Chapter J

24
t•ili•h
ilhr:rn111m ... , ,.ii44M
-- ■-- it-%Mi ..... • ,,,,
~
~- . d M 1· c.0 rmed a partners hip and agreed to share
20I3Jos ean ana11
1-1: On May l, ,. . f 3.7 respectively. Jose contn.bute d a computer
profits and.losses t11 t~e;,::~:cm~~ibuted P200,000 cash. The comput er was
that cost him PSO,OO
55
M 1 2013 immediately after the formation of the
sold for ~ ,oo o on a~t should be recorded in Jose's capital account on
partnership. W11at an1ou. ? ,,
fonnation ofthe partnership.
a; PSS,000
b. PSJ,500
c. P60,000
d. PS0,000

1-2: Red, White, and Blue form a partnership on May 1, 2013. They agree that Red
will contribute office equipment with a total fair value of P40,000 ; White will
contribute delivery equipment with a fair value ofP80,000; and Blue will contribute
cash. lfBlue want a one third interest in the capital and profits, he should contribute
the following of cash:
a P 40,000
b~ P 60,000
c. Pl20,000
d. Pl80,000

1-3: Mateo and Julio formed . art h' .

assets: a P ners 1P on Apnl 1 and contributed the following

Cash Mateo Julio

Land P300,000 PI00,000
300,000
Th e land was sub.
.
part h.1 Ject to a mortg f p
and fers. P- Under the part · ~ge O 50,000, which was assun1ed by the
1
at o~s in the ratio ofone-th ~ers 11p contr~ct, Mateo and Julio will share profit
Apnl 1 should be: ird at1ct two-tlurds respectively. Julio's capital account
'Y PJso, 000
h. P3oo,ooo
c. P4oo,ooo
d. P4so,o 00
Parr,i.erships: Basic Considerations and Organizations
25

1-4: pls,a and ~la fonn a new partnership. Elsa invesIS PJ00,000 in cas~ for her 60
percent interest in the capital and profits of the business. Perla contnbutes 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 ofP50,000 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?
a. P 40,000
b, P 80,000
c. PIJ0,000
d. PJS0,000

1-5: Anton and Bauzon formed a partnership and agreed to divide initial capital equally,
even though Anton contributed Pl 00,000 and Bauzon contributed P84,000 in
identifiable assets. Under the hon-us-method, to adjust the capital accounts,
Dauzon ,s intangible assets should be debited for:
a. P46,000
b. P16,000
f· P 8,000
d°I Zero

1-6: Reyes and Santos drafted a partnership agreement that lists the following assets
contributed at the partnership fom1ation:

Co11trib11ted by
Reyes Santos
Cash P200,000 P300,000
Invcntory 150.000
1
Building 400~000
Equipment 150,000

'The building is subject !o a mortgage of Pl 00,000, which the partnership has

assu~1e~. The partnership agreement also specifies the profits and losses are to
be dtstnbuted evenly. ~hat amounts should be recorded as capital for Reyes
and Santos at the formation of the partnership?
Reyes Sa11tos
a. .P350,000 P850,000
..b;- P350,000 P750,000
c. PSS0,000 P550,000
,I. P6(J0,00fJ 1'600,000
 Ot . '\ .' \ ~ -\ " BB ~\.tld l "{" t:- ., ~ i '\ ,·)urtn~rship by (on1bining th
, Ap nl
1-7~ · · 5tl......· t.) \ . · · , · ·
Ot11 C ( \ t . eir
,~~
, _ .\A ~o nt nh ut cd '
cash oi PSO,O 0. BB 0
set)i,rut~ bu~rn ~-· _,.,r t)Prt ~hw~ 1up~. ·
·
ho 0 on·gi.na1cost, an d
t
·\.. · 1 , ' t1ert, "
, • , •
00 0 ok \·a\Ul'. a P40.00
e<' 1lt n.,}\lt'-'' r n.. t \th ·1 p 5 t,.
, . . \ , •Th~ pa rtn~r~· \.u.p ~ Te nt t'·d rc~pons,· b \· \11 · y t"•or h O 35 000
p~O.f\\'{.' t~u r ' ,, nc .
u\. , " · t e1 , ,
_ C C •"· " t\t rib
-- ·
utcd equipment \¥ tth a P30,
m<'lrt~,,gc att"K--l\Cli tv'tht pl. t'lp
.
~t1\'. '-\ · 000
,k \'llt' e l v-"000 l'll'n!.\llt\ co "t .u,,d po:;~ 000 fnir value. The partn
. \ : .
hiLx · "' · . ~ .-~~ ,l. --- . ·t s ~u ership
. ,n'etn('nt s~ ltH~S t ,at pt ·-- •t ~ ,d losses arc to be sh ar ed
. ' •
.
,~ . . _._. .. ,. ,-,1n1·...,.1 .....,no \ s m . ._ equa \ly but 1s
ai.bulions . \Vh,ch partners ha
, ,\t ,,~\1:t re \!.tU u H1 \! '·-"'-"t'
'v" • •
...... ~ ,,\_ \.." "
·
s the largest Apn·130,
201 3. c~ir1ta\ h.1lanec·?

a.. AA
b. BB
-c., cc
d. A.U capital ac co ll1 tl ba
lances a,re eq ua l
\.-8: PP. R..~. and SS are new
CPA's and are to fom1 a partn
as b.{)f PS0.Ol).) and hi s ~n ership. PP is to contribute
1puter originally costing
h3.fld value of P25.000. RR is P60,000 bu t has a second
to contribute cash of P80,00
~-s -se]~r.g\.'0mrme~. 1s: to c-onn 0. SS , \\?hose family
ibute cash of P25 ,000 and a
\\ ltn a regular selling brand new computer
price of P60J)Q() but which
m~ l)rofits equally.The ca cost is PS0,000. Partners ag
pital balances upon ree
formation are:
pp
RR ss
J-1' P :'5,0 (JQ
PS0, 000 P85,000
b. Pl l0 ,000
P80,0-00 P 75,000
c. P 80 ,0,00
P80,000 P8 0, 00 0
d.. P 81 ,333
PBS,333
P88,334
l-9 : v~- ,., ,1 \,_·
~kJ.~mg ~ a-e.nte:red Ul
• >A G.J. .A. C::~u :" Or
· .
to a pa rtn ersh ip on l\1nrch \, 20 l 3 by inve .
s.u ng th l'

r
9(1 _0()()
\60.000
 27

TI1c 3~ e:.:ffi cn1between Maria and ~ora provides that profits and losses are to
he divided into 40~'o to J\faria and 60% to ;\Ora. and that the partnership is to
a~urnc a liabi".ny on 1l1c cornputer equipment of P60,000. The partners funher
agree that '\'.era is to receive a capital credit equal to her profit and Joss ratio,
Ho,, n1uch cash is to be invested by Nora?

a. P135,000
b. P/ 45,000
'f P l 55 .. 000
,i/.. P130,000

1-10: Roy. San~ and Tim dec ided to engage in a real estate venture as a partner ship.
Roy inYested P 140,000 cash and Sam provided an office and furnishings valued
at P220.0 00. (Tbere is a P60~000 note payable 1emainin g on the furnishings to
b e assume d by the partners hip). Although Tim has no tangible assets to invest,
both Roy and Sam believe that Tim's expert salesmanship provides an adequate
investn1ent The partners agree to receive an equal capital interest in the partnership.
l!sing tbe bonus metb~ what is the capita] balance of Tim?

IL p 50,000
b. . Zero
c.. P140,000
d, PI00,0 00
1-11: Lara and Mitra fonne-d a partnership on July 1, 2013 and invested the foJJowing
assets:

Lara Mitra
Cash P130,000 P200,000
Compme r Equipme nt 50,000

The computer equipm ent bas a note payable amount ing to PI 0,000, which was
assumed by the part11ership. The partners hip agre,ement provide s that Lara and
Jvfitra will have an equal capital credit Using the goodwill method~the amount of
goodv-1111 to be recorded upon formation of the partnership is:

a; PJI0,00 0
b. Pll0,00 0
c. PJ00,00 0
d. PJ30,00 0
28 Chapler J

1-12: The partnership of Perez and Reyes was formed

on March 31 , 2013. At that
date , Perez invested P50,000 cash and office equipm
ent valued at P30,000.
Reyes invested P70,000 cash, merchandise valued at
P110,000, and furnitures
valued at PI 00,000, subject to a notes payable of P50,000
(which the partnership
assumes). The partnership provides that Perez and Rey
es share profits and losses
25: 75, respectively. The agreement further provides that the
partners should ini~ally
have, an equal interest in the partnership capital. Un
der the goodwill and the
bonus method, what is the total capital of the partners
after the formation?
Bo,rus Method Goodwill Method
a, P310,000 P460,000
b. P360,000 PSJ0,000
c. P300,000
P410,000
d. P350,000
P400,000
l-13: Ruiz and Pena are combining their separate bus
ine sses to form a partnership .
Cash and noncash assets are to be contributed for a tota
l capital of P300,000.
The noncash assets to be contributed and the liabilities
to be assumed are:

Ru iz
Pe ii a
Book Fair
value Boo k Fair
Accounts Receivable valu e valu e valu e
Inventories P20,000 P20,000
Equipment 30,000
40,000 P20,000 P25,000
Accounts Payable 60,000
45,000 40,000 50,000
15,000
15,000 I 0,000 l 0,000
The Partner 's capital
· ace
and the assum tion f . 0~~ts. should be equal after all the
contribution of as_s~
P O
habihnes. How much cash is to be contributed by Ruiz ts
?
a. P1so,ooo
b. P 60,000
c. P210,ooo
d. P 85,0 00
Partnerships: Basic Con siderations and Organizations 29

1-14: On March 1, 2013, Cruz and Ferrer formed a partnership with each contributing
the following assets:

Ferrer
Cash P30,000 P70,000
Machinery and equipment 25,000 75,000
Building 225,000
Furniture and fixture s 10,000

The building is subject to a mortgage loan of P90,000, which is to be assumed

by the partnership. The partnership agree1nent provides that Cruz and Ferrer
share profits and losses 30 percent and 70 percent, respectively.
Assuming that.the partners agreed to bring their respective capital in proportion
to their respective profit and loss ratio, and using Ferrer's capital as the base,
how much cash is to be invested by Cruz? ,
a. Pl9,000
b. P30,000
c. P40,000
d,· P55,000

1-15: The statement of financial position as of July 31, 2013 for the business owned by
C. Borja shows the following assets and liabilities: ·

Cash P2,500
Accounts Receivable 10,000
Merchandise Inventory 15,000 '
Fixtures 18,000 r
Accounts Payable · 6,000

It is estimated that 5% of the receivables may prove uncollectible. Merchandise

inventory includes obsolete items costing P5,000 of which P2,000 might still be
realized. Depreciation has never been recorded: the fixtures are two years old
have an estimated ~seful life o~ l Oyears, and would cost P20,000 if current!;
purchased. D. Arce 1s to be admitted as a partner upon his investment of P20 000
cash and Pl 0,000 worth of merchandise. What is the total assets of the
partnership?
a. P70,500
b. P48,000
- c. P6 7,500
d1 P74,000
30

1-H,: On September JO, 20 l ,I , Ll>p

~L t1thn 1ts l'vlen\k.: fo r~ 111~1:1~st in ~
On thi s dl\t~ . . Lopc1.\; \.:,tpth,l acvo
w,\ sht1w~ n b. .tl~uh.'e 1.J t Pl :'.'~, 4(i is~~~ ­
were ugn.;cd ui) \)t l tx: r~)~· th\; tllr (} 1 he t0 hv ,\:1r1.£
n1ntion Qf th\: partn~rship :
\ . Prcp",:,d cx pcn~t.:$ of Pl 7 ,5
00 and n( (''f'lt\;J. expens~-s (1 f
ft(.,'{)g\\ l/ l'tL
P5 .Qt)\) M e t0 he
2. 5<~1 of the l~ut~t,n\,Hng m:<.:Qtm
1)
ts t'l'\.'l.'l'·~1bl~ of Lo ~z am~u
is to ~ rL'Cug.rn t.(-d us un~l,l\~~tibk nring ro. Pl lX)JX..)().
3. Mende, ,s ti.,, be cretht~d w1th ~,
n on~-third int~n=sl in the partner
,nv c~t "~ash u~,c..k h'Onl th~ PS0.0 shtp,:md i£ m
00 W\.1t1 h \,f r11en:-hanJ1~c-
Thc ~,n ,o un t of ca sh to be in
v~ ste d hy ~\ en dez an d t.h e
p~u-tncrship m\:: tot~d ca pi ta l of th e

q; P32,950 and P248,.850,r1:~

pecti,·ely.
b.. PSS,300 un tl 1'22 l ,2UO re
sp ec
c.. P82,950 and P248,85U resp ti,·e l_r.
ectively.
d. P32, 950 "" " P 17 1.. 200 r~
~pecti,:ely..
\-17: !Y\oran t,n? Nakar entered
int<.., a p~trt nc r~hip on Fe br uarv
the follow1ngasseu;: l. 20 \ 3 bv in \·estin~
- ~ · -
i\fa ror . S a bi r
Ca!-·h
Mc rch an di. st ltw en to ry Pl5 .00 0
La nd · p-15,.tl.10
Bui\din~ \5, {l' ()
Fumihi~e u.nd tixtun:- 65 ,o. »-

Th e ag
to be d'ree·dtne
d nt
· be tw ee n· M oran and N' ak. ar _
. iv,
1s to aSs\1n,ee mt o4 0o/o{ to Nl on m) an d6 00A provides th at profits an d los.....-..es are
the p 0 (
30 ' 00 0 mo rtg ag e loa. n to Na.ka.rt an d th.
.
at the partne1~b .
on th e bu 1ld mg. IP
lfNakar is to receive a c· .t l 're
C"lsh must he inv~st? ·3 P 1 a c d. . .
it eq ua l to his profit and tos s ratio. hoVii" rnucb
a. Pl 27 ,5 00
b. Pl 72,soo
c. P 9·7,500
d, P 77,500
 31

t-lR: As of July l , 20 13. Flores and Garcia decided to form a partnership. Their
statements·of financial position on this date are:

Flores Garl'iu

Cnsh p 1,500 P 3,750

A(counts rc(civablc 54,000 22,500
Ml~r('hnndis~ lnvcntory 20,250
~fachincry and equipment 15,000 27,0CXJ
Total P70,500 P73,500

Accounts Payable Pl3,500 P24,000

Flores, capital 57,000
Garcia~ capitnl 49,500
Total P70,500 P73,500

The partners agreed that the machinery and equipment of Flores is

ooderdepreciated by P 1,500 and that of Garcia by P4,500. Allowance for doubtful
accounts is to be set up amounting to P 12,000 for Flores and P4,500 for Garcia.
The partnership agreement provides for a profit and loss ratio and capital interest
of 60% to Flores and 40% to Garcia. How much cash must Flores invest to
bring the partner's capital balances proportionate to their profit and loss ratio?

a. P14,250
b. P 5,250
c1 P/7,250
d. PJ0,250

1-19: Ortiz and Ponce are partners sharing profits in this proportion-60:40. A statement
of financial position prepared for the partners on April 1, 2013:

Cash P 48,000 Accounts Payable P 89,000

Accounts receivable 92,000 Ortiz, capital
Inventories 133,000
165,000 Ponce, capital
Equipment P70,000
108,000
Less Ac cumulated
Depreciation
Total Ass\!ts
45,000
~- 25,000

P33 0,000 Total Liabilities & Capital P330.000

 U 11!f 1M I

f- J9. -·· • t
(Ol l ll'f'l li(\7

On this date. the partners agt ee h)

adnnt Ro~a s as a \'tRtncr. The \er
agreement are smnma.rized below . ms ot the

A5sets and habihties are to be re~tatc

<l as fol h.,w~·.
a. An a\\owance forpossib\e unco\\e
ctibles of P4.500 i~tu be t'~tnbU ~hcli
b. ltwentonesareto be restata1 at the .
irp1~scnt 1~p\tt~cn1cnt w,luc of P17
c. A~crueJ expenses of P4 ~000 are 0,000 .
to be re0Jgui 1.cd.
Ortiz, Ponce and Roxas will di,ide pro
fits in the rat,o of 5:3. Capital bHlll\
the partners after the fon na tio tc(~~ \)f
n of the new partnership nrc
aforementioned ratio , with Ortiz
and Pon~e nm kin g ca sh set \ \e,
tl> be in the
themselves outside of the partnership nc l\t bl"'tWc-cn
to adjust the ir capitals, and Ro
cash in the partnership for his int xas itwtsting
Roxas? ere st. Ho w n1u1..·h 1..'ash is tu be invested by
a. P60,2SO
b. P4 7,500
c. PS0,000
d. P59,3 i 5

l-lO: ~n Jul)~l o~the c~rrent yea

r, Jocson and Gmnez fron1 a pnrtnetship . Joc
mves~ l:~1:am b_usi~le~~ a~~~ts at v~\ue s\,n is h.1
s which arc yet to be agreed npot1,
~~t~~ ~8()~~ hf
h~~ es~~~ '.st~ contribute s1;ttli
1 l le ,s tu
~ ' '' 1tc 1 ,s 1 0 ot the total c.nptta\ cient .:nsh to bring his tot11l
ns had been agtced upmt
Details regarding the book value fJ
their correspond· . · s O ocson ,s bu~mc
mg va1uation
·
ss assets and hnbilitic~ und
follow:

Bo ok .◄ g, ·t('(/
Accounts receivable l'tl/ues l ;,tuati01t."____ .... -~
Allowance for doub\fu\ ,,
Merchandise inventory °CCOUnts P54 ,000 l'~4.l)(X)
Store cquiprncnt ~.( ~
{1,(~Xl
Accumulated dep rec iatian . _~\,.,. . 9(\6 lXl 105.(X))
,) '-•'~ cqu1pm . 27!000
Office equipment <.'nt
Accumulat<:d depreciation -- orr \~J)JO I _\,100
,-, , . U\.(~X)
Accounts Payable IC'-'. 1.;q u1p lr\\.' \l\
\)_tj)I,}
<l"Sl~l
.....___ ----.. . ..___. ...__ --·-4~,
- __00( )
..........__ •~~.OX)
-·--- -- --- --· - -~·- _._. -·-
 Partnership s · Basic Consui£rations and Organizations j j

1-20: Continued

Gomez agrees to invest cash of P30,000 and merchandise valued at current

market price. The value of the merchandise to be invested by Gomez and the
amount of cash to be invested by Jocson are:

a. P/20,000 and P48,000 respectively.

b. P210,000 and P49,200 respectively.
c. P J05,000 and PS0,000 respectively.
d. P 90,000 and P48,000 respectively.

1-21: On April I, 20 I3, EIJ and Emm pooled their assets to form a partnership, with
the finn to take over their business assets and assume the liabilities. Partners
capitals are to be based on net assets transferred after the following adjustments:

Emm inventory is to be increased by P3,000; an allowance for doubtful accounts

of P 1,000 and P 1,500 are to be set up in books of EJI and Emm, respectively;
and accounts payable of P4 ,000 is to be recognized on ElI's books. The individual
trial balances on April I, 2013, before adjustments follow:

Ell £mm
Assets P75.000 Pl 13,000
Liabilities 5,000 34,500
Capital 70,000 78,500

How much is the capital of Ell after the above adjustment'i to his books?
a. P70,000
b. P65,000
c. P68,500
d. P66,000

1-22: Cortez admits Di vino for a partnership interest in his business. The statement of
financial position of Cortez on November 30, 20 I 3 prior to the admission of
Di vino shows the folJowing:
Debit Credit
Cash p ')

Accounts receivable 96,000

Merchandise inventory 144,000
Accounts payable P49,600
Cortez, capital ?
 ( 'Jwpt C'r I

! _;: ; · ( \m (tl tU t\ f

lt \S a1?.rccd that for purp

o ses of establishing C
o rtez's interest, the fo
~'td\u~tnwn~,should be m llowing
ade:
\ .· An ,\\\owan~e for do
ubtful accounts of2%
o f accounts receivable
r~t ,b\i~hro. is to be
" The n1errhundise in
ventory is to be valued
:- . Prepaid · ex at P \ 60,000.
penses of PS ,200 an d · d expe nses o f P3 200 are to
accn1e be
1\.'Cl" gn ized. ,
Di\1no uwC$tc~ cac;h of P
l \3 ,640 to give him a one-
the tinn . \Vhat is the ca third interest i~ ~ e total
pital balance of Cortez c~pi~l ~
before the admission
a. P22 7,2 80 ofD1vmo ·
b. P230,l 20
c. P211 .200
d. P250.500

.Items 1-23 anti 1-24

are based on the follow
On June 30. 20 l 3 Ede ing data:
n and Flora fom1ed a pa
fu l\o·wing as sets : rtnership w it h ea ch
contributing the

Eden
Book Value Fair Value Flora
C as h Book Value Fair Valu e
Office Eq uipment P37S,OOO P37S,OOO
350.000 P87S,OOO P875 ,000
Building. - Net 312,000 872,500 937,500
Furniture and Fixtures
95,000 3,262,500 2,812,500
\25,000
The bui\d~g is subject to
partnc~\up . Th~ partner
a mortgage \oan of P1,
ship agreement provid
\ 25,000 which is to be
assumed by the
----
\o~ses m ~he raho ~f 30 es that Eden and Flora
% share profits and
bnn_g their respectwe ca and 70% respectively. Assuming that the pa
rt
eir profit and loss ratio ners agreed to
cap ita\ as the ba se: pital in proportion to th
. and using Fl0rd
1-23! \Vhat is th e ca pi
ta\ acconnt balance
a. PJ,500,00lJ of F\ora on June 30, 20
13?
b. P4,000,000
c. PJ,937,500
d. P3,837,500
1~24: How rnuch is the addttion~J c,111>h v; ~ inv,:.~t,~11 r,y 1~J<;;t{!
11, P2,6H7,5tJO
h. P2,587,000
(~. P 688,000
d. /' 687,000

1.. 25: Rey, Sain? and Tin, ft>rrned a partnership on May 3 J, 2(JJ 3, ',\titb th~ foJw--11,ng
assets, measured at their fair market value,;, oontributtd.byeach partner;

Rey Sam 11m

Cash JJ6() ,()()(J J'72/$$J PJ{,(JJ/ ~~
Delivery equipment 900,000
Computer equipment 51,000 2J'J,t/J) 15/f ~

Although Tim has contributed the most cash to the partnership, ·nm
did not have
the full amount of P 180,000 avaHable and ·was force to borrow person ally
Pl2Q,000. The delivery equipment contributed by Rey has a mortga ge of
P540,000 and the partnership is to assume the reh'J)Onsib ihtyfor the Joan. The
partners agree to divide profits and losses 4-0% to Rey; 4!Y'/4 to Sam; and 20'¼
to Tim.

The partners further agreed to bring their respective capita] interest in proportion
to their profit and loss ratio.

Using the bonus method, capita] transfer among partner s should be made as
follows:

tL From Rey and Tim, P87,960, and P3,480 respectively to Sam..

b. From Sam to Rey, P87,96 0 and to Tim, PJ,480.
c. From Sam to Tim, P3,600 and from Sam to Rey, P88,20 0.
d. From Rey to Tim, P3,480, and from Rey to Sam, P9 J,4 0.
4
1-26: Candy and Dandy have just fonned a partners hip c d . h f
P 126 ,000 ~n d comput er . . · . · an y contnbuted cas 0
equipm ent that cost p54 . r . of the
compute r 1s P36,000. Candy has a notes pa . b] ' 000 · The fair ,aJu~
to be as.s umed by he partners hip Candy . Yta c on the comput er ofP 2.. •000
t.
h.
p 90 s o have 60'¼° capita
1
partnership.· ·
Dandy contribu ted only , 1interest UJ t e
. . fth
partners as agreed is equaJJy. ' 000. The profit and loss ratm O e·
36

Ca nd y sh ou ld n1ake an addition
al investn1ent (withd.nl,val) of :

P 96!000
"·b. P 84.000
('. P( i 6.800)
t.l. P( l 5,000)

Qu tst io n 27 arul 28 tire based

on th e fo llo wi ng da-ta:
On hmc l , 2013, May an d Nora f
om1ed a partnership. M ay is to
fair values. Sh e is to tra ns fer he invest assets at
r liabilities an d is to co ntr ibu te
br ing he r total capital to P2 l 0,0 sufficient cash to
00 wh ich is 70 % of th e to tal
pa rtn ers hip . De tai ls reg ard ing ca pi tal of the
the bo ok va lue s of M ay ~s bu
liabilities and their correspondin sin es s as se ts and
g fair values arc:

Bo ok va lu es Fa ir \·a lu es
Ac cou nts rec eiv abl e (ne t)
ltw cn tor y 53,800 P53,000
Equipn.1ent 98 ,40 0 107 .00 0
No tes pa yable 25.800 34 ,00 0
56.000
56 .00 0
N~ra agrees to invest cash of P42,0
pn ce .
00 an d me rch an dis e va lue d at cl.l
lT\!nt market

1-27: W ha t is the value of the me

rch an dis e to be inv es ted by No ra ?
a. P4 8,0 00
b. P8 4,0 00
c. P4 2,0 00
,t. P3 8,0 00

1-28: \"/hat is the am ou nt of ca

sh to be inv es ted by f\ ay:
1
a. P7 2,0 00
b. P62,000
c. P26,000
d. P65,000
P.u··mr nfups B,,Jtr- Cort5idN"tHWII.\" 011d Or~mu.:atwn.r JJ
•
1-29: Alex and Carlos fonned a pru1nership and agreed to divide inttial cap,tal equally,
even though Alex contributed Pl 00,000 and Carlos contributed P84 t000 in
identifiable ~ts.

Under the bonus approach to adjust the capital'accounts, Carlos unident, fiable
asset should be debited for

a. P46,000
b. Pl6,000
c. P 8,000
d. p 0

l-3'0: Noy and Bi agreed to combine their business into a partnership. The statement
of financial position of Noy and Bi showed the fol lowing:

Noy Bi
Book Value Fair Value Book Value fair Value
Cash Pl0,000 Pl0,000 Pl4,000 Pl4,000
Accounts recei vable - net 92,000 92,000 92,000 92.000
Merchandise inventory 180,000 216,000 144,000 150,000
Computer equipment 28,800 24,000 16,200 14.000
Furniture and fixtures 19,200 18,000
Accounts pa yable 108,000 )08,000 72,000 72,000

Agre.ed capitals of Noy and Bi in the partnership are P250,000 and P200.000.
respectively. The excess over the net assets contributed to the partnership is to
be treated as goodwill.

Vlh.icb of the following statements is correct?

a. T!,e go-odwi/1 of Noy is P2,000

b. The goodwill of Bi is P2,000
c. Tire total capital of rl,e part11ership is P438,000.
d. The tow/ as,(ets oft he part11er."l,ip is P6 / 8,0()0.
38 ( 'Jwp ler /

l-3 1: Villar an d Roxa s so le prop

rie torships fo rm ed a p~ rtn er sh
ca sh of P2 ,205 ,00 0 and of fic e ip . Vill_ar cont~ibuted
eq ui pm en t th at co st P9 45 ,0 00
ha d been used and had be en 70 . 1 he equ1pmcnt
% depreciated, the fair va lu e of
P6 30 ,000. Villar also contribu th e eq ui pm en t is
ted a note payable of P2 l 0, 00
the partnership. Villar is to have 0 to be assumed by
60% interest in the partnership
only P 1,575 ,000 merchandise inv . Ro xa s contributed
entory at fair value. Th e pa rtn er
be in co nf or mi ty with their int s' capital should
erest in th e pa rtn er sh ip . Af te
partners agreed to share profits r th e fon na tio n the
and losses equally.
Assuming the use of the bonus
method, which of th e following
sta tem en ts is true?
a. The ag re ed ca pi ta l of Vi
llar is P2 ,6 25 ,0 00
b. The total ag re ed ca pi ta l
of th e pa rtn er sh ip is P4 ,3 75
c. The ca pi ta l of Ro xa s wi ,0 00
ll in cr ea se by P 10 5, 00 0 as
tra ns /er of capital. a re su lt of the
d. There is eit he r an in ve
stm en t or wi th dr aw al of as se
t.
1-32: Loren an d Jamby decide_
to co m b~ e their businesses an
July l ,_2013. Th e following are d fo rm a pa rtn er sh ip on
formation: th eu ass ets and liabilities on Ju ly 1 20 13
be.c.
, iore

Lo ren Ja mb y
As se ts
Liabilities P210,750 Pl 03 ,00 0
9J,500 36,000
The following agreements are
made to ad~iusts assets an d 1· b·
ia i1·it1. es:
a. Both partners will provide
b. Lo re n's fixed as se ts we re PS ,000 allowance fo rd
ov er
assets were un de r-d ep re cia ted -d ep re cia ted b p~ ub tfu l accounts.,
by PS00 Y ,0 00 an d J am by s fixed
c. Accrued expenses are to be
th e amount of p 1 20 0 an d precognized i~ h ho
. ' t_ e ok s of Lo re n an d Jamby
d . Obso1ete inventory to be wr 1,00 0 , res pe cti ve ly in
e. Lo re n an d Jamby also agreeitten of f b Lo .
d to sh Y :ie n am ou nt s to
are pr o its an d lo ss es eqP3 ,500.
ually.
W ha t is th e total as se to ftb ep ar
tn er sh ·tp aft h
er t e formati.on?
a. P2 97 ,5 50
b. P3 00 ,7 50
c. P3 03 ,5 50
d.. P2 98 ,5 50
 , tdl!t 11111,w. u11d l)rgv1 1tZ.<JJ rr111 •
39
h11 111 1 t il,11, ·. Hw 1,. ( 11.1'1 1

to form a partnership
f ... 3J; C,1bo and J:.du each operating a separate business agreed
rships on the
on July J, 201 3. The ass, ~ and Jiabilitiesofthe two sole proprieto
date of formation are ah fo lkJ·,vs:

Gibo Edu

Caih PJ9,200 P72,000

192,000 144.,000
Ac.cmmti:; rcee ivablc
240,000 216,000
Merc hand i1,c inventory
60,000 72,000
1:-quipmcnt
60,000 96,000
A ccou n t1, paya bl e
Note:, payahl e 12,000

The partners agreed on the followi.ng adjustments:

less 15% and
Gibo ~s accounts receivable are to be taken over at book value
Edu'i; accounts receivable at book value less 10%. Gibo
's equipment is new and
disposed at 900/o
considered adequate for the new business. Edu 's equipment is
resulting from
of its book. value. It iB agreed that Gibo bear one-- fourth of the Joss
the sale.
the partnership
As.4rultlingFAu inve& sufficient cash to give him a one-halfinterest in
sale by Edu of
after charging to Gibo 's capital account his share ofthe Joss on the
the equipment, how much must Edu invest?

a. P/6, 800
b. P20,400
c. P/2, 400
d. PJB,200
 c '/111 p,,,,, I

\ ',rsh P2104H l l00 P1,09MJ(')()

Ai:,',rnnt~ n.',~ti\v,,h k I/):, t ,llt,() ., ._49)(~7 \ ,~
\nv c ntM k~ 52K,l60 l,1•14,'14N
\'1ff f) t, \t y 1\1\\\ l''-\U l\'l\\ l)llt
. IH'I
61 J, ,Ht() 852,22 4
\)th t'r nss cts ){,HOO I 5~8
-- ~. - ---·- £10 -
---
P5.C)09 ,5N8

A'-' l'CHrnts pnyt,b\ ~ P787,336

N,,tt's pnyah\c t,000,000
~.f ort sngc pnyah\c
1-440,000
Gornc\l, ~apito\ 2,443.3(,4
Bt')'t\1\t, cn1)ita\
3,097,528
Totn\ h:,bi\itics ond equity
P4,230,700 P5,609 ,588

Th ~ pa rtn ers ag ree d tha t the pro

pe rty an d eq uip n1 cn t of Ga rne
und erd epr cci atc d by P8 0,0 00 and tt is
tha t of Br yan t is ov er- de pre cia ted
P200,000. Ac cou nts rec eiv abl e of P by
108 ,00 0 in Ga rne tt's bo ok an d Pl4
in Bry ant 's bo ok are unc oll cct ib\ e. 0.0 00
Th e partnership decided to assum
mortgage liability of Bryant. Th e par e the
tne rsh ip's agreetnent provides for a
and loss ratio and capital interest of 60 profit
% to Gan1ett and 40 % to Bryant. Bry
is willing to inv est or wi thd raw cas h ant
fronl the paitnership to co n ply wi
agreement. 1 th the

Wl1at are the capital bal anc es of Gan1ett

and Bty ant aft er the for ma tio n?
a. P2 ,25 5,3 64 a11d Pl, 50 3,5 76 ,
res pec tiv ely .
b. Pl, 25 5,3 64 a,ad PJ ,15 7,5 28,
res pec tiv elv .
c. P6 ,89 6,2 92 an d P4 ,59 7,5 28, res pec tiv eiv .
d. P6 ,89 6,2 92 a11d P3 ,J 57, 528 ,
res pec tiv e(v .
 41

:I-JS; ·us1r1g the datci in No. 1--34, what is the totaJ asset of the partnership after the
formation:

a.. Pll;058,JJ6
b. PS,618,336
c. 1'6,618,336
d. P9,840,288

1-36: Gordon and Fernando sole proprietorships decided to form a partnership on

June 1, 2013. The partnership will takeovertbeirassetsandassume their l1abiJities.
As of June J, 2013, the net assets of Gordon and Fernando are P220,000 and
,.. , P309,375 , respectively. The partners agreed on a 25:75 profit and loss ratio.
Furthenn.ore, the partners arrive on the following agreements to revalue their
assets and liabilitk-s:

a. Gordon'~ inventory is undervalued by P11,000.

b. An aJlowance for doubtful account is to be set up in the books of Gordon
and Fernando in the amount of P2, 750 and P4, 125, respectively.
c. Accrued expenses of P20,250 was not recognized in Fernando's books.

How much cash should Gordon invest (withdraw) so that their capital interest
would be quaJ to their profit and loss ratio.

a. P(l 33,150)
b. P( 95,000)
c. P 133,250
d. P 95,000
42

PROBLE\IS

Prohlt·m 1-1

tementoffinancial pos1t1on. . of pedro .... 3 before accepting

- Castro on 0ctober 1' 101
The sttBu nag as h.is partner is shown belO\-\':
Pablo
Pedro Cutro ..
Statement ofFm1ncial Pos1ti-0n
October 1, 2013
Assets

Ca.sh p 6,000
Notes receivable 3,000
Accounts receivable P24.000
Less: Allowance for bad debts l.000 23,000
Merchandise Inventory
8,000
Furni ture and fixture . .
~-000
Less Accumulated depreciation
600 5,400
T0121 Assets
P45,400
liabilities and Equity
Notes payable
Accounts payable P4,000
Pedro Castro, capital 10,000
Total Liabilities and Equity 31,400
P45,400

Pablo Bunag offers to invest cash to give him a capital Credit equal to one-half ( 1/2) of
Pedro Castro's
Castro capital
accepts the
after giving effect to the adjustment of the items below. Pedro
offer.
1. Tue merchandise is to be valued at P7 AOO.
2. Toe accounts receivable is estimated to be 95% realizable.
3. Interest accrued on the notes receivable enumerated below is to be reflected.
Pl ,000, 6°/o dated July I, 20 l 0.
P2,000, 6% dated August I, 2010.
5
4. beInterest accrued at % annually from April
recorded. . I, 20 IO on the notes payable is to
5 The furniture and fixtures _is to be valued at P4,600. .
6· Office supplies on hand Which have beai charged to eXJ)ense in the imt amounlt(i
· 10 p400. These are still to be USed by the Partnership.
 43

Problem / - /_· Con1inueJ

Required:
1. Prepare the necessary journal entries in al1 the books to record the fonnation of
the partnership if:
a) The books of Pedro Castro will be retained by the partnership.
b) A ne\v set of books \\fill be used.
2 . Prepare the statement of financial position of the partnership.

Prohlen1 1-2
On June 30~2013 Jose, the sole proprietor of the Jose Company, expands the company
and establish a partnership with Pedro and Pablo. The partners plan to share profits
and losses as follows: Jose, 50 percent; Pedro, 25 percent; Pablo, 25 percent. They
also agree that the beginning capital balances of the partnership wi11 reflect this same
relationship.
Jose asked Pedro to join the partnership because bis many business contacts are
expected to be valuable during the expansion. Pedro is also contributing P28,000 cash.
Pablo is contnbuting Pl I ,000 cash and marketable securities costing P42,000 to Pablo
but are ,;urrently worth P57,500.
Jose's invesu:nentin the partnership is the Jose Company. Hep]ans to payoff the notes
with his personal assets. The other partners ~ave ~eed that partnership wilJ assume
the accounts payable. 1be statement of financial position for the Jose Company follows:
Jose Company
Statemeat of Fm.ancial Position
Ju.n e 34, 2013

Assets
Cash P I 0,000
Accounts re,c eivable (net) 48,000
Inventory 72,000
Equipment (Net of accumulated depreciation of P20,000) 70,000
Total Assets P200,000
Liabiliti.es and Equity
Accounts Payable P 53,000
Notes Payable 62,000
Jose, Capital 85,000
Total liabil ities and equit y P200,000

lbc partners agree that the inventory is worth P85,000, and the equipment is worth half
its original cos~ and the aHowance establishe<l for doubtful accounts is correct.
44 Ch apter J

Prob lem J-2: Co ntinu ed

Required: Prepare u e state
1 ment offmancial position
20 \ 3 under each of the fu\\ow of the partnership on June
ing independent assumptions 30,
:
l. The partners agree to us
e the bonus method to reco
2. The.partners agree to rd th~ fon11ation. . .
use the goodwill approach
to re~ord the fonnatlon.
Problem \- 3

On June 30 , 2013 ,.Carlo To

rre and Pepe Basco, who ha
decided to form partnership s his own retail business,
wherein they will participate
60°/oand 40°/o, respectivel in the profits in the ratio
y. The statement of financi
al
of
da te is presented below
. position of Pepe Basco on this
Pepe Basco
Statement of Financial Po
sition
June 30 , 2013

As se ts
Ca sh
Accounts re ce iv ab le
Less Es tim ate d un co lle p 400
cti bl c ac co un ts Pl6,000
M er ch an di se In ve nt or
y 1,600
Fu rniture and fixtures 14,400
Less Accumulated de pr 20 ,000
ec iat io n P ?,000
I

Total assets 1,000

4,000
Liabilities and Equity
P38.800
Accounts pa ya bl e
Pepe Basco , capital
Tota\ Liabilities and Eq
uit y
P 3,600
35 ,200
Conditions agreed upon be P38,800
fore the fonnat" f
10n o t \1e partnership
a) The acco~nts receiyab :
b) The fun11ture and fixtu\c of Pepe Basco is estin .
c) All the payables arc to re s of Pepe Basco.1 d1ate d to be realizable 'l t 70
b~ as sume(\ by. t\ c ~ ~.n1 er %-
d) TI1e capi·ta1O f tl1e pa .' 1 pa,
~n er
<leprcc1ated b~ PSOO
Basco, and Car\o Tortn ership is based on the . sh111
rre is to co
r ' · . · ·
. 1 b l nt rib ut e C" ''-'\a,
capita a ances. p~op<~lt.·l() na . \J\\Slcd ca tn\ ba la nc e of
m order t p, Pep\!
e) A new set of books w,l\ tc to th e prof it and loss r~ti <.> n1a k·e th
( h :,

be used hy the ptlrtn ership . e pa11ner '.5

o.
 45
J,1artr11.:nhip ~ lJasu· Con ti iderotinnc; anJ Org amzafions

/'mblem J-3 : Continued

Required:
l. Prepare the necessary adjusting entries in the books of Pepe Basco.
2. Prepare the opening jouma] entries in the books of the partnership.

Prohlem 1-4
Roccs and Sales, who are engaged in the same type of business, agree to combine their
resources and form a partnership on January I , 2013. Their post-clo sing trial balances
as of Janu ary l, 2013 are as foJlows:
Roces Sales
DR CR DR CR
Cash P 14,400 p 4,800
Acc ounts rccci vable 57,600 72,000
Merchand i se in ventory 124,800 192,000
Delivery equipmen t 19,200 48,000
Fixtures 144,000 96,000
Prepaid in s urance 4,800 3)00
Accounts payable 104,000 64,000
Note s payable 40,000
Accrued taxe s 6,400 8,000 ·- - -
Allowanc es for bad debts 12,800
Accumula ted depreciati on-
DcJi very equipmen t 12,800 8,000
Accumula ted depreciati on-
Fixtures 80,000 88,000
Cap ital 161,600 195,200
P364,800 P364,800 P416,000 P416,000

It is agreed that the partnersh ip shall acquire the assets and assume · · o f the
th 1· b 1·11t1es
. . · e ia ·
busmesses at the following va]ues:

Races Sales
Accounts receivable (net) P56,000
Fixtures (net)
Me rchandi se inventory 80,000 P4,800
Goodwill 132,800
40,000 32,000
Required . Prepare the necessary journal ent · ·
partnershi p assuming that: nes 111 the books ofRoces , Sales, and the
a. Roces' books wi II be used by the .
b . Sales ' books will be used by the partne~s~ 1p.
c;_ A new set of books wi 11 be openfJ~n ehrship. .
· Y t e p_a nnersh1p .
 CIW/Jl cr i
·1 6

Proh h.' nl 1-5

.
· , tor three years . ., dtir,· ng which tin1e profits have
The finn of.I . Lagntan has been °1:era t 111 £ . _. ,ecded both to strengthen its · ··
l:x.'Cn satisfactory b\lt .m additi onal nw:stn1ent is st:I 11 J pos1t1on
in the m arket and to increase its pro fits .

[n Dece mber 20 13, Lagtn an agrees to admi.t M , . equ·:tl

. agno as an , t· '- paitn.
er in the firm. TI1e
• pos1a
sta teme nt of financial · · on ot·tI1e respe•c t1ve firms are as o 11 ows .

Lag man Magn o

ASS t.' fS

Cas h P8,00 0 PS,000

Ac~o tmt~ recei va ble 21 ,000 13,000
Me rc handi se in vento ry 9,000 15,000
Eq uipme nt 5,000 3,000
O ther ass ets 37,000 9,000
Total P80,0 00 P45,000
Lia bilitie s and Equity
A ccoun t s payab le Pl2,0 00 P6,00 0
Notes paya ble 5,000
J. Lagm an , capita l
10,000
63,00 0
R . M a gno , capita l
29,000
Tota l
P80,0 00 P45,000

Additional data:
(a) Goodwill of P8,000 is to be allowed to Lagman.
(b) Magn o's merc hand ise is to be value d at Pl2,0 00.
(c) Magno's notes payable have unrec orded P300 accru ed interest.
(d) Lagm an is to_set up an allow a?ce for bad de~ts equa l to one perc
ent of his
accounts receivable, and Magno s account~ receivable is to be value d at p 12,00
though trans fe1Ted gross to the new firm. 0
(e) Afte r givin g effec t to the abov e prov ision s, \!ach partn er is to-w
ithdr aw or
contribute sufficient capital to give hiin an investment of P35,0 00.

Required:
J. Joun1aJ cntr~es to cl~se Magn o 's boc~ks.
2. Joum aJ entn_e s to ad.rust the books, o! Lagman.
3. Journ al entri es t<? take up Magno s mvcstn1ent on the book s of
book s to be retra m~d by t~~ new_firm. Lagm an, the
4 . Statcinent of financ1a~ position ot the new finn.
 fl"n11 l't s/11ps : Basic Comidl'mr,011 \· r111d Orgu 11i: alru11.> 47

' Prohlem 1-6

Toledo and Ureta each operating a separate business agreed to join in partnershjp as of
July I, 2013. The account baJances presented by each partner as of this date were as
fol1ows:

Toledo

Cash P 3,200 Accounts Payable PJ0,000

Accounts Receivable 3,200 Notes Payable 2,000
Merchandise 40,000 Capital 73,200
Office Equipment 10,000
P85,200 P85,200

Ureta

Cash Pl2,000 Accounts PayabJe Pl 6,000

Accounts Receivable 24,000 Capital 68,000
Merchandise 36,000
Office Equipment 12,000
P84,000 P84,000

The assets of the two partners were careful1y examined and it was agreed that certain
adjustments be made and th~ above balance sheets as adjusted be the basis on which
the partnership begins operations.
The adjustments agreed upon are as fallows:
Toledo's accounts receivables are to be taken over at a book value less 15% and
Ureta's accounts receivable at book value less I 0%. Toledo's office equipment is new
and is considered adequate for the new business; therefore, it is decided that Ureta
dispose of his equipment at the highest cash price possible and that Toledo bear one-
fourth of the loss resulting from the sale. Ureta's office ~uipment is disposed ofat book
value less I 0%. It is further agreed that Ureta pay sufficient cash to give him a one-half
(I/2) interest in the business after charging to Toledo's capital account his share of the
Joss on the sale by Ureta of office equipment.
Required:
1. Prepare the journal entries on the books of Toledo and on the books of Ureta to
give effect to the agreement.
2. Open the books of the new partnership, making separate entries for the contribution.<;
ofToledo and Ureta. ·
3. Record Ureta'scash contrib~tion, ~hich ~~es hitn half interest in the new partnership.
4. Prepare a ~tate~ent o~ fmanctal position for the new partnership after the
consummation of the entire agreem.cnt.