Name: Section: Score:

1. Velasco, Osenia and Balmes are partners in an accounting firm with each partner owning an
equal share of the business. Osenia died suddenly of a heart attack. What will most likely
become of the partnership.
a. Velasco and Balmes will be able to purchase Osenia’s interest from his estate.
b. It will immediately cease to exist, Velasco and Balmes will have to find new jobs.
c. Osenia’s share of the business will automatically be split between Velasco and Balmes.
d. It will be dissolved. Velasco and Balmes will lose personal property to pay business debt.

2. The partnership agreement is contained in the article of the partnership, an express contract
among the partners. Such an agreement ordinarily does not include
a. the right and duties of the partners.
b. a limitation on a partner’s liability to creditors.
c. the allocation of income between the partners.
d. the right and duties of the partners in the event of partners dissolution.

3. The division of partnership profits on the basis of salaries, interest and an agreed ratio is usually
necessary because
a. Most investors require this method of distribution.
b. This reflects the amount of time devoted to the partnership by the partners.
c. Partners seldom contribute time, effort and resources equally.
d. This prevents arguments among the partners.

e. The division of partnership

profits on the basis of
salaries, interest and an
agreed ratio is
f. usually necessary
4.
because
In a liquidation, the liabilities of a partnership should paid.
a. Before any sale of assets.
b. Before the distribution of gains and losses on the disposal of assets.
c. After a revaluation of assets.
d. Before the distribution of cash to partners.

5. A and B are partners. On January 2, 2010, C was admitted as a new partner. At the time of C’s
admission, the partnership creditors were M for P50,000 and N for P30,000. After January 2,
2010, the partnership borrowed from O – P20,000 and P40,000 from P. On May 15, 2010, the
partnership became insolvent leaving an obligation amounting to P140,000 and partnership
assets amounting to P30,000. The creditors are going after the separate properties of the
partners to satisfy their remaining claims. How are the creditors’ claims satisfied?
Statement 1 – M and N can go after the separate properties of A and B but C’s separate
properties are not answerable to their claims.
Statement 2 – O and P can go after the separate properties of A, B and C.

a. True; True
 b. B. True; False
c. C. False; True
d. D. False; False
e. True; True
f. B. True; False
g. C. False; True
h. D. False; False
a. True, True b. True; False c. False; True d. False; False

6. X, Y and Z form Y Partnership to engage in import-export business. The partners agrees that
the profit will be divided on the following ratio: X – 20%, Y- 30%, Z- 50%, but no agreement as to
losses. After one year of operation, there was a loss of P10,000. How will you apportion this
losses if the capital contributions are as follows: X – P20,000; Y - P15,000; Z – P5,000. (2
points)
a. According to their capital contribution: X- P5,000; Y- P3,750; Z- P1,250.
b. X – P2,000; Y – P3,000; Z – P5,000.
c. Equally among X, Y and Z.
d. A third party may be called to make the distribution.

7. As of December 31, the books of AME Partnership showed capital balances of A – P40,000; M
–P25,000; and E – P5,000. The partners’ profit and loss ratio were 3:2:1, respectively. The
partners decided 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. How much is recognized gain or loss? (2 points)
a. 45,000 b. 44,000 c. 42,000 d. 40,000

For the next 2 question: The following condensed balance sheet is presented for the
partnership of Alfa and Beda, who share profits and losses in the ratio of 60:40, respectively:

Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000

Accounts payable, 120,000

Alfa, capital 348,000
Beda, capital 232,000
700,000

8. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide
to admit Capp as a new partner with a 20% interest. No goodwill or bonus is to be
recorded. What amount should Capp contribute in cash or other assets? (2 points)
a. 110,000 b. 116,000 c. 140,000 d. 145,000

9. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If
 the other assets are sold for P500,000, what amount of the available cash should be
distributed to Alfa? (2 points)
a. 273,000 c. 255,000
b. 327,000 d. 348,000

10. Which of the following best illustrates the insolvency of a firm?

a. The filing of bankruptcy proceedings against the firm.
b. The firm has more liabilities than assets.
c. A deficit in the firm’s retained earnings.
d. The firm has negative working capital.

11. Liabilities of P180,000 existed at the beginning of a period. During the period, liabilities
recorded at P88,000 were settled for P76,000, and a new liability of P24,000 were
incurred. A statement of realization and liquidation would show liabilities not liquidated”
of (2 pts)
a. 204,000 b. 128,000 c. 116,000 d. 92,000

12. Cebuano Company has

had severe financial
difficulties and is
considering the possibility
of
13. liquidation. At this time, the
company has the following
assets (stated at net
realizable value) and
14. liabilities.
15. Assets (pledged against
debts of P70,000) P116,000
16. Assets (pledged against
debt of P130,000) 50,000
17. Other assets 80,000
18. Liabilities with priority
42,000
19. Unsecured creditors
200,000
20. Cebuano Company has
had severe financial
difficulties and is
considering the possibility
of
21. liquidation. At this time, the
company has the following
assets (stated at net
realizable value) and
22. liabilities.
23. Assets (pledged against
debts of P70,000) P116,000
24. Assets (pledged against
debt of P130,000) 50,000
25. Other assets 80,000
26. Liabilities with priority
42,000
27. Unsecured creditors
200,000
28. Cebuano Company has
had severe financial
difficulties and is
considering the possibility
of
29. liquidation. At this time, the
company has the following
assets (stated at net
realizable value) and
30. liabilities.
31. Assets (pledged against
debts of P70,000) P116,000
32. Assets (pledged against
debt of P130,000) 50,000
33. Other assets 80,000
34. Liabilities with priority
42,000
35. Unsecured creditors
200,000
36. Cebuano Company has
had severe financial
difficulties and is
considering the possibility
of
37. liquidation. At this time, the
company has the following
assets (stated at net
realizable value) and
38. liabilities.
39. Assets (pledged against
debts of P70,000) P116,000
40. Assets (pledged against
debt of P130,000) 50,000
41. Other assets 80,000
42. Liabilities with priority
42,000
43. Unsecured creditors
200,000
12. Cebuano Company has had severe financial difficulties and is considering
the possibility of liquidation. At this time, the company has the following assets (stated at
net realizable value) and liabilities.
Assets (pledged against debts of P70,000) P116,000
Assets (pledged against debt of P130,000) 50,000
Other assets 80,000
Liabilities with priority 42,000
Unsecured creditors 200,000

In liquidation, how much would be paid to the partially secured creditors? (2 pts)
a.130,000 b.200,000 c. P 50,000 d. P 74,000

13. A statement of affairs shows P30,000 of assets pledged to partially secured creditors,
liabilities of P65,000 to partially secured creditors. P25,000 to unsecured creditors with
priority, and P90,000 to other unsecured creditors. If the deficiency to unsecured creditors is
P40,000, what is the amount of net free assets?
a. P 85,000 b. P 75,000 c. P 50,000 d. P 110,000p