Professional Documents
Culture Documents
Ac Far Quiz3
Ac Far Quiz3
Emil and Pearl form a new partnership. Emil invests P300,000 in cash for her 60 percent interest in the
capital and profits of the business. Pearl contributes land that has an original cost of P40,000 and a fair
market value of P70,000, and a building that has a tax basis of P50,000 and 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 Pearl contribute?
a. P40,000
b. P80,000
c. P110,000
d. P15,0000
2. The Green and Red partnership was formed on January 2, 2011. Under the partnership agreement, each
partner has an equal initial capital balance accounted for under the goodwill method. Partnership net
income or loss is allocated 60% to Green and 40% to Red. To form the partnership, Green originally
contributed assets costing P30,000 with a fair value of P60,000 on January 2, 2011, and Red contributed
P20,000 in cash. Drawings by the partners during 2011 totaled P3,000 by Green and P9,000 by Red.
The partnership’s 2011 net income was P25,000. Red’s initial capital balance in the partnership is:
a. P20,000.
b. P25,000.
c. P40,000.
d. P60,000.
3. Pirante and Wilson drafted a partnership agreement that lists the following assets contributed at the
partnership’s formation:
The building is subject to a mortgage of P20,000, which the partnership assumed. The partnership
agreement also specifies that profits and losses are to be distributed evenly. What amounts should be
recorded as capital for Pirante and Wilson at the formation of the partnership?
a. P70,000 and P170,000, respectively.
b. P70,000 and P150,000, respectively.
c. P110,000 for each partner.
d. P120,000 for each partner.
4. AA and Belen formed a partnership and they agreed to share initial capital equally, although AA
contributed P150,000 and Belen contributed P126,000 in identifiable assets. Under the bonus approach to
adjust the capital accounts, Belen received (gave) a bonus equal to:
a. P24,000
b. P12,000
c. (P24,000)
d. (P12,000)
5.
AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000; and, CC,
P100,000. AA and CC are not to actively participate in the business but will refer customers, while BB will
manage the firm. BB has to give up his present job which gives her an annual income of P120,000. The
partners decided that profits and losses shall be shared equally. Upon formation, partners’ capital
balances would be:
6. Brenda and Cathy formed a partnership and agreed to divide initial capital equally, even though Brenda
contributed P200,000 and Cathy contributed P168,000 in identifiable assets. Under the bonus approach
to record the contributions of the partners, Cathy’s capital account should be credited for
7. On May, 31, 2011, Allen, Belen, and Cenen formed a partnership by combining their businesses. Allen
give cash of P50,000. Belen gave a property with a carrying amount of P30,000, an original cost of
P40,000, and a fair market value of P80,000. Belen’s property, however, has a P35,000 mortgage for
which the new partnership accepted legal responsibility. Cenen gave a delivery equipment with a book
value of P30,000, an acquisition cost of P75,000, and an appraised value of P55,000. It was agreed that
profits and losses are to be shared equally. The partner with the biggest capital account balance as of
May 31, 2011, is
a. Allen
b. Belen
c. Cenen
d. Allen have equal capital balance.
Allen Belen Cenen
Cash P50,000 P - P -
Non cash asset - 80,000 55,000
Mortgage - (35,000) -
Capital account balances P50,000 P45,000 P55,000
8. Abel and Carr formed a partnership and agreed to divide initial capital outlay equally, even though Abel
contributed P100,000 and Carr contributed P84,000 in identifiable assets. Under the bonus approach to
adjust the capital accounts, Carr’s unidentifiable asset should be debited for
a. P46,000
b. P8,0000
c. P16,000
d. P-0-
9. On October 1, 2011, Carla and Clara joined in a partnership. Carla contributed cash while Clara
contributed merchandise worth P25,000 and a second-hand delivery truck currently valued at P50,000 but
encumbered by a one-year chattel mortgage note for P15,000. If initial capital balances are to conform to
the profit-sharing ratio of 2:3, respectively, the amount of cash contributed by Carla was:
a. P24,000
b. P30,000
c. P40,000
d. P50,000
10. AA, BB, and CC are to form a partnership. AA is to contribute cash of P100,000; BB, P10,000, and CC,
an equipment valued at P100,000. AA and CC are not to actively participate in the business but will refer
customers, while BB will manage the firm. BB has to give up her present job which gives her an annual
income of P120,000. The partners decided that profits and losses shall be shared equally. Upon
formation, assuming a chattel mortgage of P10,000 on the equipment is assumed by the partnership, the
net assets of the partnership is equal to:
a. P210,000
b. P200,000
c. P220,000
d. P330,000
AA P100,000
BB 10,000
CC 100,000
Total P210,000
Less liabilities assumed 10,000
Net assets contributed by the partners P200,000