A, B and C decided to form a partnership.

The following
transactions were made
1. A contributed land with an agreed value of P200,000, fair
value of P250,000 and carrying amount of P190,000. The
land is subject to a mortgage at DEF bank at P50,000 which
the partnership will assume.
2. B contributed furniture with a book value P250,000 and
accumulated depreciation of P70,000
3. C contributed land with fair value of P300,000. The land is
subject is subject to a mortgage at ABC bank worth
P150,000 which the partnership will not assume.
4. B contributed land with agreed value of P400,000. The land
is subject to a mortgage with West East bank worth
P250,000. The partnership will only assume P150,000 of
the mortgage.
5. A, B and C contributed cash of P150,000, P70,000 and
P100,000 respectively
Requirements
1. Journalize the following transactions
2. Determine the ending capital balances of A, B and C
3. Assuming that the partnership agreed to make their capital
balances equal to their profit or loss ratio. The profit or
loss ratio of A, B and C is 2:5:3 respectively.
a. How much is the adjusted capital balances of A, B and
C?
b. How much is the bonus to/from A, B and C respectively?
4. Assuming B needs to invest additional cash for his initial
capital to be equal to 50% of the total partnership capital?
a. How much is the(adjusted) total partnership capital upon
formation?
b. How much additional cash shall B invest in the
partnership?
Assume the following data on January 1, 20x4 for ABC
partnership has the following capital balances and their
respective P/L percentages
A, Capital (30%): 250,000
B, Capital (50%): 350,000
C, Capital (20%): 100,000

The company has a net income of P200,000 during 20x4 with

the following stipulation
- Annual salaries shall be given to A, B and C worth P24,000,
P16,000 and P40,000 respectively
- The remaining profit shall be distributed to the partners
according to their profit and loss ratios.

On January 2, 20X5, D was admitted to the partnership as a new

partner with 10% capital interest

Required:
I. Compute for the adjusted capital balance of the partners
after the following transactions
A. D purchased 20% of A’s Capital Interest in the
partnership
B. D Invested P100,000 in the partnership. The assets of
the partnership are fairly valued
C. D invested P80,000 in the partnership. The assets of the
partnership are fairly valued
D. D invested P150,000 in the partnership. The assets of
the partnership are fairly valued
E. D invested P120,000 in the partnership. The partnership
assets are fairly valued except for land that is
undervalued by a certain amount.
II. Journalize the transactions above
CASE PROBLEMS: Withdrawal
Capital balances of A, B and C along with their profit or loss ratio were as follows. C is planning to
withdraw his capital interest in the partnership.
A (40%): 480,000
B (40%): 480,000
C (20%): 240,000

1. Assuming C received P240,000 cash in settlement of his interest in the partnership, journalize this
transaction.
2. Assuming C received P300,000 cash in settlement of his interest in the partnership. The net assets
of the partnership are fairly valued
- How much is the adjusted capital balances of A and B respectively ?
3. Assuming C received P200,000 cash in settlement of his interest in the partnership. The net assets
of the partnership are fairly valued
- How much is the adjusted capital balances of A and B respectively ?
4. Assuming C received P300,000 cash in settlement of his interest in the partnership. The
difference is attributable to undervaluation of land.
- How much is the adjusted capital balances of A and B respectively ?
5. Assuming C received P200,000 cash in settlement of his interest in the partnership. The
difference is attributable to overvaluation of equipment
- How much is the adjusted capital balances of A and B respectively ?
CASE 1
A and B formed a partnership. The partnership agreement
stipulates the following
1. Annual Salary allowances of P160,000 for A and P80,000
for B
2. The partners share profits equally and losses on a 60:40
ratio
Required: Compute for the respective shares of A and B in the
profits assuming that
a. The partnership earned a profit of P200,000
b. The partnership earned a profit of P300,000
CASE 2
D is the managing partner of the partnership. He is given a 25%
bonus to the partnership. The pre-tax net income of the
partnership is P1,000,000 and the partnership is subject to a 25%
income tax rate.
Required: Compute the bonus to be given to B on the following
assumptions
1. The bonus is based on profit before bonuses and income tax
2. The bonus is based on profit after bonus but before income
tax
3. The bonus is based on profit after bonus and income tax
CASE 3
Y AND Z have capital balances at the beginning of the year of
P500,000 and P600,000, respectively. They share profit as
follows
• Interest of 5% on beginning capital balances
• Salary allowances of P80,000 to Y and P100,000 to Z
• Balance in the ratio of 3:2
The partnership realized profit of P275,000 during the current
year before interest and salary allowances to partners
1. Compute the respective shares of the partners on the
partnership profit
2. Assuming that the partnership stipulation states giving 10%
bonus to Y, determine the respective shares of the partners
on the partnership profit of assuming that
a. Bonus is based on profit before any deductions for
 interest, salaries and bonus
b. Bonus is based on profit after deducting interests but
before salaries and bonus
c. Bonus is based on profit after deducting interests and
salaries but before bonus
d. Bonus is based on profit after deducting interests,
salaries and bonus
ABC Partnership earned a profit of P240,000 in 20x1. The
movements in the capital accounts of the partners are shown
below
A B C
Jan. 1 120,000 80,000 140,000
May 1 Debit of 20,000 Debit of 10,000 ------
July 1 ------ Credit of 20,000 Credit of 40,000
Aug 1 Credit of 10,000 ------ Debit of 15,000
Oct 1 Debit of 10,000 Debit of 5,000 ------

The additional stipulations are given

A. Annual salary to A, B and C worth P20,000, P30,000 and
P50,000 respectively
B. Each partner shall receive 10% on the ending capital
investments
C. Any remaining profit or loss shall be shared 2:2:4
Required
1. Compute for the share of each partner in the profits of the
partnership
2. Assuming that A received a share worth P60,000 in the
profits of the partnership
a. How much was the profit earned by the partnership?
b. How much did C receive from the partnership profits?
3. Assume that everything is the same except that each partner
shall partner shall receive 10% on their average capital
investments, compute for the share in profit of each partner
 ADVACC1 – SECTION A
First Long Quiz

Name : _________________________________________________________________________________________________________

CASE 1

In the AD Partnership, Anthony’s Capital is P280,000 and Davis’ is P80,000 and they share income in a 3:1
ratio respectively. They decide to admit Luka to the partnership. Each of the following questions is
independent to the others

A. Anthony and Davis agree that some of the inventory is obsolete. The inventory account is
decreased before Luka was admitted. Luka Invests P80,000 for one fifth interest. What was the
amount of Inventory written down?
B. Assuming that Luka invests one-fifth of the partnership by investing P88,000. The land account is
increased before Luka is admitted. By what amount is the land account increased?

CASE 2

The condensed capital balances of EE, FF and GG with corresponding profit or loss sharing percentage as
of June 30,2015 are as follows

EE, Capital (50%) 240,000

FF, Capital (30%) 144,000
GG, Capital (20%) 96,000
480,000

EE retired from the partnership. By mutual agreement, he was paid P270,000 for his interest in the
partnership. The partnership’s assets are fairly valued.

A. After EE’s retirement, what is the total net assets of the partnership ?
B. After EE’s retirement, what is GG’s ending capital balance ?

CASE 3

A, B and C , a partnership formed on January 2025, had the following initial investments

A – 100,000
B – 150,000
C – 225,000

The partnership agreement states that profits and losses are to be shared equally by the partners after
consideration is made for the following

- Salaries allowed to partners, P60,000 for A, P48,000 for B and P46,000 for C
- Average capital balances during the year shall be allowed 10%

Additional information

- On June 30,2015, A invested an additional P60,000

- C withdrew P70,000 from the partnership (permanent) on September 30, 2015
- Share in the remaining partnership profit was P5,000 for each partner

A. Compute for the profit to be allocated to A, B and C

B. Compute for the total partnership capital as of December 31, 2025
C. Compute for the ending partnership capital balances of A, B and C
CASE 4

A condensed statement of financial position prepared for AA Partnership, owned by Aguinaldo and Ando,
as at October 31, 2015, is shown below. Aguinaldo and Ando invited Alam to their partnership. Aguinaldo
and Ando 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 Alam. Then the new partnership will have a profit/loss ratio of
Alam, 50%; Aguinaldo, 30%, and Ando 20%.

Aguinaldo, Capital 2,240,000

Ando, Capital 1,280,000

Required: Journalize the following transactions

A. Alam purchases one-half equity in the partnership from Aguinaldo and Ando for P2,200,000.
Payment is to be made directly to Aguinaldo and Ando. Aguinaldo and Ando each will retain one-
half of their respective equities and transfer the other halves to Alam.
B. Alam invests P4,000,000 to the partnership receiving 50% interest in the partnership.
C. Alam invests P4,000,000to the partnership receiving 50% interest. The amount of Alam’s
investment implies that the property, plant and equipment were carried at amount less than their
fair values.
D. Alam invests P2,400,000in the partnership and receives 50% interest in capital and income. All
partnership assets and liabilities are fairly valued
CASE 1

1.

2.

CASE 2

1.

2.

CASE 3

1. Profit A

2. Profit B

3. Profit C

2. Total partnership
capital
3.A – Ending capital

4. B – Ending capital

5. C – Ending capital

CASE 4
CASE 1 : ADMISSION OF NEW PARTNER
D was admitted in the partnership operated by A, B and C with a 20% interest in the partnership. Capital
balances of A, B and C along with their profit or loss ratio prior to D’s admission were as follows
A (40%): 480,000
B (40%): 480,000
C (20%): 240,000

All assets and liabilities are fairly valued

(Purchase of interest)
1. Assuming D paid A and C a total of P240,000 for his 20% interest in the partnership by
purchasing 30% of A’s Interest and 40% of C’s interest for a certain amount.
- By how much should the total capital of the new partnership increase after D’s admission?
- What would be the capital balance and the new profit and loss percentage of A and C
immediately after D’s admission?
- What are the capital balances of A and C immediately after D’s admission?
2. Assuming D paid A and C a total of P300,000 for his 20% interest in the partnership by
purchasing 30% of A’s Interest and 40% of C’s interest for a certain amount.
-What are the capital balances of A and C immediately after D’s admission?
(Admission by investment)
1. What amount should D invest into the partnership assuming no bonus is to be recognized?
2. Assuming D invested a total of P400,000 into the partnership, how much is the adjusted capital
balances of A, B and C respectively?
3. Assuming D invested a total of P250,000 into the partnership, how much is the adjusted capital
balances of A, B and C respectively?
(Asset revaluation)
1. Assuming D invested P325,000 into the partnership. The investment of D indicated that all assets
and liabilities are fairly valued except that equipment is undervalued by a certain amount.
- How much was the land undervalued?
- How much is the adjusted capital balances of A, B and C respectively?
2. Assuming D invested P280,000 into the partnership. The investment of D indicated that all assets
and liabilities are fairly valued except that equipment is over-valued by a certain amount.
- How much was the equipment overvalued?
- How much are the adjusted capital balances of A, B and C respectively?