Comprehensive Review Fundamentals of Accounting il - Partnership 1. Lelouch,C.c. and Suzaku are partners in an accounting firm. Their capital account balances at year end were Lelouch, $0,000; C.C,, 110,000; and Suzaku, 50,000. They share profits and losses on 4:4:2, after the following special terms: 1. Partner Suzaku is to receive a bonus of 10% of net income after the bonus. 2. Interest of 10% shall be paid on that portion of a partners capital in excess of P100,000 3. Salaries of P10,000 and P12,000 shall be paid to partners Lelouch & Suzaku respectively. ‘Assuming a net income of P44,000 for the year, the total profit share of partner Suzaku was: a. P7,800 b. 16,800 P19,400 d. P19,800 2. On April 1, 2010, Sakata and Gintoki formed partnership with each contributing the following, assets: Sakata Gintoki cash 600,000 280,000 Machinery 440,000 Building 200,000 Furniture and Fixtures 120,000 ‘The building is subject to mortgage loan of P320,000 which is not assumed by the partnership. The partnership agreement provides that Sakata and Gintoki share income and loss of 25% and 75%, respectively. Assuming the partnership agreement provides that the partners initially should have and equal interest in the partnership capital. Gintoki capital account should be: ‘a. P960,000 b. 1,120,000 ©. P720,000 . 1,200,000 3. Chino, Dimi and Ejie were partners with capital balances on January 2, 2011 of P660,000, P440,000 and P220,000 respectively. On July 1, 2011 Chino retires from the partnership. On the date of retirement the partnership net loss is P132,000 and the partners agreed that certain asset is to be revalued at P176,000 from its original cost of P110,000. The partners agreed further to pay Chino 495,000 in settlement of his interest. The remaining partners continue to operate under anew partnership, DE partnership. What is the total capital of DE partnership? a. P759,000 b. P748,000 627,000 d. 616,000 4, Jong and Victor are partners with capitals of P200,000 and P100,000 and sharing profits 3:1 respectively. They agree to admit a new partner, Noel. Noel invests P125,000 for a 25% interest in the firm and the parties agree that the total firm capital after Noel’s admission is to be P425,000. After Noel's admission, the partner's capital balances would be214,062.50, P104,687.50, and P106,250.00 respectively 225,000.00, P100,000.00, and P:100,000.00 respectively 239,062.50, P79,687.50, and P125,000.00 respectively |. 250,000.00, P75,000.00, and P100,000.00 respectively aoge 5. PP, QQ, and RR, partners to a firm, have capital balances of P11,200, P13,000, and P5,800, respectively, and share profits in the ratio 42:1. Prepare a schedule showing how available cash will be given to the partners as it becomes available. Who among the partners shall be paid first with an available cash of P1,400? a.aQ b. Noone c.RR PP 6. On March 1, 2011, Jeff Clemente and Ann Hemandez decide to combine their businesses and form partnership. Their balance sheets on March 1, before adjustments, showed the following: Ann __ Jeff Cash... pee nen 9,000 P 3,760 Accounts receivable, 18,500 19,500 Inventories... 30,000 419,500 Furitures and fixture (net)... 30,000 9,000 Office equipment (net). oe 11,500 2,750 Prepaid expenses.. a 6,375 3,000 TOTAL P_S1.500 Accounts Payable.. P 18,000 Capital... 33,500 TOTAL 51,500 ‘They agreed to have the following items recorded in tt 1. Provide 2% allowance for doubtful accounts. 2. Ann's fumiture and fixtures should be P31,000, while Jeff's office equipment is under depreciated by P250. 3, Rent expense incurred previously by Ann was not yet recorded amounting to P1000, 4. books: while salary expense incurred by Jeff was not also recorded amounting to P800. The fair market value of inventory amounted to: For Ann: P29,500 and for Jeff: P21,000. Compute the net (debit) oredit adjustment for Ann and Jeff respectively: a. 2,870; 2,820 c. (870); 180 b. (2,870); (2,820) 4. 870; (180) 7. The same information in Number 6 compute the total liabilities after formation: a. 61,950 ©. 65,550 b. 63,750 d. 63,950 8. The same information in Number 6 compute the total assets after formation: a. 197,985 . 160,765 b. 156,875 d. 152,9859. On January 31, 2011, partners of Lon, Mac and Nan, LLP, had the following loan and capital account balances (after closing entries of January) Loan Receivable from loan P 20, 000 dr Loan Payable to Nan 60, 000 or Lon, capital 30, 000 dr Mac, capital 120, 000 or Nan, capital 70, 000 cr ‘The partnership's income sharing ratio was Lon, 50%; Mac, 20%; and Nan, 30%. On January 31, 2011, Ole was admitted to the partnership for a 20% interest in the total capital of the capital in ‘exchange for an investment of P40, 000 cash. Prior to Ole's admission, the existing partners agreed to increase the carrying amount of the partnership's inventories to current fair value, a P60, 000 increase. The capital account to be carried to Ole: a. P60, 000 b. P40, 000 c. P52, 000 d. P46, 000 10. In the AD partnership, Allen’s capital is P140, 000 and D: income in a 3:1 ratio, respectively. They decide to admit Davi questions is independent of the others. I's is P40, 000 and they share to the partnership. Each of the Allen and Danie! agree that some of the inventory is obsolete. The inventory account is decreased before David is admitted. David invests P40, 000 for a 1/5 interest. What is the amount of the inventory written down? a. P4, 000 b. P10, 000 c. P15, 000 d. P20, 000 11. Using the same information in No. 10, David directly purchases a 1/5 interest paying Allen P34, 000 and Daniel P10, 000. The land account is increased before David is admitted. By what amount is the land account increased? a, P40, 000 b. P36, 000 cc. P20, 000 d. P10, 000 12. Using the same information in No. 10, David invests P40, 000 for a 1/5 interest in the total capital of P220, 000. The journal to record David's admission into the partnership will include: a) A credit to cash for P40, 000 b) Adebit to Allen, Capital for P3, 000 ¢) A credit to David, Capital for P40, 000 d) A credit to Daniel, Capital for P1, 00013. As of December 31, 2012, the books of JJ Partnership showed capital balances of Jun King, 40,000 ; Jessie James, P25,000; John Alfred, P5,000. The partner's profit and loss ratio was 3:2:1, respectively. The partner’s decided to liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities amounting to P12,000, they stil have cash of 28,000 left for distribution. ‘Assuming that any capital debit balance is uncollectible, the share of Jun King in the distribution of the P28,000 cash would be: a. P17,800 c. P19,000 b. P18,000 . 17,000 14. After operating for 5 years, the books of the partnership of Ik-Ik and Eddie showed the follo balances: © Net assets P130000 © lek, Capital P85000 © Eddie, Capital P45000 The partner's profit and loss sharing ratio was 1:1. If liquidation takes place at this point and the net assets are realized at book value the partner's are entitled to: Ik-Ik to receive P3000 & Eddie to receive P4000 Ick to receive P97500 & Eddie to receive P32500 Ik-Ik to receive P6500 & Eddie to receive P65000 Ik-tk to receive P8500 & Eddie to receive P45000 args 15. The condensed balance sheet of B,S and A partnership as of March 31, 2012 follows: cash 28000 Liabilities P4800 Other Assets 265000 B, Capital 95000 S,Capital 80000 A, Capital 70000 Total 293000 Total 293000 Income and loss ratio is 50:25:25 respectively. The partner's voted to dissolve the partnership and liquidate by selling assets in installments. P70000 was realized on the first cash sale of other assets which has a book value of P150000. After settlement with creditors, all cash available was distributed to partners. How much cash was received by A? 10500 32500 21250 20000 eoge16. Rachel, Ashley, and Jacob are partners. They share profits and losses equally. After the books are closed, their capital balances are P90,000, P120,000, and P70,000, respectively. Jacob has decided to leave the firm, Which of the following would be included in the entry to record the transaction if the partnership pays Jacob P50,000 in cash and a promissory note for P20,000 for his withdrawal from the partnership? ‘A. Jacob, capital would be credited for 50,000 . Jacob, capital would be debited for 50,000 8. Jacob, capital would be credited for P70,000 D. Jacob, capital would be debited for 70,000 17, The HILLSIDE Partnership shows the following profit and loss ratios and capital balances: Roel 60% 252000 Jek 30% 126000 Mike 10% 42000 ‘The partners decide to sell Frank 20% of their respective capital and profit and loss interests for a total payment of P9000. Frank will pay the money directly to the other partners. If the partners, agree that goodwill is not to be recorded, what are the capital balances of the partners after Frank's admission to the partnership? Roel Jek Frank a. P198000 99000 33000 90000 210600 100800 33600 84000 «. P216000 108000 36000 90000 d. P255699 127800 42600 Paa000 18. In relation to no. 17, how much cash should Roel, Jek and Mike receive, respectively from Frank? 50400, P25200 and P8400, if and only if no goodwill is recorded. 50400, P25200 and P8400, whether or not goodwill is recorded. 54000, P27000 and P9000, if and only if no gooduill is recorded. 54000, P27000 and P9000, whether or not goodwill is recorded. 19. The condensed balance sheet of Pu,Ma and Sa partnership as of March 31, 2012 follows: Cash 49000 Liabilities 60000 Other Assets 210000 Pu, Capital 48000 Ma, Capital 72000 Sa, Capital 70000 Income and loss ratio is 5:3:2 respectively. The partner's voted to dissolve the partnership and liquidate by selling assets in installments. P90000 was realized on the first cash sale of other assets which has @ book value of P120000. After settlement with creditors, all cash available was distributed to partners. How much cash was received by Pu?a. (12000) b. 35000 45000 do 20. In relation to no. 19, how much cash should Ma and Sa receive? a) Ma, 36000; Sa, 46000 b) Ma, 30000; Sa, 40000 <) Ma, 28800; Sa, 41200 d) Ma, 27000; Sa, 18000 21, MM, NN and 00 are partners with capital balances as of December 31, 2011 of 300000, 300000 and 200000 respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that 00 is to take certain equipment with second-hand value of 500000 and a note for the balance of 00's interest. ‘The equipment may cost 80000. Compute for: (1) 00's acquisition of the 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) 15000 each for MM and NN (2) 150000 b) (1)5000 each for MM,NNandOO —(2) 145000 ) (1)5000 each for MM,NNandOO (2) 195000 d) (1) 7500 each for MM and 0O (2) 145000 22. J and KK partnership's balance sheet at December 31,2011 reported the following: Total asset -100000 Total liabilities - 20000 14, capital - 40000 KK, capital — 40000 On January 2, 2012.1) and KK dissolved their partnership and transferred all assets and liabilities toa newly formed corporation. At the date of incorporation the fair value of the net assets was 12000 more than the carrying amount on the partnership book, of which 7000 was assigned to tangible assets and '5000 was assigned to goodwill. J and KK were each issued 5000 shares of the corporation's 1 par value ordinary share. Immediately following incorporation, share premium/additional paid-in-capital in excess of par should be credited for: a) 68000 ©) 77000 'b) 70000 4) 8200023. As of December 31,2011 the books of TON partnership showed capital balances of: T 40000; O 25000; N 5000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decide to liquidate and they sold all non-cash assets for 37000. After settlement of all liabilities amounting to 12000, they still have cash of 28000 left for distribution. Assuming that any capital debit balance is Uncollectible, the share of T in the distribution of the 28000 cash would be: a) 17800 b) 18000 ) 19000 d) 17000 24, MARIELLE, DANIX and JENNY partners share profits on a §:3:2 ratio. On January 1, 2012, ECHER admitted into the partnership with a 10% share in profits. The old partners continue to participate in Profits in their original ratio For the year 2012 the net income of the partnership was reported as 12500. However it was discovered that the following items were omitted in the firm’s book: UNRECOVERED AT YEAR END 2011 2012 Prepaid expense 800 Accrued expense 600 Unearned income 700 Accrued income 500 (2) The new profit and loss ratio for DANIX, and (2) the share of partner JENNY in the 2012 income: a) 30%; 2214 b) 27% :2214 ©) 27%: 2286 d) 30%: 2286 25. SHAWN AND MIKEE are partners who share profits and losses in the ratio of 7:3, respectively. On October 21, 2011, their respective capital accounts were as follows: SHAWN......35000 MIKEE. 30000 65000 On that date they agreed to admit CHERRY as a partner with a one-third interest in the capital and profit and losses, and upon her invest ment of 25000. The new partnership will begin with a total capital of90000. immediately after CHERRY’s admission, what are the capital balances of SHAWN, MIKEE and CHERRY respectively? 2) 30000;30000;30000 b) 31500;28500;30000 ©) 31667;28333;30000 4d) 35000;30000;25000 26. In JUSTIN and CLAUDINE partnership, partners had a capital ratio of 3:1 and a profit and loss ratio of 2:1 respectively. The bonus method was used to record GRACE’s admittance as a new partner. What ratio would be used to allocate, to JUSTIN and CLAUDINE the excess of GRACE’s contribution over the amount credited to GRACE capital account? a) Jand Cnew relative ratio b)_Jand C new relative profit and loss ratio )_Jand Cold capital ratio d) sand Cold profit and loss ratio 27. ADRIAN and MARIELLE are partners with capital account balances of 12000 and 18000 respectively. They agree to admit JENNY as a partner with a one-third interest in capital and profit, for an investment ‘of 20000, after revaluing the assets of Adrian and Marielle. Goodwill to the original partners should be: a) o b) 6667 ) 10000 d) 13333 28. On June 30, 2011 the condensed balance sheet for the partnership of DD, FF and GG together with their respective profit and loss sharing percentages was as follows: Asset net of liabilities. 320000 DD, capital(50%). FF,capital(30%). GG, capital{ 20%), DD decided to retire from the partnership and by mutual agreement, is to be paid 180000 out of partnership fund for his interest. Total goodwill implicit in the agreement is to be recorded. After DD retirement, what are the capital balances of the other partners? a) FF 84000 GG 56000 b) FF 102000 Ge 68000 <) FF108000 GG 72000 d) FF 12000 GG 8000029, Smith a partner in an accounting firm, decided to withdraw from the partnership, his share in the partnership profit and losses was 20%. Upon withdrawing from the partnership he was paid 88800 in final settlement for hid interest. The total of the partners’ capital account before recognition of partnership goodwill and prior to Smith withdrawal was 252000. After his withdrawal the remaining partners’ capital accounts excluding their share of goodwill totalled 192000. The total goodwill of the firm was: a) 144000 b) 168000 ©) 192000 4) 300000 30. AA BB and CC are partners with average capital balances during 2012 of 360000, 180000 and 120000 respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of 90000 to AA and 60000 to CC the residual profit or oss is divided equally. In 2012 the partnership sustained a 99000 loss before interest and salaries to partners. By what amount should AA capital account change? a) 22000 increase b) 33000 decrease ) 105000 decrease d) 126000 increase