Quiz-chapter1 Partnership Formation And Operations 1t5d35

ST. THOMAS MORE COLLEGE- CLARK College of Business

AFAR: First Quiz Name: Year & Section:

Date: Score:

Quiz 1 1. MT and JF formed a partnership on April 1 and contributed the following assets: MT JF Cash . . . . . . . . . . . . . . . . . . . . . . . . P 150,000 P 50,000 Land . . . . . . . . . . . . . . . . . . . . . . . . 310,000 The land was subject to a P30,000 mortgage, which the partnership assumed. Under the partnership agreement, MT and JF will share profit and loss in the ratio of one-third and respectively. JF’s capital at April 1 should be: 2. On April 30, 20x4, AA, BB, and CC formed a partnership by combining their separate business proprietorships. AA contributed P50,000 cash. BB 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. CC 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 Iosses are to be shared equally but is silent regarding capital contributions. Which partner has the largest April 30, 20x4, capital balance? a. b.

AA BB

c. d.

CC All capital balances are equal

3. Albert, Claude, and Jamie form a partnership by contributing P25,000, P70,000, and P80,000, respectively. In addition, the partners agree that Albert should receive P20,000 of goodwill because of his special skills relevant to this business. What amount of capital will exist for Albert when the partnership is formed? 4. Chris and David are forming a partnership with contributions of P75,000 and P125,000, respectively. In addition, they agree that they will recognize P25,000 goodwill with regard to David’s s in the area. What is the total amount of capital that will exist for the partnership immediately after it is formed? 5. Luca and Mira formed a partnership on 7/1/20x4 and contributed the following assets:

Luca

Mira

Cash P65,000 P100,000 Land 300,000 The realty was subject to a mortgage of P25,000, which was assumed by the partnership. The partnership agreement provides that Luca and Mira will share profits and losses in the ratio of onethird and two-thirds, respectively. Mira’s capital at 7/1/20x4 should be

On 7/1/20x4, Burr and Lapp formed a partnership, agreeing to share profits and losses in the ratio of 4:6, respectively. Burr contributed a parcel of land that cost him P25,000. Lapp contributed P50,000 cash. The land was sold for P50,000 on 7/2/20x4-one day after the partnership’s formation. How much should be recorded in Burr’s capital upon partnership’s formation? 6. On 7/1/20x4, Pane and Sills formed a partnership, and each contributed assets with agreed-upon values as follows:

Pane

Sill

Cash P 40,000 P 30,000 Machinery and equipment 100,000 Land 350,000

The building is subject to a mortgage loan of P100,000, which is to be assumed by the partnership. The agreed-upon value of the building is P50,000 more than the tax basis of P300,000. The partnership agreement provides that Pane and Sills share profits and losses 60% and 40%, respectively. Using this information, on 7/1/20x4, the balance in Sills’s capital should be:

Use the following information for question 8 and 9: On September 30,20x4, LL its MM for an interest in his business. On this date, LL’s capital shows a balance of P158,400. The following were agreed upon before the formation of the partnership: a. Prepaid expenses of P17,500 and accrued expenses of P5,000 are to be recognize b. 5% of the outstanding s receivable of Lopez amounting to P100,000 is to be recognized as uncollectible. c. MM is to be credited with a one-third interest in the partnership and is to invest cash aside from the P50,000 worth of merchandise. 7. How much cash is to be invested by MM? a. P32,950 c. b. P55,300 d.

P82,950 P 5,300

8. The total capital of the partnership is: a. P221,200 b. P198,850

P171,200 P248,850

c. d.

9. Chris is a partner in a local partnership. The profit and loss sharing agreement includes an interest allocation of 7 percent on the invested capital. The capital of Chris reveals that he had a beginning capital balance of P50,000. He withdrew P10,000 on May 1 and invested P25,000 on October 31. Rounded to the nearest peso, what is Chris’ weighted average capital balance? 10. Richard is a partner in a local partnership. The profit and loss sharing agreement includes an interest allocation of 8 percent on the invested capital. Richard had a beginning capital balance of P60,000. He invested P30,000 on March 1, withdrew P20,000 on August 1, and invested P40,000 on December 1. Rounded to the nearest dollar, what dollar amount is allocated to Richard as interest on capital balance if the weighted average capital balance is used as the basis of the computation? 11. Shawn is a managing partner in a local business. Part of his profit allocation is a bonus based on the store’s operating income. The bonus is 8 percent of operating income in excess of P200,000 after deducting the bonus. If operating income for the year is P250,000, what is Shawn’s bonus (rounded to the nearest dollar)? 12. Norman, Sarah, and Taylor are partners. The partnership income for the period is P130,000. The partnership agreement assigns salaries to the partners of P10,000, P15,000, and P18,000, respectively. In addition, the partners have profit and loss residual ratios of 30%, 45%, and 25%. What is the amount of profit and loss allocated to Sarah as a result of applying the residual ratios? 13. Nick, Joe, and Mike are partners. The company has P150,000 net income for the period. How is this income divided to the partners if the following profit and loss allocation process is followed? Nick Joe Mike Weighted average capital P200,000 P350,000 P180,000 Salary 25,000 15,000 35,000 Bonus .1 (NI - P100,000) Residual profit/loss ratios .25 .45 .30 Return on invested capital 9% 14. Harriet, Bob, and Tim are partners. Income for the current year is P500,000. The profit and loss agreement states that salaries are P35,000, P50,000, and P40,000, respectively. In addition, the residual profit and loss ratios are 40%, 30%, and 30%, respectively. How much of the profit is allocated to Harriet?