MIDTERM EXAMINATION IN PARTNERSHIP

I. Write TRUE if the statement is correct or FALSE if otherwise. Write your answers before the
number.
___________1. A written partnership contract is required to be prepared whenever a partnership is formed.
___________2. Any partner can legally bind all the partners by any action for the partnership.
___________3. A partnership has no power of succession.
___________4.In the partnership books, there are as there are as many capital and drawing accounts as there
are partners.
___________5. The minimum number of owners composing a partnership must at least two natural persons.
___________6. A partnership is much easier and less expensive to organize than a corporation.
___________7. Every partner is assumed as an agent of the partnership.
___________8. All partnerships have at least one general partner.
___________9. Each partner generally has the authority to enter into contracts which are binding upon the
partnership.
__________10. The property invested in a partnership by a partner becomes the property of the partnership.
__________11. In the basic accounting equation, the partnership owner’s capital is equal to the net asset of
the partnership business.
__________12. A partnership’s deficit is normally a credit balance.
__________13.Under the bonus method, the capital contributed by the partners should be equal to their
agreed total contribution.
__________14. The amount of capital contribution to be made by the partners could be based on the partner’s
agreement.
__________15.A partner’s personal drawings in anticipation of partnership’s profit should be credited to the
partner’s capital account.
__________16.If there is no agreed value on noncash assets contributed by the partners, these should be
recorded in the partnership’s books at their fair value.
__________17.The partner’s interest in the partnership assets is always proportionate to his interest in the
partnership’s profit and loss.
__________18.In the absence of partner’s agreement, the partners must contribute the partnership’s total
agreed capitalization equally.
__________19.In closing the books of the sole proprietor which is converted into a partnership, the closing
entries likewise include the closing of real accounts.
__________20.The entry to record the acceptance and the skill to be contributed by an industrial partner is
through a memorandum entry.
__________11.Temporary withdrawals of cash from partnership are charged to the partner’s

II. MULTIPLE CHOICE

Direction: Encircle the letter of the best answer.
1. The Articles of Co-Partnership should contain clear provisions on all of the following except:
a. Taxes paid by the partnership
b. Causes of partnership dissolution
c. Withdrawals allowed to partners
d. Profit-sharing ratio

2. When a partnership cannot pay its debts with business assets, the partners
a. Are not personally liable for the debts
b. Have limited personal liability
c. Must convert the partnership to a joint venture
d. Must use their personal assets to meet the debts

3. A partner who takes active part in the business but whose connection with the partnership is concealed
to the public is known as a/an
a. Silent partner
b. Secret partner
c. Nominal partner
 d. Ostensible partner
4. A partnership which has failed to comply with one or more of the legal requirements for its
establishment is classified as a/an
a. Open partnership
b. De jure partnership
c. De facto partnership
d. Secret partnership

5. All of the following are true of a partnership except

a. it must be a business for profit
b. the formation requires no written agreement
c. there may be 100 partners
d. all of the above statements are true

6. Partnership is formed by the partners by:

a. Written agreement
b. Oral agreement
c. Written or oral
d. None of these

7. The members of partnership firm are individually called as:

a. Director
b. Investor
c. Partner
d. Manager

8. The object of partnership is to:

a. Earn profit  
b. Not to earn profit
c. Welfare of members
d. None of these

9. A partnership is
a. Any association of two or more individuals
b. An association of two or more persons to carry on a business for a profit, as co-owners
c. Not a separate legal entity for legal purpose
d. An entity created by following statutory requirements

10. A principle which states that the business is separate and distinct from the owners
a. Individual theory
b. Accounting theory
c. Substance over form
d. Materiality

III. PROBLEMS
1. The DEF partnership reported net income of $130,000 for the year ended December 31, 2008. According to the
partnership agreement, partnership profits and losses are to be distributed as follows:

   
How should partnership net income for 2008 be allocated to D, E, and F?
     
A. Option A
B. Option B
C. Option C
D. Option D

11. The JPB partnership reported net income of $160,000 for the year ended December 31, 2008. According to the
partnership agreement, partnership profits and losses are to be distributed as follows:

   
How should partnership net income for 2008 be allocated to J, P, and B?

    
A. Option A
B. Option B
C. Option C
D. Option D

 The APB partnership agreement specifies that partnership net income be allocated as follows:

   

Average capital balances for the current year were $50,000 for A, $30,000 for P, and $20,000 for B.

 12. Refer to the information given. Assuming a current year net income of $150,000, what amount should be allocated to
each partner?

 
A. Option A
B. Option B
C. Option C
D. Option D

13. Refer to the information given. Assuming a current year net income of $50,000, what amount should be allocated to
each partner?

A. Option A
B. Option B
C. Option C
D. Option D

Bolano, Baler and Bensan are partners in an accounting firm. Their capital account balances at year-end were P180,000,
P220,000 and P100,000, respectively. They share profits and losses on a 4:4:2 ratio, after considering the following terms.
a. Bensan is to receive a bonus of P10% of profit after bonus.
b. Interest of 10% shall be paid on that portion of a partner’s capital in excess of P200,000
c. Salaries of P20,000 and P24,000 shall be paid to partners Bolano and Bensan, respectively.

Assuming a profit of P220,000 for the year, the total profit share of Bensan was

a. P50,800 c. P38,800
b. P54,800 d. P74,800
c. The partnership agreement of G. Banal and H. Bernal provides that interest at 10% per year is to be
credited to each partner on the basis of average capital balances. A summary of Bernal’s account for
the year ended December 31, 2016 is as follows:

Balance, January 1 P 560,000

Additional investment, July 1 160,000

Withdrawal, August 1 ( 60,000)

Balance, December 31 P 660, 000

Instruction:

a. Compute for the average capital of Bernal.

Compute for the amount of interest that should be credited to the capital account of Bernal for the year 2016