Assessment (Problem 1 to 35) PDF

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Mitchie Anne Joy D. Faustino ACT203 – Financial Accounting and Reporting On May 1, 2018, Gonzaga and Balace formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Gonzaga contributed a parcel of land that cost P10,000. Balace contributed P40,000 cash. The land...

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Mitchie Anne Joy D. Faustino

ACT203 – Financial Accounting and Reporting

1. On May 1, 2018, Gonzaga and Balace formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Gonzaga contributed a parcel of land that cost P10,000. Balace contributed P40,000 cash. The land was sold for P18,000 on May 1, 2018, immediately after formation of the partnership. What amount should be recorded in Gonzaga's capital account on formation of the partnership? a. P15,000 b. P17,400 c. P10,000

2. On Mar. 1, 2018, Sarabia and Abad decided to combine their businesses and form a partnership. Their statements of financial position on Mar. 1, before adjustments, showed the following: Sarabia

Abad

9,000

3,700

Accounts receivable

18,500

13,500

Inventories

30,000

19,500

Furniture and Fixtures (net)

30,000

9,000

Office Equipment (net)

11,500

2,750

__6,375__

_3,000__

105,375

105,375

45,750

18,000

Capital

_59,625_

_33,500__

Total

105,375

105,375

Cash

Prepaid Expenses Total

Accounts Payable

They agreed to have the following items recorded in their books: Provide 2% allowance for doubtful accounts.

Sarabia's furniture and fixtures should be P31,000, while Abad's office equipment is under-depreciated by P250. Rent expense incurred previously by Sarabia was not yet recorded amounting to P1,000, while salary expense incurred by Abad was not also recorded amounting to P800. The fair market values of inventory amounted to: For Sarabia

29,500

For Abad

21,000

Compute the net (debit) credit adjustment for Sarabia and Abad: Sarabia

Abad

Sarabia

Abad

a. P 2,870

P(2,870)

c. P(870)

P180

b. P(2,870)

P(2,870)

d. P870

P(180)

3. Using the same information in the previous number, what is amount of total liabilities after the formation? a. P63,950

c. P63,750

b. P65,550

d. P61,950

4. Using the same information is #2, what is the amount of total assets after the formation? a. P160,765

c. P157,985

b. P152,985

d. P156,875

5. Ables and Galang executed a partnership agreement that lists the following assets contributed at the partnership's formation: Contributed by:

Cash

Ables

Galang

P20,000

P30,000

Inventory

15,000

Building

40,000

Furniture and Equipment

15,000

The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership agreement also specified that profits and losses are to be distributed equally. What amounts should be recorded as capital for Ables and Galang at the formation of the partnership? Ables

Galang

a. P35,000

P85,000

b. P35,000

P75,000

c. P55,000

P55,000

d. P60,000

P60,000

6. Orcajada invested in a partnership a parcel of land which cost his father P200,000. The land had a market value of P300,000 when Orcajada inherited it three years ago. Currently, the land is independently appraised at P500,000 even though Orcajada insisted that he "wouldn't take P900,000 for it." The land should be recorded in the accounts of the partnership at: a. P300,000 b. P500,000 c. P900,000 d. P200,000

7. On Apr. 30, 2018, Lacson, Yacapin, and Bernal formed a partnership by combining their separate business proprietorships. Lacson contributed cash of P50,000. Yacapin contributed property with a P36,000 carrying amount, a P40,000 original cost, and P80,000 fair value. The partnership accepted responsibility for the P35,000 mortgage attached to the property. Bernal contributed equipment with a P30,000 carrying amount, a P75,000 original cost, and P55,000 fair value. The partnership agreement specifies that profits and losses are to be shared equally but is silent-regarding capital contributions. Which partner has the largest Apr 30, 2018, capital balance? a. Lacson

c. Bernal

b. Yacapin

d. All capital account balances are equal

8. On Aug. 1, Isada and Ureta-Reyes pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partnership capitals are to be based on net assets transferred after the following adjustments. Profits and losses are allocated equally. The inventory of Ureta-Reyes is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500 is to be set up in the books of Isada and Ureta-Reyes, respectively; and

accounts payable of P4,000 is to be recognized in Isada's books. The individual trial balances in August, before adjustments, follow:

Assets Liabilities

Isada

Ureta-Reyes

P75,000

P113,000

5,000

34,500

What is the capital of Isada and Ureta-Reyes after the above adjustments? a. Isada, P68,750; U. Reyes, P77,250

c. Isada, P65,000; U. Reyes, P76,000

b. Isada, P65,000; U. Reyes, P81,000

d. Isada, P75,000; U. Reyes, P81,000

9. Calma and Abello formed a partnership on April 1 and contributed the following assets:

Cash Liabilities

Calma

Abello

P 150,000

P50,000 310,000

The land was subject to a mortgage of P30,000, which was assumed by the partnership. Under the partnership agreement, Calma and Abello will share profit and loss in the ratio of one-third and two-thirds, respectively. Abello's capital account on April 1 should be: a. P330,000 b. P360,000 c. P300,000 d. P340,000 10. Pedernal, Pating, and Liggayu are forming a new partnership. Pedernal is to invest cash of P100,000 and stapling equipment originally costing P120,000 but has a second-hand market value of P50,000. Pating is to invest cash of P160,000. Liggayu, whose family is engaged in selling stapling equipment, is to contribute cash of P50,000 and a brand-new stapling equipment to be used by the partnership with a regular price of 120,000 but which cost their family's business P100,000. Partners agreed to share profits equally. The capital balances upon formation are: a. Pedernal, P220,000; Pating, P160,000; and Liggayu, P150,000 b. Pedernal, P150,000; Pating, P160,000; and Liggayu, P170,000 c. Pedernal, P160,000; Pating, P160,000; and Liggayu, P160,000 d. Pedernal, P176,666; Pating, P176,666; and Liggayu, P176,668

11. Estrada and Molina formed a partnership on Mar. 1, 2018, and contributed the following assets: Estrada Cash

Molina

P80,000

Equipment

P50,000

The equipment was subject to a chattel mortgage of P10,000 that was assumed by the partnership. The partners agreed to share profits and losses equally, Molina's capital account at Mar. 1, 2018, should be: a. P50,000

c. P40,000

b. P45,000

d. P60,000

12. On Mar. 1, 2018, Kalaw and Borromeo formed a partnership with each contributing the following assets: Kalaw

Borromeo

Cash

P30,000

P70,000

Machinery and Equipment

25,000

75,000

Building Furniture and Fixtures

225,000 10,000

The building is subject to mortgage loan of P80,000, which is to be assumed by the partnership. Agreement provides that Kalaw and Borromeo share profits and losses 30% and 70%, respectively. On Mar. 1, 2018, the balance in Borromeo's capital account should be: a. P370,000

c. P305,000

b. P314,000

d. P290,000

13. The same information in the previous number except that the mortgage loan is not assumed by the partnership. On Mar. 1, 2018, the balance in Borromeo's capital account should be: a. P370,000

c. P305,000

b. P314,000

d. P290,000

14. On July 1, Faminial and Fetalvero formed a partnership, agreeing to share profits and losses in the ratio of 4:6 respectively. Faminial contributed a parcel of land that cost P25,000. Fetalvero contributed P50,000 cash. The land was sold for P50,000 on July 1, three hours after formation of the partnership. How much should be recorded in Faminial's capital account on formation of the partnership? a. P50,000

c. P25,000

b. P20,000

d. P10,000

15. On Apr. 30, 2018, Foja, Lupian, and Retada formed a partnership by combining their separate business proprietorships. Foja contributed cash of P50,000. Lupian contributed property with a P36,000 carrying amount, a P40,000 original cost, and P80,000 fair value. The partnership assumed the P35,000 mortgage attached to the property. Retada contributed equipment with a P30,000 carrying amount, a P75,000 original cost, and P55,000 fair value. The partnership agreement specified that profits and losses are to be shared equally. Which partner has the largest Apr. 30, 2018, capital account balance? a. Foja b. Retada C. Lupian d. All capital account balances are equal

16. Lacson and Solis started a partnership. Lacson contributed a building that she purchased 10 years ago for P100,000. The accumulated depreciation on the building on the date of formation of the partnership is P25,000 and the fair value is P110,000. For what amount will Lacson's capital account be credited on the books of the partnership? a. P100,000

c. P110,000

b. P75,000

d. P25,000

17. A large cash withdrawal by Partner Ruiz from Bernal, Ruiz, Adriano and Gogola, which is viewed by all partners as a permanent reduction of Ruiz's ownership equity in the partnership, is recorded with a debit to: a. Ruiz, Capital b. Retained Earnings

c. Loan Receivable from Ruiz. d. Ruiz, Drawing

18. Lintao and Pido formed a partnership, each contributing assets to the business. Lintao contributed inventory with a current market value in excess of its cost. Pido contributed real estate with a cost in excess of its current market value. At what amount should the partnership record each of the following assets? Inventory

Real Estate

a. Cost

Cost

b. Market Value

Cost

c. Cost

Market Value

d. Market Value

Market Value

19. Partnership capital and drawing accounts are similar to the corporate: a. Retained earnings account b. Paid-in capital and retained earnings accounts c. Preferred and common stock accounts d. Paid-in capital, retained earnings and dividends accounts

20. Which of the following partnership characteristics is an advantage? a. Mutual agency

c. Limited life

b. Unlimited liability d. Ease of formation

21. A partner who contributes his work, labor or industry to the common fund of the partnership is called: a. limited partner

c. industrial partner

b. capitalist partner

d. managing partner

22. When a partner invests assets other than cash into a partnership, these assets should be listed on the statement of financial position at: a. their carrying (book) value

c. their fair market value

b. their original cost

d. the value the investing partner assigns to them

23. Which of the following is not a characteristic of partnerships? a. Voluntary association

c. Limited liability

b. Mutual agency

d. Limited life

24. Which of these characteristics does not apply to a general professional partnership? a. Unlimited life

c. Unlimited liability

b. Mutual agency

d. No business income tax

25. The most appropriate lead to look for relationships among partners is in the: a. accounting records

c. partnership agreement

b. voluntary association

d. relevant professional journals

26. A partner will not bind the partnership to an outside purchase contract when the: a. the item purchased is considered immaterial in amount b. item purchased is not within the normal scope of the business c. partner who made the purchase withdraws from the partnership d. partner was not authorized by the other partners to make the purchase

27. A partner invested into a partnership a building with a P250,000 carrying value and P400,000 fair market value. The related mortgage payable of P125,000 was assumed by the partnership. As a result of the investment, the partner's capital account will be credited for: a. P125,000 b. P275,000 c. P250,000 d. P400,000

28. Which of the following partnership characteristics is a disadvantage? a. Unlimited liability

c. Voluntary association

b. Ease of dissolution

d. Participation in partnership income

29. All of the following are true for both general and limited partnerships except: a. both are easily dissolved b. both must have at least one general partner c. all partners are liable for all debts of the firm d. all partners have the right to participate in the profits of the business

30. A partnership records a partner's investment of assets in the business at: a. value set by the partners b. the market value of the assets invested c. the partner's book value of the assets invested d. any of the above

31. Which of the following is not a characteristic of most partnerships? a. Ease of formation b. Limited liability c. Mutual agency d. Limited life

32. The partner's capital account is credited in the following cases except when it involves the recording of the: a. additional investment b. original investment c. shares in profit d. debit balance of the drawing account at the end of the period

33. An advantage of the partnership as a form of business organization would be: a. A partnership is bound by the acts of the partners. b. A partnership is created by mere agreement of the partners. c. Partners do not pay income taxes on their share in partnership profit. d. The death or withdrawal of a partner may terminate a partnership.

34. The partnership agreement is contained in the articles of partnership, an express contract among the partners. Such an agreement ordinarily does not include: a. the rights and duties of the partners. b. a limitation on a partner's liability to creditors. c. the allocation of income between the partners. d. the rights and duties of the partners in the event of partnership dissolution.

35. Non-cash assets invested into a partnership are recorded at: a. zero b. their original cost c. their carrying value d. their fair market value

SUMMARY: 1. C 2. C 3. B 4. C 5. B 6. B 7. C 8. B 9. A 10. B

11. C 12. D 13. A 14. A 15. B 16. C 17. A 18. D 19. D 20. D

21. C 22. C 23. C 24. A 25. C 26. B 27. B 28. A 29. C 30. A

31. B 32. D 33. B 34. B 35. D...