CHRISTIAN COLLEGES OF SOUTHEAST ASIA

Fundamentals of Accounting, Part 2

Long Quiz
Instructor: Darwin P. Ang, C.P.A.

1. A partnership agreement calls for profits to be allocated based on salaries of P15,000 and
P30,000 for Partners A and B, respectively. Partner A is to receive a bonus equal to 10% of
partnership income after the bonus. Interest at the rate of 10% is to be allocated to Partner C
based on their weighted average capital after draws. Partner C began the current year with a
capital balance of P54,000 and had the following subsequent activities:

March 1: Withdraw, P20,000

July 1: Withdraw, P10,000
September 1: Contributed, P5,000
October 1: Contributed, P12,000

Assuming the partnership has income of P66,000, determine the amount to be allocated to
partner A.
a. P20,767 b. P24,767 c. P25,167 d. P23,125

2. Jamby and Miriam just formed a partnership. Jamby contributed cash of P2,205,000 and office
equipment that cost P945,000. The equipment had been used in her sole proprietorship and had
been 70% depreciated, the appraised value of the equipment is P630,000. Jamby also
contributed a note payable of P210,000 to be assumed by the partnership. Jamby is to have 60%
interest in the partnership. Miriam contributed only P1,575,000 merchandise inventory at fair
market value. Assume the use of bonus method, the partners’ capital must be in conformity with
their profit and loss ratio upon formation.

In the formation, which of the following is true?

a. The agreed capital of Jamby upon formation is P2,625,000.
b. The total agreed capital of the partnership is P4,375,000.
c. The capital of Miriam will increase by P105,000 as a result of the transfer of capital.
d. There is either an investment or withdrawal of asset under the bonus method.

3. Chuvalo and Perdovich formed a partnership. After one year of operation, the partnership had
the following trial balance:

Partners split profits as follows:

 A salary of P12,000 is paid to Perdovich.
 Remaining profit (or loss) are split 50-50.

The ending capital balance of Chuvalo amounted to:

a. P24,500 b. P34,000 c. P38,500 d. P30,000

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 4. On June 1, 2013, E and F formed a partnership with each contributing the following assets:

The building is subject to a mortgage loan of P1,1250,00 which is to be assumed by the

partnership. The partnership agreement provides that E and F share profits and losses of 30%
and 70% respectively. Assuming that the partners agreed to bring their respective capital in
proportion to their profit and loss ratio, compute the capital account balance of F on June 1,
2013.

a. P3,500,000 b. P4,262,500 c. P3,837,500 d. P3,887,500

5. In relation to question no. 4, how much additional cash should E invest?

a. P687,500 b. P717,500 c. P2,687,500 d. P2,717,500

6. OO and PP formed a new partnership. OO invested P900,000 in cash. PP contributed land that
had an original cost of P120,000 and a fair market value of P210,000, and building that had a tax
basis of P150,000 and fair value of P270,000. The building is subject to a P120,000 mortgage that
the partnership will assume. Profit and loss ratio is 60:40 to OO and PP respectively.

What is the capital balance of PP upon formation of the partnership?

a. P120,000 b. P240,000 c. P360,000 d. P600,000

7. The partnership of Gary, Jerome and Paul was formed on January 1, 2010. The original
investments were as follows:

Gary P 80,000
Jerome 120,000
Paul 180,000

According to the partnership agreement, net income or loss will be divided among the
respective partners as follows:
 Salaries of P12,000 for Gary, P10,000 for Jerome and P8,000 for Paul.
 Interest of 8% on the average capital balance during the year of Gary, Jerome and
Paul.
 Remainder is divided equally.

Additional information is as follows:

 Net income of the partnership for the year ended December 31, 2010 was P70,000.
 Gary invested an additional P20,000 in the partnership on July 1, 2010.
 Paul withdrew P30,000 from the partnership on October 1, 2010.
 Gary, Jerome and Paul made regular drawings against their shares of net income
during 2010 of P10,000 each.

The partner capital balances as of December 31, 2010 are:

Gary Jerome Paul
a. P112,333 P132,733 P164,934
b. 102,333 122,733 154,934

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 c. 92,000 102,000 134,934
d. 122,333 132,733 164,934
8. Cindy, Jackie and Connie are forming a new partnership each contributing cash of P200,000 and
their respective office equipment and supplies valued at P100,000, P200,000 and P300,000
respectively. Cindy’s non-cash contribution is her own developed accounting software valued at
cost which she could sell for thrice the amount. Partners’ agree to admit his software at market
value and they will share profits equally Capital balances upon formation are:
a. Cindy, P466,666; Jackie, P466,666; and Connie, P466,667.
b. Cindy, P300,000; Jackie, P400,000; and Connie, P500,000.
c. Cindy, P400,000; Jackie, P400,000; and Connie, P400,000.
d. Cindy, P500,000; Jackie, P400,000; and Connie, P500,000.

9. JR and his very close friend AJ formed a partnership on January 1, 2012 with JR contributing
P16,000 cash and AJ equipment with a book value of P6,400 and a fair value of P4,800 and
inventory items with a book value of P2,400 and a fair value of P3,200. During 2012, JR made
additional investment of P1,600 on April 1 and P1,600 on June 1, and on September 1, he
withdrew P4,000. AJ had no additional investments nor withdrawals during the year. The average
capital balance of JR at the end of 2005 is:
a. P16,800 b. P10,000 c. P15,200 d. P14,400

10. On May 1, 2013, O and P formed a partnership and agreed to share profits and losses in the
ration of 3:7 respectively. O contributed a parcel of land that cost P10,000. P contributed
P40,000 cash. The land was sold for P18,000 on May 1, 2013, immediately after the formation of
the partnership. What amount should be recorded in O’s capital account on the formation of the
partnership?
a. P18,000 b. P17,400 c. P15,000 d. P10,000

11. A and B will contribute P150,000 each and C will contribute P50,000 plus his skill. They agreed to
share profit 2:2:1, respectively. The correct amount of the total partnership capitalization would
be
a. P187,500 b. P375,000 c. P250,000 d. P350,000

12. The balance sheet as of July 31, 2013 for the business owned by CC shows the following assets
and liabilities:

Cash P 2,500
Accounts receivable 10,000
Merchandise inventory 15,000
Furniture 18,000
Accounts payable 6,000

It is estimated that 5% of the receivable may prove uncollectible. Merchandise inventory

includes obsolete items costing P5,000, of which P2,000 might still be realized. Depreciation has
never been recorded. The furniture are two years old, have an estimated useful life of 10 years,
and would cost P20,000 if currently purchased. DD is to be admitted as a partner upon his
investment of P20,000 cash and P10,000 worth of merchandise. What are the total assets of the
partnership?
a. P70,500 b. P48,000 c. P67,500 d. P74,000

13. GG admits HH for partnership interest in his business. The balance sheet accounts of GG on
November 30, 2012 prior to the admission of HH are as follows:

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 It is agreed that for purposes of establishing GG’s interest, the following adjustments should be
made:
 An allowance for doubtful accounts of 2% of accounts receivable is to be
established.
 The merchandise inventory is to be valued at P160,000.
 Prepaid expenses of P5,200 and accrued expenses of P3,200 are to be recognized.

HH invested cash P113,640 to give him a one-third interest in the total of the firm. What is the
capital balance of GG before the admission of HH?
a. P227,280 b. P230,120 c. P211,200 d. P250,200

14. Peter and Paul formed a partnership on January 2, 2012, and agreed to share net income and
losses 90% and 10% respectively. Peter invested cash of P250,000. Paul invested no assets but
had a specialized expertise and managed the firm full-time. The partnership contract provided
for the following:
 Partner’s capital accounts are to be credited annually with interest at 5% of
beginning capital account balances.
 Paul is to be paid a salary of P10,000 a month.
 Paul is to receive a bonus of 20% of income before deduction of salary, bonus and
interest on partners’ account balances.
 Bonus, interest and Paul’s salary are considered expenses of the partnership.
The income statement for the year 2012 of the partnership included the following:
Revenue P964,500
Expenses (includes salary, interest and bonus to Paul) 497,000
Net income P467,500
What is Paul’s bonus for 2012?
a. P120,000 b. P150,000 c. P130,000 d. P93,750

15. The partnership agreement of Rey and Serg provides that interest at 10% is to be credited to
each partner on the basis of average capital balances. A summary of Serg capital account for the
year ended December 31, 2013 is as follows:

Balance, January 1 P140,000

Additional investment, July 1 40,000
Withdrawal, August 1 15,000

What amount of interest should be credit the capital account of Serg for 2013?
a. P15,250 b. P15,375 c. P16,500 d. P17,250

16. Mary and Grace entered into a partnership forming Mary Grace Enterprises to market food
supplies to Filipinos in Hongkong. Since Mary would be taking an active role in actual marketing,
she was to receive a 20% bonus on profits before bonus. The balance of the profits and losses
were to be divided between them in the ratio of 2:3, Mary and Grace respectively. The first year
of operations resulted in an income of P1,000,000. Mary would be entitled to:
a. P180,000 b. P300,000 c. P450,000 d. P520,000

17. The partnership of the JJ, KK and LL provided for the division of net income or losses in the
following manners:

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  Bonus of 20% of income before the bonus to JJ.
 Interest at 15% on average capital account balances to each partner.
 Remaining income or loss, equally to each partner.
Net income of the JJ, KK and LL Partnership for 2012 was P90,000, and the average capital
balances for the year were, JJ, P100,000; KK, P200,000 and LL, P300,000.

How much of the P90,000 partnership profit for 2012 should be distributed to JJ?
a. P27,000 b. P6,000 c. P33,000 d. P39,000
18. LL, MM and PP are partners with capital of P40,000, P25,000 and P15,000 respectively. The
partnership agreement provides the each partner shall be allowed 5% interest on his capital,
that LL shall be allowed an annual salary of P8,500, and that MM shall be entitled to a minimum
of P14,000 per annum including amounts allowed as interest on capital and as share of profits.
Profit after interest and salary allowances is to be divided between LL, MM and PP 5:3:2,
respectively. What amount must be earned by the partnership during 2013 before charges for
interest or salary if LL is to receive an aggregate of P20,000 to include interest, salary and share
of profits?
a. P38,500 b. P40,000 c. P38,550 d. P35,880

19. Sheila, Irene and Sheryl are partners with capital balances on January 1, 2012 of P600,000,
P240,000 and P120,000, respectively. They agreed to share profits and losses as follows:
 Salary allowances of Sheila, P96,000, Irene, P120,000 and Sheryl, P120,000.
 Interest allowed on beginning of the year’s capital balances at 6%.
 The managing partner, Sheila is entitled 20% bonus after allowing as expenses
partners’ salaries, interest and bonus.
 Profits after partners’ salaries, interest and bonus are to be divided equally.
For the year 2012, the partnership reported profit before interest, salaries and bonus of
P588,000. For the year, the partners’ drawings were Sheila, P204,000; Irene, P40,000 and Sheryl,
P212,000. Each partner’s share in the profits after salaries, interest and bonus was:
a. P196,000 b. P54,000 c. P64,800 d. P51,480

20. X, Y and Z agreed to form a partnership. X contributed P50,000 for two-third interest in the
partnership. Y and Z will share equally in the remaining required capitalization. The total assets
of the partnership upon formation is:
a. P100,000 b. P75,000 c. P20,000 d. P120,000

21. One of the following is not a characteristic of contract of partnership.

a. Real, in that the partners must deliver their contributions in order for the partnership
contract to be perfected.
b. Principal, because it can stand by itself.
c. Preparatory, because it is a means by which other contracts will be entered into.
d. Onerous, because the parties contribute money, property or industry to the common
fund.

22. Which of the following provisions in the Partnership Law are considered directory and not
mandatory?
a. If the capital is P3,000 or more, it must appear in a public instrument.
b. The partnership contract must be recorded with the SEC.
c. If immovable properties are contributed, it must appear in a public instrument.
d. A and B.
e. B and C.

23. A partnership without a definite period of existence and which can be dissolved at any time by
any of the partnership is called:
a. Universal partnership of all present property.
b. Universal partnership of profits.
c. Particular partnership.

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 d. Partnership at will.

24. Which of the following statements is true?

a. A is the capitalists partner. A is engaged personally in the same kind of business the
partnership is engaged in. In here, if there are losses in A’s other business, the
partnership will not bear the losses.
b. A, B and C are partners of A & Co., with B as managing partner. The partnership is to
exist for 10 years based from the articles. After only two years of existence, B can
dissolve A & Co. by his individual act.
c. Both statements are true.
d. Both statements are false.

25. Which of the following statements is (are) usually correct regarding a general partner’s liability?
a. All general partners are jointly and severally liable for partnership’s criminal acts.
b. All general partners are liable only for those partnership obligations they actually
authorized.
c. Both statements are true.
d. Both statements are false.

26. Which of the following stipulations in a partnership agreement is valid?

a. A capitalist partner is excluded from profits.
b. A capitalist partner is excluded from losses.
c. An industrial partner is excluded from losses.
d. An industrial partner is excluded from profits.

27. This partnership is composed of capitalist and industrial partners.

a. Universal partners.
b. Limited partners.
c. General partners.
d. None of these.

28. Which of the following statements is true?

a. An artificial person like a corporation may be a partner in a partnership.
b. A limited partner may contribute money, industry and property to a partnership.
c. Both statements are true.
d. Both statements are false.

29. A partnership formed for the exercise of a profession which is duly registered is an example of:
a. Universal partnership of profits.
b. Universal partnership of all present property.
c. Particular partnership.
d. Partnership by estoppels.

30. Which of the following statements is true?

a. A person may be a general partner and a limited partner in the same partnership at the
same time.
b. A partnership begins from the time the partnership contract is registered with the SEC.
c. The profits and losses of the partnership shall be divided equally among the partners if
they have no profit and loss sharing agreement.
d. The sharing of gross sales is a prima-facie evidence that one is a partner in the business.

***END OF LONG QUIZ***

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