1.

On February 14, 2015, Matt and Jeff agreed to invest equal amounts and share profits equally to
form partnership. Matt invested P780,000 and a piece of equipment. Jeff invested some assets
which are shown below:
Accounts Receivable P100,000 Machineries, net P560,000
Inventory 280,000 Intangibles, net 230,000
The assets invested by Jeff are not properly valued. P8,000 of the accounts receivable are proven
uncollectable. Inventories are to be written down to P260,000. Included in the machineries is an
obsolete apparatus acquired for P96,000 with an accumulated depreciation balance of P84,000.
Part of the intangibles is patent with a carrying amount of P14,000 which was sued upon by a
competitor. Jeff unsuccessfully defended the case and the final judgment of the court was
released on February 12, 2015.

What is the fair value of the equipment invested by Matt?

Answer: 336,000
2. As July 1, 2014, Jack and Jill decided to form a partnership. Their balance sheets on date are:
Jack Jill
Investments P24,000 P60,0000
Accounts Receivable 864,000 360,000
Merchandise Inventory - 324,000
Machinery and Equipment 240,000 432,000

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Total P1,128,000 P1,176,000

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Accounts Payable eH w P216,000 P384,000
Jack, Capital 912,000 -
Jill, Capital - 792,000

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Total P1,128,000 P1,176,000
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The parties agreed that the machinery and equipment of Jack is overdepreciated by P88,000 and
that of Jill is underdepreciated by P72,000. Allowance for doubtful accounts is to be set up
amounting to P70,000 for Jill. The inventory of Jill is to have a value of P174,000.
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The partnership agreement provides for a profit and loss ratio and capital investment of 60% to
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Jack and 40%to Jill after additional equal investments of cash by each partner.
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How much additional cash must Jack invest to bring the partners’ capital balances proportionate
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to their profit and loss ratio?

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3. How much is the total assets of the partnership after the formation?
4. Aiden, Amelia and Madison formed a partnership on April 30, with the following assets,
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measured at their fair market values, contributed by each partner:

Aiden Amelia Madison
Cash P100,000 P120,000 P300,000
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Auto mobile 85,000

Computer and printer 280,000
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Office furniture 51,000

Land and building 1,500,000 35,000 25,000
Total P1,685,000 P486,000 P325,000
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Although Madison has contributed the most cash to the partnership, he did not have the full
amount of P300,000 available and was forced to borrow P200,000. The land and building
contributed by Aiden has a mortgage of P900,000 and the partnership is to assume responsibility
of the loan. If the profit and loss sharing agreement is 40%, 40%, and 20%, respectively, for
Aiden, Amelia and Madison, what is the total capital investment of all partners at the opening of
the business on April 30?
5. C, P, and A are new CPA’s and are to form an accounting partnership. C is to contribute cash of
P75,000 and his computer originally bought at P80,000 but has a second hand value of P50,000.
P is to contribute cash of P100,000, and tables and chairs worth P20,000 but acquired by P for
only P18,000. A, whose family is selling computers, is to contribute cash of P40,000 and brand
new computer plus printer with regular price at P80,000 but which cost their family’s computer
dealership P70,000. Partners agree to share profits 3:2:3. The capital balances of C, P, and A,
respectively, upon formation are:

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 6. Darwin and Sanders are joining their separate businesses to form a partnership. Property and
cash are to be contributed for the total capital of P400,000. The property and be contributed and
liabilities to be assumed are:
Darwin Sanders
Book Value Fair Value Book Value Fair Value
Accounts receivable 30,000 P30,000
Inventories 30,000 45,000 80,000 90,000
Equipment 50,000 40,000 90,000 95,000
Accounts payable 15,000 15,000 10,000 10,000
The partners’ capital accounts are to be equal after all contributions and assumptions of
liabilities. Profit and loss ratio is 45% Darwin and 55% Sanders.
The amount of cash Darwin and Sanders must contribute:
7. Effective August 1, 2016, Alex and Bob agreed to form a partnership from their two respective
proprietorships. The balance sheets presented below reflect the financial position of both
proprietorships as of July 31, 2016:
Alex Bob
Cash P12,000 P30,000
Accounts receivable 72,000 42,000
Merchandise inventory 198,000 252,000
Prepaid rent 24,000

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Store equipment 240,000 180,000

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Accumulated depreciation (90,000) (108,000)

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Building eH w 750,000
Accumulated depreciation (150,000)

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Land 360,000 _________
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Totals P1,392,000 P420,000
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Accounts payable P45,000 18,000

Mortgage payable 360,000
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Alex, capital 987,000

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Bob, capital _______ 402,000

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Totals P1,392,000 P420,000

As of August 1, 2016, the fair value of Alex’s assets were: merchandise inventory, P162,000; store
equipment, P90,000; building, P1,500,000; and land, P600,000. For Bob, the fair value of the
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assets on the same date were: merchandise inventory, P270,000; store equipment, P39,000;
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prepaid rent, P0. All other items on the two balance sheets were stated at their fair values. How
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much capital must be credited to Alex upon formation of the partnership?

8. Roy admits Al as a partner in the business. Balance sheet accounts of Roy on September 30, just
before admission of Al show:
Cash P15,600
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Accounts receivable 72,000

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Merchandise inventory 108,000

Accounts payable 37,000
Roy, capital 158,000
It is agreed that for the purposes of establishing Roy’s interest, the following adjustments shall
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be made:
a. An allowance for doubtful accounts of 2% is to be established.
b. Merchandise inventory is to be valued at P121,200
c. Prepaid expenses of P2,100 and accrued expenses of P2,400 are to be recognized.
Al is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Al’s
investment to the partnership?

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