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Review On Partnership

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quintanamarfrancis
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22 views2 pages

Review On Partnership

Uploaded by

quintanamarfrancis
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 PDF, TXT or read online on Scribd
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SPECIAL LECTURE ON PARTNERSHIP ACCOUNTING

1. The statement of financial position of KTV Partnership prior to liquidation is as follows:

ASSETS LIABILITIES AND EQUITY


Cash P 75,000 Accounts payable P 105,000
Other assets 210,000 Loan - K 30,000
Loan - V 15,000 K, capital 45,000
T, capital 75,000
V, capital 45,000
____________ ____________
Total P300,000 Total P300,000

The partners share profits and losses in the ratio of 5:3:2, respectively. Other assets were sold for
P75,000. The P105,000 outside liabilities were paid, and liquidation expenses of P12,000 were
incurred and paid.

In addition, the value of partners’ personal assets and liabilities as of that date were as follows:

K T V
Personal assets P 35,000 P50,000 10,000
Personal liabilities 21,000 19,000 15,000

a) How much cash should T receive?


b) Assuming V received a total of P18,000 and all of the partners are personally solvent, how
much is the amount of gain (loss) on realization of other assets?
c) In connection with the preceding question, how much be realized from the sale of the
firm’s other assets?

2. The partnership’s statement of financial position as of July 31, 2024 are as follows:
Cash P 30,000 Accounts payable P 65,000
Accounts receivable 140,000 Loan from P 15,000
Inventory 200,000 C, Capital (40%) 315,000
Equipment 500,000 P, Capital (30%) 250,000
A, Capital (30%) 225,000
Total P870,000 Total P870,000

Additional information:
A. On July 31, 2024, the partners agreed to adjust the inventory and equipment to its current fair
value of P230,000 and P460,000, respectively.
B. As of July 31, 2024, the income summary account has a debit balance of P52,000.

Determine the capital balance of Partner A on August 1, 2024 under each INDEPENDENT
assumption:
a) On August 1, 2024, the partners decided to admit B to the partnership. Partner C and A
decided to sell to Partner B 1/3 of their respective capital and profit and loss interests for
a total payment of P200,000.
b) On August 1, 2024, the partners decided to admit B to the partnership. B invests P400,000
for a one-fourth interest. The partners agreed to have a total capital of P1,250,000 after
B’s admission. In addition, a revaluation of the partnership assets shall be recognized.
c) On August 1, 2024, Partner P decided to retire from the partnership. C and A agreed that
the partnership will pay P cash of P195,000 for his partnership interest including his loan.
The bonus method is used to account for the retirement.

Prepared by: Bernard Rodney D. Alvarez, CPA, CAT, CTT, CB, RCA, MICB, MRITax
3. Roger admits Stephen as a partner in business. Just before the partnership’s formation, Roger and
Stephens’s books showed the following balances:

Roger’s Books Stephen’s Books


Cash P120,000 P90,000
Accounts receivable 50,000 70,000
Merchandise inventory 70,000 65,000
Office equipment (net) 45,000 50,000
Furniture and fixtures (net) 25,000 30,000
Accounts payable 65,000 55,000
Notes payable 15,000 10,000

It was agreed that the following adjustments have to be reflected:


• Allowance for doubtful accounts of 3% on both books of the partners should be set up.
• Roger’s inventories of P5,000 were already worthless and needs to be written-off while Stephen’s
inventories have a net realizable value of P62,000.
• Roger’s office equipment is under-depreciated by P5,000 while Stephen’s office equipment is
undervalued by P4,000.
• Roger’s furniture and fixtures is over-depreciated by P2,000 while Stephen’s furniture and
fixtures is overvalued by P3,000.
• A prepaid rent of Roger amounted to P8,000 and accrued salaries expense of Stephen for P3,000
should be recognized.

The partners agreed that upon formation, they will reflect their capital balances in the partnership
books in conformity of their profit and loss ratio of 2:3.

a) What is the adjusted capital of Stephen upon partnership formation?


b) Assuming bonus method was used, what is the capital of Stephen?
c) Assuming the partners agreed that their capital upon formation must be in conformity
with their P/L ratio, what is the capital of Roger?

4. The capital accounts of Dawn and Calem shows the following information for the year 2024:

Dawn Calem
January 1 250,000 180,000
February 28 15,000
April 1 (permanent) (15,000)
May 1 30,000
July 31 (temporary) (21,000) (18,000)
September 1 9,000
October 30 (permanent) (12,000)
December 31 21,000

The income summary account shows a credit balance of P450,000 on December 31, 2024. The profit
and loss of the partnership shall be distributed in the following manner:
• Monthly salary of P8,000 and P12,000 to Dawn and Calem, respectively.
• Interest of 15% to the partners based on their weighted average capital in excess of P100,000.
• Bonus to Dawn of 10% on net income after salaries, interest and bonus.
• Remaining profit will be divided based on a 3:2 ratio.

a) How much is the total share of Dawn in the partnership profit?


b) What is the capital balance of Calem as of December 31, 2024?

-end-

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