NEGROS ORIENTAL STATE UNIVERSITY M.

NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

1. Effective August 1, 2022, Brett and Clyde 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, 2022:

Brett Clyde
Cash P24,000 P60,000
Accounts Receivable 144,000 84,000
Merchandise Inventory 396,000 504,000
Prepaid Rent 48,000
Store Equipment 480,000 360,000
Accumulated Depreciation (180,000) (216,000)
Building 1,500,000
Accumulated Depreciation (300,000)
Land 720,000
Total P2,784,000 P840,000
Accounts Payable 90,000 36,000
Mortgage Payable 720,000
Alex, Capital ?
Bob, Capital 804,000
Total P2,784,000 P840,000

As of August 1, 2022, the fair value of Brett’s assets were: merchandise inventory, P324,000;
store equipment, P180,000; building, P3,000,000; and land, P1,200,000. For Clyde, the fair value
of the assets on the same date were: merchandise inventory, P540,000; store equipment,
P78,000; prepaid rent, P 0. All other items on the two balance sheets were stated at their fair
values. How much capital must be credited to Brett upon formation of partnership?

A. P4,062,000
B. P3,582,000
C. P726,000
D. P4,788,000
E. None of these

2. J and K decided to form a Partnership and provided the following transactions:

• J invested P250,000 cash and equipment with a fair value of P150,000.

• K invested P350,000 cash, merchandise with an agreed value of P550,000, and Land with an
appraised value of P500,000 subject to a mortgage payable of P250,000 which the partnership
will assume.
• The partners also agreed to an equal interest in the partnership capital.

Compute the amount reported as total capital of the partners after formation

A. 1,800,000
B. 1,550,000
C. 1,750,000
D. 1,500,000
E. None of these

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

3. Celso, Dario, and Ermo formed the CDE Partnership on August 30, 2021, with the following
assets, measured at book values in their respective records, contributed by each partner:

Celso Dario Ermo

Cash P259,200 P86,400 P103,680
Inventory 58,464 75,200
PPE 1,296,000 240,000
Total P1,613,664 P326,400 P178,880

A part of Celso’s cash contribution, P172,800, comes from personal borrowings. Also, the PPE
of Celso and Dario are mortgaged with the bank for P777,600 and P57,600, respectively. The
partnership is to assume responsibility for these PPE mortgages. The fair value of the inventories
contributed by Ermo is P73,440 while the PPE contributed by Dario at this date is P272,160 The
partners have agreed to share profits and losses on a 5:2:3 ratio, to Celso, Dario, and Ermo,
respectively. 1. What is the capital balance for each partner at the opening of business on
August 30, 2021?

A. Celso, P836,064; Dario, P300,960; & Ermo, P177,120

B. Celso, P1,161,200; Dario, P418,000; & Ermo, P246,000
C. Celso, P1,987,500; Dario, P189,000; & Ermo, P217,500
D. Celso, P1,095,120; Dario, P547,560; & Ermo, P182,520
E. None of these

For items 4 to 6:

A and B formed a partnership. The partnership agreement stipulates the following:

• A shall contribute noncash assets with carrying amount of P60, 000 and fair value of
P100,000.
• B shall contribute cash of P200, 000.
• A and B shall have interest of 80% and 20%, respectively, on both initial partnership
capital and in subsequent partnership profits and losses.

4. The total partnership capital after formation is

A. P300, 000
B. P260, 000
C. P360, 000
D. P420, 000
E. None of these

5. The entry to record the contribution of B includes

A. Debit to cash for P60, 000.

B. A credit to A’s capital for P140, 000.
C. A credit to B’s capital for P200, 000.
D. All of these.

6. The adjusted capital of B after the formation, using the bonus approach is

A. P100, 000
B. P200, 000
C. P60, 000
D. P240, 000
E. None of these
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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

7. A and B formed a partnership. The following are their contributions:

A B
Cash P 500,000 -
Accounts Receivable 100,000 -
Building P700,000
Total P600,000 P700,000

A, Capital P600,000
B, Capital P700,000
Total P600,000 P700,000

Additional information:

• The accounts receivable includes a P20, 000 account that us deemed uncollectible.
• The building s under-depreciated by P50, 000.
• The building has an unpaid mortgage P100, 000, but this is not assumed by the
partnership. Partner B promised to pay for the mortgage himself.

How much is the correct valuation of A’s capital immediately after the partnership formation?

A. P460, 000
B. P580, 000
C. P650, 000
D. P720, 000
E. None of these

8. Kali and Andy are currently changing their partnership profit and loss ratios from 75/25 to
60/40. They have created a list of assets that have market and book value differences. One
of the assets is a building with a P300,000 market value and P200,000 book value. Two years
after changing the profit and loss ratios, the building is sold for P380,000. How much of the
profit is allocated to Kali?

A. P108,000
B. P135,000
C. P123,000
D. P183,000
E. None of these

9. A and B formed a partnership to manufacture and sell computer software. A brings to the
partnership cash of P10,000, accounts receivable of P30,000, inventory of P70,000, computer
equipment with a cost of P400,000, and accounts payable of P85,000. B contributes cash of
P5,000 and a software program. The development of this program cost B P18,000, but its
current market value is much greater. The partners agree on the following values based on an
independent appraisal:

A’s contributions:

Cash, P10,000; inventory, P70,000; and accounts payable, P85,000 (the appraiser believes that
the current market values for these items equal A’s values).
Accounts receivable, P30,000 less allowance for doubtful accounts of P5,000.
Computer equipment, P500,000 less accumulated depreciation of P50,000.

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

B’s contributions:

Cash, P5,000.
Computer software, P100,000.

Compute the adjusted capital balance of A and B to be presented on the balance sheet.

A. A, P425,000; B, P 23,000
B. A, P470,000; B, P 23,000
C. A, P425,000; B, P105,000
D. A, P470,000; B, P105,000
E. None of these

10. A and B formed a partnership on January 25, 20x2 by investing the following assets:

A B
Cash P272,000
Accounts receivable P612,000
Inventory 884,000
Land and Building 204,000
Equipment 1,360,000

A and B agreed for a profit and loss ratio of 6:4, respectively, and that the partnership is to
assume the P680,000 mortgage on the land. Assuming the capital interest of the partners is
proportionate to their profit and loss ratio, the bonus upon formation is:

a. P40,800 to B
b. P40,800 to A
c. P60,800 to B
d. P60,800 to A
E. None of these

- END OF EXAMINATION -

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