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Unit I – Partnership Formation and Operation Lesson

Lesson 2 – Partnership Formation

Name: Charlotte Kacy C. Abrasaldo Score__________

Section: BSA – 3A Date:____________

Assignment 1 – THEORY.

1. The net contributions of the partners to the partnership is measured at

a) cost c) discretionary amount determined by partner
b) fair value d) any of these

2. Transactions between and among the partners are:

a) recorded in the partnership books c) either a or b
b) not recorded in the partnership books d) neither a or b

3. Which of the following accounts has a normal credit balance?

a) Loans to partners c) Partner’s drawing
b) partner’s capital d) Due from partner

4. What is the entry for the acceptance of an industrial partner’s skills as his contribution?
a) General journal through a debit-credit entry
b) General ledger through a debit-credit entry
c) General ledger through a memorandum entry
d) none of the above

5. The partner’s capital account increases in the following cases except when a partner’s transaction in
the partnership involves:
a) initial investment c) additional investment
b) share in net income d) personal drawings

For items 6 -7:

Dee and Tee agreed to form a partnership. Dee contributed cash of P 50,000 while Tee contributed cash of
P150,000. They agreed to have an equal interest on the initial capital and in partnership profits and losses.

6. Which of the following statements is false?

a) Tee’s contribution will be debited for P150,000.
b) The partnership capital after recording the investments od Dee and Tee is P 200,000.
c) Dee’s contribution will be debited for P 50,000.
d) none of these

7. Which of the following statements is correct?

a) the contractual agreement is void because Dee’s contribution is less than the agreed interest of Dee.
b) Tee’s contribution will be debited for P 100,000.
c. Dee will make an additional investment of P 100,000 to make his capital balance equal to Tee’s capital.
d. Dee and Tee will have capital balances of P 100,000 each after the partnership formation.
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8. A and B agreed to form a partnership. A contributed P 300,000 cash while B contributed his expertise.
partnership agreement stipulates that A and B shall have equal interest in both initial capital and profits and
losses.

Which of the following is correct?

a) Immediately after the formation of the partnership, the balance of A capital account in the partnership
books is P 300,000.
b) Immediately after the formation of the partnership, the balance of B capital account in the partnership
books is zero.
c) A’s contribution will be debited for P 300,000, but the net credit to A’s capital account will be P 150,000.
d) None of these

9. Statement 1. A bonus exists when the capital account of a partner is credited for an amount greater than of
lesser than the fair value of his contribution.
Statement 2: A bonus given to a partner is treated as an adjustment to the capital account of the other
partners.

a) True: True b) False: False c) True: False d) False: True

10.Fay and May agreed to form a partnership. The agreement stipulates that Fay shall contribute a non-cash
assets with a fair value of P 150,000 and while May shall contribute cash of P 150,000. However, since Fay
will be bringing her special skills to the partnership, the partners agreed that Fay shall be entitled to a 60%
interest in partnership profits and losses.

Which of the following is incorrect?

a) Fay’s contribution shall be debited for P 150,000.
b) The total capital of the partnership immediately after the formation of the partnership is P 300,000.
c) Fay’s capital account balance immediately after the formation of the partnership is P 180,000.
d) None of these.
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Unit I – Partnership Formation and Operation Lesson

2 – Partnership Formation

Name: Charlotte Kacy C. Abrasaldo Score__________

Section: BSA-3A Date:____________

Assignment 2 – Brief exercises. Instruction: Answer as directed.

1. Journalize the investments of Eddie and Fred.

Date Particulars PR Debit Credit
2020
Aug.1 Cash P 500,000
Equipment 250,000
Edie, Capital P 750,000
To record investment

Cash 350,000
Service vehicle 400,000
Fred, Capital 750,000
To record investment
2.
Date Particulars PR Debit Credit
2020
July 1 Equipment P 400,000
Mortgage Payable P 100,000
Pepe, Capital 300,000
To record investment

Cash 100,000
Equipment 80,000
Pilar, Capital 180,000
To record initial investment

3. Using the same data in 2 above, except that the mortgage will not be assumed by the partnership. Record
the investment of Pepe.
Date Particulars PR Debit Credit
2020
July 1 Equipment P 400,000
Pepe, Capital P 400,000
To record investment

4. How much cash will be presented in the partnership’s statement of financial position? 580,000

Solution:
AGREED CAPITAL DISTRIBUTED CAPITAL DIFFERENCE
Mark 500,000 180,000 320,000
Nick 500,000 240,000 260,000
TOTAL 1,000,000 420,000 580,000

5. Journalize the investments of MM, NN and LL.

Date Particulars PR Debit Credit
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2020
July 1 Cash P 20,000
Delivery truck 250,000
Computers 48,000
Mortgage Payable P 100,000
MM, Capital 218,000
To record initial investment

Cash 22,000
Delivery truck 228,000
Computer 51,000
Office furniture 9,500
NN, Capital 310,500
To record initial investment

Cash 40,000
Office furniture 22,500
LL, Capital 62,500
To record initial investment

6. Using the same data in number 5: except that the agreement further provides that the partners’ capital must
be in conformity with their profit and loss ratio upon formation, the capital balances of MM, NN and LL in
the partnership statement of financial position:

MM: 236,400 NN: 236,400 LL: 118,200

Solution:

CONTRIBUTED P/L Rated AGREED CAPITAL DIFFERENCE

CAPITAL
MM 218,000 40% 236,400 18,400
NN 310,500 40% 236,400 (74,100)
LL 62,500 20% 118,200 55,700
591,000 591,000

7. Refer to no. 6: the journal entry to record the transfer of capital (bonus) :
Date Particulars PR Debit Credit
2020
July 1 NN, Capital P 74,100
MM, Capital P 18,400
LL, Capital 55,700
To record the transfer of capital (bonus)
End