Review

Financial Accounting and Reporting II

Midterm Examination Review

 Kebs Merchandise 38,000
Statement of Financial Position (30,000)
December 31, 2021 8,000
ASSET LIABILITIES & CAPITAL King: 8,000 x 3/6 = 4,000
Cash 35,000 Accounts Payable 40,000
20,000 – 4,000 = 16,000
Accounts Receivable 20,000 Mortgage Payable 60,000
Inventory 45,000 King Capital 20,000 Sing: 8,000 x 3/6 = 4,000
Other Assets 90,000 Bing Capital 30,000
40,000 – 4,000 = 36,000
190,000 Sing Capital 40,000
190,000
The partnership started its operations on January 2, 2019 with King, Bing and Sing as partners, they share
profit/loss 30%, 40% and 30%, respectively. On December 31, 2021, Bing decided to withdraw from the
partnership. The partnership paid Bing 38,000. Using the Bonus method:
1.How much will be the capital balance of King after the withdrawal? 16,000
2.How much will be the capital balance of Sing after the withdrawal? 36,000
Yellow, Red and Blue are partners who share profit and loss 30%, 35% and 35%, respectively. They decided to
liquidate the partnership. Below is the Statement of Financial Position prior to liquidation.

ASSET LIABILITIES & CAPITAL

Cash 26,000 Liabilities 93,000
Other Assets 210,000 Red, Loan 3,000
236,000 Blue, Loan 22,000
Yellow, Capital 38,000
Red, Capital 20,000
Blue, Capital 60,000
236,000
Other Assets realized at P140,000.00. Deficient partner is insolvent
1.How much is the share of Yellow in the gain/(loss) on realization?
2.How much cash will Red receive in the liquidation?
3.How much cash will Yellow receive in the liquidation?
4.How much is the share of Blue in the additional loss?
5.How much is left in the deficiency of Red after offsetting it to his loan amount?
 Cash Other Assets Liabilities Red Loan Blue Loan Yellow Cap. Red Cap. Blue Cap.
Balance 26,000 210,0000 93,000 3,000 22,000 38,000 20,0 00 60,000
Realization 140,000 (210,000) (21,000) (24,500) (24,500)
Balance 166,000 0 93,000 3,000 22,000 17,000 (4,500) 35,500
Pyt of Liab (93,000) ( 93,000)
Balance 73,000 0 0 3,000 22,000 17,000 (4,500) 35,500
Offset of Loan (3,000) (3,000)
Balance 73,000 0 0 0 22,000 17,00 0 (1,500) 35,500
Addt’l Loss (692) 1,500 (808)
Balance 73,000 0 0 0 22,000 16,30 8 0 35,692
Payment (73,000) 0 0 0 (22,000) (16,308) 0 (35,692)
Other Assets realized at P140,000.00. Deficient partner is insolvent
1.How much is the share of Yellow in the gain/(loss) on realization? (21,000)
2.How much cash will Red receive in the liquidation? 0
3.How much cash will Yellow receive in the liquidation? 16,308
4.How much is the share of Blue in the additional loss? (808)
5.How much is left in the deficiency of Red after offsetting it to his loan amount? 1,500
Ey, Bee, and Cee are to form a partnership. Ey is to contribute cash of P100,000; Cash 110,000
Bee, P10,000, and Cee, an equipment valued at P100,000. Ey and Cee are not to (100,000+10,000)
actively participate in the business but will refer customers, while Bee will Equipment 100,000
manage the firm. Bee has to give up her present job which gives her an annual Total Asset 210,000
income of P120,000. The partners decided that profits and losses shall be Mortgage Payable (10,000)
shared equally. Upon formation, assuming a chattel mortgage of P10,000 on the
equipment is assumed by the partnership, the net assets of the partnership is Net Asset 200,000
equal to:
Land 80,000
Building 90,000
Mr. B and Ms. K form a new partnership. Mr. B invests P300,000 in cash for his Total Asset 170,000
60 percent interest in the capital and profits of the business. Ms. K contributes Mortgage Payable (40,000)
land that has an original cost of P40,000 and a fair market value of P80,000, and Net Asset 130,000
a building that has a tax basis of P50,000 and a fair value of P90,000. The
building is subject to a P40,000 mortgage that the partnership will assume. 300,000/60%= 500,00
What amount of cash should Ms. K contribute? Ms. B 300,000 & Ms. K 200,000
Ms. K 200,000-130,000
A, B and C formed a partnership. A will contribute cash amounting to P10,000 Cash =70,000
and B will contribute equipment costing P10,000. The equipment have an
estimated residual value of 5% of cost and the estimated useful life is 48
months. B have already used the equipment for 25% of its useful life. The fair
0
value of the equipment is P12,000. On the other hand, C will contribute his
services to the partnership which is equivalent to an annual salary of P100,000.
As of the formation of the partnership, how much is the capital contribution of
C?
Mr. B and Ms. K drafted a partnership agreement that lists the following assets contributed at the partnership’s
formation:
Mr. B Ms. K
Cash P40,000 P60,000
Inventory - 30,000
Building - 80,000
Furniture and equipment 30,000 -
The partnership agreement also specifies that profits and losses are to be distributed evenly. What amounts
should be recorded as capital for Mr. B and Ms. K at the formation of the partnership?

Mr. B Ms. K
Cash P40,000 P60,000
Inventory - 30,000
Building - 80,000
Furniture and equipment 30,000 -
70,000 170,000
Thalia, Calliope and Mnemosyne formed a partnership. Thalia, Calliope are both sole proprietors who have existing
businesses. They will contribute their net assets to the partnership while Mnemosyne will contribute her services. All
partners agreed to give Mnemosyne an annual salary amounting to P100,000 per year for her services to the partnership.
The unadjusted trial balance of Thalia and Calliope prior to the formation of the partnership disclosed the following
balances:
Thalia Capital Calliope Capital
Thalia Calliope
70,000 200,000
2,000 3,000 5,000 7,500
Assets 100,000.00 250,000.00 2,500 5,000
(100k x 25% x 10%) (250k x 20% x 10%)

Liabilities 30,000.00 50,000.00 10,000 . 20,000 .

58,500 177,500
Capital 70,000.00 200,000.00
All partners also agreed to the following adjustments:
1. The value of the equipment in the books of Thalia and Calliope was decreased by P2,000 and P5,000, respectively.
2. The value of the inventory accounts of Thalia and Calliope was increased by P3,000 and P7,500, respectively.
3. 10% of the Accounts Receivables of both businesses were written off. The Accounts Receivable of Thalia is equivalent to
25% of the total assets while Calliope's is equivalent to 20% of her total assets.
4. Accrued expenses amounting to 10,000 and 20,000 should be recognized in the books of Thalia and Calliope,
respectively.

Given the information above, compute for the contribution of Calliope to the new partnership. 177,500
Given the information above, compute for the total assets of the new partnership. 346,000
Thalia:100,000+3,000-2,000-2,500=98,500 Calliope:250,000+7,500-5,000-5,000=247,500
 Apple, a partner in the Grand Partnership, has a 40% participation in partnership profits and
losses. Apple’s capital account has a net decrease of P160,000 during the calendar year
2020. During 2020, Apple withdrew P420,000 and contributed property valued at P200,000
to the partnership.
How much was the net income of Grand Partnership for the year 2020?
Apple Capital
Apple share in Profit 60,000
420,000 200,000
60,000 Partnership Income 60,000/40% =150,000

160,000
Dianne and Danica are partners of Dianne Enterprises. The average Diane Danica Total
capital of Dianne and Danica are P500,000 and 250,000 respectively. Interest 50,000 25,000 75,000
The business earned a profit of 240,000 for the year. Salaries 150,000 80,000 230,000
The partners agreed profits and losses ratio are as follows: Bonus (240kx10%) 24,000 24,000
1. Interest of 10% on the average capital balances. Balance (44,500)(44,500) (89,000)
2. Salaries of 150,000 to Dianne and P80,000 to Danica per year will 155,500 84,500 240,000
be given.
3. Bonus of 10% of profit before interest, salaries and bonus but
before tax to Danica.
4. The balance to be divided equally.
How much will be allocated to Dianne? 155,500
The partnership has the following data:
1. Sales = P1,540,000
2. Cost of Goods Sold = P616,000
3. Operating Expenses = P150,000 Sales 1,540,000
4. Salary allocations to partners = P146,000 Cost of Goods Sold (616,000)
5. Interest paid to banks = P4,000 Operating Expenses (150,000)
6. Partners’ withdrawals = 100,000 Interest paid to banks (4,000)
How much was the profit or loss of the partnership? Net Profit 770,000

The capital accounts of Ale, Gian, and Moy are presented below with their respective profit and
loss ratios:

Ale P 384,000 (1/6)

Gian 836,000 (1/3)
Moy 556,000 (1/2)
Tin was admitted to the partnership when she purchased directly, for P528,000 a
proportionate interest from Moy and Gian in the net assets and profits of the partnership. As a
result, Tin acquired a 1/5 interest in the net assets and profits of the firm.

Compute for the combined gain realized by Moy and Gian upon the sale of a portion of their
interests in the partnership to Tin. Purchase Price 528,000
BV (384k+836k+556k = 1,776,000 x 1/5) 355,200
Gain 172,800
The capital balances of the BRAINY partnership on November 30, 2020 were:

Jas, Capital (75% profit percentage) P560,000

Jade, Capital (25% profit percentage) 204,000

On December 1, Jill was admitted to a 35% interest in the partnership when she purchased 35%
of each existing partner’s capital for P400,000, paid directly to Jas and Jade.
Jas Capital 560,0000
How much is the capital of Jas after the admission of Jill?
35%x560,000 (196,000)
Balance 364,000

Micah and Joel are partners with a profit and loss ratio of 75:25 and capital balances of P400,000 and
P200,000 respectively. Hosea is to be admitted into the partnership by purchasing a 20% interest in the
capital, profits and losses for P240,000.

The capital balances of Micah and Joel after the admission of Hosea are:

Micah, P320,000 and Joel, P160,000

(400k x 80%) (200k x 80%)
John and Stephen are partners with capitals of P400,000 and P200,000 and sharing profits
and losses 3:1 respectively. They agree to admit Peter as partner with an investment of
P300,000 for a 50% interest in the firm. John and Stephen transfer part of their capitals to
Peter as a bonus.
The capital balances of the partners after Peter’s admission are:
AC CC Bonus/AR John 400,000-112,500 = P287,500;
Stephen 200,000-37,500 = P162,500;
Old Partners 450,000 600,000 (150,000) Peter, P450,000
New Partners 450,000 300,000 150,000
900,000 900,000 0
Jack, Jill and Hill are partners sharing profit and losses 4:2:3. On September 30,2021, Hill died. The
partnership and Hill’s heirs decided agree to wait until December 31, to close the books which is
the end of the accounting period.

The Income summary has a debit balance of 138,000 on Dec. 31, 2021.
1.How much is the proportionate share in the profit/(loss) of Hill at the date of the death? (34,500)
2.At the end of accounting period, how much is the share of Jack in the profit/(loss)? (69,000)
Hill 138,000 x 9/12 = 103,500 Jack 103,500 x 4/9 = 46,000
103,500 x 3/9 = 34,500 34,500 x 4/6 = 23,000
69,000