ACC131_PQ5 c.

The bonus always results in an increase to old partner’s capital

balances.
1. A change in the ownership of a partnership results in the D d. Assuming that recorded assets are properly valued, the book value of
a. Consolidation of the partnership the new partnership is equal to the book value of the old partnership and
b. Liquidation of the partnership the investment of the new partner.
c. Realization of the partnership
d. Dissolution of the partnership 10. Pascual invested P400,000 for a 10% interest in the partnership that has total
capital of P3,000,000 after admitting Pascual. Which of the following is
2. When a partner withdraws from a partnership taking assets that true? C
represent less than his capital balance, B a. Pascual’s capital is P260,000.
a. No bonus results b. Pascual receives a bonus of P100,000.
b. The remaining partners receive a bonus c. The original partners received a bonus of P100,000.
c. The withdrawing partner receives a bonus d. The original partners’ capital in the business was P2,700,000 before
d. The remaining partners owe the withdrawing partner the difference admitting Pascual.

3. Which of the following will not result in dissolution of a partnership? B 11. Statement 1: Liquidation is the termination of business operations or the
a. Incapacity of a partner winding up of the affairs. It is synonymous with partnership dissolution.
b. Negative capital balance of a partner Statement 2: During liquidation, the owner’s interests are settled first before
c. Bankruptcy of a partner creditors’ interest. A
d. Admission of a new partner a. False; False
b. False; True
4. Total partners’ equity will not change when a withdrawing partner A c. True; False
a. Sells his interest to a new or remaining partner d. True; True
b. Withdraws assets equal to his capital balance
c. Withdraws assets amounting to less than his capital balance 12. Which of the following does not relate to the liquidation of partnership? E
d. Withdraws assets amounting to greater than his capital balance a. Realization of assets
b. Division of gains or loss on realization, by charges or credits to partners’
5. Which of the following statement is true? C capital
a. When a new partner invests more than the proportionate share he c. Payment of liabilities
receives in the partnership, a bonus is recorded to his account. d. Payment of partners’ interest
b. Partnership dissolution is synonymous with partnership liquidation. e. Conversion of partner’s equity into common stock
c. A new partner cannot be admitted into a partnership without the consent
of all the partners. 13. Which of the following has the least priority of payment in case of
d. The dissolution of the partnership discharges the existing liability of any partnership liquidation? D
partner. a. Priority claims, such as artisans, governments, liquidation expenses
b. Secured creditors to the extent covered by proceeds from sale of pledged
6. When Jill retired from the partnership of Jill, Bill and Hill, the final assets
settlement of her interest exceeded her capital balance. Under the c. Unsecured credit to the extent covered by the proceeds from sale of
bonus method, the excess: C unpledged (or free) assets
a. Was recorded as goodwill. d. The partners’ capital balance.
b. Was recorded as an expense.
c. Reduced the capital balances of Bill and Hill. 14. Which of the following statements is correct regarding a partner's debit
d. Had no effect on the capital balances of Bill and Hill. capital balances?
a. The partner should make contributions to reduce the debit balance to
7. In the LM Partnership, Laura and Maria had a capital ratio of 3:1 and whatever extent possible.
profit and loss ratio of 2:1, respectively. They used the bonus method to b. If contributions are not possible, the other partners with credit capital
record Nora’s admission as a new partner. What ratio should be used to balances will be allocated a portion of the debit balance based on their
allocate to Laura and Maria the excess of Nora’s contribution over the proportionate profit-and-loss-sharing percentages.
amount credited to Nora’s capital account? D c. Partners who absorb another's debit capital balance have a legal claim
a. Laura and Maria’s new relative capital ratio. against the deficient partner.
b. Laura and Maria’s new relative profit and loss ratio. d. All of these statements are correct.
c. Laura and Maria’s old capital ratio.
d. Laura and Maria’s old profit and loss ratio. 15. If a partnership has only non-cash assets, all liabilities have been
properly disbursed, and no additional liquidation expenses are expected, the
8. Goodwill should be recognized on the retirement of a new partner from a maximum potential loss to the partnership in the liquidation process is: B
partnership: D a. the fair market value of the non-cash assets
a. If the partnership contract provides that the retiring partner is to receive the b. the book value of the non-cash assets
balance of his or her capital account plus an amount of goodwill. c. the estimated proceeds from the sale of the assets less the book value of
b. If the new partner acquires from the retiring partner for cash the interest of the non-cash assets
the retiring partner in the partnership. d. none of the above
c. If the retiring partner agrees to accept an amount of cash that is less than the
balance of the partner’s capital account.
d. Under no circumstances.

9. Which of the following best characterizes the bonus method of recording a

new partner’s investment in a partnership? D
a. Net assets of the old partnership are not revalued.
b. The partner’s initial capital balance is equal to his investment.