Republic of the Philippines

BATANGAS STATE UNIVERSITY

ARASOF-Nasugbu
Nasugbu, Batangas

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS, AND

INTERNATIONAL HOSPITALITY MANAGEMENT

MIDTERM EXAMINATION
ACC 102 - Financial Accounting and Reporting 2

Name: ___________________________________ Date: ________________________

Course/Year/Section: _______________________ Instructor: ____________________

Test I. MULTIPLE CHOICE. Select the best response.

1-2. The following condensed balance sheet is presented at February 18, 2021 for the partnership of Dana
and Janis, who share profits and losses in the ratio of 60:40, respectfully. Cash – P150,000; Noncash Assets
– P300,000; Dana, Loan – P20,000; Accounts Payable – P120,000; Dana, Capital – P195,000; Janis, Capital
– P155,000. The non-cash assets realized P250,000 in actual liquidation.

1. How much would Dana receive if cash is distributed to the partners just before the start of actual
liquidation?
a. P5,000
b. P18,000
c. P30,000
d. P0

2. How much cash would Janis receive upon final liquidation, assuming no prior cash distribution had been
made to the partners?
a. P135,000
b. P145,000
c. P100,000
d. P0

3. 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 choices

4. A local partnership was considering the possibility of liquidation since one of the partners (Ding) was
insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis,
respectively. Ding, Capital – P60,000; Laurel, Capital – P67,000; Ezzard, Capital – P17,000; Tillman,
Capital – P96,000. Ding’s creditors filed a P25,000 claim against the partnership’s assets. At that time, the
partnership held assets reported at P360,000 and liabilities of P120,000. If the assets could be sold for
P228,000 what is the minimum amount that Ding’s creditors would have received?
a. P -0-
b. P2,500
c. P36,000
d. P38,250

5. A local partnership was in the process of liquidating and reported the following capital balances: Justice,
Capital (40% share of all profits and losses) – P23,000; Zobart, Capital (35%) – P22,000; Douglass, Capital
(25%) – (P14,000). Douglass indicated that the P14,000 deficit would be covered by a forthcoming
contribution. However, the two remaining partners asked to receive the P31,000 that was then available.
How much of this money should Justice receive?
a. P15,000
b. P15,467
c. P17,333
d. P15,533
6-7. Partners Dennis and Lily have decided to liquidate their business. The following information is
available: Cash – P100,000; Inventory – P200,000; Accounts Payable – P100,000; Dennis, Capital –
P120,000; Lily, Capital – P80,000. Dennis and Lily share profits and losses in a 3:2 ratio. During the first
month of liquidation, half the inventory is sold for P60,000, and P60,000 of the accounts payable is paid.
During the second month, the rest of the inventory is sold for P45,000, and the remaining accounts payable
are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the
second month.

6. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the first
month?
a. P64,000
b. P60,000
c. P24,000
d. P36,000

7. Assume instead that the remaining inventory was sold for P10,000 in the second month. What payments
will be made to Dennis and Lily at the end of the second month?
a. Dennis – P0; Lily – P0
b. Dennis – P10,000; Lily – P0
c. Dennis – P5,000; Lily – P5,000
d. Dennis – P6,000; Lily – P4,000

8. Statement 1 – If partners X, Y and Z agreed to divide profit in the ratio of 1:2:3, this indicated that partner
Z will always receive the largest share
Statement 2 – To distribute profit/loss equally, simply divide the amount of profit/loss by two
a. True; False
b. False; True
c. True; True
d. False; False

9. Statement 1 – In installment liquidation, cash priority program and schedule of safe payment would result
to different available cash to be distributed to partners.
Statement 2 – The partner with the highest capital balance will always have the highest share in the net
profit/loss of the partnership.
a. True; False
b. False; True
c. True; True
d. False; False

10. The following balance sheet was prepared for the X, Y and Z partnership on March 31, 2021: Cash –
P25,000; Other Assets – P180,000; Liabilities – P52,000; X, Capital (40%) – P40,000; Y, Capital (40%) –
P65,000; Z, Capital (20%) – P48,000. The partnership is being liquidated by the sale of assets in
installments. The first sale of non-cash assets having book value of P90,000 realizes P50,000. Assume that
each partner properly received some cash after the second sale of assets. The cash to be distributed amount
to P14,000 from the third sale of assets, and unsold assets with a P6,000 book value remain. How should
the P14,000 be distributed to X, Y and Z respectively?
a. P5,600; P6,500; P2,800
b. P5,000; P5,000; P4,000
c. P0; P11,200; P2,800
d. P5,600; P5,600; 2,800

11. On September 2, 2020, Nino, Olan, and Pete formed a partnership investing cash of P945,000,
P850,000, and P264,600. The partners share profits and losses in the ratio of 3:2:2 and on October 31, 2020
the firm has cash of P63,000, other assets of P2,992,500, and liabilities of P1,612,800. On this date they
decided to go out of busines and sell all the assets for P1,890,000. Pete has personal assets of P94,500 that
may, if necessary, be used to meet partnership obligations. Loss from operations was P617,400. How much
should be distributed to Olan upon liquidation of the partnership?
a. P128,520
b. P306,180
c. P0
d. P268,380

12. E, J, and N agree to liquidate their consulting practice as soon as possible after the close of business on
July 31, 2020. The trial balance on that date shows the following account balances: Cash – P130,000;
Accounts Receivable – P120,000; Furniture and fixtures – P350,000; Accounts Payable – P60,000; Loan
to E – P40,000; E, Capital – P200,000; J, Capital – P150,000; N, Capital P150,000. The partners share
profits and losses 50%, 20%, and 30% to E, J, and N, respectively, after N is allowed a monthly salary of
P40,000. August transactions and events are as follows: 1. The accounts payable are paid. 2. Accounts
receivable of P80,000 are collected in full. N accepts accounts receivable with a face value and fair value
of P30,000 in partial satisfaction of his capital balance. The remaining accounts receivable are written off
as uncollectible. 3. Furniture with a book value of P250,000 is sold for P150,000. 4. Furniture with a book
value of P40,000 and an agreed upon fair value of P10,000 is taken by J in partial settlement of his capital
balance. The remaining furniture and fixtures are donated to Goodwill Industries. 5. Liquidation expenses
of P30,000 are paid. 6. Available cash is distributed to partners on August 31. How much of J’s equity was
recovered from the partnership liquidation?
a. P25,000
b. P51,000
c. P94,000
d. none

13. The N, R, and W Partnership has not been successful. Hence, the partners have sadly concluded that
operations must be terminated and their partnership liquidated. Profits and losses are shared as follows: N,
45 percent; R, 35 percent; and W, 20 percent. As the accountant placed in charged of this partnership, you
have responsibility for the liquidation and distribution of assets. When you assume your responsibilities,
the partnership balance sheet is as follows: Cash – P180,000; Other assets – P540,000; Liabilities –
P120,000; Loan from N – P180,000; N, Capital – P60,000; R, Capital – P300,000; W, Capital – P60,000.
During the first two months of your duties, the following events occur: 1. Assets having a book value of
P400,000 are sold for P120,000 cash. 2. Previously unrecorded liabilities of P10,000 are recognized. 3.
Before distributing available cash balances to creditors and partners, you conclude that a cash reserve of
P10,000 should be set aside for future potential expenses. 4. Remaining cash balances are distributed to
creditors and partners. How much cash N should receive?
a. P42,000
b. P26,250
c. P31,875
d. P180,000

14. The following balances were taken from the partnership books of Des, Gra and Sya immediately before
liquidation: Cash – P20,000; Noncash assets – P90,000; Liabilities – P25,000; Des, Capital (30%) –
P25,000; Gra, Capital (30%) – P30,000; Sya, Capital (40%) – P30,000. Included in the amount of noncash
assets is an advance to Des worth P4,000 and also included in the amount of liabilities is an advance from
Gra worth P3,000. If Gra receives P15,000 in the first distribution, how much will Des receive?
a. P3,000
b. P5,000
c. P10,000
d. -0-

15. LAM, KO and TO share profits and losses as follows: LAM 20%, KO 30%, and TO 50%. The
partnership’s Statement of Financial Position as of December 31, 2020 is presented below: Cash –
P410,400; Noncash Assets – P2,028,600; Liabilities – P690,750; Loan from KO – P67,500; LAM, Capital
– P270,000; KO, Capital – P398,250; TO, Capital – P1,012,500. The partners decided to liquidate on
January 2, 2021. All partners are personally solvent except for LAM. If TO received P236,250 for her
interest, how much were the noncash assets sold for?
a. P476,100
b. P516,600
c. P1,512,00
d. P1,552,500

16. Because of their differences, Jessica, Matt and Danny decided to liquidate their partnership on
November 30, 2020. Jessica, Matt and Danny have a profit ratio of 4:3:3. The balance sheet of the
partnership on December 31, 2019 reported P25,000; P30,000; and P10,000 capital balances of the three
partners respectively. Cash on the most recent balance sheet date amount to 30% of total liabilities. Debt
ratio (Debt Ratio=Liabilities/Assets) as of December 31, 2019 amounted to 20%. During the eleven months
ended, revenues reported amounted to P44,000; expenses incurred totaled P22,000; net cash flows
amounted to P15,125 and liabilities increased by P28,750. If Jessica wants to receive P27,600, what should
be the selling price of the noncash assets of the company on November 30, 2020?
a. P91,875
b. P94,225
c. P127,500
d. P96,500

17-18. The balance sheet of partners DES, PA and SITO as of December 31, 2020 are shown below: Cash
– P50,000; Noncash assets – P250,000; Liabilities – P80,000; Des, Capital (50%) – P100,000; Pa, Capital
(25%) P75,000; Sito, Capital (25%) – P45,000. On January 2021, certain noncash assets were sold for a
certain amount. Liquidation expenses and liabilities of P4,000 and P25,000 were paid. Future liquidation
expenses of P5,000 are anticipated. Pa received P42,750 from the first distribution of available cash.

17. How much is the cash received from the realization?

a. P120,000
b. P140,000
c. P130,000
d. P75,000

18. Assuming that on February 2021, the remaining noncash assets were sold for P75,000 and liquidation
expenses of P5,000 are paid, how much is the total cash received by Des from the two distributions of cash?
a. P37,500
b. P73,000
c. P75,000
d. P74,000

19. Following is the balance sheet of the WXYZ Partnership at March 31, 2021, when the partnership is to
be liquidated: Cash – P6,000; Other Assets – P126,000; Liabilities – P12,400; W, Loan – P12,000; X, Loan
– P14,400; Z, Loan – P9,600; W, Capital (25%) – P16,200; X, Capital (25%) – P12,000; Y, Capital (25%)
– P37,700; Z, Capital (25%) – P17,700. During the month of April 2021, assets having book value of
P18,000 are sold at a loss of P2,400. Liquidation expenses of P600 are paid as well as P7,200 of the
liabilities. Of the liabilities shown in the balance sheet, P240 represents salary payable to Z and P160
represents salary payable to Y. On April 30, 2021, how much cash will be distributed to the partners?
a. W – 0; X – 0; Y – 0; Z – P9,000
b. W – P1,950; X – P1,950; Y – P1,950; Z – P1,950
c. W – 0; X – 0; Y – 0; Z – P1,950
d. W – 0; X – 0; Y – P9,000; Z – 0

20. The after-closing trial balances of the Brenda, Peter, and Timothy partnership at December 31, 2020
included the following accounts and balances: Cash – P120,000; Accounts receivable, net – P140,000; Loan
to Timothy – P20,000; Inventory – P200,000; Plant assets, net – P200,000; Trademarks – P20,000;
Accounts Payable – P150,000; Notes Payable – P100,000; Loan from Peter – P10,000; Brenda, Capital
(50%) – P170,000; Peter, Capital (30%) – P170,000; Timothy, Capital (20%) – P100,000. The partnership
is to be liquidated as soon as possible, and all available cash except for a P10,000 contingency balance is
to be distributed at the end of each month prior to the time that all assets are converted into cash. During
January 2021, P100,000 was collected from accounts receivable, inventory items with a book value of
P80,000 were sold for P100,000, and available cash was distributed. During February 2021, Brenda
received plant assets with a book value of P60,000 and a fair value of P50,000 in partial settlement of her
equity in the partnership. Also, during February, the remaining inventory items were sold for P60,000,
liquidation expenses of P2,000 were paid, and a liability of P8,000 was discovered. Cash was distributed
on February 28. During March 2021, plant assets were sold for P110,000. The remaining noncash assets
were written off, final liquidation expenses of P5,000 were paid, and cash was distributed. The dissolution
of the partnership was completed on March 31, 2021. The amount of cash to be received by Timothy for
the month of March:
a. P0
b. P23,000
c. P29,000
d. P60,000

21. If a partner is insolvent, his personal properties shall be distributed

a. to partnership creditors
b. to the partners by way of additional contributions when the assets of the partnership were insufficient to
settle all obligations
c. to partnership and separate creditors in the ratio of their loan exposures
d. to separate creditors

22. A liquidation differs from a dissolution in that in a liquidation

a. assets may be revalued
b. the business will not continue
c. there may be adjustment of partners’ capital accounts
d. gains and losses are distributed according to the partnership agreement

23. A partner’s loss absorption balance is calculated by

a. dividing the partner’s capital balance by his percentage interest in capital
b. multiplying distributable assets by the partner’s profit sharing percentage
c. dividing the partner’s total interests by his profit and loss sharing percentage
d. multiplying the partner’s total interest by his profit and loss sharing percentage

24. UU,VV and WW were partners with capital balances on January 2, 2021 of P700,000, P840,000
and 620,000 respectively. Their profit and loss ratio is 3:5:2. On August 1, 2021, UU retires form the
partnership. On the date of retirement, the partnership net loss is P480,000 and the partners agreed
that inventories are to be revalued at P370,000 from its original cost of P340,000. The partners
agreed further to pay UU P568,500 in settlement of his interest. Upon retirement of UU, which of the
following will result?
a, Bonus to VV is P2,500
b. Bonus from WW is P1,000
c. Goodwill of UU is P3,500
d. VVs capital after retirement of UU is P85,000 higher that WW

25. H and I are partners sharing profits and losses in the ratio of 6:4 respectively. On January 2, the
partners decided to admit J as a new partner upon his investment of P96,000. On this date, the
interest in the partnership of H and I are as follows: H, P138,000; I, P111,600. Assuming that the
new partner is given a ¼ interest in the firm. The partnership uses bonus method in admitting J into
the partnership. The admission of a new partner will result to which of the following:

a. total capitalization of partnership after admission of J is P345,600

b. Bonus from I is P3,840
c. Bonus to J is P9,600
d. bonus from H is P5,760

26. Among the various options available for determining the partners’ share of profit are the
following except:
a. capital contributions and service to the partnership
b. loans to the partnership
c. capital contributions
d. bonus given to managing partner/s

27. Partners B1 and B2 share income in a 2:1 ratio, respectively. Each partner receives an annual
salary allowance of P72,000. If the salaries are recorded in the accounts of the partnership as an
expense rather than treated as an allocation of profit, the total amount allocated to each partner for
salaries and profit would be
a. unchanged for both B1 and B2
b. less for both B1 and B2
c. more for B1 and less for B2
d. more for B2 and less for B1

28. LL, MM and PP are partners with capitals of P40,000; P25,000 and P15,000 respectively. The
partnership agreement provides that each partner shall be allowed 5% interest on his capital, that LL
shall be allowed an annual salary of P8,500, and that MM shall be entitled to a minimum of P14,000
per annum including amounts allowed as interest on capital and as share of profit. Profit after interest
and salary allowances is to be divided between LL, MM and PP as 5:3:2 respectively. What amount
must be earned by the partnership during 2021 before charges for interest or salary if LL is to receive
an aggregate of P20,000 to include interest, salary, and share of profit?
a. P38,000
b. P50,000
c. P38,550
d. P35,880

29. On March 31, 2021, Evan and Helen decide to combine their business and form a partnership.
The balance sheets of Evan and Helen on March 31, 2021 before adjustments show as follows:
They agreed to provide 3% for doubtful accounts of their accounts receivables and found Helen’s
furniture and fixture to be under depreciated by P900. If each partner’s share in equity is to be equal
to the net assets invested, the capital accounts of Evan and Helen would be?
a. P58,170 and P33,095 respectively
b. b. P58,320 and P32,495, respectively
c. P59,070 and P32,195 respectively
d. d. P104,820 and P50,195 respectively

30. On October 1, 2021, Pamu and Kevin formed a partnership and agreed to share profits and losses
in the ratio of 3:7, respectively. Balances of capital accounts should be in accordance with the profit
and loss percentage on the date of partnership formation. Pamu contributed a parcel of land that cost
her P200,000. Kevin contributed P300,000 cash. The land has a quoted price of P360,000 on October
1, 2021. What amount should be recorded in Pamu’s capital account upon formation of the
partnership assuming the use of bonus method?
a. P150,000
b. P198,000
c. P200,000
d. P360,000

31. MA, TA and BA formed a partnership on January 1, 2021. They had the following initial
investments: MA – P200,000, TA – P300,000 and BA- P450,000. The partnership agreement states
that profit and losses are to be shared equally by the partners after consideration is made for the
following:
a. salary allowance of P120,000 for MA, P96,000 for TA and P72,000 for BA
b. average partners’ capital balances during the year shall be allowed 10% interest.

Additional information:
a. on June 30, 2021, MA invested an additional P120,000
b. BA withdrew P140,000 from the partnership on September 30, 2021
c. share on the remaining partnership profit was P10,000 for each partner.
How much is the total partnership capital on December 31, 2021?
a. P950,000
b. P970,000
c. P1,345,500
d. P1,365,500

32. On May 1, 2021, the business accounts of TSISS and MISS appear below:

Tsiss and Miss agreed to form a partnership contributing their respective assets and equities subject
to the following adjustments:
a. Accounts Receivables of P20,000 in Tsiss’ books and P35,000 in Miss books are uncollectible
b. Inventories of P5,500 and P6,700 are worthless in Tsiss and Miss’ respective books
c. Other Assets of P2,000 and P3,600 in Tsiss and Miss’ respective books are to be written off
Assuming SANH offered to join for a 20% interest in the firm, how much cash should she
contribute?
a. P324,382
b. P330,870
c. P337,487
d. P344,237

33. CFOUR, desires to purchase a one-fourth capital and profit and loss interest in the partnership of
CONE, CTWO AND CTHREE. The three partners agree to sell CFOUR one-fourth of their
respective capital and profit and loss interest in exchange for a total payment of P200,000. The profit
and loss ratio and capital balances of partners are as follows:

CONE P400,000 60%

CTWO P200,000 30%
CTHREE P100,000 10%

If assets are to be revalued prior to the admission of CFOUR, what would be the capital balance of
CONE after admission of CFOUR?
a. P300,000
b. P345,000
c. P385,000
d. P460,000

34. Corazon invests P100,000 in a partnership for a one-third interest. Prior to Corazon’ admission,
the partnership had two partners with capital balances of P190,000 each. If no asset revaluation is
recognized prior to Corazon’s admission, what amount is credited to her capital account?
a. P135,000
b. P160,000
c. P170,000
d. P190,000

35. The following are the capital account balances and profit and loss ratio of the partners in
Motorola Company on December 31, 2021

Capital Account Profit and

Balances Loss Ratio
MM 120,000 25%
TT 160,000 50%
RR 400,000 25%

On January 1, 2021, LL is admitted to the partnership under the following agreement:

a. LL is to share 1/3 in the profits and loss while the other partners continue to participate in profits
and loss ratio in their original ratio
b. LL is to pay TT, P48,000 for a ¼ interest of the latter’s equity in the partnership net assets and is
to invest P280,000 cash in the partnership
c. the total capital after LL’s admission is to be P1,040,000, of which LL’s capital account is to show
P300,00.
The new profit and loss ratio of all partners after LL’s admission:
a. MM,25%; TT50%; RR, 25% and LL33.33%
b. MM,18.75%; TT,37.5%; RR, 18.75% and LL25%
c. MM,25%; TT, 25%; RR, 25% and LL25%
d. MM,16.67%; TT, 33.33%; RR, 16.67% and LL33.33%
36. MM, NN and OO are partners with Capital balances on December 31, 2021 of 300,000, 300,000
and 200,000 respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO
is to take certain equipment with second value of 50,000 and a note for the balance of OO’s interest.
The equipment are carried on the books at 65,000. Brand new equipment my costs 80,000. Compute
for (1) OO’s acquisition of the second hand equipment that will result in the reduction of capital; (2)
the value of the note that OO got from the partnership\s liquidation.
a. (1)15,000 each for MM and NN; (2) 150,000
b. (1)5,000 each for MM, NN and OO ; (2) 145,000
c. (1)5,000 each for MM, NN and OO ; (2) 195,000
d. (1) 7,500 each for Mm and NN ; (2) 145,000

37. The partnership agreement provides of Xx, YY and ZZ provides for the year end allocation of net
income in the following order:
• First, XX is to receive 10% of net income up to 200,000 and 20% over 200,000
• Second, YY and ZZ each are to receive 5% of the remaining income over 300,000
• The balance of income is to be allocated equally among the three partners.
The partnerships net income was 500,000 before any allocation to partners. What amount should be
allocated to XX?
a. 202,000
b. 216,000
c. 206,000
d. 220,000

38. JJ and KK are partners who share profits and losses in the ratio of 60%:40% respectively. JJ’s
salary is 60,000and 30,000 to KK. The partners are also paid interest on their average capital
balances. In 2021, JJ received 30,000 of interest and KK 12,000. The profit and loss allocation is
determined after deductions for salary and interest payments. If KK’s share in the residual income
(income after salaries and interest) was 60,000, what was the total partnership income?
a. 192,000
b. 345,000
c. 282,000
d. 387,000

39. AA, BB and Cc are partners with average capital balances during 2021 of 360,000, 180,000 and
120,000 respectively. Partners receive 10% interest on their average capital balances. After deducting
salaries of 90,000 to AA and 60,000 to CC the residual profit or loss is divided equally. In 2021, the
partnership sustained a 99,000 loss before interest and salaries to partners. By what amount should
AA’s capital account change?
a. 21,000 increase
b. 33,000 decrease
c. 105,000 decrease
d. 126,000 increase

40. AA and DD created a partnership to own and operate a health food store. The partnership
agreement provided that AA receive a salary of 10,000 and DD a salary of 5,000 to recognize they
relative time spent in operating the store. Remaining profits and losses were divided 60:40 to AA and
DD respectively. Income for 2020, the first year of operations, of 13,000 was allocated 8,800 to AA
and 4,200 to DD. On January 1, 2021, the partnership agreement was changed to reflect the fact that
DD could no longer devote any time to the store’s operations. The new agreement allows AA a
salary of 18,000 and the remaining profits and losses are divide equally. In 2021, an error was
discovered such that the 2020 reported income was understated by 4,000. The partnership income of
25,000 for 2021 included the 4,000 related to year 2020. In the reported net income of 25,000 for the
year 2021, AA and DD would have?
a. 21,900;3,100
b. 17.100;17.100
c. 0; 0
d. 12,500; 12,500

41. Merlin, a partner in the Camelot Partnership has 30% participation in the partnership profits and
losses. Merlin’s capital account has a net decrease of 1,200,000 during the calendar year 2020.
During 2020, Merlin withdrew 2,600,000 (charged against his capital account) and contributed
property valued at 500,000 to the partnership. What was the net income of the Camelot Partnership
for year 2020?
a. 3,000,000
b. 4,666,667
c. 7,000,000
d. 11,000,000

42. On January 1, 2021, A, B, C and D formed Bakya Trading Co., a partnership, with capital
contributions as follows: a, 50,000; B,25,000; C 25,000 and D 20,000. The partnership contract
provided that each partner shall receive a 5% interest on contributed capital, and that A and B shall
receive salaries of 5,000 and 3,000 respectively. The contract also provided that C shall receive a
minimum of 2,500 per annum and D a minimum of 6,000, which is inclusive of amounts representing
interest and share of remaining profits. The balance of the profits shall be distributed to A,B,C and D
in the ratio of 3;3;2;2. What amount must be earned by the partnership, before any charge for interest
and salaries so that A may receive an aggregate of 12,500 including interest, salary and share of
profits?
a. 16,667
b. 30,000
c. 30,667
d. 32,333

43. The FF and II partnership agreement provides for FF to receive a 20% bonus on profits before the
bonus. Remaining profits and losses are divided between FF and II in the ratio of 2:3 respectively.
Which partner has a greater advantage when the partnership has a profit? When it has a loss?
a. FF; II
b. FF; FF
c. II; FF
d. II; II

44. PP contributed 24,000 and CC contributed 48,000 to form a partnership and they agreed to share
profits in the ratio of their original capital contributions. During the first year of operations, they
made a profit of 16,290. PP withdrew 5,050 and CC 8,000. At the start of the following year, they
agreed to admit GG into the partnership. He was to receive a1/4 interest in the capital and profits
upon payment of 30,000 to PP and CC whose capital accounts were reduced by transfers to GG’s
capital account of amounts sufficient to bring them back to their original capital ratio. How should
the 30,000 paid by Gg be divided between PP and CC?
a. PP 9,825; CC 20,175
b. PP 15,000; CC 15,000
c. PP 10,000; CC 20,000
d. PP 9,300; 20,700

45. On December 1, 2021, DD and EE formed a partnership with each contributing the following
assets at fair market values:

DD EE
Cash P 9,000 P18,000
Machinery and Equipment 13,500
Land 90,000
Building 27,000
Office Furniture 13,500
The land and building are subject to a mortgage loan of P54,000 that the partnership will assume.
The partnership agreement provides that DD and EE share profits and losses, 40% and 60%
respectively and partners agreed to bring their capital balances in proportion to the profit and loss
ratio and using the capital balance of EE as the basis. The additional cash investment made by DD
should be:
a. P18,000
b. P85,000
c. P134,100
d. P166,250

46-47. JJ and KK are joining their respective separate business to form a partnership. Cash and non
cash assets are to be contributed for a total capital of P300,000. The non-cash assets to be contributed
and liabilities to be assumed are:
 JJ KK
Book Value Fair Value Book Value Fair Value
Accounts Receivable P22,500 P22,500
Inventories 22,500 33,750 P60,000 P67,500
Equipment 37,500 30,000 67,500 71,250
Accounts Payable 11,250 11,250 7,500 7,500
The partners’ capital accounts are to be equal after all contributions of assets and assumption of
liabilities
Determine:
46. The total assets of the partnership
a. P318,750 b. P300,000 c. P281,250 d. 225,000

47. The amount of cash that each partner must contribute

a. JJ – P75,000; KK – P18,750 b. JJ – P75,000; KK – P11,250

c. JJ – P161,250; KK – P157500 d. JJ – P127,500; KK – P11,250
48. PP and QQ are partners operating a chain of retail stores. The partnership agreement provides for
the following:

PP QQ
Salaries P10,000 P5,000
Interest on average capital balances 10% 10%
Remainder 20% of net income None
Before interest but
After bonus and
salaries
The income summary account for the year 2021 shows a credit balance of P51,000 before any
deductions. Average capital balances for PP and QQ are P50,000 and P75,000 respectively. The
share of PP and QQ in the P51,000 net income would be:
a. PP P24,062.50; QQ P26,937.50 b. PP P23,500; QQ P27,500
c. PP P26,541.50; QQ P24,458.50 d. PP P26,250; QQ P24,750

48. On a worksheet, the Income Statement debit column equals P798,000 and the credit column
equals P710,000. Which of the following statements is correct?
a. The company realized a net income of P88,000 and it must be added to the Income Statement
credit column and the Balance Sheet debit column to complete the worksheet.
b. The company incurred a net loss of P88,000 and it must be subtracted from the Income Statement
debit column and the Balance Sheet credit column to complete the worksheet.
c. The company incurred a net loss of P88,000 and it must be added to the Income Statement credit
column and the Balance Sheet debit column to complete the worksheet
d. The company realized a net income of P88,000 and it must be subtracted from the Income
Statement credit column and the Balance Sheet credit column to complete the worksheet.

49. The balance sheet as of September 30, 2021, for the partnership D,E and F shows the following
information: Assets P360,000; D Loan, P20,000 D, Capital P83,000; E, Capital P77,000; F, capital
P180,000. It was agreed among the partners that D retires from the partnership, and it was also
further agreed that the assets should be adjusted to their fair value of P345,000 as of September 30,
2021. Net loss prior to the retirement of D amount to P70,000. The partnership is to pay D P62,000
cash for D’s partnership interest, which would include the payment of his loan. No goodwill is to be
recorded. D, E and F shares profit 40%, 15% and 45% respectively. After D’s retirement, how much
would F’s capital balance be?
a. P66,000 b. P147,000 c. P136,500 d. P185,250

50. The partnership capital is 300,000 and its total liabilities are 100,000. if the assets of the
partnership are undervalued by 20% and the liabilities are overvalued by 10%, how much is the
correct amount of Partner B’s capital if his interest in the partnership is 40%
A. 200,000
B. 164,000
C. 160,000
D. 120,000

51. If the amount of liabilities is 165,000 and the percentage of owner’s claim in the total
partnership’s assets is 45%, the partnership total assets would be
A. 200,000
B. 300,000
C. 366,667
D. 255,750

52. If the partnership’s cash is 25,000, the net assets are 250,000 and the total claim of the outside
creditors is 200,000, the total amount of the noncash assets woud be
A. 525,000
B. 425,000
C. 325,000
D. 275,000

53. X and Y agreed form a partnership. X is to contribute cash of 135,000 and Y is to contribute his
equipment with book value of 200,000. It was agreed that the contribution of Y shall be recorded at
an amount equal to 55% claim in the partnership. The total assets of the partnership upon formation
is
A. 335,000
B. 300,000
C. 245,000
D. 135,000

54. X, Y and Z agreed to form a partnership with X contributing 50,000 for 2/3 interest in the
partnership and Y and Z sharing equally in the remaining required capitalization. The total assets of
the partnership upon formation is
A. 100,000
B. 150,000
C. 75,000
D. 225,000

55. Partners A and B will contribute cash and C will contribute an equipment acquired 2 years ago at
the cost of 100,000. the equipment is being depreciated on a straight line method for 5 years without
scrap value. The age of the equipment at the date of formation is one year and three months. At that
date, the fair value of the equipment is 110,000. The amount to be credited to C capital is
A. 25,000
B. 75,000
C. 100,000
D. 110,000

56. A and B will contribute 150,000 each and C will contribute 50,000 plus his skill. They agreed to
share profit at 2:2:1 ratio respectively. The correct amount of the total partnership capitalization
would be
A. 200,000
B. 375,000
C. 250,000
D. 350,000

57. Mighty Darrel and Super Zigg formed a partnership and agreed to have an equal interest in the
partnership’s assets. They agreed to make the following contributions : Darrel contributed 100,000
and Zigg contributed 84,000 in identifiable assets. Under the bonus approach, what is the amount of
bonus from Darrel to Zigg capital?
A. 46,000
B. 16,000
C. 8,000
D. 0

58. Asun and Rita agreed to convert the sole proprietorship of Rita into a partnership. Before the
agreed formation, the assets and liabilities of Rita’s sole proprietorship’s business are 300,000 and
100,000 respectively. They agreed to contribute the partnership's capital equally to share profit and
loss equally. If the assets of Rita’s sole proprietorship are valued at 200,000, how much should Rita
contribute as additional cash investment in the total agreed capitalization of 250,000?
A. 250,000
B. 100,000
C. 50,000
D. 25,000

59. Cion and Erro agreed to form a partnership with agreed capitalization of 300,000 with Erro
contributing 1/3 of the total agreed capitalization. How much should Cion contribute?
A. 200,000
B. 150,000
C. 100,000
D. 50,000

60. A is the owner of an existing single proprietorship with net assets of 50,000. they agreed to
record the assets and liabilities of A’s business at book value. The book value of A’s business
liability is 60,000. B and C will contribute equally in cash 60% of the total capitalization based on
the capital contribution of A. the capital contribution of B should be
A. 37,500
B. 75,000
C. 82,500
D. 165,000

61. Hagar is the owner of a sole proprietorship with net assets at book value of 100,000. Lot is also a
sole proprietor with net assets at book value of 200,000. the net assets of Hagar and Lot are to be
taken by the partnership at their respective book value. Gideon is to contribute cash equal to 1/2 of
the total agreed capitalization based on the contribution of Hagar and Lot. The amount of Gideon’s
cash contribution should be
A. 100,000
B. 150,000
C. 200,000
D. 300,000

Jenny, Mar and Rie formed a partnership by combining their separate businesses with the following
statements of financial position:

They also agreed that their respective capital balances should be equal in amount and profit and loss
should be divided equally. Any partner whose capital balance is not equal to that of the partner with
the highest capital balance after adjustments shall give additional cash contribution.
62. Which of the partners has the highest capital balance after adjustment and how much?
A. Rie, 130,000
B. Mar, 129,000
C. Jenny, 130,500
D. Any of the above

63. How much is the total additional cash contributions of the partners with the lower capital
balances?
A. 2,000
B. 2,500
C. 3,000
D. 4,500

64. How much is the total partnership capital

A. 387,000
B. 389,500
C. 390,000
D. 391,500

65. Ragasa and Mendoza are partners sharing profits in the ratio of 3:2 respectively.On January 1,
Ragasa and Mendoza decided to admit Gangoso as a new partner upon her investment of 8,000.On
this date their interests in the partnership are as follows: Ragasa 11,500, Mendoza, 9,300. Assuming
that the new partner is given 1/3 interest in the firm,with bonus being allowed to the new partner, the
new capital balances of Ragasa, Mendoza and Gangoso respectively would be
A. 10,540; 8,660 and 9,600
B. 11,500; 9,300 and 8,000
C. 11,520; 7,680 and 9,600
D. 12,480; 8,320 and 8,000

66. I. It is possible to invests assets into the partnership and be given zero capital credit.
II. Total contributed capital is the sum of the capital balances of the old partners and the actual
investment of the new partner. It should always equal the new partnership capital.
A. TRUE; TRUE
B. TRUE; FALSE
C. FALSE; TRUE
D. FALSE; FALSE

67. A partnership records a partner’s investment of assets in the business at

A. A value set by the partners
B. The market value of the assets invested
C. The partners book value of the assets invested
D. Any of the above.

68. I. A public instrument needs to be executed when immovable property or real rights are
contributed to the partnership.
II. There is no income tax imposed on partnerships.
A. TRUE; TRUE
B. TRUE; FALSE
C. FALSE; TRUE
D. FALSE; FALSE

69. I. A partnership agreement should include the procedure for ending the business.
II. An oral agreement is sufficient to effect partnership formation of a professional partnership.
A. TRUE; TRUE
B. TRUE; FALSE
C. FALSE; TRUE
D. FALSE; FALSE

70. Which of the following is not normally a part of the Articles of Partnership?
A. Kinds of partners
B. Contributions of partners
C. Profit and loss agreement
D. Kinds of creditors

71. Dar and Ling share in the partnership’s profit in the ratio of 2:1 respectively. Dar received
245,000 as his share. How much did Ling receive as his share?
A. 367,000
B. 245,000
C. 122,500
D. 122,000

72.Periodic withdrawals of partners are best viewed as

A. Distributions of partnership assets to the partners
B. Payment for partners personal services to the partnership
C. Expense of doing business
D. Taxable income to the partners.

73. Castillo, Labasan and Hollanes are partners with average capital balances during 2021 of
P472,500, P238,650 and P162,350 respectively. The partners receive 10% interest in their average
capital balances after deducting salaries of P122,325 to Castillo and P82,625 to Hollanes, the residual
profit or loss are divided equally. In 2021, the partnership had loss of P125,624 before interest and
salaries to partners. By what amount should Castillo’s and Hollanes capital account change -
increase(decrease)?
A. Castillo - 30,267; Hollanes (40,448)
B. Castillo - 29,476; Hollanes 17,536
C. Castillo - (40,844); Hollanes 31,235
D. Castillo - 28,358; Hollanes 32,458

74. Bacalso and tenajeros have respective partnership capital balances of 48,000 and 24,000 on Jan 1.
Bacalso withdrew 6,000 on May 1 and 6,000 on July 1. Tenejeros invested an additional 12,000 on
April 1 and withdrew 8,000 on Oct. 1. The average caital balances for Bacalso and Tenajeros for the
year are
A. 36,000; 28,000
B. 41,000; 31,000
C. 42,000; 26,000
D. 48,000; 24,000

75. The partnership agreement of Zuniga, Armenta & Galang provided for the year end allocation of
profit in the following order:

*First, Zubiga is to receive 10% of profit up to 200,000 and 20% over 200,000
*Second, Armenta and Galang each are to receive 5% of the remaining profit over 300,000
*The balance of profit is to be allocated equally among the three partners

The partnership’s 2021 profit was 500,000 before any allocations to partners. What amount should be
allocated to Zuniga?
A. 202,000
B. 216,000
C. 206,000
D. 220,000

76. I. Aside from his capital balance before retirement, a retiring partner’s capital interest should
include the net income during the period before dissolution, bonus(if any) and adjustment due to
asset revaluation.
II. Loans made by the partnership to a withdrawing partner reduce his interest in the partnership.
A. TRUE; TRUE
B. TRUE; FALSE
C. FALSE; TRUE
D. FALSE; FALSE

77. I. There is no partnership dissolution if an heir succeeded the original partner in order to continue
the same partnership business.
II. Liquidation is always preceded by dissolution.
A. TRUE; TRUE
B. TRUE; FALSE
C. FALSE; TRUE
D. FALSE; FALSE

Prepared by:

(signed)
Asst. Prof. ALVIN C. ANDULAN
Course Instructor / Professor
Date: ______________________
Reviewed by:

(signed)
Ms. CARLA M. SANDOVAL
OIC-Chair, BSA & BSMA
Date: ______________________

Approved by:

(signed)
Assoc. Prof. ERWIN A. CAPARAS
Dean, CABEIHM
Date: ______________________