Polytechnic University of the Philippines

Sto. Tomas Branch

AY 2021 – 2022
Financial Accounting and Reporting 1
Assignment

Name: Jenebeth R. Nieva

I. Partnership Formation

Problem 1.  A, B and C formed a partnership on January 1, 2021 by contributing the following assets and
liabilities:

Cash Inventory PPE Account Notes Mortgage

s Payable payable
payable
Partner Face value Cost Fair value Book value Fair value
A 10,000 20,00 30,000 10,000 40,000 20,000
0
B 20,000 40,00 20,000 50,000 20,000 10,000
0
C 30,000 50,00 40,000 30,000 50,000 70,000
0

Required: 

1. Determine the capital balance of each partner assuming the partners agreed that the contributed
capital of each partner is the amount to be credited as his capital.
Answer:
A P 60,000
B P 50,000
C P 50,000

Solution:

Partnershi
A B C p
Cash 10,000 20,000 30,000 60,000

Inventory 30,000 20,000 40,000 90,000

PPE 40,000 20,000 50,000 110,000
Accounts
Payable (40,000) (20,000)
Notes
Payable (10,000) (10,000)
Mortgage
Payable (70,000) (70,000)
 Capital
Balance ₱60,000 ₱50,000 ₱50,000 ₱160,000

2. Who among the partners receive bonus assuming the partners agreed that they will have equal interest
in the partnership after the formation?

Answer: B and C

Solution:

Actual Contribution Bonus Method

Partner A ₱60,000 (P160,000/3) ₱53,334
Partner B ₱50,000 (P160,000/3) ₱53,333
Partner C ₱50,000 (P160,000/3) ₱53,333
Total ₱160,000 ₱160,000

B and C shall receive bonus.

3. Assuming the partners agreed that A will have 20% capital interest and B will have 30% capital interest,
how much is the amount of bonus to C?

Answer: P 30,000

Solution:
Actual Contribution Bonus Method
Partner A ₱60,000 (P160,000x20%) ₱32,000
Partner B ₱50,000 (P160,000x30%) ₱48,000
Partner C ₱50,000 (P160,000x50%) ₱80,000
Total ₱160,000 ₱160,000

P 80,000 – P 50,000 = P 30,000

The amount of bonus to C is P 30,000.

4. Assuming the partners agreed that A will have 50% capital interest, how much bonus is received by A
from B and C?

Answer: P 20,000

Solution:
Actual Contribution Bonus Method
Partner A ₱60,000 (P160,000x50%) ₱80,000

P 80,000 – P 60,000 = P 20,000

The amount of bonus A shall receive from B and C is P 20,000.

5. Assuming the partners agreed that A will have 10% capital interest and C will have 10% capital
interest, how much is the amount of bonus to B?

Answer: P 78,000

Solution:
Actual Contribution Bonus Method
Partner A ₱60,000 (P160,000x10%) ₱16,000
Partner B ₱50,000 (P160,000x80%) ₱128,000
Partner C ₱50,000 (P160,000x10%) ₱16,000
Total ₱160,000 ₱160,000

P 128,000 – P 50,000 = P 78,000

The amount of bonus to B is P 78,000.

Problem 2. On January 1, 2021, A, B and C formed a partnership. A contributed P50,000 cash. B

contributed inventory with a cost of P100,000 and fair value of P150,000. C contributed a land with
historical cost of P50,000 and assessed value of P200,000. The land is mortgaged for P100,000. On
January 3, 2021, the land was sold for P250,000. How much is the amount to be credited to C assuming
there will be no bonus?

Answer: P 150,000

Solution:

P 250,000 – P 100,000 = P 150,000

The amount to be credited to C is P 150,000.

Problem 3. On January 1, 2021, A, owner of a sole proprietorship business, B and C decided to form a
partnership. B contributed a building with a cost of P100,000 and accumulated depreciation of P20,000.
The fair value of the building is P130,000. The building is mortgaged for P30,000. The statement of
financial position of A’s business shows the following balances on December 31, 2020 with the
corresponding fair values:

Book value Fair value

Cash P100,000 P100,000
Accounts Receivable 200,000 125,000
Allowance for bad debts     (50,000)
Inventory     50,000   70,000
PPE, gross   150,000 150,000
Acc. Depreciation   (50,000)
Accounts Payable 100,000 105,000
 Notes Payable 50,000   50,000

How much is the amount of cash to be contributed by C to have a 20% ownership in the business?
Answer: P 97,500

Solution:
A B Partnership
Cash P100,000 P100,000
Accounts Receivable 125,000 125,000
Inventory 70,000 70,000
PPE, gross 150,000 150,000
Land P130,000 P130,000
Accounts Payable (105,000) (105,000)
Notes Payable (50,000) (50,000)
Mortgage Payable (30,000) (30,000)
Total P290,000 P100,000 P390,000

P 390,000 x 20/80 = P97,500

The amount of cash to be contributed by C is P 97,500.

II. Partnership Operation

Problem 1. On January 1, 2021, Angel and Bea formed a partnership with an investment of P40,000 by
Angel and P60,000 by Bea. On December 31,2021, after closing all income and expense accounts, the
Income Summary account showed a credit balance of P60,000, representing the profit for the year 2021.
Changes in the capital accounts during 2021 are summarized as follows:
Transactions Angel Bea
Capital balances, January 1,2021 40,000 60,000
Additional investments, March 1 20,000 50,000
Additional investments, August 1 20,000 40,000
Withdrawal, October 1 (20,000)     -
Withdrawal, November 1 (50,000)
Capital balances, December 31,2021 60,000 100,000

Required: Determine the profit share of Angel and Bea under the following profit or loss arrangement:
a. The profit or loss will be divided equally.

b. The profit or loss will be divided in the ratio of 60:40 to Angel and Bea.
c. The profit or loss will be divided based on the beginning capital balance ratio.
d. The profit or loss will be divided based on the ending capital balance ratio.
e. The profit or loss will be divided based on the weighted average capital balance ratio.
f. The profit or loss will be divided based on the following terms:
a. Salaries to Angel and Bea of P20,000 and P30,000 respectively.
b. Interest of 10% on ending capital balance.
d. Remaining profit or loss after salaries, interest and bonus, equally.
g. Assuming there is net loss of P60,000 and the profit or loss will be divided based on the following
terms:
a. Salaries to Angel and Bea of P20,000 and P30,000 respectively.
b. Interest of 10% on ending capital balance.
d. Remaining profit or loss after salaries, interest and bonus, equally.
h. The profit or loss will be divided based on the following terms:
a. Salaries to Angel and Bea of P5,000 and P10,000 respectively.
b. Interest of 10% on beginning capital balance.
c. Bonus to Bea, 20% of net income before salaries, interest and bonus.
d. Remaining profit or loss after salaries, interest and bonus, equally.
i. The profit or loss will be divided based on the following terms:
a. Salaries to Angel and Bea of P5,000 and P10,000 respectively.
b. Interest of 10% ending capital balance.
c. Bonus to Bea, 20% of net income before salaries and interest but after deduction of bonus.
d. Remaining profit or loss after salaries, interest and bonus, equally.
j. The profit or loss will be divided based on the following terms:
a. Salaries to Angel and Bea of P5,000 and P10,000 respectively.
b. Interest of 10% weighted average capital balance.
c. Bonus to Bea, 20% of net income after salaries and interest but before deduction of bonus.
d. Remaining profit or loss after salaries, interest and bonus, equally.
l. The profit or loss will be divided based on the following terms:
a. Salaries to Angel and Bea of P5,000 and P10,000 respectively.
b. Interest of 10% weighted average capital balance.
c. Bonus to Bea, 20% of net income after deduction of salaries, interest and bonus.
d. Remaining profit or loss after salaries, interest and bonus, equally.