Colegio de San Gabriel Arcangel

Area E, City of San Jose del Monte, Bulacan

PRELIM EXAMINATION IN COGM6

ACCOUNTING FOR SPECIAL TRANSACTIONS
FEBRUARY 16, 2022
SET A

ANSWER SHEET:
1. 6. 11. 16. 21. 26.
2. 7. 12. 17. 22. 27.
3. 8. 13. 18. 23. 28.
4. 9. 14. 19. 24. 29.
5. 10. 15. 20. 25. 30.

QUESTIONS:
PROBLEM 1
On March 1, of the current year, Pio and Qleo decided to combine their businesses and form a
partnership. Theie balance sheets on March 1, before adjustments showed the following:

PIO QLEO
Cash 9,000 3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and Fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
Total 105,375 51,500
Accounts payable 45,750 18,000
Capital 59,625 33,500
Total 105,375 51,500

They agreed to have the following items recorded in their books:

 Provide 2% allowance for doubtful accounts
 Pio’s furniture and fixtures should be P31,000, while Qleo’s office equipment is under
depreciated by P250
 Rent expense incurred previously by Pio was not recorded amounting to P1,000, while
salary expenses incurred by Qleo was not also recorded amounting to P800
 The fair market value of inventory amounted to P29,500 for Pio and P21,000 for Qleo

1) Compute for the net (debit) credit adjustment for Pio

2) Compute for the net (debit) credit adjustment for Qleo
3) How much is the total liabilities after the formation?
4) How much is the total assets after the formation?

PROBLEM 2
On June 1, of the current year, Rio and Sio combined their separate business to form a partnership.
The non-cash assets to be contributed and liabilities to be assumed are as follows:

RIO SIO
Carrying Fair value Carrying value Fair value
value
Accounts receivable 25,000 26,250 20,000 19,500
Inventories 40,000 45,000 20,000 20,750
PPE 100,000 91,250 86,250 82,250
Accounts payable 15,000 15,000 11,250 11,250

Rio and Sio are to invest equal amounts of cash such that the contribution of Rio would be 10%
more than the investment of Sio.
5) Total cash of the partnership
6) Total assets of the partnership
7) Total capital of the partnership

PROBLEM 3
Cian and Dian are joining their separate business to form a partnership. Cash and noncash assets
are to be contributed for a total capital of P150,000. The noncash assets to be contributed and
liabilities to be assumed are :

Cian Dian
Book Fair value Book Fair value
value value
Accounts receivable 11,250.00 11,250.00
Inventories 11,250.00 16,875.00 30,000.00 33,750.00
Equipment 18,750.00 15,000.00 33,750.00 35,625.00
Accounts payable 5,637.50 5,625.00 3,750.00 3,750.00

8) The partner’s capital accounts are to be equal after all contributions of assets and
assumptions of liabilities. The total assets of the partnership is:
9) The amount of cash that each partner must contribute:
PROBLEM 4
Baser and Michelle just formed a partnership. Baser contributed cash of P920,000 and office
equipment that costs P422,000. The equipment had been used in his business and had been 70%
depreciated. The current value of the equipment is P295,000. Baser also contributed a note payable
of P87,000 to be assumed by the partnership. The partners agreed on a profit and loss ratio of 50%
each. Baser is to have a 70% interest in the partnership. Michelle contributed only a merchandise
inventory from her sole business carried at P550,000 on a FIFO basis. The current fair value of
merchandise is P525,000

10) To consummate the formation of the partnership, Baser should make additional
investment or (withdrawal) of:
PROBLEM 5
In 2018, Norman and Concha agreed to form a new partnership under the following general
agreements:
 Partner’s contribution will be on a 5:4 ratio; Profit and Loss, 5:5, and Capital credits 57:43
ratio respectively to Norman and Concha. Their respective contributions will come from old
proprietorships they owned.
 Norman contributed the following items and amounts: Cash – P748,800, Equipment (at
book value per his proprietorship records) – P512,000
 Concha contributed the following items at their carrying amounts in the proprietorship
records: Accounts receivable – P96,000; Inventory – P268,800; Furniture & Fixtures –
P514,560; Intangibles – P220,800
 All noncash contributions are not properly valued. The two partners have agreed that (a)
P7,680 of the accounts receivable are uncollectible; (b) The inventories are overstated by
P19,200; (c) the furniture and fixtures are understated by P11,520; and the intangibles
include a patent with a carrying value of P13,440, which must now be derecognized upon a
court order. The rest of the intangibles are fairly valued.

11) How much is the total depreciable fixed assets recorded by the partnership?
12) What is the capital balance of Concha after the formation of the partnership?

PROBLEM 6
The Green and Red Partnership was formed on January 2, 2010. Under the partnership agreement,
each partner has an equal initial capital balance. Partnership net income or loss is allocated 60% to
Green and 40% to Red. To form the partnership, Green originally contributed assets costing
P50,000 and fair value of P60,000 on January 2, 2010, and Red contributed P20,000 cash.
Drawings by the partners during 2010 totaled P3,000 by Green and P9,000 by Red. The partnership
net income in 2010 was P25,000.

13) Under the goodwill method, what is Red’s initial capital balance in the partnership?
PROBLEM 7
Greg, Harris and Ivan have a retail partnership business selling computers. The partners are allowed
an interest allocation of 8% on their average capital. Additions or subtractions in capital made from
1st to 15th of the month is considered made at the beginning of the month, whereas additions and
subtractions in capital made from 16th to 30th of the month is considered done at the end of the
month. Partner’s capital activity for the year was:

Greg Harris Ivan

Jan 1, balance 200,000 300,000 250,000
Feb 2, investment 50,000
Mar 6, investment 10,000 20,000
Apr 20, withdrawal (10,000)
July 3, withdrawal and investment (7,000) 10,000
Sep 29, investment 5,000 4,000 5,000
Nov. 5, investment 5,000

14) What is the weighted average capital of Greg, and how much is his interest on his
average capital?
15) What is the weighted average capital of Harris, and how much is his interest on his
average capital?
16) What is the weighted average capital of Ivan, and how much is his interest on his
average capital?
PROBLEM 8
The following balance sheet for the partnership of Alma, Vilma, at Thelma were taken from the
books on July 1, 2020:
Assets Liabilities and
Capital
Cash 40,000 Liabilities 100,000
Other assets 360,000 Alma, capital 74,000
Vilma, capital 130,000
Thelma, capital 96,000
Total 400,000 Total 400,000

The partnership agreed to distribute the profits as follows:

 Annual salaries to Alma and Vilma of P3,000 each
 Allow interest of 6% on beginning capital
 A bonus of 10% to Vilma, bonus to be treated as expense and after salaries and interest
 Balance: 40%:40%:20% to Alma, Vilma and Thelma respectively

17) If the net income of the partnership was P122,000 during the 6-month period ending
December 31, 2020, the total share of Vilma in the partnership income is:
18) If Thelma receives as her share of net income P42,880 for the 6-month period ending
December 31, 2020, the total income realized by the partnership for the same period
before salaries, interest, and bonus was:

PROBLEM 9
Malou and Che formed a partnership on January 2, 2020 and agreed to share income 90% and 10%
respectively. Malou contributed capital of P50,000 while Che contributed her special expertise and
manages the firm full-time. The partnership agreement provides the following:
 Capital accounts are to be credited annually with interest at 5% of the beginning capital
 Che is to be paid a salary of P2,000 per month
  Che is to receive a bonus of 20% of income calculated before deducting bonus, salary and
interest on both capital accounts
 Bonus, interest and salary of Che are to be considered partnership expenses

The results of operation for the year 2020 was a profit of P93,500 computed as follows: Revenue –
P192,900, less Expenses (including salary, interest and bonus) – P99,400
19) The amount of bonus to Che is:
20) The total share of Che on the 2020 partnership net income is:
21) The total share of Malou on the 2020 partnership net income is:

PROBLEM 10
Derha, a senior partner in a law firm, has 30% participation in the firm’s profit and losses. During
2020, Derha withdrew P130,000 against her capital but contributed property with a fair value of
P25,000. Derha’s capital increased by P15,000 during 2020.

22) The net income of the partnership for 2020 is:

PROBLEM 11
Elmo, Fred and Greg invest P40,000, P30,000 and P25,000 respectively, in a partnership on June
30, 2020. They agree to divide net income or loss as follows:

 Interest at 10% on beginning capital account balances

 Salaries of P10,000, P8,000 and P6,000 respectively to Elmo, Fred and Greg
 Remaining net income or loss is divided equally
 A minimum of P18,000 of income is guaranteed to Greg regardless of the results of the
operation

23) If the net income for the year ended June 30, 2020 before interest, and salaries
allowances to partners was P44,000, the amount of the net income credited to Elmo
is:

PROBLEM 12
X, Y and Z are partners with average capital balances during 2020 of P120,000, P60,000 and
P40,000 respectively. Partners receive 10% interest on their average capital balances. After
deducting salaries of P30,000 to X and P20,000 to Y, the residual profit or loss is divided equally.
In 2020, the partnership sustained a net loss of P33,000 before interest and salaries to partners.
24) By what amount should X’s capital account change?

PROBLEM 13
Pixel and Quiel are partners operating a chain of retail stores. The partnership agreement provides
for the following:

Pixel Quiel
Salaries P5,000 P2,500
Interest on capital balance 10% 10%
Bonus 20% of net income before interest but
after bonus and salaries
Remainder 30% 70%

The income summary account for the year shows a credit balance of P25,500 before any deductions.
Average capital balances for Pixel and Quiel are P25,000 and P37,500 respectively.
25) The share of Pixel in the P25,500 net income would be:
26) The share of Quiel in the P25,500 net income would be:

PROBLEM 14
The capital accounts of the Sarah and Opel partnership on January 1, 2020 were: Sarah (75% profit
percentage) – P140,000 and Opel (25% profit percentage) – P60,000. Total capital – P200,000
On October 1, Tina was admitted for a P40% interest in the partnership when she purchased 40% of
each existing partner’s capital for P100,000, paid directly to Sarah and Opel. The partnership net
income for the year is P82,500 and 2/3 of it was earned in the last quarter of the year. Sarah, Opel,
Tina
Determine the capital balances of following after Tina’s admission
partnership
27) Sarah
28) Opel
29) How much will Sarah receive from the above transaction
30) Assume Tina is admitted by investing the P100,000 into the partnership for a 40%
interest, how much is the ending capital balance of Opel after the admission of Tina