University of Perpetual Help System Dalta

Advanced Accounting I RJ CARASCO

Quiz

ILUSORIO, Elgie P. MWF 5:00-7:00 PM

BSAT 3

1. Lacson and Bernal started a partnership. Lacson contributed a building that she purchased 10 years
ago for P 100,000. The accumulated depreciation on the building on the date of formation of the
partnership is P 25,000 and the fair value is P110,000. For what amount will Lacson’s capital account be
credited on the books of the partnership?

ANSWER: P110,000

Building P110,000
Lacson, Capital P110,000

2. Red, White, and Blue form a partnership on May 1, 2005. They agree that Red will contribute office
equipment with a total fair value of P 40,000; White will contribute delivery equipment with a fair value
of P 80,000; and Blue will contribute cash. If Blue want a one third interest in the capital and profits, he
should contribute cash of:

ANSWER: P60,000

Red P40,000 [(40,000+80,000)/0.6666666666]=P180,000

White P80,000 180,000*0.33333333=P60,000
Blue (1/3) P60,000
P180,000

3. Mateo and Julio formed a partnership on April 1 and contributed the following assets: Mateo
Julio Cash P 300,000 P 100,000 Land P 300,000 The land was subject to a mortgage of P 50,000, which
was assumed by the partnership. Under the partnership contract, Mateo and Julio will share profit and l
oss in the ratio of one-third and two-thirds respectively. Julio’s capital account at April 1 should be:

ANSWER: P350,000

Julio
Land P300,000-P50,000=P250,000
Cash P100,000
Total P350,000
4. On April 30, 2005, AA, BB and CC formed a partnership by combining their separate business
proprietorships. AA contributed cash of P 50,000. BB contributed property with a P 36,000 book value, a
P 40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for the P 35,000
mortgage attached to the property. CC contributed equipment with a P 30,000 book value, a P 75,000
original cost and P 55,000 fair value. The partnership agreement specifies that profits and losses are to
be shared equally but is silent regarding capital contributions. Which partner has the largest April 30,
2005, capital balance

ANSWER: CC P55,000

Contribution of AA, BB and CC

Cash (AA) P50,000 P50,000
Property (BB) P80,000 less mortgage payable P35,000 P45,000
Equipment (CC) P55,000 P55,000

5. PP, RR, and SS are new CPA’s and are to form partnership. PP is to contribute cash of P 50,000 and his
computer originally costing P 60,000 but has a second hand value of P 25,000. RR is to contribute cash of
P 80,000. SS, whose family is selling computers, is to contribute cash of P 25,000 and a brand new
computer with a regular selling price of P 60,000 but which cost is P 50,000. Partners agree to share
profits equally. The capital balances upon formation are:

ANSWER: PP P110,000 ; RR P80,000 ; SS P75,000

PP RR SS
Cash P50,000 P80,000 P25,000
Equipment P60,000 - P50,000
Total P110,000 P80,000 P75,000

6. Elsa and Pearl form a new partnership. Elsa invests P 300,000 in cash for her 60 percent interest in the
capital and profits of the business. Pearl contributes land that has an original cost of P 40,000 and a fair
market value of P70,000, and a building that has a tax basis of P 50,000 and a fair market value of P
90,000. The building is subject to a P 40,000 mortgage that the partnership will assume. What amount of
cash should Pearl contribute?

ANSWER: P80,000

Elsa Pearl
Cash P300,000 P80,000
Land - P70,000
Building - P50,000
Total P300,000 P200,000

Elsa P300,000/60%=P500,000
Pearl P500,000*40%=P200,000
P200,000-P120,000=P80,000 Additional Cash Investment
7. On April 1, 2006, Ell and Emmy pooled their assets to form a partnership, with the firm to take over
their business assets and assume the liabilities. Partners capitals are to be based on net assets
transferred after the following adjustments:

a) Emmy inventory is to be increased by P 3,000;

b) An allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in books of Ell and Emmy,
respectively; and
c) Accounts payable of P 4,000 is to be recognized on Ell’s books.
The individual trial balances on April 1, 2006, before adjustments follow:
Ell Emmy
Assets P75,000 P113,000
Liabilities 5,000 34,500
Capital 70,000 78,500
How much is the capital of Ell after the above adjustments to his book

ANSWER: P65,000

Ell, Capital P1,000

Allowance for Doubtful Accounts P1,000

Additional Accounts Payable to be recognized P4,000

Ell, Capital P70,000-P5,000=P65,000

8. On September 30, 2005, Lopez admits Mendez for an interest in his business. On this date, Lopez’s
capital account shows a balance of P 158,400. The following were agreed upon before the formation of
the partnership:

a) Prepaid expenses of P 17,500 and accrued expenses of P 5,000 are to be recognized.

b) 5% of the outstanding accounts receivable of Lopez amounting to P 100,000 is to be recognized as
uncollectible.
c) Mendez is to be credited with a one-third interest in the partnership and is to invest cash aside from
the P50,000 worth of merchandise.
The amount of cash to be invested by Mendez and the total capital of the partnership are:

ANSWER: P32,950 ; P248,850

Lopez New Capital P165,900 this represent two-thirds of the total capital of the partnership
P165,900/0.666666666=P248,850 total capital of the partnership

Mendez Capital P248,850*0.333333333=P82,950

Additional Cash Investment P82,950-P50,000=P32,950
9. Ruiz and Pena are combining their separate businesses to form a partnership. Cash and noncash
assets are to be contributed for a total capital of P 300,000. The noncash assets to be contributed and
the liabilities to be assumed are:

Ruiz Pena

Book Value Fair Value Book Value Fair Value

Accounts receivable P20,000 P20,000 -

Inventories 30,000 40,000 P20,000 P25,000

Equipment 60,000 45,000 40,000 50,000
Accounts payable 15,000 15,000 10,000 10,000

The partner’s capital accounts should be equal after all the contribution of assets and the assumptions
of liabilities. How much cash is to be contributed by Ruiz?

ANSWER: P60,000

Each partner should have a total capital of P150,000

Ruiz Old Capital P90,000
Additional Cash to be contributed P60,000

10. On July 1 of the current year, Jobson and Gomez form a partnership. Jobson is to invest certain
business assets at values which are yet to be agreed upon. He is to transfer his business liabilities and is
to contribute sufficient cash to bring his total capital to P 180,000, which is 60% of the total capital as
had been agreed upon. Details regarding the book values of Jobson’s business assets and liabilities and
their corresponding valuation follow:

Book Value Agreed Valuations

Accounts Receivable P 54,000 P 54,000
Allowance for doubtful accounts 3,600 6,000
Merchandise inventory 96,600 105,000
Store equipment 27,000
Accumulated depreciation-Store equipment 18,000 13,200
Office equipment 18,000
Accumulated depreciation-Office equipment 9,600 4,800
Accounts payable 48,000 48,000

Gomez agrees to invest cash of P 30,000 and merchandise valued at current market price. The value of
the merchandise to be invested by Gomez and the amount of cash to be invested by Jobson are

ANSWER: P90,000.00 ; P48,000.00 Respectively

Jobson Total Capital P180,000 (60%)

Total Capital of the Partnership P180,000/60%=P300,000
Gomez Total Capital P120,000
Cash Investment P30,000
Merchandise to be invested P90,000

Jobson Total Capital P180,000

Jobson’s Total Agreed Valuation of business assets and liabilities P132,000
Additional Cash Investment P48,000

END