4. As of December 31, 2021, the books of TWO partnership showed capital MOCK EXAM (2021) Part 1 balances of: Tim — P40,000, Wina — P25,000; and Oca — P5,000. The partners’ profit and loss ratio were 3: 1, respectively. The partners decided to liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities amounting to P12,000, they still have cash of P28,000 left for debit balance is uncollectible, the share of Tim in the distribution of P28,000 cash would be? a. 17,800 b. 18,000 ©. 17,000 d. 19,000 "CASH | NCA | LIABILITIES] TIM WINA | OCA Pal 3 2 4 Ending | 5,000 | 78,000 72,000 40,000 | 25,000 | 5,000 Balances Sale of | 37,000 | (79,000) (21,000) | (14,000) | (7,000) non-cash Total__| 40,000 = 12,000 19,000 | 14,000 | (2,000) Payment | (12,000) (12,000) | 49,000 | 14,000 | ~(2,000) of liabilities Total__| 28,000 : 19,000 | 41,000 | (2,000) (7,200) | (800) | 2,000 Total 17,800 | 10,200 > 2. X and Y are partners in a firm with capitals of P 18,000 and P 20,000, respectively. Z was admitted for 1/3 share in profits and brings P 34,000 as capital. Calculate the amount of goodwill. * a, P 24,000 b.P 30,000 c.P 10,000 .P 15,000AC cc ‘Goodwill __ 68,000 38,000 30,000 | 34,000 34,000 402,000 I 72,000 t 30,000 3. Kand L are equal partners. They admitted M for a 1/4 share in future profits. New profit-sharing ratio will be * a. 2:2:2 b.3:3:1 ¢.3:3:2 d equally Answer: M= 1/4 , to bring the hundred percent share, it should be 4/4. So, the remaining percentage is 3/4 , to get the new profit sharing ratio is as follows: 4. May, June and July are partners with average capital balances during 2021 of 120,000 P60,000 and P40,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P30,000 to May and P20,000 to July, the residual profit and loss is divided equally. In 2021, the partnership sustained a P33,000 loss before interest and salaries to partners. By what amount should May's capital account change? * ‘A. P'7,000 increase B. P 11,000 decrease C. P 35,000 decrease D. P 42,000 increaseAnswer: May June July Total interest on capital (10%) 120,000 x 10% P 12,000 60,000 x 10% P6000 I 40,000 x 10% P 4,000 P 22,000, Salaries 30,000 20,000 50,000 Total P 42,000 P 6,000 P 24,000, P 72,000 Residual (85,000) (5,000) (85,000) (705,000) Loss 7,000 (23,000) (47,000) (33,000) 5. Aand B formed a partnership. The partnership agreement stipulates the following: (1) Annual salary allowaiices.of P 80,000 for A and P 40,000 for B; and (2) the partners share in profits and losses equally. The partnership earned profit of P 100,000 after salaries. How much is the share of B? * A. P90,000 B.P 30,000 C.P70,000 —D. P.40,000 Solution: A B Total Salaries 80,000 ‘40,000 120,000 Residual 50,000 50,000 100,000 Total “ 130,000 90,000 220,000 | 6. Under the partnership agreement, Rina 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 Tina and Unna, and 30% to Vina. If the partnership's income is P318,000, Tina's share would be * A. P79,500 B, P_92,750 C. P 132,500 D. P 145,750Solution: Rina Tian Unna Vina Total Bonus 53,000 P 53,000 Residual 92,750 92,750 79,500 265,000 Total 53,000 | P92,750 | P92,750 | 79,500 318,000 7. Lindsey and Ruth are partners with capital balances of P 60,000 and P. 20,000, respectively. Profits and losses are divided in the ratio of 6:4. Lindsey and Ruth decided to form a new partnership with Jobelle, who invested land valued at P 15,000 for a 20% capital interest in the new partnership. Jobelle's cost of the land was P 12,000. What is the capital balance of Lindsey after the admission of Ruth? * A. P60,000 B.P.57,600 C.P62,400 —D. 45,600 Solution: AC cc Total Old 76,000 80,000 (4,000) New 19,000 45,000 4,000 Total P 95,000 P 95,000 Bonus allocation: Lindsey = (4,000) x 60% = (2,400) Ruth = (4,000) x 40% = (1,600) Lindsey, Capital 30,000 - 2,400 = P57,600 Ruth, Capital = 20,000 - 4,600 = P18,4008. As of December 31, 2021, the books of TWO partnership showed capital balances of: Tim - P 40,000, Wina - P 25,000, and Oca - P5,000. The partners’ profit and logs ratio were 3:2:1, respectively. The partners decided to liquidate and they sold all non-cash assets for P 37,000. After settlement of all liabilities amounting to P 12,000, they still have cash of P 28,000 left for distribution. Assuming that any capital debit balance is uncollectible, the share of Tim in the distribution of P 28,000 cash would be: * A. P 17,800 B.P 18,000 c.P 17,000 —_D. P 19,000 ~ | Cash [NCA Tim | Wina Oca Pal | | 3 2 4 Ending | 3,000 | 78,000 | 12,000 | 40,000 | 25,000 | 5,000 Balances | Sale of | 37,000 | (78,000) (21,000) | (14,000) | (7,000) Non-cash | Balance | 40,000 | - 72,000 | 19,000 | 17,000 | (2,000) | Payment of | Liabilities | (12,000) | 12,000 Total | 28,000 19,000 | 17,000 | (2,000) | | (4,200) | (800) | 2,000 [Gash 28,000 17,800 | 10,200 ~ Distribution | Red, White, and Blue form a partnership on May 1, 2021. They agree that Red will contribute office equipment with a total fair value of P 40,000; White will contribute delivery equipment with a fair value of P 80,000; and Blue will contribute cash. If Blue want a one third interest in the capital and profits, he should contribute cash of: * A. P 120,000 —_—B. P. 180,000 & P.60,000 D. P 40,000Solution: ~ [Red White [Blue Cash 60,000 Office Equipment _| 40,000 | Delivery 80,000 Equipment Contribution 40,000 80,000 [60,000 Red and White Capitals = 120,000/ 2/3 Cash contribution of blue = 180,000 x 1/3 =P 60,000MOCK EXAM (2021) Part 2 4. Partners DD, EE, FF, and GG share profits 50%, 30%, 10% and 10%, respectively. Accounts maintained with partners just prior to liquidation were as follows: ‘Advances Loans Capitals (Dr. Balances) (Cr. Balan (Cr. Balances) DD P 5,000 P 40,000 EE 70,000 30,000 FF 4,500 75,000 GG 2,500 25,000 At this point, cash of P18,000 is available for distribution to the partners. How much of the P18,000 cash should be distributed to each partner? A. DD, P9,000; EE, P 5,400; FF, P1,800; GG, P1,800 B. DD, P -0. D. DD, P-0-; EE, P 6,625; FF, -0-; GG, P 11,375Answer: : A. DD, P9,000; EE, P 5,400; FF, P1,800; GG, P 1,800 Since there is no other condition as to profit sharing, the 18,000 will be distributed per the agreed % sharing. 2. Carlo and Tyron are partners in a trading company. During 2021, they withdrew their salary allowances of P200,000 and P300,000, respectively. Profits and losses are shared in the ratio of 3:2. The income summary account before any profit allocation has a credit balance of P600,000. The partners’ capital account shows the following: Carlo Tyron Beginning Balance P 600,000 P 400,000 ‘Additional Investment 700,000 200,000 Withdrawal other than (200,000) (100,000) salary allowance What are the capital balances of the partners for the year 2021 after closing Income Summary and the Withdrawal accounts? Answer: Step 1: Find their share in Net Income Salaries Remaining (according to P/L ratio) 3/5: 215: Carlo Tyron Total Salaries 200,000 300,000 500,000 Remaining 80,000 40,000 260,000 340,000, 600,000 Step 2: Distribute the share in Net Income the deduct their salaries withdrawal Cario TyronBeginning Balances 600,000 ‘400,000 I ‘Additional Investments 100,000 200,000 Withdrawals other than (200,000) (100,000) salary allowances Share in Net income 260,000 340,000 Withdrawal of Salaries (200,000) (300,000) Capital Balances, after P 560,000 P 540,000 closing 3. assume that Jose has been operating a retail store for a number of years. A statement of financial position on July 1, 2020 is prepared for Jose Company as follows: ‘JOSE COMPANY ‘Statement of Financial Postion ‘aly 04, 2020 ASSETS Jcash P 60,000) ‘Accounts Receivable +50,000|(S, Inventory 70,000) Equipment 40.000 Less: Accumulated Depreciation __ 4,000 Total Assets LIABILITIES AND CAPITAL Accounts Payable Jose, Capital Total Liabities and Capital Jose needs additional capital to meet the increasing sales and offers Pedro an interest in the business. Jose and Pedro agree to form a partnership to be known as JP Partnership. Jose's business is audited and its net assets are appraised. The audit and appraisal show the following: Allowance for bad debts of P5,000 is to be provided. Inventory is to be recorded at its market value of P80,000 ‘The equipment has a fair value of P35,000. Accounts payable has not been recorded, P2,000.Answer: of the partnership are: 2020 July 1 Inventory Using the above procedures, the journal entries to record the formation eee eS | | ‘ecummulated Depreciation — Equipment | | Equipment ‘Allowance for Bad Debts ‘Accounts Payable ‘Jose, Capital Cash Pedro, Capital Using the above procedures, the joumal entries partnership are: (Sole Proprietorship) Books of Jos record the formation of the 2019 July 1_ Inventory 40,000 ‘Accumulated Depreciation — Equipment 4,000 Equipment 3,000 ‘Allowance for Bad Debts ‘Accounts Payable 2,000 Jose, Capital 2,000 Accounts Payable 88,000 ‘Allowances for Bad Debis 3,000 Jose, Capital 732,000 Cash 0,000 ‘Accounts Receivable 50,000 Tnventory 50,0007 Equipment 36,000, New Books of the Partnership 2015 July 1 e Cash 760,000 ‘Accounts Receivable 30,000 Taventory 0,000 Equipment 35,000 ‘Recounts Payable 38,000 ‘Allowance for Bad Dabs Jose, Capital Pedro, Capital 00074. Assume that Partners A and B each report a Capital Account of 300,000. Partner C wants to join the partnership as an equal one-third partner. Because the partnership has been very profitable, Partners A and B Tequire Partner C to contribute 600,000 in cash to the partnership in Feturn for a one-third interest. Assume that Partners A and B share profits 60% and 40%, respectively, prior to the admission of Partner C. After admission of Partner C, Partners A and B retain their relative proportion of profit allocation after granting Partner C a 30% profit-allocation interest. Required: Use the Bonus Method to record the journal entry on the books of the partnership to reflect the admission of Partner C. Answer: AC cc BONUS Old 800,000 600,000 200,000 New 400,000 600,000 (200,000) Total 1,200,000 1,200,000 | Allocation of bonus to old partners: A= 200,000 x 60%= 120,000 = 200,000 x 40%= 80,000 Entry: Cash 600,000 A, Capital 120,000 B, Capital 80,000 C, Capital i 400,000