Pamantasan ng Cabuyao

Katapatan Subd., Banay Banay, City of Cabuyao

PRELIM EXAMINATION

Name: _________________________________ Score:___________

Accounting for Special Transactions (ACP101) W.E. Peralta
Solve the following problems and encircle the correct answer. Show all necessary computations.
1. Carson and Lamb establish a partnership to operate a used-furniture business under the name C&L Partnership. Carson
contributes furniture inventory that cost P600,000 and has fair value of P800,000. Lamb contributes P300,000 cash and delivery
equipment that cost P400,000 and has fair value of P300,000. The partners agree to share profits and losses 60% to Carson
and 40% to Lamb. What is the capital balances of Carson and Lamb respectively, immediately after the formation of the
partnership?
A. P800,000 and P700,000 C. P800,000 and P800,000
B. 800,000 and 600,000 D. 700,000 and 700,000
2. Arnold, Beverly and Carolyn are partners who share profit and losses 4:4:2, respectively, after Beverly, who manages the
partnership, receives a bonus of 10% of income net of the bonus. Partnership income for the year is P253,000. How much is
the share of Arnold in the partnership income?
A. P115,000 C. P 46,000
B. 92,000 D. 102,500
Use the following information for Questions 3 and 4:
Kathy and Eddie formed the K&E partnership many years ago. Capital account balances on January 1, 2017, were as follows:
Kathy P496,750
Eddie 268,250
The partnership agreement provides Kathy with an annual salary of P10,000 plus a bonus of 5% of partnership net income for
managing the business. Eddie is provided an annual salary of P15,000 with no bonus. The remainder, if any, is shared evenly
by the partners. Partnership net income for the year 2017 was P30,000. Eddie and Kathy each invested an additional P5,000
during the year to finance a special purchase. Year-end drawing account balances were P15,000 for Kathy and P10,000 for
Eddie.
3. What is the share of Kathy and Eddie, respectively, in the net income of the partnership?
A. P16,750 and P13,250 C. P15,000 and P15,000
B. 13,250 and 16,750 D. 14,250 and 17,250

4. What is the capital balance at year-end of Partner Kathy and Eddie respectively?
A. P280,000 and P500,000 C. P500,000 and P280,000
B. 310,000 and 480,000 D. 520,000 and 260,000
Use the following information Questions 5 through 7:
Timmy and Lassie have been operating an accounting firm as partners for a number of years, and at the beginning of 2012,
their capital balances were P60,000 and P75,000 respectively. During 2012, Timmy invested an additional P10,000 on April 1
and withdrew P6,000 on August 30. Lassie withdrew P12,000 on May 1 and withdrew another P6,000 on November 1. In
addition, Timmy and Lassie withdrew their salary allowances of P18,000 and P24,000, respectively. At the end of 2012, total
capital of the partnership was P182,000. Timmy and Lassie share income after salary allowances in a 60:40 ratio.
5. What is the average capital balance of Timmy and Lassie respectively for the year 2012?
A. P64,000 and P57,000 C. P60,000 and P75,000
B. 65,500 and 66,000 D. 70,000 and 63,000
6. What is the share of Timmy and Lassie in the partnership income, respectively, for the year 2012?
A. P29,400 and P31,600 C. P54,600 and P48,400
B. 60,600 and 42,400 D. None of the Above
7. What is the capital balance of Timmy and Lassie, respectively at the end of the year 2012?
A. P100,600 and P81,400 C. P 90,600 and P91,400
B. 95,600 and 86,400 D. 105,600 and 86,400
Use the following information for Questions 8 through10:
Harry, Iona, and Jerry formed a partnership on January 1, 2010, with each partner contributing P20,000 cash. Although the
partnership agreement provides that Jerry receive a salary of P1,000 per month for managing the partnership business, Jerry
has never withdrawn any money from the partnership. Harry withdrew P4,000 in each of the years 2010 and 2011, and Iona
invested an additional P8,000 in 2010 and withdrew P8,000 during 2011. Due to an oversight, the partnership has not maintained
formal accounting records, but the following information as of December 31, 2011, is available:

Cash on hand 28,500

Due from customers 20,000
Merchandise on hand 40,000
Delivery vehicle (net) 37,000
Prepaid expenses 4,000
Assets 129,500
 Accounts payable 14,600
Wages payable 4,400
Note payable 10,000
Interest payable 500
Liabilities 29,500
The partners agreed that income for 2011 was about half of the total income for the first two years of operations. Although profits
were not divided in 2011, the partnership agreements provide that profits, after allowance for Jerry’s salary, are to be divided
each year on the basis of beginning-of-the-year capital balances.
8. How much is the net income for 2011?
A. P48,000 C. P96,000
B. 24,000 D. 16,000
9. How much is the share of Harry, Iona and Jerry respectively, in the 2011 net income?
A. P4,000, P4,000, P12,000 C. P8,000, P8,000 and P8,000
B. 5,000, 3,000 12,000 D. Some other amount for each partner
10. What is the capital balances at January 1, 2011 of Harry, Iona and Jerry, respectively?
A. P22,000; P36,000; P24,000 C. P36,000; P22,000; P24,000
B. 20,000; 32,000; 36,000 D. 32,000; 20,000; 36,000
11. The capital accounts of Faxon and Bell partnership on September 30, 2011, were:
Faxon capital (75% profit percentage) 140,000
Bell capital (25% profit percentage) 60,000
On October 1, 2011, Roberts was admitted to a 40% interest in the partnership when he purchased 40% of each existing
partner’s capital for P120,000, paid directly to Faxon and Bell. What is the capital balances of Faxon, Bell and Roberts
respectively, immediately after the admission?
A. P84,000; P36,000; P80,000 C. P140,000; P60,000; P120,000
B. 90,000; 40,000; 80,000 D. 100,000: 64,000: 90,000
12. Capital balances and profit sharing percentage for the partnership of Manda, Emeril, and Fotenot on January 1, 2011 are as
follows:
Manda (36%) 140,000
Emeril (24%) 100,000
Fotenot (40%) 160,000
On January 3, 2011, the partners agree to admit Bourdeaux for a 25% interest in capital and earnings for his investment in the
partnership of P120,000. What is the capital balance of Bourdeax immediately after the admission?
A. P120,000 C. P130,000
B. 110,000 D. 140,000
13. On December 31, 2012, Tina and Webb, who share profits and losses equally, have capital balances of P170,000 and P200,000
respectively. They agree to admit Zen for one-third interest in capital and profits for his investment of P200,000. Partnership
assets are fairly valued and so its liabilities. Immediately after the admission of Zen, what is the capital balance of Tina, Webb
and Zen, respectively?
A. P170,000, P200,000, and P200,000
B. P165,000, P195,000, and P200,000
C. P175,000, P205,000, and P190,000
D. P185,000, P215,000 and P200,000
14. The December 31, 2011, balance sheet of Bennet, Carter and Davis partnership is summarized as follows:

Cash 100,000 Carter loan 100,000

Other assets, net 500,000 Bennet, capital 100,000
Carter, capital 200,000
Davis, capital 200,000
600,000 P600,000
The partners share profits and losses as follows: Bennet 20%; Carter 30%; and Davis, 50%. Carter is retiring from the
partnership, and the partners have agreed that “other assets” should be adjusted to their fair value of P600,000 at December
31, 2011. They further agreed that Carter will receive P244,000 cash for his partnership interest exclusive of his loan, which is
to be paid in full. After Carter’s retirement, the capital balances of Bennet and Davis, respectively, will be:
A. 116,000 and 240,000 C. 100,000 and 200,000
B. 101,714 and 254,286 D. 73,143 and 182,857
15. Partners Allen, Baker, and Coe share profits and losses 50:30:20, respectively. The balance sheet at April 30, 2011, follows:
Cash 40,000 Accounts payable 100,000
Other assets 360,000 Allen, capital 74,000
Baker, capital 130,000
Coe, capital 96,000
400,000 P400,000
The partners assets and liabilities are recorded and presented at their respective fair values. Jones is to be admitted as a new
partner with a 20% capital interest and 20% share of profits and losses in exchange for a cash contribution. How much cash
should Jones contribute?
A. 60,000 C. 75,000
B. 72,000 D. 80,000
16. Williams desires to purchase a one-fourth capital and profit and loss interest in the partnership of Eli, George and Dick. The
three partners agree to sell Williams one-fourth of their respective capital and profit and loss interests in exchange for a total
payment of P40,000. Immediately before the sale of their interests to Williams, the capital balances of the partners were as
follows:
Eli (60%) 80,000
George (30%) 40,000
Dick (10%) 20,000
All assets, except for a depreciable asset, and liabilities of the partnership are fairly valued. It was agreed to adjust the book of
the partnership with respect to the undervalued before the acquisition of Williams of the interest in the partnership. Immediately
after William’s acquisition, what should be the capital balances of Eli, George and Dick respectively?
A. P60,000; P30,000 and P15,000
B. P69,000; P34,500 and P16,500
C. P77,000; P38,500 and P19,500
D. P92,000; P46,000 and P22,000
Use the following information for Questions17 through 20:
Kobe Snow and Brian White formed a partnership on July 1, 2010. Kobe invested P20,000 cash, inventory valued at P15,000,
and equipment valued at P65,000. Brian invested P50,000 cash and land valued at P120,000. The partnership assumed the
P40,000 mortgage on the land.
On June 30, 2011, the partnership reported a net loss of P24,000. The partnership contract specified that income and losses
were to be allocated by allowing 10% interest on the original capital investment, salaries of P15,000 to Kobe and P20,000 to
Brian, and the remainder to be divided in the ratio of 40:60.
On July 1, 2011, Sam Hansel was admitted into the partnership with a P70,000 cash investment. Alan was given a 30% interest
in the partnership because of his special skills. The partners elect to use the bonus method to record the admission.
On June 30, 2012, the partnership reported a net income of P150,000. The new partnership agreement stipulated that net
income and losses were to be divided in a fixed ratio of 20:50:30.
On July 1, 2012, Kobe withdrew from the partnership for personal reasons. Kobe was given P40,000 cash and P60,000 note for
his capital interest.
17. What is the capital credit of Kobe and Brian, respectively, immediately after the formation of partnership?
A. P100,000 and P120,000 C. P110,000 and P130,000
B. 100,000 and 130,000 D. 100,000 and 140,000

18. How much is the capital credit of Sam Hansel upon admission?
A. P82,800 C. P70,000
B. 78,400 D. 84,000
19. How much is the share of Kobe, Brian and Sam , respectively, in the net income of partnership for the year ending June 30,
2012?
A. P50,000; P50,000; P50,000 C. P30,000; P50,000; P70,000
B. 30,000; 75,000; 45,000 D. 45,000; 60,000; 45,000
20. How much is the bonus old partners upon the withdrawal of Kobe from the partnership?
A. P27,080 C. P40,000
B. 60,000 D. 17,080

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w ep/A C P 101/prelim exam