1.

The following balances were picked up from the general ledger of TIMARE Partnership on
December 31, 2014:
Tinio, Capital
50,000 1/1
200,000

Mayo, Capital
1/1
250,000

Tinio, Drawing
11/25 15,000 12/31 160,000

Mayo, Drawing
12/31 75,000

7/1

Reyes, Capital
1/1
300,000

6/15

Reyes, Drawing
5,00O 12/31 90,000

Loan Payable, Reyes

6/15 50,000
Required:
a. How much was the total profit earned by the partnership for the year 2015?
b. Determine the capital balances to be presented in the statement of financial position on
December 31.
c. The articles of Co-Partnership provides that any profit share may be withdrawn anytime or be
made part of permanent capital. Make the necessary journal entry to effect this provision if
both Tinio and Reyes elected to make 50% of the profit share as part of permanent capital.
How much will Tinio and Reyes capital be? Compare your answer with (b) above and explain.
2. A) From the following transactions, construct the partners equity by making general ledger
postings.
Jan 2

Ignacio and Mallari, CPAs, invested cash of PHP 50,000 and PHP 100,000,
respectively to start a consultancy office.
Ignacio made an additional investment in the form of furniture and equipment
which book value of PHP 35,000 was 30% net of depreciation. Market value is
half of its original cost. She invested additional cash to arrive at an agreed equity
equal to Mallaris equity.

Mar 1

Mallari extended an 18% one year PHP 30,000 loan to the partnership.

June 30

Partnership collected and retained a personal receivable of Ignacio amounting to

PHP 45,000 which it promised to return before the end of the year.

Oct 1

Mallari made a permanent cash withdrawal of PHP 20,000 which Ignacio

approved as a personal emergency measure.

Dec 1

The partnership paid Ignacio PHP 10,000 of the amount collected on June 30 and
promised to pay the balance next year.

Dec 31

Partnership operation achieved a revenue of PHP 90,000. Partners agreed to

divide profits based on net capital contributions. Partners further agreed that no
profit withdrawals be made for the first five years to augment the resources of
the business.

B) Prepare a statement of changes in partners equity.

C) Ignore the agreement on Dec. 31 of A) above. Assume that the cash withdrawal on October
1 is in anticipation of share in net income and partners agree that this can be withdrawn
anytime. Change ledger postings for Oct 1 for the cash withdrawal and Dec 31 for the profit
share. How much will the capital accounts be in the partners equity section of the statement of
financial position?
D) Note all concepts used. I will give you one: right over assets (equal equity)
3. Lacson and Lim formed a partnership on March 31, with the following investments:
Lacson
Lim
Cash
PHP
10,000
35,000
Land (with a PHP 25,000 mortgage)
105,000
Furniture and Equipment (acquired Oct 1)
150,000
The partners agreed on each having a 50% interest in the partnership after revaluing the land
to PHP 150,000 and depreciating the furniture and fixtures by 10%. The mortgage is to be assued
by the partnership and has an unrecorded 12% interest. Last interest payment was Jan 1.
Required: Prepare supporting tables whenever necessary.
a) What are the adjusted capital contributions of the partners? Assuming no goodwill or bonus
should be recognized, who should make additional cash contribution in order that the equity
agreement of 50% for each partner will be complied with? Give two investment entries in the
partnership books.
b) Suppose in a) above there was no expressed agreement that a partner will make additional
investment for deficient contribution. What would be the implication? Explain and give one
investment entry in the partnership book.
c) Suppose the sharing ratio is 40% for Lacson and 60% for Lim and they agreed that an upward
adjustment on non-cash assets should be made. How much would be the adjustment? Give the
investment entry of this partner in the books of the partnership.
4. On July 1, 2015, Velasquez and Carlos decided to pool their assets and form a partnership. The
firm is to take over business assets and assume business liabilities, and capitals are to be based
on net assets transferred after the following adjustments:
a) Carlos inventory is understated by PHP 2,000.
b) An allowance for doubtful accounts of 25% is to be established on the accounts receivable of
each party after a write off of PHP 2,000 from the accounts of Velasquez. Accounts are
presented below at an 80% realizable value in both books.
c) Accrued liability of PHP 800 is to be recognized on Velasquez books.
d) Equipment should be 50% depreciated.
e) Carlos is to invest additional cash so his interest will be 60% in the firm.
Financial position for Velasquez and Carlos on July 1 before adjustments are given:
Velasquez
Carlos
Cash
PHP
7,500
4,500
Accounts Receivable
18,000
15,000
Inventory
16,000
12,000
Equipment
10,000
12,000
Accumulated Depreciation
(4,500)
(1,500)
47,000
42,000
Accounts Payable
Capital

PHP

13,800
33,200
47,000

10,000
32,000
42,000

Required: Prepare supporting tables whenever necessary.

a) Compute for the partners adjusted contributions in parallel column.
b) Two investment entries in the partnership books.
c) Ignore agreement e). Assume instead, that goodwill be recognized with equity ratio for
Velasquez at 40%. Give the investment entry for the partner with goodwill to be recognized.
5. On July 1, Bautista, Olano and Gatdula decided to form a partnership. The financial position of
their business showed the following:
Cash
Accounts Receivable
Merchandise Inventory
Furniture and Equipment
Total

PHP

Accounts Payable
Capital
Total

PHP

Bautista
25,000
23,500
36,000
25,500
110,000

Olano
7,800
34,000
54,500
6,700
103,000

Gatdula
20,000
10,600
15,900
13,500
60,000

38,000
72,000
110,000

45,000
58,000
103,000

12,700
47,300
60,000

The partnership was to be called BOGs Health Spa. They also agreed to the following:
a) That the furniture and equipment was overstated by PHP 700 in Olanos books.
b) Obsolete merchandise be written off in Bautistas book amounting to PHP 6,000.
c) That a 3% provision for doubtful accounts be set up in all books.
d) Bautista will invest only PHP 15,000 out of the cash of PHP 25,000 and all the other assets and
liabilities.
e) That total partners equity shall be PHP 156,000. All partners shall have equal interest and
share in the profit. Gatdulas merchandise shall receive an adjustment in compliance with this
agreement.
Required: Prepare supporting tables whenever necessary:
1. Determine the adjusted capital accounts of the partners.
2. Compare the capital credit against the actual capital contributions of the partners.
3. Determine the proper treatment for the differences.
4. Assume, instead, that total partners equity will be equal to total actual contributions made.
How will you treat the difference, if any?