TRUE OR FALSE

1. Partners’ capital accounts are credited for the amount invested and or permanently withdrawn.

2. Partner’s regular withdrawal of cash is credited to a separate drawing account.

3. Partner’s regular withdrawal of cash is debited to a separate drawing account.

4. If a partner’s investment in a partnership consists of equipment that has accumulated depreciation of

P 8, 000, it should be recorded at net of accumulated depreciation in the partnership books.

5. When the partnership’s market value is greater than the book value of equity, the new partner is
usually required to pay a bonus to the current partners.

6. If a partnership incurs a loss for the period, the Income Summary account is required to be credited in
a closing entry to allocate the loss to the partners.

7. When a 10% bonus to a managing partner is stipulated in the partnership agreement, this should be
given even if the business operation resulted to a loss.

8. It indicates that a bonus was paid to the original partners if a new partner invests in a partnership at
book value and acquires a ¼ interest in total partnership capital.

9. When a retiring partner receives partnership assets that are less than his or her capital balance on the
date of withdrawal, a bonus to the remaining partners results.

10. In admission by investment, if total contributions exceed the total agreed capital, it may be implied
that assets are overstated and should be decreased through an adjustment.

11. The amounts that the partners withdraw from the partnership are taxed.

12. The salary allowances or interest cannot be used as a method of determining profit share if the
partnership incurs a loss.

13. The salary allowances or interest cannot be used as a method of determining profit share if the
partnership’s net income is not sufficient to cover them.

14. Ordinary shareholders always share equally with preference shareholders in all dividends.

15. Par value is the price at which a share of stock is bought or sold.

16. The ease of transferability of shares of stock and the shareholders’ limited liability in a corporation
makes the shares of stock attractive to investors.

17. The legal capital requirements protect creditors by requiring a minimum level of net assets.