ACCO 30013 Quiz 1 on Partnership

Accounting
2nd sem, AY 20-21

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Win and Baek are partners with capitals of P400,000 and P200,000 sharing
profits and losses 3:1, respectively. They agree to admit Jhim as partner. Jhim
invests P300,000 for a 50% interest in the firm. Win and Baek transfer part of
their capitals to Jhim as a bonus. The capital balance of the partner Baek after
Jhim’s admission is? *
(1 Point)

162,500

The basis in computing the partner's loss absorption balance is (choose the best
answer): *
(1 Point)

Partner's interest

Capital balance after loss on realization

 Share in unallocated net income

Capital balance

Under what circumstances can the closing of Income Summary account results
in a debit to one partner’s capital account and credits to the other partners’
capital accounts? *
(1 Point)

The partnership agreement provided for interest on capital and salary allowances and net
income is less than the sum of the interest and salary allowances.

The results of operations are allocated in a profit and loss ratio and the partnership’s net
income was very low.

The results of operations are divided in the average capital ratio and one partner had a low
capital balance.

The results of operations are divided in a profit and loss ratio and the partnership sustained a
loss for the period.

Baekhyun is trying to decide whether to accept a salary of 40,000 or a salary of

25,000 plus a bonus of 10% of net income after salary and bonus as a means of
allocating profit among the partners. Salaries traceable to the other partners are
estimated to be 100,000. What amount of income would be necessary so that
Baekhyun would consider the choices to be equal? *
(1 Point)

540,000
 5

If MA contributed P367,500 to the partnership to provide cash to pay the

creditors, what amount must GA’s P472,500 partnership equity would appear
recoverable? *
(1 Point)

414,750

In the preparation of schedule of safe payments to partners, cash withheld for

possible liquidation expenses and unrecognized liabilities is treated as *
(1 Point)

loss on realization

operating expenses

liabilities

possible loss

Which of the following is CORRECT in installment liquidation of a partnership? *

(1 Point)
 The loss absorption capacity of a particular partner is calculated by adding the capital and the
share in restricted interest.

None of the choices is correct.

Anticipated liquidation expenses are treated as current period loss and deducted in the
partners’ capital account in determining the ending capital balance.

Payment to partners can be made only if all the noncash assets were sold or already disposed.

The existing partnership has been incorporated but the capital balances of the
partners exceed the total par value of the shares to be issued. The difference
shall be credited to *
(1 Point)

Profit or Loss

Retained Earnings

Other Comprehensive Income

Share Premium

In admission of a new partner by investment, the total contributed capital of all

the partners is more than the total agreed capitalization of new partnership but
the capital credit of new partner is less than his capital contribution. Which of
the following statements is correct? *
(1 Point)

There has been asset revaluation with bonus to old partners.

There has been asset revaluation with bonus to new partner.

There has been asset impairment with bonus to old partners.

There has been bonus given to old partners without any revaluation or impairment.
 10

In the cash distribution plan, the partner who receives the first cash distribution
is the one who has the highest *
(1 Point)

profit and loss ratio

loss absorption balance

capital balance

loan balance

11

Win, Baek and Jhim are partners with capital credit balances as of December 31,
2021 of P300,000; P300,000; and P200,000, respectively. Jhim is allowed to
withdraw, and it was agreed that she is to take certain furniture items at their
second-hand value of P15,000, plus a promissory note for the balance of her
interests. The furniture items are carried on the books as fully depreciated;
brand new, however, they would cost P18,000. Profits and losses are shared
equally. How much is credited to Notes Payable as a result of Jhim's retirement?
*
(1 Point)

185,000
 12

Win and Jhim formed a partnership. Win invested cash worth P85,000 and a
machine. On the other hand, Jhim contributed cash worth P55,000 and
equipment which has a mortgage of P35,000 which Jhim will pay personally.
The total capital after the formation was P360,000. They also agreed to reflect
55:45 capital ratio. No other investment or withdrawal occurred other than
mentioned above to reflect their capital ratio agreement. How much is the fair
value of the machine? *
(1 Point)

113,000

13

If A is the total capital of the 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 capital
credit to the new partner, then there is: *
(1 Point)

A bonus to the new partner if B = A + C and D

A bonus to the old partner if B = A + C and D>C.

Both are correct.

Both are incorrect.

 14

Win, Baek and Jhim are partners of WBJ partnership. They decided to liquidate
on March 31 of the current year. On this date, they have non- cash assets of
P530,000 and liabilities of P250,000, including loan from Jhim of P50,000. Win,
Baek and Jhim have capital balances of P80,000, P130,000 and P90,000,
respectively. Profits and loss are shared 3:3:4 for Win, Baek and Jhim. All
partners are solvent. Determine the total loss on realization if Jhim received
P25,000 in final settlement. *
(1 Point)

287,500

15

Win and Baek have capital balances of P200,000 and P220,000 respectively
before the admission of 2021 Miss Universe, Jhim. The profits and loss
agreement was 35:65. Jhim was to be admitted for 40% interest in the Love
Triangle Partnership and 20% in the profits and losses by contributing a used
machine which had a cost of P205,000 and an appraised value of P180,000.
After admission of Jhim, Win and Baek agreed to share profits and losses
equally. At the end of the year, the new partnership generated net income of
P130,000. How much is the capital balance of Baek after the admission of Jhim?
*
(1 Point)

122,500

16

When the loss absorption balance of all the partners in the cash priority
program is equal, cash distribution at this point is divided *
(1 Point)

according to capital ratio

 according to profit and loss ratio

equally

any of the choices

17

In the liquidation of a partnership in installments, the profit and loss ratio is

used for cash payments to partners *
(1 Point)

only for asset realizations that result in a gain

throughout the course of the liquidation

at no time

once the partner's capital account balances have been reduced ti the profit and loss ratio

18

Assuming that a partnership has no loans from partners, how is a partner's loss
absorption balance computed? (choose the best answer) *
(1 Point)

multiply his pre-liquidation capital balance by his fractional share of profits and losses

divide his profit and loss ratio by his pre-liquidation capital balance

multiply his pre-liquidation capital balance by his profit and loss ratio

divide his pre-liquidation capital balance capital balance by his profit and loss ratio
 19

Theoretical loss is computed by adding book value of unsold non-cash assets

and *
(1 Point)

loss on realization

cash set aside for future expenses

actual liquidation expenses

unpaid liabilities

20

S1. Safe payment is calculated by deducting the liabilities paid and liquidation
expenses paid from the total cash available.
S2. Cash priority program is prepared every time cash is available. *
(1 Point)

False, False

True, True

False, True

True, False

21

Which of the following statements concerning the formation of partnership

business is correct? *
(1 Point)

The juridical personality of the partnership arises from the issuance of certification of
registration.
 The parties may become partners only upon contribution of money or property but not of
industry or service.

The capital to be credited to each partner upon formation may not be the amount actually
contributed by each partner.

Philippine Financial Reporting Standards (PFRS) allows recognition of goodwill arising from
the formation of partnership.

22

In calculating safe payment, it is assumed that *

(1 Point)

cash on hand can be fully distributed

all non-cash assets are worthless

partnership liabilities have been paid

no liquidation expenses will be paid

23

The balance sheet accounts of partners Win, Baek and Jhim before liquidation
are the following: Cash, P360,000; Non-Cash Assets, P1,790,000; Liabilities,
P1,000,000; Win, Capital (50%), P460,000; Baek, Capital (30%), P370,000 and
Jhim, Capital (20%), P320,000. On the first month of liquidation, assets with a
book value of P1,400,000 are sold for P1,060,000. Liquidation expenses of
P40,000 are paid and additional expenses are anticipated. Liabilities are paid
amounting to P362,000, and sufficient cash is retained to ensure the payment to
creditors before making payment to partners. In the first payment of cash to
partners, Baek received P100,000. What is the amount of cash withheld for
future liquidation expenses? *
(1 Point)

130,000
 24

Using data in #23, how much was distributed to Jhim? *

(1 Point)

140,000

25

The amount of cash withheld for the anticipated liquidation expenses is: *
(1 Point)

36,000

26

Using the data in #25, how much did Ryan receive? *

(1 Point)

73,500
 27

The amount received by Ayien in the 2nd month is *

(1 Point)

97,500

28

Using the data in #27, the amount received by Avie in the 3rd month is *
(1 Point)

91,500

29

Using the data in #27, how much is the total restricted interest in the 2nd
month? *
(1 Point)

228,000
 30

Using the data in #27, how much is the total payment to Avie if Mac already
received P275,000? *
(1 Point)

250,000

31

SECTION *

BSMA 2-10

BSA 2-10

BSMA 2-6

BSA 2-8

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