General de Jesus College

Discipline* Integrity*Excellence

“That in all things, God may be glorified”

NAME: _______________________ SCORE: _______________

YR & SEC. _____________________ DATE: ________________

BASIC FINANCIAL ACCOUNTING AND REPORTING THEORIES

FINAL EXAMINATION

PROBLEM 1
A,B and C decided to form ABC Partnership. It was agreed that A will contribute equipment with assessed
value of P100,000 with historical costs of P800,000 and accumulated depreciation of P600,000. A day after the
partnership formation, the equipment was sold for P300,000.
B will contribute a land and building with carrying amount of P1,200,000 and fair value of P1,500,000. The
land and building are 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. The partners also agreed that C will
contribute sufficient cash to the partnership.

1. What is the agreed capitalization of ABC Partnership?

2. What is the cash to be contributed by C in the ABC Partnership?

PROBLEM 2
Charlie and Delta formed a partnership. Charlie invested cash worth P85,000 and a machine. On the other hand,
Delta contributed cash worth P55,000 and an equipment which has a mortgage of P35,000 which Delta will pay
personally. The total capital after formation was P360,000. They also further agreed to reflect 55:45 ratio on
their capital balances respectively. No other investment or withdrawal occurred other than mentioned to reflect
their capital ratio agreement.
3. How much is the fair value of the machine?

4. How much is the fair value of the equipment?

PROBLEM 3
On January 1, 2020, Regina, Jessica and Nataly formed a partnership with profit or loss sharing agreement of
2:3:5.
Regina contributed a land with assessed value from city assessor in the amount of P1,000,000. The land is
subject t a real estate mortgage which is annotated to the title of the land in the amount of P800,000 and will be
assumed by the partnership. The appraised value of the land is P2,400,000. Jessica contributed a building with a
cost of P2,000,000 and accumulated depreciation of P1,500,000. The fair value of the building is P800,000.
Nataly contributed investment in trading securities with historical cost of P6,000,000. The trading securities
have quoted price in active market of P3,000,000.
The partners decided to bring their capital balances in accordance with their profit or loss sharing agreement.
The total agreed capitalization of the new partnership is P10,000,000.

5. How much should additional capital should Jessica contribute to bring his capital balance to the agreed
capitalization?

PROBLEM 4
On January 1, 2020, Len, May and Nancy decided to form a business partnership to operate supermarket. Len
and May both owned a grocery business with the Statement of Financial Position as of December 31, 2019:
LEN MAY
Cash P 10,000,000 P 20,000,000
Accounts Receivable 20,000,000 30,000,000
Inventories 70,000,000 50,000,000
Property, Plant and equipment 50,000,000 10,000,000
Accounts Payable 40,000,000 20,000,000
Notes payable 30,000,000 50,000,000
Capital 80,000,000 30,000,000

The following additional notes are provided

a. Len and May will contribute all its assets and liabilities to the newly formed partnership
b. The parties agree to provide 10% and 20% allowance for bad debts to the Accounts receivable to
Len and May respectively
c. The inventories of Len and May are reported at historical cost and have a net realizable value of
P60,000,000 and P45,000,0000 respectively
d. The PPE of Len and May have not been depreciated and should be depreciated by 40% and 30%
respectively.
e. The interest payable on both notes payable were unrecorded and unpaid since the date of contract.
Len’s notes payable is dated April 1, 2019 while May’s notes payable is dated June 30, 2019.
f. Nancy will have 20% interest in the partnership upon contribution of sufficient cash.

6. What is the cash to be contributed by Nancy on January 1, 2020?

7. What is the total liabilities of the partnership after formation?

8. What is the total partnership capital after formation?

PROBLEM 5
On January 1,2020, 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 profit and loss ratio is 3:2:5, respectively for A,B and
C.
During 2020, A and B made additional investments of P200,000 and P500,000 respectively. At the end of 2020,
B and C made drawings of P300,000 and P100,000 respectively. On December 31, 2020, the capital balance of
B is reported at P200,000.

9. What is the net income or (net loss) of ABC Partnership for the year ended December 31, 2020?

10. What is the capital balance of C on December 31, 2020?

PROBLEM 6
On January 1, 2020 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 2020, A, B and C made additional investments of P500,000, P200,000 and P300,000 respectively. At
the end of 2020, A,B and C made drawings of P200,000, P100,000 and P400,000 respectively. At the end of
2020, the capital balance of C is reported at P320,000. The profit or loss agreement of the partners is as follows:
 10% interest on original capital contributions
 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 partners

11. What is the partnership profit for the year ended December 31, 2020?

12. What is A’s share in the partnership profit for 2020?

13. What is the share of B in the partnership profit for 2020?

PROBLEM 7
On January 1, 2020, K and S formed KS Partnership and the articles of co-partnership provides that profit or
loss shall be distributed accordingly:
 10% interest on average capital balances
 P50,000 and P100,000 quarterly salary for K and S, respectively
 The remainder shall be distributed in the ratio of 3:2 for K and S, respectively

The following transactions regarding capital balance of the partners for year 2020 are provided:
K, Capital S, Capital
Jan 1 ,2020 P 1,000,000 P 500,000
March 31, 2020 100,000
July 1, 2020 (200,000)
September 30, 2020 (200,000)
October 1, 2020 700,000
The chief accountant of the partnership reported net income of P1,000,000 for the year 2020.

14. The share of K in the net income is

15. The share of S in the net income is

16. What is the capital balance of K on December 31, 2020?

PROBLEM 8
On July 1, 2020, D and J formed DJ Partnership with initial investment of P1,000,000 and P2,000,000
respectively. D is appointed as managing partner.
The articles of co-partnership provide that profit or loss shall be distributed accordingly:
 30% interest on original capital contribution ratio.
 Monthly salary of P20,000 and P10,000 respectively for D and J
 D shall be entitled to bonus equivalent to 20% of net income after interest, salary and bonus
 The remainder shall be distributed in ratio of 3:2 for D and J respectively.

For the year ended December 31, 2020, the partnership reported income of P750,000.
17. What is the share in net income of D for the year ended December 31, 2020?

18. Using the same data, what is the share in net income of J assuming the bonus is equivalent to 20% of net
income after interest and salary but before bonus for the year ended December 31, 2020?
PROBLEM 9
A partnership provided the following in their distribution of profits and losses:
First T is to receive 10% of net income up to P100,000 and 20% of the amount in excess thereof
Then V and J are to receive 5% of the remaining income in excess of P150,000 after T’s share above are
deducted
Finally the balance shall be divided equally
The partnership earned a net income of P250,000.

19. What would be the total share of T?

20. What would be the total share of V?

21. What would be the total share of J?

PROBLEM 10
On January 1, 2013, Bart and Bert have respective capital balance of P30,000 and P50,000. Bart invested
P30,000 on June 30, while Bert invested an additional P60,000 on November 1.
Bart had capital withdrawal of P12,000 on August 1, while Bert had capital withdrawal of P20,000 on
September 30.
The partners allow respective monthly salaries of P500 and P600, credit 15% interest on their average capital
balances, and share any residual earnings equally.
The partnership reports operating income of P25,000 for 2013.
22. What is Bart’s average capital balance?

23. What is Bert’s average capital balance?

24. What is Bart’s distributive share in the net income?

25. What is Bert’s distributive share in the net income?

PROBLEM 11
As of the end of the year, the balance sheet of the business Criminal Company shows total liabilities of
P542,500 and capital balance of P460,000/ During the year, total assets increased by P164,000, and total
liabilities increased by P125,000. The proprietor also had total drawings for personal use of P16,000. Compute
for the following:
26. Total assets at the end of the year

27. Total Assets at the beginning of the year

28. Total liabilities at the end of the year

29. Capital balance at the beginning of the year

PROBLEM 12
The selected accounts and balances of Star Mart appear as follows
Advertising expense P 140,000
Transportation in 70,000
Transportation out 100,000
Interest income 240,000
X, Capital 1,400,000
X, Drawing 210,000
Merchandise inventory Jan. 1 700,000
Merchandise inventory Dec 31 560,000
Purchases 600,000
Purchase returns and allowances 40,000
Rent expense 90,000
Sales 1,500,000
Sales discount 60,000
Sales returns and allowances 130,000
Salaries expense 320,000

30. How much is the Net sales for Star Mart?

31. How much is the Cost of Goods sold for Star Mart?
 32. How much is the gross profit for Star Mart?

PROBLEM 13
The partial net income of a company have the following items
Net purchases P 80,000
Cost of goods available for sale 110,000
Ending inventory 40,000
Gross profit 50,000

33. How much is the net sales of the company?

34. How much was the beginning inventory of the company?

PROBLEM 14
The following were taken from the records of JC Capital at the end of their first year of operations:
General Ledger Normal Balance
Freight out P 10,000
Freight in 5,000
Purchase Discounts 5,000
Purchase returns 20,000
Purchases 250,000
Sales Discounts 2,500
Sales returns 10,000
Sales 300,000
JC Drawing 5,000
JC Capital 100,000
Notes Payable (2 years) 80,000
Accounts payable 40,000
Accumulated Depreciation 9,000
Equipment 60,000
Supplies 2,000
Allowance for bad debts 500
Accounts Receivable 185,000
Cash 25,000

Adjustments are still needed for the following items:

a. The unsold inventory at the end of the period is P20,000.
b. The accrued interest on note payable is P1,600
c. The correct accumulated depreciation is P21,000
d. The actual unused supplies at the end of the year is P200
e. The allowance for doubtful accounts is to be increased to P1,850

35. The cost of goods sold for JC Company is

36. The Operating expense for the year amounted to

37. The net income for the year is

PROBLEM 15
On January 1, 2019, Jackson and Kendall formed a partnership. Jackson who has many years of
experience in the business, contributed P100,000 in cash. Kendall contributed assets having the
following book values and fair values.
BOOK VALUE FAIR VALUE
Inventory P 30,000 P 25,000
Building 40,000 150,000
Equipment 60,000 85,000

The partnership assumed a mortgage of P40,000 on the building. Capital accounts are set equal to net
assets invested.

38. The increase in capital of Kendal is

39. How much is the total asset of the partnership?

40. How much is the total capital of the partnership?

Prepared by: Noted by

John Daniel R. Gomez,CPA Bryan C. Barlis, CPA, MBA

Instructor Department head
College of Accountancy and Business Administration