ACTIVITY
Use the following information for numbers 1-7 ……………………………………………………
On October 1, 20x4, Andre and Bruce decided to pool their assets and form a partnership. They
allocate profit and loss in the ratio of 44:56 for Andre and Bruce, respectively. The firm is to take
over business assets and assume business liabilities, and capitals are to be based on net
assets transferred after the following adjustments:
●
●
●
●
●
●
●
●
●
Andre’s inventory amounting to P12,000 is worthless, while Bruce’s agreed value of
inventory amounted to P150,000.
Additional uncollectible accounts of P7,200 for Andre is to be provided; a 5% allowance
is to be recognized in the books of Bruce.
Accrued rent income of P12,000 on Andre, and accrued salaries of P9,600 on Bruce
should be recognized on their respective books.
Interest at 16% on Notes Receivable dated August 17, 20x4 should be accrued.
The office supplies unused amounted to P24,000.
The equipment’s agreed value amounted to P60,000.
The furniture and fixtures has a fair market value of P108,000.
Interest at 12% on Notes Payable dated July 1, 20x4 should be accrued.
Bruce has an unrecorded patent amounting to P48,000 and is to invest the additional
cash necessary to have a 60% interest in the new firm.
In cases, wherein days are considered, use 360 days as the basis.
Balance sheets for Andre and Bruce on October 1, 20x4 before adjustments are given below:
Accounts
Cash …………………………………………………….
Accounts Receivable ………………………………….
Allowance for doubtful accounts ……………………..
Notes Receivable ……………………………………...
Merchandise Inventory ………………………………..
Office Supplies …………………………………………
Equipment ……………………………………………...
Accumulated depreciation - equipment ……………..
Furniture & Fixtures …………………………………...
Accumulated depreciation - furniture & fixtures ……
Total Assets …………………………………………...
Accounts Payable ……………………………………..
Notes Payable …………………………………………
Capitals …………………………………………………
Total Liabilities and Capital ………………………...
Andre
P
90,000
216,000
(4,800)
Bruce
P
192,000
32,400
120,000
(54,000)
54,000
180,000
(6,000)
60,000
144,000
_______________
P
591,600
P
144,000
(24,000)
552,000
P
P
120,000
P
430,000
552,000
P
159,600
60,000
372,000
591,600
Determine the following:
1.
2.
3.
4.
5.
6.
7.
The net adjustments - capital in the books of: _________________
The adjusted capital of Andre and Bruce in their respective books is: _______________
The additional investment (withdrawal) made by Bruce is: _________________
The total assets of the partnership after formation is: _________________
The total liabilities of the partnership after formation is: _________________
The total capital of the partnership after formation is: _________________
The capital balances of Andre and Bruce in the combined balance sheet: ____________
Use the following information for numbers 8-10 …………………………………………………
On May 1, 2024, the business assets of Chay and Denise appear below:
Accounts
Cash …………………………………………………….
Accounts Receivable ………………………………….
Inventories ……………………………………………...
Land …………………………………………………….
Building …………………………………………………
Furniture & Fixtures …………………………………...
Other Assets …………………………………………...
Chay
P
P
Accounts Payable ……………………………………..
11,000
234,536
120,035
603,000
50,345
2,000
1,020,916
378,940
Denise
P
P
22,354
567,890
260,102
428,267
34,789
3,600
1,317,002
588,650
Chay and Denise agreed to form a partnership contributing their respective assets and equities
subject to the following adjustments:
●
●
●
Accounts Receivable of P20,000 in Chay’s books and P35,000 in Denise’s are
uncollectible
Inventories of P5,500 and P6,700 are worthless in Chay’s and Denise’s respective
books.
Other assets of P2,000 and P3,600 in Chay’s & Denise’s respective books are to be
written off
8. The capital accounts of the partners after the adjustments will be: _________________
9. The total assets of the partnership is: _________________
10. Ethan offered to join for a 20% interest in the firm. How much cash should he contribute?
11. Francis and Glenn are partners operating a chain of retail stores. The partnership
agreement provides for the following:
Francis
Glenn
Salaries …………………………………………………
P 5,000
P 2,500
Interest on average capital balances ………………..
10%
10%
Bonus ….. ……………………………………………...
20% on net
income before
interest but after
bonus & salaries
Remainder ……………………………………………...
30%
70%
The income summary account for year 2021 shows a credit balance of P25,500 before any
deductions. Average capital balances for Francis and Glenn are P25,000 and P37,500,
respectively. How much should be the share of Francis and Glenn in the P25,500 net income?
_________________
Use the following information for numbers 12-13 ………………………………………………...
Hanabi and Inuyasha formed a partnership on January 2, 2024 and agreed to share profits and
loss in the ratio of 90% and 10%, respectively. Hanabi contributed capital of P 6,250. Inuyasha
contributed no capital but has specialized expertise and manages the firm full time. There were
no withdrawals during the year. The partnership agreement provides the following:
●
●
●
●
Capital accounts are to be credited annually with interest at 5% of the beginning capital
Inuyasha is to be paid a salary of P250 per month
Inuyasha is to receive a bonus of 20% of net income calculated before deducting his
salary and interest on both capital accounts
Bonus, interest, and Inuyasha’s salary are to be considered as partnership expenses
The partnership’s income statement for 2024 is as follows:
Revenues …………………………………………………………..
Less: Expenses (including salary, interest, and bonus) ………
Net income ………………………………………………………..
P 24,112.50
P 12,425.00
P 11,687.50
12. What is Inuyasha’s 2024 bonus? _________________
13. How much is the total share of Inuyasha on the 2024 partnership net income? ________
14. The Firefly Company, a partnership, was formed on January 1, 2021, with four partners,
JJ, KK, LL, and MM. Capital contributions were as follows: JJ, P25,000; KK, P12,500;
LL, P12,500; MM, P10,000. The partnership agreement provides that partners shall
receive 5% interest in the amounts of their capital contributions. In addition, JJ is to
receive a salary of P2,500 and KK a salary of P1,500. The agreement further provides
that LL shall receive a minimum of P1,250 per annum from the partnership and MM a
minimum of P3,000 per annum, both including amounts allowed as interest on capital
and their respective shares of profits. The balance of the profit is to be shared in the
following proportions: JJ, 30%; KK, 30%; LL, 20% and MM, 20%.
Calculate the amount that must be earned by the partnership during 2021, before any
charges for interest on capital or partners’ salaries, in order that JJ may receive an
aggregate of P6,250 including interest, salary and share of profits. _________________
Use the following information for numbers 15-18 ………………………………………………...
The NN, OO, and PP Partnership was formed on January 2, 2024. The original cash
investments were as follows:
NN ................................................................................................. P 48,000
OO ................................................................................................ P 72,000
PP .................................................................................................. P 108,000
According to the general partnership contract, the partners were to be remunerated as follows:
●
●
●
Salaries of P7,200 for NN, P6,000 for OO, and P6,800 for PP.
Interest at 12% on the average capital account balances during the year.
Remainder divided 40% to NN, 30% to OO, and 30% for PP.
Income before partners’ salaries for the year ended December 31, 2024, was P46,040. NN
invested an additional P12,000, in the partnership on July 1; PP withdrew P18,000 from the
partnership on October 1, and, as authorized by the partnership contract, NN, OO, and PP each
withdrew P375 monthly against their shares of net income for the year. Determine the following:
15. The share of partner NN in the net income
16. The capital balance of partner PP on December 31, 2024:
17. If the salaries to partners’ are to be recognized as operating expenses by the
partnership, the share of partner OO in the net income?
18. Using the same information in No. 3, the capital balance of partner PP on December 31,
2024?
19. The partnership agreement between Queen, Rico, and Sammy provides for the following
profit sharing agreement: bonus of 20% net income before bonus to Queen; interest of
15% on average capital balances; remainder, equally. The average capital balances of
Queen, Rico, and Sammy are P3,000,000, P6,000,000, and P9,000,000 respectively.
The respective shares of Rico and Sammy in the net income of P2,700,000 should be?
20. Tyla, a partner in the Water partnership has a 30% share in the partnership profit and
loss. His capital account had a net decrease of P60,000 in 2023. In 2023, she withdrew
P130,000 against her capital and invested properties valued at P25,000 in the
partnership. The net income of the partnership in 2023 is: _________________
Use the following information for numbers 21-22 ………………………………………………...
Capital balances and profit and loss sharing ratios of the partners in the UVW Partnership are
as follows:
U, Capital ……………………………………………………………..
V, Capital ……………………………………………………………..
W, Capital ……………………………………………………………..
P 168,000
192,000
120,000
U needs money and agrees to assign one-fourth of his interest in the partnership to X for
P45,000 cash. X pays P45,000 directly to U.
21. What is the capital balance of X?
22. The total capital of UVW Partnership immediately after the assignment of the interest to
partner X?
Use the following information for numbers 23-27 ………………………………………………...
A partnership had the following condensed balance sheet:
Assets
Liabilities & Capital
Cash ………………………………… P 2,500
NonCash Assets ……………...……
32,500
XX, Loan …………………………...
2,500
Total ………………………………… P 37,500
Liabilities …………………………… P 7,500
XX, Capital …………………………
20,000
YY, Capital …………………………
10,000
Total ………………………………… P 37,500
The percentages in parentheses after the partner’s capital balances represent their respective
interests in profits and losses. The partners agree to admit ZZ as a member of the firm.
23. ZZ purchases a 1⁄4 interest in the firm. One-fourth of each partner’s capital is to be
transferred to the new partner. ZZ pays the partners P7,500 which is divided between
them in proportion to the equities given up. The capital balances of XX, YY, and ZZ after
should be:
24. If ZZ invests P10,000 in cash for 1⁄4 ownership interest. The money goes to the original
partners The capital balances of XX, YY, ZZ after the admission assuming if book value
method is used should be:
25. Using the same information in no. 24, what is the partnership gain (or gain to be
recognized in partnership books)?
26. Using the same information in no. 24, The gain to be recognized by XX and YY?
27. If revaluation/adjustments in assets are recognized, the capital balances of XX, YY and
ZZ after theadmission should be: _____________
28. Ken and Mini are partners with capital balances of P25,000 and P35,000, respectively,
and they share profits and losses equally. The partners agree to take Zoey into the
partnership for a 40% interest in capital and profits, while Ken and Mini each retain a
30% interest. Zoey pays P30,000 cash directly to Ken and Mini for his 40% interest, and
total revaluation of asset (or goodwill implied) by Zoey’s payment is recognized on the
partnership books. If Ken and Mini transfer equal amounts of capital to Zoey, the capital
balances after Zoey’s admittance will be? ____________________
29. The capital accounts of the partnership of Newton, Sharman, and Jackson on June 1,
20x4, are presented, along with their respective profit and loss ratios:
Mike ……………………………………………………. P 139,000
Randall ………………………………………………… 208,000
Sulli …………………………………………………….
96,000
P 444,000
1/2
1/3
1/6
On June 1, 20x4, Boo was admitted to the partnership when he purchased, for
P132,000, a proportionate interest from Mike and Randall in the net assets and profits of
the partnership. As a result of this transaction, Boo 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 Mike and Randall upon the sale of a portion of their
interests in the partnership to Boo?
30. In the AB partnership, Allen’s capital is P70,000 and Byron’s is P20,000 and they share
income in a 3:1 ratio respectively. They decide to admit Chris to the partnership. Chris
directly purchases a one-fifth interest by paying Allen P17,000 and Byron P5,000. The
land account is increased before Chris is admitted. By what amount is the land account
increased?
Use the following information for numbers 31-33 ………………………………………………...
Yoru, Jett, Sage, and Skye are partners sharing earnings in the ratio of 3/21; 4/21; 6/21 and
8/21.
The balances of their capital accounts on December 31,2022 are as follows:
Yoru ……………………………………………………………….. P 500
Jett ………………………………………………………………… 12,500
Sage ………………………………………………………………. 12,500
Skye ………………………………………………………………. 4,500
The partners decided to liquidate, and they accordingly converted the non-cash assets into
P11,600 of cash. After paying the liabilities amounting to P1,500, they have P11,100 to divide.
Assume that a debit balance of any partner’s capital is uncollectible.
Determine the following:
31. The book value of the non-cash assets amounted to: ____________
32. The share of Yoru in the loss upon conversion of the non-cash assets into cash was?
33. After the P11,100 was divided, the capital balance of Jett was: ______________
Use the following information for numbers 34-35 …………………………………………………
Gian, Arthur and Daniel are partners in a wholesale business. On January 1, 2024 the total
capital was P30,000 and drawings presented as follows:
Capitals
Gian ………………………………………………...
Arthur ……………………………………………….
Daniel ………………………………………………
P
6,250
5,000
18,750
Drawings
P
3,750
2,500
1,250
Partners agree that profit and loss ratio are shared equally. Because of the failure of some
debtors to pay their outstanding accounts, the partnership losses heavily ang is compelled to
liquidate. After exhausting the partnership assets, including those arising from an operating
profit of P4,500 in 2024, they still owe P5,250 to creditors on December 31, 2024. Gian has no
personal assets but the others are well off.
34. The partnership liquidation loss: _____________
35. The amount to be received by Daniel as a result of the liquidation: _____________
Use the following information for numbers 36-37 …………………………………………………
A balance sheet for the partnership of Maris, Anthony, and Jam who share profits in the ratio of
2:1:1, shows the following balances just before the liquidation:
Cash ....................................................... P 6,000
Other assets ............................................. 29,750
Liabilities .................................................. 10,000
Maris, Capital ............................................ 11,000
Anthony, Capital ............................................ 7,750
Jam, Capital ........................................... 7,000
On the first installment of the liquidation, certain assets are sold for P16,000. Liquidation
expenses of P500 are paid, and additional liquidation expenses are anticipated. Liabilities are
paid amount to P2,700, and sufficient cash is retained to insure the payment to creditors before
making payment to partners. On the first payment to partners, Maris receives P3,125.
36. The total cash payment to partners in the first installment amounted to: _____________
37. The amount of cash withheld for anticipated liquidation expenses and unpaid liabilities
amounted to: ______________
Use the following information for numbers 38-41 …………………………………………………
Assets
Cash ………………………………………..
Accounts Receivable ……………………..
Inventories …………………………………
Land ………………………………………..
Building (net) ………………………………
Equipment (net) ……………………………
Total Assets ………………………………..
Carrying Value
P
P
Fair Value
20,000 P
45,000
60,000
75,000
180,000
170,000
550,000 P
20,000
30,000
35,000
70,000
100,000
80,000
335,000
Liabilities
Accounts payable ………………………………………………………………..
Wages payable (all have priority) ………………………………………………
Taxes payable ……………………………………………………………………
Notes payable (secured & received by receivables and inventory) ………..
Interest on notes payable ……………………………………………………….
Bonds payable (secured by land and building) ………………………………
Interest on bonds payable ………………………………………………………
Total Liabilities ……………………………………………………………………
P
P
60,000
10,000
10,000
120,000
6,000
150,000
7,000
363,000
38. What is the total amount of unsecured claims?
39. What is the total amount of free assets?
40. What amount is expected to be available for general unsecured creditors/claims without
priority (net free assets)?
41. What is the estimated dividend percentage or the expected recovery per peso of
unsecured creditors?
42. A statement of affairs shows P30,000 of assets pledged to partially secured creditors
liabilities of P65,000 to partially secured creditors. P25,000 to unsecured creditors with
priority and P90,000 to other unsecured creditors. If the deficiency to unsecured
creditors is P40,000, what is the amount of net free assets?
43. If a statement of realization shows assets to be realized of P500,000, assets not realized
of P320,000 assets acquired of zero, and a gain on realization of P22,000, the amount
that would be reported for assets realized is?
44. KARERA Corporation is insolvent and its statement of affairs shows the following
information:
Estimated gains on realization of assets …………………………… P 1,440,000
Estimated losses on realization of assets ………………………….. 2,000,000
Additional assets ……………………………………………………… 1,280,000
Additional liabilities ……………………………………………………
960,000
Capital stock …………………………………………………………… 2.000,000
Deficit …………………………………………………………………… 1,200,000
The pro-rate payment on the peso to stockholders (estimated to be recovered by
stockholders) is?
Use the following information for numbers 44-46 …………………………………………………
STL Builders Construction Company has used the cost-to-cost percentage of completion
method of recognizing revenue. Samantha assumed leadership of the business after the recent
death of his father. In reviewing the records, Samantha finds the following information regarding
a recently completed building project for which the total contract was P2,000,000.
2022
Gross profit (loss) each year
Cost incurred each year ……………………
P
40,000
360,000
2023
P
140,000
?
2024
P
(20,000)
820,000
Samantha wants to know how effectively the company operated during the last 3 years on this
project and since the information is not complete, has asked for answers to the following
questions:
45. How much cost was incurred in 2020?
46. What percentage of the project was completed by the end of 2020?
47. What was the percentage of completion during the year 2020?
48. What was the estimated gross profit on the project by the end of 2020?
49. What was the estimated cost to complete the project at the end of 2020?
50. KRLB Construction Company enters into a contract with a customer to build a 50
kilometers road for P100,000,000.00 with a performance bonus of P60,000,000.00 that
will be paid based on the timing of completion. The amount of the performance bonus
decreases by 10% per week for every week beyond the agreed-upon completion date.
The contract requirements are similar to contracts that KRLB Builders has performed
previously, and management believes that such experience is predictive for this contract.
Management estimates that there is a 60% probability that the contract will be completed
by the agreed-upon completion date, a 30% probability that it will be completed one
week late, and only a 10% probability that it will be completed two weeks late. Determine
the probability-weighted amount for the management to determine the transaction price.
____________