1/7 Chapter 1 - Accounting for Partnership Formation & Operation Chapter 1 - Accounting for Partnership Formation & Operation * MULTIPLE CHOICE (PROBLEMS) On January 1, of the current year, Tonie, Abbie and JM entered into articles of co- On March 1, of the current year, PP and QQ decide to combine their businesses partnership for the operation of TAJ computer shop. Toni contributed and form a partnership. Their balance sheets on March 1, before adjustments, investment property with assessed value of P1,700,000 subject to mortgage showed the following: payable of P500,000 to be assumed by the partnership. Abbie contributed PP computer equipment with cost of P600,000 with accumulated depreciation of Cash P 9,000.00 OQ P200,000. The fair market value of the computer equipment is P300,000. On the P Accounts Receivable 18,500.00 3,750.00 same date, the partnership was able to sell the investment property for Inventories 30,000.00 13,500.00 P2,000,000. Furniture and Fixtures (net) 30,000.00 19,500.00 Office Equipment (net 11,500.00 orff to 9,000.00 4. How much cash shall be contributed by JM if the articles of co-partnership provide that Toni will have 60% interest in the partnership? Prepaid Expenses 6,375.00 2,750.00 P500,000 Ic.in P800,000 Total 05,375.00 3,000.00 45,750.00 51,500.00 b. P700,000 d. P600,00 Accounts Payable Capital 59,625.00 18,000.00 33,500.00 On January 1, of the current year, Angel, Bea and Collen formed ABC & Co., a Total 105,375.00 51,500.00 general professional partnership for the exercise of their common profession. Angel contributed a building with cost of P5M and accumulated depreciation of They agreed to have the following items recorded in their books: P4M. Based on the city ass ssor's records, the building has an assessed value of P2M. The building has an annotated mortgage payable amount to P500,000 to be a. Provide 2% allowance for doubtful accounts. b. PP's furniture and fixtures should be P31,000, while QQ's office assumed by the partnership. equipment is under-depreciated by P250. On the other hand, Bea contributed 10,000 shares of stock with par value of c. Rent expense incurred previously by PP was not yet recorded amounting to P1,000, while salary expense incurred by QQ was not also recorded P200/share and prevailing quoted price of P300/share. On January 2, the amounting to P800. building contributed by Angel was sold for P5.5M. d. The fair market value of inventory amounted to: for PP P29,500 and for QQ P21,000 5. Assuming Colleen wants to have 20% capital interest in the newly formed partnership, how much cash shall be contributed by Colleen? 1. Compute for the net (debit) credit adjustment for PP and QQ: P875,000 P2,000,000 a. PP: P2,870; QQ: P2,820 b. P1,125,000 d. P2,125,000 b. PP: (P870); QQ: P180 C. PP: (P2,870); (P2,820) At the beginning of the current year, Regina, Jessica and Nataly formed a d. PP: 870; QQ:(P180) partnership with profit or loss sharing agreement of 2:3:5. Regina contributed a land with assessed value from city assessor in the amount of P1,000,000. The land 2. How much is the total liabilities after the formation? is subject to a real estate mortgage which is annotated to the tittle of the land is P61,950 C. P63,750 the amount of P800,000 and will be assumed by the partnership. The appraised 63,950 P65,550 value of the land is P2,400,000 and originally costing P500,000. Jessica contributed building acquired for P2,000,000 with carrying value of P1,500,000. 3. How much is the total assets after the formation? The fair value of the building is P1,000,000. Nataly contributed investment in P157,985 C. P160,765 trading securities with historical cost of P6,000,000. The trading securities have b. 156,875 d. P152,985 quoted price in active market of P3,000,000. The partners decided to bring their capital balances in accordance with their profit or loss sharing agreement. The total agreed capitalization of the new partnership is P10,000,000. X Scanned with CamScan Remove watermark 37 Chapter 1 - Accounting for Partnership Formation & Operation Chapter 1 - Accounting for Partnership Formation & Operation -05 to asjim ofni Larsline MUlina bidd A pinoT asay mottus ord lo I visuns) no boludistros inof porla motuamos AT to 00,005.19 A business owned by Charles was short and Charles decided to form a 4 6. Which of the following statements correct?. (TRA partnership with Raven and Erik, Raven was able to contribute cash thrice the yra. Jessica should contribute additional capital in the amount interest of Charles in the partnership while Erik was able to contribute cash twice orli no 090 00P2,000,0004) the interest of Raven in the partnership. The assets contributed by Charles were to: virxjob. The agreed capital of Nataly is P500,000 as follows: Cash P18,000; Accounts Receivable (net) P366,000; Inventory P840,000; and Store Equipment of P300,000 with accumulated depreciation of P1,800,000 C. Regina should contribute additional capital in the amount of P30,000 but with a fair value of P200,000 withmanchu d. Nataly is entitled to withdraw in the amount of P1,000,000 Charles, Raven and Erik agreed that the Receivables was impaired by an Alma and Becca have just formed a partnership. Alma contributed cash of additional amount of P8,000. They also agreed that the fair value of the inventory P176,400 and office equipment that cost P75,600. The equipment had been used is P920,000. in his sole proprietorship and had been 70% depreciated, the current value of the equipment is P50,400. Alma also contributed a note payable of P16,800 to be 9. The total assets of the partnership: a. P15,460,000 C. P7,880,000 assumed by the partnership. Alma is to have a 30% interest in the partnership. b P14,960,000 d. P7,092,000 Becca contributed P256,000 land at fair market value. ud 6 bot noo fognA John and Jude form a partnership with John contributing cash of P50,000 and 7. Becca should make additional investment of; P234,000 P256,000 Bori gniblind onT PASS equipment with fair value of P70,000. Jude contributed machinery with fair value of P180,000 and enough cash to have a capital participation of 70%. The profit P490,000 d. P210,000 and loss ratio are 25% to John and 75% to Jude. ji Miley admits Claire as a partner in business. Just before the partnership's 10. How much is the total cash of partnership upon formation ormation, Miley's books showed the following: a. P230,000 . P200,000 Trot bloe grid vo botudhines anibliud b. P150,000 d. P250,000 Cash 2,600 nnot what Accounts receivable Of 12,00037 mollo) 21in122A Gab and Migs entered into a partnership as of March 1, 2021 by investing Inventories 31 1 18,000 P1,000,000 and P600,000, respectively. They agreed that Gab, as the managing Accounts payable 6,200 84 partner, was to receive a salary of P960,000 per year and a bonus computed at Miley, Capital 26,400 .19 10% of the net income after adjustment for the salary; the balance of the income was to be distributed in the ratio of their original capital balances. On December It was agreed that, for establishing Miley's investment in the firm, the following 31, 2021, account balances were as follows: adjustments shall be reflected: In long ritiw girlaronhad 1 sulsy bozz es ruiw bral Cash P 560,000 Accounts payable P 480,000 al him. Allowance for bad debts of 2% should be set up. States lost a of boldue at Accounts receivable 536,000 Gab, capital 1,000,000 boats." Merchandise inventory should be valued at P20,000.9,0981 to trusoms sri Furniture & Fixtures 360,000 Migs, capita 600,000 bleed Prepaid expense of P350 and accrued expense of P400 should be Sales Allowances :40,000 Gab, drawing (160,000) .090.00c. recognized. Purchases ,568,000 Migs, drawing (240,000) Operating expenses 480,000 Sales 1,864,000 8. How much cash should Claire invest to secure a one-third interest in the nor partnership? 5vilas ni soliq boloup Inventories on December 31, 2021 were as follows: supplies, P20,000, off Josharg.P14,055 : 22 P17,600206 mi espnated Infiqes merchandise, P584,000. Prepaid insurance was P7,600 while accrued expenses P9,4370) q wd." P14,205 Issifeligno boorgs Info were P12,400. Depreciation rate was 20% per year