Seatwork –Finals- FAR

1. On July 1, 2018, AA and BB decided to form a partnership. The firm is to take over business assets and assumes
liabilities, and capitals are to be based on net assets transferred after the following adjustments:
a. AA and BB’s inventory is to be valued at P62,000 and P44,000, respectively.
b. Accounts Receivable of P4,000 in AA’s books and P2,000 in BB’s books are uncollectible.
c. Accrued salaries of P8,000 for AA and P10,000 for BB are still to be recognized in the books.
d. Unused office supplies of AA amounted to P10,000, while that of BB amounted to P3,000.
e. Unrecorded patent of P14,000 and prepaid rent of P9,000 are to be recognized in the books of AA and BB,
respectively.
f. AA is to invest or withdraw cash necessary to have a 40% interest in the firm.
Statement of Financial Position for AA and BB on July 1 before adjustments are given below:
AA BB
Cash 62,000 100,000
Accounts Receivable 52,000 40,000
Inventory 64,000 48,000
Office Supplies - 10,000
Equipment 40,000 48,000
Accumulated Depreciation-Equip (18,000) 6,000
Total Assets 200,000 252,000

Accounts Payable 56,000 40,000

Capital 144,000 200,000
Total Liabilities and Capital 200,000 240,000

Determine:
1. The net adjustment in capital in the books of AA and BB.
2. The adjusted capital of AA and BB in their respective books.
3. The additional investment/withdrawal made by AA.
4. The total assets of the partnership after formation.
5. The total liabilities of the partnership after formation.
6. The capital balances of AA and BB in the combined Statement of Financial Position.

2. On December 1, 2015, DD and EE formed a partnership with each contributing the following assets at fair market
values:
DD EE
Cash 18,000 36,000
Machinery and Equipment 27,000
Land 180,000
Building 54,000
Office Furniture 27,000
The land and building are subject to a mortgage loan of P108,000 that the partnership will assume. The partnership
agreement provides that DD and EE share profits and losses , 40% and 60%, respectively and partners agreed to bring
their capital balances in proportion to the profit and loss ratio and using capital balance of EE as the basis. What is the
additional cash investment made by DD?
3. JJ and KK are joining their separate business to form a partnership. Cash and non-cash assets are to be contributed
for a total capital of P300,000. The non-cash assets to be contributed and liabilities to be assumed are:
JJ KK
Book Va l ue Fa i r Va l ue Book Va l ue Fa i r Va l ue
Accounts Receivable 22,500 22,500
Inventories 22,500 33,750 60,000 67,500
Equipment 37,500 30,000 67,500 71,250
Accounts Payable 11,275 11,250 7,500 7,500
The partner’s capital accounts are to be equal after all contributions of assets and assumptions of liabilities.
Determine: (a) The total Assets of the partnership. (b) The amount of cash that each partner must contribute.

4. Up and Down are partners Their capital accounts during 2015 were as follows:
Up, Ca pita l Down, Ca pita l
8/23 6,000 1/1 30,000 3/5 9,000 1/1 50,000
4/3 8,000 7/6 7,000
10/31 6,000 10/7 5,000

Partnership net income is P50,000 for the year. The partnership agreement provides for the division of net
income as follows:
 Each partner is credited 10% interest on his or her average capital (rounded to the nearest month)
 Because of prior work experience; Up is entitled to an annual salary of P12,000 and Down is credited
with P8,000.
 Any remainder, income or loss is to be allocated based on beginning capital.
Prepare a schedule showing the partnership distribution of income.

5. Art, Bart, Cart and Dart own a publishing company that they operate as a partnership. The partnership
agreement includes the following:
 Art receives a salary of P20,000 and a bonus of 3% of income after all bonuses.
 Bart receives a salary of P10,000 and a bonus of 2% of income after all bonuses.
 All partners are to receive 10% interest on the average capital balances.
The average capital balances of Art, P50,000; Bart, P45,000; Cart , P20,000; and Dart, P47,000. Any remaining
profit and losses are to be allocated equally among the partners. Determine how a profit of P105,000 would be
allocated among the partners.

6. PP and QQ are partners operating a chain of retail stores. The partnership agreement provides for the
following:
PP QQ
Salaries 10,000 5,000
Interest on average capital balances 10% 10%
Bonus 20% of net i ncome before none
i nteres t but after s al ari es and bonus
Remainder 30% 70%
The income summary account for the year 2018 shows a credit balance of P51,000 before any deductions.
Average capital balances for PP and QQ are P50,000 and P75,000, respectively. The share of PP and QQ in the
P51,000 net income would be:
7. XX and YY formed a partnership on January 2, 2018 and agreed to share profits and loss in the ratio of 90% and
10%, respectively. XX contributed capital of P25,000. YY contributed no capital but has a specialized expertise
and manages the firm full time. There were no withdrawals during the year. The partnership agreement
provides for the following
 Capital accounts are to be credited annually with interest at 5% of the beginning capital.
 YY is to be paid a salary of P1,000 a month.
 YY is to receive a bonus of 20% on net income calculated before deducting his salary and interest on both
capital accounts.
 Bonus, interest, and YY’s salary are to be considered as partnership expenses.

The partnership’s statement of income for 2018 follows:

Revenues P 96,450
 Less: Expenses (including salary, interest, and bonus) 49,700
Net income P 46,750
What is YY’s 2018 bonus?

8. The Trading Company, a partnership, was formed on January 1, 2018 , with four partners, D, E, F, and G.
Capital contributions were as follows: D, P50,000; E, P25,000; F, P25,000, and G, P20,000. The partnership
agreement provides that partners shall receive 5% interest in the amounts of their capital contributions. In
addition, D is to receive a salary of P5,000 and E a salary of P3,000. The agreement further provides that F shall
receive a minimum of P2,500 per annum from the partnership and G a minimum of P6,000 per annum, both
including amounts allowed as interest on capital and their respective shares of profits. The balance of the
profit is to be shared in the following proportions: D, 30%; E, 30%; F, 20%, and G, 20%. Calculate the amount
that must be earned by the partnership during 2018, before any charges for interest on capital or partner’s
salaries, in order that D may receive an aggregate of P12,500 including interest, salary and share of profits.