REVIEWER IN PARTNERSHIP

1. The partners agreed to equalize their interests. Cash settlements among the partners are to be
made outside the partnership. Which of the following statements is correct?
a. A and C pay B ₱250,000 and ₱625,000, respectively.
b. A pays B ₱250,000 while B pays C ₱625,000.
c. C pays A and B ₱625,000.
d. A provides additional ₱250,000 to the partnership.

Solutions:
  A B C Partnership
Cash 750,000 1,000,000 500,000 2,250,000
Accounts receivable 875,000 875,000
Inventories 1,125,000 1,125,000
Building 1,750,000 1,750,000
Accounts payable (375,000) (375,000)
Net contribution 1,625,000 2,750,000 1,250,000 5,625,000
Equal interest 1,875,000 1, 875,000 1,875,000 5,625,000
Cash receipt (payment) (250,000) 875,000 (625,000) -

2. How much are the capital balances of partners’ A, B and C, respectively, right after the
formation of the partnership?
a. 1,875,000; 1,875,000; 1,875,000
b. 1,625,000; 2,750,000; 1,250,000
c. 1,500,000; 1,500,000; 1,500,000
d. 750,000 ; 1,000,000; 500,000

3. A and B agreed to form a partnership. The contributions of the partners are as follows:

  A B
Cash 600,000
Inventory 20,000
Land 400,000
Equipment 50,000

Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related accounts payable.
 The land has a fair value of ₱700,000 and is subject to a mortgage of ₱100,000. However, B agreed
to settle the mortgage personally.

How much are the adjusted capital contributions of A and B, respectively?

a. 670,000; 690,000
b. 670,000; 700,000
c. 660,000; 700,000
d. 670,000; 600,000
Solution:
  A B
Cash 600,000
Inventory 20,000
Land 700,000
Equipment 50,000
Accounts payable (20,000 x ½) (10,000)
Adjusted capital balances 660,000 700,000

4. A and B formed a partnership. The following are their contributions:

  A B
Cash 400,000 -
Accounts receivable 100,000 -
Equipment 700,000
Total 500,000 700,000

A, capital 500,000
B, capital 700,000
Total 500,000 700,000

Additional information:
 The accounts receivable includes a ₱30,000 account that is deemed uncollectible.
 The equipment is over-depreciated by ₱50,000. The equipment was obtained by B through
financing. The related loan payable has an unpaid balance of ₱250,000 which the partnership
assumes on repaying.

Which partner has the higher capital credit, and how much?
a. A, ₱470,000
b. A, ₱500,000
c. B, ₱500,000
d. B, ₱400,000

5. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.

6. A and B formed a partnership. A contributed cash of ₱500,000 while B contributed land with
carrying amount of ₱400,000 and fair value of ₱800,000. The land has an unpaid mortgage of
₱200,000 which is assumed by the partnership. How much is the correct valuation of B’s capital
immediately after the partnership formation?
a. 400,000
b. 500,000
c. 600,000
d. 800,000