Reviewer in Partnership Accounting

THEORIES
( With Computations )

1. Which of the following is false?

a. A partnership loan that was made from a partner who has a capital deficiency may

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be offset against the debit balance in his capital account.
b. Gains and losses incurred at liquidation are distributed t the partners using the residual
profit and loss sharing ratios when these amounts represent profits and losses from prior

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periods that would have been shared using the remainder profit and loss ratios.
c. In dividing the profit or loss to the partners, all types of withdrawals made by a partner
affects the computation of the ending capital balance used as a basis in providing

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allowance as to interest.
d. When partners agree to make their capital ratio in conformity with their profit and loss
ratio using the transfer of capital method, the partner whose agreed capital is lower
than his contributed capital, may receive a payment from the partner whose agreed
capital is higher than his contributed capital.
2. If a retiring partner receives more than his adjusted capital balance before retirement, what
is the logical reason of the capital balances of the remaining partner decrease after said
retirement?
a. Bonus is given by remaining partners to retiring partner
b. Bonus is given by retiring partner to remaining partners
c. Goodwill arising from retirement of a partner is recognized
d. Impairment loss of an existing asset is recognized at the time of retirement
3. At the date of partnership formation, the amount credited to a partner’s capital is less than
the fair value of the property contributed. Which of the following is the most valid reason?
a. The property contributed by the partner is impaired
b. The property contributed by the partner has been subjected to a positive asset
revaluation.
c. Bonus has been given by the partner to the other partners
d. Goodwill arising from the partnership formation has been recognized.
4. Which of the following is true if the total contributed capital of all the partners is equal to the
agreed capitalization of the new partnership in admission of a new partner by investment?
a. Asset revaluation is recognized
b. Impairment loss is recognized
c. Bonus to or from new partner is recognized
d. Any of the foregoing.
5. The admission of a new partners to a 20% interest in a partnership for an investment of
P18,000, withtotal agreed capital to be P75,000, will result in:
a. Goodwill to the old partners
b. Goodwill to the new partner
c. Bonus to the old partners
d. Bonus to the new partners
6. Kyogre and Groudon are partners who have capital balances of P600,000 and P480,000,
and sharing profits in the ratio of 3:2. Rayquaza is admitted as a partner upon investing

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P220,000 for a 25% interest in the firm, and profits are to be shaed equally. Given the choice
between goodwill and bonus method, Rayquaza would:
a. Prefer bonus method due to Rayquaza’s gain of P105,000
b. Prefer bonus method due to Rayquaza’s gain of P140,000
c. Prefer goodwill method due to Rayquaza’s gain of P140,000
d. Be indifferent for goodwill and bonus methods are the same.
7. Which of the following relate to the capital share of a partner in a partnership?

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a. The percentage of equity that a partner has on net assets
b. Proportionate to a partner’s capital contribution
c. May not be proportionate tp the capital contribution due to bonus

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d. All of these
8. How many statement/s is/are true?
I. A partner’s non-cash contribution should be recorded at its fair value in the

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absence of an agreed value. T
II. All partnership have at least one general partner. T
III. A partner’s contribution in the form of industry id recorded as “Industry” in the
partnership books. F
IV. If the partners did not agree as to how profits are to be allocated, then usch
should be divided among the partners, equally. F
a. 1 c. 3
b. 2 d. 4
9. The non-cash contributions of the partners are recorded by the partnership at their:
a. Agreed Value c. Carrying Amount
b. Fair Value d. Cost
10. A partnership which has failed to comply with one or more of the legal requirements for its
establishment is a/an:
a. Open partnership c. De facto partnership
b. De jure partnership d. Illegal partnership
11. Antares and Betelgeuse formed a partnership, each contributing assets t the business.
Antares contributed inventory with current market value in excess of its carrying amount.
Betelgeuse contributed rel estate with a carrying amount in excess of its current market value.
At what amount should the partnership record each of the following assets?
Inventory Real Estate
a. Carrying amount Market value
b. Market value Carrying amount
c. Carrying amount Carrying amount
d. Market value Market value
12. How many statement/s is/are false?
I. A major advantage of the partnership form of organization is that the partners
have unlimited liability. F
II. Trall invests the following assets in a new partnership: P15,000 in cash, and
equipment that cost P30,000 but has book value of P17,000 and fair market value
of P20,000. Trall, Capital will be credited for P32,000. F
III. Unless stated otherwise in the partnership contract , profits an losses are shared
among the partners m the ratio of their capital equity balances. F

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IV. If salary allowances and interest on capital are stipulated in the partnership profit
and loss sharing agreement, they are implemented only if income Is sufficient to
cover the amounts required by these features. F
V. The distribution of cash to partners in a partnership liquidation is through the
partners’ income sharing ratio. F

a. 1

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b. 2
c. 3
d. 4

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e. 5
13. Which of the following would not be considered a disadvantage of the partnership form of
organization?

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a. Limited life
b. Unlimited liability
c. Mutual agency
d. Ease of formation
14. The partner in a limited partnership that has unlimited liability is referred to as the:
a. Lead partner c. General partner
b. Head partner d. Unlimited partner
15. Allied invests personally owned equipment, which originally cost P110,000 and has
accumulated depreciation of P30,000 in the Allied-Mastercomputer partnership. Both partners
agree that the fair market value of the equipment was P60,000. The entry made by the
partnership to record Allied’s investment should be:
a. Equipment 110,000
Accumulated depreciation - Equipment 30,000
Allied, Capital 80,000
b. Equipment 80,000
Allied, Capital 80,000
c. Equipment 60,000
Loss on purchase of equipment 20.000
Accumulated depreciation - Equipment 30,000
Allied, Capital 110,000
d. Equipment 60,000
Allied, Capital 60,000
16. Which of the following would not be recorded in the entry for the formation of a
partnership?
a. Accumulated depreciation
b. Allowance for doubtful accounts
c. Accounts receivable
d. All of these would be recorded
17. Which of the following would not be considered as an expense of a partnership in
determining the income for the period?
a. Expired insurance c. Supplies used
b. Salary allowance to partners d. Transportation out

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Items 18 to 20 are based on the information below:

Partners Abel and Cain have capital balances in a partnership of P40,000 and P60,000,
respectively. They agree to share profits and losses as follows:
Abel Cain
As salaries P10,000 P12,000
As interest on capital at the beginning of the year 10% 10%
Remaining profits or losses 50% 50%

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18. If income for the year was P50,000, what will be the distribution of income to Cain?
a. P23,000 c. P20,000
b. P27,000 d. P10,000

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19. If income for the year was P30,000, what will be the distribution of income to Abel?
a. P13,000 c. P10,000
b. P77,000 d. P14,000

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20. If net loss for the year was P2,000, what will be the distribution to Cain?
a. P12,000 income c. P1,000 loss
b. P1,000 income d. P2,000 loss
21. If the partnership agreement specifies salaries to partners, interest on partners’ capital, and
the remainder on a fixed ratio, and the partnership net income is not sufficient to cover both
salaries and interest, then:
a. Only salary/ies is/are allocated to the partner/s
b. Only interest/s is/are allocated to the partner/s
c. The entire net income is shared on an agreed ratio.
d. Both salaries and interest are allocated regardless
22. In liquidation of a partnership, any gain or loss on the realization of non-cash assets should
be allocated:
a. First to creditors and the remainders to partners
b. To the partners on the basis of their capital balances
c. To the partners on the basis of their income-sharing ratio
d. Only after all creditors have been paid
23. If a partners has a capital deficiency in a liquidation and does not have the personal
resources to eliminate it:
a. The creditors will have to absorb the capital deficiency
b. The other partners will absorb the capital deficiency on the basis of their respective
capital balances.
c. The other partners will absorb the capital deficiency on the basis of their respective
income sharing ratios.
d. Neither the creditors nor the other partners will have to absorb the capital deficiency.
24. When a partnership terminates business, the sale of non-cash assets is called:
a. Liquidation
b. Derecognition
c. Realization
d. Depression
25. The liquidation of a partnership is a process containing the following steps:
1. Pay the partnership liabilities in cash
2. Allocate the gain or loss on realization to the partners on their income ratios
3. Sell non-cash assets for cash and recognized a gain or loss on their realization

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4. Distribute remaining cash to partners on the basis of their remaining capital

balances.
What is the proper sequencing of the events?
a. 3 2, 4, 1 c. 1, 3, 2, 4
b. 3, 2, 1, 4 d. 1, 4, 3, 2
26. Stine and Watson have partnership capital balances of $320,000 and $240,000,respectively.
Watson negotiates to sell his partnership interest to Leary for $280,000. Stine agrees to accept

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Leary as a new partner. The partnership entry to record this transaction is:
a. Cash 280,000
Manson, Capital 280,000

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b. Mark, Capital 280,000
Manson, Capital 280,000
c. Cash 40,000

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Mark, Capital 240,000
Manson, Capital 280,000
d. Mark , Capital 240,000
Manson, Capital 240,000
27. The admission of a new partner to an existing partnership:
a. May be accomplished only by investing assets
b. Requires purchasing the interest of one or more existing partners
c. Causes a legal dissolution of the existing partnership
d. Is almost always accompanied by the liquidation of a business
28. When a partnership interest is purchased:
a. Every partner’s capital account is affected
b. The transaction is a personal transaction between the purchaser and the selling
partner/s
c. The purchaser receives equity equal to the amount of paid
d. All partners will receive some part of the purchase price.
29. A invests P20,000 in cash in the A-R Partnership to acquire a 1/4 interest. In this case
a. The accounting will be the same as a purchase of an interest.
b. The total net assets of the new partnership are unchanged from the previous
partnership.
c. The total capital of the new partnership is greater than the total capital of the old
partnership.
d. A’s income ratio will automatically be 1/4.
30. Which of the following is correct when admitting a new partner into an existing partnership?

Purchase of Interest Admission by Investment

a. Total net assets no change no change
b. Total net assets increased no change
c. Total net assets no change increased
d. Total net assets no change unchanged
31. When admitting a new partner by investment, a bonus to old partners is allocated on:
a. The basis of capital balances
b. The basis of original investments of the old partners
c. The basis of profit and loss sharing ratio before the admission
d. The basis of control over the partnership

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32. Wilhelm joined the partnership by giving P30,000 cash. If the net assets ( total capital ) of
the partnership are still the same amount after Wilhelm has been admitted, then Wilhelm:
a. Must have been admitted by investment of assets
b. Must have been admitted by purchase of a partner’s interest
c. Must have received a bonus upon being admitted
d. Could have bee admitted by an investment of assets or by purchase of a partner’s
interest.

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33. Partnership capital and drawings account are similar to the corporate:
a. Paid in capital, retained earnings, and dividends accounts
b. Retained earnings accounts

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c. Paid in capital and retained earnings accounts
d. Preferred and common stock accounts
34. It is the change in the relation of the partners caused by any partner ceasing to be

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associated in the carrying of the business.
a. Liquidation c. Incorporation
b. Dissolution d. Break - up
Items 35 and 36 are based on the information below:
On June 30, 2024, the condensed baalnce sheet for the partnership of Jini, Jeane, and Jane,
together with their respective profit and loss sharing percentage, were as follows:

Jini, Capital P160,000

Jeane, Capital 96,000
Jane, Capital 64,000
Net Asset P320,000

35. Jini decided to retired from the partnership 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 Jini’s retirement, what will be the capital balances of the other partners?
Jeane Jane
a. P84,000 P56,000
b. P102,000 P68,000
c. P108,000 P72,000
d. P120,000 P80,000
36. Assume instead that Jini remains in the partnership and that Rane is admitted as a new
partner with 25% interest in the capital of the new partnership for cash payment of P140,000.
Total goodwill implicit in the transaction is to be recorded. Immediately after admission of
Rane, Jini’s capital account balance should be?
a. P280,000
b. P210,000
c. P160,000
d. P140,000
37. On May 1, 2024, Maribel and Rolando formed a partnership and agreed to share profits
and losses in the ratio of 3:7, respectively. Maribel contributed an equipment that cost him
P20,000 was currently 50% depreciated. Rolando contributed P80,000 cash. The equipment
was sold for P36,000 on May 1, 2024, immediately after formation of the partnership. What
amount should be recorded in Maribel’s capital account on the formation of the partnership?
a. P34,800

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b. P36,000
c. P20,000
d. P10,000
38. In relation to the previous question, if the equipment was sold for P36,000 three weeks after
the formation , at what amount is Maribel’s capital account credited for?
a. P34,800
b. P36,000

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c. P20,000
d. P10,000
39. D, I, Y are capitalist partners and Z is an industrialist partner. The partnership reported a net

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loss of P200,000. The partners share profits in the ratio 2:3:2:3. How much is the share of Z?
a. P60,000
b. P20,000

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c. P40,000
d. P0
40. Jol is admitted into the partnership of Li and Bee by investing cash equivalent to 1/3 of their
capital. Which of the following is true after the admission of Jol?
a. Assets of the partnership will increase
b. Total partner’s capital remains unchanged
c. Li and Bee’s capital decreased by 1/3
d. The assets of the partnership is unchanged
41. Jol is admitted into the partnership of Li and Bee by purchasing the capital interest of the
the old partners equal to 1/3 of their respective capital. Which of the following is true after the
admission of Jol?
a. Assets of the partnership will increase
b. Total partner’s capital remains unchanged
c. Li and Bee’s capital increased by 1/3
d. The assets of the partnership is unchanged
42. Which of the following statements is correct regarding a partner’s debit capital balances?
a. The partner should make additional contributions to reduce the debit balance to
extent of the partner’s personal net assets.
b. If contributions are not possible due to the deficient partner being insolvent, the other
partners with credit balances will be allocated portions of the debit balance based on
their respective proportionate profit and loss sharing ratio or percentage.
c. Partners who absorb another partner’s debit balance have a legal claim against the
deficient partner.
d. All of the statements are correct.
43. Kingchow and Dokan are partners sharing profits equally and with capital balances,
respectively, of P750,000 and P500,000. The firm owes Dokan P200,0000, as evidenced by a
promissory note. Upon liquidation, cash of P300,000 becomes available for distribution to
partners. In the final cash distribution, the respective shares of Kingchow and Dokan will be:
a. P150,000 and P150,000 c. P200,000 and P100,000
b. P175,000 and P125,000 d. P275,000 and P25,000
44. The following are the profit sharing ratio and capital account balances of the partnership
of Tanjiro, Inosuke, and Zenitsu as of May 5, 2024: Tanjiro(50%), P400,000; Inosuke(30%), P120,000;
Zenitsu(20%), P80,000. As of the said date, Tanjiro retired from the partnership. Per agreement,

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Tanjiro was paid P225,000 for his interest and the goodwill implied from the settlement was
recorded. After Tanjiro’s retirement, the partnership’s net assets was?
a. P175,000 c. P225,000
b. P200,000 d. P250,000
45. Jack, En, and Poi, are partners in an accounting firm sharing profits in the respective ratio
of 3:3:2. Bert is admitted as a new partner and is allowed a 25% share in profits, with the
balance to e shared proportionately by the original partners in their original ratio. What is the

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new profit-sharing ratio of Jack, En, Poi, and Bert, respectively?
a. 30%, 30%, 20%, 20%
b. 40%, 40%, 10%, 10%

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c. 28.125%, 28.125%, 18.75%, 25%
d. 37.5%, 37.5%, 25%, 25%
46. James, Tyler, and Carl decided to dissolve their partnership on February 21, 2024 (the

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company’s fiscal year ends on April 31). On this date, their income sharing percentage and
capital balances were as follows:
James(40%) P50,000 Tyler(30%) P60,000 Carl(30%) P20,000

The net income from May 1, 2023 to February 21, 2024 was P44,000. Also on February 21, 2024,
the partnership’s cash and liabilities were P40,000 and P90,000, respectively. What was the
book value of the non-cash assets on February 21, 2024?
a. P190,000 c. P180,000
b. P220,000 d. P224,000
47. D, E,and L decided to terminate their partnership on the fiscal year ended August 31, 2024.
On this date, their capital balances and income-sharing percentage were as follows:
D(40%) P50,000 E(30%) P60,000 L(30%) P20,000

The net income for the whole fiscal year was P44,000. Also on August 31, 2024, the
partnership’s cash and liabilities were P40,000 and P90,000, respectively. For D to receive
P55,200 in full settlement of his interest in the partnership, how much must be realized from the
sale of the partnership’s non-cash assets?
a. P187,000 c. P193,000
b. P177,000 d. P193,000
48. On March 31, 2024, the partners Frappe, Espresso, and Latte of THE COFFEE 3 Partnership,
had the following loan and capital account balances ( after closing entries ):
Debits Credit
Frappe, Loan P 20,000
Latte, Loan P 60,000
Frappe, Capital P 30,000
Espresso, Capital P120,000
Latte, Capital P 70,000

The partnership ‘s income sharing ratio was Frappe, 50%; Espresso, 20%; Latte, 40%. On March
31, 2024, Cappuccino was admitted to the partnership for a 20% interest in total capital of the
partnership in exchange for an investment of P40,000 cash. Prior to Cappuccino, the existing
partners agreed to increase the P60,000 carrying amount of the partnership’s inventories to
current fair value of P120,000. The capital account to be credited to Cappuccino:
a. P60,000 c. P52,000

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b. P40,000 d. P46,000

49. If the partnership is liquidated, how is the final allocation of business assets made to the
partners?
a. Equally
b. According to the profit and loss ratio
c. According to the final capital interest of the partners

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d. According to the initial investments
50. Which of the following is correct if bonus to a partner is involved in distribution?
a. Bonus shall always be given regardless of the result of the business operations.

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b. Bonus shall always be given if the partnership resulted to a profit.
c. Bonus shall not be given if it will result to negative amount after deducting the
partnership salaries and interest as basis in multiplying the bonus rate, even if the result

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of the partnership operation is a profit.
d. None of the above
Consider the following statements below:
I. Permanent withdrawals are included in the computation of ending capital
balances and the weighted average capital.
II. Temporary drawings are included in the computation of ending capital balances
and the weighted average capital.
III. In partnership operations, if the base amount is negative, a bonus is given to the
partner.
IV. Admission by investment will always result to a bonus to or from the new partner.
V. Gain or loss is recognized by the partnership when payment to the partnership is
more or less than the capital credit of the incoming partner.
VI. Gain or loss is recognized by the old partners when a new partner personally and
directly paid for a portion of the old partners’ capital balances.
VII. The order of priority in recognizing the amount to be recorded in the partnership
books upon formation is: (1) Agreed Value, (2) Fair Value, (3) Carrying Amount or
Book Value, (4) Cost.
51. How many of the following statement/s is/are true?
a. 2 c. 4
b. 3 d. 1
52. A partners’ withdrawal of assets from a partnership that is considered a permanent
reduction in that partners’ equity is debited to the partners:
a. Drawing accounts c. Capital account
b. Retained earnings account d. Loan receivable account
53. The recognition of goodwill in the accounting records of a partnership may be appropriate
for:
a. Retirement of an existing partner c. A or B
b. Admission by investment d. Neither A or B
54. If the amount invested by the incoming partner is more than his capital credit in the new
partnership and goodwill is not recorded, which of the following is true?
a. The new partner receives a bonus
b. The old partners share the bonus in their respective profit and loss ratio before
admission.
c. The old partners share the bonus in their respective profit and loss ratio after admission.

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d. The old and new partners receives the bonus based on their new profit and loss
sharing ratio.
55. What is the rule of offset in a partnership undergoing liquidation?
a. Receivables from partners should offset against their debit capital balances before
they receive any cash distributions.
b. Loans to partners should offset against their debit capital balances before they
receive any cash distributions.

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c. Loans from partners should offset against their credit capital balances before they
receive any cash distributions.
d. Loans from partners should offset against their debit capital balances before they

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receive any cash distributions.
Items 56 and 57 are based on the information below:
VENI, VEDI, VICI, and GAIUS are partners sharing profits and loss in the ratio 3:4:6:8. Their capital

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balances on December 31, 2024 are as follows:
VENI P 1,000 VEDI P25,000
VICI P25,000 GAIUS P 9,000
Due to a steady decline in the business performance, the partners decided to liquidate their
partnership and accordingly convert the non-cash assets into P23,200 cash. After paying
liabilities of P3,000, they have P22,200 cash left.

56. What is the gain or loss on realization of non-cash assets?

a. P22,500 Loss c. P36,800 Loss
b. P37,800 Gain d. P37,800 Loss
57. What was the carrying amount of the non-cash assets?
a. P61,000 c. P45,700
b. P60,000 d. P14,600
Items 58 and 59 are based on the information below:
Eren, Mikasa, and Armin are partners in the Survey Corps Partnership sharing profits and losses
in a 40:30:30 ratio, they are now finished in their second year of doing business wherein their
condensed income statement showed total revenues of P1,300,000 and expenses amounting
to P700,000. Their respective capital balance as of the first day of the year are as follows:
Eren P100,000 Mikasa P90,000 Armin P90,000

Meanwhile, the partners contract included the following income distribution plan:
1. Salaries every two months of P30,000.
2. Interest of 20% on beginning capital balances in excess of P50,000.
3. Bonus to Eren of 25% based on net income after bonus but before salaries and interest.
Below are the movement in capital balances of the partners for the year:
 Eren invested his equipment with a carrying amount of P100,000 but with a current
market value of P120,000. He also withdrew P20,000 cash.
 Mikasa did not made additional investments but she only withdrew P25,000 cash for
personal use.
 Armin invested additional cash in the amount being 20% more than his beginning
capital. He subsequently withdrew P10,000 cash from the partnership assets.

58. How much is the share of Eren on the partnership profit?

a. P275,600 c. P257,600

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b. P276,500 d. P275,700
59. At what amount are the capitals of Armin and Mikasa shown in the balance sheet as of
the year-ended?
a. Armin - P206,200; Mikasa - P227,200 c. Armin - P260,200; Mikasa - P227,200
b. Armin - P260,200; Mikasa - P272,200 d. Armin - P202,600; Mikasa - P202,700
60. Assuming bonus method was used in the admission of a new partner, which of the
following is true?

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I. If any, any cash settlement between partners are not recorded in the partnership
books.
II. Total invested/contributed capital equals total agreed capital after admission.

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III. It is probable that a gain can be recognized by the partners assuming the amount
of capital transferred to the incoming partner is less than the cash received for it.
IV. A gain is recognized when the amount paid to the partnership is less than the

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capital trasferred to the incoming partner.

a. I, III, and IV c. II, III, and IV

b. I, II, and III d. II, and III only
Imu and Joyboy’s partnership agreement stipulates the following:
1. Imu shall receive 8% of profit not exceeding P80,000 and 18% over P100,000 but
not exceeding P300,000.
2. Joyboy shall receive a bonus of10% of the remaining profit and an additional 5%
for the remaining profit after prior allocations to both partners.
3. Any remainder is allocated equally.

The partnership earned a profit of P280,000

61. What is the amount of share to Joyboy?

a. P107,487 c. P170,487
b. P107,478 d. P170.748
A partnership agreement indicates that Caesar is to be allocated 10% interest based on the
partner’s weighted average capital balance. The movements in Caesar’s capital account
follows:
Dr. Cr.
March 1 P80,000
July 31 P30,000
Sept. 30 40,000
Dec. 31 10,000

62. What is the interest on the weighted average balance of Caesar’s capital?
a. P6,471 c. P6,417
b. P6,714 d. None of the choices
Items 63 to 65 are based on the information below:
Z purchases 25% interest in the net assets and profits of the partnership from X and Y who had
a profit sharing ratio of 55:45, for P100,000. X and Y agreed to share proportionately on the 25%
interest sold to Z. The partnership's net assets are fairly valued.

The capitals of X an Y are as follows: X: P80,000 Y: P120,000

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63. How much is the combined gain of X and Y?

a. P25,000 c. P75,000
b. P50,000 d. P100,000
64. How much is debited to X’s capital account?
a. P27,500 c. P25,700
b. P22,500 d. P25,200
65. How much is the personal gain of Y?

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a. P27,500 c. P50,000
b. P22,500 d. P25,200
Items 66 to 67 are based on the information below:

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N decides to withdraw from ARLN Partnership since the partner wants to focus on another
business. Before the withdrawal of N, the income summary and expense summary account
had a debit balance of P100,000. The partners also agreed to revalue an equipment with

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book value of P70,000, and a fair value of P110,000. The capital balances and profit sharing
percentage of the partners are as follows:
A, Capital (20%) P 280,000
R, Capital (30%) 420,000
L, Capital (30%) 420,000
N, Capital (20%) 280,000
Total P1,400,000

The remaining partners agreed to settle N’s capital for P310,000.

66. Assuming partial goodwill method was used, how much goodwill is debited?
a. P30,000 c. P12,000
b. P 2,000 d. P42,000
67. Assuming total goodwill method was used, what is the capital balance of R after
withdrawal of N?
a. P408,000 c. P510,000
b. P450,000 d. P354,000
68. When a new partner is admitted in an existing partnership either by purchase of interest or
by investment, which of the following statement is true?
a. The partnership book is required to be changed with a new one.
b. Bonus should be recorded
c. The partnership's non-cash assets should be adjusted to conform with their fair market
values.
d. Both requires to undergo the liquidation process
69. In the partnership of Seven and Eleven with capital balances of P50,000 and P75,000
respectively and Draybthru is admitted by buying one-half of Eleven’s interest for P36,000.
a. Eleven suffered a personal loss of P1,500
b. The loss is divided between them on an agreed ratio
c. The sale is at its book value
d. The sale is more than the book value.
70. One of the characteristics of lump sum liquidation as compared to installment is:
a. A new partner may be admitted to the partnership
b. Non-cash assets are sold in one setting only
c. The non-cash assets are usually sold at less than the book value

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d. Liabilities will be given the first priority

Items 71 to 73 are based on the information below:
Troi, Kent, and Anton formed a partnership on January 1, 2024. Troi invested P60,000, Kent
invested P60,000, and Anton invested P140,000. Troi will manage the store and work 40 hours
per week in the store. Kent will work 20 hours per week, and Anton will be idle. Each partner
withdrew 30% of his profit distribution during the year. If there was no income distribution to a
partner, there were no withdrawals of cash.

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Compute for the capital balances at the end of 2024 under the following independent
assumptions:

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71. Net income is P120,000, and the income ratio is Troi, 40%; Kent, 35%; Anton, 25%.
a. P93,600; P89,400; P116,000 c. P93,600; P89,400; P161,000
b. P93,600; P89,040; P161,000 d. P96,300; P89,400; P116,000

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72. Net income is P140,000 and the partnership agreement only specifies a salary of P50,000 to
Troi and P30,000 to Kent.
a. P109,000; P59,000; P145,000 c. P190,000; P59,000; P154,000
b. P109,000; P95,000; P145,000 d. P109,000; P95,000; P154,000
73. Net income is P86,000 and the partnership agreement provides for (1) Salary of P40,000 to
Troi and P40,000 to Kent, (2) Interest on beginning capital balances at the rate of 10%, and (3)
any remaining profit or loss is to be shares by the partners: Troi, (40%); Kent, (35%); Anton, (25%).
a. P86,600; P83,700; P146,300 c. P86,600; P87,300; P143,600
b. P86,600; P87,300; P146,300 d. P86,600; P90,000; P140,000
74. How does partnership accounting differ from corporate accounting?
a. The matching principle is not considered as appropriate.
b. Revenues are recognized at a different time by a partnership than is appropriate for a
corporation.
c. Individual capital accounts replace the contributed capital and retained earnings
balances found in corporate accounting.
d. Partnerships reports all assets at fair value as of the latest balances sheet date.
75. Which of the following would least likely to be used as a means of allocating profits among
partners who are active in the management of the partnership?
a. Salaries
b. Bonus as a percentage of net income before bonus
c. Bonus as a percentage of sales in excess of a targeted amount
d. Interest on average capital balances
76. If a partner with a debit capital balance during liquidation is personally solvent, the:
a. Partner must invest additional assets in to the partnership
b. Partner’s debit balance will be allocated to the other partners
c. Other partners will give the partner enough cash to absorb the debit balance
d. Partnership will loan the partner enough cash to absorb the debit balance
77. Which of the following has the effect of increasing the unadjusted capital to arrive at the
adjusted capital?
a. Understated allowance for doubtful accounts
b. Unrecognized accrued expenses
c. Overstated accumulated depreciation
d. Mortgage assumed

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78. Which of the following has the effect of decreasing the unadjusted capital to arrive at the
adjusted capital?
a. Unrecorded prepayments
b. Increase in inventory balance
c. Decrease in loan
d. Mortgage assumed
79. Shokaku and Zuikaku decided to form a partnership called The Cranes Partnership.

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Shokaku contributed cash of P10,000, and an equipment with a carrying amount of P15,000,
and a current fair value of P20,000. The soon to be partners agreed to value it as P18,000.
Zuikaku, on the other hand, contributed inventory worth P30,000 realizable at P25,000. What

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are the capital to be credited to Shokaku and Zuikaku?
a. P28,000 and P30,000 c. P28,000 and P25,000
b. P30,000 and P25,000 d. P30,000 and P30,000

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Items 80 to 82 are based on the information below:
Forma, Ope, and Disso are partners with capital balances of P450,000, P1,600,000, and
P750,000, respectively, sharing profits and losses of 4:3:3. Liqui is admitted as a new partner
who specializes in the target market of the partnership. He is to invest cash for a 25% interest in
the partnership capital and profit and losses, which includes a credit of P400,000 bonus upon
his admission.

80. How much cash should Liqui invest?

a. P400,000 c. P350,000
b. P450,000 d. P300,000
81. How much is the capital credit of Liqui?
a. P810,000 c. P800,000
b. P1,066,667 d. P750,000
82. What is the new profit and loss sharing of the partners?
a. 4:3:3:2.5 c. Equally
b. 30%, 22.5%, 22.5%, 25% d. According to capital balances
83. A simple partnership liquidation requires that:
a. Periodic payments to creditors and partners determined by safe payments schedule.
b. Partnership assets to be converted into cash with full payment to all outside creditors
before remaining cash is distributed to partners in a lump sum payment
c. Only creditors are to be paid in an orderly manner
d. Periodic payments to partners as cash becomes available
Items 84 to 89 are based on the following information:
The statement of financial position of COUNTRY Partnership, just before liquidation on 2024 is as
follows:

Assets Liabilities and Capital

Cash P100,000 Accounts payable P140,000

Non-cash Assets 280,000 Loan from Japan 40,000
Due from America 20,000 Japan, Capital (50%) 60,000
Australia, Capital (30%) 100,000
America, Capital (20%) 60,000
Total Assets P400,000 Total Liabilities and Capital P400,000

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Partners Japan and Australia have more personal liabilities than personal assets.

If America received P16,000 as settlement:

84. How much cash should Japan and Australia receive?
a. P24,000 and P48,000 c. P 64,000 and P50,000
b. P40,000 and P64,000 d. P100,000 and P60,000
85. What amount represents the gain or loss on realization of non-cash assets?

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a. P120,000 c. (P120,000)
b. P160,000 d. (P160,000)
86. How much were the non-cash assets sold for?

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a. P160,000 c. P150,000
b. P170,000 d. P140,000
If Australia received P70,000 as settlement, and liquidation expenses of P10,000 were paid:

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87. How much cash should Japan and America receive?
a. P50,000 and P40,000 c. P10,000 and P40,000
b. P50,000 and P20,000 d. P50,000 and P30,000
88. What amount represents the gain or loss on realization of non-cash assets?
a. P90,000 c. (P100,000)
b. (P90,000) d. P 95,000
89. How much were the non-cash assets sold for?
a. P10,000 c. P150,000
b. P90,000 d. P190,000
90. Which of the following is true about the cash settlement received by the partners after
liquidation?
a. Cash settlements are always based on the profit and loss ratio
b. Cash settlements are composed of final capital balances plus loans made to the
partnership and/or less loans from the partnership
c. In some cases of liquidation, not all partners receive cash in the final settlement.
d. Either B or C
e. All of the above
91. In the GB Partnership, Guoba’s capital is P140,000 and Zhongli’s is P40,000, and they share
income in a 3:1 ratio, respectively. They decided to admit Traveler to the partnership. Guoba
and Zhongli agree that some of the inventory is obsolete. The inventory decreased before
Traveler is admitted. Traveler invests P40,000 for a one-fifth interest. What is the amount of
inventory written down?
a. P4,000 b. P10,000 c. P15,000 d. P20,000
92. What accounting transactions are not recorded by an accountant during liquidation?
a. The conversion of partnership assets into cash
b. The allocation of the resulting gains and losses
c. The payment of liabilities and expenses
d. Remaining unpaid debts settled and the distribution if any remaining assets to the
partners based on their profit and loss ratio.
93. In case of admission of a new partenr by investment in the partnership, which of the
following statements is correct?
a. If there is a bonus but without asset revaluation, the total contributed capital of all
partners will be lower than the new agreed capitalization.

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b. If there is a positive asset revaluation without bonus, the total contributed capital of all
partners will be higher than the new agreed capitalization.
c. If there is a negative asset revaluation ( asset impairment ) but without bonus, the
contributed capital of the new partner will be equal to his agreed capitalization in the
new partnership.
d. If there is a positive asset revaluation or asset impairment, the difference between the
total contributed capital of all partners and the new agreed capitalization shall be

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distributed to all partners including new partner using the new profit or loss ratio
agreement.
94. Goodwill is not allowed to be recorded in a formation of a partnership in accordance with:

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a. PFRS 3 c. PAS 1
b. PFRS 10 d. PAS 27
Sovetskaya and Rossiya shares profit and losses equally after providing for annual salaries of

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P150,000 and P180,000, respectively, and a bonus of 10% on net income after salaries and
bonus to Sovetskaya.

The profit and loss statement of the partnership for the whole year is shown below:
Sales P6,000,000
Less: Cost of Sales 3,000,000
Gross profit P3,000,000
Less: Expenses 2,450,000
Net profit P 550,000

95. Based on the above information, which of the following is correct?

a. If the expense is exclusive of bonus and salaries, the amount of bonus is P20,000.
b. The amount of bonus if the expense is inclusive of salaries is P50,000.
c. If the expense includes bonus and salaries, the amount of bonus is P55,000.
d. The amount of bonus if the expense is inclusive of salaries is P55,000.
Items 96 to 98 are based on the information below:
Lev, Mikhail, and Ilya are partners with capital balances on December 1, 2024 of P600,000,
P600,000, and P400,000, respectively, and sharing profits and losses equally. Ilya is to retire, and
it is agreed that she is to take certain equipment with second-hand value of P100,000 and a
note for the balance of his interest. The equipment is carried in the books at P130,000, but a
brand new one would cost P160,000.

96. Ilya’s acquisition of the furniture would result in:

a. Reduction in capital of P10,000 each for all partners
b. Reduction in capital of P15,000 each for Lev and Mikhail
c. Reduction in capital of P30,000 for Ilya
d. Reduction in capital of P110,000 for Ilya
97. What amount represents the note payable to Ilya?
a. P145,000 c. P295,000
b. P290,000 d. P285,000
98. Assuming Ilya is to be paid P300,000 cash and the notes payable is P40,000, how much is
the capital balance of Lev after retirement of Ilya? ( Hint: Use bonus method )
a. P565,000 c. P555,000
b. P556,000 d. P550,000

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99. Periodic withdrawals by partners are best viewed as:

a. Expense of doing business
b. Taxable income to the partners
c. Distribution of partnership assets to the partners
d. Payment for partners’ personal services to the partnership
100. The most equitable distribution of partnership profit based on capital contributions yses
which of the following capital concept?

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a. Equal Capital
b. Ending Capital
c. Beginning Capital

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d. Average Capital

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PROBLEMS
PROBLEM 1
PARTNER and SHEEP decided to combine their separate business to form a partnership. Cash
and Non-cash assets are to be contributed for a total capital of P600,000. The contributed

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liabilities are to be assumed by the partnership. They further agreed that their capital balances
after the formation must be equal.

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The following are the assets and liabilities to be contributed into the partnership:

PARTNER SHEEP

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Carrying Fair Value Carrying Fair Value
Amount Amount
Accounts Receivable P40,000 P40,000 - -
Merchandise Inventory 60,000 80,000 P40,000 P50,000
Machinery 120,000 90,000 80,000 100,000
Accounts Payable 30,000 30,000 20,000 20,000

Requirements:
1. What is the amount of additional cash contribution to be made by PARTNER in
accordance with their agreement?
2. What is the amount of capital credited to SHEEP after the formation?

PROBLEM 2
Alpha and Omega formed a partnership. Alpha invested cash worth P85,000 and a machine.
Omega contributed cash worth P55,000 and an equipment which has a mortgage attached
to it of P35,000 in which Omega will pay the loan personally. The total capital after the
formation was P360,000. They also further agreed to reflect a 55:45 profit sharing ratio as to
their capital balances respectively upon formation. No other investment or withdrawal
occurred other than mentioned to reflect their capital ratio agreement.

How much was the fair value of the machine and equipment that were contributed?

PROBLEM 3
Sunflower and Tulips started a partnership. Sunflower contributed a building that he purchased
10 years ago for P100,000, the partners agreed to value it at P100,000. The accumulated
depreciation on the building on the date of formation is P25,000 an its fair value is P110,000.

How much would be Sunflower’s capital account be credited for?

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PROBLEM 4
On March 1, 2024, Sena and Hawks formed a partnership with each contributing the following
assets:

Sena Hawks
Cash P60,000 P140,000
Office Equipment 50,000 150,000

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Building 450,000
Furniture & Fixtures 20,000

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The building is subject to a mortgage loan of P180,000, which is to be assumed by the
partnership. The partnership agreement provides that Sena and Hawks share profits and losses
at 30% and 70% respectively. Assuming that the partners agreed to bring their respective

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capital in proportion to their P & L ratio, and using Hawks capital as the base.

Requirements:
1. Determine the capital account balance of Hawks on March 1, 2024.
2. Compute the additional cash to be invested by Sena.

PROBLEM 5
Tanya has been operating a pizza business as a sole proprietor for several years. On
December 31, 2024, the business has the following account balances:

Cash P10,000
Inventory 30,000
Equipment 50,000
Accumulated Depreciation
10,000
Liabilities 10,000
Tanya, Capital 70,000

Tanya would like to raise some additional capital, as she is interested in eventually buying a
building for the pizza business. She offers Degurechaff an interest in the business and the two
agree to form a partnership. An audit and appraisal of Tanya’s business disclose that all assets
and liabilities are valued properly on the books of the business except for the inventory that
was overvalued bu P7,000. Tanya and Degurechaff prepared and sign articles of co
partnership that includes all significant operating policies. Degurechaff will contribute cash for
a 30% capital interest. The Tanya Degurechaff Partnership will acquire all of Tanya’s business
and assume its debts.

How much cash must be contributed by Degurechaff to the partnership?

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PROBLEM 6
The balance sheet of Lockheed on February 28, 2024 is as follows:

Cash P2,150 Accounts Payable P3,600

Accounts Receivable P3,500
Allow. For Doubtful
(1,250) 2,250 Lockheed, Capital 7,300
Accounts

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Inventory 4,500
Equipment 3,000
Accum. Dep’n (1,000) 2,000

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P10,900 P10,900

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Martin offers to invest P20,000 cash. Lockheed may withdraw ot contribute cash to make his
capital balance equal to P10,000. The offer was accepted by Martin after the adjustments to
be made below:
1. Depreciation is overstated by P200.
2. Merchandise is to be valued at P4,000.
3. Allow. For Doubtful Accounts should be P1,500.
4. Additional accounts payable previously unrecognized amounts to P600.

Requirements:
1. How much was invested ( withdrew ) by Lockheed to conform with the agreement?
2. How much is the total assets of the partnership after the formation?

PROBLEM 7
Ran ,Rands, and Randy formed a partnership on January, 1 2024 with initial investment of:
P100,000, P150,000, and P225,000, respectively. The partnership agreement states that profits
and losses are to be shared equally by the partners after consideration is made for the
following:

A. Salaries are allowed to partners: P6,000 for Ran, P4,000 for Rands, and P3,000 for
Randy.
B. Partner’s avrage capital balance during the year shall be allowed a 10% interest.
C. Bonus of 20% of income after salaries, interest, and bonus will be given to Randy.

Additional information:
- On June 30, 2024, Ran invested an additional P60,000.
- Randy withdrew cash of P70,000 from the partnership on September 30, 2024.
- For the year 2024, total revenue and expenses are P1,000,000 and P680,000,
respectively.

Requirements:
1. What is the share of Rands in the partnership?
2. Compute the capital balance of Ran on December 31, 2024.
3. Prepare the entry on the books of the partnership to distribute the net income to the
partners.

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PROBLEM 8
The partnership agreement of Al, Co, and Plus provides that profits are to be divided as follows:
a. Al is to receive a salary allowance of P10,000 for managing the partnership.
b. Partners are to receive 10% interest on average capital balances.
c. Bonus of 10% of income after salary but before interest and bonus.
d. Remaining profits are to be divided 30%, 30%, and 40% to Al, Co, and Plus,
respectively.

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Al had a capital balance of P60,000 on January 1, 2024 and had drawings of P8,000 during the
year ended December 31, 2024. Co’s capital balance on January 1, 2024 was P90,000, and

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she invested an additional P30,000 o n September 1, 2024. Plus’ beginning capital was
P110,000 and she withdrew P10,000 on July 1, 2024 but invested an additional P20,000 on
October 1, 2024.

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Requirements:
1. Prepare a schedule to show the allocation of the partnership net income of P25,000
for 2019.
2. Prepare the journal entry to distribute the net income to the partners.
3. How much did each partners receive from the profit allocation?

PROBLEM 9
Northrop, Bell, and General were partners with capital balances of P80,000, P100,000, and
P70,000, respectively. They agreed to admit Raytheon to the partnership. Raytheon invested
P50,000 cash and an equipment with P40,000 fair value for a 25% interest. Before the admission
of Raytheon, the profit and loss sharing ratio was 2:3:2. The partners agreed to use the bonus
method to account for the admission of Raytheon to the partnership.

Requirements:
1. What is the capital of Raytheon immediately after his admission?
2. How much is the bonus?
3. Assuming the asset revaluation method was used, what is the capital balance of
Northrop upon admission of Raytheon?

PROBLEM 10
In the RRJ partnership ( to which Bradley seeks admittance ), the capital balances of Roland,
Randel, and Julienne, who share income in the ratio of 5:3:2 are:

Roland P500,000
Randel 300,000
Julienne 200,000

If no goodwill or bonus is to be recorded, how much should Bradley invest for a 20% interest?

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PROBLEM 11
Bacardi, Boones, and Chamdor have the following capital balances: P40,000, P50,000, and
P30,000, respectively. The partners share profits and losses 20%,40%, and 40%, respectively.
Boones retires and is paid P80,000 based on the terms of the original partnership agreements.

Requirements:
1. If goodwill method is used, what is the capital of the remaining partners?

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2. If the bonus method is used, what is the capital of the remaining partners?
3. What is the total partnership capital after Boones retires receiving P80,000 and using
bonus method?

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PROBLEM 12

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The following balances as at October 31, 2024, for the partnership of Oda, Hideyoshi, and
Tokugawa were as follows:
Cash P50,000 Liabilities P15,000
Leila, Loan 15,000 Oda, Loan 22,500
Non-Cash Assets 400,000 Oda, Capital 105,000
Hideyoshi, Capital 97,500
Tokugawa, Capital 225,000
Total P465,000 Total P465,000
Oda has decided to retire from the partnership on October 31. The partners agreed to adjust
non-cash assets to their fair market value of P490,000. The profit to October 31 is P100,000. Oda
will be paid P173,000 for his partnership interest inclusive of her loan which is repaid in full. Their
profit and loss is 3:3:4, respectively.

What will be the balance of Hideyoshi’s capital account after the retirement of Oda?

PROBLEM 13
Rimuru, Veldora, and Milim decided to liquidate their partnership on July 31, 2024. Their capital
balance and proft and loss ratio are as follows:

Capital Balance Profit and Loss Ratio

Rimuru P100,000 40%
Veldora 120,000 30%
Milim 40,000 30%

From January 1, 2024 to July 31, 2024, the partnership’s net loss is P10,000 . On July 31, 2024
before realization the balance of cash is P50,000 and that of liabilties is P100,000.

For Rimuru to receive P80,000 in the settlement of his interest upon liquidation, the non-cash
assets must be sold for?

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PROBLEM 14
On December 31, 2024, the accounting records of the Crayola partnership included the
following information:

Decaf, Drawing ( debit balance ) P28,000

Fro, Drawing ( debit balance ) 18,000
Fre, Loan ( credit balance ) 40,000

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Decaf, Capital 130,000
Fro, Capital 110,000
Fre, Capital 115,000

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Before liquidation, the partnership had P55,000 cash, and liabilities amounting to P160,000. The
partnership was liquidated on December 31, 2024, and Fro received P85,000 cash. Decaf, Fro,

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Fre share net income and losses in a 5:3:2 ratio respectively.

Requirements:
1. How much should Decaf and Fre receive upon liquidation of the partnership?
2. How much was the book value of the non-cash assets?
3. How much was the non-cash assets sold for?

PROBLEM 15
The following balance sheet is presented for the partnership of Rheinmetall, Liebherr, and
Krauss who share profits and losses in the ratio of 4:3:3.

Cash P90,000 Accounts Payable P210,000

Other assets 830,000 Krauss, Loan 30,000
Rheinmetall, Loan 20,000 Rheinmetall, Capital 310,000
Liebherr, Capital 200,000
Krauss, Capital 190,000
Total Assets P940,000 Total Liabilities and Capital P940,000

The partners decide to liquidate the partnership and the other assets are sold for P700,000.

How much of the available cash should be distributed to the partners?

PROBLEM 16
Clean and Asyugo formed a partnership and agree to divide the initial partnership capital
equally, even though Clean contributed P50,000 in identifiable assets and Asyugo contributed
P42,000. Such an agreement implies that Asyugo is contributing unidentifiable assets such as
individual talents, established clientele, and banking connections to the partnership.

The unidentifiable asset is not recorded on the partnership books, the journal entry necessary
to establish the equal capital interest is?

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PROBLEM 17
On August 31, 20X8 YOU and I pooled their assets to form a partnership, with the firm to take
over their business assets and assume the liabilities. The partners capitals are to be based on
the assets transferred after the following adjustments:
a. I’s inventory is to be increased by P3,000.
b. An allowance for bad debts of P1,000 and P1,500 are to be set up on the books of
YOU and I, respectively.

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c. Accounts payable of P4,000 was failed to be recognized in the books of YOU.
d. An amount of cash must be contributed by any one of the partners in order to
establish an equal amount of interest.

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The following balances appear on YOU and I’s individual books on August 31 before
adjustments:

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Assets Liabilities
YOU P 75,000 P 5,000
I P113,000 P 34,500

How much capital must be credited to YOU?

PROBLEM 18
The balance sheet as of July 31, 20X6, for the business owned by Souryuu, shows the following
assets and liabilities:

Cash 50,000 Accounts Payable P 28,800

Accounts Receivable 34,000
Inventory 220,000
Furniture & Fixtures 200,000
Acc. Depn’n ( 36,000)
Carrying Amount 164,000

It is estimated that 5% of the receivables will prove to be uncollectible. Inventory includes

obsolete items costing P18,000 that has a net realizable value of P4,000. The PPE is to be
restated to it current market value of P180,000. Prepaid items amount to P5,000. Hiryuu is to be
admitted as a partner upon investing P200,000 cash and P100,000 inventory. The profit and loss
ratio after formation is agreed to be 50:50, in short, equally.

Requirements:
1. How much capital is to be credited to Souryuu upon formation?
2. If the partners are credited with capital based upon their profit and loss ratio, how
much is contributed or withdrawn by HiryuuS?

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PROBLEM 19
MEGUMI and NOBARA are partners sharing profits 60:40. A balance sheet prepared for the
partnership on April 1, 20X4 shows the following:

Cash P 48,000 Accounts Payable P 89,000

Accounts Receivable 92,000 MEGUMI, Capital 133,000
Inventory 165,000 NOBARA, Capital 108,000

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Equipment 70,000
Accumulated Depreciation ( 45,000)
P 330,000 P 330,000

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On this date, the partners agree to admit YUJI as a partner. The terms of the agreement is that
assets and liabilities are to be restated as follows:

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a. An allowance for possible uncollectibes of P4,500 is to be established.
b. Inventories are to be restated at their present replancement values of P170,000.
c. Equipment are to be restated at a value of P35,000.
d. Accrued expenses of P4,000 are to be recognized.

MEGUMI, NOBARA, and YUJI will divide profits in the ratio 5:3:2. Capital balances for the
partners are to be in this ratio with MEGUMI and NOBARA making cash settlement outside of
the partnership for the required capital adjustment between themselves and YUJI investing
cash in the partnership for his interest.

Requirements:
1. How much cash should YUJI contribute?
2. What is the capital adjustments should be made between X and Y?

PROBLEM 20
Han, Hyo, and Joo are partners and share profits and losses as follows: Salaries of P40,000 to
Han; P30,000 to Hyo. If net income exceeds salaries, then a bonus is allocated to Han. The
bonus is 5% of net income after salaries and the bonus. Residual profits or residual losses are
allocated 10% to Han, 20% to Hyo, and 70% to Joo,

The beginning balances of the partners for the year are: P100,000, P80,000, and P90,000,
respectively.

The following are the capital movements of the partners, excluding their share of income:

Han Hyo Joo

Add. Investments P20,000 P20,000 P20,000
Withdrawals 12,000 5,000 2,000
Drawings ( temp. ) 5,000 8,000 4,000

Details for the partners capital movements are as follows:

a. Han made additional investments on May 10, withdrew on June 31, and made
temporary withdrawals on September 1.

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b. Hyo has the same date with Han regarding their capital movements.
c. Joo made additional investments April 6, withdrew on June 25, and made temporary
withdrawals on August 31.

Requirements:
1. If net income before salaries and bonus is P140,000, how much is the share of Han, and
how much is the capital of Hyo at the end of the year?

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2. If the profit and losses sharing agreement included a 5% interest on the weighted-
average capital of the partners, how much is the share of Joo, and how much is her
ending capital?

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PROBLEM 21
The partnership agreement of Fairchild, Douglas, and Martin provides that profits are to be

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divided as follows:
a. Martin receives a monthly salary of 2,000 and Douglas for P1,500 for their time spent
managing the business.
b. All partners receive 10% interest on their average capital balances.
c. Residual profits and losses are to be divided equally.

On January 1 the capital balances were Fairchild, P200,000; Douglas, P160,000; and Martin,
P150,000. Fairchild invested an additional P40,000 on July 1 and withdrew P40,000 on October
1. Martin and Douglas had drawings P18,000 each during the year. ( hint: drawings are
temporary, withdrawals are permanent. )

If the net income for the year was P28,000, how much must be the share of Martin?

PROBLEM 22
Kirito and Asuna had the following clause in their partnership agreement: “ The partners are to
be allowed quarterly salaries as follows: Kirito, P22,500; Asuna. P18,000; and these salaries are
to be charged against the earnings of the business. In addition, Kirito is to be allowed a bonus
of 20% of the net income after salaries and interest have been deducted, and this bonus is to
be considered as an expense of the business. Any remainder is to be divided equally. “

If the net income after partners’ salaries, interest, and bonus amounts to P397,500, and the
interest on Kirito’s capital account is P37,280 and on Asuna’s capital account is P65,560, how
much must be the share of Kirito on the partnership net income?

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PROBLEM 23
Pau and Linian entered into a partnership as of March 1, 20x4 by investing P1,000,000 and
P600,000, respectively. They agreed that Pau, as the managing partner, was to receive a
salary of P960,000 per year and a bonus computed at 10% of the net income after adjustment
for the salary; the balance of the income was to be distributed in the ratio of their original
capital balances. On December 31, 20X4, account balances were as follows:

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Cash P 560,000 Accounts Payable P 480,000
Accounts Receivable 536,000 Pau, Capital 1,000,000
Equipment 360,000 Linian, Capital 600,000

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Sales Returns and Allowances 40,000 Pau, Drawing ( 160,000)
Purchases 1,568,000 Linian, Drawing ( 240,000)
Operating Expenses 480,000 Sales 1,864,000

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Inventories for December 31, 20X4 was P584,000. Supplies, P20,000. Prepaid insurance was
P7,600 while accrued expenses were P12,400. Depreciation rate was 20% per year not
included in the operating expenses.

The distribution of net profit was?

PROBLEM 24
The income statement of A-FAR Partnership for the year ended December 31, 20X5 appear
below:
Sales P600,000
Less: Cost of Goods Sales 380,000
Gross Profit P220,000
Less: Operating Expenses ( 60,000)
Net Income P160,000
Additional information:
a. Alex and Farah began the year with a capital balance of P81,600 and P224,000,
respectively.
b. On April 1, Alex invested additional P30,000 into the partnership and on August 1,
Farah invested an additional P40,000 into the partnership.
c. Throughout the year, each partner withdrew P800 per week in anticipation of
partnership income. The partners agreed that these withdrawals are not to be
included in the computation of average capital balances for purposes of income
distributions.

Alex and Farah have agreed to distribute partnership net income according to the following:
Alex Farah
1. Interest on average capital balances 6% 6%
2. Bonus on net income before the bonus but
10%
after interest on average capital balances
3. Salaries P50,000 P60,000
4. Residual ( if positive ) 70% 30%
5. Residual ( if negative ) 50% 50%

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Requirements:
1. The share of Alex and Farah on the net income is? P80,944, P79,436
2. The ending capital balance of Farah is?

PROBLEM 25
Partners Justine, Julienne, and Ran share profits and losses 5:3:2, respectively, and their
balance sheet on October 30, 20X4 follows:

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Cash P 160,000 Accounts Payable P 400,000
Other Assets 1,440,000 Justine, Capital 296,000

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Julienne, Capital 520,000
Ran, Capital 384,000
P1,600,000 P1,600,000

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The assets and liabilities are recorded at their current fair value. Jeane is to be admitted as a
new partner with 20% interest in capital and earnings. Justine was credited a bonus of P10,000.

How much cash should Jeane contribute?

PROBLEM 26
X and Y are partners who share profits and losses in the ratio 7:3, respectively. On October 5,
20X2, their respective capital accounts are as follows: X: P35,000, Y: P30,000.

On that date, they agreed to admit Z as a partner with one-third interest in the partnership
upon his investment of P25,000. The new partnership will begin with a total capital balance of
P90,000.

Immediately after Z’s admission, what are the partner’s capital balances?

PROBLEM 27
I, L, and Y are partners whose capital balances and shares in profits are as follows:
Capital Balances P&L ratio
I P50,000 50%
L 30,000 25%
Y 20,000 25%

S is admitted into the partnership by paying P12,000 for 1/3 of the share in equity of L and by
contributing P40,000. The partners agree to raising the total capitalization to P150,000, 40% of
which is S’s capital credit. S’s share in the net income is also 40% and the old partners are to
divide net income in the old ratio among themselves.

Requirements:
1. What is the new profit and loss sharing ratio of the old partners after admission of the
new partner?
2. The capital balances of the partners after admission are?

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PROBLEM 28
Felon, Fulcrum, and Foxbat are partners in a business and share in its earnings at the respective
rates of 50%, 30%, and 20%. At the beginning of the new fiscal year, they admit Blackbird, who
is to invest in the firm sufficient cash funds to give him one-third interest in the capital and in
the earnings. The following closing trial balance is taken from the firm’s old books:

Cash P1,000,000 Accounts Payable P 500,000

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Marketable securities 750,000 Bank Loan 300,000
Accounts Receivable 2,250,000 Felon, Capital 1,750,000
Fulcrum, Capital 1,000,000

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Foxbat, Capital 450,000
P4,000,000 P4,000,000

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The securities have a market value of P500,000, and an allowance of P250,000 is required to
cover uncollectible accounts. No other adjustments is necessary, but the three old partners
must among themselves bring the balance in their capital accounts into agreement with their
interest in the earnings.

Requirements:
1. What amount must be invested by Blackbird?
2. What should be the balance of Felon’s capital after Blackbird’s admission?

PROBLEM 29
Vorschlaghammer, Zerstorer, and Blutertragen are partners with a profit and loss ratio of 5:4:1.
The partnership was liquidated, and prior to liquidation process, the parternship ba;ance sheet
show the following:

Cash P 80,000 Vorchslaghammer, Capital P320,000

Other assets 720,000 Zerstorer, Capital 320,000
Blutertragen, Capital 160,000
P800,000 P800,000

After the partnership was liquidated and the cash was distributed, Zerstorer received P128,000
in cash in full settlement of his interest.

The amount of realization loss on the sale of the other assets was?

PROBLEM 30
Partners Price, Soap, and Gaz have decided to liquidate their partnership. The partnership’s
balance sheet reveals the following:

Cash P 50,000 Liabilties P 60,000

Other assets 500,000 Price, Capital 180,000
Soap, Capital 240,000
Gaz, Capital 70,000
P550,000 P800,000

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The selling price of the other assets must have been?

PROBLEM 31
Rimuru, Milim, and Veldora are partners , having capitals of P321,742, P419,078, and P276,350,
respectively. They share earnings as follows: Rimuru: 35%, Milim: 45%, and Veldora: 20%. They
sell their assets for a lump sum of P1,400,000, which increases the firm’s cash to P1,500,000. Of
the gain made, P240,000 was on a patent which had been developed principally by Veldora,

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and it wsa agreed that he should have half of sich gain nefore the remaining gain was divided
among the three partners.

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How much did Veldora recovered from the partnership liquidation?

PROBLEM 32

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Russia, China, and Ukraine are partners with capital balances on January 1, 20x5 of P300,000,
P300,000, and P200,000, respectively. Profits are shared 3:2:3. Ukrain wishes to withdraw and it is
agreed that he is to take certain assets at their second hand value of P15,000 and note fr the
balance of his interest. The assets are carried on the books as fully depreciated. Brand new, a
specific asset, an equipment has fair value of P25,000.

The capital balances of Russia and China after Ukraine’s withdrawal are?

PROBLEM 33
The following balances as of the end of 20x7 for the partnership of West, East, and North,
together with their respective profit and losses percentages, were as follows:

Assets P360,000 West, Loan P 18,000

West, Capital 84,000
East, Capital 78,000
North, Capital 180,000
P360,000 P360,000

West decided to retire from the partnership. The parties agreed to adjust the assets to their fari
market value of P432,000 as of December 31, 20X7. West will be paid P122,400 for his
partnership interest inclusive of his loan which is to be repaid in full. No goodwill is to be
recorded.

Requirements:
1. After West’s retirement, what will be the balance of East’s capital account?
2. Assuming that the P122,400 payment to West exclude his loan, what will be the
balance of East’s capital account, after West’s retirement?

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PROBLEM 34
Osamu Dazai and Ranpo Edogawa have capital balances of P65,000 and P35,000 and share
profits 3:2. Atsushi Nakajima is admitted as a partner and is given a 25% interest in the firm
upon investing P40,000 cash. Profits are to be shared 5:3:2 by Dazai, Edogawa, and Nakajima.
Jun’ichirou Tanizaki subsequently enters the partnership by investing P25,000 for a 20% interest
in the net assets and a 20% share in the firm’s profits. Former partners share the balance of the
profits in their original ratio. Dazai has difficulty getting along with Tanizaki and withdraws from

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the partnership. The partnership pay P73,000 cash for Dazai’s interest.

Requirements:

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1. How much are the capital balances of Edogawa, Nakajima, and Tanizaki, respectively
after Edogawa’s withdrawal under the bonus method?
2. Assuming the withdrawal is accounted for using goodwill method, how much are the

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capital balances of Edogawa, Nakajima, and Tanizaki, respectivel?

PROBLEM 35
A, B, and C are partners dividing profits and losses in the ratio of 5:3:2 and whose capital
balances as of January 1, 2024 were P600,000, P400,000, and P300,000, respectively. C is
retiring from the partnership as of July 1, 2024. The partnership agreement provides that the
books of account need not be closed upon the retirement of the partner. Net income is to be
considered as having been realized proportionately during the period. The partnership
estimated net income for 2024, P480,000. Prior to her retirement, C paid personal expenses of
P15,000 from the partnership funds. The partnership, on the other hand, collected P50,000 from
the personal receivable of C and deposited the same for the account of the partnership.

How much is the total amount due to C as of the date of retirement?

PROBLEM 36
Amalia, Greta, and Culot are partners in a real estate company. Their respective capital
balances and profit-sharing ratios as of December 31, 2024 are as follows:

Partners Capital Balance P&L ratio

Amalia P225,000 6
Greta 150,000 2
Heidi 75,000 2

Amalia wishes to withdraw from the partnership on January 1, 2025. Greta and Heidi have
agreed to pay Amalia P281,250 from the partnership assets for his 50% capital interest. The
settlement price was based on such factors as capital contributions, sales performances, and
earning capacity. Greta and Heidi decide whether to use the bonus method or the goodwill
method to record the withdrawal, and they wish to compare the results of using two methods.

Requirements:
1. Using the bonus method, how much will be the capital balance of Heidi immediately
after Amalia’s withdrawal?

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2. Using the goodwill method, how much will be the capital balance of Greta
immediately after Amalia’s withdrawal?

PROBLEM 37
The partners in the Kafka, Dostoyevsky, and Nietzsche partnership have capital balances as
follows:

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Kafka, Capital P35,000
Dostoyevsky, Capital 35,000
Nietzsche, Capital 40,000

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Profits and losses are shared 30:30:40, respectively. On this date, Nietzsche withdraws and the
partners agree to pay him P45,000 out of partnership cash. ( Tangible assets are already stated

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at values approximating their fair market values. )

How much must be the ending capital of Kafka immediately after Nietzsche’s withdrawal,
assuming the following methods?
A. Bonus Method
B. Partial Goodwill
C. Full Goodwill

PROBLEM 38
Kopika, Nescafo, and Alpo formed a partnership on January 1, 2024, and contributed
P150,000, P200,000, and P250,000, respectively. Their articles of co-partnership provide that the
operating income be shared among the partners as follows:
 Salary of P24,000 for Kopika, P18,000 for Nescafo, and P12,000 for Alpo.
 Interest of 12% on the average capital balance during 2024 of the three partners
 Remainder in the ratio of 2:4:4.

The operating income for the year ending December 31, 2024 amounted to P176,000. Kopiko
contributed additional capital of P30,000 on July 1 and made withdrawals P10,000 on October.
Nescafo contributed additional capital of P20,000 on August 1 and withdrew P10,000 on
October 1, and Alpo only withdrew P30,000 on November 1.

Requirements:
1. How much is the share of each partners in the operating income?
2. The ending capital of each partners are?

PROBLEM 39
Oxford, an active partner in the Oxford-Belfast Partnership, receives an annual bonus of 25% of
the partnership income after deducting the bonus. For the year ended December 31, 2024,
the partnership income before bonus amount to P240,000.

The bonus of Oxford for the year is?

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PROBLEM 40
On May 1, 20X1, the business assets of Avaunt and Rouge were as summarized below:
Avaunt Rouge
Cash P 11,000 P 22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -

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Building - 428,267
Furniture and Fixtures 50,345 34,789
Other assets 2,000 3,600

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Total P 1,020,916 P 1,317,002

Accounts payable P 178,940 P 243,650

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Notes Payable 200,000 345,000
Avaunt, Capital 641,976 -
Rouge, Capital - 728,352
Total P 1,020,916 P 1,317,002

Avaunt and Rouge agreed to form a partnership, contributing their respective assets and
equities subject to the following adjustments:
a. Accounts receivable of P20,000 in Avaunt’s books and P35,000 in Rouge’s books are
uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in Avaunt and Rouge’s respective books.
c. All other assets are to be written off.
Requirements:
1. The capital accounts of the partners after the adjustments will be?
2. How much assets does the partnership have?
3. Euphor offered to join for a 20% interest in the firm, how much cash should he
contribute?
4. After Euphor’s admission, the profit and loss sharing ratio was agreed to be 4:4:2 based
on capital credits. How much should the cash settlement be between Avant and
Rouge?
5. During the first year of their operations, the partners earned P325,000. Profits were
distributed in the agreed manner. The partners’ drawings were: Avant, P50,000; Rouge,
P65,000; Euphor, P28,000. How much is their respective ending?

PROBLEM 41
U The partnership agreement of Boll, Ma, and Zhendong provided for the year-end allocation
of profit in the following order:
a. First, Boll is to receive 10% of profit up to P200,000 and 20% over P200,000.
b. Second, Ma and Zhendong each are to receive 5% of the remaining profit over
P300,000.
c. The balance of profit is to be allocated equally among the three partners.
The partnership’s 2024 profit was P500,000 before any allocations to partners.

What amount should be allocated to Boll?

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PROBLEM 42
On January 1, 2024, H, I, J, and K formed the HIJK Partnership, with contributions as follows: H,
P50,000; I, P25,000; J, P25,000; K, P20,000. The partnership contract provided that each partner
shall receive a 5% interest on contributed capital, and that H and I shall receive salaries of
P5,000 and P3,000, respectively. The contract also provided that J shall receive a minimum of
P2,500 per annum, and K a minimum of P6,000 per annum, which is inclusive of amounts
representing interest and share of remaining profits. The balance of the profits shall be

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distributed to the partners in a ratio of 3:3:2:2.

What amount must be earned by the partnership, before any charge for interest and salaries,

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so that H may receive an aggregate of P12,500 including interes, salary, and share of the
remaining profits?
PROBLEM 43

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Patton, Montgomery, Manstein, and Guderian are partners, sharing earning in the ratio of
3:4:6:8. The balance of their capital accounts on December 31, 2024 are as follows:
Patton P 1,000
Montgomery 25,000
Manstein 25,000
Guderian 9,000
P 60,000
The partners decided to liquidate, and they accordingly convert the non-cash assets into
P23,200 of cash. After paying the liabilities amounting to P3,000, they have P22,200 to divide.
Assume that a debit balance in any of the partner’s capital is uncollectible.

Requirements:
1. The book value of non-cash assets amounted to?
2. The share of Montgomery in the loss on realization is?

PROBLEM 44
The condensed statement of financial position of Oda Nobunaga on October 1, 2024 before
accepting Tokugawa Ieyasu as his partner is shown below:

Cash P 6,000
Accounts receivable P 24,000
Allowance for bad debts 1,000 23,000
Notes receivable 3,000
Merchandise Inventory 8,000
Furniture and Fixtures P 6,000
Accumulated depreciation - Furniture and Fixtures 600 5,400
Total Assets P 45,400

Notes payable P 4,000

Accounts payable 10,000
Nobunaga, Capital 31,400
Total Liabilities and Equity P 45,400

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Tokugawa Ieyasu offers to invest cash to give him a capital credit equal to one-half of
Nobunaga’s capital after giving effect to the adjustment of the items below. Nobunaga
accepts the offer.
a. The merchandise is to be valued of P7,400.
b. The accounts receivable is estimated to be 95% realizable.
c. Interest accrued on the notes receivable enumerated below is to be reflected.
i. P1,000, 6% dated July 1, 2024.

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ii. P2,000, 6& fated August 1, 2024.
d. Interest accrued at 5% from April 1, 2024 on the notes payable is to be recorded.
e. The furniture and fixtures is to be valued at P4,600.

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f. Office supplies on hand which have been charged to expense in the past amounted
to P400. These are still to be used by the partnership.

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Requirements:
1. How much is the adjusted capital of Oda Nobunaga?
2. How much cash must be invested by Tokugawa Ieyasu?

PROBLEM 45
On February 1, 2024, JR Partnership begins its operations with the following investments:

Jeane P80,000
Ran 40,000

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

a. Jeane will be allowed annual salary P96,000 and P48,000 to Ran.
b. The partners will be allowed with interest equal to 10% of the capital balance as of the
first day of operations for the year.
c. Jeane will be allowed a bonus of 10% of the net income before salaries and interest
but after bonus.
d. The remainder will be divided on the basis of beginning capital for the first year and
equally for the subsequent years.
e. Each partner is allowed to withdraw up to P4,000 a year.

Partnership’s operation results in a net loss of P6,000 in 2024 and a profit of P22,000 in 2025.
Each partner withdraws the maximum amount each year.

What is the capital balance of Jeane on December 31, 2025?

PROBLEM 46
Mother, Father, and Kuya are partners sharing profits and losses of 5:3:2, respectively. As of
December 31, 2024, their capital balances were:
Mother P997,500
Father 840,000
Kuya 630,000
On January 1, 2025, the partners admitted Baby as a new partner and according to their
agreement Baby will contribute P840,000 in cash to the partnership and also pay P105,000 for

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15% of Father’s share. Baby will be given a 20% share in the profits, while the original partners’
share will be proportionately the same as before. After admission of Baby, the total capital will
be P3,465,000 and Baby’s capital will be P735,000.

Requirements:
1. What is the asset revaluation?
2. What is the bonus in the admission of Dad?

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3. How much is the capital of Mother after the admission of Baby?

PROBLEM 47

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On July 31, 2024, AA, the proprietor of Double AA Trading, expands the company and
establish a partnership with HH and OO. The partners plan to share profits and losses as follows:
25% to AA; 35% to HH; 40% to OO. AA asked to join the partnership because his image and

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reputation are expected to be valuable.
 HH is also contributing P420,000 cash and a building that was acquired for P4,040,000
with carrying amount of P3,480,000 and a fair market value of P1,960,000. The building
is subject to a mortgage that the partnership did not assume.
 OO is contributing P848,000 cash and inventory costing P2,100,000 but have a net
realizable value of P1,900,000.
AA’s investment in the partnership is the Double AA Trading. The statement of Financial
Position for the Double AA Trading is as follows:

Cash P1,560,000 Accounts payable P1,748,000

Accounts receivable 1,824,000 Notes payable 2,368,000
Inventory 1,576,000 AA, Capital 3,316,000
Equipment, net 2,472,000
Total P7,432,000 Total P7,432,000

The following were agreed on by the partners:

a. The partners agree that 35% of AA’s inventory is considered worthless.
b. The equipment is worth 3/4 of its carrying amount.
c. The accounts receivable is 85% realizable.
d. AA plans to pay off accounts payable with his personal assets.
e. The partners have agreed that the partnership will assume the notes payable.
f. The partners agreed capital balances upon formation will be in conformity with their
profit and loss ratio.

Requirements:
1. Using HH’s capital as the base, how much will the other partners invest or withdraw?
2. Using OO’s capital as the base, how much will the other partners invest or withdraw?
3. If the transfer of capital ( bonus method ) is used, what are he capital accounts of the
partners?
4. Using AA’s capital as the base, how much will the other partners invest or withdraw?

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PROBLEM 48
The balance sheet of WPS Partnership on January 1, 2024 is presented below:
Cash P 200,000 Accounts payable P 600,000
Non-cash assets 1,800,000 Due to C 20,000
Due from W 50,000 W, Capital 450,000
P, Capital 750,000
S, Capital 230,000

C
Total P2,050,000 Total P2,050,000
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The net income amounted to P300,000 for the year 2024 which was earned evenly throughout

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the year and the partners decide to adjust non-cash assets to its fair value of P2,000,000 prior
to the admission of U on June 30, 2024. U contributed P500,000 in the partnership for 20% share
in the profit and losses and 25% in capital. After admitting the new partner, the old partners

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continue to share in proportion to their old profit and loss ratio.

What is the capital of Partner W on December 31, 2024?

PROBLEM 49
Partners Izanami, Izanagi, and Amaterasu decided to liquidate the partnership. The partner’s
total interests and their profit sf loss ratio before liquidation are:
A (45%) B(35%) C(20%)
P650,000 P820,000 P230,000
The total assets of the partnership prior to liquidation includes cash of P800,000; non-cash
assets of a certain amount and a receivable from Partner Izanami of P150,000. The total
liabilities to outside creditors are P650,000 and a loan from Izanagi amounting to P100,000. The
partnership paid liquidation expenses amounting to P10,000. At the end of the liquidation,
Izanami receives P382,500.

Requirements:
1. How much was the cash realized from the sale of the non-cash assets?
2. What is the loss on realization?

PROBLEM 50
Mason, Woods, and Bowman are partners in the MAC-V SOG Partnership with a profit and loss
ratio of 40:30:30. As of December 31, 20X5, the following account balances are shown:
Debits Credits
Cash P25,000
Accounts receivable 15,000
Equipment 30,000
Accumulated depreciation - Equipment P15,000
Prepaid Insurance 10,000
Accounts payable 8,000
Mason, Capital 22,800
Woods, Capital 17,100
Bowman, Capital 17,100
Totals P80,000 P80,000

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The partnership earned P250,000 in revenues and incurred P150,000 in expenses. Income tax
rate is 25%. During the day, the partners agreed to admit Hudson into the new partnership to
be named CIA SOG Partnership. Hudson is to invest sufficient cash to have a capital credit
which is 20% more than the total adjusted capital of the old partners.

The partner agreed on the following adjustments:

The accounts receivable is deemed to be uncollectible at 6 1/2%.

C

 The fair value of the equipment is P25,000.
 The prepaid insurance is good for the next 12 months, this insurance was prepaid
on June 31, 2024.

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 Accrued expenses were not recognized during the year amounting to P5,000.

How much did Hudson invest in the new partnership?

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PROBLEM 51
Arva, Leana, and Rokai are partners with a profit and loss sharing ratio of 20%, 40%, and 40%,
respectively. Their capital balances are as follows: P120,000, P160,000, and P120,000. Randall is
to be admitted into the partnership with an investment of P150,000 for a 25% interest in the
capital, profit, and losses of the business.

Requirements:
1. Prepare necessary journal entries to record the admission of Randall, assuming the use of:
a) Revaluation of Assets
b) Bonus Approach
2. Prepare necessary journal entries to record the admission of Randall, assuming, instead of
investing, he purchases his interest:
a) Implicit or Total Goodwill
b) Bonus Approach
PROBLEM 52
The following is the condensed statement of financial position for Ray, Motoko, and Urban
who are partners in the GUN Partnership, they share profits 50%, 30%, 20%. On November 19,
2024, they ultimately decided to terminate their contract and in turn, their partnership:

Assets Liabilities and Capital

Cash P 50,000 Accounts payable P 60,000
Other Assets 250,000 Loan from Urban 20,000
Loan to Ray 25,000 Due to Motoko 10,000
Ray, Capital 80,000
Ray, Drawings ( 10,000)
Motoko, Capital 100,000
Motoko, Drawings ( 10,000)
Urban, Capital 85,000
Urban, Drawings ( 10,000)
Total P 325,000 Total P325,000

Any debit balance in the partner’s capital account are uncollectible.

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Requirements:
1. Assume that the other assets were sold at book value less 50%, how much did each
partners receive in the cash distribution?
2. Assume that Urban received P10,000 in the distribution of available cash:
a) How much was the loss on realization?
b) How much were the other assets sold for?
c) How much did Ray and Motoko receive?

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3. Assumed that Motoko received P15,000 in the distribution of available cash, and that
P20,000 of liquidation expenses were paid:
a) How much was the loss on realization?

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b) How much were the other assets sold for?
c) How much did Ray and Urban receive?

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PROBLEM 53-55
Svetlana, Mariya, and Lena are three specialists in weapon designs and at the same time, a
proprietor at their own respective business. They compromised and formed a partnership
named SML Weapons Lab Partnership on July 5, 2024. Their contributions are as follows:
Svetlana Mariya Lena
Cash P96,000 P100,000 P108,000
Inventories 50,000 - 70,000
Equipment, net 150,000 200,000 -
Laboratory Supplies 50,000 100,000 60,000
Office Building 300,000
Land 400,000
Accounts Payable 50,000

The partners agreed to the following:

 Svetlana and Lena’s cash balance is overstated by 20%.
 Svetlana has obsolete inventories with recorded cost of P10,000. Lena’s inventories are
currently realizable at P75,000.
 Svetlana’s equipment is over-depreciated by P10,000, while that of Mariya is under-
depreciated by P20,000.
 Mariya failed to record P30,000 of accounts receivable from a customer however, it
has been a long time, therefore it was deemed necessary to establish an allowance
for bad debts at 1/4 of the accounts receivable.
 The land of Svetlana has been agreed to be valued at P500,000. The property had a
mortgage attached to it and is to be assumed by the partnership, P100,000.
 The profit and loss sharing ratio will be 40:30:30, and the each partner’s capital credit
should be in proportion to the profit and loss ratio with each partner investing or
withdrawing cash to meet this agreement.

Their profit and loss sharing agreement is as follows:

 Salaries to each partner of P40,000 annually.
 Interest of 6% on beginning capital balances for Svetlana and Mariya as of the first day
of the year.
 Bonus to Lena of 20% of net income after salaries and bonus but before interest.

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Provided below is the capital movements of each partners:

Svetlana Mariya Lena

Additional Investments P20,000 - P30,000
Withdrawals ( permanent ) 10,000 15,000
Drawings ( temporary ) 5,000 P10,000 5,000

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As of December 31, 2024, the partnership earned revenues of P800,000 and incurred P400,000
expenses during the year.

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On the next day, the business was going well so they decided to admit Roksana, a veteran
manager, into the partnership by investing P400,000 cash for 20% interest in the new

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partnership, both capital and share in profits and losses. Roksana’s admission is to be
accounted for using goodwill method. Before admission, the Land is to be revalued at
P600,000.

Requirements:
1. How much are the adjusted capitals of each partners before formation?
2. How much did each partners invest or withdraw?
3. How much are the shares of each partners in the profit?
4. What are the capital balances of all partners after admission of Roksana?
5. Prepare all necessary journal entries.

PROBLEM 56
Lehmann, Meier, Hoffman, and Braun owns a logistics company which they operate as a
partnership. The partnership agreement includes the following:
 Lehmann receives a salary of P200,000 and a bonus of 3% of income after all
salaries and bonuses.
 Meier receives a salary of P100,000 and a bonus of 2% of income after all salaries
and bonuses.
 All partners are to receive a 10% interest on their average capital balances. The
average capital balances are as follows:
i. Lehmann - P500,000
ii. Meier - P450,000
iii. Hoffman - P200,000
iv. Braun - P470,000
 Remaining profit or loss is divided equally

Requirements:
1. Assuming the profit was P1,050,000, how much are allocated to each partners?
2. Assuming a loss of P400,000, how much are allocated to each partners?

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PROBLEM 57
Soyuz, Kuznetsov, and Romanov are partners in SKR Partnership with capital balances as of
September 30, 2024 of: P500,000, P300,000, and P200,000, respectively. They share profits and
losses on a 5:3:2 ratio. Furthermore, the partners agreed to admit Dimitriy into the new
partnership by investing P200,000 for a 20% interest. Before admission, a specific non-cash
asset is needed to be written-off since it was deemed to be obsolete. After admission, the old
partners decided to make cash settlements between themselves in order for their capital

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balances after admission to be in proportion of their new profit and loss ratio.

Requirements:

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1. How much was book value of the non-cash asset written-off?
2. What are the capital balances of Soyuz, Kuznetsov, and Romanov after admission of
Dimitry?

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PROBLEM 58
On January 5, 2024, Partner Wahed decided to withdraw from the Wahed, Ithnan, and
Thalathah Partnership. Their profit and loss ratio is 3:2:1, respectively. Partnership assets are to
be used to acquire Wahed’s partnership interest. Below are the balances of their capital
accounts as of this date:I

Wahed P120,000 Ithnan P60,000 Thalathah P50,000

Requirements:

Consider each of the following as independent from the other:

1. If Wahed is paid P54,000, what are the capital balances of the remaining partners?
2. If Wahed is paid P45,000, what are the capital balances of the remaining partners?
3. If Wahed accepted cash of P40,500 and an equipment with current fair value of P9,000.
The equipment had a cost of P30,000 and was 60% depreciated, with no salvage
value, what are the capital balances of the remaining partners?
4. Prepare the necessary journal entries from requirement one to three.

PROBLEM 59
Friedrich der Grosse withdrew from the partnership of PROTOTYPE on May 31, 2024. The
remaining partners, Agir, August von Parseval, and Prinz Rupprecht agreed on the following:
a. Grosse receives a payment of P150,000 inclusive of his P20,000 loan to the partnership,
and his capital interest.
b. As of date of retirement a certain equipment is needed to be revalued from its carrying
amount of P280,000 and his share of the unallocated net income from January 1 to
May 31 of P100,000 from which Grosse’s capital account decreased to P144,000.

Before the withdrawal of Grosse, the partners share profits and losses in the ratio of 30:25:20:25
and total capital was P760,000, 25% of which is Ruprecht’s. After withdrawal his capital is
P180,000.

Requirements:
1. How much was the fair value of the equipment?

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2. How much is the total capital after the withdrawal of Friedrich der Grosse?
3. Prepare the journal entry for the allocation of the asset revaluation, net income, and
the withdrawal.

PROBLEM 60
The statement of financial position of the partnership of Hindenburg, Schultz, and Mainz shows
the following information:

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Assets Liabilities and Capital

Cash P 80,000 Liabilities P 600,000

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Non-cash assets 1,440,000 Schultz, Loan 128,000
Mainz, Loan 40,000
Hindenburg, Capital 500,000

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Schultz, Capital 172,000
Mainz, Capital 80,000
Total P1,520,000 Total P1,520,000

Mainz is the only solvent partner, the other partners’ personal assets are tied up with their
personal liabilities. The parters share profits and losses in the ratio 50:30:20

Requirements:
1. For Schultz to receive P60,000 in the cash available for distribution:
a) How much was the loss on realization?
b) How much were the non-cash assets sold for?
2. Assuming instead that non-cash assets were sold P540,000, how much did each
partners receive in the available cash?

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