Please answer the following questions for our discussion next meeting!

Please make sure to read Partnership Formation

topic.

1. H and I formed a partnership agreeing to share profits equally. H contributed P10,000 cash and P400,000 newly
purchased equipment. I contributed P15,000 cash and a parcel of land acquired 5 years ago for P100,000. Three hours
after formation, the land was sold for P200,000. How much is the capital balance of I?

a. P50,000 b. P215,000 c. P150,000 d. P165,000

2. The following transactions and agreements relate to the formation of the ABC Partnership:

• Andrea contributed a delivery truck with cost her P300,000 but now has a second-hand value half of its cost.

• Brenda has P500,000 personal assets but she contributed only P80,000 cash.

• Carlene contributed P150,000 cash. P120,000 of these were borrowed money from Brenda.

• The partners agreed to share in profit equally despite differences in capital contribution.

What should be the correct capital balances of partners Andrea, Brenda and Carlene?

a. P150,000; P80,000; P30,000 c. P150,000; P80,000; P120,000

b. P150,000; P80,000; P150,000 d. P300,000; P500,000; P150,000

3. Partner Y and Z agreed to form ZY Partnership sharing profit 40% and 60%. The partnership also assumed the
separate liabilities of the partners: Y, P200,000 and Z, P300,000. Cash of P150,000 and P250,000 were also contributed
by Y and Z. Immediately after formation, the partners were credited with P500,000 and P400,000 capital. How much is
the agreed value of non-cash assets contributed by Z?

a. P450,000 c. P1,000,000

b. P550,000 d. P700,000

4. Goodwill or bonus?

H, I and J contributed P650,000, P550,000 and P600,000 but agreed to share equal interest while maintaining their total
capital balance. Which is incorrect?

a. H will be debited for a P50,000 bonus. c. J will be debited for P50,000 bonus.

b. I will be credited for a P50,000 bonus. d. J will not receive any bonus.

5. Bonus method

A, Q and W contributed a total of P600,000 cash to form WAQ Partnership. Only W possess the technical expertise
required by the business so A and Q agreed to provide 10% of their contributed capital as bonus to W. A and W
contributed
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 a. P200,000 b. P240,000 c. P120,000 d. P168,000

The total bonus to W is

a. P18,000 b. P24,000 c. P36,000 d. P48,000

6. Goodwill method

A, B and C formed a partnership and contributed P100,000, P50,000 and P80,000 cash, respectively. A and C further
contributed non-cash assets with agreed values of P50,000 and P20,000, respectively. Owing to the business expertise of
B and C, A concurred that they will be credited with 20% goodwill based on their contributed capital. How much is the
total goodwill to be recognized upon formation?

a. P26,000 b. P60,000 c. P30,000 d. P50,000

How much is the adjusted capital of C after formation?

a. P80,000 b. P100,000 c. P96,000 d. P120,000

7. A, B and C formed a partnership whereby A shall be credited for P120,000 by contributing P100,000. B and C
shall contribute enough cash for their 20% and 30% interest in the partnership, respectively and to cover their respective
share in the bonus to A. What is B’s cash contribution?

a. P56,000 c. P48,000

b. P52,000 d. P40,000

8. Zeus and Raymund formed a partnership agreeing to share profits 40:60, respectively. Zeus contributed a special
equipment which cost him P200,000. Raymund contributed a parcel of land which he purchased for P300,000 three
years ago. The equipment and the land have current fair market value of P150,000 and P400,000, respectively, but the
partners agreed that the equipment and the land will be booked at cost. The bonus method shall be used for whatever
fair value adjustments. What is Zeus’ adjusted capital after the formation?

a. P200,000 c. P130,000

b. P150,000 d. P110,000

9. Benson is a proprietor with adjusted capital balance of P120,000. In need of additional financing, he sold 40% of
his capital to Candy for P60,000. Any goodwill implied by Candy’s purchase is to be recorded prior to Candy’s admission.
What is Benson’s capital immediately after formation?

a. P120,000 c. P84,000

b. P90,000 d. P72,000

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 10. Personal cash settlement

Partner Alex and Becky agreed to form a partnership by contributing the assets of their separate businesses. The
partners agreed to an equal capital credit on the total contributed capital. Cash settlements will be made among them to
even out the difference. The abridged balance sheets of Alex and Becky is are follows:

Alex Becky

Total assets P 120,000 P 80,000

Total liabilities 40,000 20,000

The partnership formation results in

a. P10,000 bonus to Becky. c. P10,000 cash settlement to Becky.

b. P10,000 goodwill to Becky. d. P10,000 cash settlement from Becky.

11. Drawings or Investments

Bob and Bitz contributed P10,000 and P20,000 cash, respectively. Bob further contributed a used equipment which cost
him P50,000. Bitz contributed his delivery truck which also cost him P120,000. Bob and Bitz agreed to share profit
equally but to share capital on the ratio of 40:60, respectively. A valuation report rendered by Pal Appraisal Company
indicates that the truck and equipment have fair values of P70,000 and P40,000, respectively. If the partners agreed to
adjust their capital by cash re-investment, which is true?

a. Bob shall contribute P15,000. c. Bitz shall contribute P15,000.

b. Bob shall contribute P10,000. d. Bitz shall contribute P10,000.

12. If the partners agreed to adjust their capital by cash withdrawal, which is true?

a. Bob shall withdraw P15,000. c. Bitz shall withdraw P15,000.

b. Bob shall withdraw P10,000. d. Bitz shall withdraw P10,000.

13. Helen has a proprietorship business with net assets of P500,000. In need of cash financing, Helen admitted
Teddy and Rod for a 30% and 20% interest in the business, respectively. The partners also agreed to recognize goodwill
for Helen and to be credited with their capital contribution. Rod contributed P220,000 for his capital interest. How much
is the goodwill for Helen?

a. P100,000 b. P50,000 c. P0 d. P25,000

14. C has P220,000 net assets in his business before formation. C admitted A, B into his business. The partners
agreed to a total partnership capital of P600,000 and that no intangibles will be recognized. A, B and C will have 20%,
40% and 40% capital interest. If in pursuant to their agreement, A and B contributed P100,000 and P280,000 for their
respective capital interest, which statement is correct?

a. A will be credited for P20,000 bonus.

b. study source
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 c. C will be debited for a bonus of P8,000.

d. A and C will be credited for a P24,000 and P8,000 bonus, respectively.

15. ZY Partnership was formed on March 1, 2010 with the following asset contributed by partners Zen and Yu:

Yu Zen

Cash P 262,500 P 187,500

Merchandise 412,500

Building 750,000

Furniture and fixtures - 112,500

The partnership agreement provides for the following:

1. The partnership assumed the P225,000 mortgage on the building.

2. Zen and Yu shall share profits or losses 1:3, respectively.

3. Zen and Yu shall have initially equal capital. No intangible asset is to be recognized.

Yu’s capital would be:

a. P1,500,000 c. P750,000

b. P862,500 d. P543,750

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