Southwestern University PHINMA

FIL 124 (Review on Partnership and Corporation Accounting)

FINAL EXAM

1. When property other than cash is invested in a partnership, at what amount

should the noncash property be credited to the contributing partner’s capital
account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.

2. Under the bonus method, any increase or decrease in the capital credit of a
partner is
a. deducted from or added to the capital credits of the other partners.
b. recognized as goodwill.
c. recognized as expense.
d. deferred and amortized to profit or loss.

3. A and B agreed to form a partnership. The contributions of the partners are as

follows:
A B
Cash 600,000
Inventory 20,000
Land 400,000
Equipment 50,000

Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related
accounts payable.
 The land has a fair value of ₱700,000 and is subject to a mortgage of ₱100,000.
However, B agreed to settle the mortgage personally.

How much are the adjusted capital contributions of A and B, respectively?

a. 670,000; 690,000
b. 670,000; 700,000
c. 660,000; 700,000
d. 670,000; 600,000

4. Mr. A, a partner in ABC Co., is deciding on whether to accept a salary of

₱16,000 or a salary of ₱10,000 plus a bonus of 10% of profit. The bonus shall be
computed on profit after salaries and bonus. Salaries of the other partners amount
to ₱40,000. What amount of profit would be necessary so that Mr. A would be
indifferent between the choices?
a. 60,000
b. 116,000
c. 110,000
d. 106,000

5. The partnership agreement of A, B and C stipulates the following:

 A, the managing partner, shall receive a bonus of 10% of profit.
 Each partner shall receive a 6% interest on average capital investments.
 Any remaining profit or loss shall be shared equally.

The average capital investments of the partners during the year were ₱80,000 for
A, ₱50,000 for B, and ₱30,000 for C. The partnership incurred loss of ₱20,000
during the period. How much was A’s share?
a. 3,607
b. 5,067
c. 6,867
d. 8,067

6. A and B formed a partnership on January 1, 20x1. Their contributions were

credited to their respective capital accounts as follows:
Capital accounts
A, Capital 150,000
B, Capital 250,000
400,000

During the year, the partnership earned profit of ₱1,000,000. There was no
contractual stipulation on how profits are to be shared by the partners. How much
is the share of B in the profit?
a. 375,000
b. 425,000
c. 565,000
d. 625,000

Use the following information for the next four questions:

The partners’ capital accounts in AB Partnership before the admission of a new
partner are as follows:
Capital accounts P/L ratio
A, Capital 200,000 60%
B, Capital 120,000 40%
320,000

7. C purchases 20% interest in the partnership from A and B for ₱280,000. How
much is the total equity of the partnership after the admission of C?
a. 320,000
b. 240,000
c. 440,000
d. 200,000

8. C invests ₱120,000 cash for a 20% interest in the net assets and profits of the
partnership. Under the bonus method, how much is the initial capital credit of C?
a. 88,000
b. 240,000
c. 264,000
d. 0

9. Before the admission of C, B decides to retire. A acquires B’s interest for

₱180,000. How much is the capital balance of A after the retirement of B but before
the admission of C?
a. 200,000
b. 280,000
c. 264,000
d. 320,000

10. Before the admission of C, B decides to retire. The partnership pays B

₱180,000 as settlement of his partnership interest. How much is the capital balance
of A after the retirement of B but before the admission of C?
a. 140,000
b. 200,000
c. 260,000
d. 320,000

11. The partnership of A, B and C is undergoing liquidation. Information on the

financial position of the partnership follows:
Cash 150,000
Other assets 450,000
Total 600,000
Liabilities 225,000
A, capital (40%) 60,000
B, capital (30%) 270,000
C, capital (30%) 45,000
Total 600,000
The other assets were realized at ₱300,000. None of the partners is solvent.
How much cash did the partners receive?
A B C
a. 15,000 205,000 5,000
b. 5,000 225,000 0
c. 25,000 185,000 15,000
d. 0 225,000 0

12. A and B decided to liquidate their partnership. The partnership’s records show
the following information:
Non-cash assets 120,000
Liabilities 15,000
A, capital (50%) 60,000
B, capital (50%) 45,000
Total liabilities and equity 120,000
The assets were sold for ₱32,000 and A received ₱16,000 in the cash distribution to
the partners. How much did B receive?
a. 17,000
b. 16,000
c. 1,000
d. 0

13. ABC Partnership decided to liquidate. Information before the start of liquidation
is as follows:
Cash 50,000 Liabilities 375,000
Noncash assets 900,000 B, Loan 80,000
C, Loan 25,000
A, Capital (50%) 312,500
B, Capital (30%) 107,500
C, Capital (20%) 50,000
Total 950,000 Total Liab. & Equity 950,000
The noncash assets were sold for ₱400,000. C is the only solvent partner. How
much did B receive on the cash distribution to the partners?
a. 37,500
b. 28,125
c. 31,675
d. 0

14. The accounts of AB Partnership after its noncash assets were realized are as
follows:
Debit Credit
Cash 34,000
Accounts payable 25,000
Loan payable to A 9,000
A, Capital 8,000
B, Capital 8,000
In the settlement of the partners’ interest in the partnership, how much total cash
did the two partners receive?
a. 0
b. 1,000
c. 8,000
d. 9,000

15. A, B and C are partners. Their respective personal assets, personal liabilities
and partnership capital balances are as follows:
A B C
Personal assets 90,000 240,000 180,000
Personal liabilities 75,000 150,000 216,000
Capital balances 150,000 (96,000) 210,000

Which of the partners is personally insolvent?

a. A
b. B
c. C
d. B & C

16. Farewell Partnership is undergoing liquidation. Information on Farewell follows:

Cash 40,000
Accounts receivable 180,000
Receivable from B 10,000
Inventory 160,000
Equipment 310,000
Total 700,000

Accrued liabilities 250,000

Payable to A 20,000
A, Capital (60%) 240,000
B, Capital (40%) 190,000
Total 700,000

Information on the conversion of non-cash assets is as follows:

 Only 60% of the accounts receivable was collected; the balance is uncollectible.
 ₱50,000 was received for the entire inventory.
 The equipment was sold at its carrying amount.
 ₱10,000 Liquidation expenses were paid.

How much was the loss allocated to B in the determination of cash distributions to
the partners?
a. 76,800
b. 87,600
c. 115,200
d. 192,000

17. ABC Co. is undergoing liquidation. Information before the start of the
liquidation process is as follows:
Cash 10,000 Accounts payable 80,000
Accounts receivable 80,000 Payable to B 20,000
Receivable from A 10,000 A, Capital (50%) 250,000
 Inventory 180,000 B, Capital (30%) 150,000
Equipment, net 320,000 C, Capital (20%) 100,000
Total 600,000 Total Liab. & Equity 600,000
Which partner has the highest maximum loss absorption capacity?
a. Partner A
b. Partner B
c. Partner C
d. Partner D

18. These are liabilities that, although not secured by any asset, are mandated by
law to be paid first before any other unsecured liabilities.
a. Unsecured liabilities with priority
b. Fully secured creditors
c. Partially secured creditors
d. Unsecured liabilities without priority

19. Which of the following is excluded when computing for the total free assets?
a. excess of realizable value of assets pledged to fully secured creditors over the
expected net settlement amount of the fully secured liabilities.
b. total realizable value of assets not pledged as collateral security
c. realizable value of assets pledged to partially secured creditors
d. all of the above items are included

20. “Assets to be realized” is placed on which side of a statement of realization

and liquidation?
a. debit side, measured at realizable value
b. credit side, measured at book value
c. debit side, measured at book value
d. no side

21. A law that governs partnerships is

a. Philippine Constitution c. Corporation Code
b. Civil Code d. Accountancy Law

22. The accounting for partnerships differs from the accounting for sole
proprietorships, corporations and cooperatives in regard to the accounting for
a. assets c. equity
b. liabilities d. all of these

23. Which of the following partnership characteristics is a disadvantage?

a. unlimited liabilities c. voluntary association
b. ease of dissolution d. participation in partnership
income
24. All of the following are true for both general and limited partnerships except
a. both are easily dissolved
b. both must have at least one general partner
c. all partners are liable for all the debts of the firm
d. all partners have the right to participate in the profits of the business

25. Partnership capital and drawing accounts are similar to the corporate
a. retained earnings account
b. paid-in capital and retained earnings accounts
c. preferred and common stock account
d. paid-in capital, retained earnings account and dividends accounts

26. Statement 1: When an immovable property has been contributed, the contract
of partnership must be put in writing.
Statement 2: Failure to register the partnership contract with the SEC when
an immovable property has been contributed voids the formation of the
partnership.
a. Only the first statement is correct c. Both statements are
correct
b. Only the second statement is correct d. Neither statement is
correct
27. All of the following will dissolve the existence of the partnership except
a. admission of a new partner c. death of a partner
b. insolvency of a partner d. incurrence of losses

28. A partner who does not actively participates in the day-to-day activities of the
partnership and is not known to the public as partner is called a
a. silent partner c. dormant partner
b. secret partner d. nominal partner

29. The partners share in the partnership profits or losses in accordance with their
partnership agreement. If there is no stipulation on how the partners should share
in the profits or losses of the partnership,
a. they should share equally
b. they should let one of the partners decide unilaterally on how profits should be
divided among partners
c. their respective shares would be in proportion to their contributions
d. they should not share at all but donate their profits to the partnership

30. Which of the following best describes the nature of salary and interest allowances
in a partnership profit and loss sharing agreement?
a. a means of determining reasonable monthly withdrawals by each
partner
b. the amount upon which each partner will have to pay personal income
tax
 c. a means of distributing profit in relation to services rendered and
capital invested by partners
d. expenses of the business that should be deducted from revenue in
determining profit

31. If the partnership agreement does not specify how profit or loss is to be allocated,
profit or loss should be allocated
a. equally
b. in accordance with their capital contribution
c. in proportion to the average of capital invested during the period
d. equitably so that partners are well compensated for their time and
effort

32. The following statements are correct except

a. A corporation enjoys the right of succession
b. A corporation possesses the powers and attributes prescribed by its
incorporators
c. A corporation is an artificial being with a distinct personality
d. A corporation has a legal life of 50 years which can be extended for
another 50 years

33. Statement 1: The admission of a new shareholder in the corporation results in

the dissolution of the old corporation and, at the same time, of the creation of new
corporation.
Statement 2: The liability of a shareholder is limited to his/her personal
properties, except if the articles of incorporation expressly provide otherwise.
a. Only the first statement is correct c. Both statements are
correct
b. Only the second statement is correct d. Neither statement is
correct

34. The following statements are true except

a. A public corporation is a stock corporation performing governmental functions
b. A private corporation is formed and organized by private individuals to
accomplish the purpose specified in the articles of incorporation
c. A private corporation can be a stock or non-stock corporation
d. A stock corporation is a private corporation in all instances

35. Determine the incorrect statement(s).

Statement 1: Shares of stock cannot be transferred without the consent of the
other shareholders
Statement 2: Shares without par value may be issued for a consideration less
than P5.00 per share
 Statement 3: Preference shares of stock may be issued with no-par value.
Statement 4: A certificate of stock evidencing the ownership over shares of
stocks are cab be issued until the full collection of subscription
a. 1, 2, 3 and 4 c. Only 1 and 3
b. 1, 3 and 4 d. Only 4

36. A corporation is being organized with an authorized share capital of P50,000.

How much of this P50,000 should be subscribed and how much must be actually
paid?
Amount Subscribed Amount Paid
a. P12,500 P3,125
b. 10,000 2,500
c. 25,000 6,250
d. 12,500 5,000

37. No par value shares cannot be issued

a. with preference as to assets or as to dividends
b. without being fully paid
c. by banks, trust companies, insurance companies, public utilities and building
and loan association
d. all of the above

38. Outstanding shares are the

a. number of shares that have been issued to shareholders
b. total number of shares that can be issued by the company at any
time
c. number of shares that are owned by shareholders at the balance sheet
date
d. number of shares the company has repurchased

39. XYZ, Inc. has issued 200,000 shares of P1 par value ordinary shares at P12. If
it repurchases 13,000 shares during 2019 at P14
a. profit would decrease by P26,000
b. shareholders’ equity would decrease by P182,000
c. shareholders’ equity would decrease by P26,000
d. profit would decrease by P156,000

40. Treasury stock was acquired for cash at a price in excess of its par value. The
treasury stock was subsequently reissued for cash at a price in excess of its
acquisition price. If the cost method of accounting for treasury stock transactions is
used, what is the effect on retained earnings?
Acquisition of Reissuance of
Treasury Stock Treasury Stock
a. No effect Increase
 b. No effect No effect
c. Increase Decrease
d. Decrease Increase

41. If a company reissued at P200 per share 100 shares of treasury stock that it
had previously acquired for P280 per share and there wasn’t any Share Premium –
Treasury, it would debit
a. Loss on Sale of Treasury Stock for P8,000
b. Share Premium – Ordinary for P8,000
c. Retained Earnings for P8,000
d. Treasury Stock for P8,000

42. When ordinary shares are sold on subscription

a. a shareholders’ equity account called Subscription Receivable is used to
record the par value of the shares issued
b. the Ordinary Shares account is credited when the subscription contract is
signed and a down payment is received
c. the Ordinary Shares account is credited when the subscription price has been
fully paid and there is issued
d. the Ordinary Shares account is not used. Shares issued on subscription are
credited to Subscribed Ordinary Shares, a permanent shareholders’ equity account.

43. A corporation declared cash dividends on its ordinary shares in Dec. 2018,
payable in Jan. 2019. Retained earnings will
a. decrease on the date of payment c. not be affected on the
date of payment
b. increase on the date of declaration d. not affected on the date of
declaration

44. When a small dividend is declared, Retained Earning is debited for

a. the fair market value of the shares to be distributed
b. the liquidation value of the shares to be distributed
c. the par value of the shares to be distributed
d. zero; it is not affected by the declaration of a small share divided

45. Statement 1: Cash dividends are declared solely by the board of directors
Statement 2: Share dividends will necessitate the concurrence of at least
two-thirds of the outstanding shareholders
a. Only the first statement is correct c. Both statements are
correct
b. Only the second statement is correct d. Neither statement is
correct
46. Indirect materials are:
CONVERSION COST MANUFACTURING COST
PRIME COST
a. Yes Yes Yes
b. Yes Yes No
c. No Yes Yes
d. No No No

47. The wages of the factory janitorial staff should be classified as:
a. Factory overhead cost c. Period cost
b. Direct labor cost d. Prime cost

48 – 50. The following account balances and other information were taken from the
accounting records of Levi Corporation for the year ended Dec. 31, 2019:

P Work-in-Process, P
Finished Goods, ending 15,000 ending 75,000
Raw Materials Inventory, ending 25,000 Net Purchases 120,000
Work-in-Process, beginning 25,000 Conversion Costs 180,000
Finished Goods, beginning 30,000 Prime Costs 245,000
Raw Materials Inventory,
beginning 50,000

48. How much is total manufacturing cost of Levi Corporation on Dec. 31, 2019 its
Statement of Cost of Goods Sold?
a. P 325,000 c. P 570,000
b. P 425,000 d. none of these

49. How much is the corporation’s total cost of goods manufactured?

a. P 520,000 c. P 275,000
b. P 375,000 d. none of these

50. Compute for the total cost of goods sold of the corporation.
a. P 387,000 c. P 535,000
b. P 290,000 d. none of these

51-56 Aaron and Moises decided to form a partnership on January 1, 2020. Their
Statement of Financial Position on this date were:

Aaron Moises
Cash P 75,000 P 65,000
 Accounts Receivable 45,000 71,000
Inventory 48,000 64,000
Supplies 12,000
Equipment 250,000 200,000
Accounts Payable 30,000 50,000
Capital 400,000 350,000

They agreed the following adjustments shall be made:

a. Equipment of Aaron is under-depreciated by P75,000 and that of Moises is
over-depreciated by P45,000
b. Allowance for doubtful accounts is to be set up amounting to P12,000 for Aaron
and P13,000 for Moises
c. Inventories of P3,000 and P4,000 are worthless in the books of Aaron and
Moises, respectively.
d. Accrued salaries of P15,000 for Aaron and P20,000 for Moises are still to be
recognized in the books.
e. Unused supplies of Aaron is to be valued at P4,000
f. Unrecorded prepaid rent is to be recognized in the book of Moises at P8,000

51. Determine the net adjustments to capital in the books of Aaron and Moises:
a. Aaron, P113,000 net credit; Moises, P90,000 net credit
b. Aaron, P113,000 net debit; Moises, P16,000 net credit
c. Aaron, P38,000 net credit; Moises, P90,000 net debit
d. Aaron, P38,000 net debit; Moises, P16,000 net debit

52. Determine the adjusted capital of Aaron and Moises

a. Aaron - P287,000; Moises - P366,000
b. Aaron - P513,000; Moises - P440,000
c. Aaron - P362,000; Moises – P334,000
d. Aaron - P438,000; Moises - P260,000

53. How much is the total capital of partnership after formation?

a. P 752,000 c. P 653,000
b. P 696,000 d. P 953,000
54. How much is the total asset of partnership after formation?
a. P 672,000 c. P 811,000
b. P 813,000 d. P 768,000

55. How much is the total liabilities of partnership after formation?

a. P 80,000 c. P 35,000
b. P 115,000 d. P 100,000

56. Assume that the partners agreed that Aaron is to invest or withdrew cash
necessary to make his capital equal to Moises adjusted capital, how much additional
investment (withdrawal) should be made by Aaron?
a. P 79,000 c. (P 28,000)
b. (P 73,000) d. P 178,000

57-61 The Dang Mang Sang Partnership was formed on January 1, 2019. The original
cash investments were as follows:
Dang P 96,000
Mang 144,000
Sang 216,000
According to their contract, the partners were to be remunerated as follows:
a. Salaries of P14,400 for Dang, P12,000 for Mang and P13,600 for Sang
b. Interest at 12% on the average capital account balances during the year
c. Remainder is to be divided 25%, 50% and 20% for Dang, Mang and Sang,
respectively.

Income before partners’ salaries for the year ended December 31, 2019, was
P80,080. Dang invested and additional P24,000 in the partnership on July 1; Sang
withdrew P36,000 from the partnership on October 1; and, as authorized by the
partnership contract, Dang, Mang and Sang each withdrew P750 monthly against
their shares of net income for the year.

57. Compute the share of Sang in the net income of the partnership
a. P 23,000 c. P 32,090
b. P 21,090 d. P 34,690

58. Determine the capital balance of Dang on December 31, 2019

a. P143,610 c. P156,780
b. P134,610 d. P145,780

59. If salaries to partners are to be recognized as operating expenses by the

partnership, how much is the share of partner Mang in the net income?
 a. P21,780 c. P9,780
b. P22,080 d. P12,080

60. Using the information in no.60, the capital balance of Dang on December 31,
2019
a. P143,610 c. P156,780
b. P134,610 d. P145,780

61. If a partnership has profit of P44,000 and Partner Moon is to be allocated a bonus
of 10% of profit after bonus, Moon’s bonus would be
a. P4,400 c. P4,000
b. P3,600 d. None of these

62-63 Neftali Corporation provided the following information:

Authorized share capital, 400,000 ordinary, par value, P10 P 4,000,000

Authorized share capital, 500,000 ordinary, no-par value 5,000,000
Issued, 250,000 par value shares 2,500,000
Issued, 175,000 no-par value shares 2,100,000
Subscribed par value, 70,500 shares 600,000
Subscribed no-par value, 80,000 shares 1,040,000
Share Premium - par value 520,000
Treasury shares, 25,500 par-values shares, at cost 310,000
Subscription receivable - par value 180,000
Subscription receivable - no-par value 320,000
Retained Earnings 3,700,000

62. The board of directors of the corporation declared dividends of P5 per share
payable to shareholders on record. Determine the number of shares entitled to
receive dividends
a. 470,000 shares c. 425,000 shares
b. 495,500 shares d. 399,500 share

63. Based on the information in no. 62, determine the amount of dividends for the
period
a. P 2,350,000 c. P 2,125,000
b. P 2,477,500 d. P 1,997,500

64-67. The shareholders’ equity of Zebulun Corporation on May 1, 2020 is as follows:

Share capital, P20 par value P2,800,000

Subscribed share capital 400,000
Share premium 400,000
 Retained Earnings 1,700,000
Treasury shares (P25 cost per shares) 350,000

64. The corporation declares a “1 for 10 share dividends” on May 15 to shareholders

of record as of May 21, for distribution on May 31. The fair values per share were
P24, P25, and P26 on May 15, 21, and 31, respectively. Compute the total share
dividends to be recorded at Retained Earnings account
a. P 379,600 c. P 384,000
b. P 350,400 d. P 416,000

65. Based on the information in no. 64, how is the share premium?
a. P 58,400 c. P 96,000
b. P 87,600 d. P 0

66. The corporation declares a “1 for 5 share dividends” on May 15 to shareholders

of record as of May 21, for distribution on May 31. The fair values per share were
P24, P25, and P26 on May 15, 21, and 31, respectively. Compute the total share
dividends to be recorded at Retained Earnings account

a. P 700,800 c. P 759,000
b. P 584,000 d. P 640,000

67. Based on the information in no. 66, how is the share premium?
a. P 168,800 c. P 128,000
b. P 175,200 d. P 0

68-69 Joshua subscribed for 10,000 shares at P100 par, paying P600,000 as initial
payment. The balance of the subscription was called and Joshua failed to pay.
Consequently, the subscription was declared delinquent. The offer price is P450,000
including the balance due on the subscription, interest of P20,000 and costs of sales
of P30,000.
There are three bidders who are willing to pay the offer price, namely:
Asher – 6,000 shares, Ben – 5,000 shares and Caleb – 4,500 shares.

68. How many shares shall be received by Joshua and the highest bidder?
a. Joshua - 6,000 shares and Asher - 4,000 shares
b. Joshua - 4,000 shares and Asher - 6,000 shares
c. Joshua - 5,500 shares and Caleb - 4,500 shares
d. Joshua - 4,500 shares and Caleb – 5,500 shares

69. Suppose that there is no bidder, what account should be debited to record this
delinquent transaction?
 a. Treasury shares P450,000
b. Cash P450,000
c. Subscribed Share Capital P1,450,000
d. Share capital – Ordinary shares P1,450,000

70. The following information pertains to Zion Corporation:

Ordinary share capital, 50,000 shares, P100 par P5,000,000
Share premium – original issuance 500,000
Share premium – treasury shares 100,000
Retained earnings 1,000,000
Treasury shares, 5,000 shares at cost 750,000
If the 5,000 ordinary shares held as treasury are subsequently retired, what
amount should be debited to retained earnings account to record this
transaction?
a. P50,000 c. P150,000
b. P100,000 d. 0

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