Problem 1.

L, E and G are partners with capital balances of P336,000, P540,000 and P190,000
respectively, sharing profits and losses in the ratio of 2:5:1. S is admitted as a new partner bringing with
him expertise and is to invest cash for a 15% interest in the partnership considering the transfer of capital
from him of P90,000 upon his admission.

Upon admission of S, which of the following statements is wrong?

A. The capital balance of E amount to P596,250
B. Cash will be debited in the amount of P204,000
C. The capital account of G will be credited in the amount of P11,250
D. The total agreed capital of the old partners is P90,000 greater than there contributed
capital

Problem 2. F, D and T are partners dividing profits and losses in the ratio of 2:3:1 respectively. Their
capital balances on December 31, 2020 were P214,000, P328,000, and P194,000, respectively. T is
retiring from the partnership as of April 30, 2021. Assume net income is considered as having been
realized evenly throughout the year during the year of a partner’s retirement. After retirement of a partner,
remaining partners would divide profits and losses in the remaining original ratio. The partnership
reported net income of P270,000 for the year 2021. T is to be paid an amount which is 130 percent of his
adjusted equity as of the date of his retirement.

Which of the following statements is false?

A. Upon retirement of T, the balance of the capital account of F amount to P218,920.
B. At the end of 2021, the balance of the capital account of D is P152,460 higher than the capital
account balance of F

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C. The capital account of F has a net increase of P76,920 from beginning to end of 2021.

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D. Upon retirement of T, the capital account of D will have a net increase of P7,380 as a result of the

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transfer of capital.
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Problem 3. On August 1, 2021 D, the sole proprietor of the V Company, expands the company and
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establish a partnership with B and L. The partners plan to share profits and losses as follows: D, 40%; B,
35% and L, 25%. D asked B to join the partnership because his image and reputation are expected to be
valuable during the formation. B is also contributing P105,000 cash and a building that was acquired for
P1,010,000, with carrying amount of P870,000, and a fair market value of P490,000. The building is
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subject to a P198,000 mortgage that the partnership did not assume. L is contributing P212,000 cash
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and marketable securities costing P336,000 to L but are currently worth P475,000. D’s investment in the
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partnership is the V Company. The Statement of Financial Position for the V Company follows:

V Company
Statement of Financial Position
August 1, 2021
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Assets Liabilities and Capital

Cash P 390,000 Accounts payable P 437,000
Accounts receivable 456,000 Notes payable 592,000
Merchandise inventory 394,000 D, capital 829,000
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Equipment, net 618,000 ________

Total Assets P1,858,000 Total Liabilities and Capital P1,858,000
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The partners agree that 35% of the inventory is considered worthless, the equipment is worth 75% of its
carrying amount, and 15% of the accounts receivable is uncollectible. D plans to pay off the accounts
payable with his personal assets. The other partners have agreed that partnership will assume the notes
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payable.

Which of the following statements is false assuming the partners agree that their capital balances upon
formation will be in conformity with their profit and loss ratio
A. Assuming the partners will either invest or withdraw cash, using L as the base, D and B will both
invest cash with a total amount of P560,800.
B. If the transfer of capital method is used, the capital accounts of D and L will be debited in the
amount of P30,320 and P140,200, respectively.
C. Assuming the partners will either invest or withdraw cash, using D as the base, B and L will both
invest cash with a total amount of P75,800.
D. Assuming the partners will either invest or withdraw cash, using B as the base, D and L will both
withdraw cash with a total amount of P487,200.

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 Problem 4. L and G are partners of B Partnership begins its first year of operations on May 31, 2021 with
the following capital balances:

L, Capital P360,000
G, Capital 180,000

According to the partnership agreement, all profits and losses will be distributed as follows:
● L will be allowed an annual salary of P240,000 while G will be allowed a monthly salary of
P28,000.
● The partners will be allowed with interest equal to 15% of the capital balance as of the first day of
the year.
● G will be allowed a bonus of 12% of the net income after bonus.
● The remainder will be divided equally.
● Each partner is allowed to withdraw up to P18,000 on the first year and up to P24,000 the
following year and for the next three years.

Assume that the results of operations in 2021 from the date of formation is P140,000 net income and
P70,000 net loss the following year. Assume further that each partner withdraws the maximum amount
from the business each period.

Which of the following statements is wrong?

A. There is a net increase of P24,375 in the capital account of L from beginning to end of 2021.
B. The capital balance of G at the end of first year is P259,625.
C. The capital balance of L at the end of 2022 is P310,731.25.
D. The share of G in the net loss in 2022 is a credit to capital account of P3,643.75.

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Problem 5. B contributed P50,000 and A contributed P75,000 to form a partnership, and they agreed to
share profits in the ratio of their original capital contributions. The first year of operations resulted in a loss
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P29,500; B made an additional investment of P12,000 while A made a withdrawal of P7,000. At the start
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of the following year, they agreed to admit E into the partnership. He was to receive a one-third interest in
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the capital and profits upon payment of P24,000 to B and A, whose capital accounts were to be reduced
by transfers of E’s capital account of amounts sufficient to bring them back to their original capital ratio.

Upon admission of E, which of the following statements is wrong?

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A. The amount of cash paid by E to A is P10,100.

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B. The capital account of E will be credited in the amount of P33,500.

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C. The capital account of B will be debited in the amount of P23,400.

D. The balance of the capital account of A will be P40,200.
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Problem 6. G Partnership engaged in heart of steel manufacturing business had the following
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condensed financial position prior to liquidation:

Assets Liabilities and Capital

Cash P147,000 Liabilities P 82,000
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Noncash assets 720,000 Loan payable to N 45,000

N, Capital (25%) 194,000
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R, Capital (40%) 330,000

_____ _ I, Capital (35%) 216,000
Total P867,000 Total P 867,000

Assuming non-cash assets with a book value of P340,000 were sold for P415,000 and that all available
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cash was distributed.

Which of the following statements is false for N to receive a total of P176,000 cash after liquidation.
A. The proceeds from the sale of the remaining non-cash assets amount to P53,000.
B. The loss on realization on the sale of the remaining non-cash assets amount to P177,000
C. R will receive the amount of P208,000 on the first distribution of cash.
D. I will receive a total of P127,800 cash after liquidation.

Problem 7. U, P, and T are partners who share profits and losses as follows: U 45%, P 15%, and T 40%.
The Statement of Financial Position of G Partnership as of December 31, 2021 is given below:
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 G Company
Statement of Financial Position
As of December 31, 2021

Assets Liabilities and Equity

Cash P67,000 Liabilities P133,000
Noncash Assets 485,000 Loan from P 11,000
U, Capital 173,500
P, Capital 88,500
T, Capital 146,000
Total Assets P552,000 Total Liabilities and Equity P552,000

On January 1, 2012, the partners decided to liquidate. For the month of January, some assets were sold
at a gain of P14,000. Payment to P from the initial sale of assets was P45,350. Cash withheld for possible
liquidation expenses and unrecognized liabilities amounted to P36,700.

Which of the following statements is false?

A. The book/carrying value of the noncash assets sold in January amount to P160,700
B. Payment to U from the initial sale of assets was P11,050.
C. The share of T in the maximum possible loss is P150,000.
D. The total amount of cash paid and distributed for the month of January is P191,000.

Problem 8. H, C and D of The G Partnership has the following account balances before liquidation:

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Cash 105,000 Liabilities 131,000
Noncash assets

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970,000 Loan from D 25,000

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Loan to C 48,000 H, Capital (25%) 280,000
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Receivable from H 11,000 C, Capital (15%) 406,000
Expenses 639,000 D, Capital (60%) 564,000
o. Revenues 367,000
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During August, some noncash assets were sold that resulted to a gain of 18,000. Liquidation expenses of
P31,000 were paid and additional expenses amounting to P24,000 were expected to be incurred through
the following months of liquidating the partnership. Liabilities to outsiders amounting to P79,000 were
paid.
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For C to receive P218,500 on the first distribution of cash, which of the following statements is correct?
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A. The total maximum possible loss for the month of August amount to P676,000.
B. The total amount of cash paid to partners in August amount to P286,000.
C. The proceeds from the sale of the non-cash assets sold in August amount to P349,000.
D. The amount of cash withheld considered in the computation of maximum possible loss amount to
P76,000.
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