1.Al and Macmod decide to form a partnership.

  The initial investments of the partners will include

cash of P120,000 for Al and P80,000 for Macmod.  Al will transfer his office equipment with a
book value of P96,000 and a fair market value of P84,000 to the partnership.  Macmod will
transfer his land fairly valued at P1,000,000 and the building thereon fairly valued at
P600,000.  Macmod has just bought these at a lump sum price of P1,800,000.  In addition, the
partnership will assume the mortgage of P400,000 on the building.

            What will be the total capital of the partnership?

a.   P1,484,000
b.   P1,496,000
c.   P1,684,000
d.   P1,946,000
The capital of Al and Macmod shall be equal to P, and P, respectively.  These amounts are computed as follows:

                                             Al            Macmod              Total      

Cash                                P120,000      P    80,000       P   200,000
Office equipment                   84,000                                    84,000
Land                                                     1,000,000          1,000,000
Building                                                    600,000             600,000
Mortgage on building                                  (400,000)        ( 400,000)
Capital                              P204,000      P1,280,000       P1,484,000    

2.Mr. Zoom and his very close friend, Mr. Boom, formed a partnership on January 1, 2011, with
Zoom contributing P16,000 cash and Boom contributing equipment, with a book value of
P6,400 and fair value of P4,800, and inventory items, with a book value of P2,400 and fair
value of P3,200. During 2011, Boom made additional investments of P1,600 on April 1 and
P1,600 on June 1, and withdrew P4,000 on September 1. Zoom had no additional
investments or withdrawals during the year. What was the average capital balance of Mr.
Boom during 2011?
a.    P9,600
b.    P8,800
c.    P8,000
d.    P7,200

The average capital balance of Mr. Boom during 2011, is P8,800, computed as follows:
   January 1 Investment:              P8,000 x 12/12               P8,000
   April     1 Investment                 1,600  x   9/12               1,200
   June      1 Investment                1,600 x   7/12                  933
   Sept.     1 Investment              (4,000) x   4/12               (1,333)
   Mr. Boom’s average capital balance during 2011          P  8,800

3.Dulce Martin, a partner in a partnership that carries the name of The Sweet Shop, has a 30%
participation in partnership profits. Her capital account has a net decrease of P48,000 during
2011. In the same year, she withdrew P104,000 (charged against her capital account) and
contributed property valued at P20,000 to the partnership. The net income of the partnership
for 2011 was:
a.    P  36,000
b.    P120,000
c.    P132,000
d.    P440,000
 The net income of the partnership for 2011 was P120,000, computed as follows:
   Withdrawal                                                              P104,000
   Additional investment                                              (  20,000)
   Net decrease in capital                                            (  48,000)
   Dulce’s share in net income                                       P 36,000
      Divide by Dulce’s P&L ratio                                             30%
   Partnership’s net income for the year 2011                     P120,000
4.Partners Jose, Luciano, and Placido have average capital balances of P240,000, P120,000, and
P80,000, respectively, during 2011. Each partner receives 10% interest on his average capital
balance. After deducting salaries of P60,000 for Jose and P40,000 for Placido, the residual
profit or loss is divided equally. In 2011, the partnership sustained a P66,000 loss before
partners’ interests and salaries. By how much would Placido’s capital account change?
a.    P20,000 increase
b.    P22,000 decrease
c.    P32,000 decrease
d.    P48,000 increase
  Placido’s capital account balance would decrease in the amount of P22,000, computed as follows:

                                                                        Total          Placido
Interests:
P440,000 x 10% ; P80,000 x 10%               P 44,000       P  8,000
Salaries                                                             100,000        40,000
Balance (deficiency), equally                              ( 210,000)    (70,000)
Net profit (loss)                                               P(66,000)      P(22,000)

5.On January 1, 2011, Zeep and Beep have capital balances of  P20,000 and P16,000,
respectively. On July 1, 2011, Zeep invested an additional P4,000 while Beep withdrew
P1,000. Profits and losses are divided as follows: Beep is the managing partner and as such
shall receive P16,000 as salary, with Zeep receiving P7,200; both partners should receive
interest of 10% based on their beginning capital balances, to offset whatever difference in
capital investments they have; and, any remainder shall be divided equally. The net income of
the partnership for 2011 was P9,600. What was Zeep’s share in net income for 2011?
a.    P9,200
b.    P4,800
c.    P   880
d.    P   600
Zeep’s share in net income for 2011 is P600, computed as follows:

Beep Zeep Total

Salary P16,000 P7,200 P23,200
10% interest on beg. cap. 1,600 2,000 3,600
Remainder: equally (8,600) (8,600) (17,200)
Net income P  9,000 P   600 P  9,600