Polytechnic University of the Philippines

College of Accountancy

ACCO 20033 – FINAL DEPARTMENTAL EXAMINATION

October 14, 2018

Test I. Shade letter A if the statement is TRUE and letter B if the statement is FALSE. SET B

1. The admission of a new partner calls for the amendment of the old partnership agreement, but not dissolve the
old partnership.
2. When a partner retires from the business, the partner's interest may be purchased by one or more of the
remaining partners or by an outside party.
3. The percentage interest in a partnership is always the same as the profit sharing ratio.
4. Partnership existence depends on the contract but not to exceed 50 years.
5. In the absence of an agreed value and fair market value, non-cash assets should be recorded in the partnership
books at cost.
6. Each partner has an equal right to use the partnership assets, to act for the partnership, and to enter contracts
binding upon it.
7. No one becomes a member of the partnership without the consent of majority of the partners.
8. Partnership profit or loss is shared equally unless the partnership contract specifically indicates the manner in
which profit or loss is to be divided.
9. The sale of interest of the retiring partner to a new partner will require the recognition of a gain or loss on the
partnership books.
10. "Limited life" means a partnership may be dissolved as the result of any change in the ownership.
11. Assuming there are no known bad debts when two single proprietors decide to combine their businesses, it is
usual practice to enter the full amount of the Accounts Receivable as a debit and the amount of the Allowance for
Bad Debts as a credit in placing each partner's investment in the books of the partnership.

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12. The determination of the capital interest of an incapacitated partner is similar to the determination of the capital
interest of a retiring partner.

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13. The partnership should measure profit or loss for the fraction of the year up to the withdrawal date of a partner
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and allocate profit or loss according to the existing ratio.
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It is necessary to set up a drawing account for the industrial partner for the purpose of recording his share in the
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profits of the partnership.

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15. There is a required number of limited partners in a general co-partnership; in the same manner that, there is a
required number of general partners in a limited partnership.
16. Entering of a partner into a memorandum of agreement with another entity may cause the partnership to be
dissolved.
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17. When a new partner purchases ¼ interest of the equity from all the partners upon his admission, total
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partnership equity is increased by ¼.

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18. A new partner was admitted to the partnership by paying P 100,000 in cash. If the net assets of the partnership
are still the same after his admission, then the new partner must have received a bonus upon his admission.
19. In a partnership, salary allowances and interest are considered allocation of profits and losses.
20. A bonus to the remaining partners will result when the cash paid to a retiring partner is more than the retiring
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partner’s capital balance.

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21. Non cash assets invested in a partnership formed by two individuals who were previously sole proprietors would
be recorded in the partnership books at the proprietor’s fair value of the asset at the date of investment.
22. Two partners, with a capital ratio of 3:1 and profit and loss ratio of 2:1, admitted a new partner into their
business. Under the bonus method, the old partners’ old profit and loss ratio should be used to allocate the
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excess of the new partner’s contribution over the amount credited to his capital account.
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23. Loans and advances from the partnership will increase the interest of the retiring partner.
24. Ease of information is a characteristic of a partnership.
25. In opening the books for a partnership, it is customary to prepare a single journal entry for the investment of all
partners.
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26. The basis on which profits and losses are to be shared is a matter of agreement between the partners and not
necessarily the same as their investment ratio
27. Partners may invest property or cash in the partnership, but only property increases their capital account
balances.
28. Only the income statement is affected by the allocation of net income in a partnership.
29. The advantages of a partnership include unlimited liability.
30. In computing for Input Vat, the buyer should multiply the amount of purchases (excluding the VAT) by 12%.

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 Test II. Multiple Choice (Problems). Shade the appropriate letter in the scannable form. Place all supporting
computations in the worksheet provided.

31. Tip and Top are partners and have beginning capital balances of P 360,000 and P 600,000, respectively.
Partnership profits and losses are allocated as follows: salaries of P 160,000 and P 200,000 to Tip and Top,
respectively; 10% interest on their beginning capital balances, any remaining profit is divided equally. Partnership
profit of P 600,000 is allocated as follows:
a. Tip – P 300,000; Top – P 300,000 c. Tip – P 268,000; Top – P 332,000
b. Tip – P 280,000; Top – P 320,000 d. Tip – P 192,000; Top – P 408,000

32. March, April and May are partners with the following information:
Capital Balance Profit & Loss Ratio
March P 50,000 50%
April 40,000 30%
May 30,000 20%
March retired from the partnership and received an amount which exceeds his capital interest by P 40,000. Using
the bonus method, the excess payment will be shared by April and May as follows:
a. P 48,000 and P 32,000 c. P 12,000 and P 8,000
b. P 24,000 and P 16,000 d. P 36,000 and P 24,000

33. An office computer was purchased on September 1, 2017 for P 300,000. It has an estimated residual value of 10%
of cost and an estimated useful life of 10 years. The financial statements for the year ended December 31, 2017
would show balances of
Accumulated Depreciation Depreciation Expense
a. 36,000 27,000
b. 36,000 36,000

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c. 54,000 30,000
d. 36,000
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34. Crisostomo, Ibarra and Jose are partners with capital balances of P 80,000, P 120,000 and P 160,000, respectively.
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They share profits and losses in the ration of 3:4:3. Ibarra decides to withdraw from the partnership. Ibarra
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receives P 160,000 in settlement of his interest. If the bonus method is used, what is the capital balance of Jose
immediately after the retirement of Ibarra?
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a. P 200,000 b. P 140,000 c. P 160,000 d. P 180,000

35. Using the information in no. 34 and assuming bonus method is used, what is the total partnership capital
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immediately after retirement of Ibarra?

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a. P 320,000 b. P 200,000 c. P 280,000 d. P 240,000

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36. The same information in no. 34 and assuming asset revaluation method is used, what is the capital balance of
Jose immediately after the retirement of Ibarra?
a. P 180,000 b. P 200,000 c. P 190,000 d. P 160,000
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37. Smith purchases 50% of Lemon’s capital interest in the K & L Partnership for P 22,000. If the capital balance of
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Kelly and Lemon are P 40,000 and P 30,000 respectively, Smith’s capital balance following the purchase is:
a. P 22,000 b. P 35,000 c. P 20,000 d. P 15,000

38. Capital balances in the MEM partnership are Mary, Capital P 60,000; Esther, Capital P 50,000 and Mercy, Capital P
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40,000. Profits and losses are 5:3:2, respectively. The MEMO partnership is formed by admitting Olga to the
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partnership with a cash investment of P 60,000 for a 25% capital interest. The bonus to be credited to Mercy in
admitting Olga is:
a. P 10,000 b. P 7,500 c. P 3,750 d. P 1,500
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39. Pip and Bot entered into a partnership on March 1, 2017 by investing the following assets:
PIP BOT
Cash P 30,000 -
Merchandise inventory - P 90,000
Computer Equipment 160,000
Furniture & Fixtures 200,000

The agreement between Pip and Bot provides that profits and losses are to be divided into 40% to Pip and 60% to
Bot, and that the partnership is to assume a liability on the computer equipment of P 60,000. The partnership
further agreed that Bot is to receive a capital credit equal to her profit and loss ratio. How much cash is to be
invested by Bot?
a. P 135,000 b. P 145,000 c. P 155,000 d. P 130,000

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 Questions for nos. 40 to 43
Duncan, Howard and Wade are partners with capital balances of P 67,200, P 108,000 and P 38,000 respectively,
sharing profits and losses in the ratio of 2:5:1. Durant is admitted as a new partner bringing with him expertise
and is to invest cash for a 15% interest in the partnership considering the transfer of capital from him of P 18,000
upon his admission.
40. How much is the cash investment of Durant?
a. P 58,800 b. P 40,800 c. P 18,000 d. P 31,980

41. How much is the agreed capital of the new partnership?

a. P 245,180 b. P 272,000 c. P 254,000 d. P 231,200

42. How much is the capital balance of Duncan after the admission of Durant?
a. P 78,450 b. P 71,700 c. P 69,450 d. P 85,200

43. How much is Durant’s capital credit in the new partnership?

a. P 31,980 b. P 58,500 c. P 40,800 d. P 18,000

44. Howard and Odom are partners sharing profits and losses in the ration of 6:4 respectively. On January 2, the
partners decided to admit Garnett as a new partner upon his investment of P 16,000. On this date, the interest in
the partnership of Howard and Odom are P 23,000 and P 18,600, respectively.
Assuming that the new partner is given a 1/3 interest in the firm and the assets are revalued. The capital
balances of Howard, Odom and Garnett after the admission of Garnett are:
a. 23,000; 18,600; 20800 c. 23,240; 18,760; 16,000
b. 23,500; 18,600; 16,000 d. 23,000; 18,600; 16,000

45. Jun, Mar and Roy are partners. Roy is to withdraw from the partnership on December 31. It was agreed that the
settlement is to be made by payments from the personal funds of the remaining partners to Roy. Profit and loss

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ratio is 30:30:40. Capital balances on December 312, are as follows:
Jun- P 30,000

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If Jun and Mar paid Roy P 48,000, how much is the undervaluation of assets if the transaction will be recorded
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using the asset revaluation method?
a. P 500 b. P 3,000 c. P 5,000 d. P 7,500
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46. At the beginning of 2017, the balance of the Accounts Receivable and the Allowance for Bad debts were
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P 215,000 and P 1,700 credit, respectively. During 2017, credit sales were P 1,750,000. In addition, P 1,900 in
uncollectible accounts were written off as worthless. Collections for the year amounted to P 825,000.
Management estimates the end of the year uncollectible accounts receivable to be P 22,500 based on aging of
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accounts receivable. How much is the Net Realizable Value of the Accounts Receivable at year end??
a. P 191,,500 b. P 1,138,100 c. P 1,115,600 d. P 1,940,600
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47. Using the information in no. 46, the amount of Bad Debts Expense to be shown in the Statement of
Comprehensive Income for the year ended December 31, 2017 is
a. P 22,500 b. P 24,200 c. P 22,700 d. P 24,400
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Questions for nos. 48 to 50

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Guess, Bulgari and Chloe are partners with capital account balances at year-end, P 90,000; P 110,000; and
P 50,000, respectively. The partnership profit for the year is P 110,000. They share profits and losses on a 4:4:2
ratio, after considering the following terms:
1. Interest of 10% shall be paid on that portion of a partner’s capital in excess of P 100,000
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2. Salaries of P 10,000 and P 12,000 shall be paid to Guess and Chloe, respectively
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3. Chloe is to receive a bonus of 10% of profit after bonus

48. The total profit share of Guess was

a. P 40,800 b. P 48,400 c. P 44,000 d. P 48,000
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49. The total profit share of Bulgari was

a. P 44,800 b. P 31,400 c. P 31,800 d. P 44,000

50. Chloe’s share from the profit was

a. P 37,400 b. P 38,200 c. P 22,000 d. P 34,700

51. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income
and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows:
Gold, P 60,000; Silver, P 80,000; Bronze, P 55,000. If Bronze retired and withdrew P 50,000 in settlement of his
equity, the amount entered in Bronze’s capital account would be a
a. P 5,000 credit b. P 50,000 credit c. P 55,000 debit d. P 55,000 credit

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 52. Bulls, Spurs and Heat are partners sharing profits in the ratio of 3:3:2. On June 30, their capital balances are: Bulls
– P 600,000; Spurs – P 400,000; Heat – P 300,000.
The partners agree to admit Magic on the following agreement:
1. Magic is to pay Bulls P 400,000 for a ½ interest of Bulls’ interest.
2. Magic is also to invest P 300,000 in the partnership
3. The total capital of the partnership is to be P 2,000,000, of which Magic’s interest is to be 25%.
What are the capital balances of Bulls, Spurs and Heat after the admission of Magic?
a. 487,500; 587,500; 425,000 c. 300,000; 400,000; 300,000
b. 400,000; 300,000; 300,000 d. 187,500; 187,500; 125,000

53. Bosch, and Duncan are partners who share profits and losses equally. The capital accounts of Bosch and Duncan
have tripled in five years and at present have the following balances at P 90,000 and P 60,000, respectively. Kidd
desires to join the firm and offered to invest P 50,000 for a 1/3 interest. Bosch and Duncan declined his offer but
they extended a counter-offer to Kidd of P 70,000 for a ¼ interest in the capital and profits and losses of the firm.
If Kidd accepted their offer and bonus is recorded, what should be the balances in the capital accounts of Bosch
and Duncan after Kidd’s admission:
a. 100,000 and 70,000 c. 90,000 and 60,000
b. 120,000 and 90,000 d. 97,500 and 67,500

54. Sweet and Heart formed a partnership and have capital balances of P 50,000 and P 100,000, respectively. If they
agree to admit Love into the partnership, how much will she have to invest to have a ¼ interest?
a. P 25,000 b. P 50,000 c. P 37,500 d. P 100,000

55. Miami, Dallas and Chicago were partners with capital balances on January 2, 2017 of P 100,000, P 150,000, and
P 200,000, respectively. Their profit and loss ratio is 5:3:2. On July 1, 2017, Miami retires from the partnership.
On the date of retirement, the partnership profit is P 140,000 and the partners agreed that inventories are to be
revalued at P 70,000 from its original cost of P 50,000. The partners agreed further to pay Miami, P 195,000 in

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settlement of his interest. What are the capital balances of the remaining partners after the retirement of
Miami?
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a. 189,000 and 226,000 c. 207,000 and 238,000
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b. 198,000 and 232,000 d. 220,000 and 226,000
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Nos. 56 and 57 are based on the following information:
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The CFM Partnership shows the following profit and loss ratios and capital balances:
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Carter - 60% P 252,000; Fisher – 30% P 126,000; Malone – 10% P 42,000

The partners decide to sell Shaq 20% of their respective capital and profit and loss interests for a total payment of
P 90,000. Shaq will pay the money directly to the partners.
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56. If the partners agree that asset revaluation is to be recorded prior to the admission of Shaq, what are the capital
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balances of the partners after Shaq’s admission?

Carter Fisher Malone Shaq
a. P 198,000 P 99,000 P 33,000 P 90,000
b. P 201,600 P 100,800 P 33,600 P 90,000
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c. P 216,000 P 108,000 P 36,000 P 90,000

d. P 255,600 P 127,800 P 42,600 P 90,000
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57. If the partners agree that the bonus method is used, what are the capital balances of the partners after the
admission of Shaq to the partnership?
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Carter Fisher Malone Shaq

a. P 198,000 P 99,000 P 33,000 P 90,000
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b. P 201,600 P 100,800 P 33,600 P 84,000

c. P 216,000 P 108,000 P 36,000 P 90,000
d. P 255,699 P 127,800 P 42,600 P 84,000
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58. Questions for nos. 58 to 63 are VAT related problems for Merchandising
On March 1, 2017, Philip Company bought merchandise from Winston Company for P 89,600 (VAT inclusive).
Terms 3/10, 2/15, n/30. FOB shipping point, freight prepaid. The cost of the freight was P 1,680 (VAT inclusive).
On March 2, 2017, Winston issued a credit memorandum for P 3,500 (VAT exclusive). Philip Company paid the
amount due on March 15, 2017.
The amount of Purchases to be recorded by Philip Company will be
a. P 89,600 b. P 80,000 c. P 91,280 d. P 81,500

59. Using the information in no. 58, the amount due from Philip Company on March 15, 2017 will be
a. P 89,600 b. P 91,280 c. P 85,612.80 d. P 84,739.20

60. Using the information in no. 58, the amount of cash discount to be recorded by Winston Company will be
a. P 2,620.80 b. P 2,340 c. P 1,747.20 d. P 1,560

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 61. On January 15, 2017, Star Company purchased merchandise from Sun Company amounting to P 30,000 (VAT
exclusive). Terms 2/10, n/30, FOB shipping point, freight collect. Amount of freight cost is P 1,000. The amount
of Accounts Payable to be recorded on the date of purchase will be
a. P 33,600 b. P 34,720 c. P 31,000 d. P 30,000

62. Using the information in no. 61, assuming Star Company issued a debit memorandum for P 5,600 (VAT inclusive),
and paid the amount due within the discount period, the amount of Input tax on the cash discount will be
a. P 58.56 b. P 60.00 c. P 68.64 d. P 67.20

63. Using the information in nos. 61 and 62, the amount paid by Star Company is
a. P 33,600 b. P 28,000 c. P 27,440 d. P 28,440

64. Perry, Ellis and Channel are partners with capital balances on December 31, 2017 of P 300,000, P 300,000 and
P 200,000 respectively. Profits are shared equally. Channel wishes to withdraw and it is agreed that he is to take
certain furniture and fixtures with second hand value of P 50,000 and note for the balance of his interest. The
furniture and fixtures are carried in the books at P 65,000. Brand new, the furniture and fixtures may cost
P 80,000. Channel’s acquisition of the second-hand furniture will result to:
a. Reduction in capital of P 15,000 each for Perry and Ellis
b. Reduction in capital of P 10,000 for Channel
c. Reduction in capital of P 5,000 each for Perry, Ellis and Channel
d. Reduction in capital of P 7,500 each for Perry and Ellis

65. Boc and Ervin are partners with profit and loss ratio of 80:20 and capital balances of P 700,000 and P 350,000,
respectively. Mykel is to be admitted into the partnership by contributing a 30% interest in the capital, profits
and losses for P 420,000. Assuming that no asset revaluation is to be made. Which of the following is true in the
books of the partnership upon admission of Mykel?
a. Increase in asset account in the amount of P 420,000

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b. Credit capital accounts of the selling partners with total amount of P 315,000.

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c. Decrease in capital account of the acquiring partner in the amount of P 105,000.

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d. The entry upon admission will not affect the total capital of the partnership.
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End of Examination
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GOOD LUCK!
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/msb/2018
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