Part Draft 1

221.
As a result of the retirement of a partner in an existing partnership, the capital balance of the remaining
partners increases. If the assets of the partnership before retirement are properly valued, which of the
following statements is true?
A. The retiring partner received less than his capital balance before retirement
B. There is partnership net loss prior to the retirement of the said partner
C. The remaining partner gives bonus to the retiring partner
D. There is impairment of existing assets recognized prior to retirement
(CPAR PREBOARD WEEK, 2017)
93. He refers to a partner who contributed not only money and property but also industry to the newly
formed partnership.
A. Industrial partner
B. Nominal partner
C. Capitalist-industrial partner
D. Capitalist partner
CPAR 2017 Pre-Board
94. It refers to a type of partnership wherein all partners are liable to the creditors pro-rata up to the extent
of personal or separate assets after the partnership’s assets are exhausted.
A. General partnership
B. Partnership by estoppel
C. Limited partnership
D. Particular partnership
CPAR 2017 Pre-Board
95. Which of the following statements concerning the formation of partnership business is correct?
A. Philippine Financial Reporting Standards (PFRS) allows recognition of goodwill arising from the
formation of partnership.
B. The juridical personality of the partnership arises from the issuance of certification of registration.
C. The parties may become partners only upon contribution of money or property but not of industry or
service.
D. The capital to be credited to each partner upon formation may not be the amount actually
contributed by each partner.
CPAR 2017 Pre-Board
96. The partners, C and D, share profits 3:2. However, C is to receive a yearly bonus of 20% of the profits, in
addition to his profit share. The partnership made a net income for the year of P960,000 before the
bonus. Assuming C’s bonus is computed on profit after deducting said bonus, how much profit share will
D receive?
A. P307,200
B. P320,000
C. P640,000
D. P160,000
CPAR 2017 Pre-Board
97. A, B, and C are partners and share profits and losses as follows: Salaries of P40,000 to A; P30,000 to B;
and none to C. If net income exceeds salaries, then a bonus is allocated to A. The bonus is 5 percent of
net income after deducting salaries and the bonus.
Residual profits or residual losses are allocated 10 percent to A, 20 percent to B, and 70 percent to C. If
net income before salaries and bonus is P140,000, how much is the share of A?
A. P50,150
B. P43,333
C. P46,667
D. P50,000
CPAR 2017 Pre-Board
98. Carson and Lamb establish a partnership to operate and used-furniture business under the name of C & L
Furniture. Carson contributes furniture that cost P60,000 and has a fair value of P90,000. Lamb
contributes P30,000 cash and delivery equipment that cost P40,000 and has a fair value of P30,000. The
partners agree to share profits and losses 60% to Carson and 40% to Lamb. Calculate the peso amount of
inequality that will result if the initial noncash contributions of the partners are recorded at cost rather
than fair market value.
A. P30,000
B. P10,000
C. P20,000
D. P18,000
CPAR 2017 Pre-Board
Items 99 and 100 are based on the following:

Lucy and Annie were partner sharing profits and losses equally. Ochie was admitted as a partner by
contributing cash of P60,000 for one-third interest in the firm. They agreed to set the total capital at
P210,000 after Ochie’s admission. Prior to Ochie’s admission, the old partner’s capital accounts were
Lucy, P48,000, and Annie, P96,000.
99. The capital balance of Annie after Ochie’s admission was
A. P92,667
B. P94,000
C. P91,000
D. P96,000
100. Assuming that Ochie will share one-fourth interest on the partnership assets the capital balance of
Annie after Ochie’s admission is
A. P96,000
B. 99,750
C. P99,000
D. P102,750
CPAR 2017 Pre-Board
129. If a partnership has only non-cash assets, all liabilities have been properly disbursed, and no additional
liquidation expenses are expected, the maximum potential loss to the partnership in the liquidation
process is:
A. The fair market value of the non-cash assets
B. The book value of the non-cash assets
C. The estimated proceeds from the sale of the assets less the book value of the non-cash assets.
D. None of the above.
(RESA Pre-Board July 2017)
130. In partnership,
A. Management consists of the board of directors
B. Profits are always divided equally among partners
C. Dissolution results when a partner leaves the partnership
D. No partner is liable for more than a proportion of the company’s debt
(RESA Pre-Board April 2016)
131. Mr. MAC is admitted into the partnership of Do and Nald by investing cash equivalent to ¼ of their
capital. Which of the following is true after the admission of Mr. MAC?
A. Assets of the partnership will increase
B. Total partner’s equity remain the same
C. Do and Nald capital decreased by ¼.
D. Assets of the partnership will remain the same
132. Under the bonus method, when a new partner is admitted to the partnership, the total capital of the
new partnership is equal to:
A. The book value of the previous partnership plus the fair market value of the consideration paid to the
existing partnership by the incoming partner.
B. The book value of the previous partnership plus any necessary asset write-ups from book value to
market value plus the fair market value of the consideration paid to the existing partnership by the
incoming partner.
C. The book value of the previous partnership minus any asset write downs from book to market value
plus the fair market value of the consideration paid to the existing partnership by the incoming
partner.
D. The fair market value of the new partnership as implied by the value of the incoming partner’s
consideration in exchange for an ownership percentage in the new partnership.
133. Which of the following statements is correct regarding a partner’s debit capital balances?
A. The partner should make contributions to reduce the debit balance to whatever extent possible.
B. If contributions are not possible, the other partners with credit capital balances will be allocated a
portions of the debit balance based on their proportionate profit-and-loss sharing percentages.
C. Partners who absorb another’s debit capital balance have a legal claim against the deficient partner.
D. All of these statements are correct.
134. Following is the balance sheet of the ABCD Partnership at March 31, 2018, when the partnership is to
be liquidated:
Cash P 6, 000 Liabilities P 12, 400
Other Assets 126, 000 A, Loan 12, 000
B, Loan 14, 400
D, Loan 9, 600
A, Capital – 25% 16, 200
B, Capital – 25% 12, 000
C, Capital – 25% 37, 700
D, Capital – 25% 17, 700
During the month of April 2018, assets having a book value of P 18, 000 are sold at a loss of P 2, 400.
Liquidation expenses of P 600 are paid as well as P 7, 200 of the liabilities. Of the liabilities shown in the
balance sheet, P 240 represents salary payable to D and P 160 represents salary payable to C.
On April 30, 2018 cash to be distributed to A, B, C and D as follows:
A B C D
A. P0 P0 P0 P 9, 000
B. P 1, 950 P 1, 950 P 1, 950 P 1, 950
C. P0 P0 P0 P 1, 950
D. P0 P0 P 9, 000 P0
135. Cheryl is the manager of a local store. She is also a partner in the company and she receives a bonus as
part of the profit and loss allocation. Cheryl’s bonus is based on the increase in revenues recorded during
the period. The bonus arrangement is that Cheryl receives 1 percent of net income for every full
percentage point growth for revenues in excess of a 5 percent revenue growth. During the most recent
period, revenues grew from P500, 000 to P540, 000 and net income grew from P 98, 000 to P 120, 000.
How much bonus does Cheryl receive for this period?
A. P 1, 100
B. P 3, 600
C. P 2, 000
D. P 6, 000
Use the following information for questions 8 and 9:

Cleary, Wasser, and Nolan formed a partnership on January 1, 20x4, with investments of P 100, 000, P
150, 000, and P 200, 000, respectively. For division of income, they agreed to (1) interest of 10% of the
beginning capital balance each year, (2) annual compensation of P 10, 000 to Wasser and (3) sharing the
remainder of the income or loss in a ratio of 20% for Cleary and 40% each for Wasser and Nolan. Net
income was P 150, 000 in 20x4 and P 180, 000 in 20x5. Each partner withdrew P 1, 000 for personal use
every month during 20x4 and 20x5.
136. What was Wasser’s share of income for 20x4?

A. P 63, 000
B. P 53, 000
C. P 58, 000
D. P 29, 000
E. P 51, 000
137. What was Wasser’s capital balance at the end of 20x5?

A. P 201, 000
B. P 263, 520
C. P 264, 540
D. P 304, 040
E. P 313, 780
138. XX, YY, and ZZ, a partnership formed on January 1, 2018 had the following initial investment:
XX ………………………………………P 170, 000
YY ………………………………………. 255, 000
ZZ ………………………………………. 382, 500
The partnership agreement states that the profits and losses are to be shared equally by the partners
after consideration is made for the following:
- Salaries allowed to partners: P102, 000 for XX, P81, 600 for YY, and P61, 200 for ZZ.
- Average partners’ capital balances during the year shall be allowed 10%.
Additional information:
- On June 30, 2018, XX invested an additional P102, 000.
- ZZ withdrew P119, 000 from the partnership on September 30, 2018.
- Share the remaining partnership profit was P 8, 500 for each partner.
The total partnership capital on December 31, 2018 was:

A. P 688, 500
B. P 1, 141, 550
C. P 816, 000
D. d. P 1, 143, 675
139. At the time of partnership liquidation, which credits shall be settled first?
A. Those amount owing to third persons.
B. Those amount owing to partners other than capital contribution and share in profit.
C. Those amount owing to partners with respect to capital contribution.
D. Those amount owing to partners with respect to share in profit.
(CPAR Reviewer, 2017)
140. How should the net profit or net loss of the partnership be divided among the
partners, whether capitalist or industrial?
A. In accordance with their capital contribution ratio.
B. In accordance with just and equitable sharing taking into account the circumstances of the
Partnership.
C. Equally
D. In accordance with the partnership agreement.
141. At the date of partnership formation of a partnership, the amount credited to A’s capital is less than the
fair value of the property contributed. Which is the most valid reason?
A. The property contributed by A is impaired.
B. The property contributed by A has been subjected to positive asset revaluation.
C. Bonus has been given by partner A to the other partners.
D. Goodwill arising from partnership formation has been recognized.
142. When a new partner is admitted to an existing partnership through the purchase of a portion of existing
interest of an incumbent partner, which statement is correct?
A. The total capital of the old and new partnership will be the same.
B. The partnership will recognize gain or loss on the difference between the amount paid and capital
transferred.
C. Goodwill may be recognized by virtue of the admission.
D. There will be increase in the total assets of the partnership equivalent to the amount paid by the
newly admitted partner.
143. At the time of retirement, a retiring partner receives more than the amount of his capital contribution
while the remaining partners capital increase after the retirement.
Which of the following is most valid reason?
A. Goodwill during retirement is recognized.
B. Asset revaluation is recognized.
C. Bonus is given by retiring partner to remaining partners.
D. Bonus is given by the remaining partners to retiring partner.
144. On January 1, 2017, Toni, Abbie and JM entered into articles of co-partnership for the operation of TAJ
computer shop. Toni contributed investment property with assessed value of P1,700,000 subject to
mortgage payable of P500,000 to be assumed by the partnership. Abbie contributed computer
equipment with cost of P600,000 with accumulated depreciation of P200,000. The fair market value of
the computer equipment is P300,000.
On January 2, 2017, the partnership was able to sell the investment property for P2,000,000. How much
cash shall be contributed by JM if the articles of co-partnership provide that Toni will have 60% interest
in the partnership?
A. 500,000
B. 700,000
C. 800,000
D. 600,000
145. On January 1, 2017, Yazzi, Angel and Nadine organized YAN partnership by investing P5M, 2M and P3M
for capital interest ratio of 4:5:1 respectively. Nadine has been appointed as managing partner. During
year 2017, YAN partnership reported net income of P3,000,000. Their profit/loss distribution and
drawing agreement are presented below:
• 20% interest on beginning capital
• P10,000, P20,000 and P50,000 monthly salary, respectively
• 25% bonus of net income after interest and salary to managing partner
• The remainder will be divided equally among the partners.
• The partners must withdraw at the end of the year 50% of their share in net income for the period.
What is the capital balance of Nadine on December 31, 2017?
A. 1,410,000
B. 3,410,000
C. 1,610,000
D. 3,610,000
146. On December 31, 2017, the capital balance of partners Cristy, Paula and Ara of CPA Partnership are
P1M, P3M and P6M, respectively with profit or loss agreement ratio of 4:1:5. On January 1, 2018, Cristy
decided to retire and received P400,000 from the partnership.
If the assets of the partnership are not properly valued at the time of retirement, how much is the
capital balance of Paula after the retirement of Cristy?
A. 2,900,000
B. 2,850,000
C. 3,100,000
D. 3,150,000
159. Which of the following transactions will not affect the total equity of the partnership?
A. Recognition of impairment loss in case of admission of a new partner
B. Withdrawal of a partner
C. Admission of a new partner by purchase of existing partner’s interest below its book value
D. Retirement of an existing partner with payment of above the book value of such interest
(CPAR Final Pre-board Examination May 2017)
160. A, B, and C are partners with average capital balances during 2017 of P472,500, P238,650 and
P162,350; respectively. The partners receive 10% interest on their average capital balances; after
deducting salaries of P122,325 to A and P82,625 to C, the residual profit or loss is divided equally.
In 2017, the partnership had net loss of P125,624 before interest and salaries to partners.
What amount should A and C capital change respectively?
A. P40,844 decrease and P31,237 decrease
B. P30,267 increase and P40,448 decrease
C. P29,476 increase and P17,536 increase
D. P28,358 increase and P32,458 increase
161. A partner was admitted in an existing partnership through investment of cash equivalent to ¼ of the
new capitalization. If the capital balance of the old partners increases, what is the most valid reason
under Philippine GAAP?
A. Asset revaluation of existing partnership’s assets
B. Impairment loss of existing partnership’s assets
C. Recognition of goodwill of existing partnership
D. Receipt of bonus from the new partner
162. Which of the following statements concerning the formation of partnership business is correct?
A. PFRS allows recognition of goodwill arising from the formation of partnership
B. The juridical personality of the partnership arises from the issuance of certification of registration
C. The parties may become partners only upon contribution of money or property but not of industry or
service
D. The capital to be credited to each partner upon formation may not be the amount actually
contributed by each partner
163. Regina, Jessica and Nataly entered into a contract of partnership with a total capital contribution of
P5,000. The parties failed to register its articles of co-partnership with the Securities and Exchange
Commission. Which of the following statements is correct?
A. The contract of partnership is void because the law provides that when the capital contribution is at
least P3,000 it must be registered with Securities and Exchange Commission
B. The contract of partnership will bind third persons
C. The contract of partnership remains to be valid
D. The partnership does not obtain juridical personality for failure to register with Securities and
Exchange Commission.
164. In the absence of agreement as to distribution of profit, how shall the partnership profit be distributed
to the partners?
A. The industrial partner shall receive a share equivalent to the least share of a capitalist partner while
the capitalist partners shall share based on capital contribution ratio.
B. The industrial partner shall receive a just and equitable share and the remainder shall be
distributed to the capitalist partners on the basis of capital contribution ratio
C. The profit shall be distributed on the basis of loss contribution ratio which may have been agreed
upon by the partners
D. The profit shall be distributed equally to all partners including the industrial partner
165. On July 1, 2016, Anne, Bianca and Carla formed a business partnership to be operated as an advertising
agency. Anne contributed P10M cash while Bianca shall have a capital credit of P6M upon receipt of
bonus of P1M from Anne based on the provision in Articles of Co-Partnership. The terms of the
agreement provide that Anne and Bianca shall have a combined 40% capital interest in the newly formed
partnership. What is the capital contribution made by Carla to the partnership?
A. P24,000,000
B. P22,500,000
C. P25,000,000
D. P32,000,000
166. On January 1, 2017, Angel, Bea and Colleen formed ABC & Co., a general professional partnership for
the exercise of their common profession. Angel contributed a building with a cost of P5M and
accumulated depreciation of P4M. Based on the city assessor’s records, the building has an assessed
value of P2M. The building has an annotated mortgage payable amount to P500,000 to be assumed by
the partnership. On the other hand, Bea contributed 10,000 shares of stocks with par value of
P200/share and prevailing quoted price of P300/share. On January 2, 2017, the building contributed by
Angel was sold for P5.5M. If Colleen wants to have 20% capital interest in the newly formed partnership,
how much cash shall be contributed by her?
A. P875,000
B. P1,125,000
C. P2,125,000
D. P2,000,000
167. On January 1, 2014, AB and QR agreed to form a partnership. The following are their assets and
liabilities:
Accounts AB QR
Cash 136,000 76,000
Accounts Receivable 88,000 48,000
Inventories 304,000 364,000
Machinery 480,000 440,000
Accounts Payable 216,000 144,000
Notes Payable 140,000 60,000
AB decided to pay off his notes payable from his personal assets. It was also agreed that QR inventories
were overstated by P24,000 and AB machinery was over depreciated by P20,000. QR is to
invest/withdraw cash in order to receive a capital credit that is 20% more than AB’s total net investment
in the partnership.
How much cash will be presented in the partnership’s statement of financial position?
A. 486,400
B. 546,300
C. 250,400
D. 640,300
168. On December 1, 2014, MG and AN are combining their separate businesses to form a partnership. Cash
and noncash assets are to be contributed. The noncash assets to be contributed and the liabilities to be
assumed are as follows:
MG AN
Book value Fair value Book value Fair value
Accounts Receivable 250,000 262,500 200,000 195,000
Inventory 400,000 450,000 200,000 207,500
PPE 1,000,000 912,500 862,500 822,500
Accounts Payable 150,000 150,000 112,500 112,500
MG and AN are to invest equal amount of cash such that the contribution of MG would be 10% more
than the investment of AN. What is the amount of cash presented on the partnership’s statement of
Financial Position on December 1, 2014?
A. 5,025,000
B. 5,500,000
C. 5,750,000
D. 4,950,000
198. AK and BK decided to form a partnership on October 1, 2014. Their Statement of Financial Position on
this date were:
AK Bk
Cash 65,625.00 164,062.50
Accounts Receivable 1,487,500.00 896,875.00
Merchandise Inventory 875,000.00 885,937.50
Equipment 656,250.00 1,268,750.00
Total 3,084,375.00 3,215,625.00
Accounts Payable 459,375.00 1,159,375.00
AK, Capital 2,625,000.00
BK, Capital 2,056,250.00
Total 3,084,375.00 3,215,625.00
They agreed the following adjustments shall be made:

• Equipment of AK is underdepreciated by P87,500 and that BK is overdepreciated by P131,250.
• Allowance for doubtful accounts is to be set up amounting to P297,500 for AK and P196,875 for BK.
• Inventories of P21,875 and P15,312.50 are worthless in the books of AK and BK respectively.
• The partnership agreement provides for a profit and loss ratio of 70% to AK and 30% to BK.
Assuming the use of transfer of capital method, how much is the agreed capital of AK to bring the capital
balances proportionate to their profit and loss ratio.
On January 1, 2014, AB and QR agreed to form a partnership. The following are their assets and
liabilities:
Accounts AB QR
Cash 136,000 76,000
Accounts Receivable 88,000 48,000
Inventories 304,000 364,000
Machinery 480,000 440,000
Accounts Payable 216,000 144,000
Notes Payable 140,000 60,000
AB decided to pay off his notes payable from his personal assets. It was also agreed that QR inventories
were overstated by P24,000 and AB machinery was over depreciated by P20,000. QR is to
invest/withdraw cash in order to receive a capital credit that is 20% more than AB’s total net investment
in the partnership.
How much cash will be presented in the partnership’s statement of financial position?
A. 2,935,406.25
B. 2,218,125.00
C. 1,975,312.50
D. 1,258,031.25
CPAR Pre-Boards October 2017
199. On December 1, 2014, MV and CD agreed to invest equal amounts and share profits equally to form a
partnership. MV invested P3,120,000 cash and a piece of equipment. CD invested some assets which are
shown on the next page:
Book value
Accounts Receivable 400,000
Inventory 1,120,000
Machineries, net 2,240,000
Intangibles, net 920,000
The assets invested by CD are not properly valued, P32,000 of the accounts receivable are proven
uncollectible. Inventories are to be written down to P1,040,000. Included in the machineries is an
obsolete apparatus acquired for P384,000 with an accumulated depreciation balance of P336,000. Part
of the intangibles is a patent with a carrying value of P56,000 which was sued upon by a competitor. CD
unsuccessfully defended the case and the final decision of the court was released on November 29,
2014.
A. 274,000
B. 212,000
C. 486,000
D. 374,000
200. On December 1, 2014, MG and AN are combining their separate businesses to form a partnership. Cash
and noncash assets are to be contributed. The noncash assets to be contributed and the liabilities to be
assumed are as follows:
MG AN
Book value Fair value Book value Fair value
Accounts Receivable 250,000 262,500 200,000 195,000
Inventory 400,000 450,000 200,000 207,500
PPE 1,000,000 912,500 862,500 822,500
Accounts Payable 150,000 150,000 112,500 112,500
MG and AN are to invest equal amount of cash such that the contribution of MG would be 10%
more than the investment of AN.
What is the amount of cash presented on the partnership’s statement of Financial Position on
December 1, 2014?
A. 1,344,000
B. 1,244,000
C. 3,120,000
D. 2,180,000
201. CC Partnership began operations on June 1, 2014. On that date, CY and CR have capital credits of
P175,000 and P240,000, respectively. The partnership has the following profit-sharing plan:
a.) 10% interest on partners’ capital balances at the end of the year
b.) P60,000 and P75,000 annual salaries for CY and CR, respectively.
c.) Remaining profit will be divided to CY and CR on a 3:2 ratio, respectively.
During the year, CY invested P150,000 worth of merchandise and withdrew P40,000 cash, while CR
invested P120,000 cash. The partnership earned a profit of P266,375 during the year.
How much is CY’s capital balance at the end of 2014?
A. 5,025,000
B. 2,512,000
C. 3,215,000
D. 1,223,750
202. CC Partnership began operations on June 1, 2014. On that date, CY and CR have capital credits of
P175,000 and P240,000, respectively. The partnership has the following profit-sharing plan:
a) 10% interest on partners’ capital balances at the end of the year
b) P60,000 and P75,000 annual salaries for CY and CR, respectively.
c) Remaining profit will be divided to CY and CR on a 3:2 ratio, respectively.
During the year, CY invested P150,000 worth of merchandise and withdrew P40,000 cash, while CR
invested P120,000 cash. The partnership earned a profit of P266,375 during the year.
How much is CY’s capital balance at the end of 2014?
A. 266,375
B. 426,625
C. 285,000
D. 150,000
203. Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the
partnership. The accountant for the partnership believed that the dissolved partnership and the newly
formed partnership were two separate entities. What method would the accountant have used for
recording the admission of Quincy to the partnership?
A) the bonus method.
B) the equity method.
C) the goodwill method.
D) the proportionate method.
E) the cost method.
204. When the hybrid method is used to record the withdrawal of a partner, the partnership A) revalues
assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B) revalues liabilities but not assets, and no goodwill is recorded.
C) can recognize goodwill but does not revalue assets and liabilities.
D) revalues assets but not liabilities, and records goodwill to the continuing partner but not to the
withdrawing partner.
E) revalues assets and liabilities but does not record goodwill.
205. The disadvantages of the partnership form of business organization, compared to corporations, include
A) the legal requirements for formation.
B) unlimited liability for the partners.
C) the requirement for the partnership to pay income taxes.
D) the extent of governmental regulation.
E) the complexity of operations.
206. The advantages of the partnership form of business organization, compared to corporations, include
A) single taxation.
B) ease of raising capital.
C) mutual agency.
D) Limited liability.
E) difficulty of formation.
207. The dissolution of a partnership occurs

A) only when the partnership sells its assets and permanently closes its books.
B) only when a partner leaves the partnership.
C) at the end of each year, when income is allocated to the partners.
D) only when a new partner is admitted to the partnership.
E) when there is any change in the individuals who make up the partnership.
For numbers 3-4, refer to the problem below:

The following condensed balance sheet is presented at February 18, 2018 for the partnership of Dana
and Janis, who share profits and losses in ratio of 60:40, respectfully.
Cash P150,000 Accounts payable P120,000
Non-cash assets 300,000 Dana, Capital 195,000
Dana, Loan 20,000 Janis, Capital 155,000
The non-cash assets realized P250,000 in actual liquidation
3. How much would Dana receive if cash is distributed to the partners just before the start of actual
liquidation?
A. P 5,000
B. P 18,000
C. P 30,000
D. P 0
4. How much cash would Janis receive upon final liquidation, assuming no prior cash distribution had been
made to the partners.
A. P 135,000
B. P 145,000
C. P 100,000
D. P 0
(PRTC, May 2018)

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221.

Items 99 and 100 are based on the following:

Use the following information for questions 8 and 9:

136. What was Wasser’s share of income for 20x4?

137. What was Wasser’s capital balance at the end of 20x5?

The total partnership capital on December 31, 2018 was:

They agreed the following adjustments shall be made:

207. The dissolution of a partnership occurs

For numbers 3-4, refer to the problem below:

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