ACCL02B - Partnership and Corporation Accounting
Prelim Reviewer: Computations
Question 1
Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel
contributed P100,000 and Carr contributed P84,000 in identifiable assets. Under the bonus approach to
adjust the capital accounts, Carr’s unidentifiable asset should be debited for
Correct answer: 0
Question 2
The partnership agreement of XX, YY and ZZ provides for the year end allocations of net income in the
following order
- First, XX is to receive 10% of net income up to P200,000 and 20% over P200,00
- Second, YY and ZZ each are to receive 5% of the remaining income over P300,000
- The balance of the income is to be allocated equally among three partners.
- The partnership’s 2014 net income was P500,000 before any allocations to the partners.
What amount should be allocated to XX?
Correct answer: 216,000
Question 3
The partnership agreement of Go and Long provides that interest at 12% per year is to be credited to
each partner on the basis of weighted average capital balances. A summary of the capital account of
Long for the year ended December 31, 2016 is as follows:
Balance, January 1 P 450,000
Additional investment, July 1 150,000
Withdrawal, August 1 (75,000)
Balance, December 31 525,000
What amount of interest should be credited to Long’s Capital account for 2016?
Correct answer: 59,250
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Question 4
The partnership agreement of Reid and Simm provides that interest at 10% per year is to be credited to
each partner on the basis of weighted-average capital balances. A summary of Simm’s capital account for
the year-ended December 31, 2015, is as follows:
Balance, January 1 140,000
Additional investment, July 1 40,000
Withdrawal, August 1 (15,000)
Balance, December 31 165,000
What amount of interest should be credited to Simm’s capital account for 2015?
Correct answer: 15,375
Question 5
The partnership of Santos and Gonzales was formed on April 1,2013. At that date, the following assets
were contributed:
Santos Gonzales
Cash 300,000 140,000
Merchandise Inventory 220,000
Building 400,000
Furniture and Equipment 60,000
The building is subject to a mortgage loan of P160,000 which is to be assumed by the partnership. The
partnership agreement provides that Santos and Gonzales share on income and loss of 25% and 75%,
respectively.
Assuming that capital shall be proportionate to the partners’ profit and loss ratio, using Santos as the
base, the required capital of Gonzales is
Correct answer: P1,080,000
Question 6
Partner B had a capital balance on January 1, 2014 of P45,000 and made additional capital contributions
during 2014 totaling P50,000. During the year 2014, B withdrew P8,000 per month. B’s post-closing
capital balance on December 31, 2014 is P30,000. B’s share of 2014 partnership income is:
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Correct answer: P 31,000
Question 7
Oliver, Barry, and Cara are partners with average capital balances of 945,000, 477,300, and 324,700
respectively. Partners receive 10% interest on their average capital balances, salaries of 244,650 to Oliver
and 165,250 to Cara, any residual profit or loss is divided equally. In 2016, the partnership had a net loss
of 251,248 before interest and salaries to partners. By what amount should Oliver’s capital account
change?
Correct answer: 60,534
Question 8
Partner A first contributed P50,000 of capital into an existing partnership on March 1, 2012. On June
1,2012, the partner contributed another P20,000. On September 1,2012 the partner withdrew P15,000
from the partnership. Withdrawals in excess of P10,000 are charged to the partner’s capital account. The
annual weighted –average capital balance is
Correct answer: 51,667
Question 9
Hana and Bishi formed a partnership in 2016. The partnership agreement provides for annual salary
allowances of P66, 000 for Hana and P50,000 for Bishi. The partners share profit equally and loses in
ratio of 70/30. The partnership had earnings of 86,000 for 2016 before any allowance to partners. What
amount of these earnings should be credited to each partner’s capital accounts (Hana and Bishi,
respectively)?
Correct answer: 45,000 and 41,000
Question 10
Briones, Balen, and Burgos are partners with average capital balances during 2016 of P945,000,
P477,300, P324,700. The partners receive 10% interest on their average capital balances, salaries of
P244,650 to Briones and P165,250 to Burgos, any residual profit or loss is divided equally. In 2016, the
partnership had a net loss of P251,248 before interest and salaries to partners. By what amount should
Briones’ and Burgos’ capital account change, respectively?
Correct answer: P60,534 increase; P80,896 decrease
Question 11
Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the
partnership’s formation:
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Contributed By
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 P10,000, 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 respectively at the formation of the partnership?
Correct answer: 35,000 and 75,000
Question 12
J, a partner in CPA Partnership has a 30% participation in partnership profits and losses. J’s capital
account decreased by a net amount of P240,000 during the calendar year 2016. During 2016, J withdrew
P520,000 which was charged against his capital account and contributed property to the partnership
with a fair value of P100,000 but with a carrying value of P80,000. What was the profit of the CPA
Partnership for 2016?
Correct answer: 600,000
Question 13
On May 1, 2015, Cobb and Mott formed a partnership and agreed to share profits and losses in the ratio
of 3:7, respectively. Cobb contributed a parcel of land that cost him P10,000. Mott contributed P40,000
cash. The land was sold for P18,000 on May 1, 2015, immediately after formation of the partnership.
What amount should be recorded in Cobb’s capital account on formation of the partnership?
Correct answer: 18,000
Question 14
Red and White formed a partnership in 2014. The partnership agreement provides for annual salary
allowances of P55,000 for Red and P45,000 for White. The partners share profits equally and losses in a
60/40 ratio. The partnership had earnings of P80,000 for 2015 before any allowances to partners.
What amount of these earnings should be credited to Red and White’s capital account respectively?
Correct answer: 43,000; 37,000
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Question 15
Elsa and Perla form a new partnership. Elsa invests P300,000 in cash for her 60% interest in the capital
and profits of the business. Perla contributes land that has an original cost of P40,000 and a fair market
value of P70,000 and a building that has a tax basis of P50,000 and a fair market value of 90,000. The
building is subject to a P40,000 mortgage that the partnership will assume. What amount of cash should
Perla contribute?
Correct answer: 80,000
Question 16
Vice Ganda, a partner in the Showtime Partnership, has a 30% participation in partnership profits and
losses. Vice Ganda’s capital account has a net decrease of P60,000 during the year 2016. During 2016,
Vice Ganda withdraw P130,000 (charged against his capital account) and contributed property valued at
P25,000 to the partnership.
What was the net income of Showtime Partnership for 2016?
Correct answer: P150,000
Question 17
1. On June 30, 2016, the balance sheet of Northern Marketing, a partnership, is summarized as
follows:
Assets 150,000
Norz, Capital 90,000
Tenten, Capital 60,000
Norz and Tenten share profit and losses at a 60:40 ratio, respectively. They agreed to take Hen as a new
partner, who purchases 1/8 interest of Norz and Tenten for 25000. What is the amount of Hen’s capital
to be taken up in the partnership books if book value method is used?
Correct answer: 18,750
Question 18
SP Partnership of Spongebob and Patrick decided to dissolve their partnership and admit Squidward as a
new partner on May 1, 2015. They agreed to revalue the land by P350,000 and distribute the four-month
profit amounting to P500,000. The Statement of Financial Position as of December 31, 2014 showed
their capital accounts at P880,000 for Spongebob and P720,000 for Patrick. The partners agreed to divide
profits and losses based on capital contributions.
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Squidward paid Patrick P380,000 to purchase 1/3 of his interest in the partnership. Furthermore, the net
income for the remaining 8 months of 2015 amounts to P1,180,000. What is the ending balance of
Patrick, Capital?
Correct answer: P1,089,000
Question 19
Kobe and Michael entered into a partnership on September 30, 2016 by investing the following:
Kobe: Cash – P60,000; Furniture and Fixtures – P75,000
Michael: Merchandise Inventory – P50,000; Equipment – P175,000
The partners agreed that the notes payable on the equipment amounting to P60,000 is to be assumed by
the partnership. Also, they agreed that Kobe will invest additional cash to equal their contributed capital
to their total agreed capital of P400,000 giving him a 40% capital credit in the partnership.
How much bonus capital is to be credited to Curry?
Correct answer: 75,000
Question 20
W, X, Y, and Z own a publishing company that they operate as a partnership. The partnership agreement
includes the following:
-W receives a salary of P 18,000 and a bonus of 5% of income after all bonuses.
-X receives a salary of P 7,500 and a bonus of 3% of income after all bonuses.
-All partners are to receive 12% on their average capital balances.
-The average capital balances of the partners are as follows: W - P62,000; X - 41,000; Y - 24,000; Z -
37,000
-Any remaining profits(losses) are to be divided equally among the partners.
How would a profit of P 125,550 would be allocated among the partners?
Correct answer: ₱ 48,600.00; ₱ 33,675.00; ₱ 20,987.50; ₱ 22,287.50
Question 21
During 2015, Young and Zinc maintained average capital balances in their partnership of P160,000 and
P100,000, respectively. The partners receive 10% interest on the average capital balances, and residual
profit or loss is divided equally. Partnership profit before interest was P4,000. By what amount should
Zinc’s capital account change for the year?
Correct answer: 1,000 decrease
Question 22
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M, N and O share profits and losses at 2:2:1, after respective salaries of P48,000, P36,000, P24,000; but
if earnings are not adequate to cover the salary allowances, the earnings shall be distributed in the
salary ratio. The net income distributed in 2014 amounted to P103,500. A subsequent review of the
records, however, revealed that the 2014 depreciation expense had been understated by P4,500 because
capital items of P24,000 had been erroneously expensed. As at the end of 2014, O capital is overstated
(understated) by
Correct answer: (4,000)
Question 23
In the AB partnership, Allen's capital is P140,000 and Ben's is P40,000 and they share income in a 3:1
ratio, respectively. They decided to admit Charlie to the partnership. Each of the following questions is
independent of the others.
Charlie directly purchases a one-fifth interest by paying Allen P34,000 and Ben P10,000. The land
account is increased before Charlie is admitted. By what amount is the land account increased?
Correct answer: P40,000
Question 24
SHK and SJK created a partnership to own and operate a health food store. The partnership agreement
provided that SHK receive a salary of P10,000 and SJK, a salary of P5,000 to recognize their relative time
spent in operating the store.
Remaining profits and loses were divided 60:40 to SHK and SJK, respectively. Income for 2016, the 1st
year of operations of P`13,000 was allocated 8,800 to SHK and P4,200 to SJK. On January 1, 2017, the
partnership agreement was changed to reflect the fact that SJK could no longer devote any time to the
store’s operations. The new agreement allows SHK a salary of 18,000 and the remaining profit and losses
are divided equally.
In 2017, an error was discovered such that 2016 reported income was understated by 4,000. The
partnership net income of P25,000 for 2016 included in this is P4,000 income related to 2013. What
amount should be credited to SHK’s capital in 2017?
Correct answer: 21,900
Question 25
Dengue and Zika share profits and losses in the ratio of 1:2. Dengue receives a monthly salary of
P150,000. If Dengue’s capital balance is P2,500,000 at the beginning of the year and P2,000,000 at the
end of the year, the annual partnership profit after salaries is P1,200,000, then Dengue withdrew:
Correct answer: P2,700,000
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Question 26
Bol,Bal and Bel are partners in an accounting firm. Their capital account balances at year-end were
P180000, P220000, and P100000, respectively. They share profits and losses on a 4:4:2 ratio, after
considering the following items:
>Bel is to receive a bonus of 10% of profit after bonus
>Interest of 10% shall be paid on that portion of a partner's capital in excess of P200000
>Salaries of P20000 and P24000 shall be paid to partners Bol and Bel, respectively.
Assuming a profit of P220000 for the year, what is the total profit share of Bel?
Correct answer: 74800
Question 27
David and Goliath are considering forming a partnership whereby profits will be allocated through the
use of salaries and bonuses. Bonuses will be 10% of net income after total salaries and bonuses. David
will receive a salary of P30,000 and a bonus. Goliath has the option of receiving a salary of P40,000 and a
10% bonus or simply receiving a salary of P52,000. Both partners will receive the same amount of
bonus.
Determine the level of net income that would be necessary so that Goliath would be indifferent to the
profit sharing option selected.
Correct answer: P334,000
Question 28
Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the
partnership’s formation:
Roberts Smith
Cash 20000 30000
Inventory 15000
Building 40000
Furniture and Fixture 15000
The building is subject to a mortgage of 10000 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 respectively at the formation of the partnership.
Correct answer: 35000;75000
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Question 29
Biwan and Bitu are partners who share profits equally and losses in a ratio of 2:1. Biwan and Bitu have
beginning capital balances of P400,000 and P500,000, respectively and have no withdrawals during a
period of two years. After a profitable operations on the first year with a profit of P400,000 and an
unprofitable operations on the second year with a loss of P240,000, what will be the capital balances of
Biwan and Bitu respectively?
Response: [none]
Correct answer: P440,000 and P620,000
Question 30
On December 1, 2012, A and B formed a partnership, agreeing to share for profits and losses in the ratio
of 2:3 respectively. A invested a parcel of land that cost himP25,000, B invested P30,000 cash. The land
was sold for P50,000 on the same date, three hours after formation of the partnership. How much
should the capital balance of A right after formation?
Response: [none]
Correct answer: 50,000
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