CA51027: ACCOUNTING FOR GOVERNMENT AND NON-PROFIT ORGANIZATIONS QUIZ 1
1. The amount of capital credited to a partner is equal to the total assets contributed at agreed or fair
value less liabilities assumed by the partnership.
2. In the division of profit or loss, it is always true that there is no bonus in case net loss is to be divided
among the partners
3. When the result of partnership operation is net income then it is always assured that bonus will be
given to a partner(s).
4. In dividing the profit or loss to the partners, all types of withdrawals made by a partner affects the
computation of the ending capital balance used as a basis in providing an allowance as to interest.
5. Loans extended by a partner to the partnership shall affect the total interest of a partner.
6. In the division of partnership profit, provision as to salary, interest and bonus may be provided to the
partners and the remainder if any is always in the form of a profit.
7. When partners agree to make their capital ratio in conformity with their profit and loss ratio using the
transfer of capital method, the partner whose agreed capital is higher than his contributed capital, may
receive a payment from the partner whose agreed capital is lower than his contributed capital.
1. If the agreement provides for the division of losses only, profits should be divided:
a. According to the original capital ratio
b. Equally
c. According to the average capital ratio
d. According to the beginning capital ratio
2. When recording a certain asset contributed to the partnership, in the absence of any agreed value, it
should be debited
a. Fair market value
b. Carrying value
c. Assessed value
d. Original cost
3. 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 of the actual contribution by such
partner during partnership formation?
a. Receipt or transfer of capital from another partner by virtue of the partner's agreement
resulting in a bonus to the said partner.
b. Recognition of impairment loss on the property contributed by said partner.
c. When there is a bonus given by said partner to the other partners.
d. Recognition of goodwill by virtue of special skills or reputation of said partner.
4. Which of the following is not an expense of a partnership?
I. Salary of employees of the partnership
II. Salaries to partners of a partnership
III. Interest on loan from partners to the partnership
IV. Interest on partners’ capital account balances
V. Bonus given to employees
VI. Bonus allocation to partners as indicated in the P/L Sharing Agreement
a.
b.
c.
d.
I, IV, and V only
All of the items indicated
I, III, and V only
II, IV, and VI only
5. In the absence of agreement as to distribution of loss, how shall the partnership loss be distributed to
the partners?
a. The industrial partner shall be exempted from partnership loss while the capitalist partners shall
share equally
b. The industrial partner shall be exempted from partnership loss while the capitalist partners shall
be distributed in accordance with profit agreement ratio.
c. The loss shall be distributed equally to all partners including the industrial partner.
d. The industrial partner shall be exempted from partnership loss while the capitalist partners shall
be distributed on the basis of capital contribution ratio.
6. This allowance for profit allocation may be given only if there is a profit:
a. Interest allowance
b. Bonus allowance
c. Salary allowance
d. All of the above
7. Which of the following statements concerning the formation of partnership business is correct?
a. The parties may become partners only upon contribution of money or property but not of industry
or service.
b. Philippine Financial Reporting Standards (PFRS) allows recognition of goodwill arising from the
formation of partnership.
c. The capital to be credited to each partner upon formation may not be the actual amount
contributed by each partner.
d. In a transfer of capital method, one or more partners may either invest or withdraw to or from
the partnership to make their capital ratio in conformity with their profit and loss ratio.
8. If the partnership agreement does not specify how income is to be allocated, profits and loss should
be allocated
a. In proportion to their beginning capital balance during the period
b. Equally
c. In accordance with their original capital contribution
d. In proportion to the weighted average capital invested during the period
9. If the partnership assumes a liability of a partner upon formation, the entry in the partnership books will
involve
a. Debit to drawing account of that partner
b. Debit capital account of that partner
c. Credit to the asset
d. Credit to the capital account of that partner
10. Which of the following transactions shall not affect the capital balance of a partner?
a. Additional investment by a partner to the partnership.
b. Receipt of bonus by a partner from another partner based on the agreement.
c. Share of a partner in the partnership’s net loss.
d. Advances made by the partnership to a partner.
11. This is the framework within which the partners are to operate or conduct partnership business.
a. PFRS
b. Partnership agreement
c. Civil code
d. Mutual Agency
12. Which of the following will decrease the capital balance of a partner?
a. Share in partnership profit
b. Advances made by a partner to the partnership
c. Drawing made by a partner
d. Receipt of share in revaluation surplus from a partnership property, plant and equipment
13. In the absence of an agreement as to distribution of profit, how shall the partnership profit be distributed
to the partners?
a. The profit shall be distributed on the basis of loss contribution ratio which may have been agreed
upon by the partners.
b. The industrial partner shall receive a just and equitable share and the remainder shall be
distributed to the capitalist partners on the basis of capital contribution ratio.
c. The profit shall be distributed equally to all partners including the industrial partner.
d. The industrial partner shall receive a share equivalent to the least share of a capitalist partner
while the capitalist partners shall share based on capital contribution ratio.
1. On July 1, 2021, A, B and C formed a business partnership to be operated as an advertising agency.
A contributed P10M cash while B shall have capital credit of P6M upon receipt of bonus of P1M from
A based on the provision in Articles of Co-Partnership. The terms of the agreement provides that A
and B shall have a combined 40% capital interest in the newly formed partnership.
Ø Compute the capital contribution made by C to the partnership.
2. On January 1, 2021, A, B and C formed a partnership with an original capital contribution ratio of 4:5:1
for total agreed capitalization of P20,000,000. The profit or loss ratio agreement provides that profits
shall be distributed in the ratio of 3:2:5 while losses shall be distributed in the ratio of 6:1:3.
During 2021, the partnership reported net income of P8,000,000 with A and B withdrawing P2,000,000
and P1,200,000, respectively. During 2022, the partnership reported a net loss of P4,000,000 with B
and C withdrawing P800,000 and P1,600,000 respectively.
Ø Compute the capital balance of B on December 31, 2022.
3. On January 1, 2021, K, L and M formed a partnership with respective capital contributions of
P6,000,000, P15,000,000 and P9,000,000. The articles of co-partnership provides that profit or loss
shall be distributed accordingly:
•
•
•
20% interest on original capital contribution.
P90,000 monthly salary for K and P150,000 monthly salary for M.
The remainder shall be distributed on the basis of original capital contribution ratio.
On December 31, 2021, K and L made withdrawals of P1,500,000 and P3,000,000, respectively. The
Statement of Financial Position of the partnership shows that L’s capital on December 31, 2021 is
P19,500,000.
Ø Compute the capital balance of K on December 31, 2021.
4. On July 1, 2021, D and J formed a Partnership organized to train prospective professional basketball
players with initial investment of P5,000,000 and P10,000,000, respectively. D is appointed as the
managing partner. The articles of co-partnership provides that profit or loss shall be distributed
accordingly:
• 30% interest on original capital contribution ratio.
• Monthly salary of P100,000 and P50,000 respectively for D and J.
• D shall be entitled to a bonus equivalent to 20% of net income after interest, salary and bonus.
• The remainder shall be distributed in a ratio of 3:2 for D and J respectively
For the year ended December 31, 2021, the partnership reported net income of P3,750,000.
Ø Compute the share in net income of partner D for the year ended December 31, 2021.
Ø Using the same data above except for an additional agreement that Interest, Salary and
Bonus to partners (in that order) are to be provided to the extent of the earnings only.
Compute the share in net income of partner J the for the year ended December 31, 2021.
5. F and G decided to combine their businesses and form a partnership. The following are the Statement
of Financial Position before formation:
The partners agreed that the equipment of F is overvalued by P80,000 and G’s equipment is overdepreciated by P200,000. Accounts receivable of P108,000 in F’s books and P140,000 in G’s books
are deemed uncollectible. The partnership decided to assume all liabilities of F and G. The partnership
agrees to have a 60:40 capital interest and profit and loss ratio. G is willing to invest or withdraw cash
from the partnership to comply with the agreement.
Ø Compute the agreed capital balances of F and G respectively upon formation.
Ø Compute the total asset of the partnership upon formation.
6. On January 1, 2021, A, B, and C formed ABC Partnership with original capital contribution of
P1,200,000, P2,000,000, and P800,000. A is appointed as managing partner. During 2021, A, B, and
C made additional investments of P2,000,000, P800,000 and P1,200,000, respectively. At the end of
2021, A, B, and C made drawings of P800,000, P400,000, and P1,600,000 respectively. At the end of
2021, the capital balance of C is reported at P1,280,000.
The profit or loss agreement of the partners is provided below:
•
•
•
•
10% interest on original capital contribution of the partners
Semi-annual salary of P320,000 and P80,000 for A, and B, respectively
Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
Remainder is to be divided equally among the partners
Ø Compute B’s share in the partnership profit for the year-ended December 31, 2021.
Ø Compute the capital balance of B on December 31, 2021 Financial Statements.
7. On January 1, 2022, X and Y decided to form a partnership. They have the following Statements of
Financial Position:
The following were agreed to be adjusted:
• The equipment of both X and Y are undervalued by P25,000 and P75,000 respectively
• Both X and Y needs to set up an allowance for doubtful accounts amounting to P200,000 and
P75,000 respectively
• Upon formation, the partnership will have a 25:75 profit and loss ratio for X and Y respectively
• All liabilities will be assumed by the partnership
• Y must invest to bring the partners' capital balances in proportion to their profit and loss ratio
Ø Compute the agreed capital to be credited to partner Y upon formation
8. A and B will form a new partnership. The following facts were ascertained:
• A will invest cash of P15,000,000 with a 60% share in the profits of the partnership
• B will contribute land with an original cost of P2,000,000 and fair market value of P3,500,000
• B will also contribute building which has an assessed value of P2,500,000 and an appraised
value of P4,500,000. The building is also subject to a mortgage of P2,000,000 which the
partnership will assume.
• The partners agree to make their capital contribution in conformity with their P&L ratio using the
transfer of capital method. Compute the agreed capital balance of A upon formation
Ø Compute the agreed capital balance of A upon formation
9. V and C are partners engaged in a manufacturing business. Transactions affecting the partners’ capital
accounts, excluding their share in the profit in 2021 are as follows:
The income summary has a credit balance of P180,000.
The profit and loss sharing agreement of the partners provide for the following:
• Interest on beginning capital at 8%
• Semi-annual salaries of P50,000 and P70,000 for V and C, respectively
• Bonus to C of 25% of net income after deducting interest and salaries but before deducting
bonus
• Balance is to be divided equally
Ø Compute C’s share in the net income of the partnership in 2021.
Ø Assuming that the partnership incurred a net loss of P180,000 during 2021, compute V’s
share in the net loss.
10. On January 1, 2021, R, J and N formed a partnership with a profit or loss sharing agreement of 2:3:5.
R contributed a land with assessed value from city assessor in the amount of P8,000,000. The land is
subject to a real estate mortgage which is annotated to the title of the land in the amount of P6,400,000
and will be assumed by the partnership. The appraised value of the land is P19,200,000. J contributed
a building with a cost of P16,000,000 and accumulated depreciation of P12,000,000. The fair value of
the building is P6,400,000. N contributed investment in trading securities with a historical cost of
P48,000,000. The trading securities have a quoted price in the active market of P24,000,000.
The partners decided to bring their capital balances in accordance with their profit or loss sharing
agreement.
Ø The total agreed capitalization of the new partnership is P80,000,000. J should contribute
additional cash in the amount of:
11. On January 1, 2021, KD and SR formed a partnership. The articles of co-partnership provides that
profit or loss shall be distributed accordingly:
• 15% interest on average capital balance.
• P300,000 and P600,000 semi-annual salary for KD and SR, respectively
• The remainder shall be distributed in the ratio of their ending capital balance.
• The following transactions regarding the capital balance of the partners for year 2021 are
provided:
The partnership reported net income of P3,000,000 for the year 2021.
Ø Compute the share of KD in the net income of the partnership in 2021.
Ø Compute the capital balance of SR on December 31, 2021.
12. On January 1, 2021, A, B and C formed ABC & Co., a general professional partnership for the exercise
of their common profession. A contributed a building with a cost of P20,000,000 and accumulated
depreciation of P16,000,000. Based on the city assessor’s records, the building has an assessed value
of P8,000,000. The building has an annotated mortgage payable amount to P2,000,000 to be assumed
by the partnership.
On the other hand, B contributed 40,000 shares of stocks with par value of P200/share and prevailing
quoted price of P300/share. On January 2, 2021, the building contributed by A was sold for
P22,000,000.
Ø If C wants to have a 20% capital interest in the newly formed partnership, how much cash
shall be contributed by him?
13. C and D will form a new partnership. The following facts were ascertained:
•
•
•
C will invest cash of P60,000,000 for a 60% interest in the capital and profits of the partnership
D will contribute land with an original cost of P8,000,000 and fair market value of P14,000,000
D will also contribute a building which has an assessed value of P10,000,000 and an appraised
value of P18,000,000. The building is also subject to a mortgage of P8,000,000 which the
partnership will assume.
• D will contribute sufficient cash for his interest in the capital of the partnership
Ø Compute the amount of cash to be contributed by D for his interest in the agreed capital
of the partnership
14. Q and R partners sharing profits 60:40. The following is the Statement of Financial Position of the said
partnership:
The existing partners agreed to admit S as partner to form a new partnership QRS. The terms of their
agreement are as follows:
• An allowance for doubtful accounts amounting to P22,500 is to be established
• Inventories are to be restated at the agreed value of P850,000
• Accrued expenses of P20,000 are to be recognized
• The accounts payable will be assumed by the new partnership
Q, R and S will divide profits 5:3:2 and the capital balances after formation of the new partnership will
reflect the said ratio. Q and R will make personal cash settlements between themselves to adjust their
capital balances. S on the other hand, will invest additional cash for his investment in the capital interest
in the new partnership.
Ø Compute the amount of cash to be invested by S for his capital interest in the new
partnership
15. On January 1, 2022, J and K decided to form a partnership. They have the following Statements of
Financial Position:
The following were agreed to be adjusted:
• The equipment of both J and K are under depreciated by P150,000 and P450,000 respectively
• Both J and K needs to set up an allowance for doubtful accounts amounting to P1,200,000 and
P450,000 respectively
• Upon formation, the partnership will have a 60:40 profit and loss ratio for J and K respectively
• All liabilities will be assumed by the partnership
• J must invest sufficient amount of cash to bring the partners' capital balances in proportion to
their profit and loss ratio
Ø Compute the amount of cash to be contributed by J based on their agreement
T/F: (1) TRUE (2) TRUE (3) FALSE (4) FALSE (5) TRUE (6) FALSE (7) TRUE
MCQ: (1) A (2) A (3) A (4) D (5) B (6) B (7) C (8) C (9) B (10) D (11) B (12) B (13) C
SOLVING
(1) 22,500,000
(2) 9,200,000
(3) 8,580,000
(4) 1,750,000 & 2,000,000
(5) 2,255,364 , 1,503,576 & 8,058,336
(6) 880,000 & 3,560,000
(7) 2,325,000
(8) 12,600,000
(9) 113,200 & (113,200)
(10) 17,600,000
(11) 1,306,875 & 4,693,125
(12) 8,000,000
(13) 16,000,000
(14) 296,875
(15) 1,725,000