PARTNERSHIP AND CORPORATION: THEORIES

AND PROBLEMS 7. One of the distinguishing feature of a

partnership as compared to a sole
1. A partnership is a/an –
proprietorship is the “plurality of capital
A. Voluntary and valid agreement
and drawing accounts”.
among partners
A. There is one capital and one
B. Mutual agency among partners
drawing accounts
C. Entity created by the operation
B. There are two capital and two
of law
drawing accounts
D. Association for profit to be
C. There will be as many capital
divided among partners
and drawing accounts
depending on the of partners
2. The partnership agreement may be in
D. None of the above
the form of -
A. Written contract
8. Failure to stipulate on how profit and
B. Oral contract
loss be divided among partners. It should
C. Implied agreement
be –
D. Any of the above
A. In proportion to what has been
contributed
3. Which of the following partners are not
B. Settled in the court of law
liable in case of partnership losses but its
C. Equally divided
liable for partnership debts to the extent
D. By other legal mean agreeable
of their personal assets –
among partners
A. Capitalist partner
B. Silent partner
9. In case of the partnership makes profit,
C. Industrial partner
how will an industrial partner be a given
D. Secret partner
a share?
A. What is just equitable
4. The estimated price of an asset that a
B. Equally
seller is willing to sell an the buyer is also
C. Arbitrary
willing to buy in an open market –
D. Depending on the court’s
A. Sound value
decision
B. Current value
C. Fair market value
10. A partner who contributes money or
D. Replacement value
property as well as his work or industry
to the partnership is a/an –
5. When a partner invests a non-current in
A. Industrial partner
the partnership business, the recording
B. Capitalist-industrial partner
should be based on
C. Capitalist partner
A. The price dictated by the
D. Dormant partner
investing power
B. The original cost of the asset
11. The most equitable basis of distributing
C. Adjusted market value of the
by way of capital contributions is –
asset
A. Beginning capital
D. Fluctuation in prices
B. Ending capital
C. Average capital
D. Equally
6. When an industrial partner joins in the
partnership, his participation should be 12. In admission by purchase of interest,
booked in the journal and in the same, the selling partner may sell their share of
affix his signature – partnership’s interest to the incoming
A. Simple journal entry partners at
B. Compound journal entry A. Book value
C. Memorandum entry B. Less than book value
D. Separate entry
 C. More than book value
D. Any of the above
13. In the partnership of A and B with capital
balances of P50,000 and P75,000
respectively and C is admitted by buying
½ of B’s interest for P36,000
A. B, suffered a personal loss of
P1,500
B. The loss is divided between
them on an agreed ratio
C. The sale is at its book value
D. The sale is more than book value
14. Admission of a new partner by
investment will –
A. increase both the asset and
capitalization of the partnership
B. Increase the asset of the
partnership only
C. Increase the capitalization of the
partnership only
D. None of these
15. When bonus given to the old partners –
A. Old partners’ capital accounts
are credited
B. The bonus is divided based on
P/L ratio
C. New partners’ capital account is
debited
D. All of the above
16. In the partnership of ABC, sold b his
partnership interest shares to D. Who
will receive the cash payment made by
D?
A. Partner B
B. The partnership
C. Partners A and B
D. Partners A,B and C
17. When bonus formula indicates that
there is bonus to be given to old partners
A. The new partners’ capital
account will be credited
B. The new partners’ capital
account will be debited
C. The old partners’ capital account
will be credited
D. The old partners’ capital account
will be debited
18. Admission of a partner by purchase of
interest is a
A. Personal transaction between
the selling partner and the
buying partner
B. Transaction that increases
assets and capital of the
partners
C. Transaction where interest of
the buying partner is to be
transferred to the selling
partner
D. Transaction where the incoming
partner can claim bonus
19. The following instances may dissolved
the partnership except –
A. Change in partnership name
B. Retirement of a partner
C. Admission of a new partner
D. Incorporation of a partnership
20. Partnership is said to be dissolved when
a
A. New partner is admitted in an
existing partnership
B. Partner dies
C. Partner retires
D. Any of the above
21. When a partner retires, the book of the
partnership should be adjusted as of:
A. The date of retirement
B. The balance sheet date
C. Interim report
D. None of these
22. Which of the following adjustments in
the partnership books are needed in an
event the partner dies?
A. Fair value of the non-cash asset
at the time of death
B. Accrued items for both
receivable and payable
C. Prepayment of expenses and
pre-collection of income
D. All of the above
23. Which of the following will cause the
partnership to be dissolved but will
continue to operate?
A. When a partner dies
B. When a partner retires
C. When a partner withdraws
D. All of the above
24. Which of the following could be possible
cause for dissolution with liquidation of
the partnership business?
A. Death of the partner
B. Retirement of a partner
C. Insolvency of the partner
D. When partnership is being
incorporated
25. The process of winding-up the business
activity is converting non-cash assets
into cash, paying its liabilities and
distribution of cash and the remaining
assets to individual partners –
A. Realization
B. Dissolution
C. Liquidation
D. None of these
26. When the partnership’s non-cash assets
are realized at less than its book value
during the liquidation process, its results
to a –
A. Gain on realization
B. Loss on realization
C. Deficiency transactions
D. None of these
27. The following are the causes of
partnership’s dissolution with
liquidation, except
A. Bankruptcy of the firm
B. When a partners dies
C. Mutual agreement among
partners to close the business
D. The purpose of which it is
organized is accomplished
already
28. When a partner develops a debit balance
in his capital, but such partner has a loan
to the partnership, he may exercise the
doctrine of
A. Right to offset
B. Right to seizure
C. Partner’s right
D. None of these
29. The first priority to be paid when there is
cash available in the liquidation process,
be it in lump sum or installment type –
A. Outside creditors
B. Partners’ loan
C. Partners’ capital
D. None of these
30. In preparing a cash distribution plan, the
partners’ capital and loan accounts
should be –
A. Both separated
B. Combined
C. Segregated
D. None of these
31. Under liquidation by installment, the
partner who receives cash when there is
cash available is the one –
A. Who can sell the biggest portion
of the assets
B. Who has a negligible amount of
liability
C. Who can absorbed the share of
theoretical or possible loss
D. None of these
32. In dissolution by installment, final cash
settlement among the partners are
based on the –
A. Ratio agreed by the partners
B. Partner’s profit and loss sharing
ratio
C. Partner’s capital balance
D. None of these
33. When a partnership is being liquidated,
it usually focused on the following
activities –
A. Terminal activities
B. Investments activities
C. Withdrawal of capital
D. None of these
34. One of the characteristics of liquidation
by lump sum is –
A. Non-cash assets are sold in one
setting only
B. Liabilities will be given the first
priority for payment
C. The non-cash assets are usually
sold at less than book value
D. None of these
35. Which of the following is not an attribute
of a corporation?
A. An artificial being created by the
operation of law
B. Having the rights of succession
C. Have the powers, attributes and
properties expressly authorized
by law or incident to its
existence.
 D. Have limited liability of
shareholders
36. Refers to the maximum amount fixed by
corporate charter to be subscribed and
paid-in by the shareholder –
A. Authorized share capital
B. Subscribed share capital
C. Unissued share capital
D. Treasury share
37. Refers to the issued share capital and
still in the hands of the shareholders
A. Unissued share capital
B. Authorized share capital
C. Outstanding share capital
D. Subscribed share capital
38. Number of persons required to originally
form a corporation –
A. Not less than five but not more
than fifteen
B. Five persons but not to exceed
15 persons
C. Less than 5 persons only
D. None of the above
39. Which of the following are examples of a
non-share, non-profit corporation?
A. Charitable institution
B. Religious institution
C. Civic and social institution
D. All of the above
40. The maximum life of a corporation to
exist is
A. 50 years
B. 40 years
C. 30 years
D. None of the above
41. Natural persons who have agreed to but
the original and unissued shares of a
corporation are called
A. Corporators
B. Subscribers
C. Promoters
D. None of the above
42. Share certificates are issued to
subscriber upon
A. Full payment of subscription
B. Date of subscription
C. Authorization
D. Partial payment of subscription
43. If share capital is issued for tangible or
intangible property, the value of share
capital is equal to the following value in
order of priority:
A. Fair market value of the
property issued
B. Fair market value of the capital
issued
C. Par value of the share capital
D. All of the above priority
44. When shares are subscribed on an
installment basis, the Additional Paid-in
Capital is recorded at –
A. The time of issuance
B. The time of payment
C. The time of subscription
D. The time of authorization
45. In dividends declaration, there are three
(3) important dates to remember except
A. Date of declaration
B. Date of record
C. Date of issuance
D. Date of payment
46. Shareholder’s share of a corporation’s
accumulated profit from its operation is
termed as –
A. Liquidating dividends
B. Dividends out of earnings
C. Unappropriated dividends
D. Dividends on hand
47. Which of the following statement is true
concerning share dividends?
A. It reduces retained earnings and
increases share capital
B. It does not change the total
shareholders’ equity
C. Retained earnings is said to have
been capitalized
D. All of the above
48. Treasury shares are recorded at
A. Fair market value at the date of
acquisition
B. At acquisition cost
C. At acquisition cost, plus
incidental cost
D. None of the above
49. Treasury shares can be reissued –
A. At cost
B. Below cost
C. Above cost
D. All of the above
50. Which of the following statement is true
concerning Retained Earnings?
A. It has a normal balance of a
credit
 B. It represents the cumulative P350,000 on the same date, three hours after
profit and losses formation of the partnership.
C. It decreases when dividends are
55. How much should be the capital balance
declared
D. All of the above of Raymark right after the formation?
A. P200,000
PROBLEMS: B. P300,000
C. P350,000
Louche and Sweetsy are partners of Manila “TC” D. P400,000
Merchandising. After a year of successful
business operations, the partners’ equity has 56. At what amount that investment of
reached to a total amount of P480,000 which is
Daisy Ree be recorded?
50% higher than last year when they have just A. P300,000
started it. The percentage of outside creditors’ B. P320,000
claim in the total partnership assets is 40%. C. P350,000
Considering that both are general partners, D. P400,000
answer the following questions:
On March 1, 2017 Mae Adulhesa and Dheo
51. How much is the total assets of the Pondoc formed a partnership with each
partnership? contributing the following assets:
A. P100,000
B. P800,000 Adulhesa Pondoc
C. P900,000 Cash P400,000 P600,000
D. P1,000,000 A/R 120,000 -
Merchandise 50,000 60,000
52. How much is total claims from outside Building - 1,050,000
creditors? As agreed, 10% allowance for uncollectible
A. P320,000 account must be established. The building has a
B. P480,000 mortgage loan balance of P300,000 which is to
C. P540,000 be assumed by the partnership. The partners
D. P632,000 further agree on a ratio 3:2 as the basis for profit
Gwapo, Maot and Arangan are planning to form and loss distribution.
a partnership with Maot contributing cash of 57. How much would be the capital balance
P75,000 for a 1/5 interest in the partnership. of Adulhesa and Pondoc right after the
Gwapo and Arangan will share equally in the partnership formation?
remaining required capitalization. A. P1,968,000
53. How much are the shares of Gwapo and B. P2,280,000
Arangan on the remaining capitalization C. P2,370,000
of the partnership? D. P2,450,000
A. P75,000 each respectively
B. P80,000 each respectively 58. Assuming that the mortgage loan
C. P150,000 each respectively balance is not assumed by the
D. P200,000 each respectively partnership, how much would be the
capital balance contribution of Pondoc?
54. How much is the total assets of the A. P1,410,000
partnership upon formation? B. P1,710,000
A. P300,000 C. P1,810,000
B. P350,000 D. P1,950,000
C. P375,000 Ronaldo Bundaco and Jessa Branzuela formed a
D. P400,000 partnership with following contributions:
*Bundaco contributed a parcel of land which
On January 1, 2017, Raymark and Daisy Ree cost his father P100,000. The land has a fair
formed a partnership, agreeing to share profits market value of P150,000 when the land was
and losses of 40% and 60% respectively. Raymark inherited by him 3 years ago and currently has a
invested a parcel of land that cost him P300,000. fair market value of P200,000 and cash of
Daisy Ree invested cash of P200,000 and an P50,000.
equipment costing P100,000 but has a fair
market value of P120,000. The land was sold for
*Branzuela on the other hand contributed cash A. P90,000
equal to ¾ of Guimad’s capitalization. B. P95,000
C. P96,000
59. At what amount should land be valued in
D. P100,000
the partnership book?
A. P100,000 64. Assuming that there was no written
B. P150,000 agreement on how profit and loss is
C. P200,000 divided, how much is the share of John
D. P250,000 on the corrected profit?
A. P40,381
60. At what amount should Branzuela’s B. P41,143
capital account be credited? C. P54,857
A. P150,000 D. P55,385
B. P187,500
C. P190,000 Divine Dequito and Dennis Javier established a
D. P195,000 partnership business engaged in selling of “dried
fish” in Pagadian City aside from their modest
61. Assuming that the land is sold for accounting practice. Their venture attained a
P220,000 a week after the formation, considerable success so that at the end of the
what amount should be recorded as year 2017, Dequito receives P75,000 as her share
Bundaco’s capital account balance in profit. If the profit and loss ratio 3:2.
during the partnership formation?
A. P187,500 65. How much was Javier’s share?
B. P200,000 A. P50,000
C. P237,500 B. P85,000
D. P250,000 C. P112,000
D. P115,000
On March 1, 2017 Loremie Simbajon formed a
partnership with Kent Taperla and made the 66. How much amount of profit that Dequito
following contributions: and Javier shared?
A. P125,000
Cash P350,000 B. P160,000
Non-Cash P100,000 C. P187,500
D. P190,000
At the end of the year, Simbajon received a share
of P32,000 on the P80,000 profit. Deogracia Corpuz, Thelma Ciudadano, Jesus
Luntao are into a partnership business, agreeing
62. What should be the share of Taperla on to divide their profit and losses based on the
the partnership profit? following ratios:
A. 35%
B. 40% Corpuz, 50%; Ciudadano, 30% and Luntao, 20%.
C. 50% The partnership reported profit of P80,000.
D. 60% Their capital balances after operating for several
Jeepee John and Louche Celestial formed a years followed:
general professional partnership. Their Corpuz P60,000
investments follow:
Ciudadano P120,000
John P150,000
Luntao P80,000
Celestial P200,000
67. How much is Ciudadano’s share on the
Profit for distribution was P98,000. The following partnership profit if percentages are
errors were discovered before the final closing of applied after each partner receives a
the books: P20,000 salary allowance?
a. Understatement of salaries paid to the A. P24,000
staff, P5,000. B. P26,000
b. Overstatement of recorded depreciation C. P30,000
by P3,000. D. P40,000
Esterlina Gevera, Edelyn Tropico and Evelyn
63. How much is the corrected Profit? Canque are partners of City Travel and Tours. As
at December 31, 2016, the statement of a. Allowance for doubtful accounts should
Financial Position reveals their respective capital be increased from P10,000 to P15,000.
balances and the profit and loss ratio as follows: b. Merchandise should be valued from
P100,000 down to P85,000.
PARTNERS CAPITAL P/L RATIO c. Equipment’s net book value of P115,000
BALANCES should be revalued at P130,000 based
Gevera P210,000 1 on the fair market value.
Tropico P340,000 2
Canque P250,000 2 72. At what amount Paquera has to pay the
On January 1, 2017 Eduardo Degracia is admitted old partners if the purchase is at book
in the existing partnership by allowing him to value after adjustment?
purchase ¼ shares of partnership’s interest and A. P400,380
pays P250,000 provided that all partners will B. P410,937
continue to participate their share profit in the C. P414,375
original ratios. D. P415,875
68. What is the capital credit of Degracia?
A. P200,000 73. Who shall receive the cash proceeds
B. P250,000 from the sale?
C. P300,000 A. Panganiban only
D. P350,000 B. Salisana only
C. Panganiban and Salisana
69. Who shall receive the payment? D. Partnership
A. Gevera
B. Tropico 74. The present capital of the old and new
C. Canque partners after admission –
D. Partnership A. P1750,000
B. P1,835,000
70. What should be the new profit and loss C. P1,950,000
ratio of the partners? D. P1,980,000

Gevera Tropico Canque Deg. Pura Luz Igao and Sofia Goden are partners of
Southexpressway Merchandising. They shared
A. 25% 10% 45% 20%
profit and loss on an arbitrary ratio of 3:2.
B. 15% 30% 30% 25%
Junaline Estroso, has joined the partnership by
C. 20% 15% 20% 45%
buying ½ of Igao’s interest in the partnership for
D. 15% 35% 25% 25%
P220,000. The partners’ respective capital
balance on December 31, 2016 before the
71. What is the partner’s equity balances of admission are as follows:
Gevera after the admission of Degracia? Igao P450,000
A. P157,500
B. P187,500 Goden P300,000
C. P255,000
D. P300,000 Towards the end of 2017, the partnership
realized profit of P90,000.

The statement of Financial Position of Weny 75. What was the book value of Igao’s
Panganiban and Jessica Salisana showed among interest sold to Estroso?
A. P200,000
others the following capital balances just before
Luane Paquera is admitted in the partnership by B. P225,000
buying ¼ and 1/5 of Panganiban and Salisan’s C. P250,000
respective share: D. P275,000

Partners Capital Fractional 76. How much was Igao’s personal loss in
Share selling her interest to Estroso?
Panganiban P950,000 5/10 A. P3,000
Salisana P890,000 5/10 B. P4,000
The partners agreed to make adjustments on the C. P5,000
valuation of the following current and non- D. P6,000
current assets:
 77. At what amount that Estroso be credited paying its liabilities of P145,000, they have
as new partner? P35,000 cash to divide between the two of them.
A. P200,000
81. How much is the book value of the non-
B. P225,000
C. P250,000 cash assets sold?
D. P275,000 A. P215,000
B. P250,000
Annabelle Linobo, Rowena Manansala and C. P235,000
Emma Cequina are partners with capital D. P200,000
balances and profit sharing ratio as follows:
82. How much is the share of Torralba in the
Linobo Manansala Cequina realization loss?
Cap. P150,000 P100,000 P120,000 A. P35,000
Balances B. P33,000
P/L ratio 2 3 1 C. P49,000
Rommel Cahayag wishes to join the partnership D. P39,000
business by purchasing ¼ of Cequina’s interest
where the rest of the partners agree. 83. How much is the share of Rosada in the
Adjustments will be made on the following cash available for distribution?
items: A. P29,000
a. Inventory at the end of the period was B. P39,000
reported at P60,000 when it should have C. P49,000
been P70,000. D. P59,000
b. Depreciation was understated by P6,000 The partnership of Rebecca Miranda and Haydee
Cahayag pays P35,000 to Cequina. Dabucol is liquidated on August 31, 2016. The
account balances prior to the liquidation process
78. How much is corrected partner’s equity showed the following:
balance?
A. P118,000 Cash P2,000
B. P120,800 Non-Cash 200,000
C. P123,200 Accounts Payable P134,000
D. P125,000 Miranda, Loan 8,000
Miranda, Capital 30,000
79. How much is the personal gain or loss of Dabucol, Capital 30,000
Cequina?
A. P4,800 gain The partners shared profit and loss on a 60%-
B. P3,400 loss 40% basis. The non-cash were realized for
C. P4,050 loss P140,000.
D. P5,100 gain
84. How much is the gain or loss on
80. If the Statement of Financial Position is realization?
prepared right after the admisiion of A. P45,000 gain
Cahayag, He will have a share capital B. P50,000 gain
credit of C. (P60,000) loss
A. P29,800 D. (P70,000) loss
B. P30,200
C. P31,200 85. How much is the share of Dabucol on
D. P32,000 the gain or loss realization?
A. P6,000
Cecil Rosada and Andreau Torralba are partners B. P24,000
sharing a profit and loss in the ratio of 3:7. Their C. P36,000
capital balances before winding-up their D. Some other answer
business affairs were as follows:
Contributed Capital
Rosada, Capital P50,000
8% Preference of P400,000
Torralba, Capital P55,000
Shares
The partners were able to sell their non-cash Discount of P2,000
assets and realized P180,000 from the sale. After preference shares
 Ordinary shares P700,000
Subscribed share P300,000 Preference Ordinary
capital – Preference
Subscribed share P100,000 A. 50,000 shares 187,500 shares
capital – Ordinary B. 52,000 shares 190,000 shares
Subscription P75,000 C. 53,000 shares 192,500 shares
Receivable – D. 55,000 shares 193,000 shares
Preference
Subscription P50,000 90. What would be the minimum amount
Receivable – Ordinary for subscription payment as required?
Share Premium – P40,000
Ordinary Preference Ordinary
Revaluation P15,000
Increment of A. P12,500 P46,875
Property B. P13,000 P47,500
Retained Earnings P1,835,000 C. P13,500 P48,300
D. P14,000 P49,000

86. How much was legal capital of the Davao John Corporation is authorized to issue
corporation? 4,000 of ordinary shares with a par value of P100
A. P1,400,000 per share
B. P1,500,000 For incorporation purposes, answer the
C. P1,600,000 following questions:
D. P1,700,000
91. How much is the authorized share
87. How much Shareholder’s Equity balance capital?
as of December 2016? A. P200,000
A. P3,263,000 B. P300,000
B. P3,405,000 C. P400,000
C. P3,530,000 D. None of these
D. None of these
92. How much is the subscribed share
Problem capital?
Ozamiz Jeepee Corporation was approved by the A. P100,000
Securities and Exchange Commission to operate B. P140,000
with authorized share capital and par value as C. 160,000
follows: D. None of these

Preference 2,000 P100 93. How much of the subscribed share

shares capital that must be paid up?
Ordinary 5,000 shares P150 A. P25,000
Incorporators of the corporation have B. P36,000
subscribed the minimum number of shares C. P49,000
required and some with subscription payment D. None of these
requirement.
The Orland Corporation’s Income and Expense
88. How many shares of preference and Summary and Retained Earnings accounts prior
ordinary, that JP’s Corporation is to final closing showed the following postings:
authorized to issue?
Income & Expense Summary Expense
Preference Ordinary
Debit Side: Dec. 31, 2016 – P1,050,000
A. P200,000 P750,000
Credit Side: Dec. 31, 2016 – P1,800,000
B. P250,000 P800,000
C. P300,000 P850,000 Retained Earnings
D. P350,000 P900,000
Debit Side: Jan. 1, 2016 – P0
89. How many shares are required by Credit Side: Jan. 1, 2016 – P100,000
incorporators of JP’s Corporation to
meet the minimum requirement?
 94. How much is the Orland Corporation’s shares issued and outstanding with a par value
Profit or Loss during 2016 operations? P100. On the date of declaration, the market
A. (P750,000) value per share is P120.
B. P750,000
C. P850,000 98. What amount of Retained Earnings that
D. None of these should be capitalized?
A. P450,000
95. How much is the balance of Retained B. P540,000
Earnings account as of December 31, C. P600,000
2016? D. P750,000
A. P650,000
B. P750,000 99. Assuming, the corporation declares 25%
C. P850,000 share dividend, and the market value per
D. None of these share is P110, what amount of Retained
Earnings that should be capitalized?

Ronaldo Corporation’s shareholders’ equity A. P750,000

comprise of 8,000 shares of P200 par ordinary B. P825,000
shares, P400,000 of additional paid-in capital C. P900,000
and Retained Earnings of P900,000. Share D. P950,000
dividends of 6% was declared when the stock
SALIG LANG AYAW OG LAOM Corporation holds
was selling for P500 per share.
10,000 shares of its P10 par value ordinary
96. What amount of Retained Earnings shares as treasury shares reacquired in 2016 for
account should be transferred to Share P120,000. On December 31, 2017, the company
Capital? issued all 10,000 shares for P190,000.
A. P1,920,000
B. P4,800,000 100. Under cost method of
accounting for treasury shares, the
C. P240,000
reissuance would result in a credit to –
D. P96,000
A. Share Capital of P100,000
On June 30, 2016, Kent Corporation issued 4,000 B. Retained Earnings of
shares of its P100 par ordinary share in P70,000
connection with a share dividend. Kent C. Gain on Sale of Investments
shareholders’ equity accounts immediately of 70,000
before issuance of the share dividend were as D. Share Premium of P70,000
follows:

Ordinary Share P100 P2,000,000

par, 50,000 shares
authorized, 20,000
shares outstanding

Additional Paid-In 3,000,000

Capital
Retained Earnings 1,500,000

97. What should be the retained earnings

balance immediately after the share
dividend?
A. P1,100,000
B. P1,500,000
C. P2,100,000
D. P900,000
MAKAPASAR RA LAGI KA Corporation with listed
shares at Philippine Stock Exchange declared a
15% shared dividends. The company has 30,000