PROBLEM 1

Tarlac and Victoria sells inventory through their partnership. They expand their business and decide
to admit Gerona to the Partnership. Before admission of Gerona, the statement of financial position
of Tarlac and Verona are as follows:
Cash P40,000 Accounts payable P70,000
Accounts Receivable 60,000 Loan from Victoria 50,000
Inventory 140,000 Tarlac, capital (60%) 300,000
Plant assets – net 360,000 Victoria, capital (40%) 240,000
Loan to Tarlac 60,000
Total Assets P660,000 Total Liabilities and Equity P660,000

Required:
1. Gerona invest P139,500 for half of Victoria’s capital. The money goes to Victoria. Compute the
capital balance of Tarlac after admission. 300,000
2. Gerona invest P139,500 for half of Victoria’s capital. The money goes to Victoria. Compute the
capital balance of Victoria after admission. 120,000
3. Gerona invest P139,500 for half of Victoria’s capital. The money goes to Victoria. Compute the
capital balance of Gerona after admission. 120,000
4. Gerona directly purchases a one-fourth interest from Tarlac and Victoria by paying Tarlac,
P96,000 and Victoria, P108,000. The equipment is undervalued before Gerona’s admission.
Compute the capital balance of Tarlac after admission. 349,200
5. Gerona directly purchases a one-fourth interest from Tarlac and Victoria by paying Tarlac,
P96,000 and Victoria, P108,000. The equipment is undervalued before Gerona’s admission.
Compute the capital balance of Victoria after admission. 262,800
6. Gerona directly purchases a one-fourth interest from Tarlac and Victoria by paying Tarlac,
P96,000 and Victoria, P108,000. The equipment is undervalued before Gerona’s admission.
Compute the capital balance of Gerona after admission. 204,000
7. Gerona invests the amount needed to give him one-third in the capital of the partnership. No
goodwill or bonus is recorded. Compute the capital balance of Tarlac after admission. 300,000
8. Gerona invests the amount needed to give him one-third in the capital of the partnership. No
goodwill or bonus is recorded. Compute the capital balance of Victoria after admission.
240,000
9. Gerona invests the amount needed to give him one-third in the capital of the partnership. No
goodwill or bonus is recorded. Compute the capital balance of Gerona after admission.
270,000
10.Gerona invests P156,000 for a one-fourth interest. Tarlac and Victoria agree that some of the
inventory is obsolete before Gerona’s admission. Compute the capital balance of Tarlac after
admission. 256,800
11. Gerona invests P156,000 for a one-fourth interest. Tarlac and Victoria agree that some of the
inventory is obsolete before Gerona’s admission. Compute the capital balance of Victoria after
admission. 211,200
12. Gerona invests P156,000 for a one-fourth interest. Tarlac and Victoria agree that some of the
inventory is obsolete before Gerona’s admission. Compute the capital balance of Gerona after
admission. 156,000
13.Gerona invests P168,000 for a one-fourth interest. Unidentifiable asset is to be recorded.
Compute the capital balance of Tarlac after admission. 300,000
14. Gerona invests P168,000 for a one-fourth interest. Unidentifiable asset is to be recorded.
Compute the capital balance of Victoria after admission. 240,000
 15. Gerona invests P168,000 for a one-fourth interest. Unidentifiable asset is to be recorded.
Compute the capital balance of Gerona after admission. 180,000
16.Gerona invests P180,000 for a one- fifth interest. Profits and losses are to be shared by Tarlac,
Victoria and Gerona 45:30:25. Goodwill is not recorded. Compute the capital balance of Tarlac
after admission. 321,600
17. Gerona invests P180,000 for a one- fifth interest. Profits and losses are to be shared by
Tarlac, Victoria and Gerona 45:30:25. Goodwill is not recorded. Compute the capital balance of
Victoria after admission. 254,400
18.Gerona invests P180,000 for a one- fifth interest. Profits and losses are to be shared by Tarlac,
Victoria and Gerona 45:30:25. Goodwill is not recorded. Compute the capital balance of
Gerona after admission. 144,000
19.Gerona invests P300,000 for a 1/3 interest. Profits and losses are to be shared by Tarlac,
Victoria and Gerona equally. Partnership’s capital after Gerona’s admission is to be P900,000.
Compute the capital balance of Tarlac after admission. 336,000
20. Gerona invests P300,000 for a 1/3 interest. Profits and losses are to be shared by Tarlac,
Victoria and Gerona equally. Partnership’s capital after Gerona’s admission is to be P900,000.
Compute the capital balance of Victoria after admission. 264,000
21. Gerona invests P300,000 for a 1/3 interest. Profits and losses are to be shared by Tarlac,
Victoria and Gerona equally. Partnership’s capital after Gerona’s admission is to be P900,000.
Compute the capital balance of Gerona after admission. 300,000

PROBLEM 2
Pura and Ramos are partners who have capital balances of P300,000 and P240,000 and shares
profits in the ratio of 6:4. Anao admitted as a partner upon investing P250,000 for a 20% interest in
the firm. Profit and loss are to be shared 3:3:2. Given the choice between goodwill and bonus
method:
22. Compute the agreed capital of Pura using bonus method. 355,200
23. Compute the agreed capital of Ramos using bonus method. 276,800
24. Compute the agreed capital of Anao using bonus method. 158,000
25. Compute the agreed capital of Pura using goodwill method after the goodwill was written-off.
403,500
26. Compute the agreed capital of Ramos using goodwill method after the goodwill was written-
off. 251,500
27. Compute the agreed capital of Anao using goodwill method after the goodwill was written-off.
135,000

PROBLEM 3
The partnership of Cuyapo, Rosales and Villasis has been in the business for 25 years. On December
31, Villasis decided to retire from the partnership. The balance sheet before retirement of Villasis is
presented below:

Cash P40,000 Accounts payable P70,000

Accounts receivable 60,000 Notes payable 80,000
Inventory 140,000 Loan from Rosales 50,000
Plant assets – net 400,000 Cuyapo, capital (20%) 150,000
Loan to Cuyapo 30,000 Rosales, capital (30%) 200,000
Loan to Villasis 40,000 Villasis, capital (50%) 160,000
Total Assets P710,000 Total Liab and Equity P710,000
28. Villasis was paid P100,000 cash upon retirement. Compute the adjusted capital balance of
Cuyapo. 158,000
29. Villasis was paid P100,000 cash upon retirement. Compute the adjusted capital balance of
Rosales. 212,000
30. Villasis was paid P100,000 cash upon retirement. Compute the adjusted capital balance of
Villasis. 0
31.Villasis was paid P180,000 cash upon settlement. Capital of the partnership after Villasis’
retirement was to be P290,000. Compute the adjusted capital balance of Cuyapo. 126,000
32. Villasis was paid P180,000 cash upon settlement. Capital of the partnership after Villasis’
retirement was to be P290,000. Compute the adjusted capital balance of Rosales. 164,000
33. Villasis was paid P180,000 cash upon settlement. Capital of the partnership after Villasis’
retirement was to be P290,000. Compute the adjusted capital balance of Villasis. 0
34. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to
Villasis was recorded by the partnership. Compute the adjusted capital balance of Cuyapo.
150,000
35. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to
Villasis was recorded by the partnership. Compute the adjusted capital balance of Rosales.
200,000
36. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to
Villasis was recorded by the partnership. Compute the adjusted capital balance of Villasis. 0
37. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to all
partners was recorded. Compute the adjusted capital balance of Cuyapo. 162,000
38. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to all
partners was recorded. Compute the adjusted capital balance of Rosales. 218,000
39. Villasis was paid P150,000 cash upon his retirement. The portion of goodwill attributable to all
partners was recorded. Compute the adjusted capital balance of Villasis. 0
40. Due to the limited cash to the partnership, Villasis was paid merchandise with a fair value of
P100,000 and a note payable for P50,000. The carrying amount of the merchandise was
P60,000. Capital of the partnership after Villasis’ retirement was P360,000. Compute the
adjusted capital balance of Cuyapo. 154,000
41. Due to the limited cash to the partnership, Villasis was paid merchandise with a fair value of
P100,000 and a note payable for P50,000. The carrying amount of the merchandise was
P60,000. Capital of the partnership after Villasis’ retirement was P360,000. Compute the
adjusted capital balance of Rosales. 206,000
42. Due to the limited cash to the partnership, Villasis was paid merchandise with a fair value of
P100,000 and a note payable for P50,000. The carrying amount of the merchandise was
P60,000. Capital of the partnership after Villasis’ retirement was P360,000. Compute the
adjusted capital balance of Villasis. 0
PROBLEM 4
The statement of financial position of R and S, a partnership appears as follows:

R and S Partnership
Statement of Financial Position
October 31, 2020

ASSETS
Current Assets:
Cash P41,100
Accounts Receivable P212,160
Allowance for bad debts 8,000 204,160
Inventories 241,100
Prepaid expenses 10,140
P496,500
Plant Assets:
Furniture and Fixtures P241,000
Accumulated Depreciation 68,200 172,800
Total Assets P669,300

LIABILITIES AND CAPITAL

Current Liabilities:
Accounts Payable P161,400
Accrued Expenses 20,000 P182,200

Partner’s capital:
R, Capital P260,350
S, Capital 226,750 487,100
Total Liabilities and Capital P669,300

Additional information:
 R and S share profits and losses equally.
 The partners incorporate as Urdaneta Corporation with an authorized capital 5,000 shares at
P100 par stock, of which 4,400 are issued to the partners in exchange for their interest in the
net assets of R and S, and the remainder are issued at P120 per share for cash. The partners
agree that the following adjustment should be recorded:
Allowance for bad debts decreased by P4,000
Inventories increased by P12,000
Accumulated depreciation decreased by 6,200
 Goodwill is to be recognized in an amount which will cause the net assets of the partnership to
equal the cash issuance price of the shares to be issued.

43. How much is the share premium contributed by R and S to the new corporation? 69,300
44.How much goodwill is to be recognized in the corporation’s books? 0
45. How many shares R will receive? 2,340
PROBLEM 5
On January 1, 2020, the partnership of D, E and F started with an initial contribution from the
partners of P100,000, P200,000 and P300,000, respectively. The partners stipulated that in case of
death of any partner, the parties will compute profits up to the nearest month and to provide for
20% annual interest for the deceased partner prior to its settlement.

On July 1, 2020, D was heart-attacked and instantly died. The new hired accountant of the
partnership prepared the following entries during the year:

7/1/2020 D, Capital 100,000

Payable to D, Estate 100,000
To set-up D’s capital as a liability

12/31/2020 Interest expense 100,000

Payable to D, Estate 100,000
To recognize interest on D’s estate

12/31/2020 Sales 700,000

Inventory, end 50,000
Purchases 300,000
Operating expenses 160,000
Interest expense 10,000
Profit and loss summary 280,000
To close nominal accounts

12/31/2020 Profit and loss summary 280,000

E, Capital (40%) 160,000
F, Capital (30%) 120,000
To close profit and loss to E and F’s remaining P and L ratio

Profits were evenly earned throughout the year.

46. Compute the correct capital balance of E as of December 31, 2020. 332,657
47. Compute the correct capital balance of F as of December 31, 2020. 399,493