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- Statement 1: Partnership is an association of two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. Statement 2: Partnership with the capitalization of P 3,000.00 or more Partnership contract which shall appear in a public instrument, may be registered in the office of the Securities and Exchange Commission. a. True, True b. True, False c. False, False d. False, True
- Statement 1: Mutual Agency is characteristic of a partnership which means that when a partner invests his land or building and equipment, this ceases to be his personal property, instead it becomes joint property of all partners. Statement 2: Co-ownership of Profits is a characteristic of partnership which means that each partner shares in the profits of the partnership. The income or loss is divided among the partners according to their agreement. a. True, True b. True, False c. False, False d. False, True
- Statement 1: Trading Partnership is a kind of partnership whose main activity is to manufacture or purchase and sale of the merchandise. Statement 2: Non-Trading Partnership is a kind of partnership that is organized for the purpose of rendering services. a. True, True b. True, False c. False, False d. False, True
- Statement 1: Capitalist Partner is the one who contributes capital in money or property. Statement 2: Industrial Partner is the one who contributes money, property and industry. a. True, True b. True, False c. False, False d. False, True
- Statement 1: If the incoming partner purchased portion of the interest of the existing partner, there is a gain on the book of the partnership. Statement 2: If the incoming partner purchased portion of the interest of the existing partner, there is a loss on the book of the partnership. a. True, True b. True, False c. False, False d. False, True
- Statement 1: If the incoming partner invested P 100,000.00 and gets an interest in the partnership more than the amount he invested, there is bonus to the original partners. Statement 2: If the incoming partner invested P 100,000.00 and gets an interest in the partnership less than the amount he invested, there is bonus to the original partners. a. True, True b. True, False c. False, False d. False, True
- Statement 1: The reason for giving allowance of interest on partner’s capital is to give recognition to the ability, experience or time devoted by a partner to the business. Statement 2: The reason for giving bonus to partners is to give recognition to the differences in the partner’s capital contribution. a. True, True b. True, False c. False, False d. False, True
- Statement 1: Dissolution means the termination of the business activities. Statement 2: Dissolution means winding up of the business affairs. a. True, True b. True, False c. False, False d. False, True
- Statement 1: If the partnership purchased the interest of the withdrawing partner less than the amount of his/her interest, there is bonus to old partners. Statement 2: If a partner purchased the interest of the withdrawing partner more than the amount of his/her interest, there is bonus to withdrawing partner. a. True, True b. True, False c. False, False d. False, True
- Statement 1: The first step in liquidating partnership is payment of liabilities specifically external or outside creditors. Statement 2: In the process of liquidation, when a partner’s capital account reflects a debit balance, and such partner has a loan balance, the law permits the exercise of the right of offset, that is a part or all of the loan will be debited against the capital deficiency. a. True, True b. True, False c. False, False d. False, True
- All of the following are characteristics of partnership, except: a. Limited Life or easily dissolved. b. Unlimited Liability c. Co-Ownership of Profits d. Relative freedom and flexibility in decision-making
- Goodwill represents the excess of the cost of the business combination over the fair value of the identifiable net assets obtained. Therefore, the standard provides that goodwill attaches only to a business as a whole and is recognized only when a business is acquired. This provision outlawed the use of the goodwill method in partnership particularly admission and retirement of a partner because there is no business involved. a. PFRS 1 b. PFRS 2 c. PFRS 3 d. PFRS 4
- It is also called special compensation. a. Salaries b. Interest c. Bonus d. Share in the Net Income
- The first priority on recording contribution to partnership. a. Fair Value b. Book Value c. Net Present Value d. Agreed Values
- Profit and Losses are allocated based on ________.(first priority) a. Equally b. Arbitrary Ratio c. Agreement d. Capital contribution ratio
- On January 01, 2016, Abel and Cain decided to combine their business and form a partnership. Their balance sheets on January 01, 2016 before adjustments showed the following:
Abel Cain Cash 9,000.00 3,750. Accounts Receivables 18,500.00 13,500. Inventories 30,000.00 19,500. Furnitures and Fixtures(net) 30,000.00 9,000. Office Equipment(net) 11,500.00 2,750. Prepaid expenses 6,375.00 3,000. Total 105,375.00 51,500.
Accounts Payable 45,750.00 18,000. Capital 59,625.00 33,500. Total 105,375.00 51,500.
They agreed to have the following items recorded in their books:
- Provide 2% allowance for doubtful accounts.
- Abel’s furniture and fixtures should be 31,000.00 while Cain’s office equipment is under- depreciated by 250.
- Rent Expense incurred previously by Abel was not yet recorded amounting to 1,000.00 while salary expense incurred by Cain was not also recorded amounting to 800.00.
- The Fair Value of Inventory amounted to:
For Abel 29,500. For Cain 21,000. Compute the net (debit) credit adjustment for Abel and Cain:
Abel Cain
a. 2,870.00 2,820. b. (2,870.00) (2,820.00) c. (870.00) 180. d. 870.00 (180.00)
- Using the same information in number 20, compute the total liabilities after formation: a. 61,950. b. 63,750. c. 65,550. d. 63,950.
- Using the same information in number 20, compute the total assets after formation: a. 157,985. b. 156,875. c. 160,765. d. 152,985.
For numbers 23-
Assume that on January 01, 2016, Ryan and Paula formed a partnership out of their existing business. They agreed to divide the profits in the ratio of 5:3. On this date, their balance sheet appear as follows:
Ryan Balance Sheet January 01, 2016
Assets Current Assets Cash 100,000. Accounts Receivable 30,000. Less: Allowance for Bad Debts 1,500.00 28,500. Inventory 20,000. Total Current Assets 148,500. Non-Current Assets Office Equipment 40,000. Less: Accumulated Depreciation-Office Equipment 5,000.00 35,000.
Total Assets 183,500.
Liabilities Current Liabilities Accounts Payable 20,000. Notes Payable 10,000. Total Current Liabilities 30,000.
Capital Ryan, Capital 153,500.
Total Liabilities and Capital 183,500.
Paula Balance Sheet January 01, 2016
Assets Current Assets Cash 180,000. Accounts Receivable 20,000. Less: Allowance for Bad Debts 500.00 19,500. Inventory 50,000. Total Current Assets 249,500. Non-Current Assets Office Furniture 25,000. Less: Accumulated Depreciation-Office Furniture 7,500.00 17,500.
Total Assets 267,000.
Liabilities Current Liabilities Accounts Payable 30,000. Notes Payable 1,500. Total Current Liabilities 31,500.
Capital Paula, Capital 235,500.
Total Liabilities and Capital 267,000.
- What is the adjusting entry for Paula’s Allowance for bad debts adjustment? a. Allowance for Bad Debts 1,500.
Paula, Capital 1,500.
b. Paula, Capital 1,500. Allowance for Bad Debts 1,500. c. Allowance for Bad Debts 2,000.
Paula, Capital 2,000.
d. Paula, Capital 2,000. Allowance for Bad Debts 2,000.
- How much is the capital balance of Ryan after adjustments? a. 153,500. b. 152,000. c. 156,000. d. 154,600.
- How much is the capital balance of Paula before adjustments? a. 231,000. b. 235,500. c. 230,000. d. 234,000.
- How much is the required additional contribution of Ryan after all the adjustments are done? a. 152,000. b. 385,000. c. 233,000. d. 616,000.
For numbers 31-
On April 1, 2016, Anakin, Luke and Leia decided to form a partnership with the capital contribution of 200,000.00, 150,000.00 and 80,000.00 respectively. Anakin is the managing partner so they decided to allow him salary of 25,000.00 annually to compensate the time he devoted on the business. They also agreed that they will allow 7% interest on their original capital contribution. And if the business resulted a profit, they will allow 10% Bonus based on Net Income after bonus to Anakin. Their profit and loss ratio is 3:3:4. After one year of operation, the partnership resulted a Net Income of 230,000.00.
- How much is the bonus to Anakin? a. 23,000. b. 20,909. c. 2,300. d. 16,468.
- How much is the amount credited to Anakin’s Capital? a. 101,731. b. 58,572. c. 69,969. d. 82,154,
- How much is the amount credited to Luke’s Capital? a. 101,731. b. 58,572. c. 69,969. d. 82,154,
- How much is the amount credited to Leia’s Capital? a. 101,731. b. 58,572. c. 69,969. d. 82,154,
- What is the entry to record Interest on their capital? a. Income & Expense Summary 30,100. Anakin, Capital 14,000. Luke, Capital 10,500. Leia, Capital 5,600. b. Anakin, Capital 14,000. Luke, Capital 10,500. Leia, Capital 5,600. Income & Expense Summary 30,100. c. Income & Expense Summary 25,000. Anakin, Capital 25,000. d. Income & Expense Summary 82,154. Anakin, Capital 82,154.
For 36-
AA, BB, and CC decided to admit DD in the partnership. Their capital balances before admission of DD are 162,500.00, 202,650.00 and 185,250.00 respectively. DD is to invest 58,120.00 cash and Non- Cash assets whose fair value on the date of admission is worth 150,000.00.
- If they decided to maintain their total agreed capital based on their capital contributions and to give DD 20% interest in the partnership, by how much would BB’s capital be increased (decreased) after admission of DD? a. 16,924. b. 56,416. c. 22,566. d. -0-
- Using the same information in number 36, what would be their new Profit and Loss ratio after admission of DD? AA BB CC DD a. 30% 40% 30% -0- b. 25% 30% 25% 20% c. 24% 32% 24% 20% d. 20% 40% 20% 20%
- Assuming that they agreed that the total capital of the partnership is 800,000.00 and DD is to get 30% interest in the partnership, what would be the capital balance of BB after admission of DD? a. 165,380. b. 188,130. c. 206,490. d. 240,000.
- Using the same information in number 38, how much is the increase in the capital balances of AA, BB, and CC after admission of DD? AA BB CC a. 16,924.80 22,566.40 16,924. b. 2,880.00 3,840.00 2,880. c. -0- -0- -0- d. 12,280.00 18,672.00 12,280.
- Assuming that they agreed to maintain their total agreed capital based on their capital contribution and to give DD 30% interest in the partnership, what are the capital balances of AA, BB, CC, and DD after admission of DD? AA BB CC DD a. 162,500.00 202,650.00 185,250.00 208,120. b. 179,424.80 225,216.40 202,174.80 151,704. c. 165,380.00 206,490.00 188,130.00 240,000. d. 156,669.20 194,875.60 179,419.20 227,556.
For 46-
On January 4, 2016, Anthony, Robb, Brandon and Eddard decided to combine their businesses to form House of Stark Industries Partnership. Their Balance Sheet to date are as follows:
Anthony Robb Brandon Eddard
Cash 120,000.00 80,000.00 72,500.00 88,000. A/R(net) 68,000.00 52,500.00 39,750.00 12,500. Inventory 112,000.00 66,250.00 39,250.00 88,750. Equipment(net) - 12,500.00 33,680.00 138,500. Machinery(net) 58,000.00 68,000.00 42,750.00 - 358,000.00 279,250.00 227,930.00 327,750.
A/P 88,000.00^ 138,500.00^ 12,500.00^ -
Anthony, Capital 270,000.00^ -^ -^ - Robb, Capital -^ 140,750.00^ -^ - Brandon, Capital -^ -^ 215,430.00^ - Eddard, Capital -^ -^ 327,750. 358,000.00 279,250.00 227,930.00 327,750.
They decided to adjust the ff:
a. Inventories to be written down by 10%. b. Equipment are to be valued 95% of its current book value. c. Machinery is to be increased by 12.5% of its current book value.
Their agreement on how to divide their profits are as follows:
a. Interest of 4% on beginning balance of their capital. b. Salaries Anthony 1,000.00/mo Robb 1,500.00/mo Brandon 5,00.00/mo Eddard 750.00/mo c. Bonus to Robb is 12.5% Based on Net Income after Bonus. d. Their Profit and Loss Ratio will be 3:2:2:2 respectively.
Additional Information:
Net Income for the year is 325,000.00.
- Using the information above, how much is the adjustment for Anthony’s Capital Balance? a. 1,250. b. (265.25) c. (3,950.00) d. (15,800.00)
- How much will be the new capital balance of Robb after the adjustments? a. 140,750. b. 142,000. c. 140,484, d. 142,000.
- How much is the capital balance of Brandon after distribution of Net Income? a. 311,950. b. 83,422. c. 395,372. d. 271,067.
49. How much is the share of Eddard Stark on the Net Income of 325,000.00?
- a. 84,586.
- b. 101,087.
- c. 55,903.
- d. 83,422.
- a. 935,164. 50. How much is the total balance of capital after distribution of net income?
- b. 325,000.
- c. 1,260,164.
- d. 1,174,164.
