Pamantasan ng Cabuyao

Katapatan Subd., Brgy. Banay Banay, City of Cabuyao, Laguna

MIDTERM EXAM
Name: _________________________________ Score:___________
Partnership Accounting Mr. D.R. Magalang
Solve the following problems and encircle the correct answer. Show all necessary computations.

1. Partner Z first contributed P50,000 of capital into an existing partnership on March 1, 2019. On June 1,
2019, the partner contributed another P20,000. On September 1, 2019, the partner withdrew P15,000
from the partnership. Withdrawal in excess of P10,000 are charged to capital account. The annual
weighted average capital balance is

2. AA and CC are partners who shares profits and losses in the ratio of 60:40, respectively. AA’s salary is
P60,000 and P30,000 for CC. The partners are also paid interest on their average capital balances. In
2014, AA received P30,000 interest and CC received P12,000. The profit and loss allocation is
determined after deductions for salary and interest payments. If CC’s share in the residual income
(income after deducting salaries and interest) was P60,000 in 2019, what was the total partnership net
income?

3. XX and YY are partners with capital balances of P600,000 and P200,000, respectively. Profits and
losses are divided in the ratio of 60:40. XX and YY decided to for partnership with ZZ, who invested
land valued at P150,000 for a 20% capital interest in the partnership. ZZ’s cost of the land was
P120,000. The partnership elected to use the bonus method to record the admission of ZZ in the
partnership. ZZ’s capital account should be credited for:

4. A, B and C are partners with average capital balances during 2019 of P360,000, P180,000 and p120,000
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of
P90,000 to A and P60,000 to C, the residual profit or loss is divided equally. In 2019, the partnership
sustained a P99,000 loss before interest and salaries to partners, by what amount should A’s capital
change?

5. On December 31, 2019, Tina and Webb, who share profits and losses equally, have capital balances of
P170,000 and P200,000 respectively. They agree to admit Zen for one-third interest in capital and
profits for his investment of P200,000. Partnership assets are fairly valued and so its liabilities.
Immediately after the admission of Zen, what is the capital balance of Tina, Webb and Zen,
respectively?

6. Bock, an active partner in Beck and Bock partnership receives and annual bonus of 25% of partnership
net income after deducting the bonus. For the year ended December 31, 2019, partnership net income
before the amounted to P300,000. Bock’s 2019 bonus should be

7. Shirley purchased an interest in the Tony and Olga partnership by paying Tony P40,000 for half of his
capital and half of his 50% profit sharing interest. At that time, Tony’s capital balance was P30,000 and
Olga’s capital balance was P70,000. Shirley should receive a credit to her capital account of:

8. The December 31, 2019, balance sheet of Bennet, Carter and Davis partnership is summarized as
follows:
ASSETS LIABILITY&CAPITAL
Cash 100,000 Carter loan 100,000
Other assets, net 500,000 Bennet, capital 100,000
Carter, capital 200,000
Davis, capital 200,000
600,000 P600,000
The partners share profits and losses as follows: Bennet 20%; Carter 30%; and Davis, 50%. Carter 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, 2019. They further agreed that Carter will receive P244,000
cash for his partnership interest exclusive of his loan, which is to be paid in full. After Carter’s
retirement, the capital balances of Bennet and Davis, respectively, will be:

9. Partners Allen, Baker, and Coe share profits and losses 50:30:20, respectively. The balance sheet at
April 30, 2019, follows:

Cash 40,000 Accounts payable 100,000

Other assets 360,000 Allen, capital 74,000
Baker, capital 130,000
Coe, capital 96,000
400,000 P400,000
 The partners assets and liabilities are recorded and presented at their respective fair values. Jones is to
be admitted as a new partner with a 20% capital interest and 20% share of profits and losses in
exchange for a cash contribution. How much cash should Jones contribute?

10. Elton and John are partners who share profits and losses in the ratio of 7:3, respectively. On November
5, 2019, their respective accounts were P70,000 to Elton and P60,000 to Don. On that date, they agreed
to admit Candle as a partner with a one-third interest in the capital and profits and losses upon his
investment of P50,000. The new partnership will begin with a total capital of P180,000. Immediately
after Candle’s admission, what are the capital balances of partners Elton, John and Candle,
respectively?

11. Williams desires to purchase a one-fourth capital and profit and loss interest in the partnership of Eli,
George and Dick. The three partners agree to sell Williams one-fourth of their respective capital and
profit and loss interests in exchange for a total payment of P40,000. Immediately before the sale of their
interests to Williams, the capital balances of the partners were as follows:

Eli (60%) 80,000

George (30%) 40,000
Dick (10%) 20,000

All assets, except for a depreciable asset, and liabilities of the partnership are fairly valued. It was
agreed to adjust the book of the partnership with respect to the undervalued before the acquisition of
Williams of the interest in the partnership. Immediately after William’s acquisition, what should be the
capital balances of Eli, George and Dick respectively?

12. In a partnership liquidation, rank the following liabilities of a partnership in order of payments:
(1) P20,000 loan from B. Budoy who is a partner.
(2) P30,000 of profits from the last year of operation.
(3) P3,000 payable to a supplier.
(4) P100,000 in capital balances of the partners.

13. The following balance sheet is presented for the partnership of Lala, Lele and Lili, who share profits
and losses in the ratio of 5:3:2 repectively.

ASSETS LIABILITIES & EQUITIES

Cash 80,000 Liabilities 140,000
Other Assets 280,000 Lala, Capital 100,000
Lele, Capital 100,000
Lili, Capital 20,000

The partners agreed to liquidate the partnership after selling the other assets. If other assets are sold for
P160,000, how much should Lala receive upon liquidation?

Questions 14 through 18 are based on the following:

The following balance sheet is presented for the partnership of Bah, Beh, and Bih on December 31,
2019, immediately before the liquidation:
ASSETS LIABILITIES & EQUITIES
Cash 100,000 Liabilities 280,000
Noncash Assets 1,000,000 Bah, Capital 340,000
Beh, Capital 300,000
Bih, Capital 180,000

Partners Bah, Beh, and Bih share profits and losses in the ratio of 3:5:2, respectively. Due to
misunderstanding, the partners decided to liquidate the partnership. Noncash assets were converted into
cash on various dates and they agreed that cash should be immediately distributed to partners when
available.

Noncash assets were realized as follows:

Book Values Amount Realized
January, 2019 P300,000 P200,000
February, 2019 250,000 150,000
March, 2019 300,000 100,000
April, 2019 100,000 20,000

Furthermore, they agreed that any noncash assets not realized should be recognized as loss by the
partnership.

14. After the distribution of available cash on January, 2019, how much is the capital balance of Bah, Beh,
and Bih?
15. How much cash was received by the partners on February, 2019?

16. What is the capital balance of Beh after cash distribution in the month of February, 2019?

17. How much each partner received on March, 2019?

18. How much cash Bah received on April, 2019?

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