OUR LADY OF THE PILLAR COLLEGE-CAUAYAN CITY

MIDTERM EXAM = ACCOUNTING 3 & 4 = PROBLEMS

NAME:_______________________________Section______________Score __________________

Supply the required information. Show solution in a separate sheet

A. ANGEL purchased one-half of MAX's interest and share in profit in the MAX and JESS partnership by paying
MAX P180,000. Immediately before Jay's admission, the capital balances of MAX and JESS were P240,000
and P400,000, respectively. MAX and JESS were sharing profits in the ratio of
2:3, respectively.

____________ 1. What would be the capital balance of ANGEL immediately after her admission?

____________ 2. What would be the new profit and loss ratio between MAX, JESS and ANGEL,
respectively?

B. The partnership of AGNES and BANDER provides for equal sharing of profits and losses. Prior to the
admission of KATE, the capital accounts are ANGEL, P150,000 and BANDER, P210,000. KATE invests
P180,000 for a P150,000 interest.

____________ 3. How much is BANDER, Capital immediately after the admission of KATE?

C. LUCAS and MARKO, who share profits and losses equally, agree to take JUAN into the partnership for a
40% share in capital and profits. LUCAS and MARKO retain 30% interest each. LUCAS and MARKO have
capital balances of P100,000 and P140,000, respectively before the admission of JUAN. JUAN pays
P120,000 directly to LUCAS and MARKO for his 40% interest.

All assets of the partnership, except land, are fairly valued.

____________ 4. By how much was land undervalued?

____________ 5. What would be the capital balance of MARKO immediately after the admission of
JUAN?

D. X, Y and Z are partners sharing profits in the ratio of 3:3:2, respectively. On July 31, their capital balances
are as follows: X, P280,000; Y, P200,000; and Z, P160,000. They agree to admit W on the following
conditions:

• . W is to pay X P200,000 for V2 of X's interest;

• W is to invest P160,000 in the partnership;
• Some assets of the partnership are undervalued by P160,000, and these assets will be
revalued accordingly;
• W's interest is to be 25%.

____________ 6. What would be the total partnership capital immediately after the admission of W?

____________ 7. What would be the capital balance of X, immediately after his admission?

E. Partners Ellie, Ollie and Millie agreed to sell to Tillie one-fourth of their respective capital and profit and
loss interest for a total cash payment of P160,000. The capital balances and the respective percentage
interests in profits and losses immediately before the sale to Tillie are

Partner P&L Capital Balance

Ellie 50% P320,000
Ollie 30% 180,000
Millie 20% 60,000

_______________ 8. What would be the new profit and loss ratio for Ellie, Ollie, Millie and Tillie,
respectively?
 ________________9. What would be the capital balance of Ollie immediately after Tillie's admission?

_________________ 10. How much would be received by Ellie from the sale of a portion of his interest
to Tillie?

F. Partners Nitz, Pat and Candy share profits and losses50:30:20, respectively. The statement of
financial position at July 31, 2010 shows the following balances:

Cash 40,000 Accounts payable 100,000

Other assets 360,000 Nitz, capital , 74,000
Pat, capital 130,000
Candy, capital 96.000
Total 400,000 Total 400.000

The carrying values of assets and liabilities are equal to their fair values. Emmie 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. No bonus is to be effected.

__________________11. How much should Emmie contribute?

G. Egay and Egoe who share profits and losses equally have capital balances of P200,000 and P240,000,
respectively. They admit Engyl for a 1/3 interest in partnership capital and profits for an investment of
P260,000.

____________ 12. By how much were the net assets undervalued? (Engyl is credited for his capital
contribution.)

H. Tess and Shirley who share profits and losses equally, have capital balances of P170,000 and P200,000,
respectively. They agree to admit Gen for a 1/3 interest in capital and profits for her investment of
P200,000. Partnership assets are not to be revalued.

____________ 13. How much of the P200,000 would be credited to Tess and Shirley, respectively?

I. Mike and Tess are partners with capital balances of P70,000 and P50,000, respectively. They share profits
and losses in the ratio of 3 I respectively. Voce is to admitted into the partnership for a cash contribution
of P60,000 for a Vi interest in the partnership capital and the future profits and losses.

____________ 14. If Voce would be given a capital credit of P90,000, how much would be charged to Mike's
capital account?

J. Presented below is the condensed statement of financial position of the partnership of Gan, Witt, and
Windy. The partners share profits and losses in the ratio of 6:3:1, respectively.

Cash P 85,000 Liabilities P 80.000

Other assets 415,000 Gan, capital 252,000
Witt, capital 126,000
Windy, capital 42,000
Total P500,000 Total P500.000

Below are a number of independent assumptions involving Windy's retirement from the partnership.
Answer the requirements in each of the following independent assumptions:

____________ 15. Windy is to receive P50,000 as cash settlement of her interest. Partnership assets
are fairly valued. How much is the decrease in Gan, Capital as a result of Windy's withdrawal?

____________ 16. Windy is to receive P60,000 as settlement of her interest. Assume that any
difference between this amount and the carrying value of her capital indicates that some assets have fair
 values in excess of carrying values. What would be the credit to Witt, capital as a result of asset
revaluation.

____________ 17. Gan and Witty buy 1/3 and 2/3, respectively, of Windy's interest for P10,000 and
P20,000. How much is Gan, capital immediately after Windy's retirement.

____________ 18. Gan and Witty buy 1/4 and 3/4, respectively, of Windy's interest for P7,500 and
P22,500. These prices indicate that some assets are overvalued. How much is this overvaluation?

K. Samala, Sanchez and Santos decided to dissolve the partnership on June 30, 2010. Their capital balances
and profit and loss ratio on this date are: Samala, P168,000, 45%; Sanchez, P216,000, 25%; and Santos,
P96,000, 30%. The profit from January 1 through June 30 is P36,000. Also on this date, cash and liabilities
are P126,000 and P174,000, respectively.

_____________19. What was the carrying value of the non-cash assets?

_____________20. If Santos received P124,800 in full settlement of his interest in the firm, how
much should have been received by Samala?

______________21. If only PI 12,400 was realized from the non-cash assets and P20,000 liquidation
expenses were paid, how much total loss was charged against the capital of Santos?

L. The partnership of Capricorn ended its operations andis now in the process of liquidation. All assets
except some pieces of equipment have been sold. The general ledger balances are as follows:
Debit Credit
Cash 54,000
Equipment, net 220,800
Liabilities 73,200
Cap, capital (30%) 86,400
Ri, capital (50%) 67,200
Corn, capital (20%) 48,000

The partnership eventually sold the equipment at 30% of their carrying value.

________________ 22. How much should Cap receive in final settlement of his equity?

_________________23. How much should Ri receive if included in the liabilities balance is P12,000 loan
payable to Ri7

_________________24. Assume that Cap was insolvent and that the equipment was sold for only 20% of
their carrying value. How much cash was received by Corn in final settlement of his equity?

C. The accounts of the partnership of R, S and T at the end of the fiscal year on November 30, 2010 are as
follows:
Cash P103,750
Non-cash assets 707,500
Loans to R 15,000
Liabilities 262,500
Loans from S 20,000
R, Capital 266,250
S, Capital 136,250
T, Capital 141,250

R, S and T have been sharing profits and losses in the ratio of 5:3:2, respectively.

____________ 25. Who is the most vulnerable among the partners?

____________ 26. If in the first cash distribution, S received P50,000, how much was received by R?
 ____________ 27. If in the first cash distribution, S received P50,000 how much was realized from
the first sale of non-cash assets?

_______________28.. If in the first cash distribution, T received P50,000 and assets with carrying value
of P300,000 were sold, how much was the recognized gain or loss on the sale of these assets?

PROBLEM 1
Pamela, Caroline, Dina and Rose are partners, sharing earnings in the ratio of 3:4:6:8. The balance of
their capital accounts on December 31, 2002. are as follows:

Pamela P 1,000
Caroline 25,000
Dina 25,000
Rose 9,000

The partners decided to liquidate and the 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 all
partners are insolvent.

1, Total Assets of the partnership P__________________

2. Cash balance before realization of non-cash assets P _________________
3. Book value of non-cash assets P____________________.
4. Dina’s share when the P22,200 was divided P_______________
PROBLEM 2
A partnership liquidates and finds an excess cash, after payment of liabilities of P100,000. the four
partners have equal capital balances and share profits and losses in the ratio of 10:20:30:40. The four
partners (W, X, Y Z) will receive a final distribution of cash as follows:

5. W ______________
6. X _______________
7. Y _______________
8. Z ________________

PROBLEM 3

Francis, Gary and Joel are partners share profits and losses in the ratio of 2:3:5. The partners have
decided to liquidate the partnership. Their capital accounts show the following balances: Francis,
P60,000 credit; Gary, P90,000 credit; Jose – P30,000 debit.

9. What is the amount of cash available for distribution P _______________

PROBLEM 4

AIDA, LORNA and FE have capital account balances of P80,000, P100,000 and P36,000 and they share
profits in the ratio of 4:2:1, respectively. As a result of the liquidation of their partnership, AIDA
received P52,000.
 10. How much did FE received as a result of liquidation P
11. Proceeds of sale of non-cash assets
12. How much did LORNA received as a result of liquidation
13. Gain or loss on realization

PROBLEM 5
The balance sheet of the firm RJ, SJ and TJ just before liquidation shows the following:

Assets
P120,000

Liabilities 50,000
RJ Loan 10,000
RJ, CAPITAL 22,000
SJ, CAPITAL 30,000
TJ, CAPITAL 8,000
TOTAL 120,000

RJ, SJ and TJ share profit 5:3:2 respectively. Certain assets are sold for P80,000. Creditors are
paid in full, partners are paid P20,000 and cash of P10,000 is withheld pending future developments.
How much cash is to be distributed to the partners?

14. RJ _________________
15. SJ _________________
16. TJ _________________

PROBLEM 3

A balance sheet for the partnership DY, SY & LEE who share profits in the ratio of 2:1:1 shows the
following balances before liquidation:

Cash P 12,000
Other Assets 59,500
Liabilities 20,000
DY, CAPITAL 22,000
SY, CAPITAL 15,500
LEE, CAPITAL 14,000

On the first month of the liquidation, certain assets are sold for P32,000. Liquidation expenses of
P1,000 are paid and additional liquidation expenses are anticipated. Liabilities are paid amounting to
P5,400 and sufficient cash is retained to insure the payment to creditors before making payments to
partners. On the first installment to partners, DY receives P 6,250.00

17. The total cash distributed to partners in the first installment P___________.

18. Amount of cash received by SY in the first installment P____________

19. Amount of cash received by LEE in the first installment P ____________

20. The amount of cash withheld for anticipated liquidation expenses

and unpaid liabilities is P _______________________.

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D. A statement of financial position of the partnership of X, Y and Z contains the following account balances:
Cash P240,000 Accounts Payable P300,000
Accounts receivable 280,000 Notes Payable 200,000
Loans to Z 40,000 Loans from Y 20,000
Inventories 400,000 X, Capital 340,000
Property, Plant and Y, Capital 340,000
Equipment 440,000 Z, Capital 200,000
In January 2010, the loan to Z was offset against his capital balance. P200,000 of accounts receivable
were collected and inventories with carrying value of P160,000 were sold for P200,000. Available cash was
distributed.

X, Y and Z share profits and losses in the ratio of 5:3:2, respectively.

____________ 11. How much cash was available for distribution to

partners?

____________ 12. After the first distribution of cash, how much

was the equity of Y?

____________ 13. If P40,000 cash was withheld for possible

liquidation expenses, how much did X receive, if any, in the first cash distribution?

____________ 14. If Z received P30,000 during the first cash

distribution, how much should have been received by X?
____________ 15. If X received a total of P240,000 in full
settlement of his interest in the partnership, how much total loss was incurred on
the liquidation of the partnership?

THERE IS NOTHING SWEETER THAN

“

VICTORY EARNED BY STRUGGLE.

PERSISTENCE ALWAYS PAYS”