Chapter 17 18 Exam Partnership Formation and Operations Sept. 15 2021 - Attempt Review

10/15/21, 2:11 PM Chapter 17-18 Exam - Partnership Formation and Operations (Sept.
15, 2021): Attempt review
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/ II. Chapter 18: Partnership Operations / Chapter 17-18 Exam - Partnership Formation and Operations (Sept. 15, 2021)
Started on Wednesday, September 15, 2021, 10:05 AM

State Finished
Completed on Wednesday, September 15, 2021, 11:24 AM
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Grade 54.00 out of 83.00 (65%)
Question 1
Correct Mark 1.00 out of 1.00
If
a partner is a capitalist/industrialist partner, he gets just and equitable
share as an
industrial partner and another share as a capitalist partner
according to his capital
contribution.
Select one:
True 
False
The correct answer is 'True'.
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10/15/21, 2:11 PM Chapter 17-18 Exam - Partnership Formation and Operations (Sept. 15, 2021): Attempt review
Question 2
Incorrect Mark 0.00 out of 2.00
Partner Terry
first contributes P200,000 of capital in an existing partnership on February
1,
2020. On June 1, 2020, the partner contributed another P200,000. On September 1,
2020, the partner withdraw
P150,000 from the partnership. Withdrawals in excess of
P50,000 are chargeable
to the partner’s capital account. The partnership’s fiscal year end is
December
31. The annual weighted-average capital
balance is
a. P300,000
b. P266,667
c. P250,000
d. P283, 333

The correct answer is:

P266,667
Question 3
On January 1, 2019,
A, B, C, and D formed ABCD Trading Co., a partnership with capital
contributions as follows: A, P500,000; B, P250,000; C, P250,000; and D,
P200,000. The
partnership contract provided that each partner shall receive a
5% interest on contributed
capital, and that A and B shall receive salaries of
P50,000 and P30,000, respectively. The
contract also provided that C shall receive a minimum of P25,000 per annum, and
D a
minimum of P60,000 per annum, which is inclusive of amounts representing
interest and
share of remaining profits.
The balance of the profits shall be distributed to A, B, C, and D
in a
3:3:2:2 ratio. What amount must be
earned by the partnership, before any charge for
interest and salaries, so that
A may receive an aggregate of P125,000 including interest,
salary and share of
profits?

Select one:
a. P 323,334
b. P300,000
c. P306,667

d. P166,667
The correct answer is: P 323,334
Question 4
Partnership
residual profit and loss percentages have to be (always) the last component
applied in the profit and loss allocation process.
Select one:
True 
False
Question 5
A
partner usually retains title to assets contributed to a partnership, so that
certain assets
may be identified as belonging to a given partner.
Select one:
True
False 
The correct answer is 'False'.
Question 6
When
salary and interest allocations exceed profit, a loss has occurred.
Select one:
True 
False
Question 7
A
bonus exists when the capital account of a partner is credited for an amount
greater than
or less than the fair value of his contributions.
Select one:
True 
False
Question 8
A
stipulation that excludes one or more partners from any share in the profits or
losses is
valid.
Select one:
True
False 
Question 9
From the choices given on the right corner of this question box, choose the correct answer
that best describes each of the question stated below:
This
means a partner is an agent and has the authority to act mutual agency
for the partnership
and to enter into contracts on its behalf.

When
Accounts Receivables are brought into the new gross amount
partnership business, it is
normally recorded at ________.

A
means of achieving a fair division of profit among the
salary allowance
partners based on the
time and talents devoted to the
partnership business.

This
is given to partners that give recognition to differences on interest allowance
capital
contributions by partners.

In
the loss sharing, the loss of the partnership should be
loss-sharing ratio
divided among the
partners in accordance with the
_____________?

A
basis for allocating partnership profits or losses that reflects
average capital
capital
actually available for use by the partnership during the
year.

This
account is credited at the fair value of the net assets of the partner’s capital account
partnership.
Is a theory that deal with the question of who the entity is.
entity theory

Noncash
drawings are valued at _______________, at the date of market values
the withdrawals.

When
assets that are based on depreciation (and amortization)
net amount
are brought into the
new partnership business, these assets
should be recorded at __________.

A
statement that reports the assets, liabilities, and equity on an
statement of financial position
entity and
which shows its financial position or condition at a
given date.

If
there is no agreement between partners as to the sharing of
profit-sharing ratio
losses, the basis
of the sharing of the loss is based on the
__________?

The correct answer is: This

means a partner is an agent and has the authority to act for the partnership
and to enter
into contracts on its behalf. → mutual agency, When
Accounts Receivables are brought into the new partnership
business, it is
normally recorded at ________. → gross amount, A
means of achieving a fair division of profit among
the partners based on the
time and talents devoted to the partnership business. → salary allowance, This
is given to
partners that give recognition to differences on capital
contributions by partners. → interest allowance,
In
the loss sharing, the loss of the partnership should be divided among the
partners in accordance with the
_____________? → loss-sharing ratio, A
basis for allocating partnership profits or losses that reflects capital
actually available for use by the partnership during the year. → average capital, This
account is credited at the fair
value of the net assets of the partnership. → partner’s capital account, Is a theory that deal with the question of who
the entity is. → entity theory, Noncash
drawings are valued at _______________, at the date of the withdrawals.
→ market values, When
assets that are based on depreciation (and amortization) are brought into the
new partnership
business, these assets should be recorded at __________. → net amount, A
statement that reports the assets,
liabilities, and equity on an entity and
which shows its financial position or condition at a given date. → statement of
financial position,
If
there is no agreement between partners as to the sharing of losses, the basis
of the sharing of the loss is based on the
__________? → profit-sharing ratio
Question 10
Partnerships
are required to have interest on capital clauses in the articles of
partnership.
Select one:
True 
False
Question 11
It
is possible for a partner’s capital account to increase as a result of the
allocation of a loss.
Select one:
True 
False
Question 12
Partially correct Mark 8.00 out of 10.00
On June 1, 2021, Ramirez

and Martinez formed a partnership with each contributing the
following assets:
Ramirez Martinez
Cash P540,000 P468,000
Machinery and Equipment 960,000 1,320,000
Building - 1,250,000
Furniture and fixtures 828,000 -
The building is subject to a mortgage loan of P650,000,

which is to be assumed by the partnership.
The partnership
agreement provides that Ramirez and Martinez share
profits and losses 30% and 70%, respectively.
In the balance sheet of the partnership, building will be

P600,000

The journal entry recognizing the investment of Martinez include a credit to Martinez, P2,388,000
Capital of
In the balance sheet of the partnership, machinery and equipment will be

P2,280,000

In the balance sheet of the partnership, cash will be P1,008,000


The journal entry recognizing the investment of Ramirez include a credit to Ramirez, P2,328,000
Capital of


In the balance sheet of the partnership, building will be → P1,250,000,
The journal entry recognizing the investment of Martinez include a credit to Martinez, Capital of → P2,388,000,
In the balance sheet of the partnership, machinery and equipment will be → P2,280,000,
In the balance sheet of the partnership, cash will be → P1,008,000,
The journal entry recognizing the investment of Ramirez include a credit to Ramirez, Capital of → P2,328,000
Question 13
Individuals,
partnerships, and corporations are allowed to be partners in a partnership.
Select one:
True 
False
Question 14
The
form and content of the statement of comprehensive income of a partnership
resemble
those of a sole proprietorship with no exceptions.
Select one:
True 
False
Question 15
The
interest component of partnership profit and loss allocation rewards partners
for
capital contributions.
Select one:
True 
False
Question 16
Partnership
capital and drawings accounts are similar to the corporate

Select one:
a. Paid in capital,
retained earnings, and dividend accounts.
b. Paid in capital
and retained earnings accounts.

c. Preferred and
common stock accounts.
d. Retained earnings
account.
The correct answer is: Paid in capital,

retained earnings, and dividend accounts.
Question 17
When
an agreement provides for salaries to partner/partners, salary allocations must
not
be made especially when profit is inadequate to cover salaries or there is
a loss.
Select one:
True
False 
Question 18
RR, a partner in
the RD partnership, is entitled to 40% of the profits and losses. During
2019, RR contributed land to the
partnership that cost her P50,000, but had a fair value of
P60,000. Also, during 2019, RR had drawings of
P80,000. The balance of RR’s capital
accounts was P120,000 at the beginning of the year and P150,000 at the end of
the year.
What is the partnership’s comprehensive
income (loss) for 2019?
Select one:
a. P150,000
b. P125,000

c. (P75,000)
d. (P50,000)
The correct answer is: P125,000
Question 19
In
normal circumstances, bonus to the managing partner shall be given even when
the
results of operations of the partnership are unfavorable.
Select one:
True
False 
Question 20
In a limited
partnership,
Select one:
a. The general partners have limited liability
b. All partners have limited liability
c. All but the general partners

have limited liability
d. All but the general partners have unlimited liability


The correct answer is: All but the general partners

have limited liability
Question 21
Not
all of the partners in a general partnership are personally liable for all
debts incurred
by the partnership.
Select one:
True
False 
Question 22
MM 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 salaries 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 MM would consider the choices to be equal?

Select one:
a. P165,000
b. P265,000
c. P290,000

d. P305,000
Question 23
Partnerships
are not required to pay any taxes.
Select one:
True
False 
Question 24
Partners A & B
share profits and losses equally after each has been credited in all
circumstances with annual salary allowances of P30,000 and P24,000,
respectively. Based
on this agreement,
in which of the following circumstances will Partner A benefit by
P6,000 more
than Partner B?
Select one:
a. Only if the
partnership does not incur a loss for the year.
b. Only if the
partnership has earnings of at least P6,000 for the year.
c. Only if the
partnership has net income of P54,000 or more for the year.

d. In all earnings
or loss situation.
The correct answer is: In all earnings

or loss situation.
Question 25
Which of the
following is not a component of the formula used to distribute income?
Select one:
a. After all other
allocation, the remainder divided according to the profit and loss sharing
ratio.
b. Salary allocation
to those partners working.
c. Interest on the
average capital investments.
d. Interest on notes
to partners.

The correct answer is: Interest on notes

to partners.
Question 26
Arturo Perez, a
partner in the AP Partnership, has a 30% participation in partnership
profits
and losses. Perez’s capital account has a net decrease of P60,000 during the
calendar year 2019. During 2019, Perez
withdrew P130,000 (charged against his capital
account) and contributed
property valued at P25,000 to the partnership.
What was the net
income of the AP Partnership for 2019?
Select one:
a. P150,000

b. P233,333
c. P550,000
d. P350,000
Question 27
Partnerships
are not required to prepare financial statements in accordance with Generally
Accepted Accounting Principles unless they have publicly traded debt or are
required to
follow GAAP by a creditor.
Select one:
True 
False
Question 28
Acer and Dell

formed a partnership and agreed to divide initial capital equally, even though
Acer contributed P100,000 and Dell contributed P84,000 in identifiable
assets. Under the
bonus approach to adjust
the capital accounts, Dell’s unidentifiable asset should be debited
for
Select one:
a. P8,000
b. P84,000
c. P0

d. P92,000
The correct answer is: P0
Question 29
The partnership
form of business is
Select one:
a. A taxable entity
b. A fiscal entity
c. An economic
entity

d. A separate legal
entity, just as a corporation is a legal entity
The correct answer is: An economic

entity
Question 30
Which of the
following is not a characteristic of a partnership?
Select one:
a. A partnership
requires written Articles of Partnership.
b. The partnership
itself pays no income taxes.
c. It is easy to
form a partnership.
d. Any partner can

be held personally liable for all debts of the business.

The correct answer is: A partnership

requires written Articles of Partnership.
Question 31
Interest
on loans from partners is recognized as partnership income.
Select one:
True 
False
Question 32
Net
income should always be a component in the bonus calculation.
Select one:
True 
False
Question 33
Mary admits Jane

as partner in the business. Balance sheet accounts of Mary just before
the
admission of Jane show: Cash, P26,000; Accounts Receivable, P120,000;
Merchandise
Inventory, P180,000; and Accounts Payable, P62,000. It was agreed that for purposes of
establishing Mary’s interest, the following adjustments be made: 1) an
allowance for
doubtful accounts of 3% of accounts receivable is to be
established; (2) merchandise
inventory is to be adjusted upward by P25,000, and
(3) prepaid expenses of P3,600 and
accrued liabilities of P4,000 are to be
recognized. If Jane is to invest
sufficient cash to
obtain 2/5 interest in the partnership, how much would Jane
contribute to the new
partnership?

Select one:
a. P113,980
b. P190,000
c. P95,000
d. P176,000

Question 34
Salary
allowances given to partners are normally considered expenses recognized as a
deduction in the statement of income/expenses.
Select one:
True
False 
Question 35
Partnerships
must revalue assets up and/or down when the profit and loss ratios are
adjusted.
Select one:
True 
False
Question 36
KK, SS and WW
formed a partnership on January 1, 2019. Each contributed P144,000.
Salaries were to be allowed as follows: KK, P36,000; SS, P36,000; and WW,
P54,000.
Drawings were equal to salaries
and be taken out evenly throughout the year.
With
sufficient partnership net income, KK and SS could split a bonus
equal to 25 percent of
partnership net income after salaries and bonus (in no
event could the bonus go below
zero).
Remaining profits were to be divided as follows: 30% for KK; 30% for SS,
and 40%
for WW. For the year,
partnership total comprehensive income was P144,000. What are
the capital
balances of the partners on December 31, 2019:
Select one:
a. KK, P150,600; SS, P150,600; WW, P148,800
b. KK, P186,120; SS,

P186,120; WW, P203,760
c. KK, P150,120; SS, P150,120; WW, P149,760


d. KK, P151,200; SS,

P151,200; WW, P149,400
The correct answer is: KK, P150,120; SS, P150,120; WW, P149,760
Question 37
The
proprietary theory is based on the notion that the business entity is an
aggregation of
the owners.
Select one:
True 
False
Question 38
Which of the
following is not a characteristic of the proprietary theory that influences
accounting for partnerships?
Select one:
a. Changes in the
ownership structure of a partnership result in the dissolution of the
partnership.
b. A partnership is
characterized by limited liability.
c. Partners’
salaries are viewed as a distribution of income rather than a component of
income.
d. A partnership is
not viewed as separate entity, distinct, taxable entity.

The correct answer is: A partnership is

characterized by limited liability.
Question 39
On January 2, 2019,
Abel, Cain, and Joshua formed a partnership. Abel contributed cash of
P100,000
and a delivery equipment that originally costs him P120,000, but with a second
hand value of P50,000. Cain contributed
P160,000 in cash. Joshua, whose family
sells
office equipment, contributed P50,000 in cash and office equipment that
cost his family’s
dealership P100,000 but with a regular selling price of
P120,000. In 2019, the partnership
reported net income of P120,000. On
December 31, 2019, what would be the capital
balance of partners Abel, Cain, and Joshua, respectively?

Select one:
a. Abel, P187,500; Cain, P200,000; Joshua, P212,500

b. Abel, P257,500; Cain, P200,000; Joshua, P192,500
c. Abel, P190,000; Cain, P200,000; Joshua, P210,000
d. Abel, P260,000; Cain, P200,000; Joshua, P190,000
The correct answer is: Abel, P187,500; Cain, P200,000; Joshua, P212,500
Question 40
If the
partnership agreement does not specify how income is to be allocated, profit
and loss
should be allocated
Select one:
a. Equitably so that
partners are compensated for the time and effort expended on behalf of the
partnership.
b. In accordance
with their capital contributions.

c. Equally
d. In proportion to
the weighted average of capital invested during the period.
The correct answer is: In accordance

with their capital contributions.
Question 41
In
the absence of any agreement, salary allowances shall not be given when
partnership
operations yielded losses.
Select one:
True
False 
Question 42
Partially correct Mark 3.00 out of 10.00
Rey and Tom Partnership

was organized and began operations on March 1, 2020. On that
date, Rey invested P950,000 and Tom
invested machinery and equipment with current fair
value of P800,000. Because of shortage of cash, on November 1,
2020 Tom invested
additional cash of P200,000 in the partnership. The partnership contract includes the
following remuneration plan:
Rey Tom
Monthly Salary (recognized as expense) P20,000 P25,000
Annual interest on beginning capital 12% 12%
Bonus on the net profit before salaries and interest

but after bonus 4%
Balance 45% 55%
The salary was to be withdrawn by each partner in

monthly installments. The partnership’s
net profit for 2020 is
P1,404,000.
Answer the following (answers can be repeated):

The ending capital of Rey (December 31, 2020) will be P1,475,500 
The bonus of Rey will be P54,000 
In the profit distribution schedule, the total salary allowance will be

P450,000 
Of the P1,404,000 net profit of the partnership, the share of Tom will be
P725,500 
The ending capital of Tom (December 31, 2020) will be

P678,500 
In the profit distribution schedule, the residual income (remainder) will be P690,000 
Of the P1,404,000 net profit of the partnership, the share of Rey will be P678,500 
In the profit distribution schedule, the total salary allowance will be P450,000 
In the profit distribution schedule, the salary allowance of Tom will be

P250,000 
The total withdrawal of Tom will be P250,000 

The ending capital of Rey (December 31, 2020) will be → P1,425,250,
The bonus of Rey will be → P54,000,
In the profit distribution schedule, the total salary allowance will be → P175,000,
Of the P1,404,000 net profit of the partnership, the share of Tom will be → P728,750,
The ending capital of Tom (December 31, 2020) will be → P1,478,750,
In the profit distribution schedule, the residual income (remainder) will be → P725,000,
Of the P1,404,000 net profit of the partnership, the share of Rey will be → P675,250,
In the profit distribution schedule, the total salary allowance will be → P450,000,
In the profit distribution schedule, the salary allowance of Tom will be → P80,000,
The total withdrawal of Tom will be → P250,000
Question 43
Which of the
following is not considered a legitimate expense of a company?
Select one:
a. Supplies used in
the partners’ offices.
b. Interest paid to
partners based on the amount of invested capital.

c. Salaries for
management hired to run the business.
d. Depreciation on
assets contributed to the partnership by partners.
The correct answer is: Interest paid to

partners based on the amount of invested capital.
Question 44
The fact that

salaries paid to partners are not a component of partnership income is
indicative of
Select one:
a. Being characteristic
of the proprietary theory.
b. A departure from
generally accepted accounting principles.
c. Being
characteristic of the entity theory.

d. Why partnerships
are characterized by unlimited liability.
The correct answer is: Being characteristic

of the proprietary theory.
Question 45
The
account used when the partnership borrowed money from the partners is advances
from
partners.
Select one:
True
False 
Question 46
Interest
earned on loans to partners is recognized as income of the partnership.
Select one:
True
False 
◄ Attendance: Chapter 17-18 Exam (Sept. 15, 2021)
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10/15/21, 2:11 PM Chapter 17-18 Exam - Partnership Formation and Operations (Sept.

15, 2021): Attempt review

Started on Wednesday, September 15, 2021, 10:05 AM

The correct answer is 'True'.

The correct answer is:

The correct answer is: P 323,334

The correct answer is 'True'.

The correct answer is 'False'.

The correct answer is 'False'.

The correct answer is 'True'.

The correct answer is 'False'.

The correct answer is: This

The correct answer is 'False'.

The correct answer is 'True'.

On June 1, 2021, Ramirez

Cash P540,000 P468,000

Machinery and Equipment 960,000 1,320,000

Furniture and fixtures 828,000 -

The building is subject to a mortgage loan of P650,000,

In the balance sheet of the partnership, building will be

In the balance sheet of the partnership, machinery and equipment will be

In the balance sheet of the partnership, cash will be P1,008,000

The correct answer is:

The correct answer is 'True'.

The correct answer is 'False'.

The correct answer is 'True'.

The correct answer is: Paid in capital,

The correct answer is 'False'.

The correct answer is: P125,000

The correct answer is 'False'.

b. All partners have limited liability

c. All but the general partners

d. All but the general partners have unlimited liability

The correct answer is: All but the general partners

The correct answer is 'False'.

The correct answer is: P290,000

The correct answer is 'False'.

The correct answer is: In all earnings

The correct answer is: Interest on notes

The correct answer is: P150,000

The correct answer is 'True'.

Acer and Dell

The correct answer is: P0

The correct answer is: An economic

d. Any partner can

The correct answer is: A partnership

The correct answer is 'False'.

The correct answer is 'False'.

Mary admits Jane

The correct answer is: P190,000

The correct answer is 'False'.

The correct answer is 'False'.

b. KK, P186,120; SS,

c. KK, P150,120; SS, P150,120; WW, P149,760

d. KK, P151,200; SS,

The correct answer is 'True'.

The correct answer is: A partnership is

b. Abel, P257,500; Cain, P200,000; Joshua, P192,500

c. Abel, P190,000; Cain, P200,000; Joshua, P210,000

d. Abel, P260,000; Cain, P200,000; Joshua, P190,000

The correct answer is: In accordance

The correct answer is 'False'.

Rey and Tom Partnership