Excel Professional Services, Inc. Management Firm of reson Review and | Trai ~~ Oy (LUZON) Manila 7339344 * 5; BSS Mare ia Cu, Logue O48 Sists Ore gy (VISAYAS) Bacolad ¢ (MINDANAO) Cagayan ADVANCED FINANCIAL ACCOUNTING AFAR.2301-PARTNERSHIPS CPA REVIEW ing Certer (PRTC) DE LEON/DE LEON/DE LEON SH; OCTOBER _2017 LECTURE NOTES @stments of the partners are recognized at ‘and credited to the partners capital accounts int y partnership goody is ge reretore, (Retatar othe butions of th is deemed be a0 THe TEAL ee ee ie ates to indivdusl partners CRPPAC ACCOUNTS pe their agreement. For examples 1h and 8 formed a partnership on January 2, 2017 by Contributing the flloning net aesets fear Meir espective proprietorships: A 8 cash P 30,000. @ 20,000 2 50, Nos cast assets 620.000(m40) 730,000, aes? abilities (450,000) (530,900)+ s+ 185.6 Net assets * Ru P200,000 270,000 pet init? qe ITS Oe corel 24 ‘The non-cash assets of A is overstated by P24,500 while the liabilfes oF B is understated by P5,500 They agreed on a interest/capital ratio of 48:52 to A and B, respectively. The compound journal entry to record the formation of the partnership is, Cash Non-cash assets Liabilities A, capital 5, capital ‘The above agreement resulted in a bonus of PL1,700 tr B to A, which is the excess of B's contribution of P214,5 against a smaller capital credit of P202,800, or the excess of A's capital credit of P187,200 over the amount contributed of P175,500. This Is referred to as BONUS METHOD. If no bonus is to_be recognized, the partners should _have used their contribetions catio, 45°45 as capital ratio t A and B, respectively. THS © referred to as NET INVETMENT method, OPERATIONS During the operations of the partnership, loan by a partner to the partnership (Loans Payable) or by'the partnership to &@ partner (Loans Receivable) may he recogn temporary drewings in anticipation of profits may oct; additional investments may aiso be made by the partners: and the result of operations during the period is report Partnership income or loss is allocated to oartners in manw ways. Generally, agreement items for income or toss allocation conform with the following remunerations: @. income allocations on the basis of capital hat reward partners in proportion to their respect investments through interests; b. income allocations on the Basis of service contribut to reward partners for their respective service to the partnership through salaries c. income allocations on the basis of effective management of the partnership through banuses; and 4. Any numerical ratio, e.g. 3:2:5 wili apply tot sesiIat~y FTass after allo mad (c) above, Page 1 of it For examote In continuation of the same Illustrative Case Partner A invested additional capital an May 3, 2017 for 30,000 cash; contributed merchandise vath a fair valve of 24,000 on September 1, 2017; and withdrew permanently cash of 12,000 on December 1, 2017. Partnec.8 had no additional investments nor permanent withdrawats during 2017, dra f ly They agreed to divide profits and jésses as follows: a. Interest of 6% on average capital for each partner . Selaries of P4,000 each month t0 both partners coBonus te A of 10% of net income after interests and salaries; and The balance is agreed to be aivided equally. Both partners witha nporarily 60% of their respective salaries. ers The reported profit of P1SU,000 for 2017 wili be divided as foliows B TOTAL Interests P1z108 P 25,020 Salanes 48,000 96,000 Bonus 2,898 Balance 121081 13,0a1 36, Total 7,781 73,208 P50, 0 coptalis aoa Tiicome Summary capil follows: rie P187,200 12 20,000 8,000 (2,000) Average capital 214,200 Multiply by 6 Interest P 17,852 Ave, capital of B : P202.800 x 6% 12,168 The financial statements prepared for partnerships are similar to those prepared for corporations, except for the the balanced shed, ‘eminershi equity for_a partnership. wil be partnets™ costa balances; a Saran, plat eck onal BREA conta and retained. earnings, iu lau af a” statement of Fetarted earnings done. (Gr Corporations, paernios ptesenl a statement of partners’ capital in Loloping hasicaergrens its ownersivp equity on the balance sheet thers’ capital balances will show of be TGs, Sei oo) masters, iranal ot captal temporary’ net HESne or al. loss, Br parinG treated as operating experises compensation AFAR.2201EXCEL PROFESSIONAL SERVICES, INC For example Continuing with the same Illustrative Case, the statement of Partners’ capital balances during’ 2017 follows: A B TOTAL 88 P187,200 P. 202,800 390,000 AL 54,000 54,000 Wdrwl of C (12,000) (12,000) Drawings (28,800) (28,800) (57,600) SONI 76,791 73,209 150,000 EB 277,191 P247,209—P524,400 {As illustrated, per GAAP, partners’ compensation items such as interests, salaries, ané bonuses are simply items selected by the partners to make the profit distribution fair. Nevertheless, in some cases, partners’ remuneration items are treated as operating expenses ‘and accordingly included in the income statement. This latter case requires additional accounting procedures, and the profit agreement will then apply to the decreased net incame as a consequence of the Increased operating expenses. For example: Continuing with the same Illustrative Case, The following journal entry will be recorded to validate the compensation items as operating expenses: Interest expense 25,020 Salary expense 96,000" Bonus expenses 2,898 Ay capital 8, capital 63,750 60,168 The reduced net income of P26,082 (P150,000 P123,918) will be recorded as follows Income Summary 26,082 A, capital 13,041 8, capital 13,041 Although the revised schedule of capital balances will have new details, ( 2 items instead of just one over the net income) , the ending capital balances will be identical since’ ‘the _profit_and loss agreement remai med effectively the ‘same. ADMISSION OF A NEW PARTNER Any major change in ovmership, such as admission of a new partner, or withdrawal of a partner from an existing partnership | dissolves the entity. Dissolution of a Partnership entity does not however iniply Tquidation, Tor oftentimes uusiness entity continues its operations te Furniture and fixtures 534,56040.53 Intangibies 220,800 (75.44) All the non-cash contributions are not properiy valued. The two partners have agreed that (a) P7,680 of the accounts receivable are uncollectible, (b) the inventories are overstated by P19,200; (c) the furniture and fixtures ere understated by P11,520; and the intangibles incluse ¢ patent with a carrying value of P12,440, which must now bbe derecognized upon a ‘court order. The rest of the intangible items are fairly valued. 2, How much is the total depreciable fixed asset recorded by the partnership? 2. P1,060,800 ¢. P 944,000 b. P 403,200 d, P 1,116,480 3. What is the capital balance of Carle after the formation of the partnership? a. ,P1,026,541 © b. "P1,339,200 4 1,325,808 PL.o71,360 Page 5 of 11 ~ www.prte.com.ph — IT, PARTNERSHIP OPERATIONS. On January 1, 2017, GEMMO and NORMA formed 2 partnership by intially contributing. cash of P 350,000 ana $220,000, respectively. The changes in the capital balances during 2037 are summarized as follows Gemino Norma CAPITAL BALANCES A Janwary 1, 2017 » 350,000 9): p 220,000 Investment, April i 32,0001 Withdrawal July boy (50,000) x6 Javestment September 1 93,000 »4/,3 Witherawal October 1 (4,000) «3/2 Tavestment December 31 8,000 Ending Balance, Dec 31 378,009 271,000 The partnership reported a net income of P406,200 in 2017 and the profit and ss agreement are as fellows: 3. Interest at 38% is allowed on average capital balances; b. Salaries of 2,500 per month to each partner, Bonus to GEMMO of 10% of net income after interest, onus; and em d. Balance to be divided in the ratio of 6:4 to NORMA, respectively. 3EMMO and Both partners withdrew one-fourth of their salary aliowances‘in 2017. Required: 1. Prepare a schedule for the division net profit for: 2017 with supporting computations when appropriate, 2. Prepare a statement of the partners’ cepital balances fer 201? under the following assumptions MULTIPLE CHOICE LORENZO and MARTIN created a partnership to own and operate a heaith-food store. The partnership agreement provided that LORENZO receive -an annual salary of 10,000 and MARTIN a salary of P5,000 to recognize their relative time spent in operating the store. Remaining profits and’ losses were divided 60:40 to’ Lorenzo and Martin, respectively. ‘Income of P13,000 for 2027, the first year of operations, was allocated P8,800 to Lorenzo and P4200 to Martin. On January 1, 2018, the partnership agreement was changed to reflect the fact that Martin could no longer devote any teme to the store’s operations The new agreement allows Lorenzot a salary of 18,000, and the remaining profits and losses are divided equally. Uh 2018 an error was discovered ‘such that the 2017 reported income was understated by P4,000° The partnership income of P25,000 for 2018 included this 4,000 related to 2017 1, /In the reported niet income of 125,000 for the year 2018, Lorenz would nave a. P21,900 c. P1?,100 D. PO d, P12,500 Debbie, a senior ‘partner in a law firm, has a 30% Participation in the firm’s profit and fosses.- During 2018, Debbie withdrew 130,000 against’ hier capital but contributed property with a fair value of 25,000. Debbie's capital increased by P15,000 during 2018 2. ‘The net income of the partnership for 2018 Is, a. P150,000 €)/P350,000 >, P400,000 , P550,000 E, £, and G invest. P40,000, P30,000 and P25,000 respectively, in @ partnership on lune 30, 2017. They agree to divide aet income or loss as follows: 3 Intarast at 10% on beginning capital account balances ©, Salaries of P10,000, P8,000 end P6,000, respectively toe, FangG ¢, Remaining net income-or {oss divided equally d. A minimum: of P18,000 of income guaranteed to G AFAR.2301EXCEL PROFESSIONAL SERVICES, INC 3. If the net income for the year ended June 30,2018 before interest and salary allowances to partners was 44,000, the amount of the net income credited to E is: a. P17,500 b. P16,000 c. P14,667 d, Pi4,500 A, B and. C are partners with average capital balances during 2017 of P120,000, 60,000, and 40,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P30,000 to A and P20,000 to 8, the residual profit or loss is divided equally. In 2017 the partnership sustained & 33,000 loss before interest and salaries to partners, 4. By what amount should A’s capital account change? a. P7,000 increase _‘c. P11,000 decrease b. P35,000 decrease d. P42,000 increase Partners Justine and Michelle share profits 3:1 after annual salary allowances of P4,000 and P6,000 respectively; however, if profits are not adequate to meet the salary allowances, the entire profit is to be divided in the salary ratio, Profits of P9,000 were reported for the year 2017. In 2018, it is ascertained that in calculating net income for the year ended December 31, 2017, depreciation was overstated by P3,600 and the ending inventory was understated by P800. 5. The amount of the net adjustments in the books of Justine and Michelle are: tine Michelle ‘a. P(2,950) (1,450) sb. P.2,950 P 1,450 c. P6550 P 6,850 dP 1/840 » 2,780 III, PARTNERSHIP DISSOLUTION ‘A. ADMISSION OF A NEW PARTNER ENZO and LOUISE are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The partnership balance sheet at August 30, 2017 follows: Cash P. 50,000 Accounts Payable P 113,500 Inventory 75,000 Enzo, Loan 5,500 Land 80,000 Enzo, capital 475,000 Buildings 505,000 Louise, capital 131,000 Louise, Loan 15,000 Total 725,000 Total 725,000 ‘The partners agreed to admit ERIKA for a one-tenth interest for a P70,000 consideration. At the time of ‘admission, the fair market value of the land Is appraised at P180,000' and the market value, of the inventory is 150,000, 1. Assume ERIKA is admitted by purchase of each of the original partners’ interest and paid the partners : A. Prepare the journal entries on the revaluation of assets and the admission of ERIKA B. Calculate the capital balances of the partners after the admission of ERIKA. C. Calculate the amounts received by ENZO, Pa and LOUISE, P_____for their respective partnership interest transferred to ERIKA. D. Explain why no amount of bonus was recognized despite the difference between ERIKA’s investment and her acquired partnership interest. 2, Now assume ERIKA is admitted by 70,000 to the partnership A, Prepare the entry for the admission of ERIKA B. Calculate the partners’ capital balances after the ‘admission of ERIKA investing the ‘Page 6 of 11 www.prtc.com.ph C. How did you accaunt for the differences between contributions anti capital credits of the partners? MULTIPLE CHOICE The capital accounts of the Sarah and Owen partnership on January 1, 2017, were: Sarah, capital (75% profit percentage) P 140,000 Owen, capital (25% profit percentage) __ 60,000 Total capital P 200,000 On October 1, Thess was admitted for a 40 percent interest in the partnership when ne purchased 40 percent of each existing partner's capital for P100,000, paid directly to Sarah and Owen. The partnership's net income for the year is P82,500 and 2/3 of it was eared in the last quarter of the year. 1, What are the capital balances of Sarah, Owen and ‘Thess after Thess’s admission to the partnership? 84,000; P36,000; P80,000 108,750; P44,250; 102,000 96,375; P40,125; P91,000 P90,000;P40,000; 670,000 2. How much will Sarah receive from the above transaction? a. 71,000 «. P69,000 ‘B. P74,000 d. 95,000 3. Assume Thess is admitted by investing the 100,000 into the partnership for a 40% interest, how much is the ending capital balance of Owen after admission and the bonus (given)/received to/from Thess? ‘2, 55,000; (P5000) —_c, P71,250; P4,250 b. P63,250; (P10,500) d. P59,125; (P7,750) Abner, Blanche, Candy, and Donna have become partners in the ABCD Partnership under the following circumstances: On August 1, 2017 Partners Abner and Blanche had the following ownership balances in the AB Partnership: ABNER BLANCHE Capital 250,000 200,000 Loan (30,000) 10,000 Total 220,000 210,000 In the morning of this date, Candy was admitted as a partner with an investment of 150,000 for 20% interest in capital and in profits or losses. In the afternoon of the same day, over merienda, Donna learned about the nature and objectives of the ABC Partnership and insisted that she became a partner and was willing to cantribute 100,000 under acceptable terms determined by the old partners, The old partners, in a caucus, have agreed to allocate 15% of existing total capital, as well as. 15% of profits or losses to Donna. Over dinner, Donna accepted the admission arrangement without any change. On the other hand, the old partners will use the partners’ interest ratio for their share of the capital transfer to Donna. Under the old AB Partnership, profit or loss was 60% and 40% to Abner and Blanche, respectively. 4. Determine the capital balance of Candy upon her admission to the AB Partnership on August 1. a, P116,000 ¢. P120,000 b. 122,000 d, P118,000 5. How much cash will Abner receive upon the transfer of, part of his interest to Donna? a: 20,000 cc. P35,000 be P51,000 , 45,900 AFAR.2301EXCEL PROFESSIONAL SERVICES. INC. 6. Determine the capital balance of Blanche under the ABCD Partnership in the late evening of August 1, 2017. a. P 27,800 c. #108,000 ». P180,200 4, 90,000 as tet gordi ed Eaten B. RETIREMENT OF A PARTNER “ eugital * ie The following balances as at Octobe ats 017 for the Partnership of TANTE, LEN; and CONS were 9 flows Cash P 66,000 Liabilities 65,000 Len, Loan 19,000 Tante, loan 20,500 Other Assets 500,000 Tante, capital 167,000 Len, capital 407,500 Cons, capital ‘000 Totals P§85,000 Totals 585,000 Tante has decided to retire from the partnership on October 31. Partners agreed to adjust the non-cash assets to their fair market value of P620,000. The estimated profit to October 31 is P120,000. Tante will be paid 263,000 for his partnership interest inclusive of his loan which is repaid in full. Their profit and loss ratio is 4:2:4 to TANTE, LEN and CONS, respectively. 1. Prepare entries for the retirement of TANTE from the partnership. 2. What will be the balance of LEN’S capital account after the retirement of TANTE? Po MULTIPLE CHOICE ‘The balance sheet at ecember 31, 2028, for the Bea, Dia, and Marj partnership is summarized as follows Assets P 800,000 Liabilities P 200,000, Loan to Dia 100,000 Bea capital (50%) 300,000 900,000 Dia capital (40%) 300,000 160,000 P 900,000 Dia is retiring from the partnership. The partners agree that partnership assets, excluding Dia’s loan, should be adjusted to their fair value of P1,000,000 anc that Dia should réceive P310,000 for her capitel balance net of the 100,000 loan, 1. How much are the capital balances of Bea and Mar} immediately after Dia’s retirement. a. P375,000; P115,000 , Pa00,000; P120,000 . P385,000; 117,000 d. P308,333; P101,667 Marj capital (10%) A, B, and C formed a partnership on January 2, 2616 with the following contributions: a 100,000 tu 8 200,000 19.93 c 300,000 The partners agreed on a capital yatio of 1:2 formation and P&L ratio of 3:3:4, respectis partnership reported a net loss of 20,000 for 2016. Also, at the end of 2016, C has decided to withdraw from the fiem and was paid P25G,000 from partnership ¢ ‘On April 1, 2017, D was admitted as 2 partner with an investment of P160,000. He is given @ share in capital of 40%and in profits, 30% the old partners have agreed to retain their old ratio over the remaining profit and lose share of 70%. The partnership reported a net profi, of 21,000 for 2017, one-third of which is deemed earned as Of the end of the year's first quarter's aperatian 2, Determine the capital balances of A and 6, respectively, as of December 31, 2016. a. P 94,000 & P196,000 <<. P 194,000 & P115,000 b. P 115,000 &P215,000 d. P.165,000 & P215,000, 98,540, 75,720 & P113,840 93,640, 770,820 & P109,640 P100,990, P78,170 & 120,140 d. P104,000, P204,000 & P203,000 On June 30, 2017, the balance sheet for the partnership of D, E and F, together with their respective profit and loss ratios, is sunmarized as follows: |, at Cost P300,000 0, loan 15,0004 D, capital (20%) 70,000! = E, capital (20%) 65,000 F, capital (60%) 150,000 $300,000 D has decided to retire from the partnership, and by mutual agreement the assets are to be adjusted to their fair value of P360,000 at June 30, 2017. Itys agreed, thes, the partnership ‘will pay © P102,000+'82sh |" Fer His! partnership interest exclusive of his Inan, which is to be repaid in full 4. After D'S retirement, what are the capital account balances of partners € and F, respectively? ‘a, P65,000 and 150,000. P97,000 and P246,000 'b. P72,000 and 171,000 d. 77,000 and 186,000, . INCORPORATION Partners Bob and Tess, who share profits and losses equally, have decided to incorporate the partnership at December 31, 2017. The partnersivp net assets after the folowing adjustments wil be contributed in exchange for shares of stocks from the corporation |. provision of allowance for doubtful accounts, P5,000 iu, acjustment of overstated equipment by 2,000 iii. achustment of understated laventory by P16,000 and y. recognition of additional depreciation of Pa, 000. \¢ corporation's ordinary shares 16 to have a par value of each and the partners are to be issued corresponding es equivalent t6 70% of thew adjusted capital P2 balances The partrership balance sheet at December 31, 2017 follaws; * Cash P 90,000 Liabilities P 86,000 Acets rec 50,600 Acc. dep 4,000 ventory 70,000 Bob, capital 85,000, Equiomerit 40,000 Tess, 75,000 capita Total P 250,000 Total P 250,000 Determine the total credit to APIC upon incorporation of the partnership 2. 9 49,500 cP 48,000 b. ? 115,500 i. P 112,000 The number of orcinary shares issued to Partner Tess a2 6/238 b. 245, 0.237 XY and ACE partnership's balance sheet at December 31, 2017 reported the foliowing balances Total assets. P150,000 Tota! habiities 30,000 Lexy, capital ‘59,000, fice, capital 000 Op daouary 2, 2017, LEXY end ACE cissolved their uartnership and transferred all assets and uabilives to a howly formed rorporation. At the dat of incorporation, the fair value of the net assets was P18,G00 more than the carrying amount on the partnership's Becks. OF which F10,000 was assigned to tangible assets and P8000 was ned f0 patent. LEXY and ACE were each sued 5,000 shares of the corporation's PIO par. comion 5 i othe capital balances of A, 8, and ¢, > Immediately folowing incorporation, adstionsl palin fy on Det 3 ene ab in excess of par should be credited tor Page 7 of 11 www.prte.com.ph = AFAR.2301 Terseten @ YY = IegoodEXCEL PROFESSIONAL SERVICES, INC. ‘The following balance sheet for the partnership of A, 8 ‘and C was taken from the books on December 31, 2017 Assets Ligbultiés and Cape Cash. P 40,000 Liabilities 109,000 Other Assets 360,000 A, Capital (40%) 74,000 B, Capital (40%), 130,000 , Capital (20%) 98,000 Total Assets P400,000 Total Liab& Cap —P.400,0110 2. If the firm is dissolved and liquidates by installment, the first sale of the other assets having book value of 180,000 realized P80,000 and all cash available are distributed, the amount to be received by &, B, and C respectively would-be a B ¢ a, Fo Pis,000 40,000 BPO 80,000 20,000 : ~- P20,000 Po Po d Po PO 20,000 3. If the firm is dissolved and liquidates and A receives 3 total of P3,000 In full settlement of his interest, then C would have received a total of a, P56,000 . P 60,500 b. P 31,000 J. P $8,000 The accounts of the partnership of PBA at December 31, 14,000 (12,000) Bryan, copital {P&L 20%) Cecile, capital (P&L-40%) Assume nor\-cash assets have been all disposed and Cecile has promised to pay his deficiency, in a week’s time, 5. Calculate the amount to be: received by one of the partners if cash is paid enmediately on February 15, 2017 &. Apple, 22,000 © b.. Bryan,,P12,000, a Bryan, 910,990 Apple, 12,000 A condensed balarice sheet with prafit'sharing percentages for the Z, F, ane G partnership on January 1, 2017, shows the following ‘Cash P100,000.Liabuities 80,000 ‘Other assets $00,000 E, capital (40%) 100,000 F, capital (40%) 250,000 G, capital (20%). 170,000 7600,000 P600,000 (On January 2, 2017, the partners decide to liquidate the business, and during January they sell assets with ¢ book value of P300,000 for P170,000. (130 > 6. How much cash wiil the partners receive if all available cash, except for a P10,000 contingency fund, is distributed immediately after the sale. 2. Alt partners vail receive PE0,000 2017 areas follows: o) \b._ Partners F and G will both receive P90,000 Cash P 132,000" Liabilities P 100,000 e~Partner F wal recewve P96,667 and partner G will Non-cash 1,166,000 Loan from 8 32,000 receive P93,333, assets d, Partner F will receive P190,000 Loan to P 24,000 P, capital 330,000(+4 8, capital 586,000\"Llaudia, Petra, Mona, end Hilda are partners. who share A, capital 274.000 profits and “losses at 40%, 30%, 20%, and- 10%, Total 1,322,000 Total 1,322,000 respectively. Since tive of ther have given intention to They divide profits and losses 3:5:2 to P, @, and A respectively, They have decided to liquidate the partnership at this date. 4. Determine the amount payable to Partner A if cash is paid just before the start of liquidation on December 31, 2017. 2. P 28,286 muRVesae b. P. 35,300 dP 35,120 The partnership ABC is. currently: liquidating and on February 15, 2017, their balances in-capital and their profit and lass (P&L) ratios are shown below ‘Apple, capital (P&L 40%) 22,000 CLASSROOM DRILL Albert and Bryan have just formed a partnership. Albert contributed cash of 2,346,000 and office equipment that cost P1,170,000. The equipment had been used in the sole proprietorship and had been 80% depreciated. The current fair vaiue of the equipment is 756,000. An unpaid mortgage loan on the equipment of 252,000 will be assumed by the partnership. Albert is to have a 60% Interest in:the partnership net assets. Bryan is to contribute, only, merchandise with a fair yaiue of P1,890,000. Both partners agreed on @ profit and loss ratio of 55% to Albert and the balance to Bryan: 1.70 finalize the partnership agreement, Albert should make additional investment (withdrawal) of cash in the amount of. i a. P(_ 36,000) . P264,000 b. P(540,000) 4. P(15,000) ‘The partnership agreement of ROGER, REGGIE and SORBY provides for the division of net income es foliows: + REGGIE, who manages the partnership is to receive a salary of P35,200 per year. Page 9 of 11 withdraw, they have decided to liquidate the partnership instead. At this point, the capital balances of the partners are as follows: Claudia P 48,000. Petra 21,600 Mona 34,400 Hilda 16,000 7. Which of the following statemént is true? 2, The first available P1,G00 isl go to Hilds D, Claudia will be the last to receive cash . The first avatiable P2,400 will go to Mona, d Claudia will collect a portion of any available cash before Hilda receives anything, Te twNicd s gyl ow INComuel gy Re cofecreBeyn on fust Sch dictschin, redate ued Woe He ced Nidan + ‘Each parther 12 to Be allowed interdbt at 20% of beginning capital + Remaining profits are to be divided equally. During 2017, ROGER invested an adaitional 912,800 in the partnership. REGGIE and BOBBY had permanent capital withdrawals of P16,000,. and 12.800, respectively. REGGIE had a temporary drawing of P4,500, No other investments or withdrawals were made during 2017. On January 1, 2017, the capital, balances were ROGER, 208,000; REGGIE, £240,000; and BOBBY, P224,000.Total pital at year-end was PBO6,400. Compute the capita! oalance of each partner at year- end ROGER REGGIE BOBBY 257,500 297,800 251,100 258,300 287,000 251,400 250,665.6 292,800 244/266.4 258,300 297,000 251,100 AFAR.2301EXCEL PROFESSIONAL SERVICES, INC. The YES Partnership started operations on January 2, 2016 with the foliowing capital balances: YWES 88,000 ERNIE 64,000, SERGE 90,000 Their profit and loss agreement has the following provisions: + -YVES will be given an annual salary of P16,000 and ‘SERGE P8,000. + All partners will be given 10% interest on beginning capital balances every year. + The balance of the profit, or the loss, will be divided on a 5:2:3 to YVES, ERNIE, and SERGE, respectively + Each partner is allowed to withdraw up to PE,000 every year In 2017, partnership operations resulted in a net loss of P16,000, while in 2018, it was a net profit of P32,000. All partners withdrew the maximum amount of P8,000 each year. 3. Calculate the balance of YVES' capital at the end of 2017 a. P 72,700 b. P 77,600 c. Pa9,600 6. 64,900 4, Calculate the balance of Ernie's capital at the end of 2018. a. P 82,080 b. P.44,076 ¢. PB1,760 d. 77,600 MYRNA and NORMA are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The partnership balance sheet at August 30, 2017 follows: Cash P. 27,000' Accounts payable P 30,000 Other assets 266,000 MYRNA, Loan 13,000 NORMA, 20,000 MYRNA, capital 180,000 Loan NORMA, capital 30,000 Total P 313,000 Total 313,000 At this date, OLGA was admitted as a partner for a consideration of P97,500 cash for a 40% interest in capital and in profits. 5. Assume OLGA is admitted by purchase of 40% each of the original partners’ interest, determine how the 97,500 will be apportioned to MYRNA and NORMA a. MYRNA, P65,700 and NORMA, P31,800 b. MYRNA, P64,800 and NORMA, 32,700 cc. MYRNA, P65,500 and NORMA, P32,000 d. MYRNA, P65,900 ond NORMA, P31,600 6. Assume OLGA is admitted by investing the 97,500 into the partnership, determine the effects of any bonus over the capital balances of the original parthers: 2, MYRNA, P(19,800) and NORMA, P(29,700) b. MYRNA, P. 18,000 and NORMA, p 29,700 c. MYRNA, P(29,700) and NORMA, P(19,800) d. MYRNA, P(18,675) and NORMA (12,450) The following are the condensed balance sheets of G&N Partnership at August 30, 2017, at which date Ellery is to be admitted with a 30% interest in capital for an investment of P55,000. Book Value Fair Value Cash P 20,000 P_20,000 Other assets 503,000 417,000 Total assets 523,000 437,000 Current liabilities P 54,000 Pp 54,000 Non current liabilities 269,000 275,000 Gemmo, capital 420,000 Norma, capital 80,000 Total equities 523,000 Page 10 of 11 www.prtc.com.ph Gemmo and Norma share profits at 60% and 40%, respectively. 7. What will be the respective capital balances of Gemmo, Norma, and Ellery after the new partner's admission P68,460, P45,640, and P48,900 bb.» P48,900, P45,640, and P68,460 . P45,640, 968,460, and P48,900 Gd. P64,860, P49, 240, and P48,900 The equity accounts of the partnership of KARDO and LERMA at March 31, 2017 are as follows: KARDO, capital 512,000 LERMA , capital 256,000 KARDO, loan (credit) 448,000 LERMA, loan (debit) 24,000 The partners share profits and losses in the ratio of 3:2, respectively. The partnership is in desperate néed of cash, and the partners agree to admit JACK as a partner with 2 1/3 interest in the capital and profits and losses upon his investment of P192,000. 8. Immediately after JACK's admission, what should be the capital balances of KARDO, LERMA, and JACK, respectively ‘a, P598,000; P222,000; P410,000 b. P480,000; P480,000; P480,000 ¢ P544,000; P256,000; P400,000 d. P435,200; P204,800; P320,000 The following are the capital balances of ABC Partnerships at August 1, 2017 Albert (40% P&L) 220,000 Bernard (40% P&L) 160,000 Conrad (20% P&L) 110,000 Dennis invests P270,000 in cash for 2 30% ownership interest. The payment goes to the original partners Revaluation/adjustment in asset is to be recognized upon Dennis’ admission 9. How much adjustment in asset should be recorded and what is Dennis’ beginning capital balance 410,000 and P270,000 b. 140,000 and P270,000 * ©. P140,000 and P189,00 d. P410,000 and P189,000 The partnership of COCO, PIOLO, and DANIEL and their profit and loss ratios were as follows: Assets P. 1,200,000 Coco, loan P 60,000 Coco, capital (30%) 280,000 Piolo, capital (30%) 260,000 Damiel, capital (40%) 600,000 Total equities P 1,200,000 COCO decided to retire from the partnership and by mutual agreement, the assets were adjusted to their Current fair value of P1,440,000. The partnership paid 408,000 cash for COCO’s equity in the partnership, exclusive of the loan which was repaid in full, 10. The capital balances of PIOLO and respectively, after COCO's retirement partnership was DANIEL, from the 2. 360,000; P855,000 «. b. P288,000; P684,000 300,000; P675,000 d. P308,000; P664,000 The following balances as at October 31, 2017 for the Partnership of WILMA, XELYN , and YSKA were as follows Cash P 80,000 Liabilities P 24,000 XELYN, 24,000 WILMA, 36,000 Loan loan Non-cash 640,000 WILMA, 168,000 assets capital AFAR.2301EXCEL PROFESSIONAL SERVICES, INC. XELYN, 156,000 capital YSKA, 360,000 capital Totals P744,000 Totals 744,000 WILMA has decided to retire from the partnership on October 31. Partners agreed to adjust the non-cash assets to their fair market value of P784,000. The estimated profit to October 31 is P160,000. WILMA will be paic 276,800 for her partnership interest inclusive of her loan Which is to be paid in full. Their profit and loss ratio is 3:4:3 to WILMA, XELYN, and YSKA, respectively. 11. What will be the balance of XELYN’s capital account after the retirement of WILMA. a. P 258,888 c. P 264,114 b. P459,086 . P288,588 ‘The MORICATA Partnership has the balances and P&L ratio at August 4, 2017 following. capital Mora, capital (30%) P129,750 Rico, capital (30%) 108,750 Cara, capital (20%) 80,000 Tano, capital (20%) 71,500 390,000 Cara has decided to withdraw from the partnership and oy agreement of all the partners, will be paid P90,000 from. partnership cash. 12, Immediately after Cara’s retirement, the capital ratio of Mora, Rico, and Tano, respectively will be a, 33-1/3%, 33-1/3%, and 33-1/3% b. 40%, 34%, and 26% ©. 37-1/2%, 37-1/2%, and 25% d. 42 %,35 %,and 23 %. ‘The following condensed balance sheet is prepared for SAMMY and JOKER, who share profits and losses in the ratio of 60:40, respectively Other assets P 720,000 Accounts 192,000 payable ‘Sammy, loan 32,000 Sammy, capital 312,000 Joker, capital 248,000 Total P 752,000 Total 752,000 15, The partners have decided to liquidate the partnership, If the other assets are sold for P770,000, what amount of the available cash should be distributed to Sammy? a. P310,000 . P342,000 b. P312,000 . P390,000 On January 1, 2017, the partners CARLO, DIEGO, and EDGAR, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: Cash P. 80,000 Liabilities 96,000 Other assets 400,000 Carlo, capital 128,000 Diego, capital 144,000 Edgar, capital 112,000 Total P480,000 Total P 480,000 On January 15, 2017, the first cash sale of other assets with a carrying amount of P240,000 realized P192,000, Safe installment payments were made the same date. 18, How much cash should be distributed to each partner? CARLO DIEGO EDGAR P 30,000 102,000 P 88,000 P 70,000 a bP 80,000 P 90,000 c. P_24,000 P 81,600 P 70,400 d. P120,000 P 72,000 48,000 ASSER, JING, and TONY are in the process of liquidating their partnership. They have the following capital balances and profit and loss percentages: Capital Balance Profit and Loss % ASSER 8,000 debit 20% JING 28,800 creait 50% TONY {9,600 credit 30% ‘The partnership balance sheet shows cash of P8,000, non cash assets of P22,400, and no liabilities. 19. Assuming no liquidation expenses, what safe payments could be made? ‘a. P8,000 split between JING and TONY by a ratio of 5:3, Respectively b. P8,000 to JING only . P1,600 to ASSER, ,P4,000 to JING and P2,400 to TONY d. P28,800 to JING only. On January 1, 2017, the partners SELYA, TESSA, and URSULA, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: Cash P 45,000 Liabilities 54,000 Other assets 225,000 Selya, capital 72,000 Tess, capital 81,000 Ursula, capital 63,000 Total P 270,000 Total 270,000 On January 15, 2017, the first cash sale of other assets with a carrying amount of P135,000 realized P108,000, Safe installment payments were made on the same date. 20. How much cash should be distributed to each partner? SELYA TESSA —URSULA a P15,000 P51,000 P44,000 b. 40,000 P45,000 P35,000 © P55,900 33,000 P22,000 4. P13,500 45,900 P39,600 © - end of afar.2301 - Page 11 of 11 AFAR.2301