COLLEGE OF MANAGEMENT AND ACCOUNTANCY

BAM 201 PARTNERSHIP AND CORPORATION ACCOUNTING

SECOND PERIODICAL EXAMINATION

GENERAL INSTRUCTIONS: No examinee shall copy or refer to any solution, answer or work of another or allow anyone
to copy or refer to his work, nor in any manner help or ask the help of any person or communicate with any person by means
of words, signs, gestures, codes, and other similar acts which may enable him to exchange, impart or acquire relevant
information while the examination is in progress. Shade the corresponding letter of your answer in the answer sheet
provided. ERASURES ARE NOT ALLOWED.

1. Statement 1: A partnership is dissolved when a new partner is admitted to the partnership.

Statement 2: Liquidation of a partnership is the process of ending the business.
a. Statement 1 is True; Statement 2 is True c. Statement 1 is False; Statement 2 is True
b. Statement 1 is True; Statement 2 is False d. Statement 1 is False; Statement 2 is False

2. Statement 1: Partnership liquidation is the same as partnership dissolution.

Statement 2: When a bonus is allowed to a new partner, part of the entry to record his admission to a business reduces the
capital accounts of the old partners.
a. Statement 1 is True; Statement 2 is True c. Statement 1 is False; Statement 2 is True
b. Statement 1 is True; Statement 2 is False d. Statement 1 is False; Statement 2 is False

3. Statement 1: It is possible to invest assets into a partnership and be given a zero-capital balance.
Statement 2: The right of offset is the legal right of a partner to apply part or all of his loan account balance against a capital
deficiency resulting from losses in the realization of the partnership assets.
a. Statement 1 is True; Statement 2 is True c. Statement 1 is False; Statement 2 is True
b. Statement 1 is True; Statement 2 is False d. Statement 1 is False; Statement 2 is False

4. Statement 1: A person admitted as a partner into an existing partnership is liable for obligations of the partnership
contracted before his admission.
Statement 2: If liquidation of a partnership results in a negative balance in a partner's account, the partner must pay into the
partnership the amount of the negative balance.
a. Statement 1 is True; Statement 2 is True c. Statement 1 is False; Statement 2 is True
b. Statement 1 is True; Statement 2 is False d. Statement 1 is False; Statement 2 is False

5. Statement 1: A partner's inability to meet his obligations at the time of liquidation relieves that individual of his liabilities
to the other partners.
Statement 2: When a partner withdraws assets greater than his capital balance, the excess is treated as a bonus to the
remaining partners.
a. Statement 1 is True; Statement 2 is True c. Statement 1 is False; Statement 2 is True
b. Statement 1 is True; Statement 2 is False d. Statement 1 is False; Statement 2 is False

6. If a new partner acquires partnership interest directly from the partners rather than from the partnership,
a. no entry is required.
b. the existing partnership is liquidated.
c. the partnership assets should not be revalued because this type of transaction does not result to partnership dissolution.
d. the existing partners’ capital accounts are reduced and the new partner’s capital account is increased.

7. When Bauhaus retired from the partnership of Bauhaus, Bookmark, and Baskerville, the final settlement of Bauhaus’
interest exceeded Bauhaus’ capital balance. Under the bonus method, the excess
a. was recorded as goodwill. c. reduced the capital balances of Bookmark and Baskerville.
b. was recorded as an expense. d. had no effect on the capital balances of Bookmark&Baskerville.

8. Total partners' equity will not change when a withdrawing partner

a. withdraws assets equal to his capital balance. c. withdraws assets amounting to less than his capital balance.
b. sells his interest to a new or remaining partner. d. withdraws assets amounting to greater than his capital balance.

9. Which of the following results in the dissolution of a partnership?

a. The withdrawal of a partner from a partnership.
b. The receipt of share in profit by an existing partner.
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c. The contribution of additional assets to the partnership by an existing partner.
d. The winding up of the partnership and the distribution of remaining assets to the partners.

10. In a partnership liquidation, the assets of the partnerships shall be applied lastly to
a. those owing to outside creditors.
b. those owing to the partners with respect to their share of the profits.
c. those owing to the partners with respect to their capital contributions.
d. those owing to inside creditors in the form of loans or advances for business expenses by the partners.

11. 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. Only when a new partner is admitted to the partnership.
d. When there is any change in the individuals who make up the partnership.

12. In a simple partnership liquidation, the last remaining cash distribution should be made according to the ratio of
a. the individual partner’s profit and loss agreement.
b. the individual partner's capital accounts, increased by partner loans to the partnership.
c. the individual partner’s capital accounts, increased by partnership loans to the partners and decreased by partner loans
to the partnership.
d. the individual partner’s capital accounts, decreased by partnership loans to the partners and increased by partner loans
to the partnership.

13. If a partner with a debit capital balance during liquidation is personally solvent, then
a. partner must invest additional assets in the partnership.
b. partner's debit balance will be allocated to the other partners.
c. other partners will give the partner enough cash to absorb the debit balance.
d. partnership will loan the partner enough cash to absorb the debit balance.

14. Which of the following will not result in dissolution of a partnership?

a. Incapacity of a partner c. Bankruptcy of a partner
b. Negative capital balance of a partner d. Admission of a new partner

15. If a bonus is traceable to the old partners rather than to a new partner, it is allocated among the partners according to
a. capital ratio of the old partners. c. profit and loss ratio of the old partnership.
b. capital ratio of the new partnership. d. profit and loss ratio of tine new partnership.

16. When a partner withdraws from a partnership taking assets that represent less than his capital balance
a. no bonus results. c. the withdrawing partner receives a bonus.
b. the remaining partners receive a bonus. d. remaining partners owe the withdrawing partner the difference.

17. 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 an adjustment of partners' capital accounts.
d. gains and losses are distributed according to the partnership agreement.

18. In a liquidation, the liabilities of the partnership should be paid

a. before any sales of assets. c. before the distribution of gains and losses on the disposal of assets.
b. before the distribution of cash to partners. d. after a revaluation of assets.

19. If a partner is insolvent, his personal properties shall first 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.

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20. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:
a. Partnership liabilities, partnership loans and partnership capital balances.
b. Partnership drawings, partnership liabilities, partnership loans and partnership capital balances.
c. Partnership liabilities, partnership loans, partnership drawings and partnership capital balances.
d. Partnership liabilities, partnership capital balances and partnership loans.

21. A and B are partners with the following capital balances and profit-sharing percentages: A (40%) P750,000 and B (60%)
P1,050,000. A and B admitted C into the partnership when C purchased 20% of the capital interests of A and B for P400,000.
The partnership’s net assets on C’s admission date were fairly valued. How much is the total equity of the partnership
immediately after the admission of C?
a. 1,800,000 b. 2,200,000 c. 2,250,000 d. 2,380,000

22. The following are the capital account balances and profit and loss ratios of the partners in AB Partnership as of
December 31, 2021:
Capital accounts Profit & loss ratios
A, Capital P 200,000 40%
B, Capital 400,000 60%
P 600,000

On December 31, 2021, C was admitted to the partnership when he acquired 20% interest in the net assets and profits of
the firm for a P120,000 investment. The net assets of the firm as of this date approximate their fair values. How much is the
capital balance of A after the admission of C if C’s admission was accounted for using the bonus method?
a. 190,400 b. 192,800 c. 194,800 d. 206,667

Use the following information for the next three independent cases:
The capital balances and profit and loss ratios of the partners in ABC Co. are as follows:
Capital accounts Profit & loss ratios
A, Capital P 40,000 40%
B, Capital 60,000 30%
C, Capital 80,000 30%
Total P 180,000

23. D purchases one-half of C’s interest for P50,000. The ‘book value method’ is to be used. Which of the following
statements is most likely to be incorrect?
a. D’s capital is credited for one-half of C’s capital balance.
b. C’s capital balance is reduced for the equity transfer to D.
c. The cash payment of D to C is not reflected in the partnership’s accounting records.
d. The partnership equity is increased by D’s payment.

24. The carrying amount of the net assets approximates fair value. D invests P80,000 cash for a 25% interest in the
partnership’s net assets and profits. Under the bonus method, how much is the capital balance of A after D’s admission?
a. 46,000 b. 64,500 c. 84,500 d. 65,000

25. The carrying amount of the net assets approximates fair value. D invests P52,000 cash for a 25% interest in the
partnership’s net assets and profits. Under the bonus method, how much is the capital balance of B after D’s admission?
a. 37,600 b. 48,700 c. 58,200 d. 78,200

26. The following are the capital account balances and profit and loss ratios of the partners in AB Partnership as of
December 31, 2021:
Capital accounts Profit & loss ratios
A, Capital P 250,000 40%
B, Capital 350,000 60%
Total P 600,000

On December 31, 2021, C was admitted to the partnership when he purchased half of A’s capital interest for P100,000.
How much is A’s capital balance after the admission of C?
a. 100,000 b. 125,000 c. 200,000 d. 120,000

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27. The capital accounts of the partnership of Newton, Sharman, and Jackson on June 1, 2021, are presented, along with
their respective profit and loss ratios:
Capital accounts Profit & loss ratios
Newton P139,200 1/2
Sharman 208,800 1/3
Jackson 96,000 1/6
Total P444,000

On June 1, 2021, Sidney was admitted to the partnership when he purchased, for P132,000, a proportionate interest from
Newton and Sharman in the net assets and profits of the partnership. As a result of this transaction, Sidney acquired a one-
fifth interest in the net assets and profits of the firm. Assuming that implied goodwill is not to be recorded, what is the
combined gain realized by Newton and Sharman upon the sale of a portion of their interests in the partnership to Sidney?
a. 0 b. 43,200 c. 62,400 d. 82,000

28. The partnership of A, B and C is undergoing liquidation. Information on the financial position of the partnership follows:
Assets:
Cash 150,000
Other assets 450,000
Total 600,000

Liabilities and Equity:

Liabilities 225,000
A, capital (40%) 60,000
B, capital (30%) 270,000
C, capital (30%) 45,000
Total 600,000

The other assets were realized at ₱300,000. None of the partners is solvent. How much cash did the partners receive?
A B C A B C
a. 15,000 205,000 5,000 c. 25,000 185,000 15,000
b. 5,000 225,000 0 d. 0 225,000 0

29. A and B decided to liquidate their partnership. The partnership’s records show the following information:
Non-cash assets 120,000

Liabilities 15,000
A, capital (50%) 60,000
B, capital (50%) 45,000
Total liabilities and equity 120,000

The assets were sold for ₱32,000 and A received ₱16,000 in the cash distribution to the partners. How much did B receive?
a. 17,000 b. 16,000 c. 1,00 d. 0

30. A, B and C are partners. Their respective personal assets, personal liabilities and partnership capital balances are as
follows:
A B C
Personal assets 90,000 240,000 180,000
Personal liabilities 75,000 150,000 216,000
Capital balances 150,000 (96,000) 210,000

Which of the partners is personally insolvent?

a. A b. B c. C d. B & C

31. Constantia invested P400,000 for a 20% interest in a partnership that has capital totaling P150,000 after admitting
Constantia. Which of the following is true?
a. Constantia 's capital is P400,000.
b. Constantia received a bonus of P100,000.
c. The original partners received a bonus of P100,000.
d. The original partners' capital in the business was P1,200,000 before admitting Constantia.

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32. Partners, Yacapin, Babaran, and Cuenca share profits and losses in a 5:3:2 ratio, respectively. Yacapin wishes to leave
the partnership, so the assets are revalued and are found to be overvalued by P60,000. If each partner had a capital balance
of P200,000 prior to Yacapin’s notification of withdrawal, what amount should Yacapin be allowed to withdraw from the
partnership?
a. P230,000 b. P180,000 c. P170,000 d. P140,000

33. Ragasa and Mendoza are partners sharing profits in the ratio of 3:2, respectively. On Jan. 1, Ragasa and Mendoza
decided to admit Gangoso as a new partner upon her investment of P8,000. On this date, their interests in the partnership
are as follows: Ragasa, P11,500; Mendoza, P9,300. Assuming that the new partner is given a 1/3 interest in the firm, with
bonus being allowed to the new partner, the new capital balances of Ragasa, Mendoza and Gangoso respectively are,
a. P10,540, P8,660 and P9,600. c. P11,500, P9,300 and P8,000.
b. P11,520, P7,680 and P9,600. d. P12,480, P8,320 and P8,000.

34. Perdio paid Tria P600,000 for her P400,000 interest in a partnership. On the partnership books,
a. Perdio will receive a bonus. c. Perdio wil have a capital balance of P600,000.
b. Perdio will give up a bonus. d. Perdio will have a capital balance of P400,000.

35. Partners Baldecir and Magallanes each have a P300,000 capital balance and share profits and losses in a 3:1 ratio,
respectively. Cash equals P100,000, non-cash assets equal P1,000,000, and liabilities equal P500,000. If the non-cash
assets are sold for P400,000, and both partners agreed to make up for any capital deficits with personal cash contributions,
Magallanes eventually will receive cash of
a. P0 b. P100,000 c. P150,000 d. P175,000

36. Partners Baldecir and Magallanes each have a P300,000 capital balance and share profits and losses in a 3:1 ratio,
respectively. Cash equals P100,000, non-cash assets equal P1,000,000, and liabilities equal P500,000. If the non-cash
assets are sold for P500,000, and each partner is personally insolvent, Magallanes eventually will receive cash of
a. P0 b. P100,000 c. P150,000 d. P175,000

37. Partners Biore and Selisana each have a P450,000 capital balance and share profits and losses in a 3:2 ratio,
respectively. Cash equals P150,000, non-cash assets equal P1,500,000, and liabilities equal P750,000. If the non-cash
assets are sold for P1,000,000, the change in Selisana's capital account will be
a. increase of P500,000. b. decrease of P250,000. c. decrease of P200,000. d. increase of P400,000.

38. Ragasa and Mendoza are partners sharing profits in the ratio of 3:2, respectively. On Jan. 1, Ragasa and Mendoza
decided to admit Gangoso as a new partner upon her investment of P8,000. On this date, their interests in the partnership
are as follows: Ragasa, P 11,500; Mendoza, P9,300. Assuming that the new partner is given a 1/3 interest in the firm, with
bonus being allowed to the new partner, the new capital balances of Ragasa, Mendoza and Gangoso respectively is,
a. P10,540, P8,660 and P9,600. c. P11,500, P9,300 and P8,000.
b. P11,520, P7,680 and P9,600. d. P12,480, P8,320 and P8,000.

39. In the Ravelo-Cabance partnership, Ravelo and Cabance had a capital ratio of 3:1 and a profit and loss ratio of 2:1,
respectively. The bonus method was used to record Futalan's admission as a new partner. What ratio should be used to
allocate, to Ravelo and Cabance, the excess of Futalan's contribution over the amount credited to Futalan's capital account?
a. Ravelo and Cabance's old capital ratio. c. Ravelo and Cabance's old profit and loss ratio.
b. Ravelo and Cabance's new relative capital ratio. d. Ravelo and Cabance's new relative profit and loss ratio.

40. Salvador and Cureg are partners with capital balances of P60,000 and P20,000, respectively. Profits and losses are
divided in the ratio of 60:40. Salvador and Cureg decided to form a new partnership with Lusterio, who invested land valued
at P15,000 for a 20% capital interest in the new partnership. Lusterio's cost of the land was the partnership used the bonus
method to record the admission of Lusterio into the partnership. Lusterio's capital account should be credited for
a. P12,000 b. P15,000 c. P16,000 d. P19,000

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