3.

Lacson and Lim formed a partnership on March 31, with the following investments:
Lacson
Lim
Cash
P
10,000
P
35,000
Land (with a P25,000 mortgage)
105,000
Furniture & Equipment (acquired October 1)
150,000
The partners agreed on each having a 50% interest in the partnership after revaluing the land to P150,000 and
depreciating the furniture and fixtures by 10%. The mortgage is to be assumed by the partnership and has no
unrecorded 12% interest. Last interest payment was January 1.
Required: Prepare supporting tables whenever necessary.
a. What are the adjusted capital contributions of the partners? Assuming no goodwill or bonus should be
recognized, who should make additional cash contribution in order that the equity agreement of 50% for
each partner will be complied with? Give two investment entries in the partnership books.
b. Suppose in (a) above there was no expressed agreement that a partner will make additional investment for
deficient contribution. What would be the implication? Explain and give one investment entry in the
partnership book.
c. Suppose the sharing ratio is 40% for Lacson and 60% for Lim and they agreed that an upward adjustment on
non-cash assets should be made. How much would be the adjustment? Give the investment entry of this
partner in the books of the partnership.

4. On July 1, 2015, Velasquez and Carlos decided to pool their assets and form a partnership. The firm is to take over
business assets and assume business liabilities, and capitals are to be based on net assets transferred after the
following adjustments:
a. Carlos inventory is understated by P2,000.
b. An allowance for doubtful accounts of 25% is to be established on the accounts receivable of each party
after a write off of P2,000 from the accounts of Velasquez. Accounts are presented below at 80% realizable
value in both books.
c. Accrued liability of P800 is to be recognized on Velasquez books.
d. Equipment should be 50% depreciated.
e. Carlos is to invest additional cash so his interest will be 60% in the firm.
Financial position for Velasquez and Carlos on July 1 before adjustments are given:
Velasquez
Carlos
Cash
P
7,500
P
4,500
Accounts Receivable
18,000
15,000
Inventory
16,000
12,000
Equipment
10,000
12,000
Accumulated Depreciation
(4,500)
(1,500)
Total
P 47,000
P 42,000
Accounts Payable
Capital
Total

P
P

13,800
33,200
47,000

P
P

10,000
32,000
42,000

Required: Prepare supporting tables whenever necessary.

a. Compute for the partners adjusted contributions in parallel column.
b. Two investment entries in the partnership books.
c. Ignore agreement (e). Assume instead, that goodwill be recognized with equity ratio for Velasquez at 40%.
Give the investment entry for the partner with goodwill to be recognized.

5. On July 1, Bautista, Olano and Gatdula decided to form a partnership. The financial position of their business
showed the following:
Bautista
Olano
Gatdula
Cash
P
25,000
P
7,800
P 20,000
Accounts Receivable
23,500
34,000
10,600
Merchandise Inventory
36,000
54,500
15,900
Furniture and Equipment
25,500
6,700
13,500
Total
P 110,000
P 103,000
P 60,000

Accounts Payable
Capital
Total

P
P

38,000
72,000
110,000

P
P

45,000
58,000
103,000

P
P

12,700
47,300
60,000

The partnership was to be called BOGs Health Spa. They also agreed to the following:
a. That the furniture and equipment was overstated by P700 in Olanos books.
b. Obsolete merchandise be written off in Bautistas book amounting to P6,000.
c. That a 3% provision for doubtful accounts be set up in all books.
d. Bautista will invest only P15,000 out of the cash of P25,000 and all the other assets and liabilities.
e. That total partners equity shall be P156,000. All partners shall have equal interest and share in the profit.
Gatdulas merchandise shall receive an adjustment in compliance with this agreement.
Required: Prepare supporting tables whenever necessary.
1. Determine the adjusted capital accounts of the partners.
2. Compare the capital credit against the actual capital contributions of the partners.
3. Determine the proper treatment for the differences.
4. Assume, instead, that total partners equity will be equal to total actual contributions made. How will you
treat the difference, if any?

1. The following balances were picked up from the general ledger of TIMARE Partnership on December 31, 2014:

7/1

Tinio, Capital
50,000 1/1

11/25

Tinio, Drawing
15,000 12/31 160,000

200,000

Mayo, Capital
1/1

250,000

Mayo, Drawing
12/31

75,000

Reyes, Capital
1/1
300,000

6/15

Reyes, Drawing
5,000 12/31
90,000

Loan Payable, Reyes

6/15
50,000
Required:
a. How much was the total profit earned by the partnership for the year 2015?
b. Determine the capital balances to be presented in the statement of financial position on December 31.
c. The articles of Co-Partnership provide that any profit share may be withdrawn anytime or be made part of
permanent capital. Make the necessary journal entry to effect this provision if both Tinio and Reyes elected
to make 50% of the profit share as part of permanent capital. How much will Tinio and Reyes capital be?
Compare your answer with (b) above and explain.

2.
a. From the following transactions, construct the partners equity by making general ledger postings.
Jan 2

Ignacio and Mallari, CPAs, invested cash of P50,000 and P100,000 respectively to start a consultancy
office.
Ignacio made an additional investment in the form of furniture and equipment which book value of
P35,000 was 30% net of depreciation. Market value is half of its original cost. She invested additional
cash to arrive at an agreed equity equal to Mallaris equity.

Mar 1

Mallari extended an 18% one year P30,000 loan to the partnership.

Jun 30

Partnership collected and retained a personal receivable of Ignacio amounting to P45,000 which it
promised to return before the end of the year.

Oct 1

Mallari made a permanent cash withdrawal of P20,000 which Ignacio approved as a personal
emergency measure.

Dec 1

The partnership paid Ignacio P10,000 of the amount collected on June 30 and promised to pay the
balance next year.

Dec 31

Partnership operation achieved a revenue of P90,000. Partners agreed to divide profits based on net
capital contributions. Partners further agreed that no profit withdrawals be made for the first five years
to augment the resources of the business.

b. Prepare a statement of changes in partners equity.

c. Ignore the agreement on December 31 of letter a above. Assume that the cash withdrawal on October 1 is in
anticipation of share in net income and partners agree that this can be withdrawn anytime. Change ledger postings for
October 1 for the cash withdrawal and December 31 for the profit share. How much will the capital accounts be in the
partners equity section of the statement of financial position?
d. Note all concepts used. I will give you one: right over assets (equal equity).