- Ch ap ter 1

Partnership
I. Introduction

A partn ershi p is defin ed as an asso ciatio

n of two or more perso ,:is who
contr ibute s mone y, prop erty or indus
try to a com mon fund w!th the
inten tion of divid ing the profi ts amo
ng them selve s. Acco untin g for
partn ershi ps shou ld co~p ly with, the lega
l requ ireme nt~ as set forth b:," the
Partnership Law as well as comp lying with
the partn ershi p ogre ~me nt itself .
II. Partnership Fonnafion and Capi tal Acco
unts
All assets contr ibute d to the partn ershi p
are reco rded by the partn ersh ip at
their agre ed values (oOa ir.mark et value
s. in the abse nce of agre ed value s).
All fiabilities that the partn ershi p assumes
are reco rded at their net pres ent
values. Thus. if a pcirtner contr ibute s a nonc
ash asset to the partn ersh ip (e.g ..
land or equip ment ) subje ct to mort gage
, the contr ibutin g partn er's capi tal
acco unt is credi ted for t_h e agre ed value
(or fair value s) of the nonc ash
asset less the mort ga~e assu med by_the
partn ershi p.
The capi tal acco unt is an equi ty acco
unt simil ar to the shar ehol ders '
equi ty acco unts in, a corpo ratio n. It
is used to acco unt for perm anen t
withd rawa ls and addit ional.contr ibutio ns.
Othe r impo rtant acco unts inclu de
a .draw ing acco unt and loons to or from.
partn ers. The draw ing acco unt is
used to acco unt for net incom e or loss and
perso nal or norm al withd rawa ls
i.e., share again st ~et incom e. It is close
d at the end ol the perio d into th~
.capi tal acco unt. L~n ~cco u~ts ~re set
up for amou nts inten ded as loans .
rathe r ttlan.as addit ional capit al inves tmen
ts. In liquid ation proc eedi ngs
loan to or from a partn er is in esse nce treat
partn er's·c apita l acco unt. ed as an incre ase or decr ease · • a
in a
 ------ -:---- ----9i aPter J J
Partnenhip
1
C)lvlslon of Profits and Losses IV. Dlssolulion
II/. ore allocated bOSed on agreemen t.
As a rule profits and losses .. . A. Admission of a New Partner
. thods exist for the cfMS1on of partnership Pro1:&.:.
od Vanous me following: "'~
Meth :s - ·ncJuding the A new partner may be admitted to the patnership by purchasing the
and- 1osses, , interest of one or more of the existing partners or by contributin g
cash or other assets (i.e .. investmen t of additional capital) . These
I. Equally, . two situations ore d iscussed below.
Arbitrary ratio. .
2.
Capital contribution rot,o: I. Purchase of Interest- When a new patner enters the partnership
3.
a. Original Capit~I or initial investmen t by purchasing the interest of an existing patner. the price paid for
b Beginning coprtal of each yea that interest is irrelevant to the partnership accounting records
· because it is a private or personal transaction between the buyer
·c '. Average Capital
and seller. The assets and liabilities o f the partnership are not
d. Ending Capita_!of each yeQr
affected: The capital account of the new partner is recorded.b y
4. Interest on capital balance and/or locin balances and the balance merely reclassifying the capital account of the old partner.
on agreed ratio,
Salaries to partners and the balance on agreed r<?'· J , 2. Admissicin by Investment of Additional Assets-A new partner may
5. an
be gaited interest in the partneiship in ~nge for conbi:)ufec f
. --6. Bonus to p~rtners and the balance on agreed ratio.
assets and/or goodwtll (e.g~ business·expertise, an established
a. Bonus as 011 "expense" n computilg the bonus amount. Here, ~ientele. etc.). The admission of the new partner and contrbJtio n
bonus is computed based on net income after bonus. .of <ilSSets may be 1ecor;ded on the basis of the born.JS method.
b. Bonus as·a distribution of profit. Here. the bonus is c·o mputed
based on net income before deducting the,'bonus. Bonus method - This method is based ·upon the historical cost
principle. Admittance of a new partner involves debiting cash or
7 Interest on capitals and/or loan balances. salaries _to partners. a~ other assets for the FMV of the assets contnbuted and credting the
bonus to partner and the balance on agreed ratio. new patner's capital for the ogeed p:e.• purchased ) percentag e
of total capital. Total capital equals the book value of the net
The method of division to be used in any given sifuotion is generaDy the method ' assets prior to admittance of the new partner. plus the FMV of the
specified in the partnership agreemen t. This agreemen t must always be assets contnbuted by the ·n ew partner. A difference between the
1
consulted first, since it is legally binding on the partners. If no profit and o_ss FMV of the assets contributed and the interest genteel to the new
sharing arrangeme nt is specified in the partnership agreemen t. the part~ partner results in the recognition of a bonus.
requires that profits and losses be shared according to capital contn~fi?O·
a. No bonus recogtized -wtien an incorTWlQ partner's capitol .
Capital contribution should be interpreted to be original cap(ta ~/~ . . account (ownership interest) is to be equal to his puchase
capital of each year in the absence of original capital; 51milar1V, 1~ price, the partnership books merely debit cash or other assets
agreement specifies how profits are to be shared but is silent as to profit and aecfrt capital. ·
losses are to be shared in the sci'me manner as profits. Notice tha_t ~eresfS.
and loss sharing ratio is totally independe nt of the partners' ownersh~ ~.. sticie . b . ..· Bonus granted. to the old parlne,s-W hen lthe FMV of the
Thu$. -t wo partners may have ownership interests of 7CR. and 30% uu• cmetsconfrbJfed byaiinc ormgpa ther~ theano..n t
· of ~ i p interest to be credited to his'topitol ciccount.
profits and losses equally.
the old ~ recognize a bonus equal to this' excess.
This
bonus is allocated on the basis of the some ratio used for
!.---
----------'-:-----:-------:---:-~.'
. me ~!location (unless otherwise specified ·.
inco t) R ding ln 1n the ·
partnership agreemen . ecor I " .v ves crediting th . .
o
· 1
partners' capital accounts by the allocated amounts. ~ old
. Bonus granted to new partner - An incoming partner
c. conlribUte assets having a FMV smaller than the partne~
interest grante? to that new partner. Simk~rty. the new~
7
may not contribute any ass ts at all. _The incoming P0rtn
therefore presumed to contribute an intangible asset su ~ ls
managerial expertise qr personal business reputatio~ 1c t~
case. a bonus is granted to the new partner. and the~; it IS
accounts of the old partners are reduced on the basis of~~
profit and loss ratio. r 4. 'Drawing accounts. and
Goodwill method. I~ PFRS No. 3,_ go?dwill represents the excess of
~he c_ost of the business c<?mb,nation over the fair value of the
identifiable net assets obtained. Therefore, the standard provides
that goodwlll attaches only to a business as a whole and is
recognized only when a business Is acquired. This provision of PFRS
No. 3 ou~owed ~he use·of t~e .goodwill method in portne/5hip·
accounting particularly adm1SS1on and retirement of a partner
because there is no business involved. The term "business" is defined ·
in the Appendix Aof PFRS No. 3 as:
An integrated set of activities and assets conducted
and managed for the purpose of providing: .
(a} a return to investor; or
(b} . . lower costs or other-economic benefits ckectly and
proportionately to policyholders or participants.
A busine~ generally consists of inputs. processes appue<;l .
to those inputs. and resulting outputs that are. or W!"
be. used to generate revenues. If gOO<jwrl/ is present 1n ·
a lransferred set of activities and.assets, the transferred ~~
set shall be presumed to be a business.
~efer t_o Appendix of this chapter for further discussion -one!,
dlustrahon. · approach is to close out the partnership books completely and to
B. Wlthdrc;,wal of a Partner
Admission of a new partner is not the only mal"!ner by whiCh a ~ ·:
can undergo a change in composition. Over the life of anY partn
Partnership 5
partners may leave the organization. Thus, some method of establishing
on ~quitable settlement of the withdrawing partner's interest in the
business property is necessary. ·.
~or a·.partner to w!thdrow or retire from the partnership. the total
int¥est of a partner should be properly determined which includes
the following·: . .·
1. Shore in the profit CJnd loss 6f the ·partnership.
2. Adjustments in assets and liobDities to reflect fair malc:et values.
3. . Loons to and from portnet'ship.
5. Capitol interest / accounts.
Withdrawal or retirement from the partnership may either be:
I
\
1. Selfing of on interest to an outsider. This is simiar to admission by
purchase.
2. SelHng of an interest to ari existing patner, The interest of the rem,g
partner will be purchased with the personal assets of existing
partners rather than with the assets of the partnership.
.
3. Selfing of on interest to the partnership/paymentfrom partnership
fund. Under this approach. the withdrawal of a pa1ner maybe
treated as: · ·
o. Payment at book value
b. Payment at less thcin book value - bonus method
c. Payment at more than book value - bom~ method ·
C. Incorporation of a Partnership
for a yaiety of reasons. inclucfing legal and/or tax reasons. t h e ~
of a partnership may choose to incorporate. Two approaches of
-opening the corporate books are in general use. One is to refan the
books of the partnership and to record all assets and liobitl8$ at fair
market value concomitant with the closing of the partners' capitol ·
accounts and the opening of a Common ~tock account. The other
n this case. the fair
open a new set <;>f boOks ·for the corporation. l_
market values are used as the basis for recording oU assets and .
liabilities ~h the -balancing amount credited .t o Common Stock.
occasionally. additional cash or other assets may be Invested In the
corporation. ,
 ----- ----- --.... :C:: :h~apte~;
Partner ship
7

~
'I. .
15
ttie
emnQ partne rship assets into cash an
process of con~ pamer.;- fl"eque ntty. the sale of OSSe~
MULTIPLE CHOIC E QUESl lONSf
, ...
~ cCJ5h to creotors

°'~o rrv ~
,,ave P::::.,
bOth credtOC'S and pai:tne rs. 1he cre<i\
~ ~ 5l}lfi Ciel" ~'°~ bCJSic rule is th~t no_ distnb ution
""" losses and liquid ation expen ses hav
is ma: Note to the Exami nees:

Accor ding to f>FRS No. 3. goodw ill repres ents th

'°""'.,.... ...-_prunti
t,een paid OI .
al possi eind'" -'"'ual prema turely distrib uting cash
(JYided fOf AA
·to1 ·accou
IV"-' d fi ·t · ,e
0
ness comb ination over the fair value of the identif
Theref ore. the standa rd provid es that.go odwlR
e excess of the cost of the b usi-
ia ble net as.se ts o bta in ed.
nt later shows a e 1c1 mayb e held attach es only to a buslne u as a
p01nei- wt,o5e ~P' . solven t partne r is unabl e to repay such whole and is recogn ized only when a busines s
Is acq
~ ~ f O fiquido tion may be distrib uted in a lump
liable 11 0 No. 3 outlaw ed the use of the goodw ill metho d In p uired. This provisi on ol PFRS
n rtnersh lp particu larly admis-
(iSt!IJUtlon- The proc ~ sold and au credito rs sion and retirem ent of a partne r because there
is no busine ss involve d.
satisfie d. or the procee os
SIITlan ~d(l55e tsed~ ~ in installm ents as
~~cjs 11bJt exces s cash becom es Partne rship format ion:
~--·-· - .
avoloble- l. On Decem ber 1. 2011. EE and FF formed a partne
[)is1rDVtion - lhe ffit step in the liquida tion for profi ts and losses in the ratio o f 2:3 . respec tively rship. agreei ng to shore
proces s is to se1 land that cost him P25.00 0. FF inve sted P30.00 0 . EE investe d o parce l of
"- L ~ assets and alloca te the resulti' :'g ga~n cash . The land was sold for
or loss to the capital PS0.00 0 o n the some dote. three hours o tter format
d counts 01 the pamen in occcxd ance with thelf profit How much should be the capito l balanc e of EE io n of the partne rship .
and loss sharing
~ the second step is to satisfy the liabilitie s owing
to credito r.; othe,-
right ofter format io n i
~ patners .. The ftWd step is to satis1y liabiliti es o. P25.00 0 c. P60.000
owing to partne rs other b. 30.000
than tor capital and profits. The final step is to d. 50.000
distrib ute any cash
remoiri ng to the partn ~ 1or capita l and finally (AICPA )
for profits . Any
delicien cy (Le .. debit balanc e) in a solven t partne 2. On Morch 1 . 2011. II and JJ formed o p artners h
r's capita l will requ,;e the followi ng assets: ip with each contrib uting
that partner to contrib ute cash equal to the eebit
balanc e. 11 the
delicient partner is insolve nt. the debit balan ce
must be absorb ed by II JJ
the 1et I u i, ,g ~ {usually in accor dance with
their profit and loss Cash ............. ................................. ........ ... ...... . P300.00
shang ratio) . Note. howev er. that in order to achiev Machi nery and equipm ent ... .......... ... .... ..... . 0 P 700.000
e an equitab le 250.000 750.000
m1lbJfion. a partner 's loon to the partne rship will tirst be Buildin g ........................................ ....... ... .... .. .. .
used to offset Furnitu re and fixtures ....... ... ...... .... ...... ..... ... ... 2.250.0 00
a debit balanc e in his capital accou nt. lherefO fe_. 100.000
· right ol offset doc:l,il, e. a partne r's loan to the
under this so-calle d
partne rship will nove . The buildin g is subjec t to mortga ge loon of P800.00
dstll:Ju1ion priorily Ottf to the extent it excee ds a by the partne rship agreem ent provid es that II 0. w hich is to be assum e d
debit balanc e in the
patner 's capta oc:cou nt. losses 30% and 70%. respec tively . On Morch 1. and JJ shore p rofit:s on~
capito l accou nt should be: 2011 the balanc e ,n J J s
6. luslulme 11t Distribu tions - The liquida tion of a partne
rship may take o . P3.700.000 c. P3.050.000
place over a period ot severa l month s. Install b . 3 .140.00 0
ment distribu tions moY d. 2.900.0 00
be made to PQrtne n on the basis o1 a Sched ule
of Sate· Payme nts 01 (AJC PA)
':ash Priority Program . in conjun ction with a Liquid ation
Schedu le 3 . The same informa tion in Numbe r 2. excep t that
wrilar to the one used tor lump sum liquida ti ons. the mortgo 9e •~n is r;,o t
lhe Sched~ le 0 1 assum ed by the partner ship. On Morch I . 20 11 the
balanc e ,n J J s capita l
Sate P?'f"l8 "h tottes a Conse Native appro ach accou nt should be:
to the di5!rib ution:
assumn g that noncas h assets ore worthle ss: thus distrib
mode to PClltnen on the basis ot the value of partne
ution rnoYuntl a . P3.700.000 c. P3.050.000
the assets are sold. rship a ssets. b. 3 . 140.000 d. 2.900.0 00
(Adop t ed)
 2:_
~ - - -- - - ---.:C::::'.'h':aprer I
Partnership_
8 • .d d to form a partnership. Their balan
I FfandGGdec1 e Ce
~~eare:-- What is the capitol of AA and BB ofter·the above adjustments?
4. A5ofJufYl.~
sheets on thiS uu• FF . c . AA. P65,000; BB, P76,000
GG a. AA, P68,750; BB, P77,250
b . AA, P75.000; BB, P81,000 d. AA. P65,000: BB, P8 l.OOO
....................... P 15,000 P 37,50() (Adopte d)
Cash ....................................... 540 000 225,CXX)
AcCOIXlfs receiVable ...... .................... ........ , -
202,500 6. CC admits DD as a partner in business. Account s in the ledger for CC on
erch(rldise inventory ............................... Novemb er 30, 2011, just before the admissio n of DD, show the follow ing
~ac/'tlefYond equipment ........................ I50,000 270,CXX)
balances:
•otal ........................... P705,000 P735,CXX)
fl •••"•"•""""""'""" "'"" . Cash .............................................. .: ............................... ...... . P 6,800
Account s receivab le .......................................................... . 14,200
AccMtsPayoble ....................................... Pl35,000 P240,CXX) Merchandise inventory ..... :............... ............... .................... 20,000
FF, capitol..................................................... 570,000 Account s payable .............................................................. .. 8,000
CC, capitol ............... .............................. ............... ............... 33,000
GG, capital .................................................. 495,00)
---
Total ......-............................,......................... P705,000 P735,CXX> It is agreed that for purposes of establishing CC's interest. the following
adjustments shall be made:
The portne~ agreed that the machinery and equipm ent of FF •
underdepreciated by Pl5,CXX) and that of GG by P45 000 Alf IS (a) An allowan ce for doubtfu l accoun ts of 3% of accoun ts
~tflA~?b esetupo mountin gtoPl20 ,000fo; , .. i~o;~~e~ receivab le is to be established.
. (b) The merchan dise inventor y is to be valued at P23.000.
c~~iltei, estof60% ro~r~~;: :o~~ fora profit Onc.J 'OSS roti? ~nd (c) Prepaid salary expenses of P600 and accrued rent expense of
10 bring the P<J'fners' ccipitol'bal · ow.much Casi I must FF invest Pf¥)() are to be recogniz ed. ·
loss rofiof onces proportionate to their profit and
DD is to invest sufficient cash to obtain a l /3 interest in the partners hip.
a. Pl42.500
C. . P172.S(X)
Comput e for: (l) CC's adjusted capital before the admissior, of DD: and
b. 52.500 (2) the amount of cash investme nt by DD:
d. · 102.500
a. (·l) P35,347; (2) Pl 1,971 . c. (l) P35,374; (2) P17,687
S. OnAugustl,AAandBB . (Adopte d} b. (I) 36,374; (2) 18,487 d. (l) 28,174; (2) 14,087
frm .to t01ce over !her ~Qled their assets tO . (Adopte d)
Capjtab are to be business assets and form a Partnership, with the
0
dJustments. jProfit ~ d on net assets ~ssume the liabilities. Partners 7. MM, NN, and 00 are partners with capital balance s on Decemb er 31.
nd
88 ,5 •111ventay is to .
loss ore allocated,.,,~!.~,,e d ofter the following 2011 of P300,000, P300,000 and P200,000, respectiv ely. Profits are shored
,..1""' y.1 equally. 00 wishes to withdraw and it is agreed that 00 is to take certain
OCcountsotP1~ be ll'lcreased b equipme nt with second- hand value of PS0,000 and a note for the balance
r ~ - OlldPJ.50:i y P◄,OOo· on II .
of OO's interest. The equipme nt are carried on the books at P65,000. Brand
boob.fhe~ ~ounts~ retobes et~pin~ owance for doubtfu l
new equipme nt may cost PS0,000. Comput e for: (1) OO' s acquisiti on of
·-•UJQ1rfof~ 0 bleofp,4,00ois t e bootcs of AA and BB, the second,.hand equipme nt will result to reductio n in capitol; (2) the value
es on AUQust I beo be recogniz ed AA' s
t
in of the note -that will 00 get from the partners hip's liquidati on.
Assets ' fore Odiustm
1 en s, follow:
--.....
~
a. (1) P15,000e ach for MM anc;I NN, (2) P150,000.
- ..::::::::::::::........................:. ~ BB b. ( l) PS,000 each for MM, NN and 00, (2) Pl 45,000.
............ •..•.• P75(X)Q (2) ·P195,000.
................~.. s'nrv-. Pt 13,000 c. ( 1J PS,000 each for MM, NN and 00,
"'VU . 34,500 d. (1) P7,500 each for MM and NN, (2) P145,000.
(Adopt~ d)
 Chapter J
JO
Partnership
II
·th tormt:d a partnership with each partner contributing the
8. Jones and SmI
tonowing items: LL and MM agreed to form a partnership by c ontrib •,ting their respective
J.Q!]fil assets and equities subject to the following adju:dmenls:
Smith
Cash ............ ................................................... P80,000 P 40.000 a. Accounts receivable of P20.000 in LL's books a nd P35,000 in MM's
Building - cost to Jones ............................... 300,000 are uncollectible.
• fair value ............................................. 400,000
Inventory - cost to Smith ............................. b Inventories of PS,500 and P6,700 are worthless in LL's and MM 's
200.000 respective books.
• fair value ............................................. 280.000
Mortgage poyob'.e ......................,................ 120.000 c. Other assets of 1"2,000 and P3,600 in LL's and MM 's respective
Accounts payable:........................................ 60,000 books ore to be written off.
Assu~e .t~at for to~ purposes Jones and Smith agree to share equally in The capital account of the partners after the adjustments will be:
the hob,rtt~es assumed by the Jones and Smith partnership . What is the
balance 1n each partner's capital account for financial accounting
purpos~s? · a. LL, P6 l 5,942; MM, P717,894 c. LL P64o:876; MM, P683,050
b. LL. P640,87Q: MM, P7 l 2,345 d. LL, P6 l 4.476; MM, P683,052
Jones . (PhilCPA)
Smith
A. P350.00) P270.00)
B. P260,000 P180,00)
·.o. The some information in Number 9, how much total assets does the
C. P360,00) partnership have a fter formation?
P260,00)
D. . PS00.00)
P300.00) a. P2,337,918 c. P2,265, 118
0. Option A b. 2,237,918 · d. 2,365.218
b. C. Option'C (PhilCPA)
Options
d. Option D
9. 1 2011 PP and Ga-decide to combine their busin~sses and
The business assets of LL and MM
appear below: 11. On Marchrt • rsh., p· The·,r balanc e sheets on Morch
1. before ad1ustments.
form a pa ne · ·
showed the following:·
Cash -.................... LL MM
Accountsreceiv~ble ............................... PP 00
p 11,000 p
Inventories ........................... 22,354 P 3,750
~.536 Cash .........................................: •·················
P 9,000
567,890 13,500
~~~i~g·::::::::::::::::::::::::::::::::::::::::::::::::::::::: 120.035 260,102 Accounts receivable ................................ 18.500
30.000 19.500
~lure and fixture .............................. 603,000 Inventories ..................................................
30.<Xl() 9,000
er 0 ssets ..................•..:····::::::::········· 428,267 Furniture and fixtures (net) •······················ 27f:/J
50.345 11 ,500
34,789 Office equipment (net) ·······················:.... ,
1010 1 ··········•· .. 2,000 3,600 Prepaid expenses ·················--···················
6.375 ~
Accounts P0YOble ······························ _!l1020,916 PlOS.375 PSl,500
Pl.317,ooi Total ......•...•.........................•..•.......· ...... . ····
~oles PQyoble ......:.... .......................
l. COpilol ············· p " 178,940 P 243,650 · p -45,750 PlB.000
..".1•:::::::::::..·····••.........:::::::::::::::::::
MM, CTootpoilla · 200.000 345,000 A Ounts payable ··················-···" ·,······:··· . 59,625 ~
cc
capitol ....................................··············••" ··
641,976 ' PSl,500
··········· . ······················ PlOS.375
···············••..., .. P_!.020.916 -- 728,352
Pl.317,(")2
Total ..........: .................................................. ..
. \.
 JJ
-'-- --- -... :._ _~
!.:_ 11 ~-: +-- --- --- --- --- --- Partnership
rded in their book s:
They agree d to have the follow ing items reco
Partnership Operations:
for doub tful acco unts .
I. Provide 2% allow ance s and losses in the ratio of 60%: ~ -
PP's furnitu re and fixtures s~ou ld be P31.000. while QQ•s 15. JJ and KK are partners who share profit
2. . . Office 00 for KIC The partn ers ore also ·
equip ment is unde r-dep recia ted by P250. respectively. JJ's salary is P60,000 and P30,0
yet re In 2011. JJ rece ived PJ0.000
3. Rent expense incur red previ ously by PP was not paid interest on their overa ge capit al balan ces.
amou nting tb P1,000. while_ salar y expe nse
incur red by
rd ed
Q~ of interest and KK. P12,000. The profit .and loss oUoc ofion is dete rmin ed
Was ' paym ents. If KK's share in the
not also recor ded c::imounhng to P800. ofter dedu ction s for the salary and interest
of inven tory amo unte d to: dedu cting salari es and interest) was P60.0 00
4. The fair mark et value residual incom e {inco me after ·
e?
in 2011, what wds the total partnership incom
For PP .........•................................................, P29,500
ForQQ·......... ................................................ . 21,00Q a. P192 000 C. P2B2.000
b. 345.000 d. 387.<XX>
for PP and QQ; fAdo ptedJ
Com pute the net (debit} credi t adjus tmen t
pp pp untin g amou nts:
00 . 00 16. The Partnership has the follow ing acco
a. P 2870 P 2,820 C. P(870J P 180
(2,870} (2,820} d. 870 (1) Sales = P70,000
b. (IBOJ
(Adapted) (2) Cost of Good s Sold = P40,000
f3J Oper ating Expenses= P10,000
comp ute the total ii·ab·i·t · . ft (4} . Salary alloc ation s to partn ers= P 13.000
12. . The sa~e: information in N~m ber 11, 11 ,es a er
(SJ Interest paid to bank s = P2000
.form ahon
f6J P<11rtners.' withd rawa l~ = PB~OOO
a. P61.950 C. P65.550
b. 63,750 .d . 63;950 The partn ershi p net incom e floss} is:
11 a. P20.000 c. P 5,000
13. The same inform.ation in Num b
forma tion: · · er • com pute the total ·assets after b. ·18,CXX> d. . (3.000J

a. (Ada oted )
P157,985 C. Pl60,765
b. 156,875 d. .152985
to acce pt a solay of P«J.0 00 or a
17. Lanc elot is. trying to decid e whet her
yy f zz '
incom e ofter salary and bonus
14. On Apnl 30, 2011. XX and
ershi p by comb ining their salary of P25.000 plus a bonu s of l 0% of net
sepa rate business propr iet0 h. orme d a pa~n
t~
XX co~t nbut ed cash of PlS,000. YY · as a mean s of alloc ating profit among the partn ers. Salaries troc: eable to
000. Wha t amo unt of Inco me
contn buted prope rty with a ~ 5 the other partn ers are estim ated to be Pl00,
cany i~g amou nt. a P60.000 original · consider the choic es to be
cost, and P120.000 fair value Th·
t p acce pted responsibility for.
t~e P52500 mortg age attac h~d 0 fhartnetsh1rty. ZZ contr ibute d equip ment
a P45,000 carry in a · e prope
wbul d be nece ssay so
equa l?
that Lanc elot woul d
With
value. The parfnershipga ~~~t, a Pl 12,~
origin al cost. and P82500 fair C. P265.000
that profit s and losses are to a. Pl65,000
.be shared equa lly but ~ 5•1 ?nt spe':i fies
b · 290,000 . d. 305.000
regar din~ capi tal contr ibutio ns. Which
P0rtner has the largest Aprill ~n 20 (AdaptedJ
• 11 , capit al bala nce? ·
a. XX
b. Yr C. 11
d. All capit al acco unt balar:ic~s
ore equa l ·
(AJCPAJ .
u ~7
l'artnership JS
18. Cab and Jo are considering forming a partnership whereby profits w·
•allocated ttvough the usEl of salaries and bonuses. B~:muses will be 1~11 be
net income after total salaries and bonuses. Cab will receive a s 1 .%of What amount of interest should be credited to SS's capital account for
P30.000 and O bonus. Jo has t~e. option of receiving a salary of ~4~ry of 2011? ·
and O 10% bonus or simply receIvIng a salary of P52,000. Both Portner~~
receive tt.,e same amount of bonus. · w,11 a. P45,750 c. P46,125
b. 49,500 d. 51.750
Determine the level of net income that would be necessary so th0 t (AICPA)
would be indifferent to the profit sharing option selected. Jo
21 . AA, BB; and CC are partners with average capital balances during 2011 of
P 94,000 P360,CX?O; P180,000, and P120,000, respectively. Partners receive l0% interest
a. P240.000 C.
on their average capital balances. After deducting salaries of P90,000 to
b. 300,000 d . 334,000
AA and P60,000 to CC the residual profit or loss is divided equally. In 2011
the partnership sustained a P99,000.loss before interest and salaries to
19. The partnership agreement of XX. YY & n
provides for the year-e d
n
partners. By what amount should AA 's capital account change?
allocation of net income in the following order:
a. P21,000 increase c. Pl 05,CXX) decrease
b. 33.~ decrease d. · 126,000 increase
First, XX is to receive 10% of net income up to P200.000 and 20% (AICPA)
over P200,000.
• Second. YY and ZZ each are to receive 5% of the remaining 22. AA and DD created a partnership to own and operate a health-food
income over P300,000. store. The partnership agreement provided that AA receive a salary of
P10,000 and DD a salary of PS,000 to recognize their relative time spent in
The balance of income is to be allocated equally among the operating the store. Remaining profits and losses were divided 60:40 to AA
three partners. · · and DD, respectively. Income for 201 1, the first year of operations of P13,000
was allocated P8,800 to AA and P4.200 to DD.
The partnership's 201 I net income was PS00.000 before any allocations to
partne~. What amount should be allocated to XX? · . On January 1, 2012. the partnership agreement was changed to r~flect
the fact that DD could no longer d{;lvote any time to the store's operations.
a. P202,000 The new agreement allows AA a salary of P18,CXX>, and the remaining profits
c. P206,000 and losses are divided equally. In 2012 an error was discovered such that
b. . 216,000 d. 220,000 the 2011 reported income wa~ understated by P4,000. The partnership
(AICPA) income of P25,000 for 2012 included the P4,000 related to year 2011.
20· The ~artnership agreement of RR cind SS pro~ides that interest at 10% per
In the reported net income of P25.000 for the year 2012. AA and DD would
yea~ is to be credited to each partner on the basis of weighted-overa~e have:
capital balances. A summary of the capital account of SS for the year
ended December 31. 2011 , is as follows: . . .. DD AA DD
AA
Balance, January 1 a. P21,900 P 3,100 c. P O P • 0
A~ditional investm~~{ J~·r'···i···········································•··
P420.000 17,100 d. 12,500 12,500
b. 17,100
Y ···········--········--······················
120.000 (Adapted)
Withdrawal, Au ust 1
Balance, Dece~ber ~i.........................................................
( 45.000) ·
·····································•··•········· 495.000
 ter ·1.
~/6~ ----- ----- ----- ----- --.:: ::C' .!!h a~p Partnership
·/7

end
y , 2008. DD and·EE decide d t.o form a partne rship. At the
23. · On Januar 1 a net ,nc~m e of P120:000 .- The capita l Comp ute for the share of DD and BB in the p artners
hip net incom e
of the year, the partnership made
salary allowa nces P800 and Pl.000 for DD and BB.
accoun ts of the partners~ip show the follow1ng transa ctions. assuming month ly
on overag e capita l
respectively; interest allowa nce a.t a 12% annua l rote

January I ..••......•....•.
Dr.

Apnl I ••.••.••..............•
DD, Capitol
Cr.

PS,000
-
EE, Capito /
Dr.
-
P40,000
Cr.
-
P25,00Q
balanc es: and remaining profits

a.
b.
alloca

DD. Pl0,520; BB, P13,480

DD, P12,000; BB. P12,000
ted equally

c.
d.
.

DD, Pl0,800; BB, P13.200

DD, Pl0,600; BB, P13.400
(Adapt ed)
June 1............. .......... 10,000
August I •.•••..•.•.••...... 10,000
follow ing
September 1 ........... P3.000 25. AA •ond BB formed a partne rship in 201 J. a nd m.ade the
5,000 1.000 investments and capito l withdra wals during the year:
October l ............... .
December 1........... . 4,000 5,000
AA Ell
e ca ital .. ·
Assuming that an interest of 20% per annum is given on overag Investments Draws Investments Draws
ted equally , the alloca tion of p~fit
and the balance of the profits is alloca Is
should be: . March 1 .......................... .-. P30,000 , P20.000
...•..•..... ........ ."......... . PI0,000 Pl0.000
June l
a. DD, P60,000; EE, P59.400 DD, P67.200; EE. P52,800 2000
c. August 1 ........................... 20,000
b. DD, P61.200; EE, P58,800 d. DD. P68.800; EE, PS 1,200 Decem ber! ............ ....... . 5,000
(PhilCPA) salary of which
Tl-ie partnership's profit and loss agreem ent provides for a
ced operat ions on a bonus of 10%
24. The partnership ~r DD and BB was formed a~lco mmen P30,000 was paid to each partne r for 2011. AA is to receive
BB investing cash of also to receiv e
~~~ l . 2011 , w1(h DD con~ributing P30,000 cash and on net incom e after salaries and bonus. The partners are
d by both
July I 20~~dBt:iu1pfent with '!':1 agreed upon valuat ion of P20,000. On interest of 8% on overag e annua l capita l balanc es affecte
•·t inves ed an add1honal PI0,000 in the partne rship DD mode investments and drawings. Any remain ing profits ore tb
•·t be alloca ted
~nc~~~ib:r' t~~~o~ P ~ 1.on Ma.y
1 4
0
! 2, 201 I but reinve sted the P4,000 equally among the partners.
managing p~rtner: ~;~~re . ,; pg~
1thdrew P800 per month a.nd BB, the
w. • . pe~ month . These drawin gs were Assuming net income of.P60.000 before salaries and bonus.
determ ine how
charged to solo · ex at Decem ber
31. 2011 is as fol~ws~ense. A preclos1ng tnal balanc e ,taken the income would be allocat ed among the partners:

a. AA. P31.138; BB. P28,862 c. AA. P30,633; BB, P29,367

Debit Credit
b. M P33.537; BB. P26,463 d. AA. P30,684; BB, P29,316
p 9,000 (Adopt ed: Fischer~ Taylor)
~=iva ble - net ·························
Equipment - net ··········•·u •••H•H••H ••··········· ·· ••••• 15,000
50.000 on existing partnership
Other assets ······-' ······························· 26. Portner A first contrib uted PS0.000 of capita l iRto
Liabilities• •••••••• ······················•·
·········•···•••
··············•·..•••h•H,o•· 19,000
on Morch 1.2011.OnJune 1. 2011. thepar tn~rco ntribut edono therP2 0.000.
t "••••••H••• P.17.000 the partnership,
DD, capital .. ············ ········••. On September 1, 2011. the partne r withdre w P15,000 from
30.000 . partne r's capita l

~s -::: : ::: : : : : : : : : : : : : :
Withdrawals in excess of Pl0.000 .are charge d to the
40,000 Is
50,000 accou nt. The annual weight ed-ave rage capita l balanc e
17-.000 c. P60,000
Salaries \o part~~ ·····························•............. 4.000 a. P62.000
51,667 d. 48.333
01her miscenane~·;;,··; ·······~······················ 18.000 b.
5.000 (Adap ted-Fi scher & Taylor) .
Total :P nses ············· ······•···
····· ·························· ············· P137,000 P137,000
 18 ~ /9
Partnership
WW and RR share profits and losses equ~lly. WW and RR receive
27. aHowances of P20.000 and P30.~. respectively. and both Partn~ ~ sa1~ry 3a(. por!icipo tion in
'19. Merlin. a partner in the Camelot Partnership. has a
IQ% interest on their average capital balances. Average capital b ~e~e ip profits and losses. Merlin's capital account has a net decreas e
partnersh
are calculated.at the beginni~g of.each month regarqle ss of w~inces of P1,200,000 during the calendar year 2011 . During 2011; Merin withckew
capital contributions and capital withdrawals were made, an"d 0 n the again~ his capital account) and contribu ted property
P2,600,000 (charged
drawings are not used in determining the average capital balan/ rlners valued at'PS00,000 to the partnership. What was the net income of the
net income for 2011 is P120.000: es. Total
• Camel<i Partnership for year 2011?

--EL_ a. P3.000.000 C. P 7,000,000

January I.capital balances ............................. P100,000 b . 4,666,667 d . 11,000,000
P120,(XX) (AICPA)
Yearly drawings (Pl .500 a month)................... 18,000
18,(XX)
Permanent withdrawals of capital:
June 3 .......................................... ....... ......... (12.000J 30. On January 2. 2011. BB and PP formed a partnership. BB contnbut ed capitol
May2 .................................... ....................... of Pl 75,000.00 and PP. P25,000.00. They agreed to share profits and losses
Additional investmer:its of capital:
{15,000) 80% and 20%. respectively. PP is the general manage r and works in tfle
partnership full time and is given a salary of PS,000.00 a month; an interest
~~;b;~i::::::::::::::::::::::~:::::··-................... -10.000
50,000 ·
of 5% of the beginnin g capitol (of both partner) and a bonus of 15% o f net
income before the salary, interest and the bonus.
What is the weighted average capital for WW and RR .
2011? respectiv ely for Th~ profit and loss stateme nt of the partners hip for the ·year ended
Decemb er 31. 2011 is as follows: ·
a: PJ10,667 and Pl 19,583.
c. p 100,000 and P120 ()()() Net Sales ..·........................................................................ P875.<XX>
b. p I c:15,333 ano P126,667,
d. Pl26,667andPI05.333 Cost of goods sold ............................................_........... 700.000
(Adapte d- p;..+ferson/Shoulders) . P175,CXX)
Gross profit ......................................................................,
28. HH, MM, and AA formed a partn·ers . 0 . 143.000
Expenses ~ncluding the solay. interest and the bonus)
Pl 50,00, P200.000. and P250 000 hrp ~ January 1, 2011, and contributed 32.000
provide that the operating . ;:spect,v ely. Their articles of co-partnership . Net income ...................................................................... p
~~ows~assalary, P24.000forH~ .pq~e be shared among the partners as
re~~ on t~e average capitaiduri·~ for MM, and Pl 2.000 for AA; interest· TJ,e amount of bonus to PP in 20i' 1 amounte d to:
01nd er 1n the ratio of 2· . · ng ~Ol 1 of the three partners · and the
. . ·4•4, respectively. · . • . a.. Pl3,304 c. P18.<XX>
The operating in b. 16,456 d. 20.700
·to Pl 76.000 H com~ for the Year endin · (PhiCPA)
made O dr~w;H contnbuted additional 9 D7tcemb er 31,•20 I 1 amounte d
capital of P20 ng of PJ0,000 on Octo ca~, al of P30.000 on July ! and 31 . On January 1, 2011 , A. B, C and D formed Bokyo Trading Co~ a partnersh ip,
I; and, AA rnoCX: on Aug~st 1 and mad~er } M~ contribu ted additiona l rso.cm: c.
80
draWing_of p30 000
• on Novemb
°
rQWing of PI 0,000 on October ·
er 1.
with capital contributions as follows: A. B. P25,000; P25.000:
and D, P20.000. The partnership contract provided that each partner shal
The partners• c
, receive a 5% interest on con1nbuted capital_. and that A and Bshal receive
~it~I balances on Dece salaries of P5:000 an~ f?.000. respectively. The controct also provided that
a. HH, P17.9 680· mber 31, 201-1 ·are:
C shall receive a minimum of P2.500 per omum, D o. minimum of and
b. HH PJ79' , MM, P229 360· . P6,000 per on,:i~m. which is'inclusive of amounts represenmg interest and
nd
C. HH: Pl 89·~:MM, P229:s20'. Q • AA, P239,360 share of remaining profits; The balance of 1he profits shol be distributed to
d. HH, P223' 1ao'. ~~- P239,36Q: aanndd, AA.AA, P239,520 A, B, C, and D in a 3:3;i:2 ratio.
• ''Yl•Yl,.P272,' : ' • P269,360 -
. 060, and,_AA. P280,760
(PhDCPA)
 ~20~------- -------- --------- ..:~ Partnership ]I

: · amed by the partnership, before any char

What amount mlu~t b~~ that A may receive an aggregate of P l~eSfOQor With sufficient partnership net income. XX and YY could split a bonus equal
interest and so ones. f fits2 ·
inc."uding interest. salary and share o pro . . to 25 percent of partnership net income after sa laries and bonus (in no
event could the bonus go below zero).
c. P30,667
a. Pl6,667
d. 32,333 Remaining profits were to be split as follows: 30% for XX; 30% for YY. and
b. 30,000
(PhilCPA) 40% for ZZ.

32_ ·AA. BB ancf cc are partners with 9verage t~a~itaihbala,:irtces during 20 11 of For the year. par:tnership net income was P120,000.
p 472,soo. P238,650. ·a nd P162,3_50• respec iv: y. e pa ne~s receive IQ%
interest on their average capital batance~. after deducting salaries of Compute the ending capital for each partner:
p 122,325 to AA and P82.625 to CC. the residual .profits or loss is divided
equally. · a. XX, P155, 100; YY, P155, 100; ZZ. P169,800
b. XX, P126,000; YY, P 126,000; ZZ, P124,500
In 2011. the partnership had a net loss of P 125.624 before the interest and c. . XX. P125,100; YY. P125,100; ZZ. P124,800
salaries to partners. d. XX, P125,500; YY, P125.500; ZZ. P124.000
(Adapted)
By what amount should AA 'sand CC's capital account change - increase·
/decrease)? 35. CC. PP. and AA. accountants. agree to form c;i partnership and to shore
profit~ in the ratio of 5:3:2. They also agreed that AA is to be allowed a
AA cc AA cc salary of P28.000. and that PP is to be guaranteed P21 .000 as his shore of
a. PJQ.267 P(40.448) the profits. During the first year of operation, income from fees are P 180,0CX),
C. P(40,844)
P31,235
b. 29.476 17,536 while expehses total P96,000, What amount of net income should be
d. 28,358
32.458 credited to each partner's capital account?
(PhilCPAJ
33. The.same informa!ion in Numt-er 32, except the partnership hod a loss of a. CC, P28,000, PP. P16,800, AA, Pl 1.200
PI ~5.62~ after the interest and salaries to partners, by what amount should b. CC. P25.000, PP. P21.0Cio. AA, P38,000
BB s capital account change - increase (decrease)? c. CC. P24,000. PP, P22,000. AA. P38,000
d. CC, P25,000. PP, P21.000. AA, P39,0CX)
a. P(l 15,443) C. P(41 ,875) (Adopted)
b. 23,865 d. (18,010)
.36·. Hunt, Rob, Turman, and Kelly own a publishing company that they operate
~-~~d ZZ formed a partnership on January I, 2011. Each contributed
34
· as o parthership: The partnership agreement includes the following:

• Hunt receives a salary of P20,000 and a bonus of 3% of income

Salaries were to be allocated as follows: after all bonuses.
• Rob receives a salary of Pl0,000 and a bonus of 2% of income
xx·
P30,CXX) - yy
P30,-<XX)
ll
P45,000
. \ ·•
after all bonuses.
All partners are to receive 10% interest on their average capital
balances.
Drawings were equal to salarie nd
. year. . sa be taken out evenly throughout the
 Chapter I T 'parmenhip 13
es are as follows:
erage capital t,alanc
nieav · P50000 Other pertinent information are as follows:

.?::::::. .••:: : .: : ;~ Net income of partnership .............................. .

Capital accounts, end of the year:
. JJ ............................................. ·................... .
2011
---
P14,400

45,400
2012
P13,600

54,000
- .. and loss are to be divided equally among the Partn KK ................................................................. 45,000 55,000
AnY remaining profitS ers.
fit f plQS 000 would be allocated among the Part The aggregate capital of JJ and KK after capitalizing the average profits .
Determine how a pro o , nen. at 20% per annum is: ,
Hunt, p41,450; Rob, P29,950: Tumnon,Pl 5,450'. Kelly, P18, 15() a. P67,765 c. P69,000
a. Hunt p2s,OOO; Rob, Pl 6,500; Turmon,P 2,000, Kelly, p 4,70() b. · 72,105. d. 71.000
b. Hunt: p39,700; Rob, P29,200; Tumnan.Pl 6.700; Kelly, Pl9.40() (PhilCPA)
~-- Cannot be determined.
39. MM, NN and 00 partners, share profits.on a 5:3:2 ratio. On January l, 2012,
(Adapted) PP admitted into the partnership with a l 0% share in profits. The old partners
continue to participate in profits in their original ratio.
37 RR and pp share pro~ts alter the provisio~ of annual salary <;1llowances of·
· Pl 4_400 and Pl 3,200, respectively I~ the ratio ?f 6:4. However: 1f partnership's For the year 2012, the net income of the partnership was reported as P12,500.
net income is insufficient to provide for said allowances In full amount, However, it was discovered that the following items were omitted in the
the net income shall be divided equally between the partners. In 2011, the firm's books: · ·
foffowing errors were discovered: Depreciation for 2011 is understated by
Unrecorded at year end 2011 2012
P2.100, and the inventory on December 31, 2011 is oversto,ted by Pl I.400.
The partnership net income for 2011 was reported to be P,19,500. Prepaid expense ...,,.....................: .......................... P8()0
Ace.rued expense ..:................................................ P600
The capital accounts of the partners should be increased (decreased) by: Unearned income .............:..:................................. 700
Accrued income· .._. ................................................. 500
a . . RR, P(6,540); PP, P(6,540) c. RR. P(6,960); · PP, P 6,540 . (l) The new profit and loss ratio· for N, and (2) the share of portne( 00 in .
b. RR. P 3,000; PP, P 3,000 d. RR, P(6,750); PP, P( 6,750) the 2012 net income:
(Adapted)
a. (1)30%; (2)P2,214 C. (1) 27%; (2) P2,286
38. JJ and KK ore porlners shoring profits 6(J. J and 40% respectively. The overage b. (1)27%; (2)P2,214 d. (l) 30%; (2) P2.286
.(PhilCPA)
profits for the ~~ two years are to· be capitalized at 20% per year !_for
puposes of admitting a new partner) in determining the aggregate capitol 40. A, B. and C are partners in an accountir1g firm. Their capital account
ofrf JJ a nd KK. after adjusting the profits for the· following items omitted ' balances at year-end were A P90,000; BP 110,000 and C PS0,000. They share
om the books: · profits.and losses on c:i 4:4:2 ratio, ofter-the following special terms:

Omissions at Year-End 1. Portner C is to receive a bonus of l 0% of net income after the

2011 2012
c.-- bonus.
PrAc~~~e~ ············••...............······
. ............ .. 2. Interests of l 0% sJ:lall b~ paid on that portion of a partner's capital
-v,;;u '-"Ptlnse Pl ,600 in excess of P100,000.
Deferred Income ......................................·········· 1,200 3. Salaries of P10,000 and P12,000 shall be paid to partners A &. c •
p1,4CXJ (espectively. ·
AcCf\Jed Income ·············................ •·········
.. .................................... 1,CXXJ
 Chapter I
14 Partnership 15

. t. me of P44 000 tor the year, the total profit share 01

Assuming a ne rnco ' . It was agreed that X anq Y only should bear equally the expense for a bad
Partner C was: debt of P40,000 written-off in the six months to 31 December 2011 in arriving
c. Pl9,400 at the P300,000 profit.
a. P 7,800 d. 19,800
b. 16,800 Which of the following correctly states X's profit st.lore for the year?
(PhilCPA)
9; P216,000 c. P220,000
41 . x, y and z, a partnership formed on January 1, 2011 had the following b. 200,000 d. 224,000
initial investments: (ACCA)

X PI00,000 43. Sand T orein partnership and prepare their accounts to 31 December
y 150,000

-
each year. On 1 July 2011, U joined the partnership. Profit sharing
z 225,000 qrrangements are:

The partnership agreement states that profits and losses are to-be shared 6 months to 6 months to 31
equally by the partners after-.consideration is made for the. following: 30 June 2011 December 2011
Salary ...................:............... S PiS,000 P25,000
Salaries allowed to partners: P60,000 for X, P48,000 for y and 3g 000 Shore of balance in profit S 60% 40%
bL - -' T -40% 40%
Average partner's capital balances during thi:- / -:)Or shall be u 20%
allowed 10%. - ,·
The partnership profit for the year ended 3 I December2008 was P350,000
Adl:litionar informotiori: accruing evenly over the year. What are the partners' total profit shares
for the year ended 31 December 2011 ?
On.June 30, 2011 X invested an additiona~P60,000 s T u
Z with~rew P70,~ ~om the partnership on September 30, 2011 . P124,000 P30,000
a. P196,000
Share rn the remarnrng partnership profit was P5.000 tor each b. "217,000 108,000 25,000
partner. -
C. 155,000 130,000 65,000
d. 175,000 145,000 35,000
The total partnership capi~al on December 31, 2~ 11 ~as: jACCA)
a. P-405,000
C.
b. 671.SOO P-480,000 44. AA and BB entered into a partnership as of Morch L 2011 by investing
d. 672.750 P125,000 and P75,000, respectively. They agreed that AA, as the managing
(PhilCPA) partner, was to receive a salary of PJ0,800 per year and a bonus computed
42. X and Y are in portnershi h . - - at 10% of the net profit ofter adjustment for tne salary; the balance of the
accounts to 31 Decemb P, s anng profits equally and preparing their profit was to be distributed in the ratio of their original capitol balances.
partnership, and from that~a~~~h yfietor· On 1 July 20 l l. z joined . i~ the On December 31, 2011, account balances were as follows:
'"'ro r s are shared 40%, 40%. and 2()%. x y z Cash.............................. P70,000 Accounts payable . P 60,000
In the year ended a1 Dec 67,000
. ember 2011, profits were: Accounts rec eivable . AA, capitol ............. 125,000
Furniture and fixtures .. 45,000 BB; capital .............. 75.000
6 months to 31 June 2011 - Soles returns ................. 5,000 · AA, drawing .......... . ( 20,000)
6 months to 31 December................... - - , y \ 000
,......., .................,..... rD,uv,
2011 Purchases ..............:..... . 196,000 BB, drawing ............ ( 30,000)
··~---······························· :3CX),CX)() Operating expenses .. . 60,000 Sales ......................... 233.000
 \

~]6~------- ------------ ---~~ Partnership 17

. . Inventories on December 31 . 2011 were as follo~s: supplies, P2.SOQ
·ise p 000 Prepaid insurance was P950 while accrued expe· · ,
merehand • 73• · 0% nses Assl~nment of Interest to a Third.Party:
were Pl.550. Depreciation rate was 2 per year.
47. Capital balances and profit and loss shoring ratios of the partners in the
The partners' capital balances on oe·cember 31. 2011. ofter closing th BIG Entertainment Gallery are as follows:
net profit and drawing accounts. were: e

-
B~tty. capital {50%) ··············••••····••••·•·•···•••··••······················ Pl 40.000
AA . BB AA BB ~gy. capital (30%) ..............•...•..•......................................... Jl/JJXJJ
· Grabby, capital (20%) ...•.....•...•.•••..•......•.......•......•.............. · JOOJXJJ
a. Pl35,940 P47,960 C. Pl39,680 P48,68()
P49.860 d. P142350 Total ······································'················································· P,4()()/XJJ
b. P139,540 P47,670
(PhilCPA) Betty nE!eds money and agrees to assign half of her interest in the patnership
to Yessir fOI' P90,000 cash. Yessir pays <flf'ectly to Betty. Yessir does not become
-45. In the AA-BB partnership, AA and BB had a capitol ratio of 3: 1 and a profit a partner:
and loss ratio of 2:1. respectively. The bonus method was used to recor~
CC's admittance as a new partner. What ratio would be used to allocate What is the total capital of the BIG Partnership immediately after the
assignment of the interest to Yessir? ·
to AA and BB. the excess of CC's contribution over the amount credited
to CC's capital account? a. P310.000 c. P490,000
b. 200,000 d. 400.000
a. AA and BB's new relative ratio. • (Adopted)
b. AA and BB 's new relative profit and loss ratio.
c. AApnd BB's old c~pital ratio. ~artnershlp ~lssolutlqn: Admission of a New Partner - Purchase or Investment
d. AA and BB's.old profit,ond loss ratio.
48. Presented below is the condensed balo~ce shee~ of th~ ~artnership.of KK.
(AICPA) LL and MM_who shore profits and losses 1n the ratio of 6.3: 1. respectively:
46. The-FF and II partnership agre~ment provides for FF to receive a 20% bonus Cash ........................ P 85.000 Liabilities ··················-·· P ll>.000
on profits before the bonus. Remaining profits and losses are divided Other assets ........:... 4I 5,000 KK. capitol .................. 252.CXX>
between FF and II in the ratio of 2 to 3. respectively. Which partner has a LL capital .........:......... . 126,00l'
greater ·advantage when the partnership hos a profit or when it has a MM. capital ................. -42.CXX>
loss? ·
Total :..............;......... P500,000 TotQI .:........................... PSOOIXJJ
.!!QEJ. Loss The partner agree to sell NN 20% of ther respective capital and pr~fit and
/
a. FF II . loss interests for a total payment of P90.000. The P?yment by NN IS to be
b. FF FF made directly to the individual partners: The capital balances of KK. ll
c. II FF and MM. respectively after admission of NN are:
d. II II
Pl98,000: P 99.000: P33,000.
(AICP('l a.
P20J.600; Pl00,800; P33.600.
b.
P216,000; P108,000: P36,000.
c.
P255,600; P127,800; P-42.600.
d. (AICPA)
;
 Cha le,- I
28
Partnership 29
, balance !-heet of Western Marketing. a PPrtnershi
9 On June 30. 2011. the . . . P.
4 . is summarized as follows. How should the P30,000 paid by GG be divided between PP and CC2
t ................................................... P15Q,~
~~i~c~~1 ·: : : :: : :::: : : ._...... .... . ... ..... . ...... . .. .... ..
Tern. capitol .....................•....................................................
90.~
a.
b.
PP,P 9.825; CC, P20,175.
PP.PlS.000; CC. PlS.000
c.
d.
PP.Pl0.000; CC. P20.000.
PP.P 9,300; CC. P20.700
60.~ (Adapted)

West and Tern shore profit an<;I losses at d 60:40 ratio. respectively. They 52. bn January 31. 201 \, partners of Lon. Moc & Nan. LLP. had the following
d to toke in Cuba as a new partner, who purchases 1/8.interest of loan and capitalaccount balances {after closing entries for January):
~~!eand rem tor P25.000. What i~ tl:)e amount of Cubo_'s capitol to be
Loan receivable from Lon ......................................: ........ :.. P 20.000 dr
token up in the partnership books 1f book value method Is used? Loan payable to Nan ....:..........." ...:.................................... 60.000 cr
Lon, capital .............................. ·........................................... 30.000 dr
a. P12,500 . c. P25.000 Mac. capital ......................................................................... 120.000 cr
b. 18.750 d. 31.250 Nan, ·capital ... :...................................•.....................,............. 70.000 cr
(Adapted)
The partnership's income sharing ratio was Lon. 50%: Mac. 20%, and Nan.
50. The capital accounts of the partnership of NN. W, and JJ on June 1, 2011
30%. On January 31. 2011. Ole was admitted to the partnership for a 20%
interest in total capitol of the partnership in exchange fo,..an _irwestment
ore presented below with their respective profit and loss ratios: of P40,000 cash. Prior to Ole's admission, the existing porfl:\ers agreed to
increase the conying amount of the partnership's inventorie~ to current
NN ..-........ · ........................... .. P139,200 1/2 . fair value. a P60.000.increase. The capitol account to be credited to Ole:
VY ........................................ .. 208,800 1/3
JJ ............ ·················:·..·......... 96,CXX) 1/6 a. P60.000 C. P52000
b. P:4(),000 d. P-46,000
(Adapted)
On June 1; 2011, Ll is admitted to the partnership when U purchased. fa
P132,000, a proportionate interest from NN and JJ in the net assets and 53. Partners AA. ~B. and CC divide J:?rofits and losses 5:3:2, respectively. and
profits of the partnership. As a result of a transaction LL acquired a one- their balance sheet on September 30, 2011 is as follows:
fifth interest in the net assets and profits of the firm. What is the combined

the partnership to LL? ·

a
gain realized by NN and JJ upon the sole of portion of their interest in
·
ABC Partnership
Balance Sheet
September 30. 2011
a. P O C. P62400
b. 43,200 Cash ................. ·................................................:...._. ...........:··· P ~.cm
d. 82000
(AICPA) Other assets .....................................................................:..... TJIJJDJ
51 Totalassets .....:..................................;................................... ~.cm
~~~ot~~~~e~:e~·F and CC conf!ibuted P48,000 to form a portners~ip; ·:

=
·
contributioJ Durin~ t~ha~e profitnn .the ratio of their original capital . Accounts payable ........................................................-........ P200.000
P16,290; PP withdrew PSe rst year of..operations, they mode a profi~ of• AA, capitol ..............................:..........;··············-::.:::·: .....~....... 1-18.cm
cf~~ f
year, they agreed to ad~~
one-fourth interest in the ~apit
. PP and CC, whose capital
r
C -PS,000. At the start of the following
o the partnership. He was to recelvet9
0 0nd profits upon payment of P30,000 0
·
BB, capital ..;..........................................................................
cc, capital-..' ...........................................................'............. .
GG's capital account of 0 ~~o~nts wfficere to be reduced by transfers t~ Tqtal liabilities and capital ................................................. -~
original capital ratio. n SU lent to bring them bock to ~•
~JO ~-- ---- -:-- ---- ---- ---- -:-- --.: :::: C~ . .Partnership
. b·i·ties are record ed at. appro ximate curren t fair vaiu es JI
·th 20% . t t.
The assets on d I,o , 1 odwi,~llerebs '"! ca~ita l anei '
DD is io be admitt ed as a new ~artnetr wr t . OG·-
o or onus WIii not b e ~n that.da te they agreed t · . . rd interest
men
. exchonge
. gs ,n
eorrvn
for o cash ,nves In the capita l and profits a~cf~Jl'!lt EE as a partne~"."ith a one-thi
The new partnership Will b . o~es. and up~ his investment of P25.000.
considered. ion Wh ·~gin th 0 total capital of P90,000. Immediately
after EE's admiss wi
respectively? ' 0
are th e capitol balanc e of CC. DD. and EE,
How much cash should DD contrib ute?
I P150,000 a(
o. PJ20.000
C. P30,000; P30,000; P30,000· . . c . P31.667; P28,333; P30.000;
.d. 160,000 b. P3 l ,500; ·P28,50(); P30,000i d:
b. 144,CXX> P35.000; P30,000; P25.000;
(PhilCPAJ (AIC~AJ

tor the partne rship of 56

· : : ~~~ilr~ ~~cou nts for th~ part~e~hip of LL and MM at
Octob er 31 , 2011
54. The following conde nsed balan ce sheet is J?reseme~
LL PP, and QQ, who shore profits and losses ,n the ratio of 4:3:3, respectively:
LL, capita l, .........,............................ . p. 80'000·
Cash •................................. .....:................................................ · P 90,0000 MM, ~apit<:JI · · . · ......_.................................
, ,,,, 40#()()()
ssets ................ -... · ............................ .......... ........ ·•.•.. 830,00
•••••••••••• •~••••••nuo .•o••: • .. •••·•••~ • • • •••;•••••uo ooo.
, ,, -., , ,,,,
0

Othera
20.000
LL loon ... ·.................... ·...•........... · ......... .·...... ·........... -.......... . P120,000
P940,000 The partners share profits and losses in the ratio ~f 3:2 respec
tively.

Accounts payab le ..... ,....................:.........................•...•..•.... P210,000 s agree to

The f?artnership is in desf?erate need of cash, ana the partner
QQ, loon .................................... .. .. : .................................
. .. 30,000 · a
_ p9rtne one-thi
rwith_ rd in the capita l and profits and losses
admit ~~ as
................... •....••••·•.•.••• 310,00 0 iately offer NN's admiss ion. what
LL capito l ..................: ...................... upon .his investment of P30.000 . Immed
............ · .: ...............................•. ..•...•.•....•• 200,000 be the capita l balanc es of LL . MM and NN respec tively. assuming
PP, capito l ............ should
..... i •• 190,000 · · '
QQ, capito l ........... ....................................................... bonus is to be recogn ized?
P940,000 ~. P66,667; P33,333; PS0.000.
a. P50,000; ~50.000; PS0.000.
b. . P60.000; P60,000; P60,000. d. P68.000; P32.ocio: PS0.000.
the balan ce sheet ·:
Assume that the assets and liabilities are fairly valued on (AICPA)
decide s fo admit FF as a new partne r, with a 20%.
and that the partnership :
interest. No goodw ill or bonus is to be record ed. 0 and P20,000.
57. 00 and TT are partners with COP.ital balances P60.00
00 and TT
? respectively. Profits and losses ore divided in the ratio of 60:40.
How much should FF contri bute iri cash or other assets decide d to form a new partner ship with GG, who investe d land valued at
cost of the.
PIS.000 for o 20% capita l interest in the new partnership. GG's
a. -P 140,000 c. Pl75,000 metho d to
land was p 12,000: The part11.ership elected to use the bonus
_177,500 l accou nt
b. 142.CXX> d.
(AICPA) record the admission of GG into the partnership. GG's <?apita
should be credite d for:
55. CC an~ DD or~ partners who share profits and losses
in the ratio of 7:3, c. P16,000
21,201 r, their respec tive capita l accou nts were a. P12.CXX> 19,000
respectively. On Octob er b. 15,CXX>
d.
as follows: (AICPA)

cc ..•.......·-····-·················································
P35,000
DD 30,000
·················•·•·••·•··•···················•····•·············
P65,000
 Part,,ership 33
· . d partnership and agreed to divide initial capital equ Uy
58. RRandXXf°';:i~R ~ontribu ted P25,000 and XX contrib~ ted P21 ,()00. ,
. In Retirement or Withdrawal of a Partner
even thoug d the bonus approac h to adJust the
identifiableXX~sse~,sd.eUnntifi~~le assets should be debited for: cap1ta1
.
accounts. s un 62. On June 30. 2011. the statemen t of financial position for the partnership of
c. P2000 CC, MM. and PP. together with their respectiv e profit and loss ratios. were ·
. a .. Pll,500 as follows:
b. 4,(XX) d. 0
(AICPA) Assets, at cost ................ ....................................................... P180.000
59 In the AD partnership, Allen's capi_tal is P140,~ and Danie_l's is P40,00o CC. loan ...'. ....................:....................................................... 9,000
• and they share income in a 3:1 raho, respe<?trvely. Th~y d~c1de to admit CC, capital (20%) ................ ................................................. 42,000
David to the partnership. Each of the following question s Is indepen dent MM, capital (20%) ................................................................. 39.000
of the others. PP, capital (60%) .............................., ................. :................. 90,000
Total .. ·............................................................................ P180.000
AJlen and Doniel agree that som·e ~f t~e invE:ntory·is o~so!ete. The invent01y
account is decreased before David Is admitte d. David invests P40.000 for
CC decided to retire from the partnership. By mutual agreement. the assets
a one-fifth interest. What is the amount of inventor y written down? are to be adjusted to their fair value of P216.000 at June 30. 2011 . It w~s
a. P4,000 · agreed that the partners hip would pay .cc. P61 .200 ca~h .for CC s
c. P15,000 · partnership interest. including CC's loan which Is to be repaid In full . No
b. PIO,(XX) d. P20,000 goodwill is to be recorded . After CC's retirement. what is the balance of
' MM' s capital account?
llJ. lJsir• • ·. ~ ,arrye information in No. 59, David directly purchas es a one-fifth
inte1 . o/ paying Allen P34,000,a nd Daniel Pl0,000. The land account is a. P36,450 c. P45,450
increased before David is admitted. By what amount is the land account b. 39.000 d. 46,200
increased? (AICPA)

a. P40,000 c. P~,000 63. The Decemb er 31, 2011, statemen t of financial position of the BB, CC. and
b. P36,000 d. Pl0,000 DD partnership is summarized as follows:

Cash ............................... . Pl00,000 CC, loan ............... Pl00,000

61. ~sing th same information in No. 59, David invests.P40,000 tor a one-fifth
7 Other assets, at cost .... 500,000 BB. capital ............ 100.000
inter~s! 1n _the total capital of P220,000. The journal to record David's CC, capital .......... 200,000
adm1SS1on rnto the partnership Will include: DD. capital ........... 200,000
P600.000 P600.000
a. · A cre~it to Cash for P40,000.
b. A deb,! to Allen. Capital for P3,000. The partners ~hare profits and losses as follows: BB. 20%: CC, 30%: and _DD,
c. A cred!t to David, Capital for p40,000. 50% cc is retiring from the partnership and te partners have agreed that
d. A credit to Daniel, Capital for PJ.000. " th~r assets" should be adjusted to their fair value of P600,000 at Decemb f:r
.c~sh for his
3~. 2011 . They further agree that CC .will re<:eiv~ P244,000
partnership interest e~clusive of the ~oan, which 1s to be paid In full. No
goodwill implied by CC's-pay ment w1U be recorded .
 ~J4~-------- ---~---------~ ~ ~ Partnenhip Jj

After CC's retirement, the capitol baiance~ of BB and DD, respectiveIy,;wi1J .

be: A. B. C. and Q's partnership hos undervalued tangible ossefs of P20.000.
C. PI 00,000 and P200,000 and X and Ypartnership has undervalued tangible assets of PS.000. All the
a. Pl 16,000ondP240,000
p JO I,7 I4 and P254,286 d. . P 73, 143 and PI a2;a57 partners agree that:
b.
(Adapted)
(a) ·the partnership of A. B. C, and D possesses goodwill of P30.000 and
64. The port'ners' capital (income-shoring ratio inf Parentheses) of Nunn, Owen, (bJ the partnership of X and Y possesses goodwill of Pl0.000.
I
Park & Quon LLP on May 31, 20 I I, were as OIIows: ·
The combined businesses will continue to use the general ledger of A, B. C.
Nunr. (20%) .............................::............................................ . P. 60,000 anctD.
Owen (20%) .......................................................................... . 80,0X)
Park (20%) .............................................................................. 70,0X) Assume that tangible assets ore to be revalued and goodwDI is to be
Quan (40%) ...................... ,..................................................... 40,0X) recorded. Compute the amount of goodwill recognized in the partnership
Total partners' capital (20%) ...............;.......:..:........ :.......... . P250,0X> books:

On Moy 31 , 20 I I, with the consent of Nunn. Owen. and Quan: a. Zero c. P40,000
a. Sam Pork retired from the partnership and was paid P50.000 cash ·b. P~.000 d. 68.CXXl
in full settlement of his interest in the partnership. (Adapted: Advanced Accounting by Pahler)
b. Lois Reed was admitted to the partnership with a P20.000 cash ·
investment for a I 0% interest in the net assets of Nunn, Owen . 66. Using the same information in No. 65. compute the capital balances of A
and Quan. and X. respectively:

The capital account to be credited to Reed is: a. A. P70.000; X. P69.000 c. A. P58.000; X. P64.000
b. A, P62,000; X. P65.000 d. A. PS0.000; ~ P60.000
a. P22,000 c. P20,000
b. 27,000 d. 25,000 67. Using the .some information in No. 65 except.that bonusilmlCethod isttotbhe
(Adapted) . ompu e e
used with respect to undervalued assets and goodw1 .
Business Combination: Each Partnership Has Undervalued Tangible Assets ~nd amount of goodwill recognized i.n the boolcs:
Goodwill · ·
-a. Zero c. P40.000
65· T~~~ort~ership of A. B, <;,
~':)d D has agreed· to combine with the - d. 68.CXXl
b. P~.000
fh . ersh,p qt X ar:id Y. The Ind1v1,dual capital accounts and profit and loss
onng percentage of each partner follow: ,-thomodpuisteto ~
68. Using the same information in No. d65 exctsept ndthot oodwibon~lmel
used with respect to undervalue osse o 9 . -.:.
P & L Sharing % ~ , capital balances of A ond X. respectively: .
Capitol Accounts Now Propos~
A c. A, P58.000: X. P64.000
B ································ PS0,000 40 2B a. , A. P70.000; X. P69,000
............................... 35.000 3) 21 b. A, p5Q,OOO; X. P60.000
d. A. PS0.960; X. P58.800
C
D ···························· 40,(X)() 20 14
····························· 25,(X)() 10 7
150.(X)()
X
y . ........................... p 60,(X)() 50
=1570 · ·
··········•,,............. 40;(X)() .50 ~
f.100.oOO 100 ~
 Chapter 1
36 Partnership 17
1nco,porallon of a partnership
70. Partners Art and Tony. who shore equally in profits and losses. hove the
haring profits and losses in the ratio of 1.2 following balance sheet as of December 31 . 2011 :
69. Roy on? G~ are pa~n:: they decided to form the R & G Corporati~~
respectively: On July ~ets ~nd liabilities from the partnership to the Cash ....................... . P120.000 A/payable ............... Pl 72,000
by _trans~em~g thehonge of its shores. The following is the post-closing A/Receivable ......... 100.000 Accum.dep'n ....... . 8.000
corporation in exc a Inventory ................. 140.000 Art. capital ............. . U0.000
trial balance of the partnership: Equipment ............. . 80.000 Tony. capitol ........... 120,(XX)
Debit Credit Total ......................... P440.000 Total ......................... P-4-40.000
Cash ..................................................................... P 45,000 They ogre.e d to incorporate their partnership. with the new corporation
Accounts Receivable (n~t) ............................... 60.000 absorbing the net assets after the following adjustments: provision of
Inventory ............................................................. . 90.000 allowance for bad debts of Pl0.000; restatement of the inventory at its
current' fair value of P 160,000; and. recognition of further depreciation on
Rxed Assets (net) .....................-........................... · 174.000 the equipment of P3.000. The corporation's capital stock is to hove a par
Liabilities ...............................................•.............. P 60.000 value of P 100, and the partners are to be issued cooesponcfing total shores
Roy. Capital ........................................................ 94.800 equivalent to their adjusted capital balances.
Gil. Capital ....................................:...._................. 21:4.200
The total par value of the shares of capital stock that were issued to por:t~
P369.000 P369,000 Art and Tony was:
It was agreed that adjustments be made to the following assets to be a. P260.000 C. P273.(XX)
transferred to the corporation: b. 267,000 d. 2!Kl,000
(PhilCPA)
Accounts Receivable ...........·.. ............. .... ... ........ ..... ... .. .. .... P 40.000
Inventory .....................................................................•... : ..... 68.000 71 . JJ & KK partnership's balance sheet at December ~ 1, 2011. reported the
Fixed Assets ··························· ········· ·························· ············ 180.600 following:

The R& G Corporation was authorized to issue P100 par preferenced sh0tes Total assets ·····················································-··-···-·-····-· Pl00.000
~~: 1Opar or~inary sha~e. Roy and Gil agreed to receive for their equity Total liabmties ................... ·........................... ~ ··-···-····- ··... 20.000
~ne~~ 7~ ordinary shore each. plus even multiples of 1Oshares
for the.- JJ, capital·················································-···--··-·········-···- «>.000
remaining mterest. · KK. capital ..........................·...........................- ..................._ «>.COO
The total number of sh f · . . - On January 2,· 2012. JJ and KK dissolved their partnership and transferred
·corporar . ares O preference and ordinary share issued by the
ae: ion in exchange of the ~JSSets and liabilities of the partnership all assets and liabilities to a newly-formed corporation. At the dote of
incorporation. the fair value of the net assets was P 12.000 more than the
carrying amount on the partnership's books. of which P7.000 was assigned
Preference Shc.-e to tangible assets and P5.000 was assigned to goodwill. JJ and U were
Ordinary Share
Preference Share Ordinary Share each issued 5.000 shares of the corporation's Pt par value OC'db ~ share.
a. 2.540 shores
b. 2.592 shares 1.500 shores Immediately following incorporation. shae premlum/addtional ~
c. 2.642 shares 1.440 shares
1,440 shares capital in excess·of·par should be credited for:
d. 2,642shares 1,550 shares •·
(PhilCPA) ,
a. P68.000 c. Pn.ax>
b. 70,000 d. 82.000
 !....-.------ ------------ ----!..Parr ne~1,· -.
!.!J8 ~ ':'artnership 39

partnersfllp Uquldalion
~um~ instead that fhe Heidi Partnership is dissolved and liquidated by
. . . d balance sheet.is presente~ for the partnershi : 1nstallme.nts, and the first realization of P40.000 cash is on the sole of other
72 ThefolloWingconcienshe hare profits and losses In the ratio of 4.P ,.0 t
·3-~•. assE:ts with book value of P80,000. After the payment of liabilities, the
AA. BB, and CC, W o s available cash shall be distributed to.W, x, and Y, respectively, as follows:
respectiv~~:
ca:; . . . . . . .... . . . . . . .. . . . . -··· · · · ···. ................·····. . ..... p 160,00Q a.,
b'.
P36,000;
P44,000;
P27,000;
P28,000;
and,
and,
P27,000
P28,000
Other assets ...........:.....................·,·············-·························· 320,00Q- C. P16,000; P12,000; and, Pl2,000
Total .........................................,..................................... P-480,~ d. P24,000; P13,000; and, P13,000
(PhDCPA)

Liabilities ......... _................................ ···················•·· ···· ·· ···· ·· ·· · Pl80,CXX) 74. . The partners of th_e M&N Partnership started liquidating their business on
AA. capitol ........-...........~•···················································· 48,CXX) July 1,,2011 , at which time the partners were sharing profits and losses 40%
BB. capital .................................................,........................... 216,CXX) to M and 60% to N. The balance sheet of the partnership appeared as
36.CXX) • follows: · ·
CC, capital .....................,..···············:························:··········
Totol ..............................................·-···················.··········· P480,0do . M&N Partnership
Balance Shee.t - July 1. 2011
The partners agreed to dissolve the partnership after selling the other assets
for P200,000. Upon dissolution of the pa,:tnership. AA should have received. Assets Uabilities & Equity
Cash .............................. P 8,800 Accounts payable ............ P 32-400
a. P .0 c. P72,000 · Receivable ........,........... . 22,400 M. capital ......... P31.000
b. 48,000 d. 84,000 Inventory ......................;· 39,400 M. drawing ...... ( 5.400) 25,600
(AICPA) Equipment ...... P65,200 N, capital ..:...... P33,200
Accumulated N, drawing....... I ' 200t 33,000
34,400 -N, loan ................................ 14,000
73. W, X. and Y are partners sharing profits and losses in the ratio of 4:3:3. . depreciation (30,800)
respectively. The ·condensed ba'lance sheet of Heidi Partnership as oL Total .....................,........._. . Pe105.000 Total .................................... P105.000
December3l.2011 is: . ·- ·
During the month of july, the partners collected P600 o( the.re~e.i vobles
Heidi Partnership with no loss. The partners also sold during the month the entire inventory
Balcince Sheet on whic;:h they realized a total 9f P32AOO.
December 31. 2011
Cash . How much of the cash was paid to M's capital on July 31 , 2011?
Other assets ·········........................................................... p 50.000
a. P25,600 c. P320
··························································· 1~,000 d. 0
Total assets b. 5,400
.. .... ·..................................................... P180,000 (PhilCPA)

Liabiliti~s .................... ..................... 75. Afte·r operating fo~ five years, t~e· books of the partnership of Bo and By
W, capital ................................... ·p 40,000
X, capital ····•·..········•··•··········•··•····••••·••·•·······•··• 60,<XXJ showed the following balances.
Y, capital ·· 40.<XXJ Net ossefs ................................,.............................................. Pl69,000
40,<XXJ Bo. capital ........................:..........................: ... ,..................... l l0,500
Total fiabil;;:~· and capital ············•·•·•·••····•·•···
By, capital ............................................................................. 58,500
• I ··············· '·······························. PJBO.@ ·
 ' - - ~ - - - - : - - - - - - - - - - - - . _ _ ; ' - -~~
~40~-+ Partpership
.
·
'. . . t k s place at this point and the net assets are realized
at
"'
If 1iqu1dalflonthaeepartners are entitled to: .
book vaue: · . · After the P22.200 was divided, the capital balance of Doming o was:

Bo to receive Pl 17,CXXJ & By to rece!ve P52.000 a. P3.200 C. P 4,500

a. Boto receiveP126.750 & By to rec~ive P42,250 b. 3.920 d. 17,800
P84.500 (PhilCPA)
b. 80 to receive P84,500·& By to rece1~e
· ~: Bo to receive Pl 10.500 & Byto receive P58,500 . .
(PhilCPA) 78. As of Decemb er 31, 2011. the books of Ton Partnership showed capital
balance s of: T P40,000; 0 , P.25,000; N, P5,000. The partners ' profit and loss
ss r 30, 2011 ratio was 3:2:1, respectiv ely. The partners decided to liquidate and they
76. RR. and TT decided to dissolvfiet the. partnth~rshdiptonfNovembe
Their capital balances and pro I ra 110 on IS a e, ollow: · sold all non-cas h assets for P37,000. After settleme nt of all liabilities
amounti ng P12,000, they still have cash of P28,000 left for distributi on.
Capital Assuming that any capital de_b it balance is uncollec tible, the share of T in
Profit

RR
S5 . .........................................,......................... 60.000
Balances
PS0.000 - Ratio
the distributi on of the P28,000 cash woyld be:

a.
b.
Pl7,800_
18,000
C.
d.
Pl9,CXX)
17,000
(PhOCPA)
TT •• ••• •• •• •• ,• •• ••• •• • • • • ••••• ••• • •uo o o♦♦♦ O ♦o••
• •• • • •• •• • • •• • ••• • •• 20,000

The net income from January 1 to Novemb er 30, 2011 is P« ooo Also 0 79. A local partners hip was consider ing the possibility of liquidatio n since one
. of-the partners .is solvent (Tillman) and the others are insolven t. Capital
this dot~. cosh·ond !iobilities ore P40.000 Ol")d P90,000, respe~ti ve.ly. Fo~ R~
balance s affhat time were as follows. Profits and losses were divided on
to recerve P~5.200 1n full settleme nt of his interest in the firm. how much
a 4:2:2:2 basis. respectiv ely.
must be real,~ed from t~e sole of the firm's non-cas h assets?

a. Pl 96,CXXl · Ding, ~apital ..,.......:.........~ ..................................- P 60,000

c. P193,000 Laurel. capital ................................................. ... . 67,000 ·
b. 177,CXXl d. 187.000· 17,000
Ezzard, capital ..........:.........................................
(Adapted ) 96,000
Tillman. c?pitol ...........:·······························,·" ·...
n. Silverio, Domingo Reyes dp t . . '
rotioof3/ 2l '. • an as or are partners. sharing earnings in the Ding's creditors· filed a P25,000 claim against the partners hip's ~ets_. .At
121 8121 · respectiv ely.The balance s of their capital that time, the partners hip held assets reported at P360,000 and ti?~H1ties
accounts 0 ~i!~!mb and ·
er 3 1, 20 1.1 are as follows: of p 120,000. If the QSSets could be sold for P228,000. what is the minimum
amount th.at Ding's creditors would have received ?
P 1,000 c. P36,CXX)
25,000 a. P O
P38,720
b. P2500 d.
25;000
·9,000
80. The Keaton. Lewis and Meador partnership had the following balance
P60,000 • sheet just before entering liquidatio n: .
~·-
The P0rtners decide to Ii u·d . . === .
cash ........... ;............. ;. P -10,000 Liabilities ........................ P130.000
~ash assets into P23,200 ~f ~~te, and they accordin gly convert the non- . Non-cas h assets ....._... .300,000 Keaton,.capital ............ 60,000
. ~~· !hey~~ P22,200 to ~~:;fter payingthat
the liabmties amounti ng to
a debit b...;ance lri any
Lewis, capital ............... .C0,000
er-s capital is uncollectible'. e. Assume Meador. capital ........... 00.000
P310,000 P310.000
 - -----~
~41___ ___ ___~_. :... ..---
,tj
Partnership
(osses in a ratio of 2 .4. .
Keotori, Lewis and Meador share pro~ts ~nd nses we . .~. t:-lon.
cash assets were sold for P180,0 00. Llqu1 datro n expe nses are p 16,800 and that the
w ith assets of ;: Plo. ~. Assuming that the. actu al liquid ation expe
Assume that Keaton wo~ personally insol vent ·valu e of P240,000 are sold for P216,000.
non- c.ash assets with a book
both solv ent nd,OOo 011d
liabilities of P60,000. Lewis and Mea dor were Obie to
cover deficits in their capitol accounts, if any.
Wha t amo unt 0 ~ How ml:Jch cash should CC receive?
expe cted .to rece ive from cash ColJld
Keaton's.p ersonal creditors have · Partnership a. P46A57 c. P74,571
assets? b. 39.600 d. -0- ·,
(Ada pted )
a. P O C. P30,000
erted into cash in the liquid ation ·
b. P26,CXX) ' d. P34,000 · '83. After all noncash assets ho~e been conv er contains the following acco unt
of the AA and JJ partnership. the ledg
·
lable for the Pe . balances:
81 . The fol!owing account balances were avai datio n: rry, Quin cy and
Renqu1st partnership just before it ente red liqui Debi t Crecfd

Cash .................. ......... p 90.000 liabi lities Cash ................................................... ........ . P34,000

Non-c ash assets ........ 300,CXX) ·Perry, capit;;··········· P170,(XX)

70.000
Accounts paya ble ........,............................
Loon paya ble to AA ................................. ·
P25,000
9.000
AA, capi tol ........................,..............,......... .
Quin cy, cap ital ....... 50,(XX) 8,000
8,000
Renquist. cap ital ... . 100.CXX> JJ. capitol .................................................. .
P390,CXX) 00. to acco unts paya ble and;
P390,CXX) Avai lable cash should be distri bute d: P25,0
Pe . . . ·
• rry, Q~incy and Renquist had sh P9.000 loan· paya ble to AA C. Pl .000 to AA ond'PB.000 to JJ
its and losse s in a ratio of 2:4:4 .. a. PB,000 to AA and Pl.000 to JJ
~i~1at,on expense~ were expe ctec i~i6rofe PB:00 0. All partn ers were solve nt. b. P◄.500 each to AA and JJ
d.
. . (Ada pted )
h would be the minimum am
h t~e non- caish assets must
/i;~~a~ten?-sold for, in order far ~~7~~oyr;hic
' .
0 rece ive som e· cash from the , .
in textile distribution business. sharing
. n • 84. Arthur. Baker and Corter are partners 31. 2011 the partnership capi tal
profits and losses equally. On Dece mbe r
as l
fo_lows:
~: ~~~~~~u n: !nexcess of p 175 000
and partners drawings were
Total
c. Anyamo~nt ~n excess of Pl 11:000 r · Bo!(er
Arthu Cart er
d, Any omou~t /~ excess of P] 83,000 PI00.000 PB0,000 P300,000 P◄00,000
excess of p 19B 667 Capital 20.000 ·120.0 00
82. AA. BB, and CC ore . . • 60,000 40.CXX.
• Drow_ing
ers in ABC Part .
50%, 30% and 20% Partn
and shar e profi ts and losses de receivables and was force d
~o~nership and • respe.ctively. The ;ers hip
0
The partnership was unable to colle ct o~a d to P72.000 whic h was au
ners have agre ed to liqui date the ratin g profi t in 2011 amo unte
liqu1dation. the some liquidation pa t~ be incu rred . Prior to the
to liquid ate. Ope
ershi p assets. Unse ttled creditors' claims at
values: Portnershi p •bala n~xp ense s exhausted. including the partn r and Cort er have substantial
e shee t refle cts the follo wing book Dece mbe r 31, 2011 total led P84.000. Bake s.
but Arthu r hos no pers onal asset
Cash priva te resources.
·
Non-c~~h·~~~·····••..:...........·. _ 25.200 The final cash distributio n to Corter was:
ts ·············
0th . YOble to cc ··············
Notes Pa ········ ·······················
········ ··········· p 2.97.6
:S:-
cc
!:;/~
c
i~
.~ : :
;: :
::
. defied
:
: :::
: :
:::
: : : : : : :
: : : :: ::
············
: :
:-:::::: ................ .. .
00
-38.400
184.800
72.00o -
a . P78,000
. · 84.00
· b 0
c.
d.
P108.000
162.000
(PhiCPAt
--··--··--
' Op1tal .................................. ··················:--·_···----· ( 12.00o)
..............................,. ................................... 39,600
 ". ~ Partne rship 4J

· Mio wt'lo divide profits and losses 50%. 30% 0 nd

85. Ja. Rar:"- ..,__ following Octo ber 31. 20 r I acco unt baiances:20%.
anc1 the In the ~t ~•~ of iQuid otion, P128.000was receiand ved on the sale of certa in
respectiYefY, ,....... of P-4.000 we,e paid. oddltloc IOI lquid otion
assets. Liquidation expen ses ation is comp leted.
Pl2,CXl() expenses of P3.~ ore anticipate d befor e liquid
00. The availa ble cash was disfri buted to the
4,8CX). Creditors were paid P22.-4
7.2CX) partners.
14,40'.)
d on the abov e doto :
59,40'.) The cash to be recei ved by each portner base
44,40'.) MM UMM
1(1( U KX
39,CXlQ
a. P56,600 P28.3X> P28,3X> c. P29.G> P32.JIX> P26.700
of P64,200J 88.m:> 62.tlOO 56,tO )
Th e~ ·~ assets ore P2l l.2~ (inclu ding _cash settle me t · The b. 86.000 61.(XX) 55,Ca> d.
Mmo receives P33,0 00 1n final (Adapted)
partne,snp is iquido ted and
n •How
much is the tota loss on realization?
share s proffls ot the ratio of
88. NN. 00. PP. and GG. partn ers too low mn. follow:
5:3: I : I . On June 30. releva nt partn ers• accou nts
a. PIO.llXJ C. P54,0 00
b. 31.21> d. 64,200 Loans Capi tol
Adllo nces
(Adapted) Dr. Cr. Cr.
and Mylene, portner~ w h o share earn ings equa lly were PZUD ) Pld0.000
86. When Mikkied NN ····-·- -··-·-· ··-····
ncop odtat . .
was appo int~d to «um 120.ax>
wnd up thei- ~owplone occid ent. a liquid ator 00 - --··-················· PIS,000 "1m>
Pl 10.cm; Lidbities. P20The ~c:o~ nts s~ow ed cash
, P35,0 00; other assets. pp ·····-r--·-·············· 10.000 t<XUXX)
PS-4.CXX>. 8eca,se of ·. .000. M•~~- _c apita l, Pl 1,000 ; and Myle ne. ·capital. ~ ·- - ······-····
nonc ash assets. the l:lle rar clsbl:>utlon to
iQuid ator< nk4,u ted':r spe~ ,ahze d n?tur e of the On this cloy. cash or P72.000 is decla red as o,,olo
iQl.,~ ~-der able trm~ woul d be requ ired to dispose partn ers wa bene lt tom the P72.000
them. The ex,:,erises of th g, rent. travel. partners as proflh . Who amon g the
{adve rtisin
etc.) are eslinafed at PIO .~ rng e business I
cash distribution¥
o. PP and GG c. Al. equa iy
How ITWJCh cash ca, be cistribut d safely to each partn er at this point? b . 00 and GG · d. NN and 00
e IAdar:>ted)
a. P5.(XX) to Mild: .
b. P5.(XX) fo ~ and PO to Mylene 'led on .Ant 30. 2011 and
c. P3.(XX) to Miclci'. and PSOO to Myle ne 89. The portn ersHp of M. BB. and CC was dDol
co, wefte d Into c:mh on
d. P51XX) t o ~ and PO to Mytene acco unt ·balan ces. ofter non-c ash <mets were
• onct P 1,000 to Mytene September 1, 2011 ~=
(Adapted) Assets . UcJb atle.s ondfq ufy
87. A balance ,__
~t for the
2: 1•. 1 r8Spec..fjy Acco lntsp a,.atl la ,__ P120.Q00
P0rtnershi pr~fits Cash - - - - PS0.000
ety, shows the folio P of KK, LL and MM. who shareation M.ca pltal 13D'51 - 9QaJ 0
· wrng balan ces just befo re liquid : 88. cas,lt al 130SJ _ t,o«xq
Cast, 0 ,.___ .
- ••it:r" ~fs CC. capt al CaQ - IICXUXXJI
P-48.QX> ·. ~ ~ .!S__I<. Coe:_ LL. Cop. MM, CQE;

Pal~ P88.(XX) P62.CXX> P56,CXX>

 Partnership
47.
liabilities of the partners at Septem ber 1, 20 11 are:
Personal assets an d 91. The August, Albert and Ge .
Persona / · Pe,... ·
,.,0 na/ 2011, and the artne . r'!Y. P~rtne~h,p became insolvent on January J,
Assets Uabilit• this respect thetllo~ h,pfrs be,n.g hqu,dated as soon as practicab le. In
~ 9 in ormatron for the partners has been marshaled:
PB0,000 P90.CXX)
M ......................,....••··········:···························· Capito/ Ba/onces Personal Assets Personal Uabilities
881.'................................................... ................ . 100,000 61,CXX)
cc ................................................................... 192,000 80,CXX) ~~~'::t ·········· pl~-~
Gerry ············ , )
P80,000
30;(X)()
P40,000
50,000
............. (30,000) 70,000 30,000
If CC contributes P70,000 to the partners hip to provide cash ·to Pay th
e
creditors, what amount of AA's P90,000 partners hip equity would ap ~a Total .............. P(20.000)
to be recoverable?
Assume that residual ~?fits cind !osses are shared equally among the three
c. P79,000 partners. Based on th,s 1nformatron, calculate the maximum amount that
a . P90,000 August can expect to_receive from the partnership liquidation is:
b. 81.000 . d. None
(Adapted) a. P20,000 C. P70,000
b. 40,000 d. · 110.000·
(Adopted )
90. After all pa~n~rship assets w~re converte d into cash and all available
cash was distributed to creditors , the ledger of the Daniela Erika and 92. Gordo and Gordo formed a partnership on July 1. 2011 to ~perote two
Fredline partnership showed the following balance s: ' ·
stores to be manage d by each of them. They invested P30,000 and P20,000
and agreed to share earnings 60% and 40%. respectively. All their
Debit Credit transactions were for -cash; and all their sut?sequent transactions were
handled through their respective bank accounts as summarized below:
, Accounts payable ................. ............................. P20,000 Gai'do · Gordo
°?niela, capital (40%) ...................................... . 10.~
Erika. capital (30%) ............................................ 60,000 Cash receipts........................................................ P79,100 P65,245
Cash disbursements .............................•............... 62.275 70,695
Fredfine, capital (30%) ........ :.............................. P90.000
P90,000 P90,000 On October 31. 2008, all remaining noncash assets in the two stores were
. · sold for cash of P60,000. The partnership was dissolved. and cash settlement
·d :
Percentages indicated
assets and liabilit'e f there res, ual profit and loss sharing ratios. Personal was effected
. . the P.60,000 cash, Gordo received
. distribution. of
. In the
1 s O e part_ners ore as folloy.,s:
a. P24,000 c. P34,000
b. 26,CXX> d. 36,000
Daniela Erika Fredfine (PhDCPA)
Personal assets
. Personal liabilities PS0,000 P50,000 PJ00,000
45,000 40,000 40,000 93. PP, QQ, and RR. partners to a firm •. have capitafil b~latnhces t<?f Pl,1~200 •
PS.800, respectiv ely, and ~hare pro ts,~ era 10 o ~:2:1.
. . P13,000, and
Thf: partnership creditors
Prepare a schedule showing how ava,lable cash will be given to the
claims, and the partners s~ttrocee~ agc:11nst Fredline for recovery of their
. le therr claims against each other. partners as it:becomes avattable. Who among the portnen shall be paid
first with an available cash of Pl.400? · ·
.
How much would Erik.a receive?
a. ·oo c. RR
a. P --0- d. pp
b. 45,000 C. P47, 143 . b. Noone (Adopted)
d. Cannot be determi ned d)
. (Adapte