Mabini Colleges, Inc.

Daet, Camarines Norte

College of Business Administration and Accountancy
ADVANCED ACCOUNTING PART 1
Accounting 8a
1. On December 01, 2012. EE and FF formed a partnership, agreeing to
share for profits and losses in the ratio of 2:3 respectively. EE
invested a parcel ofland that cost him P25,000. FF 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 EE right after formation of the partnership.
a. P25, 000 b.30,000 c. P60,000 d. 50,000
2. On March 01, 2012, II and JJ formed a partnership with each
contributing the following asset:

II JJ
Cash…………………………………………………………. P300, 000 P700, 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
consumed by the partnership agreement provides that II and JJ share profits
and losses 30% and 70% respectively. On March 1, 2012the balance in JJ’s
capital account should be:
a. P3,700,000 b. 3,140,000 c. P3,050,000 d. 2,900,000
3. The same information in number 2, except that the mortgage loan is not
assumed by the partnership. On March 1, 2012 the balance in JJ’s
capital account should be:
a. P3,700,000 b. 3,140,000 c. P3,050,000 d. 2,900,000
4. As of July 01, 2012, FF and GG decided to form a partnership. Their
balance sheets on this date are:

FF GG
Cash…………………………………………………………………………… P 15,000 P 37,000
Accounts Receivable…………………………………………………. 540,000 225,000
Merchandise Inventory…………………………………… __ 202,000
Machinery and Equipment………………………………………. 150,000 270,000
Total……………………………………………………………. P705,000 P735,000

Accounts Payable……………………………………………………. P 135,000 P240,000

FF Capital……………………………………………………………….. 570,000
GG Capital………………………………………………………………. __ 495,000
Total……………………………………………………………………….. P705,000 P735,000
The partners agreed that the machinery and equipment of FF is under
depreaciated by P15,000 and that of GG by P45,000. Allowance for doubtful
accounts is set up amounting to P120,000 for FF and 45,000 for GG. The
partnership agreement provides for a profit and loss ratio and capital
interest of 60 % to FF and 40% to GG. How much cash must FF invest to bring
the partner’s capital balances proportionate to their profit and loss ratio:
a. P142,500 b. 52,500 c.P172,500 d. 102,500

5. On August 1, AA and BB pooled their assets to form a partnership, with

the firm to take over their business assets and assume the
liabilities. Partner’s capitals are to be based on net assets

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

transferred after the following adjustments. (Profit and Losses are

allocated equally.) BB’s inventory is to be increased by P4,000; an
allowance for doubtful accounts of P1,000And P1,500 are to be set up
in the books of AA and BB, respectively; and accounts payable of
P4,000 is to be recognized in AA’s books. The individual trial
balances on august 1, before adjustments, follow:

AA BB
Assets………………………………………………………………………… P75,000 P113,000
Liabilities……………………………………………………………………. 5,000 34,500
What is the capital of AA and BB after the above adjustments?
a. AA,P68,750; BB, P77,250 c. AA, P65,000; BB, P76,000
b. AA, P75,000; BB, P81,000 d. AA, P65,000; BB, 81,000
6. CC admits DD as a partner in business. Accounts in the ledger for CC
on November 30, 2012, just before the admission of DD, show the
following balances:
Cash………………………………………………… P 6,800
Accounts Receivable…………………………. 14,200
Merchandise Inventory…………………… 20,000
Accounts Payable……………………………… 8,000
CC, Capital………………………………………… 33,000
It is agreed that the purposes of establishing CC’s interest, the following
adjustments shall be made:
(a) An allowance for doubtful accounts of 3percent 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.
DD is to invest sufficient cash to obtain a 1/3 interest in the partnership.
Compute for: (1) CC’s adjusted capital before the admission of DD; and (2)
the amount of cash investment by D
a. (1) P35,347; (2) P11,971 c. (1) P35,374 (2) P 17,687
b. (1) P36,374; (2) P 18,487 d.(1) P28,174 (2) P 14,087
7. MM, NN and OO are partners with capital balances on December 2012 of
P300,000, P300,000 and P200,000 respectively. Profits are shared
equally. OO wishes to withdraw and it is agreed that OO is to take
certain equipment with second hand value of P50,000 and a note for a
balance of OO’s interest. The equipment are carried on the books at
P65,000. Brand new equipment may cost P80,000. Compute for: (i) OO’s
acquisition and second hand equipment will result to reduction in
capital: (2) the value of the note that will OO get from the
partnership’s liquidation.
a. (1) P15,000 each from MM and NN (2) P150,000
b. (1) P 5,000 each for MM, NN and OO (2) P 145,000
c. (1)P 5,000 each for MM, NN and OO (2) P195,00
d. (1)P 7,500 each for MM and NN (2) P 145,000
8. Jane sans Smith formed a partnership with each partner contributing
the following items:

Jones Smith
Cash………………………………………………………… P 80,000 P 40,000

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

Building-cost for Jones…………………………….. 300,000

-fair value………………………………………………. 400,000
Inventory-costtoSmith…………………………… 200,000
-fairvalue……………………………………………. 280,000
Mortgage payable…………………………………… 120,000
AccountsPayable…………………………………….. 60,000
Assume that for tax purposes Jones and Smith agree to share equally in the
liabilities assumed by the Jones and Smith partnership. What is the balance
in each partner’s capital account for financial accounting purposes:
Jones Smith
A. P350,000 P270,000
B. P260,000 P180,000
C. P360,000 P260,00
D. P500,000 P300,00
a. Option A b. Option B c. Option C d. Option D

9. The business assets of LL and MM appear below:

LL MM
Cash………………………………………………………………… P 11,000 P 22,354
Accounts receivable…………………… 234,536 567,890
Inventories………………………………………………… 120,035 260,102
Land………………………………………………………………… 603,000
Building………………………………………………………....... - 428,267
Furniture and Fixtures……………… 50,345 4,789
Other Assets………………………………………… 2,000 3,600
TOTAL…………………………………. P1,020,916 P1,317,002
Accounts Payable……………………………………………P 178,940 P 243,650
Notes Payable………………………………………… 200,000 345,000
LL. Capital……………………………………………………….. 641,976 -
MM, Capital………………………… - 728,352
TOTAL………………………………… P1,020,916 P1,317,002
LL and MM agreed to form a partnership by contributing their respective
assets and equities subject to the following adjustments:
a. Accounts receivable of 20,000 in LL’s books and 35,000 in MM’s
respective books.
b. Inventories of 5,500 and 6,700 are worthless in LL’s and MM’s
respective books.
c. Other assets of 2,000 and 3,600 in LL’s and MM’s respective books are
to be written off.
The capital account of the partners after the adjustments will be:
a. LL, P615,942; MM, P17, 894
b. LL, P640,876; MM, P712,345
c. LL, P640,876; MM, P683,050
d. LL, P614,476; MM, P683,052

10. The same information in number 9, how much total assets does the
partnership have after formation:
a. P2,2337,918 c. P 2,265,118
b. P 2,237,918 d. P 2, 365,218

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

11. On March 01, 2012, PP and QQ decide to combine their businesses and form
a partnership. Their balance sheets on March 01, before adjustments, showed
the following
PP QQ
Cash……………………………….. P 9,000 P 3,750
Accounts Receivable……….. 18,500 13,500
Inventories………………………. 30,000 19,500
Furniture and Fixtures……… 30,000 9,000
Office Equipment……………… 11,500 2,750
Prepaid Expenses…………….. 6,375 3,000
TOTAL……. P 105,375 51,500
They agreed to have the following items recorded in their books:
1. Provide 2 percent allowance for doubtful accounts.
2. PP’s furniture and fixtures should be P 31,000 while QQ’s office
equipment is under depreciated by P 250
3. Rent expense incurred previously by PP was not yet recorded amounting
to P 1,000, while salary expense incurred by QQ was not also recorded
amounting to P 800.
4. The fair mark value of the inventory amounted to:
For PP…………………P 29,500
For QQ…………………P 21,000
Compute the net (debit) credit adjustment for PP and QQ:
PP QQ PP QQ
a. P2,870 P2,820 c. P(870) P180
b. (2,870) (2,820) d.870 (180)

12. The same information in number 11, compute the total liabilities after
formation:
a. P61, 950 c. P65,550
b 63, 750 d. 63,950
13. The same information in number 11, compute the assets after formation:
a. P157,985 c. P160,765
b. 156,875 d. 152,985
14. On April 30, 2012 , XX, YY and ZZ formed a partnership by combining
their separate business proprietors. XX contributed cash of P 75,000. YY
contributed property with P 54,000, carrying amount, a P 60,000 original
cost and !20, 000 fair value. The partnership accepted the responsibility
for the P 52,500 mortgage attached to the property. ZZ contributed equipment
with a P 45,000 carrying amount, a P 112, 500 original cost, and P 82,000
fair value. The partnership agreement specifies that profits and losses are
to be shared equally but is silent regarding capital contributions. Which
partner has the largest April 30,2012, capital balance?
a. XX c. YY
b. ZZ d. all capital account balances are equal

15. JJ and KK are partners share profits and losses in the ratio of 60
percent and 40 percent respectively. JJ’s salary is P60,000 and P30,000 for
KK. The partners are also paid interest on their average capital balances.
In 2012 JJ received P30,000of interest and KK, P12,000. The profit and loss
allocation is determined after the deductions for the salary and interest
payments. If KK’s share in the residual income (income after deducting

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

salaries and interest) was P60,000 in 2012, what was the total partnership
income?
a. P192,000 c. P282,000
b. 345,000 d. 387,000
16.The partnership agreement of RR and SS provides that’s interest at 10%
per year is to be credited to each partner on the basis of weighted-average
capital balances. A summary of a capital account of SS for the year ended
December 31, 2012, is as follow:
Balance, January 1 ……………………………………………………………. P 420, 000
Additional investments, July 1……….…………………………………… 120, 000
Withdrawal, August 1………………………………………………………... (45, 000)
Balance, December 31………………………………………………………… 495, 000
What amount of interest should be credited to SS’s capital account for 2012?
a.P45,750 c. P46,125
b. 49,500 d. 51,750

17. AA, BB and CC are partners who average capital balances during 2012 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 are divided
equally. In 2012 the partnership sustained a P99, 000 loss before interest
and salaries to partners. In what amount should AA’s capital account change.
a. P21,000 increase c. P105,000 decrease
b. 33,000 decrease d. 126,000 increase

18.AA and DD create a partnership to own and operate a health-food store.

The partnership agreement provide that AA receive a salary of P10, 000 and
DD a salary of P5, 000 to recognize their relatives time spend in operating
the store. Remaining profits and losses were divide 60:40 to AA and DD,
respectively. Income for 2012, the first year of operations, of P13, 000
was allocated P8, 800 to AA and P4, 200 to DD.
On January 1, 2013, the partnership agreement was changed to reflect on the
fact that DD could no longer devote any time to the store’s operation. The
new agreement allows AA a salary of P18, 000, and the remaining profits and
losses are divided equally. In 2013 an error was discovered such that 2012
reported income was understated by P4, 000 related to year 2012.
In the reported net income of P25, 000 for the year 2013, AA and DD would
have:
AA DD AA DD
a. P21,900 P 3,100 c. P 0 P 0
b. 17,100 17,100 d. 12,500 12,500

19.On January 1, 2012, DD and EE decided to form a partnership. At the end

of the year, the partnership made a net income of P120, 000. The capital
accounts of the partnership show the following transactions:
DD, capital EE, Capital
Dr. Cr. Dr. Cr.
January 1……………………- P40,000 - P25, 000
April 1……………………P5, 000 - - -
June 1………………………… - - - 10, 000
August………………………….- 10, 000 - -

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

September……………………- - P3,000 -
October………………………- 5, 000 1, 000 -
December……………………- 4, 000 - 5, 000
Assuming that an interest of 20% per annum is given an average capital and
the balance of profits is allocated equally, the allocation of profit should
be:
a. DD, P60,000; EE. 59,400 c. DD, P67,000; EE. 52,800
b. DD, P61,000; EE,59, 400 d.DD, P68,000; EE, 51,200

20.The partnership of DD and BB was formed and commenced operation on March

1, 2011, with DD contributing P30, 000 cash and BB investing cash of P10,
000 and equipment with an agreed upon valuation of P20, 000. On July 1,
2011, BB invested an additional P10, 000 in the partnership, DD made a
capital withdrawal of P4, 000 on May 2, 2011 but reinvested the P4, 000 0n
October 1, 2011. During 2011, DD withdrew P800 per month and BB, the
managing partner, withdrew P1,000 per month. These drawing were charge to
salary expense. A preclosing trial balance taken at December 31, 2011 is as
follows:
Debit Credit
Cash………………………………………………………………… P9, 000
Receivable-net…………………………………………………. P15, 000
Equipment-net…………………………………………………. 50, 000
Other assets……………………………………………………... 19, 000
Liabilities…………………………..…………………………….. P17, 000
DD, capital………………………………………………….…….. 30, 000
BB, capital………………………………………………………… 40, 000
Service Revenue……………………………………………. 50, 000
Supplies expense………………………………………….. 17, 000
Utilities expense…………………………………………… 4, 000
Salaries to partners……………………………………… 18,000
Other Miscellaneous Expenses……………………… 5,000
TOTAL……………. P137,000 P137,000
Compute for the share of DD and BB in the partnership net income assuming
monthly salary allowances P800 and P1000 for DD and BB respectively.
Interest allowance at 12%annual rate an average capital balances: remaining
profits allocated equally.
a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200
b. DD, P12,000; BB, 12,000 d. DD, P10,600, BB,P13,400

21. AA and BB formed a partnership in 2012 and made the following investment
and capital withdrawals during the year:
AA BB
INVESTMENTS DRAWS INVESTMENTS DRAWS
March 1…… 30,000 P20,000
June 1 P10,000 P10,000
August 1………………… 20,000
December 1 5,000 2,000
The partnership profits and losses agreement provides for a salary of
which P30,000 was paid to each partner for 2012 . AA is to receive a bonus
of 10% on net income after salaries and bonus . The partners are also to
receive interest of 8% on average annual capital balances affected y both

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

investments and drawings . Any remaining profits are to be allocated equally

among the partners. Assuming net income is P60,000 before salaries and
bonus, determine how the income would be allocated among the partners:
a. AA,P31,138; BB P28,862 c. AA, P30,633; BB, 29,367
b. AA, P33,537; Bb. P 26,463 d. AA, P 30,684; BB, 29,316

22. Partner A first contributed P50,000 of capital into existing partnership

on March 1,2012. On June 1,2012 the partner contributed another P20,000 . On
September 1, 2012 the partner withdrew P15,000 from the partnership.
Withdrawal in excess of P10,000 are charged to the partner’s capital
account. The annual weighted average capital balance is:
a. P62,000 c. P 60,000
b. 51,667 d. 48,333
23. WW and RR share profits and losses equally. WW and RR receive salary
allowances of P20,000 and P30,000, respectively, and both partners receive
10% interest on their average capital balances. Total net income for 2011 is
P120,000.

WW RR
January 1 capital balances………………………P100,000 P120,000
Yearly drawings (1,500 a month)……………18,000 18,000
Permanent withdrawals of capital………….
June3…………………………………… (12,000)
May2…………………………………… (15,000)
Additional investments of capital:
July………………………………………. 40,000
October………………………………… 50,000

What is the weighted average capital for WW and RR respectively for 2011?
a.P110,667 and P119,583 c. P100,000 and 200,000
b.P105,333 and 126,667 d. P126,667 and 105,333

24. HH, MM and AA formed a partnership on January 1, 2011 and contributed

P150,000, P200, 000, P250, 000, respectively. Their articles of co-
partnership provide that the operating income be shared among the partners
as follows: as salary, P24, 000 for HH, P18, 000 for MM, and P12, 000 for
AA; interest of 12% on the average capital during 2011 of three partners;
and the remainder in the ratio of 2:4:4, respectively. The operating income
for the year ending December 31, 2011 amounted to P176, 000. HH contributed
additional capital of P30, 000 on July 1 and made a drawing of P10, 000 on
October 1; MM contributed additional capital of P20, 000 on August 1 and
made a drawing of P10, 000 on October 1; and, AA made a drawing of P30, 000
on November 1.
The partners’ capital balances on December 31, 2011, are:
a. HH,P179,680; MM,P229,360; and AA, P239,360
b. HH,P179,760; MM,P229,520; and AA,P239, 520
c. HH,P189,680; MM,P229,360; and AA,P239,360
d. HH,P223,180; MM,P272,060; and AA,P280,760

25. Merlin, a partner in the Camelot partnership, has a 30% participation in

partnership profits and losses. Merlin’s capital account has a net decrease

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

of P1, 200, 000 during the calendar year 2011. During 2011, Merlin withdrew
P2, 600, 000 (charged against his capital account) and contributed property
valued at p500, 000 to the partnership. What was the net income of the
Camelot partnership for year 2011.
a. 3,000,000 c. P, 7,000,000
b.4,667,667 d. 11,000,000

26.On January 2, 2011, BB and PP formed a partnership. BB contributed

capital of P175, 000 and PP, P25, 000. They agreed to share profits and
losses 80% and 20%, respectively. PP is the general manager and works and
the partnership full time and is given a salary of P5, 000 a month; an
interest of 5% of the beginning capital (of both partner) and a bonus of 15%
of net income before the salary, interest, and the bonus.
The profit and loss statement of the partnership for the year ended
December 31, 2011, is as follows:
Net sale……………………………………………………………… P875, 000
Cost of good sold………………………………………………... 700, 000
Gross profit……………………………………….. 175, 000
Expense (including the salary, interest and the bonus 143, 000
The amount of bonus to PP in 2011 amounted to:
a. P13,304 c. P18,000
b, 16,456 d. 20,700

27.On January 1 2012, A, B, C and D formed Bakya Trading Co., a partnership,

with capital contributions as follows: A, P50, 000; B, P25, 000; C P25, 000;
and D P20, 000. The partnership contract provided that each partner shall
receive a 5% interest on contributed capital, and that A and B shall receive
salary of P5, 000 and P3, 000, respectively. The contract also provided that
C shall receive a minimum of P2, 500 per annum, and D a minimum of P6, 000
per annum, which is inclusive in amounts presenting interest and share of
remaining profits. The balance of the profit shall be distributed to A, B,
C, and D in a 3:3:2:2 ratio. What amount must be earned by the partnership,
before any charge for interest and salaries, so that A may receive an
aggregate of P12, 500 including interest, salary, and share of profits?
a. P16,667 c. P30,667
b. 30,000 d. 32,333

28. AA, BB and CC are partners with average capital balance during 2011 of
P472, 500, P238, 650, and P162, 350, respectively. The partners receive 10%
interest on their average capital balances; after deducting salaries of
P122, 325 to AA and P82, 625 to CC, the residual profits and loss is divided
equally. In 2011, the partnership had a net loss of P125, 624 before the
interest and salaries to partners. By what amount should AA’s and CC’s
capital account charge- increase (decrease)?
AA CC AA CC
a. P30,267 P(40,448) c. P(40,448) P31,235
b. 29,476 17,536 d. 20,358 32,458

29.The same information in no. 32, except the partnership ha a loss of P125,
624 after the interest and salaries to partners, by what amount should BB’s
capital account charge-increase (decrease)?

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Name:_______________________ Advanced Accounting Part 1
1st Semester SY 2019-2020 Accounting 8a

a. P(115,443) c. P ( 41,875)
b. 23,865 d. (18,010)

30.XX, YY, and ZZ formed a partnership on January 1, 2012. Each contributed

P120, 000.
Salaries to be allocated as follows:
XX YY ZZ
P30, 000 P30, 000 P45, 000
Drawings were equal to salaries and be taken out evenly throughout the year.
With sufficient partnership net income, XX and YY could split a bonus equal
to 25% of partnership net income after salaries and bonus (in no event could
the bonus below zero).
Remaining profits were to be split as follows: 30% for XX; 30% for YY, and
40% for ZZ.
For the year, partnership net income was P120, 000.
Compute the ending capital for each partner:
a. XX, P155,100; YY, P155,100; ZZ, P169,800
b. XX, P126,000; YY,P126,000; ZZ, P124,500
c. XX,P125,100; YY,P125,100; ZZ, P124,800
d. XX, P125,500; YY,P125,500; ZZ, P124,000

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