Accoun ng for Special Transac ons: Prelim Long Quiz

Direc on: Write the le er of your best answer on your yellow paper. Erasures are not allowed and considered wrong.

1. Under the bonus method, any increase or decrease in the capital credit of a partner is?
a. Deducted from or added to the capital credit of the c. Recognized as expense
partners
b. Recognized as goodwill d. Deferred and amor zed to profit or loss

2. Salaries to accoun ng managers typically should be?

a. A device for sharing net income c. Drawing of the partners
b. An opera ng expense of the partnership d. Reduc on of capital balance of the partners

3. Ini ally, a partner’s interest in a partnership is generally equal to?

a. The sum of the fair market values (FMV) of the assets contributed to the firm, increase by the liabili es of the
partners assumed by the partnership
b. Total FMV of assets contributed less liabili es, at book value, to be assumed by the partnership
c. Total FMV of assets contributed
d. Net assets contributed at FMV

4. Partnership net income is defined as

a. the interest alloca on to the partners, based on weighted average invested capital
b. partnership income a er deduc ng the partners salaries, interest and bonus
c. partnership income a er deduc ng the partners salaries, interest but before bonus
d. partnership income before deduc ng the partners salaries, interest and bonus

5. A partnership’s profit-sharing ra o
a. applies to partnership income a er salaries and interest are deducted
b. applies to partnership income before salaries but a er the interest are deducted
c. applies to partnership income a er salaries but before the interest are deducted
d. partnership income before deduc ng the partners salaries, interest and bonus

6. When can bonus method applied?

a. When a partnership is formed c. When exis ng partner re red to the partnership
b. When a new partner is added to the partnership d. It can applied in A, B, or C circumstances

7. If the agreement provides for division of losses only. Profits should be divided as?
a. Equally c. According to loss ra o
b. According to capital contribu on d. According to the current capital amount

8. Transac ons between and among partners are?

a. recorded in the partnership books c. either a or b
b. not recorded in the partnership books d. neither a or b

9. Under bonus method?

a. total partnership capital is equal to the fair market value of the partners net contribu on to the partnership
b. total partnership capital is less than the fair market value of the partners net contribu on to the partnership
c. total partnership capital is greater than the fair market value of the partners net contribu on to the partnership
d. total partnership capital is less than the FMV of the partners net contribu on to the partnership, if bonus is given to
the incoming partners

10. Mr. A and Mr. B formed a partnership, each contribu ng P1M in cash. The partners agreed that Mr. A’s capital
account to be credited for P800,000. Which of the following statement is correct?
a. The credit to Mr. B’s capital account is P1.2M c. The s pula on is void
b. Mr. A is given a bonus of P200,000 d. The s pula on is voidable

11. Which of the following statements best describe the term partnership dissolu on?
a. The withdrawal of a partner from a partnership c. The change in the rela on of the partnership
b. The end of a partnership life d. The winding up of the business affairs

12. Salaries to the partners of a partnership typically should be accounted for as:
a. A device for sharing net income c. Reduc on of the partners’ capital
b. An opera ng expense of the partnership d. Drawing of the partners from the partnership

13. Which of the following will not result of the dissolu on?
a. Insolvency of the partnership c. Admission by purchase of capital of a partner
b. Assignment of an exis ng partners to third party d. Death of a partner

14. If a partner who re red from the partnership received a less than the capital balance before re rement which also
result to the decrease of capital balance of the remaining partners, which is correct?
Accoun ng for Special Transac ons: Prelim Long Quiz
a. An impairment loss is recognized before the re rement c. Revalua on surplus is recognized before re rement
b. The re ring partner received a bonus from remaining d. The re ring partner gives bonus to the remaining
partner partner

15. If the partnership agreement provides a formula for the computa on of bonus to the partners, the bonus would be?
a. next to last, because the final alloca on is the distribu on of the profit residual
b. before income tax alloca on are made
c. a er the salary and interest alloca ons are made
d. in any manner agreed by the partners

16. On July 1, of the current year, a partnership was formed by John and Seth. John contributed cash. Seth, previously a
sole proprietor contributed property other than cash including real property subject to mortgage. Seth capital account at
that date should be recorded at?
a. Seth book value of the property c. Seth fair value of the property
b. Seth book value of the property less mortgage payable d. Seth FMV of the property less mortgage payable

17. When the new partner credit capital exceeds its contributed capital balance,
a. The old partners received a bonus from new partners c. The new partner received bonus from old partners
b. The partnership has asset revalua on before admission d. The partnership has goodwill before admission

18. A and B’s partnership agreement s pulates that partnership has profits shall be shared between them on a 70:30
basis. However, the agreement is silent regarding the sharing of losses. If the partnership incurs loss, how would the loss
have distributed to the partners?
a. 70:30 c. based on their capital contribu on
b. equally d. None of the choices

19. Which of the following is not a legi mate expense of the partnership?
a. supplies used in the partners office c. salaries of the management hired to run business
b. deprecia on on assets contributed by partners d. Interest expense to the capital invest by partners

20. The asset contribu ons of partners contribu on are ini ally measured at (select the best answer)?
a. Agreed value c. Partner’s acquisi on cost of the property
b. Fair market values d. A or B

21. On May 1, 2020, the business assets of John and Paul appears below:
John Paul
Cash 11,000 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture and fixtures 50,345 34,789
Other assets 2,000 3600
Total 1,020,916 1,317,002
Accounts Payable 178,940 243,650
Notes Payable 200,000 345,000
John, Capital 641,976 0
Paul, Capital 0 728,352
Total 1,020,916 1,317,002
John and Paul agreed to form a partnership contribu ng their respec ve assets and equi es subject to the following
adjustments:
 Accounts receivable of P20,000 in John’s book and P35,000 in Paul’s book are uncollec ble.
 Inventories of P5,500 and P6,700 are worthless in John and Paul’s book respec vely.
 Other assets of P2,000 and P3,600 in John and Paul’s respec ve books are to be wri en off.
Peter offered to join for a 20% ownership in the firm. How much cash should he contributed?
a. P 330,870 c. P 344,237 e. answer not given
b. P 337,487 d. P 324,382

22. On April 30, 2020, Alex, Ben and Cesar formed a partnership by combining their separate business assets to form a
partnership business. Alex contributed cash of P500,000. Ben contributed property with a P360,000 carrying amount, a
P400,000 original cost, and P800,000 fair market value. The partnership accepts the responsibility for P350,000 mortgage
a ached to the property. Cesar contributed equipment with a P300,000 carrying amount, a P750,000 original cost and
P550,000 fair market value. The partnership agreement specifies that P&L ra o are to be shared equally but silent
regarding on capital contribu ons. What is the capital balances of the partners on April 30, 2020?
Alex Ben Cesar
a. P500,000 P800,000 P550,000
b. P500,000 P450,000 P550,000
c. P500,000 P360,000 P300,000
Accoun ng for Special Transac ons: Prelim Long Quiz
d. P500,000 P400,000 P750,000
e. Answer not given

23. In the Calendar year 2020, the partnership of A and B realized of P240,000. The capital accounts of the partners show
the following pos ng:
A, Capital B, Capital
Debit Credit Debit Credit
Jan 1 120,000 80,000
May 1 20,000 10,000
July 1 20,000
Aug 1 10,000
Oct 1 10,000 5,000

If profits are to be based on original capital, the share of A and B, respec vely are?
a. P129,600 and P110,400 c. P136,800 and P103,200 e. answer not given
b. P144,000 and P96,000 d. P136,543 and P103,457

24. Using the same data in number 23, if 20% interest based on the capital at the beginning of the year is allowed and
given the balance of the P240,000 profit is divided equally, the total share of A and B, respec vely are:
a. P 121,500 and P118,500 c. P123,000 and P117,000 e. answer not given
b. P 124,000 and P116,000 d. P122,625 and P117,375

25. Mitz, Marc and Mart are partners sharing profits in the ra o of 5:3:2 , respec vely. As of December 31, 2020, their
capital balance were P95,000 for Mitz, P80,000 for Marc, and P60,000 for Mart. On January 1, 2021, the partnership
admi ed Vince as a new partner and according to their agreement, Vince will contribute P80,000 in cash to the
partnership and also pay P10,000 for 15% of Marc’s share. Vince will be given a 20% share in profits, while the original
partner’s share will be propor onately the same as before. A er admission of Vince, the total capital will be P330,000
and Vince capital will be P70,000.

The balance of Marc’s capital a er the admission of Vince?

a. P 72,600 c. P79,100 e. answer not given
b. P 74,600 d. P81,100

26. Alma and Becca have just formed partnership. Alma contributed cash of P176,400 and office equipment that cost
P75,600. The equipment had been used in his sole proprietorship and had been 70% depreciated, the current value of
the equipment is P50,400. Alma contributed a note payable of P16,800 to be assumed by the partnership. Alma is to
have a 30% interest in the partnership. Becca contributed P256,000 land at fair market value.

Becca should make addi onal contribu ons of?

a. P 234,000 c. P 256,000 e. answer not given
b. P 490,000 d. P 210,000

27. Dino and Gavin, partners allow monthly salaries (P6,000 & P5,000, respec vely) and 6% interest based on beginning
capital (P300,000 & P230,000, respec vely), and then divide profit any remaining equally.
On profit of P100,000, the respec ve shares would be?
a. P 50,000 and P50,000 c. P 56,500 and P43,400 e. answer not given
b. P 54,500 and P45,500 d. P 58,100 and P41,900

28. Chan and Dara are partners who agreed to share profits and losses in the following manner:
Chan Dara
Annual Salaries P 261,000 P 259,000
Interest on Average capital 5% 10%
Bonus based on net income a er salaries & Interest 10%
Remainder 50% 50%

During the year ended December 31, 2021, the partnership’s result of opera on was P575,000 profit before any
deduc on. Chan and Dara average capital balances for the year are P600,000 and P300,000, respec vely. How much is
the total share of Dara in the partnership net income for the year ended December 31, 2021?
a. P 287,500 c. P 288,500 e. answer not given
b. P 286,500 d. P 295,665

29. Bing, Bong and Bag are partners with average capital balance during 2021 of P120,000, P60,000, and P40,000,
respec vely. Partners will receive 10% interest on their average capital balances. A er deduc ng salaries of P30,000 to
Bing and 20,000 to Bang, the residual profit or loss is divided equally. In CY2021, the partnership sustained a P33,000 loss
before interest and salaries to partners.
By what should Bing’s capital account change?
a. P 42,000 increase c. P 11,000 decrease e. answer not given
b. P 25,000 decrease d. P 7,000 increase
Accoun ng for Special Transac ons: Prelim Long Quiz

30. The partners, C and D, shares profits 3:2. However, C is to receive a yearly bonus of 20% of profits, in addi on, to his
profit share. The partnership made a net income for the year of P960,000 before bonus. Assuming C’s bonus is computed
on profit a er deduc ng said bonus, how much share will D receive?
a. P 640,000 c. P 320,000 e. answer not given
b. P 160,000 d. P 307,200

31. A and B formed a partnership. The partnership agreement s pulates the following:
A. Annual salary allowance of P200,000 to A
B. Bonus to A of 10% of the profits a er partner’s salaries and bonus.
C. The partners share profits and losses on a 60:40 ra o
During the year, the partnership incur loss of P80,000.

How much is the share of B in the partnership loss?

a. P 109,091 c. P 29,091 e. answer not given
b. P 112,000 d. P 0

32. Using number 31, by what amount did A’s capital account change? Increase (decrease)
a. P (29,091) c. P (32,000) e. answer not given
b. P 29,091 d. P 32,000

33. Sean and Andie formed a general professional partnership. Their capital contribu ons were credited to their
respec ve capital accounts as follows: Sean, Capital – P600,000; Andie, Capital- P1,000,000. During the year, the
partnership earned a profit of P4,000,000 before income tax rate of 30%. How much is the share of Andie in the
partnership profit?
a. P 1,750,000 c. P 1,500,000 e. answer not given
b. P 2,500,000 d. P 2,000,000

34. The capital balances of partners Lancer and Mainer before the admission of Jaypee were P200,000 and P300,000,
respec vely. Jaypee invested certain amount for a 25% interest income partnership. As a result of his admission, the old
partners received a P25,000 bonus. How much does Jaypee invest for his 25% interest in the partnership?
a. P 166,667 c. P 175,000 e. answer not given
b. P 125,000 d. P 200,000

35. Jonathan invest P20,000 for a 10% percent interest in a partnership with a total capital of P150,000. Which of the
following is true?
a. Jonathan capital is P20,000 d. The original partners’ capital in the business
b. The original partners received a bonus of P5,000 was P135,000 before admi ng of Jonathan
c. Jonathan received a bonus of P5,000 e. answer not given

36. A and B agreed to form a partnership. The partnership agreement s pulates the following:
 Total capital of P300,000
 25:75 ra o in the equity of partnership for A and B, respec vely
A contributed P100,000 cash, while B contributed P300,000 equipment with P200,000 deprecia on cost. The partners
agreed to value the equipment at P200,000. The partners determine that the fair market value is at P300,000. Which
should provide addi onal investment (or withdrawal part of his investment) in order to bring the partners’ credits equal
to their respec ve interests in the equity of the partnership assuming the partnership uses bonus method.
a. Addi onal capital of P25,000 of A c. Addi onal capital of P25,000 of B e. answer not given
b. Withdrawal of P25,000 to B d. No addi onal contribu on to A or B

37. On January 1, 2020, A, B and C formed ABC partnership with total agreed capitaliza on of P1,000,000. The capital
interest ra o of ABC Partnership is 5:1:4 while the profit or loss ra o is 3:2:5, respec vely for A,B and C.

During 2020, A and B made addi onal investment of P200,000 and P500,000, respec vely. At the end of the 2020, B and
C made a drawing of P300,000 and P100,000. On December 31, 2020, the capital balance of B reported at P200,000.
What is the net income or loss of ABC Partnership for the year ended December 31, 2020?
a. P 500,000 loss c. P 800,000 income e. answer not given
b. P 1,000,000 loss d. P 1,200,000 income

38. Using number 37, the capital balance of C on December 31, 2020?
a. P 150,000 c. P 200,000 e. answer not given
b. P 50,000 d. P 250,000

39.Partners interest in the partnership is generally equals to?

a. Fair market value (FMV) of net assets at the date of contribu on
b. The sum of FMV of the partner’s contribu on increased by liabili es assumed by partnership
c. The sum of FMV of the partner’s contribu on decreased by any personal liabili es assumed by other partners
d. The unamor zed cost of the assets of the partner
Accoun ng for Special Transac ons: Prelim Long Quiz
40. On January 1, 2020, A, B and C formed ABC Partnership with original capital contribu on of P300,000, P500,000 and
P200,000. A is appointed as managing partner.

During 2020, A, B and C made addi onal investments of P500,000, P200,000 and P300,000, respec vely. At the end of
2020, A, B, and C made a drawing of P200,000, P100,000 and P400,000, respec vely. At the end of 2020, the capital
balance of C is reported at P320,000. The profit and loss agreement are as follows:
 10% interest on original capital contribu on of the partners
 Quarterly salary of P40,000 and P10,000 for A and B, respec vely.
 Bonus to A equivalent to 20% of Net income a er interest and salary of all partners
 Remainder is to be distributed equally among the partners.

What is the partnership profit for the year ended December 31, 2020?
a. P 900,000 c. P 1,050,000 e. answer not given
b. P 1,020,000 d. P 960,000

41. Using the item no. 40, what is A’s share in partnership profit for 2020?
a. P 190,000 c. P 540,000 e. answer not given
b. P 340,000 d. P 200,000

42. Using the item no. 40, what is B’s share in partnership profit for 2020?
a. P 200,000 c. P 50,000 e. answer not given
b. P 290,000 d. P 90,000

43-45. Garcia and Henson formed a partnership on January 2, 2020, and agreed to share profits 90% and 10%,
respec vely. Garcia contributed capital of P25,000. Henson contributed no capital but has specialized exper se and
manages the firm full me. There were no withdrawals during the year. The partnership agreement provides for the
following.
 Capital accounts are to be credited annually with interest at 5% of beginning capital.
 Henson is to be paid salary of P1,000 a month.
 Henson is to be received a bonus of 20% of income calculated before deduc ng his salary and interest on both
capital accounts.
 Bonus, interest, and Henson’s salary are to be considered partnership expenses.
 The partnership income in 2020, as follows:
Revenues P 96,450
Expenses (including salary, interest and bonus) 49,700
Net income 46,750
Compute the following:
43. How much is Henson’s bonus?
a. P 11,688 c. P 15,000 e. answer not given
b. P 12,000 d. P 15,738

44. How much is the salary to be distributed to partners?

a. P 6,000 c. P 18,000 e. answer not given
b. P 12,000 d. P 24,000

45. How much is the interest distributed to the partners?

a. P 1,250 c. P 125 e. answer not given
b. P 2,500 d. P 250
46-47. The partners of ABC Co had the following capital balances and P/L sharing percentages: A(50%), P320,000,
B(30%), P192,000 and C (20%), P128,000.
46. A decided to re re and sold his interest to B for P360,000. The entry on A’s re rement included a
a. credit to B’s capital for P360,000 c. debit to B’s capital for P24,000 e. answer not given
b. credit to B’s capital for P320,000 d. debit to B’s capital for P16,000
47. A withdrew from the partnership and was paid for P360,000 by the partnership. What is the capital balance of C right
a er A’s withdrawal?
a. P112,000 c. P 168,000 e. answer not given
b. P116,800 d. P 172,000
48. Salaries of a partners?
a. treated as opera ng expense c. device for sharing net income e. answer not given
b. treated as reduc on on capital d. part of cost of sales
49. A partners drawing account is, in substance
a. A capital account c. A salary expense e. answer not given
b. A contra-capital account d. A loan account
50. Which of the following is not among to be distributed to partners if the partnership incurs loss during the year?
a. Salaries c. Interest e. answer not given
b. Bonus d. All are s ll distributed even loss