1.

A unique feature of partnerships compared with publicly owned corporations is that They do
not have to follow GAAP

2. Under the entity theory, a partnership is Viewed as having its own existence apart from the
partners

3. A personal receivable of a Rosa in the amount of P7,000 was collected and retained by the
partnership. Which of the following is the correct entry?

(dr.)Cash P7,000 (cr.)Rosa, Drawing P7,000

4. If the partnership agreement provides a formula for the computation of a bonus to the partners,
the bonus would be computed

in any manner agreed to by the partners

5. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus
allocation, interest on capital, with any remainder to be allocated by preset ratio. If a partnership
has a loss to allocate, generally which of the following procedures would be applied?

The bonus criteria will not be used

6. Which of the following statements about partnership is correct?

Two capital accounts are generally maintained for each partner, a drawing account and a capital
account.
7. Which of the following would be least likely to be used as a means of allocating profits among
partners who are active in the management of the partnership?

Interest on average capital balances

8. The following information will be used for Question nos. 8 and 9

RD formed a partnership on February 10, 2021. R contributed cash of P150,000, while D

contributed inventory with a fair value of P120,000. Due to R's expertise in selling, D agreed that
R should have 60 percent of the total capital of the partnership. R and D agreed to recognize
goodwill.

What is the capital balance of R after the goodwill is recognized? 

180,000

9. The following information will be used for Question nos. 8 and 9

RD formed a partnership on February 10, 2021. R contributed cash of P150,000, while D

contributed inventory with a fair value of P120,000. Due to R's expertise in selling, D agreed that
R should have 60 percent of the total capital of the partnership. R and D agreed to recognize
goodwill.

What is the total capital of RD partnership upon formation and recognition of goodwill?

300,000

10. The following information will be used for Question nos. 10 and 11

On July 5, 2021, the business accounts of Leonard and George appear below:

Leonard George
Cash P20,000 P130,000
Accounts Receivable 70,000 14,000
Merchandise Inventory 120,000 80,000
Land 1,200,000  - 
Buildings  -  750,000
Furniture and Fixtures 180,000 90,000
Accounts Payable 160,000 155,000
Leonard, Capital 1,430,000  - 
George, Capital  -  909,000
Both agreed to form a partnership contributing their respective assets and liabilities subject to the
following adjustments:

 Accounts Receivable of P15,000 in Leonard’s books and P4,000 in George’s books are
uncollectible.
 Inventories of P30,000 and P10,000 are worthless in Leonard’s and George’s respective
books.
 Buildings in George’s books has a fair market value of P900,000.

Accounts payable worth P55,000 on Leonard’s books will not be passed upon the partnership.
What is the contributed capital of Leonard?
1,440,000

11. The following information will be used for Question nos. 10 and 11

On July 5, 2021, the business accounts of Leonard and George appear below:
Leonard George
Cash P20,000 P130,000
Accounts Receivable 70,000 14,000
Merchandise Inventory 120,000 80,000
Land 1,200,000  - 
Buildings  -  750,000
Furniture and Fixtures 180,000 90,000
Accounts Payable 160,000 155,000
Leonard, Capital 1,430,000  - 
George, Capital  -  909,000
Both agreed to form a partnership contributing their respective assets and liabilities subject to the
following adjustments:
 Accounts Receivable of P15,000 in Leonard’s books and P4,000 in George’s books are
uncollectible.
 Inventories of P30,000 and P10,000 are worthless in Leonard’s and George’s respective
books.
 Buildings in George’s books has a fair market value of P900,000.
 Accounts payable worth P55,000 on Leonard’s books will not be passed upon the
partnership.
What is the contributed capital of George? 1,045,000

12. Russ and Harden formed a partnership on January 1, 2019. Russ contributed cash of
P120,000 and Harden contributed land with a fair value of P160,000. The partnership assumed
the mortgage on the land which amounted to P40,000 on January 1. Harden originally paid
P90,000 for the land. On July 31, 2019, the partnership sold the land for P190,000. Assuming
Russ and Harden share profits and losses equally, how much of the gain from sale of land should
be credited to Russ for financial accounting purposes? 15,000

13. The ZYX partnership reported net income of P130,000 for the year ended December 31,
2019. According to the partnership agreement, partnership profits and losses are to be distributed
as follows:

Z Y X
Salaries P25,000 P20,000 P15,000
Bonus on net income 10% - -
Remainder 60% 30% 10%
The partnership income allocated to partner Z is: 72,200

14. The following information will be used for Question nos. 13-15

The ZYX partnership reported net income of P130,000 for the year ended December 31, 2019.
According to the partnership agreement, partnership profits and losses are to be distributed as
follows:
Z Y X
Salaries P25,000 P20,000 P15,000
Bonus on net income 10% - -
Remainder 60% 30% 10%
The partnership income allocated to partner Y is: 37,100

15. The following information will be used for Question nos. 13-15

The ZYX partnership reported net income of P130,000 for the year ended December 31, 2019.
According to the partnership agreement, partnership profits and losses are to be distributed as
follows:

Z Y X
Salaries P25,000 P20,000 P15,000
Bonus on net income 10% - -
Remainder 60% 30% 10%

The partnership income allocated to partner X is: 20,700

16. The following information will be used for Question nos. 16 and 17
Overgrow and Torrent share profits and losses equally. Overgrow and Torrent receive salary
allowances of P20,000 and P30,000, respectively, and both partners receive 10% interest on their
average capital balances. Average capital balances are calculated at the beginning of each month
balance regardless of when additional capital contributions or permanent withdrawals are made
subsequently within the month. Partners’ drawings are not used in determining the average
capital balances. Total net income for 2020 is P120,000.
Overgrow Torrent
January 1 Capital Balances P100,000 P120,000
Yearly drawings (P1,500 per month) 18,000 18,000
Permanent withdrawals of capital:
  June 3 (12,000)
  May 2 (15,000)
Additional investments of capital:
  July 3 40,000
  October 2 50,000

What is the weighted-average capital for Overgrow in 2020? 110667

17. The following information will be used for Question nos. 16 and 17

Overgrow and Torrent share profits and losses equally. Overgrow and Torrent receive salary
allowances of P20,000 and P30,000, respectively, and both partners receive 10% interest on their
average capital balances. Average capital balances are calculated at the beginning of each month
balance regardless of when additional capital contributions or permanent withdrawals are made
subsequently within the month. Partners’ drawings are not used in determining the average
capital balances. Total net income for 2020 is P120,000.
 Overgrow Torrent
January 1 Capital Balances P100,000 P120,000
Yearly drawings (P1,500 per month) 18,000 18,000
Permanent withdrawals of capital:
  June 3 (12,000)
  May 2 (15,000)
Additional investments of capital:
  July 3 40,000
  October 2 50,000

What is the weighted-average capital for Torrent in 2020? 119583

18. Saturday is trying to decide whether to accept a salary of P60,000 or a salary of P25,000 plus
a bonus of 20% of net income after the bonus as a means of allocating profit among the partners.
What amount of income would be necessary so that Saturday would consider the choices to be
equal? 210000

19. Neko and Inu formed a partnership on January 2, 2020, and agreed to share profits 90% and
10%, respectively. Neko contributed capital of P25,000. Inu contributed no capital but has a
specialized expertise and manages the form full time. There were no withdrawals during the
year. The partnership agreement provides for the following:
 Capital accounts are to be credited annually with interest at 5% of beginning capital.
 Inu is to be paid salary of P1,000 a month
 Inu is to receive a bonus of 20% of income calculated before deducting his salary and
interest on both capital accounts.

The partnership 2020 income statement follows:

Revenues                                                                  P96,450

Expenses (including salary, interest and bonus)      49,700

Net Income                                                               P46,750

 What is Inu’s 2020 bonus? 15000

20. Lebron and Anthony formed their partnership on June 16, 2019. They agreed to equally share
the partnership profits. In 2020 the partners agreed to change the profit-sharing ratio to 60:40 for
the year. Also in 2020, the partners discovered that the land invested by Lebron was recorded at
its cost of P500,000. The fair value of the land was P700,000 at the time of formation. No
adjustments were made upon the discovery. The land was sold on August 21, 2020 at
P1,000,000. How much is the total effect on the capital of Anthony with regards to the fair value
adjustment and disposal of land? 220000