***Problem 14:***

On Jan. 1, 2009, X and Y agreed to combine their talents and capital and form XY Partnership. X
contributed P 60,000 cash, merchandise with a book value of P 120,000; a current market value of P
145,000; and an average value of P 132,000 and equipment (net) with a book value of P 171,000; a
discounted value of P 173,500; fair value of P 185,000 and a dissolution value of P 140,000. Y gave P
90,000 cash and Land with a book value of P 300,000; an assessed value for tax purposes of P
286,000; an appraised value of P 330,000; and original value of P 290,000. The partners agreed to
invest or withdraw cash in order their capital to be at par with each other. On Dec. 31, 2009, before the
books are closed, the drawing account of X shows a debit balance of P 6,636; and for Y, debit balance,
P 1,604. The partnership agreement with regards to division of profits and losses provides that X and Y
is to be allowed of 7% and 6% interest on capital balance (at the inception of the partnership) in excess
of P 300,000; each partner is to be allowed of an annual salary of P 30,000; X is to receive bonus of
15% and Y, 25% of the income after allowance for interests, salaries, and bonuses; and the remainder
is to be divided to X and Y in the ratio of 65:35, respectively. The income summary account on Dec. 31,
has a credit balance of P 88,150 before any entry for the allowance of interests, salaries, and bonuses,
and this balance is closed into the partners’ capital account. The balances of the drawing accounts are
also closed into the capital accounts. On Jan. 3, 2010, Z is admitted as a partner upon investment of P
360,000 in the firm. X and Y sharing in the ratio 65:35 give a bonus to Z so that Z may have a 30%
interest in the firm. The new agreement provides that profits and losses are to be distributed as follows:
X, 35%; Y, 25%; Z, 40%. Interests, salaries, and bonuses are not allowed. On Dec. 31, 2010, the
partners’ drawing accounts have debit balance as follows: X, P 4,118; Y, P 3,509; Z, P 4,173. The
income summary account has a P 115,000 debit balance. Accounts are closed. In Jan. 2011, the
partners decide to liquidate. The assets are realized on a piece-meal basis and the partners decided to
distribute cash as it becomes available. In Feb., after creditors are fully paid, cash of P 142,000 remains
available for partners. This is distributed to the proper parties. In Apr., cash realized from sale of non
cash assets is P 135,600 and this is distributed to the partners. In May, cash realized from the sale of
non cash assets is P 169,500. The remaining non cash assets were unrealizable and were written off as
a complete loss.

Questions to answer:
1. What is the balance of X, capital upon formation?
2. How much is the share of X in the 2009 net income?
3. How much is the bonus of Y in the net income?
4. What is the capital balance of X immediately after the admission of Z?
5. How much is the share of Z in the 2010 loss?
6. What is the capital balance of Y prior to liquidation?
7. Who among the partners is the most invulnerable to losses?
8. How much cash did Y received from the February distribution?
9. What is the capital balance of X after the first distribution?
10. How much cash did Z received from the April distribution?
11. How much cash did X received from the April distribution?
12. How much cash did Y received from the final distribution?
13. How much cash did Z received from the final distribution?
14. How much was left in X’s capital after the final distribution?
15. How much must have been the total loss on realization?