LA SALLE UNIVERSITY
College of Business and Accountancy
First Semester 2024-2025
FINANCIAL ACCOUNTING AND
REPORTING
Practice Problems on Partnership
Accounting 2025/2026 LA SALLE
UNIVERSITY
November 18, 2024
Part 1: Nature and Formation
1. What is the minimum number of partners required to 6. Partner’s interest in a partnership is generally equal
commence a partnership business? a. 20 to:
b. 10 a. The fair value of net assets at date of
c. 2 contribution.
d. 4
b. The sum of the fair values of the assets the
2. With regard to a partnership business which of the partner contributes to the firm, increased by
following statements are correct? any liabilities of other partners assumed and
I. Every partner has to participate in decreased by any personal liabilities that are
management. assumed by other partners.
II. Every partner needs to contribute equal c. The sum of the bases of the individual
amounts as capital. assets the partner contributes to the firm,
decreased by the partner’s share of
III. The number of partners may be from two to
partnership liabilities.
any number.
d. The unamortized cost of the assets to the
IV. Each partner has unlimited joint and several
partner.
responsibility to meet partnership debts.
a. I and IV
7. Which of the following statements, concerning
b. II and IV
partnership is true?
c. III and IV
a. A partnership is a legal entity, separate and
d. I and II distinct from the individual partners.
b. Individual partners are jointly liable for the
3. The partner’s drawing accounts are used: debts and obligations of a partnership.
a. To record the partner’s salaries. c. Income tax is levied on the individual
b. To reduce the partner’s capital account balances partners’ share of the net income of a
at the end of the period. partnership and is reported in their personal
c. In the same manner as the partners’ loan tax returns.
accounts. d. All of the above is true.
d. To record the partners’ share of net income or
loss for an accounting period. 8. On July 1, 2023, Long and Short formed a
partnership. Long contributed cash. Short,
4. Which of the following accounts can be found in the previously a sole proprietor, contributed property
MN partnerships’ general ledger? other than cash, including realty subject to a
I. Receivable from M mortgage, which the partnership assumed. Short’s
II. M drawing III. M loan a. I only. capital account of July 1, 2023, should be recorded
at:
b. I and II.
a. Short’s book value of the property at July 1,
c. I, II, and III.
2023.
d. II and III.
b. Short’s book value of the property less
mortgage payable at July 1, 2023.
5. Which of the following statements about partnership
c. Fair value of the property less the mortgage
is true?
payable at July 1, 2023.
a. Two accounts are generally maintained for each
d. The fair value of the property at July 1, 2023.
partner, a drawing account and a capital
account.
9. A partnership is formed by two individuals who were
b. The drawing account is credited with the
previously sole proprietors. Property other than cash
partner’s withdrawals of cash or other assets
that is part of the initial investment in the partnership
, property at the date of the investment, whichever is Reyes Santos
higher. Cash ₱200,000 ₱300,000 Inventory -
b. Proprietor’s book values or the fair value of 150,000 Building - 400,000
the property at the date of the investment, Equipment 150,000 -
whichever is lower. The building is subject to mortgage of ₱100,000,
c. Proprietor’s book values of the property at which the partnership has assumed. The partnership
the date of investment. agreement also specifies the profits and losses are
d. Fair value of the property at the date of the to be distributed evenly. What amount should be
recorded as capital for Reyes and Santos at the
investment.
formation of the partnership?
10. On April 30, 2023, Apple, Berry and Cherry formed a a. ₱350,000 for Reyes and ₱850,000 for Santos.
partnership by combining their separate business b. ₱350,000 for Reyes and ₱750,000 for Santos.
proprietorships. Apple contributed ₱50,000 cash, c. ₱550,000 for Reyes and ₱550,000 for Santos.
Berry contributed property with a ₱36,000 book d. ₱600,000 for Reyes and ₱600,000 for Santos.
value, a ₱40,000 original cost, and ₱80,000 fair
value. The partnership assumed a ₱35,000 mortgage 14. Maria and Nora entered into a partnership on March
attached to the property. Cherry contributed 1, 2023 by investing the following assets:
equipment with a ₱30,000 carrying amount, a Maria Nora
₱75,000 original cost, and ₱55,000 fair value. The Cash ₱30,000 ₱-
partnership agreement specifies that profits and Merchandise inventory - 90,000 Computer
losses are to be shared equally but is silent regarding equipment - 160,000
capital contributions. Which partner has the smallest Furniture and fixtures 200,000 -
April 30, 2023, capital account balance? a. Apple
b. Berry The agreement between Maria and Nora provides
c. Cherry that profits and losses are to be divided into 40% to
Maria and 60% to Nora, and that the partnership is to
d. None of the above
assume a liability on the computer equipment of
₱60,000. The partners further agree that Nora is to
11. On May 1, 2023, Jose and Maria formed a
receive a capital credit equal to her profit and loss
partnership and agreed to share profits and losses
ratio. How much cash is to be invested by Nora? a.
in the ratio of 3:7, respectively. Jose contributed a
₱135,000
computer that cost him ₱50,000. Maria contributed
b. ₱145,000
₱200,000 cash. The computer was sold for ₱55,000
on May 1, 2023 immediately after the formation of c. ₱155,000
the partnership. What amount should be recorded in d. ₱130,000
Jose’s capital account on formation of the
partnership? a. ₱55,000 15. Roy, Sam and Tim decided to engage in a real
b. ₱51,500 estate venture as a partnership. Roy invested
₱140,000 cash and Sam provided an office and
c. ₱60,000
furnishings valued at ₱220,000. (There is ₱60,000
d. ₱50,000
note payable remaining on the furnishings to be
assumed by the partnership). Although Tim has no
12. Mateo and Julio formed a partnership on April 1 and
tangible assets to invest, both Roy and Sam believe
contributed the following assets:
that Tim’s expert salesmanship provides an
adequate investment. The partners agree to receive
Mateo Julio
an equal capital interest in the partnership. Using
Cash ₱300,000 ₱100,000
the bonus method, what is the capital balance of
Land 300,000
Tim? a. ₱50,000
The land was subject to a mortgage of ₱50,000,
which was assumed by the partnership. Under the b. Zero
partnership contract, Mateo and Julio will share c. ₱140,000
profit and loss in the ratio of one-third and two-third d. ₱100,000
respectively. Julio’s capital account at April 1 should
be: 16. The partnership of Perez and Reyes was formed on
a. ₱350,000 March 31, 2023. At that date, Perez invested
b. ₱300,000 ₱50,000 cash and office equipment valued at
c. ₱400,000 ₱30,000. Reyes invested ₱70,000 cash,
d. ₱450,000 merchandise valued at ₱110,000, and furniture
valued at ₱100,000, subject to a notes payable of
₱50,000 (which the partnership assumes). The
13. Reyes and Santos drafted a partnership agreement
College of Business and Accountancy
First Semester 2024-2025
FINANCIAL ACCOUNTING AND
REPORTING
Practice Problems on Partnership
Accounting 2025/2026 LA SALLE
UNIVERSITY
November 18, 2024
Part 1: Nature and Formation
1. What is the minimum number of partners required to 6. Partner’s interest in a partnership is generally equal
commence a partnership business? a. 20 to:
b. 10 a. The fair value of net assets at date of
c. 2 contribution.
d. 4
b. The sum of the fair values of the assets the
2. With regard to a partnership business which of the partner contributes to the firm, increased by
following statements are correct? any liabilities of other partners assumed and
I. Every partner has to participate in decreased by any personal liabilities that are
management. assumed by other partners.
II. Every partner needs to contribute equal c. The sum of the bases of the individual
amounts as capital. assets the partner contributes to the firm,
decreased by the partner’s share of
III. The number of partners may be from two to
partnership liabilities.
any number.
d. The unamortized cost of the assets to the
IV. Each partner has unlimited joint and several
partner.
responsibility to meet partnership debts.
a. I and IV
7. Which of the following statements, concerning
b. II and IV
partnership is true?
c. III and IV
a. A partnership is a legal entity, separate and
d. I and II distinct from the individual partners.
b. Individual partners are jointly liable for the
3. The partner’s drawing accounts are used: debts and obligations of a partnership.
a. To record the partner’s salaries. c. Income tax is levied on the individual
b. To reduce the partner’s capital account balances partners’ share of the net income of a
at the end of the period. partnership and is reported in their personal
c. In the same manner as the partners’ loan tax returns.
accounts. d. All of the above is true.
d. To record the partners’ share of net income or
loss for an accounting period. 8. On July 1, 2023, Long and Short formed a
partnership. Long contributed cash. Short,
4. Which of the following accounts can be found in the previously a sole proprietor, contributed property
MN partnerships’ general ledger? other than cash, including realty subject to a
I. Receivable from M mortgage, which the partnership assumed. Short’s
II. M drawing III. M loan a. I only. capital account of July 1, 2023, should be recorded
at:
b. I and II.
a. Short’s book value of the property at July 1,
c. I, II, and III.
2023.
d. II and III.
b. Short’s book value of the property less
mortgage payable at July 1, 2023.
5. Which of the following statements about partnership
c. Fair value of the property less the mortgage
is true?
payable at July 1, 2023.
a. Two accounts are generally maintained for each
d. The fair value of the property at July 1, 2023.
partner, a drawing account and a capital
account.
9. A partnership is formed by two individuals who were
b. The drawing account is credited with the
previously sole proprietors. Property other than cash
partner’s withdrawals of cash or other assets
that is part of the initial investment in the partnership
, property at the date of the investment, whichever is Reyes Santos
higher. Cash ₱200,000 ₱300,000 Inventory -
b. Proprietor’s book values or the fair value of 150,000 Building - 400,000
the property at the date of the investment, Equipment 150,000 -
whichever is lower. The building is subject to mortgage of ₱100,000,
c. Proprietor’s book values of the property at which the partnership has assumed. The partnership
the date of investment. agreement also specifies the profits and losses are
d. Fair value of the property at the date of the to be distributed evenly. What amount should be
recorded as capital for Reyes and Santos at the
investment.
formation of the partnership?
10. On April 30, 2023, Apple, Berry and Cherry formed a a. ₱350,000 for Reyes and ₱850,000 for Santos.
partnership by combining their separate business b. ₱350,000 for Reyes and ₱750,000 for Santos.
proprietorships. Apple contributed ₱50,000 cash, c. ₱550,000 for Reyes and ₱550,000 for Santos.
Berry contributed property with a ₱36,000 book d. ₱600,000 for Reyes and ₱600,000 for Santos.
value, a ₱40,000 original cost, and ₱80,000 fair
value. The partnership assumed a ₱35,000 mortgage 14. Maria and Nora entered into a partnership on March
attached to the property. Cherry contributed 1, 2023 by investing the following assets:
equipment with a ₱30,000 carrying amount, a Maria Nora
₱75,000 original cost, and ₱55,000 fair value. The Cash ₱30,000 ₱-
partnership agreement specifies that profits and Merchandise inventory - 90,000 Computer
losses are to be shared equally but is silent regarding equipment - 160,000
capital contributions. Which partner has the smallest Furniture and fixtures 200,000 -
April 30, 2023, capital account balance? a. Apple
b. Berry The agreement between Maria and Nora provides
c. Cherry that profits and losses are to be divided into 40% to
Maria and 60% to Nora, and that the partnership is to
d. None of the above
assume a liability on the computer equipment of
₱60,000. The partners further agree that Nora is to
11. On May 1, 2023, Jose and Maria formed a
receive a capital credit equal to her profit and loss
partnership and agreed to share profits and losses
ratio. How much cash is to be invested by Nora? a.
in the ratio of 3:7, respectively. Jose contributed a
₱135,000
computer that cost him ₱50,000. Maria contributed
b. ₱145,000
₱200,000 cash. The computer was sold for ₱55,000
on May 1, 2023 immediately after the formation of c. ₱155,000
the partnership. What amount should be recorded in d. ₱130,000
Jose’s capital account on formation of the
partnership? a. ₱55,000 15. Roy, Sam and Tim decided to engage in a real
b. ₱51,500 estate venture as a partnership. Roy invested
₱140,000 cash and Sam provided an office and
c. ₱60,000
furnishings valued at ₱220,000. (There is ₱60,000
d. ₱50,000
note payable remaining on the furnishings to be
assumed by the partnership). Although Tim has no
12. Mateo and Julio formed a partnership on April 1 and
tangible assets to invest, both Roy and Sam believe
contributed the following assets:
that Tim’s expert salesmanship provides an
adequate investment. The partners agree to receive
Mateo Julio
an equal capital interest in the partnership. Using
Cash ₱300,000 ₱100,000
the bonus method, what is the capital balance of
Land 300,000
Tim? a. ₱50,000
The land was subject to a mortgage of ₱50,000,
which was assumed by the partnership. Under the b. Zero
partnership contract, Mateo and Julio will share c. ₱140,000
profit and loss in the ratio of one-third and two-third d. ₱100,000
respectively. Julio’s capital account at April 1 should
be: 16. The partnership of Perez and Reyes was formed on
a. ₱350,000 March 31, 2023. At that date, Perez invested
b. ₱300,000 ₱50,000 cash and office equipment valued at
c. ₱400,000 ₱30,000. Reyes invested ₱70,000 cash,
d. ₱450,000 merchandise valued at ₱110,000, and furniture
valued at ₱100,000, subject to a notes payable of
₱50,000 (which the partnership assumes). The
13. Reyes and Santos drafted a partnership agreement
