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Problem Exercises: Partnership Formation Part 1

The document contains several problems involving the formation of partnerships. The problems require calculating partner capital accounts and contributions based on the assets each partner contributes and the profit/loss sharing ratios agreed upon. The assets contributed include cash, equipment, inventory, land, buildings, and goodwill.

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Jon Sagabay
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68 views2 pages

Problem Exercises: Partnership Formation Part 1

The document contains several problems involving the formation of partnerships. The problems require calculating partner capital accounts and contributions based on the assets each partner contributes and the profit/loss sharing ratios agreed upon. The assets contributed include cash, equipment, inventory, land, buildings, and goodwill.

Uploaded by

Jon Sagabay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem Exercises: Partnership Formation Part 1

1. On May 1, 2013, Jose and Maria formed a partnership and agreed to share profits and losses in the ratio of 3:7,
respectively. Jose contributed a computer that cost him P50,000. Maria contributed P200,000 cash. The computer
was sold for P55,000 on May 1, 2013 immediately after the formation of the partnership. What amount should be
recorded in Jose’s capital account on formation of the partnership?

2. Red, White and Blue form a partnership on May 1, 2013. They agreed 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
of cash:

3. Mateo and Julio formed a partnership on April 1 and contributed the following assets:

Mateo Julio
Cash P300,000 P100,000
Land 300,000

The land was subject to a mortgage of P50,000, which was assumed by the partnership. Under the partnership
contract, Mateo and Julio will share profit and loss in the ratio of one-third and two-thirds respectively. Julio’s
capital account at April 1 should be:

4. Elsa and Perla form a new partnership. Elsa invests P300,000 in cash for her 60 percent interest in the capital and
profits of the business. Perla 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 market value of P90,000. The building is subject
to a P40,000 mortgage that the partnership will assume. What amount of cash should Perla contribute?

5. Reyes and Santos drafted a partnership agreement that lists the following assets contributed at the partnership
formation:

Contributed by
Reyes Santos
Cash P200,000 P300,000
Inventory - 150,000
Building - 400,000
Equipment 150,000

The building is subject to a mortgage of P100,000, which the partnership has assumed. The partnership agreement
also specifies the profits and losses are to be distributed evenly. What amounts should be recorded as capital for
Reyes and Santos at the formation of the partnership?

6. Maria and Nora entered into a partnership on March 1, 2013 by investing the following assets:
Maria Nora
Cash P30,000 P -
Merchandise inventory - 90,000
Computer Equipment 160,000
Furniture and Fixtures 200,000 -
The agreement between Maria and Nora provides that profits and losses are to be divided into 40% to Maria and
60% to Nora, and that the partnership is to assume a liability on the computer equipment of P60,000. The partners
further agree that Nora is to receive a capital credit equal to her profit and loss ratio. How much cash is to be
invested by Nora?

7. Roy, Sam and Tim decided to engage in real estate venture as a partnership. Roy invested P140,000 cash and Sam
provided an office and furnishings valued at P220,000. (There is a P60,000 note payable remaining on the
furnishings to be assumed by the partnership). Although Tim has no tangible assets to invest, both Roy and Sam
believe that Tim’s expert salesmanship provides an adequate investment. The partners agree to receive an equal
capital interest in the partnership. Using the bonus method, what is the capital balances of Tim?

8. The partnership of Perez and Reyes was formed on March 31, 2013. At that date, Perez invested P50,000 cash and
office equipment valued at P30,000. Reyes invested P70,000 cash, merchandise valued at P110,000, and furnitures
valued at P100,000, subject to a notes payable of P50,000 (which the partnership assumes). The partnership
provides that Perez and Reyes share profits and losses 25:75, respectively. The agreement further provides that
the partners should initially have an equal interest in the partnership capital. Under the goodwill and the bonus
method, what is the total capital of the partners after the formation?

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