Question

1. On March 1, 20x7, E and F formed a partnership with each contributing the following assets:

	E	F
Cash	20,000	50,000
Office Equipment	100,000	80,000
Building	-	300,000
Furniture& Fixtures	30,000	-

The building is subject to a mortgage loan of P80,000, which is to be assumed by the partnership. The partnershipagreement provides that E and F share profits and losses at 30% and 70% respectively. Assuming that thepartners agreed to bring their respective capital in proportion to their P & L ratios, and using F capital as the base.

Compute the capital account balance of F on March 1, 20x7.

Select one:

a. P350,000

b. P510,000

c. P460,000

d. P430,000

2.

On March 1, 20x7, E and F formed a partnership with each contributing the following assets:

	E	F
Cash	20,000	50,000
Office Equipment	100,000	80,000
Building	-	300,000
Furniture& Fixtures	30,000	-

The building is subject to a mortgage loan of P80,000, which is to be assumed by the partnership. The partnership agreement provides that E and F share profits and losses at 30% and 70% respectively. Assuming that the partners agreed to bring their respective capital in proportion to their P & L ratios, and using F capital as the base.

How much is the additional cash to be invested by E?

Select one:

a. -0-

b. P200,000

c. P20,000

d. P100,000

3.

SS, TT, UU, and VV, partners to a law firm, shares profits at ratio of 4:3:1:1. On June 30, relevant partners’ accounts follow:

	Advances (Dr)	Loans (Cr)	Capital (Cr)
SS	-	10,000	50,000
TT	-	15,000	80,000
UU	22,000	-	55,000
VV	18,000		75,000

On this day, cash of P60,000 is declared as available for distribution to partnersas profits. Who among the partners will benefit from the P60,000 cash distribution?

Select one:

a. All of the partners

b. TT and VV

c. TT, UU and VV

d. TT only

4.

Brand Constructions began operation in 20x8. Construction activities for the first year is shown below. All contract are with different customers, and any work remaining at December 31, 20x8 is expected to be completed in 20x9. Brand uses the cost-to-cost percentage of completion in accounting for its projects.

Project	Contract price	Billings to date	Collections to date	Actual costs to date	Additional cost to complete
One	560,000	360,000	340,000	450,000	130,000
Two	670,000	220,000	210,000	126,000	504,000
Three	520,000	500,000	440,000	330,000
Totals	1,750,000	1,080,000	990,000	906,000	634,000

Calculate the amount of inventory recognized as a current asset in the 20x8 balance sheet.

Select one:

a. P86,000

b. P-0-

c. P24,000

d. P70,000

5.

Partnership of T, U and V and their profit and loss ratios were as follows:

Assets	P 500,000
T, loan		P    20,000
T, capital (30%)		140,000
U, capital (30%)		120,000
V, capital (40%)		180,000
Total equities		460,000

T decided to retire from the partnership and by mutual agreement, the assets were adjusted to their current fairvalue of P625,000. The partnership paid P200,000 cash for T’s equity in the partnership, exclusive of the loanwhich was repaid in full.

The capital balances of U and V, respectively, after T’s retirement from the partnership was:

Select one:

a. P146,250 and P218,750

b. P147,857 and P217,143

c. P139,286 and P205,714

d. P94,286 and P145,714

6.

On June 1, A and B pooled their assets to form a partnership, with the firm to take over their business assets and assumethe liabilities. Partners’ capitals are to be based on net assets transferred after the following adjustments:

1. B’s inventory is to be increased by P5,000.
2. An allowance for doubtful accounts of P2,800 and P2,500 are to be set up on the books of A and B, respectively.
3. Accounts payable of P7,000 is to be recognized on the books of A.

The individual trial balances on June 1, before adjustments follow:

	A, capital	B, capital
Assets	P   90,000	P   45,000
Liabilities	10,000	5,000
Capital	80,000	40,000

What is the capital balance of B after adjustments?

Select one:

a. P45,200

b. P35,500

c. P42,000

d. P42,500

Answer 1

1) Ans a = P350,000

The building brought by F is having a mortgage loan of P80,000 which is to be assumed by the partnership.Hence, the net effect value of building brought by F is P300,000 - P80,000 = P220,000

Capital Contribution by F = Cash + Office Equipment + Building

                                     = P50,000 + P80,000 + P220,000 = P350,000

2) Ans a = -0-

Considering the Contribution by F as the base capital , total capital required by the firm is P350,000 / 70% = P500,000

Initial Capital Contribution by E = P150,000

Total Capital Initially Contributed = P150,000 + P350,000 = P500,000

which is equals to the required capital.

So no additional capital is required to be brought in by E.

3) Ans a

All the partners are eligible for the share of profit.

5) Ans b = P147,857 and P217,143

The assets are increased by 125,000

This revaluation profit will be shared by T,U,V in their profit sharing ratio of 30%,30%,40% i.e, 37,500 , 37,500 , 50,000.

Now the balance payable to T = 140,000 + 37,500 + 20,000 = 197,500

But the firm is paying 200,000+20,000 = 220,000

The difference of 22,500 is goodwill which is to be borne by U and V in their profit sharing ratio.

The Capitals of U and V after retirement of T are

U = 120,000 + 37,500 - (22,500*3/7) = 147,857

V = 180,000 + 50,000 - (22,500*4/7) = 217143

6) Ans b = P35,500

Assets of B (given)    = P45,000

Increment of Inventory     = P5,000

Decrement of recevables = (P2,500)

a) Net Value of Assets        = P47,500

Liabilities of B (given)      = P5,000

    Unrecorded payables      = P7,000

b) Net Value of Liabilities     = P12,000

Capital of B after adjustments (a - b) = P35,500