Write your answers on the answer sheet provided.
True/False: Write T if the statement is true and F if the statement is false.
CAPITAL LETTERS ONLY. NO ERASURES. NO SUPERIMPOSITIONS.
1. A partnership is an association of two or more persons who contributes money, property or industry to a
common fund with the intention of dividing the profits among themselves.
2. In a partnership, the capital account is an equity account used to record permanent withdrawals and additional
contributions.
3. A partnership can be formed by mere agreement among the partners.
4. An agreement that excludes one of the partners from any share in the profits is valid.
5. An industrial partner is excluded from any share in the partnership losses.
6. A partner may contribute cash and property but not services.
7. Individual partners’ personal assets and liabilities may be included in the partnership books.
8. All assets contributed to the partnership are recorded by the partnership at their fair market values.
9. Capitalist partners are partners who contribute cash and non-cash assets to the partnership.
10. Industrial partners are partners who contribute cash and services to the partnership.
11. Partners agree on how their profits/losses be divided among themselves.
12. Without a profit/loss agreement, the partners will have to let the court fix it for them.
13. Losses should always be allocated in the same ratio with profits.
14. Bonus can be distibuted to the partners even if the partnership incurs a loss.
15. Salaries can be distributed to the partners even if the partnership incurs a loss.
16. After salaries, interest, and bonus are allocated, the remaining profit should be allocated according to their
profit ratio.
17. Interest on capital balances may be computed based on weighted average capital, ending capital or on any
manner as agreed by the partners.
18. In the absence of a predetermined agreement, the profit/loss is divided according to the original capital
contributed by the partners.
19. If the partnership agreement specifies how profits are to be shared but is silent as to losses, losses are to be
shared in the same manner as profits.
20. Ownership interests should always be equal to the partners’ profit and loss ratio.
21. Partnership dissolution occurs whenever there is a change in ownership.
22. When partnership dissolution occurs, a new accounting entity exists.
23. Partnership dissolution is always followed by liquidation of assets and liabilities.
24. Admission of a new partner may be through purchase of interest from an existing partner/s or investment of
additional assets.
25. When a new partner enters the partnership by purchasing the interest of an existing partner, the price paid for
that interest is irrelevant to the partnership accounting records because it is a private or personal transaction
among the partners.
26. When a new partner enters the partnership by purchasing the interest of an existing partner, a gain/loss must
be recorded in the partnership books to account for the existing partner’s personal gain/loss.
27. Under the bonus method, when the capital account of a new partner is credited for an amount less than his
contribution, a bonus is given to the existing partners.
28. Retirement, withdrawal, and death of a partner result to partnership dissolution.
29. When a retiring partner sells his interest to existing partner/s, a gain or loss from the transaction should be
recorded in the partnership books.
30. When a retiring partner receives an amount less than his capital contribution, a bonus is allocated between the
remaining partners in proportion to their capital accounts.
Multiple Choice: Choose the letter of the best answer.
CAPITAL LETTERS ONLY. NO ERASURES. NO SUPERIMPOSITIONS.
31. As of July 1, 2023, Faye and Gay decided to form a partnership. Their balance sheets on this date are:
Faye
Gay
Cash
P15,000
P37,500
Accounts Receivable
540,000
225,000
Merchandise Inventory
202,500
Machinery and Equipment
150,000
270,000
TOTAL
P705,000
P735,000
Accounts Payable
135,000
240,000
Faye, Capital
570,000
Gay, Capital
490,000
TOTAL
P705,000
P735,000
The partners agreed that the machinery and equipment of Faye is underdepreciated by P15,000 and that of
Gay by P45,000. Allowance for doubtful accounts is to be set up amounting to P120,000 for Faye and
P45,000 for Gay. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to
Faye and 40% to Gay. How much cash must Faye invest to bring the partners’ capital balances proportionate
to their profit and loss ratio?
a. P 142,500
c. P 172,500
b. P 52,500
d. P 102,500
32. On March 1, 2023, Patrick and Mike decided to combine their businesses and form a partnership. Their
balance sheets on March 1, before adjustments, showed the following:
Patrick
Mike
Cash
P 9,000
P 3,750
Accounts receivable
18,500
13,500
Inventories
30,000
19,500
Furniture and fixtures (net)
30,000
9,000
Office equipment (net)
11,500
2,750
Prepaid expenses
6,375
3,000
TOTAL
P 105,735
P 51,500
Accounts payable
Capital
TOTAL
33.
34.
35.
36.
37.
P 45,750
59,625
P 105,375
P 18,000
33,500
P 51,500
They agreed to have the following items recorded in their books:
1. Provide 2% allowance for doubtful accounts.
2. Patrick’s furniture and fixtures should be P31,000 while Mike’s office equipment is underdepreciated by
P250.
3. Rent expense incurred previously by Patrick was not yet recorded amounting to P1,000, while salary
expense incurred by Mike was not also recorded amounting to P800.
4. The fair market value of inventory amounted to P29,500 for Patrick and P21,000 for Mike.
Compute the net (debit) credit adjustment for Patrick and Mike.
a. Patrick: P 2,870
c. Patrick: (P 870)
Mike: P 2,820
Mike: P 180
b. Patrick: (P 2,870)
d. Patrick: P 870
Mike: (P 2,820)
Mike: (P 180)
Using the same information, compute the total liabilities after formation:
a. P 63,750
c. P 65,550
b. P 61,950
d. P 63,950
Compute the total assets after formation:
a. P 156,875
c. P 160,765
b. P 157,985
d. P 152,985
On January 1, 2023, Rosabel, Jeryl, and Bernadette formed a partnership with profit or loss sharing agreement
of 2:3:5.
Rosabel contributed land with assessed value from the city assessor in the amount of P1,000,000. The
appraised value of the land is P2,400,000. Jeryl contributed a building with a cost of P2,000,000 and
accumulated depreciation of P1,500,000. The fair value of the building is P800,000. Bernadette contributed
investment in traing securities with historical cost of P6,000,000. The trading securities have a quoted price in
an active market of P3,000,000.
The partners decided to bring their capital balances in accordance with their profit or loss sharing
agreement. Furthermore, they have agreed that their total capital should be P10,000,000.
Which of the following statements is correct?
a. The agreed capital of Bernadette is P500,000.
b. Rosabel should contribute additional capital in the amount of P1,800,000.
c. Jeryl should contribute additional capital in the amount of P2,200,000.
d. Bernadette is entitled to withdraw in the amount of P1,000,000.
Leonard and Joker formed a partnership to operate a retail store of various merchandise. They agreed on the
following distribution of profits and losses.
Leonard
Joker
Salaries
400,000
350,000
Interest on capital ending balances before distribution of profit/loss
25%
30%
Bonus on net income after salaries and interest but before bonuses
15%
12%
Remainder
40%
60%
Only 80% of the partners’ share in net income is distributed. The remaining 20% is retained as partners’
capital. Partnership’s net income amounted to P2,500,000 at the end of the year. Leonard and Joker’s ending
capital balances prior to distribution of profit/loss amounted to P1,250,000 and P1,100,000, respectively.
How much is Joker’s share in the partnership net income?
a. P 1,018,985
b. P 950,000
c. P 1,297,985
d. P 997,985
How much is Joker’s ending capital after the distribution of the net income?
38.
39.
40.
41.
42.
43.
44.
a. 1,359,597
b. 2,418,985
c. 1,600,000
d. 2,397,985
How much is Leonard’s share in the partnership net income?
a. 1,481,015
b. 1,550,000
c. 1,202,015
d. 1,502,015
The partnership of Anaiah, Phoebe, Zhylote and Desiree reflected capital balances before the distribution of
the net income amounting to P125,000; P100,000; P175,000; and P150,000, respectively. The partners are to
divide profits and losses among themselves based on the following stipulations that they agreed on:
1. Salary of P30,000 each to Anaiah, Phoebe, and Desiree.
2. 10% interest on the capital balance before the distribution of income to the partners.
3. A 20% bonus after bonus, salaries, and interest is to be given to Zhylote.
4. The balance is to be divided on a 3:4:2:1 ratio.
If Phoebe receives P70,000 from the partnership results of operations, what is the net income of the
partnership?
a. P300,000
c. P270,000
b. P235,000
d. P277,500
Kelly is trying to decide whether to accept a bonus of 25% of net income after salaries and bonus or a salary
of P97,500 plus a bonus of 10% of net income after salaries and bonus as a means of allocating profit among
partners. Salaries traceable to the other partners are estimated to be P450,000.What amount of income would
be necessary so that Kelly would consider the choices equal?
a. P 1,100,000
c. P 1,262,500
b. P 650,000
d. P 1,197,500
Partner A has a 25% participation in the profits of a partnership . During the year, A’s capital account had a
net increase of P10,000. Partner A made contributions of P40,000 and capital withdrawals of P60,000 during
the year.
How much profit did the partnership earn during the year?
a. 80,000
c. 120,000
b. 90,000
d. 100,000
A, B, and C are partners in an accounting firm. Their capital account balances at year-end were P90,000,
P110,000, and P50,000, respectively. They share profits and losses on a 4:4:2 ratio, after the following special
terms:
1. Partner C is to receive a bonus of 10% of net income after the bonus.
2. Interests of 10% shall be paid on that portion of a partner’s capital in excess of P100,000.
3. 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 is:
a. P7,800
c. P19,400
b. P16,800
d. P19,800
A, B, and C are partners with average capital balances during 2023 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 A and P60,000 to C, the residual profit or loss is divided equally. In 2023, the partnership
sustained a P99,000 loss before interest and salaries to partners. By what amount should A’s capital account
change?
a. P21,000 increase
c. P105,000 decrease
b. P33,000 decrease
d. P126,000 increase
Brejiet and Leah are partners with capital balances of P30,000 and P40,000 and sharing profits and losses
40% and 60%, respectively. If Donalyn is admitted as partner paying P20,000 in exchange for 50% of
Brejiet’s equity. How much is the interest of Brejiet and Leah after admission of Donalyn?
a. P15,000 and P40,000
c. P20,000 and P40,000
b. P15,000 and P20,000
d. P20,000 and P20,000
45. Mary, Gemma, and Myline are partners with capital balances of P224,000, P780,000 and P340,000,
respectively, sharing profits and losses in the ratio of 3:2:1. Rhea is admitted as a new partner bringing in her
expertise and is to invest cash for a 25% interest in the partnership which includes a credit of P210,000 bonus
upon her admission. How much cash should Rhea contribute?
a. P555,000
c. P168,000
b. P390,000
d. P450,000
46. Anselma, Analie and Christine were partners with capital balances on January 2, 2023 of P100,000, P150,000
and P200,000 respectively. Their profit/loss ratio is 5:3:2 while their capital interest ratio is 4:4:2. On July
1,2023, Russel was admitted into the partnership for 20% interest in capital and 25% in profits/losses by
contributing P25,000 cash and the old partners agreed to bring their interest to their old P/L ratio. The
partnership had net income of P60,000 before admission of Russel and the partners agree to revalue its
overvalued equipment by P10,000.
The capital balance of Anselma after the admission of Russel would be:
a. P85,000
c. P168,000
b. P139,200
d. P134,400
47. Jocelyn and Therese are partners with capital balances of P60,000 and P20,000, respectively. Profits and
losses are divided in the ratio of 60:40. Jocelyn and Therese decided to admit Jelie into the partnership. Jelie
invested land valued at P15,000 for a 20% capital interest in the partnership.The cost of the land was P12,000.
The partnership elected to use the bonus method to record admission of Jelie into the partnership. Jelie’s
capital account should be credited for:
a. P12,000
c. P16,000
b. P15,000
d. P19,000
48. A, B, and C are partners sharing profits in a 2:5:1 ratio, and with capital balances of P120,000, P155,000, and
P115,000, respectively. The partners generated net loss of P140,000 during the year. Due to internal
problems, B wants out of the partnership. Before retirement, the value of their inventory increased from
85,000 to 97,000. The partners decided to pay partner B P70,000 upon retirement.
How much are the capital balances of partners A and C after the retirement of partner B?
a. 84,667 and 97,333
c. 89,000 and 99,500
b. 91,333 and 100,667
d. 87,000 and 98,500
49. A, B, and C share profits in the ratio of 2:3:5. On January 20, C opted to retire from the partnership. The
capital balances of the partners on this date were:
A P25,000
B P40,000
C P35,000
CASE 1: How much will be the capital of B, assuming C sold his interest to B for P10,000?
a. P75,000
c. P25,000
b. P50,000
d. P40,000
50. CASE 2: How much is debited from A assuming C is paid P39,000 in full settlement of his interest?
a. P2,400
c. P3,000
b. P4,000
d. P1,600
Write your answers on the answer sheet provided.
Answer Section
TRUE/FALSE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
T
T
T
F
T
F
F
T
T
F
T
F
F
F
T
T
T
T
T
F
T
T
F
T
T
F
T
T
F
F
MULTIPLE CHOICE
31. C
Adjusted first the accounts.
Cash
Accounts Receivable
Merchandise Inventory
Machinery and Equipment
TOTAL
Faye
P15,000
420,000
135,000
P570,000
Gay
P37,500
180,000
202,500
225,000
P645,000
32.
33.
34.
35.
36.
37.
Accounts Payable
135,000
240,000
Faye, Capital
435,000
Gay, Capital
405,000
P570,000
P645,000
TOTAL
Start with Gay’s capital account:
405,000/40% = 1,012,500
Compute how much should be Faye’s capital account:
1,012,500 x 60% = 607,500
Amount to be credited to Faye’s capital 607,500
Adjusted capital balance
435,000
Amount of cash Faye must invest
172,500
C
Patrick
Mike
Allowance for Doubtful Account
(370)
(270)
Furniture and Fixtures
1,000
Office equipment
(250)
Salaries/rent expense
(1,000)
(800)
Inventory
(500)
1,500
TOTAL
(870)
180
C
Patrick
Mike
Accounts Payable
45,750
18,000
Rent expense
1,000
Salary expense
800
46,750
18,800
TOTAL:
65,550
B
Cash (9,000 + 3,750)
12,750
Accounts receivable (18,130 + 13,230)
31,360
Inventories (29,500 + 21,000)
50,500
Furniture and fixtures (net) (31,000 + 9,000)
40,000
Office equipment (net) (11,500 + 2,500)
14,000
Prepaid expenses (6,375 + 3,000)
9,375
TOTAL
157,985
C
Partners
Total conttibuted capital
Total agreed capital
Rosabel
2,400,000
2,000,000
Jeryl
800,000
3,000,000
Bernadette
3,000,000
5,000,000
TOTAL
6,200,000
10,000,000
C
A
Joker’s share in net income
Multiply by:
To be included in Joker’s capital
Joker’s capital
to invest (withdraw)
(400,000)
2,200,000
2,000,000
3,800,000
1,297,985
20%
259,597
1,100,000
38.
39.
40.
41.
Joker’s ending capital after the distribution of the net income
1,359,597
C
Solution for 36 and 38
Leonard
Joker
Salaries
400,000
350,000
Interest: Leonard 1,250,000 x 25%
312,500
330,000
Joker 1,100,000 x 30%
Bonus Leonard (2,500,000-750,000-642,500) x 15%
166,125
132,900
Joker (2,500,000-750,000-642,500) x 12%
Remainder Leonard 808,475 x 40%
323,390
485,085
Joker 808,475 x 60%
TOTAL
1,202,015
1,297,985
B
Anaiah
Phoebe
Zhylote
Desiree
Salaries
30,000
30,000
30,000
Interest
A-125,000 x 10%
12,500
P-100,000 x 10%
10,000
Z-175,000 x 10%
17,500
D-150,000 x 10%
15,000
Bonus
15,000**
Remainder (3:4:2:1)
30,000
(squeeze)
70,000
*Net income after bonus, salaries and interest
75,000
**Zhylote’s bonus: 75,000 x 20% = 15,000
C
Let x = net income after salaries and bonus
Equation: 0.25x = 97,500 + 0.10x
Simplify: 0.25x = 97,500 + 0.10x
0.15x = 97,500
0.15
0.15
x = 650,000
Option 1:
Net income after salaries and bonus
650,000
Salaries
450,000
Bonus (650,000 x 25%)
162,500
Total net income
1,262,500
Option 2:
Net income after salaries and bonus
650,000
Salaries (450,000 + 97,500)
547,500
Bonus (650,000 x 10%)
65,000
Total net income
1,262,500
C
A, Capital
Beginning bal.
withdrawals
40,000
Total
750,000
642,500
299,025
808,475
2,500,000
Total
90,000
55,000
75,000*
(30,000/40%)
235,000
60,000
Ending bal.
10,000
Contribution
30,000*
Share in
profit
70,000
70,000
*30,000/25% = 120,000
42. C
Salaries
Interest (110,000 - 100,000) x 10%
Bonus = P P
= 44,000-(44,000/1.10)
1+Br
Remainder (4:4:2)
Total
43. A
Salaries
Interest
A-360,000 x 10%
B-180,000 x 10%
C-120,000 x 10%
Loss Sharing (99,000 + 150,000 + 66,000)/3
A
10,000
B
C
12,000
4,000
Total
22,000
1,000
4,000
3,400
19,400
17,000
44,000
1,000
6,800
16,800
6,800
7,800
A
90,000
B
C
60,000
36,000
18,000
12,000
66,000
(105.000) (105.000) (105.000) (315.000)
21,000 (87,000) (33,000) (99,000)
44. A
Partners
Brejiet
Leah
Donalyn
Total
45. C
Original capital
transfer
balances
within equity
30,000
(15,000)
40,000
15,000
70,000
Total
150,000
New capital
balances
15,000
40,000
15,000
70,000
Total Contributed Bonus to (from)
Total Agreed
Capital
partners
Capital
Mary
224,000
(105,000)
119,000
Gemma
780,000
(70,000)
710,000
Myline
340,000
(35,000)
305,000
Rhea
168,000**
210,000
378,000*
Total
1,512,000
1,512,000
*(119,000+710,000+305,000)/75% x 25% = 378,000
**378,000 - 210,000 = 168,000
46. A
Anselma
Analie
Christine
Unadjusted capital balances
100,000
150,000
200,000
Net income
30,000
18,000
12,000
Revaluation loss-equipment
(5,000)
(3,000)
(2,000)
Adjusted capital balances
125,000
165,000
210,000
Total
450,000
60,000
(10,000)
500,000
Partners
Total Contributed
Capital
Bonus to (from)
partners
Total Agreed
Capital
Anselma
Analie
Christine
Russel
125,000
165,000
210,000
25,000
525,000
(40,000)
(24,000)
(16,000)
80,000
-
85,000
141,000
194,000
105,000
525,000
47. D
Partners
Total
Contributed
Capital
Jocelyn
60,000
Therese
20,000
Jelie
15,000
Total
95,000
*95,000 x 20% = 19,000
48. B
Unadjusted capital balances
Net loss (2:5:1)
Revaluation gain (2:5:1)
Adjusted balances before retirement
Payment to B
Bonus to (from) partners
Capital balances after retirement
49. A
Capital balances before retirement
Transfer of capital
Capital balances after retirement
50. D
Capital balances before retirement
Full settlement of C’s interest
Bonus to (from) partners (2:3)
Capital balances after retirement
Bonus to (from)
partners
Total Agreed
Capital
(2,400)
(1,600)
4,000
-
57,600
18,400
19,000*
95,000
A
120,000
(35,000)
3,000
88,000
3.333
91,333
B
155,000
(87,500)
7,500
75,000
(70,000)
(5,000)
-
A
25,000
25,000
B
40,000
35,000
75,000
C
35,000
(35,000)
-
A
25,000
B
40,000
(1,600)
23,400
(2,400)
37,600
C
35,000
(39,000)
4,000
-
C
115,000
(17,500)
1,500
99,000
1.667
100,667
Total
390,000
(140,000)
12,000
262,000
(70,000)
192,000