TEST QUESTIONAIRE

1. The partnership agreement is an express d. Onerous, because the parties contribute money,
contract among the partners (the owners of the property, or industry to the common fund
business). Such an agreement generally does not
include 7.The minimum capital in money or property
a. A limitation on a partner’s liability to creditors. except when immovable property or real rights
b. The rights and duties of the partners. thereto are contributed, that will require the
c. The allocation of income between the partners. contract of partnership to be in a public
d. The rights and duties of the partners in the event of instrument
partnership dissolution. and be registered with the Securities and
2. A partnership records a partner’s investment Exchange Commission (SEC).
of assets in the business at a. P5, 000.00
a. The market value of the assets invested. b. P10, 000.00
b. A special value set by the partners. c. P3, 000.00
c. The partner’s book value of the assets invested. d. P30, 000.00
d. Any of the above, depending upon the partnership
agreement. 8. When a partnership is formed, noncash assets
contributed by partners should be recorded:
3. When property other than cash is invested in
a partnership, at what amount should the I.At their respective book values for income tax
noncash property be credited to the contributing purposes
partner’s capital account?
a. Fair value at the date of recognition. II.At their respective fair values for financial accounting
b. Contributing partner’s original cost. purposes
c. Assessed valuation for property tax purposes. A. I only
d. Contributing partner’s tax basis. B. II only
4. When property other than cash is invested in C. Both I and II
a partnership, at what amount should the D. Neither I nor II
noncash property be credited to the contributing 9.Which of the following is not a feature of a
partner’s capital account? partnership?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost. a. mutual agency
c. Assessed valuation for property tax purposes. b. limited life
d. Contributing partner’s tax basis. c. limited liability
d. none of these
5. Four individuals who were previously sole
proprietors form a partnership. Each partner 10. The Grey and Redd Partnership was formed on
contributes inventory and equipment for use by January 2, 2010. Under the partnership agreement,
the partnership. What basis should the each partner has an equal initial capital balance.
partnership use to record the contributed Partnership net income or loss is allocated 60% to Grey
assets? and 40% to Redd. To form the partnership, Grey
a. Inventory at the lower of FIFO cost or market. originally contributed assets costing P30,000 with a fair
b. Inventory at the lower of weighted-average cost or value of P60,000 on January 2, 2010, and Redd
market. contributed P20,000 cash. Drawings by the partners
c. Equipment at each proprietor’s carrying amount. during 2010 totaled P3, 000 by Grey an P9,000 by
d. Equipment at fair value. Redd. The partnership net income in 2010 was
P25,000.
6. One of the following is not a characteristic of
contract of partnership. Under the goodwill method, what is Redd’s initial
a. Real, in that the partners must deliver their capital balance in the partnership? (Bonus
contributions in order for the partnership contract to Question Only)
be perfected
b. Principal, because it can stand by itself a. 20,000
c. Preparatory, because it is a means by which other b. 25,000
contracts will be entered into
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c. 40,000 A. The capital account of GT will be credited in the
d. 60,000 amount of P2,250
B. The total agreed capital of the old partners is
11.Using the information in No. 10, under the P18,000 greater than their contributed capital
bonus method, what is the amount of bonus? C. The capital balance of EZ amount to P119,250
a. 20,000 bonus to Grey D. Cash will be debited in the amount of P40,800
b. 20,000 bonus to Redd 15.On June 1, 2013, AZ invited MG to join him in his
c. 40,000 bonus to Grey business. MG agreed provided that AZ will adjust the
d. 40,000 bonus to Redd accumulated depreciation of his equipment account to
12. On May 1, 2010, the business assets, and liabilities a certain amount, and will recognize additional
of John and Paul appear below accrued expenses of P40,000. After that, MG is to
(John and Paul respectively): invest additional pieces of equipment make her
Cash P11,000; P22,354 interest equal to 45%.
Accounts Receivable P234,536; P567,890 If the capital balances of AZ before and after
Inventories P120,035; P260,102 adjustment were 556,00 and 484,000
Land P603,000; 0 respectively, what is the effect in the carrying
Building P428,267; 0 value of the equipment as a result of the
Furniture & Fixture P50,345; P34,789 admission of MG?
Other Assets P2,000; P3,600 A. 364,000
Total P1,020,916 ; P1,317, 002 B. (32,000)
Accounts Payable P178,940; P243,650 C. 396,000
Notes Payable P200,000; P345,000 D. (324,000)
John, Capital P641, 976 16. TM and SJ, having capital balances of P980,000 and
Paul, Capital P728,352 P525,000 respectively, decided to admit GD into the
Total P 1, 020, 916; P1, 317, 002 partnership.
John and Paul agreed to form a partnership contributing If TM and SJ share profit in proportion of 3;1
their respective assets and equities subject to the respectively, and SJ's capital balance after GD's
following adjustments: investment is P589,750, how much was invested
a. Accounts receivable of P20, 000 in John’s books and by GD?
P35, 000 in Paul’s are uncollectible. A. P848,750
b. Inventories of P5, 500 and P6, 700 are worthless in B. P1,174,250
John’s and Paul’s respective books. C. P588,000
c. Other assets of P2, 000 and P3, 600 in John’s and D. P847,000
Paul’s respective books are to be written off.
17. In AD partnership, Allen's capital is P140,000 and
The capital accounts of John and Paul, Daniel's capital is P40,000 and they share a net income
respectively, after the adjustments will be: ratio of 3:1 respectively.
a. 614, 476; 683, 052 b. 640, 876;712, 345 They decided to admit David in the partnership.
c. 615, 942; 717, 894 d. 613,576; 683, 350 What amount will David invest to give him 1/5
13. Based on No. 12, how much assets does the interest in the partnership if no bonus/goodwill
partnership have? is recorded?
a. 2, 317, 918 A.P60,000
b. 2, 237, 918 B.P36,000
c. 2, 265, 118 C.P50,000
d. 2, 365, 218 D.P45,000
14. LF, EZ, and GT are partners with capital balances of 18. ZEE acquired the assets (net of liabilities) of
P67,200, P108,000 and P38,000 respectively, sharing partner BEE in exchange for cash. The acquisition price
profits and losses in the ratio of 2:5:1. SG is admitted exceeds the fair value of the net assets acquired.
as a new partner bringing with him expertise and is How should ZEE determine the amount to be
to invest cash for a 15% interest in the partnership reported for the plant and equipment, and for
considering the transfer of capital from him of P18,000 long-term debt of the acquired debt of partner
upon his admission. BEE?
Upon admission of SG, which of the following
statements is false?
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A. Plant and equipment: Fair value ; Long-term debt: 19. A and B agreed to form a partnership, and agreed
BEE's carrying amount to divide initial capital equally, even though a
B. Plant and equipment: Fair value ; Long-term debt: contributed 100,000 and B contributed 84,000 in
Fair value identifiable assets.
C. Plant and equipment: BEE's carrying amount; Long- Under bonus method, to amount should be
term debt: Fair Value debited on B’s Capital?
D. Plant and equipment: BEE's carrying amount; Long-
term debt: BEE's carrying amount A.16,000 B.8,000C.46,000 D.None
of the Above

20-21.Bonnie and Clyde enters into a partnership agreement in which Bonnie is to have 55% interest in the
partnership and 35% in the profits and losses, while Clyde will have 45% interest in the partnership and 65% in the
profits and losses.
Bonnie contributed the following:
Cost; Fair value
Building 235,000; 255,000
Equipment 168,000; 156,000
Land 500,000 ;525,000
The building and the equipment has a mortgage of 50,000 and 35,000 respectively. Clyde is to contribute 150,000
cash and a equipment. The partners agreed that only the building mortgage will be assumed by the partnership.
20. How much is the fair market value of the equipment which Clyde contributed?
A. 615,818 B. 989,143 C. 546,273 D. 574,909
21. How much is the total asset of the partnership upon formation?
A. 1,892,143 B. 1,701,818 C. 1,660,909 D. 1,632,273

22. On May 1, 2015, Cat and Meow formed a partnership and agreed to share profits and losses in the ratio of 3:7,
respectively. Cat contributed a parcel of land that cost her P10,000. Meow contributed P40,000 cash. The land has a
fair value of P15,000. Cat insisted that the value of land should be P18,000. The partners agreed to value the land at
P18,000.
What amount should be recorded in Cat’s capital account on formation of the new partnership?
a.P18,000 b. P17,400 c. P15,000 d. P10,000

23. On July 1, Manny and Marry formed a partnership, agreeing to share profits and losses in the ratio of 4:6,
respectively. Manny contributed a parcel of land that cost him P25,000. Marry contributed P50,000 cash. The land
was sold for P60,000 on July 1, four hours after formation of the partnership.
How much should be recorded in Marry’s capital account on the partnership formation?
a. P10,000 b. P25,000 c. P50,000 d. P60,000

a. On March 1, 2015, PP and QQ decide to combine their businesses and form a partnership. Their
b. balance sheets on March1, before adjustments, showed the following:
c. PP QQ
d. Cash P 9,000 P 3,750
e. Accounts Receivable 18,500 13,500
f. Inventories 30,000 19,500
g. Furniture and Fixtures (net) 30,000 9,000
h. OfÏce Equipment (net) 11,500 2,750
i. Prepaid Expenses 6,375 3,000
j. Total P 105,375 P51,500
k. Accounts Payable P45,750 P18,000
l. Capital 59,625 33,500
m. Total P105,375 P51,500
n. They agreed to have the following items recorded in their books:
o. On March 1, 2015, PP and QQ decide to combine their businesses and form a partnership. Their
p. balance sheets on March1, before adjustments, showed the following:
q. PP QQ
r. Cash P 9,000 P 3,750
s. Accounts Receivable 18,500 13,500
t. Inventories 30,000 19,500
u. Furniture and Fixtures (net) 30,000 9,000
v. OfÏce Equipment (net) 11,500 2,750
w. Prepaid Expenses 6,375 3,000
x. Total P 105,375 P51,500
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 y. Accounts Payable P45,750 P18,000
z. Capital 59,625 33,500
aa. Total P105,375 P51,500
bb. They agreed to have the following items recorded in their books:
cc. On March 1, 2015, PP and QQ decide to combine their businesses and form a partnership. Their
dd. balance sheets on March1, before adjustments, showed the following:
ee. PP QQ
ff. Cash P 9,000 P 3,750
gg. Accounts Receivable 18,500 13,500
hh. Inventories 30,000 19,500
ii. Furniture and Fixtures (net) 30,000 9,000
jj. OfÏce Equipment (net) 11,500 2,750
kk. Prepaid Expenses 6,375 3,000
ll. Total P 105,375 P51,500
mm. Accounts Payable P45,750 P18,000
nn. Capital 59,625 33,500
oo. Total P105,375 P51,500
pp. They agreed to have the following items recorded in their books:
qq. On March 1, 2015, PP and QQ decide to combine their businesses and form a partnership. Their
rr. balance sheets on March1, before adjustments, showed the following:
ss. PP QQ
tt. Cash P 9,000 P 3,750
uu. Accounts Receivable 18,500 13,500
vv. Inventories 30,000 19,500
ww.Furniture and Fixtures (net) 30,000 9,000
xx. OfÏce Equipment (net) 11,500 2,750
yy. Prepaid Expenses 6,375 3,000
zz. Total P 105,375 P51,500
aaa. Accounts Payable P45,750 P18,000
bbb. Capital 59,625 33,500
ccc. Total P105,375 P51,500
ddd. They agreed to have the following items recorded in their books:
24. On June 1, 2015, T, U and V formed a partnership by combining their separate business proprietorships. T
contributed cash of ₱

. U contributed property with a ₱80,000 carrying amount, a ₱95,000 original cost, and ₱120,000 fair
value. The partnership accepted the responsibility for the ₱55,500 mortgage attached to the property. V
contributed equipment with a ₱65,000 carrying amount, a ₱90,000 original cost, and ₱78,000 fair value. The
partnership agreement specifies that P & L are to be shared equally but is silent regarding capital contributions.
Which partner has the largest capital balance at the beginning of the partnership?
a. T b. U c. V d. All capital account balances are equal

25. A partner’s withdrawal of assets from a limited liability partnership that is considered a permanent reduction in
that partner’s equity is debited to the partner’s:
a. Drawing account b. Retained earnings account c. Capital account d. Loan receivable account

26. On April 30, year 1, Algee, Belger, and Ceda formed a partnership by combining their separate
business proprietorships. Algee contributed cash of P50,000. Belger contributed property with a P36,000
carrying amount, a 40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for the
P35,000 mortgage attached to the property. Ceda contributed equipment with a P30,000 carrying amount, a P75,000
original cost, and P55,000 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, year 1capital account balance?
a. Algee. b. Belger. c. Ceda. d. All capital account balances are equal.

27. Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel contributed
P100,000 and Carr contributed P84,000 in identifiable assets. Under the bonus approach to adjust the capital accounts,
Carr’s unidentifiable asset should be debited for :
a. P46,000 b. P16,000 c. P 8,000 d. P0

28. Partnership capital and drawing accounts are similar to the corporate
A. Paid-in capital, retained earnings, and dividend accounts
B. Retained earnings account.
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C. Paid-in capital and retained earnings accounts.
D. Preferred and common stock accounts

29.For individuals who were previously sole proprietors form a partnership. Each partner contributes inventory and
equipment for use by the partnership. What basis should the partnership use to record the contributed assets?
A. Inventory at the lower of FIFO cost or market.
B. Inventory at the lower of weighted-average cost or market.
C. Equipment at each proprietor’s carrying amount
D. Equipment at fair value.

30.The advantages of the partnership form of business organization, compared to corporations, include
a. Single taxation b. Ease of raising capital c. Mutual Agency d. Limted
Liability