Afar302 A - PF 1

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Chapter 1
Partnership Formation
NAME: TERUEL, MARIA NICOLE Date: 2/16/22

Professor: DR. LYSSANDER DELA CRUZ Section: BSA-3 Score:
QUIZ:
1. Which of the following statements is correct?

a. An advantage of a partnership is that it is difficult to dissolve.
b. Partner A contributed cash of ₱100 and land with carrying amount of ₱500 and fair value of
₱700 to a partnership. If no bonus is given to any partner, Partner A’s capital account should
be credited for ₱600.
c. Partner C contributed inventory costing ₱500 but with a net realizable value of ₱400 to a
partnership. The related accounts payable of ₱100 will be assumed by the partnership. The
net credit to Partner C’s capital account in the partnership books is ₱300.
d. A partnership business has a legal life of 50 years.
2. The accounting for partnerships differs from the accounting for sole proprietorships,
corporations and cooperatives in regard to the accounting for
a. assets.
b. liabilities.
c. equity.
d. all of these.
3. Partnership capital and drawings accounts are similar to the corporate

a. paid in capital, retained earnings, and dividends accounts.
b. retained earnings account.
c. paid in capital and retained earnings accounts.
d. preferred and common stock accounts.
4. A and B formed a partnership. Although A and B contributed equal amounts of cash, it was
agreed that the initial credit to A’s capital account should be greater than that of B. If the bonus
method is used, which of the following statements is correct?
a. A capital bonus is given to B.
b. Partner B’s account is not affected by the agreement.
c. Goodwill must be recorded.
d. The increase in A’s capital account is treated as a decrease in B’s capital account.
5. On April 30, 20x1, A, B and C formed a partnership. A contributed cash of ₱50,000. B

contributed property with ₱36,000 carrying amount, ₱40,000 original cost and ₱80,000 fair value.
The partnership accepted responsibility for the ₱35,000 mortgage attached to the property. C
contributed equipment with ₱30,000 carrying amount, ₱75,000 original cost and ₱55,000 fair
value. The partnership agreement specifies that profits and losses are to be shared equally but is
silent regarding capital contributions. Which partner has the smallest April 30, 20x1 capital
account balance?
a. A
b. B
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c. C
d. All capital account balances are equal
Use the following information for the next two questions:

A and B formed a partnership. The following are their contributions:
A B
Cash 200,000 -
Accounts receivable 150,000 -
Inventory 100,000 -
Land 500,000
Building 620,000
Total 450,000 1,120,000
Note payable 220,000
A, capital 230,000
B, capital 1,120,000
Total 450,000 1,120,000
Additional information:
 The accounts receivable has a recoverable amount of ₱120,000.
 The inventory has an estimated selling price of ₱110,000 and estimated costs to sell of ₱20,000.
 The land has a fair value of ₱500,000 an unpaid mortgage of ₱120,000. The partners agreed that B
shall settle the mortgage using his personal funds.
 The building is over-depreciated by ₱30,000.
 The building also has an unpaid mortgage amounting to ₱550,000. The partners agreed that the
partnership shall assume repayment of the mortgage.
 The note payable has a fair value of ₱210,000.
 A and B shall share in profits and losses 40% and 60%, respectively.
6. How much are the adjusted capital balances of A and B, respectively?

A B
a. 200,000 600,000
b. 230,000 480,000
c. 200,000 1,030,000
d. 230,000 600,000
7. Assume that a partner’s capital shall be increased accordingly by contributing additional cash to
bring the partners’ capital balances proportionate to their profit or loss ratio. Which partner
should provide additional cash and how much is the additional cash contribution?
a. Partner A should provide additional capital of ₱150,000.
b. Partner A should provide additional capital of ₱200,000.
c. Partner B should withdraw capital of ₱300,000.
d. Partner B should provide capital of ₱300,000.
8. A and B agreed to form a partnership. A shall contribute ₱60,000 cash while B shall contribute
₱120,000 cash. However due to the expertise that A will be bringing to the partnership, the
partners agreed that they should initially have an equal interest in the partnership capital.
Under the bonus method, how much is the adjusted capital balance of B immediately after the
formation of the partnership?
a. 60,000
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b. 90,000
c. 120,000
d. none of these
9. A, B and C formed a partnership. Their contributions are as follows:

A B C
Cash 50,000 40,000 140,000
Equipment 150,000
Totals 50,000 190,000 140,000
Additional information:
 Although C has contributed the most cash to the partnership, he did not have the full amount of
₱140,000 available and was forced to borrow ₱40,000. The partners agreed that half of the
amount borrowed shall be assumed by the partnership.
 The equipment contributed by B has an unpaid mortgage of ₱20,000, the repayment of which is
not assumed by the partnership.
 The partners agreed to equalize their interests. Cash settlements among the partners are to be
made outside the partnership.
Which partner(s) shall receive cash payment from the other partner(s)?
a. B shall receive ₱70,000 from C
b. C shall pay ₱70,000 to A
c. A shall receive ₱70,000 from B
d. A shall pay ₱70,000 to B
10. A and B agreed to form a partnership. The partnership agreement stipulates the following:
 Initial capital of ₱300,000.
 A 25:75 interest in the equity of the partnership.
A contributed ₱100,000 cash, while B contributed ₱200,000 cash. Which partner should provide
additional investment (or withdraw part of his investment) in order to bring the partners’ capital
credits equal to their respective interests in the equity of the partnership?
a. A shall provide additional capital of ₱25,000.
b. B shall withdraw capital of ₱25,000.
c. B shall make an additional investment of ₱25,000.
d. No additional contribution or withdrawal shall be made.
“A wise man will hear and increase learning, and a man of understanding will attain wise counsel.” (Proverbs 1:5)
- END –
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Answer Sheet
1 C 6 A
2 C 7 B
3 A 8 B
4 D 9 D
5 B 10 C

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NAME: TERUEL, MARIA NICOLE Date: 2/16/22

1. Which of the following statements is correct?

3. Partnership capital and drawings accounts are similar to the corporate

5. On April 30, 20x1, A, B and C formed a partnership. A contributed cash of ₱50,000. B

Use the following information for the next two questions:

6. How much are the adjusted capital balances of A and B, respectively?

9. A, B and C formed a partnership. Their contributions are as follows:

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