Dynamic Society of Accounting Students (DySAS)

Second Partnership and Corporation Accounting Tutorial

Second Semester S.Y. 2012-2013

Dissolution
1. Which of the following condition does not constitutes a legal dissolution of a partnership?
a. Death of a partner c. Retirement of a partner
b. Admission of a partner d. Additional investment of a partner

2. Which is least likely a valid reason for partnership dissolution?

a. Admission of a partner c. Declaration of partner’s insolvency
b. Retirement of a new partner d. Sustained loss of the partnership for the year

3. Total partners’ equity will not change when a withdrawing partner

a. Withdraws asset equal to his capital balance
b. Sells his interest to a new or remaining partner
c. Withdraws asset amounting to less than his capital balance
d. Withdraws asset amounting to greater than his capital balance

4. The following transactions will affect the balance of the partnership capital except
a. retirement of a partner by settlement equal to his interest
b. the partnership generates net income for the year
c. admission by purchase without implied goodwill, but with bonus
d. permanent withdrawal by partners

5. When the partner withdraws from the partnership taking assets that represent more than his capital balance
a. no bonus result
b. the remaining partner received a bonus
c. the withdrawing partner received a bonus
d. the remaining partner owe the withdrawing partner the difference

6. When the investment of a new partner exceeds the new partner’s initial capital balance, who will receive the bonus?
a. the new partner
b. the old partners in their old profit and loss ratio
c. the old partners in their new profit or loss ratio
d. the old and new partners I their new profit and loss ratio

7. Which of the following describes the admission of a new partner by investing an amount more than his capital credit under
bonus method?
Net assets Total capital
a. No effect increase
b. Increase increase
c. Decrease decrease
d. No effect no effect

8. Man, Com, and Tah are in a partnership. Tah decides to withdraw his partnership interest by selling it to Bom. Man and Com
agree to this. Man and Com’s capital accounts
a. will increase when Bom is admitted
b. will decrease when Bom is admitted
c. will not be affected when Bom is admitted
d. cannot be determined

9. In admission of new partner by investment, if the total agreed capital is more than the total contributed capital there is
a. goodwill b. bonus c. goodwill and bonus d. error in recording

10. RJheck bought Mark’s interest in the Rommar and Mark Partnership by purchasing the interest of Mark for P600,000. The
capital balances before the sale were P240,000 and P360,000, respectively and they share profits and losses equally. What will be
the amount in Rommar’s Capital account?
a. P360,000 b. P240,000 c. P480,000 d. P600,000

11. Javar and Jovit are partners who share profits and losses equally. Each has a capital balance of P40,000 and P50,000
respectively. They agree to admit Jo Anne as a new partner upon investment of land costing P50,000, but which is appraised at
P60,000. Profits and losses are to be shared equally after the admission of Jo Anne. What is the percentage of Jo Anne interest in
the firm?
a. 40% b. 33.71% c. 33% d. 35.71%

12. Aimee, Warren and Janna were partners with capital balances on January 2, 2012 of P100,000, P150,000, and P200,000,
respectively. Their profit and loss ratio is 5:3:2. On July 1,2012, Aimee retires from the partnership. On the date of retirement
the partnership income is P140,000 and the partners agreed that inventories are to be revalued at P70,000 from its original cost of
P50,000. The partners agreed further to pay Aimee P195,000 in settlement of his interest. What are the capital balances of the
remaining partners after the retirement of Aimee?
Warren Janna Warren Janna
a. P189,000 P226,000 c. P207,000 P238,000
b. P198,000 P232,000 d. P220,000 P226,000
13. Jazel and Reymond are partners who share profits and losses in the ratio of 6:4. On January 1, 2013, their capital balances are
80,000 and 20,000 respectively. Jc is to be admitted for a 20 percent interest in the partnership by direct purchase from the
partners for 30,000. How much should the 30,000 cash be divided between Jazel and Reymond?
Jazel Reymond Jazel Reymond
a. 18,000 12,000 c. 20,000 10,000
b. 22,000 8,000 d. 24,000 6,000

14. The following statement of financial position is for the partnership of Shiela, Reymond, and Ken, before the admission of
Aljohn:
Cash P20,000 Liabilities P50,000
Other assets 180,000 Shiela, Capital (40%) 37,000
Ken, Capital (40%) 65,000
_________ Alfie, Capital (20%) 48,000
Total P200,000 Total P200,000
If the assets are fairly valued and the partnership wishes to admit Aljohn as a new one-sixth-interest partner without recording
goodwill or bonus, Aljohn should contribute cash of:
a. P30,000 b. P33,333 c. P36,000 d. P40,000

15. On June 30, 2009, the statement of financial position for the partnership of Lee, Elbert and Johnel, together with their
respective profit and loss ratio, was shown as follows:
Assets, at cost P180,000
Lee, Loan P 9,000
Lee, Capital (20%) 42,000
Elbert, Capital (20%) 39,000
Jonel Capital (60%) 90,000
180,000
Lee had 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, 2009. It was agreed that the partnership would pay Lee P61,200 cash for his interest, including Lee’s loan which is to
be repaid in full. No goodwill is to be recorded. After Lee’s retirement, what is the balance of Elbert’s Capital account?
a. P46,200 b. P36,450 c. P39,000 d. P45,450

16. The existing capital balances of old partners prior to admission of Khou are as follows
Gwua(30%) Po (30%) Kayu (40%)
200,000 280,000 320,000
Khou is to be admitted to the partnership by investing 200,000 for 18% interest in capital and profits of the partnership. Under the
bonus method, the capital balances of Gwua, Po, and Kayu after khou’s admission are:
Gwua Po Kayu
a. 194,000 274,000 312,000
b. 206,000 286,000 328,000
c. 200,000 280,000 320,000
d. 204,120 285,720 326,560

17. On April 27, 2011, the capital accounts are as follows: XX - P360,000; YY – P225,000; ZZ – P135,000. At this time, WW is
admitted to the firm when he purchase a 1/6 interest in the firm for P82,500. The old partners equalized their capital investments.
Afterwards, all the partners agree to divide profits and losses equally. The new partnership closes its books on June 30, 2011
reporting a profit of P12,600 for two months. The partners made the following withdrawals: XX and ZZ, P750 per month; YY
and WW, P1,000 per month. On June 30,2011, WW invest enough cash to increase his capital to a 1/3 interest in the partnership.
How much cash is to be invested by WW? a. P180,755 b. P181,075 c. P20,000
d. P60,333

Liquidation
1. Which of the following statements is true concerning the distribution of safe payments?
a. The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.
b. Safe payments are equal to the recorded capital balances of partners with positive capital balances.
c. The distribution of safe payments may only be made after all liabilities have been paid.
d. In computing safe payments, partners with positive capital balances are assumed to absorb an equal share of any deficit
balance(s).

2. In calculating the safe payment, you assume:

a. Partnership liabilities have been paid c. All noncash assets are worthless
b. No liquidation expenses will be paid d. Cash on hand can be fully distributed

3. What is the preferred method of resolving a partner's deficit balance?

a. Partners never have a deficit balance.
b. The other partners must contribute personal assets to cover the deficit balance.
c. The partnership must sell assets in order to cover the deficit balance.
d. The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities.

4. The partner to receive cash first under an advance cash distribution plan is the partner who
a. can absorb the largest liquidation loss.
b. has the largest capital balance.
c. has the smallest profit and loss percentage.
d. has either the largest capital balance or the smallest profit and loss percentage.

5. What is the rule of offset?

a. Receivables from partners should offset against their capital debit balances before they receive any cash distribution.
b. Loans to partners should offset against their debit capital balances before they receive any cash distribution.
c. Loans from partners should offset against their credit capital balances before they receive any cash distribution
d. Loans from partners should offset against their debit capital balances before they receive any cash distribution

6. In the preparation of schedule of safe payments to partners, cash withheld for future liquidation expenses and unrecorded
liabilities that may be discovered is treated as:
a. Operating Expenses b. Liabilities c. Loss on realization d. Possible loss

7. Upon partnership liquidation, payments should be made in this order of priority.

a. Outside creditors, partners for capital accounts and partners for loan accounts.
b. Partners for capital accounts, partners for loan accounts and outside creditors.
c. Partners for loan account, partners for capital accounts and outside creditors.
d. Outside creditors, loan payable to partners, partner’s capital credit balance

8. Statement 1: The cash priority program allows the priority of cash distribution to the partner who has the least absorption
capacity.
Statement 2: There is always loss on realization when noncash assets are converted into cash during liquidation process.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.

9. The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:
Cash P10,000 Liabilities P130,000
Noncash assets 300,000 Keaton, capital 60,000
Lewis, capital 40,000
________ Meador, capital 80,000_
Total P310,000 Total P310,000
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for P180,000. Liquidation
expenses were P10,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership,
while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of
partnership assets?
a. P38,000 b. P30,000 c. P24,000 d. P34,000

10. The Financial, Advanced, and Cost partnership was about to enter liquidation with the following account balances:
Cash P90,000 Liabilities P60,000
Noncash assets 300,000 Finanial, capital 80,000
Advanced, capital 110,000
________ Cost, capital 140,000
Total P390,000 Total P390,000
Estimated expenses of liquidation were P5,000. Financial, Advanced, and Cost shared profits and losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the cash be
distributed?
a. in a ratio of 1:2:2 among the partners c. in a ratio of 1:2 between Financial and Cost
b. P18,333 to Financial and P16,667 to Cost d. P15,000 to Financial and P10,000 to Cost

11. A statement of financial position for the partnership of Dy, Sy, and Lee, who share profits in the ratio of 2:1:1, shows the
following balances just before liquidation:
Cash P12,000 Liabilities P20,000
Other assets 59,500 Dy, capital 22,000
Sy, capital 15,500
_______ Lee, capital 14,000
Total P71,500 Total P71,500
On the first month of the liquidation, certain assets are sold for P32,000. Liquidation expenses of P1,000 are paid, and additional
liquidation expenses are anticipated. Liabilities are paid amounting to P5,400, and sufficient cash is retained to insure the
payment to creditors before making payments to partners. On the first payment to partners, Dy receives P6,250.
The total cash distributed to the partners in the first installment is:
a. P20,000 b. P12,500 c. P25,000 d. P10,000

12. Using the same information on item 11, the amount of cash withheld for anticipated liquidation expenses and unpaid
liabilities is:
a. P14,600 b. P2,000 c. P16,600 d. P17,600

13. August, Jessa, Joma, and Nova were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were
beginning to liquidate their business. At the start of the process, capital balances were as follows:
August, Capital P72,000 Joma, Capital P52,000
Jessa, Capital 32,000 Nova, Capital 24,000
Which one of the following statements is true?
a. The first available 16,000 would go to Joma. c. The first available 8,000 would go to Nova.
b. The first available 16,000 would go to August. d. The first available 8,000 would go to Jessa.

14. As of Dec. 31, 2007, the books of GTB partnership showed capital balances of G - P40,000; T - P25,000; B – P5,000. The
partners profits and loss ratio was 3:2:1, respectively. The partners decide to dissolve and liquidate. They sold all the non-cash
assets for P37,000 cash. After settlement of all liabilities amounting to P12,000, they still have P28,000 cash left for distribution.
The loss on realization of the non-cash assets was:
 a. 28,000 b. 40,000 c. 42,000 d. 45,000

15. Following is the statement of financial position of the CPA partnership before realization of assets on July 1, 2012:
Cash 10,000 Liabilities 28,000
Accounts Receivable 50,000 Cheru, Capital 45,000
Inventory 30,000 Pedro, Capital 27,000
Equipment 60,000 Aljohn, Capital 50,000
The partners share income 40:40:20, respectively. On July 2, the partnership is liquidated. 60% of the receivables are collected
and that inventory is sold for 20,000. Equipment is sold for 30,000. How much is to be distributed to Pedro?
a. 3,000 b. 21,0000 c. 38,000 d. 0

16. The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:
Cash 16,000 Liabilities 150,000
Noncash Assets 424,000 Abrams, Capital 80,000
Bartle, Capital 90,000
Creighton, Capital 130,000
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be 12,000.
After the liquidation expenses of 12,000 had been paid and the noncash assets sold, Creighton had a deficit of 8,000. For what
amount were the noncash assets sold?
a. 170,000 b. 264,000 c. 158,000 d. 146,000

“CPAs are not born.....

.....they are made.”
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