Of Alabang Inc.: Prelim Examination Bsa 32E1

LYCEUM OF ALABANG INC.
ISO 9001:2015 CERTIFIED
Genevieve Vargas Accounting for Specialize Transaction Prof. Albina Balon

BSA 4th Year – Irregular PRELIM EXAMINATION BSA 32E1
MULTIPLE CHOICE (SHOW YOUR SOLUTION / EXPLANATION)
1. On January 01, 2017, Yazzi, Angel and Nadine organized YAN partnership by investing P5M, 2M and P3M for
capital interest ratio of 4:5:1 respectively. Nadine has been appointed as managing partner. During year 2017,
YAN partnership reported net income of P3,000,000. Their profit/loss distribution and drawing agreement are
presented below:
• 20% interest on beginning capital
• P10, 000, P20,000 and P50,000 monthly salary, respectively
• 25% bonus of net income after interest and salary to managing partner
• The remainder will be divided equally among partners.
• The partners must withdraw at the end of the year 50% of their share in net income for thee period.
What is the capital balance of Nadine on December 31, 2017?
A. 1, 410,000
B. 3,410,000
C. 1,610,000
D. 3,610,000
SOLUTION:
Yazzi Angel Nadine Remainder
Salary 120,000 240,000 600,000 3,000,000 3,000,000
(10K x12) (20K x12) (50K x12)
Interest 800,000 1,000,000 200,000 2,040,000 3,000,000 -940,000
(2M x 40%) (2M x 50%) (2M x10%)
Bonus 10,000 40,000 2,040,000 -2,000,000
(40K x25%)
30,000 40,000-10,000
Remainder 10,000 10,000 10,000 0 30,000 – 30,000
Total Share in NI 930,000 1,250,000 820,000
Drawings 465,000 625,000 410,000

Base lining Km.30, National Road., Tunasan, Muntinlupa City, Philippines
Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
Capital, Beg. 4,000,000 5,000,000 1,000,000
Capital, End. 4,465,000 5,625,000 1,410,000
2. On December 31, 2017, the capital balance of partners Cristy, Paula and Ara of CPA Partnership are P1M, P3M,
and P6M, respectively with profit of loss agreement ratio 0f 4:1:5. On January 1, 2018, Cristy decided to retire
and received P400,000 from the partnership.
If the assets of the partnership are not properly valued at the time of retirement, how much is the capital
balance of Paula after the retirement of Cristy?
A. 2,900,000
B. 2,850,000
C. 3,100,000
D. 3,150,000
Number 3 and 4
On December 31, 2017, the statement of financial position of DEF with profit or loss ratio of 4:1:5 is presented
below.
Cash 2M Liability of third person 4M

Noncash asset 8M D, capital 3.5M
E, capital 1.5M
F, capital 1M
On January 31, 2018, DEF partnership has been subjected to installment liquidation. As of January 31, 2018, the
following data concerning liquidation are provided:
➢ Noncash asset with book value of P6M has been sold at a loss of P2M.
➢ Liquidation expense amounting to P400,000 has been incurred for the month of January.
➢ P600,000 cash have been withheld for future liquidation expense.
➢ P3M liability has been paid.
3. What is F’s share in the maximum possible loss on January 31, 2018?
A. 1,300,000
B. 1,000,000
C. 1,500,000
D. 500,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
SOLUTION:
D, Capital E, Capital F, Capital
Profit and Loss Ratio 40% 10% 50%
Restricted Interest for possible losses:
Unrealized noncash assets 2M
Cash Withheld 600K
Restricted interest (1,040,000) (260,000) (1,300,000)
4. What is the amount received by E on January 31, 2018?

A. 300,000
B. 700,000
C. 1,000,000
D. 0
SOLUTION:
Cash Noncash Liabilities D, capital E, Capital F, Capital
Balance before 2,000,000 8,000,000 4,000,000 3,500,000 1,500,000 1,000,000

liquidation
Liquidation:
-Realization 4,000,000 (6,000,000) (800,000) (200,000) (1,000,000)
- Expenses (400,000) (160,000) (40,000) (200,000)
-Liabilities (3,000,000) (3,000,000)
Balance after January 2,600,000 2,000,000 1,000,000 2,540,000 1,260,000 (200,000)
Computation of Distribution of Cash on January 31, 2018
D Capital E Capital F Capital
Balance before payments to partners
-Capital 2,540,000 1,260,000 (200,000)

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
Restricted Interest for possible losses
Unrealized Noncash 2,000,000
Withheld Cash 600,000
Total Restricted 2,600,000 (1,040,000) (260,000) (1,300,000)
Balance 1,500,000 1,000,000 (1,500,000)
Another restricted for possible
Insolvency of (4:1) (1,200,000) (300,000) 1,500,000
Payment to Partners 300,000 700,000 -
5. On December 1, 2011, EE and FF formed a partnership, agreeing to share for profits and losses in the ratio of
2:3, respectively. EE invested a parcel of land that cost him P25,000. FF invested P30,000 cash. The land was sold
for P50,000 on the same date, three hours after formation of the partnership. How much should be capital
balance of EE right after formation?
A. P25,000
B. 30,000
C. 20,000
D. 50,000
SOLUTION/EXPLANATION: The contribution of noncash asset to a partnership should be recorded based on their fair
value. In that case, the fair value of the land would be measured by its sales price on the date of sale, thus 50,000 is the
correct answer.
6. MM, NN and OO are partners with capital balances on December 31, 2011 of P300,000, P300,000 and P200,000,
respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is to take certain
equipment with second-hand value of P50,000 and a note for the balance of OO’s interest. The equipment is
carried on the books at P65,000. Brand new equipment may cost P80,000. Compute for: (1) OO’s acquisition of
the second-hand equipment will result to reduction in capital; (2) the value of the note that will OO get from the
partnership’s liquidation.
A. (1) 15,000 each for MM and NN, (2) P150,000
B. (1) 5,000 each for MM, NN and OO, (2) P145,000
C. (1) 5,000 each for MM, NN and OO, (2) P195,000
D. (1) 7,500 each for MM and NN, (2) 145,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
SOLUTION:
Reduction in capital:
Equipment at carrying value. 65,000
Equipment at second-hand value (fair value) (50,000)
Decrease in equipment P15,000
Multiply by: Profit and loss ratio of MM, NN
And OO 1/3
Reduction in capital 5,000
Notes Payable to OO:
Unadjusted capital of OO 200,000
Less: Share in the decrease of equipment (5,000)
Adjusted capital to OO 195,000
Less: Equipment received at second hand value (50,000)
Value of Notes Payable 145,000
7. JJ and KK are partners who share profits and losses in the ratio of 60%: 40% respectively. JJ’s salary P60,000 and
P30,000 for KK. The partners are also paid interest on their average capital balances. In 2011, JJ received
P30,000 of interest and KK, P12,000. The profit and loss allocation is determined after deductions for the salary
and interest payments. If KK’s share in the residual income (income after deducting salaries and interest) was
P60,000 in 2011.
What was the total partnership income?
A. P192,000
B. P345,000
C. P282,000
D. P387,000
SOLUTION:
JJ KK Total
Salary 60,000 30,000 90,000
Interest 30,000 12,000 42,000
Balance or Residual Profit 60,000 150,000
Total 282,000
Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
8. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10%of
net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the
other partners are estimated to be P100,000. What amount of income would be necessary so that Lancelot
would consider the choices to be equal.
A. P165,000
B. P290,000
C. P265,000
D. P305,000
SOLUTION: Bonus = 10% (NI – Salaries – Bonus)
P15,000 = 10% [NI – (100,000+25,000) – 15,000]
15,000 = 10% (NI – 140,000)
15,000 = 10%NI – 14,000
29,000/10% = NI
NI =P290,000
9. Merlin, a partner in the Camelot partnership, has a 30% participation in partnership profits and losses. Merlin’s
capital account has a net decrease of P200,000 during the calendar year 2011. During 2011, Merlin withdrew
P2,600,000 (charged against his capital account) and contributed property valued at P500,000 to the
partnership. What was the net income of the Camelot partnership for year 2011?
A. P3,000,000
B. 4,666,667
C. 7,000,000
D. 11,000,000
SOLUTION:
Merlin, Capital
Withdrawal 2,600,000
Property 500,000 900,000
1,200,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
Withdrawals P 2,600,000
Investment (500,000)
Share in Net Income (balance figure) (900,000)
Net income Decrease (1,200,000)
Net Income of the partnership 900,000 / 30% = P3,000,000
10. The partnership agreement of XX, YY and ZZ provides for the allocation of net income in the following order:
First, XX is to receive 10% of net income up to P200,000 and 20% over P200,000.
Second, YY and ZZ each are to receive 5% of the remain income over P300,000.
The balance of income is to be allocated equally among the three partners.
The partnership’s 2011 net income was P500,000 before any allocations to partners. What amount should be
allocated to XX?
A. P202, 000
B. P216,000
C. P206,000
D. P220, 000
SOLUTION:
XX = 200,000 x 10% =20,000 profit up to 200k
300,000 x 20% = 60,000 over to 200k (500-200) = 300K
Total =80,000
Remainder (500,000 – 80,000) = 420,000
YY: (120,000 x 5%) = 6,000 So 120,000 and the remaining profit over 300k.
ZZ: (120,000 x 5%) = 6,000
Total =12,000
Balance (500,000 -80,000 -12,000) = 408,000
408,000 / 3 =136,000
XX YY ZZ
80,000 6,000 6,000
136,000 136,000 136,000
Total 216,000 142,000 142,000
Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
11. On April 30, 2011, XX, YY and ZZ formed a partnership by combining their separate business proprietorships. XX
contributed cash of P75,000. YY contributed property with a P54,000 carrying amount, a P60,000 original cost,
and P120,000 fair value. The partnership accepted responsibility for the P52,500 mortgage attached to the
property. ZZ contributed equipment with a P45,000 carrying amount, a P112,500 original cost, and P82,500 fair
value. The partnership agreement specifies that profits and losses are to be shared equally but is silent regarding
capital contributions. Which partner has the largest April 30, 2011, Capital balance?
A. XX
B. YY
C. ZZ
D. All capital balances are equal
SOLUTION:
XX YY ZZ
Cash 75,000
Property 120,000
Equipment 82,500
Less: Mortgage assumed (52,500)
Capital Balances 75,000 67,500 82,500
Since ZZ is the highest Capital Balance among the three, thus the correct answer is C.
12. The partnership has the following accounting amounts:

(1) Sales P70,000
(2) Cost of goods sold P40,000
(3) Operating expenses P10,000
(4) Salary Allocations to partners P13,000
(5) Interest paid to banks P2,000
(6) Partners withdrawals P8,000
The Partnership income loss is:
A. P20,000
B. P18,000
C. P5,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
SOLUTION:
Sales P70,000
Less: Cost of Goods sold (40,000)
Gross Profit 30,000
Less: Operating Expenses (10,000)
Operating Expenses 20,000
Less: other expenses: Interest expense (2,000)
Net Income: 18,000
13. The capital accounts of the partnership of NN, VV and JJ on lune are presented below with their respective profit
and loss ratios: (P139,200 ½ , 208,800 1/3 ,96,000 1/6) on June 1, 2011, LL is admitted to the partnership when
LL purchased, for P132,000, a proportionate interest from NN and JJ in the net assets and profits of the
partnership. As a result of a transaction LL acquired a fifth interest in the net assets and profits of the firm. What
is the combined gain realized by NN and JJ upon the sale of a portion of their interest in the partnership to LL?
A. P0
B. P43,200
C. P62,400
D. P82,000
SOLUTION:
Amount Paid P132,000
Book Value of interest acquired (139,000 + 208,900 + 96,000) x 1/5 (88,000)
Gain ₱ 43,200
14. On January 31, 2011, partners of Ln, Mac and Nan, LLP, had the following loan and capital account balances
(after closing entries for January):
Loan receivable from Lon 20,000 dr

Loan Payable to Nan 60,000 cr
Lon, capital 30,000 dr
Mac, capital 30,000 dr
Nan, capital 30,000 dr

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
The partnership’s income sharing ratio was Lon, 50%; Ma, 20%; and Nan, 30%. On January 31,2011, Ole was admitted to
the partnership for a 20% interest in total capital of the partnership in exchange for an investment of P40,000 cash. Prior
to Ole’s admission, the existing partners agreed to increase the carrying amount of the partnership’s inventories to
current fair value, a P60,000 increase. The capital account to be credited to Ole:
A. P60,000
B. P40,000
C. P52,000
D. P46,000
SOLUTION:
Total agreed capital of the new partnership
(equal to total contributed capital*) ........................................................... ₱260,000
Multiplied by: interest acquired..................................................................... 20%
Capital account to be credited to Ole...........................................................₱52,000
15. Which of the following transactions will not affect the total equity of the partnership?
A. Recognition of impairment loss in case of admission of a new partner
B. Withdrawal of a partner
C. Admission of a new partner by purchase of existing partner’s interest below its book value.
D. Retirement of an existing partner with payment of above the book value of such interest
16. A, B, and C are partners with average capital balances during 2017 0f P472,500, P238,650 and P162,350;
respectively. The partners receive 10% interest on their average capital balances; after deducting salaries of
P122,325 to A and P82,625 to C, the residual profit or loss is divided equally.
In 2017, the partnership had net loss of P125,624 before interest and salaries to partners. What amount should
A and C capital change respectively?
A. P40,844 decrease and P31,327 decrease
B. P30,267 increase and P40,448 decrease
C. P29,476 increase and P17,536 increase
D. P28,358 increase and 32,458 increase.
SOLUTION:
A B C Total
10% Interest on average capital* ₱47,250 ₱23,865 ₱16,235 ₱87,350
Salaries 122,235 - 82,625 204,950
Balance: equally (139,308) (139,308) (139,308) (417,924)
Increase (Decrease) ₱30,627 (₱115,443) (₱40,448) ₱125,624

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
17. A partner was admitted in an existing partnership through investment of cash equivalent to ¼ of the new
capitalization. If the capital of the old partners increases, what is the most valid reason under Philippine GAAP?
A. Asset revaluation of existing partnerships assets
B. Impairment loss of existing partnership assets
C. Recognition of goodwill of existing partnership
D. Receipt of bonus from the new partner
18. Which of the following statement concerning the formation of partnership business is correct?
A. PFRS allows recognition of goodwill arising from the formation of partnership
B. The juridical personality of the partnership arises from the issuance of certification of registration
C. The parties may become partners only upon contribution of money or property but not industry or service
D. The capital to be credited to each partner upon formation may not be amount actually contributed by
each partner
19. Regina, Jessica and Nataly entered into a contract of partnership with a total capital contribution of P5,000. The
parties failed to register its articles of co-partnership with the securities and exchange commission. Which of the
following statements is correct?
A. The contract of partnership is void because the law provides that when the capital contribution is at least
P3,000 it must be registered with securities and exchange commission
B. The contract of partnership will bind third persons
C. The contract of partnership remains to be valid
D. The partnership does not obtain juridical personality for failure to register with securities and exchange
commission.
20. In the absence of agreement as to distribution of profit, how shall the partnership profit be distributed to the
partners?
A. The industrial partner shall receive a share equivalent to the least share of a capitalist partner while the
capitalist partners shall share based on capital contribution ratio.
B. The industrial partner shall receive a just and equitable share the remainder shall be distributed to the
capitalist partners on the basis of capital contribution ratio
C. The profit shall be distributed on the basis of loss contribution ratio which may have been agreed upon by
the partners
D. The profit shall be distributed equally to all partners including the industrial partner
21. On July 1, 2016, Anne, Bianca, and Carla formed a business partnership to be operated as advertising agency.
Anne contributed P10M cash while Bianca shall have capital credit of P6M
Upon receipt of the bonus of P1M from Anne based on the provision in Articles of Co-partnership. The terms of
agreement provide that Anne and Bianca shall have a combined 40% capital interest in the newly formed
partnership, what is the capital contribution made by Carla to the partnership?
A. P24,000,000
B. P22,500,000
C. P25,000,000
D. 32,000,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
SOLUTION:
Anne, Capital ₱10,000,000 - ₱1,000,000 =₱9,000,000
Bianca Capital ₱15,000,000 -₱6,000,000= ₱9,000,000
Capital Contribution of Carla (9,000,000 /0.40) = ₱22,500,000
22. On January 1, 2017, Angel Bea and Collen formed ABC & Co., a general professional partnership for the exercise
of their common profession. Angel contributed a building with a cost of P5M and accumulated depreciation of
P4M. Based on the city assessor’s records, the building has an assessed value of P2M. the building has an
annotated mortgage payable amount to P500,000 to be assumed by the partnership.
On the other hand, Bea contributed 10,000 shares of stocks with par value of P200/share and prevailing quoted
price of P300/share. On January 2, 2017, the building contributed by Angel was sold for P5.5M. if Coleen wants
to have 20% capital interest in the newly formed partnership, how much cash shall be contributed by her?
A. P875,000
B. P1,125.000
C. P2,125,000
D. P2,000,000
SOLUTION:
Angel
Building (Fair Market Value) 5,500,000
Less: Mortgage Payable (500,000)
Net Income 5,000,000
Bea
Shares of Stocks (10,000 x ₱300) 3,000,000
Total (5,000,000 – 3,000,000) =₱2,000,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
23. On January 1, 2014, AB and QR agreed to form a partnership. The following are their assets and liabilities.
Accounts AB QR
Cash 136,000 76,000
Accounts Receivable 88,000 48,000
Inventories 304,000 364,000
Machinery 480,000 440,000
Accounts Payable 216,000 144,000
Notes Payable 140,000 60,000
AB decided to pay off his notes payable from his personal assets. It was also agreed that QR inventories
overstated by P24,000 and AB Machinery was over depreciated by P20,000. QR is to invest/withdraw cash in
order to receive a capital credit that is 20% more than AB’s total net investment in the partnership.
How much cash will be presented in the partnership’s statement of financial position?
A. 486,400
B. 546,300
C. 250,400
D. 640,300
SOLUTION:
AB QR
Cash 136,000 76,000
AR 88,000 48,000
Inventories 304,000 364,000
Machinery 480,000 440,000
AP (216,000) (144,000)
P652,000 P724,000
Add: 140,000 -
20,000 (24,000)
Total 812,000 700,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
x 1.20
974,400
974,400
(700,000)
274,400
136,000
76,000
₱486,400
24. On December 1, 2014, MG and AN are combining their separate businesses to form a partnership. Cash and
noncash assets are to be contributed. The noncash assets to be contributed and the liabilities to be assumed are
as follows:
MG AN
Book Value Fair Value Book Value Fair Value
Account Receivables 250,000 262,500 200,000 195,000
Inventory 400,000 450,000 200,000 207,500
PPE 1,000,000 912,500 862,500 822,500
Accounts Payable 150,000 150,000 112,500 112,500
MG and AN to invest equal amount of cash that the contribution of MG would be 10%
More than the investment of AN. What is the amount of cash presented on the partnership’s statement of
financial position on December 1, 2014?
A. 5,025,000
B. 5,500,000
C. 5,750,000
D. 4,950,000

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
SOLUTION:
MG AN Total
Capital: 1,475,000 1,112,500 2,587,500
MG
1,475,000 + x = (1,112,500 + x) 1.10
251,250 = 1x
.10 .10
X = 2,512,500
x2
₱ 5,025,000
25. After the admission of a new partner, the total partnership capital increased by the fair value of the new
partner’s net contributions to the partnership. The admission was accounted for
A. Under the goodwill method
B. Under the bonus method
C. As a purchase of interest
D. As an investment in the partnership

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
PREPARED BY: ALBINA E. BALON. CPA, MBA
CHECKED BY:
MR. CESAR RAMIREZ, CPA, MBA MS. LEAH P. DIGO, Ph.D
BSA PROGRAM CHAIR VICE PRESIDENT OF ACADEMIC AFFAIRS

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248

Of Alabang Inc.: Prelim Examination Bsa 32E1

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LYCEUM OF ALABANG INC.

ISO 9001:2015 CERTIFIED

Genevieve Vargas Accounting for Specialize Transaction Prof. Albina Balon

MULTIPLE CHOICE (SHOW YOUR SOLUTION / EXPLANATION)

Yazzi Angel Nadine Remainder

Salary 120,000 240,000 600,000 3,000,000 3,000,000

(10K x12) (20K x12) (50K x12)

Interest 800,000 1,000,000 200,000 2,040,000 3,000,000 -940,000

(2M x 40%) (2M x 50%) (2M x10%)

Bonus 10,000 40,000 2,040,000 -2,000,000

Remainder 10,000 10,000 10,000 0 30,000 – 30,000

Total Share in NI 930,000 1,250,000 820,000

Drawings 465,000 625,000 410,000

Capital, Beg. 4,000,000 5,000,000 1,000,000

Capital, End. 4,465,000 5,625,000 1,410,000

Cash 2M Liability of third person 4M

Base lining Km.30, National Road., Tunasan, Muntinlupa City, Philippines

D, Capital E, Capital F, Capital

Profit and Loss Ratio 40% 10% 50%

Restricted Interest for possible losses:

Unrealized noncash assets 2M

Cash Withheld 600K

Restricted interest (1,040,000) (260,000) (1,300,000)

4. What is the amount received by E on January 31, 2018?

Cash Noncash Liabilities D, capital E, Capital F, Capital

Balance before 2,000,000 8,000,000 4,000,000 3,500,000 1,500,000 1,000,000

-Realization 4,000,000 (6,000,000) (800,000) (200,000) (1,000,000)

- Expenses (400,000) (160,000) (40,000) (200,000)

-Liabilities (3,000,000) (3,000,000)

Balance after January 2,600,000 2,000,000 1,000,000 2,540,000 1,260,000 (200,000)

Computation of Distribution of Cash on January 31, 2018

D Capital E Capital F Capital

Balance before payments to partners

-Capital 2,540,000 1,260,000 (200,000)

Base lining Km.30, National Road., Tunasan, Muntinlupa City, Philippines

Restricted Interest for possible losses

Unrealized Noncash 2,000,000

Withheld Cash 600,000

Total Restricted 2,600,000 (1,040,000) (260,000) (1,300,000)

Balance 1,500,000 1,000,000 (1,500,000)

Another restricted for possible

Insolvency of (4:1) (1,200,000) (300,000) 1,500,000

Payment to Partners 300,000 700,000 -

Base lining Km.30, National Road., Tunasan, Muntinlupa City, Philippines

Equipment at carrying value. 65,000

Equipment at second-hand value (fair value) (50,000)

Decrease in equipment P15,000

Multiply by: Profit and loss ratio of MM, NN

Reduction in capital 5,000

Notes Payable to OO:

Unadjusted capital of OO 200,000

Less: Share in the decrease of equipment (5,000)

Adjusted capital to OO 195,000

Less: Equipment received at second hand value (50,000)

Value of Notes Payable 145,000

Salary 60,000 30,000 90,000

Interest 30,000 12,000 42,000

Balance or Residual Profit 60,000 150,000

SOLUTION: Bonus = 10% (NI – Salaries – Bonus)

P15,000 = 10% [NI – (100,000+25,000) – 15,000]

15,000 = 10% (NI – 140,000)

15,000 = 10%NI – 14,000

Property 500,000 900,000