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Advanced Financial Accounting

The document describes the formation of the ABC Partnership. Partner A contributed equipment worth $100,000 that was later sold for $300,000. Partner B contributed land and buildings worth $1,200,000 with a $1,500,000 fair value, subject to a $300,000 mortgage. The partners agreed B would have a 60% capital interest. Partner C was required to contribute any remaining cash needed. The document also describes partnership operations in 2018, including additional investments by A and B, drawings by B and C, and asks to calculate the partnership's net income/loss and C's ending capital balance.

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142 views2 pages

Advanced Financial Accounting

The document describes the formation of the ABC Partnership. Partner A contributed equipment worth $100,000 that was later sold for $300,000. Partner B contributed land and buildings worth $1,200,000 with a $1,500,000 fair value, subject to a $300,000 mortgage. The partners agreed B would have a 60% capital interest. Partner C was required to contribute any remaining cash needed. The document also describes partnership operations in 2018, including additional investments by A and B, drawings by B and C, and asks to calculate the partnership's net income/loss and C's ending capital balance.

Uploaded by

elsana philip
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Problem Portion

Numbers 1 and 2 (Partnership Formation)

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment
with assessed value of P100,000 with historical cost of P800,000 and accumulated depreciation
of P600,000. A day after the partnership formation, the equipment was sold for P 300,000.

B will contribute a land and building with carrying amount of P1,200,000 and fair value of
P1,500,000. The land and building are subject to a mortgage payable amounting to P300,000 to
be assumed by the partnership. The partners agreed that B will have 60% capital interest in the
partnership. The partners also agreed that C will contribute sufficient cash to the partnership.

1. What is the total agreed capitalization of the ABC Partnership?


A. 1,500,000
B. 2,000,000
C. 2,500,000
D. 3,000,000

2. What is the cash to be contributed by C in the ABC Partnership?


A. 500,000
B. 600,000
C. 700,000
D. 800,000

Numbers 3 and 4 (Partnership Operation – Capital Account Transactions)

On January 1, 2018, A, B and C formed ABC Partnership with total agreed capitalization of
P1,000,000. The capital interest ratio of the ABC Partnership is 5:1:4 while the profit or loss
ratio is 3:2:5, respectively for A, B and C.

During 2018, A and B made additional investments of P200,000 and P500,000, respectively. At
the end of 2018, B and C made drawings of P300,000 and P100,000, respectively. On December
31, 2018, the capital balance of B is reported at P200,000.

3. What is the net income or net loss of ABC Partnership for the year ended December 31,
2018?
A. 500,000 loss
B. 1,000,000 loss
C. 800,000 income
D. 1,200,000 income

4. What is the capital balance of C on December 31, 2018?


A. 150,000
B. 50,000
C. 200,000
D. 250,000

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