1st Final Departmental Examination Reviewer A.Y.

2022-2023 d) Recording the debit of an entry for a different amount than the credit
THEORIES
ACCOUNTING CYCLE 6. The recognition of depreciation expense is based on the concept which states
1. Statement 1: Accrued revenue adjusting entries are required when cash is that costs that provide economic benefits over several accounting periods but
received after the revenue is earned. cannot be directly associated with the earning of revenues are recognized as
Statement 2: An unearned revenue refers to a cash received from a customer expenses over the periods where the economic benefits are consumed. What is
prior to the delivery of goods. this concept called?
Statement 3: Prepaid expenses are those which have already been incurred but a) Concept of immediate recognition
not yet paid as of the statement of financial position date. b) Consistency concept
a) Only one of the statements is correct c) Prudence concept
b) All of the statements are incorrect d) Concept of systematic and rational allocation
c) Only two of the statements are correct
d) All of the statements are correct 7. Prepayments of expenses are initially recorded using varying methods. Under
which method are prepayments of expenses initially debited to an expense
2. In closing the books, what kind of accounts do you reduce the balances to zero account, and at the end of the period, the unused portion is recognized as an
at the end of the accounting period? asset, while the incurred portion remains an expense?
a) Real accounts a) Asset method
b) Nominal accounts b) Liability Method
c) Personal accounts c) Expense method
d) Contra account d) Income Method

3. Which of the following determines the book value of a plant asset? 8. Statement 1: Income minus expenses equals profit or loss. If income exceeds
a) By deducting the contra account from the original balance of the asset account expenses, there is profit. If income is less than expenses, there is loss.
b) By adding the contra account to the original balance of the asset account Statement 2: Profit or loss is closed to the “owner’s capital” account at the end of
c) By adding the accumulated depreciation to date and the estimated disposal value each period. Profit increases equity, while loss decreases equity.
d) By deducting the original cost of the asset to the depreciation expense Which of the statements is/are correct?
a) Only Statement 1 is correct
4. Which concept implies that income is recognized when earned rather than when b) Only Statement 2 is correct
collected? c) Both Statements are correct
a) Historical Cost Concept d) Both Statements are incorrect
b) Accrual Basis of Accounting
c) Materiality Concept 9. Statement 1: All adjusting entries involve at least one balance sheet account
d) Matching Principle but not any income statement account
Statement 2: Not all adjusting entries affect the profit or loss for the period
5. A trial balance is prepared because it helps reveal some errors that caused the Which of the statements is/are correct?
total debits and total credits to be unequal. The following are errors revealed by a) Only Statement 1 is correct
a trial balance, except one. Which is it? b) Only Statement 2 is correct
a) Omitting entirely the entry for a transaction c) Both Statements are correct
b) Journalizing or posting half of an entry, i.e., a debit without a credit or vice-versa d) Both Statements are incorrect
c) Transplacement entry on one side of an entry
10. Which step in the accounting cycle involves transferring information from the
journal to the ledger? 15. A partner’s capital account is credited for the following transactions except … ?
a) Posting a) Original investment
b) Closing the books b) Additional investment
c) Preparing the unadjusted trial balance c) Permanent withdrawals
d) Journalizing d) Credit balance of the drawing account at the end of the period

PARTNERSHIP FORMATION 16. Which is true about valuation of investments by partners?

a) Asset accounts are credited for assets contributed to the partnership
11. A kind of partner wherein, instead of money, he contributes his expertise and b) Liability accounts are debited for any liability assumed by the partnership
competencies as an investment. c) When a partner invests non-cash assets, they are to be recorded at values agreed upon
a) Capitalist partner by the partners
b) Industrial partner d) Separate capital accounts are debited for the amount of each partner’s net investment
c) Capitalist-industrial partner (assets less liabilities)
d) Limited partner
17. When a partner invests non-cash assets, they are to be recorded at values
12. Statement 1: Articles of partnership a written agreement among the partners agreed upon by the partners. In the absence of any agreement, the contributions
which governs the formation, operation, and dissolution of the partnership. will be recognized at which value?
Statement 2: In a partnership, there should be as many capital accounts and as a) fair market value at the date of transfer to the partnership
many drawing accounts as there are partners. b) fair market value at the acquisition date
a) True, True c) net realizable value
b) True, False d) capital ratio value
c) False, False
d) False, True 18.Which of the following is not an area where there are differences when
comparing partnerships and corporations?
13. It refers to the amount by which the capital credit exceeds the carrying amount a) The ease of formation
of the net assets. b) The level of owner legal liability
a) Capital share c) The ease of ownership transferability
b) Bonus d) All of the above are areas where partnerships and corporations differ
c) Interest
d) Goodwill 19. Which of the following is not a difference when comparing partnerships and
corporation?
14. It refers to the price that would be received to sell an asset or paid to transfer a a) Corporations must conform to the GAAP whereas partnerships are not required to
liability in an orderly transaction between market participants at the measurement conform to GAAP
date. b) Partnerships and corporations neither are required to attain state approval to form
a) Net realizable value c) Partners have unlimited liability while corporation shareholders generally do not have
b) Fair value unlimited liability
c) Bonus d) Corporations are required to pay income tax while partnerships are not required to pay
d) Capital share value income taxes
 24. If only the share of each partner in the profits has been agreed upon by the
20. In a limited partnership, the entity ceases to legally exist when partners, what should their proportion of losses be?
a) An existing partner retires or dies a) Equally
b) A new partner enters the partnership b) According to capital contributions
c) A limited partner transfers his/her interest c) In the same proportion as the profit
d) A general partner is no longer present d) Based on their simple average capital ratio

PARTNERSHIP OPERATIONS 25. Which is false about the distribution of profits in a partnership?
a) Profits are divided according to partners’ agreement
21. Among the following statements, what is the right order of procedure for the b) If there is no agreement as to distribution of profits, the profit share to capitalist
preparation of closing entries for a partnership? partners shall be divided according to their capital contributions
I. The balance of the Income Summary account, which represents profit or c) If there is no agreement as to distribution of profits, industrial partners shall receive just
loss of the partnership, is transferred either to the drawing accounts or and equitable amount of profit and he/she shall receive it before the capitalist partners
directly to the capital accounts of the partners. divide the remaining profits
II. The balance of the drawing account of each partner is transferred to d) Industrial partners are not entitled to any profit
his/her capital account.
III. Income summary is debited and all expense and other nominal accounts 26. Which is true about the distribution of losses in a partnership?
with debit balances are credited. a) Purely industrial partners are not liable for losses
IV. All revenue and other nominal accounts with credit balances are debited b) Purely industrial partners are liable for losses of the partnership
and Income Summary is credited. c) Capitalist partners shall divide losses equally among themselves
a) II, I, III, and IV d) Losses are divided equally in absence of partners’ agreement
b) I, III, IV, II
c) IV, III, I, II 27. Partnership net income is defined as
d) III, IV, II, I a) The interest allocation to the partners, based on weighted average invested capital
b) Partnership income after deducting partner salaries and interest
22. If the distribution of profits and losses are not mentioned in the agreement, how c) Partnership income after deducting partner salaries
would the partners divide the profits and losses? d) Partnership income before deducting salaries and interest
a) In accordance with capital contributions
b) They will share it equally 28. A partnership’s income-sharing ratio
c) In accordance with their working hours a) Applies to partnership income after salaries and interest are deducted
d) There will be no distribution at all b) Applies to partnership income before salaries and interest are deducted
c) Applies to partnership income after salaries are deducted but before interest is deducted
23. This method recognizes the time and effort that a partner may devote in running d) Applies to partnership income before both salaries and interest are deducted.
the firm’s business operations but does not take into consideration the
differences in contributions. 29. Which of the following interest component calculation bases is least susceptible
a) Arbitrary ratio to manipulation when allocating profits and losses to partners?
b) Capital ratio a) Beginning capital account balance
c) Interest on capital and the balance on agreed ratio b) Average of beginning and ending capital account balances
d) Salary allowances to partners and the balance on agreed ratio c) Weighted average capital account balance
d) Ending capital account balance
 36. Which of the following should be done when the partnership profit and loss
ratios are changed?
30. Which of the following statements is true with regard to the partnership residual a) The book and market value of assets and liabilities should be evaluated
profit and loss ratios? b) The capital accounts should be modified to reflect the new profit and loss ratios
a) A partner’s residual profit ratio must be the same as the loss ratio c) The creditors should be informed that the profit and loss ratios have been changed
b) Residual profit and loss ratios can be changed by agreement d) The partners must draft new articles of partnership
c) The residual profit and loss ratio must always be applied
d) All of the above are true statements 37. In what manner do the remaining partners share in the bonus paid to a
withdrawing partner?
31. It refers to the termination of the contract of an existing partnership. a) In proportion to their residual profit and loss ratios
a) Partnership Termination b) Equally
b) Partnership Dissolution c) In proportion to their capital account balances
c) Partnership Liquidation d) The partner with the greatest capital account is assigned the bonus
d) Partnership Realization
38. Which of the following statements is true with regard to a withdrawing partner?
32. The purchase price of the interest sold to the new partner may be, a) A bonus must be paid to the retiring partner
a) Equal to the book value of interest sold b) A bonus may be paid to the retiring partner
b) Less than the book value of interest sold c) A bonus must be paid to the retiring partner or to the remaining partners
c) More than the book value of interest sol d) Recognizing a bonus is not appropriate when a partner retires
d) All of the above
39. What change occurs to continuing partners’ capital accounts when a
33. When is the asset revaluation being done? withdrawing partner is assigned goodwill/revaluation of asset at the date of
a) Before the admission of the new partner withdrawal?
b) During the admission of the new partner a) Continuing partners’ capital accounts decease by their profit and loss ratio proportion of
c) After the admission of the new partner the goodwill assigned to the withdrawing partner
d) None of the above b) Continuing partners’ capital accounts increase
c) Continuing partners’ capital accounts do not change
34. What are the effects of investment from the admission of a new partner to d) Goodwill cannot be recognized with regard to withdrawing partners
assets and capital of the partnership?
a) The assets increase and the capital decreases 40. Daniel, Joshua, and Enrique are partners who share income in a 5:4:3 ratio. Each
b) The assets decrease and the capital increases has a capital balance of P60,000. Daniel retires from the partnership and is paid
c) The assets increase and the capital increases P95,000. In recording the retirement, no entry was made to Joshua’s capital
d) The assets decrease and the capital decreases account. Which method of recording the retirement was used?
a) Bonus
35. When can the bonus method be applied? b) Partial Goodwill
a) When partnership is formed c) Total Goodwill
b) When a new partner is added to the partnership d) Transfer of Assets
c) When an existing partner retires from the partnership
d) The bonus method can be applied in all three of the above circumstances 41. At the beginning of the year San Miguel Corporation had Accounts Receivable of
Php 280,000 with allowance for bad debts of Php 19,900. At the end of the year,
the accounts receivable has a balance of Php 650,000. It is the company’s policy Jan. 20 LJS invested P500,000 cash.
to provide allowance for uncollectible accounts equal to 10% of the outstanding Jan. 20 Paid P4,000 office rent for the remainder of January
accounts receivable. What is the bad debts expense for the period? Jan. 21 Purchased office supplies for P2,000. The supplies will last for
a) Php 8,100 several months, and the payment is not due until February 15.
b) Php 45,100 Jan. 22 Purchased office equipment for P150,000 cash.
c) Php 47,900 Jan. 26 Performed consulting services and billed clients P20,000. The
d) Php 84,900 entire amount will not be collected until February.
Jan. 31 Recorded P1,000 utilities expense. Payment is not due until
42. On June 1, 2022, Manila Electronic Co. paid Php 30,000 representing a one year February 20.
rental for an office space in a building owned by Ayala Corporation. The asset How much is the Cash amount to be posted in Trial balance?
method was used to record the payment. What is the Rent Expense on December a) P354,000
31, 2022? b) P646,000
a) Php 12,500 c) P654,000
b) Php 15,000 d) P346,000
c) Php 17,500
d) Php 20,000 PARTNERSHIP FORMATION

43. Treasure Catering had total assets amounting to Php 12,000,000 and liabilities 46. Dino and Jun formed a partnership and agreed to divide initial capital equally,
of Php 7,500,000, at the beginning of the period. During the period, Treasure even though Dino contributed Php 211,000 and Jun gave Php 156,000 in
Catering earned a total income of Php 6,000,000 and incurred total expenses of Php identifiable assets. How much is the capital of Dino after the formation of the
4,500,000. How much is Treasure Catering’s ending equity? partnership?
a) Php 1,500,000 a) Php 183,500
b) Php 3,000,000 b) Php 211,000
c) Php 4,500,000 c) Php 156,000
d) Php 6,000,000 d) Php 367,000
Answer: A
44. WYWS Consulting Services opened for business on January 5, 2023. On Jan. 26, Solution:
Lee Jong Suk performed consulting services and billed clients P20,000. The entire 211,000 + 156,000 = 367,000
amount will not be collected until February. 367,000 / 2 = Php 183,500
Which of the following is the correct journal entry for above transaction?
a) Consulting Revenue P 20,000 47. Sina and Hina entered into a partnership agreement in which Sina is to have a
Accounts Receivable P 20,000 60% interest in capital and profits and Hina is to have a 40% interest in capital
b) Cash P 20,000 and profits. Sina will contribute cash and the following non-cash assets:
Consulting Revenue P 20,000 Land-Cost-Php 47,000 FMV-Php 82,000; Building-Cost-Php 270,000 FMV-Php
c) Accounts Receivable P 20,000 170,000; Equipment-Cost-Php 43,000 FMV-Php 31,000. There is a Php 30,000
Consulting Revenue P 20,000 mortgage on the Building that the partnership agrees to assume. Hina
d) Consulting Revenue P 20,000 contributes Php 210,000 cash to the partnership. How much additional cash
Cash P 20,000 should Sina invest to have a 60% share in the new partnership?
a) Php 15,000
45. WYWS Consulting Services opened for business on January 5, 2023. b) Php 32,000
c) Php 45,000 assumed.The partnership agreement also specifies that profits and losses are to be
d) Php 62,000 distributed evenly. What amounts should be recorded as capital for
Roberts and Smith at the formation of the partnership?
48. On December 1, 2021, Yamai and Sahi formed a partnership with contributing Roberts Smith
the following assets at fair market values: a) 35,000, 85,000
YAMAI SAHI b) 35,000, 75,000
Cash P 9,000 P 18,000 c) 55,000, 55,000
Machinery and Equipment 13,500 d) 60,000, 60,000
Land 90,000
Building 27,000 PARTNERSHIP OPERATIONS
Office Furniture 13,500
The land and building are subject to a mortgage loan of Php 54,000 that the 51. Partners Josh, Noah and Bailey, accountants, agree to form a partnership and to
partnership will assume. The partnership agreement provides that Yamai and Sahi share profits in the ratio of 5:3:2. They also agreed that Bailey is to be allowed a
share profits and losses, 40% and 60%, respectively and partners agreed to bring salary of Php 31,000 and that Noah is to be guaranteed Php 20,000 as his share
their capital balances in proportion to the profit and loss ratio and using the capital of the profits. During the first year of operation, service revenue is Php 210,000,
balance of Sahi as the basis. The additional cash investment made by Yamai should while expenses total P75,000. What amount of net income should be credited to
be: Josh’s capital account?
a) Php 18,000 a) Php 33,333
b) Php 134,000 b) Php 52,000
c) Php 12,870 c) Php 60,000
d) Php 11,300 d) Php 96,429

49. On December 1, 2020, Mashi and Dami formed a partnership agreeing to share Solution:
profits and losses in the ratio of 2:3 respectively. Mashi invested a parcel of land Service Revenue 210,000
that cost him Php 25,000. Dami invested cash worth Php 30,000. The land was sold Total Expenses (75,000)
on the same day as the formation of the partnership. How much should be the Bailey’s Salary (31,000)
capital balance of Mashi right after formation? Noah’s Share in Profit (20,000)
a) Php 25,000 Remainder 84,000
b) Php 75,000 Josh: 84,000 x 5/7 = Php 60,000
c) Php 30,000
d) Php 50,000 52. At the beginning of 2022, the statement of financial position for R&M Company
showed the following balances in the partners’ capital accounts: Ria: Php 24,000;
50. Roberts and Smith drafted a partnership agreement that lists the and Mau: Php 26,000. Ria and Mau share profits and losses in a 3:7 ratio,
following assets contributed at the partnership’s formation: respectively. During 2022, R&M experienced a Php 40,000 loss. During the period,
Roberts Smith Ria and Mau withdrew Php 10,000 and Php 18,000 respectively. What will be the
Cash 20,000 30,000 balance of Ria’s capital account on Dec. 31, 2022?
Inventory 15,000 a) Php 12,000
Building 40,000 b) Php 2,000
Furniture and Equipment 15,000 c) Php 3,600
The building is subject to a mortgage of P 10,000, which the partnership has d) Php 26,000

53. At the beginning of 2019, the statement of financial position for Twins Company
showed the following balances in the partners’ capital accounts: Bryan: Php
120,000; and Ryan: Php 96,000. Bryan and Ryan share profits and losses in a 6:4
ratio, respectively. During 2019, Twins Company experienced a Php 25,000 loss.
During the period, Bryan and Ryan withdrew Php 20,000 and Php 15,000
respectively. What will be the balance of Ryan’s capital account on Dec. 31, 2019?
a) Php 71,000
b) Php 85,000
c) Php 106,000
d) Php 25,000
54. Juan and Karlos are partners who share profits and losses in the ratio of 60:40,
respectively. Juan’s salary is P60,000 and P30,000 for Karlos. The partners are also
paid interest on their average capital balances. In 2023, Juan received P30,000 of
interest and Karlos, P12,000. The profit and loss allocation is determined after
deductions for the salary and interest payments. If Karlos’ share in the residual
income (income after deducting salaries and interest) was P60,000 in 2023, what
was the total partnership income?
a) P192,000
b) P345,000
c) P282,000
d) P387,000
55. Balmond is trying to decide whether to accept a salary of P40,000 or a salary of
P25,000 plus a bonus of 10% of net income after salary and bonus as a means of
allocating profit among the partners. Salaries traceable to the other partners are
estimated to be P100,000. What amount of income would be necessary so that
Balmond would consider the choices to be equal?
a) P165,000
b) P290,000
c) P265,000
d) P305,000
. follows;
PARTNERSHIP DISSOLUTION
56. Bubbles, Blossom and Buttercup have capital balances of Php 73,000, Php
100,000, and Php 190,000, respectively and they share profits and losses in the
ratio of 4:3:3. Mojo Jojo purchases 20% interest in equity and profits from the
partners for Php 180,000. What would be the new capital balance of Bubbles,
Blossom and Buttercup after the admission of Mojo Jojo?
a) Bubbles: Php 29,200 ; Blossom: Php 30,000 ; Buttercup: Php 57,000
b) Bubbles: Php 43,500 ; Blossom: Php 45,750 ; Buttercup: Php 60,750
c) Bubbles: Php 58,400 ; Blossom: Php 80,000 ; Buttercup: Php 152,000
d) Bubbles: Php 72,000 ; Blossom: Php 54,000 ; Buttercup: Php 54,000
57. Rene and Ricardo are partners who share profits and losses in the ratio of 3:1,
respectively. On September 1, 2022, their capital balances were: Rene – Php
300,000 and Ricardo – Php 200,000. On this date, Karl invests Php 150,000 in
the firm and is given a capital credit of Php 100,000 which is to be 1/8 of the
capital of the new partnership. What is the new capital balance of Rene after the
admission of Karl?
a) Php 350,000
b) Php 450,000
c) Php 550,000
d) Php 650,000
58. Presented below is the condensed balance sheet of the partnership of Nana,
Angela, and Melissa who share profits and losses in the ratio of 6:3:1, respectively:
Cash…………P 85,000 Nana, Capital………P252,000
Other Assets.. 415,000 Angela, Capital………126,000
Liabilities………80,000 Melissa, Capital……….42,000
The partner agree to sell Harith a 20% of their respective capital and profit and loss
interests for a total payment of P90,000. The payment by Harith is to be made
directly to the individual partners. The capital balances of Nana, Angela, and
Melissa, respectively after admission of Harith are:
a) P198,000; P 99,000; P33,000
b) P201,600; P100,800; P33,600
c) P216,000; P108,000; P36,000
d) P255,000; P127,800; P42,600
59. The condensed balance sheet of the partnership of Edith, Faramis, and Gloo with
corresponding profit and loss sharing percentage as of June 30, 2023 was as
Net assets P480,000
Edith, capital (50%) P240,000
Faramis, capital (30%) 144,000
Gloo, capital (20%) 96,000
P480,000
As of said date, Edith retires from the partnership. By mutual agreement, she was
paid P270,000 for her interest in the partnership. Partial goodwill or adjustment in interest 5% of the starting capital is given also to both partners and a bonus to P of 15% of net
assets was to be recorded. After Edith’s retirement, the total net assets of the profit before the salary, interest and bonus.
partnership was: The condensed statement of comprehensive income of the partnership for the year ended
a) P300,000 December 31, 2019 is as follows:
b) P210,000
c) P240,000
d) P270,000

60. Claude, Dyrroth, and Estes shared profit and losses based on 5:3:2. Estes was
allowed to withdraw from the partnership on 31 December 2023 with P600,000
(1) The bonus of Perez for the year 2019 is?
cash as full settlement. The condensed balanced sheet of the partnership as of that
(2) How much is the share of B in the profit or loss for the year 2019?
date was as follows:
(3) How much is the share of P in the profit or loss for the year 2019?
Assets
Due from Estes P 250,000
Goodwill 2,000,000
Other Assets 4,750,000
Liabilities and Capital
Liabilities P2,000,000
Due to Dyrroth 750,000
3. A, B and C are partners in the accounting firm. Their capital account balances at year and
Claude, capital 1,750,000
were:
Dyrroth, capital 1,500,000
A – 90,000
Estes, capital 1,000,000
B – 110,000
Using the partial adjustment of goodwill method, the new capital balances of Claude
C – 50,000
and Dyrroth, respectively, after Estes’ withdrawal are:
They share profits and losses in a 4:4:2 ratio, after the following special terms:
a) P1,842,750; P1,556,250
1. Partner C is to receive a bonus of 10% of the net income after bonus.
b) P1,375,000; P1,275,000
2. Interest of 10% shall be paid on that portion of a partner’s capital in excess of 100,000.
c) P2,000,000; P1,650,000
3. Salaries of 10,000 and 12,000 shall be paid to partners A and C, respectively.
d) P1,750,000; P1,500,000
Assuming a net income of 44,00 for the year, the total profit share of partner C would be:
—--------------------------------------------------------------------------------------------------------------------------------------
PARTNERSHIP OPERATIONS
1. The partners, A and B, share profits 3:2. However, A is to receive a yearly bonus of 20% o the
profits, in addition to his profit share. The partnership made a net income for the year of 24,000
before the bonus. Assuming A’s bonus is computed on profit after deducting said bonus. How
4. On January 1, 2019, David and Enrile decided to form a partnership. At the end of the year, the
much profit share will be?
partnership had a credit balance in its income summary account of 120,000. The capital
accounts of the partnership show the following transactions below.
2. On January 2, 2019, B and P formed a partnership. B contributed capital of 175,000 and P
25,000. They agreed to share profits and losses 80% and 20%, respectively. P is a general
manager and works in the partnership in full time. P is given a salary of 5,000 a month. An
 Assuming that an interest if 20% per annum is given on average capital and the balance of the
profits is divided equally, how much is the share of David in profits for the year 2019?
5. On January 1, 2019, Zeep and Beep have capital balances of 20,000 and 16,000, respectively.
On July 1, 2019, Zeep invests an additional 4,000 and Beep withdraws 1,600. Profits and
losses are divided as follows: Beep is a managing partner, and such as shall receive 16,000
salary and Zeep shall receive 7,200; both partners shall receive interest of 10% on their
beginning capital balances to offset whatever difference in capital investments they have, and
any remainder shall be divided equally. Income of the Zeep-Beep Partnership for the year is
9,600. How much is Beep’s share in the net income?
Alba – 30,000
Bana – 20,000
Cada – 10,000
a. Assuming no profit and loss ratios are provided in the partnership agreement and there has
been no change in capital contributions during the year, how much is the capital balance of
Cada after distribution of profit or loss for the period?
b. Assuming no profit and loss ratios are provided in the partnership agreement and there has
been no change in the capital contributions during the year, how much profit share would Alba
be entitled to received?
9. The partnership agreement of Eve and Fred provides that at 10% per year is to be credited to each
partner on the basis of weighted average capital balances. A summary of Fred’s capital account for the
year ended December 31, 2019 is as follows:

6. H, M and N are partners with average capital balances in 2019 of 240,000, 120,000 and
80,000, respectively. Partners receive 10% interest on their average capital balances. After
deducting salaries of 60,000 to H and 40,000 to N, the residual profit or loss is divided equally. The amount of interest that should be credited to Fred’s capital account for 2019 is?
In 2019, the partnership sustained a 66,000 loss before interest and salaries to partners. By —--------------------------------------------------------------------------------------------------------------------------------------
what amount should N’s capital change? PARTNERSHIP DISSOLUTION
1.The following instance dissolve a partnership except
a. Admission of a new partner.
b.Change in the name of the partnership.
c.Conversion of a partnership to a corporation.
7. Choji, a partner in the GBC partnership, has a 30% participation in partnership profits and d.Revaluation of partnership assets.
losses. Choji’s capital account has a net decreased of 60,000 during the calendar year 2019.
During 2019, Choji withdrew 130,000 (charged against his capital account) and contributed 2.Before the effectivity of dissolution, assets and liabilities should be restated at their
property valued at 25,000 to the partnership.what was the net income of the GBC partnership a.fair market values.
for year 2019? b. realizable values.
c.liquidating values.
d. historical values.

3. An adjustment of the assets and liabilities of the partnership to their fair market values
8. In its first year of operations, Alba & Company, a partnership, has a credit balance in its income before dissolution is called
summary account of 20,000 before providing for salaries of 5,000 and 3,000 per annum for a.Positive asset revaluation
b. Negative Asset revaluation
Alba and Bana, respectively, as stipulated in the partnership agreement. Capital contributions
c.Asset revaluation
are as follows:
d. Revaluation surplus
4.Statement 1: Mutual agency requires that an admission of a new partner is possible only 10.Statement 1: The deceased partner is considered to have withdrawn from the partnership
with the consent of all partners. and his heirs or estate may receive his interest in the firm.
Statement 2: If there is a deficit capital contribution of the old partner(s), he will require a Statement 2: In order not to seriously impair the working capital and the operation of the
bonus from the new partner to meet his agreed capital contribution. businesses, the partnership may insure the lives of its partners and present itself as the
a.Only statement 1 is true. Beneficiary.
b. Both statements are true. a.Only statement 1 is true.
c.Only statement 2 is true. b.Only statement 2 is true.
d. Both statements are false. c.Both statements are true
d. Both statements are false.
5.Statement 1: The admission of new partner through purchase of interest of existing
partner will increase the partnership capital. 11.Upon dissolution, the partners may agree to adjust the partnership assets and liabilities. The net
Statement 2: Admission of new partner through his direct investment in the partnership effect of such restatement of partnership assets and liabilities must be adjusted to the respective
will increase the partnership capital even the under bonus method. partners’ capital balances based on their
a.Only statement 1 is true. a.ending capital balances
b.Only statement 2 is true. b.old profit and loss ratio
c.Both statements are true c.new profit and loss ratio
d. Both statements are false. d.beginning capital balances

6.When a new partner is admitted by his direct investment in the partnership and if his 12.Which of the following is not correct regarding the admission of a new partner?
agreed capital credit is more than his agreed total contributed capital, there is a a.The admission of a new partner needs the consent of each of the old partners.
a.Bonus to new partner. b.The admission by purchase of interest of an existing partner need not have the
b. no bonus to all partners. consent of remaining partners.
c.Bonus to old partners. c.The admission of a new partner by direct investment in he partnership must have the
d. claim from new partner. consent of all the existing partners.
d.The admission of a new partner either by purchase or by direct existing partnership.
7.The following transactions will affect the balance of the total partnership capital except
a.Retirement of a partner by settlement equal to his interest. 13.If he new partner is admitted by purchase of interest of an old partner at an amount higher
b.The partnership generates net income for the year. than its book value, this will result in
c.Admission by purchase without implied goodwill, but with bonus. a.the increase in total partnership’s capital
d.Permanent withdrawals by partners. b.the decrease the partnership’s net assets.
c.no change in partnership’s net assets.
8.Which is the least likely valid reason for partnership dissolution? d.no change in old partner’s capital.
a.Admission of a new partner
b.Retirement of a partner 14.The admission of a new partner by direct investment in the partnership will result in the
c.Declaration of partner’s insolvency Increase
d.Losses sustained by the partnership for the year a.in partnership’s assets
b.in total partnership’s capital
9.Which of the following is not a cause of partnership dissolution? c.the old partners’ capital
a.Retirement of one of the partners d.the partnership’s assets and total capital
b.Admission of a new partner
c.Death of a partner 15.If ever bonus is agreed to be recognized in he admission of new partner by direct
d.Change in the civil status of a partner investment I the partnership,
a.bonus is recorded as debit in the partnership’s books
 b.bonus is recorded as credit in the partnership’s books a.No effect; Increase
c.bonus to new partner will make the capital credit to admitted partner more than his b.Increase; Increase
capital contributed c.Decrease;Decrease
d.bonus to old partner will make the capital credit of the admitted partner more than his d.No effect; No effect
capital contributed
21.Ro and Que are partners who share profits and losses equally. Each has a capital balance of
16.When Dj retired from the Partnership Dj, Zig and Jowa, the final settlement of Dj’s P40,000 and P50,000, respectively. They agreed to admit Lix as a new partner upon investment of
partnership interest exceeded his capital balance. Under the bonus method, the excess land costing P50,000, but which is appraised at P60,000. Profits and losses are to be shared equally
a.reduced the capital balance of Zig and Jowa after the admission of Lix. What is the percentage of Lix’s interest in the firm?
b.had no effect to the capital balance of Zig and Jowa a. 40,00%
c.was recorded as debit to bonus c. 33.33%
d.was recorded as expense b. 33.71%
d. 35.71%
17.Statement 1: As a rule, the personal assets of the partners shall first be applied to their
respective personal assets of the partners shall first be applied to their respective personal 22. Based on the above case, what is the capital balance of Ro, Que and Lix in the partnership?
creditors. a. P50,000 each
Statement 2: In general, insolvency arises when a business (or individual) cannot pay b. P40,000, P50,000 and P60,000, respectively
outstanding obligation as they mature. c. P40,000, P50,000 and P50,000, respectively
a.Only statement 1 is true. d. P46,667 each
b.Only statement 2 is true.
c.Both statements are true 23.If the original partnership capital is P100,000 and the new partner is admitted by investing P10,000
d. Both statements are false. for 20% interest in the partnership under bonus method, the newpartnership’s accounting elements
would be
Net assets
18. If bonus is trace is traceable to the existing partners, it is allocated among them according
Total capital
to the
a.P125,000; P125,000
a. profit or loss agreement of the existing partnership
b.P125,000 ;P110,000
b. profit or loss agreement of the new partnership
c.P110,000; P110,000
c. capital ratio of existing partners
d.P100,000; P100,000
d. goodwill to incoming partner
24. If the total assets of the existing partnership is P500,000 and the new partner is admitted by
19.Which of the following best describes the admission of new partner by investing an
investing P100,000 for 20% interest in the partnership, under bonus method the new basic accounting
amount more than his capital credit under the bonus method?
elements of the partnership is described as
Net assets
Net assets
Total capital
Total capital
a.No effect; Increase
a. P500,000; P600,000
b.Increase; Increase
b.P600,000; P600,000
c.Decrease; Decrease
c.P625,000; P625,000
d.No effect; No effect
d.P625,000; P600,000
20.Which of the following best describes the admission of a new partner by investing an
25.Suppose that the old partnership of A & B reported the following:
amount lesser than his capital credit under the bonus method?
Partners
Net assets
Capital
Total capital
Profit and loss ratio 200,000
AP200,000; 40% 40%
BP 300,000; 60% Upon retirement of X he is paid P165,000. If they agreed that bonus is to be recognized,
If C is to be admitted for 20% interest in the partnership’s asset and profit by investing P125,000, the partnership’s total capital balance after retirement of X would be
then new profit and loss ratio of the new partnership without specific agreement between A a. P360,000
and B would be: b. P345,000
A c. P295,000
B d. P290,000
a.40%; 60%
b.40%; 60% 29.The existing capital balances of Abnoy, Bitoy and Caloy prior to retirement of Abnoy
c.32%; 48% were as follows:
d.33%; 33% Partners
Capital
26.If an existing partnership admits a new partner for a 1/5 interest in the partnership’s total Profit and loss ratio
agreed capital of P40,000 for an investment of P10,000, the admission of new partner will Abnoy
result in the recognition of P150,000
a.bonus to the old partners if the total net assets contributed amounted P40,000 20%
b.bonus to the new partner if the total net assets contributed were value at P40,000. Bitoy
c.bonus to the new partner if the total net assets contributed by old partners amounted to 200,000
P30,000. 30%
d.no bonus if the total net assets contributed by the old partners were appraised at P30,000. Caloy
250,000
27. Before the admission of C, the partnership of A and B reported a net asset of P180,000 50%
which A and B partners contributed equally. C is admitted by investingP60,000 for capital Abnoy retired from the partnership by selling his whole interest in he partnership to Doy
credit of P80,000. Which of the following is the effect under bonus method? for P120,000. This retirement of Abnoy will result in the total partnership’s assets and
The above transaction will effect a capital as:
a.decrease on the capital balances of the old partner amounting to P10,000 each. Net assets
b.bonus of P20,000 to the new partner. Total capital
c.balance of P80,000 capital to all of the partners. a.P450,000; P450,000
d.All of the above b. P480,000; P480,000
c. P600,000; P600,000
28.The capital balances and profit/loss sharing of X, Y, and Z just before the retirement of X d. P720,000; P720,000
are
Partners 30.The existing capital balances of Ali, Billy and Clay prior to retirement of Ali were as
Capital follows:
Profit and loss ratio Partner
X Capital
P150,000 Profit and loss ratio
30% Ali
Y P100,000
160,000 25%
30% Billy
Z 200,000
35% B
Clay C
300,000 Capital balances
40% P100,000
Ali retired from the partnership by selling his whole interest in the partnership to Billy P200,000
and Clay for P120,000. This retirement of Ali will result in the total partnership’s assets P300,000
and capital as: Profit and loss ratio
Net assets 20%
Total capital 30%
a. P480,000; P480,000 50%
b. P500,000; P500,000 D is to be admitted to the partnership by direct purchase of 20% each of the existing
c.P600,000; P600,000 partners’ capital for P100,000. The net assets of the partnership right after the admission
d.P720,000; P720,000 of D would be
a. P340,000
31.Gerry and Narda are partners who have a capital of P90,000 each and share profits and b. P300,000
losses equally. They offer to admit Art for a one third interest in the firm upon his c. P600,000
investment of P60,000. Under the bonus method, what is the total agreed capital of the d. P480,000
Partnership?
a. P180,000 34.The existing capital balances of old partners prior to admission of D re as follows:
b. P240,000 Partners
c. P270,000 A
d. P150,000 B
C
32.Ba and Ka are partners who share profit and losses in the ratio of 7:3, respectively. On Capital balances
December 31, 200C, their respective capital accounts were as follows: P200,000
BaP350,000 P280,000
Ka 300,000 P320,000
Total P650,000 D is to be admitted into the partnership by investing P200,000 for 18% interest in capitall
On the date, they agreed to admit Daw as a partner with a one-third interest in he capital and profits of the partnership for this investment. The assets of the partnership are not to
and profits and losses, and upon his investment of P250,000. Under the bonus method, be revalued. Under the bonus method the total partnership’s capital after admission of D
what are the capital balances of Ba, Ka and Daw immediately after the admission of Is
Daw? a. P800,000
Ba, Capital b. P975,610
Ka, Capital c. P1,000,000
Daw, Capital d. P 650,000
a.P350,000; P300,000; P325,000
b.P315,000; P285,000; P300,000 35. The capital balances in the FSH are Farrah’s capital P600,000, Sarrah’s capital P500,000,
c. P316,000; P283,333; P300,000 and Hannah capital P400,000, and income ratios are 5:3:2, respectively. The FISH Partnership is
d.P350,000; P300,000; P250,000 formed by admitting Irish into the firm with a cash investment of P600,000
for a 25% capital in admitting Irish is
33.The existing capital balances of old partners prior to admission of Dare as follows: a. P100,000
Partners b. P 75,000
A c. P 37,500
 38. The total amount of the new partnership total capitalization is
d. P 15,000 a. P1,500,000
b. P1,250,000
36.Dunn and Grey are partners with capital account balances of P60,000 and P90,000 c. P1,200,000
respectively. They agree to admit Zorn as a partner with a one-third interest in capital and d. P1,000,000
profits, after agreed revaluation of partnership’s assets, for his investment of P100,000.
The increase in Grey’s capital as a result of the revaluation of partnership’s assets for the 39.The amount of bonus to V is
admission of Zorn is a. P250,000
a. P20,000 b. P200,000
b. P30,000 c. P150,000
c. P50,000 d. P 50,000
d. P66,667
40. The amount of positive (negative) asset revaluation is
37.On June 30,200A, the partnership statement of financial position of Coll, Maduro, and a. P300,000
Prieto is as follows: b. P250,000
Assets, at cost c. P200,000
P180,000 d. P150,000
P&L Ratio —--------------------------------------------------------------------------------------------------------------------------------------
Coll, Loan 9,000 1st Final Departmental Examinations Reviewer A.Y. 2022-2023 Subject Code: ACCO 101 Course
Coll, Capital 20%; 42,000 Subject: Financial Accounting and Reporting
Maduro, Capital 20%; 39,000 1. What is a partnership?
Prieto, Capital 60%; 90,000 a) A legal form of business operation between two or more individuals who share
Coll has decided to retire from the partnership. By mutual agreement, the assets are to be management and profits
adjusted to their fair value of P216,000 at June 30, 200A. It was agreed that the b) A connection or cooperative link between people or organizations
partnership would pay Coll P61,200 cash for Coll’s interest, including Colls’s loan which c) A group of people who work together in an organized way for a shared purpose
is to be repaid in full. Bonus to Coll is to be recognized. After Coll’s retirement, what is d) Denoting a worker or resource designed to serve the people of a particular area
the balance of Maduro’s Capital account?
a. P36,450
2. During the formation of a partnership, both partners were given capital credits equal to their capital
b. P39,000
contributions. This means that the _______ method of partnership was applied.
c. P45,450
d. P46,200 a) Bonus
b) Full Investment
Items 38 to 40 are based on the following: c) Transfer of Capital
S (50%) d) Goodwill
G (50%)
Beginning capital 3. Which of the following is not closed in the closing process for a partnership?
P540,000 a) Service Revenue
P460,000 b) A, Capital
S and G partners would like to accept Vas a new partner to contribute cash amounting to c) Income Summary
P250,000 for a capital credit of P300,000 representing 20% of the new partnership total d) A, Drawing
capitalization.
4. Statement 1: In the absence of an agreement, both the capitalist and industrial partners shall share d) Are paid to preference shareholders if sufficient funds remain after payment of ordinary
in the profits in proportion to their capital contributions. dividend
Statement 2: If only the division of profits is agreed upon, the division of losses will be the same as the
agreement on the division of profits. 10. The effect of recording a 100% share dividend would be to
a) Only statement 1 is true a) Decrease the current ratio, decrease working capital and decrease book value per share.
b) Only statement 2 is true b) Leave inventory turnover unaffected, increase earnings per share and increase book value
c) Both statements are true per share.
d) Both statements are false c) Leave working capital unaffected, decrease earnings per share and increase book value per
share.
5. Salary allowances stipulated in the partnership agreement are considered only if income is sufficient d) Leave working capital unaffected, decrease earnings per share and decrease book
to cover such allowances. value per share.
a) True
b) False 11. How would the retained earnings be affected by the acquisition and the subsequent resale of
treasury shares at more than its cost, respectively?
6. The following conditions will result to partnership dissolution by a change in ownership structure a) Decrease, Decrease
except b) Decrease, No Effect
a) Admission of an old partner c) No Effect, Decrease
b) Retirement of a partner d) No Effect, No Effect
c) Death of an old partner
d) Incorporation of a partnership 12. Statement 1: There are at least 10 required to form the corporation who are called incorporators.
Statement 2: The corporation issues all the delinquent shares to the highest bidder.
7. The profit of the partnership is transferred to the drawing accounts of the partners if the intention of a) Statement 1 is false; Statement 1 is true
the partners is: b) Statement 1 is true; Statement 1 is false
a) Make the profit a part of permanent capital c) Both statements is true
b) Increase the partner’s available funds for personal drawing d) Both statements is false
c) Keep the capital account intact for investments and permanent withdrawals
d) Make a personal withdrawal later 13. When a new partner purchases an interest directly from an existing partner, the assets of the
partnership will?
8. If a new partner purchases his interest from an old partner, the only entry on the partnership books is a) Not change
a credit to the purchaser’s capital account with a debit to the b) Be divided into 2
a) Bonus account c) Increase by the amount invested
b) Capital accounts of other partners d) Decrease by the amount paid
c) Capital account of the selling partner
d) Cash account 14. Statement 1: The admission of a new partner calls for the amendment of the old partnership
agreement, but not dissolve the old partnership.
9. Noncumulative preference dividends in arrears Statement 2: When two single proprietors decide to combine their businesses, GAAP usually require
a) Are not paid and not disclosed that noncash assets be recorded at their market value as of the end of the reporting period.
b) Must be paid before any other cash dividends can be distributed a) True; True
c) Are disclosed as liability until paid b) True; False
c) False; True
 d) False; False b) Statement 1 is False; Statement 2 is True
c) Both statements are False
15. Statement 1: External partnership creditors have priority over the personal assets of a partner. d) Statement 1 is True; Statement 2 is False
Statement 2: A capital deficiency can be eliminated by offsetting against a partner’s loan.
a) True; True 21. Killua and Gon are partners who share profits equally and losses in a 2:1 ratio. If they have
b) True; False beginning capital balances of P240,000 and P168,000 respectively, made no additional investments
c) False; True nor withdrawals, and suffered an unprofitable year with a loss of P36,000, their capital balances will
d) False; False be?
a) Killua P264,000 Gon P180,000
16. Installment liquidation has the following restricted interests, except: b) Killua P228,000 Gon P144,000
a) Cash withheld c) Killua P216,000 Gon P156,000
b) Unpaid liabilities d) Killua P252,000 Gon P192,000
c) Remaining unsold assets
d) Debit balances in capital 22. On January 1, 2021, Princess and Nicole formed a partnership and agreed to share profits and
losses in the ratio of 3:7, respectively. Princess contributed a parcel of land that cost P120,000. Nicole
17. Statement 1: All incorporators are shareholders but not all shareholders are incorporators. contributed P150,000 cash. The land was sold for P180,000 on January 1, 2021, immediately after the
Statement 2: A corporation, like partnership, may be formed by the mere agreement of five or more formation of the partnership. What amount should be recorded in Princess’ capital account on formation
persons. of the partnership?
a) Both statements are True. a) P150,000
b) Statement 1 is False; Statement 2 is True b) P120,000
c) Both statements are False. c) P165,000
d) Statement 1 is True; Statement 2 is False d) P180,000

18. An artificial being created by operation of law formed by five or more persons. 23. Zero, an active partner in the Knights Partnership, receives an annual bonus of 20% of the
a) Corporation partnership income after deducting bonus. For the year ended, December 31, 2022, partnership
b) Incorporators income before bonus amounted to P180,000. The bonus of Zero for the year 2022 is
c) Partnership a) P30,000
d) Sole Proprietorship b) P31,667
c) P0
19. An entity declared a cash dividend on its share capital in December of the current year, payable in d) P36,000
January of the next year. Retained Earnings
a) Decrease on the date payment 24. Blue, a partner of the BOW Partnership, has a 45% participation in profit. Blue’s capital account had
b) Increase on the date of declaration a net decrease of P120,000 during the year 2020. In 2020, Blue withdrew P300,000 (charged against
c) Not be affected on the date of declaration his capital account) and invested in the partnership P90,000 cash. Determine the profit of the BOW
d) Not be affected on the date of payment Partnership for the year 2020.
a) P200,000
20. Statement 1: Preference share dividends are usually paid prior to payment of ordinary share b) P733,333
dividends. c) P266,667
Statement 2: Paid in capital is capital from contributions by shareholders. d) P700,000
a) Both statements are True
25. Corpse is the managing partner of J10 Partnership. He is given an incentive of 10% bonus on profit. b) P220,000
The profit of the partnership is 756,000 and the income tax rate is 30%. Determine the amount of bonus c) P100,000
if it is computed based on profit after deduction for bonus but before deduction for income tax. d) P180,000
a) P77,600
b) P98,182 30. The partnership agreement of Megan and Rozen provides that interest at 10% per year is to be
c) P92,280 credited to each other on the basis of average capital balances. A summary of Megan’s capital account
d) P70,032 for the year ended December 31, 2021, is as follows: Balance, Jan 1 P1,000,000 Additional
Investment, July 1 200,000 Withdrawal, Oct 1 140,000 Balance, Dec 31 P1,060,000 What amount of
For items 26-28 On April 4, 2022, North, East, and West formed a partnership combining their interest should be credited to Megan’s capital account for 2021?
businesses. North contributed cash of P240,000. East contributed property with a carrying amount of a) P1,065,000
P280,000, original cost of P360,000, and a fair value of P400,000. The P50,000 mortgage attached to b) P106,000
the property became the partnership’s responsibility. West contributed equipment with the carrying c) P1,060,000
amount of P110,000, original cost of P190,000, and fair market value of P250,000. The partners agreed d) P106,500
to share profits and losses equally.
31. For the year 2020, the partnership books of Deku, Kacchan, and Shoto showed a profit of
26. How much is the investment of East? 1,200,000. It was disclosed, however, that the following errors were made. Determine the new profit or
a) P350,000 loss of the partnership. 2019 2020 Accrued expenses not recorded at year-end P25,000 Inventory
b) P400,000 overstatement P96,000 Purchases not recorded 36,000 Income received in advance, not recorded
c) P450,000 30,000 Unused supplies not adjusted at year-end 20,000
d) P280,000 a) P1,257,000
b) P1,165,000
27. How much is the total assets of the partnership? c) P1,103,000
a) P840,000 d) P1,143,000
b) P600,000
c) P890,000 32. Takao is investing in a partnership with Midorima. Takao contributes equipment that originally cost
d) P630,000 P70,000, has a book value of P45,000, and a fair market value of P58,000. The entry that the
partnership makes to record Takao’s initial contribution includes a
28. How much is the implied bonus to North if the profit and loss ratio were to also apply to the a) Debit to equipment of P70,000
partner’s capital interest? b) Debit to Takao, Capital of P45,000
a) P0 c) Debit to equipment of P58,000
b) P40,000 d) Debit to Takao, Capital of P58,000
c) P60,000
d) P80,000 33. Karma and Nagisa, partners, allow monthly salaries, P4,000 & P6,000, respectively, and 10%
interest on beginning capital, P400,000 & P320,000, respectively, and then divide any remaining profit
29. Akashi and Bokuto formed a partnership in the year 2021. The partnership agreement provides for equally. On a net profit of P200,000, the respective shares would be
annual salaries of P180,000 for Bokuto and P120,000 for Akashi. The partners share profits equally a) P100,000 and P100,000
and losses in a 60:40 ratio. The partnership had a profit of P250,000 for the year 2021 before any b) P92,000 and P108,000
salaries to partners. What amount should be credited to Bokuto as a result of the distribution of the c) P103,000 and P97,000
partnership profit? d) P96,000 and P104,000
a) P150,000
34. Corpse, Tina, and Foolish share profits and losses in the ratio of 2:3:5, respectively. Their c) P78
partnership realized a profit of P1,450,000 during the year. Tina, with a beginning capital balance of d) 100
P1,000,000 withdrew P180,000 during the year. Tina’s ending capital balance is
a) P1,225,000 39. With the same given above, determine the book value per ordinary share with respect to preference
b) P1,110,000 share as to assets.
c) P1,290,000 a) P45
d) P1,303,333 b) P85
c) P65
35. Youngro and Sooho entered into a partnership agreement in which Youngro gets have a 70% d) P0
interest in capital and profits while Sooho gets 30%. Youngro contributed the following: Building: Cost
of P225,000, Fair Market Value (FMV) P200,000; Equipment: Cost of P60,000, FMV P85,000; Land: 40. Entity A received a subscription for 7,000 shares at 15 per share on March 31, 20x1. Entity A's
Cost of P400,000; FMV P340,000. Sooho contributes P300,000 cash to the partnership. How much is shares have a par value 10 per share. Entity A collected the subscription receivable on May 15, 20x1.
the capital interest of Youngro in the new partnership? Which of the following statements is correct?
a) P625,000 a) Entity A should credit share premium for 35,000
b) P925,000 b) Entity A should credit share premium for 70,000
c) P227,500 c) Entity A should debit share premium for 35,000
d) P647,500 d) Entity A should debit share premium for 70,000

36. Using information in no. 35, how much is the implied bonus? 41. Entity A reacquires 3,000 of its own shares for 15 and immediately retires them. The shares have
a) P25,200 par value of 10 and were originally issued at 40 per share. The journal entry to record the retirement of
b) P277,500 the shares includes which of the following?
c) P22,500 a) Debit to Retained earnings for 75,000
d) P300,000 b) Credit to Treasury share for 120,000
c) Debit to Share capital for 30,000
37. Blue company provided the following shareholders’ equity at the year-end: Share Capital, P10 d) Credit to Share premium - retirement for 55,000
P250,000 Share Premium 100,000 Retained Earnings - Unappropriated 1,000,000 Retained Earnings –
Appropriated for Contingencies 600,000 Revaluation Surplus 400,000 Total P2,350,000 Compute for 42. Entity A receives 40,000 shares with par value of 150 and fair value of 250 on November 2, 20x1.
the book value per share. The shares have fair value of 170 per share on December 31, 20x1. How much additional capital is
a) P90 recognized in Entity A's December 31, 20x1 balance sheet in having resulted from the receipt of the
b) P94 donated shares?
c) P95 a) 6,000,000
d) P100 b) 10,000,000
c) 6,800,000
For items 38-39 d) 0
38. Blue Company reported the following shareholders’ equity on December 31, 20x1 Preference
Share Capital, 10% P40 par P3,000,000 Ordinary Share Capital, P100 par P5,000,000 Retained 43. Entity A was incorporated on January 1, 20x1 with an authorized capitalization is 1,000,000 divided
Earnings (Deficit) (750,000) Determine the book value per preference share with respect to preference into 100,000 shares with par value of 10 per share. The following were the share related transactions of
share as to assets. Entity A during the year. Cash subscriptions of 30,000 shares at 12 per share Subscriptions of 40,000
a) P75 shares at 18 per share. Seventy-five percent of the subscription price were collected during the year.
b) P85 How much is the Entity A's total shareholders' equity after recording the transaction above?
 a) 900,000 d) P248,000; P126,000; P47,000
b) 680,000
c) 540,000 48. Acad and Dev sell 1/4 of their partnership interest to Comm receiving P500,000 each. At the time of
d) 360,000 admission, Acad and Dev each had a P1,000,000 capital balance. The admission of Comm will cause
the net partnership assets to…
44. Liabilities of P90,000 existed at the beginning of a period. During the period, liabilities recorded at a) increase by P500,000
P44,000 were settled for P38,000, and new liabilities of P12,000 were incurred. At statement of b) increase by P1,000,000
realization and liquidation would show "liabilities not liquidated" of: c) remain at P1,000,000
a) P46,000 d) remain at P2,000,000
b) P58,000
c) P64,000 49. We Bare Bears had the following balances before liquidation on February 20, 2023: Cash P24,000;
d) P102,000 Non-cash assets, P84,000; Liabilities, P12,000; Grizzly, Loans, P2,400; Grizzly, Capital (30%), P9,600;
Panda, Capital (50%), P48,000, Ice Bear, Capital (20%), P36,000. Liquidation expenses paid amounted
45. The partners G, P, and S have capital balances of P210,000, P195,000, and P270,000, while profit to P1,000. Grizzly is solvent, while Panda and Ice Bear are insolvent. Compute the total payment for
and loss are divided in the ratio of 30%, 40% and 30%. P is to withdraw from the partnership after each partner (including loans) if non-cash assets were realized at P36,000.
receiving P245,000, including a loan of P25,000, for her capital interest. Using the asset revaluation a) P0; P24,000; P26,400
method, how much is the amount of asset revaluation increase (decrease)? b) P0; P23,500; P26,200
a) P62,500 c) P5,100; P24,000; P26,400
b) (P82,500) d) P5,100; P19,860; P24,740
c) P125,000
d) (P165,000) 50. On January 24, 2023, partners Murphy, Diaz and Parker decided to liquidate their partnership. Prior
to this, the partners had cash of P30,000, liabilities amounting to P50,000, including a P14,000 loan to
46. We, Bear, and Bares are partners with profit/loss sharing ratio of 35:30:35. On January 1, 2023, Parker, and their capital balances were Murphy - P36,000; Diaz - P54,000; and Parker - P18,000. The
their capital balances are as follows: We, P330,000; Bear P250,000; and Bears P520,000. Each of the profit/loss ratio was 3:3:4. In the Cash Priority Program, first allocation is given to?
partners withdrawn P10,000 during 2022, and their operation resulted in a net loss of P20,000. Bear a) Murphy for P 12,000
retired from the partnership and received P270,000 for his interest. Assuming the assets were b) Diaz for P 18,000
revalued, what is the balance of We’s capital account after the retirement of Bear? c) Parker for P 12,000
a) P155,000 d) Murphy for P 36,000
b) P355,000
c) P555,000 51. On January 31, 2023, Amanda, Barry, Chloe and Darrell decided to liquidate their partnership, and
d) cannot be determined they accordingly converted the noncash assets into cash. The partners have capital balances of
Amanda, P10,000; Barry, P250,000; Chloe, P250,000; and Darrell, P90,000, and profit/loss sharing
47. North, South, and East are partners with capital balances of P252,000, P126,000, and P42,000 ratio of 3/21, 4/21, 6/21 and 8/21. After paying the liabilities amounting to P60,000, they have P222,000
respectively. They share profits and losses in the ratio of 60%, 30% and 10%. On February 3, 2023, the to divide. How much cash should Amanda receive?
partners agree to sell West 20% of their respective capital and profit and loss interests for the amount a) P0
of P90,000, which is paid directly to individual partners. After admission of West, what are the capital b) P138,800
balances of North, South, and East? c) P83,200
a) P184,000; P72,000; P25,000 d) P44,000
b) P201,600; P100,800; P33,600
c) P216,000; P108,000; P36,000
52. Apple, Boy and Cat are partners with capital balances of P25,000, P38,000, and P19,000, 56. The shareholders’ equity of Avatar Inc., as of December 31, 2023 consists of 10% Preference
respectively. They share profit or loss in the ratio of 20%, 30%, and 50%. On January 25, 2023, the Shares (cumulative and participating) with outstanding shares of 6,000, P100 par value; Ordinary
partners decided to liquidate, and realize non-cash assets into P34,500 cash. After paying the liabilities Shares of 10,000 with P40 par value and Retained Earnings of P800,000. Dividends were in arrears for
amounting to P8,000, they have P32,600 to divide. What is the book value of the non-cash assets? 2 years at the start of 2023. Dividends declared for 2023 amounted to P 200,000. How much will be in
a) P0 arrears at the end of 2023?
b) P61,900 a) P200,000
c) P83,900 b) P250,000
d) P90,000 c) P60,000
d) P0
53. On July 1, 2023, Mingyu Corporation exchanged 30,000 shares of its P 500 par value of Ordinary
Shares for land. A few months ago, the land was appraised by Mr. Vernon, an independent appraiser, 57. The Liwayway Company showed the following balances related to an issuance of OSC OSC, P 50
at P 5,000,000. Branded shares are currently traded at the stock exchange at P 300. How much should par, 200,000 shares P 10,000,000 OS Premium P 4,000,000 The company retired 2,000 shares of
be debited to the land account? OSC. How many shares are the number of shares issued and outstanding immediately after
a) P5,000,000 retirement?
b) P15,000,000 a) P200,000 shares
c) P9,000,000 b) P198,000 shares
d) P30,000 c) P50,000 shares
d) P1,000 shares
54. The shareholders’ equity section of Jungwoon Company as of December 31, 2023 before closing
its books and recording the 2023 dividends is as follows: Ordinary share, 100,000 shares issued and 58. Jungkook Corporation released a partial list of account titles and balances as of December 31,
outstanding P 3,500,000 Ordinary share premium P 4,000,000 Retained earnings P 6,000,000 2023. With this information, how much is the total Share Capital? Cash P520,000 Notes Receivable
Jungwoon’s board of directors declared a 20% share capital dividend on December 31, 2023 when the P30,000 Preference Share Capital, P100 par, 10,000 shares authorized P550,000 Ordinary Share
market value of each share was P70. The corporation’s 2023 operations resulted in a loss of P900,000. Capital, P 20 par, 100,000 shares authorized P1,000,000 Preference share premium P150,000
What amount should Jungwoon report as retained earnings as of December 31, 2023? Ordinary share premium P250,000 Retained Earnings P350,000 Accounts Payable P100,000 Sales
a) P4,500,000 P900,000
b) P13,000,000 a) P1,950,000
c) P13,500,000 b) P1,550,000
d) P600,000 c) P1,000,000
d) P400,000
55. In 2023, Seventeen Corporation issued for P150 per share, 20,000 convertible preference shares of
P150 par value. One preference share may be converted into three ordinary shares of P 25 par value 59. Using information in no. 58, how much is the total Additional Paid in Capital?
at the option of the preference shareholder. On December 31, 2023, all of the preference shares were a) P1,950,000
converted into ordinary shares. The market value of the ordinary share at the conversion date was P b) P1,550,000
40. What amount should be credited to ordinary share capital on December 31, 2023? c) P1,000,000
a) P1,240,000 d) P400,000
b) P1,500,000
c) P500,000 60. Using information in no. 58, how much is the total Shareholders’ Equity?
d) P0 a) P1,950,000
b) P2,300,000
c) P1,000,000
d) P400,000
—--------------------------------------------------------------------------------------------------------------------------------------
 Answer: P54,000

2. The following information pertains to CPA Partnership of Cathy, Philip and Amor:

Cathy, Capital (20%) P200,000

Philip, Capital (30%) 200,000

Amor, Capital (50%) 300,000

On this date, the partners agreed to admit Leah into the partnership. Assuming Leah purchased 50% of
the partners’ capital and pays P500,000 to the old partners, how would this amount be distributed to
them?

Answer: P130,000 to Cathy, P145,000 to Philip, and P225,000 to Amor

3. C and P are partners with profit and loss ratio of 75:25 and capital balances of P525,000 and
P262,500, respectively. A is to be admitted into the partnership by purchasing a 20% interest in the
capital, profits and losses for P315,000. Assuming that no asset revaluation is to be made, the capital
balances of C and P, respectively, after admission of A are:

Answer: P420,000 and P210,000

4. C, P and A share profits in the ratio of 2:3:5. On January 31, A opted to retire from the partnership.
The capital balances on this date follow:

C P175,000
—--------------------------------------------------------------------------------------------------------------------------------------
P P280,000
Practice Problems on Partnership Dissolution
A P245,000
1. C and P are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2022,
How much will be the capital balance of P, assuming A sold his interest to P for P100,000?
their respective capital accounts were as follows:
Answer: P525,000
C 60,000
5. C, P and A share profits in the ratio of 2:3:5. On January 31, A opted to retire from the partnership.
P 50,000
The capital balances on this date follow:
On that date, A was admitted as a partner with one-third capital interest in capital and profits for an
C P175,000
investment of P40,000. The new partnership began with total capital of P150,000. Immediately after A’s
admission, C’s capital should be:
P P280,000
 A P245,000 On January 1, 2023, D is admitted to the partnership by investing P1,000,000 to the partnership for
20% capital interest. If all the assets of the existing partnership are properly valued, what is the capital
How much is to be debited from C assuming A is paid P273,000 by the partnership in full settlement of balance of C after the admission of D?
his interest?
Answer: P960,000
Answer: P11,200
8. Using the same information given in No. 7 but assuming that the existing asset of ABC Partnership
6. On December 31, 2022, the Statement of Financial Position of ABC Partnership provided the is not properly valued, what is the capital balance of B after the admission of D?
following data with profit or loss ratio of 1:6:3:
Answer: P1,300,000
Cash P1,000,000
9. On December 31, 2022, CPA Partnership’s Statement of Financial Position shows that C, P and A
Noncurrent Assets 2,000,000 have capital balances of P500,000, P300,000 and P200,000 with profit or loss of 1:3:6. On January 1,
2023, A retired from the partnership and received P350,000. At the time of A’s retirement, an asset of
Total Liabilities P 600,000 the partnership is undervalued. What is the capital balance of C after the retirement of A?

A, Capital 900,000 Answer: P525,000

B, Capital 800,000 10. The following condensed balance sheet is presented for the partnership of A and B, who share
profits and losses in the ratio of 60:40, respectively:
C, Capital 700,000

On January 1, 2023, D is admitted to the partnership by purchasing 40% of the capital interest of B at
a price of P500,000.What is the capital balance of B after the admission of D on January 1, 2023?
Cash P 45,000 Accounts Payable P 120,000
Answer: P480,000
Other Assets 625,000 A, Capital 348,000
7. On December 31, 2022, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 1:6:3:
B, Loan 30,000 B, Capital 232,000
Cash P1,300,000

Noncurrent Assets 2,000,000 P 700,000 P 700,000

Total Liabilities P 300,000

A, Capital 1,400,000
The assets and liabilities are fairly valued on the balance sheet. A and B decide to admit C as a new
B, Capital 700,000 partner with a 20% interest. No bonus is to be recorded. What amount should C contribute in cash or
other assets?
C, Capital 900,000
Answer: P145,000