Name:

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1. Rober t
sandSmi t
hdraf t
edapartnershipagreementthatl
ist
sthefol
lowi
ngassetscontr
ibut
edatthepart
nership’
sformati
on:
Cont r
ibutedby
RobertsSmith
Cash P20,000 P30,000
Inventory 15,000
Buildi
ng 40,000
Furnit
ur e&equi pment 15,000
Thebui l
dingissubjecttoamor tgageofP10, 000,whi
chthepart
nershi
phasassumed.Thepartnershi
pagreementalsospeci
fi
es
thatpr ofit
sandl ossesar etobedi st
ri
butedev enl
y.Whatamountsshouldberecordedascapit
alforRobertsandSmi t
hatthe
format i
onoft hepar t
nership?
Rober ts Smith
a. P35, 000 P85,000
b. P35, 000 P75,000
c. P55, 000 P55,000
d. P60, 000 P60,000

Sol
uti
on:
1.(b)Therequirementi stodet erminetheamount st ober ecordedascapital
forRobertsandSmi thatthe
formationofthepartnership.Unl essotherwi seagreeduponbyt hepartner
s,i
ndivi
dualcapit
alaccountsshoul dbe
credi
tedforthef ai
rmar ketvalue( onthedat eofcont r
ibuti
on)ofthenetassetscontr
ibutedbythatpartner.I
ti s
necessarytoassumet hattheamount slistedarefai rmarketv al
ues.Theamountofnetasset sthatRoberts
contri
butedisP35,000( P20,000+P15, 000) .Thefairmar ketvalueofthenetasset
sSmi thcontr
ibutedisP75, 000
(P30,000+P15, 000+P40, 000–P10, 000) .Thepar tners’prof
itandlossshari
ngrati
odoesnotaf fecttheinit
ial
recordi
ngoft hecapit
al account s.

2. OnApr il30,2016,Algee,Belger
,andCedaf ormedapar tnershi
pbycombi ni
ngt hei
rseparatebusinesspropri
etorshi
ps.Algee
contr
ibutedcashofP50, 000.Belgercontr
ibutedpropert
ywi t
haP36, 000carr
yingamount ,aP40,000origi
nalcost,andP80,000
fai
rv al
ue.Thepar tnershipacceptedr esponsibi
l
ityfortheP35, 000mor t
gageat tachedtot hepr oper
ty.Cedacont ri
buted
 equipmentwi thaP30,000carryi
ngamount,aP75,
000or
iginalcost,
andP55,
000f ai
rval
ue.Thepart
ner
shipagr
eementspecif
ies
thatprofit
sandl ossesaretobesharedequal
lybuti
ssi
lentregardi
ngcapi
talcontr
ibut
ions.Whi
chpar
tnerhasthel
argestApri
l
30,2016capi tal
accountbalance?
a. Algee.
b. Bel ger.
c. Ceda.
d. All capit
alaccountbal
ancesareequal
.

Sol
uti
on:
2.(c)Therequi
rementi
stodet
ermi
newhi
chpar
tnerhast
hel
argestcapi
talaccountbal
ance.Uset
hesol
uti
ons
approacht
osolvethepr
obl
em.

Eachpartnerval
ueshiscontri
buti
ontothepart
nershi
patitsf
airmarketv
alue.Thefai
rmar ketval
uebecomest
he
part
ner’
sbalanceinhiscapit
alaccountandi
sbasistothepart
nershi
pundergenerall
yacceptedaccount
ing
pri
ncipl
es.Anyli
abil
i
tiesassumedbyt hepar
tner
ship,
reducesthepart
ners’
capit
albalancebytheamount
assumed.

3. AbelandCar rf
ormedapart
nershipandagreedt
odi v
idei
nit
ialcapi
talequal
l
y,event
houghAbelcontr
ibut
edP100,000andCarr
contr
ibutedP84,
000ini
dent
ifi
ableasset
s.Underthebonusapproachtoadjustt
hecapi
talaccount
s,Carr
’suni
denti
fi
abl
easset
shoul
dbedebi t
edfor
a. P46, 000
b. P16, 000
c. P8, 000
d. P0

Sol
uti
on:
3.(d)Undert
hebonusmet hod,uni
dent
if
iabl
easset
s( i
.e.
,goodwil
l
)ar
enotr
ecognized.Thetot
alr
esult
ingcapi
tal
i
st heFVofthetangi
blei
nvestmentsoft
hepart
ners.Thus,ther
ewoul
dbenounidentif
iabl
easset
srecogni
zedby
thecreat
ionoft
hisnewpartnershi
p.

4. Whenpropertyotherthancashi si nvest
edinapar t
ner
shi
p,atwhatamountshoul
dthenoncashpr
oper
tybecr
edi
tedt
othe
cont
ri
buti
ngpartner’
scapit
alaccount ?
a. Fai
rvalueatthedateofcont r
ibuti
on.
b. Contr
ibut
ingpartner
’sori
ginalcost.
c. Assessedvaluat
ionforpropertytaxpurposes.
d. Contr
ibut
ingpartner
’staxbasis.

Sol
uti
on:
4.(a)Noncashasset
scontributedtoanenti
tyshouldberecor
dedatfairmarketval
ueatt hedat eofcontr
ibut
ion.
Thecreati
onofanewent it
ycr eat
esanewaccount abi
li
tyfort
heseassets.Thepartner
’sori
ginalcostrel
atestoa
previ
ousaccount
abil
i
ty.Theassessedvaluat
ionandthetaxbasismaydifferf
rom f
airmarketvalue.

5. RedandWhi tefor
medapar t
nershi
pin2016.Thepar
tner
shi
pagreementprovi
desforannualsalar
yall
owancesofP55,000for
RedandP45, 000forWhite.Thepar t
ner
sshareprof
it
sequal
lyandlossesina60/ 40rat
io.Thepartner
shiphadearningsof
P80,000for2016bef
oreanyal l
owancetopart
ner
s.Whatamountoftheseear
ningsshoul
dbecr edi
tedtoeachpar
tner
’scapit
al
account?
Red Whit
e
a. P40,000 P40,
000
b. P43,000 P37,
000
c. P44,000 P36,
000
d. P45,000 P35,
000

Sol
uti
on:
5.(b)Credi
tstopart
ner
s’capi
talaccount
sarebaseduponearningsaft
eral
lowanceforint
erest
,salaryand
bonus.Theearni
ngsbeforeanyall
owanceof$80,000i
sreducedbyt hesal
aryal
lowancesof$100,000and
resul
tsinalossof$20,
000.The$20,000lossi
sthendi
str
ibutedtothepart
nersi
nr el
ati
ontotheirprofi
tand
l
ossr at
iosasfol
lows:
I
tisi
mpor
tantt
onot
ethatt
hel
ossesar
edi
str
ibut
ed60/
40whi
l
epr
ofi
tsar
eshar
edequal
l
y.
6. Fox,Greg,andHowear epar t
nerswi t
haveragecapitalbal
ancesduring2016ofP120,000,P60,
000,andP40,000,respect
ivel
y.
Part
nersr eceive10%i nt
erestont hei
raver
agecapitalbal
ances.Aft
erdeducti
ngsal
ari
esofP30,000toFoxandP20, 000toHowe,
theresi
dualpr ofitorlossisdividedequall
y.In2016t hepartner
shipsustai
nedaP33,000lossbeforei
nter
estandsal ari
esto
part
ners.Bywhatamountshoul dFox’scapit
alaccountchange?
a. P7, 000i ncrease.
b. P11, 000decr ease.
c. P35, 000decr ease.
d. P42, 000i ncrease.

Sol
uti
on:
6.(
a)Whendi vi
dingthepart
nershi
plossof$33,000,fi
rstint
erestandsalari
esareallocat
edt othepart
ners,
i
ncreasi
ngt hei
rcapit
albal
ances.Thi
sall
ocat
ionofinterestandsalari
eswill
alsoincr
easetheamountofl oss.
Thi
sincreasedlossamountwoul dthenbeallocat
edt othepar t
ners,decr
easingthei
rcapitalaccount
s.The
computati
onsareshownbel ow.

Thus,Fox’
saccounti
ncr
easesby$7,000.
Ther
* esi
duall
ossof$105,000isthel ossr
esult
ingaft
ertheint
erestandsal
aryal
l
owancesar
ededuct
ed
[
$33,000loss–($12,
000+$6,000+$4,000)–($30,000+$20,
000)
].
7. ThepartnershipagreementofAxel,Berg&Cobbpr ov
idesforthey ear-endall
ocati
onofnetincomei
nt hefol
l
owingorder
:
Fi
rst,
Axel i
st orecei
ve10%ofneti ncomeupt oP100,000and20%ov erP100,000.
Second,BergandCobbeachar etoreceiv
e5%oft her emai
ningi ncomeov erP150,000.
Thebalanceofi ncomeistobeallocatedequall
yamongt hethreepar t
ners.
Thepartnership’
s2010netincomewasP250, 000beforeanyallocati
onst opart
ners.Whatamountshouldbeal
l
ocatedtoAxel
?
a. P101,000
b. P103,000
c. P108,000
d. P110,000

Sol
uti
on:
7.(
c)Thedi
str
ibut
ionoft
hepar
tner
shi
pneti
ncomeof$250,
000occur
sint
hreest
epsasf
oll
ows:

Thus,
$108,
000woul
dbedi
str
ibut
edt
oAxel
.
8. Thepar t
nershipagr eementofReidandSi mm prov
idesthatint
erestat10% pery eari
stobecr edit
edtoeachpart
neront he
basisofwei ght
ed-av er
agecapit
albalances.Asummar yofSimm’scapitalaccountfort
heyearendedDecember31,2016,i
sas
fol
lows:
Balance,January1P140, 000Addit
ionalinvest
ment,Jul
y140,000Wi t
hdrawal,August1(15,
000)Balance,
December31165,
000
Whatamountofi nterestshoul
dbecreditedtoSimm’scapit
alaccountfor2016?
 a. P15,
250
b. P15,
375
c. P16,
500
d. P17,
250

Sol
uti
on:
8.(
b)Wemustf
ir
stdet
ermi
neSi
mm’
swei
ght
ed-
aver
agecapi
tal
bal
ancef
or2010asf
oll
ows:

Theprobl
em stat
esthatint
erestof10%peryeari
stobecredi
tedtoeachpar
tner
’scapi
talaccount
,and10%
ofSi
mm’ sweight
ed-
averagecapital
bal
anceof$153,
750i
s$15,375.
9. TheFlatandIr
onpar t
nershipagr
eementpr ov
idesforFl
att
orecei
vea20%bonusonprof
itsbefor
ethebonus.Remaini
ngpr
ofi
ts
andlossesaredivi
dedbet weenFlatandIronintherat
ioof2:
3,r
espect
ivel
y.Whi
chpar
tnerhasagreateradvant
agewhenthe
par
tnershi
phasapr ofi
torwhenithasal oss?
Profit Loss
a. Flat I r
on
b. Flat Fl at
c. Ir
on Flat
d. Ir
on Ir
on

Sol
uti
on:
9.(b)Inbot
hthecaseofapr of
itoraloss,
Flatwil
lhav
eagr eat
eradvantage.Whenthereisaprof
it,
Flatwil
l
obtai
na20%bonusonpr of
it
sbef or
ethebonus,andalsot
ake40%oft hepr of
itaf
terthebonus.I
ronont he
otherhand,
wil
lonl
yrecei
ve60%oft heprof
itaf
tert
hebonus.Thefol
lowingexampleil
lust
rat
esthi
s:

I
nthecaseofaloss,itcaneasi
l
ybeseent
hatsi
nceFl
athasasmal
l
erper
cent
ageshar
eint
hel
osst
hathe
hasagr
eateradv
antage.

10.BlauandRubiar epartner
swhoshareprofi
t sandl
ossesintherati
oof6:4,r
espect
ivel
y.OnMay1, 2016,
t hei
rrespect
ivecapi
tal
account swereasfol
lows:
BlauP60, 000Rubi50,000Onthatdate,Lindwasadmi t
tedasapar t
nerwithaone-thi
rdi
nterestincapitalandprofi
tsforan
i
nv estmentofP40,000.Thenew par
tnershipbeganwithtotalcapi
talofP150,
000.Immediatel
yaf t
erLind’sadmissi
on,Blau’
s
capitalshoul
dbe
a. P50, 000
b. P54, 000
c. P56, 667
d. P60, 000

Sol
uti
on:
10.(b)Ther equirementi stocalculatethebalancesi nthecapi talaccountsofapar tner
shipaftert
he
admissionofanewpar t
ner.I
nt hiscase,thenewpar tneri si
nvesti
ng$40, 000f ora1/ 3int
erestinthenew
total
capi t
al of$150,000.Nogoodwi l
l i
srecordedbecauset henewcapi tal($150,000)equalsthetotalofthe
oldcapital($110,000)andCar ter’
sinvestment( $40,000) .Howev er,abonusof$10, 000isbeingcredit
edto
thenewpar tner’
scapitalaccountbecausehi sinterest( 1/3of$150, 000,or$50, 000)exceedshisinvestment
($40,
000) .Thebonust othenewpar t
nerischar gedt otheol dpar t
nersintheirpr of
itandlossrati
osasshown
below.
Blau[60,000–3/ 5(10,000)]$54,000Rubi [50,
000–2/ 5( 10,
000)]46,000Lind( 150,000÷3)50, 000$150,000
11.KernandPat earepar
tnerswi t
hcapit
albal
ancesofP60, 000andP20,000,r
especti
vel
y.Pr ofi
tsandlossesaredi
vi
dedi
ntherat
io
of60:40.KernandPatedeci dedtoform anewpar t
ner shi
pwithGrant,whoinvest
edl andv al
uedatP15,
000fora20%capit
al
i
nterestinthenew partnershi
p.Grant’
scostofthel andwasP12, 000.Thepar t
nershipel ectedt
ouset hebonusmethodto
recordtheadmissi
onofGr antint
othepart
nershi
p.Grant’scapi
tal
accountshoul
dbecr edi t
edf or
a. P12, 000
b. P15, 000
c. P16, 000
d. P19, 000

Sol
uti
on:
11.( d)Ther equir
ementi stodet erminethebalancei nthenew part
ner
’scapit
alaccountafteradmission
usingthebonusmet hod.Inthiscase,Granti
sinvesti
nglandwit
haFVof$15, 000fora1/5inter
estinthenew
totalcapit
alof$95,000.Usingt hebonusmet hod,thenewcapital$95,
000equalsthetotaloft
heol dcapital
plusGr ant
’sinvestment($60,000+$20, 000+$15, 000)
.Thus,abonusof$4,000isbeingcredi
tedtoGr ant’
s
capitalaccountbecausehi si nter
est(1/5of$95, 000,or$19,
000)exceedshisinvestment($15,
000).The
bonust
othenewpar
tneri
schar
gedt
otheol
dpar
tner
s’capi
tal
account
sint
hei
rpr
ofi
tandl
ossr
ati
os.

12.DunnandGr eyar
epartner
swi t
hcapi
talaccountbalancesofP60,
000andP90,
000,respecti
vel
y.Theyagr
eetoadmi tZor
nasa
par
tnerwithaone-
thi
rdint
eresti
ncapit
alandprofi
ts,forani
nvest
mentofP100,
000.Revaluati
ontotheor
igi
nalpar
tnersshoul
d
be
a. P0
b. P33,333
c. P50,000
d. P66,667

Sol
uti
on:
12.( c)Therequi
rementist odeterminetheamountofgoodwi llimpl i
edbyZor n’
sinvestment.Zornis
i
nv esti
ng$100,
000fora1/ 3inter
estinthepart
ner
ship.Ther
efore,$100, 000represent
s1/3oft hevalueof
theequityoft
henewpartnershi
p($100,000÷1/3=$300,000).Thet angibleporti
onoftheequityi
s$250,000
($60,000+$90,
000+$100,000).Thus,t
hetotal
impl
iedgoodwilli
s$50, 000( $300,
000–$250, 000)
.

I
tems13and14ar ebasedont hef
oll
owing:
Thef ollowingcondensedbal ancesheetispresentedfort
hepartnershi
pofAlf
aandBeda,whoshareprof
it
sandlossesintherat
io
of60: 40, r
especti
vel
y:
Cash P45, 000
Otherasset s 625,000
Beda, loan 30,000
Account spayable P120,000
Alf
a, capi t
al 348,
000
Beda, capital 232,
000
P700, 000 P700,000
13.Theasset sandli
abi
li
tiesar ef
air
lyval
uedont hebal
ancesheet.Alf
aandBedadecidet
oadmitCappasanewpar tnerwit
h20%
i
nt erest.Nogoodwil
lorbonusi stober ecor
ded.Whatamountshoul dCappcont
ri
butei
ncashorot
herasset
s?
a. P110, 000
b. P116, 000
c. P140, 000
d. P145, 000

Sol
uti
on:
13.(
d)I
fnogoodwi
l
lorbonusi
stober
ecor
ded,
thef
ormul
atodet
ermi
net
henecessar
ycont
ri
but
ioni
s

Analter
nati
vecomputati
oni stodi vi
detheoldpar tner’
scapit
al(
$580,000)bytheirinter
estaftert
henew
part
ner’
sadmissi
on.Theresultisthetot
alcapi
talafteradmissi
on($580,
000÷80%=$725, 000).Tocomput
e
thenew part
ner’
scontri
but
ion,t heoldpart
ners’capitalcanbesubtract
edfrom totalcapit
al($725,
000–
$580,
000=$145,000),
ortotalcapit
alcanbemul t
ipl
iedby20%( 20%×$725,000=$145, 000).

14.Inst
eadofadmit
tinganewpar
tner
,Alf
aandBedadeci det
oli
qui
dat
ethepar
tner
shi
p.I
ftheot
herasset
sar
esol
dforP500,
000,
whatamountoftheavai
l
abl
ecashshouldbedi
str
ibut
edtoAlf
a?
a. P255,
000
b. P273,
000
c. P327,
000
d. P348,
000

Sol
uti
on:
14.(b)Todet erminetheamountofcashdi str
ibutedduringli
quidati
on,thesol
utionsapproachist
oprepar
ean
abbrevi
atedst at
ementofpar t
nershipli
quidati
on.I napartner
shipliqui
dati
on,cashisdistr
ibut
edbasedonthe
capit
albalancesoft hepar
tnersafteradjusti
ngt hem foranyincome( l
oss)tothedat eofl
iqui
dati
onandanyl
oans
or
advancesbet weenthepartnersandt hepartnership.Theabbreviat
edstatementf ol
l
ows:
Notethatt
hetot
alcashavail
ableal
soequal
s$425,
000.
Beginni
ngcash$45,000Proceedsfr
om sal
e500,
000PaymentofAP(
120,
000)$425,
000Ther
efor
e,Al
facan
recei
ve$273,
000incashinful
lli
qui
dati
onofhi
scapi
tal
balance.

15.IntheAdel-Br
ickpartnership,AdelandBr ickhadacapi talr
ati
oof3:1andapr of
itandl
ossrat
ioof2:1,respect
ivel
y.Thebonus
met hodwasusedt or ecordCol ter’
sadmi ttanceasanewpar tner
.Whatrati
owoul dbeusedtoal
locate,toAdelandBrick,t
he
excessofColter
’scontri
but i
onov ertheamountcr edi
tedtoColt
er’
scapi
tal
account?
a. Adel andBrick’
snewr elati
vecapi t
alratio.
b. Adel andBrick’
snewr elati
vepr ofi
tandl ossrati
o.
c. Adel andBrick’
soldcapi t
alrati
o.
d. Adel andBrick’
soldpr ofitandlossr atio.

Sol
uti
on:
15.(d)Thebonusmethodimpl i
est hattheoldpartnersei
t herr
eceiv
edabonusf r
om thenewpartner,
orthey
paidabonustothenewpar t
ner.Int hi
scase, Colt
er,t
henewpar t
ner,cont
ri
butedanamounti nexcessofthe
amountcredi
tedtoCol
ter’
scapitalaccount.Accordingl
y,theexcessshouldbet r
eatedasabonust oAdeland
Bri
ck.Thisbonusshoul
dbet r
eat edasanadj ustmenttot heoldpar t
ner
s’capitalaccount
sandshouldbe
al
locatedbyusi
ngAdelandBrick’soldpr of
itandlossrat
io.

I
tems16and17ar ebasedont hefol
l
owi ng:
OnJune30, 2016, thecondensedbalancesheetf ort
hepar
tnershi
pofEddy ,Fox,andGrimm,toget
herwit
htheirr
espectivepr
ofitand
l
ossshar ingper centageswereasf ol
lows:
Assets,netofl i
abili
ti
esP320,000Eddy ,capi
tal(
50%)P160,
000Fox, capit
al(30%)96,000Gri
mm, capi
tal
(20%)64,000P320,000
16.Eddydeci dedt or et
ir
efrom thepar t
nershi
pandbymut ualagreementi stobepai dP180,
000outofpar t
nershipfundsforhis
interest.TotalRev al
uati
onintheagr eementistober
ecorded.AfterEddy’
sreti
rement,whatar
ethecapit
albalancesoftheother
par t
ners?
Fox Gri
mm
a. P84, 000 P56,000
b. P102, 000 P68,000
c. P108, 000 P72,000
d. P120, 000 P80,000

Sol
uti
on:
16.(c)Eddyistobepaid$180, 000f orhi
s50%i nterestint hepar t
nershi
p.Thisi
mpliesthatthenetassetsof
thepar t
ner
shiparewor
th$360, 000( $180,000÷50%) .Sincet henetassetsarecur
rentlyreportedat$320,
000,
i
mpl iedgoodwil
li
s$40,000( $360,000–$320, 000).Whengoodwi l
li
srecorded,
thegoodwi llaccounti
s
debitedandthepart
ner
s’ capit
al accountsarecreditedf ortheirshareofthegoodwil
l.Therefore,t
hecapit
al
balancesofFoxandGrimm ar e$108, 000and$72, 000, ascomput edbelow.
FoxGr imm Previ
ouscapitalbalance$96, 000$64,000Shar eofgoodwi l
lFox(30%×$40, 000)12,000Gri
mm
(20%×$40, 000)−8,
000Newcapi talbal
ance$108,000$72, 000
17.Assumeinst eadthatEddyremainsint
hepart
nershi
pandt hatHamm i sadmitt
edasanewpar
tnerwitha25%i
nter
estinthe
capi
taloft henew par t
nershi
pf oracashpaymentofP140, 000.Totalrev
aluat
ioni
nthet
ransact
ioni
sto berecor
ded.
Immediat
elyaf t
eradmissi
onofHamm, Eddy
’scapit
alaccountbalanceshoul
dbe
a. P280,000
b. P210,000
c. P160,000
d. P140,000

Sol
uti
on:
17.( b)Hamm wi llpay$140, 000f ora25%i nter
estinthepart
nershi p.Thisimpliesthatt
henetasset soft he
partnershi
p,incl
udingt henew i nv est
ment ,arewor t
h$560,000( $140,000÷25%) .Netassetsar ecurrentl
y
reportedat$320, 000,andHamm’ scashpay mentof$140, 000br ingst hattotalupto$460, 000.Therefore,
i
mpl iedgoodwi l
lis$100, 000[ $560,000–( $320,000+$140,000)].Whengoodwi lli
srecorded,thegoodwi ll
accounti sdebitedandt hepar tners’capitalaccountsarecreditedf ort hei
rshar eofgoodwi l
l.Therefore,
Eddy ’scapi
talbalance( $160,000)i sincr
easedbyhi sshareoft hegoodwi l
l(50%×$100, 000=$50, 000),to
resultinabalanceof$210, 000( $160,000+$50, 000).

18.OnJune30, 2016,thebalancesheetforthepart
ner shipofCol l
,Madur
o,andPr i
eto,togetherwit
hthei
rrespect
iveprofi
tandloss
rat
ios,wer easf ol
lows:
Assets,atcostP180, 000Coll,l
oanP9,000Coll,capital(20%)42,000Maduro,capital(20%)39,000Priet
o,capit
al(60%)90,000
TotalP180, 000Col lhasdecidedtoreti
refrom thepar tner
ship.Bymutualagreement ,t
heassetsaretobeadj ust
edt othei
rfai
r
val
ueofP216, 000atJune30,2016.I twasagr eedt hatt hepart
ner
shipwoul dpayCol lP61,
200cashf orColl’
spartner
ship
i
nterest,includi
ngCol l’
sloanwhi chistober epaidi nf ul
l.Nogoodwilli
st ober ecorded.AfterCol
l’
sr et
ir
ement,whati sthe
bal
anceofMadur o’scapit
alaccount?
a. P36, 450
b. P39, 000
c. P45, 450
d. P46, 200

Sol
uti
on:
18.(
c)Ther
equi
rementi
stodet
ermi
net
hebal
ancei
nMadur
o’scapi
tal
accountaf
terCol
l
’sr
eti
rement
.Whena
partnerwi thdrawsf rom apartner shi
padet ermi nationofthef ai
rv al
ueoftheentit
ymustbemade.Si nceiti
s
statedi nt hepr obl em thatthewi thdrawingpartneri ssell
inghisinterestt
ot hepart
ner shi
pandt hatnogoodwilli
s
tober ecor ded, thebonusmet hodmustbeempl oyedafterrestatementofassetstoFV.Thecapi tal
accountsaft
er
restatementt oFVwoul dbe
Coll
[$42,000+20%( $216, 000–$180, 000)]=$49, 200
Madur o
[$39,000+20%( $216, 000–$180, 000)]=$46, 200
Prieto
[$90,000+60%( $216, 000–$180, 000)]=$111, 600
Thebonuspai dt oCol listhedifferencebetweent hecashpai dt ohimf orhispar
tnershipint
erestandthebalance
oft hatinter estpl ushisloanbalance.
Bonus=[ $61, 200–( $49,200+$9, 000)]=$3,000
Madur o’
scapi tal accountwoul dber educedbyhi sproporti
onateshar eofthebonus, basedont heprofi
tandloss
rati
ooft her emai ningpartners[20%/ (20%+60%)=25%] .
Madur o’scapi tal [
$46,200–25%( $3,000)]=$45, 450
19.All
enr eti
redf r
om thepartnershi
pofAl l
en,Beck,andChal
e.Allen’
scashsettl
ementfr
om thepar t
ner
shipwasbasedonnew
goodwi l
ldet er
minedatt hedat eofreti
rementplusthecarr
yingamountoft heothernetassets.Asaconsequenceoft
he
set
tlement ,thecapi
talaccountsofBeckandChal eweredecr
eased.Inaccount
ingf
orAllen’
swithdr
awal,t
hepar
tner
shi
pcoul
d
haveusedt he
Bonusmet hod Posi
ti
veRev al
uat
ionmethod
a. No Yes
b. No No
c. Yes Yes
d. Yes No

Sol
uti
on:
19.( d)Underbot ht hebonusandgoodwi llmet hods,theassetsoft hepart
nershipmustf i
rstber estat
edt o
theirfairmarketv alue.Then,thewit
hdrawi ngpar tner
’scapit
alaccountmustbeadj ustedtot heamountt hat
thewi thdrawi
ngpar tneri
sexpectedtorecei v
e.Whent hebonusmet hodisused,nonewgoodwi lli
srecorded.
I
nst ead,theexi sting partner
s’capit
alaccount sar ereduced byt heamountnecessar yt oi ncreaset he
withdrawingpar tner’scapitaltotheamounts/ hei stobepai d.Whent hegoodwi llmethodi sused,new
goodwi llisrecorded,andeachpar t
ner’scapi talaccountisincreasedaccordingly
.Ther efore,thebonus
met hodr esul
tsinadecr easeofexisti
ngpar t
ners’capit
alaccounts,whil
ethePosi ti
verev aluati
onmet hod
resultsinanincreaseofexi st
ingpar
tners’capitalaccounts.

20.WhenMi l
lr et
iredfrom thepart
nershi
pofMi l
l
,Yale,andLear
,thef
inalset
tl
ementofMi
l
l’
sint
erestexceededMi
l
l’
scapi
tal
bal
ance.Undert hebonusmethod,t
heexcess
a. Wasr ecordedasgoodwill
.
b. Wasr ecordedasanexpense.
c. Reducedthecapi t
albal
ancesofYaleandLear.
d. Hadnoef fectonthecapit
albal
ancesofYaleandLear
.

Sol
uti
on:
20.(c)Underthebonusmet hod,adj
ust
mentsaremadeonl yamongpar t
ner’
scapitalaccount
s(nogoodwil
li
s
recordedont hepartnershi
pbooks).SinceMil
l’
spar
tnershipint
erestexceededtheamountofMi l
l
’scapi
tal
balance,theexcessi nt
erestwouldreducethecapi
talbalancesofYaleandLear .Onlyundert
hegoodwi l
l
met hod cant heexcessi nter
estber ecor
ded asgoodwi l
l.Underno circumstancesshouldtheexcess
partnershi
pinter
estberecordedasanexpense.

21.Thefoll
owingcondensedbalancesheetispresentedf
orthepartnershi
pofSmithandJones,whoshareprofi
tsandlossesi
nthe
rat
ioof60:40,r
especti
vel
y:
OtherassetsP450,000Smith,l
oan20,000P470, 000AccountspayableP120,
000Smi t
h,capi
tal195,
000Jones,capit
al155,
000
P470,000Thepar t
nershavedecidedtoli
quidatethepart
nershi
p.Iftheot
herassetsaresol
df orP385,
000,whatamountofthe
avai
lablecashshouldbedi
stri
butedtoSmith?
a. P136,000
b. P156,000
c. P159,000
d. P195,000

Sol
uti
on:
21.( a)Thissi
tuati
onr epresentsasimplel i
quidat
ionsinceallassetsar edi str
ibutedatonepoi ntinti
me
ratherthanini
nstall
ment s.Inasimpleli
quidati
onallofthenoncashasset sar esoldandt heproceedsf r
om
theirsalear
ecompar edtot hei
rbookvaluetocomput ethegainorloss.Thegai norlossont heassetsisthen
distri
butedtothepar t
ners’accountsbeforeanyoft hecashi sdist
ributed.Thepar tnerl
oanshoul dnotbe
consideredanoncashassetf orthepurposeofdet ermininggai
norl oss,thus,Smi thisresponsibl
et othe
partnershi
pforther epaymentoft heent i
reamountoft heloan.Ther epaymentoft heloanr educesthat
partner’
s(Smit
h)distri
butionasfol
lows:
22.OnJanuar y1,2016,t hepar tnersofCobb,Davis,andEddy ,whoshar eprofit
sandl ossesint her ati
oof5:3:
2,respect
ivel
y,
decidedt oli
quidat
ethei rpart
nershi
p.Onthisdat
et hepart
nershipcondensedbalancesheetwasasf oll
ows:
Asset sCashP50, 000Ot herasset
s250,000P300, 000Liabil
i
tiesandCapitalLiabi
l
iti
esP60, 000Cobb,capi t
al80,000Dav i
s,
capital90,000Eddy,capi t
al70,000P300,
000OnJanuar y15,2016,thefi
rstcashsaleofotherasset swithacarr
yingamountof
P150, 000reali
zedP120, 000.Safeinst
all
mentpay mentstot hepart
nerswer emadet hesamedat e.Howmuchcashshoul dbe
dist
ributedtoeachpar tner?
Cobb Dav i
s Eddy
a. P15, 000 P51,000 P44,000
b. P40, 000 P45,000 P35,000
c. P55, 000 P33,000 P22,000
d. P60, 000 P36,000 P24,000

Sol
uti
on:
22.(a)Ascheduleofsafepay mentsmustbepr eparedt odeterminetheamountofcasht obedistr
ibutedto
eachpar t
neratJanuary15,2010.Thef i
rstcashsal eofot her
assetswithatotalbookvalueof$150,000r eal
ized$120, 000incash,resul
ti
ngina$30,000loss.Thislossi
s
all
ocatedamongt hepartnersbasedupont heirprofi
tandl ossrati
os.Thescheduleiscomplet
edbasedupon
theassumpt i
onthattheremainingotherassetsar etotal
lyworthl
ess,andtheirbookval
uesaredistr
ibutedt
o
thepartnersasl
osses,basedupont hepar t
ners’profitandlossrati
os.Thecashpay mentst
oeachpar tner
canbef oundatthebottom oftheschedule.

Thus,
thecashshoul
dbedi
str
ibut
edasf
oll
ows:
$15,
000t
oCobb,
$51,
000t
oDav
is,
and$44,
000t
oEddy
.

It
ems23and24ar ebasedont hef oll
owi ng:
CLAIRE,DAISY,andELSIEf or
medt heCDEPar t
nershi
ponAugust1, 2015, wit
hthef ol
lowingassets,
measur edatfai
rmar ketval
ues,
contri
butedbyeachpartner:
CLAI RE DAISY ELSI E
Cash P 324, 000 P108,000 P129,600
Accountsrecei
vable
73,080 - 91,800
Plant,
Propert
y,&
Equipment(PPE) 1,620,000 340,200 -
A partofCLAI RE’scashcont ri
but i
on,P216, 000,comesf r
om per sonalborrowings.Also,thePPE ofCLAI RE andDAI SY are
mor t
gagedwi ththebankf orP972, 000andP72, 000,respect
ivel
y.Thepar t
nershipist oassumer esponsi
bil
it
yfort hesePPE
mor t
gages.Thepar t
nershav eagr eedt oshareprofit
sandlossesona5: 2:
3rati
o,toCLAI RE,DAISY,andELSIE,r
espect
ively.
23.Whati sthecapit
albalancef oreachpar t
nerattheopeningofbusi nessonAugust1, 2015?
a. CLAIRE,P1,
045,080;DAI SY, P376,200;&ELSI E,
P221,400
b. CLAIRE,P1,161,200;DAI SY,P418, 000;&ELSIE,P246,
000
c. CLAIRE,P1,
987,500;DAI SY, P189,000;&ELSI E,
P217,500
d. CLAIRE,P1,
095,120;DAI SY, P547,560;&ELSI E,
P182,520

Sol
uti
on:
24.Whatisthecapitalbal
anceforeachpart
neratAugust1,2014,
inst
ead,
ift
hei
nter
estr
ati
oisgi
venat5:
3:2t
oCLAI
RE,
DAI
SY,
and
ELSI
E,respecti
vely?
a. CLAIRE,P730,080;DAISY,P730,
080;&ELSIE,
P365,040
b. CLAIRE,P985,608;
DAISY,P492,804;
&ELSIE,P164,268
c. CLAIRE,P1,
987,500;
DAISY,P189,
000;
&ELSIE,P217,500
d. CLAIRE,P821,340;
DAISY,P492,
804;&ELSIE,P328,
536

Sol
uti
on:

It
ems25and26ar ebasedont hef ol
lowi ng:
OnJanuar y1,2015,FRI DAandGLACEf ormedapar tnershi
pbycont ri
butingcashofP405, 000andP270, 000,respectiv
ely.On
February12015,Par t
nerFRI DAcont ributedanaddi tionalP135,000casht ot hepart
nershipandonAugust1,2014Par tnerFRIDA
madeaper manentwi t
hdrawalofP67, 500.OnMay1,2015,Par tnerGLACEcont r
ibutedmachinerywit
haf airmar ketvalueof
P90,
000andanetbookv al
ueofP75, 000whencont ri
buted.OnNov ember1, 2015PartnerGLACEcontri
butedanadditi
onalP45,000
cashtot hepar tner
ship.Bot hpartner
swi thdrewone- fourthoftheirsalar
yallowancesin2015.
Thepart nershipreportedaneti ncomeofP257, 400i n2014andt heprofitandl ossagr
eementar easfoll
ows:
a. Int erestat6%isal l
owedonav eragecapi talbalances;
b. Sal ariesofP2,700permont htoeachpar tner;
c. Bonust oFRIDAof10%ofneti ncomeaf terinterest,sal
ari
es,andbonus; and
d. Bal ancet obedi vi
dedi ntherati
oof6: 4t oFRIDAandGLACE, r
espectively.
25.Det er minehowt heneti ncomewi llbeal locatedt othepar t
ners:
a. FRI DA,P160,000andGLACE, P126, 000
b. FRI DA,P180,000andGLACE, P106, 000
c. FRI DA,P170,000andGLACE, P116, 000
d. FRI DA,P153,000andGLACE, P104, 400

26.Det
ermi
nethecapi
tal
balancesofthepar
tner
satDecember31,
2015:
a. FRI
DA,
P617,400andGLACE, P501,
300
b. FRI
DA,
P551,000andGLACE, P686,
000
c. FRI
DA,
P688,000andGLACE, P449,
000
d. FRI
DA,
P683,000andGLACE, P554,
000

It
ems27and28ar ebasedonthefoll
owing:
HAIDEEandISABELarepar
tnersshari
ngprofi
tsandl
ossesi
nther
ati
oof60%and40%,
respect
ivel
y.Thepar
tner
shi
pbal
ancesheet
atAugust30,
2014fol
lows:

Cash P 12,150 Account spay abl

e P 13,500
Otherasset
s 119,700 Hai dee,Loan 5,850
I
sabel,Loan 9,000 Hai dee,capi
tal 81,000
Isabel,capit
al 40,500
Tot
al P140,850 Tot al P140,850
Atthisdat
e,JOSI
Ewasadmitt
edasapar tnerforaconsider
ati
onofP43,875cashfora40%int
eresti
ncapi
tal
andinpr
ofi
ts.
27.AssumeJOSI Eisadmit
tedbypurchaseof 40% eachoft heor i
ginalpar
tner
s’i
nter
est
,determi
nehow theP43,
875wi
l
lbe
appor
ti
onedtoHAI
DEEandISABEL
a. HAIDEE,
P32,
850 andISABEL,
P15, 900
b. HAIDEE,
P32,
450 andISABEL,
P16, 300
c. HAIDEE,
P29,
565 andISABEL,
P14, 310
d. HAIDEE,
P32,
950 andISABEL,
P15, 800
28.AssumeJOSI Eisadmi t
ted byinvest
ingtheP43,
875t
othepar
tner
shi
p,det
ermi
net
heef
fect
sofanybonusov
ert
hecapi
tal
bal
ancesoftheori
ginal
part
ners:
a. HAIDEE,P(9,900)andISABEL,P( 14,
850)
b. HAIDEE,P 9,000 andISABEL,p14, 850
c. HAIDEE,P(14,
850) andI SABEL,P(9,
900)
d. HAIDEE,P(13,
365)andI SABELP (8,910)

29.Thef
ollowi ngbal
ancesasatOctober31, 2014forthePart
ner
shi
pofKARLO,
LORNA,
andMYRNAwer
easf
oll
ows:
Cash P 50,000 Liabil
it
ies P15,000
Lorna, Loan 15,
000 Karlo,l
oan 22,
500
Non- cash 400,
000 Karlo,capital 105,000
asset s
Lorna, 97,
500
capital
My rna, 225,000
capital
Totals P465,000 Totals P465,000

KARLOhasdeci dedt oreti

refrom thepart
nershiponOctober31.Par t
nersagreedt
oadjustthenon-cashassetstothei
rfai
rmarket
val
ueofP490,000.Theest imatedpr of
itt
oOct ober31i
sP100, 000.KARLOwill
bepaidP173,000forhispart
nershi
pinter
esti
ncl
usive
ofhi
sloanwhichi srepaidinfull
.Theirpr
ofi
tandl ossr
ati
oi s3:3:
4toKARLO,LORNA, andMYRNA, respect
ivel
y.
Whatwil
lbethebal anceofLORNA’ scapi
talaccountaf
terthereti
rementofKARLO.
a. P 129,444 c.P124,449
b. P 144,429 d.P149,424

I
tems30and31ar ebasedonthef ol
l
owing:
Theaccountsofthepartner
shi
pofNOPatDecember31, 2014ar easfol
l
ows:
Cash P 74,
250 Li abil
iti
es P 56,
250
Non-cashasset
s Loanf rom O 18,
000
655,
875
LoantoN 13,
500 N, capit
al 185,
625
O, capit
al 329,
625
P,capi tal 154,
125
Total P743,625 Tot al P743,625
Theydivi
deprofi
tsandlosses3:5:
2toN,O, andPr espect
ivel
y.Theyhavedecidedtoli
quidat
ethepar
tner
shi
patthisdat
e.
30.DeterminetheamountpayabletoPart
nerPi fcashispaidjustbef
orethestartofl
iqui
dati
ononDecember31,2014.
a. P 16,
750 c.P 17, 679
b. P 15,
911 d.P 17, 560

31.Det
erminetheamountPar
tnerNandPar
tnerOwoul
dhav
erecei
vedbyt
het
imePar
tnerPwoul
dhav
erecei
vedacumul
ati
ve
amountofP40,
500.
a. N,P1,
785andO,P72,
650
b. N,P1,
578andO,P70,
265
c. N,P1,
875andO,P70,
625
d. N,P1,
688andO,P63,
562

32.Thef ol
lowingcondensedbalancesheetispreparedf orQUIELandROGER,whosharepr
ofit
sandlossesi
nt her
ati
oof60:40,
respect
ively:
Otherassets P405, 000 Accounts P108,000
payabl
e
Quiel,l
oan 18,000 Quiel
,capit
al 175,500
Roger,capi
tal 139,500
Total P423, 000 Total P423, 000
Thepar tner
shav edecidedtoli
qui
datethepartner
shi
p.Iftheotherasset
sar
esoldf
orP346,
500,whatamountoftheav
ail
abl
ecash
shouldbedi str
ibutedtoQUIEL?
a. P136, 000 c.P122,400
b. P156, 000 d.P195,000
Sol
uti
on:

33.OnJanuar y1,2014,thepar tnersSELYA,TESSA,and URSULA,whoshar eprofi

tsandlossesintherati
oof5:3:
2,respect
ivel
y,
deci
dedtoli
quidat
etheirpar t
nershi p.Ont hisdatethepar
tner
shi
pcondensedbal
ancesheetwasasf ol
lows:
Cash P 45,000 Li abi l
iti
es P 54,
000
Otherassets 225,000 Sel ya,capi t
al 72,
000
Tess, capital 81,
000
Ursula, capit
al 63,
000
Total P270,000 Tot al P270,
000
OnJanuar y15,2014,thef i
rstcashsal eofot herassetswit
hacarryi
ngamountofP135,000r eal
i
zedP108,000.Saf
ei nst
all
ment
paymentswer emadeont hesamedat e.
Howmuchcashshoul dbedi str
ibutedt oeachpar tner
?
SELYA TESSA URSULA
a. P15, 000 P51, 000 P44, 000
b. P40, 000 P45, 000 P35, 000
c. P55, 000 P33, 000 P22, 000
d. P13, 500 P45, 900 P39, 600

Sol
uti
on: