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