Bsa Partnership Multiple Choice Questions

MULTIPLE CHOICE QUESTIONS
PARTNERSHIP
____ 1. On December 1, 2004, EE and FF formed a partnership, agreeing to share for profits and losses in the
ratio of 2:3, respectively. EE invested a parcel of land that cost him P25,000. FF invested P30,000
cash. The land was sold for P50,000 on the same date, three hours after formation of the partnership.
How much should be the capital balance of EE right after formation?
a. P25,000 c. P60,000
b. P30,000 d. P50,000
____ 2. On March 1, 2004, II and JJ formed a partnership with each contributing the following assets:
II JJ
Cash ................................................................. P300,000 P700,000
Machinery and equipment. ................................... 250,000 750,000
Building ............................................................... 2,250,000
Furniture and fixtures ........................................... 100,000
The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership.
Partnership agreement provides that II and JJ share profits and losses 30% and 70%, respectively. On
March 1, 2004 the balance in JJ’s capital account should be:
a. P3,700,000 c. P3,050,000
b. 3,140,000 d. 2,900,000
____ 3. On March 1, 2004, II and JJ formed a partnership with each contributing the following assets:
II JJ
Cash ................................................................. P300,000 P700,000
Machinery and equipment. ................................... 250,000 750,000
Building ............................................................... 2,250,000
Furniture and fixtures ........................................... 100,000
The building is subject to mortgage loan of P800,000. The mortgage loan is not to be assumed by the
partnership. Partnership agreement provides that II and JJ share profits and losses 30% and 70%,
respectively. On March 1, 2004 the balance in JJ’s capital account should be:
a. P3,700,000 c. P3,050,000
b. 3,140,000 d. 2,900,000
____ 4. As of June 1,2004, FF and GG decided to form a partnership. Their balance sheets on this dates are:
FF GG
Cash ..................................................................... P15,000 P37,500
Account Receivable ............................................... 540,000 225,000
Merchandise Inventory ......................................... 202,500
Machinery and equipment ....................................... 150,000 270,000
_______ _______
Total .................................................... P705,000 P735,000
======== ========
Accounts Payable ............................................... P135,000 P240,000
FF,Capital ........................................................... 570,000
GG, Capital ......................................................... 495,000
_________ __________
Total .................................................... P705,000 P735,000
========= ==========
The partners agreed that the machinery and equipment of FF is underdepreciated by P15,000 and that
of GG by P45,000. Allowance for doubtful accounts is to be set up amounting to P120,000 for FF and
P45,000 for GG. The partnership agreement provides for a profit and loss ratio and capital interest of
60% to FF and 40% to GG. How much cash must FF invest to bring the partner’s capital balances
proportionate to their profit and loss ratio?
a. P142,500 c. P172,500
b. 52,500 d. 102,500
____ 5. On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their
business assets and assume the liabilities. Partners capital are to be based on net assets transferred after
the following adjustments. (Profit and loss are allocated equally.)
BB’s inventory is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500
are to be set up in books of AA and BB, respectively; and accounts payable of P4,000 is to be recognized
in AA’s books. The individual trial balances on August, before adjustments, follow:
AA BB
Assets P75,000 P113,000
Liabilities 5,000 34,500
What is the capital of AA and BB after the above adjustments?
a. AA, P68,750; BB, P77,250 c. AA, P65,000; BB, P76,000

b. AA, P75,000, BB, P81,000 d. AA, P65,000; BB, P81,000
____ 6. CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 2004, just
before the admission of DD, show the following balances:
Cash P6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Accounts Payable 8,000
CC, Capital 33,000
It is agreed that for purposes of establishing CC’s interest the following adjustments shall be made:
(a) An allowance for doubtful accounts of 3% of accounts receivable is to be established.
(b) The merchandise inventory is to be valued at P23,000.
(c) Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.
DD is to invest sufficient cash to obtain 1/3 interest in the partnership.
(1) CC’s adjusted capital before the admission of DD; and (2) the amount of cash investment by DD:
a. (1) P35,347; (2) P11,971 c. (1) P35,374; (2)P17,687
b. (1) 36,374; (2) 18,487 d. (1) 28,174;(2) 14,087
____ 7. MM, NN, and OO are partners with capital balances on December 31, 2004 of P300,000, P300,000 and
P200,000 respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is to
take certain equipment with second hand value of P50,000 and note for the balance of OO’s interest.
The equipment are carried on the books at P65,000. Brand new equipment may cost P 80,000. (1) OO’s
acquisition of the second hand equipment will result to reduction in capital; (2) the value of the note
that will OO get from the partnership’s liquidation.
a. (1) P15,000 each for MM, and NN ; (2) P150,000.
b. (1) P 5,000 each for MM, NN and OO; (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
____ 8. II, JJ, and KK are forming a new partnership. II is to invest cash of P100,000 and stapling equipment
originally costing P120,000 but has a second hand value in the market at P50,000. JJ is to invest cash
of P160,000, while KK whose family is engaged in selling stapling equipment, is to contribute cash of
P50,000 and a brand new stapling equipment to be used by the partnership with a regular price of
P120,000 but which cost their family’s business P100,000. Partners agree to share profits equally. The
capital balances upon formation are:
a. II, P220,000; JJ P160,000 and KK P150,000

b. II, P150,000; JJ P160,000 and KK P170,000
c. II, P160,000; JJ P160,000 and KK P160,000
d. II, P176,666; JJ P176,666 and KK P176,668
____ 9. The business assets of LL and MM appears below:
LL MM
Cash P11,000 P22,354
Account Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,020,916 P1,317,002
========= ========
Accounts Payable P178,940 P243,650
Notes Payable 200,000 345,000
LL,Capital 641,976
MM,Capital 728,352
Total P1,020,916 P1,317,002
========== ==========
LL and MM agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
a. Accounts Receivable of P20,000 in LL’s books and P35,000 in MM’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in LL’s and MM’s respective books.
c. Other assets of P2,000 and P3,600 in LL’s and MM’s respective books are to be written off.
The capital account of the partners after the adjustments will be:
a. LL, P615,942; MM, P717,894 c. LL, P640,876; MM, P683,050

b. LL, P640,876; MM, P712,345 d. LL, P614,476; MM, P683,052
____ 10. The business assets of LL and MM appears below:
LL MM
Cash P11,000 P22,354
Account Receivable 234,536 567,890
Land 603,000
Building 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,020,916 P1,317,002
========= ========
Notes Payable 200,000 345,000
LL,Capital 641,976
MM,Capital 728,352
Total P1,020,916 P1,317,002
========== ==========
LL and MM agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
a. Accounts Receivable of P20,000 in LL’s books and P35,000 in MM’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in LL’s and MM’s respective books.
c. Other assets of P2,000 and P3,600 in LL’s and MM’s respective books are to be written off.
How much total assets does the partnership have after formation?
a. P2,337,918 c. P2,265,118
b. 2,237,918 d. 2,365,218
____ 11. On March 1, 2004, PP and QQ decide to combine their businesses and form a partnership. Their balance
sheets on March 1, before adjustments, showed the following:
PP QQ
Cash P9,000 P3,750
Account receivable 18,500 13,500
Furniture and Fixtures (net) 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid Expenses 6,375 3,000
Total P105,375 P51,500
========= ==========
Capital 59,625 33,500
Total P105,375 P51,500
========== ===========
They agreed to have the folowing items recorded in their books:
1. Provide 2% allowance for doubtful accounts
2. PP’s furniture and fixtures should be P31,000, while QQ’s office equipment is under-
depreciated by P250.
3. Rent expense incurred previously by PP was not yet recorded amounting to P1,000, while
salary expense incurred by QQ was not also recorded amounting to P800.
4. The fair market value of inventory amounted to:
For PP.................. P29,500

For QQ................. 21,000
Compute the net (debit) credit adjustment for PP and QQ:
a. PP, P2,870; QQ P2,820 c. PP, P(870); QQ P180

b. PP, (2,870); QQ (2,820) d. PP, 870 ; QQ(180)
PP QQ
Cash P9,000 P3,750
Total P105,375 P51,500
========= ==========
Capital 59,625 33,500
Total P105,375 P51,500
========== ===========
They agreed to have the following items recorded in their books:
For PP.................. P29,500

For QQ................. 21,000
Compute the total liabilities after formation:
a. P61,950 c. P65,550
b. 63,750 d. 63,950
PP QQ
Cash P9,000 P3,750
Total P105,375 P51,500
========= ==========
Capital 59,625 33,500
Total P105,375 P51,500
========== ===========
They agreed to have the following items recorded in their books:
For PP.................. P29,500

For QQ................. 21,000
Compute the total assets after formation:
a. P157,985 c. P160,765
b. 156,875 d. 152,985
____ 14. On April 30, 2004, XX,YY, and ZZ formed a partnership by combining their separate business
proprietorship. XX contributed cash of P75,000. YY contributed property with a P54,000, carrying
amount, a P60,000 original cost, and P120,000 fair value. The partnership accepted responsibility for
the P52,500 mortgage attached to the property. ZZ contributed equipment with a P45,000 carrying
amount, a P112,500 original cost, P82,500 fair value. The partnership agreement specifies that profits
and losses are to be shared equally but is silent regarding capital contributions. Which partners has the
largest April 30, 2004, capital balance?
a. XX c. ZZ
b. YY d. All capital account balances are equal
____ 15. JJ and KK are partners who shares profits and losses in the ratio of 60%, 40% respectively. JJ’s salary
is P60,00 and P30,000 for KK. The partners are also paid interest on their average capital balances. In
2004, JJ received P30,000 of interest and KK, P12,000. The profit and loss allocation is determined
after reductions for the salary and interest payments. If KK’s share in the residual income (income after
deducting salaries and interest) was P60,000 in 2004, what was the total partnership income?
a. P192,000 c. P282,000
b. 345,000 d. 387,000
____ 16. The partnership has the following accounting amounts:
(1) Sales = P70,000

(2) Cost of Goods Sold = P40,000
(3) Operating Expenses = P10,000
(4) Salary allocations to partners = P13,000
(5) Interest paid to banks = P2,000
(6) Partner’s withdrawal = P8,000
The partners net income (loss) is:
a. P20,000 c. P5,000
b. 18,000 d. (3,000)
____ 17. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus
of 10% of net income after salary and bonus as a means of allocating profit among the partners. Salaries
traceable to the other partners are estimated to be P100,000. What amount of income would be necessary
so that Lancelot would consider the choices to be equal?
a. P165,000 c. P265,000
b. 290,000 d. 305,000
____ 18. Cab and Joe are considering forming a partnership whereby profits will be allocated through the use of
salaries and bonuses. Bonuses will be 10% of net income after total salaries and bonuses. Cab will
receive a salary of P30,000 and a bonus. Jo has the option of receiving a salary of P40,000 and a 10%
bonus or simply receiving the salary of P52,000. Both partners will receive the same amount of bonus.
Determine the level of net income that would be necessary so that Jo would be indifferent to the profit
sharing option selected.
a. P240,000 c. P94,000
b. 300,000 d. 334,000
____ 19. 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% over P200,000.
* 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 2004 net income was P500,000 before any allocations to partners. What amount
should be allocated to XX?
a. P202,000 c. P206,000
b. 216,000 d. 220,000
____ 20. The partnership agreement of RR and SS provides that interest at 10% per year is to be credited to each
partner on the basis of weighted-average capital balances. A summary of SS capital account for the year
ended December 31, 2001 , is as follows:
Balance, January 1 P420,000

Additional Investment, July 1 120,000
Withdrawal, August 1 ( 45,000)
Balance, December 31 495,000
What amount of interest should be credited to SS’s capital account for 2004?
a. P45,750 c. P46,125
b. 49,500 d. 51,750
____ 21. AA, BB and CC are partners with average capital balances during 2004 of P360,000, P180,000, and
P120,000, respectively. Partners receive 10% interest on their average capital balances. After deducting
salaries of P90,000 to AA and P60,000 to CC the residual profit or loss is divided equally. In 2004 the
partnership sustained a P99,000 loss before interest and salaries to partners. By what amount should
AA’s capital account change?
a. P21,000 increase c. P105,000 decrease

b. 33,000 decrease d. 126,000 increase
____ 22. AA and DD created a partnership to own and operate a health-food store. The partnership agreement
provided that AA receive a salary of P10,000 and DD a salary of P5,000 to recognize their relative time
spent in operating the store. Remaining profits and losses were divided 60:40 to AA and DD,
respectively. Income for 2003, the first year of operations, of P13,000 was allocated P8,800 to AA and
P4,200 to DD.
On January 1, 2004, the partnership agreement was changed to reflect the fact that DD could no longer
devote anytime to the store’s operations. The new agreement allows AA a salary of P18,000, and the
remaining profits and losses are divided equally. In 2004 an error was discovered such that 2003
reported income was understated by P4,000. The partnership income of P25,000 for 2004 included the
P4,000 related to year 2003.
In the reported net income of P25,000 for the year 2004, AA and DD would have:
a. AA, P21,900; DD, P3,100 c. AA, P 0; DD, P 0

b. AA, 17,100; DD, 17,100 d. AA, 12,500; DD, 12,500
____ 23. On January 1,2004, DD and EE decided to form a partnership. At the end of the year, the partnership
made a net income of P120,000. The capital accounts of the partnership show the following transactions:
DD, Capital EE, Capital
Dr. Cr. Dr. Cr.
January 1 - P40,000 - P25,000
April 1 P5,000 - - -
June 1 - - - 10,000
August 1 - 10,000 - -
September1 - - P3,000 -
October 1 - 5,000 1,000 -
December 1 - 4,000 - 5,000
Assuming that the interest of 20% per annum is given on average capital and the balance of the profits
is allocated equally, the allocation of profits should be:
a. DD, P60,000; EE, P59,400 c. DD, P67,200; EE, P52,800

b. DD 61,200; EE, 58,800 d. DD, 68,800; EE, 51,200
____ 24. The partnership of DD and BB was formed and commenced operations on March 1, 2004, with DD
contributing P30,000 cash and BB investing cash of P10,000 and equipment with an agreed upon
valuation of P20,000. On July 1, 2004, BB invested additional P10,000 in the partnership, DD made a
capital withdrawal of P4,000 on May 2, 2004 but reinvested the P4,000 on October 1, 2004. During
2004, DD withdrew P800 per month and BB the managing partner, withdrew P1,000 per month. These
drawings were charged to salary expense. A pre-closing trial balance taken at December 31, 2004 is as
follows:
Debit Credit
Cash P9,000
Receivable - net 15,000
Equipment - net 50,000
Other Assets 19,000
Liabilities P17,000
DD, Capital 30,000
BB, Capital 40,000
Service Revenue 50,000
Supplies Expense 17,000
Utilities Expense 4,000
Salaries to partners 18,000
Other miscellaneous expenses 5,000
Total P137.000 P137,000
=========== ============
The share of DD and BB in the partnership net income assuming monthly salary allowances P800 and
P1,000 for DD and BB, respectively; interest allowance at a 12% annual rate on average capital
balances; and remaining profits allocated equally.
a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200

b. DD, P12,000; BB, P12,000 d. DD, P10,600; BB, P13,400
____ 25. AA and BB formed a partnership in 2004 and made the following investments and capital
withdrawals during the year:
AA BB
Investments Draws Investments Draws
March 1 P30,000 - P20,000 -
June 1 - P10,000 - P10,000
August 1 20,000 - - 2,000
December 1 - 5,000 - -
The partnership’s profit and loss agreement provides for a salary of which P30,000 was paid to each
partner for 2003. AA is to receive a bonus of 10% on net income after salaries and bonus. The
partners are also to receive interest of 8% on average annual capital balances affected by both
investments and drawings. Any remaining profits are to be allocated equally among the partners.
Assuming net income of P60,000 before salaries and bonus, determine how the income would be
allocated among the partners:
a. AA, P31,138; BB, P28,862 c. AA, P30,633; BB, P29,367

b. AA, P33,537; BB, P26,463 d. AA, P30,684; BB, P29,316
____ 26. Partner A first contributed P50,000 of capital into an existing partnership on March 1, 2004. On June
1, 2004, the partner contributed another P20,000. On September 1, 2004, 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 c. P60,000
b. 51,667 d. 48,333
____ 27. WW and RR share profits and losses equally, WW and RR receive salary allowances of P20,000 and
P30,000, respectively, and both partners receive 10% interest on their average capital balances.
Avergae capital balances are calculated at the beginning of each month regardless of when the capital
contributions and capital withdrawals were made and partners drawings are not used in determining the
average capital balances. Total net income for 2004 is P120,000.
WW RR
January 1 capital balances......................... P100,000 P120,000

Yearly drawings (P1,500 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
What is the weighted average capital for WW and RR respectively for 2004?
a. P110,667 and P119,583 c. P100,000 and P120,000

b. P105,333 and P126,667 d. P126,667 and P105,333
____ 28. HH, MM, and AA formed a partnership on January 1, 2004, and contributed P150,000, P200,000, and
P250,000, respectively. Their articles of co-partnership provide that the operating income be shared
among the partners as follows: as salary, P24,000 for HH, P18,000 for MM, and P12,000 for AA;
interest of 12% on the average capital during 2004 of the three partners; and the remainder in the ratio
of 2:4:4, respectively.
The operating income for the year ending December 31, 2004 amounted to P176,000. HH contributed
additional capital of P30,000 on July 1 and made a drawing of P10,000 on October 1; MM contributed
additional capital of P20,000 on August 1 and made a drawing of P10,000 on October 1; AA made a
drawing of P30,000 on November 1.
The partners’ capital balances on December 31, 2004 are:
a. HH, P179,680; MM, P229,360; and, AA, P239,360

b. HH, P179,760; MM, P229,520; and, AA, P239,520
c. HH, P189,680; MM, P239,360; and, AA, P269,360
d. HH, P223,180; MM, P272,060; and, AA, P280,760
____ 29. Merlin, a partner in the Camelot Partnership, has a 30% participation in partnership profits and losses.
Merlin’s capital account has a net decrease of P1,200,000 during the calendar year 2004. During 2004,
Merlin withdrew P2,600,000 (charged against his capital account) and contributed property valued at
P500,000 to the partnership. What was the net income of the Camelot Partnership for year 2004?
a. P3,000,000 c. P7,000,000
b. 4,666,667 d. 11,000,000
____ 30. On January 2, 2004, BB and PP formed a partnership. BB contributed capital of P175,000 and
PP,P25,000. They agreed to share profits and losses 80% and 20%, respectively. PP is the general
manager and works in the partnership full time and is given a salary of P5,000 a month; an interest of
5% of the beginning capital (of both partner) and a bonus of 15% of net income before the salary,
interest and the bonus.
The profit and loss statement of the partnership for the year ended December 31, 2004 is as follows:
Net Sales ...................................................................................... P875,000

Cost of goods sold.......................................................................... 700,000
Gross profits ................................................................................. P175,000
Expenses (including the salary, interest and the bonus)..................... 143,000
Net income .................................................................................. P 32,000
=======
The amount of bonus to PP in 2004 amounted to:
a. P13,304 c. P18,000
b. 16,456 d. 20,700
____ 31. On January 1, 2004, A, B, C and D formed Bakya Trading Co., a partnership, with capital contributions
as follows: A, P50,000; B, P25,000; C, P25,000; and D, P20,000. The partnership contract provided
that each partner shall receive a 5% interest on contributed capital, and that A and B shall receive
salaries of P5,000 and P3,000, respectively. The contract also provided that C shall receive a minimum
of P2,500 per annum, and D a minimum of P6,000 per annum, which is inclusive of amounts
representing interest and share of remaining profits. The balance of the profits shall be distributed to A,
B, C, and D in a 3:3:2:2 ratio.
What amount must be earned by the partnership, before any charge for interest and salaries, so that A
may receive an aggregate of P12,500 including interest, salary and share of profits?
a. P16,667 c. P30,667
b. 30,000 d. 32,333
P162,350, respectively. The partners receive 10% interest on their average capital balances; after
deducting salaries of P122,325 to AA and P82,625 to CC, the residual profits or loss is divided equally.
In 2004, the partnership had a net loss of P125,624 before the interest and salaries to partners.
By what amount should AA’s and CC’s capital account change - increase (decrease)?
AA CC AA CC
a. P30,267 P(40,448) c. P(40,844) P31,235
b. 29,467 17,536 d. 28,358 32,458
P162,350, respectively. The partners receive 10% interest on their average capital balances; after
deducting salaries of P122,325 to AA and P82,625 to CC, the residual profits or loss is divided equally.
In 2004, the partnership had a net 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) c. P(41,875)
b. 23,865 d. (18,010)
____ 34. XX, YY and ZZ formed a partnership on January 1, 2004. Each contributed P120,000.
Salaries were to be allocated as follows:
XX YY ZZ
P30,000 P30,000 P45,000
Drawings were equal to salaries and be taken out evenly throughout the year.
With sufficient partnership net income, XX and YY could split a bonus equal to 25 percent of
partnership net income after salaries and bonus (in no event could the bonus go below zero).
Remaining profits were to be split as follows: 30% for XX; 30% for YY, and 40% for ZZ.
For the year, partnership net income was P120,000.
Compute the ending capital for each partner:
a. XX, P155,100; YY, P155,100; ZZ, P169,800

b. XX, P126,000; YY, P126,000; ZZ, P124,500
c. XX, P125,100; YY, P125,100; ZZ, P124,800
d. XX, P125,500; YY, P125,500; ZZ, P124,000
____ 35. 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 fess are P180,000, while expenses
total, P96,000. What amount of net income should be credited to each partners’ 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, P21,000, AA, P39,000
____ 36. Hunt, Rob, Turman, and Kelly own a publishing company that they operate as a partnership. The
partnership agreement includes the following:
* Hunt receives a salary of P20,000 and a bonus of 3% of income after all bonuses.
* Rob receives a salary of P10,000 and a bonus of 2% of income after all bonuses.
* All partners are to receive 10% interest on their average capital balances.
The average capital balances are as follows:
Hunt .............................................. P50,000

Rob ............................................... 45,000
Turman .......................................... 20,000
Kelly ............................................. 47,000
Any remaining profits and loss are to be divided equally among the partners.
Determine how a profit of 105,000 would be allocated among the partners.
a. Hunt, P41,450; Rob, P29,950; Turman, P15,450; Kelly, P18,150

b. Hunt, P28,000; Rob, P16,500; Turman, P 2,000; Kelly, P 4,700
c. Hunt, P39,700; Rob, P29,200; Turman, P16,700; Kelly, P19,400
d. Cannot be determined.
____ 37. RR and PP share profits after the provision of annual salary allowances of P14,400 and P13,320,
respectively in the ratio of 6:4. However, if partnership’s net income is insufficient to provide for said
allowances in full amount, the net income shall be divided equally between the partners. In 2004, the
following errors were discovered: Depreciation for 2004 is understated by P2,100, and the inventory on
December 31, 2004 is overstated by P11,400. The partnership net income for 2004 was reported to be
P19,500.
The capital accounts of the partners should be increased (decreased) by:
a. RR, P(6,540); PP, P(6,540) c. RR, P(6,960); PP, P 6,540

b. RR, P 3,000; PP, P 3,000 d. RR, P(6,750); PP, P(6,750)
____ 38. JJ and KK are partners sharing profits 60% and 40% respectively. The average profits for the past two
years are to be capitalized at 20% per year (for purposes of admitting a new partner) in determining the
aggregate capital of JJ and KK, after adjusting the profits for the following items omitted as follows:
Omissions at Year-End 2003 2004

Prepaid Expense ............................................................... P1,600
Accrued Expense ............................................................. 1,200
Deferred Income .............................................................. P1,400
Accrued Income ............................................................... 1,000
Other pertinent information are as follows:
2003 2004
Net income of partnership ................................................. P14,400 P13,600
Capital accounts, end of the year:
JJ .............................................................................. 45,400 54,000
KK ............................................................................ 45,000 55,000
The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum is:
a. P67,765 c. P69,000
b. 72,105 d. 71,000
____ 39. MM, NN and OO partners, share profits on a 5:3:2 ratio. On January 1, 2004, PP was admitted into the
partnership with a 10% share in profits. The old partners continue to participate in profits in their
original ratio.
For the year 2004, the net income of the partnership war reported as P12,500. However, it was
discovered that the following items were omitted in the firm’s books:
Unrecorded at year end 2003 2004

Prepaid expense ....................................................... P800
Accrued expense ..................................................... P600
Unearned income ..................................................... 700
Accrued income ....................................................... 500
(1) The new profit and loss ratio for N, and (2) the share of partner OO in the 2004 net income:
a. (1) 30%; (2) P2,214 c. (1) 27%; (2) P2,286

b. (1) 27%; (2) P2,214 d. (1) 30%; (2) P2,286
____ 40. A, B, and C are partners in an accounting firm. Their capital account balances at year-end were A
P90,000; B P110,000 and C P50,000. They share profits and losses on a 4:4:2 ratio, after the following
special terms:
1. Partner C is to receive a bonus of 10% of net income after the bonus.
2. Interests of 10% shall be paid on that portion of a partner’s capital in excess of
P100,000
3. 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. P 7,800 c. P19,400
b. 16,800 d. 19,800
____ 41. X, Y and Z, a partnership formed on January 1, 2004 had the following initial investment:
X - P100,000
Y - 150,000
Z - 225,000
The partnership agreement states that profits and losses are to be shared equally by the partners after
consideration is made for the following:
- Salaries allowed to partners: P60,000 for X, P48,000 for Y and 36,000 for Z.
- Average partner’s capital balances during the year shall be allowed 10%.
Additional information:
- On June 30, 2004 X invested an additional P60,000

- Z withdrew P70,000 from the partnership on September 30, 2004.
- Share on the remaining partnership profit was P5,000 for each partner.
The total partnership capital on December 31, 2004 was:
a. P405,000 c. P480,000
b. 671,500 d. 672,750
____ 42. AA and BB entered into a partnership as of March 1, 2004 by investing P125,000 and P75,000,
respectively. They agreed that AA, as the managing partner, was to receive a salary of P30,000 per year
and a bonus computed at 10% of the net profit after adjustment for the salary; the balance of the profit
was to be distributed in the ratio of their original capital balances. On December 31, 2004, account
balances were as follows:
Cash ............................ P70,000 Accounts payable .... P60,000

Accounts receivable ...... 67,000 AA,capital .............. 125,000
Furniture and fixtures ... 45,000 BB, capital ............. 75,000
Sales returns ................ 5,000 AA, drawing ........... (20,000)
Purchases ..................... 196,000 BB, drawing ........... (30,000)
Operating expenses ....... 60,000 Sales ..................... 233,000
Inventories on December 31, 2004 were as follows: supplies, P2,500, merchandise, P73,000. Prepaid
insurance was P950 while accrued expenses were P1,550. Depreciation rate was 20% per year.
The partners’ capital balances on December 31, 2004, after closing the net profit and drawing
accounts, were:
AA BB AA BB
a. P135,940 P47,960 c. P139,680 P48,680
b. P139,540 P49,860 d. P142,350 P47,670
____ 43. 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.
____ 44. The FF and II partnership agreement provides for FF to receive a 20% bonus on profits before the bonus.
Remaining profits and losses are divided between FF and II in the ratio of 2 to 3, respectively. Which
partner has a greater advantage when partnership has a profit or when it has a loss?
Profit Loss
a. FF II
b. FF FF
c. II FF
d. II II
____ 45. Capital balances and profit and loss sharing ratios of the partners in the BIG Entertainment Gallery are
as follows:
Betty, capital (50%) ........................................................................ P140,000

Iggy, capital (30%) ........................................................................ 160,000
Grabby capital (20%) ...................................................................... 100,000
Total .............................................................................................. P400,000
========
Betty needs money and agrees to assign half of her interest in the partnership to Yessir for P90,000
cash. Yessir pays directly to Betty, Yessir does not become a partner.
What is the total capital of the BIG Partnership immediately after the assignment of the interest to
Yessir?
a. P310,000 c. P490,000
b. 200,000 d. 400,000
____ 46. Presented below is the condensed balance sheet of the partnership of KK, LL and MM who share profits
and losses in the ratio of 6:3:1, respectively:
Cash .................... P85,000 Liabilities ..................... P 80,000

Other assets ........ 415,000 KK, capital .................. 252,000
LL, capital ................... 126,000
MM, capital ................. 42,000
Total P500,000 Total ........................... P500,000
======= =======
The partners agree to sell NN 20% of their respective capital and profit and loss interest for a total
payment of P90,000. The payment by NN is to be made directly to the individual partners. The partners
agree that implied goodwill is to be recorded prior to the acquisition by NN. The capital balance of KK,
LL and MM respectively after admission of NN are:
KK LL MM
a. P198,000; P 99,000; P33,000.
b. P201,600; P100,800; P33,600.
c. P216,000; P108,000; P36,000.
d. P255,600; P127,800; P42,600.
____ 47. XX, YY and ZZ are partners who share profits and losses in the ratio of 5:3:2, respectively. They agree
to sell a 25% of their respective capital and profits and losses ratio for a total payment directly to the
partners in the amount of P140,000. They agree that goodwill of P60,000 is to be recorded prior to
admission of AA. The condensed balance sheet of the XYZ Partnership is as follows:
Cash .......................... P60,000 Liabilities .............. P100,000

Non-cash assets ......... 540,000 XX, Capital .......... 250,000
YY, Capital .......... 150,000
ZZ, Capital .......... 100,000
Total .........................
P600,000 Total ................... P600,000
======== =======
The capital of XX, YY and ZZ respectively after the payment and admission of AA are:
a. P187,500; P112,500; and P75,000

b. P210,000; P126,000; and P84,000
c. P280,000; P168,000; and P112,000
d. P250,000; P150,000; and P100,000
____ 48. On June 30, 2004, the balance sheet of Western Marketing, a partnership, is summarized as follows:
Sundry assets ............................................................................ P150,000

West, capital ............................................................................. 90,000
Tern, capital .............................................................................. 60,000
West 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 book value method is used?
a. P12,500 c. P25,000
b. 18,750 d. 31,250
____ 49. The capital accounts of the partnership of NN, VV, and JJ on June 1, 2004 are presented below with
their respective profit and loss ratios:
NN ........................................ P139,200 1/2

VV ........................................ 208,800 1/3
JJ .......................................... 96,000 1/6
On June 1, 2004, LL is admitted to the partnership when LL purchased, for P132,000, a proportionate
interest from NN and JJ in the net assets and profits of the partnership. As a result of a transaction LL
acquired a one-fifth interest in the net assets and profits of the firm. Assuming that implied goodwill
is not to be recorded, what is the combined gain realized by NN and JJ upon the sale of a portion of
their interest in the partnership to LL?
a. P0 c. P62,400
b. 43,200 d. 82,000
____ 50. PP contributed P24,000 and CC contributed P48,000 to form 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, P20,175. c. PP, P10,000; CC, P20,000.

b. PP, P15,000; CC, P15,000 d. PP, P 9,300; CC, P20,700
____ 51. DJ partnership had a net income of P2,000 for the month ended September 30, 2004.
Ambo purchased an interest in the DJ partnership of Day and Jar by paying Day P8,000 for half of his
capital and half of his 50% percent profit sharing interest on October 1, 2004. At this time Day capital
balance was P6,000 and Jar capital balance was P14,000.
Ambo should receive a credit to his capital account balance of:
a. P4,000 c. P5,000
b. 3,000 d. 6,667
____ 52. MM and OO are partners with capital balances of P50,000 and P70,000, respectively, and they share
profits and losses equally. The partners agree to take PP into the partnership for a 40% interest in capital
and profits, while MM and OO each retain a 30% interest. PP pays P60,000 cash directly to MM and
OO for his 40% interest, and goodwill implied by PP’s payment is recognized on the partnership books.
If MM and OO transfer equal amounts of capital to PP, the capital balance after PP’s admittance will
be:
a. MM, P35,000; OO, P55,000; PP, P60,000

b. MM, P45,000; OO, P45,000; PP, P60,000
c. MM, P36,000; OO, P36,000; PP, P48,000
d. MM, P26,000; OO, P46,000; PP, P48,000
____ 53. MM and OO are partners with capital balances of P50,000 and P70,000, respectively, and they share
profits and losses equally. The partners agree to take PP into the partnership for a 40% interest in capital
and profits, while MM and OO each retain a 30% interest. PP pays P60,000 cash directly to MM and
OO for his 40% interest, and goodwill implied by PP’s payment is recognized on the partnership books.
If MM and OO transfer equal amounts of capital to PP, and the partners decided to have a cash
settlement among themselves right after the admission of PP, i.e., the capital balance should be made
in accordance with the new profit and loss ratio, what would be the capital balances after such
transaction?
a. MM, P35,000; OO, P55,000; PP, P60,000

b. MM, P45,000; OO, P45,000; PP, P60,000
c. MM, P36,000; OO, P36,000; PP, P48,000
d. MM, P26,000; OO, P46,000; PP, P48,000
____ 54. Partners AA, BB, and CC divide profits and losses 5:3:2, respectively, and their balance sheet on
September 30, 2004 are as follows:
ABC Partnership
Balance Sheet
September 30, 2004
Cash .................................................................................................
P80,000
Other assets ..................................................................................... 720,000
Total assets ...................................................................................... P800,000
=======
Accounts payable ............................................................................. P200,000
AA, capital ...................................................................................... 148,000
BB, capital ...................................................................................... 260,000
CC, capital ....................................................................................... 192,000
Total liabilities and capital ................................................................. P800,000
========
The assets and liabilities are recorded at approximate current fair values. DD is to be admitted as new
partner with a 20% interest in capital and earnings in exchange for a cash investment. Goodwill or bonus
will not be considered.
How much cash should DD contribute?
a. P120,000 c. P150,000
b. 144,000 d. 160,000
____ 55. The following condensed balanced sheet is presented for the partnership of LL, PP, and QQ, who
share profits and losses in the ratio of 4:3:3, respectively:
Cash ........................................................................................
P 90,000
Other assets ............................................................................. 830,000
LL, loan ................................................................................... 20,000
P940,000
=======
Accounts payable ..................................................................... P210,000
QQ, loan .................................................................................. 30,000
LL, capital ............................................................................... 310,000
PP, capital ............................................................................... 200,000
QQ, capital .............................................................................. 190,000
P940,000
=======
Assume that the assets and liabilities are fairly valued on the balance sheet and that the partnership
decides to admit FF as a new partner, with a 20% interest. No goodwill or bonus is to be recorded.
How much should FF contribute in cash or other assets?
a. P140,000 c. P175,000
b. 142,000 d. 177,500
____ 56. CC and DD are partners who profits and losses in the ratio of 7:3, respectively. On October 21, 2004,
their respective capital accounts were as follows:
CC .............................................................................................
P35,000
DD ............................................................................................
30,000
P65,000
=======
On that date they agreed to admit EE as a partner with a one-third interest in the capital and profits
and losses, and upon his investment of P25,000. The new partnership will begin with a total capital of
P90,000. Immediately after EE’s admission, what are the capital balance of CC, DD, and EE,
respectively?
a. P30,000; P30,000; P30,000; c. P31,667; P28,333; P30,000;

b. P31,500; P28,500; P30,000; d. P35,000; P30,000; P25,000;
____ 57. The capital account for the partnership of LL and MM at October 31, 2004 are as follows:
LL, capital ............................................................................. P 80,000

MM, capital ............................................................................ 40,000
P120,000
The partners share profits and losses in the ratio of 3:2 respectively.
The partnership is in desperate need of cash, and the partners agree to admit NN as a partner with one-
third in the capital and profits and losses upon this investment of P30,000. Immediately after NN’s
admission, what should be the capital balances of LL, MM and NN respectively, assuming goodwill is
not to be recognized?
a. P50,000; P50,000; P50,000; c. P66,667; P33,333; P50,000.

b. P60,000; P60,000; P60,000; d. P68,000; P32,000; P50,000.
____ 58. OO and TT are partners with capital balances P60,000 and P20,000, respectively. Profits and losses are
divided in the ratio of 60:40. OO and TT decided to form a new partnership with GG, who invested
land valued at P15,000 for a 20% capital interest in the new partnership. GG’s cost of the land was
P12,000. The partnership elected to use the bonus method to record the admission of GG into the
partnership. GG’s capital account should be credited for:
a. P12,000 c. P16,000
b. 15,000 d. 19,000
____ 59. 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 c. P2,000
b. 4,000 d. 0
____ 60. DD and GG, are partners with capital account balances of P12,000 and P18,000, respectively, They
agree to admit ZZ and a partner with a one-third interest in capital and profits, for an investment
P20,000, after revaluing the assets of DD and GG. Goodwill to the original partners should be:
a. P0 c. P10,000
b. 6,667 d. 13,333
____ 61. On June 30, 2004, the condensed balance sheet for the partnership of EE, FF, and GG, together with
their respective profit and loss sharing percentages was as follows:
Assets, net of liabilities ........................................................... P3,200,000

========
EE, capital (50%) .................................................................. P1,600,000
FF, capital (30%) ................................................................... 960,000
GG, capital (20%) .................................................................. 640,000
P3,200,000
========
HH is admitted as a new partner with a 25% interest in the capital of the new partnership for a cash
payment of P1,400,000. Total goodwill implicit in the transaction is to be recorded. Immediately after
admission of HH, EE’s capital account balance should be:
a. P2,800,000 c. P1,600,000
b. 2,100,000 d. 1,400,000
____ 62. The partnership of Marissa and Olga is being dissolved, and the assets and equities at book value and
fair value and profit and loss ratios at January 1, 2004 are as follows:
Book Value Fair Value

Cash .................................................. P 20,000 P 20,000
Accounts receivable - net ................... 100,000 100,000
Inventories ........................................ 50,000 200,000
Plant assets - net ............................... 100,000 120,000
P270,000 P440,000
======== ========
Accounts payable ..............................
P50,000 P50,000
Marissa, capital (50%) ......................120,000
Olga, capital (50%) ...........................
100,000
P270,000
========
Marissa and Olga agree to admit Trent into the partnership for a one-third interest. Trent invests P95,000
cash and a building to be used in the business with a book value to Trent for P100,000 and a fair value
of P120,000.
Compute the capital balance of Olga after the admission, assuming that the assets are revalued and
goodwill is recognized.
a. P175,000 c. P195,000
b. 155,000 d. 205,000
____ 63. AA and BB entered into a partnership on May 31, 2004, contributing cash of P48,000 and P32,000,
respectively, and agreeing to divide earnings in the ratio of their initial investments after allowing
annual salary allowance of P12,000 each. On December 31, 2004, the Income Summary account had a
credit balance of P34,000, while the drawing accounts showed debit balances of P14,000 for AA and
P10,000 for BB.
At the beginning of the next year, CC was admitted into the firm as a new partner with a 33-1/3%
interest for a capital credit equal to his cash investment of P60,000. AA and BB then effected a private
cash settlement between themselves in order to make the capital balances conform to a new profit-
sharing ratio of 4:2:3, respectively, with salary allowances scrapped.
How much of the amount of the private cash settlement effected between the old partners?
a. P5,000 c. P12,000
b. 9,000 d. 15,000
____ 64. AA, BB, and CC are partners sharing profits in a 5:3:2 ratio, and with capital balances of P95,000, and
P80,000, and P60,000, respectively, on December 31, 2003. The partners decide to admit DD as a new
partner on January 1, 2004. DD will contribute cash of P80,000 to the partnership and also pay P10,000
for 15% of BB’s share. DD is to have a 20% share in profits. After the admission of DD, the total capital
will be P330,000 and DD’s capital will be P70,000.
After the admission of DD, BB’s capital balance would be:
a. P72,600 c. P79,100
b. 74,000 d. 81,100
____ 65. The following are capital account balances and profit and loss ratios of the partners in Precious
Company.
P&L
Capital Ratio
LL ......................................................................... P2,250,000 2
OO ........................................................................ 750,000 1
They agree to admit RR as a partner with a 25% interest in capital upon her investment of P1,000,000.
LL, OO and RR are to share profits 5:3:2, respectively.
Subsequently, TT joins the partnership by investing P1,200,000 for a 20% interest in profits and capital,
the old partners are to share profits in their original ratio.
Assuming the goodwill method is used, how much is the goodwill to be recorded upon the admission
of TT?
a. P800,000 c. P400,000
b. 600,000 d. 240,000
____ 66. MM and NN are partners who have capitals of P6,000 and P4,800 and share profits in the ratio of 3:2.
OO is admitted as a partner upon investing cash of P5,000 with profits to be shared equally.
Assume that OO is allowed a 25% interest in the firm, (1) the capital balance of MM after the admission
of OO using goodwill method, and (2) how much will NN gain or lose by the use of bonus method over
goodwill method.
a. (1) P7,120; (2) NN will lose P140

b. (1) P7,120; (2) NN will gain P1,260
c. (1) P8,520; (2) NN will lose P1,260
d. (1) P8,520; (2) NN will gain P140
____ 67. AA and BB are partners who have capital of P600,000 and P480,000 sharing profits in the ratio of 3:2
CC admitted as a partner upon investing P500,000 for 25% interest in the firm, profits to be shared
equally. Given the choice between goodwill and bonus method, CC will?
a. Prefer bonus method due to CC’s gain of P35,000

b. Prefer bonus method due to CC’s gain of P140,000
c. Prefer goodwill method due to CC’s gain of P140,000
d. Be indifferent for the goodwill and bonus methods are the same.
____ 68. On June 30, 2004, the condensed balance sheet for the partnership of DD, FF, and GG, together with
their respective profit and loss sharing percentages was as follows:
Assets, net of liabilities .............................................................. P320,000

=======
DD, capital (50%) .................................................................... P160,000
FF, capital (30%) ...................................................................... 96,000
GG, capital (20%) .................................................................... 64,000
P320,000
=======
DD decided to retire from the partnership and by mutual agreement is to be paid P180,000 out of
partnership funds for his interest. Total goodwill implicit in the agreement is to be recorded. After DD’s
retirement, what are the capital balances of the other partners?
FF GG FF GG
a. P84,000 P56,000 c. P108,000 P72,000
b. 102,000 68,000 d. 120,000 80,000
____ 69. On June 30, 2004, the balance sheet for the partnership of CC, MM, and PP, together with their
respective profit and loss ratios, were as follows:
Assets, at cost .................................................................................... P180,000

=======
CC, loan ............................................................................................ P 9,000
CC, capital (20%) .............................................................................. 42,000
MM, capital (20%) ............................................................................ 39,000
PP, capital (60%) .............................................................................. 90,000
Total ........................................................................................... P180,000
=======
CC has decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to
their fair value of P216,000 at June 30, 2004. It was agreed that the partnership would pay CC P61,200
cash for CC’s partnership interest, including CC’s loan which is to be repaid in full. No goodwill is to
be recorded. After CC’s retirement, what is the balance of MM’s capital account?
a. P36,450 c. P45,450
b. 39,000 d. 46,200
____ 70. PP, RR and SS were partners with capital balances as of January 1, 2004, of P20,000, P30,000 and
P40,000 respectively, sharing profit and losses on a 5:3:2 ratio.
On July 1, 2004 PP withdrew from the partnership. Partners agreed that at the time of withdrawal,
certain inventories had to be revalued at P14,000 from its cost of P10,000. For six month period ending
June 30, 2004, the partnership generated a net income of P28,000. Further, partners agreed to pay PP,
P39,000 for his interest and that the remaining partner’s capital accounts, would be adjusted for
whatever goodwill the settlement would generate. The payment of PP included a goodwill of:
a. P3,000 c. P10,000
b. 5,000 d. 8,500
____ 71. The condensed balance sheet of the partnership of EE, FF and GG with corresponding profit and loss
sharing percentage as of June 30, 2004 was as follows:
Net assets .......................................................................

P480,000
=======
EE, capital (50%) ............................................................ P240,000
FF, capital (30%) ............................................................. 144,000
GG, capital (20%) ............................................................ 96,000
P480,000
=======
As of said date, EE retired from the partnership. By mutual agreement, he was paid P270,000 for his
interest in the partnership. Partial goodwill was to be recorded. After EE’s retirement, the total net assets
of the partnership was:
a. P300,000 c. P240,000
b. 210,000 d. 270,000
____ 72. The condensed balance sheet of the partnership of EE, FF and GG with corresponding profit and loss
sharing percentage as of June 30, 2004 was as follows:
Net assets .......................................................................

P480,000
=======
EE, capital (50%) ............................................................ P240,000
FF, capital (30%) ............................................................. 144,000
GG, capital (20%) ............................................................ 96,000
P480,000
=======
As of said date, EE retired from the partnership. By mutual agreement, he was paid P270,000 for his
interest in the partnership. Total goodwill was to be recorded. What will be the total net assets of the
partnership after EE’s retirement?
a. P300,000 c. P240,000
b. 210,000 d. 270,000
____ 73. A. Smith, a partner in an accounting firm, decided to withdraw from the partnership, Smith’s share of
the partnership profits and losses was 20%. Upon withdrawing from the partnership he was paid
P88,800 in final settlement for his interest. The total of the partners’ capital accounts before recognition
of partnership goodwill prior to Smith’s withdrawal was P252,000. After his withdrawal the remaining
partners’ capital accounts, excluding their share of goodwill, totaled P192,000. The total goodwill of
the firm was:
a. P144,000 c. P192,000
b. 168,000 d. 300,000
____ 74. CC, DD and EE shared profit and losses based on 5:3:2. EE was allowed to withdraw from the
partnership on 31 December 2004 with P600,000 cash as full settlement. The condensed balance sheet
of partnership as of that date was as follows:
Assets
Due from EE .......................................................................... P 250,000
Goodwill ................................................................................. 2,000,000
Other assets ........................................................................... 4,750,000
Total assets ................................................................................. P7,000,000
=========
Liabilities and Capital
Liabilities ................................................................................ P2,000,000
Due to DD ............................................................................. 750,000
CC, capital .............................................................................. 1,750,000
DD, capital ............................................................................. 1,500,000
EE, capital .............................................................................. 1,000,000
Total liabilities and capital .............................................................. P7,000,000
========
Using the partial adjustment of goodwill method, the new capital balances of the remaining partners
after EE’s withdrawal are:
a. CC, P1,842,750 and DD, P1,556,250

b. CC, P1,375,000 and DD, P1,275,000
c. CC, P2,000,000 and DD, P1,650,000
d. CC, P1,750,000 and DD, P1,500,000
____ 75. CC, DD and EE shared profit and losses based on 5:3:2. EE was allowed to withdraw from the
partnership on 31 December 2004 with P600,000 cash as full settlement. The condensed balance sheet
of partnership as of that date was as follows:
Assets
Due from EE .......................................................................... P 250,000
Goodwill ................................................................................. 2,000,000
Other assets ........................................................................... 4,750,000
Total assets ................................................................................. P7,000,000
=========
Liabilities ................................................................................ P2,000,000
Due to DD ............................................................................. 750,000
CC, capital .............................................................................. 1,750,000
DD, capital ............................................................................. 1,500,000
EE, capital .............................................................................. 1,000,000
Total liabilities and capital .............................................................. P7,000,000
========
Using the entire shrinkage in asset method or total adjustment in goodwill method, the new capital
balance of the remaining partners after EE’s withdrawal are:
a. CC, P1,843,750 and DD, P1,556,250
b. CC, P1,375,000 and DD, P1,275,000
c. CC, P2,000,000 and DD, P1,650,000
d. CC, P1,750,000 and DD, P1,500,000
____ 76. AA, BB, and CC are partners sharing profits in the ratio of 3:2:1, respectively. Capital accounts are
P50,000, P30,000 and P20,000 on December 31, 2004, when CC decides to withdraw. It is agreed to
pay P30,000 for CC’s interest. Profits after the retirement of CC are to be shared equally.
(1) The capital balance of BB after retirement of CC, using total goodwill approach, and (2) assume the
usage of bonus, partial, and total goodwill approach for the retirement, which of these methods will be
preferred by BB?
a. (1) P50,000; (2) Bonus method

b. (1) P20,000; (2) Bonus method
c. (1) P30,000; (2) Partial goodwill
d. (1) P50,000; (2) Total goodwill
____ 77. The partnership of MM, PP, and RR shared profit and loss equally. When MM withdraw from the
partnership, the partners agreed that there was unrecorded goodwill in the partnership. Under the bonus
method, the capital balances of PP and RR were:
a. Not affected.
b. Each reduce by one-half of the total amount of the unrecorded goodwill.
c. Each reduce by one-third of the total amount of hte unrecorded goodwill.
d. Each reduce by one-half of MM’s share of the total amount of the unrecorded goodwill.
____ 78. When MM retired from the partnership of MM, YY, and LL, the settlement of MM’s interest exceeded
MM’s capital balance. Under the bonus method, the excess:
a. Was recorded as goodwill.

b. Was recorded, as expense.
c. Reduced the capital balances of YY and LL.
d. Had no effect on the capital balances of YY and LL.
____ 79. AA retired from the partnership of AA, BB, and CC. AA’s cash settlement from the partnership was
based on new goodwill determined at the date of retirement plus carrying amount of the other net assets.
As a consequence of the settlement, the capital accounts of BB and CC were decreased. In accounting
for AA’s withdrawal, the partnership could have used the:
Bonus Method Goodwill Method

a. No Yes
b. No No
c. Yes Yes
d. Yes No
____ 80. When LL retired from the partnership of LL, MM, and NN, the final settlement of LL interest exceeds
LL’s capital balance. Under the partial goodwill method, the excess is:
a. Of no effect to capital accounts of MM and NN.

b. Recorded as gain.
c. Recorded as an expense.
d. Recorded as reduction of capital balances of MM and NN.
____ 81. Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1, 2004,
they decided to form the R & G Corporation by transferring the assets and liabilities from the partnership
to the Corporation in exchange of its stocks. The following is the post-closing trial balance of the
partnership to the Corporation in exchange of its stock. The Following is the post-closing trial balance
of the partnership:
Debit Credit
Cash .................................................................... P45,000
Accounts Receivable (net) .................................... 60,000
Inventory ............................................................. 90,000
Fixed Assets (net) ................................................ 174,000
Liabilities .............................................................
P60,000
Roy, Capital ......................................................... 94,800
Gil, Capital ...........................................................
214,200
P369,000 P369,000
======= =======
It was agreed that adjustments be made to the following assets to be transferred to the corporation:
Accounts Receivable .................................................................. P40,000

Inventory ................................................................................... 68,000
Fixed Assets .............................................................................. 180,600
The R & G Corporation was authorized to issue P100 par preferred stock and P10 par common stock.
Roy and Gil agreed to receive for their equity in the partnership 720 shares of the common stock each,
plus even multiples of 10 shares of preferred stock for their remaining interest.
The total number of shares of preferred and common stock issued by the Corporation in exchange of
the assets and liabilities of the partnership are:
Preferred Stock Common Stock Preferred Stock Common Stock

a. 2,540 shares 1,500 shares c. 2,642 shares 1,440 shares
b. 2,592 shares 1,440 shares d. 2,642 shares 1,550 shares
____ 82. The condensed balance sheet of the partnership of China and Japan as of December 31, 2004 showed
the following:
Total assets .......................................................................... P200,000

Total liabilities ...................................................................... 40,000
China, capital ....................................................................... 80,000
Japan, capital ....................................................................... 80,000
On this date, the partnership was dissolved and its net assets were transferred to a newly-formed
corporation. The fair value of the assets was P24,000 more than the carrying value on the firm’s books.
Each of the partner was issued 10,000 shares of the corporation’s P1 par common stock. Immediately
after effecting the transfer of the net assets, and the issuance of stock, the corporation’s additional paid-
in capital account would be credited for:
a. P136,000 c. P154,000
b. 140,000 d. 164,000
____ 83. Partners Art and Tony, who share equally in profits and losses, have the following balance sheet as of
December 31, 2004:
Cash .............................. P120,000 Accounts payable ............ P172,000

Receivable ..................... 100,000 Accum.dep’n .................. 8,000
Inventory ....................... 140,000 Art, capital ...................... 140,000
Equipment ..................... 80,000 Tony, capital .................... 120,000
Total ............................. P440,000 Total ............................... P440,000
======= =======
They agreed to incorporate their partnership, with the new corporation absorbing the net assets after the
following adjustments: provision of allowances for bad debts of P10,000; statement of the inventory at
its current fair value of P160,000; and, recognition of further depreciation on the equipment of P3,000.
The corporation’s capital stock is to have a par value of P100, and the partners are to be issued
corresponding total shares equivalent to their adjusted capital balances.
The total par value of the shares of capital stock that were issued to partners Art and Tony was:
a. P260,000 c. P273,000
b. 267,000 d. 280,000
____ 84. JJ and KK partnership’s balance sheet at December 31, 2004, reported the following:
Total assets .................................................................... P100,000

Total liabilities ................................................................. 20,000
JJ, capital ....................................................................... 40,000
KK, capital .................................................................... 40,000
On January 2, 2005, JJ and KK dissolved their partnership and transferred all assets and liabilities to a
newly-formed corporation. At the date of incorporation, the fair value of the net assets was P12,000
more than the carrying amount on the partnership’s books, of which P7,000 was assigned to tangible
assets and P5,000 was assigned to goodwill. JJ and KK were each issued 5,000 shares of the
corporation’s P1 par value common stock. Immediately following incorporation, additional paid-in-
capital in excess of par should be credited for:
a. P68,000 c. P77,000
b. 70,000 d. 82,000
____ 85. The following condensed balance sheet is presented for the partnership of AA, BB, and CC, who share
profits and losses in the ratio of 4:3:3, respectively:
Cash ...................................................................................P160,000
Other assets ........................................................................ 320,000
Total ............................................................................. P480,000
=======
Liabilities ............................................................................ P180,000
AA, capital ......................................................................... 48,000
BB, capital ......................................................................... 216,000
CC, capital ......................................................................... 36,000
Total ............................................................................ P480,000
=======
The partners agreed to dissolve the partnership after selling the other assets for P200,000. Upon
dissolution of the partnership, AA should have received.
a. P0 c. P72,000
b. 48,000 d. 84,000
____ 86. The balance sheet of the partnership of Precious, Janet, and Michelle, who share profits and losses in
the respective ratio of 5:3:2, follows:
Assets Liabilities and Capital

Cash ................................... P30,000 Liabilities ............................... P50,000
Other assets ........................ 320,000 Precious, capital .................... 80,000
Janet, capital .......................... 115,000
Michelle, capital ..................... 105,000
Total ................................. P350,000 Total ..................................... P350,000
======= =======
The partners agreed to liquidate the partnership by installments. Immediately, there was a realization of
P100,000 cash from selling other assets with book value of P150,000. Of the cash available, the priority
is the payment of the liabilities and the balance is to be distributed to the partners.
How should the remaining cash be distributed?
a. Precious, P50,000; Janet, P30,000; and, Michelle, P20,000

b. Precious, P40,000; Janet, P24,000; and, Michelle, P16,000
c. Precious, P -0- ; Janet, P31,000; and, Michelle, P49,000
d. Precious, P -0- ; Janet, P48,000; and, Michelle, P32,000
____ 87. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed
balance sheet of Heidi Partnership as of December 31, 2004 is:
Heidi Partnership
Balance Sheet
December 31, 2004
Cash ..................................................................................... P50,000

Other assets .......................................................................... 130,000
Total assets ........................................................................... P180,000
=======
Liabilities ............................................................................... P40,000
W, capital .............................................................................. 60,000
X, capital ............................................................................... 40,000
Y, capital .............................................................................. 40,000
Total liabilities and capital ....................................................... P180,000
=======
Assume instead that the Heidi Partnership is dissolved and liquidated by installments, and the first
realization of P40,000 cash is on the sale of the other assets with book value of P80,000. After the
payment of liabilities, the available cash shall be distributed to W, X, and Y, respectively, as follows:
a. P36,000; P27,000; and, P27,000

b. P44,000; P28,000; and, P28,000
c. P16,000; P12,000; and, P12,000
d. P24,000; P13,000; and, P13,000
____ 88. The partners of M&N Partnership started liquidating their business on July 1, 2004, at which time the
partners were sharing profits and losses 40% to M and 60% to N. The balance sheet of the partnership
appeared as follows:
M&N Partnership
Balance Sheet - July 1, 2004
Assets Liabilities and Capital

Cash ....................................... P8,800 Accounts payable .........................P32,400
Receivable .............................. 22,400 M, capital .............. P31,000
Inventory ................................ 39,400 M, drawing ............ 5,400 25,600
Equipment ........... P65,200 N, capital .............. P33,200
Accumulated N, drawing ........... 200 33,000
depreciation 30,800 34,400 N, loan ................................. 14,000
Total ...................................... P105,000 Total .................................... P105,000

======= =======
During the month of July, the partners collected P600 of the receivables with no loss. The partners also
sold during the month the entire inventory on which they realized a total of P32,400.
How much of the cash was paid to M’s capital on July 31, 2004?
a. P -0- c. P5,400
b. 25,600 d. 320
____ 89. The condensed balance sheet of Alex, Jay and John, as of March 31, 2004, follows:
Cash ........................ P28,000 Liabilities .....................

P 48,000
Other assets ............. 265,000 Alex, capital ................
95,000
Jay, capital ..................
80,000
John, capital ................
70,000
Total assets .................. P293,000 Total equities ...............
P239,000
======== ========
The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their partnership and
liquidate by selling the other assets in installments. The amount of P70,000 was realized on the first
cash sale of other assets with a book value of P150,000. After settlement with creditors, all cash
available was distributed to the partners.
How much was received by John in the cash distribution?
a. P10,500 c. P21,250
b. 20,000 d. 32,500
____ 90. On January 1, 2004, the partners of CC, DD, and EE, who share profits and losses in the ratio of 5:3:2,
respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet
was as follows:
Assets
Cash ............................................................................. P50,000
Other assets .................................................................. 250,000
P300,000
=======
Liabilities ......................................................................
P60,000
CC, capital ...................................................................
80,000
DD, capital ...................................................................
90,000
EE, capital ....................................................................
70,000
P300,000
=======
On January 15, 2004, the first cash sale of other assets with a carrying amount of P150,000 realized
P120,000. Safe installment payments to the partners were made the same date. How much cash should
be distributed to each partner?
CC DD EE CC DD EE
a. P15,000 P51,000 P44,000 c. P55,000 P33,000 P22,000
b. 40,000 45,000 35,000 d. 60,000 36,000 24,000
____ 91. After operating for five years, the books of the partnership of Bo and By showed the following balances:
Net assets .......................................................................... P169,000

Bo, capital .......................................................................... 110,500
By, capital .......................................................................... 58,500
If liquidation takes place at this point and the net assets are realized at book value, the partners are
entitled to:
a. Bo to receive P117,000 & By to receive P52,000

b. Bo to receive P126,750 & By to receive P42,250
c. Bo to receive P84,500 & By to receive P84,500
d. Bo to receive P110,500 & By to receive P58,500
____ 92. RR, SS and TT decided to dissolve the partnership on November 30, 2004. Their capital balances and
profit ratio on this date follow:
Capital Profit
Balances Ratio
RR .......................................................................... P50,000 40%
SS ........................................................................... 60,000 30%
TT .......................................................................... 20,000 30%
The net income from January 1 to November 30, 2004 is P44,000. Also, on this date, cash and liabilities
are P40,000 and P90,000, respectively. For RR to receive P55,200 in full settlement of his interest in
the firm, how much must be realized from the sale of the firm’s non-cash assets?
a. P196,000 c. P193,000
b. 177,000 d. 187,000
____ 93. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of 3/21, 4/21, 6/21 and
8/21, respectively. The balances of their capital accounts on December 31, 2004 are as follows:
Silverio ...........................................................................................
P1,000
Domingo ........................................................................................
25,000
Reyes ............................................................................................
25,000
Pastor ............................................................................................
9,000
P60,000
=======
The partners decide to liquidate, and they accordingly convert the non-cash assets into P23,200 of cash.
After paying the liabilities amounting to P3,000, they have P22,200 to divide. Assume that a debit
balance of any partner’s capital is uncollectible.
After the P22,200 was divided, the capital balance of Domingo was:
a. P3,200 c. P4,500
b. 3,920 d. 17,800
____ 94. As of December 31, 2004, the books of Ton Partnership showed capital balances of: T P40,000; O,
P25,000; N, P5,000. The partners’ 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 c. P19,000
b. 18,000 d. 17,000
____ 95. AA, BB, CC are partners in ABC Partnership and share profits and losses 50%, 30% and 20%,
respectively. The partners have agreed to liquidate the partnership and some liquidation expenses to be
incurred. Prior to the liquidation, the partnership balance sheet reflects the following book values:
Cash .................................................................................... P25,200

Non-cash assets ................................................................... 297,600
Notes payable to CC ............................................................. 38,400
Other liabilities ...................................................................... 184,800
AA, capital ........................................................................... 72,000
BB, capital deficit ................................................................. (12,000)
CC, capital ........................................................................... 39,600
Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with a book
value of P240,000 are sold for P216,000.
How much cash should CC receive?
a. P46,457 c. P74,571
b. 39,600 d. -0-
____ 96. Rodel and Gerry share partnership profits and losses in a 7:3 ratio. Their post-closing trial balance on
January 31 show before liquidation:
Cash ................................................................... P30,000

Accounts, receivable, net ..................................... 380,000
Inventory ............................................................ 260,000
Furniture, net ...................................................... 120,000
Accounts payable ............................................... P165,000
Rodel, capital ..................................................... 350,000
Gerry, capital ..................................................... 275,000
Asser offered to buy for P760,000 the partnership assets including liabilities but excluding cash and
after certain assets are to be restated at their fair values as follows:
Accounts receivable ............................................................. P350,000

Inventory ............................................................................. 250,000
Furniture .............................................................................. 135,000
How much will Rodel and Gerry receive as final settlement of their partnership interest?
a. P570,000 c. P790,000
b. 760,000 d. 625,000
____ 97. After all non cash assets have been converted into cash in the liquidation of the AA and JJ partnership,
the ledger contains the following account balances:
Debit Credit
Cash ......................................................... P34,000
Accounts payable ...................................... P25,000
Loan payable to AA .................................. 9,000
AA, capital ............................................... 8,000
JJ, capital ................................................. 8,000
Available cash should be distributed; P25,000 to accounts payable and;
a. P9,000 loan payable to AA c. P1,000 to AA and P8,000 to JJ

b. P4,500 each to AA and JJ d. P8,000 to AA and P1,000 to JJ
____ 98. Arthur, Baker and Carter are partners in textile distribution business, sharing profits and losses equally.
On December 31, 2004 the partnership capital and partner drawings were as follows:
Arthur Baker Carter Total

Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000
The partnership was unable to collect on trade receivables and was forced to liquidate. Operating profit
in 2004 amounted to P72,000 which was all exhausted including the partnership assets. Unsettled
creditors’ claims at December 31, 2004 totaled P84,000. Baker and Carter have substantial private
resources but Arthur has no personal assets:
Final cash distribution to Carter was:
a. P78,000 c. P108,000
b. 84,000 d. 162,000
____ 99. Jar, Ram, and Millo, who divide profits and losses 50%, 30%, and 20%, respectively, have the following
October 31, 2004 account balances:
Jar, drawing (Dr.) .................................................................. P12,000

Millo, drawing (Cr.) ............................................................... 4,800
Accounts receivable - Jar ....................................................... 7,200
Loans payable -Ram .............................................................. 14,400
Jar, capital ............................................................................ 59,400
Ram, capital ......................................................................... 44,400
Millo, capital ......................................................................... 39,000
On this data, the partnership’s assets are P211,200 (including cash of P64,200). The partnership is
liquidated and Millo receives P33,000 in final settlement. How much is the total loss on realization?
a. P10,800 c. P54,000
b. 31,200 d. 64,200
____ 100. When Mikki and Mylene, partners who share earnings equally, were incapacitated in an airplane
accident, a liquidator was appointed to wind up their business. The accounts showed cash, P35,000;
other assets, P110,000; Liabilities, P20,000; Mikki, capital, P71,000; and Mylene, capital, P54,000.
Because of highly specialized nature of the noncash assets, the liquidator anticipated that considerable
time would be required to dispose them. The expenses of liquidating the business (advertising, rent,
travel, etc.) are estimated at P10,000.
How much cash can be distributed safely to each partner at this point?
a. P5,000 to Mikki; and P0 to Mylene

b. P5,000 to Mikki; and P500 to Mylene
c. P3,000 to Mikki; and P0 to Mylene
d. P5,000 to Mikki; and P1,000 to Mylene
____ 101. A balance sheet for the partnership of KK, LL and MM, who share profits 2:1:1 respectively, shows the
following balances just before liquidation:
Cash Other Assets Liab. KK, Cap. LL, Cap. MM, Cap.
P48,000 P238,000 P80,000 P88,000 P62,000 P56,000
In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation
expenses of P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated before
liquidation is completed. Creditors were paid P22,400. Available cash was distributed to the partners.
The cash to be received by each partner based on the above data:
KK LL MM KK LL MM
a. P56,600 P28,300 P28,300 c. P29,400 P32,700 P26,700
b. 86,000 61,000 55,000 d. 88,000 62,000 56,000
____ 102. NN, OO, PP, and GG, partners to a law firm, shares profits at the ratio of 5:3:1:1. On June 30, relevant
partners’ accounts follows:
Advances Loans Capital

Dr. Cr. Cr.
NN .................................... - P20,000 P160,000
OO .................................... 40,000 120,000
PP ..................................... P18,000 - 60,000
GG .................................... 10,000 - 100,000
On this day, cash of P72,000 is declared as available for distribution to partners as profits. Who among
the partners will benefit from the P72,000 cash distribution?
a. PP and GG c. All, equally

b. OO and GG d. NN and OO
____ 103. The partnership of AA, BB, CC was dissolved on June 30, 2004 and account balances after non-cash
assets were converted into cash on September 1, 2004 are:
Cash ...................... P50,000 Accounts payable P120,000

AA, capital (30%) 90,000
BB, capital (30%) (60,000)
CC, capital (40%) (100,000)
Personal assets and liabilities of the partners at September 1, 2004 are:
Personal Personal
Assets Liabilities
AA ............................................................. P80,000 P90,000
BB ............................................................. 100,000 61,000
CC ............................................................. 192,000 80,000
If CC contributes P70,000 to the partnership to provide cash to pay the creditors, what amount of
AA’s P90,000 partnership equity would appear to be recoverable?
a. P90,000 c. P79,000
b. 81,000 d. None
____ 104. GARDO and GORDO formed a partnership on July 1, 2004 to operate two stores to be managed by
each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and 40%,
respectively. All their transactions were for cash, and all their subsequent transactions were handled
through their respective bank accounts as summarized below:
Gardo Gordo
Cash receipts ................................................. P79,100 P65,245
Cash disbursements ....................................... 62,275 70,695
On October 31, 2004, all remaining noncash assets in the two stores were sold for cash of P60,000. The
partnership was dissolved, and cash settlement was effected. In the distribution of the P60,000 cash,
GARDO received:
a. P24,000 c. P34,000
b. 26,000 d. 36,000
____ 105. PP, QQ, and RR, partners to a firm, have a 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 c. RR
b. No one d. PP
____ 106. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining assets are
being realized gradually. The equity of the partners is as follows:
Loans to
Partners’ (from) Profit and
Accounts Partnership Loss Ratio
P P24,000 6,000 3
Q 36,000 - 3
R 60,000 (10,000) 4
The second cash payment to any Partner(s) under a program of priorities shall be made thus:
a. To R P2,000 c. To R P8,000
b. To Q P6,000 d. To Q P6,000 & R P8,000
____ 107. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams partnership
appears below:
Priority
Creditors Matthew Norell Reams
First P300,000 ......... 100%
Next P80,000 .......... 70% 30%
Next P70,000 ......... 3/7 4/7
Remainder ............. 22% 34% 44%
If P550,000 of cash is to be distributed, how much will be received by the priority creditor, Matthew,
Norell and Reams?
Priority Creditors Matthew Norell Reams

a. P0 P0 P0 P0
b. 0 121,000 187,000 242,000
c. 300,000 55,000 85,000 110,000
d. 300,000 108,000 58,000 84,000
____ 108. When L retired from the partnership of L, M, and N, the final settlement of L’s interest exceeded his
capital balance. Under the bonus method, the excess is:
a. Recorded as a reduction of capital balances of M and N.
b. Recorded as expense.
c. Recorded as goodwill.
d. Of no effect to capital accounts of M and N.
____ 109. If E is the total capital of a partnership before the admission of a new partner, F is the total agreed
capital of the partnership after the admission of the new partner, G is the amount of the new partner’s
investment, and H is the amount of capital credited to the new partner, then there is
a. Goodwill to the new partner if F> (E + G) and H < G.
b. Goodwill to the old partners if F = E + G and H > G.
c. A bonus to the new partner if F = E + G and H > G.
d. Neither bonus nor goodwill if F > (E + G) and H > G.
____ 110. Partners K and C share income and loss equally after each has been credited in all circumstances with
annual salary allowances of P15,000 and P12,000, respectively. Under this arrangement, C will benefit
by P3,000 more than K in which of the following circumstances?
a. Only if the partnership has earnings of P27,000 or more for the year.
b. Only if the partnership does not incur a loss for the year.
c. In all earnings or loss situations.
d. Only if the partnership has earnings of at least P3,000 for the year.
____ 111. Partners H and E share income in a 2:1 ratio, respectively. Each partner receives an annual salary
allowances of P6,000. If the salaries are recorded in the account of the partnership as an expense rather
than treated as an allocation of income, the total amount allocated to each partner for salaries and net
income would be
a. Less for both H and E. c. More for H and less for E.
b. Unchanged for both H and E. d. More for E and less for H.
____ 112. H and J formed a partnership, each contributing assets to the business. H contributed inventory with a
current market value in excess of its carrying amount. J contributed real estate with a carrying amount
in excess of its current market value. At what amount should the partnership record each of the
following assets
Inventory Real Estate Inventory Real Estate

a. Market value Market value c. Carrying amount Carrying amount
b. Market value Carrying amount d. Carrying amount Market value
____ 113. The partnership of M, P and R shared profits and losses equally. When M withdrew from the
partnership, the partners agreed that there was unrecorded goodwill in the partnership. Under the
bonus method, the capital balances of P and R were
a. Not affected.
b. Each reduced by one-half of the total amount of the unrecorded goodwill.
c. Each reduced by one-third of the total amount of the unrecorded goodwill.
d. Each reduced by one-half of M’s share of the total amount of unrecorded goodwill.
____ 114. P, H and D are partners with capital balances of P50,000, P30,000, P20,000, respectively. The partners
share income and loss equally. For an investment of P50,000 cash, M is to be admitted as a partner
with a one-fourth interest in capital and income. Based on this information, the amount of M’s
investment can best be justified by which of the following:
a. M will receive a bonus from the other partners upon her admission to the partnership.
b. Assets of the partnership were overvalued immediately prior to M’s investment.
c. The book value of the partnership’s net assets was less than their fair value immediately
prior to M’s investment.
d. M is apparently bringing goodwill into the partnership, and her capital account will be
credited for the appropriate amount.
____ 115. When D retired from the partnership of D, K and N, the final settlement of D’s partnership interest
exceeded D’s capital balance. Under the bonus method, the excess
a. Reduced the capital balances of K and N.

b. Had no effect on the capital balances of K and N.
c. Was recorded as goodwill.
d. Was recorded as an expense.
____ 116. In a partnership liquidation, the final cash distribution to the partners would be made in accordance with
the:
a. Partners’ income and loss sharing ratio.
b. Balances of the partners’ capital accounts.
c. Ratio of the capital contribution by the partners.
d. Ratio of capital contribution less withdrawals by the partners.
____ 117. On July 1, 2002, a partnership was formed by Rizal and Bonifacio. Rizal contributed cash. Bonifacio,
previously a sole proprietor, contributed property other than cash including realty subject to a mortgage,
which was assumed by the partnership. Bonifacio’s capital account at July 1, 2002 should be recorded
at
a. Bonifacio’s book value of the property less the mortgage payable at July 1, 2002.
b. The fair value of the property less the mortgage payable at July 1, 2002.
c. The fair value of the property at July 1, 2002.
d. Bonifacio’s book value of the property at July 1, 2002.
____ 118. The partnership agreement between M and N stipulates that M is to receive a 20% bonus on profits
before bonus, with the residual profit and loss to be apportioned in the ratio 2:3, respectively. Which
partner has a greater advantage when the partnership has a profit and when it incurred a loss?
a. Profit: N ; Loss: M c. Profit: N ; Loss: N
b. Profit: M ; Loss: N d. Profit: M ; Loss: M
____ 119. W and Y join in a venture. W invests P10,000 and Y contributes P2,000; profits are to be shared equally.
The venture failed and upon conclusion, only cash of P2,500 remains for distribution. Who gets the
available cash?
a. Y c. Neither W nor Y
b. W and Y d. W
____ 120. P , Q and R, 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 distributed to
the partners as it becomes available. Who among the partners shall be paid first with an available cash
of P1,400?
a. P c. No one
b. R d. Q
____ 121. When a new partner purchases the partnership interest of an existing partner for cash, an entry on the
partnership books should:
a. Not be made.
b. Debit the old partner’s capital account and credit the new partner’s capital account for the
amount of the cash payment.
c. Debit the old partner’s capital account and credit the new partner’s capital account for the
balance in the old partner’s capital account.
d. Debit the old partner’s capital account and credit the new partner’s capital account for the
tax basis of the old partner’s capital account.
____ 122. When a new partner is admitted to a partnership for a cash contribution that differs from his or her
initial capital balance and goodwill is not recorded, the difference between the new partner’s cash
contribution and capital balance should be:
a. Debited to the old partners’ capital accounts in their old profit and loss ratio.
b. Credited to the old partners’ capital accounts in their old profit and loss ratio.
c. Credited to the old partners’ capital accounts in their new profit and loss ratio.
d. Debited or credited to the old partners’ capital accounts in their old profit and loss ratio.
____ 123. When a retiring partner receives a cash payment different than his or her capital account balance and
goodwill is not to be recorded, the difference should be;
a. Debited to the remaining partners’ capital accounts if the cash payment exceeds the
retiring partner’s capital balance.
b. Credited to the remaining partners’ capital accounts if the cash payment exceeds the
c. Debited to the remaining partners’ capital accounts if the cash payment is less than the
d. Debited to the undervalued assets if the cash payment is less than the retiring partner’s
capital balance.
____ 124. A partnership is formed by two individuals who were previously sole proprietors. Property other than
cash which is part of the initial investment in the partnership would be recorded for financial accounting
purposes at the:
a. Proprietors’ books values or the fair value of the property at the date of the investment,
whichever is higher.
b. Proprietors’ book values or the fair value of the property at the date of the investment
whichever is lower.
c. Proprietors’ book values of the property at the date of the investment.
d. Fair value of the property at the date of the investment.
____ 125. When property other than cash is invested in a partnership, at what amount should the noncash property
be credited to the contributing partner capital account?
a. Contributing partner’s tax basis.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Fair value at the date of contribution
____ 126. In accounting for the liquidation of a partnership, cash payments to partners after all nonpartner
creditors’ claims have been satisfied, but before the final cash distribution, should be according to:
a. The partners’ relative profit and loss sharing ratios.
b. The final balances in partner capital accounts.
c. The partners’ relative share of the gain or loss on liquidation.
d. Safe payments computations.
____ 127. When a partner withdraws from the partnership taking fewer assets than his or her interest,
a. no bonus results.
b. the withdrawing partner receives bonus.
c. the remaining partners receive bonus.
d. the remaining partners owe the withdrawing partner the difference.
____ 128. If A is the total capital of a partnership before the admission of a new partner, B is the total agreed
capital of the partnership after the investment of a new partner, C is the amount of the new partner’s
investment, and D is the amount of capital credit to the new partner, then there is:
a. A bonus to the new partner if B = A + C and D < C.

b. Goodwill to the old partners if B > ( A + C) and D = C.
c. Neither bonus nor goodwill if B = (A + C) and D > C.
d. Goodwill to the new partner if B > (A + C) and D < C.
____ 129. Tim retired from the partnership of Tim, Pete and Carl. Tim’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 Pete and Carl were decreased. In
accounting for Tim’s withdrawal, the partnership could have used the
Bonus method Goodwill method Bonus method Goodwill method

a. No Yes c. Yes Yes
b. No No d. Yes No
____ 130. The admission of a new partner to a 20% interest in a partnership for an investment of P18,000 with a
total agreed capital to be P75,000 will result in
a. Goodwill to the old partners. c. Bonus to the old partners.
b. Goodwill to the new partner. d. Bonus to the new partner.
____ 131. To be valid, a partnership agreement:
a. May be oral.
b. May be oral or written.
c. Must be in conformance with the Uniform Partnership Act.
d. Must be in conformance with the Internal Revenue Code.
____ 132. If a partner assigns his or her partnership interest to a bank as security for a loan, the bank:
a. Automatically becomes a partner.
b. Does not become a partner but is entitled to participate in managing the partnership.
c. Does not become a partner but is entitled to participate in the distribution of assets at
dissolution.
d. Is entitled to participate in managing the partnership and share in the profits and losses.
____ 133. In the absence of an agreement regarding income allocation, the Uniform Partnership Act requires that
income is to be allocated to partners:
a. Salaries first, the remainder in the capital ratio.

b. Salaries first, then interest on capital, the remainder in the capital ratio.
c. Original capital ratio.
d. Equally.
____ 134. The main characteristic of a liquidation done in one transaction is that all the:
a. Assets are sold in one transaction.
b. Liabilities are paid in one transaction.
c. Cash available to partners is distributed to them in one transaction.
d. Assets are sold in one transaction and all the available cash is distributed to creditors and
partners in one transaction.
____ 135. When a partner is personally insolvent and has a debit balance in his or her partnership capital account,
the personal assets should be distributed as follows:
a. To the personal creditors in full payment of their claims first, to the partnership creditors
second, and to the other partners last.
b. Proportionally to the personal and partnership creditors.
c. To the partnership creditors first to the extent of the debit balance and to the personal
creditors second.
d. Proportionally to the personal creditors and the other partners with credit balances.
____ 136. A partnership is considered to be insolvent when:
a. At least one partner is insolvent.
b. At least one partner’s capital account has a debit balance.
c. Its liabilities exceed its assets.
d. Its liabilities and partners’ capital accounts exceed its assets.
____ 137. If all liabilities have been recorded and no additional expenses are expected, the maximum loss a
partnership can realize is the:
a. Fair market value of the noncash assets.
b. Book value of the noncash assets.
c. Book value of the noncash assets plus the recorded liabilities.
d. Fair market value or the book value of the noncash assets, whichever is larger.
____ 138. A schedule calculating the safe payments to partners should be prepared:
a. If the partners receive cash before the creditors are fully satisfied.
b. In any partnership liquidation.
c. If a partnership is liquidated in one transaction.
d. If a partnership is liquidated in installments.
____ 139. The first partner to receive cash under an advance cash distribution plan is the partner who:
a. Can absorb the largest liquidation loss.
b. Has the largest capital balance.
c. Has the smallest profit and loss percentage.
d. Has either the largest capital balance or the smallest profit and loss percentage.
____ 140. When an advance distribution plan is prepared, a partner’s loan is:
a. Added to the other liabilities.
b. Added to the credit balance in the partner’s capital account.
c. Subtracted from the credit balance in the partner’s capital account.
d. Omitted from the calculation.
____ 141. Liquidation of a partnership includes all of the following steps, except:
a. Obtaining court approval
b. selling the partnership’s noncash assets
c. paying the partnership liabilities
d. distributing the remaining cash
____ 142. A capital deficiency in a partner’s capital that is uncollectible is
a. the result of a sale of noncash assets at a profit
b. the result of a loss in operations
c. a loss to the other partners
d. a gain to the other partners
____ 143. The other partners must absorb the deficiency in a partner’s capital account on liquidation because of
a. limited life and mutual agency
b. mutual agency and unlimited liability
c. limited life and co-ownership of property
d. mutual agency and partnership’s taxability
____ 144. When a partnership is liquidated, all of the following may occur, except:
a. a partner erases his deficiency by declaring bankruptcy
b. the other partners absorb a partner’s deficiency
c. a partner erases his deficiency by contributing property
d. a partner erases his deficiency by contributing cash
____ 145. In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share
in the cash according to their
a. profit and loss ratio c. capital balances
b. Withdrawals d. cash balance
____ 146. The order of partnership liquidation process is
a. sell assets, disburse cash to partners, pay liabilities

b. disburse cash to partners, pay liabilities, sell assets
c. pay liabilities, sell assets, disburse cash to partners
d. sell assets, pay liabilities, disburse cash to partners
____ 147. In a partnership liquidation, a loss from sale of noncash assets is
a. allocated to the partners with the lowest capital balance
b. allocated to partnership liabilities
c. allocated to partners based on their capital balances
d. allocated to partners based on the profit and loss sharing ratio
____ 148. A partnership liquidates and finds an excess cash, after payment of liabilities, of P100,000. The four
partners have equal capital balances and share profits and losses in the ratio of 10:20:30:40. The four
partners will receive a final distribution of cash as follows:
a. P25,000; P25,000; P25,000; P25,000 c. P12,000; P20,000; P8,000; P60,000
b. P10,000; P20,000; P30,000; P40,000 d. none of these
____ 149. Upon liquidation, the CD partnership realizes a gain on sale of assets amounting to P120,000. The gain
is allocated to the partners, Che and Drew, according to their profit and loss ratio of 1:2. How is the
gain allocated to each partner?
a. Che - P60,000; Drew - P60,000 c. Che - P40,000; Drew - P80,000
b. Che - P80,000; Drew - P40,000 d. None of these
____ 150. The liquidation of the partnership of C, D and E resulted in a deficiency in C’s capital account of
P100,000. C can contribute only P25,000 to offset her deficiency. D and E, who have capital balances
of P250,000 and P50,000 and share profits and losses in the ratio of 2:3, will absorb the deficiency as
follows:
a. D - P30,000 and E - P45,000 c. D - P45,000 and E - P30,000
b. D - P37,500 and E - P37,500 d. D - P0 and E - P0
____ 151. F, G and J are partners who share profits and losses in the ratio of 2:3:5. The partners have decided to
liquidate the partnership. Their capital accounts show the following balances: F - P60,000 credit; G -
P90,000 credit; J - P30,000 debit. What is the amount of cash available for distribution:
a. P160,000 c. P120,000
b. P150,000 d. P180,000
____ 152. In accounting for the liquidation of a partnership, cash payments to partners after all outside creditors’s
claims have been satisfied, but before the final cash distribution, should be made according to
a. safe payments computation
b. the partners’ profit and loss sharing ratio
c. the final balances in partners’ capital accounts
d. partners’ share of the gain or loss on liquidation
____ 153. In an installment liquidation, the final cash distribution to the partners should be made in accordance
with the
a. ratio of capital contributions less withdrawals by the partners
b. ratio of the original contributions plus additional investment
c. balances of the partners’ loan and capital accounts
d. partners’ profits and loss sharing ratio
____ 154. In a partnership liquidation, a gain on sale of noncash assets is
a. allocated to the partners based on their capital balances
b. allocated to the partners based on their profit and loss sharing ratio
c. allocated to the partner with the lowest capital balance
d. allocated to partnership liabilities
Partnership
Answer Section
MULTIPLE CHOICE
1. ANS: D
2. ANS: D
3. ANS: A
4. ANS: C
5. ANS: D
6. ANS: C
7. ANS: B
8. ANS: B
9. ANS: D
10. ANS: C
11. ANS: C
12. ANS: C
13. ANS: A
14. ANS: C
15. ANS: C
16. ANS: B
17. ANS: B
18. ANS: D
19. ANS: B
20. ANS: C
21. ANS: A
22. ANS: A
23. ANS: B
24. ANS: D
25. ANS: D
26. ANS: B
27. ANS: A
28. ANS: D
29. ANS: A
30. ANS: C
31. ANS: D
32. ANS: A
33. ANS: D
34. ANS: C
35. ANS: B
36. ANS: A
37. ANS: D
38. ANS: C
39. ANS: B
40. ANS: C
41. ANS: D
42. ANS: B
43. ANS: D
44. ANS: B
45. ANS: D
46. ANS: C
47. ANS: B
48. ANS: B
49. ANS: B
50. ANS: D
51. ANS: B
52. ANS: A
53. ANS: B
54. ANS: C
55. ANS: C
56. ANS: B
57. ANS: D
58. ANS: D
59. ANS: D
60. ANS: C
61. ANS: B
62. ANS: D
63. ANS: B
64. ANS: C
65. ANS: A
66. ANS: D
67. ANS: A
68. ANS: C
69. ANS: C
70. ANS: A
71. ANS: C
72. ANS: D
73. ANS: A
74. ANS: D
75. ANS: B
76. ANS: A
77. ANS: D
78. ANS: C
79. ANS: D
80. ANS: A
81. ANS: B
82. ANS: D
83. ANS: B
84. ANS: D
85. ANS: A
86. ANS: C
87. ANS: D
88. ANS: D
89. ANS: B
90. ANS: A
91. ANS: D
92. ANS: C
93. ANS: B
94. ANS: A
95. ANS: B
96. ANS: C
97. ANS: C
98. ANS: A
99. ANS: C
100. ANS: A
101. ANS: C
102. ANS: B
103. ANS: B
104. ANS: B
105. ANS: A
106. ANS: D
107. ANS: D
108. ANS: A
109. ANS: C
110. ANS: C
111. ANS: C
112. ANS: A
113. ANS: D
114. ANS: C
115. ANS: A
116. ANS: B
117. ANS: B
118. ANS: D
119. ANS: D
120. ANS: D
121. ANS: C
122. ANS: D
123. ANS: A
124. ANS: D
125. ANS: D
126. ANS: B
127. ANS: C
128. ANS: B
129. ANS: D
130. ANS: C
131. ANS: B
132. ANS: C
133. ANS: C
134. ANS: D
135. ANS: A
136. ANS: D
137. ANS: C
138. ANS: D
139. ANS: A
140. ANS: B
141. ANS: A
142. ANS: C
143. ANS: B
144. ANS: A
145. ANS: C
146. ANS: D
147. ANS: D
148. ANS: A
149. ANS: C
150. ANS: A
151. ANS: C
152. ANS: A
153. ANS: D
154. ANS: B

Bsa Partnership Multiple Choice Questions

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Bsa Partnership Multiple Choice Questions

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MULTIPLE CHOICE QUESTIONS

What is the capital of AA and BB after the above adjustments?

a. AA, P68,750; BB, P77,250 c. AA, P65,000; BB, P76,000

DD is to invest sufficient cash to obtain 1/3 interest in the partnership.

a. II, P220,000; JJ P160,000 and KK P150,000

a. LL, P615,942; MM, P717,894 c. LL, P640,876; MM, P683,050

For PP.................. P29,500

Compute the net (debit) credit adjustment for PP and QQ:

a. PP, P2,870; QQ P2,820 c. PP, P(870); QQ P180

For PP.................. P29,500

Compute the total liabilities after formation:

For PP.................. P29,500

Compute the total assets after formation:

(1) Sales = P70,000

The partners net income (loss) is:

Balance, January 1 P420,000

a. P21,000 increase c. P105,000 decrease

a. AA, P21,900; DD, P3,100 c. AA, P 0; DD, P 0

a. DD, P60,000; EE, P59,400 c. DD, P67,200; EE, P52,800

a. DD, P10,520; BB, P13,480 c. DD, P10,800; BB, P13,200

a. AA, P31,138; BB, P28,862 c. AA, P30,633; BB, P29,367

January 1 capital balances......................... P100,000 P120,000

a. P110,667 and P119,583 c. P100,000 and P120,000

The partners’ capital balances on December 31, 2004 are:

a. HH, P179,680; MM, P229,360; and, AA, P239,360

Net Sales ...................................................................................... P875,000

The amount of bonus to PP in 2004 amounted to:

By what amount should BB’s capital account change - increase (decrease)?

Salaries were to be allocated as follows:

For the year, partnership net income was P120,000.

Compute the ending capital for each partner:

a. XX, P155,100; YY, P155,100; ZZ, P169,800

a. CC, P28,000, PP, P16,800, AA, P11,200

The average capital balances are as follows:

Hunt .............................................. P50,000

Determine how a profit of 105,000 would be allocated among the partners.

a. Hunt, P41,450; Rob, P29,950; Turman, P15,450; Kelly, P18,150

The capital accounts of the partners should be increased (decreased) by:

a. RR, P(6,540); PP, P(6,540) c. RR, P(6,960); PP, P 6,540

Omissions at Year-End 2003 2004

Other pertinent information are as follows:

Unrecorded at year end 2003 2004

a. (1) 30%; (2) P2,214 c. (1) 27%; (2) P2,286

- On June 30, 2004 X invested an additional P60,000

The total partnership capital on December 31, 2004 was:

Cash ............................ P70,000 Accounts payable .... P60,000

a. AA and BB’s new relative ratio.

Betty, capital (50%) ........................................................................ P140,000

Cash .................... P85,000 Liabilities ..................... P 80,000

Cash .......................... P60,000 Liabilities .............. P100,000

a. P187,500; P112,500; and P75,000

Sundry assets ............................................................................ P150,000

NN ........................................ P139,200 1/2

a. PP, P 9,825; CC, P20,175. c. PP, P10,000; CC, P20,000.

Ambo should receive a credit to his capital account balance of:

a. MM, P35,000; OO, P55,000; PP, P60,000

a. MM, P35,000; OO, P55,000; PP, P60,000

How much cash should DD contribute?

How much should FF contribute in cash or other assets?

a. P30,000; P30,000; P30,000; c. P31,667; P28,333; P30,000;

LL, capital ............................................................................. P 80,000

a. P50,000; P50,000; P50,000; c. P66,667; P33,333; P50,000.