ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Partnership Practice Problems

SECOND SEMESTER SY 2018-2019

Practice Sets

1. The following condensed balance sheet is presented for the partnership of W, X and Y on
December 31, 2018. W’s share in profit is 35%.

Cash 160,000
Other Assets ?
Total ?

Liabilities 180,000
W, Capital 35,000
X, Capital 216,000
Y, Capital 36,000
Total 467,000

On January 5, 2019, some assets were sold and total cash of 333,400 is available for distribution to
creditors and partners. The total liabilities of 180,000 is paid and the remaining was given to X.

On January 10, 2019, another asset is sold for 33,600 and were distributed as follows:

a. 22,600 for X, where 5,000 should have been paid on January 5, 2019 if cash have been enough.
b. 11,000 for Y

On January 15, 2019, all the remaining assets were sold for 50,000.

How should the 50,000 cash on January 15, 2019 be distributed?

W X Y
a 17,500.00 20,000.00 12,500.00
b 17,000.00 20,500.00 12,500.00
c 17,500.00 21,500.00 11,000.00
d 15,000.00 15,000.00 30,000.00

2. Based on number 1, what is the profit and loss percentage sharing ratio of all the partners?

W X Y
a 35% 30% 35%
b 35% 15% 50%
c 35% 35% 30%
d 35% 10% 55%
e None of the Above

3. Based on number 1, what are the loss absorption capacity of the partners?

W X Y
a 120,000.00 600,000.00 144,000.00
b 106,000.00 546,000.00 150,000.00

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 c 112,000.00 552,000.00 156,000.00
d 118,000.00 558,000.00 162,000.00
e None of the Above

4. Based on number 1, How much is the total loss on realization of all non-cash assets?

a. 55,000
b. 48,000
c. 56,000
d. 50,000

5. Based on number 1, for W to receive 24,500 on January 15, 2019 sales, the remaining assets
should have been sold for?

a. 66,000
b. 88,000
c. 99,000
d. 70,000

6. JJ and KK are partners sharing profits in the ratio 60% and 40%, respectively. The average profits
for the past two years are to be capitalized at 20% per year (Get present value of average
profits). The following omissions were detected.

Omissions at year end 2007 2008

Prepaid Expense 1,600
Accrued Expense 1,200
Deferred Income 1,400
Accrued Income 1,000

Other Pertinent Information’s are as follows:

2007 2008
Net Income………........14,400 13,600
Capital at year end
JJ……………………45,400 54,000
KK…………………...45,000 55,000

The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum is?

a. 67,765
b. 72,105
c. 69,000
d. 71,000

7. S and T are partners and prepare their accounts at December 31 each year. On July 1, 2018, U
joined the partnership. Profit sharing agreements are:

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The net income for the year is 350,000 accruing evenly over the year. Determined each partner’s
share in profits.

S T U
a 196,000.00 124,000.00 30,000.00
b 217,000.00 108,000.00 25,000.00
c 155,000.00 130,000.00 65,000.00
d 175,000.00 145,000.00 35,000.00

8. U, V and W, a partnership formed on January 1, 2017 had the following initial investment:

U 500,000
V 750,000
W 1,125,000

The partnership agreement states that the profits and losses are to be shared equally by the
partners after consideration is made for the following:

 Salaries allowed to partner: 300,000 for U; 240,000 for V and 180,000 for W.
 Average partners’ capital balances during the year shall be allowed 10% interest.
 On June 30, 2017, U made an additional investment of 300,000.
 On September 30,2017, W withdrew 350,000 from the partnership.
 Share on the remaining partnership profit was 25,000 for each partner.

What is the total interest on average capital balances of the partners?

a. 243,750
b. 268,750
c. 288,125
d. 303,125

9. Using the same data in number 1, compute the partnership’s net profit?

a. 1,058,125
b. 1,038,750
c. 1,113,750
d. 998,750

10. Romeo and Parco are partners in a merchandising business. During 2016, they withdraw their
salary allowances of 34,000 and 59,000 respectively. Bonus is given to Parco based on 5% of net
income after salaries and bonus. Remaining profit or loss is shared in the ratio of 3:2 by Romeo
and Parco. The partners’ capital accounts show the following.

Romeo Parco
Beginning Balance 85,000 67,000
Additional Investment 40,000 43,000
Withdrawal other than salary (35,000) (20,000)
allowance
Total 90,000 90,000

What is the net profit for the period if Romeo’s Equity Balance in the post-closing trial balance is
150,000?

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 a. 201,750
b. 163,400
c. 197,400
d. 198,000

11. Cab and Jo are considering forming a partnership whereby profits will be allocated using
salaries and bonuses. Bonuses will be 10% of net income after total salaries and bonuses. Cab
will receive a salary of 30,000 and a bonus. Jo has the option of receiving a salary of 40,000 and
10% bonus or simply receiving a salary of 52,000. Both will receive the same amount of bonus.
Determine the level of net income that would be necessary so that Jo would be indifferent to
the profit-sharing option?

a. 240,000
b. 300,000
c. 94,000
d. 334,000

12. The partnership agreement of XX, YY and ZZ provides for the year-end allocation of net income
in the following order:

1. XX is to receive 10% of net income up to 200,000 and 20% over 200,000.

2. YY and ZZ each are to receive 5% of the remaining income over 300,000
3. The balance of income is to be allocated equally among the partners.

The partnership’s 2008 net income was 500,000 before any allocations. What would be the share
of XX?

a. 202,000
b. 216,000
c. 206,000
d. 220,000

13. Merlin, a partner in the Camelot Partnership, has a 30% participation in the partnership profits
and losses. Merlin’s Capital account has a decrease of 1,200,000 during the calendar year 2008.
During 2008, Merlin withdrew 2,600,000(Charge against capital account) and contributed
property valued at 500,000. What was the net income of Camelot Partnership during 2008?

a. 3,000,000
b. 4,666,667
c. 7,000,000
d. 11,000,000

14. On January 2, 2008, BB and PP formed a partnership. They contributed capital of 175,000 and
25,000, respectively. They agreed to share profits and losses 80% and 20%, respectively. PP is the
general manager and works in the partnership full time and is given a salary of 5,000 a month;
an interest of 5% of the beginning capital (of both partner) and bonus of 15% of the net income
before salary, interest and bonus.

The profit and loss statement of the partnership for the year ended December 31, 2008 is as
follows:

Net Sales 875,000

Cost of Sales (700,000)
Gross Profit 175,000

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 Expenses (including the salary, interest and 143,000
bonus)
Net Income 32,000

The amount of bonus to PP in 2008 amounted to:

a. 13,304
b. 16,456
c. 18,000
d. 20,700

15. Lancelot is trying to decide whether to accept a salary of 40,000 or salary of 25,000 plus a bonus
of 10% of net income after salary and bonus as a means of allocating profit amount he partners.
Salaries traceable to the other partners are estimated to be 100,000. What amount of income
would be necessary so that Lancelot would consider the choice to be equal?

a. 165,000
b. 290,000
c. 265,000
d. 305,000

16. On January 1, 2018, A, B, C and D formed Bakya Trading Co., a partnership, with capital
contributions as follows: A – 50,000; B-25,000; C-25,000 and D-20,000. The partnership contract
provided that each partner shall receive a 5% interest on contributed capital and that A and B
shall receive a salaries of 5,000 and 3,000, respectively. The contract also provide that C shall
receive a minimum of 2,500 per annum and D a minimum of 6,000 per annum, which is inclusive
of amounts representing interest and share of remaining profits. The balance of the profits 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 12,500 including interest, salary and share of profits.

a. 16,667
b. 30,000
c. 30,667
d. 32,333

17. RR and PP share profit after the provision of annual salary allowances of 14,400 and 13,200,
respectively in the ratio of 6:4. However, if the partnership net income is insufficient to provide
for the said allowances in full amount, the net income shall be divided equally. In 2008, the
following errors were discovered:

 Depreciation for 2008 is understated by 2,100

 The inventory on December 31, 2008 is overstated by11,400. The partnership net income for 2008
was reported to be 19,500.

The capital accounts of the partners should be increased(decreased) by:

a. RR, (6,540) and PP, (6,540)

b. RR, 3,000 and PP, 3,000
c. RR, (6,960) and PP, (6,750)
d. RR, (6750) and PP, (6,750)

18. MM, NN and OO partners, share profits on 5:3:2. On January 1, 2008, PP admitted into the
partnership with 10% share in profits. The old partners continue to participate in profits in their
original ratio.

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 For the year 2008, the net income of the partnership was reported as 12,500. However, it was
discovered that the following items were omitted in the firm’s books:

Unrecorded at year end 2007 2008

Prepaid Expense 800
Accrued Expense 600
Unearned Income 700
Accrued Income 500

The new profit and loss ratio for N and the share of partner OO in the 2008 net income
would be?

a. 30% and 2,214

b. 27% and 2,214
c. 27% and 2,286
d. 30% and 2,286

19. Sam, a partner in the ST partnership is entitled to 40% of the profits and losses. During 2016, Sam
contributed land with fair value of 60,000. Also, during 2016, Sam had drawings of 80,000. The
balance of Sam’s capital account was 120,000 at the beginning and 150,000 at the end of the
year.

What is net income(loss) during 2016?

a. (75,000)
b. (50,000)
c. 150,000
d. 125,000

20. As of July 1, 2008, FF and GG decided to form a partnership. Their balance sheets on this date
are as follows:

FF GG
Cash 15,000.00 37,500.00
Accounts Receivable 540,000.00 225,000.00
Inventory - 202,500.00
PPE 150,000.00 270,000.00
Total 705,000.00 735,000.00

Accounts Payable 135,000.00 240,000.00

FF, Capital 570,000.00
GG, Capital 495,000.00
Total 705,000.00 735,000.00

The partners agreed that the machinery and equipment of FF is under depreciated by 15,000 and
that of GG by 45,000. Allowance for doubtful accounts is to be set up amounting to 120,000 for FF
and 45,000 for GG. The partnership agreement provides for a profit and loss ratio and capital
interest ratio 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.

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a. 142,5000
b. 52,500
c. 172,500
d. 102,500

21. The partnership of A, B, C and D has agreed to combine with the partnership of X and Y. The
individual accounts and profit and loss sharing percentage of each partner follows:

Profit and Loss Sharing

Capital Accounts Now Proposed
A 50,000.00 40% 28%
B 35,000.00 30% 21%
C 40,000.00 20% 14%
D 25,000.00 10% 7%
150,000.00 100% 70%
X 60,000.00 50% 15%
Y 40,000.00 50% 15%
100,000.00 100% 30%

A, B, C and D partnership has undervalued tangible assets of 20,000 and X and Y partnership
has undervalued tangible assets of 8,000. All the partners agree that:

1. The partnership of A, B, C and D possesses a goodwill of 30,000

2. The partnership of X and Y possesses a goodwill of 10,000

Combined business will continue to use the General Ledger of A, B, C and D.

If tangible assets are to be revalued and goodwill is to be recorded, compute the amount
of goodwill to be recognized in the books of partnership books?

a. Zero
b. 30,000
c. 40,000
d. 68,000

22. Using the information in number 16, Compute the capital balance of A and X, respectively?

a. 70,000 and 69,000

b. 62,000 and 65,000
c. 58,000 and 64,000
d. 50,000 and 60,000

23. Using the information in number 16, except that bonus method is to be used with respect to
undervalued assets and goodwill, compute the capital balances of A and X, respectively.

a. Zero
b. 30,000
c. 40,000
d. 68,000

24. Presented below is the condensed balance sheet of the partnership of KK, LL and MM who
share profits and losses in the ratio of 6:3:1, respectively:

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 Cash 85,000 Liabilities 80,000
Other Assets 415,000 KK, Capital 252,000
LL, Capital 126,000
MM, Capital 42,000
Total 500,000 Total 500,000

The partners agree to sell NN a 20% interest in capital and profit and losses for a total payment of 90,000. The
payment by NN is to be directly to individual partners. The capital balances of KK, LL and MM, respectively
after admission of NN are:

a. 198,000; 99,000; 33,000

b. 201,600; 100,800; 33,600
c. 216,00; 108,000; 36,000
d. 255,600; 127,800; 42,600

25. PP contributed 24,000 and CC contributed 48,000 to form a partnership, and they agreed to
share profits in the ratio of their original capital contributions. During the first year of operations,
they made a profit of 16,290; PP withdrew 5,050 and CC 8,000. At the start of the following year,
they agreed to admit GG. He was to receive a ¼ interest in the capital and profits upon
payment of 30,000 to PP and CC, whose capital accounts are to be reduced by transfer to
GG’s capital account sufficient to bring them back to their original capital ratio.

How should the 30,000 be divided between PP and CC?

a. 9,825 and 20,175

b. 15,000 and 15,000
c. 10,000 and 20,000
d. 9,300 and 20,700

26. RR and XX formed a partnership and agreed to divide initial capital equally, even though RR
contributed 25,000 and XX contributed 21,000 in identifiable assets. Under the bonus approach
to adjust the capital accounts. XX’s unidentifiable assets should be debited for:

a. 11,500
b. 4,000
c. 2,000
d. Zero

27. In the AD partnership, Allen’s capital is 140,000 and Daniel is 40,000 and they share income in a
3:1 ratio, respectively. They decided to admit David.

Assume the following independent assumptions.

1. Allen and Daniel agree that some of the inventory is obsolete. The inventory account is
decreased before David is admitted. David invests 40,000 for a 1/5 interest. What is the
inventory write-down?
2. David directly purchases a 1/5 interest by paying Allen 34,000 and Daniel 10,000. The land
account is increased before David is admitted. By what amount is the land account
increased?

What is the amount of inventory write-down and the increased in land account?

a. 4,000 and 10,000

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 b. 10,000 and 36,000
c. 15,000 and 20,000
d. 20,000 and 40,000

28. On June 30, 2011, the statement of financial position for the partnership of BB, CC and DD,
together with their respective profit and loss ratios, were as follows:

Cash 100,000 CC,Loan 100,000

Other Assets 500,000 BB, Capital 100,000
CC, Capital 200,000
DD, Capital 200,000
Total 600,000 Total 600,000

The partners share profits and losses in the ratio 2:3:5 for CC, MM and PP, respectively. They
agreed that other assets should be valued at its fair value of 600,000 on December 31, 2011.
They further agree that CC will receive 244,000 cash for his partnership interest exclusive of the
loan, which is to be paid in full. No goodwill is to be recorded.

After CC’s retirement, the capital balances of BB and DD, respectively, will be:

a. 116,000 and 240,000

b. 101,714 and 254,286
c. 100,000 and 200,000
d. 173,000 and 182,000

29. Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1, 2011,
they decided to form the R & G Corporation by transferring the assets and liabilities from the
partnership to the Corporation in exchange of its shares. The following is the post-closing trial
balance of the partnership:

Cash 45,000
Accounts Receivable 60,000
Inventory 90,000
Fixed Assets 174,000
Laibilities 60,000
Roy, Capital 94,800
Gil, Capital 214200
Total 369,000 369,000

It was agreed that adjustment be made to the following assets:

Accounts Receivable………….40,000

Inventory………………………….68,000

Fixed Assets………………………180,600

The R & G corporation was authorized to issue 100 par preferenced shares and 10 par ordinary
shares. Roy and Gil agreed to receive 720 shares each for their equity plus even multiple 10 shares
for their remaining interest.

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The number of Preference Share and Ordinary Shares should be?

Presences Share Ordinary Shares

a 2,540 1,500
b 2,592 1,440
c 2,642 1,440
d 2,642 1,550

30. The following condensed balance sheet is presented for the partnership of AA, BB and CC, who
share profits and losses in the ratio of 4:3:3, respectively:

Cash 160,000
Other Assets 320,000
Total 480,000

Liabilities 180,000
AA, Capital 48,000
BB, Capital 216,000
CC, Capital 36,000
Total 480,000

The partners agreed to dissolve the partnership after selling the other assets for 200,000. Upon
liquidation of the partnership, AA should receive?

a. 0
b. 48,000
c. 72,000
d. 84,000

31. 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, 2012 is:

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

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

Assume that the partnership is liquidated and 40,000 is realized from the sale of assets with book
value of 80,000. The available cash to be distributed should be?

a. 36,000 and 27,000 and 27,000

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 b. 44,000 and 28,000 and 28,000
c. 16,000 and 12,000 and 12,000
d. 24,000 and 13,000 and 13,000

32. The partners of the M & N partnership started liquidating their business on July 1, 2012 at which
time the partners were sharing profits and losses at 40% and 60%, respectively. The balance
sheet of the partnership is as follows:

Cash 8,800.00 Accounts Payable 32,400.00

Receivable 22,400.00 M, Capital 31,000.00
Inventory 39,400.00 M, Drawing - 5,400.00
Equipment 65,200.00 N, Capital 33,200.00
Accumulated Depreciation -30,800.00 N, Drawing - 200.00
N, Loan 14,000.00
Total 105,000.00 Total 105,000.00

During the month of July, the partners collected 600 of the receivables with no loss. The partners
also sold during the month the entire inventory for 32,400

How much cash was paid to M on July 31, 2012?

a. 25,600
b. 5,400
c. 320
d. 0

33. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed
by each of them. They invested 30,000 and 20,000 and agreed to share earnings 60% and 40%,
respectively. All their transactions were for cash, and all their subsequent transactions were
handled through their respective bank accounts as summarized below:

Gardo Gordo
Cash 79,100.00 65,245.00
Cash Disbursements 62,275.00 70,695.00

On October 31, 2018, all remaining non-cash assets in the two stores were sold for cash of 60,000. The
partnership was liquidated, and cash settlement was. In the distribution of 60,000, Gardo received:

a. 24,000
b. 26,000
c. 34,000
d. 36,000

34. The August, Albert and Gerry partnership became insolvent on January 1, 2011 and the
partnership is being liquidated as soon as practicable. In this respect the following information
for the partners has been marshalled:

Capital Personal
Balances Assets Personal Liabilities
August 70,000.00 80,000.00 40,000.00

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 Albert (60,000.00) 30,000.00 50,000.00
Gerry (30,000.00) 70,000.00 30,000.00
Total (20,000.00) 180,000.00 120,000.00

Assume that the residual profits and losses are shared equally among the three partners. Based on
this information, calculate the maximum amount that August can expect to receive from the
partnership.

a. 20,000
b. 40,000
c. 70,000
d. 110,000

35. After all partnership assets were converted into cash and all available cash was distributed to
creditors, the ledger of Daniela, Erika and Fredline partnership showed the following balances:

Debit Credit
Accounts Payable 20,000.00
Daniela, Capital 10,000.00
Erika, Capital 60,000.00
Fredline, Capital 90,000.00
Total 90,000.00 90,000.00

Percentages indicated are residual profit and loss sharing ratios. Personal assets and liabilities of
the partnership are as follows:

Daniela Erika Fredline

Personal Assets 50,000.00 50,000.00 100,000.00
Personal Liabilities 45,000.00 40,000.00 40,000.00

The partnership creditors proceed against Fredline for recovery of their claims and the partners
settle their claims against each other.

How much would Erika receive?

a. 0
b. 45,000
c. 47,143
d. Cannot Be Determined

36. NN, OO, PP and GG, the partners to a law firm, shares profits at the ratio of 5:3:1:1. On June
30,2016, relevant partners accounts follow:

Advances to Partners Advances from Partners Capital

NN 20,000.00 160,000.00
OO 40,000.00 120,000.00
PP 18,000.00 60,000.00
GG 10,000.00 100,000.00

On this, cash of 72,000 is available for distribution, who among partners will benefit from the 72,000 cash
distribution?

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 a. PP and GG
b. OO and GG
c. All, equally
d. NN and OO

37. When Mikki and Mylene, partners who share earnings equally, were incapacitated in an
airplane accident, a liquidator was appointed to wind up their business. The accounts showed
cash, 35,000; other assets, 110,000; Liabilities, 20,000; and Mikki, Capital of 71,000 and Mylene,
Capital of 54,000. Because of highly specialized nature of non-cash assets, the liquidator
anticipated that considerable time would be required to dispose them. The expenses of
liquidating the business is 10,000.

How much cash can be distributed to each partner at this point?

a. 5,000 to Mikki and 0 to Mylene

b. 5,000 to Mikki and 500 to Mylene
c. 3,000 to Mikki and 0 to Mylene
d. 5,000 to Mikki and 1,000 to Mylene

38. A balance sheet for the partnership of KK, LL and MM, who share profits 2:1:1 respectively, shows
the following balances just before liquidation:

Cash 48,000.00
Other Assets 238,000.00
Liabilities 80,000.00
KK, Capital 88,000.00
LL, Capital 62,000.00
MM, Capital 56,000.00

In the first month of liquidation, 128,000 was received on the sale of certain assets. Liquidation expenses of
4,000 were paid and additional liquidation expenses of 3,200 are anticipated before liquidation is
completed. Creditors were paid 22,400. The available cash was distributed to the partners.

The distribution was:

KK LL MM
a 56,600 28,300 28,300
b 86,000 61,000 55,000
c 29,400 32,700 26,700
d 88,000 62,000 56,000

39. Arthur, Baker and Carter are partners in textile distribution business, sharing profits and losses
equally. On December 31, 2012, the partnership capital and partners drawings were as follows:

Arthur Baker Carter Total

Capital 100,000 80000 300000 480,000
Drawing 60000 40000 20000 120,000

The partnership was unable to collect on trade receivables and was forced to liquidate. Operating profit in
2012 amounted to 72,000 which was all exhausted, including the partnership assets. Unsettled creditors claim
at December 31, 2012 totaled 84,000. Baker and Carter have substantial private resources, but Arthur has no
personal assets.

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The final cash distribution to Carter was:

a. 78,000
b. 84,000
c. 108,000
d. 162,000

40. The following account balances were available for the Perry, Quincy and Rehnquist partnership
just before it entered liquidation:

Cash 90,000.00 Liabilities 170,000.00

Non-cash Assets 300,000.00 Perry, Capital 70,000.00
Quincy, Capital 50,000.00
Rehnquist, Capital 100,000.00
Total 390,000.00 390,000.00

Perry, Quincy and Rehnquist had share profits and losses in a ratio of 2:4:4. Liquidation expenses were
expected to be 8,000. All partners were solvent. What would be the minimum amount for which the non-
cash assets must have been sold for, for Quincy to receive some cash from liquidation?

a. Any amount in excess of 175,000

b. Any amount in excess of 117,000
c. Any amount in excess of 183,000
d. Any amount in excess of 198,667

41. A local partnership was considering the possibility of liquidation since one of the partners is
solvent (Tillman) and the others are insolvent. Capital balances at that time were as follows.
Profits and Losses were divided on a 4:2:2:2 basis, respectively.

Ding, Capital 60,000.00

Laurel, Capital 67,000.00
Ezzard, Capital 17,000.00
Tillman, Capital 96,000.00

Ding’s creditors filed a 25,000 claim against the partnership assets. At that time, the partnership held assets
reported at 360,000 and liabilities of 120,000. If the assets could be sold for 228,000, what is the minimum
amount that Ding’s Creditor would have received.

a. 0
b. 2,500
c. 36,000
d. 38,720

42. As of December 31, 2012, the books of Ton Partnership showed a capital balance of: T-40,000;
O-25,000; N-5,000. The partners profit and losses ration were 3:2:1, respectively. The partners
decide to liquidate, and they sold all non-cash assets for 37,000. After settlement of all liabilities
amounting to 12,000, they still have cash of 28,000 left for distribution. If any capital deficiency is
uncollectible, the share of T in the distribution of the 28,000 cash would be?

a. 17,800
b. 18,000
c. 19,000
d. 17,000

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 43. A cash distribution plan for Mathew, Norell and Reams partnerships appears below:
Creditors Matthew Norell Reams
First 100%
Next 80,000 70% 30%
Next 70,000 43% 57%
Remainder 22% 34% 44%
The distribution of 550,000 would be:

Creditors Matthew Norell Reams

a 0 0 0 0
b 0 121,000.00 187,000.00 242,000.00
c 300,000.00 55,000.00 85,000.00 110,000.00
d 300,000.00 108,000.00 58,000.00 84,000.00

44. On June 30, 2001, the balance sheet for the partnership of Carlo, Mario, and Pedro together with
their respective profit and loss ratios, were as follows:
Assets, net at cost P360,000

Carlo, loan P 18,000

Carlo, capital (20%) 84,000
Mario, capital (20%) 78,000
Pedro, capital (60%) 180,000
Total P360,000

Carlo has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted
to their fair value of P432,00 at June 30, 2001. It was agreed that the partnership would pay Carlo
P122,400 cash for Carlo’s partnership interest including Carlo’s loan which is to be repaid in full. No
goodwill is to be recorded.

After Carlo’s retirement, what is the balance of Mario’s capital account?

a. P72,900 b. P78,000 c. P90,900 d. P92,400

45. Alfred, a partner in the Karol partnership, has 30% participation in partnership profit and losses.
Alfred’s capital account has a net decrease of p30,000 during the calendar year 2001. During
2991, Alfred withdrew P65,000 (charged against capital account) and contributed property
valued at p12,500 to the partnership.

What was the net income of Karol Partnership for 2001?

b. P75,000 b. P116,667 c. P175,000 d. P275,000

46. The partnership of Gene, Jerry and Perry was formed on January 1, 2001. The original investments
were as follows:

Gene, P160,000 Jerry, P240,000 Perry, P360,000

According to the partnership agreement, profit or loss will be divided among the partners as follows:

 Salaries are: Gene, P24,000; Jerry, P20,000; Perry, P16,000

 Interest of 8% on the average capital balances of all the partners and remainder divided equally.

Additional information is as follows:

 Net income of the partnership for the year ended December 31, 2001 was P140,000.
 Gene invested an additional P40,000 in the partnership on July 1, 2001.
 Petty withdrew P60,000 from the partnership on October 1, 2001.
 All the partners made regular drawings against their shares in net income during 2001 of P20,000
each.

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 The interest on average capital of Perry amounted to

c. P28,800 b. P27,600 c. P25,200 d. P24,000

47. Gene’s share in the partnership net income for 201 is

a. P44,667 b. P45,467 c. P49,867 d. P50,000

48. The partners’ capital balances as of December 31, 2001 are

Gene Jerry Perry

a. P224,667 P265,467 P329,867
b. P204,667 P245,467 P309,867
c. P184,000 P204,000 P269,867
d. P344,667 P365,467 P429,867

49. Goldie, Josie, and Lily are partners with capital balances of P700,000; P500,000, and P700,000
respectively and sharing profits of 30%, 20%, and 50% respectively. The partners agreed to dissolve
the partnership, and upon liquidation all of the partnership assets are sold and sufficient cash is
realized to pay all claims except one of P100,000. Lily is personally insolvent, but the other two
partners can meet any indebtedness to the firm.

On the remaining claim of P100,00 against the partnership, Goldie is to absorb?

a. P80,000 b. P30,000 c. P60,000 d. P50,000

50. Partners AA and BB has the following capital and absorption capacity.

Capital Absorption Capacity

AA 40,000 100,000
BB 30,000 50,000

How should a cash of 30,000 available for distribution to partners be divided?

a. 24,000 and 6,000

b. 22,000 and 7,000
c. 25,000 and 5,000
d. 26,000 and 4,000

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