Partnership Formation

1. On December 1, 2017, Alas and Tair formed a partnership, agreeing to share for
profits and losses in the ratio of 2:3, respectively. Alas invested a parcel of land
that cost him P25,000. Tair 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 Alas right after formation?
a) P25,000
b) 30,000
c) 60,000
d) 50,000

ANSWER: D

2. On March 1, 2017, Mar and Cus formed a partnership with each contributing the
following assets:

Mar Cus

Cash.. P 300,000 P 700,000

Machinery and equipment. 250,000 750,000
Building. - 2,250,000
Furniture and Fixtures 100,000 -

The building is subject to mortgage loan of P800,000 which is to be assumed by

the partnership agreement provides that Mar and Cus share profits and losses
30% and 70%, respectively. On March 1, 2017 the balance in Cus capital
account should be:

a. P3,700,000
b. 3,140,000
c. 3,050,000
d. 2,900,000

ANSWER: D

3. On March 1, 2017, Mar and Cus formed a partnership with each contributing the
following assets:

Mar Cus

Cash.. P 300,000 P 700,000

Machinery and equipment. 250,000 750,000
 Building. - 2,250,000
Furniture and Fixtures 100,000 -

On March 1, 2017 the balance in Cus Capital account should be:

a) P3,700,000
b) 3,140,000
c) 3,050,000
d) 2,900,000

ANSWER: A

4. On March 1, 2017, Gja and Ya decide to combine their businesses and for a
partnership. Their balance sheets on March 1, before adjustments, showed the
following:
Gja Ya
Cash.. P 9,000 P 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.. P 105,375 P 51,500
Accounts Payable.. P 45,750 P 18,000
Capital.. 59,625 33,500
Total.. P 105,375 P 51,500
They agreed to have the following items recorded in their books:
1. Provide 2% allowance for doubtful accounts.
2. Gjas furniture and fixtures should be P31,000, while Yas office
equipment is under-depreciated by P250.
3. Rent expense incurred previously by Gja was not yet recorded
amounting to P1,000, while salary expense incurred by Ya was not
also recorded amounting to P800.
4. The fair market value of inventory amounted to:
For Gja..P29,500
For Ya... 21,000

Compute the net (debit) credit adjustment for Gja and Ya:

Gja Ya
a. P 2,870 P 2,820
b. (2,870) (2,820)
c. (870) 180
 d. 870 (180)

ANSWER: C

5. On March 1, 2017, Gja and Ya decide to combine their businesses and for a
partnership. Their balance sheets on March 1, before adjustments, showed the
following:
Gja Ya
Cash.. P 9,000 P 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.. P 105,375 P 51,500
Accounts Payable.. P 45,750 P 18,000
Capital.. 59,625 33,500
Total.. P 105,375 P 51,500
They agreed to have the following items recorded in their books:
1. Provide 2% allowance for doubtful accounts.
2. Gjas furniture and fixtures should be P31,000, while Yas office
equipment is under-depreciated by P250.
3. Rent expense incurred previously by Gja was not yet recorded
amounting to P1,000, while salary expense incurred by Ya was not
also recorded amounting to P800.
4. The fair market value of inventory amounted to:
For Gja..P29,500
For Ya... 21,000
Compute the total liabilities after formation:
a. P61,950
b. 63,750
c. 65,550
d. 63,950

ANSWER: C

6. On March 1, 2017, Gja and Ya decide to combine their businesses and for a
partnership. Their balance sheets on March 1, before adjustments, showed the
following:
Gja Ya
Cash.. P 9,000 P 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.. P 105,375 P 51,500
Accounts Payable.. P 45,750 P 18,000
Capital.. 59,625 33,500
Total.. P 105,375 P 51,500
They agreed to have the following items recorded in their books:
1. Provide 2% allowance for doubtful accounts.
2. Gjas furniture and fixtures should be P31,000, while Yas office
equipment is under-depreciated by P250.
3. Rent expense incurred previously by Gja was not yet recorded
amounting to P1,000, while salary expense incurred by Ya was not
also recorded amounting to P800.
4. The fair market value of inventory amounted to:
For Gja..P29,500
For Ya... 21,000
Compute the total assets after formation:
a. P157,985
b. 156,875
c. 160,765
d. 152,985

ANSWER: A

7. Vinh, Marcus and Alastair are partners with capital balances on December 31,
2017 of P300,000 P300,000 and P200,000, respectively. Profits are shared
equally. Alastair wishes to withdraw and it is agreed that Alastair is to take certain
equipment with second-hand value of P50,000 and a note for the balance of
Alastairs interest. The equipment are carried on the books at P65,000. Brand
new equipment may cost P80,000. Compute for Alastairs acquisition of the
second-hand equipment will result to reduction in capital:
a) P15,000 each for Vinh and Marcus
b) P5,000 each for Vinh, Marcus and Alastair
c) P10,000 each for Vinh, Marcus and Alastair
d) P7,500 each for Vinh and Marcus

ANSWER: B

8. Vinh, Marcus and Alastair are partners with capital balances on December 31,
2017 of P300,000 P300,000 and P200,000, respectively. Profits are shared
 equally. Alastair wishes to withdraw and it is agreed that Alastair is to take certain
equipment with second-hand value of P50,000 and a note for the balance of
Alastairs interest. The equipment are carried on the books at P65,000. Brand
new equipment may cost P80,000. Compute for the value of the note that will
Alastair get from the partnerships liquidation.
a) P150,000
b) 145,000
c) 195,000
d) 165,000

ANSWER: B

9. Wer admits Pa as a partner in business. Accounts in the ledger for Wer on

November 30,2017, just before the admission of Pa, show the following
balances:

Cash P 6,800
Accounts receivable 14,200
Merchandise inventory 20,000
Accounts payable 8,000
Wer, capital 33,000

It is agreed that for purposes of establishing Wers interest, the following

adjustments shall be made:

a) An allowance for doubtful accounts of 3% of accounts receivable is to be

established.
b) The merchandise inventory is to be valued at P23,000.
c) Prepaid salary expenses of P600 and accrued rent expense of P800 are
to be recognized.

Pa is to invest sufficient cash to obtain a 1/3 interest in the partnership. Compute

for Wers adjusted capital before the admission of Pa:

a. P 35,347
b. 36,374
c. 35,374
d. 28,174

ANSWER: C

10. Wer admits Pa as a partner in business. Accounts in the ledger for Wer on
November 30,2017, just before the admission of Pa, show the following
balances:
 Cash P 6,800
Accounts receivable 14,200
Merchandise inventory 20,000
Accounts payable 8,000
Wer, capital 33,000

It is agreed that for purposes of establishing Wers interest, the following

adjustments shall be made:

a) An allowance for doubtful accounts of 3% of accounts receivable is to be

established.
b) The merchandise inventory is to be valued at P23,000.
c) Prepaid salary expenses of P600 and accrued rent expense of P800 are
to be recognized.
Pa is to invest sufficient cash to obtain a 1/3 interest in the partnership. Compute
for the amount of cash investment by Pa:
a. P11,971
b. 18,487
c. 17,687
d. 14,087

ANSWER: C