ParCor Pre-Midterms Mastery Test 1 Chapter 1 & 2

1. All of the following are true for both general and limited partnership except that:
Both have at least one general partner
All partners are liable for all the debts of the firm
All partners have the right to participate in the profits of the business
Both are easily dissolved

2. A partnership characteristic which states that a partner, acting within the scope of the operations of the
business may bind the partnership and make it liable to third parties is termed as:
Mutual agency
Co-ownership of assets
Separate legal personality
Voluntary association

3. Statement 1. An industrial partner is a limited partner.

Statement 2. A partners contribution in the form of services is recorded by debiting the account Service
Income
Only statement 2 is false
Only statement 1 is false
Both statements are false
Both statements are true

4. Moonyeen will contribute a computer which she acquired for P40,000 which she agreed to be valued at
P25,000. Nilda and Hilda will contribute an equal amount of cash in the total agreed capitalization of
P62,500. The correct amount of Nildas capital credit should be:
P37,500
P22,500
P18,750
P11,250
5. Statement 1. A general partner is a partner whose liability to third parties extends to his separate
properties or personal assets who may either be a capitalist or industrial partner.
Statement 2. A limited partner is one whose liability to third parties is limited to the capital contribution.
Both statements are true
Both statements are false
Only statement 2 is false
Only statement 1 is false
6. Which of the following is debited directly to Capital?
Permanent withdrawal of capital
Partner’s share in the net loss
Withdrawal in anticipation of profit
Partners profit share
7. On September 30 of the current year. Elmer and Jewel formed a partnership. The partners agreed to
invest equal amounts of capital. Elmer invested his proprietorships asset and liabilities as follows:

Book Value Fair Market Value

Accounts Receivable P100,000 P100,000
Allowance for Uncollectible Accounts -0- 10,000
Merchandise Inventory 250,000 260,000
Prepaid Expenses 15,000 15,000
Office Equipment 480,000 280,00
Accumulated Depreciation 160,000 -0-
Accounts Payable 190,000 190,000
On September 30, Jewel invested cash in an amount equal to the current market value Elmer9s
partnership capital.They agreed that Elmer, the managing partner would earn two-third of partnership
profit. During the remainder of the year, the partnership earned P600,000. The temporary withdrawal of
Elmer and Jewel were P300,000 and P220,000, respectively. Prior to partnership formation, Elmers
Capital was:
P455.000
P910,000
P950,000
P495,000
8. On September 30 of the current year. Elmer and Jewel formed a partnership. The partners agreed to
invest equal amounts of capital. Elmer invested his proprietorship’s asset and liabilities as follows:

Book Value Fair Market Value

Accounts Receivable P100,000 P100,000
Allowance for Uncollectible Accounts -0- 10,000
Merchandise Inventory 250,000 260,000
Prepaid Expenses 15,000 15,000
Office Equipment 480,000 280,000
Accumulated Depreciation 160,000 -0-
Accounts Payable 190,000 190,000
On September 30, Jewel invested cash in an amount equal to the current market value Elmer9s
partnership capital. They agreed that Elmer, the managing partner would earn two-third of partnership
profit. During the remainder of the year, the partnership earned P600,000. The temporary withdrawal of
Elmer and Jewel were P300,000 and P220,000, respectively. On December 31 of the current year, the
total partnership capital is:
P990.000
P1,510,000
P590,000
P910,000
9. A large cash withdrawal by partner Bam from the partnership which is viewed by all partners as a
permanent reduction of Bam’s ownership equity in the partnership is recorded as a debit for:
Loan receivable from Bam
Bam, Loan
Bam, Drawing
Bam, Capital
10. Deco and Lor are partners who share profit and loss 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 Deco9s
Capital balance after closing Income Summary to Capital?
P52,000
P28,000
P20,000
P32,000
11. The E & R Partnership agreement provides for Earl to receive a 20% bonus on profit before the
bonus. Remaining profits and losses are divided between Earl and Ram in the ratio of 2:3, respectively.
Which partner has a greater advantage when partnership has a profit or when it has a loss?
Profit Ram, Loss Earl
Profit Ram, Loss Ram
Profit Earl, Loss Earl
Profit Earl, Loss Ram
12. On January 1, 2021, Birch, Beelle, Baker and Bowle formed B4 Trading, a partnership with capital
contribution as follows: Birch P150,000, Beelle P75,000, Baker P75,000, and Bowle P60,000. The
partnership agreement stipulates that each shall receive a 5% interest on contributed capital and that
Birch and Beelle shall receive salaries (chargeable as expenses of the business) of P15,000 and P9,000,
respectively. The agreement further provides that Baker shall receive a minimum of P7,500 per annum
and Bowle a minimum of P18,000, which is inclusive of amounts representing interest and their respective
share in partnership profits. The balance of the profits shall be distributed among the partners in the ratio
of 3:3:2:2.
What among must be earned by the partnership in fiscal year 2021 before any charge for interest and
partners’ salaries? In order that Birch may receive an aggregate of P37,500 including interest, salary, and
profit share?
P97,000
P50,000
P92,000
P90,000
13. Zaga admitted Ciga as a partner in business. Accounts in the ledger for Zaga on November 30, 2021
just before the admission of Ciga, showed the following balances:
Cash P6,800
Accounts Receivable P14,200
Merchandise Inventory P20,000
Accounts Payable P8,000
Zaga, Capital P33,000
It is agreed that for the purpose of establishing Zaga9s interest, the following adjustments shall be made:
a. An allowance for doubtful accounts of 3% of Accounts Receivable is to be established.
b. The Merchandise Inventory is to be valued at P23,000.
c. Prepaid Salary Expense of P600 and Accrued Rent Expense of P800 are to be recognized.
Ciga is to invest sufficient cash to obtain a one-third interest in the partnership. What is Zaga9s adjusted
capital before the admission? How much is the cash investment of Ciga?
P36,374; P18.487
P35,374; P17,687
P28,174; P14,087
P35,347; P11,971
14. Lolong and Lilang are partners operating a chain of retail stores. The partnership agreement provides
for:
• Salaries of P6,000 per month to each partner
• Interest of 10% on original capital contributions
• Bonus to Lolong of 20% of net Income before salaries and bonus but after interest on capital
• Balance is to be divided equally
The Income Summary account for 2021 before any distribution to partner shows a credit balance of
P90,000. Original capital contribution of Lolong and Lilang are P100,000 and P160,000, respectively. The
profit share of
Lolong is:
P90,000
P6,200
P48.400
P45,200
15. The partnership agreement of Travis and Troy provides that interest at 10% per year is to be credited
to each partner on the basis of the weighted average capital balances. A summary of Troy9s capital
account for the year ended December 31, 2021 follows.
Balance, January 1 P420,000
Additional Investment, July 31 120,000
Withdrawal, September 1 (45,000)
Balance, December 31 495,000
What amount of interest should be credited to Troy9s Capital account for 2021?
P16,500
P45,500
P49,500
Answer not given
16. Lyle and Clyde are partners in a business. Lyle original capital investment was P400,000 and Clyde
was P600,000. They agreed to share profits and losses as follows:
Lyle Clyde
Salaries P120,000 P180,000
Interest on Original Capital 10% 10%
Remaining Profits or Losses 3/5 2/59
If losses for the year were P150,000, how much should be allocated to Lyle?
(P170,000)
P10,000
P120,000
P154,000
17. Stanley, a partner in the SM Partnership is entitled to 40% of the profit and losses. During 2021,
Stanley contributed land with a fair value of P60,000. Also, during 2021, Stanley had drawings of
P80,000. The balance of Stanley’s Capital account was P140,000 at the beginning of 2021 and P150,000
at the end of the year. What is the partnership’s profit (loss) for 2021?
P75,000
P50,000
P30,000
P325,000
18. In the absence of any agreement in the share of the industrial partner in the partnership profit, he is
entitled to a profit share.
Equally
None, because he did not contribute capital
Equal to the share of the capitalist partner with the smallest profit share
10%
19. This statement shows the variation in the partners’ interest in the partnership.
Statement of Changes in Financial Position
Statement of Partners Variable Capital
Statement of Partners Profit and Loss Distribution
Statement of Changes in Partners’ Equity
20. If a partners personal expenses are paid by the partnership the payment is charged to the:
Partners Expense account
Partner’s Drawing Account
Partners Nominal Account
Partners Expense Account
ParCor Mastery Test 2 Chapter 2 & 3

1. Statement 1 The equity of a partner in the net assets of the partnership is different from the partner's
share in profits or losses.
Statement 2 The basis on which profits or losses are shared is a matter of agreement among the partners
and may not necessarily be the same as their capital contribution ratio.
Both statements are true
Only statement 1 is true
Both statements are false
Only statement 2 is true

2. Statement 1. The industrial partner is not liable for losses because he cannot withdraw the work or
labor already done by him.
Statement 2 A stipulation that excludes one or more partners from any share in the profits or losses is
valid.
Both statements are false
Only statement 2 is true
Both statements are true
Only Statement 1 is true
3. Statement 1 Dissolution causes the termination of the partnership.
Statement 2 The amount of money that the buying partner pays to the selling partners will go to the
partnership and not to the partners concerned.
Both statements are true
Only statement 1 is true
Only statement 2 is true
Both statements are false
4. D, E and F are partners whose capital balances totaled P400,000. They decided to admit G who
invested P120,000 cash for a 20% interest. The partners agreed to revalue the assets. This will result to:
asset revaluation of P80,000 to D, E and F.
asset revaluation of P24,000 to D, E and F.
asset revaluation of P24,000 to D and E.
asset revaluation of P80,000 to D and E.
5. Statement 1 The Income Summary account is credited in the entry to record distribution of net profit.
Statement 2. The partnership dissolution discharges the existing liability of any partner.
Both statements are false.
Both statements are true
Only statement 1 is true
Only statement 2 is true

6. Jordan invested P400,000 for a one-fourth interest in the partnership in which the other partners have
capital totaling P800,000 before admitting him. Under the bonus method,
Jordan will give up bonus of P100,000.

7. If a partner's personal expenses are paid by the partnership, the payment is charged to the:
Partner's Drawing account
8. Salaries to partners of a partnership typically should be accounted for as:
a device for sharing net income.

9. If the primary consideration is the partner's capital contribution, the most equitable profit and loss
distribution is made on the basis of:
average capital balances.
10. Which of the following partners would receive a profit share equal to the share of a capitalist partner
having the smallest profit share in the absence of profit agreement?
Industrial partner
11. If a bonus is given to the old partners upon the admission of a new partner, it shall be allocated to the
partners according to the:
profit and loss ratio of the old partnership.
12. If a partnership has profit of P44,000 and Partner Tabonan is to be allocated a bonus of 10% of profit
after the bonus, Tabonan's bonus would be:
P4,000
13. Joy and Mira are partners who share profits and losses after salary and interest allowances in the
ratio of 6:4, respectively. Joy's salary is P20,000 and Mira's is P10,000. The partners are also paid
interest on their average capital balances. In 2021, Joy received P10,000 in interest and Mira P4,000. If
Mira's share of partnership profit was P40,000 in 2021, what was the total partnership profit?
P109,000
14. Partner Hardy had a beginning capital balance of P35,000 and made additional investments of
P27,000 during the year. In the same year, Hardy made drawings of P5,000 per month. The post-closing
capital balance of Hardy is P72,000. What is his share in the partnership profit?
P70,000
15. Caan, Ty and Go have the following profit and loss agreement:
* Partners Caan and Ty will receive salaries of P40,000 each.
* Partner Go will get a bonus of 10% of profit after salaries and bonus.
* Remaining profits are shared by Caan, Ty and Go in the ratio of 3:4:3, respectively. The
partnership had a profit of P91,000. How much profit should be allocated to Go?
P4,000
16. At the beginning of 2021, the statement of financial position for Chuva Co. showed the following
balances in the partners' capital accounts: Chung P24,000 and Val P26,000. Chung and Val share
profits and losses in a 3:7 ratio. During 2021, Chuva Co. sustained a P40,000 loss. Chung withdrew
P10,000 from the partnership during the year and Val withdrew P18,000. What will be the balance in
Chung's capital on December 31, 2021?
P2,000
17. Partner Redulla has a 30% share in the psssartnership profit or loss. His Capital account had a net
decrease of P60,000 in 2021. In 2021, he withdrew P130,000 against his capital and invested properties
valued at P25,000 in the partnership. The profit of the partnership is:
P150,000
18. Catalino invested P400,000 for a 20% interest in a partnership that has capital totaling P1,500,000
after admitting Catalino. Which of the following is true?
The original partners received a bonus of P100,000.
19. LV bought Fendi's interest in the Medel and Fendi Partnership by a P600,000 direct payment to
Fendi. The capital balances before the sale were P240,000 and P360,000 to Medel and Fendi,
respectively. What will be the amount in LV's Capital account?
P360,000
20. Po and Tol are partners who share profits and losses in a ratio of 2:1 and have capital balances of
P750,000 and P1,500,000, respectively. The partners agreed to admit TL to the partnership. TL invested
P750,000 for a 35% interest in the partnership. The new total capital balance after admitting TL is
P3,000,000. Tol's capital balance after TL is admitted is:
P1,400,000
21. Total partners' equity will not change when a withdrawing partner:
sells his ownership interest to a new or remaining partner.
22. Yacapin, Mona and Sia share profits and losses in a 3:1:2 ratio, respectively. Mona wishes to leave
the partnership, so the assets are revalued and are found to be undervalued by P300,000. If each
partner had a capital balance of P500,000 prior to Mona's notification of withdrawal, what amount should
Mona be allowed to withdraw from the partnership?
P550,000
23. When a partner withdraws from a partnership taking assets that represent less than his capital
balance,
the remaining partners receive a bonus.
24. The following instances dissolve a partnership except:
revaluation of partnership assets.
25. On June 30, 2021, the account balances for the partnership of Cillon, Orly and Ram, together with
their respective
profit and loss ratio, were as follows:
Assets at cost P 180,000
Cillon, Loan 9,000
Cillon, Capital (20%) 42,000
Orly, Capital (20%) 39,000
Ram, Capital (60%) 90,000
P 180,000
Cillon decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their
fair value of P216,000 at June 30, 2021. It was agreed that the partnership would pay Cillon P61,200
cash for Cillons partnership interest, including Cillons loan which is to be repaid in full. After
Cillons retirement, what is the balance of Orlys Capital account?
P 45,450
26. Mac and Cam are partners who share profits and losses in the ratio of 7:3 and had the following
capital balances: Mac P80,000; Cam P20,000. Brotus is to be admitted for a 25% interest in the
partnership by direct purchase from the partners for P22,000. How should the P22,000 cash be divided
between Mac and Cam?
Mac P17,900; Cam P4,100
27. Paz and Zara are combining their separate business to form a partnership. Cash and Non-Cash
Assets are to be contributed for a total capital of P300,000. The non-cash assets are to be contributed
and the liabilities to be assumed are:
Paz Zara
Book Value Fair Market Value Book Value Fair Market Value Book Value
Accounts Receivable P20,000 P20,000 - -
Inventories 30,000 40,000 P20,000 P25,000
Equipment 60,000 45,000 40,000 50,000
Accounts Payable 15,000 15,000 10,000 10,000
The partner9s Capital accounts are to be equal after all the contribution of assets and the assumption of
liabilities. The amount of cash to be contributed by Paz is:
P60,000
28. Paz and Zara are combining their separate business to form a partnership. Cash and Non-Cash
Assets are to be contributed for a total capital of P300,000. The non-cash assets are to be contributed
and the liabilities to be assumed are:
Paz Zara
Book Value Fair Market Value Book Value Fair Market Value Book Value
Accounts Receivable P20,000 P20,000 - -
Inventories 30,000 40,000 P20,000 P25,000
Equipment 60,000 45,000 40,000 50,000
Accounts Payable 15,000 15,000 10,000 10,000
The partner9s Capital accounts are to be equal after all the contribution of assets and the assumption of
liabilities. The total asset of the partnership is:
P325,000
29. Cara and Mel are partners with capital balances of P30,000 and P40,000 and sharing profits and
losses 4:6 respectively. If Choco is admitted as a partner paying P20,000 in exchange for 50% of Cara9s
equity, the entry in the partnership books should be as follows:
DR. Cara, Capital P15,000; CR. Choco, Capital P15,000
30. Balde and Cabo are partners who share profits and losses in the ratio of 6:4. On October 1, 2021,
their capital account balances are: Balde P80,000 and Cabo P20,000. Yaboo is to be admitted for a 20%
interest in the partnership by direct purchase from the partners for P30,000. The new profit and loss ratio
for Baldo, Cabo and Yaboo, respectively will be:
12 : 8 : 5
31. Statement 1 The retirement of a partner by payment from partnership assets may cause the other
partners9 capital accounts to decrease.
Statement 2 The partners cannot change their original profit and loss ratio if it is stipulated in the original
partnership agreement.
Both statements are false
Only statement 2 is true
Both statements are true
Only Statement 1 is true.
32. When a partner retires, the books of the partnership should be adjusted as of:
the date of retirement.
33. Aldo and Fendi are partners who share profits and losses equally and have capital balances of
P560,000 andP490,000, respectively. Prada is admitted into the partnership by investing P490,000 for
30% capital interest. Total Agreed Capital is based on existing partners' capital balances. Asset
impairment is recognized. The account balance of Fendi, Capital after the admission of Prada would be:
P465,000
34. When a partner dies, the capital account balances of the remaining partners:
may increase, decrease or remain the same.
35. Before the effectivity of dissolution, assets and liabilities should be restated at their:
fair market values.
36. Which of the following best describes the admission of a new partner by investing an amount more
than his capital credit under bonus method?
Decrease in Net Assets; Decrease in Total Capital
37. Statement 1: Total partners9 equity will not change when a withdrawing partner sells his interest to a
new or remaining partner.
Statement 2: Negative capital balance of a partner results in the dissolution of the partnership.
Only statement 2 is true
Both statements are true
Only statement 1 is true.
Both statements are false
38. Partners Kima, Capin, and Calang share profits and losses in a 5:3:2 ratio, respectively. Kima wishes
to leave the partnership, so the assets are revalued and are found to be overvalued by P60,000. If each
partner had a capital balance of P200,000 prior to Kima9s notification of withdrawal, what amount should
Kima be allowed to withdraw from the partnership?
P170,000
ParCor Pre-Midterms Exam Part 1
1. Admission by _____________ is a type of admission of a new partner where total partnership capital
does not change at all both before and after the admission of a new partner.
Purchase
2. Statement 1 Owners equity account is credited for increase in contra-asset account.
Statement 2 If only the share of each partner in the profits has been agreed upon, the share of each in
the losses shall be in proportion to their capital contribution.
Only statement 2 is true
Both statements are true
Both statements are false
Only statement 1 is true
3. Statement 1 All partners, except limited partners, including industrial partners are personally liable for
all the debts incurred by the partnership.
Statement 2 A partner who desires to withdraw from the partnership may, without the consent of the other
partners, sell all or part of his interest either to an outsider, to the other partners, or to the partnership
itself.
Only statement 2 is true
Both statements are true
Both statements are false
Only statement 1 is true
4. Statement 1 The newly admitted partner is not liable for the liabilities incurred by the partnership before
his admission.
Statement 2 Net income is represented by a credit balance in the Income Summary account after closing
into it all nominal accounts.
Only Statement 1 is false
Only statement 2 is false
Both statements are true
Both statements are false
5. Statement 1 A capital deficiency occurs when a partner has insufficient equity to cover his or her
share of losses resulting from liquidation.
Statement 2. The percentage interest in a partnership is always the same as the profit and loss ratio.
Only statement 2 is true
Both statements are true
Both statements are false
Only Statement 1 is true
6. Statement 1 Creditors are protected, to a certain degree, when the limited partnership has at least one
general partner.
Statement 2 A partnership may be liquidated without being dissolved.
Both statements are true
Both statements are false
Only Statement 2 is false
Only Statement 1 is false
7. Statement 1 Every partner is a debtor of the partnership for whatever he may have promised to
contribute thereto.
Statement 2 If a partner withdraws in the middle of the accounting period, updating the partnership books
is not required.
Only Statement 1 is true
Only statement 2 is true
Both statements are true
Both statements are false
8. Statement 1 In liquidation, partners are given back the assets that they originally invested.
Statement 2. The principle that allows a partner to apply his receivable from the partnership against a
debit balance in his Capital account is called right of offset.
Only Statement 1 is true
Only Statement 2 is true
Both statements are true
Both statements are false
9. Statement 1 An industrial partner may also be a capitalist partner at the same time.
Statement 2 Liquidation of a partnership is the process of ending the business.
Only Statement 1 is true
Only statement 2 is true
Both statements are true
Both statements are false
10. Statement 1 Total partners' interest is the maximum loss that the partners can absorb without
reducing their equity below zero.
Statement 2 Each reduction in the loss absorption balance requires payment to partners computed by
dividing the amount of reduction by the partner's profit and loss ratio.
Both statements are false
Only Statement 1 is true
Only statement 2 is true
Both statements are true
11. Statement 1 In the final payment to partners, partners with loans to the partnership are ranked ahead
of payments to partners without loans to the partnership.
Statement 2 Payments to outside creditors are ranked ahead of payments to partners with loans to the
Partnership.
Only Statement 1 is false
Only statement 2 is false
Both statements are true
Both statements are false
12. Statement 1 If a deficient partner is personally insolvent, his capital deficiency may be absorbed by
the other partners with positive capital balance according to the profit and loss ratios of all the partners.
Statement 2 If a deficient partner is personally insolvent, his capital deficiency may be absorbed by those
partners with positive Capital balances divided in the profit and loss ratios that apply to those partners
having positive Capital balances.
Both statements are false
Only Statement 1 is true
Only Statement 2 is true.
Both statements are true
13. ______________ is the manner of distributing available cash once partners' loss absorption balances
have been brought to equal balances.
Profit and loss ratio
14. Liquidation of a partnership includes all of the following steps, except:
obtaining court approval.
15. Statement 1 Settlement of a partner's personal liabilities may come from his personal assets and his
claim on partnership assets.
Statement 2 Liquidation losses would include share on the capital deficiency of an insolvent partner.
Both statements are true
Both statements are false
Only Statement 1 is true
Only statement 2 is true
16. The first partner to receive cash under an advance cash distribution plan is the partner who:
can absorb the largest liquidation loss.
17. This pertains to the amount of capital a partnership has wherein a form in the Office of Securities and
Exchange Commission is required.
P3,000 or more
18. Statement 1 The statement of liquidation will be used to aid the liquidating partner to summarize the
events and transactions associated with the liquidation of the partnership.
Statement 2 In the liquidation of a partnership, any partner who has a capital deficiency has a personal
debt to the partnership for the amount of the deficiency.
Both statements are false
Only Statement 1 is true
Both statements are true
Only statement 2 is true
19. Statement 1 The sum of a partner's capital, loan balance and advances to the partnership is called
partner's interest.
Statement 2 Marshalling of assets involves the order of creditors' rights against the partnerships and
the personal assets of the individual partners.
Only Statement 1 is true
Both statements are true
Only statement 2 is true
Both statements are false
20. Statement 1 The entry to record the exercise of offset will debit the partner's loan account and credit
cash.
Statement 2 The creditors of the partnership are preferred with respect to the separate or personal
properties of the general partners.
Both statements are false
Only statement 1 is true
Both statements are true
Only statement 2 is true
ParCor Pre-Midterms Exam Part 2

1. The partnership of Lance and Caster completed the following transactions for the month ended
January 31, 2022.
Jan 2. Lance and Caster formed LaCas Company by investing cash of P200,000 each. They
agreed to share profits and losses by allowing a monthly salary allowance of P15,000 and
P14,000, respectively and the balance divided equally.
3 Provided P30,000 worth of services to cash customers
4 Provided P60,000 worth of services on account to their valued customers
5 Collected P22,000 from customers previously billed last Jan. 4
7 Bought furniture from Mandaue Foam Industries worth P42,000 for cash
10 Paid P32,000 for Operating Expenses broken down as follows: Rent P16,000, Advertising
Expense P9,000 and Utilities Expenses P7,000
15 Acquired P15,000 worth of supplies with P4,000 as down payment. Balance payable within 60
days
17 Additional cash investment of P50,000 from Lance and P60,000 from Caster
18 Paid P7,000 to supplier for purchase made las Jan. 15
25 Consumed P10,000 worth of supplies
27 Cash withdrawn by Lance for personal use amounted to P10,000
29 Caster has withdrawn cash of P9,000 from the business for personal use
30 Depreciation for the month amounted to P350
Assuming that Income Summary and Drawing accounts were closed. At the end of January, how much is
the Capital balance of Lance?
Amount not given
P269,325
P274,325
P264,325
2. Abaca Partnership began the process of liquidation with the following balances:
Cash P16,000 Liabilities P150,000
Non-Cash P434,000 Andy, Capital P80,000
Bandi, Capital P90,000
Candy Capital P130,000
Total: P450,000 Total: P450,000
Their profit and loss ratio are 3:2:5. Liquidation expenses are expected to be P12,000. After the
liquidation expenses have been paid and the non- cash assets sold. Partner Candy had a capital
deficiency of P8,000. For what amount were the non-cash assets sold?
P146,000
P158,000
P170,000
P264,000
3. Levy and Lexie share profits and losses equally. After the realization of all non-cash assets and
payment of all liabilities, Levy had a Capital account balance of P3,800 and Lexie had a capital deficiency
of P3,800. Levy has personal assets of P30,000 and personal liabilities of P35,000; Lexie has personal
assets of P20,000 and personal liabilities of P18,000. The total amount that personal creditors of Levy
should expect to receive after marshalling of assets is:
P35,000
P33,000
P32,000
P30,000
4. RT and TL are partners with capital balances of P200,000 and P100,000 sharing profits and losses 3:1,
respectively. They agreed to admit Pio as a partner. Pio invested P150,000 for a 50% interest in the firm.
RT and TL transferred part of their capital to Pio as a bonus. The capital balances of RT, TL, and Pio,
respectively after Pio9s admission are:
P112,500; P37,500; P150,000
P200,000; P100,000; P150,000
P143,750; P81,250; P225,000
P168,750; P56,250; P225,000
5. Following is the Statement of Financial Position for Andy, Era, and Nel Partnership on June 4, 2022.
Cash P6,000 Liabilities P20,000
Other Assets 94,000 Era, Loan 4,000
Andy, Capital 27,000
Era, Capital 39,000
Nel, Capital 10,000
Total Assets P100,000 Total Liabilities and Capital P100,000
The partners share net income or net loss as follows: Andy, 40%; Era, 40% and Nel, 20%. On June 4,
2022, other assets were sold for P30,700, and P20,500 had to be paid to liquidate the liabilities because
of unrecorded claims amounting to P500. Andy and Era are personally solvent, but Nel9s personal
liabilities exceed his personal assets by P6,000. How much cash should be distributed to partners?
Andy P1,480, Era P17,450, Nel P-0-
Andy P100, Era P16,100, Nel P-0-
Andy P100, Era P16,100 Nel P2,760
Andy P1,480, Era P16,100, Nel P-0-
6. Bernie, Fiona and Londa have capital balances of P 40,000; P50,000; and P 18,000, respectively and a
profit-sharing ratio of 4:2:1, respectively. If Bernie received P 26,000 as a result of liquidation, Londa
received as part of the liquidation the amount of:
P14,500
P14,000
P18,000
P26,000
7. As a rule, when does a partnership begin to exist?
Upon the execution of the partnership agreement by the partners.
8. Noreen, Lily and Chet are partners with capital balances of P 350,000; P 250,000; and P 350,000 and
sharing profits 30%, 20% and 50%, respectively. Partners agreed to dissolve the business and upon
liquidation, all the partnership assets are sold, and sufficient cash is realized to pay all the claims except
one for P 50,000. Chet is personally insolvent, but the other two partners are able to meet any
indebtedness to the firm. On the remaining claim against the partnership, Noreen is to absorb:
P15,000
9. Jo, Ayle and Nico are partners in a textile distribution business, sharing profits & losses equally. On
12/31/2021, the partnership capital and the partners drawing were as follows:
Jo Ayle Nico Total
Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000
The partnership was able to collect on its trade receivables, and it was forced to liquidate. The operating
profits in 2021 amounted to P 72,000 and was all exhausted including the partnership assets. Unsettled
creditors' claim on December 31, 2021 amounted to P 84,000. Ayle and Nico have substantial private
resources, but Jo has no available free assets. The final cash distribution to Nico was:
P78,000
10. Jess and Sienna want to put up an internet café business. Jess is an expert in information technology
and computers but has no funds or property to invest. Sienna knows nothing about internet and
computers, but she is willing to contribute the funds and property needed. If Jess and Sienna decide to
enter into a limited partnership, who between them will be the limited partner?
Sienna only
11. On June 30, 2021, the account balances for the partnership of Kerly, Orly and Berly, together with
their respective profit and loss ratio, were as follows:
Assets at cost 180,000
Kerly, Loan 9,000
Kerly, Capital (20%) 42,000
Orly, Capital (20%) 39,000
Berly, Capital (60%) 90,000
P180,000
Kerly decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their
fair value of P216,000 at June 30, 2021. It was agreed that the partnership would pay Kerly P61,200
cash for Kerlys partnership interest, including Kerly9s loan which is to be repaid in full. After Kerly9s
retirement, what is the balance of Orlys capital account?
P45,450
12. On June 11, 2021, Max, Nyx and Oxy form a partnership, investing Cash of P15,000; P13,500 and
P4,200, respectively. The partners share profits 3:2:2 and on August 30, 2021, they have cash of P1,000
and other assets of P47,500; liabilities are P25,600. On this date, they decide to go out of business and
sell all the assets for P30,000. Oxy has personal assets of P1,500 that may, if necessary, be used to
meet partnership obligations. How much should be distributed to Nyx upon liquidation of the partnership?
P4,860
13. Arche and Ritchie are partners who share profits and losses in the ratio of 6:4 and had the following
capital balances: Arche P180,000; Ritchie P120,000. Chiboy is to be admitted for a 20% interest in the
partnership by direct purchase from the partners for P50,000. How should the P50,000 cash be divided
between Arche and Ritchie, respectively?
a. P30,000 P20,000
14. Buds and Blossoms is a partnership engaged in the flower shop business which is operated by friends
Buddy and Mina. The flower shop is located on a lot which they leased from Ella at 10% of the yearly
gross revenues of the business. Cymon was hired as accountant at a monthly salary of P25,000 plus 5%
of the yearly net profit as bonus. Who are the partners in this flower shop business?
Buddy and Mina only.
15. Amy, Bench, Ching and Derek are partners sharing profits in the ratio of 3:4:6:8, respectively. The
balances of their capital accounts on December 31, 2021 are as follows: Amy P 500; Bench P 12,500;
Ching P 12,500;and Derek P 4,500. The partners decided to liquidate their firm and they accordingly
convert the non-cash assets into P 11,600 Cash. After paying the liabilities of P 1,500, they have P
11,100 to divide. Assume that any deficient partner is insolvent. The cash balance before realization is:
P 1,000
16. Lizan, Madel & Terry are partners sharing profits equally. On 1/01/2021, the capital accounts of the
partners are: Lizan P 6,000; Madel P 6,000; Terry P42,000. Due to liquidity problems, the partners are
compelled to liquidate. After exhausting all the partnership assets, including those arising from the
operating profit of P 10,350 in 2021, there still remains P 12,600 liabilities on 12/31/2021. Lizan has no
personal assets, but the others are solvent.
The loss on realization is:
P76,950
17. The partners Bambi and Bamboo share profit 3:2. However, Bambi is to receive a yearly bonus of
20% of the profits, in addition to his profit share. The partnership made a net income for the year of
P24,000 before the bonus. Assuming Bambis bonus is computed on profit after deducting the said bonus,
how much profit share will Bamboo receive?
P8,000
18. Noypi Brothers decided to liquidate on 12/31/2021. Partners interest are as follows:
Loan from Personal Personal
Capital Partners Assets Liabilities
Jad P 25,000 P 5,000 P 510,000 P 505,000
Jake 19,000 - 400,000 420,000
Jaz 66,000 - 100,000 170,000
Profit & loss sharing ratio is 1:1:1, respectively. Non-Cash Assets amounted to P 150,000. If all of the
assets were sold for half the price, how much would be the cash for distribution to the partners?
P 40,000
19. Noypi Brothers decided to liquidate on 12/31/2021. Partner9s interest are as follows:
Loan from Personal Personal
Capital Partners Assets Liabilities
Jad P 25,000 P 5,000 P 510,000 P 505,000
Jake 19,000 - 400,000 420,000
Jaz 66,000 - 100,000 170,000
Profit & loss sharing ratio is 1:1:1, respectively. Non-Cash Assets amounted to P 150,000. If Jake will
receive P5,000 cash in a lump-sum liquidation, how much will Jad receive?
P 16,000
20. Paz and Zara are combining their separate business to form a partnership. Cash and Non-Cash
Assets are to be contributed for a total capital of P300,000. The non-cash assets are to be contributed
and the liabilities to be assumed are:
Paz Zara
Book Value Fair Market Value Book Value Fair Market Value
Accounts Receivables P20,000 P20,000 - -
Inventories 30,000 40,000 P20,000 P25,000
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 amount of cash to be contributed by Paz is:
P60,000
21. Paz and Zara are combining their separate business to form a partnership. Cash and Non-Cash
Assets are to be contributed for a total capital of P300,000. The non-cash assets are to be contributed
and the liabilities to be assumed are:
Paz Zara
Book Value Fair Market Value Book Value Fair Market Value
Accounts Receivables P20,000 P20,000 - -
Inventories 30,000 40,000 P20,000 P25,000
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 asset of the partnership is:
P325,000
22. Carlos and Carla form a partnership on March 1, 2021 with the following investments:
CARLOS CARLA
Cash P 10,000 P 35,000
Land 105,000
Furniture and Fixtures 35,000
Carlos and Carla agreed to divide profits and losses in the ratio of 70:30, respectively and to assume the
P20,000 mortgage on the land of Carla. If Carlos is required to make his share in equity equal to 40%, he
must make an additional investment of:
P35,000
23. Balde and Cabo are partners who share profits and losses in the ratio of 6:4. On October 1, 2022,
their capital account balances are: Balde P80,000 and Cabo P20,000. Yaboo is to be admitted for a 20%
interest in the partnership by direct purchase from the partners for P30,000. The new profit and loss ratio
will be:
Balde 12 : Cabo 8 : Yaboo 5
24. Cara and Mel are partners with capital balances of P30,000 and P40,000 and sharing profits and
losses 4:6 respectively. If Choco is admitted as a partner paying P20,000 in exchange for 50% of Cara9s
equity, the entry in the partnership books should be as follows:
DR. Cara, Capital P15,000 CR. Choco, Capital P 15,000
25. Chet, Demi and Erma had capital account balances of P40,000, P50,000 and P18,000, respectively
with profit sharing ratio of 4:2:1, respectively. If Chet received only P8,000 upon liquidation of the
partnership, the total amount received by all the partners on liquidation was:
P52,000
Practice Test

1. Dragon Company issued 20,000 shares of P20 par value ordinary shares at P24 per share. Dragon
reacquired 2,000 shares of its own stock at a cost of P30 share. What is the entry to record the
reacquisition?
A. Treasury Shares 48,000
Share Premium – TS 12,000
Cash 60,000
B. Treasury Shares 40,000
Share Premium – TS 20,000
Cash 60,000
C. Treasury Shares 60,000
Cash 60,000
D. Cash 60,000
Treasury Shares 60,000
2. If Dragon Company reissued 1,000 shares of the treasury stock in for P36 per share, the entry is –
A. Cash 36,000
Treasury Shares 36,000
B. Cash 36,000
Treasury Shares 30,000
Retained Earnings 6,000
C. Cash 36,000
Treasury Shares 30,000
Share Premium – TS 6,000
D. Cash 36,000
Treasury Shares 20,000
Share premium – TS 16,000
3. Treasury stock should be shown on the statement of financial position as –
A. A current asset
B. An investment asset
C. An addition of the corporation’s stockholders’ equity
D. A reduction of the corporation’s stockholders’ equity
4. Pinoy Ka Company was organized on Jan. 1, 2019, with authorized capital of 100,000 shares of P200
par value ordinary shares. During 2019, the corporation had the following transactions affecting
stockholders’ equity:
Jan. 10 Issued 25,000 shares at P220 per share.
Mar. 25 Issued 1,000 shares for legal services when the fair value was P240 a share.
Sept. 30 Issued 5,000 shares for a tract of land when the fair value was P260 a share.
What amount should the corporation report for share premium – ordinary shares at Dec. 31, 2019?

A. P 800,000 C. P 500,000
B. 540,000 D. 840,000

5. Treasury Stock which was purchased for P28,000 is sold for P30,000. What would be the effect?
A. An increase in Shareholders’ Equity by P30,000
B. An increase in Shareholders’ Equity by P2,000
C. An increase in income by P2,000
D. No change in Total Shareholders’ Equity
6. The Share Premium Account is recorded as credit when –
A. Shares are sold higher than par value
B. Shares are sold at par value
C. Shares are sold less than par value
D. None of the above
7. One of the following is not correct. Which one?
A. Treasury shares have no voting rights as long as such stocks remain in the treasury.
B. A corporation cannot accept non-cash assets as payment of its subscription.
C. If Subscription Receivable is collectible within one year, it will be shown as a current asset item.
D. Share certificates are issued to subscribers upon full payment of subscription.
8. Which of the following statements is (are) not correct?
I. The highest bidder is a person who is willing to pay the unpaid balance of the subscription plus
accrued interest, cost of advertisement and other expenses related to the auction sale in exchange
for the “least” number of shares.
II. Ordinary and Preference shareholders have the same rights and both enjoy the same privileges
especially in distribution of dividends.
III. When there is one class of stock issued by a corporation it is always understood to be preference
shares.
A. II and III only C. II only E. I, II and III
B. I and III only D. I and II only
9. S-1: The acquisition or purchase of treasury shares will reduce the number of shares issued.
S-2: There is no effect on Share Capital Account if Treasury shares are retired.
S-3: The acquisition or purchase of treasury shares will not reduce the number of shares outstanding.

A. True, false, false C. False, true, false E. False, false, false

B. False, false, true D. True, false, true
10. The following balances were taken from the general ledger:
Authorized Share Capital P 15,000,000
Unissued Share Capital 6,000,000
Subscribed Share Capital 3,000,000
Subscription Receivable 1,200,000
Share Premium 1,500,000
Retained Earnings 2,700,000
Bonds Payable 600,000
Treasury Shares 300,000
How much should be the Total Shareholders’ Equity?
A. P 14,400,000 C. P 16,500,000 E. P 17,100,000
B. P 15,300,000 D. P 14,700,000

11. Beta Company acquired a building valued at 3,200,000 in exchange for 20,000 shares of its P100 par
ordinary shares. The stock is traded and selling for P170 per share. At what amount should the
building be recorded by the company?
A. P3,200,000 C. P 3,400,000
B. P 2,000,000 D. None of the above
12. A corporation issues 4,000 ordinary shares for P50,000. It has a par value of P10 per share. The
journal entry to record the stock issuance would include a credit to Share Premium – OS for
A. P 40,000 C. P 50,000
B. P 10,000 D. P 4,000
The stockholders’ equity section of the company’s statement of financial position revealed the
following information on December 31, 2019:
Preference Shares, P100 par P 4,500,000
Share Premium – PS 450,000
Ordinary Shares, P20 par 5,500,000
Share Premium – OS 2,350,000
Subscribed Ordinary Shares 500,000
Retained Earnings 1,500,000
Subscription Receivable – OS 200,000
13. How much is the legal capital?
A. P 10,500,000 C. P 10,300,000 E. None of the above
B. P 10,000,000 D. P 10,700,000
14. How much is the contributed capital?
A. P 12,800,000 C. P 14,800,000 E. None of the above
B. P 13,300,000 D. P 13,100,000

The following financial data were taken from Charlie Company’s statement of financial position:
Authorized Share Capital P 10,000,000
Unissued Share Capital 3,000,000
Subscribed Share Capital 1,000,000
Subscription Receivable 300,000
Share Premium 600,000
Unappropriated Retained Earnings 700,000
Appropriated Retained Earnings 400,000
Bonds Payable 500,000
Notes Payable 350,000
Treasury Shares, at cost 200,000
15. How much is the Total Stockholders’ Equity for the year?

A. P 8,100,000 C. P 9,200,000 E. None of the above

B. P 9,600,000 D. P 10,050,000
16. How much is the Total Share Capital for the year?
A. P 7,000,000 C. P 8,100,000 E. None of the above
B. P 7,700,000 D. P 8,300,000

During 2019, the company issued 150,000 shares of ordinary shares for a total of P18,000,000 and
50,000 shares of preference shares at P60 per share. In addition, on December 15, 2019, subscription for
20,000 of preference shares were taken at a purchase price of P100. These subscribed shares were paid
on January 2, 2020. Profit for 2019 was P5,000,000.

17. What would the company report as total contributed capital on its December 31, 2019 statement of
financial position?
A. P 28,000,000 C. P 26,000,000 E. None of the above
B. P 23,000,000 D. P 21,000,000

18. Reissuing treasury shares at a price above cost results in –

A. A gain to be reported as a separate item in the income statement
B. An increase in share premium – TS
C. An increase of retained earnings
D. A prior period adjustment to be reported in the statement of retained earnings
E. None of the above

19. Treasury shares transactions may result in –

A. Decreases in the balance of retained earnings.
B. Increases in the balance of retained earnings.
C. Increases or decreases in the balance of retained earnings.
D. Increases or decreases in the amount of net income.

20. Bia, Beth, and Betty, partners sharing profits equally, decided to form a corporation. They have
capital balances of P200,000, P200,000 and P400,000, respectively, and all of its assets and liabilities
will be transferred to the corporation. Their assets will be revalued from P800,000 at P1,100,000 due
to the increase in revaluation of land which was originally contributed by Betty. At P10 par value, the
partners are to receive shares of stocks as follows:
A. 30,000, 30,000, and 50,000 shares, respectively
B. 20,000, 20,000, and 40,000 shares, respectively
C. 20,000, 20,000, and 70,000 shares, respectively
D. 25,000, 25,000, and 60,000 shares, respectively
E. None of the above
The accounts below appeared in the December 31, 2019 trial balance of the Delta Company:
Share Capital, P15 par, 20,000 shares P 270,000
authorized, 18,000 shares issued
Subscription Receivable 17,000
Subscribed Share Capital 27,000
Retained Earnings 200,000
Share Premium 95,000
Treasury Shares, 1000 shares, at cost 25,000

Required: From these accounts determine the following:

21. Number of outstanding shares 17,000 shares
22. Number of shares subscribed 1,800 shares
23. Total amount of unissued share capital 30,000
24. Total amount of authorized share capital 300,000
25. Number o f shares unissued 2,000 shares