fee Ake, x leaf athumul pA e aw fone ‘ ReSA The Review School of Accountancy £8 Papa Cor. §. H. eyelet, Sampoloc, Manis §® Tel Nos. 734-39-89 8 735-98-07 PRACTICAL ACCOUNTING PROBLEMS II Partnership Formation antonio jaramillo dayag i dik 0% July 1, 2011, AA and’ BB decided to form a partnership. The firm is fo take over ‘business assets and assume liabilities, and capitals are ab to be based on net assets transferred after the following adjustmentss 4 a, AA and BB's inventory is to be valued at P3},000 and 22,000, respectively. b. Accounts receivable of P2,000 in AA’s books and P1,000 in BB’s books are uncollectible. ¢- Accrued salaries of.,P4,000 for AA and P5,000 for BB are still to be recognized in the books. 4. Unused office supplies of AA amounted to P5,000, while that of BB amounted to P1,500, “ e- Prepaid rent of P7;000 and P4,500 are to be recognized in the 4, _ books AA and BB, respectively. "caf Wyit £. BA is to invest or withdrew cash necessary to have a 408 p interest in the firm. Balance sheets for AA and BB on July 1 before adjustments are given below: x = Caan P3100 F— 30,000 ‘Recounts Receivable 26,000 | 30-000 Inventory 32,0007 24,000 Office supplies 3,900 } Equipment 20,000 4,000 ‘Accumulated depreciation ~ equipmait 73,600) | 13,0009 Total Assets P 100,000 | P 120,009 Recounts Payable 2s, 000 | F-25000 Capitals 72,000 | —-T00-000 Total Liabilities ond Capital Eiao000 |} Fiz0-o0 : Determine: oe 7 co aa Sg 1. The net adjustments - capital in the books of AA and BB: ot Wh a a. AA, P7,000 net debit; BB, P2,000 net credit 4R ut fy B. AB, P5,000 net debit; BB, F7,000 net credit i % AA, 211000 net cledits BB, P,000 nec atte PB 1 Wh @P th, 25,000: net ceedits BB, Eiogn nee ett es b 2.°The adjusted capital of AA and BB in their respective books. Ro KE pri, 67 a. AA ~ P65,000; BB ~ P102,000 c. AA - P77,000; BB - P98, 000 an b. BR ~ P63, 000; BB - 107,000 (@> AN — 777,000, BB - P99;000 S [gS 's. she additional investment {withiGeeer) made boca: a P(15, 000) 3,000 peck b. P{ 6,667) dB, 333 tg) 4, The total assets. of the partnership after formation: a. P235,333, fe. P20, 333, b. 230,000 @ 212! 000 5. The total liabilities of the partnérahip after formation: 57,000, ©. P54,000 Ih . P48, 000 d. P51,000 coh —/£6. The total capital of the partnership after formation: a. P180, 000 ce. P163, 333, b. P178,333 2195, 000 + The capital balances of AA and BB in the combined balance sheet: “gi? a. AA, PO1,250;" BB, 72,000 g BA, £100,000; 8, 75,000 z£ b. AA, 81,250; BB, P75,000 9g AA, P62,000; BB, P93,000 a On December 1, 2011, DD and KE formed a partnership with each A at contributing the following assets at fair market values: ¥ op fe cae ¢ CASH svinnnsnnnnnnn B 9,000 P 18,600 a Machinery and equipment. "13,300 7 Pe FF Land. eo 90,000 beet Building... 27,000 Seas offike furniture. 13, 500 — Hla, 000 195,00 p2-91pak ec fe . nS Se re ee po St wh ee i ee gy eae twee = “PRACTICAL ACCOUNTING PROBLEMS II page 2 The land and building are subjéct to a mortgage loan of P54,000 that the partnership will assume. The partnership agreement provides that DD and EE share profits and losses, 40% and 60%, respectively and partners agreed to bring their capital balances in proportion to the profit and loss ratio and using the capital balance of EE as the basis. The ditional cash investment made by DD should be: P 18,000 cc. P134,100 85, 500 a. 166,250 11 JJ and KK are joining their separate business to form a partnership. Cash and non-cash assets are to be contributed for a total capital of 300,000. The non-cash assets to be contributed and liabilities ‘to be assumed are: Az 1 4 CHE J KK Hook valus Fair Value Book Value Fair Value E BX44UD Accounts receivable. 22,500 P22,500 Ne Inventories. i 22,500 33,750 260,000 67,500 Equipment... 37,500 30,000 67,500. 71,250 Accounts payable. 11,250 * 11,250+ 7,500 7,500 The partner's capital accounts are to be equal after all contributions & fet of assets and assumptions of liabilities. J & regek Determine: RS 67. 13/77" tokal assets of the partnership. 53 70 71250 ASW 318, 750 cc. P281,250 pe, Gs) oes . Desa = 300,000 d. 225,000 ws 73/20 e amount of cash that each partner must contribute: 2 — ‘35-275, 000; KK-P18, 750 ©. JI-PL61,250; KK-P157,500 pg gd 72 - 3J-P75, 000; KK-P11, 250 4. 9-127, 5007 RK-P11,250 TE _ pp a6? Partnership Operations & ae w AGS Left and Right are partners. Their capital accounts during 2011 wore as follows: Left, Capital Right, Capital 8/23 P6,000 1/1 P 30,000 3/5 P9,000 1/1 PS0,000 4/3 8,000 V6 7,000 10/31 6,000 10/7 5,000 Partnership net income is P50,000 for the year. The partnership agreement provides for the division of net income as follows: * Each partner is credited 10 percent interest on his or her average capital. '* Because of prior work experience, Left is entitled to an annual salary of P12,000 and Right is credited with P8,000. © Any remainder income or loss is to be allocated based on beginning capital. How much of the partnership net income for 2010 should be assigned to ft and Right? Left, P23,666; Right, P26,334 | c. Left, P26,388; Right, P23, 612 Left, P18,750; Right, P31,250 " d. Left, P25,000; Right, P25,000 v Hunt, Rob, Turman and Kelly own a publishing company that they operate as a partnership. The partnership agreement includes the following: © Hunt receives a salary of P20,000 and a bonus of 38 of income after/all) bonuses. © “Rob regeives a salary of P10,000 and a bonus of 2% of income afterall) bonuses * Bil partners are to.receive 10% interest on their average capital balances. Courage isn’t having the atrength to go on; it’s going on when you P2-017 x td & mE sd . (oe ae Best Ct-d) : ? eee : é Z WE iba \ Nee Mi bys B2) PRACTICAL ACCOUNTING Ir page 3 The average capital balances are Hunt, P50,000; Rob, P45,000; Turman, 20,000, and Kelly, P47,000. Any remaining profits and losses are to be allocated equally among the partners. Determine how a profit’ of P105,000 would be allocated among the partners. Hunt, P41,450; Rob, P29,950; Turman, P15,450; Kelly, P18,150 . + Hunt; P28,000; Rob, P16,500; Turman, P 2,000; Kelly, P 4,700 = gat (p/-p)e- Hunt, P39,700; Rob, P29,200; Turman, P16,700; Kelly, P19,400 BU) tarcet caieet eae 2 MICAo-A) vr 2 ids. tgpP? 2nd OQ are partners operating a chain of retail stores. The partnership agreement provides for the following : ee se WB: Sas. salarie . P 10,000 P 5,000 Interest on average capital balance: 10% 10% Bom gn : 208 of net income None before interest but after bonus and salaries Rema Ne cn se 308 708 The income summary account for year 2011 shows a credit balance of P51,000 before any deductions. Average capital balances for PP and QQ are 750,000 and 75,000, respectivély. The share of PP and QO in the P51,000 net income would be: 1 a. PP; P24,,062.50; QQ, P26,937.50 . PP, P23,500; QQ, P27,500 b! PP, P26/541.50; 00, P24,458.50 @®) PP, 726/250; OO, P24,750 VII - Bonus as a distribution of profit XX and YY formed a partnership on January 2, 2011 and agreed to share profits and loss in the ratio of 90% and 10%, respectively. .xX contributed capital of 25,000. YY contributed—m capital but has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The partnership agreement provides for the following: . y Capital accounts are to be credited annually with interest at 5% a of the beginning capital. 14? yy is to be paid a salary of Pi,000 a month. = rm YY is to receive a bonus of 204 of net inconé calculated (before) Ne. x ran £ ra deducting his salary and interest on both capital accounts~ Bonus, interest, and Y¥’s salary are to be considered as 6 partnership’ expenses. ' oe oS, FAD ey ‘The partnership's income statement for 2011 follow: Revenues. Less: Expenses (including salary, interest, and bonus) 49,700 " . yy Net incone..... What is Y¥'s 2011 bonus? ac76 11 606 aaaacnae b. 12,000 £0 oe VIII - Profit Allocation The Trading Company, a partnership, was formed on January 1, 2011, with four partners,’ DD, EE, FF, and GG. Capital contributions were as follows: DD, P 50,000; EE, P25,000; FF, P25,000, and GG, P20,000. The partnership agreement provides that partners shall receive 5% interest in the amounts of their capital contributions. In. addition, DD is to receive a salary of P5,000 and, EE a salary of P3,000. The agreement further provides that FE shall receive a minimum of 2,500 per ‘annum from the partnership and GG_a ‘minimum of P6,000 per annum, both including amounts allowed as interest on capital and their respective shares of profits. The balance of the profit is to be shared in the following proportions: DD, 30%; EE, 30%; FF, 20%, and GG, 20%. Calculate the amount that must be earned by the partnership during 2011, before any charges for interest on capital or partners’ salaries, in order that DD may xeceive an aggregate of P12,500 including interest, salary-and share of profits. — a. P16, 667 So 230, 667 b. . 30,000 @® 32,333 ~ P2-01 Lar > ew t B, .P 96,450 pe 120(g07 18) 720% 3 %e era gay A A atpasseed ersticel ny hy vo a hagrtiot oy CD. op D- oe Tele Ub Sq Gn 0 PRACTICAL ACCOUNTING PROBLEMS II page 4 « Xat Statement of Partners’ Capital ex ae ae rx cp The AA, BB, and CC Partnership was formed on January 2; 2011. The original cash investments were as follows: >A. j : P 96,000 : Ba. 144, 000 ae CO : 216, 000 i axule According ‘to the general partnership contract, the partners were to be Temmnerated as folloves ge 10 & Salaries of P14,400 for AA, Pi2,000 for BB, and P13,600 for a cc: wy Top b. Interest at 128 on the average capital account balances during the year. ees © Remainder divided 408 to AA, 30% to BB, and d 30% for CC. Income before partners’ salaries for the year ended December 31, -2011, was P92,080. AA invested an additional P24,000, inthe partnership on Suly 17 CC withdrew P36,000 from the partnership on October 1; and, as authorized by the partnership contract, AA, BB, and CC each withdrew P750 monthly against their shares of net income for the year. Deternine: i Tr the share of partner AA in the net incone 2.736, 832 G) Pee, 160 B36, 232 11,760 2. the capital balance of partner CC on cecenber 31, 2011: ay P17, 540 c. 2200, 224 208,540 d. 198,624 3. 1€ the salaries to partners’ are to be recognized as operatin Gapsheed)by the partnership, the share of \parenee’ BE isc UhS ae Ficome” 17-08 Toseisz2 Qi 380 33 b. 28, 380 15, 624 ml 4, Using the same information in No. 3, the capital balance of parthee CC on Decenber 31, 20127 : 217,540, ©. 720,224 208, 540 a. 198, 624 x gp ad EE was organized and bosan parations on(Gassh BOD on chat — gag ny Gate, 00 invested 150,000 and EE invested \ant~andbutiding wich current. fair valye of P80,000 and 100,000, respectively. EE also {nvested P60,000 in the’ partnership on Novenber, 1, E011 becouse of ies chortige of cash, The! partnersaip contract’ includes the folleiiog remuneration plan: ” CCAP: ‘ bp EE Annual salary. P 18,000 P 24,000 Annual interest on average capital account balances. Remainder... The ‘annual salary was to be withdrawn by each partner in 12 monthly installments. During the fiscal year ended, february 28> 2012, DD and BE had net sales of #500,000, cost of goods sold of ¥280,000, and total operating expenses of P100,000 (excluding partners’ salaries and interest on average capital account balances). Each partner made monthly cash drawings in accordance with partnership contract. sean 108 108 608 408 Determine: 1. The share of partner. DD in the net income: 58, 800 cc. P72,000 + 66,000 46,800 Don’t do nothing because you feel you can only do little, do what you P2-01PRACTICAL ACCOUNTING PROBLEMS II page 5 SEE bd 2. The capital balance of each partner on March 1, 2012 should be (7%) &) : (G 00, 190,800; EE, 277,200 c. DD, P216,000; EE, P294,000 sae B. DD, P132,000; EE, P164,000 d. DD, P198,000; EB, P270, 000 Fag A712 3. Assuming that the annual salary are to recognized as operating expenses and the total operating expenses of PI0,000 includes the partners’ salaries expense but excluding interest on partners’ average capital account balances. The share of partner DD in the net income: 0-352 6 P58, 800 c. P72,000 Kb 66,000 d. 46,800 Hy pir = Gok & 4, Using ‘the same information in No. 3, the capital balance of each DF. partner on March 1, 2012: HO 2p a. DD, P190,800; EE, P277,200 6 bb, P216,000; EE, P294,000 be Bb: pp, 132,000; Ee, Pi64,000 Sey pp, 198,000; EE, P270;000 yy 2 x a, FF and GG are partners in merchandising business. During 2011, ‘they withdrew their salary allowances of p80,000 and P120,000, respectively. Profits and losses are shared in the rbtio of 3:2. The Income Summary account has a credit balance of P240,000 before any income allocation. Their capital accounts reflect the following: Beginning balance. P 100,000 P 60,000 Additional investments. 60,000 0,000 Withdrawals other than for salary allowances... ( 20,000) (30,000) Ending Capital vencnnnm «+ P149,900 P119,-000 $2 ¢ F 6 ?Mbetermine: F ¢ ww ale 2 [y yo 2+ TRE share of partner FF in the net income: ad - A le We a pa4, 000 c. P 80,000 ® w of ma @ 104,000 a. 24,000 nm xa 2. The capital, nilance of cach partner on december 31, 7011 ager ing the Income Summary and withdrawals’ accountes 8 FF, Pl64,0007 GG, P126,000” ¢. FF, P140,0007 GG, P110,000 /Y0 FF, P244,000; GG, P246,000 d. FF, P164,000; GG, P246,000 1 fis, _@)_ T'don't know what your destiny will be, but one thing I know: The only ones among you who will be truly happy are those who will have sought ahd found how to serve, by con) -essfully by enlisting their their reason Don't think that there's so much darkness, that it’s no use to have smalllight, because ‘even one candle can be seen a mile way when it's dark. When all else is lost, the future still remains. : ‘You can handle people more succ’ The greatest mistake you can make is to continually fear making mistakes. We are never given guarantees in life. We are only given the opportunities and itis up to us to make the BESPRACTICAL ACCOUNTING PROBLEMS II page 6 Solution to Problen IX: 1. o"; 2. bs 3.:c; 4. B Allocation/Distribution of Net Income ~ Requirement 1 : 2A. Es id Total Salaries 14,400 12,000] 13,600 | 40, 000 Tnterest=i28 oF Ave Cap. [12,960 [17,280] 24,240 | $5,080, Balance/Renainder (43:3) | (1,200) | ¢ 900) [1 900) | {3,000 Share in Net_Incone 26,160 | 25,380 | 37,540 | 92,080 statenent of Partnere’ Capital - Requirenent 2 2A 5B oe Total Capital, January 2, 2011 36,000 144,000] 216,000 | 456, 000, Additional Investments (Withdrawals) 247,000, (36,000) | _ (22,000) Net Income 26,160 28, 380 37,540 92, 080 Personal Withdrawals 13,000) | 1-3, 600) | 19,000) |__(27, 000) Sapital, December 31,2011 | 137.160 | — 163,380 208.540 | 302,080] Kllocation/Distribution of Net Income - Requirement 3 AA 5 oe Total Tnterest=108 of Ave. Cap. 42,560 [ 17,260 | 24,640] 55,080, Balance/Remainder (4:3: (1,200) {_ 900: (900) (3,000) Share in Net_Incone Ti 760] 16,380 23,940 52 “thet income before partners’ Salaries and interests. Less: Operating expenses (including salaries) Net Income after partners’ salaries but before interests.2 52,080 Incidentally, the entry to record the salaries would be: ‘Operating expenses (for salaries). aA, capital, 14,400 BB, capital, . 12,000 cc, capital. a 13,600 Statement of Partners’ Capital - Requirement 4 i AA BB, Ce, Capital, January 2, 2017 36,000} 144,000 | 216,000 Addit’l. Inv, (Withdrawals) 24,000 136, 000) Net Income Ti, 760 | 16, 380 23, 940 ‘Sal, (refer to entry above) 14,400 12,000 13, 600 Personal Withdrawals 19,000) [~¢_9,000) | 1 9,000) Capital. December 31, 2011 737,160 | 163,380] 208,540 Solution to Problem X: 1. a; 2. a; 3. bs 4. © Allocation/Distribution of Net Income - Requirement 1 DD. EE Total Salaries 1,000 | 24,000 42, 000 Interest (10% of Ave. Cap.) 15,000 | 20,000 35,000 Balance/Remainder (608: 408) 25,800 | 17,200 43,000 ‘Share in Net Income 58,800 | 61,200 | 120,000" =P 500,000 - P100,000 (excluding salaries and int. ~ P100,000 Statement of Partners’ Capital - it 2. BD. EE Total Capital, March 1," 2011 150,000 | 180,000 | 330,000 ‘Additional Investments 60, 000 60, 000 Net _Income 5g, 800 61,200 | ~ 1240, 000 Personal Withdrawals (28,000) | (24,000) | ¢ 42, 000) Capital, March 1, 2012 190,800 | 277,200 | 468.000 ‘Allocation/Distribution of Not Income — Requirement 3 DD EE Total Tnterest on Average Capital - 108|P _15,000| 20,000 | P 35,000 Balance /Remainder ~ 60¢:408 51,000 | 34,000 85,000 Share in Net Income P66, 000 | .p54,000 | P 120,000 | Statement of Partners’ Capital — Requirement 4 DD =, Capital balance, March 1, 2011 B 150,000 | P 180,000 Additional Investment 60, 000 ‘Share in Net Income 66, 000 54,000 ‘Salaries 18, 000 24,000 Salary withdrawals is, 000) | (24, 000) Capital balance, Narch 1, 2012 B216.000 | b 294,000 | P2-01ReSA The Review School of Accountancy R. Papa Cor. S. H. Loyola Sts. , Sampaloc, Manila ® Tel Nos. 734-39-89 & 735-98-07 : PRACTICAL ACCOUNTING PROBLEMS II Partnership Dissolution Admission of a New Partner I ~ Admission By Purchase / Admission By Investment A partnership had the following condensed balance sheet: Assets Liabilities and Capital cash. -PB 5,000 Liabilities. P15, 000 Noncash assets, 65,000 XX, capital 80%)... ++ 40,000 HK, LOAM earn -_5, 000 YY, capital (208)... 20, 000 Total. P75,000 Total, —_ sme B75, 000 The percentages in parentheses after the partner’s capital balances represent their ‘respective interests in profits and losses. The Partners agree to admit 22 as a member of the firm. Requized: Prepare the required entries on the partnership books to record the admission of 2Z under each of the following assumptions: Situation’ 1: 2% purchases a % interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner. 22 pays the Partners P15,000 which is divided between them in proportion to. the equities given up. “ 1, The entry to admit 2Z as a-new partner should be: a. XX, capital. - 12,000 c. XX, capital... 40,000 YY, capital... 3,000 YY, capital: 20,000 22, capital. 15,000 22, capital 60,000 XX, Capital......10,000 : 4. XX, capital... 9,378 YY, capita: 5,006 YY, capital, 9,375 22, capital... 15,000 22, capital... 18,750 %_The capital balances of XX, YY, and 22 after the admission should be: xx. xy ae xx yy an a. P30,000 P15,000: P18, 750 Drx, 000 P15,000. P15, 000 b. 25,000 25,000 25,000 20,000 20,000, 20,000 Situation 2: 22 GavesED ?20,000 in cash for a 1/4 ownership interest. , The woney gues US the craginal pasinaree 1, The entry to admit 22 as a new partner should be if book value method (no adjustments/no revaluation) is used: Cee eee 2. Using the same information in No. 1, the capital balances of XX, Y¥, and 22 after the admission should b 2 atest 2 x Be a. P30,000 P15,000 P18,750 @ #30, 000 15,000 P15, 000 b. 25,000 25,000 25,000 20,000 20,000 20,000 3. Using the same information in No. 1, compute ‘the partnership gain (or gain to be recognized in partnership books). ° e- P 5,000 1,250 4. 20,000 P2-02fb! op sitet angel ral “hr et ayeg =" ae — PRACTICAL ACCOUNTING PROBLEMS II page 2 © 4, Using the same information in No. 1, compute the gain to be recognized by XX and YY pO) P 5,000 : 1,250 20,000 oi hig 5. 12 GERRRESAT RATT in senete axe recogniséd,. the entry to Vs admit 22 should ber Mi 4M Gress Assets, 15,000 2X, capital 116,000 + XX, capital... 12,000 woe \ ge, capital 4,000. YY) capital. 3,000 joe \ oh re 14,000 XK, capital 13,000 ie ta 6,000 YY, capital, 5,750 o 20,000 2%, capital. 18, 550 OF we 20,000 Assets... 10,000 XK, capital Pw 10,000 YY, capital, hae 2 4 pe 12,080 , 7/500 ae 20,000 6. Using the same information in No. 5, the capital balances of Xk, YY, and 22 after the admission should be! xx wy az x yy Be 230,000 P15,000 P18,750 P30,000 P15, 000: P15,000 39,000 -17,250 20,000 42,000 18,000 20,000 sttaation 3: a2 (purcinsaa)a \ interest. in the tim. one-fourth of each partner's capital is to be transferred to the new partner. 22 pays the Partners 12,000, which is divided between them in proportion vo. the Squities given up- 1. The entry to admit 22 as a new partner should be if book value method 10 adjustments/no revaluation) is used: o by. XX, capital... 12, 000 XX, capital... .40,000 . bj Poe, capitan 3,000 ¥¥, capital... 20,000 mM 22, capital... 15,000 22, capi 60,000 Q x, capicar 10,000 @ wm, capitar.. 9,395 2 Seems Be capitan S63 2. Using the same information in No. 1, the capital balances of xX, YY, and Zz after the admission should be: xX waz m oY A 30,000 PI5,000 P18,750 #, ?30,000 P15,000 P15,000 25,000 25,000 25,000 YJ. 20,000 20,000 20,000 : the same information ute the partnership loss (or 7. P 6,750 Ge 12,000 {b4. Using the same information in No, 1, compute the loss to be recognized by XX and YY Es 008 Be kee Q5. If revaluation/adjustments in assets are recognized, the entry to & YY, capital, + 600 Assets. 3,000 XX, capital. YY, capital. 22, capi 7,125G9 “2g ae —v. -—# PRACTICAL ACCOUNTING PROBLEMS II b. XX, capital... d. XX, capital. 22, capital... 16,250 6. Using the same information in No. 5, the capital balances of XX, YY, and 22 after the admission should be: xx weer Xx yy 22 f 1,000 P15, 000 P18, 750 c. P30,000 P15,000 P15, 000 22,800 13,200 12,000 d. 42,000 18,000 20,000, Situation 4: 22 invests P25,000 for’ a % interest in the firm. The total agreed capital is 85,000. a ie entry to admit 22 as a ‘new partner should be: ww Re. (- cash. 25, 000 ¢. Cash. 1, capical. 2,000 acs apital. af YY, capital 750 YY, capi y & Nien 22, capital... 21,250 22, a 0 43,te I azo # 20 sae BS GE Banat 2. the capital balances of xX, YY, and 22 after the admission should be: ped ‘ xX yy. ae xX yy 2 30,000 P1S,000 P18, 750 ©. 30,000 P15,000 P15,000 43,000 20,750 21,250 d. 42,000 18,000 20,000 The new profit and loss of all partners after 22/s admission should ber the we Yaz mY ae x 4 Wl, a. 50¥e 258 25% 336 33, Bde y we Wo jcy Bl Boe 208 258 Ph 604 15k 258 Situation 5: New Partner. 22 conveyed a tangible assets with a fair value Of 732,800 "With an assuned mortgage of F5/000 tn ckcirge ire interest in(capital) keeping in mind that £2 wicld be severing “GE interest ireprettes: ae b Le that te the Joufhal entry to admit 22 1¢ bonus method is uscd? a. Tangible Assets....32, 500 ©. Tangible Assets. 22,500 5,000 ce Fe a 17,5009 yo FE é : 5,000 Mortgage Pay + 30, 625, By BLO (tag 27,500 22, icapital. d. Tangible Assets... az, capitel-— 30, 628 To te RO Fit ee OS os @ 2. The capital balances of xx, Y¥, and 22 after the admission should be: 61S 4 xx w a xR wy 22 # ?37,800 13,375 P30,625 —c. 30,000 5,000 Pis,000 43,000 20,750 21,250. 42,000 18/000 20,000 Situation 6: New Partner 22 conveyed non-cash assets with a fair value of P15,000 in exchange for a 603) interest in [CapitalJand a 1/5 interest . in profits. The total agreed capital after admission is 607000, ee 7802000. us 92 ga) tha encey col caste oa cele cee pects ey But old PRACTICAL ACCOUNTING PROBLEMS IT page 4 ‘ as @ 2. The capital balances of ¥X, YY, and 2z after the adaission shoud be: x SPY xx are ae Ky wu y Whe de B36, 800 P19,200 P24,000 °c. P30, 000 P15,000 P15, 000 2,62 : fy. 43,000 20,750. 21,250 a. 42,000" 18,000 20,000 a 0 3. The: new FOF and loss of all partners after 22's admission should be: x ow ap BK wy ae a: S088 258 258 c. 338 330 348 B. 608 158 258, (AL 64% 168 208 Situation 7: ZZ invests P15,000 for a 40% interest in the firm. A Aa) 1. I£ (bonus method]is used, the entry to admit 22 should be: p 15,000 ce. Cash... 15,000 x ” At W, capital. 16,000 28,000 12 Fw: We, capita. 24,000 40,000 7 qo “W( 40,000 ( 15,000, a 15,000 2 wm Syo) xX, ital. 12,000 15,000 x ar WY, capita 3/000 30, 000 is 2. If goodwill method is used, the entry to admit 22 should be: we x4, capital 16/000 23,000 24000 ee 40,000 ia 40,000 ec Re a Zas,000 a. can 15, 000 12,000 35,000 Xx yo 3/000 ae 1, capital. 30, 000 a ae Situation 8: 22 invests P40,000 in the firm, P10,000. is considered a a ” Lhe bopyg to Partners Xx ond Ye 2s # Bern: 40, 009 e. 30,000 oo sony 8, 000 ~ “8,000 we wi 2/000 2/000 yu wy 30,000 40,000 ® p aH. - 40,000, a 30, 000 20,000 2, 30, 000 Oe leedes fic Howe a JM .P12,000 for goodwill upon admission, i int C pcasil. 40,000 a Goodwill 21000 © w oe. capital seo x ye (py ya 7 / BL * aa ‘capital. ae 000 C4 ik vo 7 oe eae Le ag fuation 10: 2% invests P30,000 for a 37.5% interest in the firm. the i JL [2 ¢ otal firm capital is to be P#0,000 and partners agreed that theis ” ee should made to equal to their new profit and loss ratio, ¢——~ : § = % II - Admission By Purchase WW desires to purchase a one-fourth capital and profit and loss interest in the partnership of EE, GG, DD. The three ‘partners agree to sell WW « gh pncrfourth of their respective capital and profit and loss interests’ in WWSexcnange for a total payment of POO.O00, the mapieel eo eneereae in Yufreorective percentage interests in profits and losses immediately before : GtWljene sale to WH are: Glo hye EE, capital (608)... -P 160,000 cee 2 GG, capital (308). 80,000 ww 2 DD, capital (108). 49,000 b- Total ai = ‘F2a0,000 Zi ALL other assets and liabilities are fairly valued, and with asset = adjustment. is to-be recorded prior to the acquisition by ww. Taacdtstete @ Getceec tae neacinteicuase ces ss net, BE, GG, qe and DD, reopectively? ° Vv a. P120,000; P60,000; P30,000 ¢. P154,000; P77,000; P39,000 eae Po #3381000; 269,000; £33,000 4. 184,000; P92,000; P44, 000 ay t P2-02 [ore t . 2 vat = og, x4PRACTICAL ACCOUNTING PROBLEMS II page 5 III — Aduission By(fuvestment> The following condensed balance sheet is presented FoF the partnership of AA and BB, who share profits and losses in the ratio of 6:4, reapertivel cash : nP 67, 500 Other Assets 937,500 BB. loan 45,000 212050000 Accounts payable. > 160,000 BA, capital. 522,000 BB, capital 348,000 71,050,000 ‘The assets and liabilities are fairly valued on the balance sheet. AA and BB decide to admit CC as a new partner with 208 interest. No bonus or goodwill is to be recorded. What amount should CC contribute or invest in cash or other assets? ai; a. P165,000 P2210, 000 othe b. 174,000 dy 217,500 IV ~ Admission by Purchase and Investment In the AD partnership, Allen's capital is P140,000 and Daniel's is P40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. 1, David directly purchases a one-fifth interest by paying Allen P34,000 and Daniel P10,000. The land account is increased before David is admitted. By what amount is the land account increased? AG P40,000 c+ 220,000 ‘>. B36,000 a. P10, 000 Allen and Daniel agree that some of the inventory is obsolete. The inventory account is decreased before David is admitted. David invests P40,000 for a one-fifth interest. What is the amount of dnventory written dawn? ‘a. P 4,000 c, P15, 000 b. P10,000 FE P20, 000 V ~ Admission by Purchase and Investment The following are the capital account balances and the profits and loss ratio of the partners in Motorola Company on December 31, 2010: Capital Account Profit and Balances Loss Ratio P120, 000 25% — 160,000 508, = 400, 000 25 On January 1, 2011, LL is admitted to the partnership under the following agreement: a, Lb is to share 1/3 in the profits and loss while the other partners continue to participate in profits and loss ratio in their original ratio. b. LL is to pay TT, Pd8,000 for aw interest of the latter’s equity in the partnership net assets and is to invest P280,000 cash in the partnership. ¢. LL’s capital account’ after the admission is to show P300,000 and the total capital is P1,040,000. 1. The capital account balances of the partners after LL’s admission ar: a. MM, P147,000; TT, P166,000; RR, P427,000; LL, P300,000 b. MM, Pi25,000; TT, P130,000; RR, 405,000; LL, P300,000 c. MM, P138,366; TT, P156,744; RR, P418,336; LL, 300,000 # MM, P145,000; TT, P170,000; RR, P425,000; LL, 300,000 2.The new profit and loss ratio of all partners after L's admission: a. MM, 25.008; TT, 50.008; RR, 25.008; LL, 33.338 b. MM, 18.75%; TT, 37.50%; RR, 18.75%; LL, 25.008 c. MM, 25,008; TT, 25.008; RR, 25,008; LL, 25.008 Fe My 16.678; TP, 33.338; RR, 16.678; LL, 33.33% P2-02col gore * PRACTICAL ACCOUNTING PROBLEMS II page 6 Retirement or Withdrawal of. Partner (s) VI ~ Payment from Partnership Funds DD, BE, and FF are partners sharing profits and losses of 50%, 30% and 20%, respectively. The December 31, 2011 balance sheet of the partnership before any profit allocation was summarized as follows: ASSETS LIABILITES AND CAPITAL Cash... P 120,000 Accounts payabl Inventories. - 80,000 FF, loan, Furn. & Fixt. (net) 100,000 DD, capital, Patent. 30,000 EE, capital, FF, capital. eaeeee eee FE, drawings. 330, Yotal liab. @ capita. Total assets, The partnership net income for the year amounted to P60,000 On January 1, 2011, FF 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. 70 b. Purniture and fixtures should be adjusted to their current ee value of P130,000. +/% c, Patents are considered worthless and must be written-off immediately before the retirement of FF. It was agreed that the partnership will pay FF for his interest in the partnership inclusive of loan balance. 1, The entry to record the allocation of net income on December 31, 2010 should be: Inc. & Exp. ©. DD, capital....... 30,000 Summary.. 60, 000, EE, capital....... 18,000 DD, capital. 30,000 FF, capital....... 12,000 EE, capital. 18,000 Inc. & Exp. FF, capital. 12,000 SUMMA Yrnenenn 60, 000 b. Inc. & Exp. d. No entry required. Summar} 60, 000 DD, capita: 20,000 EE, capital. 20,000 FF, capital... 20,000 2. The entry to record the adjustments on assets on January 1, 2010 should be: a. Inventory. 10,000 gy DD, capita! 5,000 Patenteeneennnn 30,000 EE, capital, 3,000 Furn. & Fixt, 30,000 FF, ‘capital... 2,000 DD, capital... 5,000 Furn. @ Fixt......30,000 EE, capita: 3,000 10,000 FF, capital 2,000 30,000 b. Inventory, 10,000 4. Db, éapital.. Patentvemnnmnn 30,000 EE, capital. Furn, @ Fixt. 30,000 FF,. capital. DD, capital 3,333 Furn. @ Fixt.. 10,000 BE, capital... 3,333 10,000 FF, capital. 3,334 30,000 3. The entry to close the drawing and Joan accounts: FF, loan. =» 6,000 c. FF, drawings... 4,000 Fe, drawings. 4,000 FF, loan... FF, capital... 2,000 FF, capital, 6,000 b. FF, loan, = 6,000 d. No entry required. FF, drawings, 4,000 DD, capital... 1,000 EE, 600 FF, capital, 400 Considering Question Nos. 1,2 and 3 above the interest of FF immediately before his retirement amounted to: a. P74,000 cc. P70,000 Pe P72, 000 a. P48, 000 P2-02PRACTICAL ACCOUNTING PROBLEMS II page 7 5. Considering Question No. 4 and FF retires by receiving P72,000 cash (payment at book value), the entry to record withdrawal of FF should be: a. FF, capital... 74,000 c. FF, capital... .70,000 cash... 74,000 cash. 70,000 & FF, capital. 72,000 d. FF, capital....... 48,000 Cash... 12,000 cash. 48,000 6. Considering Question Nos. 4 and $, the capital balances of DD and EE after the retirement of FF: * DD, P165,000 and EE, P135,000 b. DD, P170,000 and EE, P138,000 c. DD, P135,000 and EE, P117,000 d. DD, P115,000 and EE, P105,000 7. Considering Question No. 4 and FF retires by receiving P76,000 cash (payment at more than book value), using bonus method, the entry to record the withdrawal of FF should be: a. FE, capital... 74,000 e. FF, capital... 70,000 DD, capital. 1,250 DD, capital. 3,750 FE, capital... ‘750 - BB, capital. 2,250 C88 enn 76, 000 cash, 76,000 Yb FE, capital... 72,000 4. FE, capital... 48,000 DD; capital... 2,500 cash 48,000 BE, capital. cash. 1,500 : 76,000, 8. Considering Question Nos. 4 and 7, the capital balances of DD and EE after the retirement of Fi % DD, P162,500 and EE, P133, 500 b. DD, P167,500 and EE, P136, 500 ¢. DD, P163,750 and EE, P134,250 d. DD, P165,000 and EE,-P135, 000 9. Considering Question No. 4 and FF retires by receiving P76,000 cash (payment at more than book value), using partial goodwill method, the entry to record the withdrawal of FF should ber a. FF, capital... 74,000 ¢: FF, capital... 70,000 2,000 Goodwill... 6,000 76, 000 Cash... 76,000 Poo FBr, capitalonn. 72,000 d. FF, capital... 48,000 Goodwill... 4,000 Goodwi1l.. 28,000 Cash. 76,000 Cash... 76,000 10. Considering Question Nos. 4 and 9, the capital balances of DD and EE after the retirement’ of FF: 162,500 and BE, P133,500 P167,500 and EE, P136,500 P163,750 and EE, P134,250 P165,000 and EE, P135,000 11. Considering Question No. 4 and FF retires by receiving 76,000 cash (payment at more than book value), using total (implied) goodwill method, the entry to record the withdrawal of FF should be: a. FF, capital... 72,000 . FF, capital... 70,000 Goodwi 4,000 6,000 Cashin 72,000 76,000 Db, capital 2/500 BE, capital 1/500 apd ie pit (PB Goodwill... 20,000 D. No entry required. ae 7 DD, capital 10,000 reup _7 fe, capital e000 eas FF, capital 4,000 pap Beh FE, capital. 76,000 pau cash. ' 76,000PRACTICAL ACCOUNTING PROBLEMS II Considering Question Nos. 2. EE ra after the. retirement DD, P175,000 and EE, b. DD, P167,500 and EE, c. DD,- P171,000 and EB, d. DD, P165,000 and EE, 13. Considering Question No. of FF: P141, 000 P136, 500 P139, 000 135,000 4 and 4 and 11, page 8 the capital balances of DD and FF retires by receiving P69,000 cash {payment at less than book value), using bonus method, the entry to record the withdrawal of FF should be: a. FF, capital... 74,000 c. FF, capital... 70,000 Db, capital 3,125 DD, capital 625 EE, capital 1,875 BE, capital 375 cash. 69, 000 Cash. 69,000 X. FE, capital, 72,000 d. FF, capital...... 69,000 DD, capital 1,875 cash. 69,000 BE, capital 1,125 Cash. 69,000, 14, Considering Question Nos: 4 and 13, the capital balances of DD and BE after the retirement of Fi a. DD, P165,625 and EE, P135,375 b. DD, P168,125 and EE, P136,875 (A: DD, P166,875 and EE, P136,125 , ‘d. DD, P165,000 and-EE, P135,000 15. Considering Question No. 4 and FF retires by receiving, P69,000 cash (payment at less than book value), using specific adjustment in assets, the entry to record the withdrawal of FF should be: a. FE, capital... 74,000 c. FE, capital... 70,000 Asset (spec) 5,000 Asset (spec.) 1,000 : cash 69,000 cash. 69,000 Mi FE, capitan. 72,000 os FF, capital... 69,000 Asset (spec.) 3,000 cash. 69,000 C88aee 69,000. 16. Considering Question Nos. 4 and 15, the capital balances of DD and EE after the retirement of FF: a. DD, P165,625 and EE, P135,375 b. DD; P168,125 and EB, P136,875 ©, DD, 166,875 and EE, P136,125 DD, P168,000 and EE, P135,000 17. Considering Question No. 4 and FF retires by receiving P69,000 ‘cash (payment at less than book value), using assets write-down to the entize entity, the entry to record the withdrawal of FF should a. FF, capital... | 72,000 €- FE, capitadnn. 70,000 Assets 3,000 Asset aon. 1,000 Cash 69,000 69,000 Joe BD, capitan, © 7,500 69,000 EE, capital... 4/500 69, 000 FE, capita. 3,000 Assets. 15,000 FE, capital... 69,000 cash... 62,000 18. considering Question Nos. 4 and 17, the capital balances of DD and EE after ‘the retirement of FF: a. DD, P165,625 and EE, P135,375 . Bl DD, P168/125 and BE, P136,875 ©} DD, P130,500 and EE, P132/000 (Ao Db, P157,500 and EE, P130,500 ‘torent achievements are not done by strength but by persoverances* ES 45s dort P2-02PRACTICAL ACCOUNTING PROBLEMS II page 9 Partnership Liquidation VII ~ Lump-sum Jackie, Karla and Linda are partners with profit and loss ratio of 508, 308, and 208, respectively. The partners decided to liquidate the Partnership effective January 1, 2011. The partnership trial balances on December 31, 2010 were as follows: Debit Credit Cash... -P 12,500 Non=cash a8set Sevmminnu 112,500 Liabilities to Creditors...... P 33,750 Loan payable - Linda. ai 3,750 GACWers contrat edad 45,000 Karla, capitalism : 30,000 / linda, capital... 4 eae T2500 Robale aioe v-nPI25,000 125,000 Required: Prepare @ statement of liquidation, ‘The'non-cash assets are sold for P28,125 and liquidation expenses of P1,875 are paid. Linda is insolvent and is unable to vepay the partnership for the debit balame. vIIT On December 31, 2011, the accounting records of MM, NN, and 00 Partnership (a general partnership) included the following ledger account balances: ‘ (Oe.) cr x MM, Ar aw MGecernnmennn -P( 15, 000.00) Rg S ae ocOlr deaning. ace (5,625.00) yes NY, Ioan oom 18;750.00 mt, capital... 76,875.00 NN, capital. 62, 812.50 00; capital. 67,500.00 Total assets of the partnership amounted to 299,062.50, including P32/812.50 cash, and partnership liabilities totaled, P93,750. The partnership was liquidated on December’ 31, 2011, and 00 received P52,031.25 cash pursuant to the liquidation. MM, NN, and OO shared net income and losses in a 5:3:2 ratio, respectively. es e7e de Determine: | is m (O\ii@une beaston! sect iaecran ee or ry 06° 6 IE /B 9,843.75 .(P49,218.75 a) Ey Peace BG indss0 | we 1818.90 7 Uf, que weaker 2. the stiount realized from sale of non-cash assets? P160,781.25 P217,031.25 He YW. 188, 906.25 i 266,250 @ ee ee eee p30) 16040 WS (Goose) 3. The cash balance after paymont of Liabilities? . P156,093.75 gf, P221,718.75 193, 593.75 2 249,343.75 ie A 2: | 2A 128 | 1G BS x juidation with the The AA, BB and CC partnership began the process of following balance sheet: CaSHenense P 16,000 Liabilities, Noneash asset: 434,000 AA, capital, +=-P250,000 80,000 BB, capital, 90,000 Cc, capital : 130, 000 Total Assets.......P450, 000 Total liab & capital.....B450,000 AA, BB and CC share profits and losses in a ratio of 3:2:5.- Liquidation expenses are expected to be P12,000. After the liquidation expenses of Pi2,000 had been paid and the non-cash assets sold, CC had a deficit of 8,000. For what amount were the non-cash assets sold? P170,000 cc. P158,000 b. P264,000 d. P146,000 Serie 20) Pass ie Can ee 2a02 ia i) a a Cr)PRACTICAL ACCOUNTING PROBLEMS II page 10 x Silverio, Domingo, Reyes, and Pasko are partners sharing earnings in the ratio of 3/21; 4/21; 6/21 and 8/21. The balances of their capital accounts on December 31, 2011 are as follows: Silverio menaputwnnenP 1,000 estas; 000 wv 25,000 a 9,000 60,000 The partners decide to liquidate, and they accordingly convert the non~ cash assets into P23,200 of cash. After paying the liabilities amounting to P3,000, they have 22,200 to divide, Assume that a debit. balance of any partner's capital is uncollectible. Determine: 1, ‘The book value of the non-cash assets amounted to: ‘a. 25,200 (PH P61, 000 b. 45,400 ‘as 63,000 The share of Silverio in the loss upon conversion of the non-cash assets into cash was: : a. Pa, 972 #: ®5, 400 ae b. 5,257 ‘d. None 3. After the P22,200 was divided, the capital balance of Domingo was: ‘a, P3,200 ce. P 4,400 wb BY 3,920 da. 17,800 je XI IR Fleming, Durano, and Mart are partners in a wholesale business. on January 1, 2011 the total capital’ was P60,000 and drawings presented as follows: Capitals Drawings Fleming, B 12,500 PB 7,500 Durano. 10, 000 5,000 Mar onsen 37, 500 2,500 Partners agree that profit and loss ratio are shared equally. Because of the failure of some debtors to pay their outstanding accounts, the partnership loses heavily and is compelled to liquidate. After exhausting the partnership assets, including those arising from an operating profit of P9,000 in 2011, they still owe P10,500 to creditors on December 31, 2011. Fleming has no personal assets but the others are well off. nea Determine: 1. The partnership. Liquidation loss: a. one ©. 255,500 Bi b20,000 #64800 2. the amount to be-received by Mart as a result of the Liquidetion: oe 63) 30 Bact ett ; 2 We 9,780 : a. 19/500 ° poe go 4 i XII - Installment me a Gp AR, BB, and CC are’ partners sharing profits and loss in the ratio’ of 4:3:3, respectively. On January 1, 2011, they decided to liquidate the partnership and the balance sheet were prepared as follows: ASSETS LIABILITIES and CAPITAL cash. P 2,000 Liabilities. oP 6; 000 Other Assets. 46, 000 BB, 5,000 cc, 2,500 BA, capitalism 14,450 BB, capital... 12, $50 cc, capital. a 7,500 Total Assets.........P48,000 Total liab & capital...PRACTICAL ACCOUNTING PROBLEMS II page 11 The following transactions as a result of liquidation were as follows: Book value ayment of of assets elf Proceeds Myiquidation Payment cash sold pg. from sale ygsExpenses to Creditors withheld January —P12,000 Lew P10,500 "tm P 500 P 6,000 P 2,000 February 7,000 ¢ 6,000 Gas 750 = 1,000 March 15,000 ee 10,000 1,000 2,500 April 12,000 5,000 5,000 toe Determine: Wi. The amount to be received by Partner BB for the month of January? ea #, P 4,000 £1,800 H 5,000 2. the amount to be received by Partner CC for the month of February? ge 0 : Ay B 1,875 ra oe A 475 H 2,500 bp rns tov cece by rin he et of mca ly P P 8,800 - z ye 3,000 & 14,450 68) wis (4, 64. the amount to be received by Partner BB for the: month of April? ac. Gus): It PO # P 1,000 : . 780 x 1,280 ov 2 © 5. The partner most vulnerable to partnership losses on liquidation is: Ww a. BA e. cc mag OSS? b. BB @. None (3) uct) 038) of 6. The se to any partner (s) under a program of priorities > ———— shall’be made thus: go 4b AAS A a. To BB, P6,712 €. To CC, P6,712 ae b. To AA, P1,117 dy To AA, P1,117 and BB, Pe38 ‘XIII Following is. the balance sheet of DD, EE, and FF Partnership (a general Partnership) on June 4, 2010, immediately prior to its liquidation: Asseta Liabilities and Capital -P 12,000 Liabilities... P 40,000 Other Asset: 188,000 EE, loan... 8,000 ‘ DD, capita: 54,000 BE, capital, 78,000 FF, capital. 20, 000 Totals... TOCA Benen 200,000 The partners shared net income and losses as follows: DD, 40%; EE, 408; and FF, 208. On June 4, 2010, the other assets were realized at. P61,400, and P41,000 had to be paid to liquidate the liabilities because of an unrecorded trade accounts payable of P1,000. DD and EE were solvent. but rr’ Personal Liabilities exceeded personal asgets, by P10, 000, How mich would each partner receive? ob ity 3 f SDB, £3,260, BE, 935,60; Fe, p -0- poe A OY OF Hid b. DD, P2,960; EE, P34,960; FF, P -0- He g & Gere) DD, B 200; EE, P24,200; FF, P -0- UY, aq Tae ae ¢ TUE 2.7 B 2007 BE, P32,200; FF, P -0- gg gz 34TH 1 oe ellos es eeecslen Ae ger’ XIV Seemann When Ray and Conniff, general partners of the Ray Conniff Partnership who shazed net income: and losses in a 4:6 ratio, were incapacitated in an accident, a liquidator was appointed to raised up the partnership. The partnership's balance sheet showed the following: Assets Liabilities and Capital Cash. -. P 35,000 ~ Liabilities... P 20,000 Other Assets... 100,000 Ray, capital. 71,000 Goodwill. 10,000 Conniff, capital 54,000 Total: Totals. PFi45,.000 P2-02PRACTICAL ACCOUNTING PROBLEMS II page 12 Because of the specialized nature of the non-cash assets, the liquidator anticipated that considerable time would be required to dispose them. Liquidation expenses paid P5,000 for advertising, rent, travel, etc. and in the process of liquidating the partnership an overlooked bill for landscaping services of P2,000 is discovered and in addition, partners agree to.keep a P3,000 contingent fund. Determine the amount of cash that should be paid to each partner: Ray Conni tt Ray. connitt as P 23,000 0 ce P 15,000 PO ® P 5,000 ° 4, P 10,0000 xv The’ partnership of JJ, KK, LL, and MM is preparing to liquidate. Profit and loss sharing ratios are shown is the summarized balance sheet at December 31, 2011 as follows: + Assets Liabilities and Capital cash oe P 200,000 Other Liabilities... P 100,000 Inventories. 200,000 33, loan... a 100, 000 Loan to KK. 20,000 "JJ, capital (40%)... 200,000 Other Assets... 510,000 KK, capital (20%) unm 320,000 LL, capital (208). 100,000 Mt, capital (20%) 110,000 Totals... - ES3EG0) © Totals F320, During January 2011, the inventories axe sold for P85,000, the other Liabilities are paid, and P50,000 is set-aside for contingencies. Compute the total ‘cash payment to partners and the cash that should Feceive by JJ and Kk: Payment: “payment to Partners oy Kx to Partners 93° KK a. PI95,000 P23,333 Pi161,667 ¢, F145,000° PO 145,000 b! 205,000 P30,000 P165,000 @) 135,000 0 P135,000 xvi The ABC Partnership is being dissolved. All liabilities have being liquidated. The balance of assets of hand is being realized gradually. The following.are details’ of partners’ accounts. r op Capital Account Current Account past & OF (original Investment) (undistributed earnings) Fartner®hip —Péb AW P 10,000 P 500 Cr. 7,500 40 B 12,500 1,000 Dr. ive . 5,000 500 Cr. 2,500 20% If A receives P8,000 at this point, how much will BB’ and CC receive? ES se Ey ge a. $11,500 P 8,000 ©. P 10,000 P 3,000 1/500 3,000 a. 2,000 2,250 a ‘XVII The balance sheet of the Partnership Duro, Kemp, and Ruth on December 31, 2011 before liquidation shows the following: Hl Assets Liabilities and Capital cash. P120,000 » Accounts payable.. swoneP150, 000 Other Assets..... 560,000 Notes payable... . 100,000 Loan to Ruth, 20,000 Loan from Kemp... 10,000 Duro, capital (508). - 170,000 Kemp, capital (308) mmm 170,000 Ruth, capital (20%) mmm 100,000 TOADS arenes BaDOOOG0 TOAD Senn 700,000 The partnership decided to liquidate as soon as possible after December 31, 2011, and all cash on hand except for P10,000 contingency balance is to be distributed at the end of each month until the liquidaticn is completed. : If in the first month of realization and distribution, the partnership pays liquidation expenses of 5,000 and Kemp receives P60,000. Compute the cash proceeds from the initial sale of other assets? a. P160, 000 200,000 b. 180,000 @ 205, 000PRACTICAL ACCOUNTING PROBLEMS II page 13 XVIIL A balance sheet for the partnership of Tree, Nee, and Dad who share Profits in the ratio of 2:1:1, shows the following balances just before Wen EGET unpaid, unrecorded Wabi lity Cash... a swweB 12,000 Other assets. samme 59, 500 Léabilities. 20,000 Tree, capital. 22,000 Nee, capital. Dad, capital, 18,500 14,000 On the first installment of the liquidation, certain assets are sold for 32,000. Liquidation expenses of P1,000 are paid, and additional liquidation expenses are anticipated. Liabilities are paid amounting to P5,400, and sufficient cash is retained to insure the payment. to creditors before making payment to partners. On the first payment to partners, Tree receives P6,250. ae Determine: \$ 1. The total cash payment to partners in the first installment is: 25,000 c. P12,500 bs 20,000 4. 10,000 of 2 The amount of cash withheld for anticipated liquidation expenses and unpaid liabilities is: a. P 2,000 c. P16, 600 by 14,600 4, 17,600 ax The partnership of Aiko, Barney and Clinton is winding its affairs. The following information has been gathered. The trial balance of the Partnership at June 30, 2011, is as follows: Aasete Liabilities and Capital cash. mvvnne B 6,000 ACCOUNES PAYAbLemnnmnP 17,000 Accounts receivable 22,000 Aiko, capital (50%)... 67/000 Inventor} ~- 14,000 Barney, capital (308)... 45,000 Property, plant and Clinton, capital (208).. 31,500 equipment (net)... 99,000 Aiko, loan. 12,000 Clinton, loan... 7,500 7,500 —— P7160, 500 F 160,500 Cash is distributed to the partners at the end of each month. A summary of transactions follow: guly: P16,500 - collected on accounts receivable; balance is uncollectible P10,000 - received from the entire inventory P 1,000 ~ liquidation expenses paid P 8,000 - cash retained in the busine: August: P 1,500 - liquidation expenses paid ~ Clinton‘s capital was reduced when Clinton accepted a piece of special equipment that had a book value of P4,000. The Partners agreed that a value of P10,000 should be placed on the machine for liquidation purposes. P 2,500 - cash retained in the business at the end of the month September: P 75,000 - received on sale of remaining plant assets PB 1,000 - liquidation expenses paid ~ No cash was retained in the business ‘Totals at the end of month Determine the cash to be paid to Barney in: ar agi eee pte eee P2-02PRACTICAL ACCOUNTING PROBLEMS II page 14 XX - Cash Priority Program Partners Dalton, Edwards, and Finley have capital balances of P40,000, 90,000 and P30,000, respectively, immediately prior to liquidation. Total remaining assets have a book value of P160,000, the liabilities having been paid. Among these remaining assets is a machine with a fair value of P35,000. The partners’ split profits and losses equally. Edwards covets the machine and is willing to accept it for P35,000 in lieu of cash. The other partners have no designs on specific assets, only cash in liquidation. How much cash, in addition to the machine, would be first distributed to Edwards, before any of the other partners received anybhing? 15,000 cc. P166, 667 ~ P50,000 " d. 300,000 XXI A cash distribution plan (payment priority program) for MM, NN, and 00 partnership appears below: Priority Creditors | MM WN, 00) First 6300, 000 1008 Next P80, 000 70 30m Next P70, 000 3/7 a7 Remainder 22% sae aa8 I£ P550,000 is to be disttibuted, how much will be received by the priority creditors MM, NN, and 00? Priority Creditors) MM NN 20 a. P 0 Pe oP o P 0 ° 121,000 187,000 242,000 300,000 , 55,000 85,000 110,000 300,000 108,000 58,000 84,000 XXII - With solution The partnership of Urich, Volks, and Wales was liquidated. The partners have shared profits and losses in the ratio of 3:4:3. Prior to liquidation, the capital balances were the following: Urich. vo meB ( 60,000) Vole eeticces + 120,000 Wales.. . (10, 000) Cash and other assets totaled 200,000 with liabilities amounting to P150,000. Liquidation left the partnership with P120,000, not enough to pay liabilities. Bach partner can contribute P20,000 (but not more) from personal assets. Determine how much cash Urich receives or pays-in as a result of the liquidation. Receives (collects) Pays-in Receives (collects) Pays-in ale =0- 20,000 c. P 10,000 b. -0- 84,000 a 24,000 Answer - a Urich Volks Wales Total Balances before | ( 60,000) | 120,000} { 10,000) 50, 000 Liquidation Loss on liquidation (24, 000) | (32,000) | (24,000) | (80, 000) (P120,000 ~ P200, 000) Balances (84, 0007 88,000] (34,000) | ( 30,000) ‘Additional Investment 20,000, 20,000 40, 000 Balances: (64, 0007 BB, 000 | (14, 000) 10, 000 ‘Additional loss (P64, 000 + P14, 000) 64,000 | ( 78,000) 14,000 h received 10,000 Wiq'person who sons seeds of kindness enjoys a perpetual harvest. ** : +#achievement comes from the person who dares** "Remember that’ nothing really "important ever happens until someone takes ‘a chance ‘Don’t think that there’s so much darkness, that it’s no use to have @ small light, because even one candle can be seen a mile away when it’s dark. P2-02PRACTICAL ACCOUNTING PROBLEMS II XXII = Wi Gardo and Gordo formed a partnership on July 1, 2009 to operate two stores to be managed by each of them. They invested P30,000 and P20,000 and agreed to share earnings 608 and 40¢,respectively. All their transactions were for cash, and all their subsequent transactions were handled through their respective bank accounts as summarized below: Gardo Gordo Cash receipts... P79, 100 65,245 Cash disbursements....... 62,275 70,695, On October 31, 2009, all remaining noncash assets in the two stores were sold for cash of P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution of the P60,000 cash, GARDO received: a. P24,000 ce. P34,000 b b. 26,000 d. P36, 000 Answer - b Gardo (608) Gordo (408) Total Initial Investments, . P30, 000 20,000 P-50,000 Investments (personal disbursement*)..... 62,275 70,695 132,970 Withdrawals (Personal receipts) (79,100) (65,245) (144, 345) Balance before Liquidation scam P13,175 P25,450 P 38,625 Gain on realization (60,000-P38,625).... 12,825 8,550 - 21,375 Balances before payment to partners... P26,000 34,000 P 60,000 Payment to partner (96,000) Solution to Problem XII for Requirement 5 and 6 using CASH PRIORITY PROGRAM/Cash Pre-distribution Plan Interests Payments x B € x B ‘© [Total Balances before Liquidation: ‘Loans 2,500 Capital 14,450 7,500 Total Interest 14,450 10, 000 Divided by (PéL)7 capitalized at 408 308 308 Toss absorption abilities or Maximum loss absorbable 36,125| 58,500 | 33,333 Priority T =0- | (22, 375) =0- 6,712.50 6, 712.50 36,125 36,125 | 33,333, 7 Priority 1 (2,792) [~(2, 792) =0- [7116.60 | 837.60 1,954.40 33,333 | 33,333 | 33,333 [1,116.60 | 7,550.10 1, 666.90 Vulnerability Rankings: Ist (Most Vulnerable)- Partner ¢ (first to suffer loss) 2m ~ Partner A 3" (Least Vulnerable)- Partner B Schedule of Payment to Partners Payment to | January- Partners A B ¢ ‘Cash Available 4,000.00 Less? Priority T 4,000.00 £000.00 Fobruary— aa Cash Available 6,250.00 Less? Priority T (6,712.50 - 4,000) 2,712.50 | ” 2,712.50 Balance 3,537.50 Less: Priority Ti 1,954.40 | 1,116.80 | 637.60 Balance (4:3) 1,583.10 Less: Pal ratio (4:3:3) 1,583.10) 633.20 | 474.90 | 475.00 7.750,00 | 4,025.00 | 475.00 March (use Pai) TSDU 9-3: 000-00] 2740-90] Fase ‘April (use Péh) 309.00 | 1,000.00 [750.00] 750.00 P2-02Pofrement ot VOTH cord Perfo ” Preble YW. ee oe ea Be eis : ye 20 eyes ed oan ot EPS eee ue 98976 puma YOR We Dis? ) (eo) fetes ons Fe uf 76 as DL toS 18 _ 72 Se my es BF 96 pachiel GW eae Be 1 Ges & re Qf 19 Moe “ Wy p is lor 72 ee cMDeE oo fos BS GQ 8) LVL 1205 72 3g) «pe: Rites 64 winethipn Liguickafion U1 7. ie Eee A ten li k L My oI ME Of (e185) yp HY CN) C9. bee yi V9, ca ec | 2 RE \GARD par nk (9 >> i ie nee yns Ut) (020) bar) 1 pa FPSAdasen ¥ Neyy Forsaer Problem DT Straten J (es Cnr Diy ae eo ial ase a Gikrafian 2 fo AG 2, Kame ay 20.7 1) a Negrin ie 7 lee eee be - Xf te * 5b () = ye as yO da 7 CaN Pe ia 2. ik AED elt lh 20. 20 a Vipuation 3 Dex (1) =t0 4) ae foe OY See y 4 hey 2 =K 4) jek 2 OD inch yr) arVeys ay 7) Gk) Gee 228 gH e FKe fh Dx yo Os) = wy (14) © 428 eee?) y 2G) = 26 GH) = 42 = pire.” Wah Problem I Admission by furchace ao 6 Y senat) Gor te ay it 4g oe Mihrfion ¥ (ee rae rae ee fe yw > Ge / BX nye aon 40 fe ID C4 Boob Tl Pdaucsint Wy Tavestment © A Sa jora.c = 170/507, Cipher © vi oly 9 0 x oe Ine aes) ep 4 zo (.5i0 (ua) eats Rae ee ea SeFIL Gr Ti gee ey aay Fablen TV eS an zi u 4 @ ay Hos MeiHeteae ve pita, | Ae OX Yee Ae so x fo’ Fae (2) PG | saa C2 6H wy ww. 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