COMPREHENSIVE EXAMINATION

PARTNERSHIP AND CORPORATION ACCOUNTING

February 27, 2025

General Instruction: Carefully read the problems. Provide clear and concise solutions. Once you
have determined your final answers, double-rule them to signify completion. Erasures or
alterations are NOT allowed. Good luck, and may you succeed in your endeavors.

PROBLEM 1
Abigail and Bryn formed a partnership. Abigail invested cash worth ₱85,000 and a machine. On the
other hand, Bryn contributed cash worth ₱55,000 and equipment, which has a mortgage of ₱35,000,
which the partners agreed to assume. The total capital after formation was ₱360,000. They also
agreed to reflect a 55:45 ratio as to their capital balances. Abigail's capital was credited in
the amount of ₱8,000, and Bryn's capital was debited with the same amount to be in agreement
with the capital balance after formation. Prepare the journal entry:
a. To record the investment of Abigail
b. To record the investment of Bryn
c. To reflect 55:45 ratio agreement as to their capital balances.
Answer:
Total Capital 360,000 Journal Entries to record investment of Abigail and Bryn
Multiply: Ratio 55% Cash 85,000
Abigail, Capital 198,000 Machine 105,000
after adjustment
Credit -8,000 Abigail, Capital 190,000
Abigail, Capital 190,000
before adjustment
Less: Cash 85,000 Cash 55,000
Cost of Machine 105,000 Equipment 150,000
Mortgage Payable 35,000
Total Capital 360,000 Bryn, Capital 170,000
Multiply: Ratio 45%
Abigail, Capital 162,000 Adjusting Entry - to reflect 55:45 ratio as to their capital
after adjustment balance
Mortgage Payable 35,000 Bryn, Capital 8,000
Debit 8,000 Abigail, Capital 8,000
Abigail, Capital 205,000
before adjustment
Less: Cash 55,000
Cost of Equipment 150,000

PROBLEM 2
Antolin and Bravo formed a partnership. The following are their contributions:

Antolin Bravo
Cash 500,000 -
Accounts receivable 100,000 -
Building 700,000
Total 600,000 700,000

Antolin, capital 600,000

Bravo, capital 700,000
Total 600,000 700,000

Additional information:
 The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
 The building is over-depreciated by ₱50,000.
 The building has an unpaid mortgage ₱100,000, which is assumed by the partnership.

Requirement: Provide the journal entry to record the contributions of the partners in the
partnership books. (Use compound entry)

Answer:
Cash 500,000
Accounts Receivable 100,000
Building 750,000
Allowance for Uncollectible Accounts 20,000
Mortgage Payable 100,000
Antolin, Capital 580000
Bravo, Capital 650,000
PROBLEM 3
Catherine and Celestine agreed to form a partnership. Catherine contributed ₱40,000 cash while
Celestine contributed equipment with fair value of ₱100,000. However, due to the expertise that
Catherine will be bringing to the partnership, the partners agreed that they should initially
have an equal interest in the partnership capital.

Requirement: Provide the journal entry to record the initial investments of the partners. (Use
compound entry)

Answer:
Cash 40,000
100,00
Equipment 0
Catherine, Capital 70,000
Celestine, Capital 70,000

PROBLEM 4
C and D are forming a new partnership, and the following conditions have been agreed upon:
• C will invest cash of P358,160 for a 40% interest in the capital and profits of the
partnership.
• D will contribute land with an original cost of P160,000 and a fair market value of
P180,000.
• D will also contribute a building with an assessed value of P180,000 and an appraised
value of P225,000. The building is subject to a mortgage of P52,000, which the
partnership will assume.
Based on the information provided, how much cash should D contribute for his interest in the
capital of the partnership?

Answer: P184,240

PROBLEM 5
A and B decided to combine their businesses and form a partnership. The following are the
statement of financial position before formation:

A B
Cash 2,048,400 1,098,360
Accounts receivable 1,031,960 2,498,716
Inventory 528,160 1,144,448
Equipment, net 613,380 852,224
Other assets 8,800 15,840
Total Assets 4,230,700 5,609,588
Accounts payable 787,336 1,072,060
Notes payable 1,000,000 -
Mortgage payable - 1,440,000
A, Capital 2,443,364 -
B. Capital - 3,097,528
Total Liabilities and Capital 4,230,700 5,609,588

The partners agreed that the equipment of A is under-depreciated by P180,000 and B’s equipment
is over-depreciated by P110,000. Accounts receivable of P108,000 in A’s books and P145,000 in
B’s books are deemed uncollectible. The partnership decided to assume all liabilities of A and
B. Partners A and B agreed to have a 60:40 profit and loss ratio, respectively. The partners
agreed to adjust their original capital to match their profit and loss ratio, and none of them
will invest or withdraw any amount.
a. Compute for the total assets after formation?
b. What are the capital balances of A and B respectively after formation?

Answer:
a. P 9,517,288
b. A – P3,130,735.2; B – P2,087,156.80

PROBLEM 6
The partnership agreement of David, Edward and Fiona stipulates the following:
 Partners David and Fiona shall receive annual salaries of ₱12,000 and ₱8,000,
respectively.
 A bonus of 10% of profit after salaries but before deduction of bonus shall be given to
Partner David, the managing partner.
 Each partner shall receive 10% interest on average capital investments.
 Any remaining profit or loss shall be shared as follows: 40% to David and 30% each to
Edward and Fiona.
The average capital investments of partners during the year are as follows:
David ₱100,000
Edward 60,000
Fiona 120,000

The partnership earns profit of ₱10,000. Compute for the respective shares of the partners on
the partnership profit.

Answer:
David Edward Fiona Total
Salaries 12,000 8,000 20,000
Interest 10000 6000 12,000 28,000
Residual Interest -15200 -11400 -11400 -38,000
Share 6,800 -5,400 8,600 10,000

PROBLEM 7
Lavigne and Megan are in partnership. They share profits in the ratio 3:2 and close their
accounts on June 30 each year. On Jan. 1, 2023, Nerissa joined the partnership. The profit-
sharing ratio was revised to become Lavigne 50%, Megan 25% and Nerissa 25%, after providing for
annual salaries as follows: Megan, P20,000 and Nerissa, P12,000. The partnership profit for the
year ended June 30, 2023 was P480,000, accruing evenly over the year. What are the partners'
total share in profits for the year ended June 30, 2023?

Answer:
Lavigne Megan Nerissa
Old 0.6 0.4
New 0.5 0.25 0.25
Residual Interest (July-Dec 2022) 144,000 96,000 240,000
Salaries 10,000 6,000 16,000
Residual Interest (Jan-June 2023) 112,000 56,000 56,000 224,000
Share in the profits 256,000 162,000 62,000 480,000

PROBLEM 8
Ace, a partner in the Ace and Lam Partnership has a 30% share in the partnership profit and
loss. His capital account had a net decrease of P60,000 in 2023. In 2023, he withdrew P130,000
against his capital and invested property valued at P25,000 in the partnership. The profit of
the partnership is _______________.

Answer:
Net decrease in capital -60,000
Withdrawal -130,000
Additional Investment 25,000
Share in the profits 45,000
Divide: P/L ratio 30%
Profit ₱150,000

PROBLEM 9
Gorres and Velayo are partners who share profits and losses after salary and interest allowances
in the ratio of 60:40, respectively. Gorres's salary is P20,000 and Velayo's is P10,000. The
partners are also paid interest on their average capital balances. In 2023, Gorres received
P10,000 in interest and Velayo P4,000. If Velayo's share of partnership profit was P40,000 in
2023, what was the total partnership profit?

Answer:
Gorres Velayo
Ratio 0.6 0.4
Salaries 20,000 10,000 30,000
Interest 4,000 14,000 18,000
Residual Interest 26,000 65,000
Share in the profits 40,000 ₱109,000

PROBLEM 10
On Jan. 2, 2023, Henry and Lou formed a partnership. Henry contributed capital of P175,000 and
Lou, P25,000. They agreed to share profits and losses in the ratio of 8:2, respectively. Lou is
the general manager and works in the partnership full time. Lou is given a salary of P5,000 a
month, an interest of 5% of the beginning capital (of both partners) and a bonus of 15% of
profit before salary, interest, and bonus. The statement of comprehensive income of the
partnership for the year ended Dec. 31, 2023 follows: Net Sales P875,000; Cost of Goods Sold
700,000; Gross Profit P175,000; Expenses (including the salary, interest, and the bonus)
143,000; Profit P32,000. The amount of bonus to Lou in 2023 amounted to:

Answer:
32,000 + 60,000 + 10,000
= 120,000 x 15% = 18,000
0.85

PROBLEM 11
Nabuang is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a
bonus of 10% of profit after the bonus as a way of dividing profits among the partners. What
amount of profit would make the choices equal?

Answer:
40,000 = 25,000 + 10% profit after bonus

15,000
= 150,000 (profit after bonus)
0.10
150,000 + 15,000 (add back) = 165,000 (profit before bonus)

PROBLEM 12
On January 1, 2024, Andeng, Besty, and Carding formed ABC Partnership with original capital
contribution of P300,000, P500,000, and P200,000. Andeng is appointed as managing partner.
During 2024, Andeng, Besty, and Carding made additional investments of P500,000, P200,000 and
P300,000, respectively. At the end of 2024, Andeng, Besty, and Carding made drawings of
P200,000, P100,000, and 400,000 respectively. At the end of 2024, the capital balance of Carding
is reported at P320,000.
The profit or loss agreement of the partners is provided below:
 10% interest on original capital contribution of the partners
 Semi-annual salary of P80,000 and P20,000 for Andeng and Besty, respectively
 Bonus to Andeng equivalent to 20% of Net Income after interest and salary to all partners
 Remainder is to be divided equally among the partners

Requirements:
a. How much is the profit share of Besty?
b. How much is the bonus given to Andeng?

Answer:
1. How much is the profit share of Besty? P290,000
2. How much is the bonus given to Andeng? P150,000

PROBLEM 13
A and B are partners sharing profits in the ratio 3:2. On January 1,2024, C joined the
partnership and the new profit-sharing ratio is as follows: A - 40%; B – 40%; C – 20%. Profits
for the year ended June 30,2024 were:
6 months ended December 31,2023 P610,000
6 months ended June 30,2024 P750,000
An irrecoverable debt of P135,600 was written off in the six months to December 31,2023 in
computing the P610,000. It was agreed that ¼ of this expense should be charged against the
profit during the 6 months ended June 30,2024. What is A’s total profit share for the year ended
June 30,2024?

Answer: P672,780

PROBLEM 14
A and B formed a partnership. The partnership agreement stipulates the following:
• Monthly salary of P3,000 for A.
• 25% bonus to A, before deductions for salary, interest, and bonus.
• 15% interest on the weighted average capital of B.

The result of the operations showed the following:

Revenue 164,000
Expenses (including salary, interest, and bonus (110,000)
Profit 54,000
The weighted average capital balance of B’s capital account is P185,000.
Compute for the bonus of A.

Answer: P39,250
PROBLEM 15
A summary of changes in the capital account of partner A in 2024, before closing, follows:
A, Capital
Balance, Jan 1 P180,000
Investment, Feb 28 60,000
Withdrawal, March 31 40,000
Investment, July 31 300,000
Withdrawal, November 1 51,000
Investment, November 30 114,960

Compute for his weighted average capital.

Answer: P326,080

PROBLEM 16
A and B formed a partnership on January 1, 2024 sharing losses 35:65, respectively. Their
contributions were credited to their respective capital accounts as follows:
A, capital = P150,000
B, capital = P250,000
During the period, the partnership earned a profit of P955,494.40. Compute for the share of B in
the profit.

Answer: P597,184

PROBLEM 17
Ivana joins the partnership of Garrino and Herald. Before the admission of Ivana, the
partnership statement of financial position shows the following information:

Cash 30,000
Accounts receivable 140,000
Inventory 200,000
Equipment 500,000
Total assets 870,000

Accounts payable 80,000

Garrino, Capital (60%) 515,000
Herald, Capital (40%) 275,000
Total liabilities and equity 870,000

The following adjustments are determined:

a. The recoverable amount of the accounts receivable is ₱120,000.
b. The inventory has a net realizable value of ₱160,000.
c. The equipment has a fair value of ₱450,000.
d. Unrecorded liabilities amount to ₱20,000.

Case #1: Ivana acquires half of Herald’s interest for ₱800,000.

Requirements:
a. Provide the entry to record the admission of Ivana.
b. Determine the balances of the partners’ capital accounts after the admission of Ivana.
c. Determine the profit or loss sharing ratio of the partners after the admission of Ivana.

Answer:
111,50
Herald, Capital 0
111,50
Ivana, Capital 0

Revaluatio Interes
Capital n TCC t TAC
437,00
Garrino 515000 -78000 437000 0
- 111,50
Herald 275000 -52000 223000 111,500 0
111,50
Ivana 111,500 0
790000 -130000 660000 0 660000

Garrino 437,00 60%

 0
111,50
Herald 0 20%
111,50
Ivana 0 20%

Case #2: Ivana invests ₱165,000 cash to the partnership in exchange for a 20% interest. Ivanas’
capital account is credited for the fair value of the 20% interest he acquired.
Requirements:
a. Provide the journal entry to record the admission of Ivana.
b. Compute for the capital balances of the partners following the admission of Ivana.
c. Determine the profit or loss sharing ratio of the partners after the admission of Ivana.

Answer:
165,00
Cash 0
165,00
Ivana, Capital 0

Capital Revaluation TCC Bonus TAC P/L Ratio

Garrino 515000 -78000 437000 437000 53%
Herald 275000 -52000 223000 223000 27%
Ivana 165,000 165000 20%
790000 -130000 825000 825000

Case #3: If Ivana is to invest sufficient cash to obtain 2/5 interest in the partnership, how
much should Ivana contribute to the new partnership?

Answer:
Garrino 437000
Herald 223000
Total 660000
Divide: 3/5 0.6
1100000
Multiply: 2/5 0.4
Contribution of Ivana 440,000

PROBLEM 18
On December 31,2024, the Balance Sheet of ABC Partnership provided the following data with
profit or loss ratio of 5:2:3
Current Assets P1,300,000 Total P300,000
Liabilities
Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1,2025, D is admitted to the partnership by investing P1,825,000 to the partnership
for 40% capital interest.
If there is an implied asset revaluation upward (surplus) / downward (impairment), determine the
agreed capital of each partner in the new partnership.

Answer:
A, Capital – P1,268,750
B, Capital – P647,500
C, Capital – P821,250
D, Capital – P1,825,000

PROBLEM 19
The capital accounts of AB Partnership on December 31,2024 were:
A (60% profit percentage) P148,200
B (40% profit percentage) 61,500

On January 1, 2025, C was admitted to a 32% interest in the partnership when he purchased 30% of
each existing partner’s capital for P55,700 paid directly to A and B. On February 25,2025, D was
admitted as a partner by investing P89,500 for a 25% interest in the partnership. Compute for
the total partnership capital after admission of C & D.
Answer: P299,200

PROBLEM 20
A, B and C were partners with capital balances on January 2,2021 of P100,000; P180,000 and
P200,000, respectively. Their profit and loss ratio is 2:3:5. On July 1,2021, A retired from the
partnership. On the date of retirement, the partnership net income is P140,000 and the partners
agreed that inventories are to be revalued at P65,000 from its original cost of P80,000. The
partners agreed further to pay A P152,600 in settlement of his interest. What is the capital
balance of C after the retirement of A?

Answer: P245,250

PROBLEM 21
The capital account balances of the partners in ABC Partnership on June 30, 2024 before any
necessary adjustments are as follows:
Capital accounts
A, Capital (20%) P600,000
B, Capital (30%) 1,000,000
C, Capital (50%) 400,000
P2,000,00
Total 0

The partnership reported profit of ₱2,250,000 for the six months ended June 30, 2024.
C dies from a broken heart on July 1, 2024. It was agreed that C’s estate shall receive cash of
₱1,110,000 and equipment with carrying amount of ₱400,000 and fair value of ₱1,000,000 as
settlement of C’s interest in the partnership. The assets will be transferred as soon as the
legal proceedings on C’s estate are finalized. What is the entry in the partnership’s books on
July 1, 2024 to reflect the separation of C?

Answer:
July 1, C, Capital 1,825,000
2024 A, Capital (285,000* x 20%/50%) 114,000
B, Capital (285,000* x 30%/50%) 171,000
Liability to the estate of 2,110,00
C 0
(2M + 1.2M)

PROBLEM 22
The balance sheet of AB Partnership at December 31,2021 reported the following:
Total Assets P1,450,000
Total Liabilities 300,000
A, capital 560,000
B, Capital 590,000

On January 2,2022, A and B transferred all their assets and liabilities to a newly formed
corporation. At the date of incorporation, it was found out that the fair value of the equipment
is P155,000 more than its carrying amount, and that an additional P42,000 of accounts receivable
is uncollectible. A and B were each issued 53,000 shares of the corporation’s P7 par value
common stock. Immediately following the incorporation, what is the amount of share premium to be
recorded?

Answer: P521,000

PROBLEM 23
On January 1, 2025, Cooper Partnership entered into liquidation. The partners' capital balances
on this date were as follows: Dominic (25%) P2,500,000; Eleonor (35%) P5,400,000; Faith (40%)
P3,700,000. The partnership has total liabilities amounting to P4,400,000, including a loan from
Eleonor P600,000. Cash on hand before the start of liquidation is P800,000. With the information
given, answer the following independent situations:
1. All the non-cash assets were considered a loss, assuming all partners had personal assets
more than their personal liabilities. How much cash must the partners invest to satisfy the
outside creditors' claims and pay the amount due to the partner/s?
2. If Eleonor received P2,255,000, assuming all partners had personal assets less than their
personal liabilities. How much was the loss from realizing the noncash assets?
 Eleonor, Dominic, Eleonor, Faith
Cash Non-cash Liabilities
Loan Capital Capital Capital
Balances 800,000 15,200,000 3,800,000 600,000 2,500,000 5,400,000 3,700,000
Loss Distri -15200000 -3800000 -5320000 -6080000
Balances 800,000 0 3,800,000 600,000 -1,300,000 80,000 -2,380,000
Additional Invest. 3,680,000 1,300,000 2,380,000
Balances 4,480,000 0 3,800,000 600,000 0 80,000 0
Payment of Liab -3,800,000 -3,800,000
Balances 680,000 0 0 600,000 0 80,000 0
Payment to Eleonor -600,000 600,000
Balances 680,000 0 0 0 0 680,000 0
Cash Distribution -680,000 -680,000

Eleonor, Dominic, Eleonor, Faith

Cash Non-cash Liabilities
Loan Capital Capital Capital
Cash Distribution 2,255,000
Payment to Eleonor -600,000
Balance 1,655,000
Capital 2,500,000 5,400,000 3,700,000
Difference (Loss) 2675000 3,745,000 4280000
Ratio 25% 35% 40%
Total Loss 10700000
Deficiency -175,000 -580,000
Loss from realizing non-cash assets 9,945,000

PROBLEM 24
A local partnership was considering the possibility of liquidation since one of the partners
(Ding) was insolvent. Capital balances at that time were as follows. Profits and losses were
divided on a 4:2:2:2 basis, respectively.
Ding, capital P 60,000
Laurel, capital P 67,000
Ezzard, capital P 17,000
Tillman, capital P 96,000

Ding's creditors filed a P25,000 claim against the partnership's assets. At that time, the
partnership held assets reported at P360,000 and liabilities of P120,000. If the assets could be
sold for P228,000, what is the minimum amount that Ding's creditors would have received?
Answer:
Non-cash
Cash Liabilities Ding Laurel Ezzard Tillman
assets
360,000 120,000 60,000 67,000 17,000 96,000
228,000 360,000 -52800 -26400 -26400 -26400
-120,000 -120,000
108,000 0 0 7,200 40,600 -9,400 69,600
-4700 -2350 9,400 -2350
108,000 2,500 38,250 0 67,250

PROBLEM 25
On December 1, 2022, M, E and A decided to liquidate their partnership. As of this date, their
capital balances were P315,000, P235,000 and P150,000 respectively. The partners share profits
and losses on a 30:50:20 ratio. Before liquidation, the partnership has total assets of
P780,000, including cash of P36,000. Net proceeds received from the sale of non-cash assets
amounted to P480,000. A received P120,000 in the settlement of his interest. How much was
received by partner E?

Answer: P160,000

PROBLEM 26
A, B, and C are liquidating their partnership. At the date the liquidation begins A, B, and C
have capital account balances of P147,000, P261,000, and P290,450, respectively and the partners
share profits and losses 35%, 30%, and 35%, respectively. In addition, the partnership has a
P28,000 Advances from A and a P15,000 Loan to C. Using the Cash Priority Program, what is the
total amount of cash needed in order to satisfy until the second priority?

Answer: P211,450
PROBLEM 27
On September 1,2024, the balance sheet of ILE Co. with P/L ratio of 5:3:2 of respective partners
I, L, and E showed the following:
Cash P1,600,000 Liabilities P1,400,000
Non-cash Assets 1,500,000 I, Capital 280,000
L, Capital 650,000
E, Capital 770,000

The partners decided to liquidate the partnership in installment. All partners are declared to
be personally insolvent.
The following transactions occurred in September:
 Non-cash assets with a carrying amount of P950,000 were sold at P920,000.
 Liquidation expenses for the month of April amounting to P50,000 were paid. Future
liquidation expenses were estimated at P85,000.
 Liabilities of P615,500 were paid.
 Unrestricted cash was distributed to partners.
Requirements:
1. How much cash is distributed to each partner on September 30,2024?
2. What is the cash balance on October 1,2024?
Answer:
1. A – 0; B – P389,000; C – P596,000
2. P869,500

PROBLEM 28
The equity section of the statement of financial position of the partnership of A, B and C shows
the following information:
A, capital (40%) 64,000
B, capital (40%) 104,000
C, capital (20%) 76,800
Total equity 244,800

Non-cash assets are sold in installment. Cash distributions are made to the partners as cash
becomes available. In the second sale of non-cash assets, the partners received the same amount
of cash in the distribution. In the third sale of non-cash assets, the amount of cash available
for distribution is ₱100,000. The carrying amount of the remaining non-cash assets is ₱260,000.
Under the cash priority program, how much cash is distributed to B in the third installment
payment?

Answer: P40,000

PROBLEM 29
On January 1, 2024, the partners of ABC Co. decided to liquidate their partnership. The
following information was made available:
Cash 80,000 Accounts payable 120,000
Accounts receivable 240,000 Payable to B 80,000
Inventory 480,000 A, Capital (20%) 400,000
Equipment 1,200,000 B, Capital (30%) 600,000
Total 2,000,000 C, Capital (50%) 800,000

Information on the conversion of non-cash assets is as follows:

 ₱210,000 was collected on accounts receivable; the balance is uncollectible.
 ₱280,000 was received for the entire inventory.
 The equipment was sold at a loss of P200,000.
 ₱18,000 liquidation expenses were paid.

How much did each partner receive from the settlement of their interest in the partnership?

Answer: A – P310,400; B – P545,600; C- P576,000

PROBLEM 30
ABC Co. is undergoing liquidation. Information before the start of the liquidation process is as
follows:
Cash 10,000 Accounts payable 80,000
Accounts receivable 80,000 Payable to B 20,000
Receivable from A 10,000 A, Capital (50%) 250,000
Inventory 180,000 B, Capital (30%) 150,000
Equipment, net 320,000 C, Capital (20%) 100,000
Total Liab. &
Total 600,000 600,000
Equity

The total cash distributed to the partners after the first and second sales of noncash assets
were ₱12,000 and ₱30,000, respectively. How much cash did A receive in the second cash
distribution?
Answer: ₱6,000
Solution:
A B C
(50%) (30%) (20%)
Capital balance 250,000 150,000 100,000
Payable to (Receivable from) (10,000) 20,000 -
Total interest in
partnership 240,000 170,000 100,000
Divide by: P/L ratio 50% 30% 20%
MLAC 480,000 566,667 500,000

Rank of payment 3rd 1st 2nd

A B C
(50%) (30%) (20%)
Rank of payment 3rd 1st 2nd
Maximum loss absorption capacity 480,000 566,667 500,000
Difference of 1st and 2nd (66,667)
Balance 480,000 500,000 500,000
Difference between 1st, 2nd and 3rd (20,000) (20,000)
Equal balance of MLAC 480,000 480,000 480,000

Cash priority program

A B C
(50%) (30%) (20%)
Rank of payment 3rd 1st 2nd
1st priority (66,667 x 30%) 20,000
2nd priority (20K x 30% & 20%) 6,000 4,000
Totals - 26,000 4,000

A B C
(50%) (30%) (20%) Total
Available Cash – 1st 12,000
Allocation:
1st priority 12,000 (12,000)
2nd priority - - -
Balance -
Payment after priorities - - - -
First distribution - 12,000 - -

A B C
(50%) (30%) (20%) Total
Available Cash – 2nd 30,000
Allocation:
1st priority 8,000* (8,000)
2nd priority - 6,000 4,000 (10,000)
Balance 12,000
Payment after priorities
12K x 50%; 30% & 20% 6,000 3,600 2,400 (12,000)
Second distribution 6,000 17,600 6,400 -
* 20K 1st priority – 12K from first distribution = 8,000

THEORIES
31. A partner's loss absorption balance is calculated by
a. dividing the partner's total interests by his profit and loss sharing percentage.
b. multiplying distributable assets by the partner's profit sharing percentage.
c. dividing the partner's capital balance by his percentage interest in capital.
d. multiplying the partner's total interests by his profit and loss sharing percentage.
32. In accounting for liquidation of a partnership, cash payments to partners after all outside
creditors' claims have been satisfied, but before final cash distribution, should be
according to
a. relative profit and loss sharing ratios.
b. safe payments computations.
c. the final balances in partners' capital accounts.
d. the relative share of gain or loss on liquidation.

33. Which of the following is not correct with respect to an installment liquidation of a
partnership?
a. All remaining liquidation expenses are anticipated.
b. All non-cash assets are assumed to be worthless.
c. Distributions to partners are always made according to their profit sharing percentages.
d. Partners with the greatest ability to absorb losses and expenses are the first to receive
installment distributions.

34. If a partner is insolvent, his personal properties shall first be distributed

a. to separate creditors.
b. to the partners by way of additional contributions when the assets of the partnership were
insufficient to settle all obligations.
c. to partnership and separate creditors in the ratio of their loan exposures.
d. to partnership creditors.

35. In a partnership liquidation, the assets of the partnerships shall be applied lastly to
a. those owing to outside creditors,
b. those owing to the partners with respect to their capital contributions,
c. those owing to the partners with respect to their share of the profits.
d. those owing to inside creditors in the form of loans or advances for business expenses by
the partners,

36. Which of the following statements is correct regarding a partner's capital deficiency?
a. Partners who absorb another's capital deficiency have a legal claim against the deficient
partner.
b. The partner should contribute to reduce the credit balance to the extent possible.
c. If contributions are not possible, the other partners with debit capital balances will be
allocated a portion of the credit balance.
d. All of these statements are correct.

37. The following is the priority sequence in which liquidation proceeds will be distributed for
a partnership:
a. Partnership liabilities, partnership loans and partnership capital balances.
b. Partnership drawings, partnership liabilities, partnership loans and partnership capital
balances.
c. Partnership liabilities, partnership loans, partnership drawings and partnership capital
balances.
d. Partnership liabilities, partnership capital balances and partnership loans.

38. Which of the following results in the dissolution of a partnership?

a. The withdrawal of a partner from a partnership.
b. The receipt of share in profit by an existing partner.
c. The contribution of additional assets to the partnership by an existing partner.
d. The winding up of the partnership and the distribution of remaining assets to the partners.

39. A partnership agreement most likely will stipulate that assets be reappraised when
a. the partnership is liquidated.
b. a partner leaves the partnership.
c. profits and losses are being distributed.
d. new partner is admitted to the partnership.

40. If a bonus is traceable to the old partners rather than to a new partner, it is allocated
among the partners according to the
a. capital ratio of the old partners. c. P/L ratio of the new partnership.
b. capital ratio of the new partnership. d. P/L ratio of the old partnership.

41. Sigay, La Presa, and Brent are in a partnership. Brent decides to withdraw from the
partnership by selling his interest to Primo. Sigay and La Presa agree to this. The capital
accounts of Sigay and La Presa
a. will not be affected when Primo is admitted c. will increase when Primo is admitted
b. cannot be determined from the information given d. will decrease when Primo is admitted
42. Statement I: It is possible to invest assets into a partnership and be given a zero-capital
balance.
Statement II: It is possible to invest no tangible assets into a partnership, yet be given a
positive opening capital balance.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

43. Statement I: When a partner leaves a partnership, it is possible that total assets will be
unaffected.
Statement II: When a new partner is given 30% interest in a partnership, he will receive 30%
of all future profits and losses.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

44. Statement I: A person admitted as a partner into a partnership is not liable for obligations
of the partnership contracted before his admission.
Statement II: A new partner must have the consent of all the partners before being admitted
to the partnership.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

45. Statement I: It is possible to allocate profit or loss to partners based solely on average
capital balances.
Statement II: The interest on partners’ capital can be considered as expenses depending on
the partners’ agreement.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

46. Statement I: When ending capital balances are used, year-end investments during the year are
encouraged.
Statement II: Interest on loans to partners is recognized as partnership income.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

47. Statement I: The salary allocation to partners also appears as salaries expense on the
partnership’s statement of comprehensive income.
Statement II: The form and content of the statement of comprehensive income of a partnership
resemble those of a sole proprietorship with no exceptions.
a. Only statement I is true c. Both statements are true
b. Only statement II is true d. Both statements are false

48. Statement I: A partnership must always have two or more owners.

Statement II: A partnership may be established for charity.
Statement III: A partnership agreement should include the procedure for ending the business.
a. All statements are correct c. Only two statements are correct
b. Only one statement is correct d. All statements are incorrect

49. Which of the following would least likely be stated in the articles of partnership?
a. Who will make the final decisions
b. How much each partner will invest
c. What the duties of each partner are
d. What products the company will sell
e. What will happen if a partner dies or wants to dissolve the partnership

50. Burgos, Del Mundo and Gonzales are partners in an accounting firm with each partner owning
an equal share of the business. Del Mundo died suddenly of a heart attack. What will most likely
become of the partnership?
a. It will immediately cease to exist. Burgos and Gonzales will have to find new jobs.
b. Del Mundo's share of the business will automatically be split between Burgos and Gonzales.
c. Burgos and Gonzales will be able to purchase Del Mundo's interest from his estate.
d. It will be dissolved. Burgos and Gonzales will lose personal property to pay business
debts.

“Study while others are sleeping; work while others are loafing; prepare while others are playing, and
dream while others are wishing.” – William A. Ward