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Problem A = AA and BB formed a partnership on July 1, 2016 to operate two stores to be managed by each of them. The invested P30,000 and P20,000 and
agreed to share earning 60% and 40%, respectively. All their transactions were for cash and all their subsequent transactions were handled through their
respective personal bank accounts as summarized below:
Cash receipts P 79,100 P65,245
Cash disbursements 62,275 70,695

On October 31, 2016, all remaining noncash assets in the two stores were sold for cash of P60,000. The partnership was dissolved, and cash settlement was
1. In the distribution of the P60,000 cash, AA received:

Problem B = Partners AA, BB, CC and DD who share profits 5:3:1:1, respectively, decide to liquidate their partnership. Capital balances before liquidation are:
AA P60,000 CC P30,000
BB 40,000 DD 10,000
The partners agree to the following:
a. Partnership’s computer equipment with a book value of P12,000 is to be taken over by partner AA at a price of P15,000.
b. Partnership’s liabilities are to be paid off and the balance of cash on hand, P30,000 is to be divided in a manner that will avoid the need for any
possible recovery of cash from a partner.
2. How much of the P30,000 cash be distributed to Partner BB?

Problem C =On December 31, 2007 the partners of ABC Company decided to liquidate the business. After exhausting partnership assets, liabilities of P50,000
remain unpaid. Below are the following capital, drawings and loan balances of the partners:
Capitals Drawings (Dr) Cr Loans to Partnership
AA 45,000 (10,000) 5,000
BB 60,000 20,000 0
CC 30,000 5,000 10,000
3. Using the information above, how much is the loss on realization?

Problem D = James, Wade, Allen and Bosh are partners sharing profits and losses equally. The partnership is insolvent and is to be liquidated. The status of
the partnership and each partner is presented below:
James Wade Allen Bosh
Partnership capital
balance 150,000 100,000 (200,000) (300,000)
Personal assets
(exclusive of
partnership interest) 1,000,000 300,000 800,000 10,000
Personal liabilities
(exclusive of
partnership interest) 400,000 600,000 50,000 280,000
4. Which of the following statement is true with regards to partnership creditors?
a. Must first seek recovery against Allen because he is personally solvent and he has a negative capital balance.
b. Will not be paid in full regardless of how they agreed legally because the partnership assets are less than partnership liabilities.
c. Will have to share Wade’s interest in the partnership on a pro-rata basis with Wade’ personal creditors.
d. Have first claims to partnership assets before any partner’s personal creditors have rights to the partnership assets
5. The partnership creditors may obtain recovery of their claims
a. In the amount of P62,500 from each partner
b. From the personal assets of either James or Wade
c. From the personal assets of either Allen or Bosh
d. From the personal assets of either James or Allen for some or all of their claims.
6. How much will be the partnership creditors’ total recovery in liquidating the partnership?
7. What are the personal net worth of James and Allen after liquidation?

Problem E = The partnership of JAMES, WADE and ALLEN decided to liquidate their partnership on May 31, 2014. Before liquidating and sharing of net
income, their capital balances are as follows: JAMES (30%) P875,000, WADE (30%) P630,000, and ALLEN (40%) P770,000. Net income from January 1 to May
31 is P420,000. Liabilities of the partnership is amounted to P950,000 and its total assets include cash

amounting to P250,000. Unsettled liabilities are P285,000. JAMES invested additional cash enough to settle their partnership’s indebtedness.

WADE is personally solvent, while ALLEN is personally insolvent, and JAMES becomes insolvent after investing the cash needed by the partnership.
Payments made to liquidate the partnership:
 Legal and accounting fees P50,000
 Cost incurred to dispose assets P25,000
 General and administrative expenses P40,000
 Representation expenses P10,000
8. How much were the partnership’s non-cash sold for?
9. How much cash will WADE invest in the partnership?
10. How much will JAMES receive as a result of their liquidation?

Problem A = James, Wade and Bosh are partners who share profits and losses as follows: James 45%, Wade 15%, and Bosh 40%. The Statement of Financial
Position of Miami Heat Partnership as of December 31, 2014 is given below:
Assets Liabilities and Capital
Cash 268,000 Liabilities 532,000
Noncash Loan payable to
assets 1,940,000 James 44,000
James, Capital 694,000
Wade, Capital 354,000
Bosh, Capital 584,000
Total Total Liabilities
2,208,000 and Capital 2,208,000
On January 1, 2015, the partners decided to liquidate. For the month of January, some assets were sold at a gain of P56,000. Payment to partner Wade from
the initial sale of assets was P180,000. Cash withheld for possible liquidation and unrecognized liabilities amounted to P146,800.
1. Which of the following statement is true?
a. The book/carrying value of the noncash assets sold in January amounted to P982,800.
b. Payment to partner James from the initial sale of assets was P172,000.
c. The total amount of cash paid and distributed for the month of January is P1,048,000.
d. The share of Bosh in the maximum possible loss is P427,680.
2. How much is the total cash paid to James on the first installment?
3. How much is the total maximum possible loss in the month of January?
4. How much was the cash realized from the first sale of non-cash assets?
5. Assuming the remaining noncash assets were sold at 60% of the carrying value, the actual liquidating expenses on the second sale was P34,000
and unrecorded liabilities was P75,000, how much is the total cash paid to all partners as final settlement?
6. Using assumption no. 5, how much is the final payment received by James?

Problem B = Miami Heat Partnership had the following condensed financial position prior to liquidation:
Assets Liabilities and Capital
Cash 588,000 Liabilities 328,000
Noncash assets 2,880,000 Loan payable to James 180,000
James, Capital (25%) 776,000
Wade, Capital (40%) 1,320,000
Bosh, Capital (35%) 864,000
Total 3,468,000 Total 3,468,000
Assuming non-cash assets with a book value of P1,360,000 were sold for P1,660,000 and that all available cash was distributed.

7. Which of the following statements is FALSE for Partner James to receive a total of P704,000 cash after liquidation?
a. The proceeds from the sale of the remaining non-cash assets is amounted to P212,000.
b. The loss on realization on the sale of the remaining non-cash assets amount to P1,308,000.
c. Partner Wade will receive the amount of P84,800 on the final distribution of cash.
d. Partner Bosh will receive a total of P532,000 cash after liquidation.

8. As of the first installment, how much cash received by James as recovery from his capital?
9. How much is the total cash received by partner Wade as recovery of his interest from the partnership?

Problem C = James, Wade and Bosh of the Miami Heat Partnership has the following account balances before liquidation:

Cash 420,000 Liabilities 1,445,000

Noncash assets 4,793,000 Loan from Bosh 100,000
Loan to Wade James, Capital
192,000 (25%) 1,120,000
Receivable from Wade, Capital
James 44,000 (15%) 1,632,000
Expenses, Bosh, Capital
(including salaries (60%) 2,240,000
of partners
P240,000 each) 2,556,000 Revenues 1,468,000
Before liquidation, it was discovered that the salaries given to the partners were credited to Salaries payable and are still part of total liabilities. No drawings were
made as of the period.
During June, some noncash assets were sold that resulted to a gain of P72,000. Liquidation expenses of P124,000 were paid and additional expenses
amounting to P96,000 were expected to be incurred through the following months of liquidating the partnership. Liabilities to outsiders amounting to P516,000
were paid.
10. For Wade to receive P1,272,000 on the first distribution of cash, which of the following statement is TRUE?
a. The total maximum possible loss for the month of June amounted to P1,789,000.
b. The total amount of cash paid to partners in June was amounted to P3,736,000
c. The proceeds from the sale of the non-cash assets sold in June was amounted to P3,801,000.
d. The amount of cash withheld considered in the computation of maximum possible loss is amounted to P96,000.
11. What amount is the total payment made to partners on the month of June?
12. How much is the cash realized from the first sale of assets?
13. How much is the carrying value of noncash sold on the first sale?
14. What is the cash balance after all payments made on the month of June?

Problem D = A balance sheet for the partnership of JAMES, WADE and BOSH, who share profits in the ratio of 2:1:1, shows the following balances just before
Cash 120,000 Liabilities 200,000
Other assets 595,000 JAMES, Capital 220,000
WADE, Capital 155,000
BOSH, Capital 140,000
On the first month of the liquidation, assets with a book value of P380,000 are sold for P345,000. Liquidation expenses of P10,000 are paid, and additional
liquidation expenses are anticipated. Liabilities are paid amounting P74,000, and sufficient cash is retained to insure the payment to creditors before making
payments to partners. On the first payment to partners, WADE receives P82,500.
15. The total cash distributed to the partners in the first installment is:
16. The amount of cash withheld for anticipation liquidation expenses and unpaid liabilities is:
17. Continue Problem D = If the remaining book value of other assets was sold for P175,000 and payment for unpaid liabilities and liquidation expenses were
made. How much liquidation expenses was paid, if JAMES received P80,000 in the final settlement?

Problem E = On December 31, 2015, Go Your Own Way partners J, A and C have capital balances of P252,000, P368,000 and P305,000, respectively. The
partnership has P275,000 liabilities and cash of P200,000. On May 1, 2016, the partnership decided to liquidate. It’s net income from January to May 1,
amounted to P348,000. It’s profit/loss distribution agreement calls for annual salaries of P134,400, P158,400, and P115,200 for J, A, and C, respectively. Any
remainder will be distributed as follows: 25% to J, 25% to A, and 50% to C.

Part of partners’ agreement, salaries given to partners are treated as expenses and salaries are accrue quarterly. The salaries for the first quarter of 2016 were
credited to salaries payable. The partnership’s cash as of this date amounted to P250,000, the non-cash assets includes loans receivable from A amounted to
P20,000 and its total liabilities amounted to P477,000, including salaries payable to partners.

During June, noncash assets with a book value of P500,000 were sold for a certain amount. The partnership paid P75,000 of its liabilities to outside creditors.
Liquidating expenses amounting to P35,800 were paid and cash will be withheld for the payment of its remaining liabilities to outsiders and anticipated future
liquidating expenses amounted P25,000.
18. How much were the noncash assets sold for in order for A to receive the amount priority to her and an additional P15,000?

Continuation: During July, noncash assets were sold for P462,000 resulting to a loss of P18,000. Remaining liabilities to outsider were paid and P462,000 were
distributed to the partners. A total of 5,000 were paid for liquidation expenses and cash withheld for future liquidating expenses.
19. What is J’s capital balance after the second cash distribution?
20. What is C’s share in the maximum possible loss after the July sale of noncash assets?

Problem A: James and Irving decided to form a partnership on October 1, 2014. Their Statement of Financial Position on this date were:

They agreed the following adjustments shall be made:

James Irv ing
a. Equipment of James is underdepreciated by P87,500 and that Irving is
C ash 65,625.00 164,062.50 overdepreciated by P131,250.
Accounts receiv able 1,487,500.00 896,875.00 b. Allowance for doubtful accounts is to be set up amounting to P297,500 for
Merchandise Inv entory 875,000.00 885,937.50 James and P196,875 for Irving.
Equipment 656,250.00 1,268,750.00 c. Inventories of P21,875 and P15,312.50 are defective in the books of
James and Irving respectively but the inventories have scrap value of 25% of the cost
Total 3,084,375.00 3,215,625.00
for James and 20% of the cost for Irving.
d. The partnership agreement provides for a profit and loss ratio of 60% to
Accounts pay able 459,375.00 1,159,375.00 James and 40% to Irving.
James, C apital 2,625,000.00 Requirements:
Case 1: Assuming the use of transfer of capital method:
Irv ing, C apital 2,056,250.00
1. How much is the capital transfer to James to bring the capital
Total 3,084,375.00 3,215,625.00 balances proportionate to their profit and loss ratio?
2. How much is the agreed capital of Irving to bring the capital balances proportionate to their profit and loss ratio?
Case 2: Under goodwill method:
3. How much is the total partnership asset after formation? –
4. How much is James capital balance after formation? -
5. How much is Irving capital balance after formation?

Problem B = On January 1, 2014, James and Love agreed to form a partnership. The following are their assets and liabilities:
James decided to pay-off his notes payable plus the due interest of P4,200 from his personal assets. It was also agreed that Love inventories were overstated
by P24,000 and James machinery was overdepreciated by P20,000.
James Lov e
C ash 36,000 56,000
Accounts receiv able 188,000 68,000
Inv entories 304,000 364,000
Machinery 480,000 440,000
Accounts pay able 216,000 144,000
N otes pay able 140,000 60,000
Assumption 1: Love is to invest/withdraw cash in order to receive a capital credit that is 20% more than James total net investment in the partnership.
6. How much cash will be presented in the partnership’s statement of financial position?
7. Total partnership capital
Assumption 2: James is to invest/withdraw cash in order to receive an equal capital credit of Love total net investment in the partnership.
8. How much is the total partnership assets?
9. How much is the total partnership liabilities?
Problem C – Yap, Yeo, Tubid and Menk own a publishing company they operate as a partnership. The partnership agreement includes the following:
a.) Yap receives a salary of P100,000 and a bonus of 10% of income after all bonuses.
b.) Yeo receives a salary of P60,000 and a bonus of 5% of income after all bonuses.
c.) All partners are to receive a 10% interest on their average capital balances.
d.) Any remaining profits are to be divided equally among the partners.
The average capital balances are as follows: Yap P100,000; Yeo P90,000; Tubid P40,000; and Menk P94,000.
10. Case 1: Determine how a net income of P345,000 would be allocated among the partners.
11. Case 2: Determine how a net loss of P20,000 would be allocated among the partners.
12. Case 3: Determine how a profit of P115,000 would be allocated among the partners under the following order of priority: Income should be
allocated by first giving priority on invested capital, then bonuses, then salary and then according to the profit and loss percentages.

Problem D - Jackson, Simpson and Dela Cruz beginning capital on January 1, 2015 are: P154,000, P198,000 and P248,000, respectively.
The Articles of Co-partnership provides that the operating income be shared among the partners as follows:
 As salary, for Jackson in the amount of P240,000; for Simpson, P180,000 and for Dela Cruz, P120,000;
 Interest of 12% on the average capital during 2015 of the three (3) partners and;
 The remainder in the ratio of 2:4:4, respectively.
For the year ended December 31, 2015, the company reported a net income of P700,000. However, before closing the 2015 books of the partnership, the
company’s auditor discovers the following errors and the partners agree that all necessary adjustments have to be made before distribution of the partnership
2014 2015
Overstatement of ending inventories P 25,000 P 30,000
Omission of depreciation on newly
acquired equipment 15,000 15,000
Understatement of commission receivable 20,000 25,000
A purchase of merchandise was not
recorded until the following year, but
included in the year-end inventory. 60,000
In the year 2015, Jackson contributed additional capital, July 1, P300,000 and made a drawing on October 1, P100,000; Simpson contributed capital on August 1,
P150,000 and made a drawing on October 1, P100,000 and Dela Cruz made a drawing of P60,000 on November 1. All partners’ drawings made for the year are
considered temporary.
Determine the following:
1. What are the partners’ shares in the corrected net income for 2015?
2. What are the partners’ capital balances on December 31, 2015?

Problem E = Stock and House was organized StockHouse Partnership and began operation on March 1, 2014. On that date, Stock invested P150,000, and
House invested computer equipments with current fair values of P180,000. House also invested P60,000 cash in the partnership on November 1, 2014, because
of problem in liquidity. The partnership contract includes the following remuneration plan:
Stock House
Annual Salary 180,000 240,000
Annual Interest on average capital 10% 10%
Remainder: 60% 40%
The partners are allowed to withdraw equal to their annual salary; any excess on allowable withdrawal will be debited against partner’s account. During the year
ended February 28, 2015, the partnership had net sales of P5,000,000, cost of goods sold of P2,800,000, and total operating expenses of P1,500,000. Each
partners made the following cash drawings in year 2014: June 30 - P120,000 each and also November 30 - P120,000 each.
Case 1: Salaries are not treated as expenses
3. Determine the partners’ shares in net income for fiscal year ended February 28, 2015.
4. What are the capital balances of the partners on February 28,2015?

Case 2: Salaries are treated as expenses

5. Determine the partners’ shares in net income for fiscal year ended February 28, 2015.
6. What are the capital balances of the partners on February 28,2015?

Problem F - James contributed P240,000 and Love contributed P480,000 to form a partnership, and they agreed to share profits in the ratio of their original
capital contributions. During the first year of operations, they made a profit of P162,900; James, withdrew P50,500 and Love, P80,000.
At the start of the following year, they agreed to admit Irving into the partnership. He was to receive a one-fourth interest in the capital and profits upon payment
of P300,000 to James and Love, whose capital accounts were to be reduced by transfers to Irving’s capital account of amounts sufficient to bring them back to
their original capital ratio.
7. How should the P300,000 paid by Irving be divided between James and Love, respectively?

Problem G – The following are the capital account balances and the profits and loss ratio of the partners in CC Company on December 31, 2015:
Capital Balances P & L Ratio
James 240,000 25%
Love 320,000 50%
Irving 800,000 25%
On January 1, 2016, Jones is admitted to the partnership under the following agreement:
a. Jones is to share 1/3 in the profit and loss while the other partners continue to participate in profit and loss ratio in their original ratio.
b. Jones is to pay Love, P96,000 for a ¼ interest of the latter’s equity in the partnership net assets and is to invest P560,000 cash in the partnership.
c. Jones’ capital account after the admission is to show P600,000 and the total capital is P2,000,000.
8. How much are the capital balances of the partners after admission of Jones?
Problem H- James, Love, and Irving are partners sharing profit and losses of 50%, 30% and 20%, respectively. The December 31, 2016 balance sheet of the
Total Debits Total Credits
Cash 180,000 Allowance for bad debts 12,000
Accounts receiv able 86,000 Accumulated depreciation 20,000
Inv entories 104,000 Liabilities 98,000
Furniture and Fix tures 120,000 James, Loan 10,000
Lov e, Drawings 15,000 Lov e, Capital 140,000
Receiv ables from Irv ing 25,000 Irv ing, Capital 120,000
Patent 30,000 James, Capital 80,000
James, Drawings 20,000
Income Summary 60,000
Total 560,000 Total 560,000
partnership before and any profit allocation was summarized as follows:
On January 1, 2017, James has decided to retire from the partnership and by mutual agreement among partners; the following have been arrived at:
a. Inventories amounting to P10,000 is considered obsolete and must be written off.
b. Furniture and fixtures should be adjusted to their current value of P130,000.
c. Patent are considered worthless and must be written-off immediately before retirement of James.
d. Accounts receivable amounted to P16,000 are to be written off.
e. Liabilities include salary payable to James amounted to P18,000.

The partnership settled the interest of James of the following: Inventories which accepted by James in amount of P30,000 with a book value of P24,000 and the
balance in cash.

Case 1: It was agreed that the partnership will pay James more than 20% for his total interest: Using bonus method
9. How much are the capital balances of remaining partners?
10. How much is the remaining partnership assets after James retirement?
Case 2: It was agreed that the partnership will pay James more than 20% for his total interest: Using total implied goodwill method
11. How much are the capital balances of remaining partners?
12. How much is the remaining partnership assets after James retirement?