QUIZ 02: Partnership Operations

Name: ____________________________ ID No.: __________

A and B are partners with capital balances of P160,000 and P80,000. They share profits in the ratio of 3:1. The partners
agree to admit C as a member of the firm.
C purchases a ¼ interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner. C pays the
partners P60,000, which is divided between them in proportion to the equities given up.
1. Give the required entries on the partnership books to record the admission of C.
A, capital 40,000
B, capital 20,000
C, capital 60,000

A and B are partners with capital balances of P160,000 and P80,000. They share profits in the ratio of 3:1. The partners
agree to admit C as a member of the firm.
C invests P120,000 for a ¼ interest in the firm. Asset revaluation is recorded on the firm books prior to the admission.
2. Give the required entries on the partnership books to record the admission of C.
3.
Asset/Other Asset 120,000
A, capital 90,000
B, capital 30,000
Cash 120,000
C, capital 120,000
Or
Asset/Other Asset 120,000
Cash 120,000
A, capital 90,000
B, capital 30,000
C, capital 120,000

A and B are partners with capital balances of P160,000 and P80,000. They share profits in the ratio of 3:1. The partners
agree to admit C as a member of the firm.
C invests P120,000 for a 50% interest in the firm. A and B transfer part of their capital to that of C as a bonus.
4. Give the required entries on the partnership books to record the admission of C.
5.
Cash 120,000
C, capital 120,000
A, capital 45,000
B, capital 15,000
C, capital 60,0000

A and B are partners with capital balances of P160,000 and P80,000. They share profits in the ratio of 3:1. The partners
agree to admit C as a member of the firm.
C invests P96,000 for a 1/3 interest in the firm. The total firm capital after his admission is to be P336,000.
6. Give the required entries on the partnership books to record the admission of C.
7.
Cash 96,000
C, capital 96,000
A, capital 12,000
B, capital 4,000
C, capital 16,000

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A and B are partners with capital balances of P160,000 and P80,000. They share profits in the ratio of 3:1. The partners
agree to admit C as a member of the firm.
C invests sufficient cash for a 1/5 interest.
8. Give the required entries on the partnership books to record the admission of C.
Cash 60,000
C, capital 60,000

The partners of DEF Partnership agree to the withdrawal of F. prior to the withdrawal of F, the partners had the following
balances: D – P32,000; E – P48,000; F – P40,000. Prior to the withdrawal of F, the partners shared profits and losses
equally.
Each of the remaining partners will purchase 50% of the interest of F for P25,000.
9. Prepare the entry or entries necessary to record the withdrawal of F from the partnership.
F, capital 40,000
D, capital 20,000
E, capital 20,000

The partners of DEF Partnership agree to the withdrawal of F. prior to the withdrawal of F, the partners had the following
balances: D – P32,000; E – P48,000; F – P40,000. Prior to the withdrawal of F, the partners shared profits and losses
equally.
The partnership will purchase the interest of F for P32,000; the bonus method is used.
10. Prepare the entry or entries necessary to record the withdrawal of F from the partnership.
F, capital 40,000
D, capital 4,000
E, capital 4,000
Cash 32,000

The partners of DEF Partnership agree to the withdrawal of F. prior to the withdrawal of F, the partners had the following
balances: D – P32,000; E – P48,000; F – P40,000. Prior to the withdrawal of F, the partners shared profits and losses
equally.
The partnership will purchase the interest of F for P46,000; asset revaluation prior to the retirement of F being recognized.
11. Prepare the entry or entries necessary to record the withdrawal of F from the partnership.
12.
Asset 18,000
D, capital 6,000
E, capital 6,000
F, capital 6,000
F, capital 46,000
Cash 46,000

13. In the AAA-BBB partnership, AAA and BBB had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The
bonus method was used to record CCC’s admittance as a new partner. What ratio would be used to allocate, to AAA
and BBB, the excess of Colter’s contribution over the amount credited to Colter’s capital account?
a. AAA and BBB’s new relative capital ratio
b. AAA and BBB’s new relative capital profit and loss ratio
c. AAA and BBB’s old capital ratio
d. AAA and BBB’s old profit and loss ratio

14. When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill's interest exceeded Mill's capital
balance. Under the bonus method, the excess
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a. Was recorded as goodwill.
b. Was recorded as an expense.
c. Reduced the capital balances of Yale and Lear.
d. Had no effect on the capital balances of Yale and Lear.

On June 30, the balance sheet for the partnership of Williams, Brown and Lowe together with their respective profit and loss
ratios was as follows:

Assets, at cost P300,000

Williams, loan P 15,000

Williams, capital (20%) 70,000
Brown, capital (20%) 65,000
Lowe, capital (60%) 150,000
Total P300,000

Williams has decided to retire from the partnership and by mutual agreement the assets are to be adjusted to their fair value
of P360,000 at June 30. It was agreed that the partnership would pay Williams P102,000 cash for his partnership interest
exclusive of his loan which is to be repaid in full. No goodwill is to be recorded in this transaction.
15. After William's retirement what are the capital account balances of Brown? P72,000
16. After William's retirement what are the capital account balances of Lowe? P171,000

On June 30, 2009, the balance sheets of the partnership of AAA, BBB and CCC, together with their respective profit and
loss ratios, were as follows:
Assets, at cost P 180,000
AAA, loan P 9,000
AAA, capital (20%) 42,000
BBB. Capital (20%) 39,000
CCC , capital (60%) 90,000
Total P 180,000
AAA has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of
P216,000 at June 30, 2009. It was agreed that the partnership would pay AAA P61,200 cash for AAA’s partnership interest,
including AAA’s loan which is to be repaid in full. No goodwill is to be recorded.
17. After AAA’s retirement, what is the balance of BBB’s capital account? P45,450

Fernando and Jose are partners with capital balances of P30,000 and P70,000, respectively. Fernando has a 30% interest
in profits and losses. All assets of the partnership are at fair market value except equipment with book value of P300,000
and fair market value of P320,000.
At this time, the partnership has decided to admit Rosa and Linda as new partners. Rosa contributes cash of P55,000 for a
20% interest in capital and a 30% interest in profits and losses. Linda contributes cash of P10,000 and an equipment with a
fair market value of P50,000 for a 25% interest in capital and a 35% interest in profits and losses. Linda is also bringing
special expertise and clients contact into the new partnership.
18. Using the bonus method, what is the amount of bonus? P9,250

Partners Alma, Bea and Carla share profits and losses 5:3:2, respectively. The balance sheet at April 30, 2003 follows:
Cash P40,000 Accounts payable P100,000
Noncash assets 360,000 Alma, capital 74,000
Bea, capital 130,000
Carla, capital 96,000

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 Total assets P400,000 Total equities P400,000
The assets and liabilities are recorded and presented at their respective fair values. Denise is to be admitted as a new partner with a
20% capital interest and a 20% share of profits and losses in exchange for a cash contribution.
19. How much cash must Denise contribute?
A. P60,000 C. P75,000
B. P72,000 D. P80,000

A B C D Total
Unadjusted cap 74,000 130,000 96,000 300,000
Investment 75,000 75,000
Agreed Capital 74,000 130,000 96,000 75,000 375,000
20%

MM, NN, and OO have a partnership. Their capital balances are P90,000, P130,000, and P170,000, respectively. They share profits
and losses 30%, 30% and 40%, respectively. PP wants to become a partner with a 25% share in partnership capital. Appraisal of the
partnership reveals that the fair value of the partnership net assets after PP’s admission is P450,000.
20. Calculate how much PP should be asked to contribute, assuming the bonus method is to be used.
A. P150,000 C. P210,000
B. P250,000 D. P70,000

A summary balance sheet for Alba, Buba and Cela appears below. Alba, Buba, and Cela share profits and losses in a ratio of 2:3:5,
respectively.
Assets Equities
Cash P 100,000 Alba, capital P425,000
Inventory 125,000 Buba, capital 400,000
Marketable Securities 200,000 Cela, capital 200,000
Land 100,000
Building – net 500,000
The partners agreed to admit Diva for a one-fifth interest. The fair market value of the land is appraised at P200,000, the market value
of the marketable securities is P250,000 and the fair value of inventory is P30,000 more than the carrying amount.
21. How much in cash will Diva have to invest to acquire one-fifth interest?
P301,250;

Henry desires to have 30% capital and profit and loss interest in the partnership of GBX. He plans to purchase some interest from the
partners and invest additional cash to achieve the 30% interest. The three partners agree to sell Henry one-fourth of their respective
capital and profit and loss interests in exchange for a total payment of P40,000. The capital accounts and the respective percentage
interest in profits and losses immediately before the sale to Henry are:
Gary, capital (60%) P80,000
Benz, capital (30%) 40,000
Xavier, capital (10%) 20,000
All other assets and liabilities are fairly valued prior to the acquisition by Henry.
22. Immediately after Henry’s acquisition, what should be the capital balances of Gary. 60,000
23. Immediately after Henry’s acquisition, what should be the capital balances of Xavier. 15,000
24. How much cash should Henry invest to the partnership? 10,000

G B X H Total
Capital 80,000 40,000 20,000 140,000
Purchase (20,000) (10,000) (5,000) 35,000 -
Total 60,000 30,000 15,000 35,000 140,000
Investment 10,000 10,000
Total 60,000 30,000 15,000 45,000 150,000

25. Statement I: When a partner leaves a partnership, it is possible that total assets will be unaffected.
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 Statement II: When new partners invest more than the equity interest they are to receive in the net assets of an existing
partnership, part of the entry to record the new partners’ investments is an increase in the capital accounts of the old partners.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: A

26. Statement I: When a new partner is given 30% interest in the partnership, he will receive 30% of all future profits and losses.
Statement II: In admission by purchase, payment is personally made to the partner from whom the interest is obtained resulting
to mere transfers among capital accounts.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: C

27. Statement I: The dissolution of a partnership is the same as the liquidation of a partnership.
Statement II: When Y purchased E’s P200,000 capital interest for P200,000, the ensuing entry on the books of the partnership
would contain a debit to cash for P200,000.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: D

28. Statement I: It is possible to invest assets into a partnership and given a capital balance less than the investment.
Statement II: A partnership may be dissolved at any time by any of the partners.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: A

29. Statement I: The withdrawal of a partner from a partnership is a type of dissolution.

Statement II: A new partner must have the consent of all the partners before being admitted into the partnership.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: A

30. Statement I: When a partner withdraws assets greater than his capital balance, the excess is treated as a bonus to the remaining
partners.
Statement II: When a partner withdraws from a partnership and the value of the assets paid to the partner by the partnership is
greater the balance in his capital account, the partnership is, in effect, paying the withdrawing partner a bonus.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: C

31. Statement I: When the existing partners pay a bonus to a newly admitted partner, the existing partners’ account are debited.
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 Statement II: When a bonus is allowed to a new partner, part of the entry to record his admission to a business reduces the
capital accounts of the old partners.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: A

32. Statement I: A person admitted as a partner into an existing partnership is liable for obligations of the partnership contracted
before his admission.
Statement II: If a partner withdraws by selling his equity interest to the partnership in exchange for an amount greater than the
balance in his capital account, the excess payment will be treated as a bonus to the continuing partners.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: D

33. Statement I: A partnership is dissolved when a new partner is admitted to the partnership.
Statement II: The retirement of a partner by payment from partnership assets may cause the other partners’ capital accounts to
decrease.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: A

34. Statement I: It is possible to invest no tangible assets into a partnership, yet be given a positive opening capital balance.
Statement II: A partner who withdraws from a partnership is always entitled to the balance in his capital account.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: B

35. Statement I: In admission by investment, the bonus method is used when the total agreed capital is more than the total
contributed capital.
Statement II: On dissolution, the partnership is terminated but continues until winding up of partnership affairs is completed.
A. True; True
B. True; False
C. False; True
D. False; False
ANSWER: D