Scribd
Upload
382 views3 pages

Test 1 - Theory (Partnership)

1. Lopez contributed non-cash assets including real estate subject to a mortgage to a new partnership formed with Mendoza. Lopez's capital account should be recorded at the fair value of the property less the mortgage payable. 2. When a partnership is formed and partners contribute assets, the partnership should record inventory at market value if higher than carrying amount, and real estate at carrying amount if lower than market value. 3. When a partner retires and receives more than their capital balance, the difference is recorded as goodwill using the bonus method.

Uploaded by

xylynn myka cabanatan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
382 views3 pages

Test 1 - Theory (Partnership)

1. Lopez contributed non-cash assets including real estate subject to a mortgage to a new partnership formed with Mendoza. Lopez's capital account should be recorded at the fair value of the property less the mortgage payable. 2. When a partnership is formed and partners contribute assets, the partnership should record inventory at market value if higher than carrying amount, and real estate at carrying amount if lower than market value. 3. When a partner retires and receives more than their capital balance, the difference is recorded as goodwill using the bonus method.

Uploaded by

xylynn myka cabanatan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

1. On June 30, 2025, a partnership was formed by Mendoza and Lopez. Mendoza contributed cash.

Lopez, previously sole proprietor, contributed noncash assets including a realty subject to mortgage
which was assumed by the partnership. Lopez's capital account at June 30, 2025 should be recorded at:
A. The fair value of the property on June 30, 2025 less the mortgage payable
B. Lopez's carrying amount of the property on June 30, 2025
C. Lopez's carrying amount of the property on June 30, 2025 less the mortgage payable
D. The fair value of the property on June 30, 2025

2. Anton and Garcia formed a partnership, each contributing assets to the business. Anton contributed
inventory with a current market value in excess of its carrying amount. Garcia contributed real estate with
a carrying amount in excess of its current market value. At what amount should the partnership record
each of the following assets?
Inventory Real Estate
A. Carrying Amount Market Value
B. Market Value Carrying Amount
C. Carrying Amount Carrying Amount
D. Market Value Market Value

3. On October 31, 2024, Morris retired from the partnership of Morris, Philip, and Marl. Morris received
P55,000 representing final settlement of his interest in the amount of P50,000. Under the bonus method,
A. P5,000 was recorded as goodwill.
B. P5,000 was recorded as expense.
C. Charged P5,000 against the capital balances of Philip and Marl.
D. P55,000 was recorded as bonus

4. How does a newly formed partnership handle the contribution of previously depreciated assets?
A. continues the depreciation life as if the owner had not changed
B. starts over, using the contributed value as the new cost basis
C. shortens the useful life of the asset per the partnership agreement
D. does not depreciate the contributed asset

5. When a partnership is liquidated, the first step in the liquidation process is to ________.
A. allocate the gain or loss on sale based on income sharing ratio
B. pay off liabilities
C. sell noncash assets
D. divide the remaining cash among the partners

6. Paul and Mark are partners having capital balances of P50,000 and P60,000, respectively, and share
profits and losses equally. Jay is going to invest P65,000 into the business to acquire a one-third
ownership interest. If the bonus method is used to record Jay's admission to the partnership:
A. Jay's capital will be P58,333
B. Mark's capital will be P70,000
C. Paul's capital will be P46,667
D. Total capital will be P195,000

7. The following must exist to have a bonus to retiring partner


A. The retiring must be paid more than the book value of his capital
B. The retiring must be paid less than the book value of his capital
C. There must be a positive revaluation
D. There must be a negative revaluation
8. When there is no partnership agreement regarding the distribution of profits, profits will be distributed
based on
A. Beginning Capital
B. Ending Capital
C. Average Capital
D. Original Capital

9. In determining the partner's average capital, the partner's temporary withdrawals are:
A. Included in the computation of average capital
B. Not considered in the computation of average capital
C. Both A and B
D. Neither A nor B

10. A and B form a partnership and agree to share profits in a 2:3 ratio. The partnership net loss for the
year is P 100,000. The partners should share the losses based on:
A. The ending capital balances
B. The average capital balances
C. 2:3 ratio
D. Original capital contribution

11. When a new partner is admitted into a partnership and the new partner receives a capital credit greater
than the tangible assets contributed, which of the following explains the difference?
I. the old partners’ goodwill is being recognized
II. the new partners’ goodwill is being recognized
A. I only C. Either I or II
B. II only D. Both I and II

12. In bonus method, the total invested capital is equal to the total agreed capital but there is a (an)
A. decrease in the individual capital of the partner
B. increase in the individual capital of the partner
C. Increase or decrease in the individual capital of the partner
D. increase or decrease in the total capital of the partnership

13. The main characteristic of a liquidation done in one transaction is that all the
A. assets are sold in one transaction
B. liabilities are paid in one transaction
C. cash available to partners is distributed to them in one transaction
D. assets are sold in one transaction and all the available cash is distributed to creditors and partners in
one transaction

14. The order of partnership liquidation process is


A. sell assets, distribute cash to partners, pay liabilities
B. disburse cash to partners, pay liabilities, sell assets
C. pay liabilities, sell assets, disburse cash to partners
D. sell assets, pay liabilities, disburse cash to partners

15. the final cash distribution to the partners ion a partnership in liquidation should be made in
accordance with
A. Balances of the partners’ capital accounts
B. Partners’ profit and loss sharing ratio
C. Ratio of capital contributions made by the partners
D. Ration of capital contributions less withdrawals made by the partners
16. If there’s no agreement as to the distribution of profit, but there is an agreement as to the distribution
of losses, how shall the partners divide profits and losses?
A. profits will be divided using the original capital contribution, while losses will be divided using the
agreed loss ratio
B. profits and losses shall be divided equally
C. profits and losses shall be divided using the agreed loss ratio
D. No distribution pf profits, only the loss shall be divided using the agreed ratio.

17. A capital deficiency can be eliminated by the following except:


A. Offsetting against a partner’s loan
B. Additional Investment
C. Selling non cash assets at a gain
D. Loss to the other partners

18. The capital deficiency of insolvent partner shall be allocated based on:
A. profit and loss ratio of the absorbing partners
B. profit and loss ratio of all partners
C. Capital ratio of the absorbing partners
D. Equal ratio

19. If a new partner purchases his interest from the existing partner, the journal entry includes:
A. a debit to the capital of a new partner
B. a debit of selling partner capital
C. a debit of bonus
D. a debit of cash

20. When a partner retires and receives in cash less than his capital balance, how should the difference be
treated?
A. the difference should be credited to the remaining partners in their remaining profit and loss ratio
B. the difference should be debited to the remaining partners in their remaining profit and loss ratio
C. the difference should be credited to all the partners in their profit and loss ratio
D. the difference should be debited to all the partners in their profit and loss ratio.

You might also like