PARTNERSHIP REVIEW

1. A written partnership contract is required to be prepared whenever a partnership is

formed.
 True
 False
2. A partner’s contribution in the form of industry or service is recorded by debiting the
account “industry
 True
 False
3. If the partner did not agree as to how profits are to be divided, then such should be
divided among the partners equally
 True
 False
4. All partners, whether capitalists or industrial, are to share on whatever partnership
profits or losses.
 True
 False
5. The percentage interest in a partnership is always the same as the profit-sharing ratio.
 True
 False
6. The profit of the partnership is transferred to the drawings account of the partner if
the intention is to keep the capital account intact for investments and permanent
withdrawals of capital
 True
 False
7. Each partner generally has the authority to enter into contracts which are binding
upon the partnership
 True
 False
8. Partnership drawings are
a. Not discussed in the specific contract provisions of the partnership
b. Always maintained in a separate account from the partner’s capital account
c. Equal to partners’ salaries
d. Usually maintained in a separate draw account with any excess draws being
debited directly to the capital account.
9. In the formation of the ABC partnership, the total of the face value of cash and fair
value of non-cash assets contributed by partner A is lower than the amount credited
to his capital, which of the following explanation is allowed by Philippine GAAP.

a. Partner A gave a bonus to partners B and C

b. Partner A contributed goodwill to the partnership through his special skill or industry
c. Partner A received a bonus from partners B and C
d. Partner A’s contributed asset is subject to asset revaluation

10. In a partnership, interest on capital investment is accounted for as a(n)

 a. allocation of net income
b. reduction of capital
c. return on investment
d. expense

11. When property other than cash is invested in a partnership, at what amount should
the noncash property be credited to the contributing partner’s capital account?

a. Contributing partners’ original cost

b. Fair value at the date of contribution
c. Assessed valuation for property tax purposes
d. Contributing partners’ tax basis

12. Partners active in a partnership business should have their share of partnership profits
based on the following:
a. Percentage of net income after salaries is paid to inactive partners.
b. Salaries only.
c. A combination of salaries and percentage of net income after salaries and any other
allocation basis.
d. a combination of salaries plus interest based on average capital balances

13. Which of the following statements are true when comparing corporations and
partnerships?
a. In theory, partnerships are more able to attract capital.
b. Unlike shareholders, general partners may have liability beyond their capital
balances.
c. Partnership entities provide for taxes at the same rates used by corporations.
d. Like corporations, partnerships have an infinite life.

14. Of the following components used to allocate profits among partners, which is less
likely to be found in a partnership of landscape architects.
a. Salaries
b. Profit and Loss percentages
c. Interest on invested capital
d. Bonuses

15. The Articles of Co-Partnership should contain clear provisions on all of the following
except
a. Taxes paid by the partnership
b. Causes of partnership dissolution
c. Withdrawals allowed to partners
d. Profit-sharing ratio

16. A and B formed a partnership. Although A and B contributed equal amounts of cash, it
was agreed that the initial credit to A’s capital account should be greater than that of
B. If the bonus method is used, which of the following statements is correct?
 a. A capital bonus is given to B.
b. Partner B’s account is not affected by the agreement.
c. Goodwill must be recorded
d. The increase in A’s capital account is treated as a decrease in B’s capital account

17. On April 30, 20x1, A, B and C formed a partnership. A contributed cash of ₱50,000. B
contributed property with ₱36,000 carrying amount, ₱40,000 original cost and
₱80,000 fair value. The partnership accepted responsibility for the ₱35,000 mortgage
attached to the property. C contributed equipment with ₱30,000 carrying amount,
₱75,000 original cost and ₱55,000 fair value. The partnership agreement specifies that
profits and losses are to be shared equally but is silent regarding capital contributions.
Which partner has the smallest April 30, 20x1 capital account balance?

a. A
b. B
c. C
d. All capital account balances are equal

18. The total liabilities of the partnership after formation

Answer________________

19. A invested 125% as much money as B, C invested 80% as much money as B. The total
of all the three is P61,000. How much did C invest?
a. 20,000
b. 16,000
c. 18,000
d. 25,000
20. A and B start a partnership by investing P24,000 and P36,000 respectively. Their
agreement is to share half of the total profit equally and then share the remaining half
in the ratio of their capital. If they share the entire profit in the ratio of their capitals,
B would have got P2500 more than what she would have got otherwise. What is the
total profit?

a.40, 000
b.50, 000
c. 60,000
d. 75,000

21. Partner A first contributed ₱50,000 of capital into an existing partnership on March 1,
2002. On June 1, 2002, said partner contributed another ₱20,000. On September 1,
2002, he withdrew ₱15,000 from the partnership. Withdrawal in excess of ₱10,000 is
charged to the partner’s capital account. What is the annual weighted average capital
balance of Partner A?

a. 32,500
b. 60,000
c. 51,667
d. 48, 333

22. A and B agreed to form a partnership. A shall contribute ₱60,000 cash while B shall
contribute ₱120,000 cash. However due to the expertise that A will be bringing to the
partnership, the partners agreed that they should initially have an equal interest in
the partnership capital. Under the bonus method, how much is the adjusted capital
balance of B immediately after the formation of the partnership?

a. 60,000
b. 90,000
c. 120,000
d. None of these

23. A and B formed a partnership. The partnership agreement stipulates the following:•
Annual salary allowances of ₱100,000 for A and ₱70,000 for B. • Bonus to A of 10% of
profit after partner’s salaries and bonus.• The partners share profits and losses on a
50:50 ratio. During the period the partnership incurred loss of ₱500,000. How much is
the share of A in the partnership results of operations during the period?

a. (280,000)
b. (220,000)
c. (265,000)
d. (235,000
 24.

How much are the adjusted capital balances of A?

Answer______________

How much are the adjusted capital balances of B?

Answer______________

25. Assume that a partner’s capital shall be increased accordingly by contributing

additional cash to bring the partners’ capital balances proportionate to their profit or
loss ratio. Which partner should provide additional cash and how much is the
additional cash contribution?

a. Partner A should provide additional capital of ₱150,000.

b. Partner A should provide additional capital of ₱200,000
c. Partner B should withdraw capital of ₱300,000.
d. Partner B should provide capital of ₱300,000.

26. The partnership agreement of Axel, Berg & Cobb provides for the year-end allocation
of net income in the following order:• First, Axel is to receive 10% of net income up to
₱100,000 and 20% over ₱100,000.• Second, Berg and Cobb each are to receive 5% of
the remaining income over ₱150,000.• The balance of income is to be allocated
equally among the three partners. The partnership’s 2003 net income was ₱250,000
before any allocations to partners. What amount should be allocated to Axel?

Answer________________
 27. How much is the share of A in the partnership profit?

Answer:___________

28. What is Henson’s 2020 bonus?

Answer___________________

DISSOLUTION

1. Which of the following results in dissolution of a partnership?

a. Withdrawal of a partner from a partnership
b. Winding up of the partnership and the distribution of remaining assets to the partners
c. Contribution of additional assets to the partnership by an existing partner
d. Receipt of a draw by an existing partner

2. Which statement below is correct if a new partner purchases an interest in capital

directly from the old partners?
 a. C=D
b. C<D
c. C=D and B=A
d. C<D AND B=A

3.

a. False, true, true

b. True, true, true
c. True, false, true
d. False, false true

4. The dissolution of a partnership occurs

a. Only when a new partner is admitted to the partnership

b. When there is any change in the individuals who make up the partnership
c. At the end of each year, when income is allocated to the partners
d. Only when the partnership sells its assets and permanently closes its books

5. When a partner retires and withdraws assets in excess of his book value, the
remaining partners absorb the excess

a. Based on their average capital balances

b. In their profit-sharing ratio
c. Equally
d. Based on their ending capital balances

6. Dissolution of a partnership is the change in the relation of partners caused by any

partner ceasing to be associated in the carrying on. Which of the following is not an
automatic cause of the dissolution of the partnership?

a. Retirement of a partner
b. Admission of a new partner
c. Death of a partner
d. Incurring partnership loss

7. A person may become a partner in a partnership by all of the following methods

except
a. Investing in the partnership with a bonus to the old partner
b. Making a loan to the partnership
c. Purchasing a partner’s interest
d. Investing in the partnership with a bonus to the new partner
8. If a new partner purchases his interest from an old partner, the only entry on the
partnership books is to credit the purchaser’s capital account with a debit to the

a. Cash account
b. Capital account of the other partners
c. Capital account of the selling partners
d. Bonus account

9. A new partner may be admitted into a partnership by any of the following except

a. Purchasing preferred stock of the partnership

b. Purchasing a partner’s interest
c. Investing in the partnership
d. Both a and c.

10. if A is the total capital of a partnership before the admission of a new partner, B is the
total capital of the partnership after the investment of a new partner, C is the amount
of the new partner's investment, and D is the amount of the capital credit to the new
partner, there is

a. Neither bonus nor asset revaluation if B=A+C and C<D

b. A bonus to the new partner if B=A + C and D<C
c. An asset revaluation to the old partners if B> (A+C) and D=C
d. A bonus to the old partners if B>(A + C) and D<C

11. Max, Alfred and Waters shared profits and losses 20%, 40%, and 40% respectively and
their partnership capital balance is P10,000, P30,000 and P50,000 respectively. Max
has decided to withdraw from the partnership. An appraisal of the business and its
property estimates the fair value to be P 200,000. Land with a book value of P30,000
has a fair value of P45,000. Max has agreed to receive P20,000 in exchange for her
partnership interest. What amount should land be recorded on the partnership
books?

a. 30,000
b. 20,000
c. 50,000
d. 45,000

12. Hannah and Blanca, having capital balances of P140,000 P 75,000 respectively,
decided to admit Jet into their partnership. Jet is to invest sufficient amount in order
to have a 25% interest in the partnership. If Hannah and Blanca share profit in a
proportion of 3:1, respectively, and Blanca's capital balance after Jet's investment is
P84,250, how much was invested by Jet?

Answer______________________
13.

Answer _____________________

14. A and B are partners with the following capital balances and profit-sharing
percentages: A (40%) ₱750,000 and B (60%) ₱1,050,000. A and B admitted C into the
partnership when C purchased 20% of the capital interests of A and B for ₱400,000.
The partnership’s net assets on C’s admission date were fairly valued. How much is
the total equity of the partnership immediately after the admission of C?

Answer _____________________

15. How much is the capital balance of B after the admission of C?

a. 94,800
b. 194,800
c. 148,400
d. Other

16.
 Answer______________

17. If no bonus allowed how much should C invest in the partnership?

Answer_______________

18. If the bonus method is used to record the admission of C, how much would be
credited to C’s capital

Answer________________

COMPREHENSIVE PROBLEM

19. On July 1, 20x1, C withdraws from the partnership when he was bought-out by his co-
partners for ₱2,480,000 cash. How much is the capital balance of A immediately after
the withdrawal of C?.

a. 1, 480,000
b. 1,880, 000
c. 2, 200,000
d. 1, 320,000
20. C retires on July 1, 20x1. It was agreed that C shall receive ₱2,480,000 cash from the
partnership in settlement of his interest. How much is the capital balance of B right
after the withdrawal of C?

a. 1,912,000
b. 1,642,000
c. 2,080,000
d. 2,120,000

21. C retires on July 1, 20x1. It was agreed that C shall receive cash of ₱2,000,000 and
equipment with carrying amount of ₱400,000 and fair value of ₱1,200,000 as
settlement of his interest in the partnership. The entry in the partnership’s books to
record the retirement of C includes

a. a debit to C’s capital for ₱400,000.

b. a debit to C’s capital for ₱2,200,000.
c. A debit to A’s capital for P240,000
d. The transaction is not recorded in partnership’s books.

22. WMSU, BSAC and ONE are partners with capital balances of P80,000, P120,000 and
P160,000, respectively. They share profits and losses in the ratio of 30:40:30. BSAC
decides to withdraw from the partnership. BSAC receives P150,000 in settlement of
his interest. If the bonus method is used, what is the capital balance of ONE
immediately after the retirement of BSAC?
Answer__________________

23. Using the information above and assuming asset revaluation method is used, what is
the capital balance of ONE immediately after the retirement of BSAC?

Answer___________________

24. Using the information above and assuming bonus method is used, what is the total
partnership capital immediately after the retirement of BSAC?

Answer__________________

25. Using the information above and assuming BSAC was paid P120,000, what is the
capital balance of WMSU immediately after the retirement of BSAC?

Answer____________________