PARTNERSHIP FORMATION Machinery 480,000 440,000

A. Accounts payable 216,000 144,000

A and decided to form a partnership on October 1, 2015. Their Notes payable 140,000 60,000
statement of financial position on this date were:
A B AB decided to pay-off his notes payable from his personal
Cash P 262,500 P 656,250 assets. It was also agreed that QRs inventories were overstated
Accounts receivable 5,950,000 3,587,500 by P24,000 and ABs machinery was overdepreciated by
Merchandise inventory 3,500,000 3,543,750 P20,000. QR is to invest/withdraw cash in order to receive a
Equipment 2,625,000 5,075,000 capital credit that is 20% more than ABs total net investment in
Total P12,337,500 P12,862,500 the partnership.

Accounts payable P1,837,500 P4,637,500 6) How much cash will be presented in the
A, Capital 10,500,000 partnerships statement of financial position?
B, Capital 8,225,000
Total P12,337,500 P12,862,500 D.
On December 1, 2015, MV and CD agreed to invest equal
They agreed to have the following adjustments: amounts and share profits equally to form a partnership. MV
Equipment of A underdepreciated by P350,000 and invested P3,120,000 cash and a piece of equipment. CD
that B is overdepreciated by P525,000; invested some assets which are shown below:
The allowance for doubtful accounts is to be set up
amounting to P1,190,000 for A and P787,500 for B; Carrying amount
Inventories of P87,500 and P61,250 are worthless in Accounts receivable P 400,000
As and Bs books respectively; and Inventory 1,120,000
Machineries, net 2,240,000
The partnership agreement provides for a profit and
Intangibles, net 920,000
loss ratio of 70% to A and 30% to B.
The assets invested by CD are not properly valued. P32,000 of
1) Assuming the use of transfer of capital method,
accounts receivable are proven uncollectible. Inventories are to
how much must be As agreed capital to bring the
be written down to P1,040,000. Included in the machineries is
capital balances proportionate to their profit/loss
an obsolete apparatus acquired for P384,000 with an
ratio?
accumulated depreciation balance of P336,000. Part of the
intangibles is a patent with carrying value of P56,000 which was
2) Assuming the use of transfer of capital method, by
sued upon by a competitor. CD unsuccessfully defended the
what amount will B debit his capital account to
bring the capital balances proportionate to their case and the final decision of the court was released on
November 29, 2015.
profit/loss ratio?
7) What is the fair value of the equipment invested by
3) Assuming A will invest/withdraw cash to bring the
MV?
capital balances of the partners proportionate to
their profit/loss ratio, how much will A invest?
E.
On December 1, 2015, MG and AN are combining their
4) Assuming B will invest/withdraw cash to bring the
separate businesses to form a partnership. Cash and non-cash
capital balances proportionate to their profit/loss
assets are to be contributed. The non-cash assets to be
ratio, how much will B invest?
contributed and the liabilities to be assumed are as follows:
B.
MG
A and B agreed the lists of the following assets to be contributed
Carrying amount Fair value
in the partnership:
Accounts receivable P 250,000 P 262,500
A B
Inventory 400,000 450,000
Cash P2,000,000 P3,000,000
Fixed assets 1,000,000 912,500
Inventory 1,500,000
Accounts payable 150,000 150,000
Land 1,000,000
AN
Building 3,000,000
Carrying amount Fair value
Furniture and fixtures 1,500,000
Accounts receivable P 200,000 P 195,000
The building is subject to a mortgage loan, already past due, in Inventory 200,000 207,500
Fixed assets 862,500 822,500
the amount of P1,000,000. A settled the mortgage from his
Accounts payable 112,500 112,500
personal funds. Partners agreed that A should be credited for
this. The partnership agreement calls for equal division of
MG and AN are to invest equal amounts of cash such that the
profit/loss between A and B
contribution of MG would be 10% more than the investment of
AN.
5) What amounts should be listed as capital for each
8) What is the amount of cash presented on the
partner?
partnerships statement of financial position on
December 1, 2015?
C.
On January 1, 2016, AB and QR agreed to form a partnership.
The following are their assets and liabilities:
AB QR
Cash P136,000 P76,000
Accounts receivable 88,000 48,000
Inventories 304,000 364,000
 F. 12) What is the amortized cost of accounts receivable
As of February 1, 2015, Heckel and Jeckel decided to form a invested by Ralph?
partnership. Their statements of financial position on this date
are as follows: 13) What is Ralphs adjusted capital balance?
Heckel Jeckel
Cash P 41,000 P53,500 14) What is the total partners equity immediately after
Accounts receivable 425,000 280,000 the formation of the partnership?
Merchandise inventory - 242,500
Property and equipment 360,000 470,000 15) How much cash did Lauren invest in the
Total P826,000 P1,046,000 partnership?

Accounts payable P150,000 P320,000 PARTNERSHIP OPERATIONS

Heckel, capital 676,000 - H.
Jeckel, capital - 726,000 Prof, Sir and Idol have the following capital accounts in their
Total P826,000 P1,046,000 partnership for 2015:
Prof Sir Idol
The partners agreed that the property and equipment of Heckel Jan. 1, Balance P80,000 P100,000 P60,000
and Jeckel were overvalued by P35,000 and P60,000 Feb. 28, Investment 30,000 75,000
respectively. An allowance for uncollectible accounts of April 14, Withdrawal 10,000 40,000
P150,000 and P80,000 shall be recognized in the books of July 1, Withdrawal 25,000
Heckel and Jeckel, respectively. Sept. 23, Investment 22,000 20,000 36,000

The capital contribution of each partner is the net amount of the Before any allocation, profit for the year was P169,400. Interest
assets contributed to and liabilities taken over by the for each partner amounts to 10% of the weighted average
partnership. capital balances. Annual salaries of Prof, Sir and Idol are
9) What would be the total partners equity P15,000, P25,000 and P10,000 respectively. Sir receives a
immediately after the formation of the bonus of 20%of profit after deducting the bonus, interest and
partnership? salaries. Any remainder is divided in a 2:2:1 ratio by Prof, Sir
and Idol respectively.
10) How much cash should Heckel invest if the
partnership agreement provides for capital 16) How much of the partnership profit was
balances proportionate to profit/loss sharing ratio distributed to Idol?
of 3:2 to Heckel and Jeckel, respectively, using the
adjusted capital of Jeckel as the base? I.
Emo and Ted are partners engaged in a manufacturing
G. business. Transactions affecting the partners capital accounts
On August 1, 2015, Ralph admits Lauren for an interest in his in 2015 are as follows:
business. On this date, Ralphs capital account shows a balance
of P245,000. The terms and agreement of the partners before Emo Ted
admission follow: Debit Credit Debit Credit
Jan., Bal. P 50,000 P 70,000
Ralphs outstanding accounts receivable were April 1 30,000 P 20,000
P100,000, with related allowance for uncollectible June 30 P 25,000 50,000
accounts of P5,000. An assessment of collectability of Sept. 1 45,000 60,000
the receivables indicates that 80% of the balance is Oct. 1 70,000 40,000
collectible.
The credit balance of P6,000 in the Unearned Interest The income summary account has a debit balance of P45,000.
account in the books of Ralph represents interest The agreement between Emo and Ted include the following
collected in advance for six months starting June 1, terms:
2015. Of this amount, P2,000hs already been earned Interest on average capital at 8%;
as of August 1, 2015. Salaries of P25,000 and P35,000 are given to Emo
A count of supplies revealed unused supplies and Ted, respectively;
approximating P8,000which were not recognized in Bonus to Ted at 25% of net income after deducting
the books of Ralph, since the entire amount of interest and salaries but before deducting the bonus;
supplies purchased during the year was charged to and
supplies expense. Balance is to be divided equally.
Inventory valuation of Ralph should be increased by
P15,000. 17) How much is the net increase/decrease in Teds
Equipment account of Ralph should be depreciated by capital account during 2015?
a additional P10,000.
Lauren is to invest cash equal to one-third of the total J.
partnership capital. The new capital is based on the Aubris was organized and began operations on May 1, 2014.
adjusted capital of Ralph, which means that Ralphs On that date, Aubrey invested P1,000,000 cash and Morris
adjusted capital represents two-thirds of the total invested land and building with fair values of P1,750,000 and
partnership capital. P850,000 respectively. The average capital balances of Aubrey
and Morris were determined to be P1, 223,890 and P1,222,090
11) What is the adjusted balance of unearned interest respectively. The partnership contract includes the following:
income in the books of Ralph, prior to the
formation of the partnership?
 Aubrey Morris 21) If profits/losses are divided using the average
Annual salaries P152,200 P151,800 capital ratio, how much is the share of DGB in the
Annual interest on average capital 20% 30% profit?
Remainder 60% 40%
22) Assume that the partners agreed on the following:
During the year ended April 30, 2015, the partnership had net interest on average capital at 8%; salaries of
sales of P3,000,000, cost of goods sold of P1,000,000 and P24,000 and P48,000 to DGB and DSP
operating expenses of P391,090. The partners salaries had respectively; bonus to DGB at 20% of profit after
been recorded as part of the operating expenses. deducting interest and salaries but before
deducting the bonus; and any remaining amount
18) How much is the total share of Aubrey in the net divided equally. How much is the share of DSP in
income for the period? the profit?

K. N.
CD Partnership begins its first year of operations with the AGB and BDC formed a partnership on January 1, 2015. On this
following capital balances: C, capital, P224,000; D, capital, date, AGB contributed net assets of P600,000. On the other
P112,000. According to the partnership agreement, all profits hand, BDC contributed no capital because he will manage the
will be divided as follows: C and D will be allowed salaries of firm on a full time basis. The partnership agreement provides for
P268,800 and P134,400, respectively. The partners will be the following:
allowed with interest equal to 10% of the beginning capital Interest at 5% shall be allowed on the beginning
balances. C will be allowed a bonus of 10% of the net income capital;
after bonus. The remainder will be divided as follows: on the BDC is to be paid salaries of P20,000 per month;
basis of the beginning capital for the first year and equally for BDC is to receive a bonus of 20% of profit computed
the subsequent years. Each partner is allowed to withdraw up to before deducting interest, salaries and bonus; and
P11,200 per year. Assume that the income summary has a debit Profits are to be divided between AGB and BDC in
balance of P16,800 on the first year and credit balance of the ratio of 7:3.
P61,600 on the second year. Assume further that each partner
withdraws the maximum amount from the business each period. There are no withdrawals by either partner during the year. The
partnership income statement contains the following:
19) What is the balance of Ds capital account at the
end of the second year? Revenues P1,720,000
Expenses (including salary, interest and bonus) 840,000
L. Profit P 880,000
Ruvi and Patrick are partners in a merchandising business.
During 2015, they withdrew their salary allowances of P34,000 23) How much is the bonus to BDC?
and P59,000 respectively. Remaining profit/loss are shared in
the ratio of 3:2 by Ruvi and Patrick. The income summary 24) What would be the equity balance of AGB at year-
account before any profit allocation has a credit balance of end?
P180,000. The partners capital accounts show the following:
O.
Ruvi Patrick AJB, BWZ and CYG are partners with average capital balances
Beginning balance P85,000 P67,000 in 2015 of P240,000, P120,000 and P80,000 respectively.
Additional investments 40,000 43,000 Partners receive 10% interest on their average capital balances.
Withdrawal other than salaries (35,000) (20,000) Salaries allowed to AJB and CYG are P60,000 and P40,000
Ending balance 90,000 90,000 respectively, and the balance of the profit is to be divided
equally. In 2015, the partnership sustained a P66,000 loss
20) What would be Patricks equity balance at before interest and salaries to partners.
December 31, 2015 after dividing the profit?
25) How much is the share of CYG in the loss?
M.
DGB and DSP are partners engaged in an export-import P.
business. Several transactions during 2015 affected the The capital accounts of ECV and ATR at the end of the year
partners capital accounts, which are summarized as follows: follow:
ECV ATR
DGB DSP Jan. 1, Balance P160,000 P240,000
Debit Credit Debit Credit Investments:
Jan. 1, Bal. P 600,000 P 800,000 March 28 180,000
March 1 P100,000 October 25 80,000
April 1 200,000 Withdrawals:
May 1 100,000 August 1 20,000
June 30 P 150,000 Sept. 4 40,000
August 31 100,000
October 1 150,000 The partnership had a profit of P120,000 for the year. The
October 31 125,000 50,000 partnership agreement provides that the profit be divided
according to average capital ratio.
The Income Summary account has a credit balance of
P180,000. 26) How much is the share of ECV in the profit for the
year?
 Q.
Partners ORD, RFC and JMK had average capital account
balances during the year of P400,000, P500,000 and P100,000
respectively. The partnership agreement provides for the
following division of profits/losses:
Interest: 6% on average capital balances of each partner
Salaries: ORD, P100,000; RFC, P150,000; and JMK, none
Remainder: ORD, 20%; RFC, 30%; and JMK, 50%
27) If the total share of ORD in the profit is P112,000,
how much should have been the partnership
profit?
R.
BDX, a partner in BBB Partnership has a 30% participation in
partnership profits and losses. BDXs capital account decreased
by a net amount of P240,000 during the calendar year 2015.
During 2015, BDX withdrew P520,000 which was charged
against his capital account and contributed property to the
partnership with a fair value of P100,000but with a carrying
value of P80,000 in his books.
28) What was the profit of the BBB Partnership for
2015?
S.
The partnership agreement of JVV and ADD provides that
annual interest at 10% of average capitals shall be credited to
each other. JVV and ADD are provided with monthly salaries of
P48,000 and P72,000, respectively. Bonus at 20% of profits
after interest, salaries and bonus shall be credited to JVV. Any
residual profit/loss is divided 60% to JVV and 40% to ADD.
The partnership started operations on July 1, 2015 and uses
calendar year as its reporting period. The profit for the six
months ended December 31, 2015, after interest and salaries
amounted to P96,000.
29) If average capital balances of JVV and ADD are
P240,000 and P360,000, respectively, how much is
the bonus credited to JVV?
30) If average capital balances of JVV and ADD are
P100,000 and P200,000, respectively, how much is
the total share of ADD in the total profit?
T.
Partner S was credited with a salary of P120,000 and interest of
P60,000 on his capital account and was charged with P20,000
as his share of the balance in the Income Summary account
after taking partners salaries and interest on partners capital
balances into account. He withdrew P140,000 during the year.
31) What amount will S report to the BIR as his share
in the partnership profit?
32) How much should the partnership report as S,
capital in its statement of financial position?
U.
PARTNERSHIP DISSOLUTION
A.
A condensed statement of financial position prepared for AA
Partnership, owned by Alma and AJ, as at October 31, 2015, is
shown below. Alma and AJ invited Alona to their partnership.
Alma and AJ have been dividing profits and losses in the ratio of
3:2 respectively, and this ratio will continue between the two
after the admission of Alona. Then the new partnership will have
a profit/loss ratio of Alona, 50%; Alma, 30%, and AJ 20%.
AA Partnership
Statement of Financial Position
October 31, 2015
Current Assets P1,440,000
Property and equipment 3,360,000
TOTAL ASSETS P4,800,000
Liabilities P1,280,000
Alma, Capital 2,240,000
AJ, Capital 1,280,000
TOTAL LIABILITIES AND EQUITY P4,800,000
Below are five different conditions under which Alona may be
admitted into the partnership. Compute the individual equity of
Alma, AJ and Alona respectively, after the admission of Alona
for each of the five independent conditions below.
33) Alona purchases one-half equity in the
partnership from Alma and AJ for P2,200,000.
Payment is to be made directly to Alma and AJ.
Alma and AJ each will retain one-half of their
respective equities and transfer the other halves
to Alona.
34) Alona invests P4,000,000 to the partnership
receiving 50% interest in the partnership.
35) Alona invests P4,000,000to the partnership
receiving 50% interest. The amount of Alonas
investment implies that the property, plant and
equipment were carried at amount less than their
fair values.
36) Alona invests P2,400,000in the partnership and
receives 50% interest in capital and income. All
partnership assets and liabilities are fairly valued.
37) Alona invests P2,880,000 in the partnership and
receives 50% interest in capital and profit. The
bonus to Alona wll be charged against Alma and
AJ in the ratio of 3:2, respectively.
B.
Red and white are partners who share profits and losses in the
ratio of 7:3 respectively. On June 30, 2015, their capital
accounts were as follows:Red, P2,800,000; White, P2,400,000.
On that day, they agreed to Admit Blue as a partner with a one-
third interest in the capital and profits upon his investment of
P2,000,000. All partnership assets and liabilities are fairly
valued.
38) Immediately after Blues admission, what are the
capital balances of Red, White and Blue,
respectively?
C.
Daisy wishes to purchase one-fourth interest in the capital and
profits in the partnership of Mickey, Minnie, and Donald. The
three partners agreed to sell one-fourth of their respective
capital and profit/loss interest for a total payment of P1,600,000.
The capital accounts and the respective percentage interests in
profits and losses immediately before the sale to Daisy follow:
Capital P/L
Mickey P3,200,000 40%
Minnie 1,600,000 30%
 Donald 800,000 30% 47) What should be the balances in the capital
accounts of Cordova and Decena after Elerias
All assets and liabilities are fairly valued. admission?

39) What should be the capital balances of Mickey, I.

Minnie, Donald and Daisy, immediately after
Daisys admission?
40) What is the new profit/loss ratio between among
Mickey, Minnie , Daisy and Donald, respectively?
On July 1, 2015, the statement of financial position for the
partnership of Karl, Lester and Miles together with their
respective profit/loss ratio were as follows:
Assets, at cost P1,800,000

D. Karl, loan 90,000

Bobot is admitted to a partnership with a 25% interest by a cash Karl, capital (20%) 420,000
investment of P1,600,000. Lester, capital 390,000
(20%)
41) If the total capital of the partnership is P5,600,000 Miles, capital (60%) 900,000
before admitting Bobot, how much is the bonus to P1,800,000
Bobot?
Karl died. The partnership would settle his interest with his heirs.
E. By mutual agreement, the assets are to be adjusted to their fair
Jack and Poy are partners who share profits and losses in the market value of P2,160,000 at July 1, 2015. It was agreed that
ratio of 60:40 respectively. On December 31, 2015, the capital the partnership would pay Karls heirs P650,000 cash for his
balances of Jack and Poy were P3,200,000 and P2,800,000, interest, including Karls loan which is to be repaid in full.
respectively. On that date, they agree to admit Hoy as a partner
with a 30% capital interest. 48) After settlement with Karls heirs, what would be
the respective capital balances of Lester and
42) If Hoy invests P2,000,000 in the partnership, what Miles?
is Jacks capital balance immediately after the
admission of Hoy? J.
Abad, a partner of the accounting firm of ABC and Company,
43) If Hoy invests P3,200,000 in the partnership, how decided to withdraw from the partnership. Abad had 30% share
much is Poys capital balance immediately after in the profits/losses. In final settlement of Abads interest the
Hoys admission? partnership paid him P86,000, although his capital balance
before his retirement was only P80,000. The P6,000 difference
F. implied that an equipment was undervalued, for which an
B,C and D are partners sharing profits and losses in the ratio of appropriate adjustment was taken up in the books of the
3:2:1, respectively. On December 31, B decides to withdraw partnership. The total of the partners capitals before Abads
from the partnership. The capital balances on this date after withdrawal and before adjustment of equipment to fair value
dividing the profit for the year are b, P346,000; C, P213,000; was P270,000.
and D, P133,000.It is agreed that B should be paid P400,000 for
his interest. 49) What would be the partnerships net assets after
the withdrawal of Abad?
44) Assume that the excess amount paid shall be
treated as a bonus to B, what would be the capital K.
balances of C and D after Bs retirement? Partners Santos, Salonga and Salazar share profits and losses
50:30:20, respectively. The statement of financial position of the
45) Assume instead that B is to be paid P310,000 and partnership at July 31, 2015 follows:
that assets are fairly valued. What would be the
capital balances of C and D immediately after Bs Cash P 40,000 Accounts payable P100,000
retirement? Other assets 360,000 Santos, capital 74,000
Salonga, capital 130,000
G. Salazar, capital 96,000
Howard and Ivan are partners with capital balances of P300,000 Total P400,000 Total P400,000
and P250,000 sharing profits/losses 3:1 respectively. They
agreed to admit Jasper as a partner. Jasper invests P150,000 The assets and liabilities are recorded and presented at their
for a 40% interest in the firm. Howard and Ivan transfer part of respective fair values. Santana is to be admitted as a new
their capital to Jasper as a bonus. partner with 20% capital interest and a 20% share of
profits/losses in exchange for a cash contribution.
46) What would be the capital balances of the partners
after Jaspers admission? 50) How much should Santana contribute?

H.
Cordova and Decena are partners who share profits and losses
equally. The capital accounts of Cordova and Decena are
P90,000 and P60,000 respectively. Eleria desires to join the firm
and invested P70,000 for a one-fourth interest in the capital of
the firm.
L.
Sy, Tan and Gokong are partners with capital balances of
P500,000, P400,000 and P300,000 respectively. Profits and
losses have been shared equally. Gokong wishes to retire from
the firm.
51) Gokongs interest is sold to Consunji, a new
partner, for P360,000. How much is the total
 partnership capital after Gokongs retirement from The firms liabilities amount to P144,000, including P16,000
the firm? owing to C and P14,000 owing to D.

52) Gokongs interest is sold to the remaining After realization of assets, the cash on hand amounted to
partners, each partner paying P180,000. How P150,000.
much is the capital of Tan after Gokongs
retirement from the firm? 60) How much was the loss on realization?

53) Gokong receives P340,000 of partnership funds 61) How much should C and D receive in final
for his interest. The excess payment is attributable settlement of their respective interest?
to an undervaluation of the firms land. All other
assets are fairly valued. How much is Sys capital D.
after the retirement of Gokong? D, E and F are partners with a profit/loss ratio of 5:4:1,
respectively. The partnership is to be liquidated. Prior to
54) Gokong receives P380,000 of the partnership liquidation, the statement of financial position shows the
funds. The remaining partners agree to absorb the following balances:
excess payment to Gokong. How much is the
firms total capital after the retirement of Gokong? Cash P 80,000 Liabilities P 80,000
Other assets 720,000 D, capital 320,000
55) Gokong receives P240,000 of partnership funds E, capital 240,000
for his interest, bonus being credited to the F, capital 160,000
remaining partners accounts. How much is the
capital of Sy after the retirement of Gokong? After realization, E received P120,000 as settlement of his
interest.
PARTNERSHIP LIQUIDATION
62) How much was the loss on sale of assets?
Lump-sum Liquidation 63) How much did F receive in final settlement of his
interest?
A.
The partnership of C, A and G named Break-even decided to 64) What amount of total cash was distributed to the
liquidate their partnership on May 31, 2015. Before liquidating partners?
and sharing of net income, their capital balances are as follows:
C (30%), P250,000; A (30%), P180,000; and G (40%), E.
P220,000. Net income from January 1 to May 31 is P120,000. The statement of financial position of L, M and N just before
Liabilities of the partnership amounted to P210,000and its total liquidation shows the following:
assets including cash amounted to P70,000.
Cash P 20,000
Unsettled liabilities areP110,000. C invested additional cash Non-cash assets 240,000
enough to settle their partnership indebtedness. A is personally Accounts payable 40,000
solvent, G is personally insolvent, and C becomes insolvent N, loan 40,000
after investing the cash needed by the partnership. L, capital 62,000
M, capital 88,000
56) How much were the partnerships non-cash assets N, capital 30,000
sold for?
L, M and N share profits and losses in the ratio of 3:2:5,
57) How much cash will A invest in the partnership? respectively. The non-cash assets were sold for P160,000.

58) How much will C receive as a result of their 65) How much cash is available for distribution to
liquidation? partners in settlement of their capital balances?

B. 66) How much cash is received by N in full settlement

Capital balances of partners after exhausting their non-cash of his total interest in the partnership, including
assets are as follows: loan?
Partners P/L Capital Balances
A 20% P (54,000) F.
U 10% 20,000 Partners E, F and G who share profits and losses in the ratio of
B 10% (66,000) 2:2:1 respectively decided to liquidate. The condensed
R 10% (12,000) statement of financial position immediately prior to the
I 20% 35,000 liquidation shows the following:
O 10% 10,000
N 20% (40,000) Cash P 400,000
Non-cash assets 1,600,000
59) Partners R, I, O and U are personally solvent. How Liabilities 560,000
much cash must O contribute to the partnership? E, loan 40,000
E, capital 180,000
C. F, capital 420,000
C and D are partners with capital balances of P98,000 and G, capital 800,000
P62,000, respectively. They share profit/loss in the ratio of 3:2
respectively. The partners decided to liquidate the partnership.
After paying liabilities to partnership creditors, cash of P830,000i In May, assets with a carrying value of P170,000 were sold for
s available for distribution to partners. Any capital deficiency is P145,000, creditors were paid in full, liquidation expense of
made good by the deficient partner, since all three partners are P5,000 was paid, and P15,000 was paid to partners.
personally solvent.
76) In May, how much did VN receive?
67) How much was the loss on realization?
68) How much would F receive in final settlement of D.
his interest? The accounts of the partnership of A, B and C at the end of its
69) How much would G receive in final settlement of fiscal year on October 31, 2015 are as follows:
his interest?
Cash P78,750 Liabilities P262,500
Installment Liquidation Non-cash 682,500 Loan from C 52,500
Loan to B 26,250 A, cap. (30%) 236,250
A. B, cap. (50%) 157,500
On January 1, 2015, the partnership of TM, JK and AB, who C, cap. (20%) 78,750
share profits and losses in the ratio of 5:3:2, respectively
decided to liquidate their partnership. On this date, the 77) If P90,000 is available for distribution to partners
partnership accounts were as follows: after all non-partner liabilities are paid, how much
should A receive?
Cash P375,000 TM, capital P408,000
Other assets 1,125,000 JK, capital 474,000 78) If in the first distribution B received P6,250, how
Liabilities 282,000 AB, capital 336,000 much should C has received at this point?

On January 15, 2015, the first cash sale of other assets with
carrying amount of P540,000 realized P444,000. Safe
installment payments to the partners were made the same date.
70) If cash of P165,000 is to be withheld for
contingencies, how much cash should be
distributed to AB?
71) Assuming the first cash sale of other assets with a
carrying amount of P690,000 realized P495,000
and cash of P240,000 is to be withheld, how much
cash should be distributed to JK?
79) If in the first distribution A received P172,500 how
much should B has received?
80) If in the first distribution C received P37,500, how
much was the total cash distributed?
81) If in the first distribution A received P73,500, how
should C has received?
82) If B received a total of P15,000 as a result of the
liquidation, what was the total amount realized
from the sale of non-cash assets?

B. E.
The accounts of the partnership of TJ, SR and MD at the end of The statement of financial position for J and K Partnership on
its fiscal year on October 31, 2015 are as follows: January 1, 2015 before liquidation is as follows:

Cash P45,000 Liabilities P150,000 Assets Liabilities and Capital

Non-cash 390,000 MD, loan 30,000 Cash P157,500 Liabilities P393,750
Loan to SR 15,000 TJ, capital (30%) 135,000 Other assets 798,750 J, cap. (60%) 315,000
SR, capital (50%) 90,000 K, cap. (40%) 247,500
MD, capital (20%) 45,000 Total P956,250 Total P956,250

72) If MD received P27,000 on the first distribution of
cash, what was the amount of cash realized from
the initial sale of assets?
73) If P55,000 is available for distribution to partners
after all non-partner liabilities are paid, how much
should TJ has received?
In January, assets with a carrying value of P382,500are sold for
P326,250, creditors are paid 80% of the amount owing to them,
liquidation expenses of P6,500 and unrecorded liabilities of
P4,750 are paid and P33,750 is distributed to partners.
83) For the month of January, how much cash is
available for distribution to the partners?

74) If in the first distribution, SR received P11,250 how 84) In the schedule of safe payments, how much was
much should MD has received at that point? deducted from Js total interest as share in the
maximum possible loss?
75) If in the first distribution MD received P52,500,
how much is the total cash distributed to F.
partners? The accounts of the partnership of Ace, Vergel and De Dios at
the end of its fiscal year on June 30, 2015 are as follows:
C.
The statement of financial position for FH and VN Partnership Cash P75,000 Liabilities P225,000
on May 1, 2015 before liquidation is as follows: Non-cash 625,000 Loan, De Dios 25,000
Assets Liabilities & Capital Loan, Vergel 25,000 Ace, cap. (30%) 250,000
Cash P70,000 Liabilities P175,000 Vergel cap. (50%) 150,000
Other assets 355,000 FH, cap. (70%) 140,000 De Dios cap. (20%) 75,000
VN, cap. (30%) 110,000 Total P725,000 Total P725,000
Total P425,000 Total P425,000
The partners decided to liquidate the business and the
liquidation took place in several months.
Use the following information for questions 6, 7 and 8.
During the first month, non-cash assets with a book value of
P425,000 were sold for P375,000. The partners withheld A summary balance sheet for the McCune, Nall, and
P75,000 for contingencies. Payment of liabilities during the first Oakley partnership appears below. McCune, Nall, and
month amounted only to P175,000. Oakley share profits and losses in a ratio of 2:3:5,
respectively.
85) How much should have received in the first month
of the partnership liquidation?
Assets
MULTIPLE CHOICE Cash P 50,000
Inventory 62,500
FORMATION AND OPERATION Marketable securities 100,000
Land 50,000
1. Loans made by a partner to the partnership are Building-net 250,000
treated as Total assets P 512,500
A. advances to the partnership for which
interest shall be paid from the date of the Equities
advance. McCune, capital P 212,500
B. advances to the partnership that are carried Nall, capital 200,000
in the partners' capital accounts. Oakely, capital 100,000
C. Accounts Payable of the partnership for Total equities P 512,500
which interest is paid.
D. advances to the partnership for which
interest does not have to be paid. The partners agree to admit Pavic for a one-fifth interest. The
fair market value of partnership land is appraised at P100,000
2. A partner assigned his partnership interest to a and the fair market value of inventory is P87,500. The assets
third party. Which statement best describes the are to be revalued prior to the admission of Pavic and there is
legal ramifications to the assignee? P15,000 of goodwill that attaches to the old partnership.
A. The assignment of the partnership interest
does not entitle the assignee to partnership 6. By how much will the capital accounts of McCune,
assets upon a liquidation. Nall, and Oakley increase, respectively, due to the
B. The assignment dissolves the partnership. revaluation of the assets and the recognition of
C. The assignee has the right to share in the goodwill?
management of the partnership. A. The capital accounts will increase by P25,000
D. The assignee does not become a partner but each.
has the right to share in future partnership B. The capital accounts will increase by P30,000
profits and to receive the proper share of each.
partnership assets upon liquidation. C. P18,000, P27,000, and P45,000.
D. P20,000, P25,000, and P30,000.
3. Under the Civil Code of the Philippines, partners
have 7. How much cash must Pavic invest to acquire a one-
fifth interest?
I. mutual agency. A. P117,500.
II.unlimited liability. B. P120,500.
A. I only. C. P146,875.
B. II only. D. P150,625.
C. I and II.
D. Neither I nor II. 8. What will the profit and loss sharing ratios be after
Pavics investment?
4. Partnerships A. 1:2:4:2.
A. are required to prepare annual reports. B. 2:3:5:2.
B. are required to file income tax returns but do C. 3:4:6:2.
not pay Federal taxes. D. 4:6:10:5.
C. are required to file income tax returns and
pay Federal income taxes. Use the following information for questions 9, 10 and 11.
D. are not required to file income tax returns or
pay Federal income taxes. Albion and Blaze share profits and losses equally. Albion
and Blaze receive salary allowances of P20,000 and
5. Langley invests his delivery van in a computer P30,000, respectively, and both partners receive 10%
repair partnership with McCurdy. What amount interest on their average capital balances. Average capital
should the van be credited to Langleys balances are calculated at the beginning of each month
partnership capital? balance regardless of when additional capital
A. The tax basis. contributions or permanent withdrawals are made
B. The fair value at the date of contribution. subsequently within the month. Partners drawings are not
C. Langleys original cost. used in determining the average capital balances. Total
D. The assessed valuation for property tax net income for 2006 is P120,000.
purposes.
 Albion Blaze C. (P8,000) to Bloom and (P12,000) to Carnes.
January 1 capital balances P 100,000 P 120,000 D. P10,000 to Bloom and (P30,000) to Carnes.
Yearly drawings (P1,500 a 18,000 18,000
month) 14. The XYZ partnership provides a 10% bonus to Partner
Permanent withdrawals of Y that is based upon partnership income, after
capital: deduction of the bonus. If the partnership's income is
June 3 ( 12,000 ) P121,000, how much is Partner Y's bonus allocation?
May 2 ( 15,000 ) A. P11,000.
Additional investments of B. P11,450.
capital: C. P11,650.
July 3 40,000 D. P12,100.
October 2 50,000
15. Drawings
A. are advances to a partnership.
9. What is the weighted-average capital for Albion and B. are loans to a partnership.
Blaze in 2006? C. are a function of interest on partnership average
A. P100,000 and P120,000. capital.
B. P105,333 and P126,667. D. *are the same nature as withdrawals.
C. P110,667 and P119,583.
D. P126,667 and P105,333. 16. If the partnership agreement provides a formula for the
computation of a bonus to the partners, the bonus
10. If the average capital for Albion and Blaze from the would be computed
above information is P112,000 and P119,000, A. next to last, because the final allocation is the
respectively, what will be the total amount of profit distribution of the profit residual.
allocated after the salary and interest distributions B. before income tax allocations are made.
are completed? C. after the salary and interest allocations are made.
A. P70,000. D. in any manner agreed to by the partners.
B. P73,100.
C. P75,000.
D. P80,000. Use the following information for questions 17, 18 and 19.

11. If the average capital balances for Albion and Blaze Davis has decided to retire from the partnership of Davis,
are P100,000 and P120,000, what will the final profit Eiser, and Foreman. The partnership will pay Davis
allocations for Albion and Blaze in 2006? P200,000. Goodwill is to be recorded in the transaction as
A. P50,000 and P70,000. implied by the excess payment to Davis. A summary
B. P54,000 and P66,000. balance sheet for the Davis, Eiser, and Foreman
C. P70,000 and P50,000. partnership appears below. Davis, Eiser, and Foreman
D. P75,000 and P45,000. share profits and losses in a ratio of 1:1:3, respectively.

Use the following information for questions 12 and 13.

Assets
Bloom and Carnes share profits and losses in a ratio of Cash P 75,000
2:3, respectively. Bloom and Carnes receive salary Inventory 82,000
allowances of P10,000 and P20,000, also respectively, Marketable securities 38,000
and both partners receive 10% interest based upon the Land 150,000
balance in their capital accounts on January 1. Partners Building-net 255,000
drawings are not used in determining the average capital Total assets P 600,000
balances. Total net income for 2006 is P60,000. If net
income after deducting the interest and salary allocations Equities
is greater than P20,000, Carnes receives a bonus of 5% Davis, capital 160,000
of the original amount of net income. Eiser, capital 140,000
Foreman, capital 300,000
Bloom Carnes Total equities P 600,000
January 1 capital balances P 200,000 P 300,000
Yearly drawings (P1,500 a 18,000 18,000 17. What goodwill will be recorded?
month) A. P40,000.
B. P120,000.
12. What are the total amounts for the allocation of C. P160,000.
interest, salary, and bonus, and, how much over- D. P200,000.
allocation is present?
A. P60,000 and P-0-. 18. What partnership capital will Eiser have after Davis
B. P80,000 and P20,000. retires?
C. P83,000 and P-0-. A. P100,000.
D. P83,000 and P23,000. B. P140,000.
C. P180,000.
13. If the partnership experiences a net loss of P20,000 for D. P220,000.
the year, what will be the final amount of profit or (loss)
closed to each partners capital account? 19. What partnership capital will Foreman have after
A. (P30,000) to Bloom and P10,000 to Carnes. Davis retires?
B. (P10,000) to Bloom and (P10,000) to Carnes. A. P240,000.
 B. P300,000.
C. P360,000.
D. P420,000.
20. In a limited partnership, a general partner
A. is excluded from management.
B. is not entitled to a bonus at the end of the year.
C. has limited liability for partnership debit.
D. has unlimited liability for partnership debit.
DISSOLUTION AND LIQUIDATION
1. Which statement is correct in describing the rank
order of payments under the Civil Code of the
Philipines?
A. Payments to partners with loans to the
partnership are ranked equally with payments to
other creditors.
B. Payments to partners with loans to the
partnership are ranked ahead of payments to
partners without loans to the partnership.
C. Payments to other creditors are ranked ahead of
payments to partners with loans to the
partnership.
D. After payments are made to other creditors and
partners with loans to the partnership, payment
can be made to partners with capital interests.
2. Which of the following procedures is acceptable when
accounting for a deficit balance in a partners capital
account during partnership liquidation?
A. A partner with a negative capital balance must
contribute personal assets to the partnership
that are sufficient to bring the capital account to
zero.
B. If a partner with a negative capital balance is
personally insolvent, the negative capital
balance may be absorbed by those partners
having a positive capital balance according to
the residual profit and loss sharing ratios that
apply to all the partners.
C. If a partner with a negative capital balance is
personally insolvent, the negative capital
balance may be absorbed by those partners
having a positive capital balance according to
the residual profit and loss sharing ratios that
apply to those partners having positive
balances.
d. All the above procedures are acceptable.
3. A partnership dissolution differs from a liquidation in
that
a. payments are made to creditors before partners
receive value.
b. periodic payments to partners are made when
cash becomes available.
c. a partner withdraws from the business and the
enterprise continues to function.
d. full payment is made to all outside creditors
before remaining cash is distributed to partners
in a final lump sum payment.
4. A partnership in liquidation has converted all assets
into cash and paid all liabilities. Under the law, the
order of payment
a. will have amounts due to partners with respect
to their capital accounts take precedence over
amounts owed by partners other than for capital
and profits.
b. will be according to the partners residual profit
and loss sharing ratios.
c. will have amounts owed by partners other than
for capital and profits take precedence over
amounts due to partners with respect to their
capital accounts.
d. Will be by any manner that is both reasonable
and rational for the partnership.
5. In partnership liquidation, how are partner salary
allocations treated?
a. Salary allocations take precedence over creditor
payments.
b. Salary allocations take precedence over
amounts due to partners with respect to their
capital interests, but not profits.
c. Salary allocations take precedence over
amounts due to partners with respect to their
capital profits, but not capital interests.
d. Salary allocations are disregarded.
6. A simple partnership liquidation requires
a. periodic payments to creditors and partners
determined by a safe payments schedule.
b. partnership assets to be converted into cash
with full payment made to all outside creditors
before remaining cash is distributed to partners
in a lump sum payment.
c. only creditors to be paid in an orderly manner.
d. periodic payments to partners as cash becomes
available.
7. In a simple partnership liquidation, the last remaining
cash distribution should be made according to the
ratio of
a. the individual partners profit and loss
agreement.
b. the individual partner's capital accounts,
increased by partner loans to the partnership.
the individual partners capital accounts,
increased by partnership loans to the partners
and decreased by partner loans to the
partnership.
D. the individual partners capital accounts,
decreased by partnership loans to the partners
and increased by partner loans to the
partnership.
8. If conditions produce a debit balance in a partners
capital account when liquidation losses are allocated
A. the partner receives further allocations of
liquidation losses, but not gains.
B. the partner receives no further allocation of
liquidation losses and gains.
C. the partner is no longer obligated to partnership
creditors.
D. the partner has an obligation of personal net
assets to the other partners.
Use the following information for questions 9, 10 and 11.
On June 30, 2006, the Warle, Xin, and Yates partnership
had the following fiscal year-end balance sheet:
Cash P 4,000 Accounts P 7,000
payable
Accounts 6,000 Loan from Xin 5,000
receivable
Inventory 14,000 Warle, 14,000
capital(20%)
Plant assets-net 12,000 Xin, 10,000 13. Jade, Kahl, and Lane are in the process of liquidating
capital(30%) their partnership. Lane has agreed to accept the
Loan to Warle 6,000 Yates, 6,000 inventory, which has a fair value of P60,000, as part of
capital(50%) her settlement. A balance sheet and the residual profit
Total assets P 42,000 Total P 42,000 and loss sharing percentages are as follows:
liab./equity
Cash P 198,000 Accounts
The percentages shown are the residual profit and loss payable P 149,000
sharing ratios. The partners dissolved the partnership on Inventory 80,000 Jade, capital
July 1, 2006,. and began the liquidation process. During July (40%) 79,000
the following events occurred: Plant Kahl, capital
* Receivables of P3,000 were collected. assets 230,000 (40%) 140,000
* The inventory was sold for P4,000. Lane, capital
* All available cash was distributed on (20%) 140,000
July 31, except for P2,000 that was set aside
for contingent expenses. Total Total
assets P 508,000 liab./equity P 508,000

9. The book value of the partnership equity (i.e., total

equity of the partners) on June 30, 2006 is If the partners then distribute the available cash, Lane
A. P60,000. will receive
B. P29,000. A. P23,000.
C. P30,000. B. P29,000
D. P42,000. C. P30,000.
D. P34,000.
10. The cash available for distribution to the partners on
July 31, 2006 is 14. Under the rule of offset, what is the proper disposition
A. P 2,000. of a partnership loan that was made from a partner
B. P4,000. who has a debit balance?
C. P 7,000. A. The loan is first paid to the debtor partner before
D. P11,000. cash payments are made to partners.
B. The loan is written off as a partnership loss if the
11. How much cash would Xin receive from the cash that partner does not have the cash to cover the debit
is available for distribution on July 31? balance.
A. P 0. C. The loan is charged off to the capital accounts of
B. P 600. all the partners in their profit and loss sharing
C. P1,000. ratios.
D. P2,000. D. The loan is charged off to the capital account of
the debtor partner.
12. Hara, Ives, and Jack are in the process of liquidating
their partnership. Since it may take several months to 15. In partnership liquidations, what are safe payments?
convert the other assets into cash, the partners agree A. The amounts of distributions that can be made to
to distribute all available cash immediately, except for the partners, after all creditors have been paid in
P10,000 that is set aside for contingent expenses. The full.
balance sheet and residual profit and loss sharing B. The amounts of distributions that can be made to
percentages are as follows: the partners with assurance that such amounts
will not have to be returned to the partnership.
Cash P 400,000 Accounts C. The amounts of distributions that can be made to
payable P 200,000 the partners, after all non-cash assets have been
Other Hara, capital adjusted to fair market value.
assets 200,000 (40%) 135,000 D. All the above are examples of the safe payments
Ives, capital concept.
(30%) 216,000
Jack, capital 16. If all partners are included in the first installment of an
(30%) 49,000 installment liquidation, then in future installments
A. cash will be distributed according to the residual
Total assets P 600,000 Total profit and loss sharing ratio.
liab./equity P 600,000 B. cash should not be distributed until all non-cash
assets are converted into cash.
How much cash should Ives receive in the first C. a safe payments schedule must be prepared
distribution? before each cash distribution to avoid excessive
A. P146,000. payments to partners.
B. P147,000. D. a cash distribution plan must be prepared so that
C. P153,000. partners will know when they will be included in
D. P156,000 cash distributions.

17. The year-end balance sheet and residual profit and

loss sharing percentages for the Lang, Maas, and Neal
partnership on December 31, 2005, are as follows:
Cash P 30,000 Accounts Jan. 31, 2016 200,000
payable P 200,000 Unissued Ordinary Share 800,000
Loan to 40,000 Loan from Subscribed Ordinary Share 400,000
Lang Maas 50,000 Share Premium - Ordinary 300,000
Other 480,000 Lang, capital
assets (25%) 70,000 1) What is the total number of ordinary shares
Maas, capital issued?
(25%) 80,000 2) What is the remaining number of shares available
Neal, capital for subscription?
(50%) 150,000 3) What is the total contributed capital?
Total Total
assets P 550,000 liab./equity P 550,000 B.
The shareholders equity of Janet Corporation at the end of
2015 and 2014 are as follows:
The partners agree to liquidate the business and
distribute cash when it becomes available. A cash 2015 2014
distribution plan for the Lang, Maas, and Neal 12% Preference Share, P100 par P1,000,000 P 600,000
partnership will show that cash available, after Ordinary Share, P20 par 2,000,000 1,800,000
outside creditors are paid, will initially go to Share Premium Preference 160,000
A. Lang in the amount of P20,000. Share Premium -Ordinary 800,000 400,000
B. Maas in the amount of P45,000.
C. Maas in the amount of P55,000. 4) What is the total number of ordinary shares issued
D. Neal in the amount of P90,000. at December 31, 2015?
5) How many preference shares were issued during
18. In a schedule of assumed loss absorptions 2015?
A. the partner with lowest loss absorption is 6) What is the average issue price per share of the
eliminated last. preference issued in 2015?
B. it is necessary to have a cash distribution plan 7) How many ordinary shares were issued in 2015?
first. 8) What is the average issue price per share of the
C. the least vulnerable partner is eliminated first. ordinary shares issued in 2015?
D. the most vulnerable partner is eliminated first.
C.
19. Which partner is considered the most vulnerable as On July 1, 2015, Nokia Corporation issued 1,000 P10 par
a result of a computation of vulnerability rankings? ordinary shares and 2,000 P10 par convertible preference
A. The partner with the lowest vulnerability shares for a lump-sum price P45,000. At this date, Nokias
ranking, who also has the lowest loss ordinary and preference were selling at P18 and P14 per share,
absorption potential. respectively.
B. The partner with the lowest vulnerability
ranking, who also has the highest loss 9) What is the amount credited to Share Premium-
absorption potential. Ordinary?
C. The partner with the highest vulnerability ratio,
who also has the lowest loss absorption 10) What is the amount credited to Share Premium-
potential. Preference?
D. The partner with the highest vulnerability
ranking, who also has the highest loss D.
absorption potential. Bosch Corp. was organized on January 1, 2015. It was
authorized by the SEC to issue share capital of P5,000,000
20. The rank order is for claims against a bankrupt divided into 50,000 shares of P100 par value ordinary share
partner of capital. The incorporators immediately subscribed to 12,500
shares at par.
I. Those owing to partners by way of contribution
II.Those owing to separate creditors 11) How much must be paid by the incorporators
III.Those owing to partnership creditors upon subscription for the corporation to meet the
A. II first; I second and III third. requirements of the SEC?
B. III first; II second and I third.
C. I first; III second and II third. E.
D. II first; III second and I third. On April 1, 2015, Globe Corp., a newly formed company had the
following share capital issued and outstanding:

Ordinary Share Capital, no par, P10 stated value,

CORPORATION 20,000 shares originally issued at P30 per share.
Preference Share Capital, P100 par, 600 shares
Formation and Share Capital Transactions originally issued at P500 per share.

A. 12) What are the amounts of Ordinary Share Capital,

The following accounts are found in the trial balance of Goodwill
Trading Corporation at December 31, 2015:
Authorized Ordinary Share, P50 par P2,000,000
Subscription Receivable collectible on
Preference Share Capital, and Additional Paid-in
Capital, respectively, that Globe Corp. should
report in its April 1, 2015 shareholders equity
section of the balance sheet?
 F.
Fortune Company prepared this journal entry on June 30, 2015: L.
The following is a list of selected account balances taken from
Cash.140,000 the December 31, 2015 general ledger of Marcelo Corporation:
Ordinary Share Capital..130,000
Share Premium-Ordinary.. 10,000 Accounts payable P1,400,000
Accounts receivable 2,357,000
13) What is the par value of the share and how many Ordinary Share Capital 1,260,000
shares were issued? Share Premium-Ordinary 1,082,750
Share Premium-Preference 92,100
G. Preference Share Capital 500,000
On June 1, Smart Company issued 8,000 shares of its P100 par Subscribed Preference Shares 140,000
ordinary share capital to Dix for a tract of land. The shares were Retained Earnings 191,950
actively traded in the stock exchange at P180 per share. On Dix Subscription Receivable 105,000
last property tax bill, the land had an assessed value of
P1,000,000. 20) What is the total contributed capital for Marcelo
Corporation at December 31, 2015?
14) What is the amount of increase in Paid-in Capital
of Smart as a result of the foregoing issuance of 21) What is the total shareholders equity of Marcelo
shares? Corporation at December 31, 2015?

H. M.
Global Co. exchanges a piece of equipment for 4,000 shares of World Class Corp.s records included the following
International Companys ordinary share capital that has a P100 shareholders equity accounts:
par value. The equipment costs Global P1,000,000 when
purchased five years ago, and currently has a fair value of Preference Share, P15 par, 200,000 shares
P560,000. The equipment has a recorded accumulated authorized P2,550,000
depreciation of P550,000 in the books of Global. Share Premium-Preference 340,000
Ordinary Share, no par, P50 stated value,
15) What is the amount credited to Share Premium- 100,000 shares authorized 3,000,000
Ordinary as a result of this exchange?
22) What was the average issue price of the
I. preference share?
Worldwide Co. was authorized to issue 10,000 preference
shares of P200 par value and 100,000 ordinary shares of P20 23) How many ordinary shares were issued?
par value. Subscription for 4,000 shares was received at P225
per share with a downpayment of 25%. The balance is payable N.
after 60 days. Shown below is information relating to the shareholders equity
of Pop Company as of December 31, 2015:
16) What is the amount of Share Premium-Preference
recognized by Worldwide upon receipt of the 12% Cumulative Preference Share
preference share subscription? Capital, P100 par P820,000
Ordinary Share Capital, P30 par, 300,000
J. shares authorized, 100,000 shares
On January 31, 2015, Mendoza Corp. was incorporated with an issued and outstanding 3,000,000
authorized share capital of P3,000,000 divided into 100,000 Additional Paid-in Capital 3,300,000
shares of P30 par. In February, 30,000 shares were sold for P40 Retained Earnings (Deficit) (500,000)
per share. In March, 20,000 shares were sold on a subscription
basis at a price of P45 per share. As of December 31, 2015, 24) What was the original issue price per share of the
one-half of the subscriptions in March was collected. ordinary shares?

25) What is the total paid-in capital?

17) What amount will appear on the December 31,
2015 statement of financial position as Ordinary
Share Capital?
K.
On January 31, 2015, Sebastian Corp. was incorporated with an
authorized share capital of P3,000,000 divided into 100,000
shares of P30 par. In February, Daniel subscribed to 30,000
shares at P40 per share . In March, Daniel failed to pay the
balance on due date. Sebastian declared the shares as
delinquent and advertised them in public auction, paying
P10,000. Coleco was the highest bidder for a bid of 14,000
shares.
18) How much did Coleco pay to the corporation?
19) How many shares did Daniel receive from the
subscription?
26) What is the total shareholders equity?
Transactions subsequent to formation
A.
The Eric Corp. was organized early in Year 1. Authorization was
obtained to issue 100,000 shares of P10 par value ordinary
share capital and 20,000 shares of P100 par, 10% cumulative
preference share capital. All preference shares were issued at
par and 80,000 ordinary shares were sold for P15 per share.
During the first five years of operations, the corporation earned
a total of P3,600,000 and paid annual dividends of P2 per
ordinary share.
1) What amount of total dividends was paid each
year?
2) How much was the Retained Earnings at the end
of the fifth year?
 3) How much was the total shareholders equity at
the end of the fifth year?
B.
David Corp. had the following shareholders equity accounts
before the declaration of bonus issue:
Ordinary Share Capital, P100 par, 20,000
shares issued and outstanding P2,000,000
Share Premium-Ordinary 100,000
Retained Earnings 1,000,000
The fair value of the ordinary share on this date is P150 per
share.
4) Assuming that a 10% bonus issue was declared,
what was the amount of the retained earnings
capitalized?
5) Assuming that a 20% bonus issue was declared
and distributed, what was the total contributed
capital after the distribution of the bonus issue?
6) Assuming that a 20% bonus issue was declared,
what was the total shareholders equity after the
distribution of the bonus issue?
C.
At the beginning of 2015, Escudero Co. had retained earnings of
P100,000. During the year, Escudero reported profit of P50,000,
sold treasury shares at a gain of P18,000, declared cash
dividends of P30,000 and declared and distributed a bonus
issue of 1,500 shares, P10 par value when the market price was
P20 per share. Outstanding shares were 15,000.
7) What is the amount of retained earnings at
December 31, 2015?
D.
Cayetano Co. has 15,000 ordinary shares authorized with a par
value of P30 per share of which 6,000 shares were outstanding.
The company authorized a bonus issue when the market value
was P80 per share, entitling its shareholders to one additional
share for each share held.
8) What is the amount charged to retained earnings
as a result of the bonus issue?
E.
The shareholders equity section of Chua Co. as of December
31, 2014 has the following balances:
Ordinary Share Capital, 25,000 shares
authorized, 10,000 shares issued and
outstanding P300,000
Share Premium 400,000
Retained Earnings 800,000
Chuas board of directors declared a 10% bonus issue on March
31, 2015 when the market value of each share was P70.
Accordingly, 1,000 new shares were issued. For the first three
months of 2015, Chua sustained a net loss of P150,000.
9) What s is the balance of retained earnings at
March 31, 2015 interim statement of financial
position?
F.
In 2013 Du30 Corp reacquired 6,000 shares of its P1 par value
ordinary share capital at P36 per share. During 2014, Du30
issued 4,000 of these shares at P45 per share.
10) What accounts and amounts should Du30 credit to
record the issuance of the 4,000 shares?
G.
The following capital accounts are shown in the statement of
financial position of Digong Corporation:
Ordinary Share Capital, P100 par, 1,000 shares P100,000
Share Premium-Ordinary 2,000
Paid-in Capital from Treasury Shares 3,000
Retained Earnings 75,000
Treasury shares, 200 shares at cost 25,000
The whole 200 treasury shares were sold for P20,000.
11) What amount if any should be charged to retained
earnings account upon sale of the 200 treasury
shares?
H.
On July 1, 2015 Mack Corp. was registered with the SEC. Its
authorized share capital consists of 1,000,000 ordinary shares
with a par value of P20 per share.
On July 15, 2015, it issued 100,000 shares at P23 per share. On
October 15, 2015, Mack paid to the majority shareholders the
sum of P800,000 and issued 50,000 shares of its ordinary share
capital in exchange for land and building. The land was
appraised at P1,300,000. The building had an original cost of
P1,500,000 and its depreciated value is P900,000. It was
appraised at P1,200,000.
On October 15, 2015, the corporation purchased 5,000 shares
of its own ordinary share capital for P110,000. On December 15,
2015, 2,000 of its treasury shares were sold for P25 per share.
12) How much is the Additional Paid-in Capital of
Mack Corp. on December 31, 2015?
I.
The shareholders equity of Tack Corp. as of January 1, 2015 is
as follows:
Ordinary Share Capital, P20 par, 200,000
shares authorized, 120,000 shares
issued and outstanding P2,400,000
Share Premium 280,000
Retained Earnings 1,540,000
Tack recorded the following transactions during 2015:
Acquired 2,000 shares of its ordinary share capital for
P70,000.
Sold 1,200 treasury shares at P42 per share.
Retired the remaining treasury shares
13) Assuming no other equity transactions occurred
during 2015, what should Tack report at December
31, 2015 as Additional Paid-in Capital?
J.
Deck Corp. was organized on January 1, 2013 at which date it
issued 100,000 shares of P10 par ordinary shares at P15 per
share. During the period January 1, 2013 through December 31,
2015, Deck reported a profit of P450,000 and paid cash
dividends of P230,000. On October 31, 2015, Deck purchased
6,000 ordinary shares at P12 per share. On December 31,
2015, it sold 4,000 treasury shares at P8 per share.
 14) What is Decks total shareholders equity at
December 31, 2015?

15) How much retained earnings is available for

dividend declaration at December 31, 2015?

K.
Zack, Inc. was organized on January 1, 2015 with authorized
share capital of 500,000, P10 par value ordinary shares. During
2015, Zack issued 10,000 shares at P14 each, purchased 1,000
treasury shares at P13 per share and subsequently sold 800 of
treasury shares at P15 per share and 200 shares at P10 per
share.

16) What is the amount of Additional Paid-in Capital at

December 31, 2015?

17) What is the balance of Ordinary Share Capital as

of December 31, 2015?

18) Assume that the Retained Earnings had a balance

of P150,000 as of December 31, 2015, what is the
total shareholders equity as of December 31,
2015?

L.
Dack Corp. was organized on January 3, 2015 with authorized
share capital of 100,000, P10 par ordinary share capital . During
2015, Dack had the following transactions affecting
shareholders equity:

Jan. 7 Issued 40,000 shares at P12 per share.

Dec. 2 Purchased 6,000 treasury shares at P13 per share.

Profit for the year 2015 was P320,000.

19) What is the total shareholder equity at December

31, 2015?

M.
Homepage, Inc. engaged in the following transactions involving
treasury shares. (Assume that the transactions were listed in
chronological order.)
Purchased for cash 12,500 treasury shares at P20 per
share.
Reissued 5,000 treasury shares at P22 per share.
Reissued 4,000 treasury shares at P22 per share.

20) By what net amount did shareholders equity

increase or decrease as a result of the foregoing
transactions?
21) What amount of Retained Earnings should be
appropriated for the treasury shares at the end of
the year?

N.
On December 29, 2014, the Dawn, Inc. was registered at the
Securities and Exchange Commission, with 100,000 shares of
authorized ordinary share capital of P100 par value. On the
same date, 40,000 shares were sold and issued at P110 per
share. On May 15, 2015, the corporation purchased 1,000
shares at P120 per share. On September 15, 2015, 600 of
these shares were sold for P105. During 2015, the corporation
realized a net profit after tax of P350,000 and paid cash
dividend of P120,000.

22) What is the total shareholders equity at December

31, 2015?
23) What is the retained earnings balance at
December 31, 2015?