UNIVERSITY OF CEBU-BANILAD

COLLEGE OF ACCOUNTANCY
BANILAD, CEBU CITY
FINAL EXAMINATION
Accounting 111B (Partnership-Corporation)
Name ______________________________ Course & yr. ___________ Schedule ____________ Score ____________

I – Write true if the statement is correct and false if incorrect.

1. _____ A new partner must have the consent of all the partners before being admitted into the partnership.
2. _____ When a partner withdraws assets greater than his capital balance, the excess is treated as a bonus to the remaining
partners.
3. _____ When a partner withdraws from a partnership and the value of the assets paid to the partner by the partnership is
greater than the balance in his capital account, the partnership is, in effect, paying the withdrawing partner a bonus.
4. _____ When the existing partner pay a bonus to a newly admitted partner, the existing partners’ accounts are debited.
5. _____ When a bonus is allowed to a new partner, part of the entry to record his admission to a business reduces the
capital accounts of the old partners.
6. _____ A person admitted as a partner into an existing partnership is liable for obligations of the partnership contracted
before his admission.
7. _____ Joel Wanagen purchased directly from Vangie Buenaventura her P30,000 partnership interest for P50,000. The
entry to record the transaction is for P30,000.
8. _____ A partnership is dissolved when a new partner is admitted to the partnership.
9. _____ The retirement of a partner by payment from partnership assets may cause the other partners’ capital accounts to
decrease.
10._____ Edward Santos directly purchased Ferdinand Romero’s P250,000 partnership interest for P300,000. The entry to
record the transaction is for P300,000.
11._____ The creditors of each partner shall be preferred to those of the partnership as regards the partnership property.
12._____ Liquidation of a partnership is the process of ending the business.
13._____ The cash settlement of all liabilities is referred to as realization.
14._____ In liquidation, partners are given back the assets that they originally invested.
15._____ Cash payments may be made in the profit and loss ratio only when instalment payments have caused the ratio of
the partners’ capital account balances to be the same as the profit and loss ratio.
16._____ Partnership creditors will be prioritized next to the inside creditors as to partnership assets in case of liquidation.
17._____ A partner’s interest can be obtained by simply adding the partner’s capital account, loans to and from the
partnership.
18._____ If liquidation of a partnership results in a negative balance in a partner’s account, the partner must pay into the
partnership the amount of the negative balance.
19._____ The use of safe payments schedule and cash priority program are alternatives which will yield the same ultimate
cash distribution to the partners.
20._____ Partnership liquidation is the same as partnership dissolution.

II – Multiple Choice. Encircle the letter of the best answer in each of the given statement/s.

1. Partners Chung, Detoya and Digao share profits and losses in a 3:1:2 ratio, respectively. Detoya wishes to leave the
partnership, so the assets are revalued and are found to be overvalued by P300,000. If each partner had a capital balance
of P500,000 prior to Detoya’s notification of withdrawal, what amount should Detoya be allowed to withdraw from the
partnership?
a. P400,000 b. P450,000 c. P500,000 d. P550,000
2. Villon invested P600,000 for a 30% interest in a partnership in which the other partners have capital totalling P1,000,000
before admitting Villon. After distribution of the bonus, what is Villon’s capital balance?
a. P720,000 b. P600,000 c. P480,000 d. P300,000
3. Total partners’ equity will not change when a withdrawing partner
a. withdraws assets equal to his capital balance. c. withdraws assets amounting to less than his capital balance.
b. sells his interest to a new or remaining partner. d. withdraws assets amounting to greater than his capital balance.
4. Narvaez invested P400,000 for a one-fourth interest in a partnership in which the other partners have capital totalling
P800,000 before admitting Narvaez. After distribution of the bonus, what is Narvaez’s capital balance?
a. P100,000 b. P200,000 c. P300,000 d. P400,000
5. Dellosa bought Longalong’s interest in the Seechua and Longalong Partnership by a P600,000 direct payment to
Longalong. The capital balances before the sale were P240,000 and P360,000, respectively. What will be the amount in
Dellosa’s Capital account?
a. P300,000 b. P360,000 c. P480,000 d. P600,000
6. Partners Yacapin, Babaran, and Cuenca share profits and losses in a 5:3:2 ratio, respectively. Yacapin wishes to leave the
partnership, so the assets are revalued and are found to be overvalued by P60,000. If each partner had a capital balance
of P200,000 prior to Yacapin’s notification of withdrawal, what amount should Yacapin be allowed to withdraw from
the partnership?
a. P230,000 b. P180,000 c. P170,000 d. P140,000
7. When a partner withdraws from a partnership taking assets that represent less than his capital balance.
a. no bonus results c. the withdrawing partner receives a bonus
b. the remaining partners receive a bonus d. the remaining partners owe the withdrawing partner the difference
8. Perdio paid Tria P600,000 for her P400,000 interest in a partnership. On the partnership books,
a. Perdio will receive a bonus c. Perdio will have a capital balance of P600,000.
b. Perdio will give up a bonus d. Perdio will have a capital balance of P400,000.
9. Mulles invested P600,000 for a one-fifth interest in a partnership in which the other partners have capital totalling
P1,200,000 before admitting Mulles. After distribution of the bonus, Mulles’ capital is
a. P240,000 b. P360,000 c. P480,000 d. P600,000
10. Pascual invested P400,000 for a 10% interest in a partnership that has total capital of P3,000,000 after admitting
Pascual. Which of the following is true?
a. Pascual’s capital is P260,000
b. Pascual received a bonus of P100,000
c. The original partners received a bonus of P100,000
d. The original partners’ capital in the business was P2,700,000 before admitting Pascual
11. If a partner is insolvent, his personal properties shall first be distributed
a. to partnership creditors.
b. to the partners by way of additional contributions when the assets of the partnership were insufficient to settle all
obligations.
c. to partnership and separate creditors in the ratio of their loan exposures.
d. to separate creditors.
12. In a partnership liquidation, the assets of the partnerships shall be applied lastly to
a. those owing to outside creditors.
b. those owing to the partners with respect to their share of the profits.
c. those owing to the partners with respect to their capital contributions.
d. those owing to inside creditors in the form of loans or advances for business expenses by the partners.
13. Which of the following statements is correct regarding a partner’s capital deficiency?
a. Partners who absorb another’s capital deficiency have a legal claim against the deficient partner.
b. The partner should contribute to reduce the debit balance to the extent possible.
c. If contributions are not possible, the other partners with credit capital balances will be allocated a portion of the debit
balance.
d. All of these statements are correct.
14. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:
a. Partnership liabilities, partnership loans and partnership capital balances.
b. Partnership drawings, partnership liabilities, partnership loans and partnership capital balances.
c. Partnership liabilities, partnership loans, partnership drawings and partnership capital balances.
d. Partnership liabilities, partnership capital balances and partnership loans.
15. Claims against partners’ personal assets by creditors if the partnership can’t pay its debt refers to
a. liquidation b. dissolution c. mutual agency d. unlimited liability
16. On a statement of financial position, treasury stock is shown as a(n)
a. asset c. deduction from the ordinary shares account
b. liability d. deduction from total shareholders’ equity
17. Which of the following is a characteristic of ordinary shares?
a. Voting rights c. Maturing date
b. Guaranteed dividends d. Receives dividends before preference shareholders
18. Ordinary shareholders usually have all of the following rights except to
a. vote to elect the board of directors c. participate in day-to-day operations of the entity
b. share in the assets in a profitable liquidation d. receive their proportional share of dividends, if dividends are declared
19. Which of the following is a characteristic of preference share?
a. Voting rights c. Maturity date
b. Guaranteed dividends d. Receives dividends before ordinary shareholders
20. Preference shares has preference over ordinary shares relative to
a. dividends and voting rights c. voting rights and assets at liquidation
b. dividends and assets at liquidation d. dividends and maturity date
21. Mizona Corp. issued 10,000 shares of its P1 par value ordinary shares for a building. The building has a fair value of
P500,000. Mizona’s ordinary shares is currently selling for P45 per share. Mizona Corp. should record the building at
a. P10,000 b. P440,000 c. P450,000 d. P500,000
22. A corporation might repurchase its own stock for all of the following reasons except to
a. vote for the board of directors. c. improve financial ratios.
b. use for employee compensation d. deter a takeover attempt
23. If a corporation reissued at P200 per share 100 shares of treasury stock that it had previously acquired for P280 per
share and there wasn’t any Share Premium – Treasury, it would debit
a. Loss on Sale of Treasury Stock for P8,000. c. Retained Earnings for P8,000
b. Share Premium – Ordinary for P8,000. D. Treasury Stock for P8,000.
24. Corpuz, Inc. has issued 200,000 shares of P1 par value ordinary shares at P15. If it repurchases 5,000 shares during
2018 at P20.
a. profit would decrease by P25,000 c. shareholders’ equity would decrease by P25,000
b. profit would decrease by P100,000 d. shareholders’ equity would decrease by P100,000
25. On Sept. 1, 2018, Modesto Corp., a newly formed corporation, had the following shares issued and outstanding:
Ordinary Shares, no par, P10 stated value, 5,000 shares originally issued at P150 per share
Preference Shares, P10 par value, 1,500 shares originally issued at P250 per share.
Modesto’s Sept. 1, 2018 statement of shareholders’ equity should report
Ordinary Shares Preference Shares Share Premium
a. P50,000 P150,000 P925,000
b. P50,000 P375,000 P700,000
c. P750,000 P370,000 -0-
d. P750,000 P150,000 P225,000
III – Give the requirements accordingly with supporting computation/s.

A. The following is the condensed statement of financial position of the partnership of Ricablanca, Tac-an, and Andres who
share profits and losses in the ratio of 4:3:3:

Cash P180,000 Accounts Payable P420,000

Other Assets 1,660,000 Payable-Partner Andres 60,000
Receivable-Partner Ricablanca 40,000 Ricablanca, Capital 620,000
Tac-an, Capital 400,000
________ Andres, Capital 380,000
Total P1,880,000 Total P1,880,000

Required: Assume that the assets and liabilities are fairly valued on the statement of financial position and the
partnership decides to admit Leon as a new partner, with a 20% interest. No bonus is to be recorded. How much cash
must Leon contribute? ________________

B. On June 30, 2018, the statement of financial position for the partnership of Villon, Obrero and Bernal, together with
their respective profit and loss ratio, were as follows:
Assets, at cost P180,000
Villon, Loan P9,000
Villon, Capital (20%) 42,000
Obrero, Capital (20%) 39,000
Bernal, Capital (60%) 90,000
P180,000

Villon 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, 2018. It was agreed that the partnership would pay Villon P61,200 cash for Villon’s partnership
interest, including Villon’s loan which is to be repaid in full. After Villon’s retirement, what is the balance of Obrero’s
capital account? _____________________

C. Ragasa and Mendoza are partners sharing profits in the ratio of 3:2, respectively. On Jan. 1, Ragasa and Mendoza
decided to admit Gangoso as a new partner upon her investment of P8,000. On this date, their interests in the partnership
are as follows: Ragasa, P11,500; Mendoza, P9,300.

Assuming that the new partner is given a 1/3 interest in the firm, with bonus being allowed to the new partner, the new
capital balances of Ragasa, Mendoza and Gangoso respectively, would be:
Ragasa ______________ Mendoza _____________ Gangoso _______________

D. Sunglao and Gadia are partners who have agreed to admit Claudio-Ty, who will invest P150,000 for a 20% interest. The
previous capital balances were P150,000 and P300,000 for Sunglao and Gadia, respectively. Sunglao and Gadia shared
profits and lossess equally.
Required:
1. What amount will be recorded in Claudio-Ty’s Capital account? ______________
2. What is Sunglao’s Capital account balance after admitting Claudio-Ty? _______________

E. On June 30, 2018, the statement of financial position of Meycauayan Marketing, a partnership, is summarized as
follows:
Assets P600,000
Orosco, Capital 360,000
De Guzman, Capital 240,000

Orosco and De Guzman share profit and losses at a 6:4 ratio, respectively. They agreed to take in Gener Castillo as a
new partner, who purchased 1/8 interest of Orosco and De Guzman for P100,000. What is the amount of Gener
Castillo’s capital to be taken up un the partnership books if the book value method is used? ______________

F. The capital accounts of the partnership of Cebedo, Esparaguera, and Chanjueco on June 1, 2018 are presented below
with their respective profit and loss ratio:
Cebedo P139,200 ½
Esparaguera 208,800 1/3
Chanjueco 96,000 1/6

On June 1, 2018, Dela Calzada is admitted to the partnership when he purchased, for P132,000, a proportionate interest
from Cebedo and Chanjueco in the net assets and profits of the partnership. As a result, Dela Calzada acquired a one-
fifth interest in the net assets and profits of the firm. What is the combined realized by Cebedo and Chanjueco upon the
sale of a portion of their interest in the partnership to Dela Calzada? _________________

G. Mactal, Macadang and Pangan are partners with capital balances of P350,000, P250,000 and P350,000 and sharing
profits 30%, 20% and 50%, respectively. Partners agreed to dissolve the business and upon liquidation, all of the
partnership assets are sold and sufficient cash is realized to pay all the claims except one for P50,000. Pangan is
 personally insolvent, but the other two partners are able to meet any indebtedness to the firm. On the remaining claim
against the partnership, Mactal is to absorb ______________
H. As of Dec. 31, 2018, the books of AEZ Partnership showed capital balances of; Amurao, P40,000; Estoque, P25,000;
Zulueta, P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decided to liquidate and they
sold all non-cash assets for P37,000. After settlement of all liabilities amounting to P12,000, they still have cash of
P28,000 left for distribution. Assuming that any capital deficiency is uncollectible, the share of Amurao in the
distribution of cash would be ________________.

I. Ramos, Seechua and Tria are partners in a textile distribution business, sharing profits and losses equally. On Dec. 31,
2017, the partnership capital and the partners’ drawing were as follows:
Ramos Seechua Tria Total
Capital P100,000 P80,000 P300,000 P480,000
Drawing 60,000 40,000 20,000 120,000

The partnership was unable to collect on its trade receivables, and it was forced to liquidate. The operating profits for
2017 amounted to P72,000, and was all exhausted including the partnership assets. Unsettled creditors’ claim at Dec. 31,
2018 amounted to P84,000. Seechua and Tria have substantial private resources, but Ramos has no available free assets.
The final cash distribution to Tria was ______________

J. On May 1, 2018, the business assets of Jerusalem and Rebusora follow:

Jerusalem Rebusora
Cash P11,000 P22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Building - 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,020,916 P1,317,002

Accounts Payable P178,940 P243,650

Notes Payable 200,000 345,000
Jerusalem, Capital 641,976
Rebusora, Capital ________ 728,352
Total P1,020,916 P1,317,002

Jerusalem and Rebusora agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
 Accounts receivable of P20,000 in Jerusalem’s books and P35,000 in Rebusora’s are uncollectible.
 Inventories of P5,500 and P6,700 are worthless in Jerusalem’s and Rebusora’s respective books.
 Other assets of P2,000 and P3,600 in Jerusalem’s and Rebusora’s respective books are to be written off.

Required:
1. The capital accounts of the partners after the adjustment will be:
Jerusalem ______________ Rebusora ______________
2. How much assets does the partnership have? ________________
3. Lazerna offered to join for a 20% interest in the firm. How much cash should he contribute? ____________
4. After Lazerna’s admission, the profit and loss sharing ratio was agreed to be 40:40:20 based on capital credits.
How much should the cash settlement be between Jerusalem and Rebusora? _____________
5. During the first year of operations, the partnership earned P325,000. Profits were distributed in the agreed manner.
Drawings were made in these amounts: Jerusalem, P50,000; Rebusora, P65,000; Lazerna, P28,000. How much are
the capital balances after the first year? Jerusalem ____________ Rebusora ____________ Lazerna ___________

K. On April 1, 2017, Buenaflor Corp., a newly formed corporation, had the following shares issued and outstanding:
 Ordinary Shares, no-par, P10 stated value, 20,000 shares originally issued for P30 per share.
 Preference Shares, P10 par value, 6,000 shares originally issued for P50 per share.

Required: Buenaflor’s April 1, 2017 statement of shareholder’s equity should report

1. Ordinary Shares ______________ Preference Shares _____________ Share Premium _____________

L. Calimpusan Corporation was organized on Jan. 1, 2017, with authorized capital of 100,000 shares of P200 par value
ordinary shares. During 2017, Calimpusan had the following transactions affecting shareholders’ equity:
Jan. 10 Issued 25,000 shares at P220 a share.
Mar. 25 Issued 1,000 shares for legal services when the fair value was P240 a share.
Sept. 30 Issued 5,000 shares for a tract of land when the fair value was P260 a share.
Required: What amount should Calimpusan report for share premium at Dec. 31, 2017? _______________

M. Sorra Corporation’s records included the following shareholder’s equity accounts:

Preference Shares, par value P150, authorized 20,000 shares P2,550,000
Share Premium – Preference 150,000
Ordinary Shares, no-par, P50 stated value, 100,000 shares authorized 3,000,000
 Required: In the statement of shareholders’ equity, the number of issued and outstanding shares for each class of stock
is Ordinary Shares ______________ Preference Shares __________________

N. On Dec. 31, 2017, D. Mallari Corp.s’ board of directors canceled 50,000 shares of P2.50 par value ordinary shares held
in treasury at an average cost of P13 per share. Before recording the cancellation of the treasury stock, D. Mallari had
the following balances in its shareholders’ equity accounts:
Ordinary Shares P540,000
Share Premium 750,000
Retained Earnings 900,000
Treasury Stock, at cost 650,000
Required: In the Dec. 31, 2017 statement of financial position, ordinary shares outstanding should be ____________

O. Santos Corp. issued 20,000 shares of P5 par ordinary shares at P10 per share. On Dec. 31, 2017, Santos’ retained
earnings were P300,000. In March 2018, Santos reacquired 5,000 shares of its ordinary shares at P20 per share. In June
2018, Santos sold 1,000 of these shares to its corporate officers for P25 per share. Santos uses the cost method to
record treasury stock. Profit for the year ended Dec. 31, 2018 was P60,000.
Required: At Dec. 31, 2018, what amount should Santos report as retained earnings? ________________

P. In 2017, Alcantara Corp. acquired 6,000 shares of its own P10 par value ordinary shares at P180 per share. In 2018,
Alcantara issued 3,000 of these shares at P250 per share. Alcantara uses the cost method to account for its treasury
stock transactions.
Required: What accounts and amounts should Alcantara credit in 2018 to record the issuance of the 3,000 shares?
Treasury Stock ____________ Share Premium ___________
Retained Earnings __________ Ordinary Shares ____________
Q. Dela Calzada Corporation was incorporated on Jan. 1, 2017, with the following authorized capitalization:

200,000 shares of Ordinary Shares, no-par, stated value P100 per share
200,000 shares of 10% Cumulative Preference Shares, par value P50 per share
During 2017, Dela Calzada issued 150,000 ordinary shares for a total of P18,000,000 and 50,000 preference shares at
P60 per share. In addition, on Dec. 15, 2017, subscriptions for 20,000 preference shares were taken at a purchase price
of P100. These subscribed shares were paid for on Jan. 2, 2018. Profit for 2017 was P5,000,000.
Required: What should Dela Calzada report as total contributed capital on its Dec. 31, 2017 statement of financial
position? __________________
Key
I – False 2, 10, 11, 13, 14, 16, 17, 20
II –
1. B
2. C
3. B
4. C
5. B
6. C
7. B
8. D
9. B
10. C
11. D
12. B
13. D
14. A
15. D
16. D
17. A
18. C
19. D
20. B
21. D
22. A
23. C
24. D
25. A
III
A. P350,000
B. P45,450
C. Ragasa P10,540
Mendoza P8,660
Gangoso P9,600
D. 1. P120,000 credit
2. P165,000 credit
E. P75,000
F. P43,200
G. P40,000
H. P17,800
I. P78,000
J. 1. Jerusalem P614,476
Rebusora P683,052
2. P2,265,118
3. P324,382
4. P34,288
5. Jerusalem P728,764
Rebusora P713,764
Lazerna P361,382
K. 1. Ordinary Shares P200,000
Preference Shares P60,000
Share Premium P640,000
L. P840,000
M. Ordinary Shares 60,000
Preference Shares 17,000
N. P415,000
O. P360,000
P. Treasury Stock P540,000
Share Premium P210,000
Retained Earnings -
Ordinary Shares -
Q. P23,000,000