24 1-1; Chapter 1 ND el Pu “OMPUTATIONAL Lei teltel ay On May 1, 2013, Jose and Maria formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Jose contributed a computer that cost him P50,000. Maria contributed P200,000 cash. The computer was sold for P55,000 on May 1, 2013 immediately after the formation of the partnership. What amount should be recorded in Jose’s capital account on formation of the partnership? a. P55,000 b. P51,500 c. P60,000 d. P50,000 Red, White, and Blue form a partnership on May 1, 2013. They agree that Red will contribute office equipment with a total fair value of P40,000; White will contribute delivery equipment with a fair value of P80,000; and Blue will contribute cash. If Blue want a one third interest in the capital and profits, he should contribute the following of cash: a P 40,000 b. P 60,000 c. P120,000 d. P180,000 Mateo and Julio formed partnership on April | and contributed the following assets: * Mateo Julio Cash 300,000 100,000 Land 300,000 lend The land was subject to a mortgage of P50,000, which was assumed by the partnership. Under the partnership contract, Mateo and Julio will share profit and loss in the ratio of one-third and two-thirds respectively. Julio’s capital account at April 1 should be: , . P350,000 300,000 400,000 450,000 RP SRPartnerships: Basic Considerations and Organizations 25 1-4: 1-5: 1-6: ROR Elsa and Perla form a new partnership. Elsa invests P300,000 in cash for her 60 percent interest in the capital and profits of the business. Perla contributes land that has an original cost of P40,000 anda fair market value of P70,000, anda. building that has a tax basis of P50,000 and a fair market value of P90,000. The building is subject to a P40,000 mortgage that the partnership will assume. What amount of cash should Perla contribute? a. P 40,000 b. P 80,000 c. P110,000 d. P150,000 “Anton and Bauzon formed a partriership and agreed to divide initial capital equally, even though Anton contributed P100,000 and Bauzon. contributed P84,000 in identifiable assets. Under the bonus method, to adjust the capital accounts, Bauzon’s intangible assets should be debited for: a. P46,000 5. P16,000 c. P 8,000 d, Zero Reyes and Santos drafted a partnership agreement that lists the following assets contributed at the partnership formation: Contributed by Reyes Santos Cash . 200,000 P300,000 Inventory - 150,000 Building sos 400,000 Equipment 150,000 - The building is subject to a mortgage of P100,000, which the partnership has assumed. The partnership agreement also specifies the profits and losses are to be distributed evenly. What amounts should be recorded as. capital for Reyes and Santos at the formation ofthe partnership? Reyes Santos P350,000 P850,000 350,000 P750,000 P550,000 P550,000 600,000 P600,000Lae | 26 1-8: Chapter 1 On April 30, 2013, AA, BB and CC formed a partnership by combining their separate business proprictorships. AA contributed cash of P50,000, BB contributed property with a P36,000 book value, a P40,000 original cost, and P80,000 fair value. The partnership accepted responsibi lity for the P35,000 mortgage attached to the property. CC contributed equipment with a P30,000 book value, a P75,000 original cost and P55,000 fair value. The partnership, agreement specifies that profits and losses are to be shared equally but is silent regarding capital contributions. Which partners has the largest April 30, 2013, capital balance? a. AA b. BB c CC d. All capital account balances are equal PP, RR, and SS are new CPA's and are to forma partnership. PPis to contribute cash of P50,000 and his computer originally costing P60,000 but has a second hand value of P25,000. RR is to contribute cash of P80,000. SS, whose family is selling computers, is to contribute cash of P25,000 and abrand new computer with a regular selling price of P60,000 but which cost is P50,000. Partners agree to share profits equally. The capital balances upon formation are: PP RR SS @ P75,000 —-P80,000_-~-P85,000 6. P110,000 P80,000 75,000 c P 80,000 80,000 P80,000 - d. P 83,333 P88,333 P88,334 Mariaand Nora entered into a partnership on March 1, 2013 by investing the following assets: Maria Nora Cash P 30,000 P = Merchandise Inventory - 90,000 Computer Equipment . 160,000 Furniture and Fixtures 200,000Parmerships: Basie Considerations and Organizations 1-9: Continued 1-10: I-ll: ‘The agreement between Maria and Nora provides that profits and losses are to be divided into 40% to Maria and 60% to Nora, and that the partnership is to assume a liability on the computer equipment of P60,000. The partners further agrec that Nora is to receive a capital credit equal to her profit and loss ratio. How much cash is to be invested by Nora? a. P135,000 b. P145,000 cc P155,000 d. P130,000 Roy, Sam and Tim decided to engage ina real estate venture as a partnership. Roy invested P140,000 cash and Sam provided an office and furnishings valued at P220,000. (There is a P60,000 note payable 1emaining on the furnishings to ‘be assumed by the partnership). Although Tim has no tangible assets to invest, both Royand Sam believe that Tim's expert salesmanship provides an adequate investment. The partners agree to receive an equal capital interest in the partnership. ‘Using the bonus method, what is the capital balance of Tim? a P 50,000 b. Zero P140,000 d. P100,000 ‘Lara and Mitra formed a partnership on July 1, 2013 and invested the following assets: Lara Mitra Cash P130,000 P 200,000 ‘Computer Equipment -50,000 ‘The computer equipment has a note payable amounting to P10,000, which was) assumed by the partnership. The partnership agreement provides that Lara and’ Mitra will have an equal capital credit. Using the goodwill method, the amount of goodwill to be recorded upon formation of the partnership is: a. P110,000 b. P120,000 c. “P100,000 d. P130,00028 1-12: 1-13: Chapter 1 The partnership of Perez and Reyes was formed on March 31, 2013. At that date, Perez invested P50,000 cash and office equipment valued at P30,000. Reyes invested P70,000 cash, merchandise valued at P1 10,000, and furnitures valued at P100,000, subject to a notes payable of P50,000 (which the partnership assumes). The partnership provides that Perez and Reyes share profits and losses 25:75, respectively. The agreement further, provides that the parmers should initially have, an equal interest in the partnership capital, Under the goodwill and the bonus method, what is the total capital of the partners after the formation? Bonus Method Goodwill Method a. 310,000 P460,000 b. — P360,000 510,000 cP 300,000 P410,000 d. —-P350,000 P400,000 Ruiz and Pefia are combining their separate businesses to forma partnership. - Cash and noncash assets are to be contributed for a total capital of P300,000. The noncash assets to be contributed and the liabilities to be assumed are: Ruiz Pena Book Fair Book Fair value value value value ‘Accounts Receivable 20,000 20,000 - = Inventories 30,000 40,000 20,000 P25,000 Equipment 60,000 45,000 40,000 50,000 Accounts Payable 15,000 15,000 10,000 10,000 The partner’s capital accounts should be equal after all the contribution of assets and the assumption of liabilities. How much cash is to be contributed by Ruiz? a. P150,000 b. P 60,000 ce. P210,000 d. P 85,000Partnerships: Basic Considerations and Organizations Soy 29 1-14: (OnMarch 1, 2013;Cruzand Ferrer formed a partnership with each contributing the following assets: : Cruz Ferrer Cash P30,000 P70,000 Machinery and equipment * 25,000 * "75,000 Building . = 225,000 Furniture and fixtures 19,000 - The building is subject toa mortgage loan of P90,000, which is to be assumed by the partnership. The partnership agreement provides that Cruz and Ferrer share profits and losses 30 percent and 70 percent, respectively. Assuming that the partners agreed to bring their ‘respective capital in proportion to their respective profit and loss ratio, and using Ferrer’s capital as the base, ‘how much cash is to be invested by Cruz? P19,000 P30,000 P40,000 P55,000 RP SR 1-15: Thestaternentof financial position as of July 31, 2013 forthe business owned by C. Borja shows the following assets and liabilities: . Cash . P2,500 Accounts Receivable 10,000 Merchandise Inventory 15,000 Fixtures 18,000 - Accounts Payable - 6,000 Itis estimated that 5% of the receivables may prove uincollectible. Merchandise inventory includes obsolete items costing P5,000 of which P2,000 might still be realized. Depreciation has never been recorded: the fixtures are two years old, have an estimated useful life of 10 years, and would cost P20,000 if currently purchased. D. Arce isto be admitted as a partner upon his investment of P20,000 cash and P10,000 worth of merchandise. What is-the total assets of the partnership? ‘ ; = P70,500 P48,000 P67,500 P74,000 ROR1-16: On September 30,2013, Lopez admits Mendez foran interest in his business. On this date, Lopez's capital actount showsa balance of P 158,400. The following were agreed upon before the formation of the partnershi ip: 1. Prepaid expenses of P17,500 and accrued expenses of P5,000 are to be Tecognized. 2. $% ofthe outstanding accounts receivable of ‘Lopez amounting to P100,000 is to be recognized as uncollectibles, 3. Mendez is to be credited with a one-third interest in the partnership and is to invest cash aside from the P50,000 worth of merchandise. The amount of cash to be invested by Mendez and the total capital of the partnership are: a. P32,950 and P248,850 respectively. 5. P55,300 and P221,200 respectively. ©. P82,950 and P248,850 respectively. 32,950 and P171,200 respectively. Ry 1-17: Moranand Nakar entered intoa partnership on February 1, 2013 by investing the following assets: a a ee to Moran Nakar Cash P1S,000 - Merchandise Inventory =. 45,000 Land - 15,000 Building - 65,000 Furniture and fixture 100,000. - ‘The agreement between Moran and Nakar provides that profits and losses are to be divided into 40% (to Moran) and 60% (to Nakar), and that the partnership is to assume the P30,000 mortgage loanon the building. IfNakaris toreceive a capital credit equal to his profit and loss ratio, how much cash must he invest? a. P127,500 b. P172,500 c P 97,500 d. P 77,500Partnerships: Basic Considerations and Organizations 31 1-18: 1-19: As of July 1, 2013, Flores and Garcia decided to form a partnership. Their statements of financial position on this date are: Flores Garcia Cash P 1,500 P 3,750 Accounts receivable 54,000 250 Merchandis¢ Inventory = 20,250 Machinery and equipment “15,000 27,000 Total P70,500 P73,500 Accounts Payable P13,500 24,000 Flores, capital 57,000 - Garcia, capital = 49,500 Total P70,500 P73,500 The partners agreed that the machinery and equipment of Flores. is underdepreciated by P1500 and that of Garcia by P4,500. Allowance for doubtful accounts is to be set up amounting to P12,000 for Flores and P4,500 for Garcia. ‘The partnership agreement provides for a profit and loss ratio and capital interest of 60% to Flores and 40% to Garcia. How much cash must Flores invest to bring the partner’s capital balances proportionate to their profit and loss ratio? a PI4,250 b. P 5,250 c. P17,250 d. P10,250 Ortiz and Ponce are partners sharing profits in this proportion 60:40. A statement of financial position prepared for the partners on April 1, 2013: Cash P 48,000 Accounts Payable P 89,000 Accounts receivable 92,000 Ortiz, capital 133,000 Inventories 165,000 Ponce, capital 108,000 Equipment P70,000 Less’ Accumulated Depreciation ~ 45,000 __ 25,000 Total Assets P330,000 Total Liabilities & Capital __P:32 Chapter 1 a! 4-19: Continued : On July 1 ofthe current year, Jocson and Gomez froma part On this date, the partners agree to admit Roxas as a partner. The terms of the agreement are summarized below, * ‘Assets and liabilities are to be restated as follows:_. a. Anallowance for possible uncollectibles of! 'P4,500 is to be established. b. . Inventories are to be restated at their present replacement value of P170,000. ¢. Accrued expenses of P4,000 are toberecognized. - Ortiz, Ponce and Roxas will divide profits in the ratio of 5:3, Capital balances of the partners after the formation of the new partnership are to be in the aforementioned ratio, with Ortiz and Ponce making cash settlement between themselves outside of the partnership to adjust their capitals, and Roxas investing akin the partnership for his interest. How much cash is to be invested by Roxas’ : a P60,250 “b. P47,500 c -PS50,000 d. PS9,375., 0. Fi invest certain busines asets at values which are yet tobe ageed upon Hels to transfer his business liabilities and is to contribute sufficient cash to bring his total capital to P180,000, which is 60% ofthe total capital as had been agreed upon. Details regarding the book values of Jocson’s business assets and liabilit os i Soler and liabilities and SSS Se Book Agreed ites, Valuations ___ Accounts receivable $4,000 * * Allowance for doubtful accounts 3600 PHAN, Merchandise inventory 96600 105,000 Store equipment 27000 - Accumulated depreciation — Store equipment 18000 1 Office equipment* § 18,000 0 Accumulated depreciation - Office equipment 9600 4800 ‘Accounts Payable . 48000 48,000 — —————-WA ee SePartnerships: Basic Considerations anil Organizations . 33 1-20: Continued Gomez agrees to invest cash of P30,000 and merchandise valued at current market price. The value of the merchandise to be invested by Gomez and the amount of cash to be invested by Jocson are: a. P120,000.and P48,000 respectively. Bb. 210,000 and P49,200 respectively. c. P105,000 and P50,000 respectively. dP 90,000 and P48,000 respectively. 1-21: OnApril 1, 2013, Ell and Emm pooled their assets to forma partnership, with the firm to take over their business assets and assume the liabilities. Partners capitals are to be based on net assets transferred after the following adjustments: Emm inventory is to be increased by P3,000; an: allowance for doubtful accounts ofP1,000 and P1,500 are to beset up in books of Ell and Emm, respectively; and accounts payable of P4,000 is to be recognized on Ell’s books. The individual trial balances on April I, 2013, before adjustments follow: ———— Ell Emm Assets 75,000 =~ P113,000 Liabilities 5,000 34,500 Capital 70,000 =. 78,500 How much is the capital of Ell after the above adjustments to his books? a. P70,000 b. P65,000 c. P68,500 ad P66,000 1-22: Cortez.admits Divino fora partnership interest in his business. The statement of . financial position of Cortez on November 30, 2013 prior to the admission of . Divino shows the following: Debit Credit Cash P ? Accounts receivable ~ 96,000 Merchandise inventory 144,000 “ Accounis payable . P49,600 Cortez, capital ’34 Chapter 1 1-22: Continued Itis agreed that for purposes of establishing Cortez’s interest, the following adjustments should be made: 1. Anallowance for doubtful accounts of 2% of accounts receivable is to be established. 2, “The merchandise inventory is to be valued at P160,009. 3. Prepaid expenses of PS,200 and accrued expenses of P3,200 are to be recognized. . Divino invested cash of P113,640 to give hima one-third interest inthe total capital of the firm. Whats the capital balance of Cortez before the admission of Divino?. P227,280 . P230,120 P211,200 P250,500 RASA Htems 1-23 and 1-24 are based on the following data: On June 30, 2013 Eden and Flora formed a Partnership with each contributing the following assets: ' . Eden Fora. Book Value Fair Value Book Value Fair Value Cash 375,000 375,000 P875,000 875,000 Office Equipment 350,000 312,000 872,500 937,500 Building - Net - - —3,262,500 2,812,500 Furniture and Fixtures 95,000 125,000 - - The building is subject toa mortgage loan of PI 1125,000 which is to be assumed by the partnership. The partnership agreement provides that Eden and Flora ‘share profits and losses in the ratio of 30% and 70% respectively. Assuming that the partners agreed to bring their respective capital in proportion to their profit and loss ratio, and using Flora capital as the base: 1-23: What is the capital account balance of Flora on June 30, 2013? a. P3,500,000 6. P4,000,000 c. P3,937,500 d. P3,837,500Partnerships: Basic Considerations und Organizations 35 1-24: 1-25: 1-26: How much is the additional cash to be invested by Eden? a: P2,687,500 6, P2,587,000 c. P. 688,000 d. P 687,000 Rey, Sam, and Tim formed a partnership on May 31, 2013, with the following assets, measured at their fair market values, contributed by each partner: Rey Sam Tim Cash 60,000 P72,000 180,000 Delivery equipment * 900,000 . Computer equipment 51,000 219,600 15,000 Although Tim has contributed the most cash to the partnership, Tim did not have the full amount of P180,000 available and was force to borrow personally P120,000. The delivery equipment contributed by Rey has a mortgage of P540,000 and the partnership is to assume the responsibility for the loan. The partners agree to divide profits and losses 40% to Rey; 40% to Sam; and 20% toTim. The partners further agreed to bring their respective capital interest in proportion to their profit and loss ratio. Using the bonus method, capital transfer among partners should be made as follows: ~ From Rey and Tim, P87,960, and P3,480 respectively to Sam. From Sam to Rey, P87,960 and to Tim, P3,480. From Sam to Tim, P3,600 and from Sam to Rey, P88,200. From Rey to Tim, P3,480, and from Rey to Sam, P91,440. RP SR Candy and Dandy have just formed a partnership. Candy contributed cash of P126,000 and computer equipment that cost P54,000. The fair value of the computer is P36,000. Candy has a notes payable on the computer of P12,000 to be assumed by the partnership. Candy is to have 60% capital interest in the partnership. Dandy contributed only P90,000. The profit and loss ratio of the partners as. agreed is equally.36 Chapter 1 1-26: Continued Candy should make an additional investment (withdrawal) of: a P96,000 6. P 84,000 c. P(76,800) ‘d. P(1S,000) Question 27 and 28 are based on the following data: 1-27: On June !, 2013, May and Nora formeda partnership. May is to invest assets at fair values. Sheis to transfer her liabilities and is to contribute sufficient cash to bring her total capital to P210,000 which is 70% of the total capital of the partnership.Details regarding the book values of May's business assets and liabilities and their corresponding fair values 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 Nora agrees to invest cash of P42,000 and merchandise. Valued at current market price, What is the value of the merchandise to be invested by Nora? P48,000 84,000 ‘P42,000 P38,000 RO eR : Whatis the amount of cash to be invested ‘by May: P72,000 P62,000 P26,000 P65,000 ROSRPartnerships: Basic Considerations and biganizations L 37 1-29: Alex and Carlos formed a partnership and agreed to divide initial capital equally, even though Alex contributed P100,000 and Carlos contributed P84,000 in identifiable assets. Under the bonus approach to adjust the. capital ‘accounts, Carlos unidentifiable asset should be debited for / P46,000 PI6,000 P 8,000 P 0 RO eA 1-30: Noy and Bi agreed to combine’ their business into a partnership. The statement of financial position of Noy and Bi showed the following: Noy BL Book Value Fair Value Book Value Fair Value Cash P1000 10,000 * = P14,000.«—«P14,000 Accounts receivable - net 92,000 92,000, 92,000 92,000 Merchandise inventory 180,000 216,000 144,000 150,000 Computer equipment 28,800 24,000 16,200 14,000 Furniture and fixtures 19,200 18,000 = ye Accounts payable 108,000 108,000 72,000 72,000. Agreed capitals of Noy and Biin the partnership are P250,000 and P200,000, respectively. The excess over the net assets contributed to the partnership is to be treated as goodwill. Which of the following statementsis correct? The goodwill of Noy is P2,000 The goodwill of Bi is P2,000 The total capital of the partnership is P438,000. The total assets of t he partnership is P618,000. RO SR38 1-31: 1-32: Chapter 1 Villar and Roxas sole proprietorship formed a partnership. Villar contributed cash of P2,205,000 and office equipment that cost P945,000. The equipment had been used and had been 70% depreciated, the fair value of the equipment is P630,000. Villar also contributed a note payable of P210,000 to be assumed by the partnership. Villar is to have 60% interest in the partnership. Roxas contributed only P1,575,000 merchandise inventory at fair value. The partners’ capital should be in conformity with their interest in the partnership. After the formation the partners agreed to share profits and losses equally. Assuming the use of the bonus method, which ofthe following statements is true? a. The agreed capital of Villar is P2,625,000 b. The total agreed capital of the partnership is P4,375,000 & The capital of Roxas will increase by P105,000 as a result of the transfer of capital. d. There is either an investment or withdrawal of asset. Loren and Jamby decide to combine their businesses and forma partnership on July 1, 2013. The following are their assets and liabilities on July 1, 2013 before formation: Loren Jamby Assets 210,750 P 103,000 Liabilities 91,500 36,000 The following agreements are made to adjusts assetsand liabilities: a. Bothpartners will provide P5,000 allowance for doubtful accounts. b. Loren’s fixed assets were over-depreciated by P1,000 and Jamby’s fixed assets were under-depreciated by P500. c. Accrued expenses are to be recognized in the books of Loren and Jamby in the amount of P1,200 and P1,000, respectively. d. Obsolete inventory to be written off by Loren amounts to P3,500. ¢. Loren and Jamby also agreed to share profits and losses equally. Whatis the total asset of the partnership after the formation? @.~P297,550 6, P300,750 c. P303,550 @. P298,550Parmerships: Basic Considerations und Organizations 39 1-33: Giboand Edu each operating a separate business agreed to form a partnership on July 1, 2013. The assets and liabilities of the two sole proprietorships on the date of formation are as follows: Gibo Edu Cash P19,200, 72,000 Accounts receivable 192,000 144,000 Merchandise inventory 240,000 216,000 Equipment 60,000 72,000 Accounts payable 60,000 96,000 Notes payable 12,000 - ‘The partners agreed on the following adjustments: Gibo’s accounts receivable are to be taken over at book value less 15% and Edu’s accounts receivable at book value less 10%. Gibo’s equipment is new and considered adequate for the new business. Edu’s equipment is disposed at 90% ofits book value. It is agreed that Gibo bear one-fourth of the loss resulting from thesale. ‘Assuming Edu invest sufficient cash to give him a one-half interest in the partnership after charging to Gibo’s capital account his share of the loss on the sale by Edu of the equipment, how much must Edu invest? PI16,800 P20,400 P12,400 P18,200 RO SR40 Chapter 1 1-34; Gamettand Bryant decided to combine their businesses and forma partnership. Below are their statements of financial position before the formation: Garnett Bryant Cash P2,048,400 P1,098,360 Accounts receivable 1,031,960 2,498,716 - Inventories 528,160 1,144,448 * Property and equipment - net 613,380 852,224 Other assets 8,800 15,840 Total assets . P4,.230,700 P5,609,588 Accounts payable 787336 1,072,060 Notes payable 1,000,000 7 Mortgage payable a 1,440,000 Gamett, capital 2,443,364 Bryant, capital 3,097,528 Total liabilities and equity P5,609,588 The partners agreed that the property and equipment of Garnett is underdepreciated by P80,000 and that of Bryant is over-depreciated by P200,000. Accounts receivable of P108,000 in Garnett's book and P140,000 in Bryant's book are uncollectible. The partnership decided to assume the mortgage liability of Bryant. The partnership's agreement provides for aprofit and loss ratio and capital interest of 60% to Garett and 40% to Bryant. Bryant is willing to invest or withdraw cash from the partnership to comply with the agreement. ‘What are the capital balances of Gamett and Bryant after the formation? P2,255,364 and P1,503,576, respectively. P2,255,364 and P3,157,528, respectively.- P6,896,292 and P4,597,528, respectively. P6,896,292 and P3,157,528, respectively. RASPartnerships: Basic Considerations and Organizations 41] Parnenhins oe ——eeoe eee 1-35; Using the data in No. 1-34, what is the total asset of ‘the partnership after the a P8,058,336 b. P5,618,336 c P6,618,336 @ P9,840,288 1-36: Gordon and Fernando sole proprietorships decided to form'a partnership on June 1,2013. The partnership will take over their assets and assume their liabilities. As of June 1, 2013, the net assets of Gordon and Femando are P220,000 and a P309,375, respectively. The partners agreed on a 25:75 profit and loss ratio. Furthermore, the partners arrive on the following agreements to revalue their assets and liabilities: a.. Gordon’s invehtory is undervalued by P 11,000. b. Anallowance for doubtful account is to be set up in the books of Gordon and Fernando inthe amount of P2,750 and P4,125, respectively. c. Accrued expenses of P20,250 was not recognized in Fernando's books. How much cash should Gordon invest (withdraw) so that their capital interest would be qual to their profit and loss ratio. a. P(133,250) b. P¢ 95,000) c, P 133,250 ad P- 95,000