MULTIPLE CHOICE - Theory of Accounts

TOA 1-1 (AICPA)

Which of the following is not a characteristic of most partnership?

a. Limited liability
b. Limited life
c. Mutual agency
d. Ease of formation

TOA 1-2 (AICPA)

Which of the following is not a characteristic of the proprietary theory that influences accounting for partnerships?
a. Partners' salaries are viewed as a distribution of income rather than a component of net income.
b. A partnership is not viewed as separate entity, distinct, taxable entity.
c. A partnership is characterized by limited liability.
d. Changes in the ownership structure of a partnership result in the dissolution of the partnership.

TOA 1-3 (AICPA)

An advantage of the partnership as a form of business organization would be

a. Partners do not pay income taxes on their share in partnership income.
b. A partnership is bound by the act of the partners.
c. C. A partnership is created by mere agreements of the partners.
d. A partnership may be terminated by the death or withdrawal of a partner

TOA 1-4 (AICPA)

Which of the following statements is correct with respect to a limited partnership?

a. A limited partner may not be an unsecured creditor of the limited partnership.
b. A general partner may not also be limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership.
d. A limited partnership can be formed with limited liability for all partners.

TOA 1-5 (Adapted)

A and B formed a partnership, each contributing non-cash assets into the partnership. Partner A contributed inventory with a
current market value in excess of its carrying amount Partner B contributed fixed asset with a carrying amount in excess of its
current market value. At what amount should the partnership record each of the assets contributed?

Inventory Fixed asset

a. Carrying amount Market value
b. Market value Carrying amount
c. Carrying amount Carrying amount
d. Market value Market value

TOA 1-6 (Adapted)

Partnership capital and drawings accounts are similar to the corporate

a. Paid in capital, retained earnings, and dividends accounts.
b. Retained earnings account.
a. C. Paid in capital and retained earnings accounts.
c. Preferred and common stock accounts.

TOA 1-7 (AICPA)

When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the
contributing partner's capital account?
a. Fair value at the date of contribution.
b. Contributing partner's original cost.
c. C. Assessed valuation for property tax purposes.
d. Contributing partner's tax basis.
TOA 1-8 (Adapted)

If the partnership agreement does not specify how income is to be allocated, profits and loss should be allocated
a. Equally
b. In proportion to the weighted average of capital invested during the period. time and effort
c. Equitably so that partners are compensated for the expended on behalf of the partnership.
d. In accordance with their capital contribution.

TOA 1-9 (Adapted)

Which of the following is not a component of the formula used to distribute income?
a. Salary allocation to those partners working.
b. After all other allocation, the remainder divided according to the profit and loss sharing ratio.
c. Interest on the average capital investments.
d. Interest on notes to partners.

1
TOA 1-10 (Adapted)

Which of the following is not considered a legitimate expense of a partnership?

a. Interest paid to partners based on the amount of invested capital.
b. Depreciation on assets contributed to the partnership by partners.
c. Salaries for management hired to run the business.
d. Supplies used in the partners' offices.

TOA 1-11 (AICPA)

The fact that salaries paid to partners are not a component of partnership income is indicative of
a. A departure from generally accepted accounting principles.
b. Being characteristic of the entity theory.
a. C. Being characteristic of the proprietary theory.
c. Why partnerships are characterized by unlimited liability.
TOA 1-12 (Adapted)

Statement I: According to the law, if no profit or loss sharing ration has been agreed upon, the partners shall share equally.
Statement II: Perdo and Kirdo formed a partnership. Perdo contributed P1,000,000 cash; while Kirdo will contribute her services.
Perdo is a capitalist partner while Kirdo is an industrial partner.

a. Both statements are true

b. Both statements are false
c. Only Statement I is true
d. Only Statement II is true

TOA 1-13 (AICPA)

The Flat and Iron partnership agreement provides for Flat to receive a 20% bonus on profits before bonus. Remaining profits and
losses are divided between Flat and Iron in the ratio of 2:3, respectively. Which partner has a greater advantage when the
partnership has a profit or when it has a loss?

Profit Loss
a. Flat Iron
b. Flat Flat
c. Iron Flat
d. Iron Iron

TOA 1-14 (AICPA)

Which of the following results in dissolution of a partnership?

a. The contribution of additional assets to the partnership by an existing partner.
b. The receipt of a draw by an existing partner.
c. The winding up of the partnership and the distribution of remaining assets to the partners.
d. The withdrawal of a partner from a partnership.
TOA 1-15 (Adapted)

If a new partner acquires a partnership interest directly from the partners rather than from the partnership itself,
a. No entry is required.
b. The partnership assets should be revalued.
c. The existing partners' capital accounts should be reduced and the new partner's account increased.
d. The partnership has undergone a quasi-reorganization.
TOA 1-16 (AICPA)

Which of the following best characterizes the bonus method of recording a new partner's investment in a partnership?
a. Net assets of the previous partnership are not revalued.
b. The new partner's initial capital balance is equal to his or her investment.
c. Assuming that recorded assets are properly valued, the book value of the new partnership is equal to the book value of
the previous partnership and the investment of the new partner.
d. The bonus always results in an increase to the previous partners" capital balances.
TOA 1-17 (Adapted)

Under the bonus method, any increase or decrease in the capital credit of a partner is
a. Deducted from or added to the capital credit of the other partners
b. Recognized as goodwill
c. Recognized as expense
d. Deferred and amortized to profit or loss

2
TOA 1-18 (AICPA)

The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:
a. Partnership drawings, partnership liabilities, partnership loans partnership capital balances.
b. Partnership liabilities, partnership loans, partnership capital balances.
c. Partnership liabilities, partnership loans, partnership drawings, partnership capital balances.
d. Partnership liabilities, partnership capital balances, partnership loans.
TOA 1-19 (Adapted)

In a partnership liquidation, the final cash payment to the partners should be made in accordance with the
a. Partner's profit and loss sharing ratio.
b. Balances of partners' capital accounts.
c. Ratio of the capital contributions by partners.
d. Safe payment computations.

TOA 1-20 (AICPA)

The doctrine of marshaling of assets

a. Is applicable only if the partnership is insolvent.
b. Allows partners to first contribute personal assets to unsatisfied partnership creditors.
c. Is applicable if either the partnership is insolvent or individual partners are insolvent.
d. Amount owed to personal creditors and to the partnership for debit capital balances are shared proportionately from the
personal assets of the partners.

TOA 1-21 (Adapted)

In the liquidation of a partnership it is necessary to (1.) distribute cash to the partners; (2.) sell non-cash assets; (3.) allocate any
gain or loss on realization to the partners; and (4.) pay liabilities. These steps should be performed in the following order:
a. (2), (3), (4), (1)
b. (2), (3), (1), (4)
c. (3), (2), (1), (4)
d. (3), (2), (4), (1)
TOA 1-22 (Adapted)

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
a. The partners' relative profit and loss sharing ratio.
b. The final balances in partner capital accounts.
c. The partners relative share of the gain or loss on liquidation.
d. Safe payment computations.
MULTIPLE CHOICE - Problems

PROB. 1-1 (Adapted)

On April 30, 2020, Al, Ben, and Ces formed a partnership by combining their separate business proprietorships. Al contributed
cash of P50,000 Ben contributed property with a P36,000 carrying amount, a P40,000 original cost. and P80,000 fair value. The
partnership accepted responsibility for the P35,000 mortgage attached to the property. Ces contributed equipment with a P30,000
carrying amount, a P75,000 original cost, and P55,000 fair value. The partnership agreement specifies that profits and losses are
to be shared equally but is silent regarding capital contributions. Which partner has the largest capital account balance at April 30,
2020

a. Al
b. Ben
c. Ces
d. All capital balances are equal

PROB. 1-2 (Adapted)

Al, Sharif, and Booba formed a partnership. Al will contribute cash of P50,000 and his store equipment that originally cost P60,000
with a second-hand value of P25,000. Sharif will contribute P80.000 in cash. Booba, whose family sells computers, will contribute
P25,000 cash and a brand new computer that cost his family's computer dealership P50,000 but with a regular selling price of
P60,000. They agreed to share profits and losses equally. Upon formation, what are the capital balances of the partners?

AI Sharif Booba
a. 75,000 80.000 85,000
b. 80,000 80.000 80,000
c. 88,333 88,333 88.334
d. 110,000 80,000 75,000

3
PROB. 1-3 (Adapted)

On January 1, 2020. Atta and Boy agreed form a partnership contributing their respective assets and equities subject to
adjustments. On that date, the following were provided:

Atta Boy
Cash 28,000 62,000
Accounts receivable 200,000 600,000
Inventories 120,000 200,000
Land 600,000
Building 500,000
Furniture & fixtures 50,000 35,000
Intangible assets 2,000 3,000
Accounts payable 180,000 250,000
Other liabilities 200,000 350,000
Capital 620,000 800,000

The following adjustments were agreed upon:

a. Accounts receivable of P20,000 and P40,000 are uncollectible in Atta's and Boy's respective books.
b. Inventories of P6,000 and P7,000 are worthless in Atta's and Boy's respective books.
c. Intangible assets are to be written off in both books.

What will be the capital balances of the partners after adjustments?

Atta Boy
a. 592,000 750,000
b. 600,000 700,000
c. 592,000 756,300
d. 600,000 750,000

PROB. 1-4 (Adapted)

Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before the admission of Jane show: Cash,
P26,000, Accounts receivable, P120,000, Merchandise inventory, P180,000, and Accounts payable, P62,000. It was agreed that
for purposes of establishing Mary's interest, the following adjustments be made: 1.) an allowance for doubtful accounts of 3% of
accounts receivable is to be established; 2.) merchandise inventory is to be adjusted upward by P25,000; and 3.) prepaid expenses
of P3,600 and accrued liabilities of P4,000 are to be recognized.

If Jane is to invest sufficient cash to obtain 2/5 interest in the partnership, how much would Jane contribute to the new partnership?

a. 176,000
b. 190,000
c. 95,000
d. 113,980

PROB. 1-5 (AICPA)

Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the partnership's formation:

Contributed by
Roberts Smith
Cash P20,000 P30,000
Inventory 15,000
Building 40,000
Furniture & equipment 15,000

The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership agreement also specifies
that profits and losses are to be distributed evenly. What amounts should be recorded as capital for Roberts and Smith at the
formation of the partnership?

Roberts Smith
a. 35,000 85,000
b. 35,000 75,000
c. 55,000 55,000
d. 60,000 60,000

PROB. 1-6 (AICPA)

On May 1, 2020, Cobb and Mott formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Cobb
contributed a parcel of land that cost him P10,000. Mott contributed P40,000 cash. The land was sold for P18,000 on May 1, 2020,
immediately after formation of the partnership. What amount should be recorded in Cobb's capital account on formation of the
partnership?

a. 18,000
b. 17,400
c. 15,000
d. 10,000
4
PROB. 1-7 (Adapted)

On April 30, 2020, Alex, Benjie, and Cesar formed a partnership by combining their separate business proprietorships. Alex
contributed cash of P500,000. Benjie contributed property with a P360,000 carrying amount, a P400,000 original cost, and
P800,000 fair market value. The partnership accepted responsibility for the P350,000 mortgage attached to the property. Cesar
contributed equipment with a P300,000 carrying amount, a P750,000 original cost, and P550,000 fair value. The partnership
agreement specifies that profits and losses are to be shared equally but is silent regarding capital contributions. What are the
capital balances of the partners at April 30, 2020?

Alex Benjie Cesar

a. 500,000 800,000 550,000
b. 500,000 450,000 550,000
c. 500,000 360,000 300,000
d. 750,000 500,000 400,000

PROB. 1-8 (AICPA)

Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel contributed P100,000 and Carr
contributed P84,000 in identifiable assets. Under the bonus approach to adjust the capital accounts, Carr's unidentifiable asset
should be debited for

a. 46,000
b. 16,000
c. 8,000
d. 0

PROB. 1-9 (AICPA)

The Grey and Redd Partnership was formed on January 2, 2020, Under the partnership agreement, each partner has an equal
initial capital balance. Partnership net income or loss is allocated 60% to Grey and 40% to Redd. To form the partnership, Grey
originally contributed assets costing P30,000 with a fair value of P60,000 on January 2, 2020, and Redd contributed P20,000 cash.
Drawings by the partners during 2020 totaled P3,000 by Grey and P9,000 by Redd. The partnership net income in 2020 was
P25,000. What is the amount of bonus?

a. 20,000 bonus to Grey

b. 20,000 bonus to Redd
c. 40,000 bonus to Grey
d. 40,000 bonus to Redd

PROB. 1-10 (Author)

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment with assessed value of P100,000
with historical cost of P800,000 and accumulated depreciation of P600,000. B will contribute a land and building with book value
of P1,200,000 and fair market value of P1,500,000. The land and building is subject to a mortgage payable amounting to P300,000
to be assumed by the partnership. The partners agreed that B will have 60% capital interest in the partnership.

They agreed that C will contribute sufficient cash to the partnership. A day after the partnership formation, the equipment was sold
for P 300,000.

a. What is the total agreed capitalization of the ABC Partnership?

a. 1,500,000
b. 2,000,000
c. 2,500,000
d. 3,000,000
b. What is the capital credit of A in the ABC Partnership after the formation?
a. 100,000
b. 200,000
c. 300,000
d. 400,000
c. What is the capital credit of B in the ABC Partnership after the formation?
a. 900,000
b. 1,500,000
c. 1,400,000
d. 1,200,000
d. What is the cash to be contributed by C in the ABC Partnership?
a. 500.000
b. 600,000
c. 700,000
d. 800,000
5
PROB. 1-11 (Adapted)

Partners AAA and BBB are sharing profits and losses in the following manner:

AAA BBB
20X1 60% 40%
20X2 70% 30%

During 20X2, the following errors committed in 20X1 were discovered:

• Accrued salaries of P10,000 was not recognized as of December 31. 20X1.
• Prepaid insurance of P25,000 was not recognized as of December 31, 20X1. The partnership uses the expense method
in recording prepayments.
• Depreciation of property and equipment was understated by P50,000.

How much is the share in net loss/income of AAA?

a. (21,000)
b. (14,000)
c. (35,000)
d. 18.000

PROB. 1-12 (AICPA)

A partnership has the following accounting amounts:

Sales P 700,000
Cost of goods sold 400,000
Operating expenses 100,000
Salary allocations to partners 130,000
Interest paid to banks 20,000
Partners drawings 80,000

What is the partnership net income (loss)?

a. 200,000
b. 180,000
c. 50,000
d. (30,000)

PROB. 1-13 (Adapted)

Partners A and B share profits and losses equally after each has been credited in all circumstances with annual salary allowances
of P30,000 and P24,000, respectively. Based on this agreement, in which of the following circumstances will Partner A benefit by
P6.000 more than Partner B?

a. Only if the partnership has net income of P54,000 or more for the year.
b. Only if the partnership does not incur a loss for the year
c. In all earnings or loss situation.
d. Only if the partnership has earnings of at least P6,000 for the year.

PROB. 1-14 (AICPA)

The ABC Partnership reports net income of P60,000. If Partners A, B, and C have income ratio of 50%, 30%, and 20%, respectively.
What is the share of Partner C from the net income of the partnership, if he was given a capital ratio of 25%?

a. 30,000
b. 12,000
c. 18,000
d. 15,000

PROB. 1-15 (Adapted)

On January 2, 2020, Abel, Cain, and Josuah formed a partnership. Abel contributed cash of P100,000 and a delivery equipment
that originally costs him P120,000, but with a second hand value of P50,000. Cain contributed P160,000 in cash. Josuah, whose
family sells office equipment, contributed P50,000 in cash and office equipment that cost his family's dealership P100,000 but with
a regular selling price of P120,000. In 2020, the partnership reported net income of P120,000. On December 31, 2020, what would
be the capital balance of the partners?

Abel Cain Josuah

a. 257,500 200,000 192,500
b. 190,000 200,000 210,000
c. 260,000 200,000 190,000
d. 187,500 200,000 212,500

6
PROB. 1-16 (AICPA)

The partnership agreement of Reid and Simm provides that interest at 10% per year is to be credited to each partner on the basis
of weighted-average capital balances. A summary of Simm's capital account for the year-ended December 31, 2020, is as follows:

Balance, January 1 P 140,000

Additional investment, July 1 40,000
Withdrawal, August 1 (15,000)
Balance. December 31 165,000

What amount of interest should be credited to Simm's capital account for 2020?

a. 15,250
b. 15,375
c. 16,500
d. 17,250

PROB, 1-17 (AICPA)

Partner Ae first contributed P50,000 of capital into existing partnership on March 1. 2020. On June 1, 2020, said partner contributed
another P20,000. On September 1, 2020, he withdrew P15,000 from the partnership. Withdrawal in excess of P10,000 are charged
to the partner's capital accounts. What is the annual weighted average capital balance of Partner Ae?

a. 32,500
b. 51,667
c. 60,000
d. 48,333

PROB. 1-18 (RPCPA)

In the calendar year 2020, the partnership of A and B realized a net profit of P240,000. The capital accounts of the partners show
the following postings:

A, capital B, capital
Debit Credit Debit Credit
Jan 1 P120,000 P80,000
May 1 P 20,000 P10,000
July 1 20,000
Aug. 1 10,000
Oct. 1 10,000 5,000

a. If the profits are to be divided based on average capital, the share of A and respectively are:
a. 129,600 110,400
b. 144,000 96,000
c. 136,800 103,200
d. 136,543 103,457

b. If 20% interest based on the capital at the end of the year is allowed and given and the balance of the P240,000 profit is divided
equally, the total share of A and B, respectively are:
a. 121,500 118,500
b. 124,000 116,000
c. 123,000 117,000
d. 122,625 117,375

PROB. 1-19 (AICPA)

During 2020. Young and Zinc maintained average capital balances in their partnership of P160,000 and P100,000, respectively.
The partners receive 10% interest on average capital balances, and residual profit or loss is divided equally. Partnership profit
before interest was P4,000. By what amount should Zine's capital account change for the year?
a. 1,000 decrease
b. 2,000 increase
c. 11,000 decrease
d. 12,000 increase

PROB. 1-20 (AICPA)

Red and White formed a partnership in 2020. The partnership agreement provides for annual salary allowances of P55,000 for
Red and P45,000 for White. The partners share profits equally and losses in a 60/40 ratio. The partnership had earnings of P80,000
for 2020 before any allowance to partners. What amount of these earnings should be credited to each partner's capital account?

Red White
40,000 40,000
43.000 37,000
44,000 36,000
45,000 35,000

7
PROB. 1-21 (AICPA)

Fox, Greg, and Howe are partners with average capital balances during 2020 of P120.000, P60,000, and P40,000, respectively.
Partners receive 10% interest on their average capital balances. After deducting salaries of P30,000 to Fox and P20,000 to Howe,
the residual profit and loss is divided equally. In 2020, the partnership sustained a P33,000 loss before interest and salaries to
partners. By what amount should Fox's capital account change?

a 7,000 increase
b. 11,000 decrease
C. 35,000 decrease
d. 42,000 increase

PROB. 1-22 (Adapted)

If a partnership has net income of P44,000 and Partner X is to be allocated bonus of 10% of income after the bonus. What is the
amount of bonus Partner X will receive?

3,000 a.
b. 3,300
C. 4,000
d. 4,400

PROB. 1-23 (AICPA)

The partnership agreement of Donn, Eddy, and Farr provides for annual distribution of profit and loss in the following sequence:

• Donn, the managing partner, receives a bonus of 10% of profit.

• Each partner receives 6% interest on average capital investment.
• Residual profit or loss is divided equally.

Average capital investments for 2020 were:

Donn P80,000
Eddy 50,000
Farr 30,000

What portion of the P100,000 partnership profit for 2020 should be allocated to Farr?

a. 28,600
b. 29,800
c. 35,133
d. 41,600

PROB. 1-24 (Adapted)

The of Partnership of Adam and Eve the following provisions were stipulated:

a. Annual salary of P60,000 each.

b. Bonus to Adam of 20% of the net income after partners' salaries, the bonus being treated as an expense.
c. Balance to be divided equally.

The partnership reported a net income of P360,000 after partners' salaries but before bonus. How much is the share of Eve in the
profit?

a. 60,000
b. 90,000
c. 150,000
d. 210,000

PROB. 1-25 (Adapted)

Partners AA and BB have profit and loss agreement with the following provisions: salaries of P30,000 and P45,000 for AA and BB,
respectively, a bonus to AA of 10% of net income after salaries and bonus; and interest of 10% on average capital balances of
P20,000 and P35,000 for AA and BB, respectively. One-third of any remaining profits will be allocated to AA and the balance to
BB. If the partnership had net income of P102,500, how much should be allocated to Partner AA?

a. 44,250
b. 47,500
c. 41,000
d. 41,167

8
PROB. 1-26 (Adapted)

Partners AA and BB have profit and loss agreement with the following provisions: salaries of P30,000 and P45,000 for AA and BB,
respectively, a bonus to AA of 10% of net income after salaries and bonus; and interest of 10% on average capital balances of
P20.000 and P35,000 for AA and BB, respectively. One-third of any remaining profits will be allocated to AA and the balance to
BB. If the partnership had net income of P22,000, how much should be allocated to Partner AA, assuming that the provisions of
the profit and loss agreement are ranked by order of priority starting with salaries?

a. 13,200
b. 12,500
c. 12,000
d. 8,800

PROB. 1-27 (Adapted)

Luz, Vi, and Minda are partners when the partnership earned a profit of P30,000. Their agreement provides the following regarding
the allocation of profits and losses:

a. 8% interest on partners' ending capital in excess of P75,000.

b. Salaries of P20,000 for Luz and P30,000 for Vi.
c. Any balance is to be distributed 2:1:1 for Luz, Vi, and Minda, respectively.

Assume ending capital balances of P60,000, P80,000, and P100,000 for partners Luz, Vi, and Minda, respectively. What is the
amount of profit allocated for Minda, if each provision of the profit and loss agreement is satisfied to whatever extent possible using
the priority order shown above?

a. (3,600)
b. 3,600
c. (2,000)
d. 2,000

PROB. 1-28 (Adapted)

XYZ Partnership provided for the following in their distribution of profits and losses:

First: X to receive 10% of net income up to P100,000 and 20% of the amount in excess thereof.

Then: Y and Z are each to receive 5% of the remaining income in excess of P150,000 after X's share.

Finally: The balance is to be distributed equally to the three partners,

If the partnership earned a net income of P250,000, what is the total share of Partner X?

a. 100,000
b. 108,000
c. 110,000
d. 130,000

PROB. 1-29 (AICPA)

Hanz, Ivy, Jasper, and Kelly own a publishing company that they operate as a partnership. Their agreement includes the following:

• Hanz will receive a salary of P20,000 and a bonus of 3% of income after all the bonuses.
• Ivy will receive a salary of P10,000 and a bonus of 2% of income after all the bonuses:
• All partners are to receive the following: Hanz- P5.000; Ivy P4.500. Jasper- P2,000; and Kelly P4.700, representing 10%
interest on their average capital balances.
• Any remaining profits are to be divided equally among the partners.

a. How would a net loss of P40.000 would be allocated among the partners?

Hanz Ivy Jasper Kelly

3,261.75 (7,169.25) (18,181.25) (17,911.25)
3,450.00 (7,050.00) (19,550.00) (16,850.00)
4,116.75 (6,764.25) (20,026.25) (17,326.25)
45,000.00 4,500.00 (8,000.00) (5,300.00)

Assuming a profit of P40,000. how would this amount be distributed to them given the following order of priority: Interest on invested
capital. then bonuses, then salary, and then according to profit and loss percentage?

Hanz Ivy Jasper Kelly

a. 23,261.75 12,830.75 1,818.75 2,088.75
b. 20,867.00 12,433.00 2,000.00 4,700.00
c. 20,740.00 12,560.00 2,000.00 4,700.00
d. 18,038.00 15,262.00 2,000.00 4,700.00
9
PROB. 1-30 (Adapted)

On October 31, 2020, Zita and Jones formed a partnership by investing cash of P300,000 and P200,000, respectively. The partners
agreed to receive an annual salary allowance of P360,000, and to give Zita a bonus of 20% of the net income after partners'
salaries, the bonus being treated as an expense. If the profits after salaries and bonus are to be divided equally, and the profits on
December 31, 2020 after partners' salaries but before bonus of Zita is P360,000, how much is the share of Zita in the profit?

a. 100,000
b. 120,000
c. 210,000
d. 270,000

PROB. 1-31 (AICPA)

Maxwell is trying to decide whether to accept a salary of P40,000 or salary of P25,000 plus a bonus of 10% of net income after
salaries and bonus as a means of allocating profit among partners. Salaries traceable to the other partners are estimated to be
P100.000. What amount of income would be necessary so that Maxwell would consider choices to be equal?

a. 165,000
b. 290,000
c. 265,000
d. 305,000

PROB. 1-32 (Adapted)

Alder, Benson, and Carl are capitalist partners and Denver, an industrial partner. The partnership reported a net loss of P100,000.
How much is the share of Denver in the reported net loss?

a. 0
b. 10.000
c. 25,000
d. 100,000

PROB. 1-33 (AICPA)

Downs, Frey, and Vick formed the DFV general partnership to act as manufacturer's representatives. The partners agreed Downs
would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that
the partnership would not terminate for 5 years. After the fourth year, the partners agreed to terminate the partnership. At that time,
the partners capital accounts were as follows: Downs, P20,000. Frey, P15,000; and Vick P10,000. There also were undistributed
losses of P30,000. Vick's share of the undistributed losses will be

a. 0
b. 1,000
c. 9,000
d. 10,000

PROB. 1-34 (AUTHOR)

On January 1, 2021, A, B and C formed ABC Partnership with total agreed capitalization of P1,000,000. The capital interest ratio
of the ABC Partnership is 5:1:4 while the profit or loss ratio is 3:2:5, respectively for A, B and C. During 2021, A and B made
additional investments of P200,000 and P500,000, respectively. At the end of 2021, B and C made drawings of P300,000 and
P100,000, respectively. On December 31, 2021, the capital balance of B is reported at P200,000.

a. What is the net income or net loss of ABC Partnership for the year ended December 31, 2021?

a. (500,000)
b. (1,000,000)
c. 800,000
d. 1,200,000

b. What is the capital balance of A on December 31, 2021?

a. 450,000
b. 350,000
c. 550,000
d. 400,000

c. What is the capital balance of C on December 31, 2021?

a. 150,000
b. 50,000
c. 200,000
d. 250,000
10
PROB. 1-35 (AUTHOR)

On January 1, 2018. A. B and C formed ABC Partnership with original capital contribution of P300,000, P500,000 and P200,000.
A is appointed as managing partner. During 2018, A. B and C made additional investments of P500,000, P200,000 and P300,000,
respectively. At the end of 2018, A, B and C made drawings of P200,000, P100,000 and P400,000, respectively. At the end of
2018, the capital balance of C is reported at P320,000. The profit or loss agreement of the partners is provided below:
• 10% interest on original capital contribution of the partners.
• Quarterly salary of P40,000 and P10,000 for A and B, respectively.
• Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
• Remainder is to be distributed equally among the partners.

a. What is C's share in the partnership profit for the year ended December 31, 2018?

a. 120,000
b. 320,000
c. 180,000
d. 220,000

b. What is the partnership profit for the year ended December 31, 2018?

a. 900,000
b. 1,020,000
c. 1,050,000
d. 960,000

c. What is the bonus given to A as managing partner for the year ended December 31, 2018?

a. 120,000
b. 150,000
c. 60,000
d. 100,000

d. What is the capital balance of A on December 31, 2018?

a. 1,140,000
b. 1,110,000
c. 1,050,000
d. 1,200,000

e. What is the capital balance of B on December 31, 2018?

a. 850,000
b. 840,000
c. 890,000
d. 940,000

PROB. 1-36 (AICPA)

Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2020, their respective capital
accounts were as follows:

Blau 60,000
Rubi 50,000

On that date, Lind was admitted as a partner with one-third interest in capital, and profits for an investment of P40,000. The new
partnership began with total capital of P150,000. Immediately after Lind's admission, Blau's capital should be

a. 50,000
b. 54,000
c. 56,667
d. 60,000

PROB. 1-37 (AICPA)

Partnership A has an existing capital of P70,000. Two partners currently own the partnership and split profits 50/50. A new partner
is to be admitted and will contribute net assets with a fair value of P90,000. For no bonus to be recognized, what is the interest in
the partnership granted the new partner?

a. 33.33%
b. 50.00%
c. 56.25%
d. 75.00%

11
PROB. 1-38 (AICPA)

Ranken purchases 50% of Lark's capital interest in the K and L. partnership for P22,000. If the capital balances of Kim and Lark
are P40.000 and P30,000, respectively, Ranken's capital balance following the purchase is

a. 22,000
b. 35,000
c. 20,000
d. 15,000

PROB. 1-39 (Adapted)

The following information pertains to ABC Partnership of Amor, Bing, and Cora:

Amor, capital (20%) P 200,000

Bing, capital (30%) 200,000
Cora, capital (50%) 300,000

On this date, the partners agreed to admit Dolly into the partnership. Assuming Dolly purchased fifty percent of the partners' capital
and pays P500,000 to the old partners, how would this amount be distributed to them?

a. 100,000 150,000 250,000

b. 130,000 145,000 225,000
c. 166,667 166,667 166,666
d. 150,000 150,000 200,000

PROB. 1-40 (AICPA)

The following balance sheet is presented for the partnership of A, B, and C. who share profits and losses in the respectively ratio
of 5:3:2.

Assets Liabilities and Capital

Cash 120,000 Liabilities 280,000
Other assets 1,080,000 A. capital 560,000
B. capital 320,000
C. capital 40,000
Total 1,200,000 Total 1,200,000

Assume that the assets and liabilities are fairly valued on the balance sheet, and the partnership decided to admit D as a new
partner with a one-fifth interest and no bonus is to be recorded. How much should D contribute in cash or other assets?

a. 147,200
b. 184,000
c. 230,000
d. 240,000

PROB. 1-41 (Adapted)

The capital balances in DEA Partnership are: D, capital P60,000; E, capital P50,000; and A, capital P40,000 and income ratios
are: 5:3:2, respectively. The DEAR Partnership is formed by admitting R to the firm with cash investment of P60,000 for a 25%
interest in capital. What is the amount of bonus to be credited to A capital in admitting R?

a. 10,000
b. 7,500
c. 3,750
d. 1,500

PROB. 1-42 (Adapted)

On October 31, 2020, Morris retired from the partnership of Morris, Philip, and Marl. Morris received P55,000 representing final
settlement of his interest in the amount of P50,000. Under the bonus method,

a. P5,000 was recorded as goodwill.

b. P5,000 was recorded as expense.
c. Charged P5,000 against the capital balances of Philip and Marl.
d. P55,000 was recorded as bonus.

PROB. 1-43 (Adapted)

In May 2020, Imelda, a partner of an accounting firm, decided to withdraw when the partners' capital balances were: Mikee,
P600,000; Raul, P600,000; and Imelda, P400,000. It was agreed that Imelda is to take the partnership's fully depreciated computer
with a second-hand value of P24,000 that cost the

12
partnership P36,000. If profits and losses are shared equally, what would be the of the remaining partners after the retirement of
Imelda?

Mikee Raul
a. 600,00 600,000
b. 592,000 592,000
c. 608,000 608,000
d. 612,000 612,000

PROB. 1-44 (Adapted)

Penny, Naty, and Mary are partners and share profits and losses equally. Each has a capital balancer of P1.800,000. Naty retires
from the partnership and receives P1,500,000. Taking the partnership assets to be fairly stated, the entry to record Naty's retirement
is

a. Naty, capital 1,800,000 (dr)

Goodwill 300,000 (cr)
Cash 1,500,000 (cr)
b. Naty, capital 1,800,000 (dr)
Partnership assets 300,000 (cr)
Cash 1,500,000 (cr)
c. Naty, capital 1,500,000 (dr)
Cash 1,500,000 (cr)
d. Naty, capital 1,800,000 (dr)
Mary, capital 150,000 (cr)
Penny, capital 150,000 (cr)
Cash 1,500,000 (cr)

PROB. 1-45 (AICPA)

On June 30, 2020, the balance sheet for the partnership of Coll, Maduro, and Prieto, together with their respective profit and loss
ratios, were as follows:

Assets, at cost 180,000

Coll, loan 9,000

Coll, capital (20%) 42,000
Maduro, capital (20%) 39,000
Prieto, capital (60%) 90,000
Total 180,000

Coll decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P216,000 at
June 30, 2020. It was agreed that the partnership would pay Coll P61,200 cash for Coll's partnership interest, including Coll's loan
which is to be repaid in full. After Coll's retirement, what is the balance of Maduro's capital account?

a. 36,450
b. 39,000
c. 45,450
d. 46,200

PROB. 1-46 (Adapted)

Peter, Queen, and Roy are partners with capital balances of P300,000, P300,000, and P200,000, respectively; and sharing profits
and losses equally. Roy is to retire and it is agreed that he is to take certain office equipment with second hand value of P50,000
and a note for his interest. The office equipment carried in the books at P65,000 but brand new would cost P80,000. Roy's
acquisition of the office equipment would result in

a. Reduction in capital of P5,000 each for Peter, Queen, and Roy.

b. Reduction in capital of P7,5000 each for Peter, Queen, and Roy.
c. Reduction in capital of P15,000 for Roy.
d. Reduction in capital of P55,000 for Roy.

PROB. 1-47 (AUTHOR)

On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the following data with profit or loss ratio
of 1:6:3:

Cash P 1,000,000 Total Liabilities P 600,000

Non-current asset 2,000,000 A, capital 900,000
B, capital 800,000
C. capital 700,000

On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of B at a price of P500,000.
13
What is the capital balance of B after the admission of D on January 1, 2021?

a. 540,000
b. 480,000
c. 420,000
d. 300,000

PROB. 1-48 (AUTHOR)

On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the following data with profit or loss ratio
of 1:6:3:

Cash P 1,300,000 Total Liabilities P 300,000

Non-current asset 2,000,000 A, capital 1,400,000
B, capital 700,000
C, capital 900,000

On January 1, 2021, D is admitted to the partnership by investing P1,000,000 to the partnership for 20% capital interest.

a. If the all the assets of the existing partnership are properly valued, what is the capital balance of C after the admission of D?

a. 960,000
b. 900.000
c. 840,000
d. 1,200,000

b. If an existing asset of ABC partnership is not properly valued, what is the capital balance of B after the admission of D?

a. 820,000
b. 1,300,000
c. 960,000
d. 780,000

PROB. 1-49 (AUTHOR)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following data with profit or loss ratio
of 5:1:4:

Cash P 1,500,000 Total Liabilities P 500,000

Non-current asset 2,000,000 A, capital 1,100,000
B, capital 1,200,000
C. capital 700,000

On January 1, 2019, D is admitted to the partnership by investing P500,000 to the partnership for 10% capital interest. The total
agreed capitalization of the new partnership is P3,000,000.

a. What is the share of A in the asset impairment?

a. 120,000
b. 80,000
c. 150,000
d. 250,000

b. What is the amount of bonus given by D to the existing partners?

a. 200,000
b. 300,000
c. 100,000
d. 150,000

c. What is the capital balance of D after his admission to the partnership?

a. 500,000
b. 300,000
c. 350,000
d. 400,000

What is the capital balance of C after the admission of D to the partnership?

a. 580,000
b. 820,000
c. 500,000
d. 780,000

14
PROB. 1-50 (AUTHOR)

On December 31, 2020, ABC Partnership's Statement of Financial Positions shows that A, B and C have capital balances of
P500,000, P300,000 and P200,000 with profit or loss ratio of 1:3:6. On January 1, 2019, C retired from the partnership and received
P350,000. At the time of C's retirement, an asset of the partnership is undervalued. What is the capital balance of A after the
retirement of C?

a. 462,500
b. 537,500
c. 562,500
d. 525,000

PROB. 1-51 (AUTHOR)

On December 31, 2020, ABC Partnership's Statement of Financial Position shows that A, B and C have capital balances of
P400,000, P300,000 and P100,000 with profit or loss ratio of 1:4:5. On January 1, 2021, C retired from the partnership and received
P80,000. At the time of C's retirement, the assets and liabilities of the partnership are properly valued. What is the capital balance
of B after the retirement of C?

a. 284,000
b. 308,000
c. 316,000
d. 320,000

PROB. 1-52 (RPCPA)

N, X and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed balance sheet of NXY
Partnership as of December 31, 2020 is:

Cash P 50,000 Liabilities P 40,000

Other assets 130,000 N, capital 60,000
X, capital 40,000
Y, capital 40,000
Total P 180,000 Total P 180,000

a. All the partners agree to admit Z as a 1/5 partner in the partnership without any bonus. Z shall contribute assets amounting to

a. 28,000
b. 10,000
c. 35,000
d. 60,000

b. The NXY Partnership is dissolved and liquidated by installments. The first realization of P40,000 cash is on the sale of other
assets with book value of P80,000. After payment of the liabilities, the cash available is distributed to N, X, and Y, respectively as
follows:

a. 36,000 27,000 27,000

b. 44,000 28,000 28,000
c. 16,000 12,000 12,000
d. 24,000 13,000 13,000

PROB. 1-53 (AICPA)

The following condensed balance sheet is presented for the partnership of Alfa and Beda, who share profits and losses in the ratio
of 60:40, respectively:

Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000

Accounts payable 120,000

Alfa, capital 348,000
Beda, capital 232,000
700,000

a. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to admit Capp as a new partner with a
20% interest. No bonus is to be recorded. What amount should Capp contribute in cash or other assets?

a. 110,000
b. 116,000
c. 140,000
d. 145,000

15
b. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other assets are sold for P500,000,
what amount of the available cash should be distributed to Alfa?

a. 255,000
b. 273,000
c. 327,000
d. 348,000

PROB. 1-54 (AICPA)

Cohen, Butler, and Davis are partners in a partnership and share profits and losses 50%, 30%, and 20%, respectively. The partners
have agreed to liquidate the partnership and anticipate that liquidation expenses will total P14,000. Prior to the liquidation, the
partnership balance sheet reflects the following book values:

Cash 21,000
Non-cash assets 248,000
Notes payable to Davis 32,000
Other liabilities 154,000
Cohen, capital 60,000
Butler, capital (deficit) (10,000)
Davis, capital 33,000

Assuming that the actual liquidation expenses are P14,000 and that non-cash assets are sold for P218,000, how would the assets
be distributed to partners if Butler has net personal assets of P8,500?

Cohen Butler Davis

15,500 - -
21,429 – 49,571
30,650 – 53,260
27,500 – 52,000

PROB. 1-55 (AICPA)

The following condensed balance sheet is presented for the partnership of Axel, Barr, and Cain, who share profits and losses in
the ratio of 4:3.3. respectively:

Cash P100,000
Other assets 300,000
Total P400,000

Liabilities P150,000
Axel, capital 40,000
Barr, capital 180,000
Cain, capital 30,000
Total P400,000

The partners agreed to dissolve the partnership after selling the other asset for P200.000. Upon dissolution of the partnership. Axel
should have received

a. 0
b. 40,000
c. 60,000
d. 70,000
PROB. 1-56 (Adapted)

Because of very unprofitable operations, partners Nal, Lou, and Gee decided to dissolve the partnership when their capital balances
and profit and loss ratio were:

Nal, capital (30%) P175,000

Lou, capital (20%) 125,000
Gee, capital (50%) 125,000
Total 175,000 P475,000

Upon liquidation, all of the partnership's assets are sold and sufficient cash is realized to pay all liabilities except one for P25,000.
Gee is personally insolvent, but the others are capable of meeting any indebtedness of the firm. By what amount would the capital
of Nal change?

a. 7,500 decrease
b. 150,000 decrease
c. 195,000 decrease
d. No change

16
PROB. 1-57 (RPCPA)

Peter and John, who share profits and losses equally, decided to liquidate their partnership when their net assets amounted to
P260,000, and capital balances of P170,000 and P90,000, respectively. If the noncash assets were sold for amount equal to its
book value, what amount of cash should Peter and John received?

Peter John
a. 130,000 130,000
b. 170,000 90,000
c. 180,000 80,000
d. 195,000 65,000

PROB. 1-58 (Adapted)

Sammy and Michael are partners of SM Partnership sharing profits and losses equally. They decided to terminate the partnership
when their capital balances are: Sammy, P750,000; Michael, P500,000. At this time, the partnership owes Michael P200,000, as
evidenced by a promissory note. Upon liquidation, cash of P300,000 becomes available for distribution to the partners. In the final
cash distribution, what would be the respective share of Sammy and Michael?

Sammy Michael
a. 150,000 150,000
b. 175,000 125,000
c. 200,000 100,000
d. 275,000 25,000

PROB. 1-59 (AICPA)

The following condensed balance sheet is presented for the partnership of Smith and Jones, who share profits and losses in the
ratio of 60:40, respectively:

Other assets P 450,000

Smith, loan 20,000
P 470,000

Accounts payable P 120,000

Smith, capital 195,000
Jones, capital 155,000
P 470,000

The partners decided to liquidate the partnership. If the other assets are sold for P385,000, what amount of the available cash
should be distributed to Smith?

a. 136,000
b. 156,000
c. 159,000
d. 195,000

PROB. 1-60 (Adapted)

On December 31, 2020, the partners of MNP Partnership decided to liquidate their business. Immediately before liquidation, the
following condensed balance sheet was prepared:

Cash P 50,000 Liabilities P 375,000

Noncash assets 900,000 Nieva, loan 80,000
Perez, loan 25,000
Munoz, capital (50%) 312,500
Nieva, capital (30%) 107,500
Perez, capital (20%) 50,000
Total P 950,000 Total P 950,000

The noncash assets were sold for P400,000. Assuming Perez is the only solvent partners, what amount of additional cash will be
invested by Perez? (rounded to the nearest peso)

a. 37,143
b. 25,000
c. d 5,000
d. 0

17
PROB. 1-61 (RPCPA)

As of December 31, the books of AME Partnership showed capital balances of A-P40,000; M-P25,000; and E-P5,000. The partners'
profit and loss ratio was 3:2:1, respectively. The partners decided to dissolve and liquidate. They sold all to P12,000, they still have
P28,000 cash left for distribution.

a. The loss on the realization of the non-cash assets was the non-cash assets for P37,000 cash. After settlement of all liabilities
amounting

a. 40,000
b. 42,000
c. 44,000
d. 45,000

b. Assuming that any partner's capital debit balance is uncollectible, of A in the P28,000 cash for distribution would be

a. 19,000
b. 18,000
c. 17,800
d. 40,000

PROB. 1-62 (RPCPA)

The following balance sheet is presented for the partnership of A. B. and C. who share profits and losses in the respectively ratio
of 5:3:2.

Assets Capital and Liabilities

Cash 120,000 Liabilities 280,000
Other assets 1,080,000 A, capital 560,000
B. capital 320,000
C. capital 40,000
Total 1,200,000 Total 1,200,000

Assume that the three partners decided to liquidate the partnership. If the other assets are sold for P800,000, how should the
available cash be distributed to each partner?

A B C
a. 280,000 320,000 40,000
b. 324,000 236,000 16,000
c. 410,000 230,000 0
d. 412,000 228,000 0

PROB. 1-63 (Author)

On December 31, 2019, the Statement of Financial Position of ABC Partnership with profit or loss ratio of 6:1:3 is presented as
follows:

Cash P 1,000,000 Total Liabilities 2,000,000

Receivable from A 500,000 Payable B 1,000,000
Other non-cash asset 2,000,000 Payable C 100,000
A, capital 700,000
B, capital (650,000)
C, capital 350,000

On January 1, 2020, the partners decided to liquidate the partnership. All partners are legally declared to be personally insolvent.
The other noncash assets were sold for P1.500.000. Liquidation expenses amounting to P100,000 were incurred.

a. How much cash was received by B at the end of partnership liquidation?

a. 250,000
b. 150,000
c. 290,000
d. 270,000

b. How much cash was received by C at the end of partnership liquidation?

a. 270,000
b. 150,000
c. 350,000
d. 220,000

18
PROB. 1-64 (AUTHOR)

On December 31, 2019, the Statement of Financial Position of ABC Partnership with profit or loss ratio of 1:4:5 is presented as
follows:

Cash P 1,200,000 Total Liabilities P 1,500,000

Non-cash asset 800,000 A, capital 150,000
B. capital 300,000
C, capital 50,000

On January 1, 2020, the partners decided to liquidate the partnership. All partners are legally declared to be personally insolvent.
The other noncash assets were sold at a specific price. Liquidation expenses amounting to P50,000 were incurred. At the end of
liquidation, A received P80,000.

a What is the amount of cash received by B at the end of liquidation?

a. 40,000
b. 30,000
c. 10,000
d. 20,000

b. What is the net proceeds from the sale of noncash asset during partnership liquidation?

a. 450,000
b. 350,000
c. 400,000
d. 500,000

PROB. 1-65 (RPCPA)

The condensed balance sheet of Alex, Jay, and John as of March 31, 2020 follows:

Cash P 28,000 Liabilities P 48,000

Other assets 265,000 Alex, capital 95,000
Jay, capital 80,000
John, capital 70,000
Total P 293,000 Total P 293,000

The income and loss ratios are 50:25:25, respectively. The partners voted to dissolve their partnership and liquidate by selling
other assets in installments. P70,000 was realized on the first cash sale of other assets with a book value of P150,000. After
settlement with creditors, all cash available was distributed to the partners. How much cash was received by John?

a. 10,500
b. 20,000
c. 21,250
d. 32,500

PROB. 1-66 (Adapted)

After incurring losses resulting from very unprofitable operations, the Goh Kong Wei Partnership decided to liquidate when the
partners' capital balances were:

Goh. capital (40%) P 80,000

Kong, capital (40%) 130,000
Wei, capital (20%) 96,000

The non-cash assets were sold in installment. Available cash were distributed to partners in every sale of non-cash asset. After
the second sale of non-cash assets, the partners received the same amount of cash in the distribution. And from the third sale of
non-cash assets, cash available for distribution amounts to P28,000, and unsold non-cash assets has a book value of P12,500.
Using cash priority program, what amount did Wei received in the third installment of cash?

a. 11,600
b. 8,000
c. 5,600
d. 0

19
PROB. 1-67 (AICPA)

Partners Able, Baker, and Chapman, who share profit and loss equally, have the following personal assets, personal liabilities, and
partnership capital balances:
Able Baker Chapman
Personal assets P 30,000 P 80,000 P 60,000
Personal liabilities 25,000 50,000 72,000
Capital balances 50,000 (32,000) 70,000

After applying the doctrine of marshalling of assets, the capital balances of Able, Baker, and Chapman, respectively, would be

a. 50,000 (2,000) 58,000

b. 48,000 0 58,000
c. 49,000 0 57,000
d. 34,000 0 54,000

PROB. 1-68 (Adapted)

Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring P200,000 when liquidated. At the same
time, Morgan has a credit capital balance in the partnership of P120.000. The capital amounts of the other partners total a credit
balance of P250,000. Under the doctrine of marshalling of assets, how much the personal creditors of Morgan can collect?

a. 120,000
b. 200,000
c. 320,000
d. 570,000

PROB. 1-69 (RPCPA)

The balance sheet of the partnership of Salve, Galo, and Norma, who share in the profits and losses in the ratio of 5:3:2,
respectively is as follows:

Assets Liabilities and Capital

Cash 30,000 Liabilities 50,000
Other assets 320,000 Salve, capital 80,000
Galo, capital 115,000
Norma, capital 105,000
Total 350,000 Total 350,000

The partnership is liquidated by installment. The first sale of non-cash assets with a book value of P150,000 realizes P100,000.
How should the remaining cash be distributed?

Salve Galo Norma

a. 50,000 30,000 20,000
b. 40,000 24,000 16,000
c. 0 31,000 49,000
d. 0 48,000 32,000

PROB. 1-70 (AICPA)

Partners Almond, Barney, and Colors have capital balances of P20,000, P50,000, and P90,000, respectively. They split profits in
the ratio of 2:4:4, respectively. Under a safe cash distribution plan, one of the partners will get the following total amount in
liquidation before any other partners get anything:

a. 0
b. 15,000
c. 40,000
d. 180.000

PROB. 1-71 (AICPA)

The ABC Partnership has assets with book value of P240,000 and a market value of P195,000, outside liabilities of P70,000, loans
payable to Partner Able of P20,000, and capital balances for Partners Able, Baker, and Chapman of P70.000, P30,000, and
P50,000, respectively. The partners share profits and losses equally.

a. How would the first P100,000 of available assets be distributed?

a. P70,000 to outside liabilities, P20,000 to Able, and the balance equally among partners.
b. P70,000 to outside liabilities, and P30,000 to Able.
c. P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman.
d. P40,000 to Able, P20,000 to Chapman, and the balance equally among partners.

b. If all outside creditors and loans to partners had been paid. How would the balance of the assets be distributed assuming
Chapman had already received assets with a value of P30,000?

a. Each of the partners would received P25.000.

b. Each of the partners would received P40,000.
c. Able: P70,000, Baker: P30,000, Chapman: P20,000
d. Able: P55,000, Baker: P15,000, Chapman: P5,000.

20
PROB. 1-72 (AUTHOR)

On December 31, 2020, the Statement of Financial Position of ABC Partnership with profit or loss ratio of 5:3:2 is presented as
follows:

Cash P 1,600,000 Total Liabilities P 2,000,000

Non-cash asset 1,400,000 A, capital 100,000
B, capital 500,000
C. capital 400,000

On January 1, 2021, the partners decided to liquidate the partnership in installment. All partners are legally declared to be
personally insolvent.

As of January 31, 2021, the following transactions occurred:

• Noncash assets with a book value P1,000,000 were sold at a gain of P100,000.
• Liquidation expenses for the month of January amounting to P50,000 were paid.
• It is estimated that liquidation expenses amounting to P150,000 will be incurred for the month of February, 2021.
• 20% of the liabilities to third persons were settled.
• Available cash were distributed to the partners.

As of February 28, 2021, the following transactions occurred:

• Remaining noncash assets were sold at a loss of P100,000.

• The final liquidation expenses for the month of February amounted to P100,000.
• The remaining liabilities to third persons were settled at a compromise amount of P1,500,000.
• Remaining cash were finally distributed to the partners.

a. What is the amount of cash received by partner C on January 31, 2021?

a. 260,000
b. 240,000
c. 300,000
d. 350,000

b. What is the share of B in the maximum possible loss on January 31, 2021?
a. 275,000
b. 110,000
c. 120,000
d. 165,000
c. What is the amount of total cash withheld on January 31, 2021?
a. 550,000
b. 1,600,000
c. 1,750,000
d. 1,700,000

d. What is the amount of cash received by A on February 28, 2021?

a. 75,000
b. 25,000
c. 50,000
d. 0

PROB. 1-73 (RPCPA)

Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1, they decided to form the R&G
Corporation by transferring the assets and liabilities of the partnership to the corporation in exchange for the latter's stock. The
following is the post-closing trial balance of the partnership

Debit Credit
Cash P 45,000
Accounts receivable (net) 60,000
Inventory 90,000
Fixed assets (net) 174,000
Liabilities P 60,000
Roy, capital 94,800
Gil, capital 214,200
P369,000 P369,000

It was agreed that adjustments be made to the following assets to be transferred to the corporation:

Accounts receivable P40,000

Inventory 68,000
Fixed assets 180,600

21
The R&G Corporation was authorized to issue P100 par preferred stock and P10 par common stock. Roy and Gil agreed to receive
for their equity in the partnership 720 shares of the common stock each, plus even multiples of 10 shares of preferred stock for
their remaining interests.

a. The total number of shares of preferred and common stocks issued by the corporation in exchange for the assets and liabilities
of the partnership are:

Preferred Common
a. 2,540 shares 1,500 shares
b. 2,592 shares 1,440 shares
c. 2,642 shares 1,440 shares
d. 2,642 shares 1,550 shares

b. The distribution of the stocks to Roy and Gil would be:

Roy Gil
Preferred Common Preferred Common
a. 785 shares 720 shares 1,384 shares 720 shares
b. 773 shares 750 shares 1,843 shares 750 shares
c. 758 shares 720 shares 1,834 shares 720 shares
d. 738 shares 720 shares 1,758 shares 720 shares

PROB. 1-74 (AICPA)

The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2020, follows:

Current assets P 250,000

Equipment (net) 30,000
Total assets P 280,000

Liabilities P 20,000
Adams, capital 160,000
Gray, capital 100,000
Total liabilities and capital P 280,000

On December 31, 2020, the fair values of the assets and liabilities were appraised at P240,000 and P20,000, respectively, by an
independent appraiser. On January 2. 2021, the partnership was incorporated and 1,000 shares of P5 par value common stock
were issued.

Immediately after the incorporation, what amount should the new corporation report as additional paid in capital?

a. 275,000
b. 260,000
c. 215,000
d. 0

22