PARTNERSHIP

FORMATION:
Problem 1:
On October 1, 20x4, R and T decided to pool their assets and form a partnership. They allocate
profit and loss in the ratio 44:56 for R and T, respectively. The firm is to take over business assets
and assume business liabilities, and capitals are to based on net assets transferred after the
following adjustments:
a. R’s inventory amounting to P12,000.00 is worthless, while T’s agreed value of inventory
amounted to P150,000.00
b. Additional uncollectible accounts of P7,200.00 for R is to be provided; a 5% allowance is
to be recognized in the books of T.
c. Accrued rent income of P12,000.00 on R, and accrued salaries of P9,600.00 on T should
be recognized on their respective books
d. Interest at 16% on Notes Receivable dated August 17, 20x4 should be accrued.
e. The office supplies unused amounted to P24,000.00
f. The equipment’s agreed value amounted to P60,000.00
g. The furniture and fixtures has a fair market value of P108,000.00
h. Interest at 12% on Notes Payable dated July 1, 20x4 should be accrued
i. T has an unrecorded patent amounting to P48,000.00 and is to invest the additional cash
necessary to have a 60% interest in the new firm.
In cases wherein days are considered, use 360 days as basis.
Balance sheets for R and T on October 1, 20x4 before adjustments are given below:

Accounts R T
Cash P 90,000.00 P 54,000.00
Accounts Receivable 216,000.00 180,000.00
Allowance for doubtful accounts (4,800.00) (6,000.00)
Notes Receivable 60,000.00
Merchandise Inventory 192,000.00 144,000.00
Office Supplies 32,400.00
Equipment 120,000.00
Accumulated depreciation- equipment (54,000.00)
Furniture and Fixtures 144,000.00
Accumulated depreciation- furniture and fixtures (24,000.00)
Total Assets P 591,000.00 P 552,000.00
Accounts Payable P 159,000.00 P 120,000.00
Notes Payable 60,000.00 -0-
Capitals 372,000.00 432,000.00
Total Liabilities and Capital P 591,600.00 P 552,000.00
Determine:
1. The net adjustments-capital in the books of:
a. R, P23,400.00 net debit; T, 30,600.00 net credit
b. R, P23,400.00 net credit; T, 30,600.00 net debit
c. R, P23,400.00 net debit; T, 2,000.00 net credit
d. R, P18,600.00 net debit; T, 30,600.00 net debit

2. The adjusted capital of R and T in their respective books.

a. R- P348,600.00; T-462,600.00 c. R- P372,000.00; T- 432,000.00
b. R- 353,800.00; T- 462,600.00 d. R- P348,600.00; T- 522,900.00

3. The additional investment (withdrawal) made by T:

a. None c. (P 60,300.00)
b. (P 54,000.00) d. 60,300.00

4. The total assets of the partnership after formation:

a. P 1,143,600.00 c. P1,220,100.00
b. P 1,162,000.00 d. P1,222,500.00

5. The total liabilities of the partnership after formation:

a. P279,600.00 c. P339,600.00
b. P281,400.00 d. P351,000.00

6. The total capital of the partnership after formation:

a. P804,000.00 c. P811,200.00
b. P806,400.00 d. P871,500.00

7. The capital balances of R and T in the combined balance sheet:

a. R-P348,600.00; T- P462,600.00 c. R-372,000.00; T-432,000.00
b. R- P353,800.00; T- 462,600.00 d. R-348,600.00; T-522,900.00

Problem 2:
On July 11, 2022, XX and YY formed a partnership with contributing the following assets at fair
market values:

XX YY
Cash P 9,000.00 P 18,000.00
Machinery and equipment 13,500.00 -
Land - 90,000.00
Building - 27,000.00
Office Furniture 13,500.00 -
The Land and building are subject to a mortgage loan of P54,000.00 that the partnership will
assume. The Partnership agreement provides that XX and YY share profits and losses, 40% and
60%, respectively and partners agreed to bring their capital balances in proportion to the profit
and loss ratio and using the capital balance of YY as the basis. The additional cash investment
made XX should be:
a. P18,000.00 b. P85,500.00 c. P134,100.00 d. P166,250.00

Problem 3:
Arti and Yu are combining their separate business to form a partnership. Cash and non-cash
assets are to be contributed for a total capital of P600,000.00. The contributed liabilities are to be
assumed by the partnership. They further agreed that their capital balances after formation must
be equal. The following are the assets and liabilities to be contributed by each entity:

Arti Yu
Book Value Fair Value Book Value Fair Value
Accounts Receivable P40,000.00 40,000.00 - -
Inventories 60,000.00 80,000.00 40,000.00 50,000.00
Equipment 120,000.00 90,000.00 80,000.00 100,000.00
Accounts Payable 30,000.00 30,000.00 20,000.00 20,000.00

1. What is the amount of the additional cash to be contributed by Arti in accordance with their
agreement?
a. P300,000.00
b. P120,000.00
c. P420,000.00
d. P170,000.00
2. What is the amount of the capital credit to Yu after formation?
a. P130,000.00
b. P100,000.00
c. P300,000.00
d. P150,000.00

Problem 4: Theory of Accounts

1. This is the framework within which the partners are to operate or conduct partnership
business.
a. Partnership agreement c. PFRS
b. Partnership value d. Mutual Agency

2. The following are true regarding the characteristics of a general partnership except,
a. Separate legal entity c. Unlimited liability
b. Ease of formation d. Unlimited life
 3. If a sole-proprietor contributes a certain asset to the partnership, in recording in the new
partnership books, it involves a
a. Credit to asset c. Debit to drawing account of the partner
b. Credit to capital account of that partner d. Debit to capital account of that partner

4. If a certain asset is contributed to the partnership, when recording that certain asset in the
partnership books, it is valued at
a. Fair market value c. Agreed value
b. Assessed value d. Promised value

OPERATIONS:
Problem 5:
Kheya and Motto formed a partnership on January 1, 2021 by contributing capital of P525,000.00
and P75,000.00 respectively and agreed to share profits and losses 70:30 respectively also.
The following were the profit of loss agreement distribution:

• Monthly salaries for partner Motto in the amount of P10,000.00

• Interest of 5% of the partners’ beginning capital
• Bonus to partner Motto, 20% of net income before deducting salaries, interest, and bonus
• Remainder will be divided using their profit or loss ratio
• At December 31,2021, the partnership generated a net income of P96,000.00 after
deducting salaries, interest and bonus

1. What is the amount of the share in the net income of Partner Kheya?
a. 93,450.00 c. 154,950.00
b. 213,450.00 d. 67,200.00

2. What is the amount of the share in the net income of Partner Motto?
a. 150,275.00 c. 152,550.00
b. 214,050.00 d. 210,300.00

Problem 6:
Partners Fhor, Dha and Fer already established a business and they want to distribute the profits
or losses that were generated at the end of the year. The capital accounts during the year were
follows:

Fhor Dha Fer

January 1 P135,000.00 P180,000.00 P75,000.00
March 1, withdrawal - (36,000.00) -
April 1, investment - - 30,000.00
May 1, Investment 72,000.00 - -
June 1, investment - 27,000.00 -
 August 1, withdrawal - - (9,000.00)
October 1, withdrawal (54,000.00) - -
December 1, investment - 18,000.00 -

The following were agreed on how to distribute the profits and losses:

• Annual salaries P600,000.00 to Fhor, P540,000.00 to Dha, and P750,000.00 to Fer

• Interest was 15% of the ending capital balance in excess of P140,000.00
• Dha receives a bonus of 20% of net income after deducting the bonus and the salaries
• Remainder will be distributed equally
• At the end of the year, there was a credit balance in the income summary account in the
amount P1,740,000.00

1. What is the share in the net income of Partner Dha?

a. P600,450.00 c. P 494,250.00
b. P593,100.00 d. P 585,750.00

2. What is the capital at the end of the year of Partner Fer?

a. P792,900.00 c. P899,100.00
b. P 96,000.00 d. P750,900.00

Problem 7:
The Lalavern Company, a partnership, was formed in January 1, 2021, with the four partners, JJ,
PP, II, and AA. Capital contributions were as follows: JJ, P25,000.00; PP, P12,500.00; II,
P12,500.00 and AA, P10,000.00. The partnership agreement provides that the partners shall
receive 5% interest in the amounts of their capital contributions. In addition, JJ is to receive a
salary of P2,500.00 and PP a salary of P1,500.00. The agreement further provides that II shall
receive a minimum of P1,250 per annum from the partnership and GG a minimum of P3,000 per
annum, both including amounts allowed as interest on capital and their respective shares of
profits. The balance of the profit is to be shared in the following proportions: JJ, 30%, EE, 30%;
FF, 20% and GG, 20%. Calculate the amount that must be earned by the partnership during 2021,
before any charges for interest on capital or partners’ salaries in order that JJ may receive an
aggregate of P6,250.00 including interest, salary and share of profits.
a. P8,333.33 c. P15,333.33
b. P15,000.00 d. P16,166.67

Problem 8: Theory of accounts

1. Partnership law provides that profits and losses of the partnership are to be divided
a. Equally
b. In accordance with their agreement
 c. Depending on the capital contribution
d. First to the partner with the highest contribution then to the partner with the lowest
contribution

2. If no agreement was made as to distribution of profits and losses, how will the profits and
losses be divided?
a. Equally
b. No distribution of profits and losses
c. In accordance to their original capital contribution
d. Profits and losses will be carried over the next year

3. If there is no agreement to distribution of profit, but there is an agreement as to distribution

of losses, how shall the partners divide the profits and losses?
a. Profits will be divided using the original capital contribution, while losses will be divided
using the agreed loss ration
b. Profits and losses shall be divided equally
c. Profits and losses shall be divided using the agreed loss ration
d. No distribution of profits, only loss shall be divided using the agreed loss ratio

4. If there is an agreement as to distribution of profit, but there is no agreement as to

distribution of losses, how shall the partners divide the profits and losses?
a. Profits and losses shall be divided equally
b. Profits will be divided using the original capital contribution, while there will be no
distribution of losses
c. Profits will be divided using the agreed profit ratio, while losses will be divided using the
original capital contribution
d. Profits and losses will be divided using the agreed profit ratio