F.L. VARGAS COLLEGE INC.

Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester

PRELIMINARY EXAMINATION
FINANCIAL ACCOUNTING AND REPORTING (PART 2)
Name:
Section:

MULTIPLE CHOICE TEST: Read each question carefully and choose ONE best answer.

1. It is an association of two or more persons who contribute money, property, or industry to

a common fund with the intention of dividing the profits among themselves.
a. Sole proprietorship
b. Corporation
c. Partnership
d. Partners

2. It is a type of partnership where each partner is personally liable to the partnership's

creditors if partnership assets are not sufficient to pay such creditors.
a. Limited Partnership
b. General Professional Partnership
c. General Partners
d. General Partnership

3. This type of partner cannot play a role in the partnership management.

a. General Partner
b. Limited Partner
c. Limited Partnership
d. General Partnership

e. Partnership is formed by persons

for the sole purpose of exercising
their profession, no part of the
income of which
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester

f.is derived from engaging in any

business.
g. Partnership is formed by persons
for the sole purpose of exercising
their profession, no part of the
income of which
h. is derived from engaging in any
business.
i.Partnership is formed by persons
for the sole purpose of exercising
their profession, no part of the
income of which
j.is derived from engaging in any
business.
4. Partnership is formed by persons for the sole purpose of exercising their profession, no
part of the income of which is derived from engaging in any business.
a. Joint venture
b. Trading partnership
c. Joint account
d. General professional partnership
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
5.
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
5. Statement 1: All partnerships are taxed in the same manner as corporation.
Statement 2: The income of a general commercial partnership is also subject Regular
Corporate Income Tax whichever is applicable.

a Statements 1 & 2 are false

b. Statement 1 is true but statement 2
is false
c. Statement 1 is false but statement 2
is true
d. Statement 1 and 2 are true
a. Statements 1 & 2 are False
b. Statement 1 is True but Statement 2 is False
c. Statement 1 is False but Statement 2 is True
d. Statement 1 and 2 are True

6. Statement 1: A CPA and a Dentist may form a GPP or an ordinary partnership.

Statement 2: Partnership and Corporation have separate juridical personalities from the
owners.
a. Statements 1 & 2 are False
b. Statement 1 is True but Statement 2 is False
c. Statement 1 is False but Statement 2 is True
d. Statement 1 and 2 are True

7. Which of the following partnership characteristics is an advantage?

a. Ease of formation
b. Taxed like a corporation
c. Unlimited liability
d. Limited life

8. A partner who contributes his work, labor or industry to the common fund of the
partnership is called
a. Limited partner
b. Capitalist partner
c. Industrial partner
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
d. Managing partner

9. Partnership capital balances include the cumulative effect of

a. Initial investment
b. Additional investment
c. Drawings
d. All of the above

10. When a partner invests assets other than cash into a partnership, these assets should be
listed on the statement of financial position at

11.Their carrying (book)

value
12.b. Their original cost
13.c. Their fair market
value
14.d. The value the
investing partner assigns
to them
a. Their carrying (book) value
b. Their original cost
c. Their fair market values
d. The value the investing partner assigns to them
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
11. Partner’s investment may include which of the following?
a. Cash
b. Non-cash assets
c. Non-cash assets with liabilities to be assumed
d. All of the above

12. A partner whose liability for partnership debts is limited to his capital contribution is
called
a. Industrial partner
b. General partner
c. Limited partner
d. Secret partner

13. Which of the following is not a characteristic of partnership?

a. Voluntary association
b. Mutual agency
c. Limited liability
d. Limited life

14. All of the following are true for both general and limited partnerships except
a. Both are easily dissolved
b. All partners are liable for all debts of the firms
c. Both must have at least one general partner
d. All partners have the right to participate in the profits of the business

15. A partnership agreement should include

a. Each partner’s duties
b. The purpose of the business
c. The method of allocating profits and losses
d. Any of the above

16. The partner’s capital account is credited in the following cases except when it involves
the recording of the
a. Additional investment
b. Original investment
c. Share in profit
d. Debit balance of the drawing account at the end of the period

17. Which of the following is a characteristic of most partnerships?

a. Unlimited life
b. Limited liability
c. Mutual contribution
d. Division of profits only
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
18. Partnership capital and drawing accounts are similar to the corporate
a. Paid-in capital, retained earnings, and dividend accounts.
b. Retained earnings account.
c. Paid-in capital and retained earnings accounts.
d. Preferred and common stock accounts.

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

20. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership’s formation:
Contributed by
Roberts Smith
Cash P 20,000 P 30,000
Inventory 15,000
Building 40,000
Furniture & Equipment 15,000

The building is subject to a mortgage of P 10,000, which the partnership has assumed.
The partnership agreement also specifies that profits and losses are to be distributed
evenly. What amounts should be recorded as capital for Roberts and Smith at the
formation of the partnership?

Roberts Smith
a. 35,000 85,000
b. 35,000 75,000
c. 55,000 55,000
d. 60,000 60,000
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
PROBLEM SOLVING: Read each problem carefully and provide your final answer only.

Problem 1: 10 points
The business assets of LL and MM appear below:
LL MM
Cash ₱11,000.00 ₱22,354.00
Accounts Receivable ₱234,536.00 ₱567,890.00
Inventories ₱120,035.00 ₱260,102.00
Land ₱603,000.00
Building ₱428,267.00
Furnitures and Fixtures ₱50,345.00 ₱34,789.00
Other assets ₱2,000.00 ₱3,600.00
Total ₱1,020,916.00 ₱1,317,002.00

Accounts payable ₱178,940.00 ₱243,650.00

Notes payable ₱200,000.00 ₱345,000.00
LL, Capital ₱641,976.00
MM, Capital   ₱728,352.00
Total ₱1,020,916.00 ₱1,317,002.00

LL and MM agreed to form a partnership by contributing their respective assets and equities
subject to the following adjustments:
a. Accounts receivable of P20,000 in LL’s books and P35,000 in MM’s are
uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in LL and MM’s respective books.
c. Other assets of P2,000 and P3,600 in LL’s and MM’s respective books are to be
written off.
Questions:
1. What is the capital account of each partner after the adjustments? (6 points)
2. How much total assets does the partnership have after formation? (4 points)
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester
Problem 2: 6 points
On March 1, 2021 II and JJ formed a partnership with each contributing the following
assets:

  II JJ
Cash ₱300,000.00 ₱700,000.00
Machinery and equipment ₱250,000.00 ₱750,000.00
Building ₱2,250,000.00
Furnitures and Fixtures ₱100,000.00

The building is subject to mortgage loan of P800,000, which is to be assumed by the

partnership. Partnership agreement provides that II and JJ share profits and losses 30%
and 70% respectively. On March 1, 2021 the balance in II and JJ capital account should
be?
Problem 3: 6 points
On December 1, 2021, EE and FF formed a partnership, agreeing to share for profits and losses
in the ratio of 2:3, respectively. EE invested a parcel of land that cost him P25,000. FF invested
P30,000 cash. The land was sold for P50,000 on the same date, three hours after formation of the
partnership. How much should be the capital balance of EE right after formation?
Problem 4: 13 points
A and B formed a partnership. The following are their contributions:

A B
Cash ₱500,000.00
Accounts Receivable ₱100,000.00
Building   ₱700,000.00
Total ₱600,000.00 ₱700,000.00

A, Capital ₱600,000.00
B, Capital ₱700,000.00

Additional information:
a. The accounts receivable includes a P20,000.00 account that is deemed uncollectible.
b. The building is under depreciated by P50,000.00.
c. The building has an unpaid mortgage P100,000.00, but this is not assumed by the partnership.
Partner B promised to pay for the mortgage himself.
 F.L. VARGAS COLLEGE INC.
Tuguegarao City

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION

A.Y. 2021 – 2022
Second Semester

Requirements:
a. Determine the correct valuations of the partners’ contributions in the partnership books of
accounts. (6 points)
b. How much total assets does the partnership have after formation? (4 points)
c. How much total liabilities does the partnership have after formation? (3 points)

---------- End of Examination ---------

Prepared by: Reviewed by:

Maria Theresa A. Manuel, CPA Dr. EDITHA M. MUHALLIN

Subject Instructor Program Coordinator/Dean

Approved by:

DENIZON P. DOMINGO
Vice President for Academic Affairs