Dynamic Society of Accounting Students (DySAS)

Second Partnership and Corporation Accounting Tutorial

Second Semester S.Y. 2016-2017

1. When the investment of the new partner exceeds the new partners’ initial capital balance and
goodwill is not recorded, who will receive the bonus?
a. new partner c. old and new partners in their new profit and loss
ratio
b. old partners in their old profit and loss ratio d. old partners in their new profit and loss
ratio

2. 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 all partners in their profit and loss ratio.
b. The difference should be debited to all partners in their profit and loss ratio.
c. The difference should be credited to the remaining partners in their remaining profit and loss ratio.
d. The difference should be debited to the remaining partners in their remaining profit and loss ratio.

3. 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

4. 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

5. 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

6. 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

7. Which of the following is not correct with regard to the admission of new partner?
a. admission of new partner needs consent of each of the old partners
b. admission by purchase of interest of one of existing partners need not have the consent of remaining
partners
c. admission of new partner by direct investment in the partnership must have the consent of all existing
partners
d. admission of new partner either by purchase or by direct investment in the partnership will result to
dissolution of the existing partnership

8. 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

9. Which of the following describes the admission of new partner by investing an amount more than his
capital credit under bonus method?
Net assets Total Capital Net assets Total Capital

a. no effect Increase c. decrease Decrease

b. increase Increase d. no effect no effect

10. If bonus is traceable to the existing partners, it is allocated among them according to the
a. profit or loss agreement of the existing partnership c. capital ratio of existing partners
b. profit or loss agreement of the new partnership d. goodwill to incoming partner

11. 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

12. The dissolution of a partnership occurs

a. only when the partnership sells its assets and permanently closes its books.
b. at the end of each year, when income is allocated to the partners.
c. only when a new partner is admitted to the partnership.
d. when there is any change in the individuals who make up the partnership

13. When the old partners receive a bonus upon admission of a new partner into a partnership, the
bonus is allocated to:
I. all the partners in their profit and loss sharing ratio.
II. the existing partners in their profit and loss sharing ratio.
a. I only b. II only c. Either I or II d. Neither I nor II

14. Gut, Tum, and Nah are in a partnership. Nah decides to withdraw his partnership interest by selling it
to Jud. Gut and Tum agree to this. Gut and Tum’s capital accounts
a. will increase when Jud is admitted
b. will decrease when Jud is admitted
c. will not be affected when Jud is admitted
d. cannot be determined

15. Before the effectivity of dissolution, assets and liabilities should be at their
a. fair market values b. realizable values c. liquidating values d. historical values

Problem

16. The existing capital balances of old partners prior to admission of Xed are as follows:
Partners Ynjui Lynnie Joseph
Capital balances 100,000 200,000 300,000
P and L ratio 20% 30% 50%
Xed is to be admitted to the partnership by direct purchase of 20% each of the existing partners’
capital for P100,000. The net assets of the partnership, right after the admission of Xed would be
a. P340,000 b. P300,000 c. P600,000 d. P480,000

17. 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

18. The following statement of financial position is for the partnership of Lee, Saud, and Kay, before the
admission of Ayo:
Cash P20,000 Liabilities P50,000

Other assets 180,000 Lee, Capital (40%) 37,000

Saud, Capital (40%) 65,000

_________ Kay, Capital (20%) 48,000

Total P200,000 Total P200,000

If the assets are fairly valued and the partnership wishes to admit Ayo as a new one-sixth-interest
partner without recording goodwill or bonus, Ayo should contribute cash of:
a. P30,000 b. P33,333 c. P36,000 d. P40,000
19. Before the admission of Noy-Noy, the partnership Nathan and Nova reported a net asset of
P180,000 which Nathan and Nova partners contributed equally. Noy-Noy is admitted by investing
P60,000 for capital credit of P80,000. Which of the following is/are the effect under bonus method?
a. a decrease on the capital balances of the old partner amounting to P10,000 each
b. a bonus of P20,000 to the new partner
c. a balance of P80,000 capital to all of the partners
d. all of the above

20. Kenneth and JC are partners who share profits and losses in the ratio of 7:3, respectively. The capital
balances of Kenneth is P35,000 and JC is P30,000. They agreed to admit Jazel as a partner with a one-
third interest in the capital and profits and losses, upon an investment of P25,000. The new partnership
will begin with a total capital of P90,000. Immediately after Jazel’s admission, what are the capital
balances of Kenneth, JC and Lory, respectively?
a. P30,000; P30,000; P30,000 c. P31,667; P28,333; P30,000
b. P31,500; P28,500; P30,000 d. P35,000; P30,000; P25,000

21. 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%

22. The existing capital balances Ariel, Greg and Cyruz prior to retirement of Ariel were as follows:
Partners Capital P and L ratio
Ariel P100,000 25%
Greg 200,000 35%
Cyruz 300,000 40%
Ariel retired from the partnership by selling his whole interest in the partnership to Greg and Cyruz for
P120,000. This retirement of Ariel will result to the total partnership’s assets and capital as:
Net Assets Total Capital Net Assets Total Capital

a. P480,000 P480,000 c. P600,000 P600,000

b. P500,000 P500,000 d. P720,000 P720,000

23. The existing capital balances of Abnoy, Bitoy and Caloy prior to retirement of Abnoy were as
follows:
Partners Capital P and L ratio
Abnoy P150,000 20%
Bitoy 200,000 30%
Caloy 250,000 50%
Abnoy retired from the partnership by selling his all interest in the partnership to Doy for P120,000. this
retirement of Abnoy will result to the total partnership’s assets and capital as:
Net Assets Total Capital Net Assets Total Capital

a. P480,000 P480,000 c. P600,000 P600,000

b. P450,000 P450,000 d. P720,000 P720,000

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

25. 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

26. Ben and Ric are partners who share profits and losses in the ratio of 6:4, respectively. On May 1,
2011, their respective capital accounts were as follows: Ben – P60,000; Ric – P50,000. On that date, Lito
was admitted as a partner with a one-third interest in capital and profits for an investment of P40,000.
The new partnership began with a total capital of P150,000. Immediately after Lito’s admission, Ben’s
capital account balance should be:

a. P50,000 b. P54,000 c. P56,667 d. P60,000

27. Perez contributed P24,000 and Cadiz contributed P48,000 to form partnership, and they agreed to
share profits in the ratio of their original capital contributions. During the first year of operations, they
made a profit of P16,290; Perez withdrew P5,050 and Cadiz P8,000. At the start of the following year,
they agreed to admit Gomez into the partnership. He was to receive a ¼ interest in the capital and
profits upon payment of P30,000 to Perez and Cadiz, whose capital accounts were to be reduced by
transfers to Gomez’s capital account of amounts sufficient to bring them back to their original capital
ratio. How should the P30,000 paid by Gomez be divided between Perez and Cadiz?

a. Perez, P9,825; Cadiz, P20,175 c. Perez, P10,000; Cadiz, P20,000

b. Perez, P15,000; Cadiz, P15,000 d. Perez, P9,300; Cadiz, P20,700

28. The capital accounts of Ed, Nick, and Vic are presented below with their respective profit and loss
ratio: Ed P 139,000 (1/2)

Nick 209,000 (1/3)

Vic 96,000 (1/6)

Tony was admitted to the partnership when he purchased directly, for P132, 000 a proportionate
interest from Ed and Nick in the net assets and profits of the partnership. As a result, Tony acquired a
one-fifth interest in the net assets and profits of the firm. Assuming no revaluation of assets is recorded,
what is the combined gain realized by Ed and Nick upon the sale of a portion of their interests in the
partnership to Tony?

a. P 0 b. P 43, 200 c. P 62, 400 d. P 82, 000

29. Red, White and Blue are partners in a business, and in its profits at the respective ratio of 5:3:2. On
Jan. 5, 2011, they admit Green, who is to invest in the firm sufficient cash to have a 1/3 interest in the
partnership capital and profits. The following trial balance is taken from the original partnership’s
records:

Debit Credit
Cash P100,000

Marketable securities 75,000

Accounts receivable 225,000

Accounts payable P80,000

Red, Capital 175,000

White, Capital 100,000

Blue, Capital __________ 45,000

P400,000 P400,000

The securities have a market value of P50,000, and an allowance of P25,000 was expected to cover
collection losses on the receivables. No other adjustments of the net assets are considered necessary;
however, the three partners among themselves must bring in their capital accounts into agreement
with their interest in profits. What amount must be invested by Green?

a. P140,000 b. P130,000 c. P135,000 d. P145,000

30. 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

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