GABALES, DESIREE DAWN V.

BSA-III

I. MULTIPLE CHOICE -THEORY

1. An advantage of the partnership as a form of business organization would be

a. Partners do not pay income taxes on their share in partnership income.

b. A partnership is bound by the act of the partners.
c. A partnership is created by mere agreements of the partners.
d. A partnership may be terminated by the death or withdrawal of a partner.

2. Which of the following statements is correct with respect to a limited partnership?

a. A limited partner may not be an unsecured creditor of the limited partnership.

b. A general partner may not also be limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership.
d. A limited partnership can be formed with limited liability for all partners.

3. Which of the following is not a characteristic of most partnership?

a. Limited liability
b. Limited life
c. Mutual agency
d. Ease of formation

4. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner's capital account?

a. Fair value at the date of contribution.

b. Contributing partner's original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner's tax basis.

5. Which of the following best characterizes the bonus method of recording a new partner's
investment in a partnership?

a. Net assets of the previous partnership are not revalued.

b. The new partner's initial capital balance is equal to his or her investment.
c. Assuming that recorded assets are properly valued, the book value of the new partnership
is equal to the book value of the previous partnership and the investment of the new
partner.
d. The bonus always results in an increase to the previous partners' capital balances.
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BSA-III

6. Assets contributed by the partners to a partnership business should be initially measured in the
partnership books at

a. the carrying amount to the contributing partner.

b. fair value.
c. current selling price.
d. whatever amount the contributing partner can think of.

7. Mr. X and Ms. Y formed a partnership, each contributing PIM in cash. The partners agreed that
Mr. X's capital account is to be credited for P.8M. Which of the following statements is correct?

a. The credit to Ms. Y's capital account is P1.2M.

b. Mr. X is given a bonus of P.2M.
c. The stipulation is void.
d. Mr. X must be ugly, while Ms. Y is beautiful.

8. You and I formed a partnership. The fair value of my contribution is P100,000 while the fair value
of your contribution is P50,000. However, since you will be contributing an expertise to the
partnership, we have agreed to value that expertise. Accordingly, we have agreed that our
respective capital accounts will be credited for equal amounts. Which of the following
statements is correct.

a. Our agreement results to a bonus of P25,000 which relates to the valuation of your expertise.
Accordingly, we will record a goodwill of P25,000.
b. Our agreement results to a bonus of P25,000. In accordance with our agreement, I shall pay
you P25,000. Our asset contributions will be debited at their fair values of P100,000 and
P50,000, respectively.
c. Our agreement results to a bonus of P25,000 which is treated as a capital adjustment - an
increase to your capital account and a decrease to my capital account. My asset contribution
will be debited at P75,000 while your asset contribution will be debited at P75,000.
d. Our agreement results to a bonus of P25,000 which is treated as a capital adjustment - an
increase to your capital account and a decrease to my capital account. Our asset
contributions will be debited at their fair values of P100,000 and P50,000, respectively.

9. Under the bonus method,

a. total partnership capital is equal to the fair value of the partners' net contributions to the
partnership.
b. total partnership capital is less than the fair value of the partners' net contributions to the
partnership.
c. total partnership capital is greater than the fair value of partners' net contributions to the
partnership.
d. total partnership capital is less than the fair value of the partners' net contributions to the
partnership, if the bonus is given to the incoming partner.
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BSA-III

10. Transactions between and among the partners are

a. recorded in the partnership books.

b. not recorded in the partnership books.
c. either a or b
d. neither a nor b

II. MULTIPLE CHOICE – COMPUTATIONAL

1. Triangle, Square and Round formed a partnership. Triangle contributed cash of P80,000. Square
contributed equipment with historical cost of P700,000, carrying amount of P180,000, and fair value of
P90,000. Round contributed building with historical cost of P1,000,000, carrying amount of P480,000 and
fair value of P690,000. The partnership will assume the unpaid mortgage of P580,000 on the building.
Which partner has the least capital account balance on partnership formation?

a. Triangle c. Round
b. Square d. None, all are equal

2. On January 1, 20x1, Mr. Ann and Ms. Buoy agreed to form a partnership. The partners'
contributions are listed below:
Mr. Ann Ms. Buoy
Cash 50,000 120,000
Accounts 360,000 1,080000
Inventories 216,000 360,000
Land 1,080,000
Building 900,000
Equipment 90,000 90,000
Accounts payable 336,000 450,000
Capital 1,460,000 2,100,000

The partners agreed to the following:

a. The recoverable amounts to the partners’ respective accounts receivable are P300,000 for Mr. Ann
and P760,000 for Ms. Buoy.
b. The inventory contributed by Ms. Buoy includes obsolete items with a recorded cost of P20,000
c. The land has an attached mortgage of P180,000, which the partnership will assume.
d. The equipment contributed by Ms. Buoy has a fair value P130,000
e. Mr. Ann has an unrecorded accounts payable of P100,000. The partnership assumes the obligation of
settling that account.

How much is the initial capital of Ms. Buoy?

a. 1,120,000
b. 1,800,000
c. 1,920,000
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BSA-III

d. 2,290,000

3. On January 1, 20x1, Mr. Angot and Ms. Banglo agreed to form a partnership and share profits and
losses in the ratio of 3:7, respectively. Mr. Angot contributed a parcel of land that cost him P10,000. Ms.
Banglo contributed P40,000 cash. The land was sold for P18,000 on January 1, 20x1, immediately after
formation of the partnership. How much is the capital balance of Mr. Angot?

a. 10,000 c. 29,000
b. 18,000 d. 40,000

Use the following information for the next two questions:

Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A
contributed P100,000 and Ms. B contributed P84,000 in identifiable assets.

4. The partners agreed that the difference in the amount of contribution and the amount of credit to the
partner's capital shall be treated as compensation for the expertise that the partner will be bringing to
the partnership. How much is the initial capital balance of Ms. B?

a. 84,000 c. 100,000
b. 92,000 d. 102,000

5.The partners agreed that the difference in the amount of contribution and the amount of credit to the
partner's capital shall be treated as cash settlement between the partners. Which of the following is
correct?

a. A pays B P16,000
b. B pays A P16,000
c. A pays B P8,000
d. The cash settlement between the partners is not recorded in the partnership books.

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“'For I know the plans I have for you,' declares the Lord, 'plans to prosper you and not to harm
you, plans to give you a hope and a future. '” — Jeremiah 29:11.