Question 1
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If the “Income and Expense Summary” account reveals a debit balance, there is a net income and such is closed directly to the capital accounts of the partners.
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True
False
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The correct answer is 'False'.
Question 2
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Hill invests the following assets in a new partnership: P15,000 in cash, and equipment that cost P30,000 but has a book value of P17,000 and fair market value of P20,000. Hill, Capital will be credited for P32,000.
Select one:
True
False
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The correct answer is 'False'.
Question 3
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General professional partnerships are exempted from income taxation.
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True
False
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The correct answer is 'True'.
Question 4
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ALF Enterprises is a partnership formed on January 1, 2007. The partners had the following initial investments: Aida – P100,000; Lorna – P150,000; and Fe – P225,000. The partnership agreement states that profits and losses are to be shared equally by the partners after considering the following: Salaries allowed to Aida – P60,000, Lorna – P48,000, and Fe – P36,000. A ten percent interest on average capital has also been agreed upon. On June 30, Aida invested an additional P60,000 cash. Fe permanently withdrew P70,000 cash from the partnership on September 30. The share on the remaining partnership profit was P5,000 for each partner.
How much is total partners’ equity after partnership profits have been distributed to partners?
Select one:
a. P672,750
b. P405,000
c. P407,000
d. P627,750
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The correct answer is: P672,750.
Question 5
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All partnerships are subject to income tax rate that is the same rate as corporations.
Select one:
True
False
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The correct answer is 'False'.
Question 6
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Van Wolverton, JoAnne Wood** and Levi Straus are partners in an accounting firm. Their capital account balances at year-end were: Van – P90,000; JoAnne – P110,000; and Levi – P50,000. They share profits and losses on a 4:4:2 ratio, respectively, after considering the terms agreed upon by them: * Levi is to receive a bonus of ten percent of net income after bonus * Interest of ten percent shall be allowed on that portion of a partner’s capital in excess of P100,000. * Salaries of P10,000 and P12,000 shall be allowed to Van and Levi, respectively.
Assuming a net income of P44,000 for the year, the total share of Levi is:
Select one:
a. P19,400
b. P7,800
c. P16,800
d. P19,800
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The correct answer is: P19,400.
Question 7
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A worksheet facilitates the preparation of the financial statements.
Select one:
True
False
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The correct answer is 'True'.
Question 8
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The totals of the Partners' Capital Statement for North Company is as follows: * Capital, January 1 -P150,000 * Additional investment -P60,000 * Drawings -P90,000 * Net income -P180,000
The partnership has three partners. The first two partners have ending capital balances that are equal. The ending balance of the third partner is half of the ending balance of the first partner.
What is the ending capital balance of the third partner?
Select one:
a. P60,000
b. P72,000
c. P48,000
d. P66,000
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The correct answer is: P60,000.
Question 9
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Thelma, Me-Anne, and Nerissa formed a partnership on June 30, 2006 and contributed P150,000, P200,000, and P250,000, respectively. The Articles of Co-Partnership provide that the operating income be shared among the partners as follows: (A) Salary: Thelma – P24,000; Me-Anne – P18,000; and Nerissa – P12,000. (B) Interest of twelve percent on average capital during the period. (C) Any remainder will be divided in the ratio of 2:4:4, respectively.
Additional Information: * Operating income for the fiscal year June 30, 2007 is P176,000 * Thelma contributed additional capital of P30,000 on December 31 and made a withdrawal of P10,000 on April 1. * Me-Anne contributed additional capital of P20,000 on February 1 and withdrew P10,000 on April 1. * Nerissa made a withdrawal of P30,000 on May 1.
The shares of each partner in the operating income is:
Select one:
a. Thelma - P53,180; Me-Anne - P62,060; Nerissa - P60,760
b. Thelma - P53,760; Me-Anne - P62,520; Nerissa - P59,720
c. Thelma - P48,400; Me-Anne - P66,800; Nerissa - P60,800
d. Thelma - P53,180; Me-Anne - P62,060; Nerissa - P60,760
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The correct answer is: Thelma - P53,180; Me-Anne - P62,060; Nerissa - P60,760.
Question 10
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When compared to a corporation, one of the major disadvantages of the partnership is its limited life.
Select one:
True
False
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The correct answer is 'True'.
Question 11
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ALF Enterprises is a partnership formed on January 1, 2007. The partners had the following initial investments: Aida – P100,000; Lorna – P150,000; and Fe – P225,000. The partnership agreement states that profits and losses are to be shared equally by the partners after considering the following: Salaries allowed to Aida – P60,000, Lorna – P48,000, and Fe –P36,000. A ten percent interest on average capital has also been agreed upon.On June 30, Aida invested an additional P60,000 cash. Fe permanently withdrew P70,000 cash from the partnership on September 30. The share on the remaining partnership profit was P5,000 for each partner.
How much is partnership profit for the year 2007 before (or prior) to distribution?
Select one:
a. P207,750
b. P199,750
c. P211,625
d. P201,625
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The correct answer is: P207,750.
Question 12
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The Partners' Capital Statement for the United Center reported the following information in total: * Capital, January 1 - P120,000 * Additional investment - P40,000 * Drawings - P80,000 * Net income - P100,000
The partnership has three partners: Moon, Garr, and Rice with ending capital balances in a ratio 40:20:40.
What are the respective ending balances of the three partners?
Select one:
a. Moon, P72,000: Garr, P36,000; Rice, P72,000
b. Moon, P80,000; Garr, P40,000; Rice, P80,000
c. Moon, P136,000; Garr, P68,000; Rice, P136,000
d. Moon, P90,000; Garr, P48,000; Rice, P90,000
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The correct answer is: Moon, P72,000: Garr, P36,000; Rice, P72,000.
Question 13
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A characteristic of a partnership that considers the business as a separate and distinct person from its owners:
Select one:
a. Business entity concept
b. Mutual agency theory
c. Recognition theory
d. Matching principle
e. Going Concern
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The correct answer is: Business entity concept.
Question 14
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In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner's capital balance.
Select one:
True
False
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The correct answer is 'False'.
Question 15
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Mr. O’Neal and his closest friend, Mr. O’Brien formed a partnership on January 1, 2007 with Mr. O’Neal contributing P16,000 cash and Mr. O’Brien contributing an equipment with a book value of P6,400 and a fair market value of P4,800, and inventory items with a book value of P2,400 and a fair market value of P3,200. During 2007, Mr. O’Brien made an additional investments of P1,600 on April 1 and P1,600 on June 1. On September 1, Mr. O’Brien withdrew P4,000. Mr. O’Neal had no additional investments or withdrawals during the year.
The average capital of Mr. O’Brien is
Select one:
a. P8,800
b. P9,600
c. P8,000
d. P7,200
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The correct answer is: P8,800.
Question 16
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By the contract of partnership, two or more persons bind themselves to contribute money, property or industry into a common fund with the intention of dividing the profits among themselves.
Select one:
True
False
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The correct answer is 'True'.
Question 17
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X and Y have original investments of P50,000 and P100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of P27,000 and P18,000 respectively, and the remainder equally.
How much of the net loss of P10,000 is allocated to X?
Select one:
a. P3,000
b. P5,000
c. P7,000
d. P10,000
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The correct answer is: P3,000.
Question 18
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Frederick and Maribeth are partners in a partnership that provides for Frederick to receive a twenty percent bonus on profits before bonus and tax. Remaining profits and losses are to be divided between Frederick and Maribeth in the ratio of 3:2, respectively.
Which partner has a greater advantage when the operations of the business resulted in a profit or a loss?
Select one:
a. Profit - Frederick; Loss - Maribeth
b. Profit - Frederick; Loss - Frederick
c. Profit - Maribeth; Loss - Maribeth
d. Profit - Maribeth; Loss - Frederick
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The correct answer is: Profit - Frederick; Loss - Maribeth.
Question 19
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An oral or a written agreement creates a partnership. A written agreement is required when immovable properties or real rights are contributed or when the partnership capital is more than:
Select one:
a. P3,000
b. P2,000
c. P4,000
d. P5,000
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The correct answer is: P3,000.
Question 20
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Jill Grier's capital statement reveals that her drawings during the year were P50,000. She made an additional capital investment of P25,000 and her share of the net loss for the year was P10,000. Her ending capital balance was P200,000.
What was Jill Grier's beginning capital balance?
Select one:
a. P235,000
b. P225,000
c. P185,000
d. P260,000
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The correct answer is: P235,000.
Question 21
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Question text Margot and Mailah are combining their businesses to form a partnership to be called: “m&M Enterprises.” Cash and non-cash assets are to be invested for a total capital of P300,000. The non-cash assets to be contributed and the liabilities to be assumed are as follows: | MARGOT | | MAILAH | | Book Value | | Fair Market Value | | Book Value | | Fair Market Value | Accounts Receivable | P20,000 | | P20,000 | | P-0- | | P-0- | Inventories | 30,000 | | 40,000 | | 20,000 | | 25,000 | Equipment | 60,000 | | 45,000 | | 40,000 | | 50,000 | Accounts Payable | 15,000 | | 15,000 | | 10,000 | | 10,000 |
The partners’ capital accounts are to be equal after all the contribution of assets and the assumption of liabilities.
The total assets of the partnership is:
Select one:
a. P325,000
b. P180,000
c. P170,000
d. P315,000
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The correct answer is: P325,000.
Question 22
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Non-cash properties or assets invested by the partner or partners are recorded at the fair market values of such assets as of the date of investment.
Select one:
True
False
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The correct answer is 'True'.
Question 23
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A partner’s contribution in the form of non-cash assets must be recorded in the books of partnership at the fair market values.
Select one:
True
False
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The correct answer is 'True'.
Question 24
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It is easier to form a partnership than a corporation.
Select one:
True
False
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The correct answer is 'True'.
Question 25
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Accounting is a service activity whose function is to provide quantitative information about economic entities that is intended to be useful in making economic decisions.
Select one:
True
False
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The correct answer is 'True'.
Question 26
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A partner who contributes industry, labor or special skills into the partnership.
Select one:
a. Industrial Partner
b. Capitalist Partner
c. Generalist Partner
d. Industrialist Partner
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The correct answer is: Industrial Partner.
Question 27
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Elsa and Perla formed a new partnership. Elsa invests P300,000 cash for her 60% interest in the capital and profits of the business. Perla contributes land that has an original cost of P40,000 and a fair market value of P70,000, and a building that has a zonal value of P50,000 and a fair market value of P90,000. The building is subject to a P40,000 mortgage that the partnership will assume.
What amount of cash should Perla contribute?
Select one:
a. P80,000
b. P40,000
c. P110,000
d. P150,000
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The correct answer is: P80,000.
Question 28
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Bill Wren started the year with a capital balance of P180,000. During the year, his share of partnership net income was P160,000 and he withdrew P30,000 from the partnership for personal use. He made an additional capital contribution of P50,000 during the year.
The amount of Bill Wren's capital balance that will be reported on the year-end balance sheet will be
Select one:
a. P360,000
b. P300,000
c. P390,000
d. P160,000
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The correct answer is: P360,000.
Question 29
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Mac and Molly formed a partnership with capital contributions of P80,000 and P120,000, respectively. Their partnership agreement called for 1) Mac to receive a P20,000 salary, 2) each partner to receive 10% based on initial capital contributions, and 3) the remaining income or loss to be divided equally.
If net income for the current year is P70,000, what amount is credited to Mac's capital account?
Select one:
a. None of the choices
b. P18,750
c. P22,500
d. P37,500
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The correct answer is: None of the choices.
Question 30
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All partners, whether capitalist or industrial, shall share in the partnership operation, be it a loss or income.
Select one:
True
False
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The correct answer is 'False'.
Question 31
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Deng and Dang are partners who share income in the ratio of 3:2. Their capital balances are P40,000 and P60,000 respectively. Income Summary has a credit balance of P20,000.
What is Deng's capital balance after closing Income Summary to Capital?
Select one:
a. P52,000
b. P28,000
c. P32,000
d. P30,000
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The correct answer is: P52,000.
Question 32
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The partnership agreement between partners must be in writing.
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True
False
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The correct answer is 'False'.
Question 33
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The articles of partnership for A B Partnership provide for a salary allowance of P5,000 per month for partner B, with the balance of net income to be divided equally. If B made an additional investment of P10,000 during the year and withdrew P4,000 per month, and net income for the year was P90,000, by what amount did B's capital increase during the year?
Select one:
a. P37,000
b. P85,000
c. P10,000
d. P60,000
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The correct answer is: P37,000.
Question 34
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Bonus, salary and interest is given only to the managing partner for successfully operating the business resulting in a net income for the partnership.
Select one:
True
False
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The correct answer is 'False'.
Question 35
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The net income of the Pine and Miles partnership is P180,000. The partnership agreement specifies that Pine and Miles have a salary allowance of P48,000 and P72,000, respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital balance of P120,000. Any remaining net income or net loss is shared equally.
What is Pine's share of the P180,000 net income?
Select one:
a. P78,000
b. P48,000
c. P60,000
d. P66,000
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The correct answer is: P78,000.
Question 36
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Question text Phyllis and Luanne entered into an agreement on February 1, 2007 by investing the following assets: | Phyllis | Luanne | Cash | P15,000 | | Inventories | | P45,000 | Furniture | 100,000 | | Land | | 15,000 | Building | | 65,000 |
The agreement between the partners provides that profits and losses are to be divided into 40% and 60% to Phyllis and Luanne, respectively, and that the partnership is to assume the P30,000 mortgage liability on the building.
Assuming that Luanne invests P50,000 cash and each partner is to be credited for the full amount of the net assets contributed, the total capital of the partnership is:
Select one:
a. P260,000
b. P210,000
c. P290,000
d. P250,000
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The correct answer is: P260,000.
Question 37
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If a partner's investment in a partnership consists of Accounts Receivable of P25,000 and an Allowance for Doubtful Accounts of P7,000, it would not be appropriate for the partnership to record the Allowance for Doubtful Accounts.
Select one:
True
False
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The correct answer is 'False'.
Question 38
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Which of the following statements, concerning partnership, is true?
Select one:
a. All of the choices are true
b. A partnership is a legal entity, separate and distinct from the individual partners
c. Individual partners are jointly liable for the debts and obligations of the partnership
d. Income tax is levied on the individual partners’ shares of the net income of a partnership and is reported in their personal income tax returns
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The correct answer is: All of the choices are true.
Question 39
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The net income agreement for Forsyth and Guilford states net income and net loss shall be divided in a ratio of 4:6, respectively. The net loss for the current year is P50,000. On January 1 of the current year, the capital balances were as follows: Forsyth, P55,000; and Guilford, P65,000. During the current year Forsyth withdrew P40,000 and Guilford withdrew P25,000.
Compute the capital balances as of December 31 of the current year.
Select one:
a. Forsyth, capital - P5,000 DR; Guilford, capital - P10,000 CR
b. Forsyth, capital - P35,000 CR; Guilford, capital - P70,000 CR
c. Forsyth, capital - P5,000 CR; Guilford, capital - P10,000 CR
d. Forsyth, capital - P5,000 DR; Guilford, capital - P10,000 DR
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The correct answer is: Forsyth, capital - P5,000 DR; Guilford, capital - P10,000 CR.
Question 40
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Anderson and Shelly are forming a partnership by combining their respective businesses. Each of their books show the following accounts and balances:

| Anderson | Shelly | Cash | P12,000 | P5,000 | Accounts Receivable | 25,000 | 18,000 | Merchandise Inventory | 40,000 | 26,000 | Furniture and Fixtures | 55,000 | 17,000 | Prepaid Expenses | 10,500 | 3,500 | Accounts Payable | 61,000 | 24,000 | Capital | 81,500 | 45,500 |
It has been agreed to provide for an allowance for doubtful accounts equal to five percent of accounts receivables of each partner and that the furniture and fixtures of Shelly are overdepreciated by P1,500. If each partner’s share in equity is to be equal to the net assets invested, the capital accounts of each partner should be:
Select one:
a. Anderson - P80,250; Shelly - P46,100
b. Anderson - P81,500; Shelly - P45,500
c. Anderson - P80,250; Shelly - P43,100
d. Anderson - P142,500; Shelly - P69,500
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The correct answer is: Anderson - P80,250; Shelly - P46,100.