Pamantasan ng Cabuyao

Katapatan Subd., Banay Banay, City of Cabuyao

PRELIM – E1
Name: _________________________________ Score:___________
Accounting for Special Transactions W.E. Peralta
Answer the following problems. Present your answers in good form.

Problem I

On December 1, 2018, XX and YY formed a partnership with each contributing the following assets at fair market values:
XX YY
Cash P36,000 P 72,000
Machinery and equipment 54,000
Land 360,000
Building 108,000
Office furniture 54,000
The land and building are subject to a mortgage loan of P216,000 that the partnership will assume. The partnership
agreement provides that XX and YY share profits and losses, 40% and 60%, respectively and partners agreed to bring their
capital balances in proportion to the profit and loss ratio using the capital balance of YY as basis.
What is: (1) the additional cash made by XX, and (2) assuming that the land and building are unencumbered by a mortgage
because YY inherited them several years ago, and that the tax basis to YY is P90,000, the capital account of YY should have
an initial balance of?

Problem II
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 P600,000. the non-cash assets to be contributed and liabilities to be assumed are:
JJ KK
Book Value Fair Value Book Value Fair Value
Accounts receivable P45,000 P45,000
Inventories 45,000 67,500 P120,000 P135,000
Equipment 75,000 60,000 135,000 142,500
Accounts payable 22,500 22,500 15,000 15,000
The partner’s capital amounts are to be equal after all contributions of assets and assumptions of liabilities.
Determine the: (1) amount of cash each partner must contribute, and (2) total assets of the partnership.
Problem III
The business assets of Berting and Carding appears below:
Berting Carding
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total Assets P1,020,916 P1,317,002
Accounts Payable P 178,940 P 243,650
Notes Payable 200,000 345,000
Capitals 641,976 728,352
Total Liabilities and Capital P1,020,916 P1,371,002
 Berting and Carding agreed to form a partnership contributing their respective assets and equities subject to the following
adjustments:
 Accounts receivable of P20,000 in Berting’s books and P35,000 in Carding’s are uncollectible.
 Inventories of P5,500 and P6,700 are worthless in Berting’s and Carding’s respective books.
 Other assets with their respective books are to be written off.

Determine the:

1. The capital accounts of the partners after the adjustments.

2. How much will be the total assets of the partnership after formation?
Problem IV

On June 1, 2018, April and May formed a partnership. April is to invest assets at fair values. She is to transfer her liabilities
and is to contribute sufficient cash to bring her capital to P210,000 which is 70% of the total capital of the partnership. Details
regarding the book values and fair values of April’s business assets and liabilities are:
Book values Fair values
Accounts receivable, net 53,800 53,000
Inventory 98,400 107,000
Equipment 25,800 34,000
Notes payable 56,000 56,000
May agrees to invest cash of P42,000 and merchandise valued at current market price.
Determine the following:

1. What is the value of merchandise to be invested by May?

2. What is the amount of cash to be invested by April?

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wep/acp101/e1