Name:_____________________________ Date:___________

Section:___________
Quiz 1

1. MT and JF formed a partnership on April 1 and contributed the following assets:

MT JF
Cash . . . . . . . . . . . . . . . . . . . . . . . . P 150,000 P 50,000
Land . . . . . . . . . . . . . . . . . . . . . . . . 310,000

The land was subject to a P30,000 mortgage, which the partnership assumed. Under the partnership
agreement, MT and JF will share profit and loss in the ratio of one-third and respectively. JF’s
capital account at April 1 should be:

2. On April 30, 20x4, AA, BB, and CC formed a partnership by combining their separate business
proprietorships. AA contributed P50,000 cash. BB contributed property with a P36,000 carrying
amount, a P40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for
the P35,000 mortgage attached to the property. CC contributed equipment with a P30,000 carrying
amount, a P75,000 original cost, and P55,000 fair value. The partnership agreement specifies that
profits and Iosses are to be shared equally but is silent regarding capital contributions. Which partner
has the largest April 30, 20x4, capital account balance?

3. Albert, Claude, and Jamie form a partnership by contributing P25,000, P70,000, and P80,000,
respectively. In addition, the partners agree that Albert should receive P20,000 of goodwill because
of his special skills relevant to this business. What amount of capital will exist for Albert when the
partnership is formed?

4. Chris and David are forming a partnership with contributions of P75,000 and P125,000, respectively.
In addition, they agree that they will recognize P25,000 goodwill with regard to David’s contacts in
the area. What is the total amount of capital that will exist for the partnership immediately after it is
formed?

5. Luca and Mira formed a partnership on 7/1/20x4 and contributed the following assets:
Luca Mira
Cash ............................................................................... P65,000 P100,000
Land ............................................................................... 300,000
The realty was subject to a mortgage of P25,000, which was assumed by the partnership. The
partnership agreement provides that Luca and Mira will share profits and losses in the ratio of one-
third and two-thirds, respectively. Mira’s capital account at 7/1/20x4 should be
6. On 7/1/20x4, Burr and Lapp formed a partnership, agreeing to share profits and losses in the ratio of
4:6, respectively. Burr contributed a parcel of land that cost him P25,000. Lapp contributed
P50,000 cash. The land was sold for P50,000 on 7/2/20x4-one day after the partnership’s formation.
How much should be recorded in Burr’s capital account upon partnership’s formation?
7. On 7/1/20x4, Pane and Sills formed a partnership, and each contributed assets with agreed-upon
values as follows:
Pane Sill
Cash ............................................................................... P 40,000 P 30,000
Machinery and equipment ............................................. 100,000
Land ............................................................................... 350,000
The building is subject to a mortgage loan of P100,000, which is to be assumed by the partnership.
The agreed-upon value of the building is P50,000 more than the tax basis of P300,000. The
partnership agreement provides that Pane and Sills share profits and losses 60% and 40%,
respectively. Using this information, on 7/1/20x4, the balance in Sills’s capital account should be:

Use the following information for question 8 and 9:

On September 30,20x4, LL admits MM for an interest in his business. On this date, LL’s capital account
shows a balance of P158,400. The following were agreed upon before the formation of the partnership:
a. Prepaid expenses of P17,500 and accrued expenses of P5,000 are to be recognize
b. 5% of the outstanding accounts receivable of Lopez amounting to P100,000 is to be recognized as
uncollectible.
c. MM is to be credited with a one-third interest in the partnership and is to invest cash aside from
the P50,000 worth of merchandise.

8.How much cash is to be invested by MM?

9.The total capital of the partnership is:

10. Bonnie and Clyde enters into a partnership agreement in which Bonnie is to have 55% interest in the
partnership and 35% in the profits and losses, while Clyde will have 45% interest in the partnership
and 65% in the profits and losses. Bonnie contributed the following:

Cost Fair value

Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000

The building and the equipment has a mortgage of 50,000 and 35,000 respectively. Clyde is to
contribute 150,000 cash and equipment. The partners agreed that only the building mortgage will be
assumed by the partnership.

How much is the fair market value of the equipment which Clyde contributed?
A. 615,818
B. 989,143
C. 546,273
D. 574,909

11. The partnership agreement is an express contract among the partners (the owners of the business).
Such an agreement generally does not include
a. A limitation on a partner’s liability to creditors.
b. The rights and duties of the partners.
c. The allocation of income between the partners.
d. The rights and duties of the partners in the event of partnership dissolution.

12. A partnership records a partner’s investment of assets in the business at

a. The market value of the assets invested.
b. A special value set by the partners.
c. The partner’s book value of the assets invested.
d. Any of the above, depending upon the partnership agreement.

13. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of recognition.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.

14. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.

15. Four individuals who were previously sole proprietors form a partnership. Each partner contributes
inventory and equipment for use by the partnership. What basis should the partnership use to record
the contributed assets?
a. Inventory at the lower of FIFO cost or market.
b. Inventory at the lower of weighted-average cost or market.
c. Equipment at each proprietor’s carrying amount.
d. Equipment at fair value.

16. A partnership formed for the exercise of a profession which is duly registered is an example of:
a. Universal partnership of profits
b. Universal partnership of all present property
c. Particular partnership
d. Partnership by estoppel

17. One of the following is not a characteristic of contract of partnership.

a. Real, in that the partners must deliver their contributions in order for the partnership contract
to be perfected
b. Principal, because it can stand by itself
c. Preparatory, because it is a means by which other contracts will be entered into
d. Onerous, because the parties contribute money, property, or industry to the common fund

18. One of the following is not a requisite of a contract of partnership. Which is it?
a. There must be a valid contract
b. There must be a mutual contribution of money, property, or industry to a common fund
c. It is established for the common benefit of the partners which is to obtain profits and divide
the same among themselves
d. The articles are kept secret among members

19. A contract where two or more persons bind themselves to contribute money, property, or industry to
a common fund with the intention of dividing the profits among themselves.
a. Voluntary Association
b. Corporation
c. Partnership
d. Sole Proprietorship
20. A partnership is a(n):
I. accounting entity.
II. taxable entity.
A. I only
B. II only
C. Neither I nor II
D. Both I and II

21. 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

22. Which of the following is not a characteristic of most partnership?

a. Limited liability
b. Limited life
c. Mutual agency
d. Ease of formation

23. Which of the following is not a characteristic of the proprietary theory that influences accounting
for partnerships?
a. Partner’s salaries are viewed as a distribution of income rather than a component of net
income.
b. A partnership is not viewed as separate entity, distinct, taxable entity.
c. A partnership is characterized by limited liability.
d. Changes in the ownership structure of a partnership result in the dissolution of the partnership.
24. Two individuals who were previously sole proprietors formed a partnership. Property other than cash
which is part of the initial investment in the partnership would be recorded for financial accounting
purposes at the :
A. Proprietors’ book values or the fair value of the property at the date of the investment
whichever is higher.
B. Proprietors’ book values or the fair value of the property at the date of the investment
whichever is lower.
C. Proprietors’ book values of the property at the date of the investment
D. Fair value of the property at the date of investment

25. A unique feature of partnerships (compared with publicly owned corporations) is that:
A. Limited liability with respect to damages arising from professional services
B. Greater allowable tax deductions for retirement plans
C. Ease of formation
D. Book value

26. An advantage of the partnership as a form of business organization would be

a. Partners do not pay income taxes on their share in partnership income
 b. A partnership is bound by the act of the partners
c. A partnership is created by mere agreements of the partners
d. A partnership may be terminated by the death or withdrawal of a partner

27. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution
b. Contributing partner’s original cost
c. Assessed valuation for property tax purposes
d. Contributing partner’s tax basis

28. Partnership capital and drawings accounts are similar to the corporate
a. Paid in capital, retained earnings, and dividends accounts
b. Retained earnings account
c. Paid in capital and retained earnings accounts
d. Preferred and common stock accounts

29. Cat and Dog formed a partnership, each contributing assets to the business. Cat contributed
inventory with a current market value in excess of its carrying amount. Dog 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. Market value Market value
b. Market value Carrying amount
c. Carrying amount Market value
d. Carrying amount Carrying amount

30. Recording of Cash Investment

a. Face Value b. Agreed value c. memorandum entry d. none of these

31. Recording of Property Investment

a. Face Value b. Agreed value c. memorandum entry d. none of these

32. Recording of the investment(industry)

a. Face Value b. Agreed value c. memorandum entry d. none of these

33. Which of the following statements are true when comparing corporations and partnerships?

a. Partnership entities provide for taxes at the same rates used by corporations
b. In theory, partnerships are more able to attract capital
c. Like corporations, partnerships have an infinite life
d. Unlike shareholders, general partners may have liability beyond their capital balances
34. Which of the following is not an advantage of partnership over a corporation?
a. Ease of formation
b. Unlimited liability
c. The elimination of taxes at the entity level
d. All of the above

35. A partner’s withdrawal of assets from a limited liability partnership that is considered a permanent
reduction of in that partner’s equity is debited to the partner’s:
a. Drawing account
b. Retained earnings account
c. Capital account
d. Loan receivable account

36. For financial accounting purposes, assets of an individual partner contributed to partnership are
recorded by the partnership at:
a. Historical cost
b. Book value
c. Fair market value
d. Lower of cost or market

37. A distinct and major advantage of the professional corporation form of organization in comparison
with the partnership form of organization is:
a. Limited liability with respect to damages arising from professional services.
b. Greater allowable tax deductions for retirement plans.
c. Ease of formation
d. Book value
e. Historical cost

38. Which of the following is not a characteristic of a partnership?

a. The partnership itself pays no income taxes.
b. It is easy to form a partnership.
c. Any partner can be held personally liable for all debts of the business.
d. A partnership requires written Articles of Partnership.
e. Each partner has the power to obligate the partnership for liabilities.
39. The advantages of the partnership form of business organization, compared to corporations, include
a. Single taxation
b. Ease of raising capital
c. Mutual Agency
d. Limited Liability
e. Difficulty of formation

40. Which of the following is NOT a characteristic of the proprietary theory that influences accounting
for partnerships?
a. Partners’ salaries are viewed as a distribution of income rather than a component of net
income.
b. A partnership is not viewed as a separate, distinct, taxable entity.
c. A partnership is characterized by limited liability.
d. Changes in the ownership structure of a partnership result in the dissolution of the
partnership.

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