Partnership Formation and Operation PDF

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PRELIM QUIZ #1 (PARTNERSHIP FORMATION AND OPERATION)EASY PROBLEMSPROBLEM 1Dayag, Guerrero, and Ferrer are forming a partnership. Dayag contributes cash of P100,000; Guerrero contributes equipment with a carrying value of P100,000 and original cost of P150,000; and Ferrer contributes a building with ...

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PRELIM QUIZ #1 (PARTNERSHIP FORMATION AND OPERATION) EASY PROBLEMS PROBLEM 1 Dayag, Guerrero, and Ferrer are forming a partnership. Dayag contributes cash of P100,000; Guerrero contributes equipment with a carrying value of P100,000 and original cost of P150,000; and Ferrer contributes a building with a market value of P300,000 and carrying value of P250,000. The partnership also assumed the P210,000 mortgage on the building. The partners agreed that Dayag, Guerrero, and Ferrer will have a profit and loss ratio of 1:8:9 and capital interest of 20:30:50, respectively, without any increase on the partnership assets. Questions: 1. How much is the capital of Dayag at the time of formation? Correct Answer: 58,000 2. What amount should be the capital of Guerrero at partnership formation? Correct Answer: 87,000 3. At the time of partnership formation, Ferrer capital should have a balance of? Correct Answer: 145,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 500,000 5. How much is the asset revaluation or goodwill? Correct Answer: Zero

PROBLEM 2 Dayag, Guerrero, and Ferrer are forming a partnership. Dayag contributes cash of P100,000; Guerrero contributes equipment with a carrying value of P100,000 and original cost of P150,000; and Ferrer contributes a building with a market value of P250,000 and carrying value of P300,000. The partnership also assumed the P210,000 mortgage on the building. The partners agreed that Dayag, Guerrero, and Ferrer will have a profit and loss ratio of 1:8:9 and capital interest of 20:30:50, respectively, without any increase on the partnership assets. Questions: 1. How much is the capital of Guerrero at the time of formation? Correct Answer: 72,000 2. What amount should be the capital of Ferrer at partnership formation? Correct Answer: 120,000 3. At the time of partnership formation, Dayag capital should have a balance of? Correct Answer: 48,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 450,000 5. How much is the asset revaluation or goodwill? Correct Answer: Zero

PROBLEM 3 Dayag, Guerrero, and Ferrer are forming a partnership. Dayag contributes cash of P150,000; Guerrero contributes equipment with a carrying value of P100,000 and original cost of P150,000; and Ferrer contributes a building with a market value of P300,000 and carrying value of P270,000. The partnership also assumed the P210,000 mortgage on the building. The partners agreed that Dayag, Guerrero, and Ferrer will have a profit and loss ratio of 1:8:9 and capital interest of 20:30:50, respectively, without any increase on the partnership assets. Questions: 1. How much is the capital of Ferrer at the time of formation? Correct Answer: 170,000 2. What amount should be the capital of Dayag at partnership formation? Correct Answer: 68,000 3. At the time of partnership formation, Guerrero capital should have a balance of? Correct Answer: 102,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 550,000 5. How much is the asset revaluation or goodwill? Correct Answer: Zero

PROBLEM 4 On September 30, 2019, Lopez admits Mendez for an interest in his business. On this date, Lopez’ capital account shows a balance of P158,400. The following were agreed upon before the formation of the partnership:  Prepaid expenses of P17,500 and accrued expenses of P5,000 are to be recognized.  5% of the outstanding accounts receivable of Lopez amounting to P100,000 is to be recognized as uncollectibles.  Mendez is to be credited with one-third interest in the partnership and is to invest cash aside from the P50,000 worth of merchandise. Questions 1. Adjusted capital of Lopez Correct Answer: 165,900 2. Net Adjustment in capital of Lopez Correct Answer: 7,500 3. The amount of cash to be invested by Mendez Correct Answer: 32,950 4. The total capital of the newly formed partnership Correct Answer: 248,850 5. Total Assets of the partnership immediately after its formation Correct Answer: 253,850

PROBLEM 5 CHRIS, KRIS, and CRISH are partners in a local partnership. The profit and loss sharing agreement includes an interest allocation of 7 percent on the invested capital. The capital account of CHRIS reveals that he had a beginning capital account balance of P50,000. He withdrew P10,000 on May 1 and invested P25,000 on October 31. On the other hand, KRIS had a beginning capital of P60,000 and withdraw supplies worth P15,000 on June 1 while CRISH had P30,000 capital balance on January and increase its capital on August 1 by investing P30,000 cash. The partners agreed that all drawings are considered permanent. Questions: 1. What is the weighted average capital balance of CHRIS? Correct Answer: 47,500 2. What is the weighted average capital balance of KRIS? Correct Answer: 51,250 3. What is the interest allocation for CRISH? Correct Answer: 2,975 4. What is the interest allocation for CHRIS? Correct Answer: 3,325 5. What amount should be allocated in the profit or loss for the interest to be given to the partners? Correct Answer: 9,888

PROBLEM 6 CHRIS, KRIS, and CRISH are partners in a local partnership. The profit and loss sharing agreement includes an interest allocation of 7 percent on the invested capital. The capital account of CHRIS reveals that he had a beginning capital account balance of P40,000. He withdrew P10,000 on May 1 and invested P25,000 on October 31. On the other hand, KRIS had a beginning capital of P60,000 and withdraw supplies worth P30,000 on June 1 while CRISH had P30,000 capital balance on January and increase its capital on August 1 by investing P45,000 cash. The partners agreed that all drawings are considered permanent. Questions: 1. What is the weighted average capital balance of CHRIS? Correct Answer: 37,500 2. What is the weighted average capital balance of KRIS? Correct Answer: 42,500 3. What is the interest allocation for CRISH? Correct Answer: 3,413 4. What is the interest allocation for CHRIS? Correct Answer: 2,625 5. What amount should be allocated in the profit or loss for the interest to be given to the partners? Correct Answer: 9,013

PROBLEM 7 CHRIS, KRIS, and CRISH are partners in a local partnership. The profit and loss sharing agreement includes an interest allocation of 7 percent on the invested capital. The capital account of CHRIS reveals that he had a beginning capital account balance of P60,000. He withdrew P20,000 on May 1 and invested P35,000 on October 31. On the other hand, KRIS had a beginning capital of P70,000 and withdraw supplies worth P45,000 on June 1 while CRISH had P30,000 capital balance on January and increase its capital on August 1 by investing P15,000 cash. The partners agreed that all drawings are considered permanent. Questions: 1. What is the weighted average capital balance of CHRIS? Correct Answer: 52,500 2. What is the weighted average capital balance of KRIS? Correct Answer: 42,750 3. What is the interest allocation for CRISH? Correct Answer: 2,538 4. What is the interest allocation for CHRIS? Correct Answer: 3,675 5. What amount should be allocated in the profit or loss for the interest to be given to the partners? Correct Answer: 9,275

PROBLEM 8 Peanut and Butter are partners operating a grocery. Their partnership agreement requires that profits and losses be divided as follows: Peanut Butter Salaries P20,000 None Commission on Gross Sales None 2percent Interest on Average Capital Balances 8percent 8percent Bonus 20% of net income before None Commission and interest But after salaries and bonus Remainder 60% 40% Sales, net of 2% discount, were P1,225,000. Income before deducting amounts for salary, commission, interest and bonus were P200,000. Average capital balances of Peanut and Butter were P400,000 and P420,000, respectively. Questions: 1. The amount of bonus to Peanut. Correct Answer: 30,000 2. Total Interest provided to partners. Correct Answer: 65,600

3. Share of Peanut on Net Income. Correct Answer: 117,640 4. Share of Butter on Net Income. Correct Answer: 82,360 5. Amount of bonus assuming it is based on Net Income after Bonus, Interest and Salaries. (Round your answer to the nearest peso) Correct Answer: 19,067

PROBLEM 9 PEACE, HOPE, and LOVE are forming a partnership. The book value of their separate assets are P50,000, P89,000, and P150,000 while the appraised value of assets contributed are P72,000, P96,000, and P120,000, respectively. In addition, PEACE and LOVE agree that HOPE’s experience is worth P36,000 and should be accounted as goodwill. The partnership also assume the mortgage amounting to P15,000 on the building invested by LOVE. After the formation, the partners desire to have a profit or loss ratio of 5:2:3. Questions: 1. How much is the capital of PEACE at the time of formation? Correct Answer: 72,000 2. What amount should be the capital of HOPE at partnership formation? Correct Answer: 132,000 3. At the time of partnership formation, LOVE capital should have a balance of? Correct Answer: 105,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 324,000 5. How much is the bonus given to HOPE? Correct Answer: Zero

PROBLEM 10 PEACE, HOPE, and LOVE are forming a partnership. The book value of their separate assets are P60,000, P89,000, and P160,000 while the appraised value of assets contributed are P72,000, P96,000, and P140,000, respectively. In addition, PEACE and LOVE agree that HOPE’s experience is worth P46,000 and should be accounted as goodwill. The partnership also assume the mortgage amounting to P15,000 on the building invested by LOVE. After the formation, the partners desire to have a profit or loss ratio of 5:2:3. Questions: 1. How much is the capital of LOVE at the time of formation? Correct Answer: 125,000 2. What amount should be the capital of PEACE at partnership formation? Correct Answer: 72,000 3. At the time of partnership formation, HOPE capital should have a balance of?

Correct Answer: 142,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 354,000 5. How much is the bonus given to HOPE? Correct Answer: 0

PROBLEM 11 PEACE, HOPE, and LOVE are forming a partnership. The book value of their separate assets are P50,000, P99,000, and P160,000 while the appraised value of assets contributed are P82,000, P96,000, and P130,000, respectively. In addition, PEACE and LOVE agree that HOPE’s experience is worth P36,000 and should be accounted as goodwill. The partnership also assume the mortgage amounting to P15,000 on the building invested by LOVE. After the formation, the partners desire to have a profit or loss ratio of 5:2:3. Questions: 1. How much is the capital of PEACE at the time of formation? Correct Answer: 82,000 2. What amount should be the capital of HOPE at partnership formation? Correct Answer: 132,000 3. At the time of partnership formation, LOVE capital should have a balance of? Correct Answer: 115,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 344,000 5. How much is the bonus given to HOPE? Correct Answer: Zero

PROBLEM 12 Norman, Sarah, and Taylor are partners. The ending balance of their capital for 2019 are P500,000, P550,000, and P430,000, respectively. The partnership income for the period is P140,000. The partnership agreement assigns salaries to the partners of P10,000, P15,000, and P18,000, respectively. Interest of 8% on capital balances should also be allocated for the partners. In addition, the partners have profit and loss residual ratios of 30%, 45%, and 25%. Questions: 1. What portion of the profit should be allocated to Sarah? Correct Answer: 49,370 2. What portion of the profit should be allocated to Taylor? Correct Answer: 47,050 3. What portion of the profit should be allocated to the interest? Correct Answer: 118,400 4. How much interest allocation should have been given to Norman? Correct Answer: 40,000

5. How much is the allocation given to Sarah on the net income after deducting salaries and interest? Correct Answer: (9,630)

PROBLEM 13 Norman, Sarah, and Taylor are partners. The ending balance of their capital for 2019 are P550,000, P500,000, and P480,000, respectively. The partnership income for the period is P140,000. The partnership agreement assigns salaries to the partners of P10,000, P15,000, and P18,000, respectively. Interest of 8% on capital balances should also be allocated for the partners. In addition, the partners have profit and loss residual ratios of 30%, 45%, and 25%. Questions: 1. What portion of the profit should be allocated to Sarah? Correct Answer: 43,570 2. What portion of the profit should be allocated to Taylor? Correct Answer: 50,050 3. What portion of the profit should be allocated to the interest? Correct Answer: 122,400 4. How much interest allocation should have been given to Norman? Correct Answer: 44,000 5. How much is the allocation given to Sarah on the net income after deducting salaries and interest? Correct Answer: (11,430)

PROBLEM 14 Norman, Sarah, and Taylor are partners. The ending balance of their capital for 2019 are P430,000, P560,000, and P450,000, respectively. The partnership income for the period is P140,000. The partnership agreement assigns salaries to the partners of P10,000, P15,000, and P18,000, respectively. Interest of 8% on capital balances should also be allocated for the partners. In addition, the partners have profit and loss residual ratios of 30%, 45%, and 25%. Questions: 1. What portion of the profit should be allocated to Sarah? Correct Answer: 51,610 2. What portion of the profit should be allocated to Taylor? Correct Answer: 49,450 3. What portion of the profit should be allocated to the interest? Correct Answer: 115,200 4. How much interest allocation should have been given to Norman? Correct Answer: 34,400 5. How much is the allocation given to Sarah on the net income after deducting salaries and interest? Correct Answer: (8,190)

PROBLEM 15 JO, WA and PAO formed a partnership on April 1 and showed the book value of the following assets: JO WA PAO Cash . . . . . . . . . . . . . . . . . . . . . . . . Land . . . . . . . . . . . . . . . . . . . . . . . . Building…………………………..

P 150,000

P 50,000 310,000 160,000

The land was subject to a P30,000 mortgage, which the partnership assumed. The building has an original cost of 200,000 and a current market value of P140,000. Under the partnership agreement, the partners will share both capital ratio and profit and loss in the ratio of 1:3:1 without any increase on the partnership assets. Questions: 1. How much is the capital of JO at the time of formation? Correct Answer: 124,000 2. What amount should be the capital of WA at partnership formation? Correct Answer: 372,000 3. At the time of partnership formation, PAO capital should have a balance of? Correct Answer: 124,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 650,000 5. How much is the asset revaluation or goodwill? Correct Answer: Zero

PROBLEM 16 JO, WA and PAO formed a partnership on April 1 and showed the book value of the following assets: JO WA PAO Cash . . . . . . . . . . . . . . . . . . . . . . . . Land . . . . . . . . . . . . . . . . . . . . . . . . Building…………………………..

P 150,000

P 50,000 210,000 160,000

The land was subject to a P30,000 mortgage, which the partnership assumed. The building has an original cost of 200,000 and a current market value of P170,000. Under the partnership agreement, the partners will share both capital ratio and profit and loss in the ratio of 1:3:1 without any increase on the partnership assets. Questions: 1. How much is the capital of WA at the time of formation? Correct Answer: 312,000 2. What amount should be the capital of JO at partnership formation? Correct Answer: 104,000

3. At the time of partnership formation, PAO capital should have a balance of? Correct Answer: 104,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 550,000 5. How much is the asset revaluation or goodwill? Correct Answer: Zero

PROBLEM 17 JO, WA and PAO formed a partnership on April 1 and showed the book value of the following assets: JO WA PAO Cash . . . . . . . . . . . . . . . . . . . . . . . . Land . . . . . . . . . . . . . . . . . . . . . . . . Building…………………………..

P 150,000

P 50,000 210,000 160,000

P 50,000

The land was subject to a P30,000 mortgage, which the partnership assumed. The building has an original cost of 200,000 and a current market value of P140,000. Under the partnership agreement, the partners will share both capital ratio and profit and loss in the ratio of 1:3:1 without any increase on the partnership assets. Questions: 1. How much is the capital of PAO at the time of formation? Correct Answer: 120,000 2. What amount should be the capital of JO at partnership formation? Correct Answer: 120,000 3. At the time of partnership formation, WA capital should have a balance of? Correct Answer: 360,000 4. How much is the total asset of the company at the beginning of the partnership? Correct Answer: 630,000 5. How much is the asset revaluation or goodwill? Correct Answer: 0

PROBLEM 18 Nick, Joe, and Mike are partners in Events Partnership. The company has earned a net income of P130,000 during the current period. The partners also agreed on the profit and loss allocation provided below. Nick Joe Mike Interest 9% 8% 9% Salary 25,000 15,000 35,000 Bonus 10% Residual profit/loss ratios .25 .45 .30

The partners would receive interest based from the weighted average capital of P200,000, P350,000, and P180,000 for Nick, Joe, and Mike, respectively while the bonus is computed on the net income in excess of interest and P30,000. Questions: 1. How much is the profit to be allocated to Nick? Correct Answer: 40,255 2. How much is the profit to be allocated to Joe? Correct Answer: 38,059 3. How much is the bonus of Mike? Correct Answer: 3,780 4. What amount is the total interest that was allocated in the profit and loss? Correct Answer: 62,200 5. How much is the allocation given to Mike on the net income after deducting salaries, interest, and bonus? Correct Answer: (3,294)

PROBLEM 19 Nick, Joe, and Mike are partners in Events Partnership. The company has earned a net income of P130,000 during the current period. The partners also agreed on the profit and loss allocation provided below. Nick Joe Mike Interest 9% 8% 9% Salary 25,000 15,000 35,000 Bonus 10% Residual profit/loss ratios .25 .45 .30 The partners would receive interest based from the weighted average capital of P350,000, P180,000, and P200,000 for Nick, Joe, and Mike, respectively while the bonus is computed on the net income in excess of Interest and P30,000. Questions: 1. How much is the profit to be allocated to Nick? Correct Answer: 53,373 2. How much is the profit to be allocated to Joe? Correct Answer: 23,771 3. How much is the bonus of Mike? Correct Answer: 3,610 4. What amount is the total interest that was allocated in the profit and loss? Correct Answer: 63,900 5. How much is the allocation given to Mike on the net income after deducting salaries, interest, and bonus?

Correct Answer: (3,753)

PROBLEM 20 Nick, Joe, and Mike are partners in Events Partnership. The company has earned a net income of P130,000 during the current period. The partners also agreed on the profit and loss allocation provided below. Nick Joe Mike Interest 9% 8% 9% Salary 25,000 15,000 35,000 Bonus 10% Residual profit/loss ratios .25 .45 .30 The partners would receive interest based from the weighted average capital of P300,000, P450,000, and P280,000 for Nick, Joe, and Mike, respectively while the bonus is computed on the net income in excess of Interest and P30,000. Questions: 1. How much is the profit to be allocated to Nick? Correct Answer: 43,405 2. How much is the profit to be allocated to Joe? Co...