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Test: AFAR 1st Quiz (Partnership)

Points: 50 points

Name: ____________________________ Score: ____________

Date: ____________________________

Signature: ____________________________

Select multiple choice answers with a cross or tick:

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Question 1 of 35 Generic 1 pt

When property other than cash is invested in a partnership, at what amount should the non-
cash property be credited to the contributing partner’s capital account?

A) Fair value at the date of contribution

B) Assessed value at the date of contribution
C) Agreed value at the date of contribution
D) Carrying value at the date of contribution

Question 2 of 35 Generic 1 pt

Under the generally accepted accounting principles in the Philippines, what is the acceptable
reason when the amount credited to a partner is greater than the amount actually
contributed by such partner during partnership formation?

A) Bonus to other partners

B) Recognition of goodwill
C) Bonus to the contributing partner
D) Recognition of impairment loss on property contributed

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Question 3 of 35 Generic 1 pt

Which of the following transactions shall not affect the capital balance of a partner?

A) Share of a partner in the partnership's net loss.

B) Additional investment made by a partner to the partnership
C) Receipt of bonus by a partner from another partner
D) Advances made by the partnership to a partner

Question 4 of 35 Generic 1 pt

Which of the following will not result to the dissolution of a partnership?

A) Admission of a new partner in an existing partnership

B) Insolvency of the partnership
C) Assignment of an existing partner's interest to a third person
D) Retirement of a partner

Question 5 of 35 Generic 1 pt

Which of the following statements is correct when a new partner is admitted to an existing
partnership by purchasing a portion of a capital interest of an existing partner?

A) The partnership is not dissolved by the admission of a new partner by purchase.

B) It will result to revaluation or impairment of existing assets of the partnership
C) The partnership will recognize gain or loss in the transfer of capital from one partner
to another partner
D) It will result to credit to capital of new partner with corresponding debit to capital of
selling partner.

Question 6 of 35 Generic 1 pt

If a partnership agreement does not specify how income is to be allocated, profits and loss
should be allocated

A) Equitably so that partners are compensated for the time and effort expended on
behalf of the partnership
B) In proportion to the weighted average of capital invested during the period
C) In accordance with their capital contribution.
D) Equally

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Question 7 of 35 Generic 1 pt

In the liquidation of general partnership, which of the following credits shall be paid first?

A) Those owing to third persons.

B) Those owing to partners for their share in profits
C) Those owing to partners for their capital contribution.
D) Those owing to partners other than capital and profits.

Question 8 of 35 Generic 1 pt

It refers to the process of converting the non-cash assets of the partnership and distributing
the total cash to the creditors and the remainder to the partners.

A) Termination
B) Liquidation
C) Operation
D) Dissolution

Question 9 of 35 Generic 1 pt

Which of the following claims shall be preferred in the liquidation of general partnership?

A) Just and equitable share of industrial partner in partnership profit

B) Capital contribution of controlling partner
C) Proportionate share of capitalist partners in partnership profit
D) Advances to partnership by managing partner

Question 10 of 35 Generic 1 pt

Which of the following transactions will increase the capital balance of a partner?

A) Drawing made during the period

B) Share in other comprehensive loss of the partnershio
C) Share in profit of the partnership
D) Share in impairment loss arising from admission of a new partner

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Question 11 of 35 Generic 1 pt

In a partnership liquidation, the final cash distribution to the partners should be made in
accordance with the

A) partners' profit and loss sharing ratio

B) ratio of the capital contributions by the partners
C) balances of the partners' capital accounts
D) ratio of capital contributions less withdrawals by the partners

Question 12 of 35 Generic 1 pt

If a partnership has only non-cash assets, all liabilities have been properly disbursed, and no
additional liquidation expenses are expected, the maximum possible loss to the partnership
in the liquidation process is:

A) none of the above

B) the book value of the non cash assets
C) the fair market value of the non cash assets
D) the estimated proceeds from the sale of the assets less the book value of the non
cash assets

Question 13 of 35 Generic 1 pt

A partnership agreement calls for allocation of profits and losses by salary allocations, a
bonus allocation, interest on capital, with any remainder to be allocated by present ratios. If a
partnership has a loss to allocate, generally which of the following procedures would be
applied?

A) Any salary allocation criteria would not be used

B) The bonus criteria would not be used
C) The loss would be allocated using the profit and loss ratios, only.
D) Any loss would be allocated equally to partners

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Question 14 of 35 Generic 1 pt

When A retired form the partnership ABC, the final settlement of A's interest is less than his
capital balance. Under the bonus method, the excess would:

A) increase the capital balance of B and C

B) be recorded as an expense
C) reduce the capital balances of B and C
D) had no effect on the capital of B and C

Question 15 of 35 Generic 1 pt

Which of the following is not considered a legitimate expense of the partnership?

A) Salaries for management hired to run the business

B) Interest paid to partners based on the amount of invested capital
C) Supplies used in the partners' offices
D) Depreciation on assets contributed to the partnership by partners

Question 16 of 35 Generic 1 pt

If a new partner acquires a partnership interest directly from the partners rather than from
the partnership:

A) no entry is required
B) the existing partners' capital accounts should be reduced and the new partner's
account increased
C) the partnership has undergone quasi - reorganization.
D) the partnership assets should be revalued

Question 17 of 35 Generic 1 pt

Which of the following results in dissolution of a partnership?

A) The receipt of a draw by an existing partner

B) The contribution of additional assets to the partnership by an existing partner
C) The winding up of the partnership and the distribution of remaining assets to the
partners
D) The withdrawal of a partner from the partnership

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Question 18 of 35 Generic 1 pt

He refers to a partner who contributed not only money and property, but also industry to the
newly formed partnership.

A) Industrial partner
B) Capitalist-industrial partner
C) Capitalist partner
D) Nominal partner

Question 19 of 35 Generic 1 pt

If a partner who retired from the partnership receives less than the capital balance before
retirement which also resulted to decrease in the capital balance of remaining partners,
which is correct?

A) The retiring partner receives bonus from remaining partner

B) Revaluation surplus is recognized before the retirement
C) An impairment loss is recognized before the retirement
D) The retiring partner gives bonus to the remaining partner

Question 20 of 35 Generic 1 pt

Which of the following is not a feature of general partnership?

A) limited life
B) mutual agency
C) none of these
D) limited liability

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Question 21 of 35 Generic 2 pts

Scott, Joe, and Ed are liquidating their partnership. At the date the liquidation, Scott, Joe,
and Ed have capital account balances of P162,000, P192,500, and P215,000, respectively
and the partners share profits and losses 40%, 35%, and 25%, respectively. In addition, the
partnership has a P36,000 Notes Payable to Scott and a P20,000 Notes Receivable from
Ed. When the liquidation begins, what is the loss absorption power with respect to Joe?

A) 550,000
B) 770,000
C) 67,375
D) 192,500

Question 22 of 35 Generic 2 pts

The following condensed balance sheet is presented for the partnership of Alfa and Beda,
who share profits and losses in the ratio of 60:40, respectively:

Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000

Accounts payable 120,000

Alfa, capital 348,000
Beda, capital 232,000
700,000

The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to
admit Capp as a new partner with 20% interest. No goodwill or bonus is to be recorded.
What amount should Capp contribute in cash or other assets?

A) 110,000
B) 116,000
C) 140,000
D) 145,000

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Question 23 of 35 Generic 2 pts

A and B share in partnership profits and losses on a 40:60 ratio. During the year, A’s capital
account has a net increase of ₱50,000. Partner A made contributions of ₱10,000 and capital
withdrawals of ₱60,000 during the year. How much was the share of B in the partnership
profit for the year?

A) 200,000
B) 150,000
C) 100,000
D) 180,000

Question 24 of 35 Generic 2 pts

The partnership agreement of A, B and C stipulates the following:

a. Partners A and C shall receive annual salaries of ₱12,000 and ₱8,000, respectively.
b. A bonus of 10% of profit after salaries but before deduction of bonus shall be c. given to
Partner A, the managing partner.
d. Each partner shall receive 10% interest on average capital investments.
Any remaining profit or loss shall be shared as follows: 40% to A and 30% each to B and C.

The average capital investments of partners during the year are as follows:
A - P100,000
B - 60,000
C - 120,000

The partnership earns profit of ₱100,000.

How much is the share of Partner C in the partnership profit?

A) 47,600
B) 33,200
C) 32,200
D) 19,200

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Question 25 of 35 Generic 2 pts

Red and White formed a partnership in 2020. The partnership agreement provides for
annual salary allowances of ₱55,000 for Red and ₱45,000 for White. The partners share
profits equally and losses in a 60/40 ratio. The partnership had earnings of ₱80,000 for 2020
before any allowance to partners. What amount of these earnings should be credited to Red
and White capital accounts', respectively?

A) 40,000 and 40,000

B) 44,000 and 36,000
C) 43,000 and 37,000
D) 45,000 and 35,000

Question 26 of 35 Generic 2 pts

On January 1, 2020, A, B and C formed a partneship. A contributed cash of P100,000 and a

delivery equipment that originally costs him P120,000, but with a second hand value of
P50,000. B contributed P160,000 in cash. C, 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 2020, the partnership reported net income of
P120,000.

On December 31, 2020, what would be the capital balances of A, B and C, respectively?

A) 190,000
200,000
210,000
B) 257,500
200,000
192,500
C) 187,500
200,000
212,500
D) 260,000
200,000
190,000

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Question 27 of 35 Generic 2 pts

The ABC Partnership has assets with book value of P240,000 and a market value of
P195,000, outside liabilities of P70,000, loans payable to Partner Able of P20,000, and
capital balances for Partners Able, Baker and Chapman of P70,000, P30,000 and P50,000,
respectively. The partners share profits and losses equally.

How would the first P100,000 of available assets be distributed?

A) P40,000 to Able, P20,000 to Chapman, and the balance equally among partners
B) P70,000 to outside liabilities, P25,000 to Able, and P5,000 to Chapman
C) P70,000 to outside liabilities, P20,000 to able and balances equally among partners
D) P70,000 to outside liabilities, and P30,000 to Able

Question 28 of 35 Generic 2 pts

On June 30, 2015, the balance sheet of Western Marketing, a partnership, is summarized as
follows:

Sundry assets…………………………………………………P150,000
West, Capital………………………………………………………90,000
Tern, Capital……………………………………………………...60,000

Wes and Tern share profit and losses at a 60:40 ratio, respectively. They agreed to take in
Cuba as a new partner, who purchases 1/8 interest of West and Tern for P25,000.

What is the amount of Cuba’s capital to be taken up in the partnership books if the book
value method is used?

A) 25,000
B) 12,500
C) 18,750
D) 31,250

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Question 29 of 35 Generic 2 pts

Pol and Loc are partners with capitals of P200,000 and P100,000 and sharing profits and
losses 3:1 respectively. They agree to admit Chic as partner. Chic invests P125,000 for a
25% interest in the firm. Parties agree that the total firm capital after Chic’s admission is to
be P425,000.

The capital balances of the partners after Chic’s admission are:

A) Pol, P250,000.00; Loc, P125,000.00; and Chic, P100,000

B) Pol, P200,000.00; Loc, P100,000.00; and Chic, P125,000
C) Pol, P214,062.50; Loc, P104,687.50; and Chic, P106,250
D) Pol, P239,062.50; Loc, P 79,687.50; and Chic, P125,000

Question 30 of 35 Generic 2 pts

Michelle, an active partner in the Michelle-Esme partnership receives an annual bonus of

25% of the partnership income after deducting the bonus. For the year ended, December 31,
2020, partnership income before the bonus amounted to P240,000. The bonus of Michelle
for the year 2020 is:

A) 80,000
B) 48,000
C) 45,000
D) 60,000

Question 31 of 35 Generic 2 pts

Lara, Ives, and Jack are in the process of liquidating their partnership. Since it may take
several months to convert the other assets into cash, the partners agree to distribute all
available cash immediately, except for P10,000 that is set aside for liquidating expenses.
The balance sheet and residual profit and loss sharing percentages are as follows:

Cash P400,000 Accounts payable 200,000

Other assets 200,000 Hara, capital (40%) 135,000
Ives, capital (30%) 216,000
Jack, capital (30%) 49,000
Total assets P 600,000 Total liab./equity P 600,000

How much cash should Ives receive in the first distribution?

A) 156,000
B) 147,000
C) 146,000
D) 153,000

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Question 32 of 35 Generic 2 pts

As of December 31, the books of AME Partnership showed capital balances of A-P40,000;
MP25,000; And E-P5,000. The partners’ profit and loss ratio were 3:2:1, respectively. The
partners decided to dissolve and liquidate. They sold all the non-cash assets for P37,000
cash. After settlement of all liabilities amounting to P12,000, they still have P28,000 cash left
for distribution.

Assuming that any partner’s capital debit balance is uncollectible, the share of A in the
P28,000 cash for distribution would be

A) 17,800
B) 40,000
C) 18,000
D) 19,000

Question 33 of 35 Generic 2 pts

On December 1, 2020, EE and FF formed a partnership, agreeing to share for profits and
losses in the ratio of 2:3, respectively. EE invested a parcel of land that cost him P25,000.
FF invested P30,000 cash. The land was sold for P50,000 on the same date, three hours
after formation of the partnership.

How much should be the capital balance of EE right after formation?

A) 30,000
B) 50,000
C) 60,000
D) 25,000

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Question 34 of 35 Generic 2 pts

On January 1, 2020, Toni, Abbie and JM entered into articles of co-partnership for the
operation of TAJ computer shop. Toni contributed investment property with assessed value
of P1,700,000 subject to mortgage payable of P500,000 to be assumed by the partnership.
Abbie contributed computer equipment with cost of P600,000 with accumulated depreciation
of P200,000. The fair market value of the computer equipment is P300,000.

On January 2, 2020, the partnership was able to sell the investment property for
P2,000,000.

How much cash shall be contributed by JM if the articles of co-partnership provide that Toni
will have 60% interest in the partnership?

A) 600,000
B) 700,000
C) 500,000
D) 800,000

Question 35 of 35 Generic 2 pts

Lancelot 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 Lancelot would consider the choices to
be equal?

A) 265,000
B) 305,000
C) 165,000
D) 290,000

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