Khiezna Estino Pakam FAR 101

BSAC – 1B Assignment #3

See if you can do this!

THEORIES: (TRUE or FALSE)

F 1. A written partnership contract is required to be prepared whenever a partnership is

formed.
F 2. All partnerships are subject to income tax
F 3. A partner’s contribution in the form of industry or service is recorded by debiting the
account “industry.”
T 4. In the partnership books, there are as many capital and drawing accounts as there are
partners.
T 5. A partner’s contribution in the form of non-cash assets should be recorded at its fair
market value in the absence of an agreed value.
T 6. A partnership is much easier and less expensive to organize than a corporation.
F 7. A newly organized partnership should always open a new set of books.
T 8. All partnerships have at least one general partner.
T 9. Each partner generally has the authority to enter into contracts which are binding upon
the partnership.
T 10. The property invested in a partnership by a partner becomes the property of the
partnership.
F 11. Contra accounts, like allowance for Uncollectible Accounts and Accumulated
Depreciation, on non-cash assets invested by partners are always carried on the partnership
book.
T 12. The unlimited liability of partners for the partnership debts makes the partnership more
reliable from the point of view of creditors.
T 13. Goodwill may be recognized upon partnership debts makes the partnership more
reliable from the point of view of creditors.
T 14. Before a partnership can operate legally, it has to first comply with registration
requirements of the SEC, DTI BIR, SSS and Mayor’s Office.
F 15. There is a required number of limited partners in a general co-partnership; in the same
manner that, there is a required number of general partners in a limited partnership.
T 16. A partnership is always owned by at least two individuals.
F 17. For Financial reporting purposes, the personal assets and debts of a partner should be
combined with the assets and debts of a business.
T 18. Partners are personally liable for the liabilities of the partnership if the partnership is
unable to pay.
T 19. In a partnership, an owner’s equity account exists for each partner
T 20. Net asset adjustments are made on a sole proprietor’s books, when these are to be
used as partnership books, for the purpose of arriving at agreed values.
THEORIES: (IDENTIFICATION)
1. A partnership wherein all the partners have limited liability except for at least one general
partner.
LIMITED PARTNERSHIP
2. The contribution of an industrial partner.
INDUSTRY, SKILL, TALENT OR SERVICE
3. A partner who contributes money, property, and industry.
CAPITALIST INDUSTRIAL PARTNER
4. A characteristics of a partnership wherein any partner can act in behalf of the partnership as
long as these acts are within the scope of normal partnership activities.
MUTUAL AGENCY
5. A partnership which has failed to comply with one or more of the legal requirements for its
establishment.
DE FACTO PARTNERSHIP
6. An entry prepared when a partner contributes skill or industry into requirements for its
establishment.
MEMORANDUM ENTRY
7. A partnership organized for the purpose of rendering services.
NONTRADING PARTNERSHIP
8. A contract whereby two or more persons bind themselves to contribute money, property, or
industry to a common fund with the intention of dividing profits among themselves.
PARTNERSHIP
9. The value assigned of the non-cash asset contributed into the partnership.
AGREED VALUE
10. One who is not really a partner, not being a party to the partnership agreement, but is made
liable as a partner for the protection of innocent third persons.
NOMINAL PARTNER
11. A written partnership contract which governs the formation, operation and dissolution of the
partnership.
ARTICLES OF CO-PARTNERSHIP
12. A partner who has a financial interest in the firm, not known to be a partner, but takes active
part in the management of the film.
SECRET PARTNER
13. The government body which is in charge with administration of various laws affecting
partnerships and corporations in the Philippines.
SECURITIES EXCHANGE COMMISSION (SEC)
14. The word added to the name of the partnership to inform the public that it is a limited
partnership.
LIMITED OR LTD
15. A partner whose liability is limited to the extent of her/his personal contribution into the
partnership.
LIMITED PARTNER
16. Amounts advanced by partners to the partnership when the business is in need of additional
funds which are immediately payable by the partnership and usually bear interest.
LOAN PAYABLE
17. Each partner’s percentage of equity in the net assets of a partnership.
CAPITAL SHARE
18. The transfer of capital from one partner to another upon partnership formation, on recognition
of intangible factors such as partners’ special expertise, established clientele or necessary business
connections.
BONUS
19. The purpose of preparing adjustments on net assets contributed by partners into the
partnership.
ARRIVE AT AGREED VALUE OR FMV
20. Partnerships which are exempt from the income tax
GENERAL PROFESSIONAL PARTNERSHIP
EXERCISES
Exercise 1 (Cash and Non-cash Contributions)

a. Cash 400,000
Alonzo, Capital 400,000

b. Accounts Receivable 500,000

Allowance for Uncollectible Accounts 50,000
Alonzo, Capital 450,000

c. Inventories 240,000
Alonzo, Capital 240,000
P300, 000 x 80% = 240,000
d. Equipment 540,000
Alonzo, Capital 540,000
P900, 000 x 6/10 = 540,000

Exercise 2 (Cash and Net Asset Contributions)

1. Cash 450,000
Accounts Receivable 180,000
Merchandise Inventory 270,000
Equipment 125,000
Allowance for Uncollectible Accounts 10,000
Accounts Payable 105,000
Notes Payable 90,000
Aquino, Capital 820,000

Cash 410,000
Asuncion, Capital 410,000
P820,000 x 3/2 = 1,230,000 x 1/3 = 410,000

2. Allowance for Uncollectible Accounts 5,000

Aquino, Capital 5,000

Merchandise Inventory 30,000

Aquino, Capital 30,000

Accumulated Depreciation 30,000

Aquino, Capital 25,000
Equipment 55,000

Allowance for Uncollectible Accounts 10,000

Accounts Payable 105,000
Notes Payable 90,000
Aquino, Capital 820,000
Cash 450,000
Accounts Receivable 180,000
Merchandise Inventory 270,000
Equipment 125,000
Exercise 3 (An Individual and a Previous Sole Proprietor)
1. Prepare the entries to record the investments of Aquino and Asuncion in the partnership’s new
set of books.
a. Amores, Capital 25,000
Allowance for Uncollectible Accounts 25,000

b. Merchandise Inventory 160,000

Amores, Capital 160,000

c. Amores, Capital 30,000

Prepaid Expenses 72,000
Accounts Payable 102,000

d. Cash 1,717,000
Andrada, Capital 1,717,000
(P1,612,000-P25,000+P160,000-30,000=1,717,000)

2. Prepare the entries to adjust and close the balances of accounts in the books of Aquino.
a. Cash 208,000
Accounts Receivable 460,000
Merchandise Inventory 1,600,000
Prepaid Expenses 72,000
Allowance for Uncollectible Accounts 25,000
Accounts Payable 598,000
Amores, Capital 1,717,000

b. Cash 1,717,000
Andrada, Capital 1,717,000

3. Prepare a statement of financial position for the new partnership

Amores and Andrada Company
Statement of Financial Position
January 1, 2020

Assets
Cash P 1,925,000
Accounts Receivable P460,000
Less Allowance for Uncollectible Accounts s25,000 435,000
Merchandise Inventory 1,600,000
Prepaid Expenses 72,000
Total Assets P4,032,000

Liabilities and Capital

Accounts Payable P598,000
Amores, Capital P1,717,000
Andrada, Capital 1,717,000 3,434,000
Total Liabilities and Capital P4,032,000
Exercise 4 (Cash and Non-cash Contributions; Bonus)
1. Each partner is credited for the full amount of net assets invested.

Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,000,000
Aranas, Capital 1,200,000

2. Each partner initially is to have equal interest in partnership capital.

Cash 1,000,000
Land 800,000
Building 1,900,000
Mortgage Payable 1,500,000
Aguirre, Capital 1,100,000
Aranes, Capital 1,100,000