FORMATION

True Or False
1 F 11 F 21 T 31 T 41 T 51 F
2 T 12 T 22 T 32 T 42 T 52 T
3 F 13 F 23 T 33 T 43 F 53 T
4 T 14 F 24 T 34 T 44 T 54 F
5 F 15 T 25 F 35 T 45 T 55 F
6 T 16 T 26 F 36 F 46 T 56 F
7 T 17 F 27 F 37 F 47 T 57 F
8 F 18 T 28 F 38 F 48 F 58 T
9 F 19 T 29 T 39 F 49 T 59
10 T 20 T 30 T 40 T 50 F 60

True Or False
1 F 11 F 21 F 31 F 41 F
2 T 12 T 22 F 32 F 42 F
3 T 13 T 23 T 33 T 43 T
4 F 14 F 24 T 34 T 44 T
5 T 15 T 25 F 35 T 45 F
6 T 16 T 26 F 36 F 46 T
7 T 17 F 27 T 37 T 47 F
8 T 18 F 28 F 38 F 48 T
9 T 19 T 29 T 39 T 49 T
10 T 20 F 30 F 40 T 50 F (except limited partner

Multiple Choice:

1. C
2. D
3. D
4. C
5. C
6. A
7. A
8. D
9. E
10. A
11. A
12. C
13. B
14. D
15. A
16. D
17. C
18. D
19. A
20. D
21. B
 22. A
23. D
24. A
25. C
26. C
27. A
28. D
29. D
30. D
31. A
32. D
33. D
The market value of the land on the date of formation, P150,000

34. C/C
Unadjusted capital 33,000 – Allowance 426 + MI 3,000 + 600 prepaid salary – accrued rent exp.
800 = P35,374 adjusted capital of Stein ÷ 2/3 = P53,061 Total partnership capital x 1/3 =
P17,687.

35. A
36. B/A/D
Answer: G: 20K + 15K = 35K ; C: 30K + 15K+ 40K -10K= 75K

Answer: G: 20K + 15K = 35K ; C: 30K + 15K+ 40K = 75K

Answer Capital Contribution of G 35 K + C 75K = 110K /2 = 55K each.

37. C

Emma Betty Carol Total

Cash 100,000 120,000 300,000 520,000
Inventory 20,000 20,000
Equipment 50,000 50,000
Unpaid liability on Equipment (20,000) (20,000)
Balance 120,000 150,000 300,000 570,000
Equal Interest 190,000 190,000 190,000 570,000
Cash receipts (payment) (70,000) (40,000) 110,000 -

- The P150,000 loan of Carol from the bank is a personal loan which will not be assumed by the
partnership.
- The cash settlement among the partners will not be recorded in the partnership books because it was
made outside the partnership.

Journal Entry
Cash 520,000
Inventory 20,000
Equipment 50,000
Liability on equipment 20,000
Emma. Capital 190,000
Betty, capital 190,000
Carol, capital 190,000

38. B
Answer: Market Value on date of Contribution

39. B
F G
 Capital beg 1,710,000 1,485,000
under dep (45,000)
over dep 135,000
Allowance (360,000) (110,000)
Total 1,305,000 1,510,000
Interest of G 40%
Total Partnership capital 3,775,000
Interest of F 60%
Capital of F 2,265,000
Less Contributed cap 1,305,000
Cash Investment 960,000
40. B
Contribution of X 240,000 + Y 150,000 = Total Cap Contribution 390,000 x 40% interest of Y =
156,000 . Cap Cont. of Y is 150,000 and his agreed capital is 156,000 = bonus to Y 6,000.

41. A/D
Cap contribution of QQ P280,000 ÷ 70% = 400,000 x 30% = 120,000 – 65,000 cap contribution
of SS = P55,000 cash investment.

42. A 120,000+100,000+ 40,000

43. B 600,000 +120,000+ 280,000+440,000+800,000 = 2,240,000/2 = 1,120,000

44. B

Kris Chen
Undj Cap 140,000 157,000
MI 6,000
Allowance (2,000) (2,500)
AP (8,000)
Capital after adj. 130,000 160,500

45. A 50,000 + 310,000 = 360,000 – 30,000 = 330,000

46. A Cap. Contribution 280,000 + 440,000 – 120,000 = 600,000 / 3 = 200,000

47. C

Cash 5,000
Accounts Receivable 20,000
Inventory 30,000
Fixtures 36,000
Accounts Payable 12,000
Total 79,000
Bad debts (5% x 20,000) (1,000)
Obsolete inventory (6,000)
Fixtures (16,000)
Total adjusted capital 56,000
Iram's investment
Cash 40,000
Inventory 20,000
Total Capital 116,000
Accounts Payable 12,000
Total assets 128,000

48. B

Zoe Angel
Unadjusted Cap 114,000 99,000
Under-depreciation (3,000) (9,000)
Bad debts (24,000) (9,000)
Adjusted cap 87,000 81,000

Angel Cap 81,000

Divide by 40%
Total Partnership Cap. 202,500
Multiply by 60%
Agreed Cap of Zoe 121,500
Less: Zoe Contribution 87,000
Total 34,500

49. C

David’s Capital 227,280

Divide by 1/3
Total Partnership capital 681,840
X 2/3
Cortez capital 454,560
Allowance 3,840
MI (32,000)
Accrued Exp. 6,400
Prepaid exp. (10,400)
Capital before admission 422,400

50. A/A/A 270,000+390,000+90,000-300,000=450,000

Cap contribution of Norin P720,000 + Cap contribution of Jen P450,000 = 1,170,000 x 40% =
468,000 – 450,000 contribution of Jen = P18,000 bonus to Jen

Total capital of the partnership 1,170,00 x 60% = 702,000

51. D/C
Answer: Fair value contribution of Earl 936,000 – 50,000 mortgage = 886,000 cap contribution ÷ 55% =
1,610,909 x 45% = 724,909 capital of Rico – Cap contribution of Rico 150,000 = 574,909.
Answer: Total Capital of the partnership 1,610,909 + 50,000 = 1,660,909

52. C/D

Answer
Rody Noy
Cash 25,000 37,500
Inventory 18,750
Building 50,000
Equipment 18,750
Mortgage payable (12,500)
Capital 43,750 93,750

Req. 2

Noy, capital 93,750

divide by Interest of Noy 40%
Total Partnership Capital 234,375
x Interest of Rody 60%
Rody, capital 140,625
Contributed capital of Rody 43,750
Investment of Cash of Rody 96,875

Total assets contributed 150,000

Additional Investment of Rody 96,875
Total Assets of Partnership 246,875

Total partnership capital 234,375

Total liability 12,500
Total Assets 246,875

53. A/D
Answer: A = 80+200+200-60 = 420 – 600 = 180

Answer D = 80+200+200+100+300 =880

54. B Use the net investment method

55. C
56. A

a. Accounts Receivable P225,000 x 5% = 11,250 required balance of Allowance – Beg. Balance 7,500 =
P3,750 adjustments
b. Interest Receivable = 75,000 x 15% x 2/12 = P1,875
c. Equipment book value P82,500 – 75,000 = P7,500
d. Furniture book value P150,000 – 135,000 = P15,000
e. Interest Payable = 75,000 x 10% x 3/12 = P1,875

Moses Joshua
Unadjusted Balance of capital 465,000 540,000
1. Accounts Receivable (9,000) (3,750)
2. Merchandise Inventory (15,000) 7,500
3. Prepaid asset and Rent Payable 15,000 (12,000)
4. Interest Receivable 1,875
5. Unused Office supplies (10,500)
6. Equipment (7,500)
7. Furniture (15,000)
8. Interest Payable (1,875)
9. Patent 60,000
Adjusted capital contribution 436,125 578,625

Adjusted capital contribution 436,125

÷ Interest of Moses 40%
Total Partnership Capital 1,090,312.50
x Interest of Joshua 60%
Capital Interest of Joshua 654,187.50
Capital Contribution of Joshua 578,625
Additional Investment of Cash by Joshua 75,562.50

57. B

Positive TCC TAC

Marie 450,000 50% 560,000 110,000
Paz 280,000 25% 280,000 -
DJ 120,000 25% 280,000 160,000
850,000 1,120,000 270,000

Bonus and revaluation TCC TAC

Marie 450,000 50% 450,000 -
Paz 280,000 25% 225,000 (55,000)
DJ 120,000 25% 225,000 105,000
850,000 900,000

Negative TCC TAC

Marie 450,000 50% 240,000 (210,000)
Paz 280,000 25% 120,000 (160,000)
DJ 120,000 25% 120,000 -
850,000 480,000 (370,000)

58. C/B
Req. 1
Paul (400 + 450K) 850,000 ÷ 20%
Alger (1.25 + 1.3M - 250K) 2,300,000
Rod (cash + 200K) 1,100,000
Total 4,250,000

Total capital of Rod 1,100,000

Less: Equipment (200,000)
Cash contribution of Rod 900,000

Req. 2
Total capital 4,250,000
Add: Mortgage payable 250,000
Total Assets 4,500,000

59. B Net Investment method

60. A
TCC TAC Bonus
A 1,632,000 60% 1,591,200 (40,800)
B 1,020,000 40% 1,060,800 40,800
2,652,000 2,652,000
STRAIGHT PROBLEMS

Problem 1
Cash 900,000
OO, capital 900,000

Land 210,000
Building 270,000
Mortgage Payable 120,000
PP, capital 360,000

Problem 2
Cash 1,050,000
Val, capital 500,000
Migs, capital 50,000
Diaw, capital 500,000

Problem 3
Answer:
1. Cash 100,000 2 Cash 100,000
Equipment 75,000 Equipment 75,000
Angie, capital 175,000 Angie, capital 175,000

Cash 150,000 Cash 150,000

Inventory 75,000 Inventory 75,000
Building 200,000 Building 200,000
Mortgage Payable 50,000 Beth, capital 425,000
Beth, capital 375,000

Cash 100,000
Equipment 75,000
Angie, capital 175,000

Cash 150,000
Inventory 75,000
Building 200,000
Mortgage Payable 50,000
Beth, capital 375,000

3. Beth, capital 100,000

Angie, capital 100,000

Total Partnership capital 175,000 + 375,000 = P550,000÷2 = 275,000

Capital credit of A 275,000 -175,000 contribution = 100,000 bonus
Capital credit of B 275,000 – 375,000 contribution = 100,000 interest given up to A

Problem 4
1. 50,000; 75,000 and 80,000
2. a. Bonus method 102,500; 51,250 and 51,250
TCC TAC
Allan 50,000 50% 102,500
Lydia 75,000 25% 51,250
Bruce 80,000 25% 51,250
205,000 = 205,000
b. Positive Revaluation (undervaluation) 160,000; 80,000 and 80,000
TCC TAC Adjustment
Allan 50,000 50% 160,000 110,000
Lydia 75,000 25% 80,000 5,000
Bruce 80,000 ÷ 25% 80,000 -
205,000 < 320,000 115,000

c. Negative Revaluation: 50,000; 25,000 and 25,000

TCC TAC Adjustment
Allan 50,000 50% 50,000 -
Lydia 75,000 25% 25,000 (50,000)
Bruce 80,000 25% 25,000 (55,000)
205,000 > 100,000 (105,000)

3. Allan additional investment of 100,000 while Bruce will have a withdrawal of 5,000
TCC TAC Adjustment
Allan 50,000 50% 150,000 100,000
Lydia 75,000 ÷ 25% 75,000 -
Bruce 80,000 25% 75,000 (5,000)
205,000 300,000 95,000

Problem 5
Agreed Capital
Solisa 9,000,000
Estrada 6,000,000
Total 15,000,000
Divide by 40%
Total Partnership Capital 6,000,000
60%
Capital of Kasan 3,600,000

Problem 6
Answer: 91,000

Problem 7
A. New Sets of books

Adjust the books

a. Interest Receivable 20,250 Unadjusted capital 1,107,000
Anton, capital 20,250 a. 20,250
(10%x270,000x9/12) b. (27,000)
c. 2,700
b. Anton, capital 27,000 d. (25,000)
Inventory 27,000 e. (5,000)
(121,500 - 94,500) Adjusted capital 1,072,950
Divide by 60%
Allowance for doubtful
c. accounts 2,700 Total Partnership capital 1,788,250
Multiply by interest of
Anton, capital 2,700 Gerald 40%
Capital of Gerald 715,300

Beginning balance 13,500

Ending balance (5%x216,000) 10,800
Adjustments (2,700)
d. Anton, capital 25,000
Accumulated
Depreciation 25,000

e. Prepaid Expenses 10,000

Anton, capital 5,000
Accrued Expenses 15,000

Close the books

Allowance for Doubtful Accounts 10,800
Accumulated Depreciation 52,000
Accounts Payable 54,000
Accrued expenses 15,000
Notes Payable 270,000
Anton, capital 1,072,950
Cash 540,000
Accounts Receivable 216,000
Notes Receivable 270,000
Interest Receivable 20,250
Inventories 94,500
Prepaid expenses 10,000
Equipment 324,000

Record the Investment of Anton and Gerald

Investment of Anton
Cash 540,000
Accounts Receivable 216,000
Notes Receivable 270,000
Interest Receivable 20,250
Inventories 94,500
Prepaid expenses 10,000
Equipment 272,000
Allowance for Doubtful Accounts 10,800
Accounts Payable 54,000
Accrued expenses 15,000
Notes Payable 270,000
Anton, capital 1,072,950

Investment of Gerald
Cash 715,300
Gerald ,capital 715,300

B. Using the books of Anton

Adjust the books

a. Interest Receivable 20,250 Unadjusted capital 1,107,000
Anton, capital 20,250 a. 20,250
(10%x270,000x9/12) b. (27,000)
c. 2,700
b. Anton, capital 27,000 d. (25,000)
Inventory 27,000 e. (5,000)
(121,500 - 94,500) Adjusted capital 1,072,950
Divide by 60%
c. Allowance for doubtful accounts 2,700 Total Partnership capital 1,788,250
Multiply by interest of
Anton, capital 2,700 Gerald 40%
Capital of Gerald 715,300
 Beginning balance 13,500
Ending balance (5%x216,000) 10,800
Adjustments (2,700)

d. Anton, capital 25,000

Accumulated Depreciation 25,000
e. Prepaid Expenses 10,000
Anton, capital 5,000
Accrued Expenses 15,000

Record the Investment of Gerald

Investment of Gerald
Cash 715,300
Gerald ,capital 715,300

Problem 8
1. W ithdrawal of 133,250
2. 932,375

Problem 9
Anton Bong
Land 240,000 Bong, capital 39,000
Accum. Dep. – Store Eq 90,000 Merchandise inventory 18,000
Accum. Dep. - Bldg 150,000 Accum. Dep – Store Eq 108,000
Building 750,000 Prepaid expenses 24,000
Merchandise inventory 36,000 Store equip 141,000
Store Equipment 150,000
Anton, capital 1,044,000

Problem 10
Req. 1 Adam Eve
Pre Closing capital balance 17,510,000 11,843,750
Sales 20,000,000 19,000,000
COGS (12,000,000) (15,200,000)
Operating Expenses (5,000,000) (4,000,000)
Post Closing capital balance 20,510,000 11,643,750

Req. 2 Adam Eve

Post Closing capital balance 20,510,000 11,643,750
Allowance for doubtful accounts 100,000 (125,000)
Interest receivable 60,000
Interest payable (77,625)
Inventory (300,000) 100,000
Prepaid insurance adjustment (260,000)
Adjustment for depreciation (2,500,000) (20,000)
Adjustment for unearned rent income 118,000
Accrued expense (10,000)
Adjusted capital before investment/withdrawal of EVE 17,988,000 11,251,125
Divide by P/L ratio 60%
Total Partnership Capital 29,980,000
Multiply by interest of Eve 40%
Capital interest of Eve 11,992,000
Capital contribution of Eve 11,251,125
Additional investment of Eve 740,875
Req. 3 17,988,000 and 11,251,125

Req. 4 Adam Eve

Total partnership capital 29,980,000
Add: Liabilities
Accounts Payable 8,495,000 1,552,500 10,047,500
Unearned rent income 177,000 177,000
Notes Payable 2,328,750 2,328,750
Accrued expenses 10,000 10,000
Interest payable 77,625 77,625
Total assets 42,620,875

Adam Eve
Assets per book 29,300,000 15,525,000
Assets adjustments:
Allowance for doubtful accounts 100,000 (125,000)
Interest receivable 60,000
Inventory (300,000) 100,000
Prepaid insurance (260,000)
Accumulated Depreciation (2,500,000) (20,000)
Additional cash investment of Eve 740,875
Total assets 26,660,000 15,960,875 42,620,875

Problem 11
Solution 280,000 – 40,000 = 240,000 Capital of E ÷ 60% = 400,000 Partnership capital x 40% = 160,000
– 90,000 capital contribution = 70,000 additional investment

J E
Cash 20,000 Cash 70,000
Furniture and Fixtures 70,000 Land 210,000
J, capital 90,000 Mortgage Payable 40,000
E, capital 240,000
Cash 70,000
J, capital 70,000
To record the initial investment and additional investment of cash of J

Problem 12
Mark capital contribution (125,000+75,000) 200,000
Paul capital contribution (175,000+275,000+500,000- 150,000) 800,000
Total capital contribution 1,000,000
Divide by 2
Capital of each partner 500,000

Total capital of partnership 1,000,000

Add: Mortgage payable 15,000
Total assets of the partnership 1,015,000

Problem 13

1.Assuming that the partners agreed to bring their respective capital in proportion to their profit and loss
ratio, the additional cash to be invested by E. and the capital balance of F on June 1, 2020.

Answer 717,500; 3,500,000;

Solution
(1)875,000 + 937,500 + 2,812,500 =4,625,000 – 1,125,000 = 3,500,000
 (2) Capital of F 3,500,000 ÷ 70% = 5,000,000 x 30% = 1,500,000 capital of E – capital contribution
782,500 = 717,500

2.Assuming each partner is credited for the full amount of net asset invested

Answer: E 782,500 and F 3,500,000

3.The partners initially should have an equal interest in the partnership capital.
Answer: E 2,141,250 and F 2,141,250

Total partnership capital P4,282,500 ÷ 2 = 2,141,250

Problem 14 Answer: 200,000; 600,000

(I) 250,000 +500,000 -150,000 = 600,000÷2/5 = 1,500,000 Total partnership capital x 3/5 interest of
Jan = 900,000 capital of Jan – Contribution of Jan 700,000 = 200,000
(II) Cash of Iram 250,000 + Cash of Jan 200,000 + MI of 300,000 – 9 month note 150,000 = 600,000

Problem 15:
Answer 84,100; 42,050; 394,150
Solution: Investment of A 84,100÷2/3 = Total partnership capital 126,150 x 1/3 = 42,050 capital of B
Total assets = Total capital 126,150 + Accounts payable 264,000 + Accrued expenses 4,000 = 394,150