BEAdvac 1 – BSA

STUDENT ACTIVITY
Week no: 1
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Name: ______________________________________________Score: _______________________________

Year and Section: ____________________________________Date: ________________________________

Diagnostic Test #1: Partnership

I. Modified True/False: Write TRUE if the statement is correct; otherwise, underline the word/s making
the statement incorrect and write the correct word/s on the blank. (20 points)

_________________1. In a partnership, each partner is personally and individually liable for all
partnership liabilities. In other words, the liability of the partners in a partnership
is limited.

_________________2. Non-cash assets contributed into the partnership should be recorded at their
carrying amounts.

_________________3. If the partnership agreement does not specify how income is to be allocated,
profit and loss should be allocated in accordance with their capital
contribution.

_________________4. Under the revaluation method, the total contributed capital of the old and
new partners is equal to the total agreed capital (total capital of the
partnership).

_________________5. Under the revaluation method, any increase or decrease in the capital credit
of a partner is deducted from or added to the capital credit of the other
partners.

_________________6. Net income or loss up to the date of liquidation should be allocated to the
partners’ capital accounts based on their P&L ratio.

_________________7. The gain or loss realized from the sale of noncash assets should be allocated
to the partners’ capital accounts based on their P&L ratio.

_________________8. In a partnership liquidation, the final cash payment to the partners should be
made in accordance with the balances of partners’ capital accounts, and not
the P&L ratio.

_________________9. The Doctrine of Marshalling of Liabilities is applicable if either the partnership is

insolvent or individual partners are insolvent.

_________________10. In accounting for the lump-sum liquidation of a partnership, cash payments

to partners after all non-partner creditors’ claims have been satisfied, but
before the final cash distribution, should be according to safe payment
computations.

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II. Problems: Write your solutions on the yellow paper and box your final answers. Do not write
at the back of your yellow paper and put a page number on every page of your solution.

A. AA, BB, and CC, partners, have capital balances of P11,200, P13,000, and P5,800,
respectively. They share profits in the ratio of 4:2:1.
1-4. Prepare a cash payment priority program and cash distribution schedule showing how
available cash will be given to the partners as it becomes available. Determine who among
the partners shall be paid first with an available P1,400.

B. The ABC Partnership is being dissolved. The profit and loss ratio is 30% for AA, 30% for BB, and
40% for CC. The total interests of AA and BB is P30,000 and P36,000, respectively. The capital
account of CC before realization is P60,000. The first cash payment under a program of
priorities belongs to CC in the amount of P2,000.
5-7. How much is the loan to (from) CC?

C. A cash distribution plan (payment priority program) for the AA, BB, CC Partnership appears
below:

Priority Creditors AA BB CC
First 300,000 100%
Next 80,000 70% 30%
Next 70,000 ? 4/7
Remainder 22% 34% ?

8-10. If P550,000 of cash is to be distributed, how much will be received by the priority creditors,
AA, BB, and CC?

D. The assets and equities of ABC Partnership at the end of October 2022 are as follows:

Assets Liabilities and Equity

Cash…………………………………Php15,000
Receivables – net……………….......…20,000
Inventory……………………………...…40,000
Plant assets – net……………………….70,000
Due from BB………………………………5,000
Total…………………………………...P150,000
Liabilities………………………………P50,000
Due to CC…………………………......10,000
AA, Capital (30%)…………………….45,000
BB, Capital (50%)………………......…30,000
CC, Capital (20%)………………...….15,000
Total………………………………….P150,000

The partners decide to liquidate the partnership. They estimate that the noncash assets, other
than the due from BB, can be converted into P100,000 cash over the two-month period ending
December 31, 2022. Cash is to be distributed to the parties as it becomes available during the
liquidation process.

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11-13. The partner most vulnerable to partnership losses on liquidation is:

14-16. P65,000 is available for first distribution. Determine the payment/s that should be made
in the first distribution.

E. The following details apply for 17-23.

Assets Liabilities and Equity

Cash…………………………………Php16,00 Liabilities………………………………P89,600
Other Assets……………….....……...272,000
Due to BB…………………………..........4,000
Due to CC…………………………….....6,400
AA, Capital (40%)……………………..76,000
BB, Capital (40%)………………......…48,000
CC, Capital (20%)…………………….64,000
Total……………………………..…....P288,000 Total…………………………………..P288,000

The other assets were sold for P136,000. Deficient partner was solvent.
17-19. BB made an additional investment of P2,400. How much is the gain or loss in the sale of
assets?
20-21. Assuming the deficient partner was insolvent and AA received P20,000 as final payment,
what is the loss shared by the partners for the deficiency of the deficient partner?
22-24. Assuming the distribution of cash happened twice, before eliminating cash deficiency
and after eliminating cash deficiency, how much is the cash distributed among the partners
in the first payment made? Prepare a Schedule of Cash Distribution.

F. At December 31, 2023, the capital balances of the partners AA, BB, and CC are P320,000,
P200,00, and P40,000, respectively, sharing profits and losses in the ratio of 3:2:1. The partners
decided to liquidate and sold all the non-cash assets for P296,000 cash. After paying all the
liabilities amounting to P96,000, they still have P224,000 cash left for distribution.
25-27. How much is the loss on realization of assets?
28-30. How much is the cash distributed to BB?

G. The balance sheet of AA, BB, CC Partnership on December 31, 2022, when the partners
decide to liquidate follows:

Cash………………………………Php100,000 Liabilities……………………………..P125,000
Other Assets……………….....……....250,000 AA, Loan…………………..……..........35,000
AA, Capital (30%)……………….…..100,000
BB, Capital (40%)………………......…15,000
CC, Capital (30%)…………………….75,000
Total……………………………..…...P350,000 Total…………………...……………..P350,000

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Cash is realized on the other assets as follows, and amounts realized are distributed at the end
of each month to the appropriate parties.

Fiscal Year 2023 Asset Book Value Cash Proceeds

January P150,000 ?
February 100,000 115,000

31-34. After satisfying all the liabilities, AA received a total amount of P82,500 while BB received
nothing in the first distribution. How much is the first cash available for distribution to the
partners?
35-36. How much is the cash proceeds in the sale of assets in January 2023?
37. How much is the loss in the sale of assets in January 2023?
38-40. After the sale of assets in February, how much each partner receive?

H. AA, BB, and CC are partners. Their profit and loss ratio is 60%, 20%, and 20%, respectively.
The partnership has a cash of P22,000, non-cash assets with a book value of P264,000, and
liabilities of ____________. The following data relates to the partners as of May 31, 2022: A has
capital balance of P129,250, personal assets of P27,500, and personal liabilities of P13,750.
B extended a loan to the partnership in the amount of P13,750, deficit of P38,500, personal
assets of P41,250, and personal liabilities of P16,500.
C has a capital balance of P8,250, personal assets of P68,750, and personal liabilities of
P41,250.
The partners agreed to contribute personal assets to whatever extent possible in order to
eliminate their respective deficits after the first sale of assets.
On June 8, 2022, assets with a book value of P82,500 were sold for P55,000 cash. On July 28,
2022, assets with a book value of P55,000 and a fair value of P63,250 were distributed to A. On
August 30, 2022, additional non-cash assets with a book value of P110,000 were sold for
P148,500.
41-42. How much is the liabilities of the partnership to the creditors?
43-44. How much is the non-assets sold at zero amount?
45-47. How much is the additional cash investment by BB?
48-49. How much is the share of each partner in the revaluation of assets?

I. AA, BB, and CC formed partnership on January 3, 2023. Their original capital contribution
were: P300,000, P200,00, and P100,000, respectively.
On August 3, 2023, AA retired from the partnership. On the date of the retirement, the
partnership net loss was P60,000 and the partners agreed that certain asset is to be revalued
at P80,000 from its original cost of P50,000.

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The partners agreed to pay AA P225,000 in settlement of his interest.

50-52. How much does each partner receive as bonus?
53-54. What is now the total capital of the remaining partners in the partnership?

J. Partners A, B, and C have current capital balances of P96,000, P48,000, and P32,000,
respectively, during 2023.
The partners agreed on the following:
1. Each partner receives 10% interest on his current capital balance.
2. A will receive P24,000 as annual salary, while C will receive P16,000.
3. The residual profit or loss is divided equally.

After considering the allocation of profit/loss among the partners, C’s capital is decreased by
P8,800.
55-57. How much is the net income or net loss sustained by the partnership in 2023?

K. AA, BB, and CC started a partnership. AA will contribute cash of P100,000 and his store
equipment that original cost P120,000 with a second-hand value of P50,000.
BB will contribute P160,000 cash. CC will contribute P50,000 cash and a brand-new computer
that cost his family’s computer dealership P100,000 but with a regular selling price of P120,000.
CC also contributed accounts receivable in the amount of P60,000, but P10,000 was
uncollectible.
They agreed to share profits and losses equally.
58-60. Upon formation, what are the capital balances of the partners?

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