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MULTIPLE CHOICE QUESTIONS. Encircle the best answer in the following questions. Show supporting computations in
good form if necessary.
D. All of those
6. On April 1, 2014, Apple and Ayme formed a partnership with each contributing the following assets:
Building 900,000
The building is subject to a mortgage loan of P 300,000, which is to be assumed by the partnership. On April 1, 2014, the
balance in Ayme’s capital account should be
7. Aster and Amie are forming a partnership by combining their businesses. Their books show the following:
It has been agreed to recognize uncollectible accounts of P 7,500 and P 5,400 to each party, respectively, and that the
furniture and fixtures of Amie are under depreciated by P 9,000. If each partner’s share in equity is to be equal to the net
assets invested, the capital accounts of Aster and Amie would be
9. Almeda and Asistio are combining their separate business to form a partnership. Cash and non-cash assets are to be
Almeda Asistio contributed
and the liabilities are to be
assumed BV FMV BV FMV are as follows:
Accounts Receivable P 40,000 P 30,000
The partners’ capital accounts are to be equal after all the contribution of assets and the assumption of liabilities. The amount
of cash to be contributed by Almeda is
Amable Aguila
A. P 100,000 C. P 210,000
Cash P 40,000
B. P 110,000 D. P 300,000
Merchandise Inventory P 90,000
Land 130,000
10. Using the information in no. 9, the
Equipment 30,000
total assets of the partnership is
Furniture and Fixtures 200,000
A. P 340,000
C. P 630,000 D. P 650,000
B. P 360,000
11. Using the information in no. 9, and assuming the excess capital credit over the fair value of the net assets transferred to the
partnership is recognized as goodwiill, how much is the goodwill to be credited to Asistio?
12. Amable and Aguila entered into a partnership on February 1, 2014 by investing the following assets:
The agreement between Amable and Aguila provides that profits and losses are to be divided 60% and 40% respectively, and
that the partnership is to assume the P 100,000 mortgage on the land. If Aguila is to receive capital credit equal to the full
amount of his net assets invested, how much is his capital balance upon partnership formation?
13. Using the information in no. 12, and assuming that Aguila invests P 100,000 cash and the partners are to have equal interest
in the partnership in the total capital of the partnership is
14. Using the information in no. 12, and assuming that the capital of the partners is proportionate to their profit and loss ratio, the
bonus upon partnership formation is
15. Using the information in no. 14, the capital balances of Amable and Aguila, respectively, upon partnership formation are
16. The Agulto and Acejas Partnership was formed on October 1, 2014. At that date, the following assets were contributed:
The building is subject to a mortgage loan of P 320,000 which is to be assumed by the partnership. The partnership
agreement provides that Agulto and Acejas share on profit or loss of 25% and 75%, respectively. Agulto’s capitala ccount at
October 1, 2014 should be
17. Using the information in no. 16 and assuming the partnership agreement provides that the partners initially should have an
equal interest in partnership capital, Acejas’ capital account on October 1, 2014 should be
Agulto Acejas
18. Using the information Cash P 600,000 P 280,000 in no. 17, the bonus to be
recognized in the transaction is
Merchandise Inventory 440,000
A. Zero D. P 480,000
Building 800,000
B. P 200,000
Furniture and Fixtures 120,000
C. P 240,000
19. Using the information in no. 17, the effect of the bonus on the capital of Agulto and Acejas, respectively, is
20. Using the information in no. 16, and assuming that capital shall be proportionate to the partners’ profit or loss ratio, the
required capital of Acejas is
21. The Articles of Co-Partnership should contain clear provisions on all of the following except
22. The non-cash contributions of the partners to form a partnership are recorded by the partnership at their
23. When a partnership cannot pay its debt with business assets, the partners
A. Are not personally liable for the debts C. Must convert the partnership to a joit venture
B. Have limited personal liability D. Must use their personal assets to meet the debts
24. A partner who takes active part in the business but whose connection with the partnership is concealed to the public is konwn
as a (an)
25. A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a
(an)
26. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the
initial investment in the partnership would be recorded for financial accounting purposes at the
A. Proprietors’ book value or the fair value of the property at the date of the investment, whichever is higher
B. Proprietors’ book value or the fair value of the property at the date of investment, whichever is lower
27. Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current
value in excess of its carrying amount. Almar contributed real estate with a carrying in excess of its current market value. At
what amount should the partnership record inventory and real estate?
28. A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be
recorded into the partnership at the proprietor’s
A. Carrying amount or the fair market value of the property at the date of the investment, whichever is higher
C. Carrying amount or the fair market value of the property at the date of the investment, whichever is lower
29. Agaton joined a partnership by contributing the following: cash, P 120,000; accounts receivable, P 4,000; land, P 240,000 at
cost, P 400,000 at fair value; and accounts payable, P 16,000. What will be the initial amount recorded in Agaton’s capital
account?
Alonzo Amurao
A. P 408,000 C. P 508,000
Cash P 300,000 P 140,000
B. P 424,000 D. P 524,000
Merchandise Inventory 220,000
Building 4,000,000
30. On October 1, 2014, Alba and Ang formed a
partnership and agreed to share profits and losses in the
ratio of 3:7, respectively. Alba
contributed cash of P 100,000 and a parcel of land that cost him P 200,000. Ang contributed P 300,000 cash. The land has a
quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on Octiber 1, 2014?
31. On June 30, 2014, a partnership was formed by Ariston and Astoria. Ariston contributed cash,. Astoria, previously a sole
proprietor, contributed non-cash assets, including a realty subject to mortgage, which was assumed by the partnership.
Astoria’s capital account at June 30, 2014 should be recorded at
A. The fair value of the property less the mortgage payable at June 30, 2014
C. Astoria’s carrying amount of the property less the mortgage payable at June 30, 2014
32. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta
contributed land costing P 600,000. the current market value of the assets are as follows: equipment, P 450,000; land, P
750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital accounts of the
Abada and Acosta, respectively, will be credited as
33. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contibuted:
Furniture and Fixtures 900,000
The building is subject to mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership
agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital
account at April 1, 2014 should be
34. Using the information in no. 33, and assuming that the partnership agreement provides that the partners initially should have
an equal interest in partnership capital, Alonzo’s capital account should be increased by
35. Using the information in no. 33, the total partnership capital on April 1, 2014 is
37. Using the information in no. 33, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the
required capital of Alonzo is
38. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli
contributed cash of P 200,000. Amy contributed property with a carrying amount of P 144,000, original cost of P 160,000,
and fair value of P 320,000. the partnership accepted responsibility for the P 140,000 mortgage attached to the property.
Annie contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000.
The partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014?
A. Aleli C. Annie
39. Using the information in no. 38, the property contributed by Amy is to be recorded by the partnership on April 1, 2014 at
40. Using the information in no. 38 and assuming capital are in the profit and loss ratio, then there is
C. No bonus to Aleli
Which is correct?
TRUE OR FALSE. Write T if the statement is correct and F if the statement is false before each number.
3. A partner’s contribution in the form of industry or service is recorded by debiting the account ‘Industry.’
4. In the partnership books, there as many capital and drawing accounts as there are partners.
5. A partner’s contribution in the form of non-cash assets should be recorded at its fair market value in the absence of an agreed
value.
9. Each partner generally has the authority to enter into contracts which is binding upon the partnership.
10. The property invested in a partnership by a partner becomes the property of the partnership.
11. Contra acconuts, like Allowance for Uncollectible Accounts and Accumulated Depreciation, on non-cash assets invested by
partners are always carried on the partnership books.
12. The unlimited liability of partners for partnership debts makes the partnership more reliable from the point of view of
creditors.
13. Goodwill may be recognized upon partnership formation when the capital credited to a partner exceeds the fair value of the
net assets transferred from previous sole proprietorship business.
14. Before a partnership can operate legally, it has to first comply with registration requirements of the SEC, DTI, BIR, SSS and
Mayor’s Office.
15. There is a required number of limited partners in a general co-partnership; in the same manner that, there is a required
number of general partners in a limited partnership.
17. For financial reporting purposes, the personal assets and debts of a partner should be combined with the assets and debts of
the business.
18. Partners are personally liable for the liabilities of the partnership if the partnership is unable to pay.
20. Net asset adjustments are made on a sole proprietor’s books, when theses are to be used as partnership books, for the purpose
of arriving at agreed values.
Problem 1.
Acosta Company
December 1, 2014
Assets
Cash P 600,000
Aguas offers to invest cash to give him an equity credit equal to one-half of the equity of Acosta after adjustments for the items
below. Acosta accepted the offer.
c. Interest is earned on notes receivable should be reflected. The note is dated September 30, 2014 and bears interest at
6%.
d. Interest accrued on notees payable for the period September 1 to December 1, 2014 should be recognized. The interest
rate on the note is 10%.
f. Office supplies on hand, which have been charged to expense, amounted to P 15,000. these supplies will be used by the
new partnership.
Instructions:
1. Prepare journal entries on the books of Acosta to give effect to the partnership formation.
On October 1, 2014, April and Arias decided to pool their assets and form a partnership. The firm is to take over business assets
and assume business liabilities; equities are to be based on net assets transferred after the following adjustments:
b. An allowance for uncollectible accounts of P 9,000 and P 7,500 respectively should be set up.
d. Arias is to conribute sufficient cash to give him a 60% interest in the new firm.
Instructions:
2. Give the entries required on the books of Arias upon the formation of the partnership.
3. Prepare a statement of financial position for the new partnership of April and Arias.
Problem 3.
Partners Abada and Albano agreed to combine their businesses into a partnership. The statement of financial position accounts of
Abada and Alabano are shown below:
ABADA ALABANO
Instructions: Give the journal entries to record the partnership formation under each of the following assumptions
Problem 4.
On January 1, 2014, Abante, Arevalo and Almonte decided to form a partnership. Abante, a sole proprietor, will transfer to the
partnership his net assets, excluding cash. Arevalo will contribute cash in an amount equal to one and one-half times the
investment of Abante. Almonte will contribute a piece of land with an agreed value of P 1,800,000 subject to a mortgage of P
300,000 to be assumed by the partnership. The statement of financial position of Abante is as shown below.
Abante Company
January 1, 2014
ASSETS
Cash P 360,000
The Articles of Co-Partnership executed for the purpose calls for adjustments to the assets, as follows:
d. The new partnership is t credit Abante with a capital of P 2,000,000. The excess capital credit over the fair value of the
net assets transeferred is to be recognized as goodwill.
Problem 5.
The partnership of Abueva and Alano was formed on June 1, 2014, when they agreed to invest equal amount of capital into the
firm. The investment by Abueva consists of P 518,000 cash and an inventory of merchandise valued at P 1,152,000. Alano agreed
to contribute the assets of his business along with the transfer to the partnership of his business liabilities. Alano was credited for
goodwill for the excess of the capital credit over the agreed value of his net assets. The assets and liabilities are shown:
Balances
Instructions:
1. Give the entries to record the investments of Abueva and Alano in the new partnership.
2. Prepare the beginning statement of financial position of the partnership, reflecting the above transfers to the firm.
Problem 6.
The partnership of Agana and Ayesa was formed on September 1, 2014. At that date, the following assets were invested:
Agana Ayesa
The building is subject to a mortgage loan of P 240,000, which is to be assumed by the partnership. The partnership contract
provides that Agana and Ayesa share earnings 40% and 60% respectively.
Instructions: Compute the amount of Ayesa’s capital account on September 1, 2014 assuming that the partnership agreement
provides that:
1. Each partner is credited for the full amount of net assets invested.
2. The partners initially should have an equal interest in the partnership capital.
3. The initial partnership capital is shared proportionate to the partners’ profit and loss ratio.
Problem 7.
Sole proprietors Alvis and Ancheta established a partnership on December 31, 2014 sharing profit and losses in the ratio 60% and
40%. They agreed that each would make the following contributions:
Alvis Ancheta
Land 375,000
Building 1,200,000
Instructions: Prepare the entries on December 31, 2014 to record the investments in the partnership by Alvis and Ancheta under
each of the following independent assumptions:
1. Each partner is credited for the full amount of the net assets invested.
2. Each partner initially should have an equal interest in the partnership capital.
3. Each partner receive capital proportionate to his profit and loss ratio.
Problem 8.
On May 1, 2014, the business accounts of Ablan and Amias appear below:
Ablan Amias
b. Inventories of P 27,000 and P 35,000 are worthless in Ablan’s and Amias’ respective books.
c. Other assets of P 10,000 and P 18,000 in Ablan’s and Amias’ books are to be written off.
Instructions:
1. Prepare journal entries to adjust the books of both partners.
Problem 9.
The post-closing trial balance of Joel Palencia and Tommy Peñaflor Partnership as of December 31, 2014 are presented below:
J. Palencia T. Peñaflor
Palencia, J. 275,500
Peñaflor, T. 389,000
Instructions:
1. J. Palencia, and T. Peñaflor agreed to combine their business to form a partnership. All of the assets and liabilities are to
be taken over by the partnership.
a. Give the entries in the books of the respective single proprietorship to finally close their book.
b. Give the journal entries to record the investments of each of the partners in the books of the partnership.
2. J. Palencia and T. Peñaflor have agreed to combine their business to form a partnership. All of the assets and liabilities
are to be taken over by the partnership, after the following adjustments are taken in the books of the respective single
proprietorship.
Allowance for Doubtful Accounts should be increased to 20% of the Accounts Receivable.
a. Give the necessary journal entries in the books of the single proprietorship to adjust and close its books.
b. Journal entries in the books of the partnership recording the investments of J. Palencia and T. Peñaflor.
MULTIPLE CHOICE - THEORY AND PROBLEM. Encircle the letter of the best answer. Show supporting computations in
good form if necessary.
1. The Articles of Co-Partnership should contain clear provisions on all of the following except
2. The non-cash contributions of the partners to form a partnership are recorded by the partnership at their
3. When a partnership cannot pay its debts with business assets, the partners
a. Are not personally liable for the debts c. Must convert the partnership to a joint venture
b. Have limited personally liabity d. Must use their personal assets to meet to the debts
4. A partner who takes active part in the business but whose connection with the partnership is concealed to the public is known
as a (an)
5. A partnership which has failed to comply with one or more of the legal requirements for its establishment is classified as a
(an)
6. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is part of the
initial investment in the partnership would be recorded for financial accounting purposes at the
a. Proprietors’ book values or the fair value of the property at the date of the investment, whichever is higher
b. Proprietors’ book values or the fair value of the property at the date of the investment, whichever is lower
7. Anton and Almar formed a partnership, each contributing assets to the business. Anton contributed inventory with a current
market value in excess of its carrying amount. Almar contributed real estate with a carrying amount in excess of its current
market value. At what amount should the partnership record each of the following assets?
8. A partnership is formed by two individuals who were previously sole proprietors. Non-cash assets invested would be
recorded into the partnership at the proprietor’s
a. Carrying amount or the fair value of the property at the date of the investment, whichever os higher
c. Carrying amount or the fair value of the property at the date of the investment, whichever is lower
9. Agaton joined a partnership by contributing the following: cash. P 120,000; accounts receivable, P 4,000; land , P240,000
cost, P 400,000 fair value; and accounts payable, P 16,000.what will be the initial amount recorded in Agaton’s capital
account?
10. On October 1, 2014, Alba and Ang formed a partnership and agreed to share profits and losses in the ratio of 3:7,
respectively. Alba contributed cash of P 100,000 and a parcel of land that cost him P 360,000. Ang contributed P 300,000
cash. The land has a quoted price of P 360,000 on October 1, 2014. What is the amount of partnership capital on October 1,
2014?
11. On June 30, 2014, a partnership was formed by Ariston and Astoria.Ariston contributed cash. Astoria, previously a sole
proprietor, contributed non-cash assets, including a realty subject to a mortgage, which was assumed by the partnership.
Astoria’s capital account at June 30, 2014 should be recorded at.
a. The fair value of the property less the mortgage payable at June 30, 2014
c. Astoria’s carrying amount of the property at June 30, 2014 less the mortgage payable at June 30, 2014
12. Abada and Acosta formed a partnership. Abada contributed cash of P 300,000 and an equipment costing P 600,000. Acosta
contributed land costing P 600,000. The current market value of the assets are as follows: equipment, P 450,000; land, P
750,000. The partnership will assume a P 150,000 liability on the land contributed by Acosta. The capital acconuts of the
partners will be credited as follows:
Abada Acosta
a. P 900,000 P 450,000
b. P 300,000 P 750,000
c. P 750,000 P 600,000
d. P 300,000 P 600,000
13. The partnership of Alonzo and Amurao was formed on April 1, 2014. At that date, the following assets were contributed:
Alonzo Amurao
Building 4,000,000
The building is subject to a mortgage loan of P 1,600,000 which is to be assumed by the partnership. The partnership
agreement provides that Alonzo and Amurao share on profit and loss of 25% and 75%, respectively. Amurao’s capital
account at April 1, 2014 should be
14. Using the information in no. 13, and assuming that the partnership agreement provides that the partners initially should have
an equal interest in partnership capital, Alonzo’s capital acconut should be increased by
15. Using the information in no. 13, the total partnership capital on April 1, 2014 is
17. Using the information in no. 13, and assuming that capital shall be proportionate to the partners’ profit and loss ratio, the
required capital of Alonzo is
18. On April 1, 2014, Aleli, Amy and Annie formed a partnership by combining their separate business proprietorships. Aleli
contributed cash of P 200,000. Amy contributed property with a carrying amount P 144,000, original cost of P 160,000, and
fair value of P 320,000. The partnership accepted responsibility for the P 140,000 mortgage attached to the property. Annie
contributed equipment with a carrying amount of P 120,000, original cost of P 300,000, and fair value of P 220,000. The
partnership agreement specifies that profits and losses are to be shared equally.
Which partner has the largest capital account balance as of April 1, 2014?
a. Aleli c. Annie
20. Using the information in no. 18, and assuming capital are in the profit and loss ratio, then there is
C. No bonus to Aleli
FF GG
Which is(are) correct?
a. A only
b. B only
d. A, B and C
c. A and B only
21. On December 1, 2014, EE and FF formed a partnership, agreeing to share for profit and losses in the ratio of 2:3,
respectively. EE invested a parcel of land that cost him P 25,000. FF invested P 30,000 cash. The land was sold for P 50,000
on the same date, three hours after formation of the partnership. How much should be the capital balance of EE right after the
formation?
II JJ
22. On March 1, 2014, II and JJ formed a
partnership with each Cash P 300,000 P 700,000 contributing the following
assets:
Machinery and Equipment 250,000 750,000
The building is subject to mortgage loan of P 800,000, which is to be assumed by the partnership agreement provides that II
and JJ share profits and losses 30% and 70% respectively. On March 1, 2014 the balance in JJ’s capital account should be:
23. The same information in no.22, except that the mortgage loan is not assumed by the partnership. On March 1, 2014 the
balance in JJ’s capital account should be
24. As of July 1, 2014, FF and GG decided to form a partnership. Their balance sheets on this date are:
Cash P 15,000 P 37,500
The partners agreed that the machinery and equipment of FF is underdepreciated by P 15,000 and that of GG by P 45,000.
Allowance for Uncolletible Accounts is to be set up amounting to P 120,000 for FF and P 45,000 for GG. The partnership
agreement provides for ap rofit and loss ratio and capital interest of 60% to FF and 40% to GG. How much cash must FF
invest to bring the partners’ capital balance proportionate to their profit and loss ratio?
25. On August 1, AA and BB pooled their assets to form a partnership, with the fir totake over their business assets and assume
the liabilities. Partners’ capital are to be based on net assets transferred after the following adjustments. (Profit and loss are
allocated equally)
BB’s inventory is to be increased by P 4,000; an allowance for doubtful accounts of P 1,000 and P 1,500 are to be set up in
the books of AA and BB, respectively; and accounts payable of P 4,000 is to be recognized in AA’s books. The individual
trial balances on August 1, before adjustments, follow:
AA BB
Jones Smith
C. Prepaid salary expenses of P 600 and accrued rent expense of P 800 are to be recognized.
Compute for: (1) CC’s adjusted capital before the admission of DD; and (2) the amount of cash investment by DD.
27. Jones and Smith formed a partnenrship with each partner contributing the following items:
Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith
partnership. What is the balance in each of the partner’s capital account for financial accounting purposes?
Jones Smith
a. P 350,000 P 270,000
b. P 260,000 P 180,000
c. P 360,000 P 260,000
d. P 500,000 P 300,000
The capital account of LL, Capital 641,976 --- the partners after the
adjustment will be MM, Capital --- 728,352
a. LL, P 615,942; MM, TOTAL P 1,020,916 P 1,317,002 d. LL, P
P 717,894 614,476; MM, P
683,052
b. LL, P 640,876; MM, P 712,345
PP QQ
29. The same information in no 28, how much total
assets does the partnership have after formation?
a. P 2,337,918 c. P 2,265,118
b. P 2,237,918 d. P 2,365,218
30. On March 1, 2014, PP and QQ decide to combine their businesses and form a partnership. Their balance sheets on March 1,
before adjustments, showed the following:
Cash P 9,000 P 3,750
2. PP’s furniture and fixtures should be P 31,000, while QQ’s office equipment is underdepreciated by P 250.
3. Rent expense incurred previously by PP was not yet recorded amounting to P 1,000, while salary expense incurred
by QQ was not also recorded amounting to P 800.
31. The same information in no. 30, compute the total liabilities after the formation:
32. The same information in no.30, comute the total assets after the formation:
33. On April 30, 2014, XX, YY and ZZ formed a partnership by combining their separate business proprietorships. XX
contributed of P 75,000. YY contributed property with a P 54,000 carrying amount, a P 60,000 original cost, and P 120,000
fair value. The partnership accepted responsibility for the P 52,500 mortgage attached to the property. ZZ contributed
equipment with a P 45,000 carrying amount, a P 112,500 original cost , and P 82,500 fair value. The partnership agreement
specifies that profits and losses are to be shared equally but is silent regarding capital contributions. Which partner has the
largest April 30, 2014 capital balance?
a. XX c. ZZ