.

Accounting for Partnership and

Corporation Final Examination

177/1 Part 1 40
Name: 77 Part 2 36
Date: Part 3 40
Score/Items Part 4 41
Part 1: MODIFIED TRUE OF FALSE Part 5 12
In the space provided before the statement, write TRUE if the statement is correct or FALSE if the Part 6 8
statement is incorrect. Correct the false statement. Total 177
TWO (2) POINTS EACH. IF FALSE STATEMENT IS NOT CORRECTED, 1 POINT ONLY.

TRUE 1. There is increase in assets with the corresponding increase in capital under admission of a
new partner by investment.
FALSE 2. Expenses cause decrease in equity and are recorded by credits.
Expenses cause decrease in equity and are recorded by DEBITS .
TRUE 3. Partnership is founded on the basis of trust.
FALSE 4. Shares without par value may not be issued for a consideration less than P10.00 per share.
Shares without par value may not be issued for a consideration less than P 5.00 per share.
TRUE 5. Temporary withrawals in partnership are presumed profit anticipation or salary withrawals.
FALSE 6. The minimum paid-up capital for the registration of a corporation is P3,000.
The minimum paid-up capital for the registration of a corporation is P5,000 .
TRUE 7. The admission of new partner by purchase of interest does not affect the total partners’
equity.
FALSE 8. An industrial partner shares in the partnership losses because he actively participate in
the operation of the business.
An industrial partner DOES NOT shares in the partnership losses because he actively participate in
the operation of the business.
TRUE 9. Subscription receivable is an asset account if collected within one year.
FALSE 10. Every partnership should have at least one general partner, and one limited partner.
Every partnership should have at least one general partner.
FALSE 11. To increase the Accumulated profits(losses) account is to debit it.
To increase the Accumulated profits(losses) account is to CREDIT it.
FALSE 12. A partnership or a corporation may become an incorporator of another corporation.
A partnership or a corporation may become CORPORATOR of another corporation.
FALSE 13. Purchase of interest at more than book value by the new partner from an old partner gives
him a personal gain from purchase of interest.
Purchase of interest at more than book value by the new partner from an old partner gives
him a personal LOSS from purchase of interest.
TRUE 14. Only those listed as shareholders as of the date of record are entited to dividend.
FALSE 15. If dividend is declared, Accumulated profits(losses) is debited at the date of record.
If dividend is declared, Accumulated profits(losses) is debited at the date of DECLARATION .
TRUE 16. Assets invested by the partners become property of the partnership without regard to the
contributing partners.
TRUE 17. All incorporators are corporators of a corporation.
TRUE 18. A partnership contract excluding a partner from profit sharing is null and void.
TRUE 19. The basic accounting equation is essential in determining the unknown amount regarding
a partner's contribution.
FALSE 20. A limited partnership is composed of all limited partners.
A limited partnership is composed of AT LEAST ONE LIMITED PARTNER .
Part 2: Identification. Fill-in the blank with your answer
TWO (2) POINTS EACH.

Fair market Value 1. For financial accounting purposes, assets of an individual partner contributed to a
partnership are recorded by the partnership at
5 2. Minimum number of incorporators needed to put up a corportion.
Outside Creditors 3. To restate the value of an old asset to conform with its fair market value is termed as:
Mutual agency 4. The act of one partner binds the other partners and the partnership. This characteristic is called
Book value per share 5. Refers to the peso equity of each share if the corporation is liquidated.
Par Value 6. The value assigned to a share of stock is called:
Juridical 7. Partnership has a personality separate and distinct from each of the
partner.
Additional Paid in
8. Another term for share premium.
capital
Solvent Partner 9. Is a deficient partner who is capable of paying to the other partners or to the partnership his
capital deficiency.
Capital Account 10. A partner’s withdrawal of assets from a partnership that is considered permanent reduction in
the patners’s equity is debited to the partner’s:
30 Days 11. If the subscriber fails to pay, how many days from the date of his payment shall his subscription
becomes delinquent?
Capitalist-Industrial 12. A partner who contributes money or property as well as his work or industry to the partnership is a
Partnership 13. A contract whereby two or more persons bind themselves together to contribute money,
property or industry to a common fund with the intention of dividing the profits among themselves.
Income and Expense
14. At the end of the accounting period, all nominal accounts are closed to temporary account called:
Summary
Capital Contribution 15. If the partners fail to stipulate how profit and loss be divided among partners, what should
be the basis?
Bonus 16. This refers to the transfer of capital from one partner to another in consideration for a good
reputation or earning capacity of the latter.
General Partner 17. A partner whose liability to third persons extends to his separate property.
Liquidation 18. The process of winding-up the business activity and converting non-cash assets into cash,
paying its liabilities and distribution of cash and the remainig assets to individual partners.

Part 3: Multiple Choice. Encircle the letter of your answer. Show your solution.
FIVE (5) POINTS PER ITEM IF SOLUTION IS PROVIDED. No solution, 1 point only
Numbers 1 to 8 are based on the following data:
Given the following assumptions, how much are the shares of Beth and Mayet in the partnership income?
Beth, Capital
6/1 24,000 1/1 120,000
5/1 160,000

Mayet, Capital
6/1 24,000 1/1 120,000
5/1 160,000

Income & Expense Summary

12/31 60,000 12/31 132,000

1. Beth and Mayet share in the ratio of 8:2, respectively

a. P57,600 and P14,400 c. P105,600 and P26,400

b. P14,400 and P57,600 d. None of the above

Profit = 72,000

Beth = 72,000 X 80% = 57,600.00

Mayet 72,000 X 20% = 14,400.00

2. Beth and Mayet share in the profit equally.

a. P66,000 and P66,000 c. P30,000 and P360,000

b. P36,000 and P36,000 d. None of the above

Profit = 72,000

Beth = 72,000 X 50% = 36,000.00

Mayet 72,000 X 50% = 36,000.00

3. Beth and Mayet share according to beginning capital ratios.

a. P40,000 and P32,000 c. P44,182 and P27,818

b. P32,000 and P40,000 d. None of the above
Profit = 72,000

Beth = 72,000 X (120/240) = 36,000.00

Mayet 72,000 X (120/240) = 36,000.00

4. Beth and Mayet share according to ending capital ratios.

a. P40,000 and P32,000 c. P44,182 and P27,818

b. P81,000 and P51,000 d. None of the above
Profit = 72,000

Beth = 72,000 X (256/512) = 36,000.00

Mayet 72,000 X (256/512) = 36,000.00
 5. Beth and Mayet share according to average capital ratios.

a. P54,476.20 and P77,523.80 c. P77,523.80 and P54,476.20

b. P48,050.23 and P23,949.76 d. None of the above

Beth:
1-Jan 120,000 x 4 = 480,000
1-May 280,000 x 1 = 280,000
1-Sep 256,000 x 7 = 1,792,000
2,552,000
/ 12
212,667
Mayet:
1-Jan 120,000 x 4 = 480,000
1-May 280,000 x 1 = 280,000
1-Sep 256,000 x 7 = 1,792,000
2,552,000
/ 12
212,667

Beth = 72,000 X (212,667/425,334) = 36,000.00

Mayet 72,000 X (212,667/425,334) = 36,000.00

6. Beth and Mayet are allowed 5% interest on their average capital and the remainder divided equally.

a. P42,285.71 and P29,714.29 c. P77,5232.80 and P54,476.20

b. P37,100.00 and P34,900.00 d. None of the above

B M T
Interest 10,633 10,633 21,267
Remainder 25,367 25,367 50,733
As Dist. 36,000 36,000 72,000

7. The distribution of income on the basis of the following agreement:

Beth: Salaries, P10,000; remainder 2/5. Mayet: Salaries, P12,000; remainder, 3/5.

a. P30,000 and P42,000 c. P42,000 and P30,000

b. P54,000 and P78,000 d. None of the above
B M T
Salaries 10,000 12,000 22,000
Remainder 20,000 30,000 50,000
As Dist. 30,000 42,000 72,000

8. The distribution of income on the basis of the following agreement:

Beth: Salaries, P10,000; interest on beg. Capital, 5%; bonus, 5% of net income.
Mayet: Salaries, P12,000; interest on beg. Capital, 5%.
Remainder divided equally.

a. P37,400 and P34,600 c. P35,000 and P37,000

b. P34,600 and P37,400 d. None of the above

B M T
Salaries 10,000 12,000 22,000
Interest 6,000 6,000 12,000
Bonus 3,600 3,600
Remainder 13,760 20,640 34,400
As Dist. 33,360 38,640 72,000

PART 4: In 2020, Lalaine Gomez Company reported the following summary transactions:

a. Authorized common stock, 50,000 shares at P50 par.

b. Issued common stock 30,000 shares at P70 per share.
c. Issued common stock, 5,000 shares for land. The fair value of the common stock is P60 per share and the fair
value of land is P275,000.
d. Accumulated profit (losses) - unappropriated, P2,000,000 (beginning balance).
f. Net income, December 31, 2020, P1,000,000 before closing to Accumulated profit (losses).
g. Treasury stock, 5,000 shares acquired at P40 per share included in appropriation.
Required:
1 Prepare all the journal entries using journal entry method.
ONE (1) POINT PER DOTTED ITEM, UNLESS STATED. = 16
a. Unissued Share Capital 2,500,000
Authorized Share Capital 2,500,000
#
b Cash 2,100,000
Unissued Share Capital 1,500,000
Share Premium 600,000
#
 c. Land 275,000
Unissued Share Capital 250,000
Share Premium 25,000
#

d. N/A (2 POINTS)

f. Income and Expense Summary 1,000,000

Accumulated Profits/losses 1,000,000
#
g. Treasury Stock 200,000
Cash 200,000
#
Accumulated Profits/losses 200,000
Accumulated Profits/losses
appropriated for treasury
Shares 200,000
#

2 Prepare the stockholders' equity portion of the balance sheet as of December 31, 2020.

Stockholders' Equity
Common stock, 50T sh. authorized,
35,000 sh. issued @ 50 par P 1,750,000
Share Premium 625,000
Total Contributed Capital P 2,375,000
Accumulated Profits/losses
Unappropriated P 2,200,000
Appropriated for TS 200,000 2,400,000
Tot. Contributed capital & Accu. P/L P 4,775,000
Less: Treasury shares 200,000
Total Shareholders' Equity P 4,975,000 Regardless of the process used, final
answer will be TEN (10) POINTS
3 Give the correct amount of the following:
THREE (3) POINTS PER ITEM = 15

a. Total Stockholders' equity 4,975,000

b. Total Accumulated profit (losses) - unrestricted 2,200,000
c. Total unissued shares 15,000 Sh.
d. Total issued shares 35,000 Sh.
e. Total Accumulated profit (losses) - restricted 200,000

PART 5:
The following data were taken from the records of Valencia Fritti Corporation
Share Capital, P60 par, 8,000 shares authorized
3,500 shares issued 210,000
Share premium 85,000
Accumulated profits (Losses) 150,000

The Corporation reacquires 1,500 shares at P75 per share, and later sold all these shares for:
a. P75 per share
b. P90 per share
c. P60 per share
Required:
ONE (1) POINT PER DOTTED ITEM. = 12
1 Journal entry for treasury shares acquisition.
Treasury Shares 112,500
Cash 112,500
#
Accumulated profits/losses 112,500
Accumulated Profits/losses
appropriated for treasury
Shares 112,500
#
2 Journal entry for the sale of treasury shares under the three given cases.
a. Cash 112,500
Treasury Shares 112,500
#
b. Cash 135,000
Treasury Shares 112,500
Share Premium 22,500
#
c. Cash 90,000
Accu. Profits/losses 22,500
Treasury Shares 112,500
#
PART 6: Provide the necessary required items. Show your solution in good form.
Modem Corporation's Income and Exapense Summary and accumulated Profits (losses) accounts prior to final
closing showed the following postings:

Requirement:
A. How much is the corporation's Profit/loss during 2020 operations? Specify if answer is profit/loss
Revenue 3,450,000
Expenses 2,014,563
Profit 1,435,437 3 POINTS

B. Journal entry on closing profit/loss to accumulated profits (losses) account.

Income & Expense Summary 1,435,437

Accu. Profits/losses 1,435,437
#

C. Accumulated profits (losses) account as of December 31, 2020

Accumulated profits (losses), Beg. 1,560,000

Profit, 2020 1,435,437
Accumulated profits (losses), end. 2,995,437 3 POINTS

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