Practice Sets 3 & 4: Accounting For Partnership
Practice Sets 3 & 4: Accounting For Partnership
Practice Sets 3 & 4: Accounting For Partnership
General Instructions:
Students can opt to answer this practice set using MS Excel; make sure to properly
number and show solutions. Once done, submit through elearn or email.
Those who opt not to use MS Excel, answer this practice sheet in a clean sheet of
paper; make sure your handwriting and answers are comprehensible. Once done, follow
my instructions re- CAMSCANNER.
DEADLINE: 5PM, FRIDAY.
C: PARTNERSHIP DISSOLUTION
2. A, B, and C are partners with present capital balances of P40,000, P50,000, and
P20,000, respectively. The partners share profits and losses according to the following
percentages: 60% for A, 30% for B, and 10% for C. D is to join the partnership upon
contributing P40,000 to the partnership in exchange for a 25% interest in capital and a
20% interest in profits and losses. An appraisal of the existing partnerships' assets
reveals the following:
Calculate the capital balances for each individual in the new partnership assuming use of
the bonus method.
3. On March 1, 2016, A and B invested in its first year of operations the following cash:
A, P480,000 and B, P240,000.
In 2016, the partnership suffered a net loss of P36,000. But in 2017 they earned a net
profit of P132,000. The partners withdrew the maximum amount from the partnership each
year. On January 1, 2018, a new partner, C was admitted in the partnership for an
investment of P400,000 for a 40% interest. No revaluation of assets is to be recorded.
After the admission of C, the partners agreed to divide profits and losses, 4:2:4, to A, B
and C respectively.
In 2017, the partnership earned a profit of P300,000 evenly throughout the year.
5. A, B and C were partners with capital balances on January 1, 2016 of P300,000, P200,000
and P100,000, respectively. On July 1, 2016, A retires from the partnership. On the date
of retirement, the partnership net loss is P60,000 and the partners agreed that certain
asset is to be revalued at P80,000 from its original cost of P50,000. The partners agreed
further to pay A P225,000 in settlement of his interest. The remaining partners continue
to operate under a new partnership.
What is the total capital of the new partnership, after the retirement of A?
BONUS PROBLEM
Cesar and Damon share partnership profits and losses at 60% and 40%, respectively. The
partners agree to admit Egan into the partnership for a 50% interest in capital and
earnings. Capital accounts immediately before the admission of Egan are:
Required:
1. Prepare the journal entry(s) for the admission of Egan to the partnership assuming
Egan invested P400,000 for the ownership interest. Egan paid the money directly to
Cesar and to Damon for 50% of each of their respective capital interests. The
partnership records goodwill.
2. Prepare the journal entry(s) for the admission of Egan to the partnership assuming
Egan invested P500,000 for the ownership interest. Egan paid the money to the
partnership for a 50% interest in capital and earnings. The partnership records
goodwill.
3. Prepare the journal entry(s) for the admission of Egan to the partnership assuming
Egan invested P700,000 for the ownership interest. Egan paid the money to the
partnership for a 50% interest in capital and earnings. The partnership records
goodwill.
D: PARTNERSHIP LIQUIDATION
1. The A, B and C partnership has total assets of P260,000. Capital balances for partners
A, B, and C are P59,000, P30,000 and P50,000, respectively. The profit/loss percentages
for partners A, B, and C are 30%, 40%, and 30%, respectively. Included in the liabilities
is a P9,000 loan payable to A.
The partnership has elected to liquidate over the next several months. Liquidation
expenses are estimated to be P15,000.
Assuming assets with a book value of P80,000 were sold for P60,000 and that P160,000 cash
is available, how should the available cash be distributed?
2. The ABC Partnership has not been successful. The partners have determined they must
liquidate their partnership. The partners have agreed to liquidate the partnership and
anticipate that liquidation expenses will total P1,000. Prior to the liquidation, the
partnership balance sheet reflects the following book values:
Cash P18,000
Noncash assets 51,000
Note receivable – A 3,000
Other liabilities 20,000
Capital, A 6,000
Capital, B 30,000
Capital, C 16,000
Profits and losses are shared 45% to A, 35% to B and 20% to C. A review of the individual
partner’s personal net worth reveals the following:
Assets Liabilities
A P165,000 P162,000
B 200,000 110,000
C 185,000 90,000
Prepare a liquidation schedule and determine how the available assets will be distributed
using a schedule of safe payments.
3. On June 30, 2021, the A, B and C partnership had the following fiscal year- end balance
sheet (in Philippine peso):
The percentages shown are the residual profit and loss sharing ratios. The partners
terminated the partnership on July I, 2021 and began the liquidation process.
Questions:
A. The book value of the partnership equity (i.e., total equity of the partners) on
June 30, 2021 is
B. The cash available for distribution to the partners on July 31, 2021 is
C. How much cash would B receive from the cash that is available for distribution on
July 31?
4. The year- end balance sheet and residual profit and loss sharing percentages for the
ABC Partnership on December 31, 2016, are as follows:
The partners agree to liquidate the business and distribute cash when it becomes
available. A cash distribution plan for the ABC Partnership will show that cash available,
after outside creditors are paid, will initially go to?
5. A, B, C and D are partners who share profits and losses 30%, 20%, 35% and 15%,
respectively. The partnership will be liquidated gradually over several months beginning
January 1, 2018. The partnership trial balance as of December 31, 2017 is as follows:
Debits Credits
Cash P 3,000
Accounts receivable 10,000
Inventory 25,000
Loan to B 4,000
Furniture 15,000
Equipment 18,000
Goodwill 10,000
Accounts payable P12,000
Note payable 30,000
Loan from C 6,000
A, capital (30%) 12,000
B, capital (20%) 9,000
C, capital (35%) 12,000
D, capital (15%) 4,000
Prepare a cash distribution plan for January 1, 2018, showing how cash installments will
be distributed among the partners as it becomes available.