Partnership Handouts

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1 RETENTION EXAMINATION EXAMINATION TUTORIAL ON PARTNERSHIP ACCOUNTING Problem 1.  Janet, Lee, Lee, Noy are are partners sharing profts profts 30%, 20% and 50%, and and with capital capital balances balances o P1,050,0 P1,050,000, 00, P50,000 P50,000 and P1,050,00 P1,050,000, 0, respect respecti!el i!ely y" #he partners partners agreed agreed to dissol!e their partnership and $pon li$idation, all o the partnership&s assets are sold and s$'cient cash is reali(ed to pay all clai)s e*cept one or P150,000" + the three partners, Noy is personal personally ly insol!ent insol!ent"" n the re)aining re)aining clai) against the partners partnership, hip, Janet is to absorb." P5,000 /" P0,000 " P120,000 " P5,000 Problem 2. 4ans, Lance, .rth$r and idd own a p$blishing co)pany that they operate as a partners partnership" hip" #heir agree)e agree)ent nt incl$des incl$des the ollowingollowing- istrib$ istrib$tion tion is to the e*tent e*tent o the earnings only" only" • • • • • 4ans will recei!e a salary o P20,000 and a bon$s o 3% o inco)e ater all the bon$ses Lance will recei!e a salary o P10,000 and a bon$s o 2% o inco)e ater all the bon$ses .ll the partners are to recei!e the ollowing- 4ans 6 P5,0007 Lance 6 P,5007 .rth$r 6 P2,000 P2, 00077 and idd idd 6 P, P,00 00,, repr represe esenti nting ng 10% inter interest est on their their a!era a!erage ge capita capitall balances" .ny re)aining profts are to be di!ided e$ally a)ong the partners Partnership reports a proft o P0,000 4ow )$ch is Lance&s share in the proft i proft is distrib$ted in the ollowing order o  priority- nterest on in!ested capital, then bon$ses, then salary, and then according to proft and loss percentage8 ." P12,590 /" P13,235"5 " P12,33 " P12,:30"5 Problem 3. ;ida, ;ina, and ;ita, sharing profts and losses 50%, 30% and 20%, ha!e capital credit balances o P00,000, P300,000 and P200,000, respecti!ely" #hey decided to ad)it a new partner, ;era to a 30% interest in the partnership $pon ;era&s in!est)ent o an a)o$nt e$al to f!ester, J$dith and ?artha were partners with capital balances on Jan$ary 2, 2013 o P0,000, P:,000 P:,000 and P59,000, P59,000, respecti!ely respecti!ely"" #heir loss sharing ratio ratio is 3-5-2" +n J$ly 1, 2013, >ster retires ro) the partnership" +n the date o retire)ent the partnership net proft ro) operations is P:,000" #he partners agreed $rther to pay >ster P9,590 in settle)ent o her interest" 4ow )$ch will be the capital o J$dith ater retire)ent o >ster8 a" P103,200 b" P11,3 c" P10:,:9 d" P10,0 Problem 5. ., / and  are partners partners in a b$siness b$siness being li$idated" li$idated" #he partnership partnership has cash o P22,000, noncash assets with a boo@ !al$e o P29,000 and liabilities o P13,250"  #he ollowing data relates relates to the partners as o J$ne 1, 2013AaB . has capital balance balance o P12,250, personal personal assets o P2,500, P2,500, personal liabilities liabilities o  P13,50" 2 AbB / e*tended a loan to the partnership in the a)o$nt o P13,50, defcit o P3:,500, personal assets o P1,250, personal liabilities o P19,500" AcB  has a capital balance o P:,250, personal assets o P9:,50 and personal liabilities o P1,250" AdB #heir proft and loss ratio is 3-1-1, ., / and , respecti!ely" +n J$ne 12, 2013, assets with a boo@ !al$e o P:2,500 were sold or P55,000 cash" #he proceeds were $sed to pay oC liabilities o the partnership" $ring the re)ainder o J$ne, no additional assets were reali(ed and o$tside creditors began to press$re the partnership or pay)ent" +n J$ly 3, the partners agreed to contrib$te personal assets, to whate!er e*tent possible, in order to eli)inate their respecti!e defcits" hortly thereater, assets with boo@ !al$e o  P55,000 and a air !al$e o P93,250 were distrib$ted to ." .ss$)ing additional noncash assets with boo@ !al$e o P110,000 were sold in J$ly or P1:,500" How much cash would be distributed to C? ." P12,950 Problem 6. /" P3,:50 " P:,:00 " P550 . Partnership has the ollowing acco$nt balances beore li$idation- ash 350,000 Noncash assets ,35,000 Loan to  150,000 Decei!able ro)  20,000 >*penses 2,230,000 P Liabilities 1,125,000 Loan ro) . 50,000 , apital A0%B 1,250,000 , apital A0%B 1,00,000 ., apital A20%B 1,000,000 De!en$es ,:00,000 P $ring J$ne, so)e noncash assets were sold that res$lted to a loss o P9,125" Li$idation e*penses o P15,000 were paid and additional e*penses a)o$nting to P0,000 were e*pected to be inc$rred thro$gh the ollowing )onths o li$idation the partnership" Liabilities to o$tsiders a)o$nting to P:5,000 were paid" What is the book value of the noncash assets which were sold for C to receive P555,550? ." P2,35,000 P2,0:3,:5 /" P2,130,000 " P2,32:,:5 " Problem 7. o o +n J$ne 1, 2012, L and ? or)ed a partnership with cash in!est)ents o P330,000 and P20,000, respecti!ely" Epon or)ation, the partners agreed to bring their capital ratio in proportion with their proft and loss ratio which is L 7 A30%B and ? 7 A0%B and ? is the partner who has to in!est or withdraw s$'cient a)o$nt o cash to conor) with the agree)ent" Proft allocation were as ollows - )onthly salaries, L 7 P39,000 and ? 7 P30,000" #he partners will be allowed with interest o 12% on their capital balances at the end o  the year beore closing the inco)e s$))ary acco$nt and any distrib$tion against net inco)e" ? recei!es a bon$s o 20% o net inco)e ater ded$cting the bon$s and his salary" 3 o o o +n .$g$st 1, 2012, L in!ested additional P:0,000 cash and withdrew P30,000 on +ctober 1, 2012" +n epte)ber 1, 2012, ? in!ested additional P:,000 cash and withdrew P1:,000 on ece)ber 1, 2012" n 2012, the partnership reported net inco)e o P50,000 beore any ded$ctions and each partner has drawings o P150,000 distrib$ted at year