1
ACCOUNTANCY DEPARTMENT
COLUMBAN COLLEGE, INC
No. 1 Mt. Apo Street, East Tapinac
Olongapo City, Philippines
“…we speak the language of business…we always give our best…”
AY: 2016-2017, 2nd Semester
PRELIM QUIZ in ADVANCED ACCOUNTING & REPORTING – P1 BSA311
Last Name:______________________________Schedule :________________________________________
First Name:______________________________Professor :________________________________________
“When students cheat on exams it’s because they value GRADES more than LEARNING”
PART 1
1. RR and PP share profits after the provision of annual salary allowances of P 14,400
and P 13,200, respectively in the ratio of 6:4. However, if partnership’s net income is
insufficient to provide for said allowances in full amount, the net income shall be
divided equally between the partners. In 2017, the following errors were discovered:
Depreciation for 2017 is understated by P 2,100, and the inventory in December 31,
2017 is overstated by P 11,400. The partnership net income for 2017 was reported to
be P 19,500.
The capital accounts of the partners should be increased (decreased) by:
A. RR, P (6,540); PP, P (6,540)
B. RR, P 3,000; PP, P 3,000
C. RR, P (6,960); PP, P 6,540
D. RR, P (6,750); PP, P (6,750)
2. In the AA-BB partnership, AA and BB had a capital ratio of 3:1 and a profit and loss
ratio of 2:1, respectively. The bonus method was used to record CC’s admittance as a
new partner. What ration would be used to allocate, to AA and BB, the excess for CC’s
contribution over the amount credited to CC’s capital account?
A. AA and BB’s new relative ratio.
B. AA and BB’s new relative profit and loss ratio.
C. AA and BB’s old capital ratio.
D. AA and BB’s old profit and loss ratio.
3. RR and XX formed a partnership and agreed to divide initial capital equally, even
though RR contributed P 25,000 and XX contributed P 21,000 in identifiable assets.
Under the bonus approach to adjust the capital accounts. XX’s unidentifiable assets
should be debited for:
A. P 11,500
B. P 4,000
C. P 2,000
D. P 0
4. In the AD partnership, Allen’s capital is P 140,000 and Daniels’s is P 40,000 and they
share income in a 3:1 ratio, respectively. They decide to admit David to the
partnership. Each of the following questions is independent of the others.
Allen and Daniel agree that some of the inventory is obsolete. The inventory account
is decreased before David is admitted. David invests P 40,000 for a one-fifth interest.
What is the amount of inventory written down?
A. P 4,000
B. P 10,000
C. P 15,000
D. P 20,000
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5. Using the same information in number 4, David directly purchases a one-fifth interest
by paying Allen P 34,000 and Daniel P 10,000. The land account is increased before
David is admitted. By what amount is the land account increased?
A. P 40,000
B. P 36,000
C. P 20,000
D. P 10,000
6. Using the same information in number 4, David invests P 40,000 for a one-fifth
interest in the total capital of P220,000. the journal to record David’s admission into
the partnership will include:
A. A credit to Cash for P 40,000.
B. A debit to Allen, Capital for P 3,000.
C. A credit to David, Capital for P 40,000.
D. A credit to Daniel, Capital for P 1,000.
7. Mark and Valerie are partners with capitals P200,000 and P100,000 and sharing
profits and losses at 3:1, respectively. They decided to admit Nora as a new partner with
a 50% interest in the firm. Nora invested cash of P150,000, and Mark and Valerie
transferred portions of their capitals as a bonus to Nora. After Nora’s admission,
Valerie’s capital would be:
a. P 37,500
c. P 81,250
b. P 56,250
d. P100,000
8. Tito and Vic, partners sharing profits and losses equally, have capital balances of
P90,000 each. Joey is admitted as a new partner, making cash investment of P120,000,
to a one-third interest in both capital and earnings. If Joey is credited in full for the
amount of his investment, the new capital of the partnership would be:
a. P240,000.
b. P300,000.
c. P360,000.
d. P420,000.
9. Moonbits Partnership had a net income of P8,000 for the month ended September 30,
2017. Sunshine purchased an interest in Moonbits Partnership of Liz and Dick by paying
Liz P32,000 for half of her capital and half of her 50% profit-sharing interest on October
1, 2017. At this time, Liz’s capital balance was P24,000 and Dick’s capital was P56,000.
Sunshine should receive capital credit equal to:
a. P12,000
b. P16,000
c. P20,000
d. P26,667
10. Sarah is admitted into the firm of Joy, Alma and Pilar. The old partners agreed to sell
to Sarah one-fourth of their respective equities and profit share. Sarah paid a total price
of P1,000,000. Before Sarah’s admission, Joy, Alma and Pilar have capital balances of
P2,000,000, P1,000,000 and P500,000 and they share profits at the ratio of 6:3:1.
Partnership assets are fairly stated and implied goodwill is to be recognized prior to
Sarah’s admission.
The new capital of the partnership is:
a. P3,500,000
b. P4,000,000
c. P5,000,000
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d.was
P4,500,000
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PART 2
1. The partnership has the following accounting amounts:
(1) Sales = P70,000
(2) Cost of Goods Sold = P40,000
(3) Operating Expenses = P10,000
(4) Salary allocations to partners = P13,000
(5) Interest paid to banks = P2,000
(6) Partner’s withdrawals = P8,000
The partnership net income (loss) is:
a. P20,000
b. P18,000
c. P5,000
d. P(3,000)
2. Cab and Jo are considering forming a partnership whereby profits will be allocated
through the use of salaries and bonuses. Bonuses will be 10% of net income after
salaries and bonuses. Cab will receive a salary of P30,000 and a bonus. Jo has the
option of receiving a salary of P40,000 and a 10% bonus or simply receiving a salary
of P52,000. Both partners will receive the same amount of bonus.
Determine the level of net income that would be necessary so that Jo would be
indifferent to the profit sharing option selected.
a. P240,000
b. P300,000
c. P94,000
d. P334,000
3. The partnership agreement of XX, YY & ZZ provides for the year-end allocation of net
in the following order:
 First, XX is to receive 10% of net income up to P200,000 and 20%over
P200,000.
 Second, YY and ZZ each are to receive 5% of the remaining income over
P300,000.
 The balance of income is to be allocated equally among the three partners.
The partnership’s 2011 net income was P500,000 before any allocations to partners.
What amount should be allocated to XX?
a. P202,000
b. P216,000
c. 206,000
d. P220,000
4. AA, BB, and CC are partners with average capital balances during 2017 of P360,000,
P180,000, and P120,000, respectively. Partners receive 10% interest on their average
capital balances. After deducting salaries of P90,000 to AA and P60,000 to CC the
residual profit or loss is divided equally. In 2017 the partnership sustained a P99,000
loss before interest and salaries to partners. By what amount should AA’s capital
account change?
a. P21,000 increase
b. P33,000 decrease
c. P105,000 decrease
d.
P126,000 increase
5. On January 1, 2017, DD and EE decided to form a partnership. At the end of the year,
a net from
income
of P120,000.
capital
accounts of the
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partnership show the following transactions.
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DD, Capital
EE,
Capital
Dr.
Cr.
P5,00
0
-
P40,00
0
10,000
5,000
4,000
Cr.
Dr.
January
1……………………
April
1………………………
June
1……………………….
August
1…………………….
September
1…………………
October
1……………………
December
1…………………
P3,000
1,000
-
P25,000
10,000
5,000
Assuming that an interest of 20% per annum is given on average capital and the balance
of the profits is allocated equally, the allocated equally, the allocation of profits should be:
a. DD, P60,000; EE, P59,400
b. DD, P61,200; EE, P58,800
c. DD, P67,200; EE, P52,800
d. DD, P68,800; EE, P51, 200
6. AA and BB formed a partnership in 2017 and made the following investments and
capital withdrawals during the year:
AA
BB
Investme
nts
March
1………………….
June
1……………………
August
1…………………
December
1……………...
Draws
P30,000
Investme
nts
Draws
P20,000
P10,000
20,000
P10,000
2,000
5,000
The partnership’s profit and loss agreement provides for a salary of which P30,000 was
paid to each partner for 2017. AA is to receive a bonus of 10% on net income after
salaries and bonus. The partners are also to receive interest of 8% on average annual
capital balances affected by both investments and drawings. Any remaining profits are to
be allocated equally among the partners.
Assuming net income of P60,000 before salaries and bonus, determine how the
income would be allocated among the partners:
a. AA, P31,138; BB, P28,862
b. AA, P33,537; BB, P26,463
c. AA, P30,633; BB, P29,367
d. AA, P30,684; BB, P29, 316
below
is the condensed
balance
sheet of
the GMT
partnership
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who share profits and losses in the ratio of 6:3:1, respectively:
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of KK, LL and MM
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Cash......................P 85,000
80,000
Other assets........... 415,000
252,000
Liabilities......................P
KK, capital....................
LL, capital..................... 126,000
MM, capital................... 42,000
Total.............................
_______
Total.....................P500,000
P500,000
The partner 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 balance balances of KK, LL and MM, respectively
after admission of NN are:
a. P198,000;
P 99,000:
P33,000.
b. P201,000;
P100,800;
P33,600.
c. P216,000;
P108,000;
P36,000.
d. P255,600;
P127,800;
P42,600.
8. The capital accounts of the partnership of NN, VV, and VV, and JJ on June 1, 2017 are
presented below with their respective profit and losses ratios:
NN....................................
P139,200
1/2
VV.................................... 208,800
1/3
JJ.......................................
96,000
1/6
On June 1, 2017, LL is admitted to the partnership when LL purchased, for P132,000,
a proportionate interest from NN and JJ in the net assets and profits of the
partnership. As a result of a transaction LL acquired a one-fifth interest in the net
assets and profits of the firm. What is the combined gain realized by NN and JJ upon
the scale of a portion of their interest in the partnership to LL?
a. P0
b. P43,200
c. P62,400
d. P82,000
9. PP contributed P24,000 and CC contributed P48,000 to form a partnership, and they
agreed to share profits in the ratio of their original capital contributions. During the
first year of operations, they made a profit of P16,290; PP withdrew P5,050 and CC
P8,000. at the start of the following year, they agreed to admit GG into the
partnership. He was to receive a one-fourth interest in the capital and profits upon
payment of P30,000 to PP and CC, whose capital accounts were to be reduced by
transfers to GG’s capital account of amounts sufficient to bring them back to their
original capital ratio.
How should the P30,000 paid by GG be divided between PP and CC?
a.
b.
PP,P 9,825; CC, P20,175
PP,P15,000; CC, P15,000
c. PP,P10,000; CC, P20,000
d. PP,P 9,300; CC, P20,700
10. On January 31, 2017, partners of Lon, Mac & Nan, LLP, had the following loan and
capital account balances (after closing entries for January):
Loan receivable from Lon................................................. P 20,000 dr
Loan payable to Nan.........................................................
60,000 cr
Lon, capital.......................................................................
30,000 dr
Mac, capital....................................................................... 120,000 cr
Nan, capital.......................................................................
70,000 cr
The partnership income sharing ratio was Lon, 50%; Mac, 20%, and Nan, 30%. On
January 31, 2017, Ole was admitted to the partnership for a 20% interest in total
capital of the partnership in exchange for an investment of P40,000 cash. Prior to
Ole’s admission, the existing partners agreed to increase the carrying amount of the
partnership’s inventories to current fair value, a P60,000 increase. The capital
account to be credited to Ole:
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a.P60,000
b. P40,000
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c. P52,000
d.P46,000
6
PART 3
N
o
Problems
Computation/Solution Here!
On January 2, 2017, Bueno and Perez formed a
partnership with capital distributions of P175,000
and P25,000, respectively. They agreed to share
profits and losses 80% and 20%, respectively. Perez
is the general manager and works in the partnership
full time. Perez is given salary of P5,000 a month; an
interest of 5% on starting capital; and a bonus of
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net profit
before the
salary,
interest,
and 03:11:48 GMT -06:00
bonus. The condensed profit and loss statement of
1.
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the partnership, for the year ended December 31,
2017, is as follows:
Net sales
P875,000
Cost of sales
700,000
Gross profit on sales
P175,000
Expenses (including salary, interest and bonus)
143,000
Net profit
P 32,000
1. The bonus in 2017 is
2. The share of Perez in the partnership net
income is
3. The share of Bueno in the partnership net
income is
2.
The balance sheet as of July 31, 2017, for the
business owned by Lorenzo, shows the following
assets and liabilities:
Cash
P 50,000
Accounts receivable
134,000
Merchandise Inventory
220,000
Furniture and Fixtures
164,000
Accounts Payable
28,800
It is estimated that 5% of the receivables will prove
uncollectible. The cash balance includes a 1,000
shares marketable equity securities recorded at its
cost, P4,000. The stock last sold on the market at
P17.50 per share. Merchandise inventory includes
obsolete items costing P18,000 that will probably
realized only P4,000. Depreciation has never been
recorded; however, the furniture and fixtures are two
years old, have an estimated total life of 10 years,
and would cost P240,000 if purchased new. Prepaid
items amount to P5,000. Cris is to be admitted as a
partner upon investing P200,000 cash and P100,000
merchandise.
Determine the following:
a. Capital credited to Lorenzo upon formation of
partnership
b. Total assets of the partnership
B and P are partners in a dry-cleaning business in
which profits and losses are shared equally. B and P
have capital balances of P40,000 and P60,000,
respectively. For each of the two (2) situations,
determine the capital to be credited to the new
partner and old partners’ capital. (2pts.each)
Sit
uations
Admission
new partner
(1) GMT -06:00
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(2)
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Entering partner
N
Purchase price
P40,000
Interest in capital acquired
30%
Paid to
Partners
Method Used
N/A
N
P60,000
20%
Partnership
Bonus
END OF THE QUIZ – GOODLUCK FOR THE RESULTS!
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