FINANCIAL ANALYSIS AND REPORTING (FAR)

Matching Type (10pts)

Kindly write the letter of the correct answer of your choice beside its corresponding number.

A. Limited Liability Company

B. Liquidation Partner
C. Limited Life
D. Dormant Partner
E. Universal Partnership of All Present Property
F. General Partner
G. De jure partnership
H. Mutual Agency
I. Partnership at will
J. Secret Partner
K. Silent Partner
L. Universal Partnership of Profits

1. A partnership which has complied with all legal requirements for its establishment. (G – De Jure)
2. A partner can bind the other partners to a contract if he is acting within his express or implied
authority. (H – Mutual Agency)
3. One who is liable to the extent of his separate property after all the assets of the partnership is
exhausted. (F – General Partner)
4. A partnership may be dissolved by admission, death, insolvency, incapacity, withdrawal of
partner or expiration of the term specified in the partnership agreement. (C – Limited Life) 5. A
partnership where all contributions become part of the partnership fund. (E ) 6. A partnership
which no term is specified and is not formed for any particular undertaking. (I – Partnership at
will)
7. One who is designated to wind up or settle the affairs of the partnership after dissolution. (B –
Liquidation Partner)
8. One who does not take active part in the business of the partnership and is not known as a
partner. (D – Dormant Partner)
9. One who takes active part in the business but is not known to be a partner by outside parties. (J
– Secret Partner)
10. A hybrid form of business for it combines the best features of partnership and a corporation. (A
– Limited Liability Company)
SEC REGISTRATION (4pts)

Anne C. and Erwan H. agreed to form a partnership to be called A & E Catering Services. The agreed
partnership capital amounted to P370,000. Upon filing in the Securities and Exchange Commission, they
were asked to pay for the registration fee composing of the filing fee and legal research fee. How much
should be the total registration fee to be paid by A & E Catering Services?
a. Filing Fee
b. Legal Research Fee
c. TOTAL Registration Fee

Filing Fee (370K * 0.002) 740 vs. 1,000 1,000 (1pt)

Legal Research Fee (1,000 * 1%) 10 (1pt)
Total Registration Fee 1,010 (2pts)

MULTIPLE CHOICE (31 pts)

Select the best answer for each of the questions. (1pt each for theories)

1. Which of the following best describes the nature of salary and interest allowances in partnership
profit and loss sharing agreement?
a. A means of determining reasonable monthly withdrawals by each partner
b. The amount upon which each partner will have to pay personal income tax
c. A means of distributing profit in relation to services rendered and capital invested by
partners. d. Expenses of the business that should be deducted from revenue in determining
profit.

2. Orosco is an industrial partner. Besides his services, he also contributed capital to the partnership.
There is no agreement as to the distribution of profits and losses. The share of Orosco in the profit is a.
to be determined by the remaining partners
b. pro-rata (based) to is contribution
c. such share as may be just and equitable under the circumstances.
d. combination of b and c

3. If the partnership agreement does not specify how profit is to be allocated, profits or losses should be
allocated
a. equally
b. in accordance with their capital contribution
c. in proportion to the average of capital invested during the period
d. equitably so that partners are well compensated for their time and effort

4. The division of partnership profits on the basis of salaries, interest and an agreed ratio is usually
necessary because
a. this prevents arguments among the partners
b. most investor require this method of distribution
c. partners seldom contribute time, effort, and resources equally
d. this reflects the amount of time devoted to the partnership by the partners.
5. Which of the following is not a component of the formula used to distribute profit? a. after
all other allocations, the remainder divided according to the profit and loss sharing ratio b.
salary allowances to the managing partners
c. interest on the average capital balances
d. interest on notes to partners

6. Which of the following distributions would be made last in dividing profits to the partners when
interest on capital balances and salary allowances are involved?
a. equally
b. specified ratio
c. salary allowances
d. interest on capital balances

7. A 1:3:2 ratio is the same as

a. 10%; 30%; 20%
b. 1/10; 3/10; 2/10
c. 1/6; 1/2; 1/3
d. 20%; 50%; 30%

8. The most equitable distribution of partnership profit based on capital contributions uses which of the
following capital concept?
a. equally
b. ending capital
c. beginning capital
d. average capital

9. Partners Luca and Pacioli receive salary of P150,000 and P300,000, respectively and share profit and
losses in a 2:1 ratio, respectively. If the partnership suffered a P150,000 losses in 2019, how much is the
share in losses of Luca? (2pts)
Luca Pacioli Total

Salary 150,000 300,000 450,000

Remainder: (400,000) (200,000) (600,000)

-150 – 450 =
-600 2/3
1/3

(250,000) 100,000 (150,000)

10. Partners Pepito and Manaloto receive an interest allowance of P100,000 and P150,000, respectively,
and divide the remaining profits and losses in a 3:1 ratio. If the company sustained a loss of P110,000
during the year, how much is the share in losses of Pepito? (2pts)
Pepito Manaloto Total

Interest 100,000 150,000 250,000

 Remainder: (270,000) (90,000) (360,000)
-250-110 =
-360 ¾
¼

(170,000) 60,000 (110,000)

11. Partners Digong and Bong receive a salary allowance of P30,000 and P70,000, respectively, and
share the remainder equally. If the company earned P40,000 during the period, how much is the share
in profits of Bong? (2pts)
DIGONG BONG TOTAL

Salary 30,000 70,000 100,000

Remainder = 40 – 100 = (30,000) (30,000) (60,000)

(60) (60K) /2
(60K) / 2

Share in Profit - 40,000 40,000

12. A partner has a capital balance of P40,000 for five months, P500,000 for four months, and P600,000
for three months. The average capital balances is (2pts)

40,000 * 5/12 = 16,666.67

500,000 * 4/12 = 166,667.67
600,000 * 3/12 = 150,000.00
Total = 333,333.34

13. Arci, Bali, and Casper are partners. Their contributions are as follows: Arci, P600,000; Bali, P400,000
and Casper, services. The partners did not agree on how to divide profits or losses. If there is a loss of
P100,000, how should the loss be shared by partners? (3pts each)

No agreement = P/L Ratio based on Original Investment

Loss = industrial partner will not receive his share in loss

Arci = (100K) * 600/1000 = (60,000)

Bali = (100K) * 400/1000 = (40,000)
Casper = 0
14. Julia, Yen, and Heaven are partners. Julia is an industrial partner. During the first year of operations,
the firm realized a profit of P60,000. During the second year, the firm sustained a loss of P30,000. In the
Articles of Partnership, it was agreed that Julia, the industrial partner would get one-third of the profit
but would not share in the losses. How much will Julia, the industrial partner, get? (2pts) a. Julia will get
only P10,000 which is one-third of the profit
b. Julia will get only P20,000 in the first year and none in the second year.
c. Julia will share in the loss in the second year.
d. Julia will get only P20,000 which is 1/3 of the profit for the first year of operations.

Charles and Philip formed a partnership on January 1, 2020. The capital accounts of the partners show
the following transactions:

Charles Prieto, Capital Philip Santos, Capital

DR CR DR CR
01/01/2020 150,000 180,000
04/30/2020 60,000
05/31/2020 90,000
08/01/2020 30,000
10/01/2020 75,000

What is the average capital balance of Charles? (2pts)

PERIOD TRANSACTION CAPITAL BAL. FRACTION AVE. CAPITAL

Jan 1 – Apr 30 150,000 inv. 150,000 4/12 50,000

Apr 30 – Aug 1 (60,000) with. 90,000 3/12 22,500

Aug 1 – Dec 31 30,000 inv. 120,000 5/12 50,000

TOTAL 122,500

What is the average capital balance of Philip? (2pts)

PERIOD TRANSACTION CAPITAL BAL. FRACTION AVE. CAPITAL

Jan 1 – May 31 180,000 inv. 180,000 5/12 75,000

May 31 – Oct 1 (90,000) with. 90,000 4/12 30,000

Oct 1 – Dec 31 75,000 inv. 165,000 3/12 41,250

TOTAL 146,250
16. The partnership earned a net profit of 672,000. The partnership agreement states that 5% interest
will be given to the partners using the ending capital balances; salaries of P30,000 and P45,000 to
Charles and Philip, respectively; bonus of 12% will be given to Philip based on profit after bonus; and any
remainder will be divided using their beginning capital balances. (3pts each)
CHARLES PHILIP TOTAL

Salaries 30,000 45,000 75,000

Interest (ending capital) 6,000 8,250 14,250

5% * 120K
5% * 165K

Bonus 72,000 72,000

P before B 112% 672,000
Bonus (12%) (72,0000)
P after B 100% 600,000

Remainder (beginning) 232,159.09 278,590.91 510,750

672-75-14.25-72=510.75

510.75 * 150/330
510.75 * 180/330

Share in Profit 268,159.09 403,840.91 672,000