DE LA SALLE UNIVERSITY

RAMON V. DEL ROSARIO COLLEGE OF BUSINESS

DEPARTMENT OF ACCOUNTANCY
ACYAVA1 – Advanced Financial Accounting and Reporting Part 1
HOMEWORK NO. 1
Partnership

Instructions: Analyze and answer the following problems. Write your solutions in your journal notebook in a
good accounting format. Double rule your final answers.

Problem 1
In 2020, Sonia and Carla agreed to form a new partnership under the following general agreements:
(1) Partners’ CONTRIBUTIONS will be on a 5:4 ratio;
(2) PROFIT & LOSS, 5:5, and
(3) CAPITAL CREDITS, 6:4 ratio, respectively to Sonia and Carla.

Their respective contributions will come from old proprietorships they owned.

Sonia contributed the following items and amounts:

Cash P599,040
Equipment (at book value per her
proprietorship records) 409,600

Carla contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable P76,800
Inventory 215,040
Furniture and fixtures 411,648
Intangibles 176,640

All the non-cash contributions are not properly valued. The two partners have agreed that (a) P6,144 of the
accounts receivable are uncollectible; (b) the inventories are overstated by P15,360; (c) the furniture and fixtures
are understated by P9,216; and the intangibles include a patent with a carrying value of P10,752, which must now
be derecognized upon a court order. The rest of the intangible items are fairly valued.

1. How much is the total depreciable fixed asset recorded by the partnership? 893,184
2. What is the capital balance of Carla after the formation of the partnership? 771,379

Problem 2
CARA and JEREMY created a partnership to own and operate a health-food store. The partnership agreement
provided that CARA receives an annual salary of P8,000 and JEREMY a salary of P4,000 to recognize their
relative time spent operating the store. Remaining profits and losses were divided 60:40 to CARA and JEREMY,
respectively. Income of P10,400 for 2019, the first year of operations, was allocated P7,040 to CARA and P3,360
to JEREMY. On January 1, 2020, the partnership agreement was changed to reflect the fact that JEREMY could
no longer devote any time to the store’s operations. The new agreement allows CARA a salary of P14,400, and
the remaining profits and losses are divided equally. In 2020 an error was discovered such that the 2019 reported
income was understated by P3.200. The partnership income of P20,000 for 2020 included this P3,200 related to
2019.

3. In the reported net income of P20,000 for the year 2020, CARA would have… 17,520

Problem 3
ERROL FLOR, and GAB invest P32,000, P24,000 and P20,000 respectively, in a partnership on June 30, 2020.
They agree to divide net income or loss as follows:
a. Interest at 10% on beginning capital account balances
b. Salaries of P8,000, P6,400 and P4,800, respectively to ERROL, FLOR, and GAB, respectively.
c. Remaining net income or loss is divided equally
d. A minimum of P14,400 of income is guaranteed to GAB regardless of the results of operation.

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 4. If the net income for the year ended June 30,2020 before interest and salary allowances to partners
was P35,200, the amount of the net income credited to ERROL is: 11,600

Problem 4
On August 1, 2020, Partners Albert and Berto had the following ownership balances in the AB Partnership:

ALBERT BERTO
Capital P250,000 P200,000
Loan (30,000) 10,000
Total P220,000 P210,000

In the morning of this date, Carlo was admitted as a partner with an investment of P150,000 for 20% interest in
capital and in profits or losses.

In the afternoon of the same day, over snacks, Dindo learned about the nature and objectives of the ABC
Partnership and insisted that he became a partner and was willing to contribute P120,000 under acceptable terms
determined by the old partners.

The old partners, in a caucus, have agreed to allocate 15% of existing total capital, as well as 15% of profits or
losses to Dindo. Over dinner, Dindo accepted the admission arrangement without any change. On the other hand,
the old partners will each transfer 15% of their respective interest to Dindo. Under the old AB Partnership, profit
or loss was 60% and 40% to Albert and Berto, respectively.

5. Determine the capital balance of Carlo upon his admission to the AB Partnership on August 1.
120,000
6. Determine the capital balance of Berto under the ABCD Partnership in the late evening of August
1, 2020. 180,200

Problem 5
The following are the capital balances of ABC Partnership at August 30, 2020:
Alfie (40% P&L) P 176,000
Bar (40% P&L) 128,000
Carl (20% P&L) 88,000

Dick invests P216,000 in cash for a 30% partnership interest. The payment goes to the original partners.
Revaluation in asset is to be recognized upon Dick’s admission.

7. How much adjustment in net assets is to be recorded and what is the new partner’s beginning
capital? 328,000; 216,000

Problem 6
The following is the condensed balance sheet of G & N partnership at August 30, 2020, at which date Ella is to
be admitted with a 30% interest in capital and in profits for an investment of P44,000.

Book Value Fair Value

Cash P 16,000 P 16,000
Other assets 402,400 333,600
Current liabilities (43,200) (43,200)
Non current liabilities (215,200) (220,000)
Greg, capital ( 96,000)
Nick, capital ( 64,000)

Greg and Nick share profits and losses 60% and 40%, respectively.

8. What will be the capital balances of Greg and Nick after Ella’s admission? 54,768; 36,512
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Problem 7
Partners Boba and Tess, who share profits and losses equally, have decided to incorporate the partnership at
December 31, 2020. The partnership net assets after the following adjustments will be contributed in exchange
for shares of stocks from the corporation.
a. provision of allowance for doubtful accounts, P6,250.
b. adjustment of overstated equipment by 2,500
c. adjustment of understated inventory by P20,000 and
d. recognition of additional depreciation of P5,000.

The corporation’s ordinary shares is to have a par value of P312.50 each and the partners are to be issued
corresponding shares equivalent to 70% of their adjusted capital balances.

The partnership balance sheet at December 31, 2020 follows:

Cash P 112,500 Liabilities P 107,500

Accts rec 62,500 Acc. Dep 5,000
Inventory 87,500 Boba, cap. 106,250
Equipment 50,000 Tess, cap. 93,750
Total P 312,500 Total P 312,500

9. Determine the total credit to APIC upon incorporation of the partnership… 61,875
10. The number of ordinary shares issued to Partner Tess is… 217

Problem 8
The balance sheet for CHESTER, JOANA and JOHN Partnership, who share profits and losses in the ratio of
50%, 25%, and 25%, respectively, shows the following balances just before liquidation.

Cash P 19,200
Other assets 95,200
Liabilities 32,000
Chester, capital 35,200
Joana, capital 24,800
John, capital 22,400

On the first month of liquidation, certain assets are sold for P51,200. Liquidation expenses of P1,600 are paid,
and additional liquidation expenses are anticipated. Liabilities are paid amounting to P8,640 and sufficient cash
is retained to insure the payment to creditors before making payments to partners. On the first payment to partners,
Chester receives P10,000.

11. Determine the amount of cash withheld for anticipated liquidation expenses. 4,800

Problem 9
The following balance sheet for the partnership of A, B, and C was taken from the books on December 31,
2020.

Assets Liabilities and Capital

Cash P 32,000 Liabilities P 80,000
Other Assets 288,000 A, Capital (40%) 59,200
B, Capital (40%) 104,000
C, Capital (20%) 76,800
Total Assets P 320,000 Total Liab & Cap P 320,000

12. If the firm is dissolved and liquidates by installment, the first sale of the other assets having book
value of P144,000 realized P64,000 and all cash available are distributed, the amount to be received by
A, B, and C respectively would be… 0, 0, 16,000

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13. If the firm is dissolved and liquidates and A receives a total of P2,400 in full settlement of his interest,
then C would have received a total of… 48,400

Problem 10
The accounts of the partnership of PBA at December 31, 2020 are as follows:

Cash P 105,600 Liabilities P 80,000

Non-cash assets 932,800 Loan from B 25,600
Loan to P 19,200 P, capital 264,000
B, capital 468,800
A, capital 219,200
Total P1,057,600 Total P1,057,600

They divide profits and losses 3:5:2 to P, B, and A respectively. They have decided to liquidate the partnership at
this date.

14. Determine the amount payable to Partner A if cash is paid just before the start of liquidation on
December 31, 2020. 22,629
15. Assume that in January, the company sold non-cash assets with book value of P772,800 for P689,600
and paid liquidation expenses of P20,800. How much cash will the partners receive if all available cash,
except for a P8,000 contingency fund, is distributed at the end of January? P – P163,200; B – P358,400;
A – P164,800

-END-

Updated April 2023