Practical Accounting 2 Theory Amp Practice Advanced Accounting Partnership Liquidation Amp Incorporation PDF Free

PRACTICAL ACCOUNTING 2
THEORY & PRACTICE

ADVANCED ACCOUNTING
Partnership Liquidation & Incorporation
QUIZZER
ADVANCED ACCOUNTING
Partnership Liquidation & Incorporations - MCQ Problems Page 2

Partnership Liquidation & Incorporations
PARTNERSHIP LIQUIDATION
Lumpsum Liquidation
Proceeds from sale of noncash assets
1. RR, SS and TT decided to dissolve the partnership on November 30, 2011. Their capital
balances and profit ratio on this date, follow:
Capital Profit
Balances Ratio
RR P50,000 40%
SS 60,000 30%
TT 20,000 30%
The net income from January 1 to November 30, 2011 is P44,000. Also, on this date, cash and
liabilities are P40.000 and P90,000, respectively. For RR to receive P55,200 in full settlement
of his interest in the firm, how much must be realized from the sale of the firm's non-cash
assets?
a. 196,000 c. 193,000
b. 177,000 d. 187,000 Dayag 2013
2. Bel, Col, and Del, partners of the BCD partnership, shared profits and losses in the ratio of 5:3:2,
respectively. On December 31,2013, the end of an unprofitable year, they decided to liquidate the
partnership. The partners' capital account balances on the date were as follows:
Bel, capital P22,000
Col, capital 24,900
Del, capital 15,000
The liabilities of the partnership amounted to P30,000 including a loan of P10,000 payable to Bel.
The cash balance was P6,000. The partners planned to realize the non-cash cash assets in
installment and to distribute cash as it becomes available. All three partners are solvent.
If Bel received a total of P20,000 as a result of liquidation, what was the total amount realized
by the partnership on the non-cash assets?
a. P85,900 c. P67,900
b. P91,900 d. P61,900 Guerrero 2013
Partner’s Personal Creditor

3. The Keaton, Lewis and Meador partnership had the following balance sheet just before
entering liquidation:
Cash P10,000 Liabilities P130,000
Non-cash assets 300,000 Keaton, capital 60,000
Lewis, capital 40,000
Meador, capital 80,000
P310,000 P310,000

ADVANCED ACCOUNTING
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Non-
cash assets were sold for PI80,000. Liquidation expenses were PI0,000. Assume that Keaton
was personally insolvent with assets of P8,000 and liabilities of P60,000. Lewis and Meador
were both solvent and able to cover deficits in their capital accounts, if any. What amount of
cash could Keaton's personal creditors have expected to receive from partnership assets?
a. P0 c. P30.000
b. P26.000 d. P34.000 Dayag 2013
4. A local partnership was considering the possibility of liquidation since one of the partners is
solvent (Tillman) and the others are insolvent. Capital balances at that time were as follows.
Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, capital P 60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
Ding's creditors filed a P25,000 claim against the partnership's assets. At that time, the
partnership held assets reported at P360,000 and liabilities of PI20,000. If the assets could be
sold for P228.000, what is the minimum amount that Ding's creditors would have received?
a. 0 c. P36,000
b. 2,500 d. P38,720 Dayag 2013
Loss on Realization
5. Jar, Ram, and Millo, who divide profits and losses 50%, 30%, and 20%, respectively, have
the following October 31, 2011 account balances:
Jar, drawing (Dr.) P12.000
Millo, drawing (Cr.) 4,800
Accounts receivable - Jar 7,200
Loans payable-Ram 14,400
Jar, capital 59,400
Ram, capital 44,400
Millo, capital 39,000
The partnership's assets are P211,200 (including cash of P64,200). The partnership is
liquidated and Millo receives P33.000 in final settlement. How much is the total loss on
realization?
a. 10,800 c. 54.000
b. 31,200 d. 64,200 Dayag 2013

Realized loss allocated to a partner

6. Because of very unprofitable operations, partners Nal, Lou, and Gee decided to dissolve the
partnership when their capital balances and profit and loss ratio were:
Nal, capital (30%) P175,000
Lou, capital (20%) 125,000
Gee, capital (50%) 175,000
Total P475,000
Upon liquidation, all of the partnership's assets are sold and sufficient cash is realized to pay
all liabilities except one for P25,000. Gee is personally insolvent, but the others are capable of
meeting any indebtedness of the firm. By what amount would the capital of Nal change?
a. 7,500 decrease c. 195,000 decrease
b. 150,000 decrease d. No change Punzalan 2014
7. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of 3/21,4/21, 6/21
and 8/21, respectively. The balances of their capital accounts on December 31, 2011 are as
follows:
Silverio P1,000
Domingo 25,000
Reyes 25,000
Pastor 9,000
The partners decide to liquidate, and they-accordingly convert the non-cash assets into P23,200 of
cash. After paying the liabilities amounting to P3,000, they have P22,200 to divide. Assume that
a debit balance of any partner's capital is uncol¬ lectible.
The share of Silverio in the loss upon conversion of the non-cash assets into cash was:
a. P4,972 c. P5,400
b. P5,257 d. P5,200 Guerrero 2013
Additional Contribution by a Partner

8. On December 31, 2010, the partners of MNP Partnership decided to liquidate their business.
Immediately before liquidation, the following condensed balance sheet was prepared:
Cash P 50,000 Liabilities P375,000
Noncash assets 900,000 Nieva, loan 80,000
Perez, loan 25,000
Munoz, capital (50%) 312,500
Nieva, capital (30%) 107,500
Perez, capital (20%) 50,000
Total P950,000 Total P950,000

ADVANCED ACCOUNTING
The noncash assets were sold for P400,000. Assuming Perez is the only solvent partners,
what amount of additional cash will be invested by Perez? (rounded to the nearest peso)
a. 37,143 c. 5,000
b. 25,000 d. 0 Punzalan 2014
9. Bach, Johann, and Straus were partners sharing profits and losses based on 4:4:2 decide to
liquidate. All assets of the partnership were liquidated. The condensed statement of financial
position just prior to liquidation follows:
Assets Liabilities and Capital
Cash • P100,000 Liabilities PI 40,000
Other assets 400,000 Bach, Loan 10,000
Bach, capital 45,000
Johann, capital 105,000
Straus, capital 200,000
Total P500,000 Total Liabilities & Capital P500,000
Other assets were sold for P247,500 realizing a loss of P152,500. Parties agreed to fully terminate
the partnership's business, thus, necessitating distribution of cash to partners and in the event of
capital deficiency, contribution of additional cash. The three partners were all solvent and could
answer any capital deficiency.
Name the partner and give the corresponding additional cash he had to invest due to his net capital
deficiency to finally settle the liquidation of the partnership.
a. Bach,PI6,000
b. Johami,P44,000
c. Bach,P 6,000
d. Straus,P30,500 Guerrero 2013
10. The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20% and
20% respectively decided to liquidate. All partnership assets are to be converted into cash. Prior
to the liquidation, the condensed statement of financial position is as follows:
Cash , P 100,000 Liabilities P 750,000
Other'assets 1,800,000 Bren, Loan 60,000
Dior, Loan 50,000
Aiko, Capital 420,000
Bren, Capital 315,000
Cinia, Capital 205,000
Dior, Capital 100,000
Total PI,900,000 Total PI,900,000

The non-cash assets realize P800,000, resulting to a loss of P1,000,000. All the partners are
solvent, and can contribute any additional cash to cover any deficiency. In the process of
liquidation, deficiency (ies) will occur and will require additional investment as follows:
a. Cinia at P7,500
b. Dior and Cinia for P50,000 and P7,50O respectively
c. Dior at P50,000
d. None Guerrero 2013
Partner’s Share
11. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed
by each of them. They invested P30.000 and P20,000 and agreed to share earnings 60%
and 40%, respectively. All their transactions were for cash, and all their subsequent
transactions were handled through their respective bank accounts as summarized below:
Gardo Gordo
Cash receipts P79,100 P65,245
Cash disbursements 62,275 70,695
On October 31, 2008, all remaining noncash assets in the two stores were sold for cash of
P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution
of the P 60,000 cash, Gardo received:
a. 24000 c. P34.000
b. 26,000 d. 36,000 Dayag 2013
12. After all partnership assets were converted into cash and all available cash was distributed to
creditors, the ledger of the Daniela, Erika, and Fredline partnership showed the following
balances:
Debit Credit
Accounts payable P20,000
Daniela, capital (40%) 10,000
Erika, capital (30%) 60,000
Fredline, capital (30%) P90,000
P90,000 P90,000
Percentages indicated are residual profit and loss sharing ratios. Personal assets and
liabilities of the partners are as follows:
Daniela Erika Fredline
Personal assets P50.000 P50,000 PI00,000
Personal liabilities 45,000 40,000 40,000

ADVANCED ACCOUNTING
The partnership creditors proceed against Fredline for recovery of their claims, and the
partners settle their claims against each other. How much would Erika receive?
a. P-0- c. P47.143
b. 45,000 d. Cannot be determined Dayag 2013
13. Arthur, Baker and Carter are partners in textile distribution business, sharing profits and
losses equally. On December 31, 2012 the partnership capital and partners drawings were as
follows:
Arthur Baker Carter
Total
Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000
The partnership was unable to collect on trade receivables and was forced to liquidate.
Operating profit in 2012 amounted to P72,000 which was all exhausted, including the
partnership assets. Unsettled creditors' claims at December 31, 2012 totalled P84,000. Baker
and Carter have substantial private resources, but Arthur has no personal assets. The final
cash distribution to Carter was:
a. 78.000 c. 108,000
b. 84,000 d. 162,000 Dayag 2013
14. After all noncash assets have been converted into cash in the liquidation of the AA and JJ
partnership, the ledger contains the following account balances:
Debit Credit
Cash P34.000
Accounts payable P25.000
Loan payable to AA 9,000
AA, capital 8,000
JJ, capital 8,000
Available cash should be distributed: P25.000 to accounts payable and; Dayag 2013
a. P9,000 loan payable to AA c. P1,000 to AA and P8,000 to JJ
b. P4,500 each to AA and JJ d. P8,000 to AA and P1,000 to JJ
15. As of December 31, 2012, the books of Ton Partnership showed capital balances of: T
P40.000; O, P25,000; N, P5,000. The partners' profit and loss ratio was 3:2:1, respectively.
The partners decided to liquidate and they sold all non-cash assets for P37.000. After
settlement of all liabilities amounting PI2,000, they still have cash of P28,000 left for
distribution. Assuming that any capital debit balance is uncollectible, the share of T in the
distribution of the P28,000 cash would be:
a. 17,800 c. 19,000
b. 18,000 d. 17,000 Dayag 2013

16. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of
3/21,4/21,6/21 and 8/21, respectively. The balances of their capital accounts on December
31,2011 are as follows:
Silverio P 1,000
Domingo 25,000
Reyes 25,000
Pastor 9,000
P60.000
The partners decide to liquidate, and they accordingly convert the noncash assets into P23,200
of cash. After paying the liabilities amounting to P3.000, they have P22,200 to divide. Assume
that a debit balance in any partner's capital is uncollectible.
After the P22,200 was divided, the capital balance of Domingo was:
a. 3,200 c. 4,500
b. 3,920 d. 17,800 Dayag 2013
17. After operating for five years, the books of the partnership of Bo and By showed the following
balances:
Net assets P169,000
Bo, capital 110,500
By, capital 58,500
If liquidation takes place at this point and the net assets are realized at book value, the
partners are entitled to:
a. Bo to receive P117,000 & By to receive P52,000
b. Bo to receive P126,750 & By to receive P42,250
c. Bo to receive P84,500 & By to receive P84,500
d. Bo to receive P110,500 & By to receive P58,500 Dayag 2013
18. The following condensed balance sheet is presented for the partnership of AA, BB, and CC,
who share profits and losses in the ratio of 4:3:3, respectively:
Cash P160,000
Other assets 320,000
Total P480,000
Liabilities P180,000
AA, capital 48,000
BB, capital 216,000
CC, capital ■ 36,000
Total P480,000

ADVANCED ACCOUNTING
The partners agreed to dissolve the partnership after selling the other assets for P200,000.
Upon dissolution of the partnership. AA should have received.
a. 0 c. 72,000
b. 48,000 d. 84,000 Dayag 2013
19. The following balance sheet is presented for the partnership of A, B, and C, who share profits
and losses in the respectively ratio of 5:3:2.
Cash 120,000 Liabilities 280,000
Other assets 1,080,000 A, capital 560,000
B, capital 320,000
C, capital 40,000
Total 1,200,000 Total 1,200,000
Assume that the three partners decided to liquidate the partnership. If the other assets are
sold for P800,000, how should the available cash be distributed to each partner?
A B C
a. 280,000 320,000 40,000
b. 324,000 236,000 16,000
c. 410,000 230,000 0
d. 412,000 228,000 0 Punzalan 2014
20. The following condensed balance sheet is presented for the partnership of Smith and Jones,
who share profits and losses in the ratio of 60:40, respectively:
Other assets P450,000
Smith, loan 20,000
P470,000
Accounts payable P120,000

Smith, capital 195,000
Jones, capital 155,000
P470,000
The partners decided to liquidate the partnership. If the other assets are sold for P385,000,
what amount of the available cash should be distributed to Smith?
a. 136,000 c. 159,000
b. 156,000 d. 195,000 Punzalan 2014

21. Peter and John, who share profits and losses equally, decided to liquidate their partnership
when their net assets amounted to P260,000, and capital balances of P170,000 and P90,000,
respectively.
If the noncash assets were sold for amount equal to its book value, what amount of cash should
Peter and John received?
Peter John
a. 130,000 130,000
b. 170,000 90,000
c. 180,000 80,000
d. 195,000 65,000 Punzalan 2014
The following condensed balance sheet is presented for the partnership of Axel, Barr, and Cain,
who share profits and losses in the ratio of 4:3:3, respectively:
Cash P100,000
Total P400,000
Liabilities P150,000
Axel, capital 40,000
Barr, capital 180,000
Cain, capital 30,000
Total P400,000
22. The partners agreed to dissolve the partnership after selling the other asset for P200,000.
Upon dissolution of the partnership, Axel should have received
a. 0 c. 60,000
b. 40,000 d. 70,000 Punzalan 2014
23. Cohen, Butler, and Davis are partners in a partnership and share profits and losses 50%, 30%,
and 20%, respectively. The partners have agreed to liquidate the partnership and anticipate
that liquidation expenses will total P14,000. Prior to the liquidation, the partnership balance
sheet reflects the following book values:
Cash 21,000
Non-cash assets 248,000
Notes payable to Davis 32,000
Other liabilities 154,000
Cohen, capital 60,000
Butler, capital (deficit) (10,000)
Davis, capital 33,000

ADVANCED ACCOUNTING
Assuming that the actual liquidation expenses are P14.000 and that non-cash assets are sold
for P218,000, how would the assets be distributed to partners if Butler has net personal
assets of P8,500?
Cohen Butler Davis
a. 15,500
b. 21,429 - 49,571
c. 30,650 - 53,260
d. 27,500 - 52,000 Punzalan 2014
24. Batman and Robin decided to liquidate their partnership business on June 1,2013, under lump-
sum liquidation. The partners had been sharing profits and losses on a 60:40 ratio. The statement
of financial position prepared on the day of liquidation began was as follows:
Cash P 18,000 Accounts payable P 42,000
Receivables 75,000 Batman, loan 24,000
Inventory 90,000 Batman, capital 102,000
Other assets 84,000 Robin, capital 90,000
Robin, drawing 9,000
During June, one-third of the receivables was collected; P45,000 of inventory was sold at an
average of 70% of book value; other assets were sold for P36,000.
How much should Batman and Robin receive upon liquidation?
Batman Robin
a. P32,000 P36,400
b. P8,100 P27,400
c. P40,200 P41,800
d. P 59,100 P54,400 Guerrero 2013
25. Pepe and Pilar started a partnership some years ago and managed to operate profitably for
several years. Recently, however, they lost a substantial legal suit and incurred unexpected
losses on accounts receivable and inventories. As a result, they decided to liquidate. They sold all
assets and only P162,000 was available to pay liabilities, which amounted to P297,000. Their capital
account balances before the liquidation and their profit and loss sharing ratios are shown below:
Capital Profit and
Balances Loss ratios
Pepe P207,000 60%
Pilar 121,500 40%

Pepe is personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal
assets in excess of P900,000.
In the settlement to partners, how much cash should Pepe receive?
a. P63,900 c. P15,300
b. P-0-' d. P63,000 Guerrero 2013
26. On July 1, 2013, the Chess Partnership has the following statement of financial position:

Cash P 20,400 Accounts payable PI22,400
Other assets 219,600 Rook, loan 14,400
Rook, capital (50%) 28,800
__ King, capital (50%) 74,400
As of July 1, 2013, the partners have personal net worth as follows:
Rook King
Assets P62,400 P 91,200
Liabilities 56,400 122,400
The personal net worth of each partner does not include any amounts clue to or from the
partnership. Assume the other assets are sold for P 123,600 after incurring liquidation expenses of
P4,800. How much should King receive?
a. P-0- c. P24,000
b. P22,800 d. P16,800 Guerrero 2013
27. The following statement of financial position is presented for the partnership of David, Ebro, and
Franco who share profits and losses in the ratio of 5:3:2 respectively:
Cash P 60,000 Liabilities PI40,000
Other assets 540,000 David, capital 280,000
Ebro, capital 160,000
Franco, capital 20,000
The partners decide to liquidate the partnership. If the other assets are sold for P400,000, how
should the available cash be distributed to each partner?
a. David, P280,000; Ebro, P160,000; Franco, P20,000
b. David, P210,000; Ebro, P118,000; Franco, P8,000
c. David, P206,000; Ebro, P114,000; Franco, PO
d. David, P205,000; Ebro, P115,000; Franco, PO Guerrero 2013

ADVANCED ACCOUNTING
28. After operating for five years, the books of the partnership of Joe and Letty showed the following
balances:
Net assets P130,000

Joe, capital 85,000
Letty, capital 45,000
If liquidation takes place at this point and the net assets are realized at book value, the partners are
entitled to:
a. Joe to receive P90,000 & Letty to receive P40,000
b. Joe to receive P97,500 & Letty to receive P32,500
c. Joe to receive P65,000 & Letty to receive P65,000
d. Joe to receive P85,000 & Letty to receive P45,000 Guerrero 2013
29. A, B and C are partners in a textile distribution business, sharing profits and losses equally. On
December 31, 2013, the partnership capital and the partners' drawing were as follows:
A B C Total
Capital P100,000 P80,000 P300.000 P480.000
Drawing 60,000 40,000 20,000 120,000
The partnership was unable to collect on its trade receivables, and it was forced to liquidate. The
operating profits for 2013 amounted to P72,000, and was all exhausted including the partnership
assets. Unsettled creditors' claim at December 31,2013 amounted to P84,000. B and C have
substantial private resources, but A has no available free assets.
The final cash distribution to C was:

a. P162,000 b. P108,000
c. P84,000 d. P78,000 Guerrero 2013
30. As of December 31,2013, the books of AME Partnership showed capital balances of: A, P40,000; M,
P25,000; E, P5,000. The partners' profit and loss ratio was 3:2:1, respectively. The partners
decided to liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities
amounting to P12,000, they still have cash of P28,000 left for distribution. Assuming that any
capital debit balance is uncollectible, the share of A in the distribution of the P28,000 cash
would be:
a. P17,800 c. P19,000
b. P18,000 d. P17,000 Guerrero 2013

Loss absorption by solvent partner

31. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and
sharing profits 30%, 20% and 50% respectively. Partners agree to dissolve the business and
upon liquidation, all of the partnership assets are sold and sufficient cash is realized to pay all the
claims except one for P50,000. Li is personally insolvent, but the other two partners are able to
meet any indebtedness to the firm. On the remaining claim against the partnership, Gilbert is to
absorb.
a. P40,000 c. P30,000
b. P15,000 d. P25,000 Guerrero 2013
Safe Payment Schedule

Priority of Payment
Partner to be paid first
32. PP, QQ, and RR, partners to a firm, have capital balances of P11,200, P13,000, and P5,800,
respectively, and share profits in the ratio of 4:2:1. Prepare a schedule showing how available
cash will be given to the partners as it becomes available. Who among the partners shall be
paid first with an available cash of P1,400?
a. QQ c. RR
b. No one d. PP Dayag 2013
1st Priority Payment

33. The August, Albert and Gerry partnership became insolvent on January 1, 2011, and the
partnership is being liquidated as soon as practicable. In this respect the following information
for the partners has been marshaled:
Capital Balances Personal Assets Personal Liabilities

August P 70,000 P80,000 P40,000
Albert (60,000) 30,000 50,000
Gerry (30,000) 70,000 30,000
Total P(20,000)
Assume that residual profits and losses are shared equally among the three partners. Based
on this information, calculate the maximum amount that August can expect to receive from
the partnership liquidation is:
a. 20.000 c. 70.000
b. 40,000 d. 110,000 Dayag 2013

ADVANCED ACCOUNTING
34. Partners Almond, Barney, and Colors have capital balances of P20,000, P50,000, and
P90,0Q0, respectively. They split profits in the ratio of 2:4:4, respectively. Under a safe cash
distribution plan, one of the partners will get the following total amount in liquidation before any
other partners get anything:
a. 0 c. 40,000
b. 15,000 d. 180,000 Punzalan 2014
2nd Priority Payment

35. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining
assets are being realized gradually. The equity of the partners is as follows:
Loans to
Partners' (from) Profit and
Accounts Partnership Loss Ratio
P P24,000 6,000 3
Q 36,000 3
R 60,000 ( 10,000) 4
The second cash payment to any Partner(s) under a program of priorities shall be made thus:
a. To R, P2,000 c. To R, P8,000 Dayag 2013
b. To Q, P6,000 d. To Q, P6,000 & R, P8,000
1st Priority & Partial 2nd Priority

36. NN, OO, PP, and GG, partners to a law firm, shares profits at the ratio of 5:3:1:1. On June
30, relevant partners' accounts follow:
Advances Loans Capital

Dr. Cr. Cr.
NN - P20,000 P160,000
OO 40,000 120,000
PP P18,000 - 60,000
GG 10,000 - 100,000
On this day, cash of P72,000 is declared as available for distribution to partners as profits.
Who among the partners will benefit from the P72.000 cash distribution?
a. PP and GG c. All, equally
b. OO and GG d. NN and OO Dayag 2013

Third Priority of Payment

37. After incurring losses resulting from very unprofitable operations, the Goh Kong Wei Partnership
decided to liquidate when the partners' capital balances were:
Goh, capital (40%) P80,000
Kong, capital (40%) 130,000
Wei, capital (20%) 96,000
The non-cash assets were sold in installment. Available cash were distributed to partners in
every sale of non-cash assets. After the second sale of non-cash assets, the partners
received the same amount of cash in the distribution. And from the third sale of non-cash
assets, cash available for distribution amounts to P28,000, and unsold non-cash assets has a
book value of PI2,500. Using cash priority program, what amount did Wei received in the third
installment of cash?
a. 11,600 c. 5,600
b. 8,000 d. 0 Punzalan 2014
1st, 2nd & 3rd priority payment

38. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams
partnership appears below:
Priority
Creditors Matthew Norell Reams
First P300,000. 100%
Next P80,000. 70% 30%
Next P70,000. 3/7 417
Remainder ...... 22% 34% 44%
If P550.000 of cash is to be distributed, how much will be received by the priority creditors,
Matthew, Norell and Reams? Dayag 2013
Priority Creditors Matthew Norell Reams
a. P 0 P 0 P 0 P 0
b. 0 121,000 187,000 242,000
c. 300,000 55,000 85,000 110,000
d. 300,000 108,000 58,000 84,000

ADVANCED ACCOUNTING
First Instalment
Cash available for safe payment
39. When Mikki and Mylene, partners who share earnings equally, were incapacitated in an
airplane accident, a liquidator was appointed to wind up their business. The accounts showed
cash, P35,000; other assets, PI 10,000; Liabilities, P20,000; Mikki, capital, P71,000; and
Mylene, capital, P54,000. Because of highly specialized nature of the noncash assets, the
liquidator anticipated that considerable time would be required to dispose them. The
expenses of liquidating the business (advertising, rent, travel, etc.) are estimated at P10,000.
How much cash can be distributed safely to each partner at this point?
a. P5.000 to Mikki; and P0 to Mylene :
b. P5.000 to Mikki; and P500 to Mylene
c. P3.000 to Mikki; and P0 to Mylene
d. P5.000 to Mikki; and P1,000 to Mylene Dayag 2013
40. Kay and Loy, partners who share profits and losses equally decided to liquidate their partnership
business in installment. The statement of financial position showed Cash, P35,000; Liabilities, P20,000;
Kay capital, P71,000; and Loy capital, P54,000. Anticipated liquidation expenses amounts to PI0,000.
How much cash can be distributed safely to each partner at this point?
Kay Loy
a. P5,000 P-0-
b. P5,000 P 500
c. P3,000 P-0-
d. P5,000 P1,000 Guerrero 2013
Cash received by a partner
41. AA, BB, and CC are partners in ABC Partnership and share profits and losses 50%, 30% and
20%, respectively. The partners have agreed to liquidate the partnership and some
liquidation expenses to be incurred. Prior to the liquidation, the partnership balance sheet
reflects the following book values:
Cash P 25,200
Notes payable to CC 38,400
AA, capital 72,000
BB, capital deficit ( 12,000)
CC, capital 39,600
Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with
a book value of P240.000 are sold for P216,000. How much cash should CC receive?
a. 46,457 c. 74,571
b. 39,600 d. -0- Dayag 2013

42. The partners of the M&N Partnership started liquidating their business on July 1,2012, at
which time the partners were sharing profits and losses 40% to M and 60% to N. The balance
sheet of the partnership appeared as follows:
M&N Partnership
Balance Sheet - July 1,2012
Assets Liabilities & Equity
Cash P8,800 Accounts payable P32,400
Receivable 22,400 M, capital P31.000
Inventory 39,400 M, drawing ( 5,400) 25,600
Equipment P65,200 N, capital P33,200
Accumulated. N, drawing ( 200) 33,000
Depreciation (30,800)34400 N, loan 14,000
Total P105,000 Total 105,000
During the month of July, the partners collected P600 of the receivables with no loss. The
partners also sold during the month the entire inventory on which they realized a total of
P32.400. How much of the cash was paid to M's capital on July 31, 2012?
a. 25.600 c. 320
b. 5,400 d. 0 Dayag 2013
43. The condensed balance sheet of Alex, Jay, and John as of March 31, 2010 follows:
Other assets 265,000 Alex, capital 95,000
Jay, capital 80,000
John, capital 70,000
Total P293,000 Total P 293,000
The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their
partnership and liquidate by selling other assets in installments. P70,000 was realized on the
first cash sale of other assets with a book value of P150,000. After settlement with creditors,
all cash available was distributed to the partners. How much cash was received by John?
a. 10,500 c. 21,250
b. 20,000 d. 32,500 Punzalan 2014
44. Partners Bee, Cee, Dee and Gee who share profits 5:3:1:1, respectively, decide to liquidate their
partnership. Capital balances before liquidation are:
Bee P60,000
Cee 40,000
Dee 30,000
Gee 10,000

ADVANCED ACCOUNTING
The partners agree to the following:

(1) Partnership's computer equipment with a book value of P12,000 is to be taken over by partner
Bee at a price of P15,000.
(2) Partnership's liabilities are to be paid off and the balance of cash on hand, P30,000 is to
be divided in a manner that will avoid the need for any possible recovery of cash from a partner.
How much of the P30,000 cash be distributed to Partner Cee?
a. P10,000 c. P20,000
b. P-0- d. P15,000 Guerrero 2013
45 The statement of financial position of Poe and Ping Partnership on May 1,2013 before
liquidation is as follows:
Other assets 71,000 Poe, capital (70%) 28,000
Ping, capital (30%) 22,000
Total P85.000 Total P85,000
In May, assets with a book value of P34,000 are sold for P29,000. Creditors are paid in full.
Liquidation expenses of P1,000 is paid, and P3,000 is paid to partners.
In May, how much did Ping receive?
a. P-0-
b. P3,000
c. P 900
d. P2,100 Guerrero 2013
46. Jay, Kay, and Ell are partners in JKE Partnership and share profits and losses, 5:3:2,
respectively. The partners have agreed to liquidate the partnership. Prior to liquidation, the
partnership statement of financial position shows the following book values:
Cash P25,200
Notes payable to Ell 38,400
Jay, capital 72,000
Kay, capital (12,000)
Ell, capital 39,600
Liquidation expenses of PI 6,800 are paid. Non-cash assets with a book value of P240,000 are
sold for P216,000. How much cash should Ell receive?
a. P74,571 c. P39,580
b. P46,458 d. P37,600 Guerrero 2013

47. The statement of financial position of the Watch Partnership on October 10,2013 when it
decided to liquidate was as follows:
Cash P 40,000 Liabilities P 60,000

Other assets 125,000 Rolex capital (50%) 45,000
Swatch capital (30%) 42,000
Timex capital (20%) 18,000
Total PI 65,000 Total P165,000
Assume the other assets with a book value of P90,000 are sold for P50,000 and that all available
cash, except for a PI0,000 contingency fund, is distributed immediately. In this case:
a. Rolex should receive nothing
b. Swatch should receive P10,000
c. Timex should receive P1,000
d. The cash should be distributed in the profit and loss ratio Guerrero 2013
48. The condensed statement of financial position of Alex, Jay and John partnership as of March
31,2013 follows:
Cash P 28,000
Total P293,000
Liabilities P 48,000
Alex, Capital 95,000
Jay, Capital 80,000
John, Capital 70,000
Total P293,000
Income and loss ratio is 50:25:25 respectively. The partners voted to dissolve the partnership and
liquidate by selling assets in installments. P70,000 was realized on the first cash sale of other assets
which has a book value of PI50,000. After settlement with creditors, all cash available was distributed
to partners. How much cash was received by John?
a. P10,500 c. P21,250
b. P32,500 d. P20,000 Guerrero 2013

ADVANCED ACCOUNTING
Cash received by individual partners

49. A balance sheet for the partnership of KK, LL and MM, who share profits 2:1:1 respectively,
shows the following balances just before liquidation:
Cash Other Assets Liab. KK, Cap. LL, Cap. MM, Cap.
P48.000 P238,000 P80.000 P88,000 P62,000 P56,000
In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation
expenses of P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated
before liquidation is completed. Creditors were paid P22.400. The available cash was
distributed to the partners. The cash to be received by each partner based on the above data:
Dayag 2013
KK LL MM KK LL MM
a. 56,600 28,300 28,300 c. 29,400 32.700 26,700
b. 86,000 61,000 55,000 d. 88,000 62,000 56,000
50. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The
condensed balance sheet of Heidi Partnership as of December31,2012 is:
Heidi Partnership
Balance Sheet
December 31,2012
Cash P 50,000
Total assets P180,000
• Liabilities P 40,000
W, capital 60,000
X, capital 40,000
Y, capital 40,000
Total liabilities and capital P180,000
Assume instead that the Heidi Partnership is dissolved and liquidated by installments, and the
first realization of P 40,000 cash is on the sale of other assets with book value of P80.000. After
the payment of liabilities, the available cash shall be distributed to W, X, and Y, respectively,
as follows:
a. P36,000; P27,000; and, P27,000
b. P44,000; P28.000; and, P28,000
a P16,000; P12,000; and, P12,000
d. P24,000; P13,000; and, P13,000 Dayag 2013

51. The balance sheet of the partnership of Salve, Galo, and Norma, who share in the profits and
losses in the ratio of 5:3:2, respectively is as follows:
Cash 30,000 Liabilities 50,000
Other assets 320,000 Salve, capital 80,000
Galo, capital 115,000
Norma, capital 105,000
Total 350,000 Total 350,000
The partnership is liquidated by installment. The first sale of non-cash assets with a book
value of P150,000 realizes P100,000. How should the remaining cash be distributed?
Salve Galo Norma
a. 50,000 30,000 20,000
b. 40,000 24,000 16,000
c. 0 31,000 49,000
d. 0 48,000 32,000 Punzalan 2014
52. The December 31,2013 statement of financial position of DJM Partnership are as follows:
Cash P20,000
Receivable from Day 20,000
Accounts payable 170,000
Day, capital 120,000
Jay, capital 90,000
May, capital 80,000
The partners' profit and loss percentage are Day, 50%; Jay, 30%; and May, 20%. On January 1
of next year, the partners decide to liquidate the partnership. They agree that all cash should be
distributed as it becomes available during the liquidation process.
If cash of P220,000, including the P20,000 cash on hand becomes available, it should be
distributed first to settle the accounts payable and then to:
Day Jay May
a. P25,000 PI 5,000 PI 0,000
b. P-0- P26,000 P24,000
c. PI0,000 P32,000 P 8,000
d. P-0- P18,000 P32,000 Guerrero 2013

ADVANCED ACCOUNTING
53. The statement of financial position of QRST Partnership just prior to liquidation shows:
Assets P90,000
Liabilities 15,000
Q, loan 5,000
Q, capital 20,000
R, capital 20,000
S, capital 20,000
T, capital 10,000
Total P90,000
Q, R, S, and T share profits and losses in the ratio of 2:1:1, respectively. Certain assets were sold
for P45,000. Creditors were paid in full amount owed and cash of P20,000 were distributed to the
partners.
How would the P20,000 cash be distributed to the partners?

Q R S T
a. P2,500 P 8,750 P 8,750 P-0-
b. P-0- P20,000 P-0- P-0-
c. P-0- P10,000 P10,000 P-0-
d. P 5,000 P5,000 P10,000 P-0- Guerrero 2013
54. L, M, N and O partners to a law firm share profits 5:3:1:1 respectively. Partners accounts prior to
liquidation were as follows:
Advances (Dr) Loans (Cr) Capitals (Cr)

L - P5,000 P40,000
M - 10,000 30,000
N P4,500 15,000
O 2,500 - 25,000
At this point, cash of PI 8,000 is available for distribution to the partners. How much of the PI
8,000 cash should be distributed to each partner?
L M N O
a. P-0- PI 8,000 P-0- P-0-
b. P-0- P-0- P-0- P18,000
c. P-0- P 6,625 P-0- PI 1,375
d. P9,000 P 5,400 PI,800 P 1,600 Guerrero 2013

55. The following statement of financial position is for the partnership of D, E and F:
Other assets 180,000 D, capital (40%) 37,000
E, capital (40%) 65,000
F, capital (20%) 48,000
Total • P200,000 Total P200,000
Figures shown parenthetically reflect agreed profit and loss sharing percentages. If the firm as
shown on the original balance sheet, is dissolved and liquidated by selling assets in
installments, the first sale of non-cash assets having a book value of P90,000 realizes P50.000,
and cash of PI 7,000 after settlement with creditors is distributed; the respective partners would
receive (to the nearest peso).
a. D, P8,000; E, P8,000; F, P4,000
b. D, 6,667; E,6,667; F,6,666
c. D,0; E,13,333; F,6,667
d. D,0; E,1,000; F,16,000 Guerrero 2013
56. Jacob, Santos, and Hervas, partners, share net income and loses in the ratio of 5:3:2. The
partners decided to liquidate the partnership. Their statement of financial position prior to
liquidation is:
Assets Liabilities & Capital

Other assets 210,000 Jacob, loan 8,000
Jacob, capital 40,000
Santos, capital 72,000
Hervas, capital 70,000
Total P250,000 Total Liabilities & Capital P250,000
The partnership is to be liquidated by installment. The first sale of non-cash assets with a carrying
amount of PI 20,000 realized P90,000. Liquidation expenses paid amounted to P2,000.
How much cash should be distributed to each partner?.
Jacob Santos Hervas
a. None P35,400 P45,600
b. 32,000 62,400 63,600
c. None 9,600 28,400
d. None 27,600 40,400 Guerrero 2013

ADVANCED ACCOUNTING
57. The partnership of Javier, Karim, and Laurel share profits and losses in the ratio of 5:3:2,
respectively. The partners voted to dissolve the partnership when its assets, liabilities, and capital
were as follows:
Other assets 210,000 Javier, capital 48,000
Karim, capital 72,000
Laurel, capital 70,000
The partnership will be liquidated over a prolonged period of time! As cash is available it will be
distributed to the partners. The first sale of non-cash assets having a book value of PI20,000
realized P90,000. How much cash should be distributed to each partner after this sale?
a. Javier, P0;Karim, P28,800; Laurel, P41,200
b. Javier, Po;Karim, P30,000; Laurel, P40,000
c. Javier, P35,000; Karim, P21,000; Laurel, P14,000
d. Javier, P45,000; Karim, P27,000; Laurel, P18,000 Guerrero 2013
Comprehensive
Questions 1 & 2 are based on the following: Dayag 2013
58. The assets and equities of the Queen, Reed, and Stac Partnership at the end of its fiscal year
on October 31, 2011 are as follows:
Assets Liabilities and Equity
Receivables-net... 20,000 Loan from Stac 10,000
Inventory 40,000 Queen, capital-30% 45,000
Plant assets-net ........... 70,000 Reed, capital-50% 30,000
Loan to Reed _ 5,000 Stac, capital - 20% 15,000
Total Assets PI50,000 Total Liabilities and Equity. PI50,000
The partners decide to liquidate the partnership. They estimate that the noncash assets, other
than the loan to Reed, can be converted into PI00,000 cash over the two-months period ending
December 31, 2011. Cash is to be distributed to the appropriate parties as it becomes available
during the liquidation process.
The partner most vulnerable to partnership losses on liquidation is:
a. Queen c. Reed and Queen equally
b. Reed d. Stac

59. Using the same information in No. 58, and P65.000 is available for first distribution, it should
be paid to:
Priority
Creditors Queen Reed Stac
a. P60,000 P 5,000 P 0 P 0
b. 60,000 1,500 2,500 1,000
c. 50,000 5,000 0 10,000
d. 50,000 12,000 0 3,000
60. The partnership of AA, BB, and CC was dissolved on June 30, 2012 and account balances
after non-cash assets were converted into cash on September 1,2012 are:
Assets Liabilities and Equity
Cash .'... P50.000 Accounts payable P120,000
AA, capital (30%) 90,000
BB, capital (30%) (60,000)
CC, capital (40%) (100,000)
Personal assets and liabilities of the partners at September 1, 2012 are:
Personal Personal
Assets Liabilities
AA P80.000 P90,000
BB 100,000 61,000
CC 192,000 80,000
If CC contributes P70.000 to the partnership to provide cash to pay the creditors, what
amount of AA's P90,000 partnership equity would appear to be recoverable?
a. 90,000 c. 79,000
b. 81,000 d. None Dayag 2013
61. The following account balances were available for the Perry, Quincy and Renquist
partnership just before it entered liquidation:
Cash P 90,000 Liabilities PI 70,000
Non-cash assets 300,000 Perry, capital 70,000
Quincy, capital 50,000
Renquist, capital ... 100,000
P390,000 P390,000
Perry, Quincy and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation
expenses were expected to be P8.000. All partners were solvent.

ADVANCED ACCOUNTING
What would be the minimum amount for which the non-cash assets must have been sold for,
in order for Quincy to receive some cash from the liquidation?
a. Any amount in excess of P175,000
b. Any amount in excess of P117,000
c. Any amount in excess of P183,000
d. Any amount in excess of P198,667 Dayag 2013
Questions 1 & 2 are based on the following: Punzalan 2014

The ABC Partnership has assets with book value of P240,000 and a market value of P195,000,
outside liabilities of P70,000, loans payable to Partner Able of P20,000, and capital balances for
Partners Able, Baker, and Chapman of P70,000, P30,000, and P50,000, respectively. The partners
share profits and losses equally.
62 How would the first P100,000 of available assets be distributed?

a. P70,000 to outside liabilities, P20,000 to Able, and the balance equally among partners.
b. P70,000 to outside liabilities, and P30,000 to Able.
c. P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman.
d. P40,000 to Able, P20,000 to Chapman, and the balance equally among partners.
63. If all outside creditors and loans to partners had been paid. How would the balance of the
assets be distributed assuming Chapman had already received assets with a value of P3
0,000?
a. Each of the partners would received P25,000.
b. Each of the partners would received P40,000.
c. Able: P70,000, Baker: P30,000, Chapman: P20,000
d. Able: P55,000, Baker: P15,000, Chapman: P5,000.

As of December 31, the books of AME Partnership showed capital balances of: A - P40,000; M -
P25,000; and E - P5,000. The partners' profit and loss ratio was 3:2:1, respectively. The partners
decided to dissolve and liquidate. They sold all the non-cash assets for P37,000 cash. After
settlement of all liabilities amounting to P12,000, they still have P28,000 cash left for distribution.
64. The loss on the realization of the non-cash assets was
a. 40,000 c. 44,000
b. 42,000 d. 45,000
65. Assuming that any partner's capital debit balance is uncollectible, the share of A in the
P28,000 cash for distribution would be
a. 19,000 c. 17,800
b. 18,000 d. 40,000

66. Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring
P200,000 when liquidated. At the same time, Morgan has a credit capital balance in the
partnership of PI20,000. The capital amounts of the other partners total a credit balance of
P250,000. Under the doctrine of marshalling of assets, how much the personal creditors of
Morgan can collect?
a. 120,000 c. 320,000
b. 200,000 d. 570,000 Punzalan 2014
67. Partners Able, Baker, and Chapman, who share profit and loss equally, have the following
personal assets, personal liabilities, and partnership capital balances:
Able Baker Chapman
Personal assets P 30,000 P 80,000 P 60,000
Personal liabilities 25,000 50,000 72,000
Capital balances 50,000 (32,000) 70,000
After applying the doctrine of marshalling of assets, the capital balances of Able,
Baker, and Chapman, respectively, would be
a. P50,000 P(2,000) P58,000
b. 48,000 0 58,000
c. 49,000 0 57,000
d. 34,000 0 54,000 Punzalan 2014
Items 95 and 96 are based on the following data Guerrero 2013

On December 31, 2013, the accounting records of the STU Partnership included the following ledger
account balances:
(Dr) Cr
Sy, drawing P(24,000)
Uy, drawing ( 9,000)
Ty, loan 30,000
Sy, capital 123,000
Ty, capital 100,500
Uy, capital 108,000
Total assets of the partnership amounted to P478,500, including P52,500 cash. The partnership was
liquidated on December 31, 2008 and Uy received P83,250 cash pursuant to the liquidation. Sy, Ty, and
Uy shared income and losses in a 5:3:2 ratio, respectively.
68. How much is the loss on realization of assets'?
a. P178,750 c. P 23,750
b. P78,750 d. PI 23,750

ADVANCED ACCOUNTING
69. How much cash is received by Sy?

a. P35,625 c. P37,125
b. P59,625 d. P13,125
70. Partners Beth, John, and Star who shared profit and losses based on 4:4:2 decided to liquidate.
All assets of the partnership were liquidated.
The condensed statement of financial position just prior to liquidation follows:
Cash P100,000 Liabilities PI 40,000
Other assets 400,000 Beth, Loan 10,000
Beth, Capital 45,000
John, Capital 105,000
Star, Capital 200,000
Other assets were sold for P247,500 realizing a loss of PI 52,500. Parties agreed to fully terminate
the partnership's business thus, necessitating distribution of cash to partners and in the event of
capital deficiency, contribution of additional cash. The three partners all solvent and could answer
any capital deficiency. The realization of assets, distribution of loss and payment of liabilities resulted
to the following partners loan and capital accounts balances prior to final cash settlement:
Beth Loan Beth, Capital John, Capital Star, Capital
a. P10,000 P10,000 P50,000 P165,000
b. 10,000 (16,000) 44,000 169,500
c. 10,000 15,000 55,000 165,000
d. 10,000 45,000 105,000 200,000 Guerrero 2013
INCORPORATION OF PARTNERSHIP
Additional Paid-In Capital
71. JJ & KK partnership's balance sheet at December 31, 2012, reported the following:
Total liabilities 20,000
JJ, capital 40,000
KK, capital 40,000
On January 2, 2013, JJ and KK dissolved their partnership and transferred all assets and
liabilities to a newly-formed corporation. At the date of incorporation, the fair value of the net
assets was PI 2,000 more than the carrying amount on the partnership's books, of which
P7,000 was assigned to tangible assets and P5,000 was assigned to goodwill. JJ and KK were
each issued 5,000 shares of the corporation's PI par value ordinary share.

Immediately following incorporation, share premium/additional paid-in-capital in excess of par

should be credited for:
a. 68,000 c. 77,000
b. 70,000 d. 82,000 Dayag 2013
72. The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2010,
follows:
Current assets P250,000

Equipment (net) 30,000
Liabilities P20,000
Adams, capital 160,000
Gray, capital 100,000
Total liabilities and capital P280,000
On December 31, 2010, the fair values of the assets and liabilities were appraised at
P240,000 and P20,000, respectively, by an independent appraiser. On January 2, 2011, the
partnership was incorporated and 1,000 shares of P5 par value common stock were issued.
Immediately after the incorporation, what amount should the new corporation report as
additional paid in capital?
a. 275,000 c. 215,000
b. 260,000 d. 0 Punzalan 2014
Shares Issued
73. Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July
1,2011, they decided to form the R & G Corporation by transferring the assets and liabilities
from the partnership to the Corporation in exchange of its shares. The following is the post-
closing trial balance of the partnership:
Debit Credit
Cash P 45,000
Accounts Receivable (net) 60,000
Inventory 90,000
Fixed Assets (net) 174,000
Liabilities P 60,000
Roy, Capital 94,800
Gil, Capital 214,200
P369,000 P369,000

ADVANCED ACCOUNTING
It was agreed that adjustments be made to the following assets to be transferred to the
corporation:
Accounts Receivable P 40,000

Inventory 68,000
Fixed Assets 180,600
The R & G Corporation was authorized to issue P100 par preference shares and P10 par
ordinary share. Roy and Gil agreed to receive for their equity in the partnership 720 ordinary
share each, plus even multiples of 10 shares for their remaining interest. The total number of
shares of preference and ordinary share issued by the Corporation in exchange of the assets
and liabilities of the partnership are: Dayag 2013
Preference Ordinary Preference Ordinary
Share Share Share Share
a. 2,540 shares 1,500 shares c. 2,642 shares 1,440 shares
b. 2,592 shares 1,440 shares d. 2,642 shares 1,550 shares
Total Par Value

74. Partners Art and Tony, who share equally in profits and losses, have the following balance
sheet as of December 31, 2011:
Cash P120,000 A/payable P172,000

A/Receivable 100,000 Accum.dep'n 8,000
Inventory 140,000 Art, capital 140,000
Equipment 80,000 Tony, capital 120,000
Total P440000 Total P440,000
They agreed to incorporate their partnership, with the new corporation absorbing the net assets
after the following adjustments: provision of allowance for bad debts of P10,000; restatement
of the inventory at its current fair value of P160,000; and, recognition of further depreciation on
the equipment of P3,000. The corporation's capital stock is to have a par value of P100, and
the partners are to be issued corresponding total shares equivalent to their adjusted capital
balances.
The total par value of the shares of capital stock that were issued to partners Art and Tony was:
a. 260.000 c. 273,000
b. 267,000 d. 280,000 Dayag 2013

Comprehensive
Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1,
2010, they decided to form the R&G Corporation by transferring the assets and liabilities of the
partnership to the corporation in exchange for the latter's stock. The following is the post-closing
trial balance of the partnership.
Debit Credit
Cash P45,000
Accounts receivable (net) 60,000
Inventory 90,000
Fixed assets (net) 174,000
Liabilities P60,000
Roy, capital 94,800
Gil, capital 214,200
P369,000 P369,000
It was agreed that adjustments be made to the following assets to be transferred

to the corporation:
Accounts receivable P40,000

Inventory 68,000
Fixed assets 180,600
The R&G Corporation was authorized to issue P100 par preferred stock and P10 par common
stock. Roy and Gil agreed to receive for their equity in the partnership 720 shares of the
common stock each, plus even multiples of 10 shares of preferred stock for their remaining
interests.
75. The total number of shares of preferred and common stocks issued by the corporation in
exchange for the assets and liabilities of the partnership are:
Preferred Common
a. 2,540 shares 1,500 shares
b. 2,592 shares 1,440 shares
c. 2,642 shares 1,440 shares
d. 2.642 shares 1,550 shares

ADVANCED ACCOUNTING
76. The distribution of the stocks to Roy and Gil would be:
Roy Gil
Preferred Common Preferred Common
a. 785 shares 720 shares 1,384 shares 720 shares
b. 773 shares 750 shares 1,843 shares 750 shares
c. 758 shares 720 shares 1,834 shares 720 shares
d. 738 shares 720 shares 1,758 shares 720 shares
CORRECTION OF ERROR
77. X and Y are in partnership, sharing profits equally and preparing their accounts to 31
December each year. On 1 July 2011, Z joined in the partnership, and from that date profits
are shared X 40%, Y 40%, and Z 20%.
In the year ended 31 December 2011, profits were:

6 months to 31 June 2011 P200,000
6 months to 31 December 2011 300,000
It was agreed that X and Y only should bear equally the expense for a bad debt of P40,000
written-off in the six months to 31 December 2011 in arriving at the P300,000 profit. Which of
the following correctly states X's profit share for the year?
a. 216,000 c. 220,000
b. 200,000 d. 224,000 Dayag 2013
78. J J and KK are partners sharing profits 60% and 40% respectively. The average profits for
the past two years are to be capitalized at 20% per year (for purposes of admitting a new
partner) in determining the aggregate capital of JJ and KK, after adjusting the profits for the
following items omitted from the books:
Omissions at Year-End 2011 2012
Prepaid Expense P1,600
Accrued Expense 1,200
Deferred Income P1,400
Accrued Income 1,000
Other pertinent information are as follows:
2011 2012
Net income of partnership P14,400 P13,600
Capital accounts, end of the year:
JJ 45,400 54,000
KK 45,000 55,000

The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum
is:
a. 67,765 c. 69.000
b. 72,105 d. 71,000 Dayag 2013
79. RR and PP share profits after the provision of annual salary allowances of P14,400 and
P13,200, respectively in the ratio of 6:4. However, if partnership's net income is insufficient to
provide for said allowances in full amount, the net income shall be divided equally between
the partners. In 2011, the following errors were discovered: Depreciation for 2011 is
understated by P2,100, and the inventory on December 31, 2011 is overstated by P11,400.
The partnership net income for 2011 was reported to be P19,500.
The capital accounts of the partners should be increased (decreased) by:
a. RR, P(6,540); PP, P(6,540) c. RR, P(6,960); PP, P 6,540
b. RR, P3,000; PP,P3,000 d. RR, P(6,750); PP, P( 6,750) Dayag 2013
80. Abe, Bert, and Carl are partners sharing profit on a 7:2:1 ratio. On January 1,2013, Dave was
admitted into the partnership with 15% share in profits. The old partners continue to participate
in profits in their original ratios. For the year 2013, the partnership showed a profit of P15,000.
However, it was discovered that the following items were omitted in the firm's book:
Unrecorded at year end 2012 2013
Accrued expense PI,050
Accrued income 875
Prepaid expenses PI,400
Unearned income PI,225
The share of partner Bert in the 2013 net profit is:
a. P2,197.50 c. P2,637.00
b. P2,490.50 d. P3,149.75 Guerrero 2013
COMPREHENSIVE
Admission & Retirement
81. The partners' capital (income-sharing ratio in parentheses) of Nunn, Owen, Park & Quan LLP
on May 31, 2012, were as follows:
Nunn (20%) P 60,000
Owen (20%) 80,000
Park (20%) : 70,000
Quan (40%) 40,000
Total partners' capital (20%) P250,000

ADVANCED ACCOUNTING
On May 31, 2012, with the consent of Nunn, Owen, and Quan:
a. Sam Park retired from the partnership and was paid P50.000 cash in full settlement
of his interest in the partnership.
b. Lois Reed was admitted to the partnership with a P20.000 cash investment for a
10% interest in the net assets of Nunn, Owen and Quan.
The capital account to be credited to Reed is:
a. 22,000 c. 20,000
b. 27,000 d. 25,000 Dayag 2013

On June 30, 2010, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm
together with their respective profit and loss sharing percentage, was as follows:
Assets, net of liabilities P320,000
Eddy, capital (50%) P160,000
Fox, capital (30%) 96,000
Grimm, capital (20%) 64,000
P320,000
82. Eddy decided to retire from the partnership and by mutual agreement is to be paid P180,000
out of partnership funds for his interest. Total goodwill implicit in the agreement is to be
recorded. After Eddy's retirement, what are the capital balances of the other partners?
Fox Grimm
a. 84,000 56,000
b. 102,000 68,000
c. 108,000 72,000
d. 120,000 80,000
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 P 140,000. total
goodwill implicit in the transaction is to be recorded.
83. Immediately after admission of Hamm, Eddy's capital account balance should be
a. 280,000 c. 160,000
b. 210,000 d. 140,000

Admission & Lumpsum Liquidation

The following condensed balance sheet is presented for the partnership of Alfa and Beda, who
share profits and losses in the ratio of 60:40, respectively:
Cash 45,000
Beda, loan 30,000
700,000
Accounts payable 120,000

Alfa, capital 348,000
Beda, capital 232,000
700,000
84. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to
admit Capp as a new partner with a 20% interest. No goodwill or bonus is to be recorded.
What amount should Capp contribute in cash or other assets?
a. 110,000 c. 140,000
b. 116,000 d. 145,000
85. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the
other assets are sold for P500,000, what amount of the available cash should be distributed
to Alfa?
a. 255,000 c. 327,000
b. 273,000 d. 348,000
Admission & Instalment Liquidation

N, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed
balance sheet of NXY Partnership as of December 31, 2006 is:
Cash P50,000
Total P180,000
Liabilities P40,000
N, capital 60,000
X, capital 40,000
Y, capital 40,000
Total P 180,000

ADVANCED ACCOUNTING
86. AH the partners agree to admit Z as a 1/5 partner in the partnership without any goodwill or
bonus. Z shall contribute assets amounting to
a. 28,000 c. 35,000
b. 10,000 d. 60,000
87. The NXY Partnership is dissolved and liquidated by installments. The first realization of
P40,000 cash is on the sale of other assets with book value of P80,000. After payment of the
liabilities, the cash available is distributed to N, X, and Y, respectively as follows:
a. 36,000 27,000 27,000
b. 44,000 28,000 28,000
c. 16,000 12,000 12,000
d. 24,000 13,000 13,000
Formation, Admission & Profit Distribution

Questions 1 thru 5 are based on the following: Punzalan 2014
On May 1, 2010, the business assets of John and Paul appear below:
John Paul
Cash P11,000 P22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture & fixtures 50,345 34,789
Other assets 2,000 3,600
Total PI,020,916 PI,317,002
Accounts payable P 178,940 P243,650

Notes payable 200,000 345,000
John, capital 641,976
Paul, capital 728,352
Total PI,020,916 PI,317,002
John and Paul agreed to form a partnership contributing their respective assets and equities
subject to the following adjustments:
a. Accounts receivable of P20,000 in John's books and P35,000 in Paul's are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John's and Paul's respective books.
c. Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be written
off.

88. The capital accounts of the partners after the adjustments will be:
a. John's 614,476
Paul's 683,052
b. John's 615,942
Paul's 717,894
c. John's 640,876
Paul's 712,345
d. John's 613,576
Paul's 683,350
89. How much assets does the partnership have?

a. 2,337,918 c. 2,265,118
b. 2,237,918 d. 2,365,218
90. Peter offered to join for a 20% interest in the firm. How much cash should he contribute?
a. 330,870 c. 344,237
b. 337,487 d. 324,382
91. After Peter's admission, the profit and loss sharing ratio was agreed to be 40:40:20, based on
capital credits. How much should the cash settlement be between John and Paul?
a. 33,602 c. 32,272
b. 32,930 d. 34,288
92. During the first year of their operations, the partnership earned P325,000. Profits were
distributed in the agreed manner. Drawings were made in these amounts: John, P50,000;
Paul, P65,000; Peter, P28,000.
How much are the capital balances after the first year?
a. John, capital 750,627
Peter, capital 372,223
b. John, capital 728,764
c. John, capital 757,915
d. John, capital 743,121

ADVANCED ACCOUNTING
93. The inexperienced accountant for Jack, Kiel and Luck Partnership prepared the following
journal entries during the year ended August 31,2013:
2013
September 1 Cash 50,000
Goodwill 150,000
Jack, capital (PI50,000 x 0.25) 37,500
Kiel, capital (P150,000 x 0.75) 112.500
Luck, capital 50,000
To record admission of Luck for a 20% interest in net assets, with goodwill credited to Kiel
in their former income sharing ratio. Goodwill is computed as follows:
Implied total capital based on Luck's investment
(P50,000 x 5) P250.000
Less: net assets prior to Luck's admission 100,000
Goodwill PI50,000
2013
August 31 Income Summary 30,000
Jack, capital (P30.000 x .20) 6,000
Kiel, capital (P30,000 x .60) 18,000
Luck, capital (P30,000 x .20) 6,000
To divide net income for the year in the residual income-sharing ratio of Jack, 20% Kiel, 60%,
and Luck, 20%. Provision in partnership contract requiring P40.000 annual salary allowance
to Luck is disregarded because income before salary is only P 3 0,000.
What should be the adjusted capital balances of old and new partner(s), respectively, at August
31,2013.
a. P192,000 & P88,000
b. P174,000 & P56,000
c. P192,000 & P56,000
d. P174,000 & P88,000 Guerrero 2013

ANSWER SHEET
1.C 26.B 51.C 76.C
2.D 27.D 52.D 77.A
3.D 28.D 53.A 78.C
4.B 29.D 54.C 79.D
5.C 30.A 55.D 80.B
6.C 31.A 56.D 81.A
7.C 32.A 57.A 82.C
8.B 33.A 58.B 83.B
9.C 34.C 59.D 84.D
10.C 35.D 60.A 85.B
11.B 36.B 61.C 86.C
12.B 37.C 62.B 87.D
13.A 38.D 63.D 88.A
14.C 39.C 64.B 89.C
15.A 40.A 65.C 90.D
16.B 41.B 66.C 91.D
17.D 42.C 67.C 92.B
18.A 43.B 68.B 93.A
19.C 44.A 69.B
20.A 45.B 70.B
21.B 46.C 71.D
22.A 47.C 72.C
23.D 48.D 73.B
24.A 49.C 74.B
25.A 50.D 75.B
ANSWER KEY Page 39

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PRACTICAL ACCOUNTING 2

THEORY & PRACTICE

Partnership Liquidation & Incorporations - MCQ Problems Page 2

Partner’s Personal Creditor

Partnership Liquidation & Incorporations - MCQ Problems Page 1

Partnership Liquidation & Incorporations - MCQ Problems Page 2

Realized loss allocated to a partner

Additional Contribution by a Partner

Partnership Liquidation & Incorporations - MCQ Problems Page 3

Partnership Liquidation & Incorporations - MCQ Problems Page 4

Partnership Liquidation & Incorporations - MCQ Problems Page 5

Partnership Liquidation & Incorporations - MCQ Problems Page 6

Partnership Liquidation & Incorporations - MCQ Problems Page 7

Accounts payable P120,000

Partnership Liquidation & Incorporations - MCQ Problems Page 8

Partnership Liquidation & Incorporations - MCQ Problems Page 9

Partnership Liquidation & Incorporations - MCQ Problems Page 10

Assets Liabilities and Capital

Partnership Liquidation & Incorporations - MCQ Problems Page 11

Net assets P130,000

The final cash distribution to C was:

Partnership Liquidation & Incorporations - MCQ Problems Page 12

Loss absorption by solvent partner

Safe Payment Schedule

1st Priority Payment

Capital Balances Personal Assets Personal Liabilities

Partnership Liquidation & Incorporations - MCQ Problems Page 13

2nd Priority Payment

1st Priority & Partial 2nd Priority

Advances Loans Capital

Partnership Liquidation & Incorporations - MCQ Problems Page 14

Third Priority of Payment

1st, 2nd & 3rd priority payment

Partnership Liquidation & Incorporations - MCQ Problems Page 15

Partnership Liquidation & Incorporations - MCQ Problems Page 16

Partnership Liquidation & Incorporations - MCQ Problems Page 17

The partners agree to the following:

Partnership Liquidation & Incorporations - MCQ Problems Page 18

Cash P 40,000 Liabilities P 60,000

Partnership Liquidation & Incorporations - MCQ Problems Page 19

Cash received by individual partners

Partnership Liquidation & Incorporations - MCQ Problems Page 20

Partnership Liquidation & Incorporations - MCQ Problems Page 21

How would the P20,000 cash be distributed to the partners?

Advances (Dr) Loans (Cr) Capitals (Cr)

Partnership Liquidation & Incorporations - MCQ Problems Page 22

Assets Liabilities & Capital

Partnership Liquidation & Incorporations - MCQ Problems Page 23

Partnership Liquidation & Incorporations - MCQ Problems Page 24

Partnership Liquidation & Incorporations - MCQ Problems Page 25

Questions 1 & 2 are based on the following: Punzalan 2014

62 How would the first P100,000 of available assets be distributed?

Questions 1 & 2 are based on the following: Punzalan 2014

Partnership Liquidation & Incorporations - MCQ Problems Page 26

Items 95 and 96 are based on the following data Guerrero 2013

Partnership Liquidation & Incorporations - MCQ Problems Page 27

69. How much cash is received by Sy?

Partnership Liquidation & Incorporations - MCQ Problems Page 28

Immediately following incorporation, share premium/additional paid-in-capital in excess of par

Current assets P250,000

Partnership Liquidation & Incorporations - MCQ Problems Page 29

Accounts Receivable P 40,000

Total Par Value