S1: When two sole proprietors form a partnership, one of them may retain his own set of

books as the partnership books. S2: When two sole proprietors form a partnership, both
of them may retain their own set of books as the partnership books

both statements are true

both statements are false

only S1 is true

only S1 is false.

How should losses in a partnership be divided between the capitalist partners? The
ranking should be:

agreement-profit and loss -capital

capital-agreement-profit and loss ratio

agreement-profit ratio-capital

profit and loss-capital-agreement.

S1: An advance to partnership by a partner with the assumption of its repayment by the
partnership increases the capital account of the partnership. S2: Drawing account is
debited for obligations of the partnership assumed by a partner

both statements are true

both statements are false

only S1 is true

only S1 is false.

Which of the following statements about partnership accounts is true?

A. Two accounts are generally maintained for each partner, a drawing account and a capital
account.
 B. The drawing account is credited with the partner’s withdrawal of cash or other assets during the
period.

Answer (A) is correct but (B) is false.

Answers (A) and (B) are both correct

35,000

82,950

55,300

32,950

Carson and Lamb establish a partnership to operate a used-furniture business under the
name C & L Furniture. Carson contributes furniture that cost P60,000 and has a fair
value of P90,000. Lamb contributes P30,000 cash and delivery equipment that cost
P40,000 and has a fair value of P30,000. The partners agree to share profits and losses
60% to Carson and 40% to Lamb. Calculate the peso inequity that will result if the initial
contributions of the partners are recorded at cost rather than fair market value.

10,000

18,000

20,000

30,000
On June 30, 20x10 MOC, the sole proprietor of MOC Inc, expands the company and
establishes a partnership with CBC and GKR. The partners plan to share profits and
losses as follows: MOC, 50%; CBC, 25% and GKR 25%. They also agree that the
beginning capital balances of partnership will reflect this same relationship. MOC asked
CBC to join the partnership because his many business contacts are expected to be
valuable during the expansion. CBC is also contributing P40,000 and a building that has
an original cost of P520,000, book value of P420,000, tax assessment of P310,000 and
fair value of P370,000. The building is subject to a P242,000 mortgage that the
partnership will assume. GKR is contributing P66,000 and marketable securities costing
P252,000 but are currently worth P345,000.MOC’s investment in the partnership is his
business. He plans to pay off the notes with his personal assets. The other partners
have agreed that the partnership will assume the accounts payable. The balance sheet
for the MOC Inc follows:
396,750

On June 30, 2020, Amal, the sole proprietor of the Amal Company, expands the
company and establish a partnership with Umong and Abongga. The partners plan to
share profits and losses as follows: Amal, 50%; Umong, 25%; and Abongga, 25%. They
also agree that the beginning capital balances of the partnership will reflect this same
relationship. Amal asked Umong to join the partnership because his many business
contacts are expected to be valuable during expansion. Umong is also contributing
P28,000 cash. Abongga is contributing P11,000 cash and marketable securities costing
P42,000 to Abongga but are currently worth P57,500. Amal’s investment in the
partnership is the Amal Company. He plans to pay off the notes with personal assets.
The other partners have agreed that partnership will assume the accounts payable. The
Statement of Financial Position for the Jamal Company follows:
254,500

S1: If the partners did not agree as to how profits are to be divided, then such should be
divided among partners equally. S2: Interest based on partner’s capital are always
provided.

both statements are true

both statements are false

only S1 is true

only S1 is false.

S1: The form and content of the Changes in Owners’ Equity of a partnership are similar
to that of a sole proprietorship with no exceptions. S2: In the entry to record distribution
of net profits, the revenue and expense summary account is credited.

both statements are true

 both statements are false

only S1 is true

only S1 is false.

Which of the following statements concerning partnership is true?

A partnership is a legal entity separate and distinct from the individual partners.

Individual partners are jointly liable for the debts and obligation of a partnership.

Income tax is levied on the individual partners’ shares of net income of a partnership and is
reported in their personal tax returns.

All of the above is true.

Under what circumstances can the closing of the income summary account result in a
debit to one partners’ capital account and credits to the other partners’ capital
accounts?

The results of operations are divided in a profit and loss ratio and the partnership sustained a loss
for the period.
The results of operations are allocated in a profit and loss ratio and the partnership’s net income
was very low.
The results of operations are divided in the average capital ratio and one partner had a low capital
balance.
The partnership agreement provides for interest on capital and salary allowances and net income
is less than the sum of the interest and salary allowances.

30,000
 48,000

52,000

70,000

John and Myung are partners in Six-string Co. Their partnership agreement states that
John is entitled to an annual salary of ₱100,000 and a bonus of 10% of profit after
salary but before bonus. The remainder is shared in the ratio of 7:2. Myungs’s share in
partnership profit for the year was ₱296,000. How much was John’s bonus if the net
income is 1,580,000?

145,348

148,000

152,000

169,000

34,600
29,130

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

no entry is required.

the existing partnership is liquidated.

the partnership assets should not be revalued because this type of transaction does not result to
partnership dissolution.

the existing partners’ capital accounts are reduced and the new partner’s capital account is
increased.
 The partnership’s total equity increases after recording D’s admission.

The admission of D is accounted for as a transaction between D and the partnership.

Goodwill of ₱15,000 must be recorded, according to the PFRS

An equity transfer of ₱45,000 will be made from the selling partners to D.

When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of
Mill's interest exceeded Mill's capital balance. Under the bonus method, the excess

was recorded as goodwill.

was recorded as an expense.

reduced the capital balances of Yale and Lear.

had no effect on the capital balances of Yale and Lear.

Statement 1 – The retirement or withdrawal of a partner from a partnership requires

termination of the business; Statement 2 – When a partner retires from a partnership, he
or she is personally liable for any partnership debts incurred after the retirement.

Only Statement 1 is correct

Only Statement 2 is correct

Both Statements are correct

Both Statements are incorrect

Two individuals who were previously sole proprietors formed a partnership. Property
other than cash which is part of the initial investment in the partnership would be
recorded for financial accounting purposes at the

fair value of the property at the date of the investment

proprietors’ book values or the fair value of the property at the date of the investment, whichever is
higher

proprietors’ book values or the fair value of the property at the date of the investment, whichever is
lower.

proprietors’ book values of the property at the date of the investment.

234,167

236,347
 324,382

341,367

Partner C decided to retire when the partners’ capital balances were: A, ₱600,000; B,
₱600,000; and C, ₱400,000. It was agreed that Partner C is to take the partnership’s
fully depreciated equipment with a fair value of ₱24,000 and a note for the balance of
her interest. The historical cost of the equipment is ₱36,000. The partners share in
profits and losses equally. How much is the total partnership capital after the retirement
of C?

1,216,000

1,264,000

1,261,000

1,624,000

370,000

Partners D, E, F, and G share profits 40%, 30%, 15%, and 15%, respectively. Their
partnership agreement provides that in the event of the death of a partner, the firm shall
continue until the end of the fiscal period. Profits shall be considered to have been
earned proportionately during this period, and the deceased partner’s capital shall be
adjusted by the proper share of the profit or loss until the date of death. From that date
until the date of settlement with the estate, there shall be added interest of 6%
computed on the adjusted capital. The remaining partners shall continue to share
profits in the old ratio. Payment to the estate shall be made within one year from the
date of the partner’s death. Partner G died on November 16. On December 31, the end of
the six-month period, account balances on the partnership books before the income
summary account is closed are as follows:

1,800

S1: The personal assets of the partners are used first to settle their personal obligations
before they are used to satisfy the claims of the partnership creditors. S2: An industrial
partner is exempted to share for the losses of the business and is not required to
contribute additional cash in case of insolvency of the partnership.

Both statements are correct

Both statements are incorrect

Only S1 is correct.

Only S1 is incorrect.

S1: In liquidation process, the noncash assets are sold only to outside parties but never
to any of the partners. S2: An insolvent partners’ capital deficiency can be solved by his
additional cash contribution.
 Both statements are correct

Both statements are incorrect

Only S1 is correct.

Only S1 is incorrect.

S1: Dissolution and liquidation are different. S2: In the liquidation of a business the
owners’ claims are settled simultaneously with the creditors’ claim.

Both statements are correct

Both statements are incorrect

Only S1 is correct.

Only S1 is incorrect.

In a partnership liquidation the realization losses result in a debit balance in one

partners’ capital account. If this partner fails to contribute personal assets to make up
this deficit, how should the debit balance be handled by the partners?

It should be written off against partnership profits like any other bad debt.

It should be allocated to all the partners in their profit and loss ratio.

It should be allocated to the remaining partners in their remaining P and L ratio.

It should be set up as a receivable and turned over to a collection agency.

During liquidation, a partners’ capital account balance drops below zero. What should
happen?

The other partners should file a legal suit against the partner with the deficit balance.

The partner with the highest capital balance should contribute sufficient assets to eliminate the
deficit.

The deficit balance should be removed from the accounting records with only the remaining
partners sharing in future gains and losses.
The partner with a deficit should contribute enough assets to offset the deficit balance.

P4,500; P2,700; P1,800

P0; P6,000; P3,000

P3,000; P3,000; P3,000

P22,500; P13,500; P9,000

P10,500; P34,500

P11,000; P35,500

P11,000; P35,000

P12,000; P35,500
32,000

48,600