Quiz on Partnership

Theory, Formation and Opertion

1. Anita and Chuchi are partners sharing profits in the ratio of 40% and 60%, respectively. Anita’s capital at the end
of 2013 decreased by P60,000. During the year, Anita withdrew P140,000 (charged to his capital account) but
made additional investment of P20,000. What was the profit for the year 2013?
a. P100,000 b. P125,000 c. P150,000 d. P200,000
2. The partnership contract of partners Lee and Mee provides that Lee, the managing partner is allowed a bonus of
20% of the profit after taxes. The partnership is subject to an income tax rate of 35% of the profit. During 2013,
the partnership earned profit before taxes of P113,000. If the bonus is based on the profit after taxes but before
bonus, how much is the bonus of Lee?
a. P13,000 b.P13,250 c. 14,500 d. 14,690
3. Using information above, if the bonus is based on the profit after bonus and taxes, how much is the bonus of
Lee?
a. 13,000 b. 13,250 c. 14,5000 d. 14,690
4. Guia, Aye and Dia are partners with average capital s of P300,000; P200,000; P500,000, respectively during
2013. The partners are entitled to salaries of P20,000 each plus 10% interest on their average capital. After
deducting the salaries and interest, the residual profit is to be evenly shared. During the year, the partnership
incurred a loss of P20,000. What would happen to Dia’s capital at the end of 2013?
a. Increase by P10,000 c. Decrease by P8,000
b. Decrease by P10,000 d. Decrease by P2,000
5. Partners Day, Pay and Kay are in the process of finalizing their profit and loss sharing agreement. They have
already agreed that Pay and Kay are to receive annual salary of P45,000 each. Day, the managing partner, has
two options;
Option 1; He will receive an annual salary of P110,000, or
Option 2: He will receive an annual salary of P90,000 plus a bonus of 20% of profit after subtracting their
salaries and his bonus.
What should be the amount of profit so that Day would get the same share irrespective of his choice?
a. 250,000 b. 300,000 c. 400,000 d. 450,000
6. The partnership of Pal and Ram was formed on April 1, 2010. At that date, the following assets were
contributed;
Pal Ram
Cash 300,000 140,000
Merchandise Inventory 220,000
Building 400,000
Furniture & Equipment 60,000

The building is subject to a mortgage loan of P160,000 which is to be assumed by the partnership. The
partnership agreement provides that Pal and Ram share on income and loss of 25% and 75%, respectively.
Ram’s capital account at April 1, 2010 should be
a. 760,000 b. 640,000 c. 690,000 d. 600,000
7. Using the information in No. 6 and assuming that the partnership agreement provides that the partners initially
should have an equal interest in the partnership capital, Pal’s capital account on April 1, 2010 should be
a. 360,000 b. 480,000 c. 960,000 d. 1,120,000
8. Using the information in No. 7, the bonus given by Ram to Pal is
a. 120,000 b. 100,000 c. 240,000 d. Zero
9. Using the information in No. 6 and assuming that capital shall be proportionate to partner’s profit and loss ratio,
the required capital of Ram is
a. 240,000 b. 480,000 c. 720,000 d. 600,000
10. The partnership agreement of Carlo, Liza and Mon provided for the following terms on distribution of profits and
losses:
 Carlo is to receive 10% of the net income up to P1,000,000 and 20% on the amount of excess
 Liza and Mon each, are to receive 5% of the remaining income in excess of P1,500,000 after Carlo’s
share as per above
 The balance to be divided equally

For the year just ended, the partnership realized a net income of P2,500,000 before distribution to partners.
The share of Carlo in the profit is
a. P1,300,000 b. P1,000,000 c. P1,080,000 d. P1,100,000
11. Ona, Zena and Hernan are partners in an accounting firm. Their ending capital account balances were: Ona,
P90,000; Zena, P110,000 and Hernan, P50,000. They share profits and losses in a 4:4:2 ratio, after the
following terms;
 Partner Hernan is to receive a bonus of 10% of the net income after the bonus
 Interest of 10% shall be paid on that portion of the partner’s capital in excess of P100,000
 Salaries of P10,000 and P12,000 shall be paid to partners Ona and Hernan, respectively.

Assuming profits of P44,000 In 2009, the total profit share of Hernan would be
a. P7,800 P19,800 c. P16,800 d. P19,400
12. Raven and Aron are partners agreeing to allow monthly salaries of P6,000 and P5,000, respectively; 6& interest
on the capital investment at the beginning of the year of P300,000 and P230,000, respectively; and the balance
equally. The first year registered a net income of P100,000. The partners share should be
Raven Aron Raven Aron
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 a. P58,100 P41,900 c. P54,500 P45,500
b. P50,000 P50,000 d. P56,600 P43,400
13. The partnership agreement of Santi and Gener provided that interest of 10% per annum is to be credited to each
partner on the basis of average capital balances. A summary of Gener’s capital account for the year ended
December 31`, 2004 follows;
Balance, January 1 P280,000
Additional investments, July 1 80,000
Withdrawal, August 1 ( 30,000 )
Balance, December 31 P330,000
=======
The amount of interest that should eventually be credited to Gener’s capital is
a. P30,500 b. P34,500 c. 33,000 d. P30,750
14. Ace, a partner in the Ace and Mena Partnership has a 30% share in the partnership profit and loss. His capital
account had a net decrease of P60,000 in 2004. In 2004, he withdraw P130,000 against his capital and invested
property valued at P25,000 in the partnership. The net income of the partnership is
a. P150,000 b. P233,333 c. P350,000 d. P550,000
15. Santo and Santita share profits in the ratio of 3:2. However, Santo is to receive a bonus of 20% of the profits, in
addition to his profit share. The partnership made a net income for the year of P24,000 before bonus. Assuming
Santo’s bonus is computed on profit after deducting said bonus, how much profit share will Santita receive?
a. P15,200 b. P 8,000 c. P9,600 d. P9,000
16. Carlo and her very close associate Ligaya formed a partnership on January 1, 2013 with Carlo contributing
P16,000 cash while Ligaya contributing equipment with a book value of P6,400 and a fair value of P4,800 and
inventory items with a book value of P2,400 and a fair value of P3,200. During 2013, Ligaya made additional
investments of P1,600 on April 1 and P1,600 on June 1 , and on Sept. 1, he withdrew P4,000. Carlo had no
additional investments or withdrawals during the year. The average capital balance at the end of 2013 for Ligaya
is
a. P9,600 b. P 8,000 c. P8,800 d. P8,800
17. In its first year of operations, the partnership of Rey, Bal and Dan made a net income of P20,000, before
providing for salaries of P5,000 and P3,000 per annum for Rey and Bal, respectively. The capital contributions
of the partners are as follows: Rey, P30,000; Bal, P20,000 and Dan, P10,000. Assuming that no profit and loss
ratio are provided in the partnership agreement and that there has been no change in the capital contributions
during the year, how much profit share would Rey be entitled to receive?
a. P10,000 b. P 5,000 c. P11,000 d. P15,000
18. Buan 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 the bonus as a away of dividing profits among the partners. What amount of income would make
the choices equal?
a. P165,000 b. P 150,000 c. P135,000 d. P 15,000
19. If a partnership has income of P44,000 and partner Ana is to be allocated a bonus of 10% of income after the
bonus, Ana’s bonus would be
a. P4,400 b. P4,000 c. P3,600 d. P8,800
20. Bam and Bal share profits and losses in the ratio of 1:2. Bam receives a monthly salary of P150,000. If Bam’s
capital balance is P2,500,000 at the beginning of the year and P2,000,000 at the end of the year, and annual
partnership profit after salaries is P1,200,000, then Bam withdrew
a. 1,300,000 b. 500,000 c. 3,200,000 d. 2,700,000
21. Pat, a partner in the a partnership has 20% participation in the partnership profit and loss. Pat’s capital account
had a net decrease of P240,000 during the calendar year 2010. During 2010, Pat withdrew P520,000 (charged
against his capital account) and contributed property valued at P100,000 to the partnership. What was the profit
of the partnership?
a. 600,000 b. 900,000 c. 1,400,000 d. 2,200,000
22. If there is a provision for division of profits but not for losses in the partnership agreement, it is concluded that
a. Losses should not be divided to the capital accounts, but matched against future earnings
b. Losses should be divided using the same approach as division of profits
c. Losses should be divided equally
d. Losses should be divided according to the ratio of capital account balances
23. The articles of partnership should contain clear provisions on all of the following, except
a. Taxes paid by the partnership c. Withdrawals allowed to partners
b. Causes of partnership dissolution d. Profit sharing ratio
24. The noncash contributions of the partners to form a partnership are recorded by the partnership at their
a. Book value c. Dissolution value
b. Agreed value d. Fair value
25. When a partnership cannot pay its debts with business assets, the partners
a. Are not personally liable for the debts
b. Have limited personal liability
c. Must convert the partnership to a joint venture
d. Must use their personal assets to meet the debts
26. A partnership which has failed to comply with one or more of the legal requirements for its establishment is
classified as
a. Open partnership c. De Facto partnership
b. De Jure partnership d. Secret partnership
27. A partnership is formed by two individuals who were previously sole proprietors. Property other than cash which
is part of the initial investment in the partnership would be recorded for financial accounting purposes at the
proprietor’s

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 a. Carrying amount or the fair value of the property at the date of the investment, whichever is higher
b. Fair value of the property at the date of the investment
c. Carrying amount or the fair value of the property at the date of the investment whichever is lower
d. Carrying amount of the property at the date of the investment
28. Which of the following is not a characteristic of most partnerships?
a. Limited life b. Limited liability c. Mutual agency d. Ease of formation
29. Which of these characteristics does not apply to a general professional partnership?
a. Unlimited life b. No business income tax c. Unlimited liability d. Mutual agency
30. What is an advantage of the partnership as a form of business organization?
a. Partners do not pay income taxes on their share in partnership net income
b. The death or withdrawal of a partner may terminate a partnership
c. A partnership is created by mere agreement of the partners
d. A partnership is bound by the acts of the partners
31. All of the following are true for both general and limited partnerships, which is false?
a. Both must have at least one general partner
b. All partners are liable for all debts of the firm
c. All partners have the right to participate in the profits of the business
d. Both are easily dissolved
32. Which partner whose liability for partnership debts is limited to his capital contribution?
a. General partner b. limited partner c. Industrial partner d. secret partner
33. Which of the following is a partner who contributes his work, labor or industry to the common fund of the
partnership?
a. Capitalist partner b. managing partner c. Industrial partner d. partner by estoppel
34. Which is a partner who is liable for the payment of partnership debts to the extent of the his separate property
after the partnership assets are exhausted?
a. Managing partner b. Capitalist partner c, General partner d. Limited partner
35. What form of partnership which comprises all the profits that the partners may acquire by their work or industry
during the existence of the partnership?
a. Universal partnership of profits c. particular partnership
b. Universal partnership of all present property d. de jure partnership
36. Which partner is the one who takes charge of the winding up of partnership affairs upon dissolution?
a. Silent partner c. Ostensible partner
b. Liquidating partner d. dormant partner
37. The partnership agreement is contained in the articles of partnership, an express contract among the partners.
Which of the following ordinarily is not included in such an agreement?
a. A limitation on a partner’s liability to creditors
b. The rights and duties of the partners
c. The allocation of income between the partners
d. The rights and duties of the partners in the event of partnership dissolution
38. Which of the following are included in the cumulative effect of Partnership capital balances?
a. Initial investments c. Share in net income and net loss
b. Additional investments d. All of the above
39. Which of the following may be included in a Partner’s investments?
a. Cash c. Non cash assets with liabilities to be assumed
b. Non-cash assets b. All of the above
40. Which of the following cases does not result to a credit when recording a partners capital account?
a. Original investment
b. Share in net income
c. Debit balance of the drawing account at the end of the period
d. All of the above
1. Liabilities and owner’s equity are similar in that
a. Both provide certain amounts of payments in the form of interest and dividends respectively based upon written
agreements
b. Both provide specific timing of payments as a result of specific maturity dates
c. Both creditors and stockholders are equity holders, although they have different rights with respect to income,
risk, control and liquidation
d. Both liabilities and owners’ equity are ranked equally when an enterprise’s assets are distributed

2. An entity may affect a reverse stock split in order to

a. Increase the number of shares outstanding
b. Raise the unit market price of its shares
c. Reduce the market price per share
d. Obtain a wider distribution of its shares

3. An entity issued common stock, if there is a change in the par value of the common stock, it is charged or credited to
additional paid-in capital. If the increase in common stock exceeds additional paid-in capital, the entity shall charge the
excess to
a. Retained earnings
b. Deferred charges
c. Other capital account
d. Income

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4. An entity’s retirement of its treasury stock resulted in the par value exceeding the cost. The difference shall be
a. Debited to additional paid in capital to the extent of the credit when the stock was issued
b. Debited to retained earnings
c. Credited to additional paid in capital relating to the same issue
d. Debited to additional paid in capital from previous treasury stock transactions of the same class

5. When collectibility is reasonably assured, the excess of the subscription price over the stated value of the no par
common stock subscribed should be recorded as
a. No par common stock
b. APIC when the subscription price is recorded
c. APIC when the subscription price is collected
d. APIC when the common stock is issued

6. When a corporation redeems all of its preferred stock for more than the original issue price, the excess paid above the
original issue price should be
a. Accounted for as a loss on exchange in the income statement
b. Charged against paid-in-capital of common stock
c. Charged to a discount on preferred stock account
d. Charged against retained earnings

7. Direct costs incurred to sell stock, such as underwriting , accounting and legal fees, printing costs and taxes shall be
debited to
a. APIC arising from issuance
b. Expenses
c. Organizational cost
d. Retained Earnings

8. Gains and losses on retirement of treasury stock shall not be included in determining income. If the retirement results
in a gain, such gain shall be credited to
a. APIC
b. Retained Earnings
c. Capital Stock
d. Income

9. Changes in the par value of capital stock are charged or credited to APIC. Any increase in capital stock that exceed
APIC shall be charged to
a. Retained Earnings
b. Income
c. Deferred Charge
d. Other capital stock account

10. For equity shared-based payment transactions, the entity shall measure the goods or services received and the
corresponding increase in equity

I. Directly, at the fair value of the goods or services received

II. Indirectly, by reference to the fair value of the equity instruments granted, if the fair value of the goods or
services received can be estimated reliably
a. I only
b. II only
c. Both I and II
d. Neither I nor II

11. share-based payment transactions provide a choice whether the entity settles in cash or issues equity instruments,
the entity is required to account for the transaction as
I. Cash settled share-based payment transaction if the entity has incurred a liability to settle in cash or other
asset
II. Equity settled share-based payment transaction if no liability has been incurred by the entity

a. I only
b. II only
c. Either I or II
d. Neither I nor II
12. Michelle Corporation issued 200,000 shares of P5 par common stock at P10 per share. On December 31, 2008,
Michelle’s retained earnings were P3,000,000. In March 2009, Michelle reacquired 50,000 shares of its common stock
at P20 per share. In June 2009, Michelle sold 10,000 of these shares to its corporate officers for P25 per share.
Michelle uses the cost method to record treasury stock. Net Income for the year ended December 31, 2009 was
P600,000. At December 31, 2009 what amount should Michelle report as retained earnings?
a. 3,600,000 c. 3,750,000
b. 3,650,000 d. 3,800,000
13. On May 1, 2009, Lalaine Corporation’s board of directors declared a 10% stock dividend. The market price of Lalaine’s
30,000 outstanding shares of P20 par value common stock was P90 per share on that date. The stock dividends was

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 distributed on July 1, 2009, when the stock’s market price was P100 per share. What amount should Lalaine credit to
additional paid in capital for this stock dividend?
a. 210,000 c. 270,000
b. 240,000 d. 300,000
14. An entity may affect a reverse stock split in order to
a. Increase the number of shares outstanding
b. Raise the unit market price of its shares
c. Reduce the market price per share
d. Obtain a wider distribution of its shares

15. An entity issued common stock, if there is a change in the par value of the common stock, it is charged or credited to
additional paid-in capital. If the increase in common stock exceeds additional paid-in capital, the entity shall charge the
excess to
a. Retained earnings
b. Deferred charges
c. Other capital account
d. Income

16. When a corporation redeems all of its preferred stock for more than the original issue price, the excess paid above the
original issue price should be
a. Accounted for as a loss on exchange in the income statement
b. Charged against paid-in-capital of common stock
c. Charged to a discount on preferred stock account
d. Charged against retained earnings

17. Direct costs incurred to sell stock, such as underwriting , accounting and legal fees, printing costs and taxes shall be
debited to
a. APIC arising from issuance
b. Expenses
c. Organizational cost
d. Retained Earnings
1. The owners of shares in stock corporation are called
a. Incorporators b. Promoters c. Members d. Stockholders
2. The stockholders or members mentioned in the Articles of Incorporation originally forming and
composing the corporation and who are signatories thereof are called
a. Incorporators b. Promoters c. Members d. Stockholders
3. The arbitrary value assigned to a share of stock is called
a. Market value b. Par value c. Liquidation value d. Book value
4. Persons who compose the corporation whether as stockholders or members are called
a. Subscribers b. Corporators c. Incorporators d. Promoters
5. The most powerful person in a corporation is the
a. Incorporator b. President c. Vice President d. Chairman of the Board
6. The amount of the stockholder’s investments is called
a. Outstanding stock b. Paid in capital c. Retained earnings d. Total stockholder’s
Equity
7. Dividends shall be declared and paid out of
a. Capital stock b. Paid in capital c. Retained earnings d. Profits earned in
selling no par
8. It means the preparation of financial statements for a period of less than one year
a. Financial reporting c. Year end reporting
b. Segment reporting d. Interim reporting
9. Selling expenses do not include
a. Salesmen’s salaries c. Depreciation of delivery equipment
b. Sales commission d. Accounting and legal fees
10. Administrative expenses do not include
a. Advertising c. Depreciation of office building
b. Salaries Expense of Secretary d. Insurance
11. A corporation is being organized with an authorized capital stock of P50,000. How much of
this P50,000 should be subscribed and how much must be actually be paid?
a. P12,000 and P3,125 b. P10,000 and P2,500 c. P25,000 and P6,250 d.
P12,500 and P5,000
12. Jardin Corporation issued 10,000 shares of P20 par value common stock at P50 per share.
The amount that would be credited to Paid In Capital in Excess of Par Common is
a. P200,000 b. P300,000 c. P500,000 d. P700,000

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13. You are given the following information: Capital stock, P80,000 (P80 par value); Additional
paid In Capital, P200,000; and Retained Earnings, P400,000. Assuming only one class of
stock, the book value per share is
a. P400 b. P280 c. P80 d. P680
14. VILLA Corp’s outstanding capital stock at Dec. 31, 2004 consisted of the following:
 30,000 shares of 5% cumulative preferred stock, par value P10 per share, fully participating
as to dividends. No dividends in arrears
 200,000 shares of common stock, par value P1 per share
On Dec. 15, 2004, Villa declared dividends of P100,000. What was the amount of dividends
payable to Common stockholders?
a. P10,000 b. P34,000 c. P47,500 d. P40,000
PS 15k +45k= 60k
OS 10k +30k=40k
15. MORE Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of P2
par value common stock, which had a fair value of P5 per share before the stock dividend was
declared. This stock dividend was distributed 60 days after the declaration date. By what
amount did More’s current liabilities increase as a result of the stock dividend declaration?
a. P0 b. P500 c. P1,000 d. P2,500 (at FMV if less than
20%; 5% x 10,000 x P5)
16. Luz Corp. has 100,000 shares of P20 par common stock outstanding. The stock’s market
value is P37 per share. Luz board of directors declared and distributed a 10% common stock
dividend. Which of the following entries showed the full effect of declaring and distributing the
dividend?
a. Retained earnings 370,000
Stock dividend Distributable 200,000
Paid In capital in Excess of Par 170,000
b. Retained earnings 200.000
Common Stock 200,000
c. Retained earnings 170,000
Paid in Capital in excess of Par 170,000
d. Retained earnings 370,000
Common stock 200,000
Paid in capital in excess of par 170,000
17. Manuel Trade, Inc. has 100,000 shares of 7% P5 par preferred stock, and 100,000 shares of
P4 par common stock outstanding. Two years preferred dividends are in arrears. Manuel
declared a cash dividend large enough to pay the preferred dividend in arrears, the preferred
dividends for the current period, and a P1.50 dividend to common. What is the total amount of
the dividend?
a. P255,000 b. P220,000 c. P150,000 d. P105,000
18. At Dec. 31, 2003 and 2004. Vela Corp. had outstanding 2,000 shares of P1,000 par value, 6%
cumulative preferred stock and 10,000 shares of P100 par value common stock. At Dec. 31,
2003, dividends in arrears on the preferred stock were P60,000. Cash dividends declared in
2004 totaled P220,000. What amount were payable to preferred and Common stock?
a. P120,000 and P100,000 c. P180,000 and P40,000
b. P160,000 and P60,000 d. P220,000 and P0

19. Rex Company was organized on January 1, 2014 at which date it issued 100,000 ordinary shares of P10 par
value at P15 per share. During the period January 1, 2015 through December 31, 2015, the entity reported net
income of P450,000 and paid cash dividend of P230,000. On January 10, 2015, the entity purchased 6,000
treasury shares at P12 per share. On December 31, 2015, the entity sold 4,000 treasury shares at P8 per share
and retired the remaining treasury shares. What amount should be reported as shareholders’ equity on
December 31, 2015?
ANSWER: P1,680,000

Issuance of ordinary shares (100,000 shs x P15) P1,500,000

Reported net income 450,000
Cash Dividend ( 230,000)
*Adjustments due treasury shares (16,000+20,000+4,000) ( 40,000)
Total Shareholders’ Equity P1,680,000

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*Journal entries: treasury shares
a. Treasury shares (6,000 x P12) 72,000
Cash 72,000
b. Cash (4,000 x P8) 32,000
Retained Earnings 16,000
Treasury Shares (4,000 x P12) 48,000
c. Ordinary Shares (2,000 x P10) 20,000
Share Premium-OS 4,000
Treasury Shares (2,000 x P12) 24,000

20. Dayron Company had 80,000 ordinary shares outstanding in January 2015. The entity distributed a 15% stock
dividend in March and a 10% stock dividend in June. After acquiring 10,000 shares of treasury in July, the entity
split the share 4 for 1 in December. How many ordinary shares are outstanding on December 31, 2015?
ANSWER: 364,800 Shares

Beginning Outstanding Shares 80,000

Add: Stock dividends declared (80,000 x 15%) 12,000
Total Shares after Stock Dividends 92,000
Add: Stock dividends declared (92,000 x 10%) 9,200
Total Shares after Stock Dividends 101,200
Less: Treasury Shares 10,000
Total Outstanding Shares 91,200
Multiply Share Split up 4:1 4
Total Outstanding Shares after Split up 364,800

21. Mary Company had 80,000 ordinary shares outstanding in January 2015. The entity distributed a 10% stock
dividend in March and a 15% stock dividend in June. After acquiring 10,000 shares of treasury in July, the entity
split the share 1 for 4 in December. How many ordinary shares are outstanding on December 31, 2015?
ANSWER: 22,800 Shares

Beginning Outstanding Shares 80,000

Add: Stock dividends declared (80,000 x 10%) 8,000
Total Shares after Stock Dividends 88,000
Add: Stock dividends declared (88,000 x 15%) 13,200
Total Shares after Stock Dividends 101,200
Less: Treasury Shares 10,000
Total Outstanding Shares 91,200
Divided by Share Split down 4:1 4
Total Outstanding Shares after Split up 22,800

22. The following data pertain to Charity Corporation;

Ordinary shares, with a par value of P100,
10,000 shares issued and outstanding P1,000,000

Retained earnings 1,200,000

The following transactions took place:

June 10 Reacquired 500 ordinary shares for treasury at P80 per share.
15 75 treasury shares were sold for P8,000
20 150 treasury shares were sold for P11,250
25 175 treasury shares were sold for P18,000.
How many outstanding shares at the end of June? 9,725 outstanding shares (10,000-500+75=150)
23. Refer to No. 22, How many shares are considered issued? 10,000 issued shares

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24. The accounts were taken from the ledger of Sulong Pinoy Corporation as of December 31, 2016.

18%, Preference shares, par value of P100, authorized 10,000 shares,

issued and outstanding 8,000 shares P 800,000
Ordinary shares, no par, authorized 25,000 shares stated value of P100,
Issued 15,000 shares of which 1,000 share are in the treasury 1,500,000
Subscribed Preference shares 100,000
Subscribed Ordinary shares 50,000
Subscription Receivable – Preference shares 40,000
Subscription Receivable – Ordinary shares 20,000
Share Premium – Preference shares 10,000
Share Premium – Ordinary shares 15,000
Donated Capital – Land 75,000
Treasury Stock, at cost, 1,000 shares 120,000
Retained Earnings 165,000
How much is the Total Stockholder’s Equity of Sulong Pinoy Corp on December 31, 2016? 2,535,000
25. Refer to No. 24, what is SPC’s legal capital? 2,450,000 (1500k+800k+100k+50k)

1. Which of the following is a common benefit of a member of a partnership, but not a benefit
of a corporate executive?
a. Interest on capital contributed
b. Retirement plans
c. Stock options
d. Health insurance
2. Which of the following forms of business organization is liable for income taxes as a
separate entity from its owners?
a. Corporations
b. General partnerships
c. Sole proprietorships
d. All of the answers are correct
3. Which of the following forms of business organizations is subject to the most government
regulation?
a. Sole proprietorship c. Corporation
b. General partnership d. Limited partnership
4. Which of the following items is treated in partnerships differently from other forms of
business organizations?
a. the recording of expenses
b. the distribution of profits or losses
c. the recording of revenues
d. the depreciation of assets
5. The statement of owners' equity does NOT contain which of the following information?
a. inventory disposed or sold by each partner
b. beginning and ending capital balances of an accounting period
c. net income earned by each partner
d. any additional investments made by partners
e. withdrawals made by partners
6. All are characteristics of a partnership, except
a. No liabilities c. Mutual agency
b. Limited life d. Co-ownership of property
7. An advantage of the partnership as a form of business organization is that
a. Partners do not pay income taxes on their share in partnership income
b. A partnership is bound by the act of the partners
c. A partnership is created by mere agreements of the partners
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 d. A partnership may be terminated by the death or withdrawal of a partner
8. The advantages of the partnership do not include
a. Ease of formation
b. Unlimited liability
c. Freedom from government regulation
d. Ease of decision making
9. The primary reason why an article of the partnership should not be kept secret among the
partners is the principle of
a. Transparency c. Mutual agency
b. Voluntary agreement d. Lawful agreement
10. A type of partner that do not share in the partnership losses?
a. Dormant partner c. Limited partner
b. Industrial partner d. Non-participating partner
11. A business partnership is formed for the purpose of
a. Contributing money, industry and property
b. Contributing money and property
c. Contributing money
d. Profit
12. Which of the following is a characteristic of most partnership?
a. Unlimited life c. Division of profits only
b. Mutual contribution d. Limited liability
13. An advantage of the partnership as a form of business organization would be:
a. The death or withdrawal of a partner may terminate a partnership
b. Partners do not pay income taxes on their share in partnership profit
c. A partnership is bound by the acts of the partners
d. A partnership is created by mere agreement of the partners
14. The partnership agreement is contained in the articles of partnership, an express contract
among the partners. Such an agreement ordinarily does not include
a. The rights and duties of the partners in the event of partnership dissolution
b. The allocation of income between the partners
c. A limitation on a partner’s liability to creditors
d. The rights and duties of the partners
15. Which of the following partnership characteristics is a disadvantage?
a. Ease of dissolution
b. Voluntary association
c. Unlimited liability
d. Participation in partnership income

16. All of the following are true for both general and limited partnerships, which is false?
a. Both must have at least one general partner
b. All partners are liable for all debts of the firm
c. All partners have the right to participate in the profits of the business
d. Both are easily dissolved

17. Which partner whose liability for partnership debts is limited to his capital contribution?
a. General partner b. limited partner c. Industrial partner d. secret
partner

18. Which is a partner who is liable for the payment of partnership debts to the extent of the
his separate property after the partnership assets are exhausted?
a. Managing partner b. Capitalist partner c, General partner d. Limited
partner

19. What form of partnership which comprises all the profits that the partners may acquire by
their work or industry during the existence of the partnership?
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a. universal partnership of profits c. particular partnership
b. universal partnership of all present property d. de jure partnership

20. Which partner is the one who takes charge of the winding up of partnership affairs upon
dissolution?
a. silent partner c. ostensible partner
b. liquidating partner d. dormant partner

21. Which of the following may be included in a Partner’s investments?

a. Cash c. Non cash assets with liabilities to be
assumed
b. Non cash assets b. All of the above
22. Which of the following cases does not result to a credit when recording a partners capital
account?
a. original investment
b. share in net income
c. debit balance of the drawing account at the end of the period
d. all of the above

23. What value is used to record a partner’s investment of assets in the business?
a. the partner’s book value of the assets invested
b. a value set by the partners
c. the market value of the assets invested
d. any of the above

24. Which of the following is not a characteristic of most partnerships?

a. Limited life d. Ease of formation
b. Limited liability e. All of the above
c. Mutual agency

25. Which of these characteristics does not apply to a general professional partnership?
a. Unlimited life d. No business income tax
b. Unlimited liability e. Mutual agency
c. Ease of formation

26. What is an advantage of the partnership as a form of business organization?

a. Partners do not pay income taxes on their share in partnership net income
b. The death or withdrawal of a partner may terminate a partnership
c. A partnership is created by mere agreement of the partners
d. A partnership is bound by the acts of the partners
e. All of the above

27. Two sole proprietors formed a partnership. Non cash asserts forming part of the initial
investment in the partnership would be recorded at the
a. Fair value of the property at the date of the investment
b. Proprietors’ book values or the fair value of the property at the date of the investment,
whichever is higher
c. Proprietors’ book values or the fair value of the property at the date of the investment,
whichever is lower
d. Proprietors’ book values of the property at the date of the investment

28. All partners, whether capitalist or industrial, are to share on whatever partnership profits or
losses.
The drawing account of a partner may have a debit or a credit balance.
a. True, true b. true, False c. False, true d. False, False

29. A written partnership contract is required to be prepared whenever a partnership is

formed.
A partnership is much easier and less expensive to organize than a corporation.
a. True, True b. True, False c. False, True d. False, False
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 30. All partnership should have at least one general partner.
A newly organized partnership should always open a new set of books.
a. True, True b. True, False c. False, True d. False, False

31. Which of the following forms of business organization is liable for income taxes as a
separate entity from its owners?
a. Corporations
b. General partnerships
c. Sole proprietorships
d. All of the answers are correct

32. Which of the following forms of business organizations is subject

to the most government regulation?
a. sole proprietorship
b. general partnership
c. corporation
d. limited partnership

33. What value is used to record a partner’s investment of assets in the business?
a. The partner’s book value of the assets invested c. The market value of the assets
invested
b. A value set by the partners d. All of the above

34. Lacson and Gloria formed a partnership, each contributing assets to the business. Lacson
contributed inventory with a current market value in excess of its cost. Gloria contributed real
estate with a cost in excess of its current market value. At what amount should the partnership
record each of the following assets?
a. Inventory at cost, real estate at cost
b. Inventory at market value, real estate at market value
c. Inventory at cost, real estate at market value
d. Inventory at market value, real estate at cost

35. Which of these characteristics does not apply to a general professional partnership?
a. Unlimited life b. No business income tax c. Unlimited liability d. Mutual
agency

1. The accounts below appear in the December 31, 2009 trial balance of Maria Company:
Authorized ordinary shares 5,000,000
Unissued ordinary shares 2,000,000
Subscribed ordinary shares 1,000,000
Subscription receivable 400,000
Share Premium 500,000
Treasury stock, at cost 100,000
Compute the total shareholder’s equity of Maria at December 31, 2009. 4,000,000
2. The shareholder’s equity section of Gem Company revealed the following information on December 31, 2009;
Preference shares 2,300,000
Share premium – Preference shares 805,000
Ordinary shares 5,250,000
Share premium – Ordinary shares 2,750,000
Subscribed ordinary shares 50,000
Subscription receivable – Ordinary shares 400,000
Retained earnings 1,900,000
How much is the legal capital? 7,600,000
3. Mean Corporation’s records included the following shareholder’s equity accounts:
Preference shares, par value P15, authorized 200,000 shares 2,550,000
Share Premium – Preference shares 150,000
Ordinary shares, no par, P50 stated value, 100,000 shares authorized 3,000,000
In Mean’s shareholder’s equity, what is the number of issued and outstanding shares for each class of shares?
60,000 OS and 170,000PS
4. On October 1, 2009, Arnel Company issued 20,000 shares of its P100 par ordinary shares to Roy for a tract of
land. The share had a market value of P180 per share on this date. On Roy’s last property tax bill, the land was
assessed at P2,400,000. Arnel should record a share premium of how much? 1,600,000
5. East Company issued 1,000 shares of its P5 ordinary shares to West as compensation for 1,000 hours of legal
services performed. West usually bills P160 per hour for legal services. On the date of issuance, the share was

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 trading on a public exchange at P140 per share. By what amount should the share premium as a result of this
transaction? 135,000 ;FMV of shares
6. Ashley Company was organized on January 1, 2009 with authorized capital of 100,000 shares of P200 par value
ordinary shares. During 2009 Ashley had the following transactions affecting shareholders’ equity:
January 10 Issued 25,000 shares at P220 per share
March 25 Issued 1,000 shares for legal services when the fair value was P240 per share
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 per share
What amount should Ashley report for share premium at December 31, 2009? 840,000
7. Becky Company issued 200,000 shares of ordinary shares when it began operations in 2005 and issued an
additional 100,000 shares in 2009. Becky also issued preference convertible to 100,000 ordinary shares. In
2009, Beck purchased 75,000 shares of its ordinary shares and held it in treasury. At December 31, 2009, how
many shares of Becky’s ordinary shares were outstanding? 225,000
8. Bronze Company provided the following information on December 31, 2010.
Share capital 5,000,000
Subscribed share capital 3,000,000
Subscription receivable 2,000,000
Share premium 1,500,000
Treasury shares, at cost 700,000
Retained earnings 1,000,000
What is the contributed capital on December 31, 2010? 7,500,000
9. The December 31, 2009 condensed statement of financial position of Gallo Services, an individual proprietorship
follows:
Current assets P1,400,000 Liabilities P 700,000
Equipment, net 1,300,000 Gallo, Capital 2,000,000
2,700,000 2,700,000
========= =========
Fair market values at December 31, 2009 are as follows:
Current assets P1,600,000
Equipment 2,100,000
Liabilities 700,000

On January 2, 2010, Gallo Services was incorporated with 5,000 shares of P100 par value ordinary shares
issued. How much should be credited to share premium? 2,500,000

10. Ashley Company was organized on January 1, 2009 with authorized capital of 100,000 shares of P200 par value
ordinary shares. During 2009 Ashley had the following transactions affecting shareholders’ equity:
January 10 Issued 25,000 shares at P220 per share
March 25 Issued 1,000 shares for legal services when the fair value was P240 per share
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 per share
Prepare journal entry for January 10 using Memo Entry method.
Dr. Cash 5,500,000
Cr. Share Capital 5,000,000
Cr. Share Premium 500,000

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