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1. Which of the following is not a characteristic of the proprietary theory that influences accounting for partnership? a. Partner’s salaries are viewed as a distribution of income rather than a component of net income. b. A partnership is not viewed as a separate entity, distinct...

1. Which of the following is not a characteristic of the proprietary theory that influences accounting for partnership? a. Partner’s salaries are viewed as a distribution of income rather than a component of net income. b. A partnership is not viewed as a separate entity, distinct, taxable entity. c. A partnership is characterised by limited liability. d. Changes in the ownership structure of a partnership result in the dissolution of the partnership. 2. An advantage of the partnership as a form of business organization would be a. Partners do not pay income taxes on their share in partnership income. b. A partnership is bound by the act of the partners. c. A partnership us created by mere agreements of the partners. d. A partnership may be terminated by the death or withdrawal of a partner. 3. A and B formed a partnership each contributing non-cash assets into the partnership. Partner A contributed inventory with a current market value in excess of it carrying amount. Partner B contributed fixed asset with a carrying amount in excess of its current market value. At what amount should the partnership record each of the assets contributed? Inventory Fixed Asset a. Carrying amount Market Value b. Market Value Carrying amount c. Carrying amount Carrying amount d. Market Value Market Value 4. If the partnership agreement does not specify how income is to be allocated, profits and loss should be allocated a. Equally. b. In proportion to the weighted average of capital invested during the period. c. Equitably so that partners are compensated for the time and effort expended on behalf of the partnership. d. In accordance with their capital contribution. 5. Which of the following is not a component of the formula used to distribute income? a. Salary allocation to those partners working. b. After all other allocation, the remainder divided according to the profit and loss sharing ratio. c. Interest on the average capital investments. d. Interest on notes to partners. 6. Which of the following is not considered a legitimate expense of a partnership? a. Interest paid to partners based on the amount of invested capital. b. Depreciation on assets contributed to the partnership by partners. c. Salaries for management hired to run the business. d. Supplies used in the partners offices. 7. Statement I. According to the law, if no profit or loss sharing ration has been agreed upon, the partners shall share equally. Statement II. Perdo and Kirdo formed a partnership. Perdo contributed P1,000,000 cash; while Kirdo will contribute her services. Perdo is a capitalist partner while Kirdo is an industrial partner. a. Both statements are true b. Both statements are false c. Only statement I is true d. Only statement II is true 8. The Flat and Iron partnership agreement provides for Flat to receive a 20% bonus on profits before bonus. Remaining profits and losses are divided between Flat and Iron in the ration of 2:3 respectively. Which partner has a greater advantage when the partnership has a profit or when it has loss? Profit Loss a. Flat Iron  b. Flat Flat c. Iron Flat d. Iron Iron 9. Which of the following results in dissolution of a partnership? a. The contribution of additional assets to the partnership by an existing partner. b. The receipt of a draw by an existing partner. c. The winding up of the partnership and the distribution of remaining assets to the partners. d. The withdrawal of a partner from a partnership. 10. If a new partner acquires a partnership interest directly from the partners rather than from the partnership itself, a. No entry is required. b. The partnership asset should be revalued. c. The existing partners' capital accounts should be reduced and the new partner's account increased. d. The partnership has undergone a quasi-reorganization. 11. Which of the following best characterizes the bonus method of recording a new partner's investment in a partnership? a. Net assets of the previous partnership are not revalued. b. The new partner's initial capital balance is equal to his or her investment. c. Assuming that recorded assets are properly valued, the book value of the new partnership is equal to the book value of the previous partnership and the investment of the new partner. d. The bonus always results in an increase to the previous partners' capital balances. 12. 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 other partners b. Recognized as goodwill c. Recognized as expense d. Deferred and amortized to profit or loss 13. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership: a. Partnership drawings, partnership liabilities, partnership loans, partnership capital balances. 14. In a partnership liquidation, the final cash payment to the partners should be made in accordance with the a. Partner's profit and loss sharing ratio. b. Balances of partners' capital accounts. c. Ratio of the capital contribution by partners. d. Safe payment computations. 15. The doctrine of marshaling of assets a. Is applicable only if the partnership is insolvent. b. Allows partners to first contribute personal assets to unsatisfied partnership creditors. c. Is applicable if either the partnership is insolvent or individual partners are insolvent. d. Amount owed to personal creditors and to the partnership for debit capital balances are shared proportionately from the personal assets of the partners. 16. In the liquidation of a partnership, it is necessary to (1.) distribute cash to the partners; (2.) sell non-cash assets; (3.) allocate any gain or loss on realization to the partners; and (4.) pay liabilities. These steps should be performed in the following order: a. (2), (3), (4), (1) b. (2), (3), (1), (4) c. (3), (2), (1), (4) d. (3), (2), (4), (1) 17. In accounting for the lump-sum liquidation of a partnership, cash payments to partners after all non-partner creditors' claims have been satisfied, but before the final cash distribution, should be according to a. The partners' relative profit and loss sharing ratio.  b. The final balances in partner capital accounts. c. The partners' relative share of the gain or loss on liquidation. d. Safe payment computations. 18. Which of the following best illustrates the insolvency of a firm? a. The filing of bankruptcy proceedings against the firm. b. A deficit in the firm's retained earnings. c. The firm has more liabilities than assets. d. The firm has negative working capital. 19. A voluntary winding-up commences when: a. The members of the board pass a special resolution to wind up. b. An application is field with the court by the members of the board. c. The company is unable to pay its debts. d. An unpaid creditor applies for the winding up. 20. If the value of the pledged property is lesser than the obligation, what is the treatment of the liability? a. Partially secured. b. Fully secured. c. Collateralized. d. Unsecured. 21. The primary difference between a balance sheet and an accounting statement of affairs is that: a. A balance sheet reflects book values, while a statement of affairs emphasizes realization values. b. Assets are arranged in a different sequence. c. Liabilities are arranged in a different sequence. d. Owners' equity is not considered in the statement of affairs. 22. An accounting statement of affairs of a corporation in financial difficulty indicates that unsecured creditors would receive P0.40 on the peso. Which one of the following assets is most likely to realize the smallest percentage of its book value? a. Accounts Receivable. b. Inventories. c. Plant and Equipment. d. Goodwill. 23. An arrangement for creditors to accept an amount less than the amount owed to them is referred to as a a. Charge and discharge agreement. b. Composition agreement. c. Bankruptcy agreement. d. Chandler agreement. 24. In a liquidation proceeding, if the proceeds on the realization of an asset exceed the lien against that asset, the excess is assigned to a. The holder of the lien. b. Other lien holders whose assets will not realize a sufficient amount to cover their liens. c. Meet the claims of the unsecured creditors. d. The stockholders of the corporation. 25. On a statement of realization and liquidation covering the six months ended August 31, 20X2 a. Liabilities to be liquidated represent the amount of obligation as of March 1. b. Liabilities to be liquidated represent the amount of obligations as of August 31. c. Liabilities liquidated represents obligations partially settled. d. Liabilities not liquidated represent amount that creditors will be unable to collect. 26. On April 30, 2024, Al, Ben, and Ces formed a partnership by combining their separate business proprietorships. Al contributed cash of P50,000. Ben 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. Ces 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 capital account balance at April 30, 2024? a. Al b. Ben c. Ces d. All capital balances are equal. 27. - 30. A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment with assessed value of P100,000 with historical cost of P800,000 and accumulated depreciation of P600,000. B will contribute a land and building with book value of P1,200,000 and fair market value of P1,500,000. The land and building is subject to a mortgage payable amounting to P300,000 to be assumed by the partnership. The partners agreed that B will have 60% capital interest in the partnership. They agreed that C will contribute sufficient cash to the partnership. A day after the partnership formation, the equipment was sold for P300,000, a. What is the total agreed capitalization of the ABC Partnership? a. 1,500,000 b. 2,000,000 c. 2,500,000 d. 3,000,000 b. What is the capital credit of A in the ABC Partnership after the formation? a. 100,000 b. 200,000 c. 300,000 d. 400,000 c. What is the capital credit of B in the ABC Partnership after the formation? a. 900,000 b. 1,500,000 c. 1,400,000 d. 1,200,000 d. What is the cash to be contributed by C in the ABC Partnership? a. 500,000 b. 600,000 c. 700,000 d. 800,000 31. The ABC Partnership reports net income of P60,000. If Partners A, B, and C have income ratio of 50%, 30% and 20% respectively. What is the share of Partner C from the net income of the partnership, if he was given a capital ratio of 25%? a. 30,000 b. 12,000 c. 18,000 d. 15,000 32. – 36. On January 1, 2024, A, B and C formed ABC Partnership with original capital contribution of P300,000, P500,000, and P200,000. A is appointed as managing partner. During 2024, A, B and C made additional investments of P500,000, P200,000, and P300,000, respectively. At the end of 2024, A, B and C made drawings of P200,000, P100,000 and P400,009, respectively. At the end of 2024, the capital balance of C is reported at P320,000. The profit or loss agreement of the partners is provided below: 10% interest in original capital contribution of the partners. Quarterly salary of P40,000 and P10,000 for A and B, respectively. Bonus to A equivalent to 20% of Net Income after interest and salary to all partners. Remainder is to be distributed equally among the partners. a. What is C's share in the partnership profit for the year ended December 31, 2024?  a. 120,000 b. 320,000 c. 180,000 d. 220,000 b. What is the partnership profit for the year ended December 31, 2024? a. 900,000 b. 1,020,000 c. 1,050,000 d. 960,000 c. What is the bonus given to A as managing partner for the year ended December 31, 2024? a. 120,000 b. 150,000 c. 60,000 d. 100,000 37. Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2024, their respective capital accounts were as follows: Blau 60,000 Rubi 50,000 On that date, Lind was admitted as a partner with one-third interest in capital, and profits for an investment of P40,000. The new partnership began with total capital of P150,000. Immediately after Lind's admission, Blau's capital should be a. 50,000 b. 54,000 c. 56,667 d. 60,000 38. Ranken purchases 50% of Lark's capital interest in the K and L partnership for P22,000. If the capital balances of Kim and Lark are P40,000 and P30,000, respectively, Ranken's capital balance following the purchase is a. 22,000 b. 35,000 c. 20,000 d. 15,000 39. The following condensed balance sheet is presented for the partnership of Smith and Jones, who share profits and losses in the ratio of 69:40, respectively: Other assets P 450,000 Smith, loan 20,000 P 470,000 Accounts payable P 120,000 Smith, capital 195,000 Jones, capital 155,000 P 470,000 The partners decided to liquidate the partnership. If the other assets are sold for P385,000, what amoubt available cash should be distributed to Smith? a. 136,000 b. 156,000 c. 159,000 d. 195,000 40. The following balance sheet is presented for the partnership of A, B, and C, who share profits and losses in the respectively ratio of 5:3:2. Assets Liabilities and Capital Cash 120,000 Liabilities 280,000  Other Assets 1,080,000 A, capital 560,000 B, capital 320,000 C, capital 40,000 Total 1,200,000 Total 1,200,000 Assume that the three partners decided to liquidate the partnership. If the other assets are sold for P800,000, how should the available cash be distributed to each partner? A B C a. 280,000. 320,000. 40,000 b. 324,000. 236,000. 16,000 c. 410,000. 230,000. 0 d. 412,000. 228,000. 0 41. Seco Corp. was forced into bankruptcy and is in the process of liquidating assets and paying claims. Unsecured claims will be paid at the rate of P0.40 on the peso. Hale holds a P30,000 non-interest bearings note receivable from Seco collateralized by an asset with a book value of P35,000 and a liquidation value of P5,000. The amount to be realized by Hale on this note is a. 5,000 b. 12,000 c. 15,000 d. 17,000 42. Liabilities of P180,000 existed at the beginning of a period. During the period, liabilities recorded at P88,000 were settled for P76,000, and a new liability of P24,000 were incurred. A statement of realization and liquidation would show liabilities not liquidated of a. 92,000 b. 116,000 c. 128,000 d. 204,000 43. Kent Co. filed a voluntary bankruptcy petition on August 15, 2024, and the statement of affairs reflected the following amounts: Book Value Estimated Current Value Assets Assets pledged with fully secured creditors P300,000 P370,000 Assets pledged with partially secured creditors 180,000 120,000 Free assets 420,000 320,000 P900,000 P810,000 Liabilities Liabilities with priority P 70,000 Fully secured creditors 260,000 Partially secured creditors 200,000 Unsecured creditors 540,000 P1,070,000 Assume that the assets are converts to cash at the estimated current values and the business is liquidated. What amount of cash will be available to pay unsecured non-priority claims? a. 240,000 b. 280,000 c. 320,000 d. 360,000 44. - 45. The following selected account balances were taken from the balance sheet of Quitting Corp. as of December 31, 2024, immediately before the take-over of the trustee: Marketable securities P300,000 Inventories 110,000  Land 150,000 Building 400,000 Additional information: Marketable securities have present market value of P320,000. These securities have been pledged to secure notes payable of P280,000. The estimated worth of inventories is P70,000. However, inventories with book value of P50,000 have been pledged to secure notes payable of P60,000. The realizable value of the inventories pledged is estimated to be P40,000. Land and building are estimated to have a total realizable value of P450,000. This property is pledged to secure the mortgage payable of P250,000. a. What is the estimated amount available for preferred claims and unsecured creditors out of assets pledged with fully secured creditors? a. 840,000 b. 810,000 c. 770,000 d. 240,000 b. What is the total amount of net free assets? a. 810,000 b. 770,000 c. 270,000 d. 240,000