Prelim Quiz : AFAR Tot al point s 26/50

For answers to problem solving questions, use the following format: xxx,xxx example:
final answer of two hundred thousand five hundred fifty two should be written as
200,552

T he respondent 's email (2204208@slu.edu.ph) was recorded on submission of t his

form.

S1: An indust rial part ner who cont ribut es his t ime and effort t o t he *0/2
part nership is considered an employee and is paid just compensat ion for
his effort s S2: In comput ing for average capit al, addit ional invest ment s
decrease t he average capit al while wit hdrawals increase t he average
capit al

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are false

 JJ and BB, who share in profit s and losses in t he rat io 3:7 decided t o *3/3
liquidat e t heir JB Part nership. The part ners’ capit al balances were
P300,000 and P190,000 respect ively. Before t he realizat ion of noncash
asset s, t he part nership has a zero balance in it s cash account and
P200,000 balance in it s liabilit ies. If JJ received P261,000 on t he final
set t lement of t he part ners’ claims, how much were t he net proceeds
from t he sale of t he noncash asset s?

560,000

JJ part nership has capit al balances on July 1, 2010 as follows: Jo, Capit al: *0/3
P 6, 000; Joy, Capit al: P 14, 000. On t he same dat e, Joyce purchased
int erest in t he part nership by paying Jo P 8, 000 for half of her capit al and
half of her 50% profit sharing int erest on t he part nership. Net income of
JJ part nership for t he period ended June 30, 2010 is P 2, 000. The capit al
credit of Joyce upon admission should be:

7,700

Correct answer

3,000

The part nership of Joy and Joyce has t he following account balances *3/3
prior t o liquidat ion: ot her asset s: P450,000 Joy, Loan: P20,000 Account s
Payable: P120,000 Joy, Capit al P195,000 Joyce, Capit al: P155,000. The
part ners decided t o liquidat e part nership. If ot her asset s are sold for
P385,000, and Joy and Joyce share profit s and losses in t he rat io 60:40
respect ively, how much was received by Joy as final set t lement ?

136,000
 S1:In t he admission of a new part ner by purchase, any change in t he value *0/2
of asset s and liabilit ies from t he last balance sheet t o t he dat e of
dissolut ion shall be for t he account of t he old part ners S2:There is an
increase in asset s wit h corresponding increase in capit al under t he
admission of a new part ner by invest ment

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are true

S1: The acquisit ion-relat ed cost s in a business combinat ion t o be *0/2

expensed immediat ely include cost of issuing debt securit ies.S2:The
acquisit ion dat e is normally t he dat e on which t he acquirer legally
t ransfers t he considerat ion, acquires t he asset s, and assumes t he
liabilit ies of t he acquiree. This is also known as t he closing dat e.

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Only S2 is true
 JJ admit t ed EE as part ner t o her business when t he t ot al asset s and *0/3
t ot al liabilit ies of t he sole propriet orship amount ed t o P250,000 and
P75,000 respect ively. EE cont ribut ed cash of P50,000 and equipment
wort h P30,000. Part nership agreement on t he net asset s cont ribut ed by
JJ are as follows: 1.) Fixed asset s are under depreciat ed by P15,000. 2.)
Pre-collect ed income amount s t o P10,000. 3.) Insurance premium of
P2,000 was expensed upon payment . Unexpired port ion of t he insurance
amount s t o P500. JJ and EE agreed t o divide profit s and losses 6:4
respect ively. What is t he capit al credit of Jennifer upon part nership
format ion?

14,155

Correct answer

150,500

S1: Right of succession allows part nership t o have an indefinit e life in as *0/2
much as a ret iring part ner can easily t ransfer his right over t he part nership
t o ot her part ies S2: Mut ual agency is an advant age of a part nership over
sole propriet orship

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are false

 Mae, Mila and Mike formed a part nership on January 15, 2011. *3/3
Immediat ely aft er t he part nership format ion, t he business named as
Triple M Supermarket has cash of P 30, 000 and net asset s of P 150,000.
If t he t ot al claims of out side credit ors amount t o P 70,000, how much is
t he noncash asset s of t he business?

190,000

S1: Non cash cont ribut ion of part ners in a part nership shall be recorded in *0/2
t he part nership books at fair market value. In t he absence of a reliable
fair market value, t he agreement bet ween and among t he part ners shall
suffice. S2: A limit ed part ner part icipat es in t he profit s but not in t he
losses of t he business

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are false

Rommel and Randy of RR Part nership have t he following profit and loss *3/3
agreement : Rommel t o receive a bonus of 10% of profit aft er bonus and
aft er which t he profit shall be divided 5:7 t o Rommel and Randy
respect ively. The part nership earned net income of P 275, 000 before
bonus during 2010. The share of Rommel in t he part nership profit s
amount ed t o?

129,167
 S1:If t he part ners did not agree as t o how profit s are t o be divided, t hen *0/2
such should be divided equally S2: Ellie and Bea agreed t o share profit s
and losses in t he rat ion 5:4 respect fully. In t his case Ellie shares 50% and
Bea shares 40%

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are false

Art hur, Brian and Craig are part ners and share profit s and losses as *3/3
follows: Salaries of P40,000 t o Art hur, P30,000 t o Brian and none t o
Craig. If net income exceeds salaries, t hen a bonus is allocat ed t o Art hur.
The bonus is 5 percent of net income aft er deduct ing salaries and t he
bonus. Residual profit s or residual losses are allocat ed 10 percent t o
Art hur, 20 percent t o Brian and 70 percent t o Craig. If net income before
salaries and bonus is P140,000, how much is t he share of Art hur?

50,000
 When admit t ing a new part ner int o an exist ing part nership, any allocat ion *0/2
for asset adjust ment t o t he old part ners are based on

[A] the profit and loss ratio

[B] an equal distribution among the partners

[C] the fair values of the assets of each partner has contributed to the
partnership

[D] the relative capital balances

[E]Answer not given

Correct answer

[A] the profit and loss ratio

The rule of offset st at es t hat “before t he part ners receive any cash *0/2
dist ribut ion…”

[A] Loans from partners should be offset against their debit capital balances

[B] Receivables from partners should be offset against their debit capital
balances

[C] Loans to partners should be offset against offset against their debit
capital balances

[D] Loans from partners should be offset against their credit capital balances

[E]Answer not given

Correct answer

[A] Loans from partners should be offset against their debit capital balances
 Manong admit s Nano as a part ner in t he business. Balance sheet *3/3
account s of Manong on Sept ember 30, just before admission of Nano
show:
Cash P 2,600

Account s Receivable 12,000

Merchandise Invent ory 18,000

Account s Payable P6,200

Manong, capit al 26,400

It is agreed t hat for purposes of est ablishing Manong’s int erest t he

following adjust ment s should be made:

Allowance for doubt ful account s of 2% should be est ablished

Merchandise invent ory is t o be valued at P20,200

Prepaid expenses of P350 and accrued liabilit ies of P400 are t o be

recognized
Nano is t o invest sufficient cash t o obt ain 1/3 int erest in t he part nership.
How much cash should Nano cont ribut e?

14,155

Pad Company acquired all t he net s asset s of Sad Company by paying *3/3
P375,000 cash. At t he t ime of acquisit ion, t he net asset s of Sad
Company have a book value of P225,000 and a fair value of P270,000. In
addit ion, a t ot al of P75,000 was paid as professional
fees t o a consult ant t o effect t he business combinat ion. At what amount
should goodwill be recorded on Pad Company’s books?

105,000
 S1:If t he part ners did not agree as t o how profit s are t o be divided, t hen *0/2
such should be divided equally S2: Ellie and Bea agreed t o share profit s
and losses in t he rat ion 5:4 respect fully. In t his case Ellie shares 50% and
Bea shares 40%

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

Correct answer

Both statements are false

On January 1, 2012, Phaet on Company acquired t he net asset s of *3/3

Shaeron Company in a business combinat ion t reat ed as a purchase by
issuing it s ordinary share capit al wort h P1,000,000. At t he dat e of t he
business combinat ion, Phaet on’s net asset s had a
book value of P1,200,000 and a fair value of P1,600,000. Shaeron’s net
asset s had a book value of P650,000 and a fair value of P800,000.
Immediat ely following t he combinat ion, t he net asset s of t he combined
company should include a goodwill of

200,000
S1: The final dist ribut ion of cash t o part ners shall be made based on t heir *2/2
profit or loss sharing agreement S2:The ent ry t o record t he exercise of
offset is debit t o part ner's loan and credit cash

Only S1 is true

Only S2 is true

Both statements are true

Both statements are false

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