Key answer of ParCor Quiz 2

1. A large cash withdrawal by Patner Ruiz from Bernal, Ruiz, Adriano and Gogola, which is viewed
by all partners as a permanent reduction of Ruiz’s ownership equity in the partnership, is
recorded with a debit to
A. Ruiz Capital B. Retained Earnings C. Loan Receivable from Ruiz D. Ruiz, drawing

2. Upon formation of a partnership each partner's initial investment of assets should be recorded
at their:
A. Book value B. Original cost C. Fair market value D. The value the investing partner
assigns to them.

3. Which of the following statements about partnership financial statements is true?

a. Details of the distribution of net income are shown in the owners' equity statement.
b. The distribution of net income is shown on the balance sheet.
C. Only the total of all partner capital balances is shown in the balance sheet.
D. The owners' equity statement is called the partners' capital statement.

4. A partner invested into a partnership a building with P250,000 carrying value and
P400,000 fair market value. The related mortgage payable of P125,000 was assumed by
the partnership. As a result of the investment, the partner’s capital account will be
credited for
a. P125,000 b. 275,000 c. 250,000 d. 400,000

5. On May 1, 2022, Go and Alcantara formed aa partnership and agreed to share profits
and losses in the ratio of 3:7, respectively. Go contributed a parcel of land that cost
P10,000. Alcantara contributed P40,000 cash. The land was sold for P18,000 on May 1,
2022, immediately after formation of the partnership. What amount should be recorded
in Go’s capital account on formation of the partnership?
A. P15,000 B. P17,400 c. P10,000 d. P18,000

6. Orcajada invested in partnership a parcel of land which cost his father P200,000. The
land had a market value of P300,000 when Orcajda inherited it three years ago.
Currently the land is independently appraised at P500,000 even though Orcajada
insisted that he “wouldn’t take P900,000 for it.” The land should be recorded in the
accounts of the partnership at
a. P300,000
b. P500,000
c. P900,000
d. P200,000
7. Partner’s investments may include which of the following
a. Cash
 b. Non-cash assets
c. Non-cash assets with liabilities to be assumed
d. All of the 3 assets mentioned
e. Only cash and non-cash assets

8. Froilan Labausa contributed land, inventory, and P280,000 cash to a partnership. The
land has a book value of P650,000 and a market value of P1,350,000. The inventory has
a book value of P600,000 and a market value of P510,000. The partnership also assumed
a P350,000 note payable owed by Labausa that was used to purchase the land, Rosalie
agreed to put up a cash equivalent to Labausa’s net investment.
Required: Prepare the journal entry to record Labausa’s and Balhag’s investment in the
partnership.

Answer:

Cash 2,070,000
Land 1,350,000
Inventory 510,000
Notes Payable 350,000
Froilan Labausa, Capital 1,790,000
Rosalie Balhag, Capital 1,790,000
To record the initial investment of Labausa and Balhag.
 9.

Answer:
1. Opening journal entries:

Cash 766,000
Accounts Receivable 140,000
Inventory 460,000
Equipment 124,000
Accounts Payable 30,000
Espanol, Capital 730,000
Quino, Capital 730,000
To record the initial investment of Espanol and Quino.
2. Statement of Financial Position