Partnership Formation: 1, On December 1, 20x5, EE and FF formed a partnership, agreeing to share ed a parcel of for profits and losses in the ratio of 2:3, respectively. EE invest land that cost him P25,000. FF invested P30,000 cash. The land was sold for P50,000 on the same date, three hours after formation of the partnership. How much should be the capital balance of EE right after formation? a. P25,000 ; c. — P60,000 b. 30,000 d. 50,000 (AICPA) On March 1, 20x5, Il and JJ formed a partnership with each contributing the following assets: " JJ Cash... P300,000 P 700,000 250,000 750,000 = 2,250,000 100,000 SS The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership agreement provides that Il and JJ share profits and losses 30% and 70%, respectively. On March 1, 20x5 the balance in JJ's capital account should be: a. P3,700,000 c. P3,050,000 b. 3,140,000 d. 2,900,000 (AICPA) . The same information in Number 2, except that the mortgage loan is not assumed by the partnership. On March 1, 20x5 the balance in JJ's capital account should be: a. P3,700,000 c. P3,050,000 b. 3,140,000 d. 2,900,000 (Adapted) . As of July 1, 20x5, FF and GG decided to form a partnership. Their balance sheets on this date are: FE GG P 15,000 P 37,500 540,000 225,000 Cash.... Accounts receivable Merchandise Inventory = 202,500 Machinery and equipment 150,000 270,00C Total... P735,000 Accounts Payable P135,000 —_ P240,000 FF, capital GG, capital 495,000 Total P735,000a The partners agreed that the machinery and equi i underdepreciated by P15,000 and that of CG by P45,000. Allowance fa doubtful accounts is to be set up amounting to P120,000 for FF and P45, 000 for GG. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to FF and 40% to GG. How much cash must FF invest to bring the partners’ capital balances proportionate to their profit and loss ratio? a. P52,560 c. P142,560 b. 102,500 d. 172,500 (Adapted) On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partners capitals are to be based on net assets transferred after the following adjustments. (Profit and loss are allocated equally.) BB's inventory is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500 are to be set up in the books of AA and BB, respectively; and accounts payable of P4,000 is to be recognized in AA's books. The individual trial balances on August 1, before adjustments, follow: AA a: P75,000 —-P113,000 5,000 34,500 What is the capital of AA and BB after the above adjustments? a. AA,P68,750; BB, P77,250 c. AA,P65,000; BB, P76,000 b. _AA,P75,000; BB, P81,000 d. AA,P65,000; BB, P81,000 . (Adapted) dmits DD as a partner in business. Accounts in the ledger for CC on Kovember 30, Sox5 Fost before the admission of DD, show the following balances: P 6,800 Cash.. : Accounts receivable 14.20 Merchandise inventory, 0,000 Accounts payable 5, CC, capital .... 33,000 It is agreed that for purposes of establishing CC's interest, the following ju e made: ; cagjustments srt wyance for doubtful accounts of 3% of accounts i is lished. receivable is to be establishe as O00 ise inventory is to be valued a 000. R er ay venpenses ‘of P4600 and accrued rent expense of (c. P800 are to be recognized.DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. Compute for: (1) CC's adjusted capital before the admission of DD; and (2) the amount of cash investment by DD: a. (1) P35,347; (2) P11,971 c. (1) P35,374; (2) P17.687 b. (1) 36,374; (2) 18,487 d, (1) 28,174; (2) 14,087 (Adapted) . MM, NN, and OO are partners with capital balances on December 31, 20x5 of P300,000, P300,000 and P200,000, respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is to take certain equipment with second-hand value of P50,000 and a note for the balance of OO'sinterest. The equipment are carried on the books at P65,000. Brand new equipment may cost P80,000. Compute for: (1) OO's acquisition of the second-hand equipment will result to reduction in capital; (2) the value of the note that will OO get from the partnership's liquidation. a. (1) P15,000 each for MM and NN, (2) P150,000. b. (1) P5,000 each for MM, NN and OO, (2) P145,000. c.. (1) P5,000 each for MM, NN and OO, (2) P195,000. d. (1) P7,500 each for MM and NN, (2) P145,000. (Adapted) . Jones and Smith formed a partnership with each partner contributing the following items: Jones Smith Cash P80,000 P.-40,000 Building 300,000 - fair value .... 400,000 Inventory — cost to Smit 200,000 - fair value .... 280,000 Mortgage payable .. 120,000 Accounts payable 60,000 Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership. What is the balance in each partner's capital account for financial accounting joses? Burp Jones Smith P350,000 P270,000 \ P260,000 P180,000 P360,000 260,000 P500,000 P300,000 9OP>9. The business assets of LL and MM appear below: LL MM Cash... P 11,000 P 22,354 Accounts receivable 234,536 567,890 Inventories 120,035 260,102 Land 603,000 - Building = 428,267 Furniture 50,345 34,789 Other assets...... 2,000 3,600 Toto ....... P1,020,916 P1,317,002 Accounts payable P 178,940 P 243,650 Notes payable 200,000 345,000 LL, capital .. 641,976 728352 002 LL and MM agreed to form a partnership by contributing their respective assets and equities subject to the following adjustments: a. Accounts receivable of P20,000 in LL's books and P35,000 in MM's are uncollectible. b. Inventories of P5,500 and P6,700 are worthless in LL's and MM's respective books. c. Other assets of P2,000 and P3,600 in LL's and MM's respective books are to be written off. The capital account of the partners after the adjustments will be: a. LL,P615,942; MM, P717,894 c, —_LL,P640,876; MM, P683,050 b. LL, P640,876; MM, P712,345 dd. _—_ LL, P614,476; MM, P683,052 (PhilCPA) 10. The same information in Number 9, how much total assets does the partnership have after formation? a. P2,337,918 Cc. P2,265,118 b. 2,237,918 d. 2,365,218 (PhilCPA)11, On March 1, 20x5, PP and QQ decide to combine their businesses and form a partnership. Their balance sheets on March 1, before adjustments, showed the following: PP aa Cash... P 9,000 P 3,750 Accounts receivable 18,500 13,500 Inventories .... 30,000 19,500 Fumiture and fixtures (net) .. 30,000 9,000 Office equipment (net) 11,500 2,750 Prepaid expenses ... 6,375 3,000 Toto ..... P105,375 P51,500 Accounts payable .. P 45,750 P18,000 Capital... 59,625. _ 33,500 Total P105,375 P51,500 They agreed to have the following items recorded in their books: 1. Provide 2% allowance for doubtful accounts. 2. PP's furniture and fixtures should be P31,000, while QQ's office equipment is under-depreciated by P250. 3. Rent expense incurred previously by PP was not yet recorded , amounting to P1,000, while salary expense incurred by QQ was not also.recorded amounting to P800. 4, The fair market value of inventory amounted to: For PP P29,500 For QQ 21,000 Compute the net (debit) credit adjustment for PP and QQ: PP PP GQ a. P 2,870 P 2,820 c. P(870) ~P 180 b. (2,870) (2,820) d. 870 (180) (Adapted) 12, The same information in Number 11, compute the total liabilities after formation: a. P61,950 c. P65,550 b. 63,750 d. 63,950 13, The same information in-Number 11, compute the total assets after formation: a. -P157,985 c. . P160,765 b. 156,875 : d. 152,985