MOCK AQE 1

 Junior Philippine Philippine Institute Institute of Accountants Accountants Baliwag Polytechnic College Baliwag, Bulacan Mock Exam Part 1 ame !

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Partnership #ormation Read and analyze the questions carefully. carefully. "trictly no erasure. Encircle your answer. You are given 1.5 hour to nish the exam. 1 point p oint each answer. !5 points"

1. #n $pril %&' !&1!' !&1!' $ye' $ye' (ee and and )ee formed formed a partnership partnership *y com*ining com*ining their separate separate *usiness proprietorships. $ye contri*uted cash of +5'&&&. (ee contri*uted property with a 5,'&&& carrying amount' a -&'&&& original cost and 1!&'&&& fair value.the partnership accepted responsi*ility for the mortgage paya*le of 5!'5&& attached to the property. property. )ee contri*uted equipment with a carrying amount of ,5'&&&' 11!'5&& cost and !'5&& fair value. /heir prot and losses are to *e shared equally *ut silent regarding capital contri*utions. 0hich partner has the largest capital *alance $pril %&' !&1! $. $ye ). )ee (. (ee 2. $ll capital capital account account *alances *alances are equal !. #n 2ecem*er 2ecem*er 1' !&1! ' 3alou and 3att 3att formed a partnership' partnership' agreeing agreeing to share share for prots prots and losses in the ratio !4% respectively. respectively. 3alou invested a parcel of land that cost him !5'&&&. 3att invested %&'&&& cash. /he land was sold for 5&'&&& on the same date three hours after formation of the partnership. ow much should *e the capital *alance of malou right after the formation $. !5'&&& ). -&'&&& (. %&'& %&'&&& && 2. 5&'& 5&'&&& && %. #n march march 1' !&1! 6atniss 6atniss and and 7ucas formed formed a partnership partnership with each each contri*uting contri*uting the following assets4 6atniss 7ucas )ash %&&'&&& +&&'&&& 3achinery !5&'&&& !5 +5&'&&& (uilding 8 !!5&'&&& 9 and 9 1&&'&&& 8  /he *uilding is su*:ect o a mortgage loan of &&'&&& which is to *e assumed *y the partnership. /heir ; < 7 ratio is %&= and +&=. #n march 1' !&1! the *alance in 7ucas>s capital account should *e $. %+ %+&&'&&& (. %1 %1,&'&&&

). %&5&'&&& 2.!?&&'&&&

,. #n 3arch 3arch 1' !&1!' )hesca )hesca and and @a*ee decide decide to com*ine com*ine their *usinesses *usinesses and form form a partnership. /heir *alance sheets on march 1' *efore ad:ustments' showed the following4 )hesca @a*ee )ash $R Anventories 9 and 9' net #Bce equip>t' net ;repaid expenses  /otal  /otal $ccounts paya*le

?'&&& 1'5&& %&'&&& %&'&&& 11'5&& -'%+5 1&5'%+5 ,5'+5&

%'+5& 1%'5&& 1?'5&& ?'&&& !'+5& %'&&& 51'5&& 1'&&&

)apital 5?'-!5  /otal 1&5'%+5 51'5&&  /hey agreed to have the C. items recorded in their *ooDs4

%%'5&&

1. ;rovide != allowance for dou*tful accounts. !. )hesca>s 9 and f should *e %1'&&& ' while @a*ee>s #Bce Equip>t is under depreciated *y !5&. %. Rent expense incurred previously *y )hesca was not yet recorded amounting to 1'&&& while salary expense incurred *y @a*ee was not also recorded amounting to &&. ,. /he fair marDet value of inventory amounted to4 )hesca !?'5&& @a*ee !1'&&& )ompute the net de*it" credit ad:ustment for )hesca and @a*ee4 $. -1'?5& ). -5'55& (. -%'+5& 2. -%'?5& 5. /he same info in no. , ' compute the total lia*ilities after formation4 $. 15+'?5 ). 1-&'+-5 (.15-'+5 2.15!'?5 )hicDen *a 0ell' let>s try it without choices. -. #n 2ecem*er 1' !&1%' )arla and )lara :oined a partnership. )arla contri*uted cash while )lara contri*uted merchandise worth !5'&&& and a second hand delivery trucD currently valued at 5&'&&&' *ut encum*ered *y one year chattel mortgage note for 15'&&&. Af initial capital *alances are to conform to the prot sharing ratio !4%' the amount of cash contri*uted *y )arla was Required4 a. /he capital *alance of )lara on 2ecem*er 1' !&1%. *. /he amount of cash contri*uted *y )arla. c. /he total partnership assets on 2ecem*er 1' !&1%. +. 3arie admits Fella as a partner in *usiness. Gust *efore the partnership>s formation' 3arie>s *ooDs showed the C4 )ash !'-&& $R 1!'&&& 3. inventory 1'&&& $ccounts paya*le -'!&& 3arie' )apital !-',&& At was agreed that' for purposes of esta*lishing 3arie>s investment in the rm' the C ad:ustments shall *e reHected4 $llowance for *ad de*ts of != should set up. 3. inventory should *e valued !&'!&& ;repaid expenses of %5& and accrued expenses of ,&& should *e recognized. Required4 a. /he ad:usted capital of 3arie. *. Anvestment of Fella to secure 1I% interest in the partnership. c. /otal lia*ilities of the partnership. • • •

. /aylor and @aga formed a partnership. /aylor contri*uted 5&'&&& cash. @aga contri*uted land and *uilding he purchased for 5&'&&& some time ago. is tax *asis in the property is now %&'&&& although it was recently appraised for +&'&&&. /here is a mortgage

paya*le attached to the *uilding that the partnership will assume. 0hat is the amount of @aga>s capital account after his contri*ution

?. @eorgina and Jolenn formed a partnership with each contri*uting the C assets4 @eorgina Jolenn )ash %&'&&& +&'&&& 3achine !5'&&& +5'&&& (uilding 8888 !!5'&&& 9 and 9 1&'&&& 8888  /he *uilding is su*:ect to mortgage paya*le of &'&&& which will not assumed *y the partnership.  /heir ; and 7 ratio is 5&45&. /he *alance on Jolenn capital account should *e 1&. the same info in no. ? if the partnership assumed the mortgage paya*le the *alance of @eorgina>s capital account should *e

Partnership $perations 1. ;a*e*e and ;a*ae*ae are partners who share prots and losses in the ratio of -&=K ,&=. ;a*e*e salary is -&'&&& and %&'&&& for ;a*ae*ae. /he partners are also paid on their average capital *alances of %&'&&& and 1!'&&&. /he prot and loss allocation is determined after deductions for the salary and interest payments. Af ;a*ae*ae share in the residual income income after salaries and interest" was -&'&&& in !&1!' what was the partnership income a. 1?!'&&& *. %,5'&&& c. !!'&&& d. %+'&&& !. /he partnership has the C accounting amounts4 Jales L +&'&&& )ogsL ,&'&&& #perating ExpL 1&'&&& Jalary allocations to partnersL1% '&&& Anterest paid to *anDs L !'&&& ;artner>s withdrawalL '&&&  /he partnership net income loss" is4 a. !&'&&& *. 1'&&& c. 5&&& d. %&&&" %. /he partnership agreement of M'Y' and N provides for the year8end allocation of net income in the following order4 9irst' M is to receive 1&= of net income up to !&&'&&& and !&= over !&&'&&&.  Y and N each are to receive 5= of the remaining income over %&&'&&&.  /he *alance of income is to *e allocated equally mong the three partners. • • •

 /he partnership>s !&11 net income was 5&&'&&& *efore allocations to partners. 0hat amount should *e allocated to M a. !&!'&&& *. !1-'&&& c. !&-'&&&

d. !!&'&&&

,. (a' (e and (i are partners with average capital *alances during !&1! of %-&'&&&' 1&'&&& and 1!&'&&&. ;artners receive 1&= interest on their average capital *alances. $fter deducting salaries of ?&'&&& to (a' and -&'&&& to (i the residual ;s capital account change W increase I decrease". q" a" 115',,%" *" !%'-5 c" ,1'+5" d" 1'&1&" r" #n Gune %&' !&1%'the *alance sheet of 9airy /ail 3arDeting' a partnership' is summarized as follows4 s" Jundry $ssetsZZZZZ.; 15&'&&& t" Fatsu' )apitalZZZZZZ ?&'&&& u" 7ucy' )apitalZZZZZZ -&'&&& v" Fatsu and 7ucy share prot and losses at a -&4,& ratio' respectively. /hey agreed to taDe in @ray as a new partner' who purchases 1I interest of Fatsu and 7ucy for ;!5'&&&. 0hat is the amount of @ray>s capital to *e taDen up in the partnership *ooDs if *ooD value method is used w" a" 1!'5&& *" 1'+5& c" !5'&&& d" %1'!5& x" 2aimler contri*uted ; !,'&&& and Ro*in contri*uted ;,'&&& to form partnership' and they agreed to share prots in the ratio of their original capital contri*utions. 2uring the rst year of operations' they made a prot of ; 1-'!?&K 2aimler withdrew ;5'&5& and Ro*in ;'&&&. $t the start of the following year' they agreed to admit 3ichael into the partnership. e was to receive a one8fourth interest in the capital and prots upon payment of ;%&'&&& to 2aimler and Ro*in' whose capital accounts were to *e reduced *y transfers to 3ichael>s capital account. y" ow much gain was realized *y 2aimler and Ro*in z" a." 11'1?& *." 1!'1?& c." 1&'1?& d." & aa" /he 2ecem*er %1'!&1%' *alance sheet of ((' ))' and 22 partnership is summarized as follows4

11.

1!.

1%.

1,.

a*" ac" /he partner>s share prots and losses as follows 4 ((' !&=K ))' %&=K 22' 5&=' )) is retiring from the partnership and the partners have agreed that Sother assetsT should *e ad:usted to their fair values of ;-&&'&&& at 2ecem*er %1'!&1%' they further agree that )) will receive ;!,,'&&& cash for his partnership interest exclusive of the loan' which is to *e paid in full' and that no goodwill implied *y ))>s payment will *e recorded. ad" ow much *onus did )) received ae" a." & *." 1!'&&& c." 1,'&&& d." 1-'&&& af" $fter ))>s retirement ' the capital *alances of (( and 22' respectively' will *e4 ag" a." 11-'&&& and !,&'&&& *." 1&1'+1, and !5,'!c." 1&&'&&& and !&&'&&& d." +%'1,% and 1!'5+ ah" ai" 2uterte' 3iriam and 3ar' partners to a rm ' have capital *alances of ;11'!&&' ;1%'&&&' and ;5'&&' respectively' and share prots in the ratio of ,4!41. ;repare a schedule showing how availa*le cash will *e given to the partners as it *ecomes availa*le. 0ho among the partners shall *e paid rst with an availa*le cash of ;1',&& a:" a." 3iriam c." 3ar *." Fo one d." 2uterte e." $s of 2ecem*er %1' !&&' the *ooDs of Fight Raid $ssassin ;artnership showed )apital *alances of4 /atsumi ;,&'&&&K $Dame' ;!5'&&&K 3ine' ;5'&&&. /he partners> prot and loss ratio was %4!41' respectively. /he partners decided to liquidate and they sold all non8cash assets for ;%+'&&&. $fter settlement of all lia*ilities amounting to ;1!'&&&' they still have cash of  ;!'&&& left for distri*ution. $ssuming that any capital deciency is uncollecti*le' the share of /atsumi in the distri*ution of  the ;!'&&& cash would *e4 f." a." 1+'&& *." 1'&&& c." 1?'&&& d." 1+'&&& g." /he *alance sheet of the partnership of ;recious' Ganet and 3ichelle who share prot and losses in the respective ratio of  54%4!' follows4

h." i." /he partners agreed to liquidate the partnership *y installments. Ammediately' there was a realization of ;1&&'&&& cash from selling other assets with *ooDs value of ;15&'&&&. #f the cash availa*le' the priority is the payment of the lia*ilities and the *alance is to *e distri*uted to the partners.  :." ow should the remaining cash *e distri*uted to ;recious' Ganet and 3ichelle' respectively D." a." ;5&'&&&K %&'&&& and !&'&&& *." ;,&'&&&K !,'&&& and 1-'&&& c." ;8&8K %1'&&& and ,?'&&& d." ;8&8K ,'&&& and %!'&&& l." 15. sing the same information in num*er 1,' how much cash should 3ichelle receive assuming the remaining assets were sold for ;1,&'&&& m." a." & *." 5&'&&& c." -&'&&& d." ,&'&&& n."

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q."  PPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPPP   PPPPPPPPPP  r." @ood lucD sa *attery test niyo. Jome pro*lems are really long and complicated so when you encounter things liDe that' taDe this a piece of advice. You should sDip it rst then proceed to simpler pro*lems. Remind yourself that whether it>s easy or diBcult' it only counts as one point on your exam or *attery test except for the domino pro*lems. 2on>t waste time. 7earn to maximize it. s." t." ;.J. Jcan rst the whole test paper *efore you proceed answering pro*lems. 3alay niyo nasa dulo yung mga madadaling pro*lems di *a. uwag malungDot Dung saDali mang walang luma*as sa mga reviewer na naprovide namin. $t least napaghandaan at nasanay yung analytical sDills nyo sa i*a>t i*ang pro*lems. 6aya niyo yan. 3agpray lagi. @od *less you (J$ !$. A>ll try to provide more reviewers sa mga susunod na araw. 6apit lang. 0ag susuDo. u." v." 88888P #$% ACA9" w*5 38PA5 x." y." z." aa." a*." ac." ad." ae." af." ag." ah." ai."6ey $nswer 9or $E Reviewer Fo. 1 a:."A. 3ultiple )hoice 8 /heories aD." 1 al."d an." am." ! * ap." ao." % d ar." aq." , c at." as." 5 * av." au." * ax." aw." + * az." ay."  d **." *a." ? c *d." *c." 1& * *e." AA. Adentication *f."1 *g." Jilent ;artner *h." ! *i."(onus *:."% *D." $greed )apitalI/otal $greed )apital

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)ontinuation"