PARTNERSHIP FORMATION

1. On Mar. 01, 2011, Sarabia and Abad decided to combine their businesses and form a
partnership. Their statements of financial position on Mar. 1, before adjustments, showed
the following:
Sarabia Abad
Cash P 9,000 P 3,750
Accounts receivable 18,000 13,500
Inventories 30,000 19,500
Furniture and Fixtures, net 30,000 9,000
Office Equipment, net 11,500 2,750
Prepaid Expenses 6,375 3,000
Total P105,375 P51,500
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Accounts payable P 45,750 P 18,000
Capital 59,625 33,500
Total P105,375 P 51,500
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They agreed to have the following items recorded in their books:
a. Provide 2% allowance for doubtful accounts.
b. Sarabia’s furniture and fixtures should be P31,000, while Abad’s office equipment is
under-depreciated by P250.
c. Rent expense incurred previously by Sarabia was not yet recorded amounting to
P1,000 while salary expense incurred by Abad was not also recorded amounting to
P800.
d. The fair market values of inventory amounted to: Sarabia, P29,500; Abad, P21,000.
Compute the net (debit) credit adjustment for Sarabia and Abad:
a. P 2,870; P 2,820, respectively c. P (860); P 180, respectively
b. P(2,870); P(2,820), respectively d. P 860; P(180), respectively.
2. Using the same information in the previous number, what is the total assets after the
formation?
a. P160,765 b. P152,985 c. P157,495 d. P156,875

3. On Aug. 1, Isada and Ureta-Reyes pooled their assets to form a partnership, with the firm to
take over their business assets and assume the liabilities. Partnership capitals are to be
based on net assets transferred after the following adjustments. Profits and losses are
allocated equally.

The inventory of Ureta-Reyes is to be increased by P4,000; an allowance for doubtful

accounts of P1,000 and P1,500 are to be set up in the books of Isada and Ureta-Reyes,
respectively; and accounts payable of P4,000 is to be recognized in Isada’s books. The
individual trial balances on August, before adjustment, follow: Isada: assets, P75,000;
liabilities, P5,000: Ureta-Reyes: assets, P113,000; liabilities, P34,500.
What is the capital of Isada and Ureta-Reyes after the above adjustments?
a. Isada, P68,750; U.Reyes, P77,250 c. Isada, P65,000; U.Reyes, P76,000
b. Isada, P65,000; U.Reyes, P81,000 d. Isada, P75,000; U.Reyes, P81,000

4. Red, White and Blue form a partnership on May 1, 2011. They agree that Red will contribute
office equipment with a total fair value of P40,000; White will contribute delivery equipment
with a fair value of P80,000; and Blue will contribute cash. If Blue want a one-third interest
in the capital and profits, he should contribute the following cash:
a. P40,000 b. P60,000 c. P120,000 d. P180,000

5. PP, RR, SS are new CPA’s and are to form a partnership. PP is to contribute cash of P50,000
and his computer originally costing P60,000 but has a second hand value of P25,000. RR is
to contribute cash of P80,000. SS, whose family is selling computers, is to contribute cash of
P25,000 and a brand new computer with a regular selling price of P60,000 but which cost is
P50,000. Partners agree to share profits equally. The capital balances upon formation are:
PP RR SS
a. P 75,000 P 80,000 P 85,000
b. P110,000 P 80,000 P 75,000
c. P 80,000 P 80,000 P 80,000
d. P 83,333 P 88,333 P 88,334
PARTNERSHIP OPERATION

1. The partnership agreement of Axel, Berg and Cobb provides for the year-end allocation of
net income in the following order:
 First, Axel is to receive 10% of net income up to P 100,000 and 20% over P 100,000.
 Second, Berg and Cobb each are to receive 5% of the remaining income over P
150,000.
 The balance of income is to be allocated equally among the three partners.
The partnership’s 2010 net income was P 250,000 before any allocations to partners. What
amount should be allocated to Axel?

a. P 101,000 b. P 108,000 c. P 103,000 d. P 110,000

2. Sig and Fred agreed to share the partnership’s profit as follows:

To Sig: P15,000 salary per month, 5% bonus after salary and bonus
To Fred: The remaining balance
What is the amount of Fred’s share from the partnership’s income of P411,000?
a. P385,000 b. P220,000 c. P219,000 d. P200,000

3. Jong and Kajong are partners who share profits and losses in the ratio of 60%; 40%
respectively. Jong’s salary is P120,000 and P60,000 for Kajong. The partners are also paid
interest on their average capital balances. In 2010, Jong received P60,000 of interest and
Kajong, P24,000. The profit and loss allocation is determined after deductions for salary and
interest payments. If Kajong’s share in the residual income (income after deducting salaries
and interest) was P120,000 in 2010, what was the total partnership income?
a. P384,000 b. P564,000 c. P690,000 d. P774,000

4. Villena, a partner in the Dulay, Villena & Co., has a 30% participation in partnership profits
and losses. Villena’s capital account has a net decrease of P120,000 during the calendar year
2011. During 2011, Villena withdraw P260,000 (charged against his capital account) and
contributed property valued at P50,000 to the partnership. What was the profit of Dulay,
Villena & Co., for the year 2011?
a. P1,100,000 b. P466,667 c. P700,000 d. P300,000

5. The partnership agreement of Paul, Simon and Peter provides for the division of net income
as follows:
 Simon, who manages the partnership is to receive an annual salary of P120,000.
 Each partner is to be allowed interest at 10% on ending capital.
 Balance is to be divided 40:25:35.
During 2017, Paul invested an additional P90,000 in the partnership. Simon made an additional
investment of P75,000 and withdrew P110,000 and Peter withdrew P60,000. No other
investments or withdrawals were made during 2008. On January 1, 2017, the capital balances
were Paul, P300,000; Simon, P410,000; and Peter, P220,000. Total capital at year-end was
P600,000. Compute the capital balance of each partner at year-end:
Paul Simon Peter
a. (P176,000) P948,125 (P172,125)
b. 214,000 410,250 24,250
c. 214,000 398,125 ( 12,125)
d. 390,000 375,000 ( 165,000)

PARTNERSHIP DISSOLUTION
1. Cookie and Dannie are partners who share profits and losses in the ratio of 7:3 respectively.
Their respectively. Their respective capital accounts are as follows:
Cookie P 6,300,000 Dannie P 5,400,000

They agreed to admit Eddie as a partner with a one-third interest in the capital and profits and
losses, upon an investment of P 4,500,000. The new partnership will begin with a total capital of P
16,200,000. Immediately after Eddie’s admission, what are the capital balances of Cookie, Dannie
and Eddie, respectively?

a. P 5,400,000; P 5,400,000; P 5,400,000 c. P 5,670,000; P 5,130,000; P 5,400,000

b. P 5,600,000; P 5,100,000; P 5,400,000 d. P 6,300,000; P 5,400,000; P 900,000

 2. Dellosa bought Longalong’s interest in the Seechua and Longalong’s Partnership by a P
600,000 direct payment to Longalong. The capital balances before the sale were P 240,000
and P 360,000, respectively. What will be the amount of Dellosa’s capital account?
a. P 300,000 b. P 360,000 c. P 600,000 d. P 480,000

3. Maria, Suma and Corta were partners with capital balances of January 2, 2010 of P100,000,
P150,000 and P200,000, respectively. Their profit and loss ratio is 5:3:2. On July 1, 2010,
Maria retires from the partnership. On the date of retirement the partnership net income is
P140,000 and the partners agreed that inventories are to be revalued at P70,000 from its
original cost of P50,000. The partners agreed further to pay Maria P195,000 in settlement of
his interest. What are the capital balances of the remaining partners after retirement of
Maria?

a. Suma, P198,000; Corta, P232,000 c. Suma, P 2017,000; Corta, P238,000

b. Suma, P189,000; Corta, P226,000 d. Suma, P 220,000; Corta, P 226,000

4. The capital balances of the partnership of X, Y and Z on June 1, 2011 are presented below
with their respective profit and loss ratio:
X P 139,200 ½
Y 208,800 1/3
Z 96,000 1/6

On June 1, 2011, Q is admitted to the partnership when he purchased, for P132,000, a

proportionate interest form X and Z in the net assets and profits of the partnership. As a result, Q
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 X and Z upon the sale of a portion of
their interest in the partnership to Q?
a. P43,200 b. P82,000 c. P62,400 d. P0

5. The December 31, 2010, statement of financial position of the BB, CC and DD partnership is
summarized as follows:
Cash P 100,000 CC, Loan P 100,000
Other Asset, at cost 500,000 BB, Capital 100,000
CC, Capital 200,000
DD, Capital 200,000
Total P 600,000 P 600,000
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The partners share profits and losses as follows: BB 20%; CC 30%; and DD 50%, CC is
retiring from the partnership and the partners have agreed that “other assets” should be
adjusted to their fair value of P600,000 at December 31, 2011. They further agree that CC
will receive P244,000 cash for his partnership interest exclusive of the loan, which is to be
paid in full.
After CC’s retirement, the capital balances of BB and DD, respectively, will be:
a. P 116,000; P 240,000 c. P 100,000; P 200,000
b. P 101,714; P 254,286 d. P 73,143; P 182,857

PARTNERSHIP LIQUIDATION

1. The partners Melchor Bombero, Felipe Niza, and Doris Pateño who shared profit and losses
in the ratio of 4:2:2, has decided to dissolve and liquidate their partnership.In the process of
liquidation, their non-cash assets of P490,000 was realized at a loss of P340,000. however,
they were able to pay their obligations to outside creditors of P105,000. the partner’s equity
balance before the start of liquidation has totaled to P450,000, broken down as follows:
Bombero P180,000; Niza P150,000 Pateño P120,000

At what amount were the non-cash assets realized?

a. P150,000 b. P175,000 c. P200,000 d. P225,000

2. Based on the above data, how much was the cash balance at the beginning of the liquidation
process?
a. P60,000 b. P65,000 d. P70,000 d. P75,000
 3. Katie, Lenie and Minnie decided to liquidate their partnership on July 31, 2008. Their capital
balances and profit and loss ratios on this date, before liquidation, are:
Capital P&L Ratio

Katie P224,000 25%

Lenie P288,000 30%

Minnie P128,000 45%

The net loss from January 1 to July 31, 2008 is P48,000. Also, on this date, cash and
liabilities are P136,000 and P232,000, respectively.

Which of the ff. is inconsistent with the result of liquidation if Lenie received P247,200 in full
settlement of her interest in the firm?

a. Total cash paid to partners, P736,000 c. Minnie received P66,800

b. Non-cash assets were sold for P600,000 d. Katie’s share in loss, P22,000

4. Partners Rose, Susan and Tina share profits and losses in the ratio of 5:3:2. At the end of a
very profitable year, they decided to liquidate the firm. The partner's capital account
balances at this time are as follows:
Rose P 2,200,000 Susan P 2,490,000 Tina P 1,500,000

The liabilities accumulate to P 3,000,000, including a loan of P 1,000,000 from Rose. The
cash balance is P 600,000. All the partners are personally solvent. The partners plan to sell
the assets in instalment. If Susan received P 360,000 from the first distribution of cash, how
much did Tina receive at that time?
a. P 200,000 b. P 120,000 c. P 80,000 d. P 220,000

5. From the records of the DTA Partnership,

Cash P 2,000 Liabilities P 5,000

Other non-cash assets 28,000 De Mesa, Loan 2,500
De Mesa, Capital 12,500
Tudtud. Capital 7,000
Apostol, Capital 3,000
Total P30,000 Total P30,000
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Profit and loss ratio is 3:2:1 for De Mesa, Tudtud and Apostol, respectively. Cash is distributed as
assets are realized. Other assets were realized as follows:

Date Cash Received Book Value

January 2011 P 6,000 P 9,000
February 2011 3,500 7,700
March 2011 12,500 11,300
How much is the total cash received by Tudtud and cash received by Apostol in January
a. P2,000; P200, respectively c. P1,500; P1,000, respectively
b. P5,000; P-0-, respectively d. P-0-; P500, respectively