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IMUS INSTITUTE

SY 2015- 2016

PRACTICAL ACCOUNTING II
OPERATION

PARTNERSHIP FORMATION and

PROBLEM 1.
Kram and Yazi decided to form a partnership on May 01, 201. Their Statement of Financial
Position on this date are:
Kram

Yazi

Cash

65,625.00

164,062.50

Accounts Receivable

1,487,500.00

896,875.00

Merchandise Inventory

875,000.00

885,937.50

Equipment

656,250.00

1,268,750.00

3,084,375.00

3,215,625.00

Accounts Payable

459,375.00

1,159,375.00

Kram, Capital

2,625,000.00

Total

Yazi, Capital
Total

2,056,250.00
3,084,375.00

3,215,625.00

They agreed to have the following adjustments shall be made:


Equipment of Kram is underdepreciated by 87,500.00 and that Yazi is
overdepreciated by 131,250.00
Allowance for doubtful accounts is to be set up amounting to 297,500.00 for Kram
and 196,875.00 for Yazi.
Inventories of 21,875.00 and 15,312.50 are worthless in the books of Kram and
Yazi respectively.
The partnership agreement provides for a profit and loss ratio of 70% to Kram and
30% to Yazi.
How much is the agreed capital of Kram to bring the capital balances proportionate to their
profit and loss ratio?

P2 - 01

PROBLEM 2.
On January 01, 2015, Kram and Yazi agreed to form a partnership. The following are their
assets and liabilities:
Kram

Yazi

Cash

136,000.00

Accounts Receivable

88,000.00

Inventory

304,000.00

364,000.00

Machinery

480,000.00

440,000.00

Accounts Payable

216,000.00

144,000.00

Notes Payable

140,000.00

60,000.00

76,000.00
48,000.00

Kram decided to pay-off his notes payable from his personal assets. It was also agreed that
Yazi inventories were overstated by 24,000.00 and Kram machinery was over depreciated
by 20,000.00. Yazi invest/withdraw cash in order to receive a capital credit that is 20%
more than Krams total net investment in the partnership. How much cash will be presented
in the partnerships statement of financial position?

PROBLEM 3.
On December 1 2014, Kram and Yazi agreed to invest equal amounts and share profits
equally to form a partnership. Kram invested 3,120,000 cash and a piece of equipment.
Yazi invested some assets which are shown below:

Particulars
Accounts Receivables
Inventory
Machineries, Net
Intangibles, Net

Book Value
400,000
1,120,000
2,240,000
920,000

The assets invested by Yazi are not properly valued. 32,000 of the accounts receivables are
proven uncollectible. Inventories are to be written down to 1,040,000. Included in the
machineries is an obsolete apparatus acquired for 384,000 with an accumulated
depreciation balance of 336,000. Part of the intangibles is a patent with a carrying value of
56,000 which was sued upon by a competitor. Yazi unsuccessfully defended the case and
the final decision of the court was released on November 29, 2014. What is the fair value of
the equipment invested by Kram?

PROBLEM 4.

P2 - 01

On December 1 2014, Kram invited Yazi to join him in his business. Yazi agreed provided that
Kram will adjust the accumulated depreciation of his equipment account to a certain
amount, and will recognize additional accrued expenses of 50,000. After that, Yazi is to
invest additional pieces of equipment to make her interest equal to 45%. If the capital
balances of Kram before and after the adjustment were 695,000 and 605,000
respectively, what is the effect in the carrying value of the equipment as a result of the
admission of Kram?

PROBLEM 5.
On December 1 2014, Kram and Yazi are combining their separate business to form a
partnership. Cash and noncash assets are to be contributed, The noncash assets to be
contributed and the liabilities to be assumed are as follows:
Particulars

Kram
Book Value
Fair Value

Yazi
Book Value

Fair Value

Accounts
Receivables

250,000

262,500

200,000

195,000

Inventory

400,000

450,000

200,000

207,500

PPE

1,000,000

912,500

862,500

822,500

Accounts Payable

150,000

150,000

112,500

112,500

Kram and Yazi are to invest equal amount of cash such that the contribution of Kram would
be 20% more than the investment of Yazi. What is the amount of cash presented on the
partnerships Statement of Financial Position on December 1, 2014?

PROBLEM 6.
KY Partnership began operations on June 01, 2014. On that date, Kram and Yazi have capital
credits of 175,000 and 240,000, respectively. The partnership has the following profitsharing plan:

10% interest on partners capital balances at the end of the year

60,000 and 75,000 annual salaries for Kram and Yazi, respectively.

Remaining profit will be divided to Kram and Yazi on a 3:2 ratios, respectively.

During the year, Kram invested 150,000 worth of merchandise and withdrew 40,000
cash, while Yazi invested 120,000 cash. The partnership earned a profit 266,375 during
the year. How much is Krams capital balances at the end of 2014?

PROBLEM 7.
Kram and Yazi are partners who have the agreement to share profit and loss in the following
manner:
Kram

Yazi

P2 - 01

Annual Salaries
Interest on average balances
Bonus (based on net income after salaries and
interest)
Remainder

261,000
5%

259,000
10%

10%
50%

50%

During the year ended December 31, 2014, the partnership generated a profit of 575,000
before any deductions. Krams and Yazis average capital balances for the year are 600,000
and 300,000, respectively. Income is distributed to the partners only as far as it is
available. How much is the total share of Yazi in the net income for the year ended 2014?

PROBLEM 8.
The following Statement of Financial Position for the Partnership of Eren, Mikasa and Armin
were taken from the books on October 01, 2014.

Assets
Cash
P
100,000.00
Other Assets
400,000.00

Total Assets

500,000.00

Liabilities and Capital


Liabilities
P
200,000.00
Eren, Capital
120,000.00
Mikasa, Capital
95,000.00
Armin, Capital
85,000.00
Total Liabilities and Capital
500,000.00

The partners agreed to distribute profits as follows:

Annual Salafries to Eren and Mikasa of 5,000 each

Annual interest of 5% on beginning capital

Bonus of 15% to Eren based on income after salaries, interest and bonus

Remaining profit: 25% to Eren, 35% to Mikasa and 40% to Armin

The partnership began its operation on Oct, 01 2014 and net income as of Dec. 31, 2014 is
69,500. How much is the share of Eren in the net income?

PROBLEM 9.
Kram and Yazi are partners engaged in a manufacturing business. Transactions affecting the
partners capital accounts in 2014 are as follows:

Kram
Dr
Beg. Balance
April 01, 2015

Yazi
Cr

200,000

Dr

Cr
280,000

P2 - 01

120,000

80,000

June 30, 2015

100,000

200,000

September 01, 2015

180,000

240,000

October 01, 2015

280,000

160,000

The income summary has a debit balance of 180,000.


Agreement between Kram and Yazi are as follows:

Interest on average capital at 8%

Salaries of 100,000 and 140,000 are given to Kram and Yazi, respectively.

Bonus to Yazi at 25% of net income after deducting interest and salaries but before
deducting bonus

Balance is to be divided equally.

How much is the net/increase decrease in Yazi capital account during 2014?

PROBLEM 10.
Kram and Yazi are partners of KY partnership begin its first year of operations on June 01,
2014 with the following capital balances:
Kram, Capital
Yazi, Capital

1,440,000
720,000

According to the partnership agreement, all profits and losses will be distributed as follows:

Kram will be allowed an annual salary of 960,000 while Yazi will be allowed a
monthly salary of 112,000

The partners will be allowed with interest equal to 15% of the capital balance as of
the first day of the year.

Yazi will be allowed a bonus 12% of the net income after bonus

The remainder will be divided equally.

Each partner is allowed to withdraw up to 72,000.00 on the first year and up to


96,000 the following year and for the next three years.

Assume that the results of operations in 2014 from the date of formation are 560,000 net
income and 280,000 net losses on the following year. Assume further that each partner
withdraws the maximum amount from the business each period.
Which of the following statements is wrong?
a) The capital balance of Kram at end of 2015 is 1,242,925
b) The share of Yazi in the net loss in 2015 is a credit to capital account of 14,575

P2 - 01

c) There is a net increase of 97,500 in the capital account of Kram from beginning to
end of 2014.
d) The capital balance of Yazi at the end of first year is 1,038,500

P2 - 01