Professional Documents
Culture Documents
a. Gwen and Peter is deciding to form a partnership. Gwen will invest P50,000 for a
40% interest in the partnership. Peter will invest cash and his equipment with a
book value of P45,000 and market value of P35,000. How much cash should
Peter invest?
➢ P40,000
b. Statement I: Bonus to old partners is given by the new partner.
Statement II: A bonus given to the old partners by a new partner decreases the
capital account balances of the old partners.
➢ Statement I is correct; Statement II is incorrect.
c. In installment liquidation, the remaining unsold assets must be treated as
➢ A complete loss
d. A partner who takes active part in the business but whose connection with the
partnership is concealed to the public is known as a (an)
➢ Secret Partner
e. Charles and Keith decided to form a partnership and contributed P456,000 and
P654,000, respectively. They agreed to divide the initial capital in the ratio 3:5.
How much is the capital of Keith after the formation of the partnership?
➢ P693,750
f. Tammy, Timmy and Tommy formed a partnership in January 1, 2021. Tommy is
an industrial partner while Tammy and Timmy are capitalist partners. They
contributed cash with an amount of P220,000 and P280,000, respectively. They
share profits in the ratio of 2:3:5 to Tammy, Timmy and Tommy. Unfortunately, the
operations for 2021 resulted to a loss of P300,000. How much is the share of
Timmy?
➢ P180,000
g. On September 30, 2021, Taylor admits Alison as a partner in her business. On
this date, Taylor’s capital account is reported at P340,450.
The following were agreed upon before the formation of their partnership:
➢ (P9,200)
n. A retiring partner may sell his capital interest to the continuing partners through
the partnership. The partnership has the obligation to make payment to the
retiring partner either by:
I. Payment in cash
II. Transfer of noncash assets
III. Recognition of liability for the full or the balance of the unpaid interest of the
retiring partner
➢ I, II AND III
o. If the total contributed capital exceeds the agreed capital with the new partner’s
investment is the same as his capital credit, then the admission of the new
partner involved a
➢ Negative asset revaluation
p. If the partners have not drawn up any agreement regarding the distribution of
profits and losses, then they must share
➢ According to capital ratio
q. A method of dividing profits which uses as basis the amount of capital invested
and the time during which such capital is actually used by the business.
➢ Average Capital Ratio
r. On January 1, 2021, Red, Blue and Yellow formed Primary Partnership with a
contribution of P200,000, P150,000 and P350,000, respectively. According to
their articles of co-partnership, profit should be distributed as follows: salaries of
P36,000 for Red, P14,000 for Blue and P20,000 for Yellow; interest of 15% on
the beginning capital; and the remainder in the ratio of 2:3:5, respectively.
For the year 2021, the partnership earned a profit of P458,000 profit. The
distribution is
➢ P122,600 for Red; P121,400 for Blue; P214,000 for Yellow
s. Madison and Mason are partners with capitals of P500,000 and P350,000 and
share profits equally and losses at 3:2, respectively. In the first year of
operations, they earned P576,000. The share of Madison in the profit is
➢ P288,000
t. After the partners’ loss absorption balances are made equal,
➢ Cash distributions are made in the profit and loss ratio
u. Poppy, Lily and Violet are partners with capital balances on May 31, 2022 of
P300,000, P300,000 and P200,000, respectively, and sharing profits and losses
equally. Violet decided to retire and agreed to take a furniture with a second-hand
value of P50,000 and a note for her interest. The furniture is carried in the books
at P65,000, but brand new would cost P80,000. Violet’s acquisition of the
furniture would result in:
➢ Reduction in capital of P5,000 each for Poppy and Lily.