PRACTICAL ACCOUNTING 2
THEORY & PRACTICE
ADVANCED ACCOUNTING
Partnership Liquidation & Incorporation
QUIZZER
ADVANCED ACCOUNTING
Partnership Liquidation & Incorporations - MCQ Problems
Page 2
Partnership Liquidation & Incorporations
PARTNERSHIP LIQUIDATION
Lumpsum Liquidation
Proceeds from sale of noncash assets
1. RR, SS and TT decided to dissolve the partnership on November 30, 2011. Their capital
balances and profit ratio on this date, follow:
Capital
Profit
Balances
Ratio
RR
P50,000
40%
SS
60,000
30%
TT
20,000
30%
The net income from January 1 to November 30, 2011 is P44,000. Also, on this date, cash and
liabilities are P40.000 and P90,000, respectively. For RR to receive P55,200 in full settlement
of his interest in the firm, how much must be realized from the sale of the firm's non-cash
assets?
a. 196,000
c. 193,000
b. 177,000
d. 187,000
Dayag 2013
2.
Bel, Col, and Del, partners of the BCD partnership, shared profits and losses in the ratio of 5:3:2,
respectively. On December 31,2013, the end of an unprofitable year, they decided to liquidate the
partnership. The partners' capital account balances on the date were as follows:
Bel, capital
P22,000
Col, capital
24,900
Del, capital
15,000
The liabilities of the partnership amounted to P30,000 including a loan of P10,000 payable to Bel.
The cash balance was P6,000. The partners planned to realize the non-cash cash assets in
installment and to distribute cash as it becomes available. All three partners are solvent.
If Bel received a total of P20,000 as a result of liquidation, what was the total amount realized
by the partnership on the non-cash assets?
a. P85,900
c. P67,900
b. P91,900
d. P61,900
Guerrero 2013
Partner’s Personal Creditor
3. The Keaton, Lewis and Meador partnership had the following balance sheet just before
entering liquidation:
Cash
P10,000
Liabilities
P130,000
Non-cash assets
300,000
Keaton, capital
60,000
Lewis, capital
40,000
Meador, capital
80,000
P310,000
P310,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 1
ADVANCED ACCOUNTING
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for PI80,000. Liquidation expenses were PI0,000. Assume that Keaton
was personally insolvent with assets of P8,000 and liabilities of P60,000. Lewis and Meador
were both solvent and able to cover deficits in their capital accounts, if any. What amount of
cash could Keaton's personal creditors have expected to receive from partnership assets?
a. P0
c. P30.000
b. P26.000
d. P34.000
Dayag 2013
4.
A local partnership was considering the possibility of liquidation since one of the partners is
solvent (Tillman) and the others are insolvent. Capital balances at that time were as follows.
Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, capital
P 60,000
Laurel, capital
67,000
Ezzard, capital
17,000
Tillman, capital
96,000
Ding's creditors filed a P25,000 claim against the partnership's assets. At that time, the
partnership held assets reported at P360,000 and liabilities of PI20,000. If the assets could be
sold for P228.000, what is the minimum amount that Ding's creditors would have received?
a. 0
c. P36,000
b. 2,500
d. P38,720
Dayag 2013
Loss on Realization
5. Jar, Ram, and Millo, who divide profits and losses 50%, 30%, and 20%, respectively, have
the following October 31, 2011 account balances:
Jar, drawing (Dr.)
P12.000
Millo, drawing (Cr.)
4,800
Accounts receivable - Jar
7,200
Loans payable-Ram
14,400
Jar, capital
59,400
Ram, capital
44,400
Millo, capital
39,000
The partnership's assets are P211,200 (including cash of P64,200). The partnership is
liquidated and Millo receives P33.000 in final settlement. How much is the total loss on
realization?
a. 10,800
c. 54.000
b. 31,200
d. 64,200
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 2
Partnership Liquidation & Incorporations
Realized loss allocated to a partner
6. Because of very unprofitable operations, partners Nal, Lou, and Gee decided to dissolve the
partnership when their capital balances and profit and loss ratio were:
Nal, capital (30%)
P175,000
Lou, capital (20%)
125,000
Gee, capital (50%)
175,000
Total
P475,000
Upon liquidation, all of the partnership's assets are sold and sufficient cash is realized to pay
all liabilities except one for P25,000. Gee is personally insolvent, but the others are capable of
meeting any indebtedness of the firm. By what amount would the capital of Nal change?
a. 7,500 decrease
c. 195,000 decrease
b. 150,000 decrease
d. No change
Punzalan 2014
7.
Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of 3/21,4/21, 6/21
and 8/21, respectively. The balances of their capital accounts on December 31, 2011 are as
follows:
Silverio
P1,000
Domingo
25,000
Reyes
25,000
Pastor
9,000
The partners decide to liquidate, and they-accordingly convert the non-cash assets into P23,200 of
cash. After paying the liabilities amounting to P3,000, they have P22,200 to divide. Assume that
a debit balance of any partner's capital is uncol¬ lectible.
The share of Silverio in the loss upon conversion of the non-cash assets into cash was:
a. P4,972
c. P5,400
b. P5,257
d. P5,200
Guerrero 2013
Additional Contribution by a Partner
8. On December 31, 2010, the partners of MNP Partnership decided to liquidate their business.
Immediately before liquidation, the following condensed balance sheet was prepared:
Cash
P 50,000
Liabilities
P375,000
Noncash assets
900,000
Nieva, loan
80,000
Perez, loan
25,000
Munoz, capital (50%)
312,500
Nieva, capital (30%)
107,500
Perez, capital (20%)
50,000
Total
P950,000
Total
P950,000
Partnership Liquidation & Incorporations - MCQ Problems
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ADVANCED ACCOUNTING
The noncash assets were sold for P400,000. Assuming Perez is the only solvent partners,
what amount of additional cash will be invested by Perez? (rounded to the nearest peso)
a. 37,143
c. 5,000
b. 25,000
d. 0
Punzalan 2014
9.
Bach, Johann, and Straus were partners sharing profits and losses based on 4:4:2 decide to
liquidate. All assets of the partnership were liquidated. The condensed statement of financial
position just prior to liquidation follows:
Assets
Liabilities and Capital
Cash
•
P100,000
Liabilities
PI 40,000
Other assets
400,000
Bach, Loan
10,000
Bach, capital
45,000
Johann, capital
105,000
Straus, capital
200,000
Total
P500,000
Total Liabilities & Capital P500,000
Other assets were sold for P247,500 realizing a loss of P152,500. Parties agreed to fully terminate
the partnership's business, thus, necessitating distribution of cash to partners and in the event of
capital deficiency, contribution of additional cash. The three partners were all solvent and could
answer any capital deficiency.
Name the partner and give the corresponding additional cash he had to invest due to his net capital
deficiency to finally settle the liquidation of the partnership.
a. Bach,PI6,000
b. Johami,P44,000
c. Bach,P 6,000
d. Straus,P30,500
Guerrero 2013
10. The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20% and
20% respectively decided to liquidate. All partnership assets are to be converted into cash. Prior
to the liquidation, the condensed statement of financial position is as follows:
Cash ,
P 100,000
Liabilities
P 750,000
Other'assets
1,800,000
Bren, Loan
60,000
Dior, Loan
50,000
Aiko, Capital
420,000
Bren, Capital
315,000
Cinia, Capital
205,000
Dior, Capital
100,000
Total
PI,900,000
Total
PI,900,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 4
Partnership Liquidation & Incorporations
The non-cash assets realize P800,000, resulting to a loss of P1,000,000. All the partners are
solvent, and can contribute any additional cash to cover any deficiency. In the process of
liquidation, deficiency (ies) will occur and will require additional investment as follows:
a. Cinia at P7,500
b. Dior and Cinia for P50,000 and P7,50O respectively
c. Dior at P50,000
d. None
Guerrero 2013
Partner’s Share
11. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed
by each of them. They invested P30.000 and P20,000 and agreed to share earnings 60%
and 40%, respectively. All their transactions were for cash, and all their subsequent
transactions were handled through their respective bank accounts as summarized below:
Gardo Gordo
Cash receipts
P79,100 P65,245
Cash disbursements
62,275
70,695
On October 31, 2008, all remaining noncash assets in the two stores were sold for cash of
P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution
of the P 60,000 cash, Gardo received:
a. 24000
c. P34.000
b. 26,000
d. 36,000
Dayag 2013
12. After all partnership assets were converted into cash and all available cash was distributed to
creditors, the ledger of the Daniela, Erika, and Fredline partnership showed the following
balances:
Debit
Credit
Accounts payable
P20,000
Daniela, capital (40%)
10,000
Erika, capital (30%)
60,000
Fredline, capital (30%)
P90,000
P90,000
P90,000
Percentages indicated are residual profit and loss sharing ratios. Personal assets and
liabilities of the partners are as follows:
Daniela
Erika
Fredline
Personal assets
P50.000
P50,000
PI00,000
Personal liabilities
45,000
40,000
40,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 5
ADVANCED ACCOUNTING
The partnership creditors proceed against Fredline for recovery of their claims, and the
partners settle their claims against each other. How much would Erika receive?
a. P-0c. P47.143
b. 45,000
d. Cannot be determined
Dayag 2013
13. Arthur, Baker and Carter are partners in textile distribution business, sharing profits and
losses equally. On December 31, 2012 the partnership capital and partners drawings were as
follows:
Arthur
Baker
Carter
Total
Capital
P100,000
P80,000
P300,000 P480,000
Drawing
60,000
40,000
20,000
120,000
The partnership was unable to collect on trade receivables and was forced to liquidate.
Operating profit in 2012 amounted to P72,000 which was all exhausted, including the
partnership assets. Unsettled creditors' claims at December 31, 2012 totalled P84,000. Baker
and Carter have substantial private resources, but Arthur has no personal assets. The final
cash distribution to Carter was:
a. 78.000
c. 108,000
b. 84,000
d. 162,000
Dayag 2013
14. After all noncash assets have been converted into cash in the liquidation of the AA and JJ
partnership, the ledger contains the following account balances:
Debit
Credit
Cash
P34.000
Accounts payable
P25.000
Loan payable to AA
9,000
AA, capital
8,000
JJ, capital
8,000
Available cash should be distributed: P25.000 to accounts payable and;
Dayag 2013
a. P9,000 loan payable to AA
c. P1,000 to AA and P8,000 to JJ
b. P4,500 each to AA and JJ
d. P8,000 to AA and P1,000 to JJ
15. As of December 31, 2012, the books of Ton Partnership showed capital balances of: T
P40.000; O, P25,000; N, P5,000. The partners' profit and loss ratio was 3:2:1, respectively.
The partners decided to liquidate and they sold all non-cash assets for P37.000. After
settlement of all liabilities amounting PI2,000, they still have cash of P28,000 left for
distribution. Assuming that any capital debit balance is uncollectible, the share of T in the
distribution of the P28,000 cash would be:
a. 17,800
c. 19,000
b. 18,000
d. 17,000
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 6
Partnership Liquidation & Incorporations
16. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of
3/21,4/21,6/21 and 8/21, respectively. The balances of their capital accounts on December
31,2011 are as follows:
Silverio
P 1,000
Domingo
25,000
Reyes
25,000
Pastor
9,000
P60.000
The partners decide to liquidate, and they accordingly convert the noncash assets into P23,200
of cash. After paying the liabilities amounting to P3.000, they have P22,200 to divide. Assume
that a debit balance in any partner's capital is uncollectible.
After the P22,200 was divided, the capital balance of Domingo was:
a. 3,200
c. 4,500
b. 3,920
d. 17,800
Dayag 2013
17. After operating for five years, the books of the partnership of Bo and By showed the following
balances:
Net assets
P169,000
Bo, capital
110,500
By, capital
58,500
If liquidation takes place at this point and the net assets are realized at book value, the
partners are entitled to:
a. Bo to receive P117,000 & By to receive P52,000
b. Bo to receive P126,750 & By to receive P42,250
c. Bo to receive P84,500 & By to receive P84,500
d. Bo to receive P110,500 & By to receive P58,500
Dayag 2013
18. The following condensed balance sheet is presented for the partnership of AA, BB, and CC,
who share profits and losses in the ratio of 4:3:3, respectively:
Cash
P160,000
Other assets
320,000
Total
P480,000
Liabilities
AA, capital
BB, capital
CC, capital
Total
Partnership Liquidation & Incorporations - MCQ Problems
P180,000
48,000
216,000
■ 36,000
P480,000
Page 7
ADVANCED ACCOUNTING
The partners agreed to dissolve the partnership after selling the other assets for P200,000.
Upon dissolution of the partnership. AA should have received.
a. 0
c. 72,000
b. 48,000
d. 84,000
Dayag 2013
19. The following balance sheet is presented for the partnership of A, B, and C, who share profits
and losses in the respectively ratio of 5:3:2.
Assets
Liabilities and Capital
Cash
120,000
Liabilities
280,000
Other assets
1,080,000
A, capital
560,000
B, capital
320,000
C, capital
40,000
Total
1,200,000
Total
1,200,000
Assume that the three partners decided to liquidate the partnership. If the other assets are
sold for P800,000, how should the available cash be distributed to each partner?
A
B
C
a. 280,000
320,000
40,000
b. 324,000
236,000
16,000
c. 410,000
230,000
0
d. 412,000
228,000
0
Punzalan 2014
20. The following condensed balance sheet is presented for the partnership of Smith and Jones,
who share profits and losses in the ratio of 60:40, respectively:
Other assets
P450,000
Smith, loan
20,000
P470,000
Accounts payable
Smith, capital
Jones, capital
P120,000
195,000
155,000
P470,000
The partners decided to liquidate the partnership. If the other assets are sold for P385,000,
what amount of the available cash should be distributed to Smith?
a. 136,000
c. 159,000
b. 156,000
d. 195,000
Punzalan 2014
Partnership Liquidation & Incorporations - MCQ Problems
Page 8
Partnership Liquidation & Incorporations
21. Peter and John, who share profits and losses equally, decided to liquidate their partnership
when their net assets amounted to P260,000, and capital balances of P170,000 and P90,000,
respectively.
If the noncash assets were sold for amount equal to its book value, what amount of cash should
Peter and John received?
Peter John
a. 130,000
130,000
b. 170,000
90,000
c. 180,000
80,000
d. 195,000
65,000
Punzalan 2014
The following condensed balance sheet is presented for the partnership of Axel, Barr, and Cain,
who share profits and losses in the ratio of 4:3:3, respectively:
Cash
P100,000
Other assets
300,000
Total
P400,000
Liabilities
Axel, capital
Barr, capital
Cain, capital
Total
P150,000
40,000
180,000
30,000
P400,000
22. The partners agreed to dissolve the partnership after selling the other asset for P200,000.
Upon dissolution of the partnership, Axel should have received
a. 0
c. 60,000
b. 40,000
d. 70,000
Punzalan 2014
23. Cohen, Butler, and Davis are partners in a partnership and share profits and losses 50%, 30%,
and 20%, respectively. The partners have agreed to liquidate the partnership and anticipate
that liquidation expenses will total P14,000. Prior to the liquidation, the partnership balance
sheet reflects the following book values:
Cash
21,000
Non-cash assets
248,000
Notes payable to Davis
32,000
Other liabilities
154,000
Cohen, capital
60,000
Butler, capital (deficit)
(10,000)
Davis, capital
33,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 9
ADVANCED ACCOUNTING
Assuming that the actual liquidation expenses are P14.000 and that non-cash assets are sold
for P218,000, how would the assets be distributed to partners if Butler has net personal
assets of P8,500?
Cohen
Butler
Davis
a. 15,500
b. 21,429
49,571
c. 30,650
53,260
d. 27,500
52,000
Punzalan 2014
24. Batman and Robin decided to liquidate their partnership business on June 1,2013, under lumpsum liquidation. The partners had been sharing profits and losses on a 60:40 ratio. The statement
of financial position prepared on the day of liquidation began was as follows:
Liabilities and Capital
Assets
Cash
P 18,000
Accounts payable
P 42,000
Receivables
75,000
Batman, loan
24,000
Inventory
102,000
90,000
Batman, capital
Other assets
84,000
Robin, capital
90,000
Robin, drawing
9,000
Total
P267,000
Total
P267,000
During June, one-third of the receivables was collected; P45,000 of inventory was sold at an
average of 70% of book value; other assets were sold for P36,000.
How much should Batman and Robin receive upon liquidation?
Batman
Robin
a. P32,000
P36,400
P27,400
b. P8,100
c. P40,200
P41,800
d. P 59,100 P54,400
Guerrero 2013
25. Pepe and Pilar started a partnership some years ago and managed to operate profitably for
several years. Recently, however, they lost a substantial legal suit and incurred unexpected
losses on accounts receivable and inventories. As a result, they decided to liquidate. They sold all
assets and only P162,000 was available to pay liabilities, which amounted to P297,000. Their capital
account balances before the liquidation and their profit and loss sharing ratios are shown below:
Capital
Profit and
Balances
Loss ratios
Pepe
P207,000
60%
Pilar
121,500
40%
Partnership Liquidation & Incorporations - MCQ Problems
Page 10
Partnership Liquidation & Incorporations
Pepe is personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal
assets in excess of P900,000.
In the settlement to partners, how much cash should Pepe receive?
a. P63,900
c. P15,300
b. P-0-'
d. P63,000
Guerrero 2013
26. On July 1, 2013, the Chess Partnership has the following statement of financial position:
Liabilities and Capital
Accounts payable
PI22,400
Rook, loan
14,400
Rook, capital (50%) 28,800
__
King, capital (50%)
74,400
Total
P240,000
Total
P240,000
As of July 1, 2013, the partners have personal net worth as follows:
Cash
Other assets
Assets
Assets
Liabilities
P 20,400
219,600
Rook
P62,400
56,400
King
P 91,200
122,400
The personal net worth of each partner does not include any amounts clue to or from the
partnership. Assume the other assets are sold for P 123,600 after incurring liquidation expenses of
P4,800. How much should King receive?
a. P-0c. P24,000
b. P22,800
d. P16,800
Guerrero 2013
27. The following statement of financial position is presented for the partnership of David, Ebro, and
Franco who share profits and losses in the ratio of 5:3:2 respectively:
Cash
P 60,000
Liabilities
PI40,000
Other assets
540,000
David, capital
280,000
Ebro, capital
160,000
Franco, capital
20,000
Total
P600,000
Total
P600,000
The partners decide to liquidate the partnership. If the other assets are sold for P400,000, how
should the available cash be distributed to each partner?
a. David, P280,000; Ebro, P160,000; Franco, P20,000
b. David, P210,000; Ebro, P118,000; Franco, P8,000
c. David, P206,000; Ebro, P114,000; Franco, PO
d. David, P205,000; Ebro, P115,000; Franco, PO
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 11
ADVANCED ACCOUNTING
28. After operating for five years, the books of the partnership of Joe and Letty showed the following
balances:
Net assets
P130,000
Joe, capital
85,000
Letty, capital
45,000
If liquidation takes place at this point and the net assets are realized at book value, the partners are
entitled to:
a. Joe to receive P90,000 & Letty to receive P40,000
b. Joe to receive P97,500 & Letty to receive P32,500
c. Joe to receive P65,000 & Letty to receive P65,000
d. Joe to receive P85,000 & Letty to receive P45,000
Guerrero 2013
29. A, B and C are partners in a textile distribution business, sharing profits and losses equally. On
December 31, 2013, the partnership capital and the partners' drawing were as follows:
Capital
Drawing
A
P100,000
60,000
B
P80,000
40,000
C
Total
P300.000 P480.000
20,000 120,000
The partnership was unable to collect on its trade receivables, and it was forced to liquidate. The
operating profits for 2013 amounted to P72,000, and was all exhausted including the partnership
assets. Unsettled creditors' claim at December 31,2013 amounted to P84,000. B and C have
substantial private resources, but A has no available free assets.
The final cash distribution to C was:
a. P162,000
c. P84,000
b. P108,000
d. P78,000
Guerrero 2013
30. As of December 31,2013, the books of AME Partnership showed capital balances of: A, P40,000; M,
P25,000; E, P5,000. The partners' profit and loss ratio was 3:2:1, respectively. The partners
decided to liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities
amounting to P12,000, they still have cash of P28,000 left for distribution. Assuming that any
capital debit balance is uncollectible, the share of A in the distribution of the P28,000 cash
would be:
a. P17,800
c. P19,000
b. P18,000
d. P17,000
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 12
Partnership Liquidation & Incorporations
Loss absorption by solvent partner
31. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and
sharing profits 30%, 20% and 50% respectively. Partners agree to dissolve the business and
upon liquidation, all of the partnership assets are sold and sufficient cash is realized to pay all the
claims except one for P50,000. Li is personally insolvent, but the other two partners are able to
meet any indebtedness to the firm. On the remaining claim against the partnership, Gilbert is to
absorb.
a. P40,000
c. P30,000
b. P15,000
d. P25,000
Guerrero 2013
Safe Payment Schedule
Priority of Payment
Partner to be paid first
32. PP, QQ, and RR, partners to a firm, have capital balances of P11,200, P13,000, and P5,800,
respectively, and share profits in the ratio of 4:2:1. Prepare a schedule showing how available
cash will be given to the partners as it becomes available. Who among the partners shall be
paid first with an available cash of P1,400?
a. QQ
c. RR
b. No one
d. PP
Dayag 2013
1st Priority Payment
33. The August, Albert and Gerry partnership became insolvent on January 1, 2011, and the
partnership is being liquidated as soon as practicable. In this respect the following information
for the partners has been marshaled:
Capital Balances Personal Assets Personal Liabilities
August
P 70,000
P80,000
P40,000
Albert
(60,000)
30,000
50,000
Gerry
(30,000)
70,000
30,000
Total
P(20,000)
Assume that residual profits and losses are shared equally among the three partners. Based
on this information, calculate the maximum amount that August can expect to receive from
the partnership liquidation is:
a. 20.000
c. 70.000
b. 40,000
d. 110,000
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 13
ADVANCED ACCOUNTING
34. Partners Almond, Barney, and Colors have capital balances of P20,000, P50,000, and
P90,0Q0, respectively. They split profits in the ratio of 2:4:4, respectively. Under a safe cash
distribution plan, one of the partners will get the following total amount in liquidation before any
other partners get anything:
a. 0
c. 40,000
b. 15,000
d. 180,000
Punzalan 2014
2nd Priority Payment
35. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining
assets are being realized gradually. The equity of the partners is as follows:
Partners'
Accounts
P24,000
36,000
60,000
P
Q
R
Loans to
(from)
Partnership
6,000
( 10,000)
Profit and
Loss Ratio
3
3
4
The second cash payment to any Partner(s) under a program of priorities shall be made thus:
a. To R, P2,000
c. To R, P8,000
Dayag 2013
b. To Q, P6,000
d. To Q, P6,000 & R, P8,000
1st Priority & Partial 2nd Priority
36. NN, OO, PP, and GG, partners to a law firm, shares profits at the ratio of 5:3:1:1. On June
30, relevant partners' accounts follow:
NN
OO
PP
GG
Advances
Dr.
P18,000
10,000
Loans
Cr.
P20,000
40,000
-
Capital
Cr.
P160,000
120,000
60,000
100,000
On this day, cash of P72,000 is declared as available for distribution to partners as profits.
Who among the partners will benefit from the P72.000 cash distribution?
a. PP and GG
c. All, equally
b. OO and GG
d. NN and OO
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 14
Partnership Liquidation & Incorporations
Third Priority of Payment
37. After incurring losses resulting from very unprofitable operations, the Goh Kong Wei Partnership
decided to liquidate when the partners' capital balances were:
Goh, capital (40%)
P80,000
Kong, capital (40%)
130,000
Wei, capital (20%)
96,000
The non-cash assets were sold in installment. Available cash were distributed to partners in
every sale of non-cash assets. After the second sale of non-cash assets, the partners
received the same amount of cash in the distribution. And from the third sale of non-cash
assets, cash available for distribution amounts to P28,000, and unsold non-cash assets has a
book value of PI2,500. Using cash priority program, what amount did Wei received in the third
installment of cash?
a. 11,600
c. 5,600
b. 8,000
d. 0
Punzalan 2014
1st, 2nd & 3rd priority payment
38. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams
partnership appears below:
Priority
Creditors Matthew Norell
Reams
First P300,000.
100%
Next P80,000.
70%
30%
Next P70,000.
3/7
417
Remainder ......
22%
34%
44%
If P550.000 of cash is to be distributed, how much will be received by the priority creditors,
Matthew, Norell and Reams?
Dayag 2013
Priority Creditors
Matthew
Norell
Reams
a.
P
0
P
0
P
0
P
0
b.
0
121,000
187,000
242,000
c.
300,000
55,000
85,000
110,000
d.
300,000
108,000
58,000
84,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 15
ADVANCED ACCOUNTING
First Instalment
Cash available for safe payment
39. When Mikki and Mylene, partners who share earnings equally, were incapacitated in an
airplane accident, a liquidator was appointed to wind up their business. The accounts showed
cash, P35,000; other assets, PI 10,000; Liabilities, P20,000; Mikki, capital, P71,000; and
Mylene, capital, P54,000. Because of highly specialized nature of the noncash assets, the
liquidator anticipated that considerable time would be required to dispose them. The
expenses of liquidating the business (advertising, rent, travel, etc.) are estimated at P10,000.
How much cash can be distributed safely to each partner at this point?
a. P5.000 to Mikki; and P0 to Mylene
:
b. P5.000 to Mikki; and P500 to Mylene
c. P3.000 to Mikki; and P0 to Mylene
d. P5.000 to Mikki; and P1,000 to Mylene
Dayag 2013
40. Kay and Loy, partners who share profits and losses equally decided to liquidate their partnership
business in installment. The statement of financial position showed Cash, P35,000; Liabilities, P20,000;
Kay capital, P71,000; and Loy capital, P54,000. Anticipated liquidation expenses amounts to PI0,000.
How much cash can be distributed safely to each partner at this point?
Kay
Loy
a. P5,000
P-0b. P5,000
P 500
c. P3,000
P-0d. P5,000
P1,000
Guerrero 2013
Cash received by a partner
41. AA, BB, and CC are partners in ABC Partnership and share profits and losses 50%, 30% and
20%, respectively. The partners have agreed to liquidate the partnership and some
liquidation expenses to be incurred. Prior to the liquidation, the partnership balance sheet
reflects the following book values:
Cash
P 25,200
Non-cash assets
297,600
Notes payable to CC
38,400
Other liabilities
184,800
AA, capital
72,000
BB, capital deficit
( 12,000)
CC, capital
39,600
Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with
a book value of P240.000 are sold for P216,000. How much cash should CC receive?
a. 46,457
c. 74,571
b. 39,600
d. -0Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 16
Partnership Liquidation & Incorporations
42. The partners of the M&N Partnership started liquidating their business on July 1,2012, at
which time the partners were sharing profits and losses 40% to M and 60% to N. The balance
sheet of the partnership appeared as follows:
M&N Partnership
Balance Sheet - July 1,2012
Assets
Liabilities & Equity
Cash
P8,800
Accounts payable P32,400
Receivable
22,400
M, capital
P31.000
Inventory
39,400
M, drawing
( 5,400)
25,600
Equipment
P65,200
N, capital
P33,200
Accumulated.
N, drawing
( 200)
33,000
Depreciation (30,800)34400
N, loan
14,000
Total
P105,000
Total
105,000
During the month of July, the partners collected P600 of the receivables with no loss. The
partners also sold during the month the entire inventory on which they realized a total of
P32.400. How much of the cash was paid to M's capital on July 31, 2012?
a. 25.600
c. 320
b. 5,400
d. 0
Dayag 2013
43. The condensed balance sheet of Alex, Jay, and John as of March 31, 2010 follows:
Cash
P28,000
Liabilities
P48,000
Other assets
265,000
Alex, capital
95,000
Jay, capital
80,000
John, capital
70,000
Total
P293,000
Total
P 293,000
The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their
partnership and liquidate by selling other assets in installments. P70,000 was realized on the
first cash sale of other assets with a book value of P150,000. After settlement with creditors,
all cash available was distributed to the partners. How much cash was received by John?
a. 10,500
c. 21,250
b. 20,000
d. 32,500
Punzalan 2014
44. Partners Bee, Cee, Dee and Gee who share profits 5:3:1:1, respectively, decide to liquidate their
partnership. Capital balances before liquidation are:
Bee
P60,000
Cee
40,000
Dee
30,000
Gee
10,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 17
ADVANCED ACCOUNTING
The partners agree to the following:
(1) Partnership's computer equipment with a book value of P12,000 is to be taken over by partner
Bee at a price of P15,000.
(2) Partnership's liabilities are to be paid off and the balance of cash on hand, P30,000 is to
be divided in a manner that will avoid the need for any possible recovery of cash from a partner.
How much of the P30,000 cash be distributed to Partner Cee?
a. P10,000
c. P20,000
b. P-0d. P15,000
Guerrero 2013
45
The statement of financial position of Poe and Ping Partnership on May 1,2013 before
liquidation is as follows:
Assets
Liabilities and Capital
Cash
P14,000
Liabilities
P35,000
Other assets
71,000
Poe, capital (70%) 28,000
Ping, capital (30%) 22,000
P85.000
Total
P85,000
Total
In May, assets with a book value of P34,000 are sold for P29,000. Creditors are paid in full.
Liquidation expenses of P1,000 is paid, and P3,000 is paid to partners.
In May, how much did Ping receive?
a. P-0b. P3,000
c. P 900
d. P2,100
Guerrero 2013
46. Jay, Kay, and Ell are partners in JKE Partnership and share profits and losses, 5:3:2,
respectively. The partners have agreed to liquidate the partnership. Prior to liquidation, the
partnership statement of financial position shows the following book values:
Cash
P25,200
Non-cash assets
297,600
Notes payable to Ell
38,400
Other liabilities
184,800
Jay, capital
72,000
Kay, capital
(12,000)
Ell, capital
39,600
Liquidation expenses of PI 6,800 are paid. Non-cash assets with a book value of P240,000 are
sold for P216,000. How much cash should Ell receive?
a. P74,571
c. P39,580
b. P46,458
d. P37,600
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 18
Partnership Liquidation & Incorporations
47. The statement of financial position of the Watch Partnership on October 10,2013 when it
decided to liquidate was as follows:
Cash
Other assets
P 40,000
125,000
Total
PI 65,000
Liabilities
Rolex capital (50%)
Swatch capital (30%)
Timex capital (20%)
Total
P 60,000
45,000
42,000
18,000
P165,000
Assume the other assets with a book value of P90,000 are sold for P50,000 and that all available
cash, except for a PI0,000 contingency fund, is distributed immediately. In this case:
a. Rolex should receive nothing
b. Swatch should receive P10,000
c. Timex should receive P1,000
d. The cash should be distributed in the profit and loss ratio
Guerrero 2013
48. The condensed statement of financial position of Alex, Jay and John partnership as of March
31,2013 follows:
Cash
Other assets
Total
P 28,000
265,000
P293,000
Liabilities
Alex, Capital
Jay, Capital
John, Capital
Total
P 48,000
95,000
80,000
70,000
P293,000
Income and loss ratio is 50:25:25 respectively. The partners voted to dissolve the partnership and
liquidate by selling assets in installments. P70,000 was realized on the first cash sale of other assets
which has a book value of PI50,000. After settlement with creditors, all cash available was distributed
to partners. How much cash was received by John?
a. P10,500
c. P21,250
b. P32,500
d. P20,000
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 19
ADVANCED ACCOUNTING
Cash received by individual partners
49. A balance sheet for the partnership of KK, LL and MM, who share profits 2:1:1 respectively,
shows the following balances just before liquidation:
Cash Other Assets Liab.
KK, Cap.
LL, Cap.
MM, Cap.
P48.000
P238,000
P80.000
P88,000
P62,000
P56,000
In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation
expenses of P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated
before liquidation is completed. Creditors were paid P22.400. The available cash was
distributed to the partners. The cash to be received by each partner based on the above data:
Dayag 2013
KK
LL
MM
KK
LL
MM
a. 56,600
28,300
28,300
c. 29,400
32.700
26,700
b. 86,000
61,000
55,000
d. 88,000
62,000
56,000
50. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The
condensed balance sheet of Heidi Partnership as of December31,2012 is:
Heidi Partnership
Balance Sheet
December 31,2012
Cash
P 50,000
Other assets
130,000
Total assets
P180,000
• Liabilities
P 40,000
W, capital
60,000
X, capital
40,000
Y, capital
40,000
Total liabilities and capital
P180,000
Assume instead that the Heidi Partnership is dissolved and liquidated by installments, and the
first realization of P 40,000 cash is on the sale of other assets with book value of P80.000. After
the payment of liabilities, the available cash shall be distributed to W, X, and Y, respectively,
as follows:
a. P36,000; P27,000; and, P27,000
b. P44,000; P28.000; and, P28,000
a P16,000; P12,000; and, P12,000
d. P24,000; P13,000; and, P13,000
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 20
Partnership Liquidation & Incorporations
51. The balance sheet of the partnership of Salve, Galo, and Norma, who share in the profits and
losses in the ratio of 5:3:2, respectively is as follows:
Assets
Liabilities and Capital
Cash
30,000
Liabilities
50,000
Other assets
320,000
Salve, capital
80,000
Galo, capital
115,000
Norma, capital
105,000
Total
350,000
Total
350,000
The partnership is liquidated by installment. The first sale of non-cash assets with a book
value of P150,000 realizes P100,000. How should the remaining cash be distributed?
Salve
Galo
Norma
a. 50,000 30,000
20,000
b. 40,000 24,000
16,000
c. 0
31,000
49,000
d. 0
48,000
32,000
Punzalan 2014
52. The December 31,2013 statement of financial position of DJM Partnership are as follows:
Cash
P20,000
Receivable from Day
20,000
Other assets
420,000
Accounts payable
170,000
Day, capital
120,000
Jay, capital
90,000
May, capital
80,000
The partners' profit and loss percentage are Day, 50%; Jay, 30%; and May, 20%. On January 1
of next year, the partners decide to liquidate the partnership. They agree that all cash should be
distributed as it becomes available during the liquidation process.
If cash of P220,000, including the P20,000 cash on hand becomes available, it should be
distributed first to settle the accounts payable and then to:
Day
Jay
May
a. P25,000 PI 5,000 PI 0,000
b. P-0P26,000 P24,000
c. PI0,000 P32,000 P 8,000
d. P-0P18,000 P32,000
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 21
ADVANCED ACCOUNTING
53. The statement of financial position of QRST Partnership just prior to liquidation shows:
Assets
P90,000
Liabilities
15,000
Q, loan
5,000
Q, capital
20,000
R, capital
20,000
S, capital
20,000
T, capital
10,000
Total
P90,000
Q, R, S, and T share profits and losses in the ratio of 2:1:1, respectively. Certain assets were sold
for P45,000. Creditors were paid in full amount owed and cash of P20,000 were distributed to the
partners.
How would the P20,000 cash be distributed to the partners?
Q
R
S
T
a. P2,500 P 8,750 P 8,750 P-0b. P-0P20,000 P-0P-0c. P-0P10,000 P10,000 P-0d. P 5,000 P5,000 P10,000 P-0-
Guerrero 2013
54. L, M, N and O partners to a law firm share profits 5:3:1:1 respectively. Partners accounts prior to
liquidation were as follows:
Advances (Dr)
L
M
N
P4,500
O
2,500
Loans (Cr)
P5,000
10,000
-
Capitals (Cr)
P40,000
30,000
15,000
25,000
At this point, cash of PI 8,000 is available for distribution to the partners. How much of the PI
8,000 cash should be distributed to each partner?
a.
b.
c.
d.
L
P-0P-0P-0P9,000
M
PI 8,000
P-0P 6,625
P 5,400
N
P-0P-0P-0PI,800
O
P-0P18,000
PI 1,375
P 1,600
Partnership Liquidation & Incorporations - MCQ Problems
Guerrero 2013
Page 22
Partnership Liquidation & Incorporations
55. The following statement of financial position is for the partnership of D, E and F:
Cash
P 20,000
Liabilities
P 50,000
Other assets
180,000
D, capital (40%) 37,000
E, capital (40%) 65,000
F, capital (20%) 48,000
Total •
P200,000
Total
P200,000
Figures shown parenthetically reflect agreed profit and loss sharing percentages. If the firm as
shown on the original balance sheet, is dissolved and liquidated by selling assets in
installments, the first sale of non-cash assets having a book value of P90,000 realizes P50.000,
and cash of PI 7,000 after settlement with creditors is distributed; the respective partners would
receive (to the nearest peso).
a. D, P8,000; E, P8,000; F, P4,000
b. D, 6,667;
E,6,667; F,6,666
c. D,0;
E,13,333; F,6,667
d. D,0;
E,1,000; F,16,000
Guerrero 2013
56. Jacob, Santos, and Hervas, partners, share net income and loses in the ratio of 5:3:2. The
partners decided to liquidate the partnership. Their statement of financial position prior to
liquidation is:
Assets
Cash
Other assets
P 40,000
210,000
Total
P250,000
Liabilities & Capital
Liabilities
P 60,000
Jacob, loan
8,000
Jacob, capital
40,000
Santos, capital
72,000
Hervas, capital
70,000
Total Liabilities & Capital P250,000
The partnership is to be liquidated by installment. The first sale of non-cash assets with a carrying
amount of PI 20,000 realized P90,000. Liquidation expenses paid amounted to P2,000.
How much cash should be distributed to each partner?.
Jacob
Santos
Hervas
a. None
P35,400 P45,600
b. 32,000
62,400
63,600
c. None
9,600
28,400
d. None
27,600
40,400
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 23
ADVANCED ACCOUNTING
57. The partnership of Javier, Karim, and Laurel share profits and losses in the ratio of 5:3:2,
respectively. The partners voted to dissolve the partnership when its assets, liabilities, and capital
were as follows:
Assets
Liabilities and Capital
Cash
P 40,000
Liabilities
P 60,000
Other assets
210,000
Javier, capital
48,000
Karim, capital
72,000
Laurel, capital
70,000
Total
P250,000
Total
P250,000
The partnership will be liquidated over a prolonged period of time! As cash is available it will be
distributed to the partners. The first sale of non-cash assets having a book value of PI20,000
realized P90,000. How much cash should be distributed to each partner after this sale?
a. Javier, P0;Karim, P28,800; Laurel, P41,200
b. Javier, Po;Karim, P30,000; Laurel, P40,000
c. Javier, P35,000; Karim, P21,000; Laurel, P14,000
d. Javier, P45,000; Karim, P27,000; Laurel, P18,000
Guerrero 2013
Comprehensive
Questions 1 & 2 are based on the following:
Dayag 2013
58. The assets and equities of the Queen, Reed, and Stac Partnership at the end of its fiscal year
on October 31, 2011 are as follows:
Assets
Liabilities and Equity
Cash
P 15,000
Liabilities
P 50,000
Receivables-net...
20,000
Loan from Stac
10,000
Inventory
40,000
Queen, capital-30%
45,000
Plant assets-net ...........
70,000
Reed, capital-50%
30,000
Loan to Reed
_ 5,000
Stac, capital - 20%
15,000
Total Assets
PI50,000
Total Liabilities and Equity. PI50,000
The partners decide to liquidate the partnership. They estimate that the noncash assets, other
than the loan to Reed, can be converted into PI00,000 cash over the two-months period ending
December 31, 2011. Cash is to be distributed to the appropriate parties as it becomes available
during the liquidation process.
The partner most vulnerable to partnership losses on liquidation is:
a. Queen
c. Reed and Queen equally
b. Reed
d. Stac
Partnership Liquidation & Incorporations - MCQ Problems
Page 24
Partnership Liquidation & Incorporations
59. Using the same information in No. 58, and P65.000 is available for first distribution, it should
be paid to:
Priority
Creditors
Queen
Reed
Stac
a.
P60,000
P 5,000
P
0
P
0
b.
60,000
1,500
2,500
1,000
c.
50,000
5,000
0
10,000
d.
50,000
12,000
0
3,000
60. The partnership of AA, BB, and CC was dissolved on June 30, 2012 and account balances
after non-cash assets were converted into cash on September 1,2012 are:
Assets
Liabilities and Equity
Cash
.'... P50.000
Accounts payable
P120,000
AA, capital (30%)
90,000
BB, capital (30%)
(60,000)
CC, capital (40%)
(100,000)
Personal assets and liabilities of the partners at September 1, 2012 are:
Personal
Personal
Assets
Liabilities
AA
P80.000
P90,000
BB
100,000
61,000
CC
192,000
80,000
If CC contributes P70.000 to the partnership to provide cash to pay the creditors, what
amount of AA's P90,000 partnership equity would appear to be recoverable?
a. 90,000
c. 79,000
b. 81,000
d. None
Dayag 2013
61. The following account balances were available for the Perry, Quincy and Renquist
partnership just before it entered liquidation:
Cash
P 90,000
Liabilities
PI 70,000
Non-cash assets
300,000
Perry, capital
70,000
Quincy, capital
50,000
Renquist, capital ...
100,000
P390,000
P390,000
Perry, Quincy and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation
expenses were expected to be P8.000. All partners were solvent.
Partnership Liquidation & Incorporations - MCQ Problems
Page 25
ADVANCED ACCOUNTING
What would be the minimum amount for which the non-cash assets must have been sold for,
in order for Quincy to receive some cash from the liquidation?
a. Any amount in excess of P175,000
b. Any amount in excess of P117,000
c. Any amount in excess of P183,000
d. Any amount in excess of P198,667
Dayag 2013
Questions 1 & 2 are based on the following:
Punzalan 2014
The ABC Partnership has assets with book value of P240,000 and a market value of P195,000,
outside liabilities of P70,000, loans payable to Partner Able of P20,000, and capital balances for
Partners Able, Baker, and Chapman of P70,000, P30,000, and P50,000, respectively. The partners
share profits and losses equally.
62
How would the first P100,000 of available assets be distributed?
a. P70,000 to outside liabilities, P20,000 to Able, and the balance equally among partners.
b. P70,000 to outside liabilities, and P30,000 to Able.
c. P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman.
d. P40,000 to Able, P20,000 to Chapman, and the balance equally among partners.
63. If all outside creditors and loans to partners had been paid. How would the balance of the
assets be distributed assuming Chapman had already received assets with a value of P3
0,000?
a. Each of the partners would received P25,000.
b. Each of the partners would received P40,000.
c. Able: P70,000, Baker: P30,000, Chapman: P20,000
d. Able: P55,000, Baker: P15,000, Chapman: P5,000.
Questions 1 & 2 are based on the following:
Punzalan 2014
As of December 31, the books of AME Partnership showed capital balances of: A - P40,000; M P25,000; and E - P5,000. The partners' profit and loss ratio was 3:2:1, respectively. The partners
decided to dissolve and liquidate. They sold all the non-cash assets for P37,000 cash. After
settlement of all liabilities amounting to P12,000, they still have P28,000 cash left for distribution.
64. The loss on the realization of the non-cash assets was
a. 40,000
c. 44,000
b. 42,000
d. 45,000
65. Assuming that any partner's capital debit balance is uncollectible, the share of A in the
P28,000 cash for distribution would be
a. 19,000
c. 17,800
b. 18,000
d. 40,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 26
Partnership Liquidation & Incorporations
66. Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring
P200,000 when liquidated. At the same time, Morgan has a credit capital balance in the
partnership of PI20,000. The capital amounts of the other partners total a credit balance of
P250,000. Under the doctrine of marshalling of assets, how much the personal creditors of
Morgan can collect?
a. 120,000
c. 320,000
b. 200,000
d. 570,000
Punzalan 2014
67. Partners Able, Baker, and Chapman, who share profit and loss equally, have the following
personal assets, personal liabilities, and partnership capital balances:
Able
Baker
Chapman
Personal assets
P 30,000
P 80,000
P 60,000
Personal liabilities
25,000
50,000
72,000
Capital balances
50,000
(32,000)
70,000
After applying the doctrine of marshalling of assets, the capital balances of Able,
Baker, and Chapman, respectively, would be
a. P50,000 P(2,000)
P58,000
b. 48,000
0
58,000
c. 49,000
0
57,000
d. 34,000
0
54,000
Punzalan 2014
Items 95 and 96 are based on the following data
Guerrero 2013
On December 31, 2013, the accounting records of the STU Partnership included the following ledger
account balances:
(Dr) Cr
Sy, drawing
P(24,000)
Uy, drawing
( 9,000)
Ty, loan
30,000
Sy, capital
123,000
Ty, capital
100,500
Uy, capital
108,000
Total assets of the partnership amounted to P478,500, including P52,500 cash. The partnership was
liquidated on December 31, 2008 and Uy received P83,250 cash pursuant to the liquidation. Sy, Ty, and
Uy shared income and losses in a 5:3:2 ratio, respectively.
68. How much is the loss on realization of assets'?
a. P178,750
c. P 23,750
b. P78,750
d. PI 23,750
Partnership Liquidation & Incorporations - MCQ Problems
Page 27
ADVANCED ACCOUNTING
69. How much cash is received by Sy?
a. P35,625
b. P59,625
c. P37,125
d. P13,125
70. Partners Beth, John, and Star who shared profit and losses based on 4:4:2 decided to liquidate.
All assets of the partnership were liquidated.
The condensed statement of financial position just prior to liquidation follows:
Cash
P100,000
Liabilities
PI 40,000
Other assets
400,000
Beth, Loan
10,000
Beth, Capital
45,000
John, Capital
105,000
Star, Capital
200,000
Total
P500,000
Total
P500,000
Other assets were sold for P247,500 realizing a loss of PI 52,500. Parties agreed to fully terminate
the partnership's business thus, necessitating distribution of cash to partners and in the event of
capital deficiency, contribution of additional cash. The three partners all solvent and could answer
any capital deficiency. The realization of assets, distribution of loss and payment of liabilities resulted
to the following partners loan and capital accounts balances prior to final cash settlement:
Beth Loan Beth, Capital John, Capital
Star, Capital
a. P10,000
P10,000
P50,000
P165,000
b. 10,000
(16,000)
44,000
169,500
c. 10,000
15,000
55,000
165,000
d. 10,000
45,000
105,000
200,000
Guerrero 2013
INCORPORATION OF PARTNERSHIP
Additional Paid-In Capital
71. JJ & KK partnership's balance sheet at December 31, 2012, reported the following:
Total assets
P100,000
Total liabilities
20,000
JJ, capital
40,000
KK, capital
40,000
On January 2, 2013, JJ and KK dissolved their partnership and transferred all assets and
liabilities to a newly-formed corporation. At the date of incorporation, the fair value of the net
assets was PI 2,000 more than the carrying amount on the partnership's books, of which
P7,000 was assigned to tangible assets and P5,000 was assigned to goodwill. JJ and KK were
each issued 5,000 shares of the corporation's PI par value ordinary share.
Partnership Liquidation & Incorporations - MCQ Problems
Page 28
Partnership Liquidation & Incorporations
Immediately following incorporation, share premium/additional paid-in-capital in excess of par
should be credited for:
a. 68,000
c. 77,000
b. 70,000
d. 82,000
Dayag 2013
72. The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2010,
follows:
Current assets
Equipment (net)
Total assets
Liabilities
Adams, capital
Gray, capital
Total liabilities and capital
P250,000
30,000
P280,000
P20,000
160,000
100,000
P280,000
On December 31, 2010, the fair values of the assets and liabilities were appraised at
P240,000 and P20,000, respectively, by an independent appraiser. On January 2, 2011, the
partnership was incorporated and 1,000 shares of P5 par value common stock were issued.
Immediately after the incorporation, what amount should the new corporation report as
additional paid in capital?
a. 275,000
c. 215,000
b. 260,000
d. 0
Punzalan 2014
Shares Issued
73. Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July
1,2011, they decided to form the R & G Corporation by transferring the assets and liabilities
from the partnership to the Corporation in exchange of its shares. The following is the postclosing trial balance of the partnership:
Debit
Credit
Cash
P 45,000
Accounts Receivable (net)
60,000
Inventory
90,000
Fixed Assets (net)
174,000
Liabilities
P 60,000
Roy, Capital
94,800
Gil, Capital
214,200
P369,000 P369,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 29
ADVANCED ACCOUNTING
It was agreed that adjustments be made to the following assets to be transferred to the
corporation:
Accounts Receivable
Inventory
Fixed Assets
P 40,000
68,000
180,600
The R & G Corporation was authorized to issue P100 par preference shares and P10 par
ordinary share. Roy and Gil agreed to receive for their equity in the partnership 720 ordinary
share each, plus even multiples of 10 shares for their remaining interest. The total number of
shares of preference and ordinary share issued by the Corporation in exchange of the assets
and liabilities of the partnership are:
Dayag 2013
Preference
Ordinary
Preference
Ordinary
Share
Share
Share
Share
a. 2,540 shares
1,500 shares
c. 2,642 shares
1,440 shares
b. 2,592 shares
1,440 shares
d. 2,642 shares
1,550 shares
Total Par Value
74. Partners Art and Tony, who share equally in profits and losses, have the following balance
sheet as of December 31, 2011:
Cash
A/Receivable
Inventory
Equipment
Total
P120,000
100,000
140,000
80,000
P440000
A/payable
Accum.dep'n
Art, capital
Tony, capital
Total
P172,000
8,000
140,000
120,000
P440,000
They agreed to incorporate their partnership, with the new corporation absorbing the net assets
after the following adjustments: provision of allowance for bad debts of P10,000; restatement
of the inventory at its current fair value of P160,000; and, recognition of further depreciation on
the equipment of P3,000. The corporation's capital stock is to have a par value of P100, and
the partners are to be issued corresponding total shares equivalent to their adjusted capital
balances.
The total par value of the shares of capital stock that were issued to partners Art and Tony was:
a. 260.000
c. 273,000
b. 267,000
d. 280,000
Dayag 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 30
Partnership Liquidation & Incorporations
Comprehensive
Questions 1 & 2 are based on the following:
Punzalan 2014
Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1,
2010, they decided to form the R&G Corporation by transferring the assets and liabilities of the
partnership to the corporation in exchange for the latter's stock. The following is the post-closing
trial balance of the partnership.
Cash
Accounts receivable (net)
Inventory
Fixed assets (net)
Liabilities
Roy, capital
Gil, capital
Debit
P45,000
60,000
90,000
174,000
P369,000
Credit
P60,000
94,800
214,200
P369,000
It was agreed that adjustments be made to the following assets to be transferred
to the corporation:
Accounts receivable
Inventory
Fixed assets
P40,000
68,000
180,600
The R&G Corporation was authorized to issue P100 par preferred stock and P10 par common
stock. Roy and Gil agreed to receive for their equity in the partnership 720 shares of the
common stock each, plus even multiples of 10 shares of preferred stock for their remaining
interests.
75. The total number of shares of preferred and common stocks issued by the corporation in
exchange for the assets and liabilities of the partnership are:
Preferred
Common
a. 2,540 shares
1,500 shares
b. 2,592 shares
1,440 shares
c. 2,642 shares
1,440 shares
d. 2.642 shares
1,550 shares
Partnership Liquidation & Incorporations - MCQ Problems
Page 31
ADVANCED ACCOUNTING
76. The distribution of the stocks to Roy and Gil would be:
Roy
Gil
Preferred
Common
Preferred
a. 785 shares
720 shares
1,384 shares
b. 773 shares
750 shares
1,843 shares
c. 758 shares
720 shares
1,834 shares
d. 738 shares
720 shares
1,758 shares
Common
720 shares
750 shares
720 shares
720 shares
CORRECTION OF ERROR
77. X and Y are in partnership, sharing profits equally and preparing their accounts to 31
December each year. On 1 July 2011, Z joined in the partnership, and from that date profits
are shared X 40%, Y 40%, and Z 20%.
In the year ended 31 December 2011, profits were:
6 months to 31 June 2011
6 months to 31 December 2011
P200,000
300,000
It was agreed that X and Y only should bear equally the expense for a bad debt of P40,000
written-off in the six months to 31 December 2011 in arriving at the P300,000 profit. Which of
the following correctly states X's profit share for the year?
a. 216,000
c. 220,000
b. 200,000
d. 224,000
Dayag 2013
78. J J and KK are partners sharing profits 60% and 40% respectively. The average profits for
the past two years are to be capitalized at 20% per year (for purposes of admitting a new
partner) in determining the aggregate capital of JJ and KK, after adjusting the profits for the
following items omitted from the books:
Omissions at Year-End
2011
2012
Prepaid Expense
P1,600
Accrued Expense
1,200
Deferred Income
P1,400
Accrued Income
1,000
Other pertinent information are as follows:
2011
2012
Net income of partnership
P14,400
P13,600
Capital accounts, end of the year:
JJ
45,400
54,000
KK
45,000
55,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 32
Partnership Liquidation & Incorporations
The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum
is:
a. 67,765
c. 69.000
b. 72,105
d. 71,000
Dayag 2013
79. RR and PP share profits after the provision of annual salary allowances of P14,400 and
P13,200, respectively in the ratio of 6:4. However, if partnership's net income is insufficient to
provide for said allowances in full amount, the net income shall be divided equally between
the partners. In 2011, the following errors were discovered: Depreciation for 2011 is
understated by P2,100, and the inventory on December 31, 2011 is overstated by P11,400.
The partnership net income for 2011 was reported to be P19,500.
The capital accounts of the partners should be increased (decreased) by:
a. RR, P(6,540); PP, P(6,540)
c. RR, P(6,960); PP, P 6,540
b. RR, P3,000; PP,P3,000
d. RR, P(6,750); PP, P( 6,750) Dayag 2013
80. Abe, Bert, and Carl are partners sharing profit on a 7:2:1 ratio. On January 1,2013, Dave was
admitted into the partnership with 15% share in profits. The old partners continue to participate
in profits in their original ratios. For the year 2013, the partnership showed a profit of P15,000.
However, it was discovered that the following items were omitted in the firm's book:
Unrecorded at year end
2012
2013
Accrued expense
PI,050
Accrued income
875
Prepaid expenses
PI,400
Unearned income
PI,225
The share of partner Bert in the 2013 net profit is:
a. P2,197.50
c. P2,637.00
b. P2,490.50
d. P3,149.75
Guerrero 2013
COMPREHENSIVE
Admission & Retirement
81. The partners' capital (income-sharing ratio in parentheses) of Nunn, Owen, Park & Quan LLP
on May 31, 2012, were as follows:
Nunn (20%)
P 60,000
Owen (20%)
80,000
Park (20%)
:
70,000
Quan (40%)
40,000
Total partners' capital (20%)
P250,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 33
ADVANCED ACCOUNTING
On May 31, 2012, with the consent of Nunn, Owen, and Quan:
a. Sam Park retired from the partnership and was paid P50.000 cash in full settlement
of his interest in the partnership.
b. Lois Reed was admitted to the partnership with a P20.000 cash investment for a
10% interest in the net assets of Nunn, Owen and Quan.
The capital account to be credited to Reed is:
a. 22,000
c. 20,000
b. 27,000
d. 25,000
Dayag 2013
Questions 1 & 2 are based on the following:
Punzalan 2014
On June 30, 2010, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm
together with their respective profit and loss sharing percentage, was as follows:
Assets, net of liabilities
P320,000
Eddy, capital (50%)
P160,000
Fox, capital (30%)
96,000
Grimm, capital (20%)
64,000
P320,000
82. Eddy decided to retire from the partnership and by mutual agreement is to be paid P180,000
out of partnership funds for his interest. Total goodwill implicit in the agreement is to be
recorded. After Eddy's retirement, what are the capital balances of the other partners?
Fox
Grimm
a.
84,000
56,000
b.
102,000
68,000
c.
108,000
72,000
d.
120,000
80,000
Assume instead that Eddy remains in the partnership and that Hamm is admitted as a new partner
with a 25% interest in the capital of the new partnership for a cash payment of P 140,000. total
goodwill implicit in the transaction is to be recorded.
83. Immediately after admission of Hamm, Eddy's capital account balance should be
a. 280,000
c. 160,000
b. 210,000
d. 140,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 34
Partnership Liquidation & Incorporations
Admission & Lumpsum Liquidation
Questions 1 & 2 are based on the following:
Punzalan 2014
The following condensed balance sheet is presented for the partnership of Alfa and Beda, who
share profits and losses in the ratio of 60:40, respectively:
Cash
45,000
Other assets
625,000
Beda, loan
30,000
700,000
Accounts payable
Alfa, capital
Beda, capital
120,000
348,000
232,000
700,000
84. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to
admit Capp as a new partner with a 20% interest. No goodwill or bonus is to be recorded.
What amount should Capp contribute in cash or other assets?
a. 110,000
c. 140,000
b. 116,000
d. 145,000
85. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the
other assets are sold for P500,000, what amount of the available cash should be distributed
to Alfa?
a. 255,000
c. 327,000
b. 273,000
d. 348,000
Admission & Instalment Liquidation
Questions 1 & 2 are based on the following:
Punzalan 2014
N, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed
balance sheet of NXY Partnership as of December 31, 2006 is:
Cash
P50,000
Other assets 130,000
Total
P180,000
Liabilities
N, capital
X, capital
Y, capital
Total P
P40,000
60,000
40,000
40,000
180,000
Partnership Liquidation & Incorporations - MCQ Problems
Page 35
ADVANCED ACCOUNTING
86. AH the partners agree to admit Z as a 1/5 partner in the partnership without any goodwill or
bonus. Z shall contribute assets amounting to
a. 28,000
c. 35,000
b. 10,000
d. 60,000
87. The NXY Partnership is dissolved and liquidated by installments. The first realization of
P40,000 cash is on the sale of other assets with book value of P80,000. After payment of the
liabilities, the cash available is distributed to N, X, and Y, respectively as follows:
a. 36,000 27,000 27,000
b. 44,000 28,000 28,000
c. 16,000 12,000 12,000
d. 24,000 13,000 13,000
Formation, Admission & Profit Distribution
Questions 1 thru 5 are based on the following:
On May 1, 2010, the business assets of John and Paul appear below:
John
Paul
Cash
P11,000
P22,354
Accounts receivable
234,536
567,890
Inventories
120,035
260,102
Land
603,000
Building
428,267
Furniture & fixtures
50,345
34,789
Other assets
2,000
3,600
Total
PI,020,916
PI,317,002
Accounts payable
Notes payable
John, capital
Paul, capital
Total
P 178,940
200,000
641,976
728,352
PI,020,916
Punzalan 2014
P243,650
345,000
PI,317,002
John and Paul agreed to form a partnership contributing their respective assets and equities
subject to the following adjustments:
a. Accounts receivable of P20,000 in John's books and P35,000 in Paul's are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John's and Paul's respective books.
c. Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be written
off.
Partnership Liquidation & Incorporations - MCQ Problems
Page 36
Partnership Liquidation & Incorporations
88. The capital accounts of the partners after the adjustments will be:
a. John's
614,476
Paul's
683,052
b. John's
615,942
Paul's
717,894
c. John's
640,876
Paul's
712,345
d. John's
613,576
Paul's
683,350
89. How much assets does the partnership have?
a. 2,337,918
c. 2,265,118
b. 2,237,918
d. 2,365,218
90. Peter offered to join for a 20% interest in the firm. How much cash should he contribute?
a. 330,870
c. 344,237
b. 337,487
d. 324,382
91. After Peter's admission, the profit and loss sharing ratio was agreed to be 40:40:20, based on
capital credits. How much should the cash settlement be between John and Paul?
a. 33,602
c. 32,272
b. 32,930
d. 34,288
92. During the first year of their operations, the partnership earned P325,000. Profits were
distributed in the agreed manner. Drawings were made in these amounts: John, P50,000;
Paul, P65,000; Peter, P28,000.
How much are the capital balances after the first year?
a. John, capital
750,627
Paul, capital
735,177
Peter, capital
372,223
b. John, capital
728,764
Paul, capital
713,764
Peter, capital
361,382
c. John, capital
757,915
Paul, capital
742,315
Peter, capital
375,837
d. John, capital
743,121
Paul, capital
727,825
Peter, capital
368,501
Partnership Liquidation & Incorporations - MCQ Problems
Page 37
ADVANCED ACCOUNTING
93. The inexperienced accountant for Jack, Kiel and Luck Partnership prepared the following
journal entries during the year ended August 31,2013:
2013
September 1 Cash
50,000
Goodwill
150,000
Jack, capital (PI50,000 x 0.25)
37,500
Kiel, capital (P150,000 x 0.75)
112.500
Luck, capital
50,000
To record admission of Luck for a 20% interest in net assets, with goodwill credited to Kiel
in their former income sharing ratio. Goodwill is computed as follows:
Implied total capital based on Luck's investment
(P50,000 x 5)
P250.000
Less: net assets prior to Luck's admission
100,000
Goodwill
PI50,000
2013
August 31
Income Summary
30,000
Jack, capital (P30.000 x .20)
6,000
Kiel, capital (P30,000 x .60)
18,000
Luck, capital (P30,000 x .20)
6,000
To divide net income for the year in the residual income-sharing ratio of Jack, 20% Kiel, 60%,
and Luck, 20%. Provision in partnership contract requiring P40.000 annual salary allowance
to Luck is disregarded because income before salary is only P 3 0,000.
What should be the adjusted capital balances of old and new partner(s), respectively, at August
31,2013.
a. P192,000 & P88,000
b. P174,000 & P56,000
c. P192,000 & P56,000
d. P174,000 & P88,000
Guerrero 2013
Partnership Liquidation & Incorporations - MCQ Problems
Page 38
Partnership Liquidation & Incorporations
ANSWER SHEET
1.C
26.B
51.C
76.C
2.D
27.D
52.D
77.A
3.D
28.D
53.A
78.C
4.B
29.D
54.C
79.D
5.C
30.A
55.D
80.B
6.C
31.A
56.D
81.A
7.C
32.A
57.A
82.C
8.B
33.A
58.B
83.B
9.C
34.C
59.D
84.D
10.C
35.D
60.A
85.B
11.B
36.B
61.C
86.C
12.B
37.C
62.B
87.D
13.A
38.D
63.D
88.A
14.C
39.C
64.B
89.C
15.A
40.A
65.C
90.D
16.B
41.B
66.C
91.D
17.D
42.C
67.C
92.B
18.A
43.B
68.B
93.A
19.C
44.A
69.B
20.A
45.B
70.B
21.B
46.C
71.D
22.A
47.C
72.C
23.D
48.D
73.B
24.A
49.C
74.B
25.A
50.D
75.B
ANSWER KEY
Page 39