Easy

1. On March 1, 20x5, II and JJ formed a partnership with each contributing the following assets:

II JJ
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 P 800,000 which is to be assumed by the partnership
agreement provides that II and JJ share profits and losses 30% and 70%, respectively.
On March 1, 20x5 the balance in JJ’s capital account should be:

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

Answer: D

Source:
Dayag

2. On June 30, 20x5, the balance sheet of Western Marketing, a partnership, is summarized as
follows:
Sundry Assets P 150,000
West, capital 90,000
Tern, capital 60,000
West and Tern share profit and losses at a 60:40 ratio, respectively. They agreed to take in Cuba
as a new partner, who purchases 1/8 interest of West and Tern for 25,000.
What is the amount of Cuba’s capital to be taken up in the partnership books if book value
method is used?

a. P 12,500 c. 25,000
b. 18,750 d. 31,250

Answer: D

Source:
Dayag
 3. On February 1, 2018, Patag Corp. issued 5,000 shares of P100 par convertible preference
shares for P110 per share. One share of preference shares can be converted into 2 shares of
Patag Corp’s P10 par value ordinary shares at the option of the preference shareholder. On
December 31, 2019 when the market value was P40 per share, all of the preference shares were
converted.
What amount should be credited to share premium-preference on February 1, 2018?
a. P500,000
b. 125,000
c. 50,000
d. 0

Ballada

4. The JJJ Corporation has the following classes of share capital outstanding as of December 31,
2014:
Ordinary Share Capital, P20 par value, 20,000 shares outstanding
Preference Share Capital, 6%, P100 par value, cumulative, 2000 shares outstanding

No dividends were paid on preference shares for 2012 and 2013. ON December 31, 2014, a total
cash dividend of P200,000 was declared.

How much dividends will be received by ordinary shareholders?

a. P0
b. 164,000
c. 176,000
d. 188,000

Baysa

Average

1. On January 1, 20x4, Jackson and Kendall formed a partnership. Jackson who has many years of
experience in this line of business, contributed P100,000 in cash. Kendall contributed assets
having the following book values and fair market values:
Book Value Market Value
Merchandise P 15,000 P 25,000
Building 40,000 150,000
Equipment 60,000 85,000
The partnership assumed a mortgage of P40,000 on the building. Capital accounts are set equal
to net assets invested.
The increase in capital of Kendall:
a. None
b. By P100,000
c. By P160,000
d. By P220,000

Dayag
 2. Partner A first contributed P50,000 of capital into an existing partnership on March 1, 20x5. On
June 1, 20x5, the partner contributed another P20,000. On September 1, 20x5, the partner
withdrew P15,000 from the partnership. Withdrawals in excess of P10,000 are charged to the
partner’s capital account. The annual weighted-average capital balance is
a. P62,000
b. 51,667
c. 60,000
d. 48,333

Dayag

3. Scott, Joe, and Ed are liquidating their partnership. At the date the liquidation begins Scott, Joe,
and Ed have capital account balances of P162,000, P192,000, and P215,000, respectively and
the partners share profits and losses 40%, 35%, and 25%, respectively. In addition, the
partnership has a P36,000 Notes Payable to Scott and a P20,000 Notes Receivable from Ed.
When the liquidation begins, what is the loss absorption power with respect to Joe?
a. P192,500
b. 67,375
c. 550,000
d. 770,000

Dayag

4. The shareholders’ equity of Cecille Corp. revealed the following on June 30, 2014:

Preference share, P100 par value P 230,000

Preference share premium 80,500
Ordinary share, P15 par value 525,000
Ordinary share premium 275,000
Ordinary share subscribed 5,000
Retained earnings 190,000
Notes payable 400,000
Subscription receivable - Ordinary 40,000

How much is the legal capital of the corporation?

a. P760,000
b. P775,000
c. P1,115,000
d. P1,305,500

Baysa

Difficult

1. AA, BB and CC are partners with average capital balances during 20x5 of P360,000, P180,000,
and P120,000, respectively. Partners receive 10% interest on their average capital balances.
After deducting salaries of P90,000 to AA and P60,000 to CC the residual profit or loss is divided
equally. In 20x5 the partnership sustained a P99,000 loss before interest and salaries to partners.

By what amount should AA’s capital account change?

a. P21,000 increase-=
 b. 33,000 decrease
c. P105,000 decrease
d. 126,000 increase

Dayag

2. AA, BB, and CC are partners sharing profits in a 5:3:2 ratio, and with a capital balances of
P95,000, P80,000, and P60,000, respectively, on December 31, 20x5. The partners decided to
admit DD as a new partner on January 1, 20x6. DD will contribute cash of P80,000 to the
partnership and also pay P10,000 for 15% of BB’s share. DD is to have 20% share in profits.
After the admission of DD, the total capital will be P330,000 and DD’s capital will be P70,000.

After the admission of DD, BB’s capital balance would be:

a. P72,600
b. 74,600
c. P79,100
d. 81,100

Dayag

3. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The
condensed balance sheet of Heidi Partnership as of December 31, 20x5 is:

Cash P 50,000
Other Assets 130,000
Total Assets P 180,000

Liabilities P 40,000
W, Capital 60,000
X, Capital 40,000
Y, Capital 40,000
Total Liabilities and Capital P 180,000

Assume instead that the Heidi Partnership is dissolved and liquidated by installments, and the
first realization of P40,000 cash is on the sale of other assets with book value of P80,000. After
the payment of liabilities, the available cash shall be distributed to W, X, and Y, respectively, as
follows:
a. P36,000; P27,000; and, P27,000
b. P44,000; P28,000; and, P28,000
c. P16,000; P12,000; and, P12,000
d. P24,000; P13,000; and P13,000

Dayag

4. The shareholders’ equity of NNN Company on December 31,2014 follows:

10% Preference Share Capital, P100 par P 500,000

Ordinary Share Capital, P60 par 3,000,000
Preference Share Premium 50,000
Ordinary Share Premium 250,000
 Retained Earnings 300,000
Total Shareholders’ Equity P 4,100,000
Preference shares are cumulative with dividends in arrears for 5 years at the beginning of 2010
and with a liquidation value of P120.
What is the book value per share of preference share capital?
a. P100
b. P120
c. P170
d. P180

Baysa