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Answer Key Accounting
Answer Key Accounting
1. When the investment of the new partner exceeds the new partners’ initial capital balance and goodwill is not recorded,
who will receive the bonus?
a. new partner c. old and new partners in their new profit and loss ratio
b. old partners in their old profit and loss ratio d. old partners in their new profit and loss ratio
2. When a partner retires and receives in cash less than his capital balance, how should the difference be treated?
a. The difference should be credited to all partners in their profit and loss ratio.
b. The difference should be debited to all partners in their profit and loss ratio.
c. The difference should be credited to the remaining partners in their remaining profit and loss ratio.
d. The difference should be debited to the remaining partners in their remaining profit and loss ratio.
3. Which of the following condition does not constitutes a legal dissolution of a partnership?
a. Death of a partner c. Retirement of a partner
b. Admission of a partner d. Additional investment of a partner
6. The following transactions will affect the balance of the partnership capital except
a. retirement of a partner by settlement equal to his interest
b. the partnership generates net income for the year
c. admission by purchase without implied goodwill, but with bonus
d. permanent withdrawal by partners
7. Which of the following is not correct with regard to the admission of new partner?
a. admission of new partner needs consent of each of the old partners
b. admission by purchase of interest of one of existing partners need not have the consent of remaining partners
c. admission of new partner by direct investment in the partnership must have the consent of all existing partners
d. admission of new partner either by purchase or by direct investment in the partnership will result to dissolution of the
existing partnership
8. In admission of new partner by investment, if the total agreed capital is more than the total contributed capital there is
a. goodwill b. bonus c. goodwill and bonus d. error in recording
9. Which of the following describes the admission of new partner by investing an amount more than his capital credit under
bonus method?
Net assets Total Capital Net assets Total Capital
a. no effect Increase c. decrease Decrease
b. increase Increase d. no effect no effect
10. If bonus is traceable to the existing partners, it is allocated among them according to the
a. profit or loss agreement of the existing partnership c. capital ratio of existing partners
b. profit or loss agreement of the new partnership d. goodwill to incoming partner
11. When the partner withdraws from the partnership taking assets that represent more than his capital balance
a. no bonus result
b. the remaining partner received a bonus
c. the withdrawing partner received a bonus
d. the remaining partner owe the withdrawing partner the difference
14. Gut, Tum, and Nah are in a partnership. Nah decides to withdraw his partnership interest by selling it to Jud. Gut and
Tum agree to this. Gut and Tum’s capital accounts
a. will increase when Jud is admitted
b. will decrease when Jud is admitted
c. will not be affected when Jud is admitted
d. cannot be determined
15. Before the effectivity of dissolution, assets and liabilities should be at their
a. fair market values b. realizable values c. liquidating values d. historical values
Problem
16. The existing capital balances of old partners prior to admission of Xed are as follows:
Partners Ynjui Lynnie Joseph
Capital balances 100,000 200,000 300,000
P and L ratio 20% 30% 50%
Xed is to be admitted to the partnership by direct purchase of 20% each of the existing partners’ capital for P100,000. The
net assets of the partnership, right after the admission of Xed would be
a. P340,000 b. P300,000 c. P600,000 d. P480,000
17. RJheck bought Mark’s interest in the Rommar and Mark Partnership by purchasing the interest of Mark for P600,000.
The capital balances before the sale were P240,000 and P360,000, respectively and they share profits and losses equally.
What will be the amount in Rommar’s Capital account?
a. P360,000 b. P240,000 c. P480,000 d. P600,000
18. The following statement of financial position is for the partnership of Lee, Saud, and Kay, before the admission of Ayo:
Cash P20,000 Liabilities P50,000
Other assets 180,000 Lee, Capital (40%) 37,000
Saud, Capital (40%) 65,000
_________ Kay, Capital (20%) 48,000
Total P200,000 Total P200,000
If the assets are fairly valued and the partnership wishes to admit Ayo as a new one-sixth-interest partner without recording
goodwill or bonus, Ayo should contribute cash of:
a. P30,000 b. P33,333 c. P36,000 d. P40,000
19. Before the admission of Noy-Noy, the partnership Nathan and Nova reported a net asset of P180,000 which Nathan and
Nova partners contributed equally. Noy-Noy is admitted by investing P60,000 for capital credit of P80,000. Which of the
following is/are the effect under bonus method?
a. a decrease on the capital balances of the old partner amounting to P10,000 each
b. a bonus of P20,000 to the new partner
c. a balance of P80,000 capital to all of the partners
d. all of the above
20. Kenneth and JC are partners who share profits and losses in the ratio of 7:3, respectively. The capital balances of
Kenneth is P35,000 and JC is P30,000. They agreed to admit Jazel as a partner with a one-third interest in the capital and
profits and losses, upon an investment of P25,000. The new partnership will begin with a total capital of P90,000.
Immediately after Jazel’s admission, what are the capital balances of Kenneth, JC and Lory, respectively?
a. P30,000; P30,000; P30,000 c. P31,667; P28,333; P30,000
b. P31,500; P28,500; P30,000 d. P35,000; P30,000; P25,000
21. Javar and Jovit are partners who share profits and losses equally. Each has a capital balance of P40,000 and P50,000
respectively. They agree to admit Jo Anne as a new partner upon investment of land costing P50,000, but which is appraised
at P60,000. Profits and losses are to be shared equally after the admission of Jo Anne. What is the percentage of Jo Anne
interest in the firm?
a. 40% b. 33.71% c. 33% d. 35.71%
22. The existing capital balances Ariel, Greg and Cyruz prior to retirement of Ariel were as follows:
Partners Capital P and L ratio
Ariel P100,000 25%
Greg 200,000 35%
Cyruz 300,000 40%
Ariel retired from the partnership by selling his whole interest in the partnership to Greg and Cyruz for P120,000. This
retirement of Ariel will result to the total partnership’s assets and capital as:
Net Assets Total Capital Net Assets Total Capital
a. P480,000 P480,000 c. P600,000 P600,000
b. P500,000 P500,000 d. P720,000 P720,000
23. The existing capital balances of Abnoy, Bitoy and Caloy prior to retirement of Abnoy were as follows:
Partners Capital P and L ratio
Abnoy P150,000 20%
Bitoy 200,000 30%
Caloy 250,000 50%
Abnoy retired from the partnership by selling his all interest in the partnership to Doy for P120,000. this retirement of Abnoy
will result to the total partnership’s assets and capital as:
Net Assets Total Capital Net Assets Total Capital
a. P480,000 P480,000 c. P600,000 P600,000
b. P450,000 P450,000 d. P720,000 P720,000
24. On June 30, 2009, the statement of financial position for the partnership of Villon, Obrero and Bernal, together with their
respective profit and loss ratio, was shown as follows:
Assets, at cost P180,000
Villon, Loan P 9,000
Villon, Capital (20%) 42,000
Obrero, Capital (20%) 39,000
Bernal, Capital (60%) 90,000
180,000
Villon had decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of
P216,000 at June 30, 2009. It was agreed that the partnership would pay Villon P61,200 cash for his interest, including
Villon’s loan which is to be repaid in full. No goodwill is to be recorded. After Villon’s retirement, what is the balance of
Obrero’s Capital account?
a. P46,200 b. P36,450 c. P39,000 d. P45,450
25. Aimee, Warren and Janna were partners with capital balances on January 2, 2012 of P100,000, P150,000, and P200,000,
respectively. Their profit and loss ratio is 5:3:2. On July 1,2012, Aimee retires from the partnership. On the date of
retirement the partnership income is P140,000 and the partners agreed that inventories are to be revalued at P70,000 from its
original cost of P50,000. The partners agreed further to pay Aimee P195,000 in settlement of his interest. What are the
capital balances of the remaining partners after the retirement of Aimee?
Warren Janna Warren Janna
a. P189,000 P226,000 c. P207,000 P238,000
b. P198,000 P232,000 d. P220,000 P226,000
26. Ben and Ric are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2011, their respective
capital accounts were as follows: Ben – P60,000; Ric – P50,000. On that date, Lito was admitted as a partner with a one-
third interest in capital and profits for an investment of P40,000. The new partnership began with a total capital of P150,000.
Immediately after Lito’s admission, Ben’s capital account balance should be:
27. Perez contributed P24,000 and Cadiz contributed P48,000 to form partnership, and they agreed to share profits in the
ratio of their original capital contributions. During the first year of operations, they made a profit of P16,290; Perez
withdrew P5,050 and Cadiz P8,000. At the start of the following year, they agreed to admit Gomez into the partnership. He
was to receive a ¼ interest in the capital and profits upon payment of P30,000 to Perez and Cadiz, whose capital accounts
were to be reduced by transfers to Gomez’s capital account of amounts sufficient to bring them back to their original capital
ratio. How should the P30,000 paid by Gomez be divided between Perez and Cadiz?
28. The capital accounts of Ed, Nick, and Vic are presented below with their respective profit and loss ratio: Ed
P 139,000 (1/2)
29. Red, White and Blue are partners in a business, and in its profits at the respective ratio of 5:3:2. On Jan. 5, 2011, they
admit Green, who is to invest in the firm sufficient cash to have a 1/3 interest in the partnership capital and profits. The
following trial balance is taken from the original partnership’s records:
Debit Credit
Cash P100,000
Marketable securities 75,000
Accounts receivable 225,000
Accounts payable P80,000
Red, Capital 175,000
White, Capital 100,000
Blue, Capital __________ 45,000
P400,000 P400,000
The securities have a market value of P50,000, and an allowance of P25,000 was expected to cover collection losses on the
receivables. No other adjustments of the net assets are considered necessary; however, the three partners among themselves
must bring in their capital accounts into agreement with their interest in profits. What amount must be invested by Green?
30. Jazel and Reymond are partners who share profits and losses in the ratio of 6:4. On January 1, 2013, their capital
balances are 80,000 and 20,000 respectively. Jc is to be admitted for a 20 percent interest in the partnership by direct
purchase from the partners for 30,000. How much should the 30,000 cash be divided between Jazel and Reymond?