Multiple Choice Problems

$1.$ Wade, a sole proprietor, agreed to form a partnership with James in a business. Accounts in the ledger for Wade on November $30,2010,$ just before the formation show the following balances:

Cash P$26,000$

Accounts Payable P$62,000$

Accounts Receivable $120,000$

Wade, Capital $264,000$

Merchandise Inventory $180,000$

It is agreed that for purposes of establishing Wade's interest, the following adjustments should be made

$1.$ An allowance for doubtful accounts of $2\%$ of accounts receivable is to be established.

$2.$ The merchandise inventory is to be valued at P$202,000$

$3.$ Prepaid expenses of P$6,500$ and accrued liabilities of P$4,000$ are to be established.

James is to invest sufficient funds in order to receive a $1/3$ interest in the partnership. How much must James contribute?

A$.$ P$143,050$

B$.$ P$132,000$

C$.$ P$95,360$

D$.$ P$88,000$

$2.$ AK and BK decided to form a partnership on October $1,2018.$ Their statement of financial position on this date are:

AK BK

Cash $65,625164,062\mathrm{.}50$

Accounts Receivable $1,487,500896,875\mathrm{.}00$

Merchandise Inventory $875,000885,937\mathrm{.}50$

Equipment $656,2501,268,750\mathrm{.}00$

Accounts Payable $459,3751,159,375\mathrm{.}00$

AK$,$ Capital $2,625,000$

BK$,$ Capital $2,056,250\mathrm{.}00$

They agreed to have the following adjustments shall be made:

$$ equipment of AK is under depreciated by Php $87,500$ and that BK is over depreciated by Php $131,250$

$$ Allowance for doubtful accounts is to be set up amounting to Php $297,500$ for AK and Php $196,875$ for BK

$$ Inventories of Php $21,875$ and Php $15,312.50$ are worthless in the books of AK and BK respectively

$$ The partnership agreement provides for a profit or loss ratio of $70\%$ and $30\%$ to AK and BK respectively

Assuming the use of transfer of capital method, how much is the agreed capital of AK to bring the capital balances proportionate to their profit or loss ratio?

a$.2,390,937\mathrm{.}50$

b$.2,935,406\mathrm{.}25$

c$.2,218,125$

d$.1,024,687\mathrm{.}50$

$3.$ On December $1,2018,$ MV and CD agreed to invest equal amounts and share profits equally to form a partnership. MV invested Php $3,120,000$ cash and a piece of equipment. CD invested some assets which are shown below:

Book Value

Accounts Receivable $400,000$

Inventory $1,120,000$

Machineries, Net $2,240,000$

Intangibles, Net $920,000$

The assets invested by CD are not properly valued. Php $32,000$ of the accounts receivable are proven uncollectible. Inventories are to be written down to Php $1,040,000.$ Included in the machineries is an obsolete apparatus acquired for Php $384,000$ with an accumulated depreciation balance of Php $336,000.$ Part of the intangible is a patent with a carrying value of Php $56,000$ which was sued upon by a competitor. M unsuccessfully defended the case and the final decision of the court was released on November $29,2018.$ What is the fair value of the equipment invested by MV$?$

a$.1,400,000$

b$.968,000$

c$.1,344,000$

d$.1,560,000$

$4.$ V and M decided to form a partnership on June $1,2018.$ The partnership will take over their assets as well as assume their liabilities. As of June $1,2018,$ the net assets of V and M are P $220,00$ and P $309,375$ respectively. Liabilities of V are $55\%$ less than the value of its net assets while liabilities of M are $40\%$ more than the value of its net assets. The partners agreed on a $25$:$75$ profit and loss ratio. Furthermore, the partners arrive on the following agreements: V$$s inventory is undervalued by P $11,000.$ An allowance for doubtful account is to be set up in the books of V and M at $10\%$ of accounts receivable balances $($V$,$ P$27,500$; M$,$ P$41,250).$ Accrued salary of P$20,250$ was not recognized in M$$s books. How much cash should V invest$/($withdraw$)$ so that their capital interest would be equal to their profit and loss ratio?

A$.$ P $95,000$

B$.$ P$133,250$

C$.$ P$(133,250)$

D$.$ P $(95,000)$

$5.$ On December $1,2019,$ MG and AN are combining their separate businesses to form a partnership. Cash and noncash assets are to be contributed. The noncash assets to be contributed and the liabilities to be assumed are as follows:

MG AN

Fair Value Book Value Fair Value Book Value

Account Receivable $250,000262,500200,000195,000$

Inventory $400,000450,000200,000207,500$

PPE $1,000,000912,500862,500822,500$

Accounts Payable $150,000150,000112,500112,500$

MG and AN are to invest equal amounts of cash such that the contribution of MG would be $10\%$ more than the investment of AN$.$ What is the amount of cash presented on the statement of financial position on December $1,2019?$

a$.2,762,500$

b$.2,512,500$

c$.5,525,000$

d$.5,025,000$