PARTNERSHIP FORMATION
1. Roberts and Smith drafted a partnership agreement that lists the following assets contributed at
the partnership formation:
Roberts
Smith
Cash
20,000
30,000
Inventory
15,000
Building
40,000
Furniture & equipment
15,000
The building is subject to a mortgage of
₱10,000, which the partnership has
assumed. The
partnership agreement also specifies that profits and losses are to be distributed evenly.
What
amounts should be recorded as capital for Roberts and Smith at the formation of the
partnership?
a. 35,000
b. 35,000
85,000
75,000
c. 55,000
d. 60,000
55,000
60,000
2. Mang and Ming agreed to form a partnership. The partnership agreement stipulates that Mang
shall contribute a noncash asset with fair value of ₱1,000 while Ming shall contribute
cash of ₱1,000. However, since Ming will be bringing in a special skill to the partnership, the
partners agreed that Ming shall be entitled to a 70% interest in the partnership initial net assets
and in subsequent partnership profits and losses. Which of the following statements is correct?
a.
b.
c.
d.
3.
Mang’s noncash asset contribution shall be debited at ₱300.
The net credit to Ming’s capital account is ₱1,400.
Mang is given a bonus.
The partnership’s total equity immediately after the formation is ₱2,400.
4.
5.
6.
A and B agreed to form a partnership. The partnership agreement stipulates the following:

Initial Capital of P100,000.

A 25:75 interest in the equity of the partnership
How much is B’s initial capital in the partnership books?
Assume that a partner’s capital shall be increased accordingly by contributing additional
cash to bring the partners’ capital balances proportionate to their profit or loss
ratio. Which partner should provide additional cash and how much is the additional cash
contribution?
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 an equal interest in
the partnership capital. A’s cash contribution should be debited at
A contributed ₱100,000 cash, while B contributed ₱200,000 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?
7.
The simple journal entries to record the partners’ contributions include
PARTNERSHIP OPERATION