Pamantasan ng Cabuyao

Katapatan Subd., Banay Banay, Cabuyao, Laguna

QUIZ NO. 3
Name: _________________________________ Score:___________
Partnership and Corporation Mr. D.R. Magalang
Solve the following problems and encircle the correct answer. Show all necessary computations.

1. Carson and Lamb establish a partnership to operate a used-furniture business under the name C&L Partnership.
Carson contributes furniture inventory that cost P600,000 and has fair value of P800,000. Lamb contributes
P300,000 cash and delivery equipment that cost P400,000 and has fair value of P300,000. The partners agree to
share profits and losses 60% to Carson and 40% to Lamb. What is the capital balances of Carson and Lamb
respectively, immediately after the formation of the partnership?
A. 800,000 and 700,000 C. 800,000 and 650,000
B. 800,000 and 600,000 D. 700,000 and 700,000

2. Arnold, Beverly and Carolyn are partners who share profit and losses [Link], respectively, after Beverly, who
manages the partnership, receives a bonus of 10% of income net of the bonus. Partnership income for the year is
P253,000. How much is the share of Arnold in the partnership income?
A. P115,000 C. P 46,000
B. 92,000 D. 102,500

Use the following information for Questions 3 and 4:

Kathy and Eddie formed the K&E partnership many years ago. Capital account balances on January 1, 2010, were
as follows:

Kathy P496,750
Eddie 268,250

The partnership agreement provides Kathy with an annual salary of P10,000 plus a bonus of 5% of partnership net
income for managing the business. Eddie is provided an annual salary of P15,000 with no bonus. The remainder,
if any, is shared evenly by the partners. Partnership net income for the year 2010 was P30,000. Eddie and Kathy
each invested an additional P5,000 during the year to finance a special purchase. Year-end drawing account
balances were P15,000 for Kathy and P10,000 for Eddie.

3. What is the share of Kathy and Eddie, respectively, in the net income of the partnership?
A. P16,750 and P13,250 C. P15,000 and P15,000
B. 13,250 and 16,750 D. 14,250 and 17,250

4. What is the capital balance at year-end of Partner Kathy and Eddie respectively?
A. P280,000 and P500,000 C. P500,000 and P280,000
B. 310,000 and 480,000 D. 520,000 and 260,000

Use the following information Questions 5 through 7:

Timmy and Lassie have been operating an accounting firm as partners for a number of years, and at the beginning
of 2012, their capital balances were P60,000 and P75,000 respectively. During 2012, Timmy invested an
additional P10,000 on April 1 and withdrew P6,000 on August 30. Lassie withdrew P12,000 on May 1 and
withdrew another P6,000 on November 1. In addition, Timmy and Lassie withdrew their salary allowances of
P18,000 and P24,000, respectively. At the end of 2012, total capital of the partnership was P182,000. Timmy and
Lassie share income after salary allowances in a 60:40 ratio.

5. What is the average capital balance of Timmy and Lassie respectively for the year 2012?
A. P64,000 and P57,000 C. P60,000 and P75,000
B. 65,500 and 66,000 D. 70,000 and 63,000

6. What is the share of Timmy and Lassie in the partnership income, respectively, for the year 2012?
A. P29,400 and P31,600 C. P54,600 and P48,400
B. 60,600 and 42,400 D. None of the Above

7. What is the capital balance of Timmy and Lassie, respectively at the end of the year 2012?
A. P100,600 and P81,400 C. P 90,600 and P91,400
B. 95,600 and 86,400 D. 105,600 and 86,400

Use the following information for Questions 8 through 11:

Harry, Iona, and Jerry formed a partnership on January 1, 2010, with each partner contributing P20,000 cash.
Although the partnership agreement provides that Jerry receive a salary of P1,000 per month for managing the
partnership business, Jerry has never withdrawn any money from the partnership. Harry withdrew P4,000 in each
of the years 2010 and 2011, and Iona invested an additional P8,000 in 2010 and withdrew P8,000 during 2011.
Due to an oversight, the partnership has not maintained formal accounting records, but the following information
as of December 31, 2011, is available:

Cash on hand 28,500

Due from customers 20,000
Merchandise on hand 40,000
 Delivery vehicle (net) 37,000
Prepaid expenses 4,000
Assets 129,500

Accounts payable 14,600

Wages payable 4,400
Note payable 10,000
Interest payable 500
Liabilities 29,500

The partners agreed that income for 2011 was about half of the total income for the first two years of operations.
Although profits were not divided in 2011, the partnership agreements provide that profits, after allowance for
Jerry’s salary, are to be divided each year on the basis of beginning-of-the-year capital balances.

8. How much is the net income for 2011?

A. P48,000 C. P96,000
B. 24,000 D. 16,000

9. How much is the share of Harry, Iona and Jerry respectively, in the 2011 net income?
A. P4,000, P4,000, P12,000 C. P8,000, P8,000 and P8,000
B. 5,000, 3,000 12,000 D. Some other amount for each partner

10. What is the capital balances at January 1, 2011 of Harry, Iona and Jerry, respectively?
A. P22,000; P36,000; P24,000 C. P36,000; P22,000; P24,000
B. 20,000; 32,000; 36,000 D. 32,000; 20,000; 36,000

11. What is the capital balances at December 31, 2011 of Harry, Iona and Jerry respectively?
A. P28,000; P20,000; P52,000 C. P20,000; P28,000; P52,000
B. 28,000; 28,000; 44,000 D. 28,000; 24,000; 48,000

12. PP and QQ are partners operating a chain of retail stores. The partnership agreement provides for the following:

PP QQ
Salaries P 10,000 P 5,000
Interest on average capital balances 10% 10%
Bonus 20% of net income before
interest but after bonus and salaries
Remainder 30% 70%

The income summary account for the year 2011 shows a credit balance of P51,000 before any deductions.
Average capital balances for PP and QQ are P50,000 and P75,000 respectively. The share of PP and QQ in the
P51,000 net income would be:
A PP, P24,062.50; QQ, P26,937.50 C. PP, P23,500; QQ, P27,500
B. PP, 26,541.50; QQ, 24,458.50 D. PP, 26,250; QQ 24,750

13. JJ and KK are joining their separate business to form a partnership. Cash and non-cash assets are to be contributed
for a total capital of P600,000. the non cash assets to be contributed and liabilities to be assumed are:
JJ KK
Book Value Fair Value Book Value Fair Value
Accounts receivable P45,000 P45,000
Inventories 45,000 67,500 P120,000 P135,000
Equipment 75,000 60,000 135,000 142,500
Accounts payable 22,500 22,500 15,000 15,000

The partner’s capital amounts are to be equal after all contributions of assts and assumptions of liabilities.

Determine the: (1) amount of cash each partner must contribute, and (2) total assets of the partnership.
A. (1) JJ – P150,000; KK – P 37,500; (2)P637,500
B. (1) JJ - 150,000; KK - 37,500; (2) 600,000
C. (1) JJ - 322,500; KK - 315,000; (2) 637,500
D. (1) JJ - 255,000; KK - 22,500; (2) 600,000

14. All partners will be liable to creditors to the extent of their separate personal properties if the partnership is
A. Limited partnership C. General partnership
B. De jure partnership D. Particular partnership

15. II, JJ and KK are forming a new partnership. II is to invest cash of P100,000 and stapling equipment originally
costing P120,000 but has a second value in the market of P50,000. JJ is to invest cash of P160,000, while KK,
whose family is engaged in selling stapling equipment, is to contribute cash of P50,000 and a brand new stapling
equipment to be used by the partnership with a regular price of P120,000 but which cost their family’s business
P100,000. Partners agree to share profits equally. The capital balances upon formation are:
A. II, P220,000; JJ, P160,000; KK, P150,000
B. II, P150,000: JJ, P160,000; KK, P170,000
C. II, P160,000; JJ, P160,000; KK, P160,000
D. II, P176,666; JJ, P176,666; KK, P176,666

Use the following information for Questions 16 and 17:

The business asset of Berting and Carding appears below:

 Berting Carding
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total Assets P1,020,916 P1,317,002

Accounts Payable P 178,940 P 243,650

Notes Payable 200,000 345,000
Capitals 641,976 728,352
Total Liabilities and Capital P1,020,916 P1,3712002

Berting and Carding agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
 Accounts receivable of P20,000 in Berting’s books and P35,000 in Carding’s are uncollectible.
 Inventories of P5,500 and P6,700 are worthless in Berting’s and Carding’s respective books.
 Other assets with their respective books are to be written off.

16. The capital accounts of the partners after the adjustments will be
A. Berting, P615,942; Carding, P717,894
B. Berting, P640,876; Carding, P712,345
C. Berting, P640,876; Carding, P683,050
D. Berting, P614,476; Carding, P683,052

17. How much will be the total assets of the partnership after formation?
A. P2,337,918 C. P2,265,118
B. 2,237,918 D. 2,365,218

18. PP and QQ are partners operating a chain of retail stores. The partnership agreement provides for the following:
PP QQ
Salaries P 10,000 P 5,000
Interest on average capital balances 10% 10%
Bonus 20% of net income
before interest but
after bonus and salaries
Remainder 30% 70%

The income summary account for the year 2014 shows a credit balance of P51,000 before any deductions.
Average capital balances for PP and QQ are P50,000 and P75,000 respectively. The share of PP and QQ in the
P51,000 net income would be:
A. PP, P24,062.50; QQ, P26,937.50 C. PP, P23,500; QQ, P27,500
B. PP, 26,541.50; QQ, 24,458.50 D. PP, 26,250; QQ 24,750

19. D, E and F are in partnership, sharing profits in the ratio of [Link] respectively, after charging salaries for E and F
of P24,000 each year.

On July 1, 2014, they agreed to change the profit-sharing ratio to [Link] and to increase E’s salary to P36,000 per
year.

For the year ended December 31, 2014, the partnership profit amounted to P480,000. Which of the following
correctly states the partners’ total profits shares for the year?

D E F
A. P234,000 P136,800 P109,200
B. 213,000 157,800 109,200
C. 186,000 171,600 122,400
D. 237,600 132,000 110,000

20. Partner Z first contributed P50,000 of capital into an existing partnership on March 1, 2007. On June 1, 2007, the
partner contributed another P20,000. On September 1, 2007, the partner withdrew P15,000 from the partnership.
Withdrawal in excess of P10,000 are charged to capital account. The annual weighted average capital balance is
A. P62,000 C. P60,000
B. 51,667 D. 48,333

21. A, B and C are partners with average capital balances during 2014 of P360,000, P180,000 and p120,000
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P90,000
to A and P60,000 to C, the residual profit or loss is divided equally. In 2014, the partnership sustained a P99,000
loss before interest and salaries to partners, by what amount should A’s capital change?
A. P21,000 increase C. P105,000 decrease
B. 33,000 decrease D. 126,000 increase

22. AA and CC are partners who shares profits and losses in the ratio of 60:40, respectively. AA’s salary is P60,000
and P30,000 for CC. The partners are also paid interest on their average capital balances. In 2014, AA received
P30,000 interest and CC received P12,000. The profit and loss allocation is determined after deductions for salary
 and interest payments. If CC’s share in the residual income (income after deducting salaries and interest) was
P60,000 in 2014, what was the total partnership net income?
A. P192,000 C. P282,000
B. 345,000 D. 387,000

23. The Traders Company, a partnership, was formed on January 1, 2015, with four partners, DD, EE, FF and GG.
Capital contributions were as follows: DD, P50,000; EE, P25,000; FF, P25,000 and GG, P20,000. The partnership
agreements provide that partners shall receive 5% interest in the amounts of their capital contributions. In
addition, DD is to receive a salary of P5,000 and EE a salary of P3,000. The agreement further provides that FF
shall receive a minimum of P2,500 per annum from the partnership and GG a minimum of P6,000 per annum,
both including amounts allowed as interest on capital and their respective shares of profits. The balance of the
profit is to be shared in the following proportions: DD, 30%; EE, 30%; FF, 20%, and GG, 20%. Calculate the
amount that must be earned by partnership during 2015, before any charges for interest on capital or partner’s
salaries, in order that DD may receive an aggregate of P12,500 including interest, salary and share of profits.
A. P16,667 C. P30,667
B. 30,000 D. 32,333

24. The partnership agreement of AA and BB provides that interest of 10% per year is to be credited to each partner
on the basis of weighted-average capital balances. A summary of BB capital account for the year ended December
31, 2015, is as follows:

Balance, January 1 P420,000

Additional investment, July 1 120,000
Withdrawal, August 1, (45,000)
Balance, December 31 495,000

What amount of interest should be credited to BB’s capital account for 2015?
A. P45,750 C. P46,125
B. 49,500 D. 51,750

25. John, Paul and George are partners in an accounting firm. Their capital account balances at December 31, 2014
were: John, P90,000; Paul; P110,000; George P50,000. They share profits and losses in a [Link] ratio, after the
following special terms:

a. Partner George is to receive a bonus of 10% of the net income after the bonus.
b. Interest of 10% shall be paid on that portion of partners’ capital in excess of P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners John and George, respectively.

The income summary account for the year 2014 shows a credit balance of P44,000. What is the profit share of
partner George?
A. P19,400 C. P17,800
B. 16,800 D. 19,800

26. Jimmy and Jason are partners who share profits and losses in the ratio of 6:4, respectively. Jimmy’s salary is P1
million and Jason is P500,000. The partners also are paid interest on their average capital balances. In 2011,
Jimmy received P500,000 of interest and Jason, P200,000. The profit and loss allocation is determined after
deductions for salary and interest payments. If Jason’s total share of partnership income was P2 million in 2011,
what was the total partnership income?
A. P4,750,000 C. P5,450,000
B. 5,000,000 D. 7,500,000

27. Hant, Rab, Thurman and Keli own a publishing company that they operate as a partnership. The partnership
agreement includes the following:

 Hant receives a salary of P20,000 and a bonus of 3% of income after all bonuses.
 Rab receives a salary of P10,000 and a bonus of 2% of income after all bonuses.
 All partners are to receive 10% interest on their average capital balances.

The average capital balances are Hant, P50,000; Rab, P45,000; Thurman, P20,000, and Keli, P47,000. Any
remaining profits and losses are to be allocated equally among partners. Determine how a profit of P105,000
would be allocated among partners.
A. Hant, P41,450; Rab, P29,950; Thurman; P15,450; Keli, P18,150
B. Hant, P28,000; Rab, P16,500; Thurman; P 2,000; Keli, P 4,700
C. Hant, P39,700; Rab, P29,200; Thurman; P16,700; Keli, P19,400
D. Cannot be determined.

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