Asynchronous 3

Mark Anthony t.
Conda
1570-19
Asynchronous class 3
1.The JPB partnership reported net income of P160,000 for the year ended December 31,
20x4. According to the partnership agreement, partnership profits and losses are to be
distributed as follows:
J P B
Salaries P P60,000 P30,000
50,000
Bonus on net income 10% 5% 10%
Remainder (if positive) 60% 30% 10%
Remainder (if negative) 30% 40% 30%

How should partnership net income for 20x4 be allocated to J, P, and B?
J P B
A. P96,000 P48,000 P16,000
B. P58,000 P64,000 P38,000
C. P60,000 P60,000 P40,000

D. P66,000 P68,000 P46,000
Solution:
Net Income: 160,000
J P B Total
Salaries 50,000 60,000 30,000 140,000
Bonus on Net income 16,000 8,000 16,000 40,000
Remainder (Negative) (6,000) (8,000) (6,000) (20,000)
Total 60,000 60,000 40,000 160,000

Correct Answer: (C) 60,000; 60,000; 40,000

2. DO is admitted into the partnership of RE and MI by investing cash equivalent to ¼ of
their capital. Which of the following is true after the admission of DO?
A. Assets of the partnership will increase
B. Total partners’ equity remain the same
C. RE and MI capital decreased by ¼
D. Assets of the partnership will remain the same

Correct Answer: (A)

For numbers 3-4, refer to the problem below:
The following condensed balance sheet is presented at February 18, 2018 for the
partnership of Dana and Janis, who share profits and losses in ratio of 60:40,
respectfully.
Cash P150,000 Accounts payable P120,000
Non-cash assets 300,000 Dana, Capital 195,000
Dana, Loan 20,000 Janis, Capital 155,000

The non-cash assets realized P250,000 in actual liquidation
3. How much would Dana receive if cash is distributed to the partners just before the start
of actual liquidation?
A. P 5,000
B. P 18,000
C. P 30,000
D. P 0
Solution:
Other assets P150,000
300,000
450,000
Dana, loan 20,000
P470,000

Accounts payable P120,000
Dana, capital 195,000
Janis, capital 155,000
P470,000
Correct Answer: (D) 0
There is no cash received by Dana just before the start of the actual liquidation.

4. How much cash would Janis receive upon final liquidation, assuming no prior cash
distribution had been made to the partners.
A. P 135,000
B. P 145,000
C. P 100,000
D. P 0

Solution:
Cash P150,000 Accounts payable P120,000 150,000-120,000 = 30,000
Non-cash assets 300,000 Dana, Capital 195,000 300,000-195,000 = 105,000
Total: 135,000
Correct Answer: (A) 135,000

5. PP contributed P24,000 and CC contributed P48,000 to form a partnership, and they
agreed to share profits in the ratio of their original capital contributions. During the first year of
operations, they made a profit of P16,290; PP withdrew P5,050 and CC P8,000. At the start of
the following year, they agreed to admit GG into the partnership. He was to receive a one-
fourth interest in the capital and profits upon payment of P30,000 to PP and CC, whose capital
accounts were to be reduced by transfers to GG’s capital account of amounts sufficient to bring
them back to their original capital ratio.
How should the P30,000 paid by GG be divided between PP and CC?
A. PP, P 9,825; CC, P 20,175
B. PP, P 15,000; CC, P 15,000
C. PP, P 10,000; CC, P 20,000
D. PP, P 9,300; CC, P 20,700
(Dayag, 2015)
Solution:
PP CC Total
Capital balances before net income ......... P 24,000 P48,000 P72,000
Net income (24:48) or (1/3:2/3) ............ 5,430 10,860 16,290
Drawings ............................................... (5,050) (8,000) (3,050)
Capital balances before admission ......... P24,380 P50,860 P75,240

Amount paid ....................................................................... P30,000
Partnership
Less: Book value of interest acquired (P75,240 x ¼)................. 18,810
Gain of PP and C............................................................ P 11,190
Therefore, the P30,000 cash should be allocated as follows:
PP CC Total
Capital balances before admission ............. P24,380 P50,860 P75,240
Required capital balances
[P & L Ratio –1/3; 2/3 of
P56;430 (P75,240 –P18,810)] ...................... 18,810 37,620 56,430
Transfer of capital to needed to
bring back to original capital ratio ............... P 5,570 P 13,240 P 18,810
Add: Personal gain (refer above), 1/3, 2/3 ... 3,730 7,460 11,190
Personal cash distribution ...................... P9,300 P 20,700 P 30,000
Correct Answer: (D) PP, P 9,300; CC, P 20,700
6. Scott, Joe, and Ed are liquidating their partnership. At the date the liquidation begins
Scott, Joe, and Ed have capital account balances of P162,000, P192,500, and P215,000,
respectively and the partners share profits and losses 40%, 35%, and 25%, respectively. In
addition, the partnership has a P36,000 Notes Payable to Scott and a P20,000 Notes Receivable
from Ed. When the liquidation begins, what is the loss absorption power with respect to Joe?
A. P192, 500
B. P 67,375
C. P550,000
D. P770,000
(Dayag,
2015)
Solution:
Joe: 192,500/35%=550,000
Absorption losses of other partners:
Scott: (162,000+36,000)/40%=495,000
Ed: (215,000-20,000)/25%=780,000
Correct Answer: (C) 550,000

7. Which of the following is not considered a legitimate expense of a partnership?
A. Interest paid to partners based on the amount of invested capital
B. Depreciation on assets contributed to the partnership by partners
C. Salaries for management hired to run the business
D. Supplies used in the partners’ offices
(Punzalan,
2014)
Solution/Explanation:
Correct Answer: D. Supplies used in the partners' offices
Because the members' offices are not deemed to be part of the firm, this kind of
expenditure is not accepted as a valid cost for a partnership. The members' offices are utilized
for personal purposes only and do not include any business-related materials of any kind.
Other Option:
A. Interest accrued and distributed to partners depending on the total amount of money
invested
Because this is an expenditure that is directly tied to the amount of money that each
partner
has invested in the firm, it may be deemed a valid expense for a partnership.
B. Impairment on assets that the partners individually provided to the partnership
Because it is a cost that is directly tied to the contribution of the partners' assets to
the firm, this is taken into consideration to be a valid expense for a partnership.
C. Wages paid to management that has been brought in to operate the company
Since this is an expenditure that is directly tied to the running of the firm, this is
taken into consideration to be a valid cost for a partnership.

8. In the AA-BB partnership, AA and BB had a capital ratio of 3:1 and a profit and loss ratio
of 2:1 respectively. The bonus method was used to record CC’s admittance as a new partner.
What ratio would be used to allocate, to AA and BB, the excess of CC’s contribution over the
amount credited to CC’s capital account?
A. AA and BB’s new relative ratio.
B. AA and BB’s new relative profit and loss ratio.
C. AA and BB’s old capital ratio.
D. AA and BB’s old profit and loss ratio.
(Dayag 2013)
The bonus method implied that the old partner either received a bonus from the new
partner, or they paid a bonus to the new partner. In this case, CC, the new partner invested an
amount in excess of the amount credited to CC’s capital account. Accordingly, the excess should
be treated as bonus to AA and BB. This bonus should be treated as an adjustment to the old
partners’ capital accounts and should be allocated by using AA and BB’s old profit and loss
ratio.
Correct Answer: (D) AA and BB’s old profit and loss ratio
9. The following is the priority sequence in which liquidation proceeds will be distributed
for a partnership:
A. Partnership drawings, partnership liabilities, partnership loans, partnership
capital balances
B. Partnership liabilities, partnership loans, partnership capital balances.
C. Partnership liabilities, partnership loans, partnership drawings, partnership
capital balances.
D. Partnership liabilities, partnership capital balances, partnership loans

10. Partnership capital and drawings accounts are similar to the corporate
A. Paid in capital, retained earnings, and dividends accounts.
B. Retained earnings accounts
C. Paid in capital and retained earnings accounts
D. Preferred and common stock accounts.
(Punzalan, 2014)

11. An advantage of the partnership as a form of business organization would be
A. Partners do not pay income taxes on their share in partnership income.
B. A partnership is bound by the act of the partners.
C. A partnership is created by mere agreements of the partners.
D. A partnership may be terminated by the death or withdrawal of a partner.
(Punzalan, 2016)
12. In the liquidation of a partnership it is necessary to (1) distribute cash to the
partners; (2) sell non-cash assets; (3) allocate any gain or loss on realization to the
partners; and (4) pay liabilities. These steps should be performed in the following order

A. 2,3,4,1
B. 2,3,1,4
C. 3,2,1,4
D. 3,2,4,1
(Punzalan,
2016)
Correct Answer: (A) In liquidation of partnership, it should be in this order:
1 sell non-cash assets
2 allocate any gain or loss on realization to the partners; and
3 pay liabilities.
4 distribute cash to the partners
13. It is the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the business.
A. Dissolution
B. Liquidation
C. Incorporation
D. Break-up
(Millan,
2017)
14. On January 1, 2016, Atta and Boy agreed to form a partnership contributing their
respective assets and equities subject to adjustment. On that date, the following were
provided:
Atta Boy
Cash 28,000 62,000
Accounts receivable 200,000 600,000
Inventories 120,000 200,000
Land 600,000
Building 500,000
Furniture and Fixtures 50,000 35,000
Intangible assets 2,000 3,000
Accounts Payable 180,000 250,000
Other liabilities 200,000 350,000
Capital 620,000 800,000
The ff adjustments were agreed upon:
A. Accounts receivable of P 20,000 and P 40,000 are uncollectible in A’s and B’s
respective books.
B. Inventories of P 6,000 and P 7,000 are worthless in A’s and B’s respective books
C. Intangible assets are to be written off in both books.
What will be the capital balances of the partners after adjustments?
Atta Boy
A.592,000 750,000
B. 600,000 700,000
C. 592,000 756,300
D. 600,000 750,000
[Text Wrapping Break](Punzalan, 2016)
Solution:
Atta Boy
Capital balances before adjustments 620,000 800,000
a. Uncollectible accounts receivable (20,000) (40,000)
b. Worthless inventories (6,000) (7,000)
c. Intangible assets written off (2,000) (3000)
Adjusted capital balances 592,000 750,000

When assets other than cash are invested into the partnership, it is necessary for the
partners to agree upon the value of such assets. The assets are recorded in accordance with
the agreement and the partners’ capital accounts are credited for the amounts of the
respective investments. The effects of the adjustments to the capital accounts should be in
accordance with the accounting equation (Asset = Liabilities + Capital).
Correct Answer: (A) 592,000 750,000

15. Partner Ae first contributed P50,000 of capital into existing partnership on March 1, 2016.
On June 1, 2016, said partner contributed another P20,000. On September 1, 2016, he
withdrew P15,000 from the partnership. Withdrawal in excess of P10,000 are charged to
partner’s capital accounts. What is the annual weighted average capital balance of Partner
Ae?
A. 32,500
B. 51,667
C. 60,000
D. 48,333
(Punzalan, 2016)
Solution:
Mar. 1 50000 10/12 41,667
Jun. 1 20000 7/12 11,667
Sept. 1 -5000 4/12 (1,667)
51,667
Correct Answer: (B) 51,667

16. Maxwell is trying to decide whether to accept a salary of P 40,000 or salary of P
25,000 plus a bonus of 10% of net income after salaries and bonus as a means of
allocating profit among partners. Salaries traceable to the other partners are estimated
to be P 100,000. What amount of income would be necessary so that Maxwell would
consider choices to be equal
A. 165,000
B. 290,000
C. 265,000
D. 305,000
(Punzalan, 2016)
Solution:
To equate P40,000 to P25,000 plus bonus, the bonus should amount to P15,000 (P40,000 –
P25,000).
Based on the foregoing the following equation should be developed:
Bonus = 10% (NI – Salaries – Bonus)
P15,000 = .10 [NI – (P100,000+P25,000) – P15,000]
P15,000 = .10 (NI –P140,000)
P15,000 + P14,000 = NI
P29,000/.10 = NI = P 290,000


For numbers 17 and 18 refer to the problem below:
On June 30, 2016, the condensed balance sheet for the partnership of Eddy, Fox, and
Grimm together with their respective profit and loss sharing percentage, were as follows:

Assets, net of liabilities P 320,000

Eddy, Capital (50%)P 160,000
Fox, Capital (30%) 96,000 Grimm, Capital
(20%) 64,000
Total Capital P 320,000
17. Eddy decided to retire from the partnership by mutual agreement is to be paid P
180,000 out of partnership funds for his interest. Total goodwill implicit in the
agreement is to be recorded. After Eddy’s retirement, what will be capital balances of
the other partners?
Fox Grimm
A. 84,000 56,000
B. 102,000 68,000
C. 108,000 72,000
D. 120,000 80,000
(Punzalan, 2016)
Solution:
Amount paid...................................................................................... P 180,000
Less: BV interest of DD (50%).............................................................160, 000
Excess / Partial goodwill..................................................................... P 20,000
Divided by/capitalized at.................................................................... 50%
Total goodwill...................................................................................... P 40,000
Therefore, the capital of the remaining partners:
FF: [P96,000 + (P 40,000 x 30%)].................................................... P 108,000
GG: [P64,000 + (P40,000 x 20%)]................................................... P 72,000
Correct Answer: (C) 108,000 72,000
The capital interest and profit and loss ratio are assumed to be the same.

18. Assume instead that Eddy remains in the partnership and that Hamm is admitted
as a new partner with 25% interest in the capital of the new partnership for a cash
payment P140,000. Total goodwill implicit in the transaction is to be recorded.
Immediately after admission of Hamm, Eddy’s capital account balance should be

A. 280,000
B. 210,000
C. 160,000
D. 140,000
Hamm will be going to pay a cash of P140,000 for a 25% interest in the partnership. This
means that the net assets of the partnership, including the new investment, are worth P560,000
(P140,000 ÷ 25%). Net assets are currently reported at P320,000, and Hamm's cash payment of
P140,000 brings that total up to P460,000. Hence, implied goodwill is P100,000 [P560,000 -
(P320,000 + P140,000)]. When goodwill is recorded, the entry is, the goodwill account is
debited, and the partners' capital accounts are credited for their share of goodwill. Therefore,
Eddy's capital balance, which is P160,000 is increased by his share of the goodwill P50,000 (50%
× P100,000), resulting to a total capital balance of $210,000 (P160,000 + P50,000).

For numbers 19-20 refer to the problem below:
The ABC Partnership has assets with book value of P240,000 and a market value of
P195,000, outside liabilities of P70,000, loans payable to Partner Able of P20,000,
and capital balances for Partners Able, Baker and Chapman of P70,000, P30,000 and
P50,000, respectively. The partners share profits and losses equally.

19. How would the first P100,000 of available assets be distributed?
A. P70,000 to outside liabilities, P20,000 to able and balances equally
among partners
B. P70,000 to outside liabilities, and P30,000 to Able
C. P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman
D. P40,000 to Able, P20,000 to Chapman, and the balance equally among partners
(Punzalan,
2017)
Solution:
Assets available amount of 100000 will be distributed as follows:
1) outside liability of 70,000
2) loan payable to Able 30,000
Correct Answer: (B)

20. If all outside creditors and loans to partners had been paid. How would the
balance of the assets be distributed assuming Chapman had already received assets
with a value of P30,000?
A. Each of the partners would receive P30,000
B. Each of the partners would receive P40,000
C. Able: P70,000; Baker: P30,000; Chapman: P20,000
D. Able: P55,000; Baker: P15,000; Chapman: P5,000
(Punzalan, 2017)

Priority 1 – Able (60, 000)
Balances 150, 000 90, 000 150, 000
Priority 2 – Able & Chapman (60, 000) (60, 000)
Balances (P & L) 90, 000 90, 000 90, 000

Payments by Priority: Able Baker Chapman
Priority 1 (60, 000 x 1/3) 20, 000
Priority 2 (60, 000 x 1/3) 20, 000 20, 000

Cash Able Baker Chapman
MV of assets 195, 000
Liabilities (70, 000)
Able, Loan (20, 000)
Balance 105, 000
Priority 1 (20, 000) 20, 000
Balance85, 000
Priority 2 (40, 000) 20, 000 20, 000
Balance 45, 000
Priority 3 (45, 000) 15, 000 15, 000 15, 000
Total 55, 000 30, 000 35, 000
Less: Asset taken by Chapman 30, 000
Balance 55, 000 15, 000 5, 000

Correct Answer: (D) Able: P55,000; Baker: P15,000; Chapman: P5,000

21. If a partner’s capital balance is credited for an amount greater than or less than
the fair value of his net contribution, the excess or deficiency is called a
B. Bonus
C. Goodwill
D. Discount
E. Premium
(Millan, 2016)

22. Before allocation of loss, which of the following items are allocated first?
A. Salaries
B. Bonuses to partners
C. Interest on the capital of an industrial partner
D. All of these
(Millan,
2016)

23. After the admission of a new partner, the total partnership capital increased by
the fair value of the new partner’s net contributions to the partnership. The admission
was accounted for
F. Under the goodwill method
G. Under the bonus method
H. As a purchase of interest
I. As an investment in the partnership
(Millan, 2016)
24. On May 1, 2016, Cobb and Mott formed a partnership and agreed to share
profits and losses in the ratio of 3:7, respectively. Cobb contributed a parcel of land
that cost him P10,000. Mott contributed P40,000 cash. The land was sold for P18,000
on May 1, 2016, immediately after formation of the partnership. What amount should
be recorded in Cobbs’s capital account on formation of the partnership?
A. 18,000
B. 17,400
C. 15,000
D. 10,000
(Punzalan, 2018)
The capital contributed by Cobb should be recorded at its fair value on the date of
contribution. The land was sold for 18,000 on the day it was contributed to the partnership.
Accordingly, this price is a reasonable measure of the fair value at that date. Cobb's capital
account should therefore be credited for 18,000.

For numbers 25 to26:
The Grey and Redd Partnership was formed on January 2, 2016. Under the partnership
agreement, each partner has an equal initial capital balance. Partnership net income or loss
is allocated 60% to Grey and 40% to Redd. To form the partnership, Grey initially
contributed assets costing P30,000 with a fair value of P60,000 on January 2, 2016, and
Redd contributed P20,000 cash. Drawings by the partners during 2016 totaled P3,000 by
Grey and P9,000 by Redd. The partnership net income in 2016 was P25,000.
(Punzalan 2018)

25. Under the goodwill method, what is Redd’s initial capital balance in the partnership?
A. 20,000
B. 25,000
C. 40,000
D. 60,000

Solution:
Contributed Capital Agreed Capital Increase(Decrease)
Grey 60,000 60,000
Redd 20,000 60,000 40,000
Total 80,000 120,000 40,000

Correct Answer: (D) 60,000
The partnership agreement provides for equal initial capital. Thus, under the goodwill
method, the capital credit for Redd should be the same as the contribution of Grey,
thereby increasing the total agreed capital to P120,000, which is P40,000 more than the total
contributed capital (goodwill).

26.Under the bonus method, what is the amount of bonus?
A. 20,000 bonus to Grey
B.20,000 bonus to Redd
C. 40,000 bonus to Grey
D. 40,000 bonus to Redd

Solution:
Grey 60,000 40,000 (20,000)
Redd 20,000 40,000 20,000
Total 80,000 80,000

Correct Answer: (B) 20,000 bonus to Redd
The partnership agreement provides for equal initial capital. Thus, under
the
bonus method, the capital credit for Redd should be the same as the contribution for
Grey,
resulting to P20,000 bonus from Grey to Redd.

27. If a partnership has net income of P44,000 and Partner X is to be allocated bonus of
10%
of income after the bonus, what is the amount of bonus Partner X will receive?
A. 3,000
B. 3,300
C. 4,000
D. 4,400
(Punzalan, 2018)
Solution:
Bonus = 10% (NI –Bonus)
B = .10 (P44,000 –B)
B = P4,400 -.10B
1.10B = P4,400
B = P4,000
28. A partnership has the following accounting amounts:

Sales P700,000
Cost of goods sold 400,000
Operating expenses 100,000
Salary allocations to 130,000
partners
Interest paid to banks 20,000
Partners' drawings 80,000
What is the partnership net income (loss)?
A. 200,000
B. 180,000
C. 50,000
D. (30,000)
(Punzalan,
2018)

Solution:
Sales 700,000
Cost of Goods Sold (400,000)
Gross Margin 300,000
Operating Expenses (100,000)
Total 200,000
Interest Paid to Banks (20,000)
Net Income (loss) 180,000

29. Ranken purchases 50% of Lark’s capital interest in the K and L partnership
for P22,000. If the capital balances of Kim and Lark are P40,000 and P30,000,
respectively, Ranken’s capital balance following the purchase is
A. 22,000
B. 35,000
C. 20,000
D. 15,000
(Punzalan, 2018)
Solution:
Ranken's capital (50% x 30,000) =15,000
When a new partner deals directly with an existing partner or partners rather than
with the partnership entity, the acquisition price is paid to the selling partner/s and not to
the partnership itself. The partnership records the redistribution of capital interests by
transferring all or a portion of the seller’s capital to the new partner’s capital account but
does not record the transfer of any asset or consideration.
30. The following condensed balance sheet is presented for the partnership of Smith
and Jones, who share profits and losses in the ratio of 60:40, respectively:
Other assets P 450,000
Smith, loan 20,000
P 470,000

Accounts payable P120,000
Smith, capital 195,000
Jones, capital 155,000
P 470,000
The partners decided to liquidate the partnership. If the other assets are sold for
P385,000, what amount of the available cash should be distributed to Smith?
A. 136,000
B. 156,000
C. 159,000
D. 195,000
(Punzalan, 2018)
Solution:
When the partnership sells the other assets, it must recognize a loss of 65,000
(450,000 - 385,000). This loss must be allocated to the partners based on their loss
ratio of 60:40. Thus, Smith's capital account is reduced to 156,000 [195,000 -
(65,000x60%)]
and Jones's to 129,000 [155,000 - (65,000 x 40%)]. The accounts payable are then paid,
leaving
assets of 265,000. Finally, the balance of the loan is subtracted from Smith's capital
account
balance, and each partner receives the balance in his/her capital account. Thus, Smith
should
receive 136,000 in cash (156,000 - 20,000).

31. Flat and Iron partnership agreement provides for Flat to receive 20% bonus on
profits before bonus. Remaining profits and losses are divided between Flat and Iron in
the ratio 2:3, respectiviely. Ehich partner has greater advantage when the partnership
has a profit or when it has a loss

A. Profit: Flat; Loss: Iron
B. Profit: Flat; Loss: Flat
C. Profit: Iron; Loss: Flat
D. Profit: Iron; Loss: Iron
(Punzalan, 2018)
When the partnership has a loss, Iron is allocated 60% and Flat 40%. Hence, flat
has the advantage when the partnership has a loss. When the partnership has a profit,
Flat receives 20% plus 40% of the remaining 80%, a total of 52% [20% + (40% × 80%)] – X.
Thus, Flat also has the advantage in this situation.

Correct Answer: (B) Profit: Flat; Loss: Flat

32. During 2016, Young and Zinc maintained average capital balances in their
partnership of 160,000 and 100,000, respectively. The partners receive 10% interest on
average capital balances and residual profit, or loss is divided equally. Partnership profit
before interest was 4000. By what amount should Zinc’s capital account change for the
year?
A. 11,000 decrease
B. 2000 increase
C. 1000 decrease
D. 12000 increase
(Punzalan, 2018)
The partners are to receive 10% interest and then split the residual profit or loss.
Because interest exceeds partnership profit before interest, the residual loss is
22,000
{[(160,000 +100,000) x 10%] - 4,000). Zinc's capital balance is increased by 10,000
(100,000 x 10%) and decreased by 11,000 (22,000 loss x 50%), a net decrease of 1,000.
Correct Answer: (C) 1000 decrease
33. Mitz, Marc and Mart are partners sharing profits in the ratio of 5:3:2, respectively. As of
December 31, 2016, their capital balances were 95,000 for Mitz, 80,000 for Marc & 60,000 for
Mart. On Jan 1, 2017, the partners admitted Vince as a new partner and according to their
agreement, Vince will contribute 80,000 in cash to the partnership and also pay 10,000 for 15%
of Marc’s share. Vince will be given a 20% share in profits, while the original partners’ share will
be approximately the same as before. After the admission of Vince, the total capital will be
330,000 and Vince’s Capital will be 70,000.

The total amount of goodwill to the old partners, upon the admission of Vince would
be:
A. 7,000
B. 15,000
C. 22,000
D. 37,000

Solution:


Old partners
[235,000-(15% x 80,000) 223,000 260,000 37,000
New partner
[80,000+(15% x 80,000) 92,000 70,000 (22,000)
Total 315,000 330,000 15,000

Again, when the total agreed capital is more than the contributed capital, there is
goodwill and this amount of ₱15,000 will be distributed to the old partners using their original
profit and loss ratio. However, in the above computations, it should be pointed out that aside
from goodwill, the new partner provides bonus to old partners in the amount of ₱22,000
(decrease in the new partner’s capital).

34. The balance of Marc’s Capital, after admission of Vince would be:
A. 72,600
B. 74,600
C. 79,100
D. 81,100
(Punzalan,
2018)
Solution:
Marc’s capital before Vince’s admission 80,000
Interest purchased by Vince (15% x 80,000) (12,000)
Share in goodwill (30% x 15,000) 4,500
Share in bonus (30% x 22,000) 6,600
Marc’s capital after Vince’s admission 79,100


When an incoming partner purchases a portion or all of the interest of one or more of the
original partners, the partnership assets remain unchanged and the related amount paid for the
purchase should not be recorded in the books of the partnership for this is regarded as a
personal transaction between the selling partner/s and the buyer.

Bonus to old partners is recorded by making transfer from the contributed capital of the
new partner to the old partners’ capital accounts, which gives the new partners a capital credit
less than his actual investment. While Goodwill to old partners should be recognized by a debit
to Goodwill account, and the resulting credit should be to old partners’ capital accounts
allocated based on their profit and loss ratio.

35. As of Dec 31, the books of AME Partnership showed capital balances of A - 40,000; M
25,000; E-5,000. The partners’ profit or loss ratio is 3:2:1, respectively. The partners decided to
dissolve and liquidate. They sold all the non-cash assets for 37,000 cash. After settlement of all
liabilities amounting to 12,000, they still have 28,000 cash left for distribution. The loss on
realization for distribution is
A. 40,000
B. 42,000
C. 44,000
D. 45,000
(Punzalan, 2018)
Solution:
Partnership Dissolution and Liquidation
Capital Balances
Cash Other Assets Liabilities A M E
Profit and loss ratio 3 2 1
Ending Balances 3,000 79,000 12,000 40,000 25,000 5,000
Sold Non-cash assets 37,000 (79,000) (21,000) (14,000)
(7,000)
Total 40,000 - 12,000 19,000 11,000
(2,000)
Payment of Liabilities (12,000) (12,000)
Total 28,000 0 19,000 11,000
(2,000)

Loss on realization of non-cash assets is calculated from the
Cash received from Sale of P37,000 minus the Cost of P79,000. Total: 42,000

36. In installment liquidation, which of the following statements is correct regarding
the partial settlement of the partners’ claims?
A. The claims of the partners and outside creditors are partially settled in proportion
B. No distribution is made to the partners until after all non-cash assets are realized
C. The carrying amount of unsold non-cash assets is treated as loss.
D. Estimates of future liquidation costs do not affect the distribution to the partners
(Milan,
2016)
37. Under the entity theory, a partnership is

A. Viewed as having its own existence apart from the partners
B. Viewed through the eyes of the partner.
C. A separate legal and tax entity
D. Unable to enter into contracts in its own name
(FT&C)
38. Which of the following statements is true concerning the treatment of salaries in
partnership accounting?
A. The salary of a partner is treated in the same manner as salaries of
corporate employees
B. Partner salaries are equal to the annual partner draw
C. Partner salaries may be used to allocate profits and losses; they are not
considered expenses of the partnership
D. Partners salaries are directly closed to the capital account
(FT&C)
39. Which of the following is true?
A. A stipulation that excludes one or more partners from any share in the profits or
losses is valid
B. The income summary account is credited in the entry to record the distribution
of profits
C. In the absence of any agreement, salary allowances to partners shall be provided
when the operations yield losses
D. Salary and interest allowances are reported in the statement of comprehensive
income as salaries and interest expense

40. Partners C & K share profits and losses equally after each has been credited in all
circumstances with annual salary allowances of 15,000 & 12,000, respectively. Under this
arrangement, C will benefit by 3,000 more than K in which of the following:
A. Only if the partnership has earnings of 27,000 or more for the year
B. Only If the partnership does not incur a loss for the year
C. In all earnings or loss situation
D. Only if the partnership has earnings of at least 3000 for the year
(FT&C 11e)
41. On June 30, 2015, the balance sheet of Western Marketing, a partnership, is
summarized as follows:
Sundry assets… P150,000
West, Capital… 90,000
Tern, Capital… 60,000
Wes and Tern share profit and losses at a 60:40 ratio, respectively. They agreed to take
in Cuba as a new partner, who purchases 1/8 interest of West and Tern for P25,000. What is
the amount of Cuba’s capital to be taken up in the partnership books if the book value
method is used?
A.
P12,500
B.
P18,750
C.
P25,000
D. P31,250
(Dayag, 2015)
Solutions:
Amount paid P 25,000
Less: Book value of interest acquired P 150,000 x 1/8 P 18,750
Gain of West and Tern P 6,250

The amount of Cuba’s capital to be taken up in the partnership books if the book value method
is used is 18,750.

42. In the AD partnership, Allen’s capital is P140,000 and Daniel’s is P40,000 and
they share income in a 3:1 ratio, respectively. They decide to admit David to the
partnership.

Allen and Daniel agree that some of the inventory is obsolete. The inventory account is
decreased before David is admitted. David invests P40,000 for a one-fifth interest. What is the
amount of inventory written down?

A. P4,000
B. P10,000
C. P15,000
D. P20,000
(Dayag,
2015)

Solution:
Total agreed capital after the admission of
David: (P40,000 x
5) P200,000
Less: Contribution/Investment of David 40,000
Capital balances of AD before the admission of David P160,000
Capital Contribution (P140,000 + P40,000) (180,000)
Reduction in Inventory P20,000
43. In the AD partnership, Allen’s capital is P140,000 and Daniel’s is P40,000 and
they share income in a 3:1 ratio, respectively. They decide to admit David to the
partnership. David directly purchases one-fifth interest by paying Allen P34,000 and
Daniel P10,000. The land account is increased before David is admitted. By what amount
is the land account increased?
A. P40,000
B. P36,000
C. P20,000
D. P10,000
(Dayag,
2015)
Solution:
Amount paid (P34,000 + P10,000) P 44,000
Less: Book value of interest acquired [(P140,000+P40,000) x 1/5] 36,000
Excess 8,000
Divided by/capitalized at 1/5
Amount of land increased P 40,000

44. RR and XX formed a partnership and agreed to divide initial capital equally, even
though RR contributed P25,000 and XX contributed P21,000 in identifiable assets. Under
the bonus method approach to adjust the capital accounts, XX’s unidentifiable assets
should be debited for:
A. P11,500
B. P4,000
C. P2,000
D. 0

(Dayag, 2015)

Under the bonus method, unidentifiable assets (i.e., Goodwill) are not recognized. The total
resulting capital is the FMV of the tangible investments of the partners. Thus, there would
be no unidentifiable assets recognized by the creation of this new partnership.
Correct Answer: (D) 0

45. Partner A first contributed P50,000 of capital into an existing partnership on
March 1, 2015. On June 1, 2015, the partner contributed another P20,000. On September 1,
2015, the partner withdrew P15,000 from the partnership. Withdrawals in excess of P10,000
are charged to the partner’s capital account. The annual weighted-average capital balance is
A. P62,000
B. P51,667
C. P60,000
D. P48,333
(Dayag,
2015)
Solutions:
The annual weighted-average capital would be:
March 1: ₱50,000 x 3 = ₱150,000
June 1: ₱70 000 x 3 = ₱210,000
September 1: ₱65,000 x 4 = ₱260,000
₱620,000
Divided by months per annum /12 months
₱51,667
The following should be noted:
1.Only P5,000 withdrawals should be deducted from capital to compute the average
capital.
2.The question is based on annual, therefore the denominator should be 12 months.
However, the 10-month weighted average capital would be P62,000
(P620,000/10months

46. For financial accounting purposes, assets of an individual partner contributed to a
partnership are recorded by the partner at
A. Historical cost
B. Book value
C. Fair market value
D. Lower of cost or market
(Dayag, 2015)

47. Which of the following interest component calculation bases is the least susceptible to
manipulation when allocating profits and losses to partners?
A. Beginning capital account balance
B. Average of beginning and ending capital balance
C. Weighted average capital account balance
D. Ending capital balance
(Dayag, 2015)

48. In a partnership, interest on capital investment is accounted for as a(n)
A. Return on investment
B. Expense
C. Allocation of net income
D. Reduction of capital
(Dayag, 2015)

49. What is the underlying purpose of the interest on capital balances component of allocating
partnership profits and losses?
A. Compensate partners who contribute economic resources to the partnership
B. Reward labor and expertise contributions
C. Reward for special responsibilities taken
D. None of the above

50. What is the underlying purpose of the salary component of allocating partnership profits
and losses?
A. Compensate partners who contribute economic resources to the partnership
B. Reward labor and expertise contributions
C. Reward for special responsibilities taken
D. None of the above
(Dayag, 2015)

51. A, B, and C are partners in an accounting firm. Their capital account balances at year-end
were A P90,000; B P110,000; C P50,000. They share profits and losses on a 4:4:2 ratio. after the
following special terms:
 Partner C is to receive a bonus of 10% of net income after the bonus.
 Interests of 10% shall be paid on that portion of a partner's capital in excess of
P100,000
 Salaries of P10,000 and P12,000 shall be paid to partners A & C respectively.
Assuming a net income of P44,000 for the year, the total profit share of Partner C was:
A. P7,800
B. P16,800
C. P19,400
D. P19,800
A B C TOTAL
Bonus* P4,000 P4,000
Interest: 10% (P110,000 -P100,000) P1,000 - 1,000
Salaries P10,000 - 12,000 22,000
Balance: 4:4:2 3,400 17,000
P19,400 P44,000
Bonus =10% (NI -Bonus)
B =.10 (P44,000 – B)
B = P 4,000 - .10B
1.10 B = P4,400
B = P4,400

52. X and Y are in partnership, sharing profits equally and preparing their accounts to 31
December each year. On 1 July 2015. Z joined in the partnership, and from that date profits are
shared X 40%,

In the year ended 31 December 2015, profits were:
6 months to 31 June 2015 P200,000
6 months to 31 December 2015 P300,000

It was agreed that X and Y only should bear equally the expense for a bad debt of P40,000
written-off in the six months to 31 December 2015 in arriving at the P300,000 profit.
Which of the following correctly states X's profit share for the year?
A. P216,000
B. P200,000
C. P220.000
D. P224,000
(Dayag, 2015)

53. Pol and Loc are partners with capitals of P200,000 and P100,000 and sharing profits and
losses 3:1 respectively. They agree to admit Chic as partner. Chic invests P125,000 for a 25%
interest in the firm. Parties agree that the total firm capital after Chic's admission is to be
P425,000.
The capital balances of the partners after Chic's admission are:
A. Pol. P214,062.50: Loc, P104,687.50; and Chic, P106,250
B. Pol, P200,000.00; Loc, P100,000.00; and Chic, P125,000
C. Pol, P239,062.50; Loc, P 79,687.50; and Chic, P125,000
D. Pol, P250,000.00; Loc, P125,000.00; and Chic, P100,000
(Guerrero, 2013)

54. Michelle, an active partner in the Michelle-Esme partnership receives an annual bonus of
25% of the partnership income after deducting the bonus. For the year ended, December 31,
2013, partnership income before the bonus amounted to P240,000. The bonus of Michelle for
the year 2013 is:
A. P45,000
B. P48,000
C. P80,000
D. P60,000
(Guerrero, 2013)

55. Rita, Sisa, and Tina are partners with the capital balances on June 30, 2013 of
P60,000,P60,000 and P40,000, respectively. Profits and losses are shared equally. Tina
withdraws from the partnership. The partners agree that Tina is to take certain furniture at
their secondhand value of P2,400 and cash for the balance of her interest. The furniture is
carried on the books as fully depreciated.
The amount of cash to be paid to Tina and the capital balances of the remaining partners after
the retirement of Tina are:
Cash Rita, Capital Sisa, Capital
A. P40,000 P60,000. P60,000
B. P37,000 P61,200 P61.200
C. P38,400 P60,800 P60,800
D. P42,800 P58,800. P58,800
(Guerrero, 2013)

For question 55-56 refer to the problem below
The AA, BB, CC Partnership was formed on January 2. 2019. The original cash
investments were as follows:
AΑ. P48,000
BB. P72,000
CC. P108,000
According to the general partnership contract, the partners were to be remunerated as
follows:
a. Salaries of P72,000 for AA, P6,000 for BB, and P6,800 for CC.
b. Interest at 12% on the average capital account balances during the year.
c. Remainder divided 40% to AA. 30% to BB, and 30% for CC.
Income before partners' salaries for the year ended December 31, 2019, was P46,040, AA
invested an additional P12,000 in the partnership on July 1: CC withdrew P18,000 from the
partnership on October 1, and, as authorized by the partnership contract, AA, BB, and CC each
withdrew P375 monthly against their shares of net income for the year.

56. Determine the share of partner AA in the net income:
A. P18,416
B. P17,616
C. P13,080
D. P5,880
(ReSA, 2018)

57. Determine the capital balance of partner CC on December 31, 2019;
A. P108,770
B. P104.270
C. P100,112
D. P99,312

58. If the salaries to partners are to be recognized as operating expenses by the partnership,
what amount is the share of partner BB in the net income?
A. P18,416
B. P14,190
C. P8,190
D. P7.8121
(ReSA, 2018)

(For question 59-60)
DD and EE was organized and began operations of March 1, 2019. On that date. DD invested
P75,000 and EE invested land and building with current fair value of P40,000 and P50,000,
respectively. EE also invested P30,000 in the partnership on November 1, 2019 because of its
shortage of cash. The partnership contract includes the following remuneration plan:
DD EE
Annual Salary P9,000 P12,000
Annual interest on average capital account balance 10%. 10%
Remainder. 60%. 40%
The annual salary was to be withdrawn by each partner in 12 monthly installments. During
fiscal year ended, February 28, 2020, DD and EE had net sales of P25,000, cost of goods sold of
P140,000 and total operating expenses of P50.000 (excluding partners' salaries and interest on
average capital account balances). Each partner made monthly cash drawings in accordance
with partnership contract
59. Determine the share of partner DD in the net income:
A. P29,400
B. P33,000
C. P36,000
D. P23,400
60. The capital balance of each partner on March 1, 2020 should be:
A. DD P95,400; EE P138,600
B. DD P66,000; EE P82,000
C. DD P108,000; EE P147,000
D. DD P99,000; EE P135,000
(ReSA. 2018)

A. Supplies used in the partners' office
B. Depreciation on assets contributed to the partnership by partners
C. Salaries for management hired to run the business
D. Interest paid to partners based on the amount of invested capital
Millan Textbook (2016)

62. If the partnership agreement does not specify how income is to be allocated, profits and
loss should be allocated
A. Equally.
B. In proportion to the weighted average of capital invested during the period.
C. Equitably so that partners are compensated for the time and effort expended on behalf of
the partnership.
D. In accordance with their capital contributions.
(Millan. 2016)

63. When Mill retired from the partnership of Mill. Yale, and Lear, the final settlement of Mill's
interest exceeded Mill's capital balance. Under the bonus method, the excess
A. Was recorded as goodwill.
B. Was recorded as an expense.
C. Reduced the capital balances of Yale and Lear.
D. Had no effect on the capital balances of Yale and Lear.
(Millan, 2016)

64. State the correct order of the claims on the personal assets of a partner,
I. The partner's separate creditors
II. To the other partner's by way of contribution
III. The partnership creditors

A. I, III, II
B. I, II, III
C. III, II, I
D. II, I, III
(Millan, 2016)

65. It is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business.
A. Dissolution
B. Liquidation
C. Incorporation
D. Break-up
(Millan, 2016)

66. MM, NN, and OO are partners with capital balances on December 31, 2012 of P300,000,
P300,000 and P200,000, respectively. Profits are shared equally. O0 wishes to withdraw and it is
agreed that OO is to take certain equipment with second-hand value of P50,000 and a note for
the balance of OO's interest. The equipment are carried on the books at P65,000. Brand new
equipment may cost P80,000. Compute for: (1) OO's acquisition of the second-hand equipment
will result to reduction in capital; (2) the value of the note that will 00 get from the
partnership's liquidation.
A. (1) P 15,000 each for MM and NN, (2) P150,000
B. (1) P5,000 each for MM, NN and 00, (2) P145,000
C. (1) P5,000 each for MM, NN and OO. (2) P195,000
D. (1) P7,500 each for MM and NN, (2) P145,000
(Dayag, 2013)

67. The partnership agreement of XX, YY and ZZ provides for the year-end allocation of net
income in the following order:

 First, XX is to receive 10% of net income up to P200,000 and 20% overP200,000.
 Second, YY and ZZ each are to receive 5% of the remaining income over
P300,000.
 The balance of income is to be allocated equally among the three partners.

The partnership's 2011 net income was P500,000 before any allocations to partners. What
amount should be allocated to XX?
A. P202,000
B. P216,000
C. P206,000
D. P220,000
(Dayag, 2013)

68. RR and XX formed a partnership and agreed to divide initial capital equally, even though RR
contributed P25,000 and XX contributed P21,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts. XX's unidentifiable assets should be debited for:

A. P11,500
B. P 4,000
C. P 2,000
D. P 0
(Dayag. 2013)

69. As of December 31, 2012, the books of Ton Partnership showed capital balances of T,
P40,000: O, P25,000: N. P5,000. The partner's profit and loss ratio was 3:2:1. respectively. The
partners decided to liquidate and they sold all non-cash assets for P37,000. After settlement of
all liabilities amounting P12.000, they still have cash of P28,000 left for distribution. Assuming
that any capital debit balance is uncollectible, the share of T in the distribution of the P28,000
cash would be:
A. P17,800
B. P18,000
C. P19,000
D. P17,000
(Dayag, 2013)

70. CC, PP and AA, accountants, agree to form a partnership and to share profits in the ratio of
5:3:2. They also agreed that AA is to be allowed a salary of P28,000, and that PP is to be
guaranteed P21,000 as his share of the profits. During the first year of operation, income from
fees are P180,000, while expenses total P96,000. What amount of net income should be
credited to each partner's capital account?
A. CC, P28,410, PP, P16,800, AA, P11,200
B. CC, P25,000, PP. P21,000, AA, P38,000
C. CC, P24,000, PP, P22,000, AA, P38,000
D. CC, P25,000, PP, P21,000, AA, P39,000
(Dayag, 2013)

71. Allen retired from the partnership of Allen, Beck and Chale. Allen's cash settlement from the
partnership was based on new goodwill determined at the date of retirement plus the carrying
amount of the other net assets. As a consequence of the settlement, the capital accounts of
Beck and Chale were decreased. In accounting for Allen's withdrawal, the partnership could
have used the:

BONUS METHOD GOODWILL METHOD
A. No. Yes
B. No. No
C. Yes. Yes
D. Yes No
(Milan, 2016)

72. Which of the following has the least priority of payment in case of partnership liquidation?
A. Priority claims such as artisans. Government, liquidation expenses
B. Secured creditors to the extent of covered by the proceeds from the sale of pledged assets.
C. Unsecured credit to the extent covered by proceeds from sale of unpledged (or free) assets.
D. The partners' capital balances.
(Milan 2016)

73. State the proper order of liquidation
I. Outside creditors
II. Owners' interests
III. Inside creditors

A. I, III, II
B. I, II, III
C. III, II, I
D. II, I, III
(Milan, 2016)

74. According to the Philippine Civil Code, if only the shares of each partner in the profits has
been agreed upon, the share of each in the losses shall be
A. equally
B. equally, but the industrial partner shall not share in the loss
C. the same as the sharing in profits
D. the same as the sharing in profits. However, the industrial partner shall not share in the loss.
(Milan, 2016)
A. Supplies used in the partners' offices.
B. Depreciation on assets contributed to the partnership by partners.
C. Salaries for management hired to run the business.
D. Interest paid to partners based on the amount of invested capital.
(Milan, 2016)

76. CC, PP and AA, accountants, agree to form a partnership and to share profits in the ratio of
5:3:2. They also agreed that AA is to be allowed a salary P28,000 and that PP is to be
guaranteed P21,000 as his share of the profits. During the first year of operation, income from
fees are P180,000, while expenses total P96,000. What amount of net income should he
credited to each partner's capital account?
A. CC, P28,000 PP, P16,800 AA, P11,200
B. CC. P25,000 PP, P21,000 AA, P38,000
C. CC, P24,000 PP, P22,000 AA, P38,000
D. CC. P25,000 PP. 21. 000 AA. P39, 000
(Dayag, 2015)

77. The same information in Number 32, except the partnership had a loss of P125, 624 after
the interest and salaries to partners, by what amount should BB's capital account change
increase(decrease)?
A. P (115,443)
B. 23,865
C. P (41,875)
D. (18,010)
(Dayag, 2015)

78. PP, QQ and RR. partners to a firm, have capital balances of P11, 200, P13, 000 and P5, 800,
respectively, and share profits in the ratio of 4:2:1. Prepare a schedule showing how available
cash will be given to the partners as it becomes available. Who among the partners shall be
paid first with an available cash of P1, 400?
A. QQ
B. No One
C. RR
D. PP

79. The August, Albert and Gerry partnership became insolvent on January 1, 2015, and the
partnership is being liquidate as as practicable. In this respect the following information for the
partners has been marshaled.

Capital Balances. Personal Assets. Personal Liabilities
August. P70,000. P80,000. P40,000
Albert -60,000 30,000 50,000
Gerry -30,000 70,000 30,000
Assume that residual profits and losses are shared equally among the three partners. Based on
this information, calculate the maximum amount that August can expect to receive from the
partnership liquidation is:
A. P20,000
B. 40,000
C. P70,000
D. 110,000
(Dayag, 2015)

80. RR and XX formed a partnership and agreed to divide initial capital equally, even though RR
contributed P25,000 and XX contributed P21,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts. XX's unidentifiable assets should be debited for:
A. 11,500. C. 2,000
B. 4,000. D.0
(Dayag, 2015)
81. Partnership capital and drawing accounts are similar to the corporate
A. Paid-in capital, retained earnings, and dividend accounts.
B. Retained earnings account.
C. Paid-in capital and retained earnings accounts.
D. Preferred and common stock accounts.
(Gleim)

82. The partnership agreement is an express contract among the partners (the owners of the
business). Such an agreement generally does not include
A. A limitation on a partner's liability to creditors.
B. The rights and duties of the partners.
C. The allocation of income between the partners.
D. The rights and duties of the partners in the event of partnership dissolution.
(Gleim)

83. A partnership records a partner's investment of assets in the business at
A. The market value of the assets invested.
B. A special value set by the partners.
C. The partner's book value of the assets invested.
D. Any of the above, depending upon the partnership agreement
(RPCPA 0598)

84. Assume that C has a P50,000 equity in the partnership of "A, B, and C." Partner C arranges
to sell his entire interest to D for P80,000 Cash. Partners A and B agree to the admission of D. At
what amount will the equity of the incoming partner, D. be shown in the balance sheet?
A. at P50,000.
B. at P50,000 and the P30,000 will be divided equally among the original partners.
C. at P80,000
D. at P80,000 and the P30,000 will represent Goodwill which will be apportioned between
E. the existing equities of A and B.
(RPCPA 107)
Albion and Blaze share profits and losses equally. Albion and Blaze receive salary allowances of
$20,000 and $30,000, respectively, and both partners receive 10% interest on their average
capital balances. Average capital balances are calculated at the beginning of each month
balance regardless of when additional capital contributions or permanent withdrawals are
made subsequently within the month. Partners' drawings are not used in determining the
average capital balances. Total net income for 2006 is $120,000.
Albion. Blaze
January 1 capital balances . $100,000. $120,000
Yearly drawings ($1.500 a month). 18,000. 18,000
Permanent withdrawals of capital:
June 3 (12,000)
May 2. (15,000)
Additional investments of capital:
July 3 40,000
October 2 50,000

85. What is the weighted-average capital for Albion and Blaze in 2006?
A. $100,000 and $120,000.
B. $105,333 and $126,667.
C. $110,667 and $119,583.
D.$126.667 and $105,333.

86. If the average capital for Albion and Blaze from the above information is $112,000 and
$119,000, respectively, what will be the total amount of profit allocated after the salary and
interest distributions are completed?
A. $70,000.
B. $73,100.
C. $75,000.
D. $80,000.
(Beams, 2009)
87. If the average capital balances for Albion and Blaze are $100,000 and $120,000, what will
the final profit allocations for Albion and Blaze in 2006?
A. $50,000 and $70,000.
B. $54,000 and $66,000.
C. $70,000 and $50,000.
D. $75,000 and $45,000.
(Beams, 2009)
For number 88 to 89 refer to the problem below: Bloom and Carnes share profits and losses in a
ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000,
also respectively, and both partners receive 10% interest based upon the balance in their
capital accounts on January 1. Partners' drawings are not used in determining the average
capital balances. Total net income for 2006 is $60,000. If net income after deducting the
interest and salary allocations is greater than $20,000, Carnes receives a bonus of 5% of the
original amount of net income.
Bloom Cames
January 1 capital balances. $200,000. $300,000
Yearly drawings ($1.500 a month). 18,000. 18,000

88. What are the total amounts for the allocation of interest, salary, and bonus, and, how much
over-allocation is present?
A. $60,000 and $0.
B. $80,000 and $20,000.
C. $83,000 and SO.
D. $83,000 and $23,000,
(Beams, 2009)

89. The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership
income, after deduction of the bonus. If the partnership's income is $121,000, how much is
Partner Y's bonus allocation?
A. $11,000.
B. $11,450.
C. $11.650.
D. $12.100.
(Beams, 2009)
Lara, Ives, and Jack are in the process of liquidating their partnership. Since it may take several
months to convert the other assets into cash, the partners agree to distribute all available cash
immediately, except for $10,000 that is set aside for contingent expenses. The balance sheet
and residual profit and loss sharing percentages are as follows:

Cash $ 400,000 Accounts payable $ 200,000
Other Assets 200,000 Hara, capital (40%) 135,000
Ives, capital (30%) 216,000
Jack Capital (30%) 49,000
Total Asset $ 600,000 Total liability/equity $ 600,000

90. How much cash should Ives receive in the first distribution?
A. $146,000.
B. $147,000.
C. $153,000.
D. $156,000

91. Which of the following transactions shall not affect the capital balance of a partner?
A. Share of a partner in the partnership's net loss
B. Receipt of bonus by a partner from another partner based on the agreement
C. Advances made by the partnership to a partner.
D. Additional investment by a partner to the partnership

92. Which of the following will not result to the dissolution of a partnership?
A. Insolvency of the partnership
B. Admission of a new partner in an existing partnership
C. Assignment of an existing partner's interest to a third person
D. Retirement of a partner
CPAR Test bank

93. He refers to a partner who contributed not only money and property but also industry to
the newly formed partnership.
A. Industrial partner
B. Nominal partner

C. Capitalist-industrial partner
D. Capitalist partner
CPAR 2017 Pre-Board

94. It refers to a type of partnership wherein all partners are liable to the creditors pro-rata up
to the extent of personal or separate assets after the partnership's assets are exhausted.
A. General partnership
B. Partnership by estoppel
C. Limited partnership
D. Particular partnership
CPAR 2017 Pre-Board
95. Which of the following statements concerning the formation of partnership business is
correct?
A. Philippine Financial Reporting Standards (PFRS) allows recognition of goodwill arising from
the formation of partnership.
B. The juridical personality of the partnership arises from the issuance of certification of
registration.
C. The parties may become partners only upon contribution of money or property but not of
industry or service.
D. The capital to be credited to each partner upon formation may not be the amount
contributed by each partner.
96. The partners, C and D, share profits 3:2. However, C is to receive a yearly bonus of 20% of
the profits, in addition to his profit share. The partnership made a net income for the year of
P960,000 before the bonus. Assuming C's bonus is computed on profit after deducting said
bonus, how much profit share will D receive?
A. P307,200
B. P320,000
C. P640,000
D. P160,000
CPAR 2017 Pre-Board
97. A, B, and C are partners and share profits and losses as follows: Salaries of P40,000 to A:
P30,000 to B; and none to C. If net income exceeds salaries, then a bonus is allocated to A. The
bonus is 5 percent of net income after deducting salaries and the bonus. Residual profits or
residual losses are allocated 10 percent to A. 20 percent to B, and 70 percent to C. If net income
before salaries and bonus is P140,000, how much is the share of A?

A. P50,150
B. P43.333
C. P46,667
D. P50,000
CPAR 2017 Pre-Board
98. Carson and Lamb establish a partnership to operate and used-furniture business under the
name of C & L Furniture. Carson contributes furniture that cost P60,000 and has a fair value of
P90,000. Lamb contributes P30,000 cash and delivery equipment that cost P40,000 and has a
fair value of P30,000. The partners agree to share profits and losses 60% to Carson and 40% to
Lamb. Calculate the peso amount of inequality that will result if the initial noncash
contributions of the partners are recorded at cost rather than fair market value.
A. P30,000
B. P10,000
C. P20,000
D. P18,000
CPAR 2017 Pre-Board

Items 99 and 100 are based on the following:
Lucy and Annie were partner sharing profits and losses equally. Ochie was admitted as a
partner by contributing cash of P60,000 for one-third interest in the firm. They agreed to set
the total capital at P210,000 after Ochie's admission. Prior to Ochie's admission, the old
partner's capital accounts were Lucy, P48,000, and Annie, P96,000.
99. The capital balance of Annie after Ochie's admission was
A. P92,667
B. P94,000
C. P91,000
D. P96,000 100.
100. Assuming that Ochie will share one-fourth interest on the partnership assets the capital
balance of Annie after Ochie's admission is
A. P96,000
B. 99,750

C. P99,000
D. P102,750
CPAR 2017 Pre-Board
101. A partnership agreement calls for allocation of profits and losses by salary allocations, a
bonus allocation, interest on capital, with any remainder to be allocated by preset ratios. If a
partnership has a loss to allocate, generally which of the following procedures would be
applied?
A. Any loss would be allocated equally to all partners.
B. Any salary allocation criteria would not be used.
C. The bonus criteria would not be used.
D. The loss would be allocated using the profit and loss ratios, only.
(Fisher, 2008)
102. Della Reise was admitted to a partnership. She contributed $25,000 cash plus equipment
she purchased for $50,000 and which had accumulated depreciation for tax purposes of
$20,000. The fair value of the equipment was $35,000. She also assumed 1/3 of partnership
debt of $15,000. Her beginning capital balance was $48,000. For tax purposes her partnership
interest should be initially valued at
A. $60,000
B. $48,000
C. $55,000
D. $65,000
(Fisher, 2008)
103. Under the bonus method, when a new partner is admitted to the partnership, the total
capital of the new partnership is equal to:
A. the book value of the previous partnership + the fair market value of the consideration paid
to the existing partnership by the incoming partner.
B. the book value of the previous partnership+ any necessary asset write ups from book value
to market value the fair market value of the consideration paid to the existing partnership by
the incoming partner.
C. the book value of the previous partnership - any asset write-downs from book to market
value + the fair market value of the consideration paid to the existing partnership by the
incoming partner.
D. the fair market value of the new partnership as implied by the value of the incoming
partner's consideration in exchange for an ownership percentage in the new partnership.
104. Assume that a partnership had assets with a book value of $240,000 and a market value of
$195,000, outside liabilities of $70,000, loans payable to partner Able of $20,000, and capital
balances for partners Able. Baker, and Chapman of $70,000, $30,000, and $50,000. How would
the first $100,000 of available assets be distributed assuming profits and losses are allocated
equally?
A. $70,000 to outside liabilities, $20,000 to Able, and the balance equally among the partners
B. $70,000 to outside liabilities and $30,000 to Able
C. $70,000 to outside liabilities, $25,000 to Able, and $5,000 to Chapman
D. $40,000 to Able, $20,000 to Chapman, and the balance equally among the partners (Fisher,
2008)
105. Partners Dalton, Edwards, and Finley have capital balances of $40,000, 90,000 and
$30,000, respectively, immediately prior to liquidation. Total remaining assets have a book
value of $160,000, the liabilities having been paid. Among these remaining assets is a machine
with a fair value of $35,000. The partners split profits and losses equally. Edwards covets the
machine and is willing to accept it for $35,000 in lieu of cash. The other partners have no
designs on specific assets, only cash in liquidation. How much cash, in addition to the machine,
would be first distributed to Edwards, before any of the other partners received anything?
A. $15,000
B. $50,000
C. $166,667
D. $300,000

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