FINANCIAL ACCOUNTING AND REPORTING – QUIZ NO.

Name: _____________________________________________________________________ Score: _______________

Answer the following problems correctly with supporting solutions. Correct journal entries
is one point per entry while correct answers with solutions to MCQs shall earn 2 points.

Use the following information for the next two questions:

On June 30, 2003, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm,
together with their respective profit and loss sharing percentages were as follows:

Assets, net of liabilities 320,000

Eddy, capital (50%) 160,000

Fox, capital (30%) 96,000

Grimm, capital (20%) 64,000

320,000

1. Eddy decided to retire from the partnership and by mutual agreement is to be paid ₱180,000
out of partnership funds for his interest. No goodwill is to be recorded. After Eddy’s retirement,
what are the capital balances of the other partners? (2)
Fox Grimm
a. 84,000 56,000
b. 102,000 68,000
c. 108,000 72,000
d. 120,000 80,000

2. Assume instead that Eddy remains in the partnership and that Hamm is admitted as a new
partner with a 25% interest in the capital of the new partnership for a cash payment of
₱140,000. The bonus method shall be used to record the admission of Hamm. Immediately
after admission of Hamm, Eddy’s capital account balance should be (2)
a. 280,000
b. 172,500
c. 160,000
d. 140,000

Melai admits Jason as a partner in business. Just before the partnership’s formation, Melai’s books
showed the following:

Cash 2,600 Accounts payable 6,200

Accounts Receivable 12,000 Melai, Capital 26,400
Inventory 18,000
It was agreed that for the purposes of establishing Melai’s investment in the firm, the following
adjustments shall be reflected:
 Allowance for bad debts of 2% should be set up.
 Inventory should be valued at P20,200.
 Prepaid expenses of P350 and accrued expenses of P400 should be recognized.
Required:
3. Prepare the entries to reflect the adjustments made to Melai’s accounts. (5)

4. How much is the adjusted capital of Melai prior to the admission of Jason? (2)
a. 14, 155 b. 26,400 c. 28,310 d. 28,410

5. How much should Jason invest to secure a one-third interest in the partnership? (2)
a. 14, 155 b. 26,400 c. 28,310 d. 28,410
Elias, Camila and Emma are partners sharing profits and losses of 40:40:20, respectively. The
December 31, 2018 balance sheet of the partnership before any profit allocation was summarized
as follows:

Assets Liabilities and Capital

Cash 90,000 Accounts payable 7,500
Inventories 60,000 Elias, Capital 105,000
Equipment 75,000 Camila, Capital 90,000
Trademark 22,500 Emma, Capital 45,000
247,500 247,500
The income summary account has a credit balance of P 25,000 for the year 2018.

On January 1, 2019, a partner decided to retire from the partnership and by mutual agreement
among the partners, the following have been arrived at:
 inventories amounting to P10,000 is considered obsolete and must be written off
 equipment should be adjusted to their current value of P50,000.
 trademarks should be written-off immediately before the retirement.
Required:
1. Prepare the entries to adjust the accounts of the partners prior to retirement of a partner.
(10)

2. Prepare the entries to record the retirement of Elias, assuming he is paid by the partnership
P100,000 cash. (4)

3. Assuming Camila is the retiring partner and Emma purchased the entire capital of Camila
for P100,000. Record the retirement of Camila. (2)

4. Assuming Emma is the retiring partner, and she is paid by the partnership cash of P20,000
and inventories worth P10,000 in exchange of her capital. Record the retirement of Emma.
(5)