Polytechnic University of the Philippines
College of Accountancy and Finance
Sta. Mesa, Manila
Accounting for Partnership
I.
Theories
1. The term that apply to the excess of agreed capital over total contributed capital
a. Bonus Method
b. Asset Revaluation Method
c. Capital credit
d. None of the above
2. It can be determined by dividing the new partners contribution by his fraction of interest
a. Contributed Capital
b. Agreed Capital
c. Bonus
d. Capital Credit
3. The transfer of capital from one to another
a. Bonus Method
b. Asset Revaluation Method
c. Capital credit
d. None of the above
4. The contribution of both the new and old partners
a. Contributed Capital
b. Agreed Capital
c. Bonus
d. Capital Credit
5. It refers to the termination of the life of an existing partnership
a. Partnership Formation
b. Partnership Dissolution
c. Partnership Liquidation
d. Partnership Incorporation
6. It is a personal transaction between the partner who sells his interest and a third party (buyer) who thereafter
becomes a partner
a. Admission by Investment
b. Admission by Purchase
c. Admission by execution
d. None of the above
7. The type of admission wherein the new partner is admitted by buying the whole interest thereof of one or more
old partners
a. Admission by Investment
b. Admission by Purchase
c. Admission by execution
d. None of the above
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8. The type of admission where assets are contributed to the partnership
a. Admission by Investment
b. Admission by Purchase
c. Admission by execution
d. None of the above
9. This refers to the termination of the business activities carried on by the partnership
a. Formation
b. Dissolution
c. Liquidation
d. Incorporation
10. The interest or equity of a partner in the partnership upon admission
a. investment
b. Purchase
c. execution
d. None of the above
11. The situation in admission of a new partner by investment wherein the two alternative solutions are the bonus
method and the asset revaluation method
a. Agreed capital is given
b. Agreed capital is not given
c. Contributed capital is not given
d. Contributed capital is given
12. The basis for the computation of the total partnership capital when the amount of a new partner's contribution
has to be determined
a. Fraction of interest
b. Fraction of capital
c. Fraction of contributed capital
d. Fraction of agreed capital
13. The equity of a partner in the partnership that is usually expressed in fraction a.)
a. Fraction of interest
b. Fraction of capital
c. Fraction of contributed capital
d. Fraction of agreed capital
14. The difference between the consideration made and the interest transferred in an admission
a. Partnership gain or loss
b. Corporation gain or loss
c. None of the above
15. Which of the following does not result in the dissolution of a partnership
a. Marriage of a partner
b. Withdrawal of a partner
c. Addition of a new partner
d. Death of a partner
16. A new partner may be admitted into a partnership by any of the following except A.
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a.
b.
c.
d.
Investing in the partnership
Purchasing preferred stock of the partnership
Purchasing partners interest
Both a and c
17. This results when there is a change in the relationship of the partners caused by any partner ceasing to be
associated in the carrying on of the business or by admission of a new partner in the partnership.
a. Winding up
c. Reorganization
b. Liquidation
d. Dissolution
18. Which of the following is not closed in the closing process for a partnership?
a. Depreciation
c. Mr. P., Capital
b. Income Summary
d. Mr. P., Drawing
19. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is
part of initial investments in the partnership would be recorded for financial accounting purposes at
a. Proprietors’ book values or the fair value of the property at the date of the investment, whichever is higher.
b. Proprietors’ book values or the fair value of the property at the date of the investment, whichever is lower.
c. Proprietors’ book values of the property at the date of investment.
d. Fair value of the property at the date of investment.
20. Anton and Garcia formed a partnership, each contributing assets to the business. Anton contributed inventory
with a current market value in excess of its carrying amount. Garcia contributed real estate with a carrying
amount in excess of its current market value. At what amount should the partnership record each of the
following assets?
Inventory
Real Estate
a. Carrying amount
Market Value
b. Market Value
Carrying amount
c. Carrying Amount
Carrying amount
d. Market value
Market Value
21. Statement 1: A partnership that has complied with all the requirements for its establishment is called de jure
partnership.
Statement 2: The unlimited liability of the partners for partnership debts makes the partnership more reliable
from the point of view of creditors.
a. True, False
c. Both are true
b. False, True
d. Both are false
22. Statement 1: Partnership profit or loss is shared equally unless the partnership contract specifically indicates the
manner in which profit or loss is to be divided.
Statement 2: No one becomes a member of the partnership without the consent of majority of the partners.
a. True, False
c. Both are true
b. False, True
d. Both are false
23. The partnership agreement of Rey and Nante provides for salary allowances of P45,000 to Rey and P35,000 to
Nante, with the remaining income or loss to be divided equally. During the year, Rey and Nante each withdraw
cash equal to 80% of their salary allowances. If the partnership net income is P100,000, Rey’s equity in the
partnership would
a. Increase more than Nante’s
c. Increase the same as Nante’s
b. Decrease more than Nante’s
d. Decrease the same as Nante’s
24. Which of the following is not allowed if the operation resulted to a net loss?
a. Salaries to partners
c. Bonus to managing partners
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b. Interest on capital
d. Both a & b
25. When a partnership purchases the interest of a retiring partner at less than book value, there must be a:
a. Bonus to the remaining partners.
b. Bonus to retiring partner.
c. Bonus to the remaining partners/negative revaluation or both.
d. Bonus to the retiring partner/positive revaluation or both.
II.
Problems
1. On October 1, 2016, Albus and Newt formed a partnership and agreed to share profit and losses in the ratio of
3:7, respectively. Albus contributed a parcel of land that cost him P2,000,000. Newt contributed P3,000,000 cash.
The land has a quoted price of P3,600,000 on October 1, 2016. What amount should be recorded in Albus’
capital account upon formation of the partnership?
a. P2,000,000
b. P3,000,000
c. P3,480,000
d. P3,600,000
2. On April 30, 2016, Harry, Hermione and Ron formed a partnership by combining their separate business
proprietorships. Harry contributed cash of P100,000. Hermione contributed a property with carrying amount of
P72,000, original cost of P80,000 and fair value of P160,000. The partnership accepted responsibility for the
P70,000 mortgage attached to the property. Ron contributed equipment with a carrying amount of P60,000,
original cost of P150,000, and fair value of P110,000. The partnership agreement specifies that profits and losses
are to be shared equally but is silent regarding capital contributions. Which partner has the largest capital
account balance as of April 30, 2016?
a. Harry
b. Hermione
c. Ron
d. All capital account balances are equal
3. De Castro and Carpio formed a partnership and agreed to divide initial capital equally, even though De Castro
contributed P100,000 and Carpio gave P84,000 in identifiable assets. Under bonus approach to adjust capital
accounts, Carpio’s capital account should be credited for
a. P50,000
b. P84,000
c. P92,000
d. P100,000
4. Molino and Nuevo entered into a partnership agreement in which Molino is to have a 60% interests in capital
and profits and Nuevo is to have a 40% interests in capital and profits. Molino contributes the following :
Land
Building
Equipment
Cost
P20, 000
P200,000
P40,000
Fair Value
P40,000
P120,000
P30,000
There is a P60,000 mortgage on the building that the partnership agrees to assume. Nuevo contributes P100,000
cash to the partnership. The partnership formation provided for
a. Bonus of P8,000 to Nuevo
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b. Bonus of P8,000 given by Nuevo
c. Bonus of P8,000 given by Molino
d. Bonus of P8,000 to Molino and Nuevo
5. On March 1, 2016, Boruto and Mitsuki decided to combine their business and form a partnership. The statement
of financial position of Boruto and Mitsuki on March 1, before adjustments is presented below.
Boruto
Cash
Accounts Receivable
Inventories
Furnitures and Fixtures (Net)
Office Equipment (Net)
Prepaid Expenses
Accounts Payable
Boruto, Capital
Mitsuki, Capital
Mitsuki
P90,000
185,000
300, 000
300,000
115,000
63,750
P1,053,750
P457,500
596,250

P1,053,750
P37,500
135,000
195,000
90,000
27,500
30,000
P515,000
P180,000

335,000
P515,000
They agreed to provide P5,550 and P4,050 respectively for uncollectible accounts on their present accounts
receivable and found Mitsuki’s furniture to be underdepreciated by P9,000.
If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of Boruto and
Mitsuki would be:
a. P581,700 and P330,950 respectively
b. P583,200 and P329,450 respectively
c. P590,700 and P321,950 respectively
d. P1,048,200 and P501,950 respectively
6. Using the information in no. 5, and assuming the partners agreed that equity is to be 60% and 40% to Boruto and
Mitsuki respectively, the capital accounts would be:
a. P547,590 and P365,060 respectively
b. P590,700 and P321,950 respectively
c. P930,900 and P620,060 respectively
d. P558,750 and P372,500 respectively
7. Jessie J. and Arianna are combining their separate businesses to form a partnership. Cash and non-cash assets
are to be contributed for a total capital of P300,000. The non-cash assets to be contributed and the liabilities to
be assumed are:
Account Receivable
Inventories
Equipment
Accounts Payable
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Jessie J.
Book Value
Fair Value
20,000
20,000
30,000
40,000
60,000
45,000
15,000
15,000
Arianna
Book Value
Fair Value
20,000
40,000
10,000
25,000
50,000
10,000
The partners’ capital accounts are to be equal after all contribution of assets and assumption of liabilities. The
amount of cash to be contributed by Jessie J. is
a. P60,000
b. P85,000
c. P150,000
d. P210,000
8. Using the information in no. 7, the total assets of the partnership is
a. P170,000
b. P180,000
c. P315,000
d. P325,000
9. The partnership of Vayne and Janna was formed on March 31, 2018. On this date, Vayne contributed P50,000
cash and office equipment valued at P30,000. Janna invested P70,000 cash, merchandise valued at P100,000,
and furniture valued at P100,000 subject to a notes payable of P50,000, which the partnership assumes. The
partnership provides that Vayne and Janna share profit and losses 25:75, respectively. The agreement further
provides that the partners should initially have an equal interest in the partnership capital. The total capital of
the partnership after the formation is:
a. P300,000
b. P310,000
c. P350,000
d. P360,000
10. GD and CL decided to form a partnership on October 1, 2018. Their Statement of Financial Position on that date
was :
GD
Cash
Accounts Receivable
Merchandise Inventory
Equipment
Total
Accounts Payable
Capital
Total




CL
65,625
1,487,500
875,000
656,250
3,084,375
459,375
2,625,000
3,084,375
164,062.50
896,875
885,937.5
1,268,750
3,215,625
1,159,375
2,056,250
3,215,625
They agreed to the following adjustments:
Equipment of GD is overvalued by P87,500 and that CL’s is undervalued by P131,250.
Allowance for Doubtful Accounts is to be set-up to P297,500 for GD and P196,875 for CL.
Inventories of P21,875 and P15,312.50 are worthless in the books of GD and CL, respectively.
The partnership agreement provides for a profit and loss ratio of 7:3 for GD and CL, respectively.
How much is the agreed capital of GD to bring the capital balances proportionate to their profit and loss ratio?
a.
b.
c.
d.
11.
2,935,406.25
2,390,937.50
2,218,125
1,024,687.50
Evie and Leo are partners who agreed to share profits and losses in the following manner:
Evie
Leo
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Annual Salaries
P261,000
P259,000 = 520k
Interest on Average Capital
5%
30k
10% 30k= 60k
Bonus (based on net income
10%
after salaries and interest)
Remainder
50%
(2.5)
50% (2.5) = 5k
During the current year, the partnership’s result of operation was P575,000 profit before any deduction. Evie and
Leo’s average capital balances for the year are P600,000 and P300,000, respectively. How much is the total share
of Leo in the net income for the current year?
a. P287,500
b. P286,500
c. P288,500
d. P295,665
12. Canlas, a partner in the 3C partnership, has a 30% participation in the partnership profit and losses. Canlas’
capital account had a net decrease of P120,000 during the calendar year of 2018. During 2018, Canlas withdrew
P260,000 (charged against his capital account) and contributed property valued at P50,000 to the partnership.
What was the profit of 3C Partnership?
a. P300,000
b. P466,667
c. P700,000
d. P1,100,000
13. Partners Fojas and Gomez share profits and loss equally after each has been credited in all circumstances will
annual salary allowances of P30,000 and P24,000, respectively. Under this arrangement, in which of the
following circumstances will Fojas benefit by P6,000 more than Gomez?
a. Only if the partnership has earning of P54,000 or more for the year
b. Only if the partnership does not incur a loss for the year
c. In all earnings or loss situation
d. Only if the partnership has earnings of at least P6,000 for the year
14. Ramos, Campos and Ocampo are partners with average capital balances in 2018 of P240,000, P120,000 and
P80,000, respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of
P60,000 to Ramos and P40,000 to Campos, the residual profit or loss is divided equally. In 2018, the partnership
sustained a loss of P66,000 before salaries and interest to partners. By what amount should Ramos’ capital
account change?
a. P14,000 decrease
b. P22,000 decrease
c. P70,000 decrease
d. P84,000 decrease
15. How much is the share of Campos in the loss?
a. P(18,000)
b. P26,000
c. P(22,000)
d. P(24,667)
16. Tamayo, Banson and Vidal formed a partnership on January 1,2017 with the following initial investments:
Tamayo
P100,000
Banson
P150,000
Vidal
P225,000
The partnership agreement stated that profits and losses are to be shared equally by the partners after
consideration is made for the following:
 Salaries allowed to partners: P60,000 for Tamayo; P48,000 to Banson and P36,000 for Vidal.
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 10% Interest on average capital for each partner.
Additional Information:
 On June 30,2017, Tamayo invested additional P60,000
 Vidal withdrew P70,000 from the partnership on Sept. 30, 2017
 Share on the remaining profit was P3,000 for each partner.
Interest on the average capital balances of the partners totaled:
a. P48,750
b. P53,750
c. P57,625
d. P60,625
17. Using the information in no. 16, the partnership net profit for 2017 before salaries, interests and partners’ share
on the remainder was:
a. P199,750
b. P201,750
c. P207,750
d. P211,625
18. ABC Partnership was formed by A, B, and C last December 1, 2017. The original investments of the partner was:
A-P200,000 1667
B-P500,000 4167
C-P300,000 2500 8334
On January 1,2018, the capital balances of the partners are:
A-P500,000
B-P900,000
C-P700,000
The Profit and Loss Sharing agreement of the partners provide the following:
 10% annual interest on capital
 Annual Salaries:
A-P50,000 4167
B-P60,000 5
C-P70,000 5833 15
 Remainder to be shared equally
Assuming the partnership operation for the year, 2018, resulted to P300,000 profit.
How much is the share of C in the profit?
a. P106,667
b. P110,000
c. P101,555
d. None of the choices
19. Assuming for the year 2017, there is a profit of P10,000, how much is the share of A?
Answer:
P1,389
20. Marvin, Gerwin and Grace formed a partnership on July 1,2017 with the following investments:
Marvin
P200,000
Gerwin
P300,000
Grace
P450,000
The partnership agreement provides that profits and losses are to be shared equally by partners after
consideration for the following:
 Annual Salaries to partners:P60,000 for Marvin, P48,000 for Gerwin, P36,000 for Grace 72000
 10% interest on average capital 49250
 10% net profit after salaries and interest as bonus to Marvin as the Managing Partner
Additional information:
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

On October 1, 2017, Marvin made additional investment of P60,000
Grace invested P30,000 on December 1, 2017
If each partner received P30,000 on the residual profit after salaries, interest and bonus, the net income
reported by the partnership was:
a. P196,625
b. P220,750
c. P176,962.50
d. P221,250
21. Considering your answer in no. 20, the capital balance of Marvin on December 31, 2017 is:
a. P81,500
b. P101,500
c. P341,500
d. P335,750
22. Presented below is the balance sheet of the partnership KK, LL and MM who share profit and losses in the ratio
of 6:3:1, respectively:
Cash
Other Assets
Liabilities
P80,000
KK, Capital
252,000
LL, Capital
126,000
MM, Capital
42,000
Total
P500,000
Total
P500,000
The partners agree to sell NN 20% of their respective capital and profit and loss interest for a total payment of
P90,000. The payment by NN is to be made directly to the individual partners. The capital balances of KK, LL and
MM, respectively after the admission of NN are:
a. P198000;
P99000;
P33000
b. P201600;
P100800;
P33600
c. P246000;
P108000;
P36000
d. P255600;
P127,800;
P42600
23. Using the same information in no.22, assuming that revaluation of asset is to be recorded prior to the acquisition
by NN. The capitals of KK, LL and MM, respectively after the admission of NN are:
a.
b.
c.
d.
198000
201600
216000
255600
P85,000
415,000
99000
100800
108000
127800
33000
33600
36000
42600
24. Capital balances and profits sharing percentages for the partnership of Charlene, April and Raven on January 1,
2018 are as follows:
Charlene (36%)
P280,000
April (24%)
200,000
Raven (40%)
320,000
On January 5, 2018 the partners agreed to admit Angel into the partnership for a 25% interest in
capital and
earnings for her investment of P240,000. The partnership assets are not to be revalued. The capital balance and
new profit and loss sharing ratio of Charlene after the admission of Angel is _________ and _____________,
respectively.
a. P260,000; 27%
c. P259,200; 27%
b. P251,200, 36%
d. P272,800; 27%
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25. The total of the partners’ capital accounts was P110,000 before the recognition of partnership asset revaluation
in preparation for the withdrawal of a partner whose profit and loss sharing ratio is 2/10. He was paid P28,000 by
the firm in the final settlement for his interest. The remaining partners’ capital accounts, excluding their share of
the asset revaluation totaled P90,000 after his withdrawal. How much was the agreed total asset revaluation of
the firm?
a. P8,000
c. P20,000
b. P140,000
d. P40,000
26. A, B, C are partners in the accounting firm. Their capital account balances at year-end were: A, P90,000; B,
P110,000; C, P50,000. They share profits and losses in a 4:4:2 ratio, after the following special terms:
 Partner C is to receive a bonus of 10% of the net income after bonus.
 Interest of 10% shall be paid on that portion of a partner’s capital in excess of P100,000.
 Salaries of P10,000 and P12,000 shall be paid to partners A and C, respectively.
Assuming a net income of P44,000 for the year, the total profit share of partner C would be:
a. P7,800
c. P19,400
b. P16,800
d. P19,800
27. Anna, Karen and Nina are partners sharing profits in the ratio of 3:3:2. On June 30, their capital balances are:
Anna – P600,000; Karen – P400,000; Nina – P300,000.
The partners agree to admit Philomena on the following agreement:
1. Philomena is to pay Anna P400,000 for a ½ interest of Anna’s interest.
2. Philomena is also to invest P300,000 in the partnership.
3. The total capital of the partnership is to be P2,000,000, of which Philomena’s interest is to be 25%.
What are the capital balances of Anna, Karen and Nina after the admission of Philomena?
a. P487,500; P587,500; P425,000
b. P400,000; P300,000; P300,000
c. P300,000; P400,000; P300,000
d. P187,500; P187,500; P125,000
28. Bonus
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