UNIVERSITY OF THE EAST – SEEDS OF THE NATIONS

CALOOCAN
2019-2020

TRUE OR FALSE

1. In general partnership, each partner is individually liable to creditors for debts incurred by the
partnership, to the extent of each partner’s capital balance.
2. A disadvantage of partnership is the mutual agency of all partners.
3. A partnership requires only an agreement between two or more persons to organize.
4. Each partner may withdraw the assets he or she contributed to the partnership at any time
5. When compared to a corporation, one of the major disadvantages of a partnership is its
limited life.
6. When compared to a corporation, one of the major advantages of a partnership is its relative
ease of formation.
7. As an advantage of a partnership form of business is that each partner’s potential loss is
limited to that partner’s investment in the partnership.
8. Each partner has a separate capital and withdrawal account
9. The chart of accounts for a partnership, with the exception of drawing and capital accounts,
does not differ from the chart of accounts of a sole proprietorship
10. When a partner invests non-cash assets in a partnership, the assets are recorded at the
partner’s book value.
11. Accounts receivable contributed to the partnership are recorded at their face value
12. A new partner contributes accounts receivable to the partnership which appear in the ledger
of his sole proprietorship at P20,500 and there was an allowance for doubtful accounts of
P750. If P600 of the accounts receivables are completely worthless, the partnership accounts
receivable should be debited for P19,900
13. If nothing is stated, partnership income is divided in proportion to the individual partner’s
capital balance
14. When a partner withdraws from the partnership, the partnership dissolves.

MULTIPLE CHOICES

1. The characteristic of a partnership that gives the authority to any partner to legally bind the
partnership and all other partners to business contracts is called
a. Unlimited liability b. Ease of formation
c. Mutual agency d. Dissolution

2. When limited partnership is formed

a. The partnership activities are limited b. All partners have limited liability
c. Some have limited liability d. None have limited liability
3. A partner invests equipment to the partnership. The equipment was purchased for P1,500,000
two years ago. The records show accumulated depreciation of P250,000. Similar equipment can
be purchased for P1,200,000. The partners believe that the equipment is valued at P1,100,000.
What should be the capital credit of the partner?
a. 1,500,000 b. 1,250,000 c. 1,200,000 d. 1,100,000

4. Elsa and Perla formed a partnership. Elsa invests P300,000 in cash for her 60% interest in the
capital and profits of the business. Perla contributes land that has an original cost of P40,000
and a fair value of P70,000 and a building that has a fair value of P90,000. The building is subject
to a P40,000 mortgage that the partnership will assume. What amount of cash should Perla
contribute?
a. 200,000 b. 120,000 c. 80,000 d. 300,000

5. Henry Jones contributed equipment, inventory, and P44,000 cash in the partnership. The
equipment had a book value of P35,000 and a market value of P28,000. The inventory had a
book value of P25,000, but only had a market value of P12,000 due to obsolescence. The
partnership also assumed P15,000 note payable owed by Henry that was originally used to
purchase the equipment. What amount should Henry’c capital account be recorded?
a. 104,000 b. 89,000 c. 69,000 d. 84,000

6. If the partnership agreement does not specify how income is to be allocated, profits should be
allocated
a. Equally
b. In proportion to the weighted-average of capital invested during the period
c. Equitably so that partners are compensated for the time and effort expended on
behalf of the partnership
d. In accordance with an established ratio

7. One who takes an active part in the management of the firm but whose connection with
partnership is concealed or unknown to the public
a. Dormant partner b. Nominal partner
c. Ostensible partner d. None of these
8. On March 1, 2019, Pam and Pen formed a partnership with each contributing the following:
PAM PEN
Cash P300,000 P700,000
Machinery and Equipment P250,000 P750,000
Building --- P2,250,000
Furniture and fixtures P100,000 ---

The building is subject to mortgage loan of P800,000 which is to be assumed by the

partnership agreement provides that Pam and Pen share profits and losses 30% and 70%
respectively. On March 1, 2019 the balance in Pen’s capital should be:
a. 3,700,000 b. 3,140,000 c. 3,050,000 d. 2,900,000

9. On June 1, 2019, May and Nora formed a partnership. May is to invest assets at fair values. She is
to contribute sufficient cash to bring her capital to P210,000, which is 70% of the total capital of
the partnership. Details regarding the book values of May’s business assets and liabilities and
their corresponding fair values are:
BOOK VALUES FAIR VALUES
Accounts Receivable P32,000 P70,000
Inventory P25,000 P20,000
Equipment --- P22,000
Notes Payable P10,000 ---

How much cash does May need to invest?

a. 108,000 b. 163,000 c. 143,000 d. 98,000

10. CC admits DD as a partner in a business. Accounts in the ledger for CC on November 30, 2019
just before the admission of DD, show the following balances:
Cash P6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Accounts Payable 8,000
CC, Capital 33,000
It is agreed that for the purposes of establishing CC’s interest, the following adjustments
should be made:
 An allowance for doubtful accounts of 3% of accounts receivable is to be established
 The merchandise inventory is to be valued at P23,000
 Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized

DD is to invest sufficient cash to obtain 1/3 interest in the partnership

Compute for: (1.) CC’s adjusted capital before the admission of DD; and (2.) the amount of cash
invested by DD:
a. (1) 35,437 ; and (2) 11,971 b. (1.) 36,374 ; and (2.) 18,487
c. (1.) 35,374 ; and (2.) 17,687 d. (1.) 28,174 ; and (2.) 14,087
11. On March 1, 2019, Phil and Queen decide to combine their businesses and form a partnership.
Their balance sheets on March 1, before adjustments, showed the following:
PHIL QUEEN
Cash 9,000 3,750
Accounts Receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and fixtures (net) 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid expenses 6,735 3,000
TOTAL 105,375 51,500
Accounts Payable 45,750 18,000
Capital 59,625 33,000
TOTAL 105,375 51,500

They agreed to have the following items recorded in their books:

 Provide 2% allowance for doubtful accounts
 Phil’s furniture and fixtures should be P31,000, while Queen’s office equipment under-
depreciated by 250
 Rent expense incurred previously by Phil was not yet recorder amounting to P1,000,
while salary expenses incurred by Queen was not also recorded amounting to P800
 The fair market value of inventory amounted to:
For Phil 29,500
For Queen 21,000

Compute the net (debit) credit adjustment to Phil and Queen:

a. 2,870 ; 2,820 b. (2,870) ; (2,820)
c. (870) ; 180 d. 870 ; (180)

12. Compute the total liabilities after the formation:

a. 61,950 b. 63,750 c. 65,550 d. 63,950

13. Compute the total assets after the formation:

a. 157,985 b. 156,875 c. 160,765 d. 152,985
14. On January 1, 2019, Jerome, Ferdy and Chelle decided to form a partnership. Jerome, a sole
proprietor, will transfer to the partnership his net assets, excluding cash. Ferdy will contribute
cash in amount equal to one and a half times the investment of Jerome. Chelle will contribute
a piece of land with an agreed value of P1,800,000 subject to a mortgage of P300,000 to be
assumed by the partnership.
The financial position of Jerome is shown below:
ASSETS:
Cash 360,000
Accounts Receivable 840,000
Allowance for Doubtful Accounts 90,000
Merchandise Inventory 1,200,000
Furniture and Equipment 1,050,000
Accumulated Depreciation 210,000
TOTAL ASSETS: 3,150,000

LIABILITIES AND EQUITY:

Accounts Payable 450,000
Jerome, Capital 2,700,000
TOTAL LIABILITIES AND EQUITY: 3,150,000

The Article of Co-Partnership executed for the purpose calls for adjustments to the assets as
follows:
a. The allowance for doubtful accounts should be increased by P150,000
b. The Inventory should be valued at P1,000,000 only
c. The furniture and equipment are underdepreciated by P240,000
d. The new partnership is to credit Jerome with a capital of P2,000,000 and Ferdy with
P3,000,000 The excess will be given to Chelle

How much is the actual contribution of Ferdy?

a. 1,920,000 b. 3,840,000 c. 2,300,000 d. 3,000,000

15. How much is the capital credited to Chelle?

a. 1,920,000 b. 3,950,000 c. 2,633,333 d. 2,900,000

16 Considering Will’s capital contribution to be P15,000,000, Will, Efren and Carla agreed their
. capital ratio to be 4:5:3
How much should be credited to Efren’s capital?
a. 18,750,000 b. 6,250,000 c. 108,000,000 d. 36,000,000

17. How much should be credited to Carla’s capital?

a. 60,000,000 b. 11,250,000 c. 3,750,000 d. 180,000,000
18. Sabina contributed the net assets of her sole proprietorship amounting to P120,000 to the
partnership, STI Partnership. Sabina, Therese and Irish agreed for a total capital contribution of
P900,000 with a proportion of 2:5:3 respectively. Irish contributed twice Sabina’s actual
contribution while Therese contributed the remaining amount needed to meet the total agreed
capital contribution.
How much is the actual contributed capital of Therese?
a. 540,000 b. 240,000 c. 450,000 d. 90,000

19. How much is the actual contribution of Irish?

a. 270,000 b. 30,000 c. 450,000 d. 240,000

20. How much is the contributed capital credited to Sabina?

a. 120,000 b. 180,000 c. 60,000 d. 240,000

21. How much is the contributed capital credited to Therese?

a. 450,000 b. 90,000 c. 540,000 d. 270,000

22. How much is the contributed capital credited to Irish?

a. 270,000 b. 240,000 c. 450,000 d. 540,000

23. How much bonus does Sabina receive from Therese?

a. 90,000 b. 30,000 c. 60,000 d. 0

24. How much bonus does Sabina receive from Irish?

a. 90,000 b. 30,000 c. 60,000 d. 0

25. How much bonus does Therese receive from Sabina?

a. 90,000 b. 30,000 c. 60,000 d. 0

26. How much bonus does Therese receive from Irish?

a. 90,000 b. 30,000 c. 60,000 d. 0

27. How much bonus does Irish receive from Sabina?

a. 90,000 b. 30,000 c. 60,000 d. 0

28. How much bonus does Irish receive from Therese?

a. 90,000 b. 30,000 c. 60,000 d. 0