Republic of the Philippines

City of Caloocan
St. Vincent de Ferrer College of Camaranin, Inc.
SVFC Compound, San Vicente de Ferrer Rd. Area D, Brgy. 179, Caloocan City

COURSE TITLE: Accounting for Special Transactions Professor: Orland L. Adrigado, CPA

MIDTERM EXAMINATION

The balance in a partner’s capital account was P20,000 on Jan. 1. On August 30, he invested an additional
P12,000 in the partnership. On December 1, withdrew 12,000.

1. Assuming that there were no other charges in his capital during the year, exclusive of income, the
amount of his average capital is:
a. P25,000
b. P24,000
c. P23,000
d. P20,000

Questions 2 - 4: On May 1, 2021, the business assets of John and Paul appear below:
John Paul
Cash 11,000 22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furnitures & Fixtures 50,345 34,789
Other assets 2,000 3,600
1,020,916 1,317,002
Accounts Payable 378,940 588,650
John and Paul agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
a. Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in John’s and Paul’s respective books.
c. Other assets of P2,000 & P3,600 in John’s & Paul’s respective books are to be written off.

2. The capital accounts of the partners after the adjustments will be:
a. John’s 614,476
Paul’s 683,052
b. John’s 615,942
Paul’s 717,894
c. John’s 640,000
Paul’s 712,345
d. John’s 640,000
Paul’s 717,894

3. How much assets does the partnership have:

a. P2,337,918
b. P2,237,918
c. P2,265,118
d. P2,365,218
4. Peter offered to join for a 20% interest in the firm. How much cash should he
contribute? a. P330,870
b. P337,487
c. P344,237
d. P324,382

On January 1, 2021, the business assets of Abner and Norman appear below:
Abner Norman
Cash 28,000 62,000
Accounts receivable 200,000 600,000
Inventories 120,000 200,000
Land 600,000
Building 500,000
Furnitures & Fixtures 50,000 35,000
Other assets 2,000 3,000
Accounts payable 180,000 250,000
Notes payable 200,000 350,000

Abner and Norman agreed to form a partnership contributing their respective assets and liabilities subject
to the following adjustments:
 Partners agreed that Accounts receivable will P180,000 in Abner’s books and P540,000 in Norman’s
books.
 Inventory of Abner has a selling price of P216,000 and P86,000 cost to sell while Norman’s book
includes 50,000 obsolete inventory
 Other assets of P2,000 and P3,000 in Abner’s and Norman’s respective books are to be written off.

5. The capital accounts of the partners after adjustments will be

a. Abner, P610,000; Norman, P797,000
b. Abner, P608,000; Norman, P747,000
c. Abner, P598,000; Norman, P687,000
d. Abner, P618,000; Norman, P737,000

The partnership agreement between Mac, Ken, and Tosh provide for the following profit sharing
arrangement: bonus of 20% on net income before bonus to Mac, interest of 15% on average capital
balances, remainder, equally. The average capital balances of Mac, Ken and Tosh are P3,000,000,
P6,000,000 and P9,000,000 respectively.

6. The respective shares of Ken and Tosh in the net income of P2,700,000 should be
a. P720,000 and P1,170,000
b. (P180,000) each
c. P810,000 and P 720,000
d. P900,000 and P1,350,000
On June 1, S and T pooled their assets to form a partnership, with the firm to take over their business
assets and assume the liabilities. Partners’ capitals are to be based on net assets transferred after the
following adjustments:
1. T’s inventory is to be increased by P3,000.
2. An allowance for doubtful accounts of P1,000 and P1,500 are to be set up on the books of S
and T, respectively.
3. Accounts payable of P4,000 is to be recognized on the books of S.
The individual trial balances on June 1, before adjustments follow:
S, Capital T, Capital
Assets 75,000 113,000
Liabilities 5,000 34,500
Capital 70,000 78,500

7. What is the capital balance of T after

adjustments? a. P85,500
b. P81,500
c. P80,000
d. P77,000

Under the partnership agreement, Mina is to receive a bonus of 20% of net income and remainder to be
distributed as follows: 35% each to Mina and Nina and 30% to Tina.

8. If the partnership’s net income is P3,180,000, Mina’s share is

a. P1,526,400
b. P1,325,000
c. P1,457,500
d. 795,000

M. Jordan, a partner in the partnership has a 30% share in the partnership profit and loss. His capital
account had a net decrease of P60,000 in 2021. In 2021, he withdrew P130,000 against his capital and
invested properties valued at P25,000 in the partnership.

9. The net income of the partnership in 2021 is:

a. P150,000
b. P233,333
c. P350,000
d. P550,000

Debbie, a senior partner in a law firm, has a 30% participation in the firm’s profit and losses. During 2021,
Debbie withdrew P130,000 against her capital but contributed property with a fair value of P25,000.
Debbie’s capital increased by P15,000 during 2021.

10. The net income of the partnership for 2021 is

a. P150,000
b. P400,000
c. P350,000
d. P550,000
E, F and G invest P40,000, P30,000 and P25,000 respectively, in a partnership on June 30, 2020. They
agree to divide net income or loss as follows:
1. Interest at 10% on beginning capital account balances
2. Salaries of P10,000, P8,000 and P6,000, respectively to E, F and G.
3. Remaining net income or loss divided equally.

11. If the net income for the year ended June 30, 2021 before interest and salary allowances to partners,
was P44,000, the amount of net income credited to E is:
a. P17,500
b. P16,000
c. P14,667
d. P14,500

On March 1, 2021, Candice and Norsen formed a partnership with each contributing the following assets:
Candice Noreen
Cash 60,000 140,000
Office Equipment 50,000 150,000
Building - 450,000
Furnitures & Fixtures 20,000 -
The building is subject to a mortgage loan of P180,000, which is to be assumed by the partnership. The
partnership agreement provides that Candice and Noreen share profits and losses at 30% and 70%
respectively. Assuming that the partners agreed to bring their respective capital in proportion to their
profit and loss ratios, and using Noreen capital as the base.

12. Compute (1) the capital account balance of Noreen on March 1, 2021 and (2) additional cash to be
invested by Candice.
a. (1) P560,000; (2) P430,000
b. (1) P560,000; (2) P110,000
c. (1) P614,000; (2) P430,000
d. (1) P614,000; (2) P110,000

Alessandra’s capital on January 1 was P40,000. She invested P6,000 on May 1, withdrew P2,400 on
August 1, and invested P3,600 on November 1.

13. Alessandra’s average capital was

a. P43,600
b. P44,200
c. P45,800
d. P48,400

14. Which of the following statements is FALSE?

a. The partnership contract can be oral or in writing
b. There is no limit as to the number of partners who can form a partnership.
c. A person can be a partner although he has no capital
d. All partners should share in the profits or losses.

15. Which of the following statements is TRUE?

a. Only individuals can form a partnership
b. A partnership cannot be formed if the purpose is to render religion services
c. Minors cannot enter into a partnership contract
d. All partnership contracts must be registered with the Securities and Exchange Commission.
16. Which of the following is not essential elements of a partnership?
a. The contract must be in writing
b. An arrangement to contribute, money, property or industry
c. An intention to divide profits
d. Established for lawful purposes.

17. Which of the following statements is/are TRUE?

Statement 1: A partner is considered an agent of the partnership
Statement 2: The partners are co-owners of the partnership assets
Statement 3: The life of the partnership is unlimited
Statement 4: Because a partnership has a separate personality from the partners, all the names of the
partners must be included in the partnership name.
a. Statement 1 and 3
b. Statement 1 and 2
c. Statement 3 and 4
d. Statement 2 and 3

18. An industrial partner contributes

a. His labor and skill only
b. His personal assets
c. His money, property and industry
d. His cash and industry

19. Which of the following statements is/are FALSE?

Statement 1: A partnership is easier to organize than a corporation.

Statement 2: A corporation is easier to dissolve than a partnership.
Statement 3: A partnership is less expensive to organize than a corporation.
Statement 4: A corporation has more legal requirements than a partnership
a. Statement 1
b. Statement 2
c. Statement 3
d. Statement 4

20. Choose the TRUE statement from among the following:

a. A commercial partnership is subject to income tax

b. A professional partnership is subject to income tax
c. in a limited partnership, all the partners are limited partners
d. In a general partnership, there must be at least one limited partner and the majority are
general partners.

21. Which of the following statements is NOT CORRECT?

a. A partnership at will is one whose term is fixed
b. De jure partnership is one, which has not complied with all the legal
requirements pertaining to it formation.
c. De facto partnership is one, which has complied with all the legal requirements
pertaining to it formation.
d. All of the above
22. A capitalist partner is one who contributes:
a. Only cash.
b. His services.
c. Money or property.
d. Money, property, or services.

23. Which of the following statements is TRUE?

a. An industrial partner does not share in the losses creditors are concerned.
b. An industrial partner is not liable for partnership debts as far as creditors are concerned.
c. An industrial partner cannot make any investment
d. An industrial partner is a co-owner of the partnership assets

24. Which of the following partners has (or have ) unlimited liability
a. General partner.
b. Limited partner.
c. Both.
d. Neither

25. As far as creditors are concerned, which of the following partners is/are liable for unpaid debts of
the partnership?
a. Industrial partner.
b. Nominal partner.
c. Silent partner.
d. All of the above

26. Which of the following partners does not or do not take active part in the management of the
partnership business?
a. Silent partner.
b. Dormant partner.
c. Nominal partner.
d. All of the above.

27. The following are the inherent rights of a partner, EXCEPT:

a. Right to share in the profits.
b. Right to participate in the management of the partnership.
c. Right to share in the partnership assets in the event of liquidation.
d. Right to demand salaries.

28. Which of the following statements is FALSE?

a. A partner who allows his name to be included in the partnership name is deemed to be a
general partner.
b. A silent partner is a general partner.
c. A nominal partner contributes only a nominal amount.
d. An industrial partner can also be a capitalist partner at the same time.
Item Nos. 29 and 30 are based on the following information:
Ricky and Nelson formed a partnership with the following contributions:
Carrying amount Market Value Agreed Value
Ricky:
Equipment P 25,000 P 24,000 P 20,000
Nelson:
Furniture & Fixtures 30,000 35,000 35,000
Machinery 200,000 190,000 200,000

In addition, the partners invested cash of P 50,000 and P 20,000 for Ricky and Nelson, respectively. The
machinery is subject to a mortgage of P 80,000.

29. How much is the total capital of the partnership assuming that the mortgage will be assumed by the
partnership?
a. P 245,000. c. P 325,000.
b. P 255,000. d. P 405,000.

30. If the mortgage will not be assumed by the partnership, how much higher is the capital of Nelson as
compared to Ricky?
a. P 105,000. c. P 185,000.
b. P 175,000. d. P 255,000.

Item No, 31 and 32 are based on the following information:

The balance sheet accounts of Jolina on December 31, 200A are shown below:
Cash P 30,000
Accounts Receivable 25,000
Inventory 45,000
Furniture 32,000
Accounts Payable 8,000

The following adjustments are to be made:

□ 3% impairment loss on accounts receivable should be provided;
□ The fair value of the furniture is P 27,000; and
□ P 5,000 of the inventory is obsolete but can still be sold for P 3,000.
Manny is to join Jolina and will invest P 20,000 cash in the new
partnership.

31. How much is the adjusted capital of Jolina?

a. P 115,250. c. P 124,000.
b. P 116,250. d. P 132,250.

32. How much are the total assets of the new partnership?
a. P 116,250. c. P 124,250.
b. P 124,000. d. P 144,250.
Item Nos. 33 and 34 are based on the following information:
Lima and Hong are planning to form a partnership. Lima will invest cash of P 20,000 for a 20% interest in
the new partnership. Hong will invest cash and his equipment with a fair market value of P 50,000. They
will share profits and losses equally.

33. How much cash should Hong invest?

a. P 30,000 c. P 60,000.
b. P 50,000 d. P 80,000.

34. How much is the total cash investment of the partners?

a. P 50,000 c. P 80,000
b. P 70,000 d. P 100,000

Philip and Morris decide to form a partnership. Philip will invest P 10,000 cash and his equipment costing
P 70,000 with a fair market value of P 50,000. Morris is to invest cash, which is equal to 70% of the total
capitalization of the partnership.

35. How much cash should Morris invest?

a. P 100,000. c. P 140,000.
b. P 120,000. d. P 200,000.

***The end***