SAN BEDA COLLEGE

Mendiola, Manila

ACCOUNTING REVIEW PROF. ROEL E. HERMOSILLA

PARTNERSHIP FORMATION

PROBLEMS
1. On May 1, 2016, the business assets and liabilities of Emma and Liam were as follows:

Emma Liam
Cash P 8,000 P 62,000
Receivables 200,000 600,000
Inventories 120,000 200,000
Land, Building and Equipment 650,000 535,000
Other Assets 2,000 3,000
Accounts payable (180,000) (250,000)

Emma and Liam agreed to form a partnership by contributing their net assets, subject to the
following adjustments:
Receivables of P 20,000 in Emmas books and P 40,000 in Liams books are uncollectible.
Inventories of P 6,000 and P 7,000 in the respective books of Emma and Liam are
worthless
Other assets in both books are written of

Upon the partnerships formation:

The respective capital of partners Emma and Liam would be ___________ ; ____________ .
The total assets of the partnership would be _______________ .

2. Noah admits Olivia as a partner in business. Accounts in the ledger of Noah on June 1, 2016,
just before the admission of Olivia, show the following balances:

Cash P 26,000 Accounts Payable P 264,000

Accounts Receivable 120,000 Noah, Capital 62,000
Merchandise Inventory 180,000

It is agreed that for purposes of establishing Noahs interest, the following adjustments should
be made:
a. An allowance for doubtful accounts of 2% of accounts receivable is to be
established.
b. The merchandise inventory is to be valued at P202,000.
c. Prepaid expenses of P6,500 and accrued expenses of P4,000 are to be
established.

Olivia is to invest sufficient funds in order to receive a 1/3 interest in the

partnership.
a. How much is the adjusted capital of Noah?
b. How much cash should Olivia invest?
c. How much is the total assets of the partnership.
d. Journal entries in the books of the new partnership.

3. The balance sheet as of July 31, 2016, for the business owned by Ethan, shows the following
assets and liabilities:

Cash P100,000 Fixtures P328,000

Accounts Receivable 268,000 Accounts Payable 57,600
Merchandise 440,000

It is estimated that 5% of the receivable will prove uncollectible. The cash balance includes
1,000 share certificates of PNB at its cost, P8,000; the stock last sold on the market at P70.00
per share. Merchandise includes obsolete items costing P36,000 that will probably realize only
P8,000. Depreciation has never been recorded; the fixtures are 2 years old, have an estimated
life of 10 years, and would cost P480,000 if purchased new currently. Sundry prepaid items
amount to P10,000. Ava is to be admitted as a partner upon investing P400,000 cash and
P200,000 merchandise.
 PAGE 2

What will be the total capital after the formation of the partnership?

4. Logan and Isabella are partners sharing profits 60:40. A balance sheet prepared for the
partnership on April 1, 2016 shows the following:

Cash 48,000 Accounts 89,000

Payable
Accounts Receivable 92,000 Logan, Capital 133,00
0
Inventory 165,000 Isabella, 108,00
Capital 0
Equipment 70,000
Accumulated (45,000)
depreciation
330,000 330,00
0

On this date, the partners agree to admit Lucas as a partner. The terms of the agreement is that
assets and liabilities are to be restated as follows:
a. An allowance for possible uncollectibles of P4,500 is to be established
b. Inventories are to be restated at their present replacement values of P170,000
c. Equipment are to be restated at a value of P35,000
d. Accrued expenses of P4,000 are to be recognized

Logan, Isabella, and Lucas will divide profits in the ratio of 5:3:2. Capital balances for the new
partners are to be in this ratio with Logan and Isabella making cash settlement outside of the
partnership for the required capital adjustment between themselves and Lucas investing cash in
the partnership for his interest.

Questions: 1. How much cash Lucas should contribute?

2. How will you state the settlement between Logan and Isabella?
3. Journal entries to efect the above transactions?

5. Jackson and Charlotte establish a partnership to operate a used-furniture business under the
name of F & D Furniture. Jackson contributes furniture that cost P60,000 and has a fair value of
P90,000. Charlotte contributes P30,000 cash and delivery equipment that cost P40,000 and has
a fair value of P30,000. The partners agree to share profits and losses 60% to Jackson and 40%
to Charlotte.

Calculate the peso amount of inequity that will result if the initial noncash contributions of the
partners are recorded at cost rather than fair market value.

6. The balance sheet of the proprietorship of Jacob as of June 30, 2016 showed the following assets
and liabilities:
Cash P 40,000
Accounts Receivable 53,600
Inventory 88,000
Equipment 65,600
Accounts Payable 63,520

The cash balance included a 200- share certificate of BW Resources common at acquisition cost
of P 1,600; the current market quotation is 70 per share. Of the accounts receivable, an
estimated 5% is considered to be doubtful of collection. Certain inventory items, booked at a
cost of P 22,960, are currently worth P 16,000. Depreciation has not been recorded; the
equipment, acquired two years ago, has a remaining useful life of about eight more years.
Prepaid expense of P 12,800 and accrued expense of P 6,120 have not been properly
recognized. Emily and Bert will join Jacob in a partnership. Jacob will invest the net assets of his
business, after efecting the appropriate adjustments, and he will be allowed credit for goodwill
equal to 10% of his initial capital credit. Emily and Bert will each contribute cash to secure the
respective interests of 1/3 and 1/6, respectively.

a. Jacobs goodwill credit would be:

b. Emily cash investment would be:

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PARTNERSHIP OPERATIONS
PROBLEMS
1. GABRIEL and AUDREY organized the Levin Partnership on January Audrey 1, 2016. The following
entries were made in their capital accounts during 2016:
Debit Credit
GABRIEL, capital:
January Audrey 1 P180,0
00
April 1 P50,00
0
October 1 10,000
AUDREY, capital;
January Audrey 1 P60,00
0
March 1 P10,00
0
September 1 20,000
November 1 10,000
Required:
If the partnership net income, computed before salaries, interest or bonus is P56,000 for 2016,
indicate its division between the partners under each of the following independent profit-
sharing agreements:
a. Interest at 4% is allowed on average capital investments, and the balance is divided
equally Audrey.
b. A salary Audrey of P24,000 is to be credited to AUDREY, 4% interest is allowed on each
partner on his ending capital balance, and the balance in the ratio of beginning capital
balances.
c. Salaries allowed to GABRIEL and AUDREY in the amounts of P34,000 and P38,000,
respectively Audrey, and remaining profits and losses are divided in the ratio of average
capital balances.
d. A bonus of 10% of partnership net income is credited to GABRIEL, a salary Audrey of
P16,000 is allowed to AUDREY, and remaining profits and losses are shared equally
Audrey (the bonus is regarded as an expense for purposes of calculating the bonus
amount).

2. AC Partnership begins its first year of operations with the following capital balances:
A, capital P 32,000
C, capital 16,000
According to the partnership agreement , all profits will be distributed as follows:
A will be allowed a monthly salary of P 3,200 and P 1,600 to C.
The partners will be allowed with interest equal to 10% of the capital balances as of the first
day of the year.
A will be allowed a bonus of 10% of the net income after bonus
The remainder will be divided on the basis of the beginning capital for the first year and
equally for the second year
Each partner is allowed to withdraw up to P 1,600 a year.

Assume that the net loss for the first year of operations is P 2,400 with net income of P 8,800 in
the following year. Assume further that each partner withdraws the maximum among from the
business each period.

What is the balance of As capital account at the end of the second year?

3. The following account balances appear in the ledger for the firm of X and Y at the end of 2016
before the profit for the year has been transferred to the partners accounts:

X, drawing P 72,000
Y, drawing 125,000

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X, loan P175,00
0
X, capital 500,000
Y, capital 500,000
Profit and loss 302,500
The following information is to be considered in closing the profit and loss account and the
drawing accounts:
1. The cost of installing equipment at the beginning of 2016, P27,000, was charged to expense.
The installation relates to equipment with a 10-year life.
2. The loan to the firm was made by X on March 1, 2016. No entry has been made for interest
on the loan, which is 6% and is to be paid to X at the time the loan is repaid.
3. The partnership agreement permits X and Y to withdraw weekly sums of P1,500 and P2,250,
respectively, these amounts to be regarded as salaries. Actual withdrawals by partners
difered from allowed amounts and are summarized in the drawing accounts.
4. Y, the managing partner, is entitled to a special bonus of 25% of the net profit after
deduction of all special allowances to partners (including the bonus), and any remaining
profit is to be distributed equally.

a) How much should be the share of each partner in the NI?

b) How much should be the Dec. 31 ending capital balance of each partner?

4. The following Balance Sheet for the partnership of Joshua, Scarlett and Matthew were taken from
the books on October 1, 2016.
ASSETS LIABILITIES & CAPITAL
Cash P 100,000 Liabilities P 200,000
Other Assets 400,000 Joshua, capital 120,000
Scarlett, capital 95,000
________ Matthew, capital 85,000
Total Assets P 500,000 Total Liabilities and 500,000
Capital

The partners agreed to distribute profits as follows:

1) Annual salaries to Joshua and Scarlett of P 5,000 each
2) Annual interest of 5% on beginning capital
3) Bonus of 15% to C based on income after salaries, interest and bonus
4) Remaining profit: 25% to Joshua, 35% to Scarlett and 40% to Scarlett

The partnership began its operations on October 1, 2016 and net income as of December 31,
2016 is P 69,500. Which of the following is true?
A. The bonus to C is P 5,804
B. Net Income after salaries, interest and bonus is P 38,696.
C. Scarletts total share in the net income is P 21,688.
D. Matthews share on the profit after salaries, interest and bonus is P13,543.

5. A, B, and C, doctors, agree to form a partnership and to share profits in the ratio 5:3:2. They also
agreed that C is to be allowed a salary of P140,000 and that B is to be guaranteed P105,000 as
his share of the profits. During the first year of operations, income from fees are P900,000, while
expenses total P480,000. How much of the profit should be credited to A?, to B?, to C?

6. Partners L and M share profits 3:1 after annual salary allowances of P40,000 and P60,000,
respectively; however, if profits are not adequate to meet the salary allowances, the entire profit
is to be divided in the salary ratio. Profits of P90,000 were reported for the year 2015. In 2016 it
is ascertained that in calculating net income for the year ended December 31, 2015,
depreciation was overstated by P36,000 and ending inventory was understated by P8,000.

a) What adjustments should be made on the capital of L and M?

b) Adjusting entry needed to correct the partners capital balances.

7. The Gulp Co., a partnership was formed on January 1, 2016, with four partners, C, P, A, and S.
Capital contributions were as follows: C- P1,000,000; P- P500,000; A- P500,000; and S-
P400,000. The partnership agreement provides that each partner shall receive 5%interest on
the amount of his capital contribution. In addition, C is to receive a salary of P100,000 and P a
salary of P60,000, which are to be charged as expenses of the business. The agreement further
provides that A shall receive a minimum of P50,000 per annum from the partnership and S a
minimum of P120,000 per annum, both
including amounts allowed as interest on capital and their respective shares of profits. The
balance of the profits to be shared in the following proportions: C- 30%; P- 30%; A- 20%; and S-
20%. Calculate the amount that must be earned by the partnership during 2016, before any
charge for interest on capital or partners salaries, in order that C may receive an aggregate of
P250,000, including interest, salary and share of profits.

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8. The income statement of Rachel-Cecilia Partnership for the year ended Dec. 31, 2016 appear
below:
Sales P600,000
Less: Cost of goods sold 380,000
Gross profit 220,000
Less: Operating expenses 60,000
Net income P160,000
Additional information:
1. Rachel and Cecilia began the year with a capital balance of P81,600 and P224,000,
respectively.
2. On April 1, Rachel invested an additional P30,000 into the partnership and on August 1,
Cecilia invested an additional P40,000 into the partnership.
3. Throughout 2016, each partner withdrew P800 per week in anticipation of partnership net
income. The partners agreed that these withdrawals are not to be included in the
computation of average capital balances for purposes of income distributions.
Rachel and Cecilia have agreed to distribute partnership net income according to the following:
Rachel Cecilia
1. Interest on average capital balances 6% 6%
2. Bonus on net income before the bonus but after
interest on average capital balances 10%
3. Salaries P 50,000 P 60,000
4. Residual (if positive) 70% 30%
5. Residual (if negative) 50% 50%
a. The share of Rachel and Cecilia on the net income:
b. The ending capital balance of Cecilia:
CHANGES IN PARTNERSHIP

PROBLEMS
1. A condensed balance sheet for the AA, BB and CC partnership at December 31, 2015, and their
profit and loss sharing percentages on that date are as follows:
Cash P 15,000 Liabilities P50,000
Other assets 185,000 AA, Capital (50%) 75,000
BB, Capital (30%) 50,000
CC, Capital (20%) 25,000
P200,000 P200,000

On January 1, 2016 the partners decided to bring DD into the partnership under the following
independent assumptions:
Questions:
a. Assuming that DD would purchase one-half of AA's capital and right to future profits directly
from AA for P60,000, how much capital is to be credited to DD?
b. Assuming that DD would purchase one-fourth of each of the partner's capital and rights to
future profits by paying a total of P45,000 directly to the partners, the partnership net assets
are to be revalued. How much will be the capital balance of BB after DD's admission?
c. Assuming that DD would invest P55,000 cash in the partnership for a 25 percent interest in
capital. Future profits would be divided 37-1/2 percent, 22-1/2 percent, 15 percent and 25
percent for AA, BB, CC and DD respectively. Partnership net assets are not to be revalued.
How much capital is to be credited to DD?

2. Capital balances and profit sharing percentages for the partnership of Aaron, Nimrod, and Elijah
on January 1, 2016 are as follows:
Aaron (36%) P140,000
Nimrod (24%) 100,000
Elijah (40%) 160,000
On January 3, 2016 the partners agree to admit Ruth into the partnership for a 25% interest in
capital and earnings for his investment in the partnership of P120,000. Partnership assets are
not to be revalued.

a. The capital balances of Aaron, Nimrod , Elijah and Ruth, immediately after the admission
of Ruth would be:
b. What will be new profit and loss ratio for Aaron, Nimrod, Elijah and Ruth, if old partners will
share profits using the old ratio?

3. The balance sheet of the Dylan and Samuel Partnership at December 31, 2015, appears below:
Assets: Liabilities and Capital:
Cash P 15,000 Accounts Payable P 35,000
Accounts Receivable (net) 45,000 Notes Payable 25,000
Inventories 75,000 Accrued Liabilities 40,000

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 PAGE 6

Property, Plant, and Mortgage Payable 110,000

Equipment, (net) 225,000 Dylan, Capital 60,000
Samuel, Capital 90,000
P360,000 P360,000

Determine the capital balances of partners immediately after the admission of Sebastian under
the following independent situations:
a. Sebastian acquired a 25 percent interest in partnership capital directly from Dylan and
Samuel for P50,000. Sebastian paid P18,750 directly to Dylan and P31,250 directly to
Samuel. Total assets of the partnership after the admission of Sebastian were P360,000.
How much must be the capital balance of Dylan immediately after the admission of
Sebastian?
b. Assume the same facts as in a except that total assets of the partnership were P410,000
after the admission of Sebastian. At January 1, 2016, inventories had a fair value of
P85,000, while property, plant, and equipment (net) had a fair value of P265,000. Both
Dylan and Samuel decided to revalue the partnerships assets before the admission of
Sebastian. Determine the capital balance of Samuel immediately after the admission of
Sebastian.
c. Sebastian acquired a 25 percent interest in capital by investing P50,000 of cash into the
partnership. Total capital of the Dylan-Samuel-Sebastian Partnership on January 1, 2016,
amounted to P200,000. Determine the capital balance of Sebastian immediately after his
admission.
d. Sebastian acquired 25 percent interest in capital by investing P80,000 of cash into the
partnership. Total capital of the Dylan-Samuel-Sebastian Partnership after Sebastians
admission amounted to P320,000. The fair value of the inventories was P85,000 and the fair
value of the property, plant, and equipment (net) was P305,000 on January 1, 2016.
Determine the capital balance of Dylan, Samuel and Sebastian immediately after
Sebastians admission.

4. I and H are partners who have capitals of P60,000 and P48,000 and who share profits in the
ratio of 3:2. I is admitted as a partner upon investing cash of P50,000 with profits to be shared
equally.

Questions:
a. Assume that I is allowed a 25 percent interest in the firm, which method (goodwill or
bonus) will benefit I, and how much?
b. Assume that I is allowed a 40 percent interest in the firm, which method (goodwill or
bonus) will benefit I, and how much?

5. F, G and H are partners with capital balances on June 30, 2016, of P300,000, P300,000 and
P200,000, respectively. Profits are shared equally. H withdraws from the partnership. The
partners agree that H is to take certain furniture and fixtures at their secondhand value of
P12,000 and a note for the balance of her interest. The furniture and fixtures are carried on the
books as fully depreciated.

Questions:
a. How much is the note payable issued to H?
b. Is there an efect on the capital accounts of F, and G, regarding H's taking of furniture
and fixtures at their second hand value of P12,000?

6. L, M, and N are partners sharing profits in the ratio of 3:2:1, respectively. Capital accounts are
P500,000, P300,000 and P200,000 on December 31, 2015, when N decides to withdraw. It is
agreed to pay P300,000 for N's interest. Profits after the withdrawal of N are to be shared
equally.
Questions:
a. Using the bonus approach, how much are the capital balances of L and M after N's
withdrawal?
b. Using the goodwill approach, how much are the capital balances of L and M after N's
withdrawal?

7. O, P and Q share profits in the ratio of 5:3:2. S is permitted to withdraw from the firm on
December 31, 2016. Profits after the withdrawal of Q are to be shared 3:2. The partnership
balance sheet on this date is as follows:
Receivable from Q P10,000 Liabilities P80,000
Goodwill 80,000 Payable to P 30,000
Other assets 190,00 O, capital 70,000
0
P, capital 60,000
Q, capital 40,000
P280,00 P280,000

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 PAGE 7

0
Questions:
a. Assuming that Q is paid P44,000 in full settlement of the capital interest and P10,000 claim
balance, using the bonus method of recording the withdrawal of Q, how much are the
capital balances of O and P after Q's withdrawal?
b. Using the data in question A, using the goodwill method of recording Q's withdrawal, how
much are the capital balances of O and P after Q's retirement?
c. In relation to A & B, which method is preferred by GAAP in recording Q's withdrawal and
why?
d. Assuming that Q is paid P24,000 in full settlement of the capital interest and P10,000 claim
balance, using the bonus method, how much are the capital balances of O and P after
withdrawal of Q?
e. Using the data in question d, using the goodwill method, how much are the capital balances
of O and P after Q's withdrawal?
f. In relation to d and e, which method is preferable by GAAP?
And why?

8. Philip, of Philip and Romy, partners sharing profits in the ratio of 60% and 40% wants to retire.
The partners agree that the fixed assets are undervalued by P20,000, that goodwill is worth
P15,000, and that Philips share of these increases shall be recorded and creditable to his
capital account. Since the working capital is only P70,000, it is decided that Philip shall
receive only one-third of his adjusted capital credit in cash. For the remainder, he accepts
securities, which have been carried as other assets at their book value and market value of
P12,000, and a six-month note payable.

The balance sheet, which is then prepared, appears as follows:

Current assets P 53,000 Current liabilities P 52,000
Other assets 3,000 Romy, capital 50,000
Fixed assets 37,000 Goodwill
9,000 -
P102,000 P102,000
Questions:
a. Current assets before Philips retirement must be:
b. Current liabilities before Philips retirement must be:
c. Fixed assets before Philips retirement must be:
d. Other assets before Philips retirement must be:
e. Philips adjusted capital balance must be:

PARTNERSHIP LIQUIDATION
PROBLEMS
1. A, B, and C are partners sharing profits in the ratio of 5:3:2, respectively. A balance sheet
prepared just prior to partnership liquidation shows the following:
A B C
Capital Balances P122,000 P 72,000 P 47,000
Loan Balances 43,000 48,000 6,000
Assets are sold and cash is distributed to partners in monthly installments during the course of
liquidation as follows:
January P20,000
February 50,000
March 80,000
April (final distribution) 20,000
Required:
a. Prepare a program to show how cash is to be distributed during the entire course of
liquidation.
b. Using the program developed above, prepare a schedule summarizing the payments to be
made to partners at the end of each month.

2. D, E and F are partners sharing profits in the ratio of 40:35:25, respectively. On December 31,
2016, they agree to liquidate. A balance sheet prepared on this date follows:
DEF Partnership
Balance Sheet
As of December 31, 2016
Cash P 2,000 Liabilities P 6,000
Other Assets 46,000 E, Loan 5,000
F, Loan 2,500
D, Capital 14,450
E, Capital 12,550

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F, Capital 7,500
P48,000 P48,000
The results of liquidation are summarized below:
Book Cash Expense Cash W/held at Liability
Value Realiz s of end of month paid
Realization
ed Realizati for estd. Future
s
on exps.
January P12,00 P10,50 P500 P2,00 P4,00
February 7,0000 6,0000 750 0
1,250 0
2,000
March 15,000 10,000 600 500 ---
April 12,000 4,000 400 --- ---
All cash available, except the amount withheld for future expenses, is distributed at the end of
each month.
Required: Determine the share of each partner every month of distribution.

3. The balance sheet of J, K and L Partnership shows the following information as of December 31,
2016:
Cash P 2,000 Liabilities P 5,000
Other Assets 28,000 J, Loan 2,500
J, Capital 12,500
K, Capital 7,000
L, Capital 3,000
P30,000 P30,000

Profit and loss ratio is 3:2:1,respectively, for J, K, and L. Other assets were realized as follows:
Date Cash Received Book Value
January, 2016 P 8,000 P 9,000
February, 2016 3,500 7,700
March, 2016 12,500 11,300
Cash is distributed as assets are realized.
a. How much is the total loss to J?
b. How much is the total cash received by K?
c. How much cash does L receive in January?

4. Balance sheet data for the firm of W, X, and Y as of January 1, 2016, follow:
Assets P1,225,000 Liabilities P 675,000
W, capital 200,000
_________ X, capital 200,000
P1,225,000 Y, capital ___200,000
P1,225,000
Partners share profits equally after the allowance of a salary to Y, the managing partner, of
P7,500 monthly. As a result of operation losses sustained at the beginning of 2016, W advanced
P150,000 to the firm on April 1; it was agreed that he would be allowed interest at 6%. With
continued losses, the members decided to liquidate. Y agreed to take over partnership
equipment in part settlement of his interest, the transfer being made at an agreed value of
P40,000. On November 1, P200,000 cash was available for distribution to partners after sale of
remaining assets and payment of partnership obligations to outsiders. Y had withdrawn his
salary for January and February but had not received his salary for the period March 1 to
November 1; no other cash payments had been made to partners. Available cash was distributed
on November 1 and the firm was declared dissolved. How much cash should W received in the
distribution of P200,000 cash available?

5. Z, Y, and X form a form a partnership on January 1, 2016, investing P150,000, P100,000 and
P100,000, respectively. Profits and losses are to be shared in the ratio 2:1:1, respectively. It is
agreed that 6% (1/2 of 1% per month) is to be charged on withdrawals that decrease capital
below the original investments. On March 1, Z withdraws P50,000. Business is unsatisfactory and
it is decided to dissolve partnership. Partnership assets realized P50,000 and the accountant
distributes this cash to the proper parties on November 1, 2016. All parties are solvent, and
proper settlement is made among partners the same day.
Questions:
a. How much is the total liquidation loss?
b. Show the final cash settlement among partners.

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6. The accounts of the partnership of Lora, Rosa and Joaquin at the end of its fiscal year on
November 30, 2016 are as follows:
Cash P 103,750 Loan from Rosa P 20,000
Other Non cash assets 707,500 Lora, capital (30%) 266,250
Loan to Lora 15,000 Rosa, capital (50%) 136,250
Liabilities 262,500 Joaquin, Capital (20%) 141,250
If in the first distribution, Rosa received P 50,000, which of the following is incorrect?
A. Total amount distributed to partners is P 336,250
B. Total amount paid to creditors is P 262,500
C. Total amount realized from the non cash assets is P 598,750.
D. Lora received an amount equal to P 187,500.

7. The partnership of B, O and Y was dissolved on October 30, 2016, and the account balances
after all noncash assets are converted to cash on November 1, 2016, along with residual profit
and loss sharing ratios, are:
Cash P 50,000
Accounts payable P120,000
B, capital (30%) 90,000
O, capital (30%) (60,000)
Y, capital (40%) (100,000)

Personal assets and liabilities of the partners at November 1, 2016 are:

Personal assets Personal liabilities
B P 80,000 P 90,000
O 100,000 61,000
Y 100,000 80,000
If Y contributed P70,000 to the partnership to provide cash to pay the creditors, what amount of
Rs P90,000 partnership equity would appear to be recoverable?

8. The partnership of Daniel, Keith, and Ross is to be liquidated as soon as possible after December
31, 2015, and all cash on hand except for P20,000 contingency balance is to be distributed at
the end of each month until the liquidation is complete. Profits and losses are shared 50%, 30%,
and 20% to Daniel, Keith, and Ross, respectively.
A balance sheet of the partnership at December 31, 2015 contains the following accounts and
balances:
Cash P 240,000 Accounts Payable P 300,000
Accounts Receivable 280,000 Notes Payable 200,000
Loan to Ross 40,000 Loan from Keith 20,000
Inventories 400,000 Daniel, Capital 340,000
Land 100,000 Keith, Capital 340,000
Equipment (net) 300,000 Ross, Capital 200,000
Goodwill 40,000
P1,400,000 P 1,400,000

In January, 2016, the loan to Ross was ofset against his capital balance and the goodwill is
written of. P200,000 is collected on account, inventory items that cost P160,000 are sold for
P200,000, and cash is distributed.

a. If available cash is distributed on January 31, 2016, Daniel, Keith, and Ross, respectively,
should receive:

b. If a cash distribution plan is developed as of January 1, 2016, the vulnerability ranks (1 is

most vulnerable) for Daniel, Keith, and Ross is:

9. After all partnership assets were converted into cash and all available cash were distributed to
creditors, the following were determined:
Ledger Balances Personal Assets Personal Liabilities
Accounts Payable P 20,000
Rose, Capital (30%) 10,000 P 50,000 P 45,000
Sol, Capital (30%) 60,000 50,000 40,000
Taz, Capital (40%) (90,000) 100,000 40,000
The partnership creditors proceed against Taz for recovery of their claims, and the partners
settle their claims against each other. The amount recovered by Sol from Taz is:
a. P 55,000 b. P45,000 c. P40,000 d. P60,000

10. Elizabeth, Diana, Anthony, and Scarlett were partners who decided to liquidate the afairs of the
partnership. Prior to dissolution, the condensed balance sheet together with the profit and loss
sharing ratio was derived as follows:
Cash P 100,000 Liabilities P 750,000

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Other assets 1,800,000 Diana, loan 60,000

Scarlett, loan 50,000
Elizabeth, capital (30%) 420,000
Diana, capital (30%) 315,000
Anthony, capital (20%) 205,000
Scarlett, capital (20%) 100,000
P 1,900,000 P1,900,000

The other assets were sold for P1,200,000. Payments were made to creditors and final
distributions of cash were made to partners.

a. The partner who got paid the most was:

b. The cash received by Scarlett will be applied:

Reh/cde

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