NATIONAL UNIVERSITY

551 M.F. Jhocson St, Sampaloc, Manila, 1008 Metro Manila

College of Business and Accountancy

ACCOUNTING FOR SPECIAL TRANSACTIONS

Quiz 2: Partnership (Problems)
3rd term A.Y. 2019-2020
Name: Section: Score:

PROBLEM A. On March 1, 2020, Matteo and Sarah decided to combine their businesses to form a partnership with 40% and 60%
interest in profits and losses, respectively. Balance sheet as of this date is presented below:
Matteo Sarah
Cash 18,000 20,000
Accounts Receivable 40,000 60,000
Inventories 60,000 75,000
Building 100,000 120,000
Equipment 115,000 412,000
Total Assets 333,000 687,000

Accounts Payable 25,000 87,000

Matteo, Capital 308,000
Sarah, Capital 600,000
Total Liabilities and Equity 333,000 687,000
The partners agreed on the following:
a. 5% of Accounts Receivable is uncollectible.
b. Inventory is to be written down by 20%.
c. Building of Matteo is overvalued by P10,000.
d. Equipment of Sarah is undervalued by P12,000.
e. Prepaid expenses of P6,000 and P3,000 is to be recognized in the books of Matteo and Sarah, respectively.
f. Accrued expenses of P8,000 and P6,000 is to be recognized in the books of Matteo and Sarah, respectively.
g. After effecting the necessary adjustments, partners Matteo and Sarah agreed to bring their adjusted capital balance in
accordance with the profit and loss ratio using the adjusted balance of Sarah.
h. The profit and loss agreement of the partners includes the following:
 Annual salaries of P36,000 and P60,000 to Matteo and Sarah, respectively.
 6% interest is allowed on partners’ beginning capital balances.
 Bonus of 20% of net income after deducting interest and bonus is given to Sarah.

i. On December 31, 2020, Income Summary has a debit balance of P100,000. Matteo withdraws P32,000 and Sarah withdraws
P13,000.

ii. On December 31, 2021, Income Summary has a credit balance of P120,000.

iii. On December 31, 2021, the partners decided to admit Mommy Divine in the partnership with a 20% interest in capital and
profits and losses. The assets and liabilities are recorded at their current fair value on this date. Matteo was credited a bonus of
P16,000.

iv. For the year 2022, partnership income totaled P360,000. On top of the profit and loss agreement on (h), Mommy Divine is to
receive annual salaries of P24,000 and 6% interest on beginning capital balance. Partners Matteo and Sarah continue to share
profit and loss proportionate to their old profit and loss ratio.

v. On January 2023, a virus entered the Philippines which greatly affects the business of the partnership. The business is not able
to recover for the first quarter of 2023 and finally decided to liquidate on April 1, 2023. Balance sheet as of this date shows Cash of
P200,000, Accounts Payable of P340,000 and Loan Payable to Mommy Divine of P50,000. The remaining noncash assets were sold
at 15% of its book value. (Round off amounts to nearest peso.)

Answer the following questions:

1. Adjusted capital of Matteo on March 1, 2020.
2. Total assets of the partnership on the date of formation.
3. Share of Matteo in the 2020 Net Income/(Net Loss).
4. Ending capital balance of Sarah on December 31, 2020.
5. Share of Sarah in the 2021 Net Income.
6. Ending capital balance of Matteo on December 31, 2021.
7. Cash contribution of Mommy Divine on December 31, 2021.
8. Share of Mommy Divine on 2022 Net Income.
9. Bonus of Sarah in 2022.
10. Loss on realization in 2023.
11. Amount received by Mommy Divine in full settlement of her interest.
12. Total cash distributed to partners

PROBLEM B. Andres, Tomas and Moises are partners of ATM partnership. They decided to liquidate on March 31 of the current
year. On this date, they have non- cash assets of P530,000 and liabilities of P250, 000, including loan from Moises of P50,000.
Andres, Tomas and Moises have capital balances of P80,000, P130,000 and P90,000, respectively. Profits and loss are shared
3:3:4 for Andres, Tomas and Moises. All partners are solvent.
13. Determine the total loss on realization if Moises received P25,000 in final settlement.

PROBLEM C. The balance sheet accounts of partners Coleen, Kim and Gerald before liquidation are the following: Cash,
P360,000; Non-Cash Assets, P1,790,000; Liabilities, P1,000,000; Coleen, Capital (50%), P460,000; Kim, Capital (30%), P370,000
and Gerald, Capital (20%), P320,000. On the first month of liquidation, assets with a book value of P1,400,000 are sold for
P1,060,000. Liquidation expenses of P40,000 are paid and additional expenses are anticipated. Liabilities are paid amounting to
P362,000, and sufficient cash is retained to ensure the payment to creditors before making payment to partners. In the first
payment of cash to partners, Kim received P100,000.
14. The cash withheld for future liquidation expenses amounted to:
15. How much was distributed to Gerald?

PROBLEM D. A Statement of Financial Position for the partnership of John, Paul and Ryan, who share profits in the ratio of 2:1:1,
shows the following balances just before liquidation:
Assets Liabilities and Equity
Cash P 144,000 Liabilities P 240,000
Other assets 714,000 John, capital 264,000
Paul, capital 186,000
Ryan, capital 168,000
In the first month of liquidation, certain assets are sold for P384,000. Liquidation expenses of P12,000 are paid, and additional
expenses are anticipated. Liabilities of P64,800 are paid and sufficient cash is retained for the anticipated liquidation expenses. In
the first payment to partners, John receives P75,000.
16. The amount of cash withheld for the anticipated liquidation expenses is:
17. How much did Ryan receive?

PROBLEM E. Capital balances of partners after exhausting their non-cash assets are as follows:
A (20%) B (10%) C (10%) D (10%) E (20%) F (10%) G (20%)
(P94,500) P35,000 (P115,500) (P21,000) P61,250 P17,500 (P70,000)
18. Partners B, D, E and F are personally solvent. How much cash must “F” contribute to the partnership?
19. Using the data in #18 and assuming that D’s personal assets totaled P100,000 and personal liabilities totaled P43,000, how
much cash will B contribute?

PROBLEM F. Avie, Ayien and Mac have decided to liquidate their partnership on March 31, 2014. At this time, the partnership has
cash of ₱315,000, non-cash assets of ₱2.1M (excluding receivable from partners) and substantial liabilities. The partners’ capital
balances, loan balances and profit and loss ratio are as follows:
Avie Ayien Mac
Capital 360,000 285,0000 390,000
Loan (debit) - (45,000) (60,000)
P&L ratio 50% 25% 25%

The assets of the partnership are liquidated as follows:

April May June
Proceeds from realization 1,360,000 350,000 180,000
Payment of liabilities 840,000 300,000 Balance
Liquidation expenses 10,000 12,000 15,000
Payment to partners 160,000 340,000 All cash

Non-cash assets was realized as follows: April – 70%; May – 20%; June – 10%.
20.The amount received by Ayien in the 2nd month is _____________
21. The amount received by Avie in the 3rd month is _____________
22. How much is the total restricted interest in the 2nd month? _______________
23. Using the information above, how much is the total payment to Avie if Mac already received P275,000? _________

PROBLEM G. The partnership of GA, LE and MA was dissolved on May 31, 2014, and the account balances after all noncash
assets are converted to cash on July 1, 2014 along with residual P/L sharing ratios, are:
Cash P262,500 Accounts Payable P630,000
LE, Capital (30%) 315,000 GA, Capital 472,500
MA, Capital (40%) 525,000

Personal assets and liabilities of the partners at July 1, 2014 are:

Personal Assets Personal Liabilities
GA P 420,000 P 472,500
LE 525,000 320,250
MA 997,500 420,000

24. If MA contributed P367,500 to the partnership to provide cash to pay the creditors, what amount must GA’s P472,500
partnership equity would appear recoverable?

PROBLEM H. Samsung, Nokia and Apple are partners who share p&l as follows: 45%:15%:40%, respectively. The Statement of
Financial Position of ZPhone Partnership as of December 31, 2016 is given below:
ASSETS LIABILITIES & CAPITAL
Cash P 268,000 Liabilities P 532,000
Noncash Assets 1,940,000 Loan from Nokia 44,000
Samsung, capital 694,000
Nokia, capital 354,000
Apple, capital 584,000
Total Assets P 2,208,000 Total Liabilities and Capital P 2,208,000

On January 1, 2017, the partners decided to liquidate. For the month of January, some assets were sold at a gain of P56,000.
Payments to partner Nokia from initial sale of assets was P181,400. Cash withheld for possible liquidation expenses and
unrecognized liabilities amounted to P146,800.
25. The theoretical loss (restricted interest) on the first month

*END OF EXAMINATION*
REMEMBER WHY YOU STARTED.