PARTNERSHIP FORMATION
1. On January 1, 20x1, Mr. A and Ms. B formed a partnership. Mr. A contributed cash of ₱500,000
while Ms. B contributed a building with carrying amount of ₱400,000 and fair value of ₱800,000.
The building has an unpaid mortgage of ₱200,000 which is not assumed by the partnership.
Requirement: Provide the journal entry to record the contributions of the partners.
2. A and B formed a partnership. The following are their contributions:
Cash
Accounts receivable
Building
Total
A, capital
B, capital
Total
A
500,000
100,000
600,000
B
700,000
700,000
600,000
600,000
700,000
700,000
Additional information:
 The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
 The building is over-depreciated by ₱50,000.
 The building has an unpaid mortgage ₱100,000, which is assumed by the partnership.
Requirement: Provide the journal entry to record the contributions of the partners in the partnership
books.
3. A and B agreed to form a partnership. A contributed ₱40,000 cash while B contributed equipment
with fair value of ₱100,000. However due to the expertise that A will be bringing to the
partnership, the partners agreed that they should initially have an equal interest in the partnership
capital.
Requirement: Provide the journal entry to record the initial investments of the partners.
Use the following information for the next two questions:
A, B and C formed a partnership. Their contributions are as follows:
A
B
Cash
750,000
1,000,000
Accounts receivable
1,500,000
Inventories
C
500,000
1,250,000
Building
Totals
2,250,000
1,875,000
2,875,000
1,750,000
Additional information:
 Only ₱875,000 of the accounts receivable are deemed collectible.
 The inventories have a net realizable value of ₱1,125,000 and related accounts payable of ₱375,000
which the partnership assumes to repay.
 The building is under-depreciated by ₱125,000.
4. The partners agreed to equalize their interests. Cash settlements among the partners are to be
made outside the partnership. Which of the following statements is correct?
a. A and C pay B ₱250,000 and ₱625,000, respectively.
b. A pays B ₱250,000 while B pays C ₱625,000.
c. C pays A and B ₱625,000.
d. A provides additional ₱250,000 to the partnership.
5. How much are the capital balances of partners’ A, B and C, respectively, right after the formation
of the partnership?
a. 1,875,000; 1,875,000; 1,875,000
b. 1,625,000; 2,750,000; 1,250,000
c. 1,500,000; 1,500,000; 1,500,000
d. 750,000 ; 1,000,000; 500,000
6. A and B agreed to form a partnership. The contributions of the partners are as follows:
Cash
Inventory
Land
Equipment
A
600,000
20,000
B
400,000
50,000
Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related accounts payable.
 The land has a fair value of ₱700,000 and is subject to a mortgage of ₱100,000. However, B agreed
to settle the mortgage personally.
How much are the adjusted capital contributions of A and B, respectively?
a. 670,000; 690,000
b. 670,000; 700,000
c. 660,000; 700,000
d. 670,000; 600,000
7. A and B formed a partnership. The following are their contributions:
Cash
Accounts receivable
Equipment
Total
A, capital
B, capital
Total
A
400,000
100,000
500,000
B
700,000
700,000
500,000
500,000
700,000
700,000
Additional information:
 The accounts receivable includes a ₱30,000 account that is deemed uncollectible.
 The equipment is over-depreciated by ₱50,000. The equipment was obtained by B through
financing. The related loan payable has an unpaid balance of ₱250,000 which the partnership
assumes on repaying.
Which partner has the higher capital credit, and how much?
a. A, ₱470,000
b. A, ₱500,000
c. B, ₱500,000
d. B, ₱400,000
8. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
9. A and B formed a partnership. A contributed cash of ₱500,000 while B contributed land with
carrying amount of ₱400,000 and fair value of ₱800,000. The land has an unpaid mortgage of
₱200,000 which is assumed by the partnership. How much is the correct valuation of B’s capital
immediately after the partnership formation?
a. 400,000
b. 500,000
c. 600,000
d. 800,000
10. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though
Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in identifiable assets. The partners agree
that the difference in the amount of contribution and the amount of credit to the partner’s capital
shall be treated as compensation for the expertise that the partner will be bringing to the
partnership. How much is the correct valuation of A’s capital immediately after the partnership
formation?
a. 84,000
b. 92,000
c. 100,000
d. 108,000
11. A and B formed a partnership. The following are their contributions:
Cash
Accounts receivable
Building
Total
A, capital
B, capital
Total
A
500,000
100,000
600,000
B
700,000
700,000
600,000
600,000
700,000
700,000
Additional information:
 The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
 The building is under-depreciated by ₱50,000.
 The building has an unpaid mortgage ₱100,000, but this is not assumed by the partnership.
Partner B promised to pay for the mortgage himself.
How much is the correct valuation of A’s capital immediately after the partnership formation?
a. 460,000
b. 580,000
c. 650,000
d. 720,000
12. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though
Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in identifiable assets. The partners agree
that the difference in the amount of contribution and the amount of credit to the partner’s capital
shall be treated as cash settlement between the partners. The compound entry to record the
partners’ contributions includes a credit to B’s capital account in the amount of
a. 84,000.
b. 92,000.
c. 100,000.
d. 108,000.