

On that day they agreed to admit sotto as a new partner with a one-third interest in the capital and
profit and losses, and upon his investment of P25,000. The new partnership will begin with a total
capital of P90,000. Immediately after sotto’s admission, what are the capital balances of Carlos, Deo and
Sotto, respectively?

a. P30,000 P30,000 P30,000

b. P31,500 P28,500 P30,000
c. P31,667 P28,333 P30,000
d. P35,000 P30,000 P25,000

19. The capital account for the partnership of Lucas and Mateo at Oct 31,2011 are as follows:

Lucas, capital P80,000

Mateo, capital 40,000

The partners share profits and losses in the ratio of 6:4 respectively.

The partnership is in desperate need of cash, and the partners agree to admit Naron as a partner with a
one-third capital and profits and losses upon his investment of P30,000. Immediately after Naron’s
admission, what should be the capital balance Lucas, Mateo and Naron respectively, assuming goodwill
is not to be recognized?

a. P50,000 P50,000 P50,000

b. P60,000 P60,000 P50,000
c. P66,667 P33,333 P50,000
d. P68,000 P32,000 P50,000

20. Ell and Emm are partners sharing profits 60% and 40%, respectively. On Jan 1, Ell and Emm decided
to admit Enn as a new partner upon his investment of P8,000. On this date, their interest in the
partnership are as follows: Ell, P11,500; Emm, P9,300

Assuming that the new partner is given a 1/3 interest in the firm, with bonus being allowed the new
partner, the new capital balances of Ell, Emm, Enn, respectively, would be:
a. P11,500 P9,300 P8,000
b. P12,480 P8,320 P8,000
c. P11,520 P7,680 P9,600
d. P10,540 P8,660 P9,600

21. Presented below is the condensed statement of financial position of the partnership of Go, Lee and
Mao who share profits and losses in the ratio of 6:3:1, respectively:

Cash P85,000 Liabilities P80,000

Other assets 415,000 Go, capital 252,000
Lee, capital 126,000
Mao, capital 42,000
________ ________
Total P500,000 Total P500,000

The partner agree to sell Gaw 20% of their respective capital and profit and loss interest for a total
payment of P90,000. The payment by Gaw is to be made directly to the individual partners. The partners
agree that implied goodwill is to be recorded prior to the acquisition by Gaw. The capital balance of Go,
Lee and Mao respectively after admission of Gaw are:

a. P198,000 P99,000 P33,000

b. P201,600 P100,800 P33,600
c. P216,000 P108,000 P36,000
d. P255,600 P126,799 P42,000

22. Partners Chito and Ditas share profits in the ratio of 6:4 respectively. On Dec 31,2011 their
respectively balances were Chito P120,000 and Ditas P100,000. On that date Meng was admitted as
partner with one-third interest in capital and profits for an investment of P80,000. The new partnership
began in 2011 with total capital of P300,000. Immediately after Meng’s admission, Chito’s capital should
be:

a. P120,000
b. P108,000
c. P100,000
d. P160,000

23. Pall and Mall are partners with capitals of P200,000 and P100,000 and sharing profits and losses 3:1
respectively. They agree to admit Kent as partner, Kent invests P150,000 for a 50% interest in the firm.
Pal and Mall transfer part of their capitals to Kent as a bonus.

a. Pal P168,750 Mall P56,250 Kent P225,000

b. Pal P112,500 Mall P37,500 Kent P150,000
c. Pal P200,000 Mall P100,000 Kent P150,000
d. Pal P143,750 Mall P81,250 Kent P225,000

24. Pol and Loc are partners with capital of P200,000 and P100,000 and sharing profits and losses 3:1
respectively. They agree to admit Chic as partner. Chic invest P125,000 for a 25% interest in the firm.
Parties agree that the total firm capital after Chic’s admission is to be P425,000.
The capital balance of the partners after chic’s admission are:

a. Pol P214,062.50 Loc P104,687.50 Chic P106,250.00

b. Pol P200,000.00 Loc P100,000.00 Chic P125,000.00
c. Pol P239,062.50 Loc P79,687.50 Chic P125,000.00
d. Pol P250,000.00 Loc P125,000.00 Chic P100,000.00

25. Ben, Joe and Fortune are new CPA’s and are to form a partnership. Ben is to contribute cash of
P50,000 and his computer originally costing P60,000 but has a second hand value of P25,000. Joe is to
contribute cash P25,000 and a brand new computer plus printer with regular price at P60,000 but which
cost their family’s computer dealership, P50,000. Partners agree to share profits equally. The capital
balances upon formation are:

a. Ben P75,000 Joe P80,000 Fortune P85,000

b. Ben P110,000 Joe P80,000 Fortune P75,000
c. Ben P80,000 Joe P80,000 Fortune P80,000
d. Ben P88,333 Joe P88,333 Fortune P88,335

26. Mitz, Marc and Mart are partners sharing earnings in the ratio 5:3:2 respectively. As of Dec 31,2010,
their capital balanced showed P95,000 for Mitz, P80,000 for Marc and P60,000 fro Mart.

On Jan 1,2011 the partnership admitted Vince as a new partner and according to the partnership
agreement, Vince will contribute P80,000 in cash to the partnership and will also pay P10,000 for 15% of
Marc’s share. Vince will share 20% in the earnings while the ratio of the original partners will remain
proportionately the same as before Vince admission, the total capital of the partnership will be
P330,000 while Vince capital account will be P70,000.

The balance of Marc’s capital account after the admission of Vince would be:

a. P81,100
b. P79,100
c. P74,600
d. P72,600

27. Rio, Sol and Tom have a partnership. Their capital balances are P96,000, P72,000, and P54,000
respectively. They split profits equally. They are considering on what basis to admit Vic, a prospective
new partner. Based on appraisal analysis, the net assets of the partnership are worth P240,000. Vic is
willing to put up cash of P24,000 plus a computer with a fair value of P42,000.

Calculate the capital balances if the existing partners recognize the difference between the fair value
and book value of the partnership’s net assets as goodwill.

a. Rio P102,000 Sol P78,000 Tom P60,000 Vic P66,000

b. Rio P96,000 Sol P72,000 Tom P54,000 Vic P66,000
c. Rio P102,000 Sol P78,000 Tom P54,000 Vic P66,000
d. Rio P96,000 Sol P78,000 Tom P60,000 Vic P66,000
28. A condensed statement of financial position for Alba, Barba and Clara appears below. Alba, Barba
and Clara share profits and losses in a ratio of 2:3:5 respectively.
Assets
Cash P100,000
Inventory 125,000
Marketable securities 200,000
Land 100,000
Building-net 500,000
Equities
Alba, capital P425,000
Barba, capital 400,000
Clara, capital 200,000

The partners agreed to admit Darna. The fair market value of the land is appraised at P200,000 and the
market value of the marketable securities is P250,000. The assets are to be revalued prior to the
admission of Darna and there is P30,000 goodwill that attaches to the old partnership.

How much cash will Darna have to invest to acquire a (1) one-fifth interest? Or a (2) four-fifth interest?

a. (1) P301,250 ; (2) P4,820,000

b. (1) P205,000 ; (2) P1,205,000
c. (1) P241,000 ; (2) P2,410,000
d. (1) P300,000 ; (2) P1,506,250

29. NN, OO and PP are partners with present capital balances of P50,000, P60,000 and P20,000
respectively. The partners share profits and losses according to the following percentages 60% for NN,
20% for OO and 20% for PP, QQ is to join the partnership upon contributing P20,000 cash, plus a
machine with a fair market value of P40,000 to the partnership in exchange for a 25% interest in the
capital and a 20% interest in the profits and losses. The existing assets of the original partnership are
undervalued by P22,000. The original partners will share the balance of profits and losses in their
original ratios.

Calculate the capital balances of each partner in the new partnership using goodwill method.
NN OO PP QQ
a. P67,400 P65,800 P25,800 P53,000
b. P50,000 P60,000 P20,000 P60,000
c. P80,000 P70,000 P20,000 P20,000
d. P80,000 P70,000 P30,000 P60,000

30. Partners Jay and Kay share profits in the ratio of 6:4 respectively. On Dec 31,2010, their redpective
accounts were Jay P120,000 and Kay P100,000. On that date, Loi was admitted as partner with 1/3
interest in the capital and profits for an investment of P80,000. The new partnership began in 2011 with
a total capital of P360,000. Immediately after Loi admission:

Amount of goodwill to Jay’s capital account would be

Be credited to Loi
a. P40,000 P108,000
b. 20,000 120,000
c. 40,000 132,000
d. 60,000 132,000

31. The Partnership of Cat and Dog provides for 3:2 sharing in profits and losses. Prior to the admission
of a third partner Elf, the capital accounts are Cat P120,000 and Dog P80,000. Elf invests P50,000 for a
P75,000 interest and partners agrees that the net assets of the new partnership would be P300,000

a. P105,000
b. P90,000
c. P70,000
D. 136,000

32. Ace, Boy and Cid are partners sharing profits in the ratio of 3:3:2. On July 31, their capital balances
are as follows:

Ace P700,000
Boy 500,000
Cid 400,000

The partners agree to admit Deo on the following agreement:

1. Deo is to pay Ace P500,000 for ½ interest of Ace’s interest
2. Deo is also to invest P400,000 in the partnership.
3. The total capital of the partnership is to be P2,400,000 of which Deo’s interest is to be 25%

What are he capital balances of the partners after the admission of Deo?
Ace Boy Cid
a. P206,250 P206,250 P137,500
b. P350,000 P500,000 P400,00
c. P556,250 P706,250 P537,500
d. P500,000 P400,000 P350,000

33. In its first year of operations, Alba and Company a partnership, made a net income of P20,000 before
providing for salaries of P5,000 and P3,000 per annum for Alba and Bana, respectively, as stipulated in
the partnership agreement. Capital contributions are as follows:

Alba P30,000
Bana 20,000
Cada 10,000

Assuming that no-profit and loss ratios are provided in the partnership agreement and that there has
been no change in the capital contributions during the year, how uch profit share would Alba be entitled
to received?

a. P10,000
b. P5,000
c. P11,000
d. P15,000
34. On Jan 1,2011 Zeep and Beep have capital balances of P20,000 and P16,000 respectively. On july
1,2011 Zeep invest an additional P4,000 and Beep withdraws P1,600. Profits and losses divided as
follows: Beep is the managing partner and as such shall receive P16,000 salary and Zeep shall receive
P7,200; both partners shall receive interest of 10% on their beginning capital balances to offset
whatever difference in capital investments they have and any remainder shall be divided equally.

Income of the Zeep-Beep partnership for the year 2011 is P9,600. Zeep’s share in the net income is:

a. P9,200
b. P880
c. P4,800
d. P600

35. Dexter and Joliber are partners agreeing to allow monthly salaries (P6,000 and P5,000 respectively)
6% interest on the capital investment at the beginning of the year (P3000,000 and P230,000
respectively) and on the remaining balance to be equally shared. The first year registered a net income
of P100,000 Profit share of the partners are:

a. Dexter P58,100 and Joliber P41,900

b. Dexter P50,000 and Joliber P50,000
c. Dexter P54,500 and Joliber P45,500
d. Dexter P56,600 and Joliber P43,400

36. Mr. Zoom and his very close friend Mr. Boom formed a partnership on Jan1,2011 with Zoom
contributing P16,000 cash and Boom contributing equipment with a book value of P6,400 and a fair
value of P8,000. During 2011 Boom made additional investments of P1,600 on April 1 and P1,600 on
June 1, and on Sept 1, he withdrew P4,000. Zoom had no additional investments nor withdrawals during
the year. The average capital balance at the end of 2011 for Mr. Boom is:

a. P9,600
b. P8000
c. P8,800
d. P7,200

37. On Jan 1,2011 David and Enrile decided to form a partnership. At the end of the year, the
partnership made a net income of P120,000. The capital accounts of the partnership show the following
transaction:
David, capital Enrile, capital
Dr. Cr. Dr Cr.
Jan 1 - P40,000 - P25,000
Apr 1 P5,000 - - -
June 1 - - - P10,000
Aug 1 - P10,000 - -
Sept 1 - - P3,000 -
Oct 1 - P5,000 P1,000 -
Dec 1 - P4,000 - P5,000
Assuming that an interest of 20% per annum is given on average capital and the balance of the profits is
divided equally, the sharing of the profits shall be:

a. David P60,000; Enrile P59,400

b. David P61,200; Enrile P58,800
c. David P67,200; Enrile P52,800
d. David P68,800; Enrile P51,200

38. The partnership agreement of Eve and Fred provides that interest at 10% per year is to be credited
to each partner on one basis of weighted-average capital balances. A summary of Fred’s capital account
for the year ended 31 Dec 2011 is as follows:

Balance, 1 Jan P280,000

Additional Investment, July 1 P80,000
Withdrawal, 1 Aug (30,000)
Balance, 31 Dec P330,000

The amout of interest that should be credited to Fred’s capital account for 2008 is

a. P30,750
b. P30,500
c. P34,500
d. P33,000

39. A, B and C are partners in the accounting firm. Their capital amount balances at year-end were: A
P90,000; B P110,000; C P50,000. They share profits and losses in a 4:4:2 ratio, after the following special
terms:
(1) Partner C is to receive a bonus of 10% of the net income after bonus.
(2) Interest of10% shall be paid on that portion of a partner’s capital in excess of P100,000
(3) Salaries of P10,000 and P12,000 shall be paid to partners A and C, respectively.

Assuming a net income of P44,000 for the year, the total profit share of partner C would be:

a. P7,800
b. P16,800
c. P19,400
d. 19,800

40. A and B entered into a partnership as of Mar 1, 2011 by investing P125,000 and P75,000
respectively, they agreed that A, as the managing partner, was to receive a salary; P30,000 per year and
a bonus computed at 10% of the net profit after adjustment for the salary; the balance of the profit was
to be distributed in the ratio of their original capital balances. On Dec 31,2011, account balances were as
follows:

Cash P70,000 Accounts receivable P60,000

Accounts receivable 67,000 A, capital 125,000
Furniture and fixtures 45,000 B, capital 75,000
Sales return 5,000 A, drawing (20,000)
Purchases 196,000 B, drawing (30,000)
Operating expenses 60,000 Sales 233,000

Inventories on Dec 31, 2011 were as follows: supplies P2,500, merchandise P73,000, prepaid was P950
while accrued expenses were P1,550. Depreciation rate was 20% per year.

The partners capital balances on Dec 31,2011, after closing the net profit and drawing accounts, were:
A B
a. P135,940 P47,960
b. P139, 540 P49,860
c. P139,680 P48,680
d. P142,350 P47,670

41. ABC’s partnership provided for the following distribution of profits and losses;
“First”. A to receive 10% o the net income up to P1,000,000 and 20% on the amount of excess thereof;
“Second” B and C each, are to receive 5% of the remaining income in excess of P1,500,000 after A’s
share as per above and;
“The balance to be divided equally among the partners.”

For the year just ended, the partnership realized a net income of P2,500,000 before distribution to
partners. The share of A is:

a. P1,300,000
b. P1,000,000
c. P1,080,000
d. P1,100,000

42. The partners, A and B, share profits 3:2. However, A is to receive yearly bonus of 20% of the profits,
in addition to his profit share. The partnership made a net income for the year of P24,000 before the
bonus. Assuming A’S bonus is computed on profit after deducting said bonus, how much profit share will
B receive?

a. P15,200
b. P9,600
c. P8,000
d. P9,000

43. Michelle, an active partner in the Michelle-Esme partnership receive an annual bonus of 25% of the
partnership income after deducting the bonus. For the year ended, Dec 31,2011, partnership income
before the bonus amounted to P240,000. The bonus of Michelle for the year 2011 is:

a. P45,000
b. P48,000
c. P80,000
d. P60,000

44. Garcia and Henson formed a partnership on Jan 2,2011 and agreed to share profits 90%, 10%
respectively. Garcia contributed capital of P25,000. Henson contributed no capital but has a specialized
expertise and manages the firm full time. There were no withdrawals during the year. The partnership
agreement provides for the following:
Capital accounts are to be credited annually with interest at 5% of beginning capital.
Henson is to be paid a salary of P1,000 a month.
Henson is to receive a bonus of 20% of income calculated before deducting his salary and interest on
both capital accounts.
Bonus, interest, and Henson’s salary are to be considered partnership expenses.
The partnership 2011 income statement follows:

Revenues P96,450
Expenses (including salary, interest and bonus) 49,700
_______
Net income P46,750

What is Henson’s 2008 bonus?

a. P11,688
b. P12,000
c. P15,000
d. P15,738

45. On Jan 2,2011 Bueno and Perez formed a partnership. Bueno contributed capital of P175,000 and
Perez P25,000. They agreed to share profits and losses 80% and 20% respectively. Perez is the general
manager and works in the partnership in full time. Perez is given a salary of P5,000 a month; a interest of
5% of the starting capital (of both partners) and a bonus of 15% of the net profit before the salary,
interest and the bonus.

The condensed statement of comprehensive income of the partnership for the year ended Dec 31,2011
is as follows:

Net sales P875,000

Cost sales 700,000
________
Gross profits on sales P175,000
Expenses (including the salary, interest and the bonus) 143,000
________
Total comprehensive income P32,000
The bonus of Perez in 2011 is:

a. P13,304.35
b. P18,000.00
c. P16,456.00
d. P20,700.00

46. On Jan 1,2011, A, B, C and D formed Bekha Trading co., a partnership, with capital contributions as
follows: A P50,000; B P25,000; C P25,000 and D P20,000. The partnership contract provided that each
partner shall receive a 5% interest on contributed capital, and that A and B receive salaries of P5,000
and P3,000, respectively. The contract also provided that C shall receive a minimum of P2,500 per
annum, and D a minimum of P6,000 per annum, which is inclusive of amounts representing interest and
share of remaining profits. The balance of the profits shall be distributed to A,B,C and D in a 3:3:2:2
ratio.
What amount must be earned by the partnership, before any charge for interest and salaries, so that A
may receive an aggregate of P12,500 including interest, salary and share of profits?

a. P16,667
b. P30,000
c. P30,667
d. P32,333

47. Arturo Perez, a partner in the AP partnership, has a 30% participation in partnership profits and
losses. Perez’s capital account has a net decrease of P60,000 during the calendar year 2011. During
2011, Perez withdrew P130,000 (charged against his capital account) and contributed property valued at
P25,000 to the partnership. What wad the net income of the AP Partnership for 2011?

a. P150,000
b. P233,333
c. P350,000
d. P550,000

48. K, L and M are partners with average capital balances during 2011 of P472,500, P238,650, and
P162,350 respectively. The partners receive 10% interest on their average capital balances; after
deducting salaries of P122,325 to K and P82,625 to M, the residual profits or loss is divided equally

In 2011, the partnership had a net loss of P125,624 before the interest and salaries to partners.
By what amount should K’s ad M’s capital account change?

K’s capital account M’s capital account

a. P40,844 decrease P31,235 decrease
b. P28,358 increase P32,458 increase
c. P29,476 increase P17,536 increase
d. P30,267 increase P40,448 decrease

49. Henry, Marta and Nestor are partners with average capital balances in 2011 of P240,000, P120,000
and P80,000 respectively. Partners receive 10% interest on their average capital balances. After
deducting salaries of P60,000 to Henry and P40,000 to Nestor, the residual profit or loss is divided
equally. In 2008 the partnership sustained a P66,000 loss before interest and salaries to partners. By
what amount should Nestor’s capital account change?

a. P30,000 decrease
b. P22,000 decrease
c. P48,000 increase
d. P28,000 increase

50. Abe, Bert and Carl are partners sharing profit on a 7:2:1 ratio. On Jan 1,2011, Dave was admitted into
the partnership with 15% share in profits. The old partners continue to participate in profits in their
original ratios.
For the year 2011, the partnership showed a profit of P15,000. However, it was discovered that the
following items were omitted in the firm’s book:
Unrecorded at year end 2007 2008
Accrued expense P1,050
Accrued income P875
Prepaid expenses P1,400
Unearned income P1,225

The share of partner Bert in the 2011 net profit is:

a. P2,197.50
b. P2,490.50
c. P2,637.00
d. P3,149.75

51. Herm, Mar and Ama formed a partnership on Jan 1,2011 and contributed P150,000, P200,000 and
P250,000 respectively. The articles of Co-partnership provides that the operating income be shared
among the partners as follows: As salary, for Herm in the amount of P24,000, for Mar P18,000 and for
Ama P12,000. Interest of 12% on the average capital during 2008 of the three partners and the
remainder in the ratio 2:4:4 respectively.
Addition information:
Operating income for the year ended December 31,2011 P176,000.

Herm contributed additional capital on July 1, P30,000 and made a drawing on Oct 1, P10,000, Mar
contributed additional capital on Aug 1, P20,000 and made a drawing on Oct 1, P10,000, and Ama made
a drawing of P30,000 on Nov 1.

The partners’ capital balances on Dec 31,2011 are:

a. Herm P179,680 Mar P229,360 Ama P239,360

b. Herm P179,760 Mar P229,520 Ama P239,520
c. Herm P189,680 Mar P239,360 Ama P269,360
d. Herm P223,180 Mar P272,060 Ama P280,760

52. The partnership of Gary, Jerome and Paul was formed on Jan 1,2011. The original investments as
follows:
Gary P80,000
Jerome P120,000
Paul P180,000

According to the partnership agreement, net income or loss will be divided among the respective
partners as follows:
Salaries of 12% for Gary, P10,000 for Jerome and P8,000 for paul
Interest of 8% on the average capital balance during the year of Gary, Jerome and Paul.
Remainder divided equally.
Additional information equally:
Net income of the partnership for the year ended DEC 31,2011.
Paul withdrew P30,000 from the partnership on Oct 1,2011.
Gary, Jerome and Paul made regular drawings against their shares of net income during 2011 of P10,000
each.

The partner’s capital balances as ofDec 31,2011 are:

Gary Jerome Paul

a. P112,333 P132,733 P164,934
b. P102, 333 P122,733 P154,934
c. P92,000 P102,000 P134,934
d. P122,333 P132,733 P164,934

53. On Jan 2, 2011 Phil, Art and Rey formed the PAR partnership contributing cash as follows:
Phil P192,000
Art P288,000
Rey P432,000

The partnership contract provides the following provisions in respect with partner’s remuneration:
1. Interest of 12% on average capital balances.
2. Annual salaries as follows:
Phil P28,800
Art P24,000
Rey P27,200
3. Remainder of the net income divided 40% to Phil, 30% to Art , and 30% to Rey.

Income before partner’s salaries and interest for the year ended Dec 31,2011 was P184,160. Phil
invested additional cash of P48,000 to the partnership on July 1, 2011. Rey withdrew P1,500 monthly
against their share of net income for theyear.

What is the capital balance of Phil on Dec 31,2011?

a. P274,320
b. P286,992
c. P235,200
d. P257,270

54. Tim and Tom entered into a partnership on Mar 1,2010 by investing P125,000 and P75,000
respectively. They agreed that Tim, as the managing partner, is to receive a salary of P30,000 per year
and a bonus computer at 10% of the net profit after adjustment for the salary and bonus; the balance of
the profit was to be distributed in the ratio of their original capital balances. On Dec 31,2011, account
balances were as follows:
Cash P70,000 Accounts receivable P60,000
Accounts receivable 67,000 Tim, capital 125,000
Furniture and Fixtures 45,000 Tom ,capital 75,000
Sales returns and Allowances 5,000 Tim, drawing (20,000)
Net purchases 196,000 Tom, drawing (30,000)
Operating expenses 60,000 Sales 233,000

Inventories on Dec 31,2011 were as follows: supplies P2,500; merchandise P73,000. Prepaid insurance
was P950 while accrued expenses were P1,550. Depreciation rate was 20% per year.
The partner’s capital balances on Dec 31,2011, after closing the net profit and drawing accounts, were:

Tim Tom
a. P142,350 P47,670
b. P135,940 P47,960
c. P139,540 P49,860
d. P139,491 P49,909

55. The inexperienced accountant for Jack, Kiel and Luck Partnership prepared the following journal
entries during the year ended Aug 31,2011:

2010
Sept 1 Cash 50,000
Goodwill 150,000
Jack, capital (P150,000 x 0.25) 37,500
Kiel, capital (P150,000 x 0.75) 112,500
Luck, capital 50,000
To record admission of Luck for a 20% interest in net assets, with goodwill credited to Kiel in their
former income sharing ratio. Goodwill is computed as follows:
Implied total capital based on Luck’s investment
(P50,000 x 5) P250,000
Less: net assets prior to Luck’s admission 100,000
________
Goodwill P150,000
2011
Aug 31 Income Summary 30,000
Jack, capital (P30,000 x .20) 6,000
Kiel, capital (P30,000 x .60) 18,000
Luck, capital ( P30,000 x .20) 6,000
To divide net income for the year in the residual income sharing ratio of Jack 20%; Kiel 60% and Luck
20%. Provision in partnership contract requiring P40,000 annual salary allowance to Luck is disregarded
because income before salary is only P30,000.

What should be the adjusted capital balances of old and new partners, respectively, at Aug 31,2011.

a. P192,000 and P88,000

b. P174,000 and P56,000
c. P192,000 and P56,000
d. P174,000 and P88,000

56. FF, GG and HH form a partnership and agree to maintain average investments of P2,500,000,
P1,250,000 and P1250,000, respectively. Interest on the excess or deficiency in a capital contribution is
to be computed at 6% per annum. After the interest allowances, FF, GG and HH are to share any
balances in the ratio of 5:3:2. Average amounts invested during the first six months were as follows: FF
P3,000,000; GG P1,370,000 and HH P 1,000,000. A loss from operations of P62,500 was incurred for the
first six months. How is this loss distributed among the partners?
 FF GG HH
a. P21,875 P18,375 P22,250
b. 12,500 10,000 49,500
c. 31,250 18,750 12,500
d. 18,375 21,875 22,250

57. RR, a partner in tee RD partnership, is entitled to 40% of the profits and losses. During 2011, RR
contributed land to the partnership that cost her P50,000, but had a fair value of P60,000. Also during
2011, RR had drawings of P80,000. The balance of RR’s capital account was P120,000 at the beginning of
the year and P150,000 at the end of the year.

What is the partnership’s comprehensive income (loss) for 2011.

a. P(75,000)
b. P(50,000)
c. P150,000
d. P125,000

58. MM is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus bonus of
10% of net income after salaries and bonus as a means of allocating profits among the partners. Salaries
traceable to the other partners are estimates to be P100,000. What mount of income would be
necessary so that MM would consider the choices to be equal?

a. P165,000
b. P290,000
c. P265,000
d. P305,000

59. KK, SS and WW formed a partnership on Jan 1, 2011. Each contributed P144,000.

Salaries were to be allowed as follows:

KK P36,000
SS 36,000
WW 54,000

Drawings were equal to salaries and be taken out evenly throughout the year.

With sufficient partnership net income, KK and SS could split a bonus equal to 25% of partnership net
income after salaries and bonus (in no event could the bonus go below zero).

Remaining profits were to be divided as follows: 30% for KK; 30% for SS and 40 for WW.

For the year, partnership comprehensive income was P144,000.

What are the capital balances of the partners on Dec 31,2011.

a. KK P186,120; SS P186,120; WW P203,760

b. KK P151,200; SS P151,200; WW P149,400
c. KK P150,120; SS P150,120; WW P149,760
d. KK P150,60O; SS P150,600; WW P148,800

60. Adam and Eve are CPA’s who have been operating their own separate practices as sole proprietors.
They decided to combine the two firms as a partnership on Jan 5, 2011. The following assets were
contributed by each:
Adam Eve
Cash P100,000 P100,000
Accounts receivable 225,000 190,000
Furniture and Equipment 35,000 38,000
Computer equipment - 46,000

The partners agreed to split profits on the basis of gross cash collection form billing generated from
clients. During 2011, Adam’s clients paid the firm a total of P1,500,000 and Eve’s clients paid P1,625,000.
Expenses for the year were P1,080,000 of which P480,000 were attributable to Adam and P600,000 to
Eve. During 2011 Eve withdrew P750,000 cash for personal needs and contributed an additional
computer value at P22,000.

What is the capital balance of Eve at Dec 31,2011?

a. P576,000
b. P839,400
c. P709,400
d. P889,400

61. Roy and Sam was organized and began operation on March 1,2011. On that date, Roy invested
P150,000 AND Sam invested computer equipment with current fair value of P180,000. Because of
shortage of cash, on Nov 1, 2011 Sam invested additional cash of P60,000 in the partnership. The
partnership contract includes the following remuneration plan:

Roy Sam
Monthly salary P10,000 P20,000
Annual interest on beginning capital 12% 12%
Bonus on the net profits before salaries
and interest but after bonus 20% -
Balance equally.

The balance to be withdrawn by each partner in monthly installments. The partnership’s net profit for
2011 is P120,000.

What are the capital balances of the partners on DEC 31, 2011?

Roy Sam
a. P243,500 P266,500
b. P136,000 P350,000
c. P86,000 P154,000
d. P87,000 P155,000

62. TM partnership begins its first year of operations with the following capital balances:
Tan capital P200,000
May capital P100,000

According to the partnership agreement, all profits will be distributed as follows:

a. Tan will be allowed a monthly salary of P20,000 with P10,000 assigned to May.
b. The partners will be allowed with interest equal to 10% of the capital balance as of the first day of the
year.
c. Tan will be allowed a bonus of 10% of the net profit after bonus.
d. The remainder will be divided on the basis of the beginning capital for the first year and equally for
the second year.
e. Each partner is allowed to withdraw up to P10,000 a year.

Assume that the net loss for the first year of operations is P15,000 with net income of P55,000 in the
subsequent year. Assume further that each partner withdraws the maximum amount from the business
each period.

What is the balance of Tan’s capital account at the end of the second year?

a. P264,750
b. P284,750
c. P180,000
d. P184,750

63. On June 30, 2011 the balance sheet for the partnership of Cruz, Merced and Prieto, together with
their respective profit and loss ratio, were as follows:

Assets, at cost P180,000

Cruz, loan 9,000

Cruz, capital (20%) 42,000
Merced, capital (20%) 39,000
Prieto, capital (60%) 90,000
________
P180,000

Cruz had decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to
their fair value P216,000 at JUNE 30, 2011. It was agreed that the partnership would pay Cruz O61,200
cash for Cruz’s partnership interest, including Cruz’s loan which is to be repaid in full. No goodwill is to
be recorded. After Cruz’s retirement, what is the balance of Merced capital account?

a. P36,450
b. P39,000
c. P45,450
d. P46,200

64. Cen,Deng and Lala are partners with capital balances on 31 Dec 2011 of P300,000, P300,000 and
P200,000 respectively. Profits are shared equally. Lala wishes to withdraw and it is agreed that she is to
take certain furniture and fixtures with second hand value of P50,000 and note for the balance of her
interest. The furniture and fixtures are carried in the books at P65,000. Brand new, the furniture and
fixtures may cost P80,000. Lala’s acquisition of the second hand furniture will result to:

a. Reduction in capital of P15,000 each for Cen and Deng.

b. Reduction in capital of P10,000 for Lala.
c. Reduction in capital of P5,000 each for Cen, Deng and Lala.
d. Reduction in capital of P7,500 each for Cen and Deng.

65. Jaime Dizon, a partner in an accounting firm, decided to withdraw from the partnership. Dizon’s
share to the partnership profits and losses was 20%. Upon withdrawing from the partnership he was
paid P74,000 in final settlement for his interest. The total for the partners capital accounts before
recognition of partnership goodwill will prior Dizon’s withdrawal was P210,000. After his withdrawal the
remaining partners’ capital accounts, excluding their share of goodwill, totaled P160,000. The implied
goodwill of the firm was:

a. P120,000
b. P140,000
c. P160,000
d. P250,000

66. Cina, Doy and Eli shared profit and Losses based on 5:3:2. Eli was allowed to withdraw from the
partnership on 31 Dec 2011 with P600,000 cash as full settlement. The condensed statement of financial
position of the partnership as f that date was as follows:

Assets
Due from Eli P250,000
Goodwill 2,000,000
Other assets 4,750,000
_________
Total assets P7,000,000

Liabilities and Capital

Liabilities P2,000,000
Due to Doy 750,000
Cina, capital 1,750,000
Doy, capital 1,500,000
Eli, capital 1,000,000
_________
Total liabilities and capital P7,000,000

Using the goodwill method, the new capital balances of the remaining partners after Eli’s withdrawal
are:

a. Cina P1,843,750 and Doy P1,556,250

b. Cina P1,375,000 and Doy P1,275,000
c. Cina P2,000,000 and Doy P1,650,000
d. Cina P1,750,000 and Doy P1,500,000
67. Pastor, Ramon and Sendong were parters with capital balances of Jan 1, 2011, of P100,000,
P150,000 and P200,000 respectively, sharing profit and losses on a 5:3:2 ratio.

On July 1,2011 Pastor withdraw from the partnership. Partners agreed that at the time of withdrawal,
certain inventories had to be revalued at P70,000 from its cost of P50,000. For the six month period
ending June 30,2011, the partnership generated a net income of P140,000. Further, partners agreed to
pay Pastor P195,000 for his interest and that the remaining partners’ capital accounts would be adjusted
for whatever goodwill the settlement would generate. The payment to Pastor included a goodwill of:

a. P15,000
b. P25,000
c. P50,000
d. P42,000

68. The condensed statement of financial position of the partnership of Endong, Fredo and Godo with
corresponding profit and loss sharing percentage as of June 30, 2011 was as follows:

Net assets P400,000

Endong, capital (50%) P200,000

Fredo, capital (30%) 120,000
Godo, capital (20%) 80,000
________
P400,000

As of said date, Endong retired from the partnership. By mutual agreement, he was paid P225,000 for
his interest in the partnership. The total implied goodwill was to be recorded. After Endong’s retirement,
the total net assets of the partnership was:

a. P250,000
b. P175,000
c. P200,000
d. P225,000

69. On Dec 31, 2011 the condensed statement of financial position of ABC partnership is presented
below:

Total assets P180,000

Amy loan P10,000

Amy capital 45,000
Bea capital 40,000
Cat capital 85,000
________
Total P180,000

Amy, Bea and Cat share profits and losses in the ratio of 3:2:1 respectively. It was agreed among the
partners that Amy retires from the partnership and the partnership’s assets to be adjusted their fair
value of P210,000. The partners further agreed to pay Amy P64,000 cash for her total interest in the
partnership.

What is the capital account of Cat after the retirement of Amy?

a. P35,000
b. P92,000
c. P27,000
d. P33,000

70. On July 10, 2011 Lolo wants to retire from JKL Partnership. The statement of financial position for
the JKL Partnership before closing on that date shows the following:

Cash P148,000 Liabilities P90,000

Receivable, net 72,000 Jose capital 200,000
Equipment, net 270,000 Kiko capital 96,000
Goodwill 60,000 Lolo capital 84,000
Income summary 80,000
________ ________
Total P550,000 Total P550,000

Jose, Kiko and Lolo share profits and losses in the ratio of 5:3:2 respectively. The partners agreed to
write off the goodwill and to adjust the equipment to their fair market value of P230,000. Lolo is paid
P110,000 cash for his total interest.

Assuming the use of the total goodwill method the total assets of the new partnership after the
retirement of Lolo is:

a. P554,000
b. P490,000
c. P474,000
d. P550,000

71. Lina, Mina and Nina were partners with capital balances on Jan 2, 2011 of P300,000, P200,000 and
P100,000 respectively. On July 1, 2011 Lina retires from the partnership. On the date of retirement the
partnership net loss is P60,000 and the partners agreed that certain asset is to be revalued at P80,000
from its original cost of P50,000. The partners agreed further to pay Lina P225,000 in settlement of her
interest. The remaining partners continue to operate under a new partnership, MN partnership.

What is the total capital MN partnership?

a. P345,000
b. P285,000
c. P340,000
d. P280,000

72. Rita, Sisa and Tina are partners with capital balances on June 30, 2011 of P60,000, P60,000 and
P40,000 respectively. Profits and losses are shared equally. Tina withdraws from the partnership. The
partners agree that Tina is to take certain furniture at their second hand value of P2,400 and cash for
the balance of her interest. The furniture is carried on the books as fully depreciated.

The amount of cash to be paid to Tina and the capital balances of the remaining partners after the
retirement of Tina are:

Cash Rita capital Sisa capital

a. P40,000 P60,000 P60,000
b. P37,600 P61,200 P61,200
c. P38,400 P60,800 P60,800
d. P42,800 P58,800 P58,800

73. As of Dec 31, 2011, the books of AME Partnership showed capital balances of: A P40,000; M P25,000
and E P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decides to
liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities amounting to
P12,000, they still have cash of P28,000 left for distribution. Assuming that any capital debit balance is
uncollectible, the share of A in the distribution of the P28,000 cash would be:

a. P17,800
b. P18,000
c. P19,000
d. P17,000

74. A, B and C are partners in textile distribution business, sharing profits and losses equally. On Dec 31,
2011, the partnership capital and the partners’ drawing were as follows:

A B C Total
Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000

The partnership was unable to collect on its trade receivables, and it was forced to liquidate. The
operating profits for 2011 amounted to P72,000, and was all exhausted including the partnership assets.
Unsettled creditors’ claimed at Dec 31, 2008 amounted to P84,000. B and C have Substantial private
resources, but A has no available free assets.

The final cash distribution to C was:

a. P162,000
b. P108,000
c. P84,000
d. P78,000

75. After operating for 5 years, the books of the partnership of Joe and Letty showed the following
balances:

Net assets P130,000

Joe, capital 85,000
Letty, capital 45,000
If liquidation takes place at this point and the net assets are realized at book value, the partners are
entitled to:

a. Joe to receive P90,000 and Letty to receive P40,000

b. Joe to receive P97,500 and Letty to receive P32,500
c. Joe to receive P65,000 and Letty to receive P65,000
d. Joe to receive P85,000 and Letty to receive P45,000

76. The following statement of financial position is presented for the partnership of David, Ebro and
Franco who share profits and losses in the ratio of 5:3:2 respectively:

Cash P60,000 Liabilities P140,000

Other assets 540,000 David, capital 280,000
Ebro, capital 160,000
Franco, capital 20,000
________ ________
Total P600,000 Total P600,000

The partners decided to liquidate the partnership. If the other assets are sold for P400,000, how should
the available cash be distributed to each partner?

a. David P280,000; Ebro P160,000; Franco P20,000

b. David P210,000; Ebro P118,000; Franco P8,000
c. David P206,000; Ebro P114,000; Franco P0
d. David P205,000; Ebro P115,000; Franco P0

77. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and
sharing profits 30%, 20% and 50% respectively. Partners agree to dissolve the business and upon
liquidation, all of the partnership assets are sold and sufficient cash is realized to pay all the claims
except one for P50,000. Li is personally insolvent, but the other two partners are able to meet any
indebtedness to the firm. On the remaining claim against the partnership, Gilbert is to absorb.

a. P40,000
b. P15,000
c. P30,000
d. P25,000

78. The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20% and 20%
respectively decided to liquidate. All partners assets are to be converted into cash. Prior to the
liquidation, the condensed statement of financial position is as follows:

Cash P100,000 Liabilities P750,000

Other assets 1,800,000 Bren, loan 60,000
Dior, loan 50,000
Aiko, capital 420,000
Bren, capital 315,000
Cinia, capital 205,000
Dior, capital 100,000
Total P1,900,000 Total P1,900,000

The non-cash assets realize P800,000 resulting to a loss of P1,000,000. All he partners are solvent, and
can contribute any additional cash to cover any deficiency. In the process of liquidation, deficiency(cies)
will occur and will require any additional investment as follows:

a. Cinia at P7,500
b. Dior and Cinia for P50,000 and P7,500 respectively
c. Dior at P50,00
d. None

79. Silverio, Domingo, Reyes and Pastor are partners, sharing earnings in the ratio of 3/21, 4/21, 6/21
and 8/21 respectively. The balances of their capital accounts on Dec 31,2011 are as follows:

Silverio P1,000
Domingo 25,000
Reyes 25,000
Pastor 9,000

The partners decide to liquidate, and they accordingly convert the non-cash assets into P23,200 of cash.
After paying the liabilities amounting to P3,000, they have P22,200 to divide. Assume that a debit
balance of any partner’s capital in uncollectible.

The share of silverio in the loss upon conversion of the non-cash assets into cash was:

a. P4,972
b. P5,257
c. P5,400
d. P5,200

80. The condensed statement of financial position of Alex, Jay and John partnership as of March 31,2011
follows:

Cash P28,000
Other assets 265,000
________
Total P293,000

Liabilities P48,000
Alex, capital 95,000
Jay, capital 80,000
John, capital 70,000
________
Total P293,000

Income and loss ratio is 50:25:25 respectively. The partners voted to dissolve the partnership and
liquidate by selling assets in installments, P70,000 was realized on the first cash sale of other assets
which has book value of P150,000. After settlement with creditors, all cash available was distributed to
partners. How much cash was received by John?

a. P10,500
b. P32,500
c. P21,250
d. P20,000

81. The partnership of Javier, Karim and Laurel share profits and losses in the ratio of 5:3:2 respectively.
The partners voted to dissolve the partnership when its assets, liabilities and capital were as follows:

Assets Liabilities and Capital

Cash P40,000 Liabilities P60,000
Other assets 210,000 Javier, capital 48,000
Karim, capital 72,000
Laurel, capital 70,000
________ ________
Total P250,000 Total P250,000

The partnership will be liquidated over a prolonged period of time. As cash is available it will be
distributed to the partners. The first sale of n0n-cash assets having a book value of P120,000 realized
P90,000. How much cash should be distributed to each partner after this sale?

a. Javier P0; Karim P28,800; Laurel P41,200

b. Javier P0; Karim P30,000; Laurel P40,000
c. Javier P35,000; Karim P21,000; Laurel P14,000
d. Javier P45,000; Karim P27,000; Laurel P18,000

82. Bach, Johann and Straus were partners sharing profits and losses based in 4:4:2 decide to liquidate.
All assets of the partnership were liquidated. The condensed statement of financial position just prior to
liquidation follows:

Assets Liabilities and Capital

Cash P100,000 Liabilities P140,000
Other assets 400,000 Bach, loan 10,000
Bach, capital 45,000
Johann, capital 105,000
Straus, capital 200,000
________ ________
Total P500,000 Total Liabilities and Capital P500,000

Other assets were sold for P247,500 realizing a loss of P152,500. Parties agreed to fully terminate the
partnership’s business, thus, necessitating distribution of cash to partners and in the event of capital
deficiency, contribution of additional cash. The three partners were all solvent and could answer any
capital deficiency.

Name the partner and give the corresponding additional cash he had to invest due to his net capital
deficiency to finally settle the liquidation of the partnership.
a. Bach P16,000
b. Johann P44,000
c. Bach P6,000
d. Straus P30,500

83. Partners Beth, John and Star who shared profit and losses based on 4:4:2 decided to liquidate. All
assets of the partnership were liquidated.

The condensed statement of financial position just prior to liquidation follows:

Cash P100,000 Liabilities P140,000

Other assets 400,000 Beth, loan 10,000
Beth, capital 45,000
John, capital 105,000
Star, capital 200,000
________ ________
Total P500,000 Total P500,000

Other assets were sold for P247,500 realizing a loss of P152,500. Parties agreed to fully terminate the
partnership’s business thus, necessitating distribution of cash to partners and in the event of capital
deficiency, contribution of additional cash. The three partners all solvent and could answer any capital
deficiency. The realization of assets, distribution of loss and payment of liabilities resulted to the
following partners loan and capital accounts balances prior to final cash settlement:

Beth, loan Beth, capital John, capital Star, capital

a. P10,000 P10,000 P50,000 P165,00
b. 10,000 (16,000) 44,000 169,500
c. 10,000 15,000 55,000 165,000
d. 10,000 45,000 105,000 200,000

84. Jacob, Santos and Hervas partners share net income and losses in the ratio of 5:3:2. The partners
decided to liquidate the partnership. Their statement of financial position prior to liquidation is:

Assets Liabilities and Capital

Cash P40,000 Liabilities P60,000
Other assets 210,000 Jacob, Loan 8,000
Jacob, capital 40,000
Santos, capital 72,000
Hervas, capital 70,000
________ ________
Total P250,000 Total liabilities and capital P250,000

The partnership is to be liquidated by installment. The first sale of non-cash assets with a carrying
amount of P120,000. Liquidation expenses paid amounted to P2,000.

How much cash should be distributed to each partner?

 Jacob Santos hervas
a. None P35,400 P45,600
b. 32,000 62,400 63,600
c. None 9,600 28,400
d. None 27,600 40,400

85. The following statement of financial position is for the partnership of D, E and F.

Cash P20,000 Liabilities P50,000

Other assets 180,000 D, capital (40%) 37,000
E, capital (40%) 65,000
F, capital (20%) 48,000
________ ________
Total P200,000 Total P200,000

Figures shown parenthetically reflect agreed profit and loss sharing percentages.

If the firm as shown on the original balance sheet, is dissolved and liquidated by selling assets in
installments, the first sale of non-cash assets having a books value of P90,000 realizes P50,000 and cash
of P17,000 after settlement with creditors is distributed; the representative partners would receive (to
the nearest peso).

a. D P8,000; E P8,000; F P4,000

b. D P6,667; E P6,667; F P6,666
c. D P0; E P13,333; F P6,667
d. D P0; E P1,000; F P16,000

86. L, M N and O partners to a law firm share profits 5:3:1:1 respectively. Partners accounts prior to
liquidation were as follows:

Advances (Dr) loans (Cr) Capitals (Cr)

L - P5,000 P40,000
M - 10,000 30,000
N P4,500 - 15,000
O 2,500 - 25,000

At this point, cash of P18,000 is available for distribution to the partners. How much of the P18,000 cash
should be distributed to each partner?

L M N O
a. P0 P18,000 P0 P0
b P0 P0 P0 P18,000
c. P0 P6,625 P0 P11,375
d. P9,000 P5,400 P1,800 P1,600

87. The statement of financial position of the Watch Partnership on Oct 10,2011 when to decided to
liquidate was as follows:
Cash P40,000 Liabilities P60,000
Other assets 125,000 Rolex, capital (50%) 45,000
Swatch, capital (30%) 42,000
Timex, capital (20%) 18,000
________ ________
Total P165,000 Total P165,000

Assume the other assets with a book value of P90,000 are sold for P50,000 and that all available cash,
except for a P10,000 contingency fund, is distributed immediately. In this case:

a. Rolex should receive nothing

b. Swatch should receive P10,000
c. Timex should receive P1,000
d. The cash should be distributed in the profit and loss ratio.

88. Kay and Loy, partners who share profits and losses equally decided to liquidate their partnership
business in installment. The statement of financial position showed Cash P35,000; Liabilities P20,000;
Kay capital P71,000 and Loy capital P54,000. Anticipated liquidation expenses amounts to P10,000.

How much cash can be distributed safely to each partners at this point?

Kay Loy
a. 5,000 0
b. 5,000 500
c. 3,000 0
d. 5000 1,000

89. The statement of financial position of QRST partnership just prior to liquidation shows:

Assets P90,000

Liabilities 15,000
Q, loan 5,000
Q, capital 20,000
R, capital 20,000
S, capita; 20,000
T, capital 10,000
_______
Total P90,000

Q, R, S and T share profits and losses in the ratio of 2:1:1, respectively. Certain assets were sold for
P45,000. Creditors were paid in full amount owned and cash of P20,000 were distributed to the
partners.

How much he P20,000 cash be distributed to the partners?

Q R S T
a. 2,500 8,750 8,750 0
b. 0 20,000 0 0
c. 0 10,000 10,000 0
d. 5,000 5,000 10,000 0

90. On Nov 30, 2011 Bee, Cee and Dee decided to liquidate BCD partnership. Their capital balances and
profits and loss on this date are as follows:

Bee, capital P50,000 (40%)

Cee, capital 60,000 (30%)
Dee, capital 20,000 (30%)

The net income from Jan 1 to Nov 30, 2011 is P44,000. On Nov 30,2011, cash and liabilities are P40,000
and P90,000 respectively.

For Bee to receive P55,200 in full settlement of his interest in the firm, how much must be realized from
the sale of the firms non-cash assets?

a. P233,000
b. P255,000
c. P149,000
d. P193,000

91. On July 1 ,2011, the Chess Partnership has the following statement of financial position:

Assets Liabilities and Capital

Cash P20,400 Accounts payable P122,400
Other assets 219,600 Rook, loan 14,400
Rook, capital (50%) 28,800
King , capital (50%) 74,400
________ ________
Total P240,000 Total P240,000

As of July 1,2011, the partners has personal net worth as follows:

Rook King
Assets P62,400 P91,200
Liabilities P56,400 122,400

The personal net worth of each partner does not include any amounts due to or from the partnership.

Assume the other asset are sold for P123,600 after incurring liquidation expenses of P4,800. How much
should king receive?

a. P 0
b. P22,800
c. P24,000
d. P16,800
92. Jay, Kay and Ell are partners in JKE partnership and share profits and losses, 5:3:2 respectively. The
partners have agreed to liquidate the partnership. Prior to liquidation, the partnership statement of
financial position shows the following book values:

Cash P25,200
Non-cash assets 297,600
Notes payable to Ell 38,400
Other liabilities 184,800
Jay, capital 72,000
Kay, capital (12,000)
Ell, capital 39,6000

Liquidation expenses of P156,800 are paid. Non-cash assets with a book value of P240,000 are sold for
P216,000

How much cash should Ell receive?

a. P74,571
b. P46,458
c. P39,580
d. P37,600

93. Bel, Col and Del partners of the BCD partnership, shared profits and losses in the ratio of 5:3:2
respectively. On Dec 31,2011, the end of an unprofitable year, they decide to liquidate the partnership.
The partners’ capital account balances on the date were as follows:

Bel, capital P22,000

Col, capital 24,900
Del, capital 15,000

The liabilities of the partnership amounted to P30,000 including a load of P10,000 payable to Bel. The
cash balance was P6,000. The partners planned to realize the non-cash assets in installment and to
distribute cash as it becomes available. All three partners are solvent.

If Bel received a total of P20,000 as a result of liquidation, what was the total amount realized by the
partnership on the non-cash assets?

a. P85,900
b. 91,900
c. 67,900
d. 61,900

94. The Dec 31,2011 statement of financial position of DJM partnership are as follows:

Cash P20,000
Receivable from day 20,000
Other assets 420,000
Accounts payable 170,000
Day, capital 120,000
Jay, capital 90,000
May, capital 80,000

The partners’ profit and loss percentage are Day 50%; Jay 30% and May 20%.

On Jan 1 of next year, the partners decide to liquidate the partnership. They agree that all cash should
be distributed as it becomes available during the liquidation process.

If cash of P220,000 including the P20,000 cash on hand becomes available, it should be distributed first
to settle the accounts payable and then to:

Day Jay May

a. 25,000 15,000 10,000
b. 0 26,000 24,000
c. 10,000 32,000 8,000
d. 0 18,000 32,000

Items 95-96 are based on the following data

On Dec 31, 2011, the accounting records of the STU partnership included the following ledger account
balances:
(Dr) Cr
Sy, drawing (24,000)
Uy, drawing (9,000)
Ty, loan 30,000
Sy, capital 123,000
Ty, capital 100,500
Uy, capital 108,000

Total assets of the partnership amounted to P478,500 including P52,500 cash. The partnership was
liquidated on Dec 31, 2008 and Uy received P83,250 cash pursuant to the liquidation. Sy, Ty and Uy
shared income and losses in a 5:3:2 ratio, respectively.

95. How much is the loss on realization of assets?

a. P178,750
b. P78, 750
c. P23, 750
d. P123,750

96. How much cash is received by Sy?

a. P35,625
b. P59,625
c. P37,125
d. P13,125
97. Pepe and Pilar started a partnership some years ago and managed to operate profitably for several
years. Recently, however, they lost a substantial legal suit and incurred unexpected losses on accounts
receivable and inventories. As a result, they decided to liquidate. They sold all assets and only P162,000
was available to pay liabilities, which amounted to P297,000. Their capital account balances before the
liquidation and their profit and losses sharing ratios are shown below:

Capital balances Profit and Loss ratios

Pepe P207,000 60%
Pilar P121,500 40%

Pepe is personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal
assets in excess of P900,000.

In the settlement to partners, how much cash should Pepe receive?

a. P63,900
b. P 0
c. P15,300
d. P63,000

98. Batman and Robin decided to liquidate their partnership on June 1, 2011, under lump-sum
liquidation. The partners had been sharing profits and losses on a 60:40 ratio. The statement of financial
position prepared on the day of liquidation began was as follows:

Assets Liabilities and Capital

Cash P18,000 Accounts payable P42,000
Receivables 75,000 Batman, loan 24,000
Inventory 90,000 Batman, capital 102,000
Other assets 84,000 Robin, capital 90,000
Robin, drawing 9,000
________ ________
Total P267,000 Total P267,000

During June, one-third of the receivables was collected; P45,000 of inventory was sold at an average of
70% of book value; other assets were sold for P36,000.

How much should Batman and Robin receive upon liquidation?

Batman Robin
a. P32,100 P36,400
b. P8,100 P27,400
c. P40,200 P41,800
d. P59,100 P54,400

99. The statement of financial position of Poe and Ping Partnership on May 1, 2011 before liquidation is
as follows:
Assets Liabilities and Capital
Cash P14,000 Liabilities P35,000
Other assets 71,000 Poe, capital (70%) 28,000
Ping, capital (30%) 22,000
_______ _______
Total P85,000 Total P85,000

In May, assets with a book value of P34,000 are sold for P29,000. Creditors are paid in full. Liquidation
expenses of P1,000 is paid, and P3,000 is paid to partners.

In May, how much did Ping receive?

a. P 0
b. P3,000
c. P900
d. P2,100

100. Partners Bee, Cee, Dee and Dee who share profits 5:3:1:2 respectively, decides to liquidation their
partnership. Capital balances before liquidations are:

Bee P60,000
Cee 40,000
Dee 30,000
Gee 10,000

The partners to the following:

(1) Partnership’s computer equipment with a book value of P12,000 is to be taken over by partner Bee
at a price of P15,000
(2) Partnership’s liabilities are to be paid off and the balance of cash on hand, P30,000 is to be divided in
a manner that will avoid the need for any possible recovery of cash from a partner.

How much of the P30,000 cash be distributed to Partner Cee?

a. P10,000
b. P 0
c. P20,000
d. P15,000