QUIZZER PARTNERSHIP ACCOUNTING

I. TRUE OR FALSE

1. In opening the books for partnership, it is customary to prepare a single

journal entry for the investment of all partners.

2. If the partnership agreement does not state how profits and losses are to be
shared, they are allocated according to the partners’ capital interest.

3. The admission of new partner calls for the amendment of the old partnership
agreement, but not dissolve the old partnership.

4. Partners may agree that the most equitable method of allocating profits and
losses is to base salaries on the services rendered by each partner.

5. The basis on which profits and losses are to be shared is a matter of

agreement between the partners and not necessarily the same as their
investment ratio.

6. If a partner is permitted to withdraw more than the book value of his/her

interest, the effect of the transaction will increase the capital accounts of the
remaining partners.

7. When a partner retires from the business, the partner’s interest may be
purchased by one or more of the remaining partners or by an outside party.

8. The basis on which profits and losses are to be shared is a matter of

agreement between the partners and not necessarily the same as their
investment ratio.

9. When two single proprietors decide to combine their businesses, generally

accepted accounting principles usually require that noncash assets be
recorded at their market value as of the date of formation of the partnership.

10.Under the mutual agency feature of the partnership, the partnership is legally
held responsible for the acts of any partner even though those acts do not
relate to the normal partnership activities.

11.The agreed capital can never be less than the total contributed capital.

12.It is desirable that a partnership agreement be evidenced by a written

contract.

13.Partners may invest property or cash in the partnership, but only property
increases their capital account balances.
 QUIZZER PARTNERSHIP ACCOUNTING

14.Only the income statement is affected by the allocation of net income in a

partnership.

15.“Limited Life” means a partnership may be dissolved as the result of any

change in the ownership.

16.If two or more sole proprietors combine their businesses to form a

partnership, the basis for the opening entries for the investments of such
partners is based upon their respective Statement of Financial Position.

17.When a new partner is admitted, the old partnership continues to exist and
the new partner invests in the existing business.

18.The advantages of a partnership include unlimited liability.

19.Ease of information is a characteristic of a partnership.

20.Two partners, with a capital of ratio 3:1 and profit and loss ratio of 2:1,
admitted a new partner into their business. Under the bonus method, the old
partners’ old profit and loss ratio should be used to allocate the excess of the
new partner’s contribution over the amount credited to his capital account.

21.In computing for input Vat, the buyer should multiply the amount of
purchases (excluding the VAT) by 12%.

22.Limited liability is not part of the definition of the partnership.

23.A bonus to the remaining partners will result when the cash paid to a retiring
partner is more than the retiring partner’s capital balance.

24.Assuming there are no known bad debts when two single proprietors decide
to combine their businesses, It is usual practice to enter the full amount of
the Accounts Receivable as a debit and the amount of the allowance for Bad
Debts as a credit in placing each partner’s investment in the books of the
partnership.

25.If one partner contributes an asset to the business, the asset is jointly owned
by all partners.

26.Total contributed capital is the new capitalization of the new partnership

which maybe equal to, less than, or more than the total agreed capital.

27.Loans and advances from the partnership will increase the interest of the
retiring partner.

28.Bonus is the amount of capital given by one partner to another to recognize

the latter’s good reputation and earning capacity.
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29.In a partnership, salary allowances and interest are considered allocation of

profits and losses.

30.A new partner was admitted in the partnership by paying P 100,00. If the new
assets of the partnership are still the same after his admission, then the new
partner must have been admitted by the investment of a non cash asset.

II. Multiple Choice

31.Kabayan invests office equipment with a fair market value of P 62,000,

delivery equipment with a fair market value of P 75,000, and cash of P
30,000. He owes P 27,000, represented by a note on the delivery equipment.
The amount of Kabayan’s capital would be

a. P 30,000 b. P 167,000 c. P 140,000 d. P 137,000

32.Dalisay invests office equipment with a fair market value of P 70,000,

delivery equipment with a fair market value of P 89,000, and cash of P
54,000. He owes P 68,000, represented by a note on the delivery equipment.
If Dalisay’s office equipment cost P 80,000 and has accumulated of P 30,000,
the amount at which the asset should be entered on the books of the new
partnership would be

a. P 50,000 b. P 70,000 c. P 140,000 d. P 89,000

33.An equipment was purchased on September 1, 2016 for P 300,000. It has an

estimated residual value of 10% of cost and an estimated useful life of 10
years. The financial statements for the year ended December 31, 2017 would
show the balances of
Accumulated Depreciation Expense
Depreciation
a. 36,000 27,000
b. 36,000 36,000
c. 54,000 30,000
d. 36,000 9,000

34.After closing the temporary accounts into income Summary, and after
allocating the net income and closing the partners’ drawing accounts,
assume the partners’ capital accounts had credit balances as follows:
 QUIZZER PARTNERSHIP ACCOUNTING

Young, P 20,000; Old, P 30,000; Teen, P 45,000. Partners share profits and
losses as follows: 20%; 30%; and 50%, respectively. If Young purchased
Teen’s interest in the partnership for P 40,000 cash, the amount entered in
Young’s capital account is a

a. P5,000 debit b. P 40,000 debit c. P 40,000 credit d. P 45,000 credit

35.Dodong and Egay formed a partnership on January 1, 2017. Dodong

contributed P 70,000 and Egay contributed P 40,000. During the year,
Dodong contributed additional P 20,000. The partnership agreements states
that Dodong is to receive P 50,000 and Egay is to receive P 40,000 as a
salary allowance. Any remaining net income is to be divided as follows:
Dodong 65%, Egay 35%. For the year ending December 31, 2017, the
partnership earned P 140,000 in net income. The partners withdrew only the
salary portion of their compensation during the first year of operation. The
35% share of Egay on the residual net income is

a. P 49,000 b. 32,500 c. P 57,000 d. 17,500

36.The same information in no. 35, the ending capital balance of Dodong would
be

a. P 122,500 b. P 70,000 c. P 90,000 d. P 172,500

37.The same information in no. 35, the ending total capital od the partnership
would be

a. P 140,000 b. P 130,000 c. 180,000 d. 270,000

38.Jam, a partner in the JM partnership, is entitled to 40% of the profits and

losses. During 2017, Jam contributed land with a fair value of P 60,000. Also,
during 2017, Jam had drawings of P 80,000. The balance of Jam’s capital
account was P 120,000 at the beginning of 2017 and P 150,000 at the end of
the year. What is the partnership’s profit (loss) for 2017?

a. (P 75,000) b. (P 50,000) c. P 150,000 d. P 125,000

39.Ompong and Paeng entered into a partnership on April 1, 2017 by investing

the following assets:
OMPONG PAENG
 QUIZZER PARTNERSHIP ACCOUNTING

Cash P 30,000 -
Accounts Receivable - P 90,000
Transportation 160,000
Equipment
Office Equipment 200,000

The agreement between Ompong and Paeng provides that profits and losses
are to be divided into 40% and 60% respectively, and that the partnership is
to assume a liability on the Transportation Equipment of P 60,000. The
partnership further agreed that Paeng is to receive a capital credit equal to
his profit and loss ratio. How much cash is to be invested by Paeng?
a. P 135,000 b. P 145,000 c. P 155,000 d. P 130,000

40.Onyok and Nonoy are partners who share profits equally and losses in a 2:1
ratio. Onyok and Nonoy have beginning capital balances of P 200,000 and P
250,000, respectively, and made no withdrawals during a period of two years.
Their partnership has resulted a profit of P 210,000 on its first year of
operation but incurred a net loss of P 120,000 on its second year of
operation. The ending capital balance of Nonoy on the first year of operation
will be

a. P 320,000 b. 210,000 c. 355,000 d. P 305,000

41.The same information in no. 40, the ending capital balance of Onyok on the
second year of operation will be

a. P 305,000 b. P 280,000 c. P 120,000 d. P 225,000

42. The same information in no. 40, the total capital of the partnership at the
end of the second year of operation will be

a. P 540,000 b. P 660,000 c. P 330,000 d. P 270,000

Questions for nos. 43 to 45

Tom, Dick and Harry are partners with capital account balances at year-end,
P 90,000; P 110,000; and P 50,000, respectively. The partnership profit for
the year is P 110,000. They share profits and losses on a 4:4:2 ratio, after
considering the following terms:
1. Interest of 10% shall be paid on that portion of a partner’s capital in
excess
of P 100,000
2. Salaries of P 10,000 and P 12,000 shall be paid to Tom and Harry,
respectively
3. Harry is to receive a bonus of 10% of profit after bonus
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43.The total profit share of Tom was

a. P 40,800 b. P 48,400 c. P 44,000 d. P 48,000

44.The total profit share of Dick was

a. P 37,000 b. P 31,400 c. P 31,800 d. P 44,000

45.Harry’s share from the profit was

a. P 37,400 b. 38,200 c. P 22,000 d. P 34,700

46.Boc and Ervin are partners with profit and loss ratio of 80:20 and capital
balance of P 70,000 and P 350,000, respectively. Mykel is to be admitted into
the partnership by contributing a 30% interest in the capital, profits and
losses for P 420,000. Assuming that no asset revaluation is to be made.
Which of the following is true in the books of the partnership upon admission
of Mykel?

a. Increase in asset account in the amount of P 420,000

b. Credit capital accounts of the selling partners with total amount of P
315,000
c. Decrease in capital account of the acquiring partner in the amount of P
105,000
d. The entry upon admission will not affect the total capital of the partnership

47.Using the data in no.46, assuming at this time, upon admission of Mykel, the
equipment of the partnership is undervalued, which of the following is false?

a. Increase in the asset account of the partnership in the amount P 350,000.

b. The capital account of Boc will be credited in the amount of P 280,000 for
his share
in the adjustment of the undervalued equipment
c. The capital account of Ervin will be debited in the amount of P 56,000 upon
transfer
of capital to the new partner
d. The capital account of Boc will have a net decrease of P 14,000 as a result
of
revaluation of asset and admission of Mykel.

48.Ali and Frazer formed a partnership in 2017 and made the following
investments and withdrawals during the year:
ALI FRAZER

Investment Withdrawal Investment Withdrawal

 QUIZZER PARTNERSHIP ACCOUNTING

January 1 216,000 252,000

June 1 108,000 162,000
August 1 27,000 54,000

The partnership’s profits and loss agreement provides for a monthly salary of
P 45,000 for each partner. All is to receive a bonus of 25% on net income
after salaries and bonus. The partners are also to receive interest of 5% on
average capital balances. Assuming the income summary has a credit
balance of P 1,400,000. Determine which of the following is incorrect in the
partnership operation:
a. Ali is to receive a bonus of P 72,000
b. Frazer will receive P 7,875 interest on average capital balance
c. Frazer has a share of 40% in the P 273,375 remainder or balamce
d. Ali, Capital account will increase by P 783,900

Questions for nos. 49 to 52

Duncan, Howard and Wade are partners with capital balances of P 67,200, P
108,000 and P 38,000, respectively, sharing profits and losses in the ratio of
2:5:1. Durant is admitted as a new partner of bringing with him expertise and
is to invest cash for a 15% interest in the partnership considering the transfer
of capital from him of P 18,000 upon his admission.
49.How much is the cash investment of Durant?

a. P 58,800 b. P 40,800 c. P 18,000 d. P 31,980

50.How much is the agreed capital of the new partnership?

a. P 245,180 b. P 272,000 c. P 254,000 d. P 231,000

51.How much is the capital balance of Duncan after the admission of Durant?

a. P 78,450 b. P 71,700 c. P 69,450 d. P 85,200

52.How much is Durant’s capital credit in the new partnership?

a. P 31,980 b. P 58,500 c. P 40,800 d. P 18,000

Questions for nos. 53 to 57 are VAT related problems for Merchandising

53.On March 1, 2017, Philip Company bought merchandise from Winston

Company for P 89,600 (VAT inclusive). Terms 3/10, 2/15, n/30. FOB shipping
point, freight prepaid. The cost of the freight was P 1,680 (VAT inclusive). On
 QUIZZER PARTNERSHIP ACCOUNTING

March 2, 2017, Winston issued a credit memorandum for P 3,500 (VAT

inclusive). Philip Company paid the amount due on March 15, 2017.
The amount of sales to be recorded by Winston Company will be

a. P 89,600 b. P 80,000 c. P 91,820 d. P 81,500

54.Using the information in no. 53, the amount due to Winston Company on
March 15, 2017 will be

a. P 89,600 b. P 91,820 c. P 85,612.80 c. P

84,739.20

55.Using the information in no.53, the amount of cash discount to be recorded

by Philip Company will be

a. P 2,620.80 b. P 2,340 c. P 1,747.20 P

1,560

56.On September 15, 2017, Star Company purchased merchandise from Sun
Company amounting to P 30,000 (VAT exclusive). Terms 2/10, n/30, FOB
shipping point, freight collect. Amount of freight cost is P 1,000. The amount
of Accounts Receivable to be recorded on the date of the sale will be

a. P 33,600 b. P 34,720 c. P 31,000 d. P 30,000

57.Using the information in no. 53, the amount of cash discount to be recorded
by Philip Company will be

a. P 58.56 b. P 60.00 c. P 68,64 P 67.20

58.Jose and Mari are partners who share profits and losses equally. The capital
accounts of Jose and Mari have tripled in five years and at present have the
following balances at P 90,000, respectively. Chan desires to join the firm and
offered to invest P 50,000 for a 1/3 interest. Jose and Mari declined his offer
but they extended a counter-offer to Chan of P 70,000 for a ¼ interest in the
capital and profits and losses of the firm. If Mari accepted their offer and
bonus is recorded, what should be the balances in the capital accounts of
Jose and Mari after Chan’s admission?

a. 100,000 and 70,000 c. 90,000 and 60,000

b. 120,000 and 90,000 d. 97,500 and 67,500

59.Sweet and Heart formed a partnership and have capital balances of P 50,000
and P 100,000, respectively. If they agree to admit Love into the partnership,
how much will she have to invest to have a ¼ interest?

a. P 25,000 b. P 50,000 c. 37,500 d. P 100,000

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60.Jayson, Jeff and Japeth are partners with capital balances on December 31,
2017 of P 300,000, P 300,000, and P 200,000, respectively. Profits are shared
equally. Japeth wishes to withdraw and it is agreed that he is to take certain
furniture and fixtures with second hand value at P 65,000. Bran new, the
furniture and fixtures may cost P 80,000. Japeth’s acquisition of the second-
hand furniture will result to:

a. Reduction in capital of P 15,000 each for Jayson and Jeff

b. Reduction in capital of P 10,000 for Japeth
c. Reduction in capital of P 5,000 each for Jayson, Jeff, and Japeth
d. Reduction in capital of P 7,500 each for Jayson and Jeff
61.Pot, Marie and Len were partners with capital balances on January 2, 2017 of
P 100,000, P 150,000 and P 200,000, respectively. Their profit and loss ratio
is 5:3:2. On July 1, 2017, Pot retires from the partnership. On the date of the
retirement, the partnership profit is P 140,000 and the partners agreed that
inventories are to be revalued at P 70,000 from its original cost if P 50,000.
The partners agreed further to pay Pot, P 195,000 in settlement of her
interest. What are the capital balances of the remaining partners after the
retirement of Pot?
a. 189,000 and 226,000 c. 207,000 and 238,000
b. 198,000 and 232,000 d. 220,000 ad 226,000
62.Jun, Mar and Rot are partners. Roy is to withdraw from the partnership on
December 31. T was agreed that the settlement is to be made by payments
from the personal funds of the remaining partners to Roy. Profit and loss ratio
is 30:30:40. Capita balances on December 31, are as follows:
Jun – P 30,000 Mar – P 25,000 Roy – P 45,000
If Jun and Mar paid Roy P 48,000, how much is the undervaluation of assets if
the transaction will be recorded using the asset revaluation method?

a. P 500 b. P 3,000 c. P 5,000 d. P 7,500

63.The total partners’ capital account was P 110,000, before the recognition of
partnership asset revaluation the withdrawal of a partner whose profit and
loss sharing ratio is 2/10. The withdrawing partner was paid P 28,000 by the
partnership in final settlement for his interest. The remaining partners’
capital accounts, excluding their share of the asset revaluation, totaled P
90,000 after his withdrawal. The total asset revaluation of the firm agreed
upon was

a. P 20,000 b. P 40,000 c. P 31,000 d. P 30,000

64.After closing the temporary owners’ equity accounts into Income Summary,
and after allocating the net income and closing the partners’ drawing
accounts, assume the partners’ capital accounts had credit balances as
follows: Gold, P 30,000; Silver, P 40,000; Bronze, P 55,000. If Bronze retired
 QUIZZER PARTNERSHIP ACCOUNTING

and withdrew P 50,000 in settlement of his equity, the amount entered in

Bronze’s capital account would be a

a. P 5,000 credit b. P 50,000 credit c. P 55,000 debit d. P 55,000 credit

65.At the beginning of 2017, the balance of the Accounts Receivable and the
Allowance for Bad debts were P 215,000 and P 1,700 credit, respectively.
During 2017, credit sales were P 1,750,000. In addition, P 1,900 in
uncollectible accounts receivable to be P 22,500 based on aging of accounts
receivable. How much is the Bad Debts Expense to be shown in the
Statement of Comprehensive Income for the year ended December 31, 2017?

a. P 22,500 b. P 24,200 c. P 22,700 d. P 24,400