Acctg Partnership Problems with solution PDF

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Partnership Exercises Partnership Formation[1]. Emil and Pearl form a new partnership. Emil invests P300,000 in cash for her 60 percent interest in the capital and profits of the business. Pearl contributes land that has an original cost of P40,000 and a fair market value of P70,000, and a building ...

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Partnership Exercises Partnership Formation

[1]. Emil and Pearl form a new partnership. Emil invests P300,000 in cash for her 60 percent interest in the capital and profits of the business. Pearl contributes land that has an original cost of P40,000 and a fair market value of P70,000, and a building that has a tax basis of P50,000 and a fair value of P90,000. The building is subject to a P40,000 mortgage that the partnership will assume. What amount of cash should Pearl contribute?

a. P40,000 b. P80,000 c. P110,000 d. P15,0000

[2]. The Green and Red partnership was formed on January 2, 2011. Under the partnership agreement, each partner has an equal initial capital balance accounted for under the goodwill method. Partnership net income or loss is allocated 60% to Green and 40% to Red. To form the partnership, Green originally contributed assets costing P30,000 with a fair value of P60,000 on January 2, 2011, and Red contributed P20,000 in cash. Drawings by the partners during 2011 totaled P3,000 by Green and P9,000 by Red. The partnership’s 2011 net income was P25,000. Red’s initial capital balance in the partnership is:

a. P20,000. b. P25,000. c. P40,000. d. P60,000.

[3]. Pirante and Wilson drafted a partnership agreement that lists the following assets contributed at the partnership’s formation:

Contributed by Pirante Cash

Wilson

P40,000

P60,000

Inventory

-

30,000

Building

-

80,000

Furniture and equipment

30,000

-

The building is subject to a mortgage of P20,000, which the partnership assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What amounts should be recorded as capital for Pirante and Wilson at the formation of the partnership? a.

P70,000 and P170,000, respectively.

b.

P70,000 and P150,000, respectively.

c.

P110,000 for each partner.

d.

P120,000 for each partner.

[4]. AA and Belen formed a partnership and they agreed to share initial capital equally, although AA contributed P150,000 and Belen contributed P126,000 in identifiable assets. Under the bonus approach to adjust the capital accounts, Belen received (gave) a bonus equal to:

a.

P24,000

b.

P12,000

c.

(P24,000)

d.

(P12,000)

[5]. AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000; and, CC, P100,000. AA and CC are not to actively participate in the business but will refer customers, while BB will manage the firm. BB has to give up his present job which gives her an annual income of P120,000. The partners decided that profits and losses shall be shared equally. Upon formation, partners’ capital balances would be: a.

P 70,000, P 70,000, and P 70,000, respectively.

b.

P100,000, P10,000, and P100,000, respectively.

c.

P100,000, P130,000, and P100,000, respectively.

d.

P110,000, P110,000, and P110,000, respectively.

[6]. Brenda and Cathy formed a partnership and agreed to divide initial capital equally, even though Brenda contributed P200,000 and Cathy contributed P168,000 in identifiable assets. Under the bonus approach to record the contributions of the partners, Cathy’s capital account should be credited for a.

P200,000.

c. P184,000

b.

P168,000.

d. P100,000

[7]. On May, 31, 2011, Allen, Belen, and Cenen formed a partnership by combining their businesses. Allen give cash of P50,000. Belen gave a property with a carrying amount of P30,000, an original cost of P40,000, and a fair market value of P80,000. Belen’s property, however, has a P35,000 mortgage for which the new partnership accepted legal responsibility. Cenen gave a delivery equipment with a book value of P30,000, an acquisition cost of P75,000, and an appraised value of P55,000. It was agreed that profits and losses are to be shared equally. The partner with the biggest capital account balance as of May 31, 2011, is

a.

Allen

b.

Belen

c.

Cenen

d.

Allen have equal capital balance.

[8]. Abel and Carr formed a partnership and agreed to divide initial capital outlay 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.

P46,000

b.

P8,0000

c.

P16,000

d.

P-0-

[9]. On October 1, 2011, Carla and Clara joined in a partnership. Carla contributed cash while Clara contributed merchandise worth P25,000 and a secondhand delivery truck currently valued at P50,000 but encumbered by a one-year chattel mortgage note for P15,000. If initial capital balances are to conform to the profit-sharing ratio of 2:3, respectively, the amount of cash contributed by Carla was:

a.

P24,000

b.

P30,000

c. P40,000 d. P50,000

[10]. AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000, and CC, an equipment valued at P100,000. AA and CC are not to actively participate in the business but will refer customers, while BB will manage the firm. BB has to give up her present job which gives her an annual income of P120,000. The partners decided that profits and losses shall be shared equally. Upon formation, assuming a chattel mortgage of P10,000 on the equipment

is assumed by the partnership, the net assets of the partnership is equal to:

a. P210,000 b. P200,000 c. P220,000 d.

P330,000

[11]. On October 1, 2011, Mel and Garri pooled their assets and form a partnership, with the firm to take over their business assets and assume their liabilities. The partner’s capitals are to be based on net assets transferred after the following adjustments: Garri’s inventory is to be increased by P3,000; an allowance for bad debts of P1,000 and P1,500 are to be set up in the books of Mel and Garri, respectively; and P4,000 of accounts payable are to be recognized in Mel’s books. The individual trial balances on October 1 show the following: Mel Assets

P113,000

Garri P75,000

Liabilities

34,500

5,000

Capital

78,500

70,000

What is the capital balance of Mel and Garri assuming they agree to share capital equally?

a.

P65,000

b.

P72,500

c.

P74,250

d.

P80,000

[12]. Chona and Charo formed a partnership on May 31, 2011. Chona’s contribution consisted of her proprietorship’s net assets with current fair value of P60,000. Charo contributed enough cash to secure a one-fourth interest in the partnership. If Chona is allowed goodwill credit equal to 20% of her initial capital, Charo’s cash contribution was:

a.

P15,000

b.

P20,000

c. P25,000 d.

P30,000

[13]. Flores, Peralta, and Jose are forming a new partnership. Flores will invest cash of P120,000 and his office equipment costing P144,000 but has a market value of P60,000. Peralta is to invest cash of P192,000 and Jose is to contribute P60,000 cash and a brand new delivery truck with a market value of P144,000 although he bought it for only P120,000. The partners will share profits and losses in the ratio of 25:25:50 for Flores, Peralta and Jose, respectively.

The capital balances of the partners upon formation are: Flores

Peralta

Jose

a.

P264,000

P192,000 P180,000

b.

P180,000

P192,000 P204,000

c.

P192,000

P192,000 P192,000

d.

P212,000

P212,000 P211,200

[14]. DJ and EJ, on May 31, 2011, pooled their net assets to form a partnership, with the new firm taking over the business assets and assuming their liabilities. The partner’s capitals are to be based on net assets transferred after the following adjustments: allowance for doubtful accounts of P1,000 and P1,500 are to be set up on the books of DJ and EJ, respectively; EJ’s inventory is to be increased by P3,000; and, accounts payable of P4,000

is to be recorded on DJ’s books. The individual trial balances on this date show: DJ Assets

EJ

P105,000

P113,000

Liabilities

35,000

34,500

Capital

70,000

78,500

What is EJ’s adjusted capital balance?

a.

P77,000

b.

P80,000

c. P81,500 d. P85,500

[15]. When property other than cash is invested in a partnership, at what amount should the non-cash 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.

Assessed valuation for property tax purposes.

d.

Contributing partner’s tax basis.

[16]. Pula invites Puti to join his business as a partner. The capital account of Pula has a credit balance of P300,000. Puti will invest cash of P120,000 and he will be given a capital credit of 30% of the total capital after making the following adjustments in the books of Pula: (a) The accumulated depreciation of the equipment is to be increased by P7,500; (b) Prepaid expenses are to be reduced by P2,400.

The capital account of Pula and Puti immediately after the formation of the partnership are: a.

P300,000 and P120,000, respectively;

b.

P290,100 and P120,000, respectively;

c.

P287,070 and P123,030, respectively;

d.

P287,070 and P 40,000, respectively.

[17]. On March 1, 2011, Jhan and Feb formed a partnership with each contributing the following assets:

Jhan Feb Cash P30,000 P70,000 Machinery and Equipment 25,000 75,000 Building 225,000 Furniture and Fixtures 10,000 -

The building is subject to a mortgage loan of P90,000, which is to be assumed by the partnership. The partnership agreement provides that Jhan and Feb share profits and losses 30 percent and 70 percent, respectively.

Assuming that the partners agreed to bring their respective capital in proportion to their respective profit and loss ratio, and using Feb’s capital as the base, how much cash is to be invested by Jhan?

a. P19,000 b. P30,000 c. P40,000 d. P55,000

[18]. Bel, Joy, and Franco, new CPAs, are to form a partnership. Bel will contribute cash of P50,000 and his computer that originally cost P60,000 but with a second-hand value of P25,000. Joy will contribute P80,000 in cash. Franco, whose family sells computers, will contribute P25,000 in cash and a brand new computer with printer that cost his family’s computer dealership P50,000 but with a regular selling price of P60,000. The three agree to share profits and losses equally. Upon formation, capital balances are: a.

Bel, P 75,000; Joy, P80,000; and, Franco, P85,000

b.

Bel, P 80,000; Joy, P80,000; and, Franco, P80,000

c.

Bel, P 88,333; Joy, P88,333; and, Franco, P88,334

d.

Bel, P110,000; Joy, P80,000; and, Franco, P75,000

[19]. Mark admits Jimenez as a partner in the business. Balance sheet accounts of Mark just before the admission of Jimenez 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 Mark’s interest, the following adjustments be made: A.

An allowance for doubtful accounts of 3% of accounts receivable is to be established;

B.

Merchandise inventory is to be adjusted upward by P25,000; and

C. Prepaid expenses of P3,600 and accrued liabilities of P4,000 are to be recognized.

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

a. P176,000 b. P190,000 c. P 95,000 d. P113,980

[20]. The balance sheet as of July 31, 2011 for the business owned by Gloriants shows the following assets and liabilities:

Cash P 2,500 Accounts Receivable 10,000 Merchandise Inventory 15,000 Fixtures 18,000 Accounts Payable 6,000

It is estimated that 5% of the accounts receivables may prove uncollectible. Merchandise inventory includes obsolete items costing P5,000 of which P2,000 might still be realized. Depreciation has never been recorded for the fixtures which are already two years old. They have an estimated useful life of 10 years, and have a current fair value of P20,000. Cruzants is to be admitted as a partner upon his investment of P20,000 cash and P10,000 worth of merchandise. What is the total assets of the partnership?

a. 70,500

b. 48,000 c. 67,500 d. 74,000

Questions 21 and 22 are based on the following information:

Selected balance sheet accounts of Silvano on December 31, 2011 are shown below:

Cash

P30,000

Accounts receivable

25,000

Inventory

45,000

Furniture

32,000

Accounts payable

8,000

The following adjustments are to be made before he agree to admit Pegasus as a partner in exchange for his investment of P20,000 cash:

§ 3% bad debts should be provided. § The fair value of the furniture is P27,000. § P5,000 of the inventory is obsolete but can still be sold for P3,000.

[21].

After adjustment, how much capital should be reflected in the books of Silvano?

a.

P115,250

b.

P116,250

c. P124,000

d. P132,250

[22].

How much is the total assets of the new partnership?

a. P116,250 b. P124,000 c. P124,250 d. P144,250

[23]. On September 30, 2011, Pain admits Gain for an interest in his business. On this date, Pain’s capital account shows a balance of P158,400. The following were agreed upon before the formation of the partnership:

1.

Prepaid expenses of P17,500 and accrued expenses of P5,000 are to be recognized.

2. 5% of the outstanding accounts receivable of Lopez amounting to P100,000 is to be recognized as uncollectibles. 3. Gain is to be credited with a one-third equity in the partnership and is to invest cash aside from the P50,000 worth of merchandise.

The amount of cash to be invested by Gain and the total capital of the partnership are: a. 32,950 and 248,850, respectively. b. 55,300 and 221,200, respectively. c. 82,950 and 248,850, respectively. d. 32,950 and 171,200, respectively.

[24]. On May 1, 2011, July and June formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. July contributed a computer that cost him P50,000. June contributed P200,000 cash. The computer was sold for 55,000 on May 1, 2011 immediately after the formation of the partnership. What amount should be recorded in July’s capital account on formation of the partnership?

a.

P55,000

b.

P51,000

c.

P60,000

d.

P50,000

[25]. Yellow, Orange and Violet form a partnership on May 1, 2011. They agree that Yellow will contribute office equipment with a total fair value of P40,000; Orange will contribute delivery equipment with a fair value of P80,000; and Violet will contribute cash. If Violet wants a one-third interest in the capital and profits, how much should she invest?

a. P 40,000 b. P 60,000 c. P120,000 d. P180,000

[26]. Wilder and Nest will pool their net assets and form a partnership, which will take over the assets and assume the liabilities. The agreed capital of the new partnership is the total net assets to be transferred subject to the following adjustments:

§ Wilder’s inventory is to be increased by P3,000.

§ Accounts receivable of P1,000 and P1,500 for Wilder and Nest respectively, will be written off. § Accrued expenses of P4,000 are to be recognized in Wilder’s books.

The unadjusted capital of Wilder is P78,500 and Nest is P70,000.

What is the capital balance of each partner assuming they agree to be equal partners?

a. P65,000 b. P72,500 c.

P74,250

d.

P80,000

[27]. On October 1, 2011, Clara and Maria joined in a partnership. Clara contributed cash while Maria contributed merchandise worth P25,000 and a second– hand delivery truck currently valued at P50,000 but encumbered by a one-year chattel mortgage note for P15,000. If initial capital balances are to conform to the profit-sharing ratio of 2:3, respectively, the amount of cash contributed by Clara was:

a. P24,000 b. P30,000 c. P40,000 d. P50,000 Questions 28 and 29 are based on the following information about Aga-Mata Partnership:

Aga and Mata are planning to form a partnership. Aga will invest P20,000 for a 20% interest in the new partnership. Mata will invest cash and his equipment with a market value of

P50,000. They will share profits and losses equally.

[28].

How much cash should Mata invest?

a. P30,000 b. P50,000 c. P60,000 d. P80,000

[29].

How much is the total cash investment of the partners?

a. P30,000 b. P50,000 c. P60,000 d. P80,000

[30]. Al and Macmod decide to form a partnership. The initial investments of the partners will include cash of P120,000 for Al and P80,000 for Macmod. Al will transfer his office equipment with a book value of P96,000 and a fair market value of P84,000 to the partnership. Macmod will transfer his land fairly valued at P1,000,000 and the building thereon fairly valued at P600,000. Macmod has just bought these at a lump sum price of P1,800,000. In addition, the partnership will assume the mortgage of P400,000 on the building.

What will be the total capital of the partnership?

a. P1,484,000 b. P1,496,000 c. P1,684,000 d. P1,946,000

Partnership Operation

[31]. Mr. Zoom and his very close friend, Mr. Boom, formed a partnership on January 1, 2011, with Zoom contributing P16,000 cash and Boom contributing equipment, with a book value of P6,400 and fair value of P4,800, and inventory items, with a book value of P2,400 and fair value of P3,200. During 2011, Boom made additional investments of P1,600 on April 1 and P1,600 on June 1, and withdrew P4,000 on September 1. Zoom had no additional investments or withdrawals during the year. What was the average capital balance of Mr. Boom during 2011? a.

P9,600

b.

P8,800

c.

P8,000

d.

P7,200

[32]. Dulce Martin, a partner in a partnership that carries the name of The Sweet Shop, has a 30% participation in partnership profits. Her capital account has a net decrease of P48,000 during 2011. In the same ...