Numbers 1 and 2 (Partnership Formation)

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment
with assessed value of P100,000 with historical cost of P800,000 and accumulated depreciation
of P600,000. A day after the partnership formation, the equipment was sold for P 300,000.

B will contribute a land and building with carrying amount of P1,200,000 and fair value of
P1,500,000. The land and building are subject to a mortgage payable amounting to P300,000 to
be assumed by the partnership. The partners agreed that B will have 60% capital interest in the
partnership. The partners also agreed that C will contribute sufficient cash to the partnership.

1. What is the total agreed capitalization of the ABC Partnership?

A. 1,500,000
B. 2,000,000
C. 2,500,000
D. 3,000,000

2. What is the cash to be contributed by C in the ABC Partnership?

A. 500,000
B. 600,000
C. 700,000
D. 800,000

Numbers 3 and 4 (Partnership Operation – Capital Account Transactions)

On January 1, 2018, A, B and C formed ABC Partnership with total agreed capitalization of
P1,000,000. The capital interest ratio of the ABC Partnership is 5:1:4 while the profit or loss
ratio is 3:2:5, respectively for A, B and C.

During 2018, A and B made additional investments of P200,000 and P500,000, respectively. At
the end of 2018, B and C made drawings of P300,000 and P100,000, respectively. On December
31, 2018, the capital balance of B is reported at P200,000.

3. What is the net income or net loss of ABC Partnership for the year ended December 31,
2018?
A. 500,000 loss
B. 1,000,000 loss
C. 800,000 income
D. 1,200,000 income

4. What is the capital balance of C on December 31, 2018?

A. 150,000
B. 50,000
C. 200,000
D. 250,000
Number 5 (Admission of partner by purchase)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 1:6:3:
Current Assets 1,000,000 Total Liabilities 600,000
Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000

On January 1, 2019, D is admitted to the partnership by purchasing 40% of the capital interest of
B at a price of P500,000.

What is the capital balance of B after the admission of D on January 1, 2019?

A. 540,000
B. 480,000
C. 420,000
D. 300,000

Number 6 (Retirement of partner)

On December 31, 2018, ABC Partnership’s Statement of Financial Positions shows that A, B and
C have capital balances of P500,000, P300,000 and P200,000 with profit or loss ratio of 1:3:6.
On January 1, 2019, C retired from the partnership and received P350,000. At the time of C’s
retirement, an asset of the partnership is undervalued.

What is the capital balance of A after the retirement of C?

A. 462,500
B. 537,500
C. 562,500
D. 525,000

Number 7 (Retirement of partners)

On December 31, 2018, ABC Partnership’s Statement of Financial Position shows that A, B and
C have capital balances of P400,000, P300,000 and P100,000 with profit or loss ratio of 1:4:5.
On January 1, 2019, C retired from the partnership and received P80,000. At the time of C’s
retirement, the assets and liabilities of the partnership are properly valued.

What is the capital balance of B after the retirement of C?

A. 284,000
B. 308,000
C. 316,000
D. 320,000
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Number 8 (Partnership Dissolution – Admission of New Partner by Investment)

On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 1:6:3:
Current Assets 1,300,000 Total Liabilities 300,000
Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1, 2019, D is admitted to the partnership by investing P1,000,000 to the partnership
for 20% capital interest.
If the all the assets of the existing partnership are properly valued, what is the capital balance of
C after the admission of D?
A. 960,000
B. 900,000
C. 840,000
D. 1,200,000

Numbers 9 and 10 (Partnership Liquidation – Lump Sum Liquidation)

On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or
loss ratio of 6:1:3 of partners A, B and C respectively, revealed the following data:

Cash 1,000,000 Other Liabilities 2,000,000

Receivable from A 500,000 Payable to B 1,000,000
Other noncash assets 2,000,000 Payable to C 100,000
A, Capital 700,000
B, Capital (650,000)
C, Capital 350,000

On January 1, 2019, the partners decided to liquidate the partnership. All partners are legally
declared to be personally insolvent. The other noncash assets were sold for P1,500,000.
Liquidation expenses amounting to P100,000 were incurred.

9. How much cash was received by B at the end of partnership liquidation?

a. 250,000
b. 150,000
c. 290,000
d. 270,000

10. How much cash was received by C at the end of partnership liquidation?
a. 270,000
b. 150,000
c. 350,000
d. 220,000
Numbers 11, 12 and 13 (Partnership Liquidation – Installment Liquidation)

On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or
loss ratio of 5:3:2 of respective partners A, B and C. showed the following information:

Cash 1,600,000 Total Liabilities 2,000,000

Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000

On January 1, 2019, the partners decided to liquidate the partnership in installment. All partners
are legally declared to be personally insolvent.

As of January 31, 2019, the following transactions occurred:

 Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000.
 Liquidation expenses for the month of January amounting to P50,000 were paid.
 It is estimated that liquidation expenses amounting to P150,000 will be incurred for the
month of February, 2019.
 20% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.

As of February 28, 2019, the following transactions occurred:

 Remaining noncash assets were sold at a loss of P100,000.
 The final liquidation expenses for the month of February amounted to P100,000.
 The remaining liabilities to third persons were settled at a compromise amount of
P1,500,000.
 Remaining cash was finally distributed to the partners.

11. What is the amount of cash received by partner C on January 31, 2019?
a. 260,000
b. 240,000
c. 300,000
d. 350,000

12. What is the share of B in the maximum possible loss on January 31, 2019?
a. 275,000
b. 110,000
c. 120,000
d. 165,000

13. What is the amount of total cash withheld on January 31, 2019?
a. 550,000
b. 1,600,000
c. 1,750,000
d. 1,700,000