Chapter 2 – Nature and Formation of a Partnership

Capitalist Industrial Partner – a partner who contributes capital in the form of money or c. May not be proportionate to capital contribution due to bonus
property and industry. d. All of these

Industrial Partner – a partner who contributes industry, labor, skill, talent or service. MC 2-6 On April 1, 2014, Apple and Ayme formed a partnership with each contributing the
following assets:
Partnership – a contract whereby two or more persons bind themselves to contribute money, Apple Ayme
property, or industry into a common fund with the intention of dividing profits among Cash P 120,000 P 80,000
themselves. Machinery and equipment 100,000 340,000
Building 900,000
Statement of Financial Position – a statement that reports the assets, liabilities, and equity of Furnitures and fixtures 40,000
an entity and which shows its financial position or condition at a given date. It is also known as
balance sheet. The building is subject to a mortgage loan of P300,000, which is to be assumed by the
partnership. On April 1, 2014, the balance in Ayme’s capital account should be

MULTIPLE CHOICE a. P 980,000

b. P 1,020,000
c. P 1,280,000
d. P 1,320,000
MC 2-1 Which of the following best describes the attributes of a partnership?
a. Limited life of the business and limited liability of partners
MC 2-7 Aster and Armie are forming a partnership by combining their business. Their books
b. Limited life of the business and unlimited liability of partners
show the following:
c. Unlimited life of the business and limited liability of partners
Aster Amie
d. Unlimited life of the business and unlimited liability of partners
Cash P 72,000 P 30,000
Accounts Receivable 150,000 108,000
MC 2-2 When a partner withdraws cash or other assets, the drawing account is
Merchandise Inventory 240,000 156,000
a. Debited
Furnitures and fixtures 330,000 102,000
b. Credited
Prepaid Expenses 63,000 21,000
c. debited and credited
Accounts Payable 366,000 144,000
d. not affected
Aster, Capital 489,000
Amie, Capital 273,000
MC 2-3 All of the following affect a partner’s capital account except
a. additional investment
It has been agreed to recognize uncollectible accounts of P7,500 and P5,400 to each
b. payment of a liability
party, respectively, and that the furniture and fixtured of Amie are under depreciated
c. partnership net income or loss
by P9,000. If each partner’s share in equity is to be equal to the net assets invested, the
d. withdrawal of the partner
capital accounts of Aster and Amie would be
a. P489,000 and P273,000 respectively.
MC 2-4 Which of the following are kinds of partnerships according to liability of partners?
b. P484,500 and P276,600 respectively.
a. General co-partnership
c. P481,500 and P258,600 respectively.
b. Limited partnership
d. P855,000 and P417,000, respectively.
c. Industrial partnership
d. A and B only
MC 2-8 A business owned by Antonia was short of cash and Antonia decided to form a
partnership with Andrea, who was able to contribute cash twice the interest of Antonia
MC 2-5 Which of the following relate to the capital share of a partner in a partnership?
in the new partnership. The assets contributed by Antonia appeared as follows in the
a. The percentage of equity that a partner has on the net assets
statement of financial position of her business: cash, P9,000; accounts receivable,
b. Proportionate to a partner’s capital contribution
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Chapter 2 – Nature and Formation of a Partnership

P189,000 with allowance for uncollectible accounts of P6,000; merchandise inventory, MC 2-12 Amable and Aguila entered into a partnership on February 1, 2014 by investing the
P420,000; and store equipment, P150,000 with accumulated depreciation of P15,000. following assets:
Amable Aguila
Antonio and Andrea agreed that the allowance for uncollectible accounts was Cash P 40,000
inadequate and should be P12,000. They also agreed that the fair value for the Merchandise Inventory P 90,000
inventory is P460,000 and for the store equipment is P140,000. The cash contributed Land 130,000
by Andrea into the partnership was Equipment 30,000
a. P 747,000 Furniture and Fixtures 200,000
b. P 786,000
c. P1,572,000 The agreement between Amable and Aguila provides that profits and losses are to be
d. P1,576,000 divided 60% and 40% respectively, and that the partnership is to assume the P100,000
mortgage on the land. If Aguila is to receive capital credit equal to the full amount of his
MC 2-9 Almeda and Asistio are combining their separate business to form a partnership. Cash net assets invested, how much is his capital balance upon partnership formation?
and non-cash assets are to be contributed for a total capital of P600,000. The non-cash a. P 10,000
assets to be contributed and the liabilities to be assumed are as follows: b. P 150,000
c. P 160,000
Almeda Asistio d. P 400,000
BV FMV BV FMV
Accounts Receivable P 40,000 P 30,000 MC 2-13 Using the information in MC 2-12 and assuming that Aguila invests P100,000cash and
Merchandise Inventory 60,000 90,000 P 40,000 P 80,000 the partners are to have equal interest in the partnership, the total capital of the
Equipment 120,000 100,000 80,000 120,000 partnership is
Accounts Payable 30,000 30,000 20,000 20,000 a. P240,000
b. P250,000
The partner’ capital accounts are to be equal after all the contribution of assets and the c. P490,000
assumption of liabilities. The amount of cash to be contributed by Almeda is d. P590,000
a. P100,000
b. P110,000 MC 2-14 Using the information in MC 2-12 and assuming that the capital of the partners is
c. P210,000 proportionate to their profit and loss ratio, the bonus upon partnership formation is
d. P300,000 a. P6,000 to Amable
b. P6,000 to Aguila
MC 2-10 Using the information in MC 2-9, the total assets of the partnership is c. P10,000 to Amable
a. P340,000 d. P10,000 to Aguila
b. P360,000
c. P630,000 MC 2-15 The Agulto and Acejas Partnership was formed on October 1, 2014. At the date, the
d. P650,000 following assets were contributed:
Agulto Acejas
MC 2-11 Using the information in MC 2-9, and assuming the excess capital credit over the fair Cash P 600,000 P 280,000
value of the net assets transferred to the partnership is recognized as goodwill, how Merchandise Inventory 440,000
much is the goodwill to be credited to Asistio? Building 800,000
a. P120,000 Furniture and Fixtures 120,000
b. P150,000
c. P180,000 The building is subject to a mortgage loan of P320,000 which is to be assumed by the
d. P300,000 partnership. The partnership agreement provides that Agulto and Acejas share on

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profit and loss of 25% and 75% respectively. Agulto’s capital account at October 1, 2014
should be
a. P 400,000
b. P 720,000
c. P1,200,000
d. P1,520,000

MC 2-17 Using the information in MC 2-16 and assuming that the partnership agreement
provides that the partners initially should have an equal interest in partnership capital,
Acejas’ capital account on October 1, 2014 should be
a. P 480,000
b. P 720,000
c. P 960,000
d. P1,200,000

MC 2-18 Using the information in MC 2-17, the effect of the bonus on capital of the partners is
a. Xero
b. P200,000
c. P240,000
d. P480,000

MC 2-19 Using the information in MC 2-17, the effect of the bonus on capital of the partners is
Agulto Acejas
a. increase increase
b. increase decrease
c. decrease increase
d. decrease decrease

MC 2-20 Using the information in MC 2-16, and assuming that capital shall be proportionate to
the partners’ profit and loss ratio, the required capital of Acejas is
a. P 520,000
b. P 720,000
c. P1,200,000
d. P1,440,000

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