PERDIZO, MILJAN P.

BSA 3
Quiz:
Problem A
Irene contributed land, inventory, and 280,000 cash to a partnership. The land has a book value of
650,000 and a market value of 1,350,000. The inventory has a book value of 600,000 and a market value
of 510,000. The partnership assumed a 350,000 note payable owed by Irene that was used to purchase the
land. Mae agreed to put up cash equivalent to Irene’s net investment. Journalize the entry to record
Irene and Mae investment in the partnership
SOLUTION:
1. To record the investment of Irene in the partnership book, the entry is:
Cash P280,000
Land P1,350,000
Inventory P510,000
Notes Payable P350,000
Irene, Capital P1,790,000
2. To record the investment of Mae in the partnership book, the entry is:
Cash P1,790,000
Mae, Capital P1,790,000
Problem B
On Aug 1, A and B pooled their assets to form a partnership, with the firm to take over their business
assets and assume the liabilities. Partners’ capital are to be based on net assets transferred after the
following adjustments (P/L are allocated equally)
B’s inventory is to increase by 4,000, an allowance for doubtful accounts of 1,000 and 1,500 are to be set
up in the books of A and B respectively and accounts payable of 4,000 is to be recognized in A’s books
the individual trial balances on Aug 1, before adjustments, follow:
A B
ASSETS 75,000 113,000
LIABILITIES 5,000 34,500
What is the capital of A and B after the above adjustments?

SOLUTION:

(1) CAPITAL OF B
ASSETS P113,000
INVENTORY P4,000
ALLOWANCE FOR DOUBTFUL ACCOUNTS (P1,500)
LIABILITIES P34,500
B, Capital P81,000

(2) CAPITAL OF A
ASSETS P75,000
 ALLOWANCE FOR DOUBTFUL ACCOUNTS (P1,000)
ACCOUNTS PAYABLE P4,000
LIABILITIES P5,000
A, Capital P65,000

Problem C
In Jan 2019, A and B agreed to produce and sell chocolate candies. A contributed 2,400,000 in cash to the
business. B contributed the building and equipment valued at 2,200,000 and 1,400,000, respectively. The
partnership had profits of 840,000 during 2019.
Requirements:
a. Prepare the journal entry to record the investment of both partners in the partnership
b. Determine the share of profit for each partner in 2019 under each of the following
conditions:
- (1) Share profit equally
- (2) Failed to agree on the profit-sharing agreement
- (3) Agreed to share profit according to the ratio of their original investment
- (4) The partners agreed to share profits by allowing interest of 10% on their original
investments and dividing the remainder equally.
- (5) Agreed to share profits by allowing salaries of 400,000 for A and 280,000 for B and
dividing the remainder equally
- (6) Agreed to share profits by paying salaries of 400,000 to A and 280,000 to B, allowing
interest of 9% on their original investment and dividing the remainder equally.
SOLUTION:
a. (1) To record the investment of A in the partnership book, the entry is:
Cash P2,400,000
A, Capital P2,400,000
(2) To record the investment of B in the partnership book, the entry is:
Building P2,200,000
Equipment P1,400,000
B, Capital P3,600,000
b. 2019 Profit = 840,000

A B TOTAL
CAPITAL CONTRIBUTION P2,400,000 P3,600,000 P6,000,000
 (1) PROFIT (EQUALLY) 420,000 420,000 840,000
(2) PROFIT (4:6) 336,000 504,000 840,000
(3) PROFIT (4:6) 336,000 504,000 840,000
(4) INTEREST (10%) 240,000 360,000 600,000
REMAINDER 1:1 120,000 120,000 240,000
TOTAL PROFIT 360,000 480,000 840,000
(5) SALARIES 400,000 280,000 680,000
REMAINDER 1:1 80,000 80,000 160,000
TOTAL PROFIT 480,000 360,000 840,000
(6) SALARIES 400,000 280,000 680,000
INTEREST (9%) 216,000 324,000 540,000
REMAINDER 1:1 190,000 190,000 380,000
TOTAL PROFIT 426,000 414,000 840,000

Problem D
I, M, and G formed a partnership on Jan 1 2020, and contributed 150,000, 200,000 and 250,000
respectively. Their articles of co-partnership provide that the operating income be shared among the
partners as follows: salary 24,000 for I, 18,000 for M, and 12,000 for A; interest of 12% on the average
capital during 2020 of the three partners; and the remainder in the ration of 2:4:4 respectively. The
operating income for the year ending December 31, 2020 amounted to 176,000. I contributed additional
capital of 30,000 on July 1 and made a drawing of 10,000 on October 1, M contributed additional capital
of 20,000 on August 1 and made a drawing of 10,000 on October 1, G made a drawing of 30,000 on
November 1. What are the partners’ capital balances on December 31, 2020?
SOLUTION:
I M
G
CAPITAL BALANCES, JAN. 1 P 150,000 P 200,000 P
250,000
ADDITIONAL CONTRIBUTIONS 300,000 20,000 -----
DRAWINGS (10,000) (10,000)
(30,000)
SHARE IN OPERATING INCOME 53,180 67,060
60,760
CAPITAL BALANCES, DEC. 31, 2020 P 223,180 P 272,060 P
280,760