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DFCAM COLLEGE
ACCOUNTING FOR SPECIAL TRANSACTIONS
MIDTERM EXAMINATION PART 1

NAME: Date:
Professor: Section: Score:

1. The partners share in partnership profits or losses in accordance with their

partnership agreement. If there is no stipulation on how the partners should share
in the profits or losses of the partnership,
a. they should share equally.
b. they should let one of the partners decide unilaterally on how the profits should
be divided among the partners.
c. their respective shares would be in proportion to their contributions.
d. they should not share at all but donate their profits to the world.

2. A and B agreed to form a partnership. A shall contribute ₱80,000 cash while B shall
contribute ₱200,000 cash. However due to the expertise that A will be bringing to
the partnership, the partners agreed that they should initially have equal interests
in the partnership capital. After recording the partners’ contributions, A’s capital
account should have a balance of
a. 40,000.
b. 80,000.
c. 140,000.
d. 200,000.

Use the following information for the next two questions:

A, B and C formed a partnership. Their contributions are as follows:
A B C
Cash 80,00 20,00 200,00
0 0 0
Equipment 160,0
00
Totals 80,00 180,0 200,00
0 00 0

Additional information:
 Although C has contributed the most cash to the partnership, he did not have the
full amount of ₱200,000 available and was forced to borrow ₱80,000.
 The equipment contributed by B has an unpaid mortgage of ₱40,000, the
repayment of which is assumed by the partnership.
 The partners agreed to equalize their interest. Cash settlements among the
partners are to be made outside the partnership.

3. Which of the following statements is correct?

a. A pays C ₱60,000.
b. A receives ₱60,000 from C.
c. A and B pays C a total of ₱60,000.
d. A pays B ₱60,000.

4. The simple journal entries to record the partners’ contributions include

a. a debit to mortgage payable for ₱40,000.
b. a credit to loan payable for ₱80,000.
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c. a ₱60,000 credit to cash.

d. a ₱60,000 debit to C’s capital account.

5. On January 1, 20x1, Mr. A and Ms. B agreed to form a partnership contributing

their respective assets and equities subject to adjustments. On that date, the
following were provided:
Mr. A Ms. B
28, 62,
Cash
000 000
Accounts 200, 600,
receivable 000 000
120, 200,
Inventories
000 000
600,
Land
000
500,
Building
000
Furniture & 50, 35,
fixtures 000 000
2, 3,
Intangible assets
000 000
Accounts 180, 250,
payable 000 000
200,00 350,00
Other liabilities
0 0
620,00 800,
Capital
0 000

The following adjustments were agreed upon:

a. Accounts receivable of ₱20,000 and ₱40,000 are uncollectible in A’s and B’s
respective books.
b. Inventories of ₱6,000 and ₱7,000 are worthless in A’s and B’s respective books.
c. Intangible assets are to be written off in both books.

How much is the initial total capital of the partnership?

ANSWER AND SOLN______________________________________________________________

6. A and B agreed to form a partnership. The partnership agreement stipulates the

following:
 Initial capital of ₱280,000.
 A 60:40 interest in the equity of the partnership.

A contributed ₱200,000 cash while B contributed ₱80,000 cash. Which partner should
provide additional investment (or withdraw part of his investment) in order to bring
the partners’ capital credits equal to their respective interests in the equity of the
partnership?
a. B shall make an additional investment of ₱32,000
b. B shall withdraw ₱32,000 from his initial contribution.
c. A shall make an additional investment of ₱32,000
d. A shall withdraw ₱23,000 from his initial contribution.

7. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital
equally even though Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in
identifiable assets. The partners agreed that the difference in the amount of
contribution and the amount of credit to the partner’s capital shall be treated as
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compensation for the expertise that the partner will be bringing to the partnership.
How much is the correct valuation of A’s capital immediately after the partnership
formation?
a. 84,000
b. 92,000
c. 100,000
d. 108,000

8. A and B formed a partnership. The following are their contributions:

A B

Cash 500,000 -

Accounts receivable 100,000 -

700,00
Building 0

700,00
Total 600,000 0

A, capital 600,000

700,00
B, capital 0

700,00
Total 600,000 0

Additional information:
 The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
 The building is under-depreciated by ₱50,000.
 The building has an unpaid mortgage ₱100,000, but this is not assumed by the
partnership. Partner B promised to pay for the mortgage himself.

How much is the correct valuation of A’s capital immediately after the partnership
formation?

ANSWER AND SOLN______________________________________________________________

9. According to the Civil Code of the Philippines, if the partnership agreement does
not specify how income is to be allocated to the partners, profits and losses should
be allocated
a. equally.
b. in proportion to the weighted average balance of capital invested during the
period.
c. equitably so that partners are compensated for the time and effort expended on
behalf of the partnership.
d. in accordance with their capital contributions, but an industrial partner does not
share in the loss.
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10. A and B formed a partnership. The partnership agreement stipulates the

following:
 Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
 The partners share in profits and losses equally.

The partnership earned profit of ₱100,000. How much is the share of B?

ANSWER AND SOLN______________________________________________________________

11. A and B’s partnership agreement stipulates the following:

 Annual salary of ₱20,000 to A.
 10% bonus to A, based on profit after salaries and bonus.
 Balance is shared on a 60:40 ratio.

If B’s share in the partnership profit for the year is ₱32,000, how much is the bonus to
A?

ANSWER AND SOLN______________________________________________________________

12. A and B formed a partnership. The partnership agreement stipulates the

following:
 First, A shall receive 10% of profit up to ₱200,000 and 20% over ₱200,000.
 Second, B shall receive 5% of the remaining profit over ₱300,000.
 Any remainder shall be shared equally.

During the year, the partnership earned profit of ₱560,000. How much is the share of
B?

ANSWER AND SOLN______________________________________________________________

13. A and B formed a partnership. The partnership agreement stipulates the

following:
 Annual salary allowances of ₱10,000 for A and ₱40,000 for B.
 Bonus to A of 10% of the profit after partner’s salaries but before bonus.
 The partners share profits and losses on a 60:40 ratio.

During the period the partnership incurred a loss of ₱20,000 before deduction for
salaries. By what amount did B’s capital account change?
a. Increased by ₱12,000
b. Increased by ₱32,000
c. Decreased by ₱12,000
d. Decreased by ₱32,000

14. A, B and C formed a partnership. The partnership agreement stipulates the

following:
 Annual salary allowances of ₱100,000 for A and ₱20,000 for B.
 10% interest on the beginning capital balance of C.
 The partners share in profits and losses on a 40:40:20 ratio.

The partnership earned profit of ₱500,000. C’s capital account had a beginning
balance of ₱300,000. The difference between the amounts received by A and B is

ANSWER AND SOLN______________________________________________________________

15. A and B formed a partnership. The partnership agreement stipulates the

following:
 Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
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 The partners share in profits and losses equally.

The partnership earned profit of ₱100,000 after salaries. How much is the share of B?

ANSWER AND SOLN______________________________________________________________

16. A and B formed a partnership. The partnership agreement stipulates the

following:
 Monthly salary allowances of ₱10,000 for A and ₱4,000 for B. The salaries are
recognized as expenses.
 The partners share equally in profits and losses.

The partnership’s statement of profit or loss for the year reported profit of
₱360,000. How much is the share of A?
a. 300,000
b. 228,000
c. 148,000
d. 128,000

17. A and B share equally in partnership profits and losses. During the year, A’s
capital account has a net increase of ₱50,000. Partner A made contributions of
₱10,000 and capital withdrawals of ₱60,000 during the year. How much was the
partnership profit for the year?

ANSWER AND SOLN______________________________________________________________

18. A and B formed a partnership. The partnership agreement stipulates the

following:
 Annual salary allowance of ₱100,000 for A, the managing partner.
 10% bonus to A after salaries but before deduction for the bonus.
 The partners share in profits and losses equally.

The share of A in the partnership profit during the period was ₱595,000, including
a bonus of ₱90,000. How much was the share of B?

ANSWER AND SOLN______________________________________________________________

19. John and Myung are partners in Six-string Co. Their partnership agreement
states that John is entitled to an annual salary of ₱100,000 and a bonus of 10% of
profit after salary but before bonus. The remainder is shared in the ratio of 7:2.
Myungs’s share in partnership profit for the year was ₱296,000. How much was
John’s bonus?

ANSWER AND SOLN______________________________________________________________

20. A and B’s partnership agreement provides the following:

 Annual salaries of ₱96,000 for A and ₱60,000 for B.
 10% bonus to A, based on profit after salaries and bonus.
 P/L ratio of 60:40.

The partnership earned profit of ₱200,000 before salaries and bonus. Which of the
following statements is correct?
a. A’s share is ₱124,000 greater than B’s share.
b. B’s share is ₱76,000 less than A’s share.
c. A’s share is ₱48,000 greater than B’s share.
d. A and B have equal shares.
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21. AB Partnership was formed on February 28, 20x1. Partner A invested ₱150,000
cash while Partner B invested land that he originally bought for ₱70,000 but has a
current fair value of ₱180,000. B invested additional cash of ₱60,000 on November
1, 20x1. The partnership contract states the following:
A B
 Monthly salary (recognized as 10,000 20,000
expenses and withdrawn
periodically)
 Interest on beginning capital 12% p.a. 12% p.a.
 Bonus on profit before salaries and 20%
interest but after bonus
 Remaining profit or loss 50% 50%

AB Partnership earned profit of ₱120,000 in 20x1. What is the capital balance of B on

December 31, 20x1?

ANSWER AND SOLN______________________________________________________________

22. Partners A and B share in profits and losses on a 70:30 ratio after salary
allowances of ₱80,000 for A and ₱40,000 for B. The business earned profit of
₱320,000 before deduction for the salaries. When closing the income summary
account,
a. A’s capital account would be credited for ₱120,000.
b. A’s capital account would be debited for ₱220,000.
c. B’s capital account would be credited for ₱100,000.
d. B’s capital account would be credited for ₱240,000.

23. A and B formed a partnership in 20x1. The partnership contract stipulates the
following:
 ₱30,000 annual salary to each partner due at each year-end.
 Bonus of 10% of profit after salaries and bonus for A
 8% interest on the partners’ weighted average capital balances.
 Any remaining profit or loss is divided equally.

The partnership’s ledger shows the following:

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A, Capital
Re Balanc
Date f. Debit Credit e
00 30,000. 30,000.
March 1, 20x1 1 00 00
09 10,000. 20,000.
June 1, 20x1 8 00 00
14 20,000. 40,000.
August 1, 20x1 6 00 00
December 1, 21 5,000.0 35,000.
20x1 1 0 00

B, Capital
Re Balanc
Date f. Debit Credit e
March 1, 00 20,000. 20,000.
20x1 1 00 00
09 10,000. 10,000.
June 1, 20x1 8 00 00
August 1, 14 2,000.0 8,000.0
20x1 6 0 0

The partnership’s profit, before salaries and bonus, in 20x1 is ₱60,000. The partners
agreed to receive full annual salaries in 20x1. How much is the share of A?
a. 30,684
b. 29,316
c. 32,772
d. 28,257

24. If a new partner acquires partnership interest directly from the partners rather
than from the partnership,
a. no entry is required.
b. the existing partnership is liquidated.
c. the partnership assets should not be revalued because this type of transaction
does not result to partnership dissolution.
d. the existing partners’ capital accounts are reduced and the new partner’s
capital account is increased.

Use the following information for the next four independent cases:
The capital balances and profit and loss ratios of the partners in ABC Co. are as
follows:
Capital P/L
A 40,000 40%
B 60,000 30%
C 80,000 30%
Total 180,000

25. D purchases one-half of C’s interest for ₱50,000. The ‘book value method’ is to
be used. Which of the following statements is most likely to be incorrect?
a. D’s capital is credited for one-half of C’s capital balance.
b. C’s capital balance is reduced for the equity transfer to D.
c. The cash payment of D to C is not reflected in the partnership’s accounting
records.
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d. The partnership equity is increased by D’s payment.

26. D purchases 25% of A’s, B’s and C’s capital interests for ₱60,000. The partners
used the ‘book value method’ to record D’s admission. Which of the following
statements is most likely to be correct?
a. The partnership’s total equity increases after recording D’s admission.
b. The admission of D is accounted for as a transaction between D and the
partnership.
c. Goodwill of ₱15,000 must be recorded, according to the PFRSs.
d. An equity transfer of ₱45,000 will be made from the selling partners to D.

27. The carrying amount of the net assets approximates fair value. D invests
₱80,000 cash for a 25% interest in the partnership’s net assets and profits. Under
the bonus method, how much is the capital balance of A after D’s admission?

ANSWER AND SOLN______________________________________________________________

28. The carrying amount of the net assets approximates fair value. D invests
₱52,000 cash for a 25% interest in the partnership’s net assets and profits. Under
the bonus method, how much is the capital balance of B after D’s admission?

ANSWER AND SOLN______________________________________________________________

Use the following information for the next two questions:

The statement of financial position of the partnership of A and B as of December 31,
20x1 is shown below:
Cash
33,354
Accounts receivable
802,426
Inventory
380,137
Land
603,000
Building
428,267
Equipment
85,134
Other assets
5,600
Total assets
2,337,918

Accounts payable
422,590
Notes payable
545,000
A, capital
641,976
B, capital
728,352
Total liabilities and equity
2,337,918

 A and B share in profits and losses equally.

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 On January 1, 20x2, C informed A and B of his intention to invest in the partnership

for a 20% interest. The partners agreed on the following adjustments prior to C’s
admission:
o Accounts receivable of ₱55,000 should be written-off.
o Inventories of ₱12,200 are obsolete and have no resale value.
o The ‘Other assets’ should be written off.

29. If no bonus is allowed, how much is C’s required investment?

ANSWER AND SOLN______________________________________________________________

30. After C’s admission, the partners agreed to adjust their capital balances to
reflect their’ respective interests in the partnership’s net assets. Cash settlement is
to be made between the partners. How much is the cash settlement?
a. ₱43,188 payment of A to B
b. ₱43,188 payment of B to A
c. ₱34,288 payment of C to A and B
d. There would be no cash settlement between the partners.

31. The capital accounts of the partnership of Nakpil, Ortiz, and Perez on June 1,
2005 are presented below with their respective profit and loss ratios:
Nakpil ₱ 139,200 1/2
Ortiz 208,800 1/3
Perez 96,000 1/6
₱ 444,000

On June 1, 2005, Quizon is admitted to the partnership when he purchased, for

₱132,000, a proportionate interest from Nakpil and Ortiz in the net assets and profits
of the partnership. As a result of a transaction, Quizon acquired a one-fifth interest in
the net assets and profits of the firm. Assuming that implied goodwill is not to be
recorded, what is the combined gain realized by Nakpil and Ortiz upon the sale of a
portion of their interest in the partnership to Quizon?

ANSWER AND SOLN______________________________________________________________

32. The following are the capital account balances and profit and loss ratios of the
partners in AB Partnership as of January 1, 20x2:
Profit or loss
Capital accounts ratios
A,
Capital 600,000 40%

B, 1,000,0
Capital 00 60%
1,600,000

On January 1, 20x2, C was admitted to the partnership when he acquired 20% interest
in the net assets and profits of the firm for a ₱400,000 investment. The bonus method
was used to record C’s admission into the partnership.

For the year 20x2, the partnership earned profit of ₱4,000,000. However, it was
discovered that the following items were overstated:
20x1 20x2

Accrued 100,00
income 80,000 0
Prepaid asset
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140,00 200,00
0 0

Accrued 160,00 240,00

expense 0 0
Unearned
income 60,000 40,000

How much is the share of A in the 20x2 profit?

ANSWER AND SOLN______________________________________________________________

33. When Mill retired from the partnership of Mill, Yale, and Lear, the final
settlement of Mill's interest exceeded Mill's capital balance. Under the bonus
method, the excess
a. was recorded as goodwill.
b. was recorded as an expense.
c. reduced the capital balances of Yale and Lear.
d. had no effect on the capital balances of Yale and Lear.

34. On June 30, 2003, the balance sheet for the partnership of Coll, Maduro, and
Prieto, together with their respective profit and loss ratios, were as follows:
180,0
Assets, at cost
00

Coll, loan 9,000

Coll, capital (20%) 42,000
Maduro, capital (20%) 39,000
Prieto, capital (60%) 90,000
180,0
Total
00

Coll has decided to retire from the partnership. By mutual agreement, the assets are to
be adjusted to their fair value of ₱216,000 at June 30, 2003. It was agreed that the
partnership would pay Coll ₱61,200 cash for Coll’s partnership interest, including
Coll’s loan which is to be repaid in full. No goodwill is to be recorded. After Coll’s
retirement, what is the balance of Maduro’s capital account?

ANSWER AND SOLN______________________________________________________________

Use the following information for the next two independent cases:
The capital account balances of the partners in ABC Partnership on June 30, 20x1
before any necessary adjustments are as follows:

Capital accounts
A, Capital (20%) 600,000
1,000,00
B, Capital (30%)
0
C, Capital (50%) 400,000
2,000,0
Total 00

The partnership reported profit of ₱3,600,000 for the six months ended June 30, 20x1.
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35. C dies from a broken heart on July 1, 20x1. It was agreed that C’s estate shall
receive cash of ₱2,000,000 and equipment with carrying amount of ₱400,000 and
fair value of ₱1,200,000 as settlement of C’s interest in the partnership. The assets
will be transferred as soon as the legal proceedings on C’s estate are finalized. The
entry in the partnership’s books on July 1, 20x1 to reflect the separation of C
includes
a. a debit to C’s capital for ₱400,000.
b. a debit to C’s capital for ₱2,200,000.
c. a credit to liability for ₱3,200,000.
d. Not recorded in partnership’s books

36. C withdraws on July 1, 20x1. It was agreed that C shall receive cash of
₱2,000,000 and fully depreciated equipment with fair value of ₱1,200,000 in
settlement of his interest in the partnership. How much is the capital balance of A
right after the withdrawal of C?
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ANSWER AND SOLN______________________________________________________________

37. The statement of financial position of ABC Co. as of December 31, 20x1 shows
the following information:
Cash 448,000
Receivable from A 32,000
Equipment 1,560,000
Totals 2,040,000
Payable to C 40,000
A, Capital (20%) 600,000
B, Capital (30%) 1,000,000
C, Capital (50%) 400,000
Totals 2,040,000

On December 31, 20x1, C decided to retire from the partnership. The partnership’s net
assets approximate their fair values except for the equipment which has a fair value of
₱1,800,000. It was agreed that the partnership would pay C ₱560,000 cash for his
partnership interest, excluding C’s loan which is to be repaid in full. What is the
balance of B’s capital account after the retirement of C?
ANSWER AND SOLN______________________________________________________________

38. Partner C decided to retire when the partners’ capital balances were: A,
₱600,000; B, ₱600,000; and C, ₱400,000. It was agreed that Partner C is to take
the partnership’s fully depreciated equipment with a fair value of ₱24,000 and a
note for the balance of her interest. The historical cost of the equipment is ₱36,000.
The partners share in profits and losses equally. How much is the total partnership
capital after the retirement of C?

ANSWER AND SOLN______________________________________________________________

Use the following information for the next three questions:

On January 1, 20x1, the partners in ABC Co. decided to admit other investors and
convert the partnership into a corporation. Relevant information follows:
Carrying Fair
amounts values
Cash 80,000 80,000
Receivables 240,000 160,000
Inventory 320,000 280,000
2,680,00
Equipment 2,160,000
0
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Payables 200,000 200,000

A, Capital
600,000
(20%) N/A
B, Capital
800,000
(30%) N/A
C, Capital
(50%) 1,200,000 N/A

The corporation has an authorized capitalization of ₱8,000,000 divided into 200,000

ordinary shares with par value of ₱40 per share.

39. Assume that the adjusted capital balances of the partners are used in
determining the number of shares to be issued to each partner. What is the
aggregate par value of the total shares issued to the partners?

ANSWER AND SOLN______________________________________________________________

40. Assume that partners A, B and C agreed to be issued 14,000, 21,000 and 35,000
shares, respectively. How much is the credit to the share premium account?

ANSWER AND SOLN______________________________________________________________

41. Assume that the corporation was authorized to issue ₱400 par preference
shares and ₱40 par ordinary shares. The partners agreed to receive 1,000 ordinary
shares each, plus even multiples of preference shares for their remaining interests.
How many ordinary shares (OS) and preference shares (PS) did A receive?
a. 1,600 OS and 1,000 PS
b. 2,200 OS and 1,000 PS
c. 1,000 OS and 2,200 PS
d. 1,000 OS and 1,600 PS

42. On January 1, 20x1, the partners of ABC Co. decided to liquidate their
partnership. The following information was made available:
Cash 80,000
Accounts receivable 240,000
Inventory 480,000
Equipment 1,200,000
Total 2,000,000
120,0
Accounts payable
00
80,00
Payable to B
0
400,00
A, Capital (20%)
0
600,00
B, Capital (30%)
0
800,00
C, Capital (50%)
0
2,000,
Total
000

The partnership will be liquidated over a prolonged period of time. Distributions to

owners shall be made as cash becomes available. Information on the conversion of non-
cash assets is as follows:
 75% of the accounts receivable was collected for only ₱120,000.
 Half of the inventory was sold for ₱160,000.
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 Equipment with carrying amount of ₱800,000 was sold for ₱480,000.

 ₱8,000 liquidation expenses were paid. Estimated future liquidation expenses
totaled ₱4,000.
 ₱36,000 cash was retained in the business for potential unrecorded liabilities and
anticipated expenses.

How much did B receive from the partial settlement of his interest in the partnership?
a. 310,400
b. 311,600
c. 317,600
d. 324,600

43. A and B decided to liquidate their partnership. The partnership’s records show
the following information:

Non-cash assets 40,000

Liabilities
5,000
A, capital (50%)
20,000
B, capital (50%)
15,000
Total liabilities and
equity 40,000

The assets were sold for ₱32,000. How much were the cash distributions to the
partners?
A B
a. 11,000 16,000
b. 14,000 13,000
c. 17,000 10,000
d. 16,000 11,000

44. On January 1, 20X2, partners Allen, Brown and Cox, who share profits and
losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. The
partnership trial balance at this date is as follows:
Debit Credit
Cash 18,000
Accounts receivable 66,000
Inventory 52,000
Machinery and equipment,
189,000
net
Allen, loan 30,000
Accounts payable 53,000
Brown, loan 20,000
Allen, capital 118,000
Brown, capital 90,000
Cox, capital 74,000
Totals 355,000 355,000
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The partners plan a program of piecemeal conversion of assets in order to minimize

liquidation losses. All available cash, less an amount retained to provide for future
expenses, is to be distributed to the partners at the end of each month. The following
liquidation transactions occurred in January 20X2.
 ₱51,000 was collected on accounts receivable; the balance is uncollectible.
 ₱38,000 was received for the entire inventory.
 ₱2,000 liquidation expenses were paid.
 ₱50,000 was paid to outside creditors, after offset of a P3,000 credit memorandum
received on January 11, 20X2.
 ₱10,000 cash was retained in the business at the end of the month for potential
unrecorded liabilities and anticipated expenses.

All partners are insolvent.

How much did B receive on the January 31, 20X2 cash distribution to the partners?

ANSWER AND SOLN______________________________________________________________

45. The statement of financial position of the partnership of A, B and C shows the
following information:

22,
Cash 400
212,
Other assets 000
234,
Total assets 400
38,
Liabilities 400
76,
A, capital (50%) 000
64,
B, capital (25%) 000
56,
C, capital (25%) 000
Total liabilities and 234,
equity 400

The partners realized ₱56,000 from the first installment sale of non-cash assets with
total carrying amount of ₱120,000. How much did B receive from the partial
liquidation?

ANSWER AND SOLN______________________________________________________________

46. On January 1, 20x1, partners A and B, who share profits and losses on a 3:1
ratio, decided to liquidate their business. As of this date, the following information
has been determined:
Other
Cash assets Liabilities A, Capital B, Capital
80,000 1,920,000 200,000 1,000,000 800,000

In the first month of liquidation, ₱720,000 was received on the sale of certain assets,
liquidation expenses of ₱20,000 were paid, and additional liquidation expenses of
₱8,000 are anticipated before liquidation is completed. Creditors were paid ₱112,000.
Available cash was distributed to the partners. How much did A receive from the
partial settlement of his interest in the partnership?
 P a g e | 15

ANSWER AND SOLN______________________________________________________________

47. On January 1, 20x1, the partners of ABC Co. decided to liquidate their
partnership. The following information was made available:
Cash 30,000
Accounts receivable 380,000
Inventory 260,000
Furniture & fixtures, net 120,000
Total 790,000
165,0
Accounts payable
00
350,00
A, Capital (70%)
0
275,00
B, Capital (30%)
0
790,00
Total
0

C offered to buy for ₱760,000 the partnership assets including liabilities but excluding
cash and after certain assets are to be restated to their fair values as follows:
Accounts receivable, ₱350,000
Inventory, ₱250,000
Furniture, ₱135,000

How much will A and B receive as final settlement of their partnership interests?
a. 570,000
c. 790,000
b. 760,000
d. 625,000

Use the following information for the next two questions:

On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The
following information was made available:
80,00
Cash
0
Accounts 240,0
receivable 00
480,00
Inventory
0
1,200,
Equipment
000
2,000,
Total
000
Accounts 600,00
payable 0
200,0
A, Capital (20%)
00
400,00
B, Capital (30%)
0
800,00
C, Capital (50%)
0
2,000,
Total
000
 P a g e | 16

The net proceeds from the sale of non-cash assets amounted to ₱160,000. The personal
assets and personal liabilities of the partners are as follows:
A B C
1,200,0 1,040,0
Personal assets 00 00 800,000
Personal (880,00 (880,00 (1,280,0
liabilities 0) 0) 00)

48. How much additional contributions shall be made by the partners in order to
settle all of the partnership liabilities?
a. 280,000
b. 360,000
c. 480,000
d. 0

49. How much did A receive from the settlement of his interest in the partnership?

ANSWER AND SOLN______________________________________________________________

50. On January 1, 20x1, the partners of ABC Co. decided to liquidate their
partnership. The partners’ capital balances as of this date are shown below:
A, Capital (40%) 800,000
B, Capital (30%) 600,000
C, Capital (20%) 400,000
D, Capital (10%) 200,000

2,000,00
Total 0

The partners agree to the following:

 Equipment with a carrying amount of ₱400,000 is to be taken over by B at a price
of ₱480,000.
 Partnership’s liabilities are to be paid off and the balance of cash on hand,
₱728,000 is to be divided in a manner that will avoid the need for any possible
recovery of cash from a partner.

How much did D receive in the settlement of the partners’ capital accounts?
a. 102,000
b. 208,000
c. 104,000
d. 0

51. On January 1, 20x1, A and B, the partners of AB Co. decided to liquidate their
business. As of this date, the partners’ capital balances before closing the books
were ₱400,000 and ₱600,000, respectively. The partners share profits on a 2:3
basis.

Each partner acts as agent of the partnership. Prior to closing of the books, the
partners’ transactions made on behalf of the partnership are summarized below:
A B
400,00 480,0
Cash receipts 0 00
Cash 300,0 600,0
disbursements 00 00
 P a g e | 17

During the January, all of the assets of the partnership were sold and after settlement
of liabilities, ₱480,000 cash is available for distribution to the owners. Both the
partners are personally insolvent. How much did A receive in the settlement of his
capital account?
a. 396,000
b. 84,000
c. 420,000
d. 0

52. ABC Partnership decided to liquidate. Information before the start of liquidation
is as follows:
50,0 375,0
Cash Liabilities
00 00
Noncash 900,0 80,0
B, Loan
assets 00 00
25,0
C, Loan
00
312,5
A, Capital (50%)
00
107,5
B, Capital (30%)
00
C, Capital (20%)
50,000
950,0 Total Liab. & 950,0
Total
00 Equity 00

The noncash assets were sold for ₱400,000. C is the only solvent partner. How much
did A receive on the cash distribution to the partners?

ANSWER AND SOLN______________________________________________________________

53. The partners of the M & N Partnership started liquidating their business on July
1, 2004, at which time the partners were sharing profits and losses 40% to M and
60% to N. The balance sheet of the partnership appeared as follows:

Accounts 32,40
Cash
8,800 payable 0
22,40 14,00
Receivable
0 N, Loan 0
39,40 31,00
Inventory
0 M, Capital 0
65,20 (5,400
Equipment M, Drawing
0 )
Accumulated (30,80 33,20
depreciation 0) N, Capital 0
N, Drawing (200)
105,0 Total Liab. & 105,0
Total Assets 00 Equity 00

During the month of July, the partners collected ₱600 of the receivables with no loss.
The partners also sold during the month the entire inventory on which they realized a
total of ₱32,400.

How much of the cash was paid to M’s capital on July 31, 2004?
 P a g e | 18

ANSWER AND SOLN______________________________________________________________

54. The partners in ABC Co. decided to liquidate their business when their capital
balances were:
A, Capital (40%) 960,000
B, Capital (40%) 1,560,000
C, Capital (20%) 1,152,000

The non-cash assets were sold on installment and partial distributions to the partners
were made as cash was made available. After the second sale of non-cash assets, all of
the three partners received the same amounts from the partial distribution. On the
third sale of non-cash assets, the available cash for distribution to the partners is
₱40,000. Using cash priority program, how much is the amount received by partner B
on the third distribution?

ANSWER AND SOLN______________________________________________________________

Use the following information for the next three questions:

Partners A, B and C decided to liquidate their partnership. A summary of the
partnership’s statement of financial position is shown below:

Liabiliti
Assets es Equity
Nonca A B C
Cash sh (20%) (30%) (50%)
160,0 200,00 370,0 480,0
00 ? 90,000 0 00 00

All the noncash assets were sold for ₱870,000. The partnership paid ₱12,000
liquidation expenses.

55. How much is the carrying amount of the noncash assets?

ANSWER AND SOLN______________________________________________________________

56. How much is the loss on the sale of noncash assets, including the effect of
liquidation expenses?
a. 98,000 c. 112,000
b. 120,000 d. 122,000

57. How much cash did A receive from the settlement of the partners’ interests?

ANSWER AND SOLN______________________________________________________________

Use the following information for the next two questions:

Partners A, B and C decided to liquidate their partnership. A summary of the
partnership’s statement of financial position is shown below:

Cash 50,000
Noncash assets 1,200,000
Total 1,250,000

Accounts payable 100,000

Payable to A 50,000
A, Capital (50%) 540,000
B, Capital (30%) 360,000
 P a g e | 19

C, Capital (20%) 200,000

1,250,00
Total
0

58. If a cash priority program is prepared, which partner is paid first and how much
is the total payments to that partner before all partners will share on the available
cash based on their profit and loss ratios?
a. A, ₱20,000 c. B, ₱90,000
b. B, ₱60,000 d. B, ₱96,000

59. Three-fourths (3/4) of the noncash assets were sold for ₱920,000. The
partnership paid ₱5,000 transaction costs on the sale. How much cash did A
receive from the settlement of the partners’ interests under the cash priority
program?

ANSWER AND SOLN______________________________________________________________

60. A, B, C, and D are partners, sharing earnings in the ratio of 3/21, 4/21, 6/21 and
8/21, respectively. The balances of their capital accounts on December 31, 20x1 are
as follows:
A……………………………………………. ₱1,000
B………………………………………….. 25,000
C……………………………………………. 25,000
D…………………………………………… 9,000
₱ 60,000
The partners decide to liquidate, and they accordingly convert the non-cash assets into
₱23,200 cash. After paying the liabilities amounting to ₱3,000, they have ₱22,000 to
divide. Assume that a debit balance of any partner’s capital is uncollectible. The share
of B in the cash distribution to the partners was: (round-off answer)
a. 3,200 c. 13,800
b. 4,500 d. 17,80

“It is the Lord who goes before you. He will be with you; he will not fail you or forsake you. Do not fear
or be dismayed.” – (Deuteronomy 31:8)