CLAIRE, DAISY, and ELSIE formed the CDE Partnership on August 1, 2019, with the following assets, measured
at fair market values, contributed by each partner:
CLAIRE
DAISY
ELSIE
Cash
P 324,000
P108,000
P129,600
Accounts receivable
73,080
91,800
Plant, Property, &
Equipment (PPE)
1,620,000
340,200
A part of CLAIRE’s cash contribution, P216,000, comes from personal borrowings. Also, the PPE of CLAIRE and
DAISY are mortgaged with the bank for P972,000 and P72,000, respectively. The partnership is to assume
responsibility for these PPE mortgages. The partners have agreed to share profits and losses on a 5:2:3 ratio,
to CLAIRE, DAISY, and ELSIE, respectively.
1. What is the capital balance for each partner at the opening of business on August 1, 2015?
a. CLAIRE, P1,045,080; DAISY, P376,200; & ELSIE, P221,400
b. CLAIRE, P1,161,200; DAISY, P418,000; & ELSIE, P246,000
c. CLAIRE, P1,987,500; DAISY, P189,000; & ELSIE, P217,500
d. CLAIRE, P1,095,120; DAISY, P547,560; & ELSIE, P182,520
2. What is the capital balance for each partner at August 1, 2019, instead, if the interest ratio is given at 5:3:2
to CLAIRE, DAISY, and ELSIE, respectively?
a.
b.
c.
d.
CLAIRE, P730,080; DAISY, P730,080; & ELSIE, P365,040
CLAIRE,P985,608; DAISY, P492,804; & ELSIE, P164,268
CLAIRE,P1,987,500;DAISY,P189,000;& ELSIE, P217,500
CLAIRE,P821,340; DAISY,P492,804; & ELSIE, P328,536
On January 1, 2019, FRIDA and GLACE formed a partnership by contributing cash of P405,000 and P270,000,
respectively. On February 1 2019, Partner FRIDA contributed an additional P135,000 cash to the partnership
and on August 1, 2019 Partner FRIDA made a permanent withdrawal of P67,500. On May 1, 2019, Partner
GLACE contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when
contributed. On November 1, 2019 Partner GLACE contributed an additional P45,000 cash to the partnership.
Both partners withdrew one-fourth of their salary allowances in 2019.
The partnership reported a net income of P257,400 in 2019 and the profit and loss agreement are as follows:
a. Interest at 6% is allowed on average capital balances;
b. Salaries of P2,700 per month to each partner;
c. Bonus to FRIDA of 10% of net income after interest, salaries, and bonus; and
d. Balance to be divided in the ratio of 6:4 to FRIDA and GLACE, respectively.
3. Determine how the net income will be allocated to the partners:
a. FRIDA, P160,000 and GLACE, P126,000
b. FRIDA, P 180,000 and GLACE, P106,000
c. FRIDA, P170,000 and GLACE, P116,000
d. FRIDA, P153,000 and GLACE, P104,400
4. Determine the capital balances of the partners at December 31, 2019:
a. FRIDA, P617,400 and GLACE, P501,300
b. FRIDA, P551,000 and GLACE, P686,000
c. FRIDA, P688,000 and GLACE, P449,000
d. FRIDA, P683,000 and GLACE, P554,000
HAIDEE and ISABEL are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The
partnership balance sheet at August 30, 2019 follows:
Cash
Other assets
Isabel, Loan
P
12,150
119,700
9,000
Total
P 140,850
Accounts payable
Haidee, Loan
Haidee, capital
Isabel, capital
Total
P 13,500
5,850
81,000
40,500
P140,850
At this date, JOSIE was admitted as a partner for a consideration of P43,875 cash for a 40% interest in capital
and in profits.
5. Assume JOSIE is admitted by purchase of 40% each of the original partners’ interest, determine how the
P43,875 will be apportioned to HAIDEE and ISABEL
a. HAIDEE, P32,850 and ISABEL, P15,900
b. HAIDEE, P32,450 and ISABEL, P16,300
c. HAIDEE, P29,565 and ISABEL, P14,310
d. HAIDEE, P32,950 and ISABEL, P15,800
6. Assume JOSIE is admitted by investing the P43,875 to the partnership, determine the effects of any bonus
over the capital balances of the original partners:
a. HAIDEE, P( 9,900) and ISABEL, P(14,850)
b. HAIDEE, P 9,000 and ISABEL, p 14,850
c. HAIDEE, P (14,850) and ISABEL, P( 9,900)
d. HAIDEE, P (13,365) and ISABEL P ( 8,910)
The following balances as at October 31, 2019 for the Partnership of KARLO, LORNA, and MYRNA were as follows:
Cash
P 50,000 Liabilities
P 15,000
Lorna, Loan
15,000 Karlo, loan
22,500
Non-cash
400,000 Karlo,
105,000
assets
capital
Lorna,
97,500
capital
Myrna,
225,000
capital
Totals
P465,000 Totals
P465,000
KARLO has decided to retire from the partnership on October 31. Partners agreed to adjust the non-cash assets
to their fair market value of P490,000. The estimated profit to October 31 is P100,000. KARLO will be paid
P173,000 for his partnership interest inclusive of his loan which is repaid in full. Their profit and loss ratio is
3:3:4 to KARLO, LORNA, and MYRNA, respectively.
7. What will be the balance of LORNA’s capital account after the retirement of KARLO.
a. P 129,444
c. P 124,449
b. P 144,429
d. P 149,424
The accounts of the partnership of NOP
Cash
P 74,250
Non-cash assets
655,875
Loan to N
13,500
Total
P743,625
at December 31, 2019 are as follows:
Liabilities
P 56,250
Loan from O
18,000
N, capital
O, capital
P, capital
Total
185,625
329,625
154,125
P743,625
They divide profits and losses 3:5:2 to N, O, and P respectively. They have decided to liquidate the partnership
at this date.
8. Determine the amount payable to Partner P if cash is paid just before the start of liquidation on December
31, 2019.
a. P 16,750
c. P 17,679
a. P 15,911
d. P 17,560
9. Determine the amount Partner N and Partner O would have received by the time Partner P would have
received a cumulative amount of P40,500.
a. N, P1,785 and O, P72,650
b. N, P1,578 and O, P70,265
c. N, P1,875 and O, P70,625
d. N, P1,688 and O, P63,562
The following condensed balance sheet is prepared for QUIEL and ROGER, who share profits and losses in the
ratio of 60:40, respectively:
Other assets
P 405,000 Accounts
P108,000
payable
Quiel, loan
18,000 Quiel, capital
175,500
Roger, capital
139,500
Total
P 423,000 Total
P 423,000
10. The partners have decided to liquidate the partnership. If the other assets are sold for P346,500, what
amount of the available cash should be distributed to QUIEL?
a. P136,000
c. P122,400
b. P156,000
d. P195,000
On January 1, 2019, the partners SELYA, TESSA, and URSULA, who share profits and losses in the ratio of 5:3:2,
respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was
as follows:
Cash
Other assets
P
45,000
225,000
Total
P 270,000
Liabilities
Selya, capital
Tess, capital
Ursula, capital
Total
P
54,000
72,000
81,000
63,000
P270,000
On January 15, 2019, the first cash sale of other assets with a carrying amount of P135,000 realized P108,000.
Safe installment payments were made on the same date.
11. How much cash should be distributed to each partner?
SELYA
TESSA
URSULA
a.
P15,000
P51,000
P44,000
b.
P40,000
P45,000
P35,000
c.
P55,000
P33,000
P22,000
d.
P13,500
P45,900
P39,600
VENUS and WILMA partnership’s balance sheet at December 31, 2019, reported the following:
Total assets
P 100,000
Total liabilities
20,000
Venus, capital
40,000
Wilma, capital
40,000
On January 2, 2019, VENUS and WILMA 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 P12,000 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 patent. VENUS and WILMA were each issued 5,000 shares of the corporation’s P1 par common
stock.
12. Immediately following incorporation, additional paid-in capital in excess of par should be credited for
a. P68,000
c. P77,000
b. P70,000
d. P82,000
When LAGUNA COMPANY filed for liquidation with the Securities and Exchange Commission, it prepared the
following balance sheet.
Current assets, net realizable
value, P110,000
Land and buildings, fair value,
P180,000)
Goodwill, fair value, P0
Total assets
Accounts payable
Mortgage payable, secured by
land and building
Common stock
Retained earnings, deficit
Total equities
P
80,000
200,000
40,000
P 320,000
P 160,000
200,000
100,000
( 140,000)
P 320,000
13. How much would the holders of the mortgage payable likely to get?
a. P 60,000
c. P192,222
b. P360,667
d. 241,000
14. What is the estimated deficiency to unsecured amounts?
a. P 70,000
c. P192,000
b. P 90,000
d. P140,000
CANYON ENTERPRISES filed a voluntary bankruptcy petition on July 31, 2019 and its Statement of Affairs reflects
the following amounts:
Book Value
Current
Value
Assets:
Pledged with Fully secured
creditor
P 520,000
P 410,000
Pledged with Partially
secured creditor
292,500
92,500
Free Assets
350,000
47,500
Totals
P1,162,500
P 550,000
Liabilities:
Unsecured with priority
Fully secured
Partially secured
Unsecured without priority
Sub-total
Stockholders’ Equity
Capital stock
Retained Earnings, deficit
Totals
P
65,000
402,250
225,000
345,000
P1,037,250
147,500
( 22,250)
P1,162,500
15. The total estimated deficiency is allocable to the following creditors at the respective amounts shown below:
Unsecured
Fully
Partially
Unsecured
W/priority
Secured
Secured
w/out priority
a. P 0
P0
P132,500
P289,750
b. P 65,000
P0
P225,000
P345,000
c. P 9,750
P0
P132,500
P345,000
d. P 0
P110,000 P225,000
P289,750
16. The estimated payment that will be made to partially secured creditors in the event of liquidation at this
point is:
a. P205,125
c. P 92,500
b. P112,625
d. P225,000
The following data were taken from the statement of affairs of MARACLARA CORPORATION:
Assets pledged for fully secured liabilities
(current fair value, P75,000)
P 90,000
Assets pledged for partially secured
liabilities (current fair value P52,000)
74,000
Free assets (current fair value , P40,000)
70,000
Unsecured liabilities with priority
7,000
Fully secured liabilities
30,000
Partially secured liabilities
60,000
Unsecured liabilities without priority
112,000
17. The amount that will be paid to creditors with priority is:
a. P7,000
c. P7,500
b. P6,000
d. P6,200
18. The amount to be paid fully secured creditors is:
a. P30,000
c. P20,000
b. P32,000
d. P35,000
19. The amount to be paid to partially secured creditors is:
a. P52,700
c. P56,200
b. P57,200
d. P 57,000
20. The amount to be paid to unsecured creditors:
a. P78,200
c. P72,000
b. P70,800
d. P72,800
PRINCESS COMPANY filed a voluntary bankruptcy petition on August 15, 2019 and the statement of affairs
reflect the following amounts:
BOOK
CARRYING
VALUE
Pledged with fully secured
creditors
Pledged with partially
secured creditors
Free Assets
Liabilities with priority
Fully secured creditors
Partially secured creditors
Unsecured creditors
ESTIMATED
CURRENT
VALUE
P 150,000
P 185,000
90,000
210,000
P 450,000
60,000
160,000
P 405,000
Liabilities
P 35,000
130,000
100,000
270,000
P 535,000
21. How much cash will be available to pay the unsecured non-priority claims?
a. P240,000
c. P160,000
b. P180,000
d. P125,000
22. BROOKLYNNE ENTERPRISES. has been forced into bankruptcy and liquidated. Unsecured claims will be paid
at the rate of P0.70 on the peso. KITKAT ENTERPRISES holds a non-interest bearing note receivable from
BROOKLYNNE in the amount of P60,000 collateralized by machinery with a liquidation value of P10,000.
The total amount to be realized by KITKAT on this note receivable is:
a. P45,000
c. P25,000
b. P30,000
d. P10,000
23. The statement of affairs of JEREMIAH CORPORATION. shows the following:
Estimated gains on realization of
assets
P 1,280,000
Estimated losses on realization of
assets
2,244,000
Additional assets
1,000,000
Additional liabilities
300,000
Capital stock
2,000,000
Deficit
900,000
The pro-rata payment on the peso, to stockholders, is:
a. P0.78
c. P0.76
b. P0.43
d. P0.75
24. The Statement of Affairs for CANDY CORPORATION shows that approximately P0.78 on the peso probably
will be paid to unsecured creditors without priority. The corporation owes TOY COMPANY P23,000 on a
promissory note, plus accrued interest of P940. Inventories with a current fair value of P19,200 collateralize
the note payable. Compute the amount that the TOY COMPANY would receive from CANDY CORPORATION
assuming that the actual payments to unsecured creditors without priority consist of 78% of total claims.
Round all amounts to the nearest peso.
a. P19,200
b. P22,897
c. P33,987
d. P52,200
Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their fair market
value, contributed by each partner:
Particulars
Anne
Iris
Alfred
Cash
P200,000
P240,000
P600,000
Automobile
170,000
Delivery Trucks
560,000
Computer and printer
102,000
Office furniture
70,000
50,000
Land and Building
3,000,000
Totals
P3,370,000
P972,000
P650,000
Although Alfred has contributed the most cash to the partnership, he did not have the full amount of P600,000
available and was forced to borrow P400,000. The land and building contributed by Anne has a mortgage of
P1,800,000 and the partnership is to assume responsibility of the loan.
25. If the profit and loss sharing agreement is 40 percent, 40 percent, and 20 percent respectively, for Anne,
Iris and Alfred, what is the total capital investment of all the partners at the opening of the business on
April 30?
a. P4,992,000
b. P3,192,000
c. P2,792,000
d. P3,328,000
In 2020, Jessie and Anne agreed to contribute equal amounts into a new partnership for a 50% interest in
profit (loss) and in capital to each of them. Their respective contributions will come from old proprietorships
they owned and will both be dissolved. Jessie contributed the following items and amounts:
Cash
P585,000
Machineries (at book value per her proprietorship records) P400,000
Anne contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable
P75,000
Inventory
210,000
Furniture and fixtures
402,000
Intangibles
172,500
All non cash contributions are not property valued. The two partners have agreed that (a) P6,000 of the
accounts receivable are uncollectible; (b) the inventories are overstated by P15,000; (c) the furniture and
fixtures are understated by P9,000; and the intangibles includes a patent with a carrying value of P10,500,
which must now be derecognized due to the result of unsuccessful litigation promulgated by the court just
before the partnership formation.
26. What is the fair value of the machineries invested by Jessie into the partnership?
a. P336,000
b. P252,000
c. P390,000
d. P350,000
27. Partners A and B have a profit and loss agreement with the following provisions: salaries of P20,000 and
P25,000 for A and B respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on
average capital balances of P40,000 and P50,000 for A and B, respectively. Any remainder is to be split
equally. If the partnership had net income of P88,000, how much should be allocated to Partner A
a. P36,000
b. P44,500
c. P50,000
d. P43,500
A partnership begins its first year with the following capital balances:
A, capital
P60,000
B, capital
P80,000
C, capital
P100,000
The articles of partnership stipulate that profits and losses be assigned in the following manner
•
Each partner is allocated interest equal to 10 percent of the beginning capital balance
•
B is allocated compensation of P20,000 per year
•
Amy remaining profits and losses are allocated on a 3:3:4 basis, respectively
•
Each partner is allowed to withdraw up to P5,000 cash per year
28. Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed.
What is the balance in C’s capital account at the end of that year?
a. P105,800
b. P106,200
c. P106,900
d. P107,400
29. Bekang, an active partner in the BA partnership receives an actual bonus of 25% of the partnership net
income after deducting the bonus. For the year ended July 31, 2018, the partnership net income before
the bonus amounted to P300,000. Bekang’s bonus for the year ended July 31, 2018 should be:
a. P56,250
b. P60,000
c. P62,500
d. P75,000
30. What is the valuation if a partner contributes a noncash property to the partnership?
a. Book value of the property
c. Actual amount of the property
b. Acquisition cost of the property
d. Fair value of the property
31. An advance cash distribution plan is prepared
a.
Each time cash is distributed to partners in an installment liquidation
b.
Each time a partnership asset is sold in an installment liquidation
c.
d.
32. In the
a.
b.
c.
d.
To determine the order and amount of cash each partner will receive as it becomes
available for distribution
None of these
cash distribution plan, which partner gets the first cash distribution?
The partner with the largest loan balance
The partner with the largest loss absorption potential
The partner with the largest capital balance
The partner with the largest profit or loss ratio
33. In the reporting of a corporate liquidation, assets are shown at
a. Present value calculate using an appropriate discount rate
b. Net realizable value
c. Historical rate
d. Book value
34. In a statement of affairs, assets are classified
a. according to whether they are pledged with particular creditors.
b. as current or noncurrent.
c. as monetary or nonmonetary.
d. as operating or nonoperating.
35. What are free assets?
a. assets for which net realizable value is greater than historical cost.
b. assets for which no market exists.
c. assets for which replacement cost is greater than historical cost.
d. assets available to be distributed for liabilities with priority and other unsecured
obligations.
Summary balance sheet for the ABD Partnership follows: Abner, Blanche, and Donna share profits in the ratio
of 5:3:2, respectively.
Cash
P 100,000
Accounts receivable
125,000
Inventory
200,000
Land
800,000
Buildings, net
1,500,000
Total
P2,725,000
Accounts payable
P 250,000
Long-term debt
450,000
Abner, capital
810,000
Blanche, capital
729,000
Donna, capital
486,000
Total
P2,725,000
The partners agree to admit Janice for a one-fifth interest. The fair value of the land is appraised at P900,000
and the market value of the inventory is P250,000. The assets are to be revalued prior to the admission of
Janice.
36. By how much will the capital accounts of Abner, Blanche, and Donna increase due to the revaluation of the
assets?
a. The capital accounts will increase by P50,000 each.
b. P60,000, P54,000, and P36,000 respectively.
c. P75,000, P45,000, and P30,000 respectively.
d. P60,000, P50,000, and P40,000 respectively.
37. How much cash will Janice have to invest into the partnership to acquire her one-fifth interest?
a. P534,750
c. P547,350
b. P553,740
d. P543,750
38. When the bankruptcy court grants the order for relief:
a. Creditors may not seek payment of their claims directly from the debtor
corporation.
b. The reorganization plan has been accepted by at least two-thirds in amount and over half in
number of claims.
c. The bankruptcy court confirms that the reorganization plan is fair and equitable.
d. The court discharges the debtor except for claims provided for in the reorganization plan.
39. When a secured claim is not fully settled by the selling of the underlying collateral
a. The unsettled portion of the claim cannot be collected by the creditor
b. The unsettled portion remains as a secured claim.
c. The unsettled portion remains as an unsecured priority claim.
d. The unsettled portion is classified as an unsecured priority claim.
Walang Forever Company is in bankruptcy and is being liquidated. The trustee has converted all assets into
P300,000 and has prepared the following list of approved claims:
Accounts payable, unsecured
P 75,000
Trustee’s fees and other costs of liquidation
40,000
Mortgage payable, secured by property that as sold for P200,000
150,000
Note payable to PRTC Bank, secured by all the accounts receivable
Of which P75,000 were collected and P5,000 were written off
100,000
Prepaid revenue (P2,500 each of two customers that ordered
Products that were never delivered
Property taxes payable
40. How much is the total amount of unsecured priority claims
a. P55,000
c. P50,000
b. P40,000
d. P45,000
5,000
10,000
41. How much is the total amount of deficiency to unsecured non-priority claims
a. P 20,000
c. P100,000
b. P 0
d. P80,000
42. How much will the bank be paid for the note payable?
a. P 80,000
b. P100,000
c. P75,000
d.P76,250
A balance sheet for the QRS Partnership, which shares profits and losses in the ratio of 5:3:2 shows the following
balances just before liquidation.
Cash
P 30,000
Other assets
148,750
Liabilities
50,000
Q, Capital
55,000
R, Capital
38,750
S, Capital
35,000
On the first month of liquidation, certain assets are sold for P80,000. Liquidation expenses of P2,500 are paid,
and additional expenses are anticipated. Liabilities are paid amounting to P13,500, and sufficient cash is retained
to insure the payment to creditors before making payment to partners, On the payments to partners, Q receives
P15,625.
43. Calculate the amount of cash withheld for anticipated liquidation expenses.
c.
a. P0
b. P7,500
c. P3,000
P4,500
The partners share profits and losses as follows: A, 20%; B, 30%; and C, 50%.
B is retiring from the partnership and the partners have agreed that the non-cash-assets should be adjusted to
fair value of P600,000 at December 31, 2007. They further agreed that B will receive P344,000 cash for his total
partnership interest
44. After B’s retirement, the capital balances of A and C, respectively, will be:
a. P116,000 and P240,000
c. P100,000 and P200,000
b. P101,714 and P254,286
d. P 73,143 and P182,857
ABC Corporation has become insolvent and a statement of affairs is being prepared. The following figures on a
statement of affairs are condensed as follows.
Assets
Pledged with fully secured creditors
Creditors
P 71,000
With priority
P 3,000
Pledged with partially secured
12,500
Fully secured
60,000
Free
11,000
Partially secured
20,000
Unsecured
18,000
45. The estimated deficiency to unsecured creditors is
a. P 5,000
b. P 12,500
c. P 15,500
d. P
6,500
The following is the balance sheet for ABC Partnership at December 31, 2009.
Cash
P
2,000
Liabilities
P 5,000
Non-cash assets
28,000
A, Loan
2,500
A, capital
12,500
B, capital
7,000
C, capital
3,000
Total
P30,000
Total
P30,000
Profits and losses are divided in the ratio of 3:2:1 for A, B, and C, respectively. The partnership was liquidated
on January 2, 2009 and the following realization of assets occurred for the three-month period indicated.
Date
Cash Proceeds
Book Values
January, 2009
P6,000
P9,000
February, 2009
3,500
7,700
March, 2009
12,500
11,300
Cash is distributed as assets are realized.
46. Calculate the total cash received by B from the above data:
a. P2,200
c. P5,000
b. P
0
d. P1,500
Partners R, S and T share profits and losses in the ratio of 5:3:2. At the end of a very unprofitable year, they
decided to liquidate the firm. The partner’s capital account balances at this time are as follows: R, P121,000;
S, P136,950; T, P82,500. The liabilities accumulate to P165,000, including a loan of P55,000 from R. The
cash balance is P33,000. All the partners are personally solvent. The partners plan to sell the assets in
installment.
47. If S received P19,800 from the first distribution of cash, how much did T receive at that time?
a. P11,000
c.
P 6,600
b. P 4,400
d. P12,100
Drake Company filed a voluntary bankruptcy petition on July 15, 2099 and the statement of affairs reflects the
following amounts:
Book
Estimated
Carrying Amount Current Value
Assets
Assets pledged with fully secured creditors
P 160,000
P 190,000
Assets pledged with partially secured creditors
90,000
60,000
Free assets
200,000
140,000
Liabilities
Liabilities with priority
20,000
Fully secured creditors
130,000
Partially secured creditors
120,000
Unsecured non-priority creditors
240,000
Assume that the assets are converted into cash at the estimated current values and the business is liquidated.
48. What total amount of cash should the partially secured creditors receive?
a. P 60,000 b. P 84,000
c. P 96,000
d. P100,000
The following information is available concerning INSOLVENT, INC. on the date the company entered bankruptcy
proceedings:
Account
Cash
Accounts receivable
Inventory
Prepaid expenses
Buildings, net
Equipment, net
Goodwill
Wages payable
Taxes payable
Accounts payable
Notes payable
Common stock
Retained earnings, Deficit
Balance per Books
P3,661
66,893
35,840
550
75,520
7,168
7,232
(3,200)
(2,317)
(101,120)
(19,392)
(92,160)
21,325
Inventory with a book value of P25,600 is security for notes of P12,800. The other notes are secured by the
equipment.
Expected realizable values of the assets are:
Accounts receivable
Inventory
Buildings
Equipment
P56,448
23,680
28,160
2,560
49. What is the estimated deficiency to unsecured creditors?
a. P 11,520
c. P 92,800
b. P 83,840
d. P101,120
Because of inability to pay its debts, the WHAHAPEND MANUFACTURING COMPANY has been forced into
bankruptcy as of April 30, 2019. The balance sheet on that date shows:
ASSETS
Cash
P 4,320
Accounts Receivable
62,960
Notes Receivable
29,600
Inventories
140,560
Prepaid expenses
1,520
Land and building
98,000
Equipment
78,080
P 415,040
LIABILITIES
Accounts payable
Notes payable
Accrued wages
Accrued taxes
Mortgage bond payable
Common stock – P20 par
Retained earnings
P
84,000
106,000
2,960
7,440
144,000
120,000
(49,360)
P415,040
Additional information:
a. Accounts receivable of P27,120 and notes receivable of P20,000 are expected to be collectible. The good
notes are pledged to P24,000 of the notes payable.
b. Inventories are expected to bring in P72,160 when sold under bankruptcy condition.
c. Land and buildings have an appraised value of 152,000. they serve as security on the bonds.
d. The current value of the equipment, net of disposal cost is P14,400.
50. What is the estimated payment to all creditors?
a. P 164,000
c. P 190,000
b. P 344,400
d. P 290,000
51. Calculate the estimated total amount recoverable on the notes payable.
a. P 72,080
c. P 22,720
b. P106,000
d. P 78,480
KAMILANG INC. a closely-held corporation was undergoing liquidation. The total cash value of KAMILANG’s
bankruptcy estate after the sale of all assets and payment of administrative expenses is P240,000.
KAMILANG has the following creditors:
•
Fracon Bank is owed P120,000 on a mortgage loan secured by KAMILANG’s real property. The property was
valued at and sold, in bankruptcy, for P112,000.
•
The BUREAU of INTERNAL REVENUE has a P19,200 recorded judgment for unpaid corporate income tax.
•
JOG Office Supplies has an unsecured claim of P4,800 that was timely filed.
•
Nanstar Electric Company has an unsecured claim of P16,000 that was timely filed.
•
Liquid Corporation is owed P80,000 in a loan contract secured by KAMILANG’s notes receivable which
realized P96,000.
•
Decoy Publications has a claim of P25,600, which is secured by KAMILANG’s inventory that was valued and
sold, in bankruptcy, for P3,200. The claim was timely filed.
52. Calculate the total amount recoverable by partially-secured creditors:
a. P0
c. P130,400
b. P10,400
d. P 19,200
53. Calculate the total amount recoverable by unsecured creditors with priority:
a. P 80,000
c. P130,400
b. P 10,400
d. P 19,200
54. Calculate the total amount recoverable by fully secured creditors:
a. P 80,000
c. P130,400
b. P 5,200
d. P 19,200
55. Calculate the total amount recoverable by unsecured creditors without priority:
a. P0
c. P14,400
b. P10,400
d. P 19,200
A distressed corporation is to be liquidated and has the following liabilities:
Income taxes
P 16,000
Notes payable, secured by land
240,000
Accounts payable
166,000
Salary payable, evenly to two employees
12,000
Bonds payable
140,000
Administrative expenses for liquidation
40,000
The said company has the following assets:
Current assets
Land
Building and equipment
Book value
P 128,000
160,000
160,000
Fair value
P 67,600
180,000
220,000
56. How much will the holders of notes payable collect following the liquidation?
a. P216,000
c. P166,000
b. P180,000
d. P240,000
The GLOOMY COMPANY has the following data in connection with its bankruptcy petition with the Securities and
Exchange Commission at the end of 2019.
Liabilities without priority
Liabilities with priority
Secured liabilities
P
460,000
220,000
Debt 1, P420,000; value of pledged asset P 360,000
Debt 2, P340,000, value of pledged asset P 200,000
Debt 3, P240,000, value of pledged asset P 280,000
The company also has a number of other assets that are not pledged in any way. The creditors holding Debt 2
want to receive at least P284,000.
57. For how much do these free assets have to be sold so that Debt 2 would receive exactly P284,000?
a. P 616,000
c. P680,000
b. P 396,000
d. P576,000
HARDSHIPS, INC. is undergoing liquidation since August 1, 2019. Five months later, on December 31, 2019,
its condensed realization and liquidation statement shows the following:
Assets:
To be realized
P2,200,000
Acquired
1,200,000
Realized
1,920,000
Not realized
2,200,000
Liabilities:
Liquidated
3,000,000
Not liquidated
2,720,000
To be liquidated
3,600,000
Assumed
2,600,000
Supplementary:
Charges
5,000,000
Credits
4,680,000
58. The net gain (loss) for the five-month period is:
a. P(520,000)
c. P 680,000
b. P 400,000
d. P 880,000
Aljon and Blas have just formed a partnership. Aljon contributed cash of P3,881,000 and office equipment that
cost P1,170,000. The equipment had been used in the sole proprietorship and had been 80% depreciated. The
current fair value of the equipment is P756,000. An unpaid mortgage loan on the equipment of P252,000 will
be assumed by the partnership. Aljon is to have a 70% interest in the partnership net assets.
Blas is to contribute, only, merchandise with a fair value of P1,890,000. Both partners agreed on a profit and
loss ratio of 55% to Aljon and the balance to Blas.
59. To finalize the partnership agreement, Aljon should make additional investment (withdrawal) of cash in the
amount of.
a. P 25,000
c. P264,000
b. P(540,000)
d. P(15,000)
In 2019, JESSIE and ANNE agreed to form a new partnership under the following general agreements:
(1) Partners’ CONTRIBUTIONS will be on a 5:4 ratio; (2) PROFIT & LOSS, equally, and (3) CAPITAL CREDITS,
6:4 ratio, respectively to JESSIE and ANNE. Their respective contributions will come from old proprietorships
they owned.
JESSIE contributed the following items and amounts:
Cash
P748,800
Equipment (at book value per her
proprietorship records)
512,000
ANNE contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable
96,000
Inventory
268,800
Furniture and fixtures
514,560
Intangibles
220,800
All the non-cash contributions are not properly valued. The two partners have agreed that (a) P7,680 of the
accounts receivable are uncollectible; (b) the inventories are overstated by P19,200; (c) the furniture and
fixtures are understated by P11,520; and the intangibles include a patent with a carrying value of P13,440,
which must now be derecognized upon a court order. The rest of the intangible items are fairly valued.
60. How much is the agreed fair value assigned to Jessie’s equipment?
a. P1,060,800
c. P 590,400
b. P 403,200
d. P 1,116,480
65. What is the capital balance of Jessie after the formation of the partnership?
a. P1,036,541
c. P1,374,019
b. P1,339,200
d. P1,446,336
MYRNA and NORMA are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The
partnership balance sheet at August 30, 2019 follows:
Cash
Other assets
NORMA,
Loan
P
27,000
266,000
20,000
Accounts payable
MYRNA, Loan
MYRNA, capital
P 30,000
13,000
180,000
Total
P 313,000
NORMA, capital
Total
90,000
P313,000
At this date, OLGA was admitted as a partner for a consideration of P97,500 cash for a 40% interest in capital
and in profits.
61. Assume OLGA is admitted by purchase of 40% each of the original partners’ interest, determine how the
P97,500 will be apportioned to MYRNA and NORMA
a. MYRNA, P65,700 and NORMA, P31,800
b. MYRNA, P64,800 and NORMA, P32,700
c. MYRNA, P65,500 and NORMA, P32,000
d. MYRNA, P65,900 and NORMA, P31,600
62. Assume OLGA is admitted by investing the P97,500 into the partnership, determine the effects of any
bonus over the capital balances of the original partners:
a. MYRNA, P(19,800) and NORMA, P(29,700)
b. MYRNA, P 18,000 and NORMA, p 29,700
c. MYRNA, P(29,700) and NORMA, P(19,800)
d. MYRNA, P(18,675) and NORMA P(12,450)
The equity accounts of the partnership of KING and QUEEN at March 31, 2019 are as follows:
KING, capital
P512,000
QUEEN, capital
256,000
KING, loan (credit)
48,000
QUEEN, drawing (debit)
24,000
The partners share profits and losses in the ratio of 3:2, respectively. The partnership is in desperate need of
cash, and the partners agree to admit JACK as a partner with a 1/3 interest in the capital and profits and losses
upon his investment of P192,000.
63. Immediately after JACK’s admission, what should be the capital balances of KING, QUEEN, and JACK,
respectively:
a. P598,000; P222,000; P410,000
b. P480,000; P480,000; P480,000
c. P544,000; P256,000; P400,000
d. P435,200; P204,800; P320,000
The following are the capital balances of ABC Partnerships at August 1, 2019:
Albert
(40% P&L)
P220,000
Bernard (40% P&L)
160,000
Conrad (20% P&L)
110,000
Dennis invests P270,000 in cash for a 30% ownership interest. The payment goes to the original partners.
Revaluation/adjustment in asset is to be recognized upon Dennis’ admission.
64. How much adjustment in asset should be recorded and what is Dennis’ beginning capital balance.
1. P410,000 and P270,000
2. P140,000 and P270,000
3. P140,000 and P189,000
4. P410,000 and P189,000
The following are the condensed balance sheets of G&N Partnership at August 30, 2019, at which date Ellery is
to be admitted with a 30% interest in capital for an investment of P55,000.
Book Value
Fair Value
Cash
P 20,000
P 20,000
Other assets
503,000
417,000
Total assets
P523,000
437,000
Current liabilities
P 54,000
P 54,000
Non current liabilities
269,000
275,000
Gemmo, capital
120,000
Norma, capital
80,000
Total equities
P523,000
Gemmo and Norma share profits at 60% and 40%, respectively.
65. What will be the respective capital balances of Gemmo, Norma, and Ellery after the new partner’s admission.
a. P68,460, P45,640, and P48,900
b. P48,900, P45,640, and P68,460
c. P45,640, P68,460, and P48,900
d. P64,860, P49,240, and P48,900
The following balances as at October 31, 2019 for
Cash
P 80,000 Liabilities
P
XELYN,
24,000 WILMA,
Loan
loan
Non-cash
640,000 WILMA,
assets
capital
XELYN,
capital
YSKA,
capital
the Partnership of WILMA, XELYN , and YSKA were as follows:
24,000
36,000
168,000
156,000
360,000
Totals
P744,000
Totals
P744,000
WILMA has decided to retire from the partnership on October 31. Partners agreed to adjust the non-cash assets
to their fair market value of P784,000. The estimated profit to October 31 is P160,000. WILMA will be paid
P276,800 for his partnership interest inclusive of her loan which is to be paid in full. Their profit and loss ratio
is 3:4:3 to WILMA, XELYN, and YSKA, respectively.
66. What will be the balance of XELYN’s capital account after the retirement of WILMA.
c. P 258,888
c. P 288,114
d. P 231,086
d. P 298,848
On June 30, 2015, the balance sheet for the partnership of COCO, PIOLO, and DANIEL and their profit and loss
ratios were as follows: Assets
P 1,200,000
Coco, loan
P
60,000
Coco, capital (30%)
280,000
Piolo, capital (30%)
260,000
Daniel, capital (40%)
600,000
Total equities
P 1,200,000
COCO decided to retire from the partnership and by mutual agreement, the assets were adjusted to their current
fair value of P1,440,000. The partnership paid P408,000 cash for COCO’s equity in the partnership, exclusive
of the loan which was repaid in full.
67. The capital balances of PIOLO and DANIEL, respectively, after COCO’s retirement from the partnership was:
a. P360,000; P855,000
c. P300,000; P675,000
b. P288,000; P684,000
d. P308,000; P664,000
The MORICATA Partnership has the following capital balances and P&L ratio at August 4, 2019.
Mora, capital (30%)
P129,750
Rico, capital
(30%)
108,750
Cara, capital
(20%)
80,000
Tano, capital (20%)
71,500
P390,000
Cara has decided to withdraw from the partnership and by agreement of all the partners, will be paid P90,000
from partnership cash.
68. Immediately after Cara’s retirement, the capital ratio of Mora, Rico, and Tano, respectively will be
a. 33-1/3%, 33-1/3%, and 33-1/3%
b. 40
%, 34
%, and 26
%
c. 37-1/2%, 37-1/2%, and 25
%
d. 42
%, 35
%, and 23
%.
A, B, and C formed a partnership on January 2, 1018 with the following contributions:
A
P100,000
B
200,000
C
300,000
The partners agreed on a capital ratio of 1:2:3 upon formation and P&L ratio of 3:3:4, respectively. The
partnership reported a net loss of P20,000 for 2018. Also, at the end of 2018, C has decided to withdraw from
the firm and was paid P250,000 from partnership cash.
On April 1, 2019, D was admitted as a partner with an investment of P160,000. He is given a share in capital of
40%and in profits, 30% the old partners have agreed to retain their old ratio over the remaining profit and loss
share of 70%. The partnership reported a net profit of P21,000 for 2014, one-third of which is deemed earned
as of the end of the year’s first quarter’s operation.
69. Determine the capital balances of A and B, respectively, as of December 31, 2018.
a. P 94,000 & P194,000
c. P 194,000 & P115,000
b. P 115,000 & P215,000 d. P 165,000 & P215,000
70. Determine the capital balances of A, B, and C, respectively on December 31, 2019.
a. P98,540, P75,720 & P113,840
b. P93,640, P70,820 & P109,640
c. P100,990, P78,170 & P120,140
d. P104,000, P204,000 & P203,000