A and B formed a partnership.

A contributed cash of ₱500,000 while B contributed land with carrying

amount of ₱400,000 and fair value of ₱800,000. The land has an unpaid mortgage of ₱200,000 which is
assumed by the partnership. How much is the correct valuation of B’s capital immediately after the
partnership formation?
a. 400,000
b. 500,000
c. 600,000
d. 800,000
Solution:

500,000
Cash 500,000 -
800,00 800,000

Land (at fair value)

200,00 200,000
Mortgage payable - 0
500,000
A, capital 500,000
600,0 600,000

1,300,000

Total 500,000 0

B, capital (800K – 200K)

Mr. A and Ms. B formed a partnership and agreed to divide the initial capitalequally even though Mr. A
contributed ₱100,000 and Ms. B contributed ₱84,000 in identifiable assets. The partners agree that the
difference in the amount of contribution and the amount of credit to the partner’s capital shall be treated
as compensation for the expertise that the partner will be bringing to the partnership. How much is the
correct valuation of A’s capital immediately after the partnership formation? a. 84,000
b. 92,000
c. 100,000
d. 108,000

Solution:
Cash 184,000

A, Capital (184,000 ÷ 2) 92,000

B, Capital (184,000 ÷ 2) 92,000
 A and B formed a partnership. The following are their contributions:

Cash 500,000 -

Accounts receivable 100,000 -

Building
700,00 0

700,00
Total 600,000 0

A, capital 600,000
700,00
B, capital 0

700,00
Total 600,000 0
Additional information:
• The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
• The building is under-depreciated by ₱50,000.
• The building has an unpaid mortgage ₱100,000, but this is not assumed by the partnership. Partner B
promised to pay for the mortgage himself.

How much is the correct valuation of A’s capital immediately after the partnership formation?
a. 460,000
b. 580,000
c. 650,000
d. 720,000

Solution:
Partners hip
A B
Cash 500,000 - 500,000
Accounts receivable
(100K – 20K)
80,000 - 80,000
Building (700K – 50K) 650,000
650,000
Total 580,000 650,000 1,230,000

A, capital 580,000 580,000

B, capital 650,000 650,000

Total 580,000 650,000 1,230,000

. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A
contributed ₱100,000 and Ms. B contributed ₱84,000 in identifiable assets. The partners agree that the
difference in the amount of contribution and the amount of credit to the partner’s capital shall be treated
as cash settlement between the partners. The compound entry to record the partners’ contributions
includes a credit to B’s capital account in the amount of a. 84,000.
b. 92,000.
c. 100,000.
d. 108,000.
Solution:
Cash 184,000

A, Capital (184,000 ÷ 2) 92,000

B, Capital (184,000 ÷ 2) 92,000
The cash settlement among the partners is not recorded in the partnership’s books because this is not a
transaction of the partnership but rather a transaction among the partners themselves.

account has a net increase of ₱50,000. Partner A made contributions of ₱10,000 and capital withdrawals
of ₱60,000 during the year. How much was the share of B in the partnership profit for the year? a. 100,000
b. 150,000
c. 200,000
d. 180,000

Solution:

Step 1:

beg.
Withdrawa
ls Additional investment
Share in profit

end.

Step 2:
A, Capital
beg.
Withdrawa
ls Additional investment
Share in profit (squeeze)
end.

Step 3: 100,000 ÷ 40% = 250,000 partnership profit Step 4: B’s share:

250,000 x 60% = 150,000