MIDTERM EXAM PART 2 -REMOVAL

For item nos. 1 and 3

OO and PP are partners sharing profits in this proportion – 60:40. A balance sheet prepared for the partners on April
1, 20x4 shows the following:
Cash . . . . . . . . . . . . . . . . . . . . P48,000 Accounts payable . . . . . . . . . P 89,000
Accounts Receivable . . . . . . . 92,000 OO, capital . . . . . . . . . . . . . . 133,000
Inventories . . . . . . . . . . . . . . . . 165,000 PP, capital. . . . . . . . . . . . . . . 108,000
Equipment . . . . . . . . . . . . 70,000
Less: Accumulated
Depreciation . . . . . . . 45,000 25,000
Total Assets . . . . . . . . . . . . . . . . P330,000 Total Liabilities & Capital . . . . P 330,000
On this date, the partners agree to admit RR as a partner. The terms of the agreement are summarized below.
Assets and liabilities are to be restated as follows:
An allowance for possible uncollectible of P7,500 is to be established.
Inventories are to be restated at their present replacement value of P155,000.
Accrued expenses of P5,000 are to be Recognized.
OO, PP and RR will divide profits in the ratio of 5:2:3. Capital balances of the partners after the formation of the
new partnership are to be in the aforementioned ratio, with OO and PP making cash settlement between them
outside of the partnership to adjust their capitals, and RR investing cash in the partnership for his interest.
1. The cash to be invested by RR is:
2. The total capital of the partnership after the admission of RR is:
3. Cash settlement between OO and PP is:
Use the following information for question 4 and 5:
CC admits DD for partnership interest in his business. The balance sheet accounts of CC on November 30,20x4
prior to the admission of DD are as follows:
Debits Credits
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P ?
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,000
Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 144,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 49,600
CC, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
It is agreed that for purposes of establishing CC’s interest, the following adjustments should be made:
a. An allowance for doubtful accounts of 5% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at P120,000.
c. Prepaid expenses of P6,200 and accrued expenses of P3,500 are to be recognized.
DD is to invest cash of P120,000 to give him a one-third (1/3) interest in the firm.
4. The balance of the capital of CC before the adjustments is:
5. The total assets of the partnership after the formation is:
6. The cash balance before the formation is:

For item nos. 6-7

The MM-NN Partnership was formed on January 2, 20x4. Under the partnership agreement, each partner has an
equal initial capital balance accounted for under the bonus method. Partnership net income or loss is allocated 60
percent to MM and 40 percent to NN. To form the partnership, MM originally contributed assets costing P30,000
with a fair value of P60,000 on January 2, 20x4, and NN contributed P25,000 in cash. Partners’ drawings during
20x4 totaled P3,000 by MM and P9,000 by NN. MM-NN’s net income for 20x4 was P50,000.
7. NN’s initial capital balance in MM-NN is:
8. MM’s share of MM-NN’s net income is:
9. Partner A first contributed P20,000 of capital into an existing partnership on February 1, 20x4
 On June 1, 20x4, the partner contributed another P20,000. On September 1, 20x4, the partner
withdrew P15,000 from the partnership. Withdrawals in excess of 5,000 are charged to the
partner's capital account. The partnership's fiscal year end is December 31.
The annual weighted-average capital balance is:

For Item nos. 10 AND11

BB and CC share profits and losses in a ratio of 2:3, respectively. BB and CC receive salary allowances of
P10,000 and P20,000, also respectively, and both partners receive 10% interest based upon the balance in their
capital accounts on January 1. Partners’ drawings are not used in determining the average capital balances. Total
net income for 20x4 is P140,000. If net income after deducting the interest and salary allocations is greater than
P20,000, CC receives a bonus of 5% of the original amount of net income.
BB CC
January 1 capital balances P 200,000 P 300,000
Yearly drawings (P1,500 a month) 18,000 18,000
10. what will be the final amount of profit or (loss) closed to each partner’s capital account?

11. If the partnership experiences a net loss of P40,000 for the year, what will be the final amount of profit or
(loss) closed to each partner’s capital account?

For item nos. 11 to 13

The balance sheet for the partnership of JJ CC and TT, whose shares of profits and losses are 40, 50, and 10 percent,
is as follows:
Cash . . . . . . . . . . . . . . . P 50,000 Accounts Payable. . . . . . . . . . . . P 150,000
Inventory. . . . . . . . . . . . 360,000 JJ, Capital. . . . . . . . . . . . . . . . . . . 160,000
CC, Capital. . . . . . . . . . . . . . . . . . 45,000
__________ TT, Capital. . . . . . . . . . . . . . . . . . . . 55,000
Total Assets . . . . . . . . . . P 410,000 Total Liabilities and Equities. . . . . P 410,000
12. If the inventory with a net book value of 300,000 is sold for P450,000 and paid liquidation expenses of 10,000,
how much should JJ receive upon liquidation of the partnership?
13. If the inventory with a book value of 280,000 is sold for 120,000 , how much should partners receive upon
liquidation of the partnership assuming deficient partner is insolvent?
14. If the inventory with a book value of 300,000 is sold for 130,000 , how much should partners receive upon
liquidation of the partnership assuming deficient partner is solvent?
15. If all inventory is sold for 160,000 and paid liquidation expenses of 15,000, how much should TT receive upon
liquidation assuming deficient partners is solvent?

16. The Abrams, Bartle and Creighton partnership began the process of liquidation with the following balance
sheet:
Cash . . . . . . . . . . . . . . . . P 16,000 Liabilities. . . . . . . . . . . . . . . . . . . . P 150,000
Abrams, loan 5,000
Noncash assets . . . . . . . 434,000 Abrams, capital . . . . . . . . . . . . . . 65,000
Bartle, capital . . . . . . . . . . . . . . . . 100,000
__________ Creighton, capital. . . . . . . . . . . . . 130,000
Total . . . . . . . . . . . . . . . . P 450,000 Total Liabilities and Equities. . . . . P 450,000
 Abrams, Bartle and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to
be P12,000. If the non-cash assets were sold for P140,000, what amount should partners receive upon
liquidation assuming deficient partner is solvent? 
Use the following information for 15 and 16:
Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of
revenue expected by the partners. They share profits and losses in a ratio of 5:3:2. They have decided to liquidate the
business and have sold all the assets except for one piece of heavy machinery. All partnership liabilities have been
settled and all the partners are personally insolvent. The machinery has a book value of P85,000, and the partners
have capital account balances as follows:
Tom, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 50,000
Dick, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Harry, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
15. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for P70,000?
16. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for P22,000?
17. The Keaton, Lewis and Meador partnership had the following balance sheet just before entering liquidation:

K e a t o n , L e w i s a n d
Cash . . . . . . . . . . . . . . . . . P 10,000
Liabilities . . . . . . . . . . . . . . . . . . . P 130,000
Noncash assets . . . . . . . . . 300,000
Keaton, capital . . . . . . . . . . . . . 60,000
Lewis, capital . . . . . . . . . . . . . . . 40,000
________ Meador, capital . . . . . . . . . . . . 80,000
Total . . . . . . . . . . . . . . . . . . P310,000 Total . . . . . . . . . . . . . . . . . . . . . . P310,000
Liquidation expenses were P10,000. Assume that Lewis was personally insolvent and could not contribute any
assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have
received from the distribution of partnership assets?

18. The partners of the M & N Partnership started liquidating their business on July 1, 2021, at which time the
partners were sharing profits and losses 40% to M and 60% to N. The balance sheet of the partnership appeared
as follows:

M & N Partnership
Balance Sheet – July 1, 2021

Assets Liabilities & Equity

Cash P 8, 800 Accounts payable P32, 400
Receivable 22, 400 M, capital P31, 000
Inventory 39, 400 M, drawing ( 5, 400)
Equipment P65, 200 N, capital P33, 200
Accumulated N, drawing ( 200) 33, 000
Depreciation (30, 800) 34, 400 N, loan 14, 000
Total P105, 000 Total P105, 000

During the month of July, the partners collected of the receivables with no loss. The partners also sold
during the month the entire inventory on which they realized a total of P33, 400 and later the equipment
that was sold at a loss of 14,000.

How much of the cash was paid to M’s capital on July 31, 2021?
19. How much of the cash was paid to N’s capital on July 31, 2021?

For item nos. 20 to 21

RR, SS and TT decided to dissolve the partnership on November 30, 2011. their capital balances and profit ratio on
this date, follow:
 Capital Balances Profit Ratio
RR P50, 000 40%
SS 60, 000 30%
TT 20, 000 30%

The net income from January 1, to November 30, 2011 is P60, 000. also, on this date, cash and liabilities
are P35, 000 and P90, 000 respectively. For RR to receive P90,000 in full settlement of his interest in the
firm,

20. How much must be realized from the sale of the firm’s non-cash assets?
21. How much cash receive by SS and TT upon liquidation?
22. As of December 31, 2011, the books of Ton Partnership showed capital balances of: T P40, 000; O, P25, 000;
N, P5, 000. The partners profit and loss ratio were 3:2:1, respectively. The partners decided to liquidate and
they sold all non-cash assets for P35, 000. after settlement of all liabilities amounting P12, 000, they still have
cash of P26, 000 left for distribution. Assuming that any capital debit balance is uncollectible, the share of T in
the distribution of the P26, 000 cash would be:

23. A local partnership was considering the possibility of liquidation since one of the partners is solvent (Tillman)
and the others are insolvent. Capital balances at that time were as follows. Profits and losses were divided on a
4:2:2:2 basis, respectively.

Ding, capital P60, 000

Laurel, capital 67, 000
Ezzard, capital 17, 000
Tillman, capital 96, 000

Ding’s creditors filed a P25, 000 claim against the partnership’s assets. At that time, the partnership held
assets reported at P360, 000 and liabilities of P120, 000. if the assets could be sold for P630, 000, what is
the minimum amount that Ding’s creditors would have received?

24. The Keatan, Lewis and Meador partnership had the following balance sheet just before entering liquidation:

Cash P 10, 000 Liabilities P130, 000

Non-cash assets 300, 000 Keatan, capital 60, 000
Lewis, capital 40, 000
_______ Meador, capital 80, 000
P310, 000 P310, 000

Keatan, Lewis and Meador share profits and losses in a ratio of 2:4:4. Non-cash assets were sold for P150,
000. Liquidation expenses were P10, 000. assume that Keatan was personally insolvent with assets of P8,
000 and liabilities of P60, 000. Lewis and Meador were both solvent and able to cover deficits in their
capital accounts, if any. What amount of cash could Keatan’s personal creditors have expected to receive
from partnership assets?

25. The following account balances were available for the Perry, Quincy and Renquist partnership just before it
entered liquidation:

Cash P 90, 000 Liabilities P170, 000

Non-cash assets 300, 000 Perry, capital 68, 000
 Quincy, capital 52, 000
_______ Renquist, capital 100, 000
P390, 000 P390, 000

Perry, Quincy and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were
expected to be P12, 000. all partners were solvent. What would be the minimum amount for which the non-
cash assets must have been sold for, in order for Quincy to receive some cash from the liquidation?
Any amount in excess of ________

26. AA, BB, and Cc are partners in ABC partnership and share profits and losses 50%, 30% and 20%, respectively.
The partners have agreed to liquidate the partnership and some liquidation expenses to be incurred. Prior to the
liquidation, the partnership balance sheet reflects the following book values:

Cash P 25, 200

Non-cash assets 297, 600
Notes payable to Cc 38, 400
Other liabilities 184, 800
AA, capital 72, 000
BB, capital deficit ( 12, 000)
CC, capital 39, 600

Assuming that the actual liquidation expenses are P13, 200 and that the non-cash assets with a book value
of P150, 000 are sold for P300, 000.

How much cash should CC receive?

For item nos. 27 to 29

The partners in the ABC partnership have capital balances as follows:
A – P70,000; B - P70,000; C - P105,000
Profits and losses are shared 30%, 20%, and 50%, respectively. On this date, C withdraws and the partners agree to
pay him P140,000 out of partnership cash.

27. The capital balances of the remaining partners after C’s withdrawal under bonus method are:
28. The capital balances of the remaining partners after C’s withdrawal under partial goodwill method are:
29. The journal entries to record C’s withdrawal in nos. 27 and 28 would be:

For item nos. 30 to 35

Assume the following data for GH Partnership had the following condensed balance sheet:
Assets Liabilities and Capital
Cash . . . . . . . . . . . . . . . . . . . . P 3,000 Liabilities . . . . . . . . . . . . . . . . . . . . . P 9,000
Noncash assets . . . . . . . . . . . 39,000 G, capital 60%) . . . . . . . . . . . . . . . 24,000
G, loan . . . . . . . . . . . . . . . . . . 3,000 H, capital(40%) . . . . . . . . . . . . . . . 12,000
Total . . . . . . . . . . . . . . . . . . . . P45,000 Total . . . . . . . . . . . . . . . . . . . . . . . . P45,000

The percentages in parentheses after the partner’s capital balances represent their respective interests in profits and
losses. The partners agree to admit J as a member of the firm.
30. Assuming J invests P 28,000 for a 30% interest in the firm. The total agreed capital after J’s admission is P
90,000, how much is the capital balance of each partner after J’s admission.
31. Assuming J invests P 45,000 for a 30% interest in the firm, how much is the capital balance of each partner
after J’s admission under bonus method?
32. Refer to no. 31, what journal entry to be made to record J’s admission?
33. Refer to 31, except that goodwill method is used.
34. Assuming J invests 22,000 for a 30% interest in the firm. The total agreed capital after J’s admission is P 90000,
how much is the capital balance of each partner after J’s admission?
35. Refer to no. 34, what journal entry to be made to record J’s admission?