ACCOUNTING FOR SPECIAL TRANSACT

FORMATION OPERATION DISSO

1.Moreno, Ella Mhir 1. Porras, Trisha 1. Cabatbat, Elisha Fait
2. Angcanan, Jessica Merianne 2. Guevarra, Ana Maria 2. Constantino, Charle
3. Landua, Norhamida 3. Calumpita, Darlen 3. Gamban, Jamela Eric
4. Domingo, Raissa 4. Sia, Rycharde 4. Lopez, Ashley Denic
5. Aldana, Alyssa 5. Clariz, Charlotte 5. Castillo, Vanessa Ro
6. Quiles, Alyssa Joy 6. Viñas, Kassandra 6. Relampagos, Ishe
7. Diamos, Elisha Adrienne 7. Sciruth E. Ulep 7. Valenzuela, Vinesh A
8. Peralta, Gleniery 8. Sosmeña, Alijah Shane 8. De Guzman, Vinzon
9. Umlas, Lyka Nicole 9. Taduran, Aliyah 9. Khaira, Chandan
10. Punzalan, King 10. Diaz, Loida Victoria 10. Dimaunahan, Sean
11. Villanueva, Jhaymi
 IONS

LUTION LIQUIDATION
h 1. Almirol, Deceniña
ne 2. Regalado, Liz
a 3. Franco, Abegail
e 4. Labo, Rya Aikester V.
se 5. Regudo, Raphael Vito O.
6. Tabong, Marla Mikaela V.
bbey Emmanuelle 7. Saldua, Jemimah
8. Villanueva, Atiene
9. Tan, Aldrin
Leonard 10. Bobadilla, Mardi
e
 QUESTION 1

Tata and Koya decided to form a partnership on August 1 of the current year. Their Statem

TATA KOYA
Cash 59,656 165,780
Accounts Receivable 1,500,000 850,000
Merchandise Inventory 755,000 880,790

Equipment 562,425 126,432

TOTAL 2,877,081 2,023,002

Accounts Payable 399,876 1,159,375

Tata, Capital 2,755,000
Koya, Capital 2,574,012
TOTAL 3,154,876 3,733,387

They agreed to the following adjustments:

- Equipment of Tata is under-depreciated by P87,500 and that Koya is over-depreciated by
P131,
- Allowance for doubtful accounts is to be set up amounting to P297,500 for Tata and P196,875 f
- Inventories of P21,875 and P15,320 are worthless in the books of Tata and Koya, respectively.

The partnership agreement provides for a profit and loss ratio of 6:4 for Tata and Koya, respectiv

What is the adjusted capital of Tata and Koya using the Net investment method?

Answer: 2,348,125 and 2,493,067

Tata Koya
Unadjusted capital 2,755,000 2,574,012
Under-depreciated equipment -87,500
Over-depreciated equipment 131,250
Allowance for bad debts -297,500 -196,875
Write-down of inventories -21,875 -15,320
Adjusted capital 2,348,125 2,493,067
 ent of Financial Position on this date were:

250.
o r Koya.

ely.
 QUESTION 2

Alyssa, Julia, and Rice are forming a partnership. The appraised value of assets contributed
is 60,000, 80,000, and 100,000, respectively. In addition, Alyssa and Julia agree that
Rice's experience in the partnership is worth 30,000. The partners desire to apply the bonus method where
applicable. What is the total capital recorded at the date the partnership is formed?

Alyssa, Capital 60,000

Rice, Capital 80,000

Julia, Capital 100,000

TOTAL 240,000

Answer: 240,000
 3
QUESTION

Rosie, Carter, and Chelsea created a partnership business with

Rosie - cash 300,000, office equipment worth 500,000

Carter - cash 700,000 and merchandise for the balance amount
m
Chelsea - machinery worth 560,000 and cash for the balance a

As per their partnership

deed, the capital of each
partner would be equal to the
capital of Rosie.

What is the capital of each partner?

Initial capital of Rosie

Cash 300,000
Office equipment 500,000
Total capital 800,000

Initial capital of Carter

Cash 700,000
Merchandise 100,000
Total capital 800,000

Initial capital of Chelsea

Cash 240,000
Machinery 560,000
Total capital 800,000

Answer: 800,000 ; 800,000 ; 800,000

 April and Jade are joining their separate
equal amount of capital as follows:
total capital of P200,000. The non-

ount

The partner's capital accounts are to be eq

much is the total assets of the partners

Nakuha toh kasi equal lahat ng capital nila

Nakuha toh kasi equal lahat ng capital nila

 QUESTION 4

business to form a partnership. Cash and non-cash assets are to be

contributed for a
c ash assets to be contributed and liabilities to be assumed are: Ella and Mhir have just
value of the computer
60% capital interest in
April Jade an additional investmen
Book Value Fair Value Book ValueFair Value
Accounts Receivable 11,250 11,250 Cash

Inventories 11,250 16,875 30,000 33,750 Equipment

Equipment 18,750 15,000 33,750 35,625 Notes paya
Accounts Payable 5,637.50 5,625 3,750 3,750 Ella, Capita

ual after all contributions of assets and assumptions of liabilities. How

hip? Mhir, Capit
Ella, Capita

Asset Liability Capital

5,625 200,000 Ella, Capita
a
3,750 Desired Ell
209,375 9,375 200,000 Ella should
5
Answer: 209, 375 Answer: 1
 QUESTION 5

formed a partnership. Ella contributed cash of P 1,260,000 and com

s P 360,000. Ella has notes payable on the computer of P 120,000 to
he partnership. Mhir contributed only P 900,000.The partners agreed
t (or withdrawal) of .

1,260,000

@fair value 360,000

ble -120,000
l 1,500,000

al 900,000 40%
l 1,350,000 60%
2,250,000 100%

l 1,500,000
, Capital 1,350,000
withdraw 150,000

0,000
p uter equipment that cost P 540,000. The fair
be assumed by the partnership. Ella is to have
to share profit and loss equally. Ella should make
On December 1, 2023, Gina and Gela for

Cash

Machinery and equipment

Land
Sobra ang na invest nya dahil 1,350,000 lang ang k Building
Office furniture
Mortgage Loan
Goal naten ang 60% The land and building are subject to a mortga
Gela share profits and losses, 40% and 60%,
ratio and using the capita

a. 18,000
b. 85,500

Answer: 18,000

Gina 40%
Gela 60%
 QUESTION 6

med a partnership with contributing the following assets at fair market values:
Gina Gela
9,000 18,000

13,500 -
- 90,000
- 27,000
13,500 -
2160
ge loan of P54,000 that the partnership will assume. The partnership agreement provides that Gina and
respectively and partners agreed to bring their capital balances in the proportion to the profit and loss
l balance of BB as the basis. The additional cash investment made by AA should be:

c. 134,000
d. 166,250

Capital Contribution Agreed Contribution

36,000 135,000 18,000
81,000 81,000 0
117,000 135,000 18,000
 Question 1

Mike, Ann, and Dre formed partnership on January 1, 20x1. The contribution of the partner
follows: Mike P300,000; Ann P250,000 and Dre P450,000. The following are the agreement
partners:

* Monthly salary to Mike, Anne and Dre of P5,000 each

* Bonus to Mike of 10% of net income after interest and bonus
* Interest of 5% based on the capital contribution. The interest is treated as
expense as per agreement of the partners.

The net income of the partnership in year 20x1 is P264,000. What is the total income of Mike
from the partnership?

A. 117,000
B. 125,000
C. 147,000
D. 107,000

Answer: A. 117,000

Solution:
Mike Ann Dre
Share in NI 102,000 75,000 87,000
Interest (5%) 15,000 12,500 22,500
Total Income 117,000 87,500 109,500
 Question 2

s are as Mark and Gabriel formed a partnership on May 1, 20x1. Mark invested P350,000 c
s of the Gabriel invested equipment's with book value of P600,000 and fair value of P450
September 1, 20x1, Mark invested additional cash pf P50,000. On October 31, 20x

* Monthly salary allowances of P2,500 and P3,000 to Mark and Gabriel,

respectively. The salary allowance is treated as expense.
* 12% interest based on beginning capital
*25% bonus on net income after bonus to partner Mark

received The interest allowance is withdrawn by the partners in anticipation of profit sha
income summary has a credit balance amounting to P125,000.

Question 1. The total share in net income of partner Gabriel in the partnership is?

A. 64,500
B. 54,000
C. 56,250
D. 87,750

Answer: C. 56,250

Solution:
Mark Gabriel Total
Bonus 28,000 36,000 64,000
Interest 25,000 - 25,000
Remainder 15,750 20,250 36,000
Share in NI 68,750 56,250 125,000

Question 2. What is the capital balance of partner Mark on December 31, 20x1?
partnership is?

A. 350,250
B. 380,750
C. 420,500
D. 440,750

Answer: D. 440,750

Solution:
Mark Gabriel Total
Beg. Balance 350,000 450,000 800,000
Additional Investment 50,000 -
Share in NI 68,750 56,250
Drawings -28,000 -56,000
Ending, Capital 440,750 450,250
 Question 3

ash while Partners Halo and Kitty have profit and loss agreement with the following provisions
,000. On • Salaries of {30,000 and P45,000 for Halo and Kitty, respectively;
1, Gabriel • A bonus to Halo of 10% of net income after salaries and bonus;
• And interest of 10% on average capital balances of P20,000 and P35,000, respectiv
• One third of the remaining profits will be allocated to Halo and the balance to Kitty

If the partnership had net income of P102,500, how much should be allocated to P
Halo?

re. The A. 41,000

B. 61,500
C. 48,000
D. 64,500

Answer: A.

Solution

Halo Kitty Total

Bonus 2,500 2,500
Interest 2,000 3,500 5,500
Salaries 30,000 45,000 75,000
Remainder 6,500 13,000 19,500
Net Income 41,000 61,500 102,500

B = 10%(NI-Salaries-Bonus)
B = 10%(102,500-75,000-B)
10250 B + 2750 - .1B
7500 1.1B = 2750
2750 B - 2,500
2500
 Question 4

: Ed, Edd, and Eddie are partners owning a grocery store. Their capital account balances w
P50,000; Edd, P110,000; Eddie, P50,000. They share profits and losses on a 4:2:2 ratop, a
following terms;
ely.
.฀ a. Eddie is to receive a bonus of 10% of net profit after bonus.
b. Interest of 10% shall be paid on that portion of a partner's capital in excess of P100,00
artner c. Salaries of P10,000 and P12,000 shall be paid to partners Ed and Eddie, respectively.

Assuming a net profit of P44,000 for the year, the profits share of Edd was

A. 9,500
B. 7,800
C. 12,400
D. 5,600

Answer: B.

Solution:

Ed Edd Eddie Total

Net Profit 44,000.00
Bonus 4,000.00 4,000.00
Interest 1,000.00 1,000.00
Salaries 10,000.00 12,000.00 22,000.00
Remainder 6,800.00 6,800.00 3,400.00 17,000.00
Net Profit 16,800.00 7,800.00 19,400.00 44,000.00
 Question 5

ere: Ed, Hannah and Zoe reports net income of $70,000. The partnership agreement pro
fter the annual salaries of $50,000 for Hannah and $28,000 for Zoe, and interest allowan
$6,000 to Hannah and $10,000 to Zoe. Any remaining income or loss is to be sha
by Hannah and 40% by Zoe.

0. How much is the amount of net income distributed to Zoe?

A. 24,800
_. B. 20,800
C. 28,200
D. 28,400

Answer: D.

Solution:
Hannah Zoe Total
Salary 50,000 28000 78,000
Interest 6,000 10000 16,000
Total 56,000 38,000 94,000
Deficiency 41,600
-14,400 28,400
-9,600 70,000
-24,000
Net incom
vides for
ces of
red 60%
 faith & ash
QUESTION 1

The partner's capital accounts in Anna and Ben partnership before the admission of
their new partner are as follows:

Capital Accounts P/L Ratios

Anna, Capital 200,000 60%
Ben, Capital 120,000 40%
320,000

Carol purchase 1/4 of Anna's capital interest in the partnership. How much is the
capital balance in the partnership of Anna after the admission of Carol?

A. 120,000
B. 150,000
C. 180,000
D. 250,000

ANSWER: B. 150,000

Solution:
Anna Ben Carol Total
Capital, Beginning 200,000 120,000 320,000
Sale of Interest to Carol 50,000 50,000 -
Capital, End 150,000 320,000
 jam & char
QUESTION 2

April, May, and June are partners who share profits and losses 30%, 25%, 45%,
respectively. April informed May and June that he is withdrawing from the partnership.
The partner's capital accounts at the date of April's withdrawal are P150,000, P135,000,
and P225,000, respectively. The partnership agreement states that the goodwill, if any, of
the withdrawing partner will be recognized for all partners immediately prior to the
withdrawal of any partner. In this instance, the partners determine that the goodwill
associated with April is P22,500. Assuming that April's equity is purchased by May (60%)
and June (40%), what is the amount of May's capital account at the date of April's
withdrawal?

A. 172,500
B. 150,000
C. 257,250
D. 153,750

ANSWER: C. 257,250

Share of April in Revaluation 22,500

Revaluation 75000

Share of April in Revaluation 22,500

Share of May in Revaluation 18750
Share of June in Revaluation 33750
Total Revaluation 75,000

April, Capital 150,000

April, Capital after revaluation 172,500

Share of May to April's Capital after revaluation 103500

Share of June to April's Capital after revaluation 69000

May's share to April's Capital after revaluation 103500

May's capital at the date of April's withdrawal 135000
May's share in the revaluation 18750
Total capital of May after April's withdrawal 257250
 vans, ishe & abbey
QUESTION 3

Blossom, Bubbles, and Buttercup are partners with capital balances of P392,000, P1,365,000,
and P595,000 respectively, sharing profits and losses in the ratio of 3:2:1. Mojo Jojo is admitted
as a new partner bringing with him expertise and is to invest cash for 25% interest on the
partnership which includes a credit of P367,500 for bonus upon his admission. How much cash
should Mojo Jojo contribute?

A. 294,000
B. 661,500
C. 1,050,000
D. 784,000

ANSWER: D. 784,000

Solution:

Total Capital 3,136,000

Interest acquired by Diaz x 25%
Cash to be contributed by Mojo Jojo 784,000
 vans, ishe & abbey
QUESTION 4

Dee Dee, Marky, and Joey are partners. Joey permitted to withdraw from the partnership on December
31. It was agreed that the settlement is to made by payments from the personal funds of the remaining
partners to Joey. Capital balances on December 31 show:

Partner Capital Balances Profit Ratio

Dee Dee 30,000 30%
Marky 25,000 30%
Joey 45,000 40%

If Dee Dee and Marky paid Joey 48,000, how much is the undervaluation of assets is the transaction will
be recorded using the revaluation of assets method?

A. 5000
B. 7,500
C. 500
D. 3,500

ANSWER: B. 7,500

Solution:

Asset Revaluation Method

Other Assets (3,000/40%) 7,500
Joey, Capital 45,000
Cash 48,000
Dee Dee, Capital (7,500 x 30%) 2,250
Marky, Capital (7,500 x 30%) 2,250
 vans, ishe & a
QUESTION 5

Partner A is personally insolvent, owing 400,000. Personal assets will only bring 150,000 when liquidate
same time, A has a credit capital balance in the partnership of 85,000. The capital amounts of the othe
total a (credit) balance of 200,000. Under the doctrine of marshaling of assets, the personal creditors o
up to _.

A. 435,000
B. 150,000
C. 235,000
D. 400,000

ANSWER: C. 235,000

Solution:
Personal Assets 150,000
Credit capital balance in the partnership 85,000
Total 235,000
bbey
Question 6

Bale and Sia are partners who share profits and losses 6:4. They ea
P70,000 and P80,000 respectively. They agree to admit Gary as a n
investment of equipment costing P70,000 with a fair value of P90,00
sharing ratio of Bale and Sia?
d. At the A. 40.9%; 37.5%
r partners B. 37.5%;40.9%
f A can collect C. 37.5%; 25%
D. 25%; 37.5%

ANSWER: C. 37.5%; 25%

Solution:
TCC Ratio (old)
Bale 70,000 60%
Sia 80,000 40%

Total 150,000 100%

Gary 90,000

Total 240,000
 Punzalan

ch have a capital balance of

ew partner upon an
1. What is the new profit-

Ratio (new)
37.50%
25.00%
63%
37.50%
 Question 1

The partnership of Cindy, Mindy, and Henry was dissolved on June 30, 20x5 and accou
converted into cash on September 1, 20x5 are:

Assets Liabi
Cash 50,000.00 Accounts Payable
Cindy, Capital
Mindy, Capital
Henry, Capital

Personal assets and liabilities of the partners at September 1, 20x5 are:

Personal Assets Personal
Cindy 80,000.00 90,000.00
Mindy 100,000.00 61,000.00
Henry 192,000.00 80,000.00

If Henry contributes P70,000 to the partnership to provide cash to pay the creditors, wha
equity would appear to be recoverable?

A. 90,000
B. 81,000
C. 79,000
D. None

Answer: B. 81,000

Solution:

Cindy Mindy
Balance before liquidation 90,000.00 - 60,000.00
Additional Investment
90,000.00 - 60,000.00
Additional investment 39,000.00
90,000.00 - 21,000.00
Additional loss for insolvency of Mindy (3:4) - 9,000.00 21,000.00
81,000.00
Additional investment (192,000-80,000-
70,000)
81,000.00
 Andrea and Francine formed a partnership
nt balances after non-cash assets were of them. They invested P30,000 and P20,0
All their transactions were for cash, and all
respective bank accounts as summarized b

lities
Cash Receipts
120,000.00
Cash Disbursement
90,000.00
- 60,000.00
- 100,000.00

On October 31, 20x5, all remaining noncas partnership was dissolved and cash settlem Andrea
received:
A. 24,000
B. 26,000
C. 34,000
D. 36,000

t amount of Cindy's P90,000 partnership

Solution:

Initial investments
Investments
Withdrawals
Balance bef. Liquidation
Gain on realization
Balances bef. payment to partners
Payment to partner

Henry Total
- 100,000.00 - 70,000.00
70,000.00 70,000.00
- 30,000.00 -
39,000.00
- 30,000.00 39,000.00
- 12,000.00 -
- 42,000.00 39,000.00
-
42,000.00 42,000.00
₱ 81,000.00
 Question 2

on July 1, 20x5 to operate two stores to be managed by each

00 and agreed to share earnings 60% and 40%, respectively. AA, BB, and CC, par
their subsequent transactions were handled through their
elow:

Andrea Francine
79,100.00 65,245.00
62,275.00 70,695.00

h assets in the two stores were sold for cash of P60,000. The
ent was effected. In the distribution of the P60,000 cash,

Answer: B. 26,000
Solution:

Andrea Francine TOTAL

30,000.00 20,000.00 50,000.00 Balances before real
62,275.00 70,695.00 132,970.00 Divided by: P&L rati
- 79,100.00 - 65,245.00 - 144,345.00 Loss absorption abili
13,175.00 25,450.00 38,625.00 Priority I
12,825.00 8,550.00 21,375.00
26,000.00 34,000.00 60,000.00 Priority II
- 26,000.00 - 34,000.00 - 60,000.00

Cash Distribution:
Cash Payment to pa
Less: Priority I
 Question 3

tners to a firm, have a capital balances of P11,200, P13,000, and P5,800, respectively, and s
be given to the partners as it becomes available. Who among the partners s

A. BB
B. No one
C. CC
D. AA

Answer: A. BB

Interest
AA BB CC
ization 11,200.00 13,000.00 5,800.00
o 0.57 0.29 0.14
ty 19,600.00 45,500.00 40,600.00
-4,900.00
19,600.00 40,600.00 40,600.00
- -21,000.00 -21,000.00
19,600.00 19,600.00 19,600.00

Available AA BB

rtner 1,400.00
-1,400.00 ₱1,400.00
hare profits in the ratio of 4:2;1. Prepare a schedule showing how available cash will
hall be paid first with an available cash of P1,400

Payments

AA BB CC Total

1,400.00 1,400.00

- 6,000.00 3,000.00 9,000.00

- 7,400.00 3,000.00 10,400.00

CC
 Questio

The MNL Partnership is being dissolved. All liabilities have been

gradually. The equity of the partners is as follows:

Partner's
Partner
Accounts
M 24,000.00
N 36,000.00
L 60,000.00

The second cash payment to any Partner(s) under a program of

A. To L, P2,000
B. To N, P6,000
C. To L, P8,000
D. To N, P6,000 & L,

Answer: D. To N, P6,

Solution:

M
Balances before Liquidation
Loans 6,000.00
Capital 24,000.00

Total Interest 30,000.00

Divided by: P&L Ratio 0.30

Loss absorption ability 100,000.00

Priority I -
100,000.00
Priority II -

100,000.00

M
Balances before Liquidation
Loans
Capital

Total Interest
Divided by: P&L Ratio
Loss absorption ability
Priority I

Priority II
-
 n4

Atiene, Bits, and Rev are liq

paid and the remaining assets are being realized
account balances of P162, 000
25%, respectively, in additio

Profit & Loss

Loans to (from) Parntership When th
Ratio
6,000.00 3
- 3 A.1
92,500 B.
- 10,000.00 4
67,375
priorities shall be made thus: C. 548,57
D. 770,000

P8,000 Solution:

000 & L, P8,000

INTERESTS
N L

- - 10,000.00
36,000.00 60,000.00
36,000.00 50,000.00
0.30 0.40
120,000.00 125,000.00
- - 5,000.00

120,000.00 120,000.00
- 20,000.00 - 20,000.00

100,000.00 100,000.00

PAYMENTS
N L

2,000.00

6,000.00 8,000.00
6,000.00 10,000.00
 Question 5

uidating their partnership. AT the date the liquidation begins, Scoot, Joe, and Ed have capital
, P192,500, and P215,000, respectively and the partners share profits and losses 40%, 35%, and
n, the partnership has a P36,000 notes payable to Scott and P20,000 notes receivable from ED.

e liquidation begins, what is the loss absorption power with respect to Bits?

1.43

Answer: C. 279,000

Bits, Capital 192,000.00

P&L 0.35
Total ₱ 548,571.43