ACCOUNTING FOR SPECIAL TRANSACTIONS
PRELIM EXAMINATION
1.
The partners share in partnership profits or losses in accordance with their partnership
agreement. If there is no stipulation on how the partners should share in the profits or losses of
the partnership,
a. they should share equally.
b. they should let one of the partners decide unilaterally on how the profits should be divided
among the partners.
c. their respective shares would be in proportion to their contributions.
d. they should not share at all but donate their profits to the world.
2.
A and B agreed to form a partnership. A shall contribute ₱80,000 cash while B shall
contribute ₱200,000 cash. However due to the expertise that A will be bringing to the
partnership, the partners agreed that they should initially have equal interests in the partnership
capital. After recording the partners’ contributions, A’s capital account should have a balance of
a. 40,000.
b. 80,000.
c. 140,000.
d. 200,000.
Use the following information for the next two questions:
A, B and C formed a partnership. Their contributions are as follows:
A
B
C
Cash
20,000 200,000
80,000
Equipmen
t
160,000
Totals
200,000
80,000
180,000
Additional information:

Although C has contributed the most cash to the partnership, he did not have the full
amount of ₱200,000 available and was forced to borrow ₱80,000.

The equipment contributed by B has an unpaid mortgage of ₱40,000, the repayment of which
is assumed by the partnership.

The partners agreed to equalize their interest. Cash settlements among the partners are to be
made outside the partnership.
3.
a.
b.
c.
d.
Which of the following statements is correct?
A pays C ₱60,000.
A receives ₱60,000 from C.
A and B pays C a total of ₱60,000.
A pays B ₱60,000.
4.
a.
b.
c.
d.
The simple journal entries to record the partners’ contributions include
a debit to mortgage payable for ₱40,000.
a credit to loan payable for ₱80,000.
a ₱60,000 credit to cash.
a ₱60,000 debit to C’s capital account.
5. On January 1, 20x1, Mr. A and Ms. B agreed to form a partnership contributing their
respective assets and equities subject to adjustments. On that date, the following were
provided:
Mr. A
Ms. B
Cash
28,000
62,000
Accounts receivable
200,000
600,000
Inventories
120,000
200,000
Land
600,000
Building
500,000
Furniture & fixtures
50,000
35,000
Intangible assets
Accounts payable
Other liabilities
Capital
2,000
180,000
200,000
620,000
3,000
250,000
350,000
800,000
The following adjustments were agreed upon:
a. Accounts receivable of ₱20,000 and ₱40,000 are uncollectible in A’s and B’s respective books.
b. Inventories of ₱6,000 and ₱7,000 are worthless in A’s and B’s respective books.
c. Intangible assets are to be written off in both books.
How much is the initial total capital of the partnership?
a. 592,000
b. 750,000
c. 1,342,000
d. 2,322,000
6.


A and B agreed to form a partnership. The partnership agreement stipulates the following:
Initial capital of ₱280,000.
A 60:40 interest in the equity of the partnership.
A contributed ₱200,000 cash while B contributed ₱80,000 cash. Which partner should provide
additional investment (or withdraw part of his investment) in order to bring the partners’ capital
credits equal to their respective interests in the equity of the partnership?
a. B shall make an additional investment of ₱32,000
b. B shall withdraw ₱32,000 from his initial contribution.
c. A shall make an additional investment of ₱32,000
d. A shall withdraw ₱23,000 from his initial contribution.
7. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even
though Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in identifiable assets. The
partners agreed that the difference in the amount of contribution and the amount of credit to
the partner’s capital shall be treated as compensation for the expertise that the partner will
be bringing to the partnership. How much is the correct valuation of A’s capital immediately
after the partnership formation?
a. 84,000
b. 92,000
c. 100,000
d. 108,000
8.
A and B formed a partnership. The following are their contributions:
A
B
Cash
500,000
-
Accounts receivable
Building
100,000
700,000
Total
600,000
700,000
A, capital
B, capital
600,000
Total
600,000
700,000
700,000
Additional information:

The accounts receivable includes a ₱20,000 account that is deemed uncollectible.

The building is under-depreciated by ₱50,000.

The building has an unpaid mortgage ₱100,000, but this is not assumed by the partnership.
Partner B promised to pay for the mortgage himself.
How much is the correct valuation of A’s capital immediately after the partnership formation?
a. 460,000
b. 580,000
c. 650,000
d. 720,000
9. According to the Civil Code of the Philippines, if the partnership agreement does not specify
how income is to be allocated to the partners, profits and losses should be allocated
a. equally.
b. in proportion to the weighted average balance of capital invested during the period.
c.
equitably so that partners are compensated for the time and effort expended on behalf of the
partnership.
d. in accordance with their capital contributions, but an industrial partner does not share in the
loss.
10.


A and B formed a partnership. The partnership agreement stipulates the following:
Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
The partners share in profits and losses equally.
The partnership earned profit of ₱100,000. How much is the share of B?
a. 70,000
b. 48,000
c. 30,000
d. 52,000
11.



A and B’s partnership agreement stipulates the following:
Annual salary of ₱20,000 to A.
10% bonus to A, based on profit after salaries and bonus.
Balance is shared on a 60:40 ratio.
If B’s share in the partnership profit for the year is ₱32,000, how much is the bonus to A?
a. 6,667
b. 7,333
c. 8,000
d. 12,000
12.



A and B formed a partnership. The partnership agreement stipulates the following:
First, A shall receive 10% of profit up to ₱200,000 and 20% over ₱200,000.
Second, B shall receive 5% of the remaining profit over ₱300,000.
Any remainder shall be shared equally.
During the year, the partnership earned profit of ₱560,000. How much is the share of B?
a. 321,800
b. 283,200
c. 231,800
d. 238,200
13.



A and B formed a partnership. The partnership agreement stipulates the following:
Annual salary allowances of ₱10,000 for A and ₱40,000 for B.
Bonus to A of 10% of the profit after partner’s salaries but before bonus.
The partners share profits and losses on a 60:40 ratio.
During the period the partnership incurred a loss of ₱20,000 before deduction for salaries. By what
amount did B’s capital account change?
a. Increased by ₱12,000
b. Increased by ₱32,000
c. Decreased by ₱12,000
d. Decreased by ₱32,000
14.



A, B and C formed a partnership. The partnership agreement stipulates the following:
Annual salary allowances of ₱100,000 for A and ₱20,000 for B.
10% interest on the beginning capital balance of C.
The partners share in profits and losses on a 40:40:20 ratio.
The partnership earned profit of ₱500,000. C’s capital account had a beginning balance of
₱300,000. The difference between the amounts received by A and B is
a. 160,000.
b. 240,000.
c. 80,000.
d. 60,000.
15. A and B formed a partnership. The partnership agreement stipulates the following:
 Annual salary allowances of ₱80,000 for A and ₱40,000 for B.
 The partners share in profits and losses equally.
The partnership earned profit of ₱100,000 after salaries. How much is the share of B?
a. 70,000
b. 30,000
c. 130,000
d. 90,000
16. A and B formed a partnership. The partnership agreement stipulates the following:
 Monthly salary allowances of ₱10,000 for A and ₱4,000 for B. The salaries are recognized as
expenses.
 The partners share equally in profits and losses.
The partnership’s statement of profit or loss for the year reported profit of ₱360,000. How much
is the share of A?
a. 300,000
b. 228,000
c. 148,000
d. 128,000
17. A and B share equally in partnership profits and losses. During the year, A’s capital account
has a net increase of ₱50,000. Partner A made contributions of ₱10,000 and capital
withdrawals of ₱60,000 during the year. How much was the partnership profit for the year?
a. 180,000
b. 210,000
c. 200,000
d. 480,000
18.



A and B formed a partnership. The partnership agreement stipulates the following:
Annual salary allowance of ₱100,000 for A, the managing partner.
10% bonus to A after salaries but before deduction for the bonus.
The partners share in profits and losses equally.
The share of A in the partnership profit during the period was ₱595,000, including a bonus of
₱90,000. How much was the share of B?
a. 386,000
b. 398,000
c. 405,000
d. 504,000
19. John and Myung are partners in Six-string Co. Their partnership agreement states that John
is entitled to an annual salary of ₱100,000 and a bonus of 10% of profit after salary but before
bonus. The remainder is shared in the ratio of 7:2. Myungs’s share in partnership profit for
the year was ₱296,000. How much was John’s bonus?
a. 169,000
b. 152,000
c. 148,000
d. 145,348
20. A and B’s partnership agreement provides the following:
Annual salaries of ₱96,000 for A and ₱60,000 for B.
10% bonus to A, based on profit after salaries and bonus.
P/L ratio of 60:40.



The partnership earned profit of ₱200,000 before salaries and bonus. Which of the following
statements is correct?
a. A’s share is ₱124,000 greater than B’s share.
b. B’s share is ₱76,000 less than A’s share.
c. A’s share is ₱48,000 greater than B’s share.
d. A and B have equal shares.




21. AB Partnership was formed on February 28, 20x1. Partner A invested ₱150,000 cash while
Partner B invested land that he originally bought for ₱70,000 but has a current fair value of
₱180,000. B invested additional cash of ₱60,000 on November 1, 20x1. The partnership
contract states the following:
A
B
Monthly salary (recognized as expenses and withdrawn
10,000
20,000
periodically)
Interest on beginning capital
12%
12% p.a.
p.a.
Bonus on profit before salaries and interest but after bonus
20%
Remaining profit or loss
50%
50%
AB Partnership earned profit of ₱120,000 in 20x1. What is the capital balance of B on December 31,
20x1?
a. 243,500
b. 226,500
c. 254,600
d. 266,500
22. Partners A and B share in profits and losses on a 70:30 ratio after salary allowances of
₱80,000 for A and ₱40,000 for B. The business earned profit of ₱320,000 before deduction for
the salaries. When closing the income summary account,
a. A’s capital account would be credited for ₱120,000.
b. A’s capital account would be debited for ₱220,000.
c. B’s capital account would be credited for ₱100,000.
d. B’s capital account would be credited for ₱240,000.




23. A and B formed a partnership in 20x1. The partnership contract stipulates the following:
₱30,000 annual salary to each partner due at each year-end.
Bonus of 10% of profit after salaries and bonus for A
8% interest on the partners’ weighted average capital balances.
Any remaining profit or loss is divided equally.
The partnership’s ledger shows the following:
A, Capital
Date
March 1, 20x1
June 1, 20x1
August 1, 20x1
December 1,
20x1
Ref
.
001
098
146
211
Debit
Credit
30,000.00
Balance
30,000.00
20,000.00
20,000.00
40,000.00
10,000.0
0
5,000.00
35,000.00
B, Capital
Date
Ref
.
March 1, 20x1
June 1, 20x1
August 1, 20x1
001
098
146
Debit
10,000.00
2,000.00
Credit
20,000.0
0
Balance
20,000.00
10,000.00
8,000.00
The partnership’s profit, before salaries and bonus, in 20x1 is ₱60,000. The partners agreed to receive
full annual salaries in 20x1. How much is the share of A?
a. 30,684
b. 29,316
c. 32,772
d. 28,257
24. If a new partner acquires partnership interest directly from the partners rather than from the
partnership,
a. no entry is required.
b. the existing partnership is liquidated.
c. the partnership assets should not be revalued because this type of transaction does not result
to partnership dissolution.
d. the existing partners’ capital accounts are reduced and the new partner’s capital account is
increased.
Use the following information for the next four independent cases:
The capital balances and profit and loss ratios of the partners in ABC Co. are as follows:
Capital
P/L
A
40,000
40%
B
60,000
30%
C
80,000
30%
Tota
l
180,000
25. D purchases one-half of C’s interest for ₱50,000. The ‘book value method’ is to be used.
Which of the following statements is most likely to be incorrect?
a. D’s capital is credited for one-half of C’s capital balance.
b. C’s capital balance is reduced for the equity transfer to D.
c. The cash payment of D to C is not reflected in the partnership’s accounting records.
d. The partnership equity is increased by D’s payment.
26. D purchases 25% of A’s, B’s and C’s capital interests for ₱60,000. The partners used the ‘book
value method’ to record D’s admission. Which of the following statements is most likely to
be correct?
a. The partnership’s total equity increases after recording D’s admission.
b. The admission of D is accounted for as a transaction between D and the partnership.
c. Goodwill of ₱15,000 must be recorded, according to the PFRSs.
d. An equity transfer of ₱45,000 will be made from the selling partners to D.
27. The carrying amount of the net assets approximates fair value. D invests ₱80,000 cash for a
25% interest in the partnership’s net assets and profits. Under the bonus method, how much
is the capital balance of A after D’s admission?
a. 46,000
b. 64,500
c. 84,500
d. 65,000
28. The carrying amount of the net assets approximates fair value. D invests ₱52,000 cash for a
25% interest in the partnership’s net assets and profits. Under the bonus method, how much
is the capital balance of B after D’s admission?
a. 37,600
b. 48,700
c. 58,200
d. 78,200
Use the following information for the next two questions:
The statement of financial position of the partnership of A and B as of December 31, 20x1 is shown
below:
Cash
Accounts receivable
Inventory
Land
Building
Equipment
33,354
802,426
380,137
603,000
428,267
85,134
Other assets
Total assets
Accounts payable
Notes payable
A, capital
B, capital
Total liabilities and
equity


5,600
2,337,918
422,590
545,000
641,976
728,352
2,337,918
A and B share in profits and losses equally.
On January 1, 20x2, C informed A and B of his intention to invest in the partnership for a
20% interest. The partners agreed on the following adjustments prior to C’s admission:
o
Accounts receivable of ₱55,000 should be written-off.
o
Inventories of ₱12,200 are obsolete and have no resale value.
o
The ‘Other assets’ should be written off.
29.
a.
b.
c.
d.
If no bonus is allowed, how much is C’s required investment?
234,167
324,382
236,347
341,367
30. After C’s admission, the partners agreed to adjust their capital balances to reflect their’
respective interests in the partnership’s net assets. Cash settlement is to be made between the
partners. How much is the cash settlement?
a. ₱43,188 payment of A to B
b. ₱43,188 payment of B to A
c. ₱34,288 payment of C to A and B
d. There would be no cash settlement between the partners.
31. The capital accounts of the partnership of Nakpil, Ortiz, and Perez on June 1, 2005 are
presented below with their respective profit and loss ratios:
Nakpil
₱ 139,200
1/2
Ortiz
208,800
1/3
Perez
96,000
1/6
₱ 444,000
On June 1, 2005, Quizon is admitted to the partnership when he purchased, for ₱132,000, a
proportionate interest from Nakpil and Ortiz in the net assets and profits of the partnership. As a
result of a transaction, Quizon acquired a one-fifth interest in the net assets and profits of the firm.
Assuming that implied goodwill is not to be recorded, what is the combined gain realized by Nakpil
and Ortiz upon the sale of a portion of their interest in the partnership to Quizon?
a. 0
b. 43,200
c. 62,400
d. 82,000
32. The following are the capital account balances and profit and loss ratios of the partners in AB
Partnership as of January 1, 20x2:
Profit or loss
Capital accounts
ratios
A,
Capital
600,000
40%
B, Capital
1,000,000
60%
1,600,000
On January 1, 20x2, C was admitted to the partnership when he acquired 20% interest in the net
assets and profits of the firm for a ₱400,000 investment. The bonus method was used to record C’s
admission into the partnership.
For the year 20x2, the partnership earned profit of ₱4,000,000. However, it was discovered that the
following items were overstated:
20x1
20x2
Accrued income
80,000
100,000
Prepaid asset
140,000
200,000
Accrued expense
Unearned
income
160,000
240,000
60,000
40,000
How much is the share of A in the 20x2 profit?
a. 1,273,600
b. 1,286,400
c. 1,592,000
d. 1,208,600
33. When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill's
interest exceeded Mill's capital balance. Under the bonus method, the excess
a. was recorded as goodwill.
b. was recorded as an expense.
c. reduced the capital balances of Yale and Lear.
d. had no effect on the capital balances of Yale and Lear.
34. On June 30, 2003, the balance sheet for the partnership of Coll, Maduro, and Prieto, together
with their respective profit and loss ratios, were as follows:
180,00
Assets, at cost
0
Coll, loan
Coll, capital (20%)
Maduro, capital (20%)
Prieto, capital (60%)
Total
9,000
42,000
39,000
90,000
180,00
0
Coll has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to
their fair value of ₱216,000 at June 30, 2003. It was agreed that the partnership would pay Coll
₱61,200 cash for Coll’s partnership interest, including Coll’s loan which is to be repaid in full. No
goodwill is to be recorded. After Coll’s retirement, what is the balance of Maduro’s capital account?
a. 36,450
b. 39,000
c. 45,450
d. 46,200
Use the following information for the next two independent cases:
The capital account balances of the partners in ABC Partnership on June 30, 20x1 before any
necessary adjustments are as follows:
Capital accounts
A, Capital (20%)
600,000
B, Capital (30%) 1,000,000
C, Capital (50%)
400,000
2,000,00
Total
0
The partnership reported profit of ₱3,600,000 for the six months ended June 30, 20x1.
35. C dies from a broken heart on July 1, 20x1. It was agreed that C’s estate shall receive cash of
₱2,000,000 and equipment with carrying amount of ₱400,000 and fair value of ₱1,200,000 as
settlement of C’s interest in the partnership. The assets will be transferred as soon as the
legal proceedings on C’s estate are finalized. The entry in the partnership’s books on July 1,
20x1 to reflect the separation of C includes
a. a debit to C’s capital for ₱400,000.
b. a debit to C’s capital for ₱2,200,000.
c. a credit to liability for ₱3,200,000.
d. Not recorded in partnership’s books
36. C withdraws on July 1, 20x1. It was agreed that C shall receive cash of ₱2,000,000 and fully
depreciated equipment with fair value of ₱1,200,000 in settlement of his interest in the
partnership. How much is the capital balance of A right after the withdrawal of C?
a. 1,240,000
b. 1,400,000
c. 1,580,000
d. 2,200,000
37. The statement of financial position of ABC Co. as of December 31, 20x1 shows the following
information:
Cash
448,000
Receivable from A
32,000
Equipment
1,560,000
2,040,00
Totals
0
Payable to C
40,000
A, Capital (20%)
600,000
B, Capital (30%)
1,000,000
C, Capital (50%)
400,000
2,040,00
Totals
0
On December 31, 20x1, C decided to retire from the partnership. The partnership’s net assets
approximate their fair values except for the equipment which has a fair value of ₱1,800,000. It was
agreed that the partnership would pay C ₱560,000 cash for his partnership interest, excluding C’s
loan which is to be repaid in full. What is the balance of B’s capital account after the retirement of
C?
a. 1,720,000
b. 1,072,000
c. 632,000
d. 1,048,000
38. Partner C decided to retire when the partners’ capital balances were: A, ₱600,000; B,
₱600,000; and C, ₱400,000. It was agreed that Partner C is to take the partnership’s fully
depreciated equipment with a fair value of ₱24,000 and a note for the balance of her interest.
The historical cost of the equipment is ₱36,000. The partners share in profits and losses
equally. How much is the total partnership capital after the retirement of C?
a. 1,216,000
b. 1,264,000
c. 1,261,000
d. 1,624,000
Use the following information for the next three questions:
On January 1, 20x1, the partners in ABC Co. decided to admit other investors and convert the
partnership into a corporation. Relevant information follows:
Carrying
Fair
amounts
values
Cash
80,000
80,000
Receivables
240,000
160,000
Inventory
320,000
280,000
Equipment
2,160,000
2,680,000
Payables
200,000
200,000
A, Capital
600,000
(20%)
N/A
B, Capital (30%)
800,000
N/A
C, Capital (50%)
1,200,000
N/A
The corporation has an authorized capitalization of ₱8,000,000 divided into 200,000 ordinary shares
with par value of ₱40 per share.
39. Assume that the adjusted capital balances of the partners are used in determining the
number of shares to be issued to each partner. What is the aggregate par value of the total
shares issued to the partners?
a. 3,000,000
b. 2,600,000
c. 2,800,000
d. 3,200,000
40. Assume that partners A, B and C agreed to be issued 14,000, 21,000 and 35,000 shares,
respectively. How much is the credit to the share premium account?
a. 50,000
b. 200,000
c. 400,000
d. 0
41. Assume that the corporation was authorized to issue ₱400 par preference shares and ₱40 par
ordinary shares. The partners agreed to receive 1,000 ordinary shares each, plus even
multiples of preference shares for their remaining interests. How many ordinary shares (OS)
and preference shares (PS) did A receive?
a. 1,600 OS and 1,000 PS
b. 2,200 OS and 1,000 PS
c. 1,000 OS and 2,200 PS
d. 1,000 OS and 1,600 PS
42. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The
following information was made available:
Cash
80,000
Accounts receivable
240,000
Inventory
480,000
Equipment
1,200,000
Total
2,000,000
Accounts payable
120,000
Payable to B
80,000
A, Capital (20%)
400,000
B, Capital (30%)
600,000
C, Capital (50%)
800,000
Total
2,000,000
The partnership will be liquidated over a prolonged period of time. Distributions to owners shall be
made as cash becomes available. Information on the conversion of non-cash assets is as follows:

75% of the accounts receivable was collected for only ₱120,000.

Half of the inventory was sold for ₱160,000.

Equipment with carrying amount of ₱800,000 was sold for ₱480,000.

₱8,000 liquidation expenses were paid. Estimated future liquidation expenses totaled ₱4,000.

₱36,000 cash was retained in the business for potential unrecorded liabilities and anticipated
expenses.
How much did B receive from the partial settlement of his interest in the partnership?
a. 310,400
b. 311,600
c. 317,600
d. 324,600
43. A and B decided to liquidate their partnership. The partnership’s records show the following
information:
Non-cash assets
Liabilities
A, capital (50%)
B, capital (50%)
Total liabilities and
equity
40,000
5,000
20,000
15,000
40,000
The assets were sold for ₱32,000. How much were the cash distributions to the partners?
A
B
a. 11,000
16,000
b. 14,000
13,000
c. 17,000
10,000
d. 16,000
11,000
44. On January 1, 20X2, partners Allen, Brown and Cox, who share profits and losses in the ratio
of 5:3:2, respectively, decided to liquidate their partnership. The partnership trial balance at
this date is as follows:
Debit
Credit
Cash
18,000
Accounts receivable
66,000
Inventory
52,000
Machinery and equipment,
189,00
net
0
Allen, loan
30,000
Accounts payable
53,000
Brown, loan
20,000
Allen, capital
118,000
Brown, capital
90,000
Cox, capital
74,000
355,00
355,000
Totals
0
The partners plan a program of piecemeal conversion of assets in order to minimize liquidation
losses. All available cash, less an amount retained to provide for future expenses, is to be distributed
to the partners at the end of each month. The following liquidation transactions occurred in January
20X2.

₱51,000 was collected on accounts receivable; the balance is uncollectible.

₱38,000 was received for the entire inventory.



₱2,000 liquidation expenses were paid.
₱50,000 was paid to outside creditors, after offset of a P3,000 credit memorandum received
on January 11, 20X2.
₱10,000 cash was retained in the business at the end of the month for potential unrecorded
liabilities and anticipated expenses.
All partners are insolvent.
How much did B receive on the January 31, 20X2 cash distribution to the partners?
a. 26,600
b. 24,600
c. 18,400
d. 0
45. The statement of financial position of the partnership of A, B and C shows the following
information:
Cash
22,400
Other assets
212,000
Total assets
234,400
Liabilities
38,400
A, capital (50%)
76,000
B, capital (25%)
64,000
C, capital (25%)
Total liabilities and
equity
56,000
234,400
The partners realized ₱56,000 from the first installment sale of non-cash assets with total carrying
amount of ₱120,000. How much did B receive from the partial liquidation?
a. 25,000
b. 24,000
c. 16,000
d. 0
46. On January 1, 20x1, partners A and B, who share profits and losses on a 3:1 ratio, decided to
liquidate their business. As of this date, the following information has been determined:
Other
Liabilitie
A,
B,
Cash
assets
s
Capital
Capital
80,00
0
1,920,000
200,000
1,000,000
800,000
In the first month of liquidation, ₱720,000 was received on the sale of certain assets, liquidation
expenses of ₱20,000 were paid, and additional liquidation expenses of ₱8,000 are anticipated before
liquidation is completed. Creditors were paid ₱112,000. Available cash was distributed to the
partners. How much did A receive from the partial settlement of his interest in the partnership?
a. 79,000
b. 493,000
c. 85,000
d. 510,400
47. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The
following information was made available:
Cash
30,000
Accounts receivable
380,000
Inventory
260,000
Furniture & fixtures, net
120,000
Total
790,000
Accounts payable
A, Capital (70%)
B, Capital (30%)
Total
165,000
350,000
275,000
790,000
C offered to buy for ₱760,000 the partnership assets including liabilities but excluding cash and after
certain assets are to be restated to their fair values as follows:
Accounts receivable, ₱350,000
Inventory, ₱250,000
Furniture, ₱135,000
How much will A and B receive as final settlement of their partnership interests?
a. 570,000
c. 790,000
b. 760,000
d. 625,000
Use the following information for the next two questions:
On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following
information was made available:
Cash
80,000
Accounts receivable
240,000
Inventory
480,000
Equipment
1,200,000
Total
Accounts payable
A, Capital (20%)
B, Capital (30%)
C, Capital (50%)
Total
2,000,000
600,000
200,000
400,000
800,000
2,000,000
The net proceeds from the sale of non-cash assets amounted to ₱160,000. The personal assets and
personal liabilities of the partners are as follows:
A
B
C
1,200,00
1,040,00
Personal assets
0
0
800,000
Personal
liabilities
(880,000) (880,000) (1,280,000)
48. How much additional contributions shall be made by the partners in order to settle all of the
partnership liabilities?
a. 280,000
b. 360,000
c. 480,000
d. 0
49. How much did A receive from the settlement of his interest in the partnership?
a. 68,800
b. 64,400
c. 82,600
d. 0
50. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The
partners’ capital balances as of this date are shown below:
A, Capital
800,000
(40%)
B, Capital (30%)
600,000
C, Capital (20%)
400,000
D, Capital
200,000
(10%)
Total
2,000,000
The partners agree to the following:

Equipment with a carrying amount of ₱400,000 is to be taken over by B at a price of ₱480,000.

Partnership’s liabilities are to be paid off and the balance of cash on hand, ₱728,000 is to be
divided in a manner that will avoid the need for any possible recovery of cash from a partner.
How much did D receive in the settlement of the partners’ capital accounts?
a. 102,000
b. 208,000
c. 104,000
d. 0
51. On January 1, 20x1, A and B, the partners of AB Co. decided to liquidate their business. As of
this date, the partners’ capital balances before closing the books were ₱400,000 and ₱600,000,
respectively. The partners share profits on a 2:3 basis.
Each partner acts as agent of the partnership. Prior to closing of the books, the partners’ transactions
made on behalf of the partnership are summarized below:
A
B
Cash receipts
400,000 480,000
Cash
disbursements
300,000 600,000
During the January, all of the assets of the partnership were sold and after settlement of liabilities,
₱480,000 cash is available for distribution to the owners. Both the partners are personally insolvent.
How much did A receive in the settlement of his capital account?
a. 396,000
b. 84,000
c. 420,000
d. 0
52. ABC Partnership decided to liquidate. Information before the start of liquidation is as
follows:
Cash
Noncash
assets
50,000
900,000
Liabilities
B, Loan
C, Loan
A, Capital (50%)
B, Capital (30%)
C, Capital (20%)
Total
950,000
Total Liab. &
Equity
375,000
80,000
25,000
312,500
107,500
50,000
950,000
The noncash assets were sold for ₱400,000. C is the only solvent partner. How much did A receive
on the cash distribution to the partners?
a. 46,875
b. 59,325
c. 62,500
d. 25,600
53. The partners of the M & N Partnership started liquidating their business on July 1, 2004, 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:
Cash
Receivable
Inventory
Equipment
Accumulated
depreciation
8,800
22,400
39,400
65,200
(30,800
)
Total Assets
105,000
Accounts payable
N, Loan
M, Capital
M, Drawing
32,400
14,000
31,000
(5,400)
N, Capital
N, Drawing
Total Liab. &
Equity
33,200
(200)
105,00
0
During the month of July, the partners collected ₱600 of the receivables with no loss. The partners
also sold during the month the entire inventory on which they realized a total of ₱32,400.
How much of the cash was paid to M’s capital on July 31, 2004?
a. 0
b. 320
c. 25,600
d. 5,400
54. The partners in ABC Co. decided to liquidate their business when their capital balances
were:
A, Capital
(40%)
960,000
B, Capital (40%)
1,560,000
C, Capital (20%)
1,152,000
The non-cash assets were sold on installment and partial distributions to the partners were made as
cash was made available. After the second sale of non-cash assets, all of the three partners received
the same amounts from the partial distribution. On the third sale of non-cash assets, the available
cash for distribution to the partners is ₱40,000. Using cash priority program, how much is the
amount received by partner B on the third distribution?
a. 16,000
b. 12,000
c. 8,000
d. 0
Use the following information for the next three questions:
Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:
Assets
Noncas
Cash
h
160,00
0
?
Liabilitie
s
90,000
A
(20%)
Equity
B
(30%)
200,000
370,000
C
(50%)
480,000
All the noncash assets were sold for ₱870,000. The partnership paid ₱12,000 liquidation expenses.
55. How much is the carrying amount of the noncash assets?
a. 740,000
c. 860,000
b. 980,000
d. 1,020,000
56. How much is the loss on the sale of noncash assets, including the effect of liquidation
expenses?
a. 98,000
c. 112,000
b. 120,000
d. 122,000
57. How much cash did A receive from the settlement of the partners’ interests?
a. 175,600
c. 183,400
b. 149,600
d. 128,400
Use the following information for the next two questions:
Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:
Cash
Noncash assets
Total
Accounts
payable
Payable to A
A, Capital (50%)
B, Capital (30%)
C, Capital (20%)
Total
50,000
1,200,000
1,250,000
100,000
50,000
540,000
360,000
200,000
1,250,00
0
58. If a cash priority program is prepared, which partner is paid first and how much is the total
payments to that partner before all partners will share on the available cash based on their
profit and loss ratios?
a. A, ₱20,000
c. B, ₱90,000
b. B, ₱60,000
d. B, ₱96,000
59. Three-fourths (3/4) of the noncash assets were sold for ₱920,000. The partnership paid ₱5,000
transaction costs on the sale. How much cash did A receive from the settlement of the
partners’ interests under the cash priority program?
a. 493,500
c. 386,500
b. 447,500
d. 306,500
60. A, B, C, and D 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, 20x1 are as follows:
A……………………………………………. ₱1,000
B………………………………………….
25,000
C……………………………………………. 25,000
D……………………………………………
9,000
₱ 60,000
The partners decide to liquidate, and they accordingly convert the non-cash assets into ₱23,200 cash.
After paying the liabilities amounting to ₱3,000, they have ₱22,000 to divide. Assume that a debit
balance of any partner’s capital is uncollectible. The share of B in the cash distribution to the
partners was: (round-off answer)
a. 3,200
c. 13,800
b. 4,500
d. 17,800
BONUS QUESTION:
61. Who created the first partnership business in the world?
a. Adam and Eve
d. Lapu-lapu and Magellan
b. Monkey and Turtle
e. Bonny and Clyde
c. Romeo and Juliet
f. None of those listed
GOOD LUCK
Answers:
1. C
2. C
3. A
4. D
5. C
6. A
7. B
8. B
9. D
10. C
11. C
12. B
13. A
14. C
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
D
A
C
C
–
C
D
C
A
D
D
D
A
C
B
A
B
A
C
C
C
B
D
A
A
B
D
C
D
A
B
A
B
B
D
C
B
C
B
A
B
D
A
B
59. B
60. NO CORRECT ANSWER
61. F