Partnership – Basic Considerations and Formation 1

CHAPTER 1

MULTIPLE CHOICE ANSWERS AND SOLUTIONS

1-1: a Jose's capital should be credited for the market value of the computer contributed by him. 1-2: b (40,000 + 80,000) ÷ 2/3 = 180,000 x 1/3 = 60,000.

1-3: a Cash P100,000 Land 300,000 Mortgage payable ( 50,000)

Net assets (Julio, capital) P350,000

1-4: b Total Capital (P300,000/60%) P500,000 Perla's interest ______40%

Perla's capital P200,000 Less: Non-cash asset contributed at market value Land P 70,000 Building 90,000 Mortgage Payable ( 40,000) _120,000

Cash contribution P 80,000

1-5: d - Zero, because under the bonus method, a transfer of capital is only required.

1-6: b Reyes Santos

Cash P200,000 P300,000 Inventory – 150,000 Building – 400,000 Equipment 150,000 Mortgage payable ________ ( 100,000)

Net asset (capital) P350,000 P750,000

1-7: c AA BB CC

Cash P 50,000 Property at Market Value P 80,000 Mortgage payable ( 35,000) Equipment at Market Value _______ _______ P55,000

Capital P 50,000 P 45,000 P55,000

2 Chapter 1

1-8: a PP RR SS

Cash P 50,000 P 80,000 P 25,000 Computer at Market Value __25,000 _______ __60,000

Capital P 75,000 P 80,000 P 85,000 1-9: c Maria Nora

Cash P 30,000 Merchandise inventory P 90,000 Computer equipment 160,000 Liability ( 60,000) Furniture and Fixtures 200,000 ________

Total contribution P230,000 P190,000

Total agreed capital (P230,000/40%) P575,000 Nora's interest ______60%

Nora's agreed capital P345,000 Less: investment 190,000

Cash to be invested P155,000

1-10: d Roy Sam Tim

Cash P140,000 – – Office Equipment – P220,000 – Note payable ________ _( 60,000)