PARTNERSHIP ACCOUNTING

FORMATION

1. Abner joined a partnership by contributing the following: cash, P120,000; accounts receivable, P4,000; land
P240,000 cost, P400,000 fair value; and accounts payable, P16,000. What will be the initial amount recorded
in Abner's capital account?
a. P408,000
b. P424,000
c. P508,000
d. P540,000

2. On October 1, 2022, Blanche and Donna formed a partnership and agreed to share profits and losses in the
ratio of 3:7, respectively. Blanche contributed cash of P100,000 and a parcel of land that cost her P200,000.
Donna contributed P300,000 cash. The land has a quoted price of P360,000 on October 1, 2022. What is the
amount of the total partnership capital on October 1, 2022?
a. P760,000
b. P960,000
c. P360,000
d. P460,0000

3. Nicole and Candy formed a partnership. Nicole contributed cash of P300,000 and an equipment costing
P600,000. Candy contributed land costing P600,000. The current market value of the assets are as follows:
equipment - P450,000; land - P750,000. The partnership will assume a P150,000 liability on the land contributed
by Candy. The capital accounts of the partners will be credited as follows:
Nicole Candy
a. P900,000 P450,000
b. P300,000 P750,000
c. P750,000 P600,000
d. P300,000 P600,000

4. The partnership of Kurt and Max was formed on April 1, 2022. At that date, the following assets were
contributed:

Kurt Max
Cash P300,000 P140,000
Merchandise inventory 220,000
Building 4,000,000
Furniture and equipment 900,000

The building is subject to a mortgage loan of P1,600,000 which is to be assumed by the partnership. The
partnership agreement provides that Kurt and Max share on profit and loss of 25% and 75%, respectively.
Max's capital account at April 1, 2022 should be
 a. P 900,000
b. P1,200,000
c. P2,760,000
d. P4,360,000

5. Using the information in No. 4, and assuming that the partnership agreement provides that the partners initially
should have an equal interest in partnership capital, Kurt's capital account should be increased by
a. P780,000
b. P900,000
c. P1,200,000
d. P1,980,000

6. Using the information in No. 5, the total partnership capital on April 1, 2022 is
a. P1,200,000
b. P3,960,000
c. P4,740,000
d. P5,560,000

7. Using the information in No. 5, bonus was given by

a. the partnership
b. nobody
c. Max to Kurt
d. Kurt to Max

8. Using the information in No. 4, and assuming that capital shall be proportionate to the partners' profit and loss
ratio, the required capital of Kurt is
a. P900,000
b. P990,000
c. P1,200,000
d. P3,960,000

OPERATIONS

1. At the beginning of the year, John had a beginning capital balance in the partnership amounting to P80,000.
During the current year, he made an additional investment of P16,000 on June 1. He also withdrew P40,000 on
September 1. How much is the average capital balance of John during the year?
a. 96,000
b. 76,000
c. 80,000
d. 72,000
2. Kaye and Ethan are partners in a partnership. Kaye is allowed an annual salary of P20,000 while Ethan is allowed
P10,000. Both partners are allowed interests based on their capital. During the year, they were allowed P10,000
and P4,000 worth of interest, respectively. Any remainder is to be allocated in the ratio 40:60 for Kaye and
Ethan, respectively. If Ethan received P40,000 as his share in the partnership net income, then how much was
the total partnership net income?
a. 65,000
b. 95,000
c. 100,000
d. 69,000

3. Dewey, Dianne, and Danica formed a partnership on January 1, 2022 and contributed P150,000, P200,000 and
P250,000, respectively. Their articles of co-partnership provide that the operating income be shared among the
partners as follows: as salary, P24,000 for Dewey, P18,000 for Dianne, and P12,000 for Danica; interest of 12%
on the average capital during 2022 of the three partners; and, the remainder in the ratio of 2:4:4, respectively.

The operating income for the year ending December 31, 2022 amounted to P176,000. Dewey contributed
additional capital of P30,000 on July 1 and made a withdrawal of P10,000 on October 1; Dianne contributed
additional capital of P20,000 on August 1 and made a withdrawal of P10,000 on October 1; and Danica made
a withdrawal of P30,000 on November 1. How much will be the share of Dewey in the P176,000 net income of
the partnership?
a. 35,200
b. 48,400
c. 53,180
d. 53,760

4. Assuming the same given as the previous problem, how much will be the capital balance of Dianne on
December 31, 2022?
a. 229,360
b. 229,520
c. 239,360
d. 272,060

5. Under their partnership agreement, Avan is to be allowed a bonus of 20% of net income after bonus and the
remainder is to be divided as follows: 35% each to Avan and Bel, and 30% to Cam. If the partnership's net
income is P318,000, Avan's share would be
a. 79,500
b. 92,750
c. 132,500
d. 145,750

6. Dulce Martin, a partner in a partnership that carries the name of the Sweet Shop, has a 30% participation in
partnership profit. Her capital account had a net decrease of P48,000 during 2022. In the same year, she
withdrew P104,000 of capital and contributed property valued at P20,000 to the partnership. The net income
of the partnership in 2022 was
 a. 36,000
b. 120,000
c. 132,000
d. 440,000

7. Maxwell is trying to decide whether to accept a salary of ₱40,000 or a salary of ₱25,000 plus a bonus of 10% of profit after
salaries and bonus, as a means of allocating profit among partners. Salaries traceable to the other partners are estimated
to be ₱100,000. What amount of profit would be necessary so that Maxwell would consider the choices to be equal?

a. 165,000
b. 265,000
c. 290,000
d. 305,000

ADMISSION
MYRNA and NORMA are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The partnership balance
sheet at August 30, 2022 follows:

Cash 27,000 Accounts payable 30,000

Other assets 266,000 MYRNA, Loan 13,000
NORMA, Loan 20,000 MYRNA, capital 180,000
NORMA, capital 90,000
Total 313,000 Total 313,000

At this date, OLGA was admitted as a partner for a consideration of P97,500 cash for a 40% interest in capital and in profits.
1. Assume OLGA is admitted by purchase of 40% each of the original partners’ interest, determine how the P97,500 will be
apportioned to MYRNA and NORMA
a. MYRNA, P65,700 and NORMA, P31,800
b. MYRNA, P64,800 and NORMA, P32,700
c. MYRNA, P65,500 and NORMA, P32,000
d. MYRNA, P65,900 and NORMA, P31,600

2. Assume OLGA is admitted by investing the P97,500 into the partnership, determine the effects of any bonus over the
capital balances of the original partners:
a. MYRNA, P(19,800) and NORMA, P(29,700)
b. MYRNA, P 18,000 and NORMA, p 29,700
c. MYRNA, P(29,700) and NORMA, P(19,800)
d. MYRNA, P(18,675) and NORMA P(12,450)

The following are the condensed balance sheets of G&N Partnership at August 30, 2018, at which date Ellery is to be admitted
with a 30% interest in capital for an investment of P55,000.

Book Value Fair Value

Cash 20,000 20,000
Other assets 503,000 417,000
Total assets 523,000 437,000
Current liabilities 54,000 54,000
 Non-current liabilities 269,000 275,000
Gemmo, capital 120,000
Norma, capital 80,000
Total Liab and equities 523,000

Gemmo and Norma share profits at 60% and 40%, respectively.

3. What will be the respective capital balances of Gemmo, Norma, and Ellery after the new partner’s admission.
a. P68,460, P45,640, and P48,900
b. P48,900, P45,640, and P68,460
c. P45,640, P68,460, and P48,900
d. P64,860, P49,240, and P48,900

The capital accounts of the Sarah and Opel partnership on January 1, 2022, were:
Sarah, capital (75% profit percentage) P 112,000
Opel, capital (25% profit percentage) 48,000
Total capital P 160,000

On October 1, Tina was admitted for a 40 percent interest in the partnership when she purchased 40 percent of each existing
partner’s capital for P80,000, paid directly to Sarah and Opel. The partnership’s net income for the year is P66,000 and 2/3 of
it was earned in the last quarter of the year.
4. What are the capital balances of Sarah, Opel and Tina after Tina’s admission to the partnership?
a. P 84,000; P36,000; P 80,000
b. P108,700; P44,250.40; P102,000
c. P 77,100; P32,100; P 72,800
d. P 90,000; P 40,000; P 70,000

5. Assume Tina is admitted by investing the P80,000 into the partnership for a 40% interest, how much is the ending capital
balance of Opel after admission and the bonus (given)/received to/from Tina?
a. P55,000; (P 5,000)
b. P63,250.40; (P10,500)
c. P71,250.40; P 4,250.40
d. P47,300; (P 6,200)

Albert, Berto, Carlo, and Dindo have become partners in the ABCD Partnership under the following circumstances:

On August 1, 2020 Partners Albert and Berto had the following ownership balances in the AB Partnership:
ALBERT BERTO
Capital P250,000 P200,000
Loan (30,000) 10,000
Total P220,000 P210,000

In the morning of this date, Carlo was admitted as a partner with an investment of P150,000 for 20% interest in capital and in
profits or losses.

In the afternoon of the same day, over snacks, Dindo learned about the nature and objectives of the ABC Partnership and
insisted that he became a partner and was willing to contribute P120,000 under acceptable terms determined by the old
partners.
The old partners, in a caucus, have agreed to allocate 15% of existing total capital, as well as 15% of profits or losses to Dindo.
Over dinner, Dindo accepted the admission arrangement without any change. On the other hand, the old partners will each
transfer 15% of their respective interest to Dindo. Under the old AB Partnership, profit or loss was 60% and 40% to Albert and
Berto, respectively.

6. Determine the capital balance of Carlo upon his admission to the AB Partnership on August 1.
a. P116,000 c. P120,000
b. P122,000 d. P118,000

7. Determine the capital balance of Berto under the ABCD Partnership in the late evening of August 1, 2020.
a. P 27,800 c. P108,000
b. P180,200 d. P 90,000

RETIREMENT
The partnership of COCO, PIOLO, and DANIEL and their profit and loss ratios were as follows:

Assets P 1,200,000
Coco, loan P 60,000
Coco, capital (30%) 280,000
Piolo, capital (30%) 260,000
Daniel, capital (40%) 600,000
Total equities P 1,200,000

COCO decided to retire from the partnership and by mutual agreement, the assets were adjusted to their current fair value of
P1,440,000. The partnership paid P408,000 cash for COCO’s equity in the partnership, exclusive of the loan which was repaid
in full.
1. The capital balances of PIOLO and DANIEL, respectively, after COCO’s retirement from the partnership was:
a. P360,000; P855,000 c. P300,000; P675,000
b. P288,000; P684,000 d. P308,000; P664,000

The following balances as at October 31, 2022 for the Partnership of WILMA, XELYN , and YSKA were as follows:
Cash P 80,000 Liabilities P 24,000
XELYN, Loan 24,000 WILMA, loan 36,000
Non-cash 640,000 WILMA, 168,000
assets capital
XELYN, capital 156,000
YSKA, capital 360,000
Totals P744,000 Totals P744,000

WILMA has decided to retire from the partnership on October 31. Partners agreed to adjust the non-cash assets to their fair
market value of P784,000. The estimated profit to October 31 is P160,000. WILMA will be paid P276,800 for her partnership
interest inclusive of her loan which is to be paid in full. Their profit and loss ratio is 3:4:3 to WILMA, XELYN, and YSKA,
respectively.
2. What will be the balance of XELYN’s capital account after the retirement of WILMA.
a. P 258,888 c. P 288,114
 b. P459,086 d. P288,588

The balance sheet at December 31, 2022, for the Beth, Daisy, and Maya partnership is summarized as follows:

Assets P 800,000 Liabilities P200,000

Loan to Daisy 100,000 Beth capital (50%) 300,000
Daisy capital (40%) 300,000
Maya capital (10% 100,000
P 900,000 P900,000
Daisy is retiring from the partnership. The partners agree that partnership assets, excluding Daisy’s loan, should be adjusted to
their fair value of P1,000,000 and that Daisy should receive P304,000 for her capital balance net of the P100,000 loan.
3. How much are the capital balances of Beth and Maya immediately after Daisy’s retirement.
a. P380,000; P116,000
b. P400,000; P120,000
c. P385,000 P117,000
d. P308,333 P101,667

A, B, and C formed a partnership on January 2, 2019 with the following contributions:

A P100,000
B 200,000
C 300,000

The partners agreed on a capital ratio of 1:2:3 upon formation and P&L ratio of 3:3:4, respectively. The partnership reported a
net loss of P20,000 for 2019. Also, at the end of 2019, C has decided to withdraw from the firm and was paid P250,000 from
partnership cash.

On April 1, 2020, D was admitted as a partner with an investment of P160,000. He is given a share in capital of 40%and in
profits, 30% the old partners have agreed to retain their old ratio over the remaining profit and loss share of 70%. The
partnership reported a net profit of P21,000 for 2020, one-third of which is deemed earned as of the end of the year’s first
quarter’s operation.

4. Determine the capital balances of A and B, respectively, as of December 31, 2019.

a. P 94,000 & P194,000 c. P 194,000 & P115,000
b. P 115,000 & P215,000 d. P 165,000 & P215,000

5. Determine the capital balances of A, B, and D, respectively on December 31, 2020.

a. P 98,500, P 75,720 & P 113,840
b. P 93,640, P 70,820 & P 109,640
c. P100,990.40 78,170.40 & P 120,140
d. P104,000, P204,000 & P 203,000

INCORPORATION
Partners Boba and Tess, who share profits and losses equally, have decided to incorporate the partnership at December 31,
2020. The partnership net assets after the following adjustments will be contributed in exchange for shares of stocks from the
corporation.

a. provision of allowance for doubtful accounts, P6,250.

b. adjustment of overstated equipment by 2,500
 c. adjustment of understated inventory by P20,000 and
d. recognition of additional depreciation of P5,000.

The corporation’s ordinary shares is to have a par value of P312.50 each and the partners are to be issued corresponding
shares equivalent to 70% of their adjusted capital balances.

The partnership balance sheet at December 31, 2020 follows:

Cash P 112,500 Liabilities P 107,500
Accts rec 62,500 Acc. Dep 5,000
Inventory 87,500 Boba, cap. 106,250
Equipment 50,000 Tess, cap. 93,750
Total P 312,500 Total P 312,500
1. Determine the total credit to APIC upon incorporation of the partnership
a. P 61,875 c. P 60,000
b. P 144,375 d. P 140,000

2. The number of ordinary shares issued to Partner Tess is

a. 210 c. 238
b. 245 d. 217

Lexy and ACE partnership’s balance sheet at December 31, 2019 reported the following balances.
Total assets P187,500
Total liabilities 37,500
Lexy, capital 75,000
Ace, capital 75,000

LIQUIDATION

The partnership of MIKEE and ROSA is in the process of liquidation. On January 1, 2020, the ledger shows account balances as
follows:

Cash P 6,400 Accounts payable P 9,600

Accounts receivable 16,000 MIKEE capital 25,600
Lumber inventory 25,600 ROSA capital 12,800

On January 10, 2020, the lumber inventory is sold for P16,000, and during January, accounts receivable of P13,440 are
collected. No further collections on the receivables are expected and the partners have incurred P2,560 of liquidation expenses.
Profits are shared 60 percent to Mikee and 40 percent to Rosa.

1. How much cash will partner Mikee and Rosa receive upon liquidation?
a. P18,304; P7,936 c. P16,768; P 6,912
b. P37,600; P18,400 d. P20,500; P20,500

The accounts of the Partnership of R, S, and T at the end of its fiscal year on November 30, 2020 are as follows:

Cash P 106,240 Loan from S P 20,480

Other non-cash assets 724,480 R, capital (30%) 272,640
 Loan to R 15,360 S, Capital (50%) 139,520
Liabilities 268,800 T, capital (20%) 144,640
2. If in the first cash distribution, S received P51,200, which of the following statements is incorrect?
a. Total amount distributed to partners is P344,320.
b. Total amount paid to creditors is P268,800.
c. T received an amount equal to 110,220
d. R received an amount equal to 192,000.

The partnership ABC is currently liquidating and on February 15, 2020, their balances in capital and their profit and loss (P&L)
ratios are shown below:

Apple, capital (P&L 40%) P17,600

Bryan, capital (P&L 20%) 11,200
Cecile, capital (P&L 40%) ( 9,600)
Assume non-cash assets have been all disposed and Cecile has promised to pay his deficiency in a week’s time,

3. Calculate the amount to be received by one of the partners if cash is paid immediately on February 15, 2020.

a. Apple, P22,000 c. Bryan, P 8,000

b. Bryan, P12,000 d. Apple, 12,000

The balance sheet for CHESTER, JOANA and JOHN Partnership, who share profits and losses in the ratio of 50%, 25%, and 25%,
respectively, shows the following balances just before liquidation.

Cash P 19,200
Other assets 95,200
Liabilities 32,000
Chester, capital 35,200
Joana, capital 24,800
John, capital 22,400
On the first month of liquidation, certain assets are sold for P51,200. Liquidation expenses of P1,600 is paid, and additional
liquidation expenses are anticipated. Liabilities are paid amounting to P8,640 and sufficient cash is retained to ensure the
payment to creditors before making payments to partners. On the first payment to partners, Chester receives P10,000.

5. Determine the amount of cash withheld for anticipated liquidation expenses.

a. P35,200 c. P33,200
b. P29,200 d. P 4,800

The following balance sheet for the partnership of A, B, and C was taken from the books on December 31, 2020.

Assets Liabilities and Capital

Cash P 32,000 Liabilities P 80,000
Other Assets 288,000 A, Capital (40%) 59,200
B, Capital (40%) 104,000
C, Capital (20%) 76,800
Total Assets P 320,000 Total Liab & Cap P 320,000
 6. If the firm is dissolved and liquidates by installment, the first sale of the other assets having book value of P144,000 realized
P64,000 and all cash available are distributed, the amount to be received by A, B, and C respectively would be
A B C
a. P 0 P18,000 P40,000
b. P 0 P80,000 P20,000
c. P20,000 P 0 P 0
d. P 0 P 0 P16,000

7. If the firm is dissolved and liquidates and A receives a total of P2,400 in full settlement of his interest, then C would have
received a total of
a. P56,000 c. P 48,400
b. P 31,000 d. P 59,000

The accounts of the partnership of PBA at December 31, 2020 are as follows:
Cash P 105,600 Liabilities P 80,000
Non-cash assets 932,800 Loan from B 25,600
Loan to P 19,200 P, capital 264,000
B, capital 468,800
A, capital 219,200
Total P1,057,600 Total P1,057,600

They divide profits and losses 3:5:2 to P, B, and A respectively. They have decided to liquidate the partnership at this date.

8. Determine the amount payable to Partner A if cash is paid just before the start of liquidation on December 31, 2020.
a. P 22,629 c. P 28,286
b. P 28,240 d. P 28,096