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PARTNERSHIP FORMATION

Problem 1.
On June 1, 2013, DM, the sole proprietor of the VMX Company
Which of the following statements is false?
A. Assuming the partners will either invest or withdraw cash, using DM as the base, BQ and LK will
both invest cash with a total amount of P303,200.
B. Assuming the partners will either invest or withdraw cash, using BQ as the base, DM and LK will
both withdraw cash with a total amount of P1,948,800.
C. Assuming the partners will either invest or withdraw cash, using LK as the base, DM and BQ will
both invest cash with a total amount of P2,243,200.
D. If the transfer of capital method is used, the capital accounts of DM and LK will be debited in the
amount of P121,280 and P560,800, respectively.
Problem 1
Assets
Liabilities
Capital Investment

BQ (35%)
2,380,000
2,380,000

LK (25%)
2,748,000
2,748,000

Cap of DM (40%)
MI Reduction
Eq Reduction
Allow on AR
Payment of AP
Adjusted Capital

3,316,000
(551,600)
(618,000)
(273,600)
1,748,000
3,620,800

Situation D
DM
BQ
LK
Total

Cont.
3,620,800
2,380,000
2,748,000
8,748,800

Agreed
3,499,520
3,062,080
2,187,200
8,748,800

Transfer
121,280
(682,080)
560,800

Situation A
DM (as base)
BQ
LK
Total/Net

Cont.
3,620,800
2,380,000
2,748,000
8,748,800

Agreed Cont.
3,620,800
3,168,200
2,263,000
9,052,000

Inv./(With.)
788,200
(485,000)
303,200

Situation B
DM
BQ (as base)
LK
Total

Cont.
3,620,800
2,380,000
2,748,000
8,748,800

Agreed Cont.
2,720,000
2,380,000
1,700,000
6,800,000

Inv./(With.)
(900,800)
(1,048,000)
1,948,800

Situation C
DM
BQ
LK (as base)
Total

Cont.
3,620,800
2,380,000
2,748,000
8,748,800

Agreed Cont.
4,396,800
3,847,200
2,748,000
10,992,000

Inv./(With.)
776,000
1,467,200
2,243,200

Problem 2.
On June 1, 2013, MP and CV
What is the fair value of the equipment invested by MP?
A. P84,000
C. P60,500
B. P87,500
D. P97,500
Problem 2
AR
MI
Mach

CV
23,000
65,000
137,000

Intangibles
Capital
Less: MP Cash
FV of Equipment

54,000
279,000
195,000
84,000

Problem 3.
On June 1, 2013, AZ invited MG to join him in his business
what is the effect in the carrying value of the equipment as a result of the admission of MG?
A. P364,000
C. P 396,000
B. P(32,000)
D. P(324,000)
Problem 3
AZ Capital After Adj.
MG Capital
Total

484,000
396,000
880,000

AZ before adjusment
Acc. Exp.
Eq adj.
AZ after adj.

556,000
(40,000)
(32,000)
484,000

Net equipment

364,000

(= 880K / 55%)

Problem 4.
On June 1, 2013, MD and AF are combining their separate businesses
What is the amount of cash presented on the partnerships Statement of Financial Position on June 1,
2013?
A. P276,250
C. P251,250
B. P552,500
D. P502,500
Problem 4
Non cash investments
AP
Capital before cash

MD
162,500
(15,000)
147,500

AF
122,500
(11,250)
111,250

Total
285,000
(26,250)
258,750

Cash Cont.
Total

251,250
398,750

251,250
362,500

502,500
761,250

147500 + .50x = 11/21 (258,750 + x)


147500 +.50x = 135,536 + .524x
.023809x = 11964
x = 502500

PARTNERSHIP OPERATION AND STATEMENT OF PARTNERS CAPITAL


Problem 1. The following Statement of Financial Position for the partnership of C, I and G were taken from
the books on October 1, 2013
Which of the following is true?
A. The bonus to C is P5,804
B. Net Income after salaries, interest and bonus is P38,696
C. Is total share in the net income is P21,688
D. Gs share on the profit after salaries, interest and bonus is P13,543
Problem 1

Salary
Interest
Bonus
Balance
Totl Division

C
1,250.00
1,500.00
8,250.00
13,750.00
24,750.00

I
1,250.00
1,187.50
19,250.00
21,687.50
C

Total
2,500.00
3,750.00
8,250.00
55,000.00
69,500.00

1,062.50
22,000.00
23,062.50

Problem 2.
EX and VP are partners engaged in a manufacturing business.
How much is the net increase/decrease in VPs capital account during 2013?
A. P 5,600
C. P(65,600)
B. P134,400
D. P(25,600)
Problem 2

Interest
Salary
Bonus
Balance
Totl Division
Investment

EX
20,000.00
100,000.00
(234,400.00)
(114,400.00)
400,000.00

VP
28,800.00
140,000.00
(234,400.00)
(65,600.00)
440,000.00

Withdrawals
Net Inc/Dec

(280,000.00)
5,600.00

(240,000.00)
134,400.00
B

Total
48,800.00
240,000.00
(468,800.00)
(180,000.00)

Problem 3.
LS and GM are partners of BMG Partnership begins its first year of operations on June 1, 2013
Which of the following statements is wrong?
A. The capital balance of LS at the end of 2014 is P1,242,925
B. The share of GM in the net loss in 2014 is a credit to capital account of P14,575.
C. There is a net increase of P97,500 in the capital account of LS from beginning to end of 2013.
D. The capital balance of GM at the end of first year is P1,038,500.

Salary
Interest
Bonus

LS
560,000.00
126,000.00
-

GM
784,000.00
63,000.00
60,000.00

Total
1,344,000.00
189,000.00
60,000.00

Balance
Totl Division
Beg Cap.

(516,500.00)
169,500.00
1,440,000.00

(516,500.00)
390,500.00
720,000.00

(1,033,000.00)
560,000.00
2,160,000.00

Total

1,609,500.00

1,110,500.00

Withdrawals
End Cap

(72,000.00)
1,537,500.00
C

(72,000.00)
1,038,500.00
D

Salary
Interest
Bonus

960,000.00
230,625.00
-

1,344,000.00
155,775.00

2,304,000.00
386,400.00
-

Balance (1,485,200.00) (1,485,200.00)


Totl Division
(294,575.00)
14,575.00
Beg Cap.
1,537,500.00
1,038,500.00

(2,970,400.00)
B
(280,000.00)
2,576,000.00

Total

1,242,925.00

1,053,075.00

Withdrawals
End Cap

(96,000.00)
1,146,925.00

(96,000.00)
957,075.00

2,576,000.00

2,104,000.00

Problem 4.
The partnership of D, T, and I was formed on January 1, 2013
how much is the net loss that must be generated by the partnership?
A.
B.

P171,000
P129,600

C. P108,000
D. P136,200

Problem 4

Salary
Interest
Bonus
Balance
Totl Division

D
80,000.00
21,600.00

T
70,000.00
32,400.00

I
48,000.00
48,600.00

(136,200.00)
(34,600.00)

(136,200.00)
(33,800.00)

(136,200.00)
(39,600.00)

Total
198,000.00
102,600.00
(408,600.00)
(108,000.00)