fee Ake, x leaf athumul pA e aw fone ‘ ReSA The Review School of Accountancy £8 Papa Cor. §. H. eyelet, Sampoloc, Manis §® Tel Nos. 734-39-89 8 735-98-07 PRACTICAL ACCOUNTING PROBLEMS II Partnership Formation antonio jaramillo dayag i dik 0% July 1, 2011, AA and’ BB decided to form a partnership. The firm is fo take over ‘business assets and assume liabilities, and capitals are ab to be based on net assets transferred after the following adjustmentss 4 a, AA and BB's inventory is to be valued at P3},000 and 22,000, respectively. b. Accounts receivable of P2,000 in AA’s books and P1,000 in BB’s books are uncollectible. ¢- Accrued salaries of.,P4,000 for AA and P5,000 for BB are still to be recognized in the books. 4. Unused office supplies of AA amounted to P5,000, while that of BB amounted to P1,500, “ e- Prepaid rent of P7;000 and P4,500 are to be recognized in the 4, _ books AA and BB, respectively. "caf Wyit £. BA is to invest or withdrew cash necessary to have a 408 p interest in the firm. Balance sheets for AA and BB on July 1 before adjustments are given below: x = Caan P3100 F— 30,000 ‘Recounts Receivable 26,000 | 30-000 Inventory 32,0007 24,000 Office supplies 3,900 } Equipment 20,000 4,000 ‘Accumulated depreciation ~ equipmait 73,600) | 13,0009 Total Assets P 100,000 | P 120,009 Recounts Payable 2s, 000 | F-25000 Capitals 72,000 | —-T00-000 Total Liabilities ond Capital Eiao000 |} Fiz0-o0 : Determine: oe 7 co aa Sg 1. The net adjustments - capital in the books of AA and BB: ot Wh a a. AA, P7,000 net debit; BB, P2,000 net credit 4R ut fy B. AB, P5,000 net debit; BB, F7,000 net credit i % AA, 211000 net cledits BB, P,000 nec atte PB 1 Wh @P th, 25,000: net ceedits BB, Eiogn nee ett es b 2.°The adjusted capital of AA and BB in their respective books. Ro KE pri, 67 a. AA ~ P65,000; BB ~ P102,000 c. AA - P77,000; BB - P98, 000 an b. BR ~ P63, 000; BB - 107,000 (@> AN — 777,000, BB - P99;000 S [gS 's. she additional investment {withiGeeer) made boca: a P(15, 000) 3,000 peck b. P{ 6,667) dB, 333 tg) 4, The total assets. of the partnership after formation: a. P235,333, fe. P20, 333, b. 230,000 @ 212! 000 5. The total liabilities of the partnérahip after formation: 57,000, ©. P54,000 Ih . P48, 000 d. P51,000 coh —/£6. The total capital of the partnership after formation: a. P180, 000 ce. P163, 333, b. P178,333 2195, 000 + The capital balances of AA and BB in the combined balance sheet: “gi? a. AA, PO1,250;" BB, 72,000 g BA, £100,000; 8, 75,000 z£ b. AA, 81,250; BB, P75,000 9g AA, P62,000; BB, P93,000 a On December 1, 2011, DD and KE formed a partnership with each A at contributing the following assets at fair market values: ¥ op fe cae ¢ CASH svinnnsnnnnnnn B 9,000 P 18,600 a Machinery and equipment. "13,300 7 Pe FF Land. eo 90,000 beet Building... 27,000 Seas offike furniture. 13, 500 — Hla, 000 195,00 p2-91pak ec fe . nS Se re ee po St wh ee i ee gy eae twee = “PRACTICAL ACCOUNTING PROBLEMS II page 2 The land and building are subjéct to a mortgage loan of P54,000 that the partnership will assume. The partnership agreement provides that DD and EE share profits and losses, 40% and 60%, respectively and partners agreed to bring their capital balances in proportion to the profit and loss ratio and using the capital balance of EE as the basis. The ditional cash investment made by DD should be: P 18,000 cc. P134,100 85, 500 a. 166,250 11 JJ and KK are joining their separate business to form a partnership. Cash and non-cash assets are to be contributed for a total capital of 300,000. The non-cash assets to be contributed and liabilities ‘to be assumed are: Az 1 4 CHE J KK Hook valus Fair Value Book Value Fair Value E BX44UD Accounts receivable. 22,500 P22,500 Ne Inventories. i 22,500 33,750 260,000 67,500 Equipment... 37,500 30,000 67,500. 71,250 Accounts payable. 11,250 * 11,250+ 7,500 7,500 The partner's capital accounts are to be equal after all contributions & fet of assets and assumptions of liabilities. J & regek Determine: RS 67. 13/77" tokal assets of the partnership. 53 70 71250 ASW 318, 750 cc. P281,250 pe, Gs) oes . Desa = 300,000 d. 225,000 ws 73/20 e amount of cash that each partner must contribute: 2 — ‘35-275, 000; KK-P18, 750 ©. JI-PL61,250; KK-P157,500 pg gd 72 - 3J-P75, 000; KK-P11, 250 4. 9-127, 5007 RK-P11,250 TE _ pp a6? Partnership Operations & ae w AGS Left and Right are partners. Their capital accounts during 2011 wore as follows: Left, Capital Right, Capital 8/23 P6,000 1/1 P 30,000 3/5 P9,000 1/1 PS0,000 4/3 8,000 V6 7,000 10/31 6,000 10/7 5,000 Partnership net income is P50,000 for the year. The partnership agreement provides for the division of net income as follows: * Each partner is credited 10 percent interest on his or her average capital. '* Because of prior work experience, Left is entitled to an annual salary of P12,000 and Right is credited with P8,000. © Any remainder income or loss is to be allocated based on beginning capital. How much of the partnership net income for 2010 should be assigned to ft and Right? Left, P23,666; Right, P26,334 | c. Left, P26,388; Right, P23, 612 Left, P18,750; Right, P31,250 " d. Left, P25,000; Right, P25,000 v Hunt, Rob, Turman and Kelly own a publishing company that they operate as a partnership. The partnership agreement includes the following: © Hunt receives a salary of P20,000 and a bonus of 38 of income after/all) bonuses. © “Rob regeives a salary of P10,000 and a bonus of 2% of income afterall) bonuses * Bil partners are to.receive 10% interest on their average capital balances. Courage isn’t having the atrength to go on; it’s going on when you P2-017 x td & mE sd . (oe ae Best Ct-d) : ? eee : é Z WE iba \ Nee Mi bys B2) PRACTICAL ACCOUNTING Ir page 3 The average capital balances are Hunt, P50,000; Rob, P45,000; Turman, 20,000, and Kelly, P47,000. Any remaining profits and losses are to be allocated equally among the partners. Determine how a profit’ of P105,000 would be allocated among the partners. Hunt, P41,450; Rob, P29,950; Turman, P15,450; Kelly, P18,150 . + Hunt; P28,000; Rob, P16,500; Turman, P 2,000; Kelly, P 4,700 = gat (p/-p)e- Hunt, P39,700; Rob, P29,200; Turman, P16,700; Kelly, P19,400 BU) tarcet caieet eae 2 MICAo-A) vr 2 ids. tgpP? 2nd OQ are partners operating a chain of retail stores. The partnership agreement provides for the following : ee se WB: Sas. salarie . P 10,000 P 5,000 Interest on average capital balance: 10% 10% Bom gn : 208 of net income None before interest but after bonus and salaries Rema Ne cn se 308 708 The income summary account for year 2011 shows a credit balance of P51,000 before any deductions. Average capital balances for PP and QQ are 750,000 and 75,000, respectivély. The share of PP and QO in the P51,000 net income would be: 1 a. PP; P24,,062.50; QQ, P26,937.50 . PP, P23,500; QQ, P27,500 b! PP, P26/541.50; 00, P24,458.50 @®) PP, 726/250; OO, P24,750 VII - Bonus as a distribution of profit XX and YY formed a partnership on January 2, 2011 and agreed to share profits and loss in the ratio of 90% and 10%, respectively. .xX contributed capital of 25,000. YY contributed—m capital but has a specialized expertise and manages the firm full time. There were no withdrawals during the year. The partnership agreement provides for the following: . y Capital accounts are to be credited annually with interest at 5% a of the beginning capital. 14? yy is to be paid a salary of Pi,000 a month. = rm YY is to receive a bonus of 204 of net inconé calculated (before) Ne. x ran £ ra deducting his salary and interest on both capital accounts~ Bonus, interest, and Y¥’s salary are to be considered as 6 partnership’ expenses. ' oe oS, FAD ey ‘The partnership's income statement for 2011 follow: Revenues. Less: Expenses (including salary, interest, and bonus) 49,700 " . yy Net incone..... What is Y¥'s 2011 bonus? ac76 11 606 aaaacnae b. 12,000 £0 oe VIII - Profit Allocation The Trading Company, a partnership, was formed on January 1, 2011, with four partners,’ DD, EE, FF, and GG. Capital contributions were as follows: DD, P 50,000; EE, P25,000; FF, P25,000, and GG, P20,000. The partnership agreement provides that partners shall receive 5% interest in the amounts of their capital contributions. In. addition, DD is to receive a salary of P5,000 and, EE a salary of P3,000. The agreement further provides that FE shall receive a minimum of 2,500 per ‘annum from the partnership and GG_a ‘minimum of P6,000 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: DD, 30%; EE, 30%; FF, 20%, and GG, 20%. Calculate the amount that must be earned by the partnership during 2011, before any charges for interest on capital or partners’ salaries, in order that DD may xeceive an aggregate of P12,500 including interest, salary-and share of profits. — a. P16, 667 So 230, 667 b. . 30,000 @® 32,333 ~ P2-01 Lar > ew t B, .P 96,450 pe 120(g07 18) 720