1. Tom and Jerry formed a management consulting partnership on January 1, 2021.

The fair value of net

assets invested by each partner follows:

Tom Jerry

Cash 13,000 12,000

Accounts receivable 8,000 6,000

Office 2,000 800

Office equipment 30,000

Land 30,000

Accounts payable 2,000 5,000

Mortgage payable 18,800

During the year, Tom withdrew P15,000 and Jerry withdrew P12,000 in anticipation of operating
profits.Net profit for 2021 was P50,000 which is to be allocated based on the original net capital
investment.

● The capital balance of Tom on December 31, 2021 is

69,553

● The capital balance of Jerry on December 31, 2021 is

29,447

2. Robert, Mico and Aaron formed a partnership on March 1, 2019 with original capital contributions of
P300,000, P100,000, and P400,000, respectively. On April 30, 2019, agreed to invest additional capital
of P100,000 each. On August 1, all partners agreed to have the same level of contributed capital of
P500,000.

● How much is the average capital balance of Mico for the 10-month period ending December 31,
2019?
330,000

● How much is the average capital balance of Robert for the 10-month period ending December
31, 2019?
430,000

● How much is the average capital balance of Mico for the 10-month period ending December 31,
2019?
Robert of P100,000. Mico of P300,000 and nothing from Aaron

3. Dino, Doods, and Dong have the following accounts and their normal balances on January 31, 2021,
the date the partners agreed to liquidate their 3D Partnership:

Cash P20,000 Accounts Payable P10,000

 Accounts Receivable 25,000 Notes Payable 27,000

Allowance for Bad Debts 5,000 Loans due to Dino 5,000

Merchandise Inventory 60,000 Loans due to Doods 7,000

Furniture & Equipment 50,000 Dino, Capital 20,000

Accumulated Depreciation 5,000 Doods, Capital 40,000

Dong, Capital 36,000

The partners divide profit and losses 4:1:5, respectively. Sales proceed follows:
Accounts Receivable P10,000
Merchandise Inventory 30,000
Furniture & Equipment 20,000

● Assuming that Dino is a limited partner, the cash paid to Dong is?
0

● If Dino is a limited partner, the cash paid to Doods is

32500

● Assuming that Dino is a limited partner, how much additional investment should Dong give?
1500

● How much is the non-cash assets?

125000

● Assuming that any deficiency will be immediately paid, the cash paid to Doods
40500

● Assuming that any deficiency is uncollectible, the cash paid to Dong?

2667

● The sale of non-cash assets resulted in a total loss of

65000

● How much is the cash available for distribution to the partners?

43000

● The sale resulted in a capital deficiency for

Dino

4. Felicity and Gregory are partners with capital balances of P700,000 and P500,000, respectively. They
agree to accept Randell who will contribute land costs him P500,000, but with a market value of
P600,000.

Randell will be given 30% interest in the partnership and bonus is to be recognized.
 ● The revised capital of Felicity after the admission of Randell is
P735,000

● Who gives the bonus?

Randell

Randell will be given 40% interest in the partnership.

● Assuming bonus is to be recognized, how much is the bonus?

120,000

● Assuming bonus is to be recognized, who gets the bonus?

Randell

5. Felicity and Gregory are partners with capital balances of P700,000 and P500,000, respectively. They
agree to accept Randell who will contribute land costs him P500,000 but with a market value of
P600,000. Randell will be given 30% interest in the partnership but assets should first be revalued
using Randell’s investment and interest as basis.

● How much is the total agreed capital?

P2,000,000

● How much is the total asset revaluation?

200,000

6. Felicity and Gregory are partners with capital balances of P700,000 and P500,000, respectively. They
agree to accept Randell who will contribute land costs him P500,000 but with a market value of
P600,000. Randell will be given 40% interest in the partnership but assets should first be revalued
using Randell’s investment and interest as basis.

● Total asset revaluation amounts to

P(300,000)

7. Ara, Bea, and Cai agreed to admit a new partner on January 1, 2021 when their capital balances were
250,000, 150,000, and 200,000, respectively. Profit and loss ratio is 2:1:2, respectively. A new partner,
Dell was admitted for cash investment that will give her 25% interest in the partnership.

How much should Dell invest?

200,000

8. Ara, Bea, and Cai agreed to admit a new partner on January 1, 2021 when their capital balances were
250,000, 150,000, and 200,000, respectively. Profit and loss ratio is 2:1:2, respectively.

Ara retired and the partnership paid her P240,000 after the assets were revalued.

● Bea’s capital after Ara’s retirement is

P145,000

Ara retired and the partnership paid her P280,000 after the assets were revalued.
 ● Total capital after Ara’s retirement is
P395,000

9. Ara, Bea, and Cai agreed to admit a new partner on January 1, 2021 when their capital balances were
250,000, 150,000, and 200,000, respectively. Profit and loss ratio is 2:1:2, respectively. A new partner,
Dell was admitted for cash investment of 100,000 for a 20% interest in an agreed capitalization of
700,000. The accountant recognized
Bonus to new partner

10. Ali and Bebe formed a partnership. The partnership agreement stipulates the following:
a. Ali shall contribute non-cash assets with a carrying amount of P60,000 and fair value of
P100,000.
b. Bebe shall contribute cash of P200,000
c. Ali and Bebe have an interest of 80% and 20%, respectively, on both initial and subsequent
partnership profits and losses
d. No outside cash settlement shall be made between the partners. *

● The entry to record the contribution of Bebe includes a credit to Ali’s capital in the amount of
140000

● The total partnership capital after the formation is ________.

300000

● The adjusted capital account of Bebe after the formation is ________.

60000

11. The partners in the ABC partnership have the capital balances as follows:
A - 70 000 ; B - 70, 000 ; C - 105 000
Profits and losses are shared 30%, 20%, 50%, respectively. On this date, C withdraws and the partners
agree to pay him P140,000 out of partnership cash. *

● Using the total revelation of asset method, the revised capital of B after the withdrawal of C is
84000

● Using partial revaluation of asset method, the revised capital of A after the withdrawal of C is
70000

● Using bonus method, the revised capital of A after the withdrawal of C is

91000 49000

12. Jack holds an ownership interest of 63% and Teresa holds an ownership interest of 37% in the J and T
partnership. This year, in order to fully develop the business, Jack contributes an additional P6800 and
Teresa contributes an additional P3200 to the partnership. Which of the following is TRUE of this
scenario
Individual contributions of P6800 by Jack and P3200 by Teresa will be recorded.

13. Assume that after operations and partners’ withdrawals during 20x2 and 20x3, DE partnership has a
book value of P120,000 and profit and loss (P&L) percentage on January 1, 20x4 as follows:
 a. Capital balances of P72,000 and P48,000 for D and E, respectively.
b. P/L ratio of 7:3 to D and E, respectively.

On this date, G is admitted to the partnership. G purchased one-fourth of D’s interest for P21,600 and
one-fourth of E’s interest for P14,400 making direct payment to D and E. The new partner will have a
one-fourth share in the profits and losses. The old partners continue to use their profit and loss ratios.

● The capital of E after the admission of G is _______.

36000

● The revised profit or loss percentage of D is _______.

52.5%

On this date, G is admitted to the partnership. G paid P28,000 directly in exchange for a one-third
interest of D.

● The capital account credit to G is _______.

24,000

14. Rica is a sole proprietor who invested her grocery when she invited Belle to form a new partnership
business. The following are the assets and liabilities of the grocery:

Cash 50,000

Merchandise 30,000 Book Value

P20,000 Market Value

Fixed Asset (100k less Acc. Depn 10K) 90,000 Book Value

70% of cost Market Value

Accounts Payable 20,000

Accrued Expenses 7,000

Belle invested the following:

Cash P60,000

Land (mortgage balance of 200,000 Book Value

P500k plus accrued interest
for 6 mos at 18%)

500,000 Market Value

Store furniture (costing 30,000

P40k less acc depn of 10k)

The total liabilities of the newly formed partnership would be

81,500
15. A statement of financial position of the partnership of X, Y, Z contains the following account balances:

Cash P240,000 Accounts Payable P300,000

Accounts Receivable 280,000 Notes Payable 200,000

Loans to Z 40,000 Loans from Y 20,000

Inventories 400,000 X, Capital 340,000

Property, Plant, and 440,000 Y, Capital 340,000

Equipment

Z, Capital 200,000

In January 2021, the loan to Z, was offset against his capital balance, P200,000 of accounts receivable
were collected and inventories with carrying value of P160,000 were sold for P200,000. Available cash
was distributed. **

X, Y, and Z share profits and losses in the ratio of 5:3:2, respectively.

● After the first distribution of cash, the equity of Y is ________.

220000

● If Z received P30,000 during the first cash distribution, the amount that should have been
received by X is ________.
15000

● If P40,000 cash was withheld for possible liquidation expenses, the amount of cash received by
Y in the first cash distribution is ________.
100000

● If X received a total of P240,000 in full settlement of his interest in the partnership, the total loss
incurred on the liquidation of the partnership is ________.
200000

● The amount of cash available for distribution to partners is ________.

140000

16. Brian Snow and Wendy Waite formed a partnership on July 1, 20x2. Brian invested P20,000 cash,
inventory valued at P15,000, and equipment valued at P67,000. Wendy invested P50,000 cash and
land valued P120,000. The partnership assumed the P40,000 mortgage on the land.

On June 30, 20x3, the partnership reported a net loss of P24,000. The partnership contract specified
that income and losses were to be allocated by allowing 10% interest on the original capital investment,
salaries of P15,000 to Brian and P20,000 to Wendy, and the remainder to be divided in the ratio of
40:60.
 On July 1, 20x3, Alan Young was admitted into the partnership with a P70,000 cash investment. Alan
was given 30% interest in the partnership because of his special skills. The partners elect to use the
bonus method to record the admission. Any bonus should be divided in the old ratio of 40:60.*

On June 30, 20x4, the partnership reported a net income of P150,000. The new partnership contract
stipulated that income and losses were to be divided a fixed ratio of 20:50:30

On July 2, 20x4, Brian withdrew from the partnership for personal reasons. Brian was given P40,000
cash and a P60,000 note for his capital interest.

● The share of Snow in the net loss for the first year is ________.
(16,320) 7680

● The share of Snow in the net income for the second year is ________.
30000

● The decrease in the capital of Waite upon the admission of Alan is ________.
8040

● Upon formation the amount credited to the capital account of Waite is ________.
130 000

● The entry to record the withdrawal of Snow includes a credit to Waite, Capital in the amount of
11850

17. A 1:3:2 ratio is the same as

⅙:½:⅓

18. Mickey, Donald, and Minnie are partners sharing profit and loss in the ratio of 2:1:1, respectively. Their
capital balances are P400,000 for Mickey, P200,000 for Donald and P100,000 for Minnie. Claims of
suppliers amounted to 500,000 including the loan extended by Minnie, P50,000. The cash balance
amounted to P300,000 and it increased to P1,050,000 as a result of the sale of the non-cash assets.

● How much cash was received by Donald in the final settlement?

162,500

● How much cash was received by Mickey in the final settlement?

325,000

● How much was the non-cash assets of the partnership?

900,000

● How much was the loss from sale of non-cash assets?

150,000

● How much was the cash proceeds from sale of non-cash assets?
750,000

● How much cash will Minnie receive?

 112,500

19. Partnership JB has two partners, Jim and Bill. Jim own 60% of the partnership and Bill owns 40%. In
which of the following transactions will the partnership be held responsible for an individual partners'
actions
Bill signs a contract to buy furniture for official use in the partnership.

20. Carlin and Marley have a partnership agreement which includes the following provisions regarding
sharing net income or net loss.
* A salary allowance of P120,000 to Carlin and P100,000 to Marley.
* An interest allowance of 10% on capital balances at the beginning of the year.
* A bonus of 20% to Carlin,
* The remainder is to be divided 40% to Carlin and 60% to Marley.

The capital balances on January 1, 2018 for Carlin and Marley was P90,000 and P120,000,
respectively. During 2018, the Carlin and Marley partnership had sales of P2,000,000, cost of goods
sold of P1,100,000, and operating expenses of P400,000. Income Tax rate is 30%.

● If bonus is computed based on net income before bonus, salary allowances, and interest on
capital, the total share of C in the partnership is ________.
214600

● If bonus is computed based on net income after bonus, salary allowances, and interest on
capital, the total share of C in the partnership is ________.
183500

21. On January 1, 2021, Am and Boy agreed to form a partnership. The partners’ contribution are as
follows:

Am Boy

Cash 50,000 120,000

AR 360,000 1,080,000

Inventories 216,000 360,000

Land 1,080,000

Building 900,000

Equipment 90,000 90,000

AP 336,000 450,000

Capital 1,460,000 2,100,000

The partners agreed to the following:

A. The recoverable amounts of the partners’ accounts receivable are P300,000 and P760,000 for
and Boy , respectively
B. The inventory contributed by Boy includes obsolete items with a recorded cost of P200,000
 C. The land contributed by Am has an attached mortgage of P180,000. The partnership shall
assume the mortgage
D. The equipment contributed by Boy has a fair value of P130,000
E. Has an unrecorded accounts payable of P100,000. The partnership assumes the obligation of
settling the account *

● The total assets of Amboy Partnership is

3986000

● The adjusted capital balance of Am is

1120000

● The adjusted capital balance of Boy is

1800000

22. Assume that AA and BB partners of AB Partnership (who share net income and loss in 80%:20%)
organize A & B Corporation to take over the net assets of the partnership. The balance sheet of the
partnership on June 20, 20x4, the date of incorporation, is as follows: **

Assets:

Cash 14,400

Trade AR 33,720

Allowance for doubtful accounts (720)

Inventories 30,600

Equipment 72,000

A/D (31,200)

Total Assets 118,800

Liabilities and Partners Capital

Trade AP 42,000

AA, Capital 57,588

BB, Capital 19,212

Total Liabilities and Partners Capital 118,800

After an appraisal of the equipment and an audit of the partnership’s financial statements, the partners
agree that the following adjustments are required to restate the net assets of the partnership to current
fair value:
A. Increase the allowance for doubtful accounts to P1,200
B. Increase the inventories to current replacement cost of P36,000
 C. Increase the equipment to its reproduction cost new, P84,000, less accumulated depreciation on
this basis, P36,600; that is to current fair value , P47,400
D. Recognize accrued liabilities of P1,320
E. Recognize goodwill of P12,000

A & B Corporation is authorized to issue 12,000 shares of P10 par common stock. It issues 9,000
shares of common stock valued at P11 a share to the partnership in exchange for the net assets of the
partnership

● In the books of the corporation, the amount credited to Paid in Capital in Excess of Par is
9000

● The adjusted capital of AA is

75348

● The adjusted capital of BB is

23652

● The total net adjustment is

22200

23. An advantage of the partnership as a form of business

A partnership is created by a mere agreement of the partners

24. Luz, Vi and Minda are partners when the partnership earned a profit of P30,000. Their agreement
provides the following regarding the allocation of profit and losses:
a. 8% interest in partner’s ending capital in excess of P75,000
b. Salaries of P20,000 for Luz and 30,000 for Vi
c. Any balance is to be distributed 2:1:1 for Luz, Vi and Minda, respectively.

Assume ending capital balances of P60,000, P80,000 and P100,000 for partners Luz, Vi and Minda,
respectively. What is the amount of profit allocated for Minda, if each provision of the profit and loss
agreement is satisfied to whatever extent possible using the priority order shown above?
P2,000

25. Partners AA and BB have profit and loss agreement with the following provisions: salaries of P30,000
and P45,000 for AA and BB, respectively; a bonus to AA of 10% of net income after salaries and bonus,
and interest of 10% on average capital balances of P20,000 and P35,000 for AA and BB, respectively.
One-third of any remaining profits will be allocated to AA and the balance to BB.

● If the partnership has net income of P102,500, how much should be allocated to Partner AA?
P41,000

● If the partnership has net income of P102,500, how much should be allocated to Partner BB?
P61,500

● If the partnership had net income of P22,000, how much should be allocated to partner AA,
assuming that the provision of the profit and loss agreement are ranked by order of priority
starting with salaries?
 P8,800

26. Hope & Faith Co. reports net income after 30% tax of P235,000 by the end of 2018. The partnership
agreement provides for division of profit or loss on the ratio of the partners’ capital balances. At the end
of 2017, each partner had a capital balance of P220,000. During 2018, Hope made additional
investment of P50,000 on April 1 and withdrew P70,000 of her capital on September 30. Faith, on the
other hand, made additional investment of P80,000 on October 1.

● The share of Hope in the net profit using the ratio of weighted average capital is ____
P117,500

27. The partnership agreement of Rossi and Olson provides for salary allowances of P45,000 to Rossi and
P35,000 to Olson, with the remaining income or loss to be divided equally. During the year, Rossi and
Olson each withdraw cash equal to 80% of their salary allowances. If partnership net income is
P100,000, Rossi’s equity in the partnership would
Increase more than Olson’s

28. Nancy and Betty enter into a partnership agreement where they decide to share profits according to the
following rules.
● Nancy and Berry will receive salaries of P1700 and P14500 respectively as the from allocation.
● The next allocation is based on 20% of each partner’s capital balances.
● Any remaining profit or loss is to be allocated completely to betty

The partnership net income for the first year is P50,000. Nancy’s capital balance is P83,000 and Betty's
capital is P11,000 at the end of the year. Calculate the share of profit/loss to be allocated to Betty.
P31,700

29. The most appropriate basis for dividing partnership net income when the partners do not plan to take
an active role in daily operation is
On a ratio based average capital balances

30. XYZ Partnership provided for the following in the distribution of profits and losses:
First: X is to receive 10% of net income up to P100,000 and 20% of the amount in excess thereof.
Then: Y and Z are each to receive a 5% of the remaining income in excess of P150,000 after X’s share.
Lastly: The balance is to be distributed equally to the three partners.

● If the partnership income is P250,000, what is the total share of X?

P108,000

31. Tamayo, Banson and Vidal, a partnership formed on january 1, 2018, had the following initial
investments.

Tamayo 100,000

Banson 150,000

Vidal 225,000
 The partnership agreement profits and losses are to be shared equally by the partners after
consideration is made for the following:
a. Salaries allowed to partners: P60,000 for Tamayo; P48,000 for Banson and P36,000 for Vidal.
b. Average partner’s capital balances during the year shall be allowed 10% interest.

Additional information:
A. On June 30,2018, Tamayo invested an additional P60,000.
B. Vidal withrew P70,000 from the partnership on September 30, 2018.
C. Share on the remaining profit was P3,000 for each partner.

● The average capital of Vidal is ________.

207500

● The partnership net profit for 2018 before salaries, interest and partner’s share on the
remainder is _______.
201750

● The average capital of Tamayo is ________.

130000

● Interest on average capital balances of the partners totals

48750

● Total Partnership Capital

666750

32. Mariano and Lucas entered into partnership on March 1, 2018, investing P125,000 and P75,000
respectively. It was agreed that Mariano, the managing partner, was to receive a salary of P12,000 per
year and also 10% bonus on the profit after adjustment for the salary, the balance of the profit was to
be divided in the ratio of the original capital. On December 31, 2018, account balances are as follows:

Cash 70,000 Accounts payable 60,000

Accounts receivable 67,000 Sales 233,000

Furniture and Fixtures 45,000 Mariano, Capital 125,000

Purchases 196,000 Lucas Capital 75,000

Sales returns & allowances 5,000 Mariano Drawing (20,000)

Operating expenses 60,000 Lucas Drawing (30,000)

Inventories on December 31, 2018 were merchandise, P73,000; Supplies P2,500. Prepaid insurance
was P950 and accrued liabilities totaled P1,550. Depreciation on Furniture & Fixtures is to be computed
at 20% per year. Income tax rate is 35%.

● The distribution of net profit to Mariano is _______.

20342
 ● The distribution of net profit to Lucas is _______.
5268

● After closing the net profit and drawing accounts, the capital of Lucas is _______.
50268

● After closing the net profit and drawing accounts, the capital of Mariano is _______.
125342

33. Sison, Torres and Velasco are partners in an accounting firm. Their capital account balances at year-
end were: Sison, P50,000; Torres, P110,000; Velasco, P50,000. They share profits and losses in a
4:4:2 ratio, after the following terms;
a. Partners Velasco is to receive a bonus of 10% of net profit after bonus.
b. Interest of 10% shall be paid on the portion of a partner’s capital in excess of P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners Sison and Velasco, respectively.

● Assuming a net profit of P22,000 for the year, the profit share of Sison was ________.
8800

● Assuming a net profit of P22,000 for the year, the profit share of Torres was ________.
(200)

● Assuming a net profit of P22,000 for the year, the profit share of Velasco was ________.
13400

● Assuming a net profit of P44,000 for the year, the profit share of Sison was ________.
16800

● Assuming a net profit of P44,000 for the year, the profit share of Torres was ________.
7800

● Assuming a net profit of P44,000 for the year, the profit share of Velasco was ________.
19400

34. Carlin and Maley have a partnership agreement which includes the following provisions regarding
sharing net income or net loss:
❖ A salary allowance of P120,000 to Carlin and P100,000 to Maley.
❖ An investment allowance of 10% on capital balances at the beginning of the year.
❖ A bonus of 20% Carlin
❖ The remainder to be divided 40% to Carlin and 60% to Maley.

The capital balance on January 1, 2018 for Carlin and Maley was P90,000 and P120,000, respectively.
During 2018, the Carlin and Maley partnership had sales of P2,000,000 cost of goods sold of
P1,100,000 and operating expenses of P400,000. Income tax rate is 30%.

● If bonus is computed based on net income before bonus, salary allowances, and interest on
capital, the total share of C in the partnership is __________.
P214,600
 ● If bonus is computed based on net income after bonus, salary allowances, and interest on
capital, the total share of C in the partnership is __________.
P183,500

35. Which one of the following would not be considered an expense of a partnership in determining income
for the period?
Salary allowance to partners

36. A partners share of net income is recognized in the accounts through

Closing entries

37. Jaime, Madrid and Soriano are partners sharing profits on a 5:3:2 ratio. On January 1, 2018, Matias
was admitted into the partnership with a 20% share in the profits. The old partners continue to
participate in profits proportionate to their original ratios. For the year 2018, the partnership books
showed a net profit of P250,000. It was disclose however, that the errors shown below were made:

● Assuming that income tax rate is 35%, the share of Jaime in the corrected net profit is
________.
96100

● Assuming that income tax rate is 35%, the share of Madrid in the corrected net profit is
________.
57660

● Assuming that income tax rate is 35%, the share of Soriano in the corrected net profit is
________.
38440

● Assuming that income tax rate is 35%, the share of Matias in the corrected net profit is
________.
48050

● The new profit and loss ratio of Jaime is ________.

40%

● The new profit and loss ratio of Madrid is ________.

24%

● The new profit and loss ratio of Soriano is _______.

16%

38. The net income of the Rice and Wynn partnership is P120,000. The partnership agreement specifies
that Rice and Wynn have a salary allowance of P32,000 and P48,000 respectively. The partnership
agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year.
Each partner had a beginning capital balance of P80,000. Any remaining net income or net loss is
shared equally.

● What is Rice’s share of the P120,000 net income?

P52,000
 ● What is the balance of Wynn’s Capital account at the end of the year after net income has been
distributed?
P148,000

39. The BLUE Company, a partnership, was formed on January 1, 2018 with four partners, Belen, Lorna,
and Edna. Capital contributions were as follows:

Belen 100,000

Lorna 50,000

Ursula 50,000

Edna 40,000

The partnership agreement provides that each partner shall receive 5% interest on the amount
of his/her capital contribution. In addition, Belen is to receive a salary of P10,000 and Lorna a salary
of P6,000 per annum which are to be charged as expenses of the business. The agreement further
provides that Ursula shall receive a minimum of P5,000 per annum from the partnership and Edna a
minimum of P12,000 per annum, both including the profits is to be distributed in the following
proportion: Belen 30% Lorna 30% Ursula 20% Edna 20%.

● The amount that must be earned by the partnership during 2018, before any change for interest
on capital or partners salaries in order that Belen may receive an aggregate of P25,000
including interest, salary and share of profits would be _________. (Disregard income tax.
Round your final answer to the nearest peso. Do not use peso sign, comma, and decimal.)
64667

● Using the amount that must be earned by the partnership during 2018, before any change for
interest in capital or partners salaries in order that Belen may receive an aggregate of P25,000,
including interest, salary and share of profits, the total earnings of Ursula would be
_________. (Disregard income tax. Round your final answer to the nearest peso. Do not use
peso sign, comma, and decimal.)
9167

● Using the amount that must be earned by the partnership during 2018, before any change for
interest in capital or partners salaries in order that Belen may receive an aggregate of P25,000,
including interest, salary and share of profits, the total earnings of Lorna would be _________.
(Disregard income tax. Round your final answer to the nearest peso. Do not use peso sign,
comma, and decimal.)
18500

40. On October 31, 2018, Zita and Jones formed a partnership by investing cash of P300,000 and
P200,000, respectively, The partners agreed to receive and annual salary allowance of P360,000 and
to give Zita a bonus 20% of the net income after partner’s salaries, the bonus being treated as an
expense.
 If the profits after salaries and bonuses are to be divided equally, and the profits on December 31,
2018 after partner’s salaries but before bonus of Zita are P360,000, how much is the share of Zita in
the profits?
P270,000

41. RK is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of
10% of net income after salaries and bonus as a means of allocating profit among partners. Salaries
traceable to the other partners are estimated to be P100,000. What amount of income would be
necessary so that RK would consider choices to be equal?
P290,000

42. A, B, and C are capitalist partners while D is an industrial partner. The partnership reported a net loss of
P100,000. How much is the share of D in the reported net loss?
P-0-

43. A partner’s share of net income is recognized in the accounts through

Closing entries

44. If the partnership agreement does not specify how income is to be allocated, profits and losses should
be allocated
In accordance with their capital contribution

45. Lori and Mike enter into a partnership and decide to share profits and losses as follows:
● The first allocation is a salary allowance with Lori receiving P12,000 and Mike receiving
P25,000.
● The second allocation is 20% of the partners’ capital balances at year end. On December 31,
2019, the capital balances for Lori and Mike are P86,000 and P344,000, respectively.
● Any remaining profit or loss is allocated equally.

For the year ending December 31, 2019, the partnership reported a net loss of P122,000. The journal
entry to record the loss allocation will _______.
Debit Lori, Capital for P93,300

46. The Smith and Jones partnership agreement stipulates that profits and losses will be shared equally
after salary allowances of P120,000 for Smith and P60,000 for Jones. At the beginning of the year,
Smith’s Capital account had a balance of P240,000, while Jones’ Capital account had a balance of
P210,000. Net income for the year was P150,000 The balance of Jones’ Capital account at the end of
the year after closing is
P255,000

47. David, Chris, and John formed a partnership on July 31, 2019. They decided to share profits equally,
but inserted a clause in the partnership agreement where any losses would be allocated in the ratio of
5:2:3, respectively. For the year ended December 31, 2019, the firm earned a net income of P50,000.
However, for the year ended December 31, 2020, the firm incurred a loss of P60,000. Assuming that
John had an initial capital contribution of P43,000 and made no withdrawals, what is the balance of
John’s capital account as of december 30, 2020? (Assume that none of the partners made any further
contributions to their capital accounts. Do not round any percentage calculations. Round all monetary
calculations to the nearest peso)
P41,667
48. DOER partnership was organized on March 1, 2021. On formation date, Dory invested P150,000 and
Erwin invested land and building with fair value of P80,000 and P100,000. Erwin also invested P60,000
cash in the partnership on November 1, 2021 to meet the additional liquidity requirements of the
business. The Article of Co-partnership stipulates the following:
A. Annual salary of P18,000 o Dory and P24,000 to Erwin
B. 10% annual interest on average capital account balance, and the
C. Remainder to be shared 6:4 to Dory and Erwin, respectively.

The annual salary was to be withdrawn by each partner in twelve monthly installments, During the fiscal
year ended, February 28, 2022, DOER had net sales of P500,000, cost of sales of P280,000, and total
operating expenses of P100,000 (excluding salaries and interest on average capital balance of
partners). Each partners made monthly cash drawings in accordance with the agreement.

Assume that the annual salary is to be recognized as operating expenses and the total operating
expenses of P100,000 includes the partners’ salaries but excluding interest on partners’ average capital
account balances.

● The capital balance of Dory at the end of the fiscal year is

216000

● The capital balance of Erwin at the end of the fiscal year is

294000

● The share of Dory in the net income is

66000

● The share of Erwin in the net income is

54000

DOER partnership was organized on March 1, 2021. On formation date, Dory invested P150,000 and
Erwin invested land and building with fair value of P80,000 and P100,000. Erwin also invested P60,000
cash in the partnership on November 1, 2021 to meet the additional liquidity requirements of the
business. The Article of Co-partnership stipulates the following:
D. Annual salary of P18,000 o Dory and P24,000 to Erwin
E. 10% annual interest on average capital account balance, and the
F. Remainder to be shared 6:4 to Dory and Erwin, respectively.

The annual salary was to be withdrawn by each partner in twelve monthly installments, During the fiscal
year ended, February 28, 2022, DOER had net sales of P500,000, cost of sales of P280,000, and total
operating expenses of P100,000 (excluding salaries and interest on average capital balance of
partners). Each partners made monthly cash drawings in accordance with the agreement.

Walang assume that annual salary blablabla.

● The capital balance of Dory at the end of the fiscal year is

190800
49. Mr Chow, Ms. King, Mr. Jolly and Ms. Bee formed a partnership on Jan. 01, 2017 with original capital
contributions of P300,000, P100,000, P200,000 and P400,000, respectively. On Jan. 01, 2019 capital
accounts of Mr. Chow, Ms King, Mr. Jolly and Ms. Bee showed the beginning balance for the year of
P450,000, P300,000, P250,000, and P400,000 , respectively. On Sept. 30 Mr. Chow and Ms. King
invested P100,000 each. Ms. Bee withdrew her investment of P100,000 on Oct. 01 for personal
reasons. The partnership suffered a net loss of P240,000.

● How much is the share of Ms. Jolly on the loss for 2019 if there is no agreement on the
distribution of profit and loss?
(48,000)

● How much is the share of Ms. Chow on the loss for 2019 if there is no agreement on the
distribution of profit and loss?
(72,000)

● How much is the average capital balance of Ms. King for the year 2019?
325,000

● How much is the average capital balance of Mr. Jolly for the year 2019?
250,000

● How much is the average capital balance of Mr. Bee for the year 2019?
375,000

50. YET Partnership began its first year of operations with investment from Y, P143,000, E, P104,000, and
T, P143,000. The Articles of Partnership provides that profit and losses be assigned in the following
manner:
a. Y and T were to be given annual salary of P26,000 and P13,000, respectively,
b. Each partner was to be given interest of 10% on capital balance as of the first day of the year,
c. Remainder was to be distributed on 5:2:3 ratio respectively for Y, E, and T.

Each Partner was allowed to withdraw up to P13,000 each year. For the first year of operation, the
partnership incurred a net loss of P26,000. In the second year, it earned net income of P52,000. Each
partner withdraw the maximum amount from the business each year.*

● E’s share in net loss for the first year is

10400

● The balance of the capital of Y at the end of the first year is

118300

● Y’s share in the net income for the second year is

28080

● The balance of the capital of T at the end of the second year is

132860

51. Assume the following data for GH Partnership:

 Assets Liabilities and Capital

Cash 3,000 Liabilities 9,000

Non-cash Assets 39,000 G, Capital (60%) 24,000

G, Loan 3,000 H, Capital (40%) 12,000

Total 45,000 Total 45,000

The % in parentheses represents the P/L ratio. The partners agree to admit J to the partnership. J must
invest cash of P28,800 equivalent to 37.50% interest in total agreed capital of P76,800. Assets are to
be revalued. *

● The amount of revaluation is

12000

● The revised capital of H after the admission of J is

16800

The % in parentheses represents the P/L ratio. The partners agree to admit J to the Partnership and the
total agreed capital after admission is P48,000. J invests P12,000 for 35% interest in the firm.

● The capital of H after the admission of J is

10,080 12480

● The capital credit of J is

16800

The % in parentheses represent the P/L ratio. The partners agree to admit J to the partnership. J
conveyed a tangible assets with a fair value of P30,000 with an assumed mortgage of P6,000 in
exchange for a 30% interest in capital with bonus being to be recognized, keeping in mind that J would
be acquiring a 1/4 interest in profits.

● The capital of G after the admission of J is

27600

52. Edwin and Darren have decided to form a partnership. Edwin contributes P80,000 cash and
merchandise inventory with a current market value of P20,000. Darren contributes a parcel of land
which was acquired two years ago at P100,000 but with a current value of P130,000. If Darren is to
make additional cash investment to have a 60% in the business, how much cash should he invest?
20000

53. John, Jeff and Jane decided to engage in a real estate venture as a partnership. John invested
P100,000 cash and Jeff provided office equipments that is carried on his books at P82,000. The
partners agree that the equipment has a fair value of P110,000. There is a P30,000 note payable
remaining on the equipment to be assumed by the partnership. Although Jane has non physical assets
to invest in the partnership, both John and Jedd believe that her experience as a real estate appraiser
 is a valuable skill needed by the partnership and is a basis for granting her a capital interest in the
partnership.

Assume that each partner is to receive an equal capital interest in the partnership and an upward
revaluation of assets by P90,000 is to be recorded.

● The capital of Jane upon formation is

90000

Assume that each partner is to receive an equal capital interest in the partnership and bonus method is
applied.
● The amount of capital transferred from John is
40000

● The capital of Jeff upon formation is

60000

54. The partnership of PP, EE and TT asked you to assist in winding up its business. You complete the
following information. The trial balance of the partnership on June 30, 20x4, is:

ACCOUNTS DEBIT CREDIT

Cash 6,000

Accounts receivable (net) 22,000

Inventory 14,000

Plant and equipment (net) 99,000

Accounts payable 17,000

PP, Capital 55,000

EE, Capital 45,000

TT, Capital 24,000

Total 141,000 141,000

The partners share profit and losses as follows: PP, 50 percent; EE, 30 percent; and TT, 20 percent.
Cash is to be distributed to the partners at the end of each month. A summary of the liquidation
transactions follows:

July
1 P16,500 collected on accounts receivable balance is uncollectible
2 P10,000 received for the entire inventory
3 P1,000 liquidation expense paid
4 P17,000 paid to creditors
5 P8,000 cash retained in the business at the end of the month
August
6 P1,500 in liquidation expense paid
7 As part payment of his capital, TT accepted an item that he develop, which had a book value of
P4,000. The part of P10,000 should be placed on this item for liquidation purposes
8 P2,500 cash retained in the business at the end of the month

September
9 P75,000 received on sale of remaining plant and equipment
10 P1,000 liquidation expenses paid. No cash retained in the business

● The amount received by PP in August cash distribution is ______.

0

● In the final cash distribution, the amount received by PP is ______.

41500

● The amount of cash available for distribution to partners in August is _______.

4000

● The amount of cash available for final distribution to partners is ______.

76500

● The amount of cash available for distribution to partners in July is ______.

6500

● In the final cash distribution, the amount received by TT is ______.

8600

● In the final cash distribution, the amount received by EE is ______.

26400

● The amount received by EE in July cash distribution is ______.

6500

The partners share profit and losses as follows: PP, 50 percent; EE, 30 percent; and TT, 20 percent.

The partners are considering an offer of P100,000 for the accounts receivable, inventory and plant and
equipment as of June 30. The P100,000 will be paid to creditors and the partners in installments, the
number and amount of which are to be negotiated.

● The partner who is most vulnerable to losses is

PP

● If the offer to sell the assets is accepted, the amount of cash to be received by TT is
17000

● The partner who first receives cash is

EE
 ● If the offer to sell the assets is accepted, the amount of cash to be received by EE is
34500

● If the offer to sell the assets is accepted, the amount of cash to be received by PP is
37500

55. In the absence of partnership agreement, the law says that income (and loss) should allocated based
on:
The ratio of capital investments

56. In a cash priority program for use in installment liquidation, the partner with the highest loss absorption
balance is the most vulnerable partner. The amount of cash to be distributed to partners in installment
liquidation can be determined by preparing a cash priority program.
Only statement 2 is true

57. Statement 1: A limited partner is liable only to the extent of his her contribution in the partnership.
Statement 2: A limited partner can use the right of offset against his capital deficiency, but he is not
required to make additional contribution out of his/her personal properties.
Only the first statement is true

58. An entry is not required in the liquidation of a partnership to record the

Allocation of a capital deficiency to partners with credit balances when the deficient partner is
solvent

59. Statement 1: In case the partnership is insolvent, the general partners are liable to pay the partnership
creditors from his/her personal properties
Statement 2: A deficient partner may apply the right of offset to a loan balance owing to him or her by
the partnership.
Both statements are true

60. Statement 1: In the event of liquidation, outside creditors has priority claim over the partnership assets.
Statement 2: When a partner becomes insolvent, the claim against his separate properties shall be paid
first to his personal creditors.
Both statements are true

61. A deficiency occurs for a partner when

Hi share in the losses of the partnership is more than his capital balance

62. Statement 1: Liquidation is the process of winding up the affairs of the business towards its termination.
Statement 2: The deficiency of a partner absorbed by the other partners is allocated based on capital
contribution.
Only the first statement is true

63. Statement 1: If A’s capital is deficient but there is a loan payable to B, the right of offset can be applied.
Statement 2: A partner whose personal assets are less than his personal liabilities is deficient.
Both statements are false

64. Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring P200,000
when liquidated. At the same time, Morgan has a credit capital balance in the partnership of P120,000.
 The capital amounts of the other partners total a credit balance of P250,000. Under the doctrine of
marshalling of assets, how much the personal creditors of Morgan can collect?
P320,000

65. Statement 1: When a partner dies and the remaining partners decide to terminate the business is called
dissolution.
Statement 2: In liquidation, the sale of non-cash assets is called realization.
Only the second statement is true

66. Statement 1: Gain or loss on realization is the difference between the cash proceeds and the book
value of the assets sold.
Statement 2: Loss on realization would decrease the partner’s capital account.
Both statements are true

67. A, B and C decided to liquidate their partnership business. The financial position of the partnership
shows: A, Capital (30%) P210,000; B, Capital (20%) P150,000; C, Capital (50%) P210,000. Upon
liquidation, all of the partnership’s assets are sold and sufficient cash is realized to pay all liabilities
except on for P30,000. All partners are solvent except C.

● By what amount would the capital of A change?

234,000 decrease

● How much is the additional contribution required of B?

6,000

68. ABC Partnership is liquidated and the non-cash assets are considered worthless. A and C are
general partners while B is a limited partner. The creditors will look to whose partner’s personal
assets for settlement of their claims?
The personal assets of Partners A and C

69. Charlize and Megan are partners with capitals of P80,000 and P40,000, respectively. They share profits
in the ratio of 3:1. The partners agree to admit Caleb as a member of the firm.

● If bonus is recognized and Caleb invests P30,000 for a 15% interest in the firm, what is Megan’s
capital after the admission of Caleb?
P41,875

70. 1. All the partners in a general partnership are personally liable for all debts incurred by the partnership.
2. A limited partnership must have at least one general partner.
Both statements are true

71. The accounts of the partnership of R, S and T at the end of the fiscal year November 30, 2020 are as
follows:
Cash 103,750
Non-cash assets 707,500
Loans to R 15,000
Liabilities 262,500
Loans from S 20,000
R, Capital 266,250
 S, Capital 136,250
T, Capital 141,250

R, S and T have been sharing profits and losses in the ratio 5:3:2 respectively.

● If in the first cash distribution, S received 50,000, the amount received by R is _______.
74167

● The most vulnerable among the partners is _______.

R

● If in the first cash distribution, S received 50,000, the amount realized from the first sale of non-
cash assets is _______.
900000 353,333 333333 559167

● If in the first cash distribution, T received P50,000 and assets with carrying value of P300,000
were sold, the gain or loss recognized on the sale of these assets is _______.
(48750)

72. Egay and Egoe who share profits and losses equally have a capital balance of 200,000 and 240,000
respectively. They admit Engyl for a 1/3 interest in partnership capital and profits for an investment of
250,000.

By how much were the net assets undervalued?

60,000

73. Partners Roger, Sergio and Tito, who share profit and loss in the ratio of 3:5:2, respectively have
decided to liquidate their partnership. The Statement of Financial Position of the partnership at the time
of liquidation is shown below:
Assets Liabilities and Capital
Cash P120,000 Accounts Payable P93,000
Other Assets 360,000 Loan from Sergio 30,000
Roger, Capital 108,000
Sergio, Capital 120,000
Tito, Capital 129,000
P480,000 P480,000

The partners desire to prepare an installment distribution schedule showing how cash would be
distributed to partners as assets are realized.

● The schedule of possible losses on capital balances would indicate that the first cash distributed
after the payment of outside creditors would be distributed to
Tito, in the amount of P57,000

● If Roger has received P30,000, how much would Sergio had received?
20,000

● In the schedule of maximum absorbable loss, the maximum absorbable loss for each partner
would be
 Roger, 360,000; Sergio, 300,000; Tito, 645,000

● Assuming that the first sale of other assets having book value of P150,000 realized P45,000
and all available cash is distributed, the partners would receive
Roger, P9,000; Sergio, P0; Tito, P63,00

74. Statement 1: A deficient and insolvent partner will still have a chance to receive cash from the
partnership if there is a loan payable to him which is higher than his capital deficiency.
Statement 2: A deficient and limited partner who has a loan to the partnership can apply the right of
offset to eliminate his deficiency.
Both statements are true
Both statements are false
Only the first statement is true
Only the second statement is true

75. Jurado, Katindig, Lazaro, and Marcelo are partners sharing earnings in the ratio of 3:4:6:8. The balance
of their capital accounts on December 31, 2015 are as follows:
Jurado P1,000
Katinding 25,000
Lazaro 25,000
Marcelo 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 P22,000 to divide.

● Assume that a debit balance in any of partner’s capital is uncollectible. The share of Jurado in
the loss upon conversion of the non-cash assets into cash was:
P5,400

● Assume that a debit balance in any of partner’s capital is uncollectible. The book value of non-
cash assets amounted to:
P61,000

● Assume that a debit balance in any of partner’s capital is uncollectible. When the P22,200 was
divided, Lazaro got
P8,320

76. The statement of Financial Position for the partnership of Eclavo, Eclara, and Elorda, who share profits
and losses in the ratio 4:5:1, is as follows:
Cash P100,000 Accounts Payable P300,000
Inventory 720,000 Eclavo, Capital 320,000
Eclara, Capital 90,000
Elorda, Capital 110,000
P820,000 P820,000

● Assuming Elorda is a limited partner, and the inventory is sold for P360,000, how much should
she receive upon liquidation of the partnership?
74,000
 ● Assuming Eclara is an insolvent partner, and the inventory is sold for P360,000, how much
should Eclavo receive upon liquidation of the partnership?
104,000

● If the inventory is sold for P600,000, how much should Eclavo receive upon liquidation of the
partnership?
P272,000

77. The following is the priority sequence on which liquidation proceeds will be distributed for a partnership:
Partnership liabilities, partnership loans, partnership capital balances

78. Statement 1: Solvent partners are partners with sufficient remaining personal assets after deducting or
liquidating the personal liabilities.
Statement 2: Right of offset is a legal right to apply a part or all of the amount owing to a partner against
his or her capital deficiency.
Both statements are true

79. Statement 1: A deficient partner has to make an additional investment to make up for his deficiency in
all instances.
Statement 2: Partnership creditors have priority over partnership properties; in the same manner that
the partners’ personal creditors have priority over partners’ personal properties.
Only the second statement is true

80. Iyah, Ayah and Mia operate a business as a partnership and share net income and net loss in a 3:3:4
ratio, respectively. The personal assets and liabilities of the partners, gathered from their personal
records show:

Partner Assets Liabilities

Iyah (General Partner) P470,000 P450,000

Ayah (General Partner) 200,000 280,000

Mia (Limited Partner) 305,000 300,000

The statement of financial position is as shown below. Assets are sold for P175,000. Liabilities are paid
as soon as cash is available. Creditors collect from solvent partners whenever necessary.

Cash P10,000 Accounts Payable P200,000

Non-Cash 375,000 Loan, Mia 5,000

Iyah, Capital 50,000

Ayah, Capital 70,000

Mia, Capital 60,000

● How much cash was received by Mia in the final settlement?

20,000
 5,000
0
10,000

● How much is the capital balance of Iyah after the sale of non-cash assets?
(P10,000)

● How much additional investment was made by Mia?

P0

● How much cash was received by Ayah in the final settlement?

0

● Who among the partners have received the cash in the final settlement?
Mia

● How much is the additional investment made by Ayah?

0

● How much is the share of Mia from the gain (loss) on sale of non-cash assets?
(P80,000)

● How much is the additional investment made by Iyah?

20,000

81. As of December 31, the books of AME Partnership showed capital balances of: A- P40,000; M-
P25,000; E-P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decided to
dissolve and liquidate. They sold all the non-cash assets for P37,000 cash. After settlement of all
liabilities amounting to P12,000, they still have P28,000 cash left for distribution.

● The loss on the realization of the non-cash assets was

P42,000

● Assuming that any partner’s capital debit balance is uncollectible, the share of A in the 28,000
cash for distribution would be
P17,800

82. The statement of financial position of the partnership A, B, and C shows: Cash, P22,400; Other Assets,
P212,000; Liabilities, P38,400; A, Capital (50%) P76,000; B, Capital (25%) P64,000, and C, Capital
(25%) P56,000.

● If B received a total of P31,000 from partnership liquidation, how much was the loss on
realization?
P127,000

● If C received P10,000 from the first cash distribution, how much was the total cash distributed to
partners?
P28,000
 ● How much is the additional contribution required of B?
P6,000

● The partners realized P56,000 from the first installment sale of non-cash assets with total
carrying amount of P120,000. How much did B receive from the partial liquidation?
P24,000

● If A received a total of P10,000 from partnership liquidation, how much was the proceeds from
the sale of all non-cash assets?
P85,000

83. The order of the liquidation process is

Sell assets, pay liabilities, disburse cash to partners

84. Jack and Beans, who share profits and losses in the ratio 3:7, decided to liquidate their Talk
Partnership. The partner’s capital balances are P300,000 and P190,000, respectively.

● Before the realization of non-cash assets, the partnership has a zero balance in its cash
account and a P200,000 balance in its liabilities. If on final settlement of partners’ claims Jack
received P261,000, how much was the net proceeds from the sale of non-cash assets?
P560,000

● If all partnership assets and liabilities are realized and settled at their carrying amounts, how
much would Beans receive from liquidation?
P190,000

● If all partnership assets are realized and all liabilities are settled, the partnership has remaining
cash of P120,000, how much would Beans receive from the liquidation?
None

● If on final settlement of partners’ claims Beans received P99,000, how much did Jack receive?
P261,000

● The partnership has total liabilities of P200,000. If all partnership assets are realized for
P500,000, how much would Jack receive from the liquidation?
243,000

85. The liabilities and capital balances of the partners before the sale of the assets and payments of
liabilities including personal assets and liabilities of the partners were:

Partnership Personal Assets Personal Liabilities

Cash P10,000

Liabilities 70,000

Kath 65,000 P1,200,000 P1,500,000

Pau 20,000 2,500,000 2,490,000

 Jas 15,000 3,000,000 3,200,000

After the assets were sold the capital balances of the partners were as follows: Kath, P48,000; Pau,
P12,000; and Jas, (P10,000)

● How much cash was received by Jas in the final settlement?

P0

● What is the P/L ratio of Jas? [34% - Kath; 16% - Pau]

50%

● How much is the gain/(loss) from sale of non-cash assets?

(P50,000)

● How much is the proceeds from sale of non-cash assets?

P110,000

● How much is the non-cash assets?

P160,000

86. Clyde, Warren and Neil formed a partnership on Jan. 1,2020 with investments of 100,000, 150,000, and
200,000 respectively. For division of income, they agreed the following conditions:
a. interest of 10% of the beginning capital balance each year.
b. annual compensation of 10,000 to Warren and
c. sharing of the remainder of the income or loss in a ratio of 20% for Clyde and 40% each for
Warren and Neil.

Net income was 150,000 in 2020 and 180,000 in 2021. Each partner withdrew 1,000 for personal use
every month during 2020 and 2021.

● The capital balance of Clyde at the end of 2021 is _______.

139420

● The capital balance of Warren at the end of 2021 is _______.

264540

● The capital balance of Neil at the end of 2021 is _______.

304040

● The share of Neil in the net income for 2021 is

70040

● The share of Warren in the net income for 2020 is

63000

● The capital balance of Clyde at the end of 2020 is _______.

117000
87. Chua and Wong are forming a partnership. Chua will invest a building that currently is being used by
another business owned by Chua. The building has a market value of P900,000. Also, the partnership
will assume responsibility for a P300,000 note secured by a mortgage on that building. Wong will invest
P500,000 cash. For the partnership, the amounts to be recorded for the building and for Chua’s Capital
account are:
Building, P900,000 and Chua, Capital, P600,000

88. The partner’s personal account which was collected by the partnership and credited to its accounts
receivable is a violation of the
Business entity concept

89. Partner B is investing in a partnership with Partner A. B contributes as part of his initial investments.
Accounts Receivable of P60,000, an Allowance for Doubtful Accounts of P9,000, Furniture of P30,000
with accumulated depreciation of P8,500 and P6,000 cash. The partners agreed that prepaid expenses
of P2,000 and accrued expenses of P1,800 have to be recognized. The entry that the partnership
makes to record B’s initial contribution includes a
Credit to B, Capital at P78,700

90. Jack holds an ownership interest of 63% and Teresa holds an ownership interest of 37% in the J and T
Partnership. This year, in order to further develop the business, Jack contributes an additional P6800
and Teresa contributes an additional P3200 to the partnership. Which of the following is TRUE of this
scenario?
Individual contributions of P6800 by Jack and P3200 by Teresa will be recorded

91. Partners’ non-cash investments are valued at

Market value

92. 1. One of the partners in a proposed partnership is a multi-millionaire. The stipulation in the articles of
partnership that this partner shall be excluded from sharing in the profits of the partnership is void.
2. A partnership may be established for charity.
Only statement 1 is true.

93. 1. The essence of partnership is that each partner must share in the profits or losses of the venture.
2. As long as the action is within the scope of the partnership, any partner can bind the partnership.
Both statements are true

94. In the absence of a partnership agreement, the law says that income (and loss) should be allocated
based on
The ratio of capital investments

95. Steve owns 64% and Mark owns 36% of a partnership business. They purchase equipment with a
suggested value of P9600. The current market value of the equipment at the time of purchase was
P9100. At the time of the balance sheet preparation, depreciation of P160 was recorded. Based on the
information provided, which of the following is TRUE of the partnership?
The equipment account will be debited at P9100 on the date of purchase

96. 1. A partnership has a limited life because any change in the relationship of the partners dissolves the
partnership.
2. In a limited partnership, the general partner’s liability is limited to his investment.
 Only statement 1 is true

97. 1. All partners in a general partnership are personally liable for all debts incurred by the partnership.
2. A limited partnership must have at least one general partner.
Both statements are true

98. Which of the following statements about partnerships is incorrect?

Right over profits and right over assets represent claims of partners that are allocated based on
partners’ capital accounts.

99. 1. A limited partnership normally has one or more general partners whose liability is unlimited.
2. A partnership is a legal entity separate and apart from its owners.
Both statements are true

100. Airamae and Aimery agreed to form AiAi Partnership. Airamae’s business which amounted to
P500,000 was audited and appraised at 75% of its book value.

● If they agreed that Aimery should invest cash equal to 60% of Airamae’s investment, Aimery
should invest?
P225,000

● If they agreed that Aimery should invest P325,000 cash and that each partner should be
credited for an equal share based on total actual contributions, Airamae’s capital credit should
be
P375,000
P350,000
P412,500
P500,000

● If they agreed that Aimery should invest cash equal to 60% of Airamae’s investment, the total
partnership capitalization would be
P600,000

● If they agreed that Aimery should invest P325,000 cash and that each partner should be
credited for an equal share based on total actual contributions, the bookkeeper should
recognize
Bonus for Aimery

101. Edwin and Darren have decided to form a partnership. Edwin contributes P80,000 cash and
merchandise inventory with a current market value of P17,000. Darren contributes P2400 cash and
office furniture with a current market value of P3200.

● When journalizing these transactions _____

Office Furniture will be debited for P3200

● If the partners decide to have equal interest in the partnership and the total actual contributions
is equal to total agreed capital, which statement is true?
There is bonus
102. Alana & Ansley enter into a partnership agreement in which Alana will be given 60% interest in
capital and profits. Alana contributes the following:
Land - P500,000 ?
Building - 5,000,000 fair value is 60% of its cost
Equipment - 1,000,000 fair value is 75% of its cost
There is P1,000,000 mortgage on the building which the partners agreed to assume.
The partners agreed that the total partnership capitalization should be P6M.

● Alana, Capital should be credited for

P3,600,000

● How much should be Ansley’s agreed capitalization?

P2,400,000

● Land should be recorded in the amount of

P850,000

103. Rica is a sole proprietor who invested her grocery when she invited Belle to form a new
partnership business. The following are the assets and liabilities of the grocery:

Cash P50,000

Merchandise 30,000 (book value)

20,000 (market value)

Fixed assets (P100,000 less Accumulated 90,000 (book value)

Depreciation of P10,000)

70% of cost (market value)

Accounts Payable 20,000

Accrued Expenses 7,000

Belle invested the following:

Cash P60,000

Land (mortgaged with a balance of P50,000 200,000 (book value)

plus accrued interest for 6 months at 18%)

500,000 (market value)

Store furniture (costing P40,000 less 30,000

accumulated depreciation of P10,000)

● The total assets of the newly formed partnership would be

P730,000

● If the mortgage note plus interest is to be assumed by the partnership, Belle. Capital should be
credited for
 P535,500

● The total liabilities of the newly formed partnership would be

P81,500

104. In comparison to a corporation, the owners of a general partnership ___

Have an unlimited personal liability for the debts of the business

105. In comparison to a corporation, the owners of a general professional partnership ___

Have an unlimited personal liability for the debts of the business

106. 1. An advantage of the partnership form of business is that each partner’s potential loss is
limited to that partner’s investment in the partnership.
2. Ownership is easily transferred in a partnership.
Both statements are false

107. 1. There is no income tax imposed on a partnership.

2. Mutual agency means that each partner has the right to bind the partnership to contracts
Only statement 2 is true

108. Partnership capital and drawings accounts are similar to the corporate
Paid in capital, retained earnings, and dividends accounts

109. An advantage of the partnership as a form of business organization would be

A partnership is created by mere agreement of the partners

110. Harold and Dwayne formed Hayne’s Partnership, with Harold investing cash of P150,000.

● If Dwayne is given 60% interest in assets and profits, how much is the partnership total agreed
capitalization?
P375,000

● How much should Dwayne invest for a 60% interest in assets and profits?
P225,000

111. The Metro Fashion partnership owned by Mary and May is terminated when creditor claims
exceed partnership assets by P40,000. Partner May is a millionaire and Mary has no personal assets.
Mary’s partnership interest is 75% and May’s 25%. Creditors
May collect the entire P40,000 from May

112. Jameson and Larry are forming a partnership. Jameson will invest a truck with a book value of
P100,000 and fair market value of P140,000. Larry will invest a building with a book value of P300,000
and a fair market value of P420,000, with a mortgage of P150,000.

● What amount should be recorded in Larry’s capital account?

P270,000

● At what amount should the building be recorded?

P420,000
 ● If it was agreed that both partners will have equal share in the net assets, using the cash
method, how much should be the additional cash investment by Jameson?
P130,000

113. Which of the following is specified in the articles of partnership?

Procedures for withdrawal of assets by the partners

114. Partner B is investing in a partnership with Partner A. B contributes as part of his initial
investments. Accounts Receivable of P60,000, an Allowance for Doubtful Accounts of P9,000; and
P6,000 cash. The entry that the partnership makes to record B’s initial contribution includes a
Credit to B, Capital for P57,000

115. Bob is investing in a partnership with Jerry. Bob contributes equipment that originally cost
P63,000, has a book value of P30,000, and a fair market value of P39,000. The entry that the
partnership makes to record Bob’s initial contribution includes a
Debit to Equipment for P39,000

116. A loan due from a partner is classified in the statement of financial position as a/an
Current assets

117. Tim and Michelle have decided to form a partnership with a 60/40 partnership interest ratio. Tim
contributes P7,500 cash and merchandise inventory with a market value of P1,500. While journalizing
this transaction___.
Tim, Capital will be credited for P9,000

118. Which one of the following would not be considered a disadvantage of the partnership form of
organization?
Ease of Formation

119. Andrea invested the following in the partnership:

Cash P10,000

Accounts receivable 50,000

Allowance for Bad Debts 5,000

Merchandise Inventory 120,000

Furnitures & Fixtures 75,000

Accumulated Depreciation 7,500

● If the Accounts Receivable has a net realizable value of P40,000 and there is an Accounts
Payable amounting to P60,000. How much should be credited to Andrea, Capital?
P177,500

● Accounts Receivable, Merchandise Inventory, and Furniture & Fixtures will respectively be
debited at the Partnership books for:
 45,000; 110,000; 60,000

● If the current fair value of the furniture and fixtures is P60,000 and that of the merchandise
inventory is 110,000, Andrea should be credited for
P225,000

120. 1. A nominal partner actively participates in the management of the business.

2. An ostensible partner is unknown to the public that he/she is a partner.
Both statements are false

121. A firm has two partners: Jim and Bill. Jim owns 60% of the partnership and Bill owns 40%. In
which of the following transactions will the partnership be held responsible for an individual partners’
actions?
Bill signs a contract to buy furniture for official use in the partnership

122. Partnership JB has two partners: Jim and Bill. Jim owns 60% of the partnership and Bill owns
40%. In which of the following transactions will the partnership be held responsible for an individual
partners’ transactions?
Bill signs a contract to buy furniture for official use in the partnership

123. If a partner’s capital account is credited with the amount that he or she contributed in cash,
which of the following financial statements will be affected?
The statement of partners’ equity

124. Edwin and Darren have decided to form a partnership. Edwin contributes P80,000 cash and
merchandise inventory with a current market value of P20,000. Darren contributes a parcel of land
which was acquired two years ago at P100,000 but with a current value of P130,000. If Darren is to
make additional cash investment to have a 60% in the business, how much cash should he invest?
P20,000

125. Rica is a sole proprietor who invested her grocery when she invited Belle to form a new
partnership business. The following are the assets and liabilities of the grocery:

Cash P50,000

Merchandise 30,000 (book value)

20,000 (market value)

Fixed assets (P100,000 less Accumulated 90,000 (book value)

Depreciation of P10,000)

70% of cost (market value)

Accounts Payable 20,000

Accrued Expenses 7,000

● Rica’s Capital account should be credited for

P113,000
126. Which of the following is TRUE of a partnership?
Partnership firms have a limited life

127. The partners have the following rights, except?

Transfer ownership at will

128. A characteristic describing a partnership as a judicial personality which can acquire, sell, or
dispose properties and incur obligations is called
Legal Entity

129. A partnership is a _______

Business with two or more owners that is not organized as a corporation

130. Which of the following is TRUE of a partnership balance sheet?

Each partner’s equity will be shown separately

131. In a partnership, mutual agency means that___

Any partner can bind the business to a contract within the scope of its regular business
operations

132. Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May
1, 2018, their respective capital accounts were as follows:
Blau 60,000
Rubi 50,000

On that date, Lind was admitted as a partner with one-third interest in capital, and profits for an
investment of P40,000. The new partnership began with a total capital of P150,000 immediately after
Lind’s admission, Blau’s capital should be
P54,000

133. When a partner retires and receives in cash less than his capital balance, how should the
difference be treated?
The difference should be credited to the remaining partners in their remaining profit and loss
ratio

134. LOV Partnership decided to admit E, who purchased a 20% interest from L, whose capital
balance was P400,000. E paid her P100,000.

● The effect of this transaction is a/an

Decrease in L’s capital

● The journal entry to record the admission of E will include a

Debit to L, Capital

135. LOV Partnership decided to admit E, who purchased a 30% interest from L, whose capital
balance was P400,000. E paid her P125,000.

● The effect of this transaction is a/an

Increase in E’s capital
 ● The journal entry to record the admission of E will include a:
Credit to E, Capital

136. Which of the following conditions constitutes a legal dissolution of a partnership?

All of the choices given

137. If the new partner is admitted by purchase of interest of an old partner at an amount higher than
its book value, this will result in
No change in partnership’s net assets

138. The capital accounts of the partnership of R and O on January 30, 2014, are as follows:
R, Capital P80,000
O, Capital P40,000

The partners share profits and losses in the ratio of 6:4. The partnership is desperate for cash and they
agreed to admit Y as a new partner with a 1/3 interest in capital and profits upon the latter’s capital
infusion of P30,000.

After Y’s admission, what are the corresponding capital balances of R, O, and Y, respectively, assuming
assets and liabilities are fairly valued?
P68,000; P32,000; P50,000

139. Charlize and Megan are partners with capitals of P80,000 and P40,000, respectively. They
share profits in the ratio of 3:1. The partners agree to admit Caleb as a member of the firm.

● If no bonus is recognized and Caleb invests P80,000 for a 50% interest in the firm, what is
Charlize’s capital after the admission of Caleb?
P65,000

● If no bonus is recognized and Caleb invests P30,000 for a 20% interest in the firm, what is
Megan's capital after the admission of Caleb?
P40,000

● If total agreed capital is based on Caleb’s contribution and Caleb Invests P30,000 for a 15%
interest in the firm, What is Megan’s capital after the admission of Caleb?
P52,500

● If no bonus is recognized and Caleb invests P80,000 for a 50% interest in the firm, what is the
profit sharing ratio of Charlize after the admission of Caleb?
37.5%

140. Charlize and Megan are partners with capitals of P80,000 and P40,000, respectively. They
share profits in the ratio of 2:3. The partners agree to admit Caleb as a member of the firm.
● If no bonus is recognized and Caleb invests P80,000 for a 50% interest in the firm, what is the
profit sharing ratio of Charlize after the admission of Caleb?
20%
141. CAR Partnership decided to admit E who invested P100,000 for a 25% interest in the
partnership with a total capitalization of P500,000.

● The capital credit of E is

P125,000

● The journal entry to record the admission of E will include

A recognition of bonus to E

● The effect of this transaction is a/an

Increase in capital

142. CAR Partnership decided to admit E who invested P120,000 for a 25% interest in the
partnership with a total capitalization of P500,000.

● The capital credit of E is

P100,000

143. Egay and Egoe who share profits and losses equally have capital balances of P200,000 and
P240,000, respectively. They admit Engyl for a 1/3 interest in partnership capital and profits for an
investment of P260,000.

By how much were the net assets undervalued? (Engyl is credited for his capital contribution)
P80,000

144. Which of the following best describes the admission of new partner by investing an amount
more than his capital credit under the bonus method?
Increase on both net assets and total capital

145. The partnership of Lim and Mallorca provides for equal sharing of profits and losses. Prior to the
admission of a third partner Zamora, the capital accounts are Lim, P75,000 and Mallorca, P105,000.
Zamora invests P90,000 for a P75,000 interest and partners agreed that the net assets of the new
partnership would be P270,000. This admission involves
Bonus to old partners of P15,000

146. Peter, Queen and Roy are partners with capital balances of P300,000. P300,000 and P200,000,
respectively, and sharing profits and losses equally. Roy is to retire and it is agreed that he will take
certain office equipment with a second hand value of P50,000 and a note for his interest. The office
equipment carried in the books at P65,000 but brand new would cost P80,000. Roy’s acquisition of the
office equipment would result in
Reduction in capital of P55,000 for Roy

147. On June 30, 2018 the condensed balance sheet for the partnership of Eddy, Fox and Grimm
together with their respective profit and loss sharing percentage was as follows
Assets, net of liabilities P 320,000
Eddy , Capital (50%) P 160,000
Fox, Capital (30%) P 96,000
Grimm, Capital (20%) P 64,000
P 320,000
 ● Eddy decided to retire from the partnership and by mutual agreement is to be paid P180,000 out
of partnership funds for his interest. Total goodwill implicit in the agreement is to be recorded.
After Eddy’s retirement, what are the capital balances of the other partner?
108,000 (Fox) 72,000 (Grimm)

● Assume that Eddy remains in the partnership and that Hamm is admitted as a new partner with
a 25% interest in the capital of the new partnership for a cash payment of P140,000. Total
goodwill implicit in the transaction is to be recorded. Immediately after admission of Hamm,
Eddy’s capital account balance should be
P210,000

148. Matthew, Paulo and Claude share partnership profits in the ratio 2:3:5. On September, 30
Claude opted to retire from the partnership. Prior to Claude’s investment, the capital balances of the
three partners are P25,000 ,P40,000 and P35,000, respectively.

● How much is Paulo’s capital after Claude’s retirement if Claude is paid P30,000 in full settlement
of his partnership interest?
P43,000

● How much is the capital of Matthew after Claude’s retirement if Claude is paid P39,000 in full
settlement of his partnership interest?
P23,400

● How much is the capital of Matthew after Claude’s retirement if Claude is paid P25,000 in full
settlement of his partnership interest?
P31,000
P29,000
P26,600
P23,400

149. When Jill retired from the partnership of Jill, Bill and Hill, the final settlement of her interest
exceeded her capital balance. Under the bonus method, the excess
Reduced the capital balance of Bill and Hill

150. When Jill retired from the partnership of Jill, Bill and Hill, the final settlement of her interest is
less than her capital balance. Under the bonus method, the difference
Increased the capital balance of Bill and Hill

151. Jeric, Ken, and Lemuel are partners sharing profits in the ratio 5:3:2 respectively, as of
December 31, 2013, their capital balances were P95,000 for Julian, P80,000 for Ken and P60,000 for
Lemuel.

On January 1, 2019 the partners admitted Mark as a new partner and according to their agreement
Mark will contribute P80,000 in cash to the partnership and also pay P10,000 for 15% for Ken’s share.
Mark will be given a 20% share in profits. While the original partners’ share will be proportionately the
same as before. After the admission of Mark, the total capital will be P330,000 and Mark’s capital will
be P70,000
 ● The bonus in the admission of Mark would be
P22,000

● The balance of Ken’s Capital after the admission of Mark would be

P79,100

● The amount of asset revaluation is

P15,000

152. Which of the following best characterizes the bonus method of recording a new partner’s
investment in a partnership?
Assuming that recorded assets are properly valued, the book value of the new partner is equal
to the book value of the previous partnership and the investment of the new partner.

153. B and N are partners sharing profits and losses in the ratio 7:3. On January 1,2013 their credit
balance capital accounts are P30,000 for B and P20,000 for N, W is to be admitted as a partner by
buying 50% of B’s interest for P20,000.

The capital balance of B after W’s admission is

P15,000

154. B and N are partners sharing profits and losses in the ratio 7:3. On January 1,2013 their credit
balance capital accounts are P70,000 for B and P30,000 for N, W is to be admitted as a partner by
buying 50% of B’s interest for P40,000.

The capital balance of B after W’s admission is

P35,000

155. Mike and Tess are partners with capital balances of P70,000 and P50,000 respectively. They
share profits and losses in the ratio of 3:1, respectively. Voce is to be admitted in the partnership for a
cash contribution of P60,000 for a ½ interest in the partnership capital and in future profits and losses.

If Voce would be given a capital credit of P90,000, how much would be charged to Mike’s capital
account?
P15,000

156. Mike and Tess are partners with capital balances of P70,000 and P50,000 respectively. They
share profits and losses in the ratio of 3:1, respectively. Voce is to be admitted in the partnership for a
cash contribution of P70,000 for a ½ interest in the partnership capital and in future profits and losses.

If Voce would be given a capital credit of P80,000, how much would be charged to Mike’s capital
account? (no asset revaluation)
P7,500

157. Partner’s Nitz, Pat and Candy share profits and losses 50:30:20 respectively. Capital balances
are P74,000 P130,000 and P96,000 respectively. The carrying values of assets and liabilities are equal
to their fair values. Emmie 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 bonus is to be effected.
 How much should Emmie contribute?
P75,000

158. J decided to withdraw from the JOY Partnership. A cash settlement was made by the
partnership this will
Decrease Assets

159. The partnership of Noynoy, Manny and Gibo have capital balances as follows: Noynoy -
P35,000, Manny - P50,000, Gibo - P40,000. Their profit and loss ratio are 30% 50% and 20%
respectively, With the consent of Noynoy and Manny, Gibo sold one-half of his interest to Erap for
P30,000 , Gibo was paid in cash by Erap.

● What is the Capital Balance of Noynoy after the admission of Erap to the partnership?
P35,000

● What is the Capital Balance of Manny after the admission of Erap to the partnership?
P50,000

160. An adjustment of the assets and liabilities of the partnership to their fair market values before
dissolution is called
Asset revaluation

161. Paul, Melvin and Elrick are partners sharing profits and losses in the ratio of 2:2:1. On July 31,
2018, their capital balances are as follows: Paul - P700,000; Melvin - P500,000; Elrick - P400,000. The
partners agree to admit Laurence on the following conditions:
A. Laurence is to pay Paul P400,000 for 1/2 of Paul’s interest:
B. Laurence is also to invest P400,000 in the partnership
C. The total interest of Laurence is 25% of the total partnership capital, which is also his share in
the new partnership profit and loss sharing ratio. The old partners are sharing in their old ratio

● How much is Paul’s capital after the admission of Laurence?

P450,000

● What is the percentage of Elrick’s share in the new profit and loss sharing ratio?
15%

162. A partnership agreement most likely will stipulate that assets be reappraised when
A partner retires

163. A partnership agreement most likely will stipulate that assets be reappraised when
New partner is admitted to the partnership

164. The following transactions will affect the balance of the total partnership capital except
Admission by purchase

165. The following transactions will affect the balance of the total partnership capital except
Retirement of a partner by selling interest to another partner
166. Ben and Ric are partners who share profits and losses in the ratio of 6:4, respectively. On May
1, 2019, their respective capital accounts were as follows:
Ben P60,000
Ric P50,000

On that date, Lito was admitted as a partner with a one-third interest in capital and profits for an
investment of P40,000. The new partnership began with a total capital of P150,000. Immediately after
Lito’s admission, Ben’s capital account balance should be
P54,000

167. The admission of a new partner involving bonus will result in

Bonus to either old or new, but not both

168. Statement 1: The admission of new partner through his direct investment in the partnership will
increase the partnership capital even under bonus method
Statement 2: The admission of new partner through purchase of interest of existing partner will increase
partnership capital
Only statement 1 is true

169. Luke and Mark, who share profits and losses equally, agree to take John into the partnership for
a 40% share in capital and profits. Luke and Mark retain 30% interest each. Luke and Mark have
Capital balances of P100,000 and P140,000 respectively before the admission of John. John pays
P120,000 directly to Luke and Mark for his 40% interest. All assets of the partnership, except for land
are fairly valued.

● What would be the capital balance of Mark, immediately after the admission of John?
P102,000

● By how much was land undervalued?

P60,000

170. Dada and Elma are partners with capital balances of P400,000 and P600,000, respectively.
They share profits and losses equally. They decided to admit Jhai as a partner who will invest P200,000
for a 16% interest. Total agreed capital is P1,250,000. Which of the following statements is true?
There is revaluation of assets equal to P50,000

171. On June 30, 2018 the balance sheet for the partnership of Coll, Maduro and Prieto together with
their respective profit and loss ratios was as follows
Assets, at cost 180,000
Coll, Loan 9,000
Coll, Capital (20%) 42,000
Maduro,Capital (20%) 39,000
Prieto, Capital (60%) 90,000
Total 180,000

Coll decided to retire from the partnership by mutual agreement, the assets are to be adjusted to their
fair value of P216,000 at June 30,2018. It was agreed that the partnership would pay Coll P61,200 cash
for Coll’s partnership interest,including Coll loan which is to be repaid in full. No goodwill is to be
recorded. No goodwill is to be recorded.
 After Coll’s retirement, what is the balance of Maduro's capital account?
P45,450

172. Pascual invested P400,000 for a 10% interest in a partnership that has a total capital of
P3,000,000 after admitting Pascual. Which of the following is true?
The original partners received a bonus of P100,000

173. B and N are partners sharing profits and losses in the ratio 7:3. On January 1, 2014 their credit
balance capital accounts are P30,000 for B and P20,000 for N. W is to be admitted for a 25% interest in
the capital directly from the partners for P45,000.

Each partner’s capital account is to be charged pro rata for amounts in their capital ratio that will
provide W with the 25% interest.

The capital balance of B after W’s admission is

P22,500

174. Partnership A has an existing capital of P70,000. Two partners currently own the partnership
and split profits of 50/50. A new partner is to be admitted and will contribute net assets with a fair value
of P90,000. For no goodwill or bonus (depending in whichever method is used) to be recognized, what
is the interest in the partnership granted the new partner?
56.25%

175. Total partners’ equity remains the same if a new partner is admitted by purchase of interest.
In partnership dissolution, bonus is computed as a percentage of net income.
Only statement 1 is true.

176. The capital accounts of Ed, Nick and Vic are presented below with their respective profit and
loss ratio:
Ed P139,000 (½)
Nick 209,000 (⅓)
Vic 96,000 (⅙)

Tony was admitted to the partnership when he purchased directly, for P132,000 a proportionate interest
from Ed and Nick in the net assets and profits of the partnership. As a result, Tony acquired a one-fifth
interest in the net assets and profits of the firm. Assuming no revaluation of net assets is recorded, what
is the combined gain realized by Ed and Nick upon the sale of a portion of their interests in the
partnership to Tony?
P43,200

177. At December 31, Rod and Sol are partners with capital balances of P40,000 and P20,000, and
they share profits and losses in the ratio of 2:1, respectively. On this date Pete invests P17,000 in cash
for a one-fifth interest in the capital and profit of the new partnership. Assuming that assets are not
revalued, how much should be credited to Pete’s capital account on December 31?
P15,400
178. In lump-sum liquidation, capital deficiency resulting from division of loss from realization must be
eliminated before making any payment to partners. Any resulting capital deficiency of an insolvent
partner is eliminated by charging the capital accounts of the remaining partners.
Both statements are true

179. Partners Ray and Allan received a salary of P150,000 and P300,000, and share profit and loss
at 2:1 ratio, respectively. If the partnership suffered a P150,000 loss in 2020, by how much Allan’s
capital account would increase or decrease?
100,000

180. Two sole proprietors, E and J, agreed to form a partnership on January 1, 2021. The trial
balance for each proprietor is shown below as of January 1, 2021.

E E J J

BV FV BV FV

Cash 40,000 40,000 30,000 30,000

AR (net) 60,000 52,000 70,000 56,000

Merchandise 100,000 94,000 100,000 114,000

Inventory

Building (net) 280,000 320,000 250,000 280,000

Furniture and 60,000 64,000 40,000 44,000

fixtures (net)

AP 110,000 110,000 80,000 80,000

Mortgage Payable 200,000 200,000 150,000 150,000

E, Capital 230,000

J, Capital 260,000

The EJ partnership will take over the assets and assume the liabilities of the proprietors as of January
1, 2021.

● The total capital of the partnership amounts to

554000

● The total assets of the partnership amounts to

1094000

● The total liabilities of the partnership amounts to

540000

181. Total partners’ equity changes if a new partner is admitted by purchase of interest.
In partnership dissolution, bonus is computed as a percentage of net income.
Only statement 2 is true
Only statement 1 is true
 Both statements are false
Both statements are true

182. Partner Fe is investing in a partnership with Partner Ann. Fe contributes as part of her initial
investment. Accounts Receivable of P80,000; an Allowance for Doubtful Accounts of P12,000. Accounts
of P8,000 should be written off. The entry that the partnership makes to record Fe’s initial contribution
includes a
Credit to Fe, Capital for P68,000

183. Faith, Hope, and Love are partners sharing profits and losses in the ratio 2:2:1 and have capital
balances of P800,000, P800,000, and P400,000, respectively. Mercy pays P220,000 directly to Love for
½ of her share in the partnership. Partners agree that it is time to revalue the assets of the partnership
using as a basis, the amount Mercy is willing to pay.

● Total partnership capital after the admission of Mercy is

P2,200,000

184. Partner’s Nitz, Pat and Candy share profits and losses 50:30:20 respectively. Capital balances
are P74,000 P130,000 and P96,000 respectively. The carrying values of assets and liabilities are equal
to their fair values. Emmie is to be admitted as a new partner with a 40% capital interest and a 40%
share of profits and losses in exchange for a cash contribution. No bonus is to be effected.

How much should Emmie contribute?

P200,000

185. Mini Partnership was formed on January 2021. According to the partnership agreement, each
partner has an equal capital balance accounted for under goodwill (revaluation of asset) approach.
Partnership net income or loss is allocated 60:40 to Mi and Ni, respectively. Mi originally contributed
assets costing P30,000 with a fair value of P60,000 on January 1, 2021, while Ni invested P20,000 in
cash. Partners’ drawings during 2021 totaled P3,000 by Mi and P9,000 by Ni. Net income for 2021 was
P25,000.**

● The capital credit of Mi upon partnership formation is

60000

● The share of N in the net income for 2021 is

10000

186. Ben and Ric are partners who share profits and losses in the ratio of 6:4, respectively. On May
1, 2019, their respective capital accounts were as follows:
Ben P50,000
Ric P50,000

On that date, Lito was admitted as a partner with a one-third interest in capital and profits for an
investment of P50,000. The new partnership began with a total capital of P150,000. Immediately after
Lito’s admission, Ben’s capital account balance should be
P60,000
P56,667
P54,000
 P50,000

187. Partners Piolo and Jericho received a salary of P400,000 and P600,000 and share in profit and
loss at 60%; 40% ratio, respectively. If the partnership generated a net profit of P540,000 in 2020, by
how much Jericho’s capital account would increase or decrease?
124,000
(276,000)
416,000
(184,000)

188. Statement 1: When a new partner enters into a partnership by purchasing in existing partner’s
interest, the total assets and equity of the business increase.
Statement 2: When a new partner is admitted to a partnership by purchasing an existing partner’s
interest, the business’s accounting records do not record the transfer of cash from the new partner to
the existing partner.
Only statement 2 is true

189. Ace and Hoby formed a partnership on May 29, 2019 by contributing P300,000 and P500,000,
respectively. Ace and hoby agreed to receive 10% interest on capital contribution, and that Ace will
receive a monthly salary of P10,000 starting August 1, 2019. The remaining balance will be divided
according to capital contribution. At the end of the year, the partnership generated a revenue of
P800,000 and expenses of P650,000.

How much is the share of Hoby from the net profit?

80,000
87,500
62,500

How much is the share of Ace from the net profit?

87,500

190. Faith, Hope, and Love are partners sharing profits and losses in the ratio 2:2:1 and have capital
balances of P800,000, P800,000, and P400,000, respectively. Grace purchases half of Faith’s interest
by paying her directly for an amount that earned her a profit of P60,000.

● The entry to record the admission of Grace in the partnership includes a

Credit to Grace, Capital, P400,000

191. Statement 1: A bonus to the remaining partners results when a retiring partner receives
partnership assets which are less than his or her capital balance on the date of withdrawal.
Statement 2: If a new partner invests in a partnership at book value and acquires ¼ interest in total
partnership capital, it indicates that a bonus was paid to the original partners.
Only statement 1 is true

192. The partnership agreement of Adrian and Arzel provides a 5% capital interest on the initial
capital contributions of P300,000 and P500,000 respectively. The agreement also provides a salary
allowance of P200,000 to Adrian. The agreed profit and loss ratio is 40% for Adrian and 60% for Arzel.
The partnership generated a net profit of P180,000 in 2020. How much is the share of Arzel on the
profit?
 (11,000)

193. Bel and May have capital balances of P900,000, and P1,300,000 as of December 31, 2020. Bel
and May share 40% and 60% in the profits and losses. The partners believe that the following assets
should be adjusted:
Accounts receivable - (book value) - P240,000; (market value) - P200,000
Inventory - (book value) - P400,000; (market value) - P450,000

Len is interested in buying 40% interest from anyone of the partner.

● If May is willing to sell 40% of her interest and profit at a price that will earn her a profit of
P25,000. How much will Len pay?
P547,400
P545,000
P520,000
P522,400
● After recording the adjustments, the revised capital of Bel is
P904,000

194. This method of distributing Profit and Loss discourages additional investments
Capital balances, beginning
Capital balances, end
Average capital balances
Original capital contribution

195. The admission of a new partner involving asset revaluation will result in:
Unequal total agreed equity and total capital contribution

196. One of the provisions in the ABC Partnership is for A to receive a 10% interest on her average
capital balance for the year 2021. A first contributed P20,000 of capital on February 1, 2021. On June 1,
she contributed another P20,000. On September 1, she withdrew P15,000 from the partnership.
Withdrawals in excess of P5,000 are charged to the partner’s capital account. The partnership’s fiscal
year ends in December 31.

The amount of interest allocated to A is ____

2667

197. Partners Deeca and Annel received a salary of P280,000 and P320,00, and share profit and
loss at 3:5 ratio, respectively. If the partnership generated a net profit of P440,000 in 2020, by how
much Deeca’s capital account would increase or decrease?
220,000

198. Statement 1: New partners will always be admitted to a partnership at a contribution equal to or
greater than the book value of their interest.
Statement 2: When a partner sells his interest to another party, the journal entry simply credits the
withdrawing partner’s capital account and debits the new partner’s capital.
Both statements are false

199. What are the considerations in determining the best method in distributing profit?
All of the above
200. Which among the following is not correct in the distribution of profit or loss?
Original capital contribution may prove equitable if there are material changes in the capital
accounts during the year

201. Dada and Elma are partners with capital balances of P400,000 and P600,000, respectively.
They share profits and losses equally. They decided to admit Jhai as a partner who will invest P200,000
for a 15% interest. Total agreed capital is P1,250,000. Which of the following statements is true?
Jhai’s capital is credited for P187,500

202. Statement 1: If the proceeds from sale is less than the book value of the non-cash assets sold,
this will increase the partnership assets but decrease the partner’s equity.
Statement 2: The feature of unlimited liability covers all partners except industrial partner
Both statements are false

203. The admission of a new partner effected through purchase of interest in the partnership is
Recorded in the partnership books as a transfer within equity

204. When mill retired from the partnership, the final settlement of Mill’s interest exceeded Mill’s
capital balance. Under the bonus method, the excess
Reduced the capital balances of the remaining partners

205. In the absence of agreement as to distribution of losses but there is an agreement for
distribution of profits, the industrial partner shall share losses based on
Shall not be liable for any losses

206. The most equitable distribution of partnership profit based on capital contributions uses which of
the following capital concept?
Average Capital