1. Bob and Bitz contributed P10,000 and P20,000 cash, respectively.

Bob further contributed a

used equipment which cost him P50,000. Bitz contributed his delivery truck which also cost him
P120,000. Bob and Bitz agreed to share profit equally but to share capital on the ratio of 40:60,
respectively. A valuation report rendered by Pal Appraisal Company indicates that the truck and
equipment has fair values of P70,000 and P40,000, respectively.

If the partners agreed to adjust their capital by cash re-investment, which is true?

A. Bob shall contribute P15,000

B. Bitz shall contribute P10,000
C. Bob shall contribute P10,000
D. Bitz shall contribute P15,000

2. The partnership reports profits of P80,000, net of P20,000 salaries and P30,000 interest and
a bonus. The bonus is computed as 20% of profits after salaries and interest. Compute the amount
of the bonus.

A. P32,500
B. P26,000
C. P20,000
D. P16,000

3. A, B and C formed a partnership. They stipulated to contribute equal capital but they shall
be credited with 30%,30% and 40% capital interest, respectively, using the goodwill approach. C
was credited P36,000 capital. Compute the total asset contributed by the partners?

A. P108,000
B. P83,182
C. P90,000
D. P81,000

4. D and E agreed to share profits and losses 40:60, respectively after providing E 17% bonuses
on partnership net income after tax and after bonus. D received P36,000 as final profit
distribution. The share of the partners on partnership profit is subject to 10% withholding tax.
The partnership is also subject to 35% income tax. Compute the partnership operating income
assuming that it equals taxable income.

A. P160,000
B. P117,000
C. P180,000
D. P150,000

5. Bob and Bitz contributed P10,000 and P20,000 cash, respectively. Bob further contributed a
used equipment which cost him P50,000. Bitz contributed his delivery truck which also cost him
P120,000. Bob and Bitz agreed to share profit equally but to share capital on the ratio of 40:60,
respectively. A valuation report rendered by Pal Appraisal Company indicates that the truck and
equipment has fair values of P70,000 and P40,000, respectively

If the partners agreed to adjust their capital by cash withdrawal, which is true?

A. Bob shall withdraw P10,000

B. Bitz shall withdraw P10,000
C. Bitz shall withdraw P15,000
D. Bob shall withdraw P15,000

6. AAA and BBB formed a partnership and agreed to divide initial capital equally, even though
AAA contributed P100,000 and BBB contributed P84,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts, BBB’s unidentifiable asset should be debited for

A. P8,000
B. P0
C. P16,000
D. P46,000
7. The following Statement of Financial Position for the partnership of A, B and C were taken
from the books on April 1, 2020.

Cash P 100,000
Liabilities P 200,000
Other assets 400,000
A, Capital 120,000

B, Capital 95,000

C, Capital 85,000
Total assets P 500,000
Total Liabilities and Capital P500,000
The partners agreed to distribute profits as follows:

• Salaries to A and B of P5,000 each

• Interest of 5% per annum on beginning capital
• Bonus of 15% to A based on net income after salaries, interest and bonus
• Remaining profit is to be divided as 25% to A, 35% to B and 40% to C

The partnership began its operations on April 1, 2020 and net income for the year ended June
30, 2020 is P69,500. Which of the following statements is correct?

A. BB’s total share in the net income is P21,688

B. The net income after salaries, interests and bonus is P50,000
C. The bonus given to A is P9,487.50
D. C’s share on the profit after salaries, interest and bonus is P13,750

8. Partner Mark and Becky agreed to form a partnership by contributing the assets of their
separate businesses. The partners agreed to an equal capital credit on the total contributed
capital. Cash settlements will be made among them to even out the difference. The abridged
balance sheets of Mark and Becky is are follows:

Mark Becky

Total assets P 120,000 P 80,000

Total liabilities 40,000 20,000

The partnership formation results is

A. P10,000 bonus to Becky

B. P10,000 goodwill to Becky
C. P10,000 cash settlement to Becky
D. P10,000 cash settlement from Becky

9. Partners A and B agreed to share profits in the following order of distribution:

• Interest of 10% on weighted average capital

• Salaries of P60,000 to A and P40,000 to B
• Residual profit, equally

Loss is shared by A and B 40:60. Details of the capital accounts of A and B is shown as
follows:

A B

Debit Credit Debit Credit

January 1 - P 240,000 - P 360,000

March 30 - 40,000 P 20,000 -

April 30 - - - 18,000

July 1 P 20,000 - 21,000 -

September 30 - 80,000 - 60,000

November 1 30,000 - - -

December 30 - - 30,000 -

The partnership made P180,000 net income. B’s share in the profit is

A. P95,550
B. P84,325
C. P95,675
D. P84,450

10. A, B and C formed a partnership whereby A shall be credited for P120,000 by contributing
P100,000. B and C shall contribute enough cash for their 20% and 30% interest in the partnership,
respectively and to cover their respective share in the bonus to A. What is B’s cash contribution?

A. P40,000
B. P52,000
C. P48,000
D. P56,000

11. The partnership of Alec and Boy reported profits of P120,000 in 2009 and divided the same
to their profit sharing ratio of 40:60, respectively. An examination conducted on the books
revealed the following:

• An item of equipment costing P30,000 which should have depreciated for 4 years was
expensed on January 2, 2009.
• Supplies of P5,000 was omitted on the records.
• An inventory costing P15,000 was omitted from the records. The purchase was not
recorded because the invoice was in transit as of the balance sheet date.

What is the net adjustment to the Capital account of Alec?

A. P17,000 increase
B. P11,000 decrease
C. P11,000 increase
D. P17,000 decrease

12. Partners A and B agreed to share profits in the following order of distribution:

• Interest of 10% on weighted average capital

• Salaries of P60,000 to A and P40,000 to B
• Residual profit, equally

Loss is shared by A and B 40:60. Details of the capital accounts of A and B is shown as
follows:
 A B

Debit Credit Debit Credit

January 1 - P 240,000 - P 360,000

March 30 - 40,000 P 20,000 -

April 30 - - - 18,000

July 1 P 20,000 - 21,000 -

September 30 - 80,000 - 60,000

November 1 30,000 - - -

December 30 - - 30,000 -

The partnership made P180,000 net income.

What is A’s ending capital balance?

A. P394,450
B. P405,675
C. P394,325
D. P395,675

13. Sponge and Bob entered into a partnership on March 1, 2020 investing P 150,000 and P 125,000
respectively. It was agreed that Sponge, the managing partner, was to receive a salary of P30,
000 per year and also 10% bonus based on net profit after adjustment for the salary, the balance
of the profit was to be divided in the ratio of their original capital. On December 31, account
balances were as follows:

Cash P 90,000 Accounts Payable P 20,000

Accounts Receivable 139,500 Sales 350,000

Furniture & Fixtures 50,000 Sponge, Capital 150,000

Purchases 260,000 Bob, Capital 125,000

Sales Returns & Allowances 5,000 Sponge, Drawing 30,000

Operating Expenses 75,000 Bob, Drawing 46,500

As of December 31, 2020: Inventories remaining – P 50, 000; supplies – P 7,500. Prepaid
insurance were P1, 000; accrued expenses – P 12, 250. Depreciation on furniture and fixtures
is to be computed using 5 year life and 10% scrap value. The net income of the partnership for
the year ended December 31, 2020 is:

A. P47,250
B. P48,750
C. P40,250
D. P41,250

14. Four M Co., a partnership was formed on January 1, 2016, with four partners, Joy, Ash, Elisha
and Gabrielle. Capital contributions were as follows: Joy - P1,000,000; Ash - P500,000; Elisha
- P500,000; and Gabrielle - P500,000. The partnership agreement provides that each partner
shall receive 5% interest on the amount of her capital contribution. In addition, Joy and Ash
are to receive salaries of P100,000 and P60,000, respectively, which are to be charged as
expenses of the business. The agreement further provides that Elisha shall receive a minimum
of P120,000 per annum from the partnership, including amounts allowed as interest on capital and
their respective shares of profits. The balance of the profits to be shared in the following
proportions: Joy - 30%; Ash - 30%; Elisha - 20%; Joy – 20%. Calculate the amount that must be
earned by the partnership during 2016, before any charge for interest on capital or partners’
salaries, in order that Joy may receive an aggregate of P250,000, including interest, salary and
share of profits.

A. Cannot be determined
B. P646,667
C. P285,000
D. P618,333

15. On July 1, 2020, Jen and King agreed to form a partnership from their respective
proprietorship businesses and to share profits equally. Jen and King’s balance sheet before
the formation were:

Jen King

Cash P 6,000 P 15,000

Accounts receivable 36,000 21,000

Merchandise inventory 99,000 126,000

Prepaid rent 12,000

Store equipment 120,000 90,000

Accumulated Depreciation (45,000) (54,000)

Building 375,000

Accumulated Depreciation (75,000)

Land 180,000

TOTALS P696,000 P210,000

Accounts payable P 22,500 P 9,000

Mortgage payable 180,000

Capital 493,500 201,000

TOTALS P696,000 P210,000

The fair values of Jen’s and King’s assets were:

Merchandise inventory P 81,000 P 9,000

Prepaid rent - -

Store equipment 45,000 19,500

Building 750,000 -
Land 300,000 -

How much capital will be credited to Jen?

A. P181,500
B. P1,197,000
C. P1,015,500
D. P895,500

16. C has P220,000 net assets in his business before formation. C admitted A, B into his business.
The partners agreed to a total partnership capital of P600,000 and that no intangibles will be
recognized. A, B and C will have 20%, 40% and 40% capital interest. If in pursuant to their
agreement, A and B contributed P100,000 and P280,000 for their respective capital interest,
which statement is correct?

A. A and C will be credited for P24,000 and P8,000 bonus, respectively.

B. A will be credited for a P20,000
C. B will be credited for a P32,000 goodwill,
D. C will bed debited for a bonus of P8,000

17. AA and BB formed a partnership in January 1, 2020 and made the following investments and
withdrawals during the year:

AA BB

Investments Withdrawal Investments Withdrawal

January 1 P 72,000 P 84,000

June 1 P 36,000 P 54,000

August 1 9,000 18,000

December 1 27,000

The partnership’s profit and loss agreement provides for monthly salary of P15,000 for each
partner. AA is to receive a bonus of 25% on net income after salaries and bonus. The partners
are also to receive interest of 5% per annum on average capital balances. Any remainder is to
be allocated based on their ending capital balances. Assuming the income summary has a credit
balance of P480,000. Determine which of the following statements is incorrect in the partnership
operation:

A. AA is to receive P24,000
B. BB has a share of 40% in the P91,125 remainder or balance
C. AA capital account will increase by P261,300
D. BB will receive P2,625 interest on average capital balance

18. Two proprietors, J and K, formed KJ Partnership. The unadjusted capital on the separate
books of J and K are P700,000 and P600,000, respectively. Allowance for bad debts will be
increased by P15,000 and P10,000 in the proprietor’s books of J and K, respectively. Accumulated
depreciation-equipment shall be increased by P50,000 for J and decreased by P30,000 for K.
Building on J’s books will be increased to P100,000 from its P80,000 book value. The total
liabilities to be assumed by the partnership from J and K were P200,000 and P300,000 respectively.
This amount includes a P50,000 unrecognized liability in J’s books. What is J’s capital after
formation?

A. P605,000
B. P655,000
C. P620,000
D. P805,000
19. A and B are partners with capital balances of P120,000 and P200,000, respectively. C is to
be admitted for a 30% interest in the partnership. It was agreed that C shall be given 10% of A
and B’s contributed capital as bonus. C is allowed to contribute his vacant lot with fair value
of P100,000 with a mortgage of P20,000. C will contribute additional cash for his capital
balance. The partnership shall assume the mortgage and its P2,000 accrued interest. What is C’s
cash contribution?

A. P32,000
B. P30,000
C. P69,200
D. P71,200

20. Katrina and Horace formed a partnership. They agreed to divide profits 40:30,
respectively, after providing for salaries of P10,000 to Katrina and P20,000, to Horace and an
interest on beginning capital. Interest traceable to Katrina and Horace were P4,000 and
P2,000, respectively. If Horace received total profit sharing of P28,000, compute the
partnership profit during the year.

A. P46,200
B. P48,000
C. P50,000
D. P56,000