THEORY
1. Which of the following is not an advantage of a partnership over a corporation? a. Ease of formation c. Less governmental regulations b. Unlimited liability d. All of the above
b. Unlimited liability
2. For financial accounting purposes, assets of an individual partner contributed to a partnership are recorded by the partnership at a. Historical cost c. Fair market value b. Book value d. Lower of cost or market
c. Fair market value
3. On July 1, X and Y formed a partnership. X contributed cash. Y, previously a sole proprietor, contributed property other than cash, including realty subject to a mortgage, which the partnership assumed. Y’s capital account on July 1, should be recorded at
a. Y’s book value of the property on July 1
b. Y’s book value of the property less the mortgage payable on July 1
c. The fair value of the property less the mortgage payable on July 1
d. The fair value of the property on July 1
c. The fair value of the property less the mortgage payable on July 1
6. According to the Philippine Civil Code, if only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be a. In equal amounts b. In equal amounts, but excluding the industrial partner c. In proportion to the partners’ contributions d. The same as the sharing in profits
d. The same as the sharing in profits
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Andrea Brillantes
5. How should the partners in a business partnership share in the profits or losses of the partnership? a. Equally b. At whatever basis of allocation that the dominating partner deems reasonable c. In accordance with the partnership agreement d. None of the above
C
The following decreases the capital balance of the partner except
A. Permanent withdrawals
B. Temporary withdrawals
C. Share in the income summary debit balance
D. Share in the income summary credit balance
D. Share in the income summary credit balance
14. Under the bonus method, any increase or decrease in the capital credit of a partner is
a. Deducted from or added to the capital credits of the other partners
b. Recognized as goodwill
c. Recognized as expense
d. Deferred and amortized to profit or loss
a. Deducted from or added to the capital credits of the other partners
10. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation, interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate, generally which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners
b. Any salary allocation criteria would not be used
c. The bonus criteria would not be used
d. The loss would be allocated using the profit and loss ratios, only
c. The bonus criteria would not be used
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Body
12. Partnership drawings are
a. Always maintained in a separate account from the partner's capital account
b. Equal to partners' salaries
c. Usually maintained in a separate draw account with any excess draws being debited directly to the capital account
d. Not discussed in the specific contract provisions of the partnership
c. Usually maintained in a separate draw account with any excess draws being debited directly to the capital account
The net contributions of the partners to the partnership are measured at
a. Fair value
b. Costs
c. Book value
d. Discretionary amount determined the by the partners
d. Discretionary amount determined the by the partners
A partner contributes a certain asset that has a mortgage and will be paid personally by that partner.
Which of the following is true when recording in the partnership books?
A. The capital of the partner will be debited in the amount of the mortgage
B. The cash of the partnership will decrease by the amount of the mortgage
C. The capital of the partner will be credited in the amount of the asset at the agreed value
D. The liability of the partnership will increase by the amount of the mortgage
C. The capital of the partner will be credited in the amount of the asset at the agreed value
If the partnership agreement provides a formula for the computation of a bonus to the partners, the
bonus would be computed
a. next to last, because the final allocation is the distribution of the profit residual.
b. before income tax allocations are made.
c. after the salary and interest allocations are made.
d. in any manner agreed to by the partners in the partnership agreement.
d. in any manner agreed to by the partners in the partnership agreement.
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What is the nature of liability of general partners as to partnership debts or obligations?
a. They are liable equally up to the extent of their separate assets after the partnership assets are exhausted
b. They are liable pro-rata up to the extent of their separate assets after the partnership assets are exhausted
c. They are liable pro-rata up to the extent of their capital contribution only
d. They are liable solidarily up to the extent of their separate assets after the partnership assets are exhausted
b. They are liable pro-rata up to the extent of their separate assets after the partnership assets are exhausted
Transactions between and among the partners are:
a. Recorded in the partnership books
b. May be recorded depending on the partners
c. Recorded only if the partner concerned is the managing partner
d. Not recorded in the partnership books
d. Not recorded in the partnership books
Mr. A and Mr. B agreed to form a partnership. The fair values of the partner’s net contribution vary; however, the partners agreed to have equal capital credits. Cash settlement shall be made between them for the difference. Which of the following statements is correct?
a. The asset contributions of the partners shall be debited to equal amounts
b. The cash settlement between the partners will either increase or decrease the total partnership capital
c. The cash settlement between the partners will not be recorded in the partnership books
d. Mr. A shall pay Mr. B to have their capital balances equal
c. The cash settlement between the partners will not be recorded in the partnership books
9. Which of the following best describes the use of interest on invested capital as a means of allocating profits?
a. If interest on invested capital is used, it must be used for all partners
b. Interest is allocated only if there is partnership net profit
c. Invested capital balances are never affected by drawings of the partnerships
d. Use of beginning or ending measures of invested capital may be subject to manipulation that distorts the measure of invested capital
d. Use of beginning or ending measures of invested capital may be subject to manipulation that distorts the measure of invested capital
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Anderson's ex-girlfriends include Kim Chiu, Bea Alonzo, Maja Salvador, and rumored exes Sarah Geronimo and Pia Wurtzbach.
10. If the total contributed capital of all the partners is equal to the total agreed capitalization
of new partnership in admission of new partner by investment, which is true?
a. Asset revaluation is recognized.
b. Impairment loss is recognized.
c. Bonus to or from new partner is recognized.
d. Any of the above.
c. Bonus to or from new partner is recognized.
4. It is the change in the relation of the partners caused by any partner ceasing to be associated
in the carrying on of the business.
a. Dissolution
b. Liquidation
c. Incorporation
d. Break-up
a. Dissolution
Partners A and B will contribute the following: A will contribute cash, P1,500,000, and B will
contribute a Building with a carrying amount of P1,000,000 and an agreed value of P1,200,000. The
building has a mortgage of P100,000. The partners further agreed to make their capital balances equal
upon formation, and the mortgage would be the obligation of the partnership.
37. What is the agreed capital of Partner A?
37. D
Cash 1,500,000
Building at agreed value 1,200,000
Mortgage assumed by partnership (100,000)
Total contributed capital / agreed capital 2,600,000
Capital interest agreement x 50%
Capital credit of Partner A 1,300,000
Partners A and B formed a partnership on April 1, 2025, with original capital contributions of
P2,000,000 and P1,500,000, respectively. They agreed to distribute profits and losses with the
following provisions:
a) 10% on their original capital contributions
b) quarterly salaries of P15,000 and P20,000, respectively for A and B
c) The remainder shall be shared at 60:40
At the end of the year, due to unfavorable circumstances, the partnership generated a net loss of
P300,000.
39. What is Partner A's share of the net loss?
35. A
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