Quiz #1

Partnership Formation
Name: Score:
Crush/ Date:
Yr.&Sec.
Instructions: For multiple choice questions, encircle the correct answer (erasures and alterations
are strictly not allowed). DO NOT use frixion pen.

I. Multiple Choice:
1. A contract whereby two or more persons bind themselves to conribute money, property, or
industry into a common fund with the intention of dividing the profits among themselves.
A. Partnership B. Marriage C. Sole proprietorship D. Corporation

2. A partner who contributes his work, labor or industry to the common fund of the partnership is
called
A. Limited partner B. Capitalist partner C. Industrial partner D. General partner

3. The partner who is liable for the payment of partnership debts to the extent of his separate
property after the partnership assets are exhausted is called
A. Limited partner B. Capitalist partner C. Industrial partner D. General partner

4. One who takes charge of the winding up of partnership affairs upon dissolution:
A. Silent partner B. Dormant partner C. Ostensible partner D. liquidating partner

5. In a limited partnership,
A. The general partners have limited liability.
B. All partners have limited liability.
C. All but the general partners have limited liability.
D. All but the general partners have unlimited liability.

Luffy is a sole proprietor who invested his grocery when he formed a partnership with Zoro. The
following are the assets and liabilities of the grocery:
Cash P 50,000
Merchandise 30,000 (book value)
20,000 (market value)
Fixed Assets (P100,000 less accumulated
Depreciation P10,000) 90,000 (book value)
50% of cost (market value)
Accounts Payable 20,000
Accrued Expenses 7,000
6. His capital account should be credited for
A. P83,000 B. P86,000 C. P93,000 D. P120,000

Items 7 to 10 are based on the following:

Gon and Killua enter into a partnership agreement in which Gon is to have a 60% interest in capital
and profits. Gon contributes the following:
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 “I can do all things through Christ who strengthens me.”-Philippians 4:13 *BMS*
 Land P 500,000 ?
Building 5,000,000 Fair value of which is 60% of its cost.
Equipment 1,000,000 Fair value of which is 75% of its cost.
There is a P1,000,000 mortgage on the building which the partners agree to assume. Killua
contributes cash of P2,500,000 and the partners agreed that this should be his capital credit.

7. How much should be the total agreed equity?

A. P5,416,667 B. P6,250,000 C. P6,750,000 D. P7,083,333

8. Land should be recorded in the amount of

A. Zero B. P500,000 C. P750,000 D. P1,000,000

9. Gon, Capital should be credited for

A. P3,250,000 B. P3,750,000 C. P4,050,000 D. P4,250,000

10.Prepare two entries to record the investments of Gon and Killua

Land 1,000,000.00
Building 3,000,000.00
Equipment 750,000.00
Mortgage Payable 1,000,000.00
Gon, Capital 3,750,000.00

Cash 2,500,000.00
Killua, Capital 2,500,000.00

II. Problem:
Naruto Uzumaki invited Sasuke Uchiha and Sakura Haruno to be his partners on June 1, 2015
and open an advertising company. His business showed the following balances:
Debit Credit
Cash P20,000
Accounts Receivable 80,000
Allowance for Bad Debts P2,000
Merchandise Inventory 120,000
Furniture and Fixtures 90,000
Accumulated Depreciation 18,000
Accounts Payable 40,000
Uzumaki, Capital 250,000
Total P310,000 P310,000

Uzumaki will invest the non-cash assets and liabilities of business for a 60% share in the partners’
equity, with the invited partners contributing equally for the remaining interest. They agree to
consider the following adjustments for Uzumaki’s contribution:
1. The accounts receivable has a realizable value of P70,000.
2. Merchandise inventory should be decreased by 10%.
3. Furniture and fixtures are only worth 75% of its cost.

Required: A) Give the entries to adjust and close the books of Uzumaki.

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 “I can do all things through Christ who strengthens me.”-Philippians 4:13 *BMS*
 B) Give one investment entry to open the books of the partnership.
A) 1) Allowance for bad debts Uzumaki, Capital 8,000
Should be 70,000 Allowance for Bad Debts 8,000
per books 78,000
Increase allowance 8,000
2) Merchandise Inventory 120,000 Uzumaki, Capital 12,000
Merchandise should be 108,000 Merchandise Inventory 12,000
Decrease by 10% 12,000
3) Furniture & Equipment at 75% 67,500 Uzumaki, Capital 4,500
Book Value 72,000 Accumulated Depreciation 4,500
Add’l provision 4,500
Uzumaki, Capital 225,500
Accumulated Depreciation 22,500
Allowance for Bad Debts 10,000
Accounts Payable 40,000
Cash 20,000
Accounts Receivable 80,000
Merchandise Inventory 108,000
Furniture & Equipment 90,000
B) 1)Accounts Receivable 80,000
Merchandise Inventory 108,000
Furniture & Equipment 67,500
Allowance for Bad Debts 10,000
Accounts Payable 40,000
Uzumaki, Capital 205,500
2) Cash 137,000
Uchiha, Capital 68,500
Haruno, Capital 68,500

Total Equity (205,500/.6)= 342,500

Add’l investment of Enriquez and Baylon each (342,500*40%)/2= 68,500

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 “I can do all things through Christ who strengthens me.”-Philippians 4:13 *BMS*