PARTNERSHIP FORMATION
1. Chua and Wong are forming a partnership. Chua will invest a building that currently is being used by
another business owned by Chua. The building has a market value of P900,000. Also, the partnership
will assume responsibility for a P300,000 note secured by a mortgage on that building. Wong will invest
P500,000 cash. For the partnership, the amounts to be recorded for the building and for Chua’s Capital
account are:
Building, P900,000 and Chua, Capital, P600,000
2. The partner’s personal account which was collected by the partnership and credited to its accounts
receivable is a violation of the
Business entity concept
3. Partner B is investing in a partnership with Partner A. B contributes as part of his initial investments.
Accounts Receivable of P60,000, an Allowance for Doubtful Accounts of P9,000, Furniture of P30,000
with accumulated depreciation of P8,500 and P6,000 cash. The partners agreed that prepaid expenses
of P2,000 and accrued expenses of P1,800 have to be recognized. The entry that the partnership
makes to record B’s initial contribution includes a
Credit to B, Capital at P78,700
4. Jack holds an ownership interest of 63% and Teresa holds an ownership interest of 37% in the J and T
Partnership. This year, in order to further develop the business, Jack contributes an additional P6800
and Teresa contributes an additional P3200 to the partnership. Which of the following is TRUE of this
scenario?
Individual contributions of P6800 by Jack and P3200 by Teresa will be recorded
5. Partners’ non-cash investments are valued at
Market value
6. 1. One of the partners in a proposed partnership is a multi-millionaire. The stipulation in the articles of
partnership that this partner shall be excluded from sharing in the profits of the partnership is void.
2. A partnership may be established for charity.
Only statement 1 is true.
7. 1. The essence of partnership is that each partner must share in the profits or losses of the venture.
2. As long as the action is within the scope of the partnership, any partner can bind the partnership.
Both statements are true
8. In the absence of a partnership agreement, the law says that income (and loss) should be allocated
based on
The ratio of capital investments
9. Steve owns 64% and Mark owns 36% of a partnership business. They purchase equipment with a
suggested value of P9600. The current market value of the equipment at the time of purchase was
P9100. At the time of the balance sheet preparation, depreciation of P160 was recorded. Based on the
information provided, which of the following is TRUE of the partnership?
The equipment account will be debited at P9100 on the date of purchase
