1 .

Assets contributed by the partners to a partnership business should be initially measured in

the partnership books at
a. the carrying amount to the contributing partner.
b. fair value.
c. current selling price.
d. whatever amount the contributing partner can think of.
2 . Mr. X and Ms. Y formed a partnership, each contributing P1M in cash. The partners agreed
that Mr. X's capital account is to be credited for P.8M. Which of the following statements is
correct?
a. The credit to Ms. Y's capital account is P1.2M.
b. Mr. X is given a bonus of P.2M.
c. The stipulation is void
d. Mr. X must be ugly, while Ms. Y is beautiful.

3. You and I formed a partnership. The fair value of my contribution is P100,000 while the fair
value of your contribution is P50,000. However, since you will be contributing an expertise to
the partnership, we have agreed to value that expertise, Accordingly, we have agreed that our
respective capital accounts will be credited for equal amounts. Which of the following
statements is correct?
a. Our agreement results to a bonus of P25,000 which relates to the valuation of your
expertise. Accordingly, we will record a goodwill of P25,000.
b. Our agreement results to a bonus of P25,000. In accordance with our agreement, I shall
pay you P25,000. Our asset contributions will be debited at their fair values of P100,000
and P50,000, respectively.
c. Our agreement results to a bonus of P25,000 which is treated as a capital adjustment -
an increase to your capital account and a decrease to my capital account. My asset
contribution will be debited at P75,000 while your asset contribution will be debited at
P75,000.
d. Our agreement results t o a bonus of P25,000 which is treated a s a capital adjustment -
a n increase to your capital account and a decrease to my capital account. Our asset
contributions will be debited a t their fair values of P100,000 and P50,000, respectively.

4. Under the bonus method,

a. total partnership capital is equal to the fair value of the partners' net contributions to
the partnership.
b. total partnership capital is less than the fair value of the partners' net contributions to
the partnership.
c. total partnership capital is greater than the fair value of partners' the net contributions
to the partnership.
d. total partnership capital is less than the fair value of the partners' net contributions to
the partnership, if the bonus is given to the incoming partner.

5. Transactions between and among the partners are

a. recorded in the partnership books.
 b. not recorded in the partnership books.
c. either a o r b
d. neither a nor b

6. A and B's partnership agreement stipulates that partnership profits shall be shared between
them on a 70:30 basis. However, the agreement is silent regarding the sharing of losses. If the
partnership incurs loss, how would the loss be distributed to A and B?
a. 70:30
b. equally
c. based on their contributions
d. all to A, none to B

7 . According to the Philippine Civil Code, in the absence of a stipulation on the sharing of
profits or losses, partnership profits and losses shall be shared by the partners
a. equally.
b. in accordance with the partnership agreement.
c. in proportion to what the partners may have contributed.
d. in proportion to what the partners may have contributed, but the industrial partner shall
not be liable for the losses.

8. Which of the following is not considered a legitimate expense of a partnership?

a. Supplies used in the partners' offices.
b. Depreciation on assets contributed to the partnership by partners.
c. Salaries for management hired to run the business.
d. Interest paid to partners based on the amount of invested capital.

9. When allocating a partnership loss to the partners, which of the following items is provided
first?
a. salaries
b. bonuses to partners
c. interest on the capital contribution of an industrial partner
d. all of these

10. Which of the following is least likely considered when distributing profits or losses to the
partners?
a. Interest on the loan of a partner from the business
b. Salary allowances to one or more partners
c. Bonus to the managing partner
d. Interest on the capital balance of one or more partners

11. Which of the following statements best describe the term dissolution as used in the
accounting for partnership businesses?
a. The withdrawal of a partner from a partnership.
 b. The winding up of business affairs
c. The end of an entity's going concern
d. The change in the relation of the partners

12 . This transaction will most likely be recorded in the partnership's books as a transfer within
equity.
a. A invests P50,000 cash for a 20% interest in the partnership.
b. C retires and the partnership pays C P80,000 a s full settlement of his capital balance.
c. E withdraws from the partnership when he was bought out by B and F.
d. G dies and his wife receives settlement of G 's interest from the partnership.

13 . Which of the following would cause an increase or decrease in the total capital of a
partnership?
a. An incoming partner acquires partnership interest from an existing partner.
b. An incoming partner acquires interest from two or more existing partners.
c. A partner acquires an outgoing partner's interest at an amount higher than the latter's
capital balance.
d. The partnership settles the account of a retiring partner.

14. In the A&B partnership, A and B had a capital ratio of 3:1 and a profit and loss ratio of 2:1,
respectively. The bonus method was used to record C's admittance as a new partner. What ratio
would be used to allocate, to A and B, the excess of C's contribution over the amount credited
to C's capital account?
a. A and B's new relative capital ratio
b. A and B's new relative capital profit and loss ratio
c. A and B's old capital ratio
d. A and B's old profit and loss ratio

15 . Allen retired from the partnership of Allen, Beck, and Chale. Allen's cash settlement from
the partnership was based on new goodwill determined at the date of retirement plus the
carrying amount of the other net assets. As a consequence of the settlement, the capital
accounts of Beck and Chale were decreased. In accounting for Allen's withdrawal, the
partnership could have used the

Bonus method Goodwill method Bonus method Goodwill method

a. No Yes c. Yes Yes
b. No No d. Yes No
Problems (2pts each)

Triangle, Square and Round formed a partnership. Triangle contributed cash o f P80,000. Square
contributed equipment with historical cost of P700,000, carrying amount of P180,000, and fair
value of P90,000. Round contributed building with historical cost of P1,000,000, carrying
amount of P480,000 and fair value of P690,000. The partnership will assume the unpaid
mortgage of P580,000 on the building. Which partner has the least capital account balance on
partnership formation?
a . Triangle c. Round
b . Square d. None, all are equal

On January 1, 20x1, Mr. Ann and Ms. Buoy agreed to form a partnership. The partners'
contributions are listed below:
Mr. Ann Ms. Buoy
Cash 50,000 120,000
Accounts receivable 360,000 1,080,000
Inventories 216,000 360,000
Land 1,080,000
Building 900,000
Equipment 90,000 90,000
Accounts payable 336,000 450,000
Capital 1,460,000 2,100,000
The partners agreed to the following:
a. The recoverable amounts of the partners' respective accounts receivable are P300,000 for Mr.
Ann and P760,000 for Ms. Buoy.
b . The inventory contributed by Ms. Buoy includes obsolete items with a recorded cost of
P20,000.
c . The land has an attached mortgage of P180,000, which the partnership will assume.
d. The equipment contributed by Ms. Buoy has a fair value of P130,000.
e . Mr. Ann has an unrecorded accounts payable of P100,000. The partnership assumes the
obligation of settling that account.

How much is the initial capital of Ms. Buoy?

a . 1,120,000
b . 1,800,000
c. 1,920,000
d. 2,920,000