Answer Key

1. partnership at will
2. A partner who gives an impression to others that he/she is a partner of the firm.
3. Either written or verbal agreement
4. the business will not continue to operate.
5. DR. T, Capital 25,000 CR. Y, Capital 10,000 CR. Income Summary 15,000
6. P48,333
7. Unlimited liability
8. partner who made the purchase withdraws from the partnership.
9. unlimited liability
10. mutual agency
11. all partners are liable for all the debts of the firm
12. mutual agency
13. Both statements are false.
14. P18,750
15. Both statements are true.
16. permanent withdrawal of capital
17. P455,000
18. P990,000
19. Bam, Capital
20. P 52,000
21. Profit Earl Loss Ram
22.
23.
24.
25.
26.
27.
28. equal to the share of the capitalist partner with the smallest profit share.’
29. Statement of Changes in Partners' Equity
30. partner's Drawing account.
31. average capital balances.
32. bonus to the managing partner.
33.
34.
35.
 MASTERY TEST CH 1 & 2

1. The agreement for the duration of partnership is absent in what kind of

partnership?
a. general partnership
b. particular partnership
c. limited partnership
d. partnership at will
2. Who is considered a partner by estoppel?
a. A partner who gives an impression to others that he/she is a partner of
the firm.
b. A partner who is below 18 years of age.
c. A partner who is involved in the daily operations of the partnership.\
d. A partner who provides some of the capital for a business but who
does not take an active part in managing the business.
3. Agreement in which form is required in a partnership?
a. written agreement
b. oral agreement
c. Either written or verbal agreement
d. Neither written nor verbal agreement
4. A liquidation differs from a dissolution in that in a liquidation
a. assets may be revalued.
b. gains and losses are distributed according to the partnership
agreement
c. there may be an adjustment of partners' Capital accounts.
d. the business will not continue to operate.
5. Partners T and Y receive a salary of P15,000 and P30,000, respectively, and
share profit and losses in a 2:1 ratio, respectively. If the partnership sustained
a P15,000 net loss in 2022, the entry to close the profit or loss into their
capital accounts is:
a. DR. T, Capital 10,000 DR. Y, Capital 5,000 CR. Income Summary
15,000
b. DR. T, Capital 25,000 CR. Y, Capital 10,000 CR. Income Summary
15,000
c. DR. T, Capital 20,000 CR. Y, Capital 10,000 CR. Income Summary
10,000
d. Dr. T, Capital 15,000 DR. Y, Capital 30,000 CR. Income Summary
45,000
6. A partner has a capital balance of P40,000 for five months, P50,000 for four
months, and P60,000 for three months. The average capital balance is:
a. P50,000
 b. P48,500
c. P49,168
d. P48,333
7. Which of the following partnership characteristics is a disadvantage?
a. Voluntary association
b. Unlimited liability
c. Ease of dissolution
d. Participation in partnership profit
8. A partner will not bind the partnership to an outside purchase contract when
the
a. the item purchased is considered immaterial in amount.
b. partner who made the purchase withdraws from the partnership.
c. item purchased is not within the normal scope of the business.
d. partner was not authorized by the other partners to make the
purchase.
9. Claim to the partners' personal assets by creditors if the partnership cannot
pay its debts refers to:
a. mutual agency
b. unlimited liability
c. Liquidation
d. dissolution
10. The ability of a partner to enter into a contract on behalf of all partners is
called
a. unlimited liability
b. the partnership agreement
c. mutual agency
d. voluntary association
11. All of the following are true for both gneral and limited partnerships except
that:
a. all partners are liable for all the debts of the firm.
b. all partners have the right to participate in the profits of the business.
c. both are easily dissolved.
d. both have at least one general partner.
12. A partnership characteristic which states that a partner, acting within the
scope of the operations of the business, may bind the partnership and make it
liable to third parties is termed as:
a. mutual agency
b. co-ownership of assets
c. voluntary association
d. separate legal personality
13. Statement 1. An industrial partner is a limited partner.
Statement 2. A partner's contribution in the form of services is recorded by
debiting the account "Service Income".
a. Both statements are false.
b. Only Statement 1 is false.
c. Only statement 2 is false.
d. Both statements are true.
14. Moonyeen will contribute a computer which she acquired for P40,000 which
she agreed to be valued at P25,000, Nilda and Hilda will contribute an equal
amount of cash in the total agreed capitalization of P62,500. The correct
amount of Nilda's capital credit should be:
a. P37,500
b. P11,250
c. P18,750
d. P22,500
15. Statement 1. A general partner is a partner whose liability to third parties
extends to his separate properties or personal assets who may either be a
capitalist or industrial partner.

Statement 2. A limited partner is one whose liability to third parties is limited

to his capital contribution.
a. Only Statement 1 is false.
b. Both statements are false.
c. Both statements are true.
d. Only Statement 2 is false.
16. Which of the following is debited directly to Capital?
a. permanent withdrawal of capital
b. partner's profit share
c. partner's share in the net loss
d. withdrawal in anticipation of profit
17. On September 30 of the current year, Elmer and Merrel formed a
partnership. The partners agreed to invest equal amounts of capital. Elmer
invested his proprietorship's assets and liabilities as follows:
Book Value Fair Market
Value

Accounts Receivable ............................... P100,000

P100,000
Allowance for Doubtful Accounts -0-
10,000
 Merchandise Inventory ........................... 250,000
260,000
Prepaid Expenses .................................... 15,000
15,000
Office Equipment .................................... 480,000
280,000
Accumulated Depreciation .................... 160,000
-0-
Accounts Payable ..................................... 190,000
190,000

On September 30, Merrel invested cash in an amount equal to the current

market value of Elmer's partnership capital, They agreed that Elmer, the
managing partner, would earn two-thirds of partnership profits, During the
remainder of the year, the partnership earned P600,000. The temporary
withdrawals of Elmer and Merrel were P300,000 and P220,000, respectively.
Prior to partnership formation, Elmer's Capital was:
a. P950,000
b. P910,000
c. P495,000
d. P455,000
18. On September 30 of the current year, Elmer and Merrel formed a partnership.
The partners agreed to invest equal amounts of capital. Elmer invested his
proprietorship's assets and liabilities as follows:
Book Value Fair Market
Value

Accounts Receivable ............................... P100,000

P100,000
Allowance for Doubtful Accounts -0-
10,000
Merchandise Inventory ........................... 250,000
260,000
Prepaid Expenses .................................... 15,000
15,000
Office Equipment .................................... 480,000
280,000
Accumulated Depreciation .................... 160,000
-0-
 Accounts Payable ..................................... 190,000
190,000

On September 30, Merrel invested cash in an amount equal to the current

market value of Elmer's partnership capital, They agreed that Elmer, the
managing partner, would earn two-thirds of partnership profits, During the
remainder of the year, the partnership earned P600,000. The temporary
withdrawals of Elmer and Merrel were P300,000 and P220,000, respectively.
On December 31 of the current year, the total partnership capital is:
a. P910,000
b. P1,510,000
c. P590,000
d. P990,000
19. A large cash withdrawal by partner Bam from the partnership which is viewed
by all partners as a permanent reduction of Bam’s ownership equity in the
partnership is recorded as a debit to:
a. Bam, Drawing
b. Loan Receivable from Bam
c. Bam, Loan
d. Bam, Capital
20. Deco and Lor are partners who share profit and loss in the ratio of 3:2. Their
capital balances are P40,000 and P60,000 respectively. Income Summary
has a credit balance of P20,000. What is Deco’s Capital balance after closing
Income Summary to Capital?
a. P 52,000
b. P 28,000
c. P30,000
d. P32,000
21. The E & R Partnership agreement provides for Earl to receive a 20% bonus
on profits before the bonus. Remaining profits and losses are divided
between Earl and Ram in the ratio of 2:3, respectively. Which partner has a
greater advantage when partnership has a profit or when it has a loss?
a. Profit Ram Loss Ram
b. Profit Ram. Loss Earl
c. Profit Earl Loss Ram
d. Profit Earl Loss Earl
22. On January 1, 2022, Birch, Beetle, Baker and Bowie formed B4 Trading, a
partnership with capital contribution as follows: Birch P150,000; Beetle
P75,000; Baker P75,000; and Bowie P60,000. The partnership agreement
stipulates that each shall receive a 5% interest on contributed capital, and
 that Birch and Beetle shall receive salaries (chargeable as expenses of the
business) of P15,000 and P9,000, respectively. The agreement further
provides that Baker shall receive a minimum of P7,500 per annum and Bowie
a minimum of P18,000, which is inclusive of amounts representing interest
and their respective share in partnership profits. The balance of the profits
shall be distributed among the partners in the ratio of 3:3:2:2.

What amount must be earned by the partnership in fiscal year 2022, before
any charge for interest and partners’ salaries, in order that Birch may receive
an aggregate of P37,500 including interest, salary and profit share?
a. P90,000
b. P50,000
c. P97,000
d. P92,000
23. Dora admitted Roda as a partner in business. Accounts in the ledger for Dora
on November 30, 2022, just before the admission of Roda, showed the
following balances:

Cash ……….......……………………………………P 6,800

Accounts Receivable ………………………… 14,200
Merchandise Inventory ……………………. 20,000
Accounts Payable …………….………………. 8,000
Dora, Capital ……………………..…………… 33,000

It is agreed that for the purpose of establishing Dora’s interest, the following
adjustments shall be made:

1. An allowance for doubtful accounts of 3% of Accounts Receivable is to

be established.
2. The merchandise inventory is to be valued at P23,000.
3. Prepaid Salary Expense of P600 and Accrued Rent Expense of P800
are to be recognized.

Roda is to invest sufficient cash to obtain a one-third interest in the

partnership. What is Dora’s adjusted capital before the admission? How
much is the cash investment by Roda?
a. P35,374; P 17,687
b. P35,347; P11,971
c. P28,174; P14,087
d. P36,374; P18,487
24. Lolong and Lilang are partners operating a chain of retail stores. The
partnership agreement provides for:
● Salaries of P6,000 per month to each partner.
● Interest at 10% on original capital contributions.
● Bonus to Lolong of 20% of net income before salaries and bonus but
after interest on capital.
● Balance is to be divided equally.

The Income Summary account for 2023 before any distribution to partners
shows a credit balance of P90,000. Original capital contribution of Lolong
and Lilang are P100,000 and P160,000 respectively.

The profit share of Lolong is:

a. P90,000
b. P45,200
c. P6,200
d. P48,400
25. The partnership agreement of Danica and Danna provides that interest at
10% per year is to be credited to each partner on the basis of the weighted
average capital balances. A summary of Danna's Capital account for the
year ended December 31, 2023 follows:

Balance, January 1 P420,000

Additional investment, July 31 120,000
Withdrawal, September 1 (45,000)
Balance, December 31 495,000

What amount of interest should be credited to Danna's Capital account for

2023?
a. answer not given
b. P49,500
c. P16,500
d. P45,500
26. Clyde and Lyle are partners in a business. Clyde's original capital
investment was P400,000 and Lyle's was P600,000. They agreed to share
profits and losses as follows:
Clyde Lyle

Salaries ................................................. P120,000 P180,000

Interest on original capital 10% 10%
 Remaining profits or losses 3/5 2/5

If losses for the year were P150,000, how much should be allocated to
Clyde?
a. P154,000
b. (P170,000)
c. P10,000
d. P120,000
27. Shaun, a partner in the SM Partnership, is entitled to 40% of the profits and
losses. During 2022, Shaun contributed land with a fair value of P60,000.
Also during 2022, Shaun had drawings of P80,000. The balance of Shaun's
Capital account was P140,000 at the beginning of 2022 and P150,000 at the
end of the year. What is the partnership's profit (loss) for 2022?
a. P30,000
b. P325,000
c. P50,000
d. P75,000
28. In the absence of any agreement in the share of the industrial partner in the
partnership profit, he is entitled to a profit share:
a. none, because he did not contribute capital
b. 10%
c. equal to the share of the capitalist partner with the smallest profit
share.
d. equally.
29. This statement shows the variation in the partners' interest in the partnership.
a. Statement of Changes in Financial Position
b. Statement of Changes in Partners' Equity
c. Statement of Partners' Profit and Loss Distribution
d. Statement of Partners' Variable Capital
30. If a partner's personal expenses are paid by the partnership, the payment is
charged to the:
a. partnership's nominal account.
b. partner's Expense account.
c. partnership's expense account.
d. partner's Drawing account.
31. If the primary consideration is the partner's capital contribution, the most
equitable profit and loss distribution is made on the basis of:
a. average capital balances.
b. equal share.
c. ending capital balances.
 d. beginning capital balances
32. This item is not treated as operating expense of the partnership:
a. bonus to the managing partner.
b. interest on the partnership's outstanding loan.
c. office supplies used.
d. salaries of manager employed by the partnership
33. Partners Mendel, Norman and Owen have capital balances in a partnership
of P150,000, P100,000 and P200,000, respectively. Net loss for the year was
P340,000. What will be Norman's Capital balance if Mendel gets a P180,000
salary, Norman gets a P70,000 salary, and Owen a 10% interest on his
beginning balance with the remainder being divided at a 2:2:1 ratio,
respectively?
a. P74,000 debit balance
b. P174,000 debit balance
c. P64,000 debit balance
d. P102,000 debit balance
34. The selected ledger accounts of MNO Partnership are as follows:

__________ Marco,
Capital____ _ _______ Noah, Capital____ _ _____
Ortiz, Capital____

__________ Income Summary____ _ DEBIT | CREDIT

DEBIT | CREDIT DEBIT | CREDIT

DEBIT | CREDIT | 01/01 150,000

04/01 12,500 | 01/01 200,000 11/01 25,000 | 01/01 250,000

12/31 130,000 | 12/31 280,000 | 05/01 30,000

| 02/01 37,500 |03/01 125,000

| | 10/01 20,000

The partnership profit (loss) is:

a. P410,000
b. P150,000
c. (P150,000)
d. P280,000
35. The partners Bambi and Bamboo share profit 3:2. However, Bambi is to
receive a yearly bonus of 20% of the profits, in addition to this profit share.
The partnership made a net income for the year of P24,000 before the bonus.
Assuming Bambi's bonus is computed on profit after deducting said bonus,
how much profit share will Bamboo receive?
a. P9,000
b. P9,600
c. P15,200
d. P8,000
A. THEORIES
1. In a limited partnership, the entity ceases to legally exits when
A. An existing partner retires or dies.
B. A new partner enters the partnership.
C. A limited partner transfers his/her interest.
D. A general partner is no longer present.

2. Which of the following is not a similarity that exists between proprietorships and
partnerships?
A. Both can use an accounting method that does not conform to GAAP.
C. Owners put the company's income on the owner's individual tax return.
B. Neither requires approval by a state to form.
D. All of these are similarities of proprietorships and partnerships.

3. Which of the following is debited directly to capital?

A. Permanent withdrawal of capital
C. Partner's profit share
B. Partner's share in the net loss
D. Withdrawal in anticipation of profit

4. In the absence of any agreement in the share of the industrial partner in the
partnership profit, he is entitled to a profit share
A. Equally
C. 10%
B. Equal to the share of the capitalist partner with the smallest profit share
D. None, because he did not contributed

5. Which statement shows the variation in the partners' interest in the partnership?
A. Statement of Changes in Partners' Equity
B. Statement of Financial Position
C. Statement of Profit and Loss Distribution
D. Statement of Cash Flows

6. If a partner's personal expenses are paid by the partnership, then the payment is
charged to
A. Partner's drawing account
B. Partner's expense account
C. Partner's nominal account
D. None of these

7. Statement 1- An industrial partner is liable only up to the extent of his interest in

the partnership.
Statement 2-Partnership with P3,000 or more capital in money or property shall be
made in a public instrument to be recorded in SEC.
Statement 3 - A partnership may be formed orally.
A. All statements are true.
C. Only one statement is true.
B. All statements are false.
D. Only one statement is false.

8. Which of the following statements is correct with regard to the creation of initial
capital account balances on a partnership's financial records?
A. The capital accounts can be created for any peso amount agreed by all partners.
B. The market value of noncash assets must be considered when creating the initial
capital Balances.
C. Each partner's capital account must have a non-zero value assigned to it.
D. All of these statements are correct.

9. Which of the following is not a difference when comparing partnerships and

corporations?
A. Corporations must conform to GAAP whereas partnerships are not required to
conform to GAAP
B. Corporations are required to pay income tax while partnerships are not required
to pay income taxes.
C. Partnerships and corporations neither are required to attain state approval to form
D. Partners have unlimited liability while corporation shareholders do not have
unlimited liability

10. Which one of the following is a characteristic of a general partnership?

A. Each partner is entitled to a reasonable
remuneration for conducting partnership
B. Each general partner is personally liable for all of the partreship obligations
C. All partners must agree to legal agreernents or they are non-binding
D. Partnership income is separately saved

11. Forda Ferson Parthenshep agreement provides for Forda to receive a 20%
bonus on profits before the bonus. Remaining profits and losses are divided
between Forda Ferson in the ratio 2:3, respectively. Which partner has a greater
advantage when partnership has a profit or when it has a loss?
A. Profit-Forda Loss-Ferson
B. Pront-Ferdea Loss-Ferson
C. Profit-Forda Less-Forda
D. Profit-Ferson, Loss-Ferson

12. Which of the following interest component calculation bases is least susceptible
to maripulation when allocating profits and litsses to partners?
A. Beginning capital account bolance
B. Ending capital account balince
C. Weighted average capital account balance
D. Average of beginning and ending capital account balances
13. Which component of the parinership profe and loss allocation compensates
partners for the routine time and effort expended in the business?
A. Interest on capital halance
B. Residual interest
C. Bonus
D. Salary

14. Which of the following should be done when the partnership profit and loss ratios
are changed?
A. The book and market value of assets and liabiities thould be evaluated
B. The capital accounts should be modified to reflect the new profit and loss ratic
C. The creditors should be informed that the profit and loss ratios have been
changed.
D. The partners must draft new articles of partnership

15. Partnership net income is defined as

A. The interest allocation to the partners, based in weighted average invested capital
B. Partnership income after deducting partner salaries
C. Partnership income after deducting partner salaries and interest
D. Partnership income before educting partner salaries and interest

16. Which of the following is not true regarding the measurement of partnership
income?
A. Partrierships employ the same revenue and expense recognition criteria is
corporations
B. Salaries to partners are deducted as expenses measuring partnership income
C. Interest allocated to partners is not deducted as an expenna in measuring
partnership income
D. Partnerships do not report income tax expense

17. Which of the following best describes a partnership's income-sharing ratio?

A. it applies to partnership income before salaries ars deducted but after interest is
deducted.
B. it applies to partnership Income after salates and interest are deducted
C. it applies to partnership income after salaries are deducted but before interest is
deducted
D. it applies to partnership income before both salaries and interest are deducted

18. If no agreement is made among the partners, profits and losses shall be divided
A. According to their average capital contributions
B. According to theid ending capital contributions
C. It applies to partnership income after salaries are deducted but before interest is
deducted
D. It applies to partnership income before both salaries and interest are deducted

19. Which component of the partnership profit and loss allocation is most commonly
offered to the partner who manages the business
A. Residual Interest
B. Bonus
C. Salary
D. lnterest on capital balance

20. Which of the following statements is true with regard to partnership residual profit
and loss ratio?
A. A partner's residual profit ratio must be the same as the loss ratio
B. The residual profit and loss ratio must always be applied
C. Residual profit and loss can be changed by agreement
D. All of these are true statements

B. PROBLEMS
21. On April 30, 2023, Haha, Hehe, and Huhu formed a partnership by combining
their separate business proprietorships. Haha contributed cash of P75,000. Hehe
contributed property with a P54,000 carrying amount, a P60,000 cost, and P120.000
fair value. The partnership accepted responsibility for the P52.500 mortgage
attached to the property, Huhu contributed equipment with a P45,000 carrying
amount, a P112,500 original cost. and P62,500 far value. The partnenhip agreement
specifies that profits and losses are to be shared equally but is silent regarding
capital contributions Which partner has the largest April 30, 2023 capital balance?
A. Haha
B. Hene
C. Huhu
D. All capital balances are equal

22. On March 1, 2021. Dee and Lulu formed a partnership with each contributing the
following assets

Dee

Cash 300,000 700,000

Machinery and eqυipment 250,000 750,000

Building 100,000

The building is subiect to mortgage loan of P800,000 which is to be assumed by the

partnership agreement that provides Dee and lULU share profits and losses 30%
and 70%, respectively. On March 1, 2021, the balance in Lulu's capital account
should be
A. P2900.000
B. P3050.000
C.P3140.000
D. P3700,000
23. On August 1, Jej and Joj pooled their sets to form a partnership, with the lion to
take over their business assets and assume the liabilities Partners capitals are to be
based on net assets transferred after the following adjustments. Profits and loss are
allocated equally
Joj’s inventory is to be increased by 4,000, an allowance for doubtful accounts of
P1,000 and P1,500 are to be set up in the books of Joj and Jej respectively, and
accounts payable of P4000 is to be recognized in Jej's books. The individual trial
balances on August 7, before adjustment follow:

Jej Joj

Assets P75,000 P113,000

Liabilities 5,000 34,500

What is the capital of Jej and Joj after the above adjustments?
A. Jej P65,000 Joj P76,000
B. Jej P65,000 Joj P8/61,000
C. Jej P75,000 Joj P76,000
D. Jej P75,000 Joj P8/61,000

24.
24. Whiley and Ngao formed a partnership with each partner contributing the
following items

Whiley Ngao

Cash P 50,000 P 40,000

Inventory - cost 200,000

Fair value 260,000

Building - cost 300,0000

Fair value 400,000

Accounts Payable 60,000

Mortgage Payable 120,000

Astume that for tax purposes Winley and Ngao agree to share equally in liabilities
assumed by Whiley Ngao partnership.. What is the balance in each partners capital
account for fie anciat accounting purposes

A. W P360.000 N 26000
B. W 260,000 N 180,000
C. W 390,000 N 230,000
D. W 290,000 N 150,000

A. Option D
B. Option C
C. Option B
D. Option A
A. THEORIES (nx1)
1. Statement 1-Dissolution causes the termination of the partnership.
Statement 2-The amount of money that the buying partner pays to the selling
partners will go to the partnership and not to the partners concerned.
A: Both statements are true.
B. Both statements are false.
C. Only statement 1 is false.
D. Only statement 2 is false.

2. Statement 1-The partnership dissolution discharges the existing liability of any

partner.
Statement 2-The equity of a partner in the net assets of the partnership is different
from the partner's shar profits of losses.
A. Both statements are true.
B. Both statements are false.
C. Only statement 1 is false.
D. Only statement 2 is false.

3. The following instances dissolve a partnership except

A. Admission of a new partner
B. Revaluation of partnership assets
C. Change of the name of the partnership
D. Conversion of a partnership into a corporation

4. Total partners' equity will not change when a withdrawing partner

A Sells his ownership interest to a new or remaining partner
B. Withdraws assets equal to his capital balance
C. Withdraws assets at an amount less than his capital balance
D. Withdraws assets at an amount greater than his capital balance
5. When a partner withdraws from a partnership taking assets that represent less
than his capital balance
A. The remaining partners owe the withdrawing partner the difference.
B. The remaining partners receive a bonus.
C. The withdrawing partner receives a bonus.
D. No bonus results

6. When a partner retires, the books of the partnership should be adjusted as of

A. The date of partnership formation
B. The end of an accounting period
C. The balance sheet date
D. The date of retirement

7. Before the effectivity of dissolution, assets and liabilities should be restated at

their
A. Historical values
B. Liquidating values
C. Fair market values
D. Original values

8. Staternent 1-The retirement of a partner by payment from partnership assets may

cause the other partners' capital accounts to decrease.
Statement 2-The partners cannot change their original profit and loss ratio if it is
stipulated in the original partnership agreernent.
A. Both statements are true.
B. Both staternents are false.
C. Only statement 1 is false.
D. Only statement 2 is false.

9. When a partner dies, the capital account balances of the remaining partners
A May increase, decrease or remain the same
B. Will remain the same
C. Will increase
D. Will decrease

10. Which of the following best describes the admission of a new partner by
investing an amount more than his capital credit under bonus method?
A. Increase in net assets; increase in total capital
C. No effect on net assets; increase in total capital
B. Decrease in net Assets; decrease in total capital
D. No effect on net assets; no effect on total capital

11. If existing partners acquire the equity of a withdrawing partner, in what manner
do they divide the equity?
A. Equally
B. Existing partners are not permitted to acquire the equity of a withdrawing partner
C. Proportionate to their residual profit and loss ratios
D. In any manner they choose

12. Which of the following forms of new partner admission will not result in a change
in the partnership's net assets?
A. Purchase of an ownership interest directly from the partnership
B. Purchase of an ownership interest directly from an existing partner
C. Either A or B
D. Neither A nor B

13. What portion of the partnership's assets must be revalued when a partner
withdraws from the partnership?
A. The withdrawing partner's share must be revalued.
C. Any or all of the partnership's assets may be revalued but none must not be
revalued.
B. All of the partnership's assets must be revalued.
D. Partnership assets may not be revalued when a partner withdraws.

14. When partnership agreement does not specify how to value a retiring partner's
interest, this valuation will be
A. Based on five times earnings over the last 3 years
B. Based on the book value of the capital interest
C. Based on a process agreed to by all partners
D. Based on outside appraisal of the partner's interest

15. In what mnner do the remaining partners share in the bonus paid to the
withdrawing partner?
A. In proportion to their residual profit and loss ratio
B. In proportion to their capital account balances
C. Recognizing a bonus is not appropriate when a partner retires.
D. Equally

16. Which of the following best describes a partnership lump-sum liquidation?

A. The combining of a partner's capital account with loans to/from the partnership
B. A series of interim distributions to partners while the sale of non-cash assets and
the payment of liabilities are occurring
C. The sale of all non-cash assets and payment of liabilities before a single
distribution to partners
D. Keeping the partnership's assets and liabilities separate from the partners'
personal assets and liabilities

17. Which of the following would be a cause of a capital deficiency?

A. A partner has borrowed money from the
partnership.
B. A partner has lent money to the partnership.
C. Partnership assets are liquidated for more than the book value.
D. The partnership has incurred a gain for the year.
18. Which of the following is not a responsibility of an accountant during a
partnership liquidation?
A. To ensure that partner distributions do not jeopardize payments to creditors
B. To distribute the most cash to the partner with the greatest capital account
C. To manage liquidation process in a manner that results in the greatest amount of
cash collected
D. To protect creditors

19. If a partner is insolvent, his personal properties shall first be distributed to

A. The partners by way of additional contribution when the assets of the partnership
were insufficient to settle all obligations
B. Partnership creditors
C. Partnership and separate creditors in the ratio of their
loan exposure
D. Separate creditors

20. Which of the following is not a part of the partnership liquidation process?
A. Closing of the accounting records
B. Allocation of any remaining profit or loss to partners' capital accounts
C. Liquidation of noncash assetsD. Recognition of market value adjustments of
assets and liabilities

B. PROBLEMS (nx2)

21. Jeje and Mon are partners with capital balances of p64,00 and P25,000,
respectively. Profits and losses are divided in the ratio of 60:40. Jeje and Mon
decided to form a new partnership with Ka, who invested land valued at P16,000 for
a 20% capital interest in the new partnership. Ka's cost of the land was-P13,000.
The partnership elected to use the bonus method to record admission of Ka into the
partnership. Ka's capital account should be credited for
A. P21,000
8. P17.800
C. P16,000
D. P13,000

22. On June 30, 2023, the balance sheet of Pazmoe Marketing, a partnership, is
summarized below:
Total Assets P120,000
Paz, Capital 70.000
Moe, Capital 50,000

Paz and Moe share profit and losses at a 60:40 ratio, respectively. They agreed to
take in Han as a new partner, who purchases 1/8 interest of Paz and Moe for
P18,000. What is the amount of Han's capital to be taken up in the partnership
books if the bock value method is used?
A. P24,000
B. P18,000
C P15,000
D. P9,000

23. Peter and Piper are partners who share profits and losses in the ratio of 7:3,
respectively. On September 30, 2023, their respective capital accounts were as
follows
Peter P39,000
Piper 32,000

On that date they agreed to admit Pepper as a partner with a one-third interest in the
capital and profit and losses, and upon his investment of P28,000, The new
partnership will begin with a total capital of P99,000 Immediately after Pepper's
admission, what are the capital balances of Peter, Piper, and Pepper, respectively?
A. P39,000; P32,000; P28,000
B. P5,667; P30,333, P33,000
C. 35,500: P30,500, P33,000
D P33.000, P33.000, P33,000

24. La, Van, and Lang are partners with capital accounts of P60,000, P110,000, and
P80,000, respectively. The partnership share profits and losses 45%, 30%, and
25%, respectively. They are considering allowing Ta to join the partnership by
investing directly into the partnership. The partners intend to revalue the assets
before Ta's admission. If the asset's market value exceeds book value by P120,000,
then how much will Ta invest to acquire a 20% equity interest in the partnership?
A. P62,500
B. P74,000
C. P86,500
D P92.500

25. Presented below is the condensed balance sheet of the partnership of Duna,
Kulit, and Nea who share profits and losses in the ratio 6:3:1, respectively.
Cash P 85,000 Liabilities P 80,000
Other Assets 415,000 Dina, Capital 251,000
Total P500,000 Kuh, Capital 125,000
Nea, Capital 44,000
Total P500,000

The partners agree to sell Jude 20% of their respective capital and profit and loss
interests for a total payment of P90,000. The payment by Jude is to be made directly
to the individual partners, The capital balances of Dina, Khü, and Nea, respectively
after the e admission of Jude are
A. P197,200, P 98,200, P34,600
B. P200,800; P100,000; P35,200
C. P216,000 P108,000; P36,000
D. P254,600; P126,800; P44,600

26. Disney, Prince, and Cess are partners in a manufacturing concern. Relevant
data regarding income-sharing relationships and capital balances are as follows:
 Partner Capital Balance P/L Ratio

Disney P150,000 35%

Prince 100.000 30%

Cess 250,000 35%

Prince decides to retire and receives P142,000 in cash from the partnership. If the
bonus method is used to account for the retirement, Disney's capital balance
subsequent to Prince's retirement will be

A. P108.000
B. P129.000
C. P135.300
D. P150,000