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B
B

B
 EXERCISE 5-1. Alternate Response. On the space provided below, write the word TRUE if the

1. The articles of co-partnership govern the formation, operation, and dissolution of the partnership.
2. Even if the partnership failed to register with the SEC, it still has a separate juridical personality.
3. The purpose of the partnership is explicitly mentioned in the articles of co partnership.
4. For the certificate of registration of business name to be issued by DTI, a partnership is required to submit articles
5. Like the certificate of registration of business name, mayor’s permit and license to operate should be renewed ever
6. A partner’s contribution in the form of labor or expertise is recorded by debiting Industry account.
7. In the books of the partnership, there are as many capital and drawing accounts as there are partners.
8. Contributions in the form of non-cash assets should be recorded at their fair market value in the absence of an agre
9. Contra-asset accounts (Allowance for Doubtful Accounts and Accumulated Depreciation) on non-cash assets inve
10. Temporary withdrawals and share in net loss increase drawing account under the indirect method.

EXERCISE 5-2. Alternate Response. On the space provided below, write the word TRUE if the
1. The articles of organization are the legal agreement of the partnership that specifies the names of partners, the nam
date and life of the partnership as well as the rights and duties of each partner.
2. The rights and duties of each partner and the manner of keeping the books of accounts are important elements of th
3. The assets of a sole proprietorship are revalued before they are assumed by a partnership.
4. Investments by a partner are credited to that partner's capital account.
5. Isa Belle, a proprietor who has agreed to take on a partner, has net assets with a ₱205,000 market value, while asse
partnership, Belle's capital will reflect the ₱195,000 carrying value of existing assets contributed to the new organiza
6. Net asset adjustments are ignored in the sole proprietor’s books, when these books are to be used as books of the p
7. With respect to non-cash assets, only the increases or decreases in values of such assets taking place during the ter
8. Partnership formation involving a sole proprietorship business may either use the books of the sole proprietor or o
9. The separate entity assumption requires personal expenses of a partner that are paid by the business be charged to
10. When a partner makes a cash withdrawal that is intended to be a permanent reduction in his or her investment, th

EXERCISE 5-3. Multiple Choice. On the space provided below, write the CAPITA
1. Which of the following statements is CORRECT?
A. The general ledger of a partnership will include a single capital account, the balance of which represents the comb
B. Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newl
C. Contributions in the form of industry are recorded with a memorandum entry in the general journal.
D. Accumulated depreciation accounts are transferred from the financial records of a sole proprietorship to a newly fo

2. The entry to record the investment of cash in a partnership by one of the partners would consist of a debit to
A. The partner's capital account and a credit to Cash
B. Cash and a credit to an account called Partners' Equities
C. Cash and a credit to the partner's capital account
D. Cash and a credit to the partner's drawing account

3. When a partner submits personal living expenses for company reimbursement and the expense is reflected as a red
A. Conservatism principle
B. Separate entity assumption
C. Going concern assumption
D. Full disclosure principle

4. When the owner of a sole proprietorship accepts a partner, the assets of the proprietorship
A. Must be transferred to the partnership at the values reflected in the financial records of the proprietorship
B. Must be converted to cash and used to pay any debts of the proprietorship, with excess cash available for investme
C. May be adjusted to reflect current values before being transferred to the partnership
D. Cannot be invested in the new partnership

5. The general ledger of a partnership will

A. Contain a separate capital account for each partner
B. Contain one capital account that reflects the total equity of all partners
C. Not contain a capital account or accounts
D. Not contain a separate drawing account for each partner

6. When a partner temporarily withdraws non-cash assets, the Drawing account is

A. Not affected
B. Debited
C. Credited
D. Debited then credited

7. The following transactions affect Partner’s Equity account, EXCEPT

A. Additional investment
B. Payment of personal expenses from partnership funds
C. Both A and B
D. Neither A nor B

8. The non-cash contributions of the partners in forming a partnership are recorded in the books of the partnership at
A. Carrying value
B. Fair market value
C. Historical cost
D. Agreed value

9. Two sole proprietors decided to form a partnership. Contributions in the form of property other than cash would be
A. Fair market value of the property at the date of investment
B. Proprietors’ carrying values or fair market value of the property at the date of investment, whichever is higher
C. Proprietors’ carrying values or fair market value of the property at the date of investment, whichever is lower
D. Proprietors’ carrying values at the date of investment

10. Alex and Julius formed a partnership, each contributing assets to the business. Alex contributed inventory with a
real estate with a carrying value more than its fair market value. Both Alex and Julius agreed that real estate be value
cash assets be recorded in the books of the partnership?
A. Agreed value Agreed value
B. Fair market value Agreed value
C. Historical cost Carrying value
D. Fair market value Fair market value