AC FAR-QUIZ7 - Quiz PDF

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Summary

1. Red and White formed a partnership in 2011. The partnership agreement provides for annualsalary allowances of P55,000 for Red and P45,000 for White. The partners share profitsequally and losses in a 60:40 ratio. The partnership had earnings of P80,000 for 2011 beforeany allowance to partners. Wha...

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1. Red and White formed a partnership in 2011. The partnership agreement provides for annual

salary allowances of P55,000 for Red and P45,000 for White. The partners share profits equally and losses in a 60:40 ratio. The partnership had earnings of P80,000 for 2011 before any allowance to partners. What amount of these earnings should be credited to each partner’s capital account? a. b. c. d.

Red P40,000 P43,000 P44,000 P45,000

White P40,000 P37,000 P36,000 P35,000

The amount of earnings that should be credited to each partner’s account are P43,000 and P37,000, for Red and White, respectively, computed as follows: Red White Total Salary allowances P55,000 P45,000 P100,000 Loss after allowances (60:40) ( 12,000) ( 8,000) ( 20,000) Earnings credited to partners P43,000 P37,000 P 80,000

2. On January 2, 2011, Bueno and Perez formed a partnership with capital distributions of

P175,000 and P25,000, respectively. They agreed to share profits and losses 80% and 20%, respectively. Perez is the general manager and works in the partnership full time. Perez is given salary of P5,000 a month; an interest of 5% on starting capital; and a bonus of 15% of net profit before the salary, interest, and bonus. The condensed profit and loss statement of the partnership, for the year ended December 31, 2011, is as follows: Net sales Cost of sales Gross profit on sales Expenses (including salary, interest and bonus) Net profit

P875,000 700,000 P175,000 143,000 P 32,000

The bonus in 2011 is

a. b. c. d.

P13,304.35 P18,000.00 P15,300.00 P20,700.00 The bonus to Perez in 2011 is P18,000, computed as follows:

Net profit after salary, interest, and bonus Salary of Perez (P5,000 x 12) Interest on starting capitals (P200,000 x 5%) Net profit before salary and interest, but before bonus Divide by Net profit before salary, interest, and bonus Bonus of Perez in 2011 (P120,000 x 15%)

P 32,000 60,000 10,000 P102,000 85% P120,000 P 18,000

3. Herm, Marc, and Alex formed a partnership on January 1, 2011, and contributed P150,000, P200,000, and P250,000, respectively. The articles of co-partnership provides that the operating income be shared among the partners as follows: as salary, P24,000 for Herm, P18,000 for Marc, and P12,000 for Alex; interest of 12% on the average capital during 2011 of the three partners; and, the remainder in the ratio of 2:4:4, respectively. The operating income for the year ending December 31, 2011 amounted to P176,000. Herm contributed additional capital of P30,000 on July 1 and made a drawing of P10,000 on October 1; Marc contributes additional capital of P20,000 on August 1 and made a drawing of P10,000 on October 1; and, Alex made a drawing of P30,000 on November 1.

The division of the P176,000 operating income is: a. Herm, P53,760; Marc, P62,520; and, Alex, P59,720 b. Herm, P35,200; Marc, P70,400; and, Alex, P70,400 c. Herm, P48,400; Marc, P66,800; and, Alex, P60,800 d. Herm, P53,180; Marc, P62,060; and, Alex, P60,760 The P176,000 operating income is divided as Herm, P53,180; Marc, P62,060; and Alex, P60,760, respectively, computed as follows: Herm: P150,000 x 12/12 30,000 x 6/12 (10,000) x 3/12 Average Capital

P150,000 15,000 (2,500) P162,500

Marc: P200,000 x 12/12 20,000 x 5/12 (10,000) x 3/12 Average capital

P200,000 8,333 (2,500) P205,833

Alex: P250,000 x 12/12 (30,000) x 2/12 Average capital

P250,000 (5,500) P245,000

Salary allowances 12% interest on average capital Remainder, 2:4:4 Division of ope. inc.

Herm P24,000

Marc P18,000

Alex P12,000

Total P54,000

19,500 9,680 P53,180

24,700 19,360 62,060

29,400 19,360 P60,670

73,600 48,400 P176,000

4. The partners’ capital balances on December 31, 2011 are:

a. b. c. d.

Herm, P179,680; Marc, P229,360; and, Alex, P239,360 Herm, P179,760; Marc, P229,520; and, Alex, P239,520 Herm, P189,680; Marc, P239,360; and, Alex, P269,360 Herm, P223,180; Marc, P272,060; and, Alex, P280,760 The partners’ capital balances on December 31, 2011 are Herm, P223,180; Marc, P272,060; and Alex, P280,760, respectively, computed as follows: Herm

Marc

Alex

Capital balances, Jan. 1

P150,000

P200,000

P250,000

Additional contributions

30,000

20,000

-

Drawings Share in operating income (6) Capital balances, Dec. 31, 2011

(10,000)

(10,000)

(30,000)

53,180

62,060

60,760

P223,180

P272,060

P280,760

5. The partnership agreement of Bing and Bong provides that Bing is to receive a 20% bonus on

profits before the bonus. Remaining profits and losses are divided in the respective ratio of 2:3. Which partner has a greater advantage when the partnership realizes a profit or when it sustains a loss? a. b. c. d.

Profit Bing Bing Bong Bong

Loss Bong Bing Bing Bong

In case of a profit, Bing’s share will be 20% plus 40% of the remaining 80%, or a total of 52%; in case of a loss, Bing’s share will only be 40%.

6. Michelle, an active partner in the Michelle-Esme Partnership, receives an annual bonus of 25%

of the partnership income after deducting the bonus. For the year ended December 31, 2011, the partnership income before bonus amounted to P240,000. The bonus of Michelle for the year 2011 is a. b. c. d.

P45,000 P48,000 P60,000 P80,000 The bonus of Michelle for the year 2011 is P48,000, computed as follows: Michelle’s bonus (P240,000  125%) x 25% P48,000

7. Mark and Valerie are partners with capitals P200,000 and P100,000 and sharing profits and

losses at 3:1, respectively. They decided to admit Nora as a new partner with a 50% interest in the firm. Nora invested cash of P150,000, and Mark and Valerie transferred portions of their capitals as a bonus to Nora. After Nora’s admission, Valerie’s capital would be: a. P 37,500 c. P 81,250 b. P 56,250 d. P100,000 Mark Valerie Nora Total Contributed capital P200,000 P100,000 P150,000 P450,000 Bonus (3:1) Nora’s AC P225,000 Nora’s CC 150,000 P 75,000 From Mark x¾ (56,250) 56,250 From Valerie x ¼ ( 18,750) 18,750 Agreed capital P143,750 P 81,250 P225,000 P450,000

8. Tito and Vic, partners sharing profits and losses equally, have capital balances of P90,000

each. Joey is admitted as a new partner, making cash investment of P120,000, to a one-third interest in both capital and earnings. If Joey is credited in full for the amount of his investment, the new capital of the partnership would be:

a. b. c. d.

P240,000. P300,000. P360,000. P420,000. Contribution of Joey Agreed capital ratio Total agreed capital

P120,000 1/3 P360,000

9. Moonbits Partnership had a net income of P8,000 for the month ended September 30, 2011.

Sunshine purchased an interest in Moonbits Partnership of Liz and Dick by paying Liz P32,000 for half of her capital and half of her 50% profit-sharing interest on October 1, 2011. At this time, Liz’s capital balance was P24,000 and Dick’s capital was P56,000. Sunshine should receive capital credit equal to:

a. b. c. d.

P12,000 P16,000 P20,000 P26,667 Capital of Liz Interest purchased Capital credit of Sunshine

P24,000 1/2 P12,000

10. Sarah is admitted into the firm of Joy, AA and Pilar. The old partners agreed to sell to Sarah

one-fourth of their respective equities and profit share. Sarah paid a total price of P1,000,000. Before Sarah’s admission, Joy, AA and Pilar have capital balances of P2,000,000, P1,000,000 and P500,000 and they share profits at the ratio of 6:3:1. Partnership assets are fairly stated and implied goodwill is to be recognized prior to Sarah’s admission. The new capital of the partnership is:

a. b. c. d.

P3.5M P4M P5M P4.5M Sarah’s contribution P1,000,000 Divided by interest bought one-fourth Total agreed capital P4,000,000...