DATA CENTER COLLEGE OF THE PHILIPPINES

Partnership and Corporation Accounting

QUIZ #1
Partnership Formation

NAME: _________________________________ DATE: _______________ SCORE: _______

I. TRUE or FALSE: Write true if the statement is correct. Otherwise, write false.

1. In a partnership, there are many capital accounts as there are partners.

2. A simple journal entry, which has one debit and one credit, is prepared when industry is
contributed into the partnership.
3. Non cash assets contributed in the formation of partnership are recorded at their agreed
value, in the absence of fair market value.
4. Silent partners take active part in the management of the business but whose
connection to the business is unknown to the public.
5. The unlimited liability of the partners makes it reliable in the point of view of creditors.
6. A partnership could acquire properties in its own name
7. Limited partnership should always have at least one general partner
8. Cash contribution should be recorded at their face value
9. All partners in a limited liability are liable only to the extent of their capital contribution
10. Generally, it is easier to form a corporation than a partnership

II. PROBLEM SOLVING: Solve for the amounts required. Support all answers with
computations in GOOD FORM. Write your final answers in the spaces provided.

1. Jasmine invested cash of 150,000 while Rose invested inventories worth 90,000 and
accounts payable of 10,000 to be assumed by the partnership. How much is the total
partnership capital upon partnership formation? ________________

2. Cjay and Jerome formed a partnership wherein Cjay contributed a parcel of land with an
acquisition cost of 250,000. Jerome invested 300,000 cash. The fair market value of the
land upon formation is 280,000. How much is the capital balance of Cjay upon
formation? __________

3. Jacob, Joshua and James formed a partnership on January 1, 2014. Jacob will
contribute land with a fair market value of 190,000 while Joshua will contribute
inventories with agreed value of 120,000. James is to invest enough cash to give him 3/5
interest in the partnership. How much cash should James invest?
___________________

4. Oliver and Roy organized a partnership, Oliver is a sole proprietorship. His books
contain the following items:
Cash 75,000
Inventories 280,000
Accounts Payable 40,000

The assets will be invested into the partnership at the values indicated above. Oliver will
pay the accounts payable personally. How much is the capital of Oliver immediately after
the formation? _____________________

5. Erich and Kaye organized a partnership, Erich is a sole proprietorship. She invested her
assets with the following costs:
Cash 15,000
Accounts Receivable 25,000
Allowance for Bad Debts 2,500
Equipment 250,000
 They agreed that the allowance should be 15% of the accounts receivable. Kaye
accepted the values of the other assets. How much is the capital of Erich immediately
after partnership formation? ____________________

6-7

On March 1, 2014, Lupisan and Ballada decided to combine their businesses and form a
partnership. Their balance sheet on March 1, before adjustments, showed the following:

Lupisan Ballada
Cash 9,000 3, 750
Inventories 30,000 19,500
Furnitures and Fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid Expense 6, 375 3,000
Accounts Payable 45, 750 18,000
Capital ? ?

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

a. Lupisan’s Furnitire and fixtures should be 45,000, while Ballada’s office
equipment is over depreciated by 1,000
b. Rent expense incurred previously by Lupisan was not yet recorded
amounting to 2,000, while salary expense incurred by Ballada was not also
recorded amounting to 1,800.
c. The fair market value of inventory amounted to:
For Lupisan 29,000
For Ballada 21,500

6. How much is the capital credited to Lupisan? ____________

7. Refer to the previous no. How much is the total partnership capital after formation?
___________

8. Dock and Lock formed a partnership. Dock contributed cash amounting to 170,000. Lock
contributed land with a fair market value of 850,000 subject to a mortgage of 250,000,
which is assumed by the partnership. The total asset of the partnership after formation
is? ____________