AEFAR 126- PARTNERSHIP AND CORPORATION

Chapter 1: Basic Consideration and Formation

TEST 1: TRUE OR FALSE (1 point each)
1. In a limited partnership, none of the partners has unlimited liability for the business debts.
2. A silent partner takes active part of the business of the partnerships and is not known by
outsiders to be a partner.
3. Assets invested in a partnership should be recorded at their cost to the partner.
4. All partnerships are subject to tax at the rate of 30% of taxable income.
5. The basis of valuation for non-cash assets investments should be at values agreed upon by the
partners.
6. Each partner is personally liable for all debts of the partnerships.
7. Adjustments prior to formation may be omitted since these will not affect the partners’ capital
credits.
8. A partnership may be established for charity.
9. A partnership has a juridical personality separate and distinct from that of each the partners.
10. One advantage of a partnership over a corporate form of organization is the unlimited liability
of partners.

TEST 2: IDENTIFICATION (1 point each)

1. It is a partnership generally associated with practice of law, public accounting, medicine, and
other professions.
2. The essence of partnership is that each partner must share in the profits or losses of the
venture.
3. Partnerships may be dissolved by the admission, death, insolvency, incapacity, withdrawal of a
partner or expiration of the term specified in the partnership agreement.
4. The partnership agreements are embodied in the ________.
5. One who contributes his knowledge and personal service to the partnership.
6. One who is not a partner but who represents him as one.
7. One who does not take active part in the business of the partnership and is not known as a
partner.
8. When the partnership capital is 3000 Php and more, in money or property, the public
instrument must be recorded with the _________.
9. One who is liable to the extent of his separate property after all the assets of the partnership
are exhausted.
10. There cannot be a partnership without contribution of money, property or industry to a
common fund.

MGA DEHVEL NG 1-C

TEST 3: ESSAY (3 points each)
1. In your own words, what is a partnership?
2. Explain what is fair market value of an asset?
3. Explain the advantages and disadvantages of partnership over sole-proprietorship and
corporation.
4. Differentiate general from a limited partner.
5. Discuss the phrases “exercise of profession.”

TEST 4: CASE ANALYSIS (5 points)

1. Ashley B. Aho and Jay D. Magiba are partners in a shabu operation. Ashley purchased a cooking
device to be used in the entity’s operation. Is this purchase binding on Jay even though he was
not involved in it? Explain.

MGA DEHVEL NG 1-C