27

Partnership
New Partner - Purchase or
Investmet
Partnership Dissolution: Admission of a
the condensed balance sheet of the partnership of KK,
is
49. Presented belowshare respectively:
MM who profits and losses in the ratio of 6:3:1,
LL and P 80,000
P 85,000 Liabilities 252,000
Cash. 415,000 KK, Capital
Qther assets. 126,000
LL, capital 42,000
MM, Capital
P500,000
PS00,000 Total
Total
their respective capital and profit and
to sel! NN 20% of by NN is to be
The partner agreetotal payment of P90,000. The payment of KK, LL
loss interests fora the individual partners. The capital balances
made directly to after gdmission of NN are:
and MM, respectively
P 99,000: P33,000.
a. PI98,000: P33,600.
P201,600: PI00,800:
b. PI08,000; P36,000.
C. P216,000: PI27,800: P42,600. (AICPA)
d. P255,600:
(or
implied goodwillThe
assuming that NN.
infomation in No. 49, to the acquisition
by
Using the sameasset) is to be recorded pior
50. revaluation of NN are:
of
and MM, respectively after admission
capitals of KK, LL, P216,000; P108,000: P36,000
P33,000 P42,600
P198,000: P 99,000: d. P255,600; Pl27,800;
P201,600: P100,800; P33,600
b. 5:3:2,
in the ratio ofprofits
profits and losses
are partners who share theirrespecfive capitaland
XX, YY and
51. respectively. Z
They agreetopayment
of
sella25%directty to the portners in the amount
for a total revaluation of assets of P60,000
ond losses ratioThey agree that goodwill orThe condensed balance sheet
of Pl40,000.00.
recorded piorto gdmission of
AA.
is to be partnership is as folows: PI00,000
of the XYZ P60,000 Liabilities 250,000
540,000
XX, Capital 150.000
Cash. YY, Capital.
Non-cash assets 100,000
ZZ, Capital
P600,000
P600,000 Total
Total payment and dmission
respectivelyafter the
YY and IZ
The capitalofXX, Pi12,000
P168,000; andPi00,000
of AA are: P280,000;
and P75,000 c. P150,000;and
a.
P187,500; PI12,500; and
Pl26,000: P84,000 d. P250,000;
b. P210,000;
28
Chapter 1
52. On une 30, 2015, the balancesheetof Westem Marketing.,o partnership,

isSUmmarized as follows:
PI50,000
Sundry assets 90,000
West, capital.
Tern, capital
60,000
West gnd Tem share profi and losses at a60:40ratio, respectivelv They
agreed to take in Cuba as onewportner, whopurchases l/8 interest of
West and Tem for P25,000. Whot athe amount of Cuba's copital to be
partnership booksif book volue methodis Used?
taken up in the
P25.000
PI2500 31,250
b. 18,750 d.

53.
(Adapt ed)
PP contributed P24,000 andCC contibuted P48,000to tom apartnershi
the ratio of their original
D ond they agreed to share profits in Capital
contributions. During the first year of operations, they made a profit of
PI6,290; PP withdrew P5,050 and CC P8,000. Afthe start of the
yea, they agreed to odmit GG into the partnership. He was To receive following
one-fourth interest in the capital ond profts upon payment of P30,000 te
PP and CC, whose capital ocCOunts were to be reduced by
GGs captal occount of amounts sufficient to bring them back to theirtransfers
to
original capital ratio.
How shoud the P30,.000 paid by GGbe dvided between PP and Cc?
a. PP,P 9825; CC, P20,175. C. PP,P10.000: CC, P20.000.
b. PP,P15,000; CC, PI5,000 d. PP.P 9,300; CC, P20,700

54. The capital accOUnts of the partnership of NN, VV, and JJ

(Adapted)
on June 1, 2015
are presented below with their respective profit and loss ratios:
B
NN
W PI39,200 I/2
208,800 I/3
96,000 1/6
On June 1,2015, Lis admitted to the
P132,000, a proportionate interest frompatnership
NN
when LL purchased, for
profits the
of and JJ in the net assets and
fifth interest inpartnership. As a result of a
transaction
the net assets and profits of the firm. L acquired a one
gain realized by NN and What is the
the partnership to L? JJ upon the sale of a portion of theircombined interest in
a. P 0
b. 43,200 C. P62,400
d. 82,000
(AICPA)
 29
Partnership
LLP, had the following
55. On January 31, 2015, partners of Lon, Mac & Nan, entries
loan and capital account balances (after closing for January):
* P 20,000 dr
Loan receivable from Lon 60,000 a
Loan payable to Nan 30,000 dr
Lon, capital -120.000 a
Mac, capital 70,000 a
Nan, capital
The partnership's income sharing ratio was Lon, 50%; Mac, 20%, andNan,
30%. On January 31, 2015, Ole was admifted to the partnership for a 20%
exchange for an investment
interest in total capital of the partnership in existing partners agreed to
of P40,000 cash. Prior to Ole's admission, the
increase the camying amount of the patnership's inventories to curent
Ole:
fair value, a P60,000 increase. The capital account be credited to
to

a. P60,000 P52,000
b. P40,000 d. P46,000
(Adapted)

56. MM and OO are partners with capital balances of P50,000 and P70,000,
The partners agree
respectively, and they share profits and losses equaly. capital
to take PP into the partnership fora 40% interest in and profits.
P60,000 cash directly
while MM and OO each retain a 30%interest. PP pays by PP's payment
to MM and 00 for his 40% interest, and goodwill implied O0 transfer equal
is recognized on the parinership books. If MM and
amounts of capital to PP, the capital balances after PP's admittance will
be:
a. MM, P35,000; OO, P55,000; PP, P&0,000
b. MM, P45,000; OO, P45,000; PP, P60,000
C. MM, P36,000; OO, P36,000; PP, P48,000
d. MM, P26,000: OO, P46,000; PP, P48,000

Usingthe same information in Number 56, and the partner's decided to

57. the
after admission of
have a cash settlement among themselves right accordance with the new
PP,i.e., the capitál balance should be made in
profit and loss ratio, what would be the capital balances after such
transaction?

a. MM, P35,000; OO,P55,000; PP, P60,000

b. MM, P45,000; OO, P45,000; PP, P60,000
C. MM, P36,000; O0, P36,000; PP, P48,000
d. MM, P26,000; O0, P46,000; PP, P48,000
(Adapted)
30
sheetispresentedfor the Chapler
condensedbalance
theratioof.
painership o
C
S8. The folowingg
LPP, andQ. who
Cash.
Other assets.
shareprofitsand
in
losses

A33,rP,es9p20,0,ec00i00v00ehy
L loan..
P940,O00
Accounts payoble. P210.30,0d00o
QQ. loan.
L, captal. 310.
200,0000
00
PP. capital.
QQ. copitd. 190,000
Assume that fhe assesandiobiiesarefoity valuedonthe balance sheet
P940,000
ondthat theeparneship decides toodmitfFF as' anewppartner, with a 209%
be recorded.
interest. No goocwal orbonus is to
much shoud FF contrbute in cash or other assets?
7ow
G. PI75,000
a. P 140,000 d 177,500
b. 142000

59. CC and DD are partnes who share profits and loSses in the
(AIC
ratio of
PA)
7:3,
respectively. On October 21, 2012, ther respective copital acCOunts wa
as follows:
B
CC P3S,000
DD 30,000
P65,000
Onthat dale they ogreed to admit EE as apartner with a one-third interest
in the capital and profits and losses, and upon his investment of P25,000.
The new partnership willbegin witha total capital of P90,000.Immediately
after EE's admission, what are the copital balance of CC, DD, and EE
respectivelye
a. P30,000: P30,000: P30,000: C. P31,667; P28,333; P30,000;
b. P31,500; P28,500; P30,000; d. P35,000; P30,000; P25,000;
(AICPA)
 31
Partnership
and MM at October 31,2015
60. The capitalaccounts for the partnership of LL
are as follows:
P 80,000
LL, capital 40,000
D MM,capital
PI20,000

3:2 respectively.
The pårtners share profits and losses in the ratio of
need of cash, and the partners agree to
The partnership is in desperate and profits and losses
admit NN as apartner with one-third in the capital NN's admission, what
upon his investnent of P30,000. Immediately after assurning
should be the capital balances of LL, MM and NN respecfivey,
bonus is tobe recognized?
P50,000; P50,000; P50,000. C. P66,667; P33,333; P50,000.
a.
d. P68,000; P32,000; P50,000.
b. P60,000; P60,000; P60,000.
(AICPA)
balances P60,000 and P20,000.
D 61. O0 and TT are partners; with capital of 60:40. O0 and TT
respectively. Profits and losses are divided in the rafio
decided to form anew partnership with GG, who invested land valued at
P15,000 for a 20% capital interest in the new partnership. GG's cost of the
the bonuS method to
land was P12,000. The partnership elected to use capital account
record the admission of GG into the partnership. GG's
should be credited for:
a. P12,000 C. P16,000
b. 15,000 d. 19,000
(AICPA)
62. The partnership of Marissa and Olga is being dissolved, and the assets and
equities at book value and fair value and profit and loss ratios at January
1, 2015 are as follows:
Book Value Fair Value
Cash P 20,000 P 20,000
Accounts receivable -net... 100,000 100,000
Inventories 50,000 200,000
Plant assets - net 100,000 120,000
P270,000 P440,000

Accounts payable P50,000 P 50,000

Marissa, capital (50%). 120,000
Olga, capital (50%) 100,000
P270,000
 32 Chapter 1
Maisso ond Olga agree to odmit Trent intothe partnership for oa one-third
interest. Trent invests P9S,000 cash ond o building to be usedin the business
fair value of P120,000.
with o book value to Trentfor P100,000 ond a
of Olga ofter the admission,assuming that
CompUte the capitol bolance
the assets are revalued and goodwillis
recognized.

C.
PI95,000
P175,000 205,000
b. 155.000 d.

63.
(Adapted)
AA and BS entered into ai partnership on May 31, 2015, contributing cash
O P48.000 and P32.000. resoecthivey, ond agreeing to QvIde earnings in
the rotio of their initial investments after ollowing annual salaryallowance
Of P1200 eoch. On December 3). 201S, the Income sumary account
nod a credit balance of P3Ao00. whie the drawing dcCOUnts showe
debit bolances of Pl4000 for AA and Pl0,000 for BB.
new.
KTme beginning of the next vea, CC Was admitted into the firm as a
partner with a 33-l/3% interest for a capital credit equal to his cash
investment of P60.000. AA and BB then effected a private cash settlement
between themsetves in order to make the capital balances Conform to g
new profit-sharing ratio of 4:2:3, respectively. with salary allowances
SoTapped.
How much of the amount of the pivote cash settlement effected between
the oid pamers?
a. P5,000 C. P12,000
b. 9,000 d. "15.000
(Adapted)
64. AA, BB, and CC are partners sharing profits in d 5:3:2 ratio, and with capital
baiances of P95,000, P80,000, and P60,000, respectively, on December 31,
2015. The partners decided to admit DD as a new partner on January 1,
2016. DD will Contribute cash of P80,000 to the partnership and alsO pay
P10,000 for 15% of BB's share. DD is to have a 20% share in profits. After the
admission of DD, the total capital will be P330,000 and DD's capitalwil
be P70,000.

After the admission of DD, BB's capital balance would be:

a. P72,600 C. P79,100
b. 74,600 d. 81,100
(Adapted)
 33
Partnershp

65. The following are capital account balances and profit and loss ratios of
the partners in Precious Company.
P&L
Capital Ratio
LL.... P2,250,000 2
750,000 1

They agree to admit RR as apartner with a 25% interest in capitat upon her
investment of Pi,000,000. LL, O0 and RR are fo share profits 5:3:2,
respectively.
20%
Subsequently, TT joins the partnership by investing P1,200.000 for ina their
interest in profits and capital,t he old partners are to share profits
original ratio.
Assuming the goodwill method is used, how much is the goodwill to be
recorded upon the admission of TT?
a. P800,000 C. P400,000
b. 600,000 d. 240,000
(PhilCPA)
66. RR dnd XX fommed a partnership and agreed to divide initial capital equaly.
even thóugh RR contributed P25,000 and XX contributed P21,000 in
identifiable assets. Under the bonus approach to adjust the capital
accounts. XX's Unidentifiable assets should be debited for:

a. Pl1,500 C. P2,000
b. 4,000 d. 0
(AICPA)

67. In the AD partnership, Allen's capital is Pl40,000 and Daniel's is P40.000

and they share incomè in a 3:1 ratio, respectively. They decide to admit
David to the partiership. Each of the foltowing questions is independent
of the others.
Allen and Danielagree that some of the inventory isobsolete. The inventory
account is decreased before David is admitted. David invests P40,000 for
aone-fifth interest. What is the amount of inventory witten down?

a. P4,000 P1S,000
b. PI0,000 P20,000
68. Using thesameintomoioninNo.67, DoviddireclyPurchaser aone-ith
Chapter I
Pl0,000.The
Iond
increasedtbeBoreDovidt odnited.
interest by paying
Allen
Doniel
andBy whatamountisthe\ond accOunt k
P34000
accOunt
inoreasedt C. P2O000
d. PI0000
a. P0.00
69. MM b.and P36.000
NN areparthers whohove capitas ofP6.000and! PABOO and
i therotioof 32.00t admittedas apartnerupon investing
share profitsin profitstobesharedequaly.
ASsume
cash hot00with
of PS5.000, sallowedo2S3interestinthefim,(1)the capitailtbalance
of MM after the odmiksion of 00using goodwll method. and (2) how
much will NN goin orlose bytheuse of bonus method over goodwill

method.
oseP140
0. ()P7.120:(2) NNwl wilgainP1,260
b. (0) P7.120: (2) NN ose Pl,260
C. () P8,520; 12) NN wl Pi40
d (P8.S20: (2) NNwillgain
(Adapled)
70. AA and BBBareparthers who have capitalof P600,000and PA80,000 shaing
odmitted as a partner upon investing
profitsin
for the raioin of32.
25% interest
between goodwil and bonus meh0d, CC
will
gP500,000
thefim,CC prfoits to be shared equaly. Given the choice

P35,000.
a. Prefer bonus method due to CC's goin of Pl40,000.
b. Prefer bonus method due to CCs gain of
C. Prefer goodwil method due to CCs gain of pl40,000.
d. Beindiierent for the goocwill ond bonus methods are the Same.
(Adapted)
Refirement or Withdrowal ofa Partner
71. On June 30, 2015, the statement of financial position for the partnership of
CC, MM, and PP, together with their respective profit and loss ratios, were
as followS:
Assets, at cost.... P180,000
CC, loar
9,000
CC, capitl (20%). 42,000
MM, Capital (20%) 39,000
PP, capital (60%) 90,000
Total
P180,000
 35
Partnership
CCdecided to retire from the partnership. By mutual agreement, the assets
are to be adjusted to their fair value of P216000 at June 30, 2015. It was
agreed that the partnership would pay CC P61,200 cash for CC's
partnership interest, including CC's loan which is to be repaid in full. No
goodwill is to be recorded. After CC's retirement, what is the balance of
MM's capitalaccount?
a. P36,450 C. P45,450
b. 39,000 d. 46,200
(AICPA)

72. The December 31, 2015, statement of financial position of the BB, CC, and
DD partnership is summarized as follows:
Cash.... PI00,000 CC, loan PI00,000
Other assets, at cost.... 500,000 BB, Capital 100,000
CC, capital. 200,000
DD, Capital 200,000
P600,000 P600,000
and DD,
The partners share profits and losses asfollows: BB, 20%; CC, 30%;
50%, CC is retiring from the partnership and the partners have agreed that
of P600,000 at December
"other assets" should be adjusted to their fair value
31, 2015. They further agree that CCwill receive P244,000 cash for his
full. No
partnership interest exclusive of the loan, which is to be paid in
goodwill implied by CC's payment will be recorded.
After CC's retirement, the capital balances of BB and DD, respectively, will
be:
d. Pll6,000 and P240,000 RI00,000 and P200,000
b. P101,7]4and P254,286 d. P 73,143 and P182,857
(Adapted)

73. On June 30, 2015,the condensed balance sheet for the partnership of DD.
FF, and GG, together with their respective profit and loss sharing
percentages was as follows:
Assets, net of liabilities P320,000

DD, caital (50%) Pl60,000

FF, capital (30%) 96,000
64,000
GG,capital (20%)
P320,000
 Chapter I

DD ecided to retire frorn the partnership and by mutua agreement is to

be paid Pi80,000 out of portnership funds tor his interest. Total goodwo
odjustnent in assets implicit in the oareement is to be recordedAe
DD'srefirement, what are the capto bolances of the other partners
FF GG FF GG
P 84000 PI08,000 P72.000
a. P56,000 C.
80,000
b. 102,000 68.000 d. 120,000
(AICPA)

PP RR and SS were partners with copital bakances as of January 1.2015, of

and losses on a
P20.000, P3O.000 and P40,000 respectively. sharing profit
5:3:2 ratio.
from the partnership. Partners agreed thot at
On July 1, 2015 PP withdraw inventories had to be revalued at Pl4,000
The firme of withdrawal, certain six month periodending June 30, 2015, the
from its cost of P10,000. For theincome of P28,000. Furtner. portners ogreed
partnership generateda net that the remaining partners' capital
to pay PP, P39,000 for his interest and wOuld
GccOUnts,would be gdjusted for whatever godwill the settlement
generate. The poyment ofPP included a goodwil of:
P3,000 C. PI0.000
a.
b. 5,000 d. 8,500
(Adapted)

75. The condensed baance sheet of the partnershipasofof EE, FF and GG with
corresponding profitand loss sharing perccentage June 30, 2015 was
as follows:
Net assets P480,000
EE,capital (50%) P240,000
Ff,capitat (30%) 144,000
GG, capital (20%) 96,000
P480,000
Asof said date, EE retired from the partnership. By mutualagreement. he
was paid P270.000 for his interest in the partnerthsip. Partial goodwil or
adjustmernt in assets was to be recorded. After EE's retirement. the total
net assets of the partnership was:
P300,000 C. P240,000
b. 210,000 d. 270,000
(Adapted)
Partnership
37
Z6 Using the same informmation in
adjustrments in assets was to be Number 75. except that totai goodwill or
of the partnership recorded. What will be the totai net aSsets
after EE's retirenent?
P300,00o
b. 210.000
C.
P240.000
270.00o
77. A. Srnith, o portner in on (Adapted)
Dartnership, Srnith's shareaccounting firm, decided to withdraw trom the
of the portnership
Upon withdrawing from the portnership he profits was
and oSses was 20%.
paid P88.800 in final
setttement for his interest. The tota! of the partners' capital accOunts
recognition of partnership goodwitl prior to Smith's withdrawat before
P252.000. After his withdraWal the remaining pcrtners' was
excluding their share of goodwil, totalled P192.000. The totaicapitai accounts.
the firm was: goodwit ot
a. Pl44,000 P192.000
b. 168,000 300,000
(AICPA)
78. CC,DD and EE shared profit and losses based on 5:3:2. EE was aliowed to
withdraw from the partnership on 31 December 2015 with P600,000 cash
as full settlement. The condensed balance sheet of the portnership as of
that date was as follows:
Assets
Due from EE P 250,000
Goodwill 2.000,000
Other assets .... 4,750.000
Total assets PZ000,000
Liabilities and Capital
Liabilities P2,000.000
Due to DD 750,000
CC, capital 1750.000
DD, Capital. 1,500,000
EE, capital 1000,000
Total liabilities and capital P7.000,000

Using the partial adjustment of goodwillmethod, the new capital balances

of the remaining patners after EE:s withdrawal are:
CC, P1,842,750 and DD, PI,556,250
b CC, Pl,375,000 and DD, PI,275,000
CC, P2,000,000 and DD, PL.650,000
CC, PI,750,000 and DD, PI,500,000
(Adapted)
 Partnership

shirkage
oxceptthat the onfio capitol
79. Usingthe sameintomotion inhunberin70,goowillis used, the new
in osset melhod o totol acjustmerit withdrawal are:
oftor fE's
balance of the partners
remcining
0. CC, PL843,750 and DD, P,556,20
b. CC, PL,375,000 and DD, PI,275,.000
Ç CC, P2,000,000 and DD, PL,630,000
d. CC, PI,750,000and DD,PI,500,000 (Adapted)

parentheses) of Nunn, Owen,

80. The partners' capital ratio
(income-sharing in
asfolloWS:
Park &QUan LLPon May 31, 2015, were P 60,000
Nunn (20%) 80,000
Owen (20%) 70,000
Park (20%) 40,000
Quan (40%) P250,000
Total partners' capital (20%)
consent of Nunn, Owen, and QUan:
On May 31, 2015, with the from cash
Sam Park retired the partnership and was paid P50,000
in fullsetlement of his interest in the partnership.
b Lois Reed was admitted to the
partnership with a P20,000 cash
interest in the net assets of Nunn, Owen
investment for a 10%
and Quan.

The capitalaccount to be credited to Reed is:

a. P22,000 C. P20,000
b. 27,000 d. 25,000
(Adapted)
81. AA, BB, and CC are partnerssharing profits in the ratio of 3:2:1,respectively.
Capital accounts are P50,000, P30,000 and P20,000 onDecember 31,2015,
when CC decides to withdraw. It is agreed to pay P30,000 for CC's interest.
Profits atter the retirement of CCare to be shared equally.
() The capital balance of BB after retirement of CC, Using total goodwil!
approach, and (2) assume the usage of bonus, partial, and total goodwill
approach for the retirement, which of these methods will be preferred by
BB?

a. ()) P50,000: (2) Bonus method

b. ()) P20,000: (2) Bonus method
C. ()) P30,000; (2) Partial goudwill
d. () P50,000: (2) Total goodwill
(Adapted)