BAFINAR – ADVANCED FINANCIAL ACCOUNTING AND REPORTING (Quiz 2)

1. The following instances dissolve a partnership except

a. Admission of a new partner c. Conversion of partnership into corporation
b. Change in the name of the partnership d. Revaluation of partnership assets
2. When a new partner is admitted by his direct investment in the partnership and if his agreed capital credit is
more than his agreed total contributed capital, there is a
a. bonus to new partner c. no bonus to all partners
b. bonus to old partners d. claim from new partner
3. The following transactions will affect the balance of the total partnership capital except
a. Retirement of a partner by settlement equal to his interest
b. The partnership generates net income for the year
c. Admission by purchase without implied goodwill, but with bonus
d. Permanent withdrawal by partners
4. Upon dissolution, the partners may agree to adjust the partnership assets and liabilities. The net effect of such
restatement of partnership assets and liabilities must be adjusted to the respective partners’ capital balances
based on their
a. ending capital balances c. new profit and loss ratio
b. old profit and loss ratio d. beginning capital balances
5. If bonus is traceable to the existing partners, it is allocated among them according to the
a. profit or loss agreement of the existing partnership
b. profit or loss agreement of the new partnership
c. capital ratio of existing partners
d. bonus to incoming partner
6. When Jill retired from the partnership of Jill, Bill and Hill, the final settlement of her interest exceeded her capital
balance. Under the bonus method, the excess
a. was recorded as goodwill c. reduced the capital balances of Bill and Hill
b. was recorded as expense d. had no effect on the capital balances of Bill and Hill
7. The capital balances in the FSH are Farrah’s capital P600,000, Sarrah’s capital P500,000, and Hannah capital
P400,000, and income ratios are 5:3:2, respectively. The FISH partnership is formed by admitting Irish into the
firm with a cash investment of P600,000 for a 25% capital interest. The bonus to be credited to Hannah’s capital
in admitting Irish is:
a. P100,000 b. P75,000 c. P37,500 d. P15,000
8. On December 31, 2013, Alan and Dino are partners with capital balances of P80,000 and P40,000 respectively.
They share profits and losses in the ratio of 2:1. On this date Steve invests P36,000 cash for one-fifth interest in
the capital and profit of the new partnership. The partners agree that the unrecorded partnership goodwill is to
be recorded simultaneously with the admission of Steve. The total unrecorded goodwill of the firm is
a. P24,000 b. P30,000 c. P 4,800 d. P 6,000
9. A partnership has the following balances:
William (40% of gains and losses) P220,000
Jennings (40%) 160,000
Bryan (20%) 110,000
Darrow invests P250,000 in cash for a 30 percent ownership interest. The money goes to the business. No
goodwill or other revaluation is to be recorded. After the transaction, what is Jenning’s capital balance?
a. P160,000 b. P168,000 c. P170,200 d. P171,200
10. X and Y are partners sharing profits and losses in the ration of 6:4 respectively. On January 2, the partners
decided to admit Z as a new partner upon his investment of P16,000. On this date, the interest in the partnership
of X and Y are as follows: X, P23,000 and Y, P18,6000. Assuming the new partner is given a one-third interest in
the firm and the assets are revalued. The capital balances of the partners after the admission of Z are
a. X, P23,000; Y, P18,600; Z, P20,800 c. X, P23,500; Y, P18,600; Z, P16,000
b. X, P23,240; Y, P18,760; Z, P16,000 d. X, P23,000; Y, P18,600; Z, P16,000

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11. The liquidation of the partnership of Emma, Earl and Ester resulted in a deficiency in Emma’s capital account of
P100,000. Emma can contribute only P25,000 to offset her deficiency. Earl and Ester, who have capital balances
of P250,000 and P50,000 and share profits and losses in the ratio of 2:3, will absorb the deficiency as follows:
a. Earl, P30,000; Ester, P45,000 c. Earl, P45,000; Ester, P30,000
b. Earl, P37,500; Ester, P37,500 d. Earl, P0; Ester, P0
12. Upon partnership liquidation, payments should be made in this order of priority
a. Outside creditors, partners for capital accounts and partners for loan accounts
b. Partners for capital accounts, partners for loan accounts and outside creditors
c. Partners for loan accounts, partners for capital accounts and outside creditors
d. Outside creditors, partners for loan accounts, partners for capital accounts
13. Which of the following is not correct with respect to an installment liquidation of a partnership?
a. Partners with greatest ability to absorb losses and expenses are first to receive installment distributions
b. Distributions to partners are always made in according to their profit sharing percentages
c. All remaining liquidation expenses are anticipated
d. All non-cash assets are assumed to be worthless
14. Assuming no loans from partners, how is a partners’ loss absorption potential computed?
a. Multiply by his pre-liquidation capital balance by his profit and loss ratio
b. Multiply his pre-liquidation capital balance by his fractional share of profits and losses
c. Divide her pre-liquidation capital balance by her profit and loss ratio
d. Divide her profit and loss ratio by her pre-liquidation capital balance
15. Espina, Espinosa, Esteban and Estellita are partners, sharing earnings in the ratio of 3:4:6:8. The balance of their
capital accounts on December 31, 2010 are as follows:
Espina P1,000 Esteban P25,000
Espinosa 25,000 Estrellita 9,000
The partners decide to liquidate, and they accordingly convert the non-cash assets into P23,200 of cash. After
paying the liabilities amounting to P3,000, they have P22,000 to divide. Assume that a debit balance in any of the
partner’s capital is uncollectible. The book value of the non-cash assets amounted to
a. P25,200 b. P45,400 c. P61,000 d. P63,000
16. Based on #15, the share of Espina in the loss upon conversion of the non-cash assets into cash was
a. P5,400 b. P23,200 c. P37,800 d. P61,000
17. Based on #15, how much did Esteban get when the P22,200 was divided?
a. P6,432 b. P8,320 c. P10,000 d. P14,200
18. As of December 31, 2010, the book value of 3E Partnership showed capital balances of E1 – P40,000; E2 –
P25,000; E3 – P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decide to dissolve
and liquidate. The sold all the non-cash assets for P37,000 cash. After settlement of all liabilities amounting to
P12,000, they still have P28,000 cash left for distribution. The loss on realization of the non-cash assets was
a. P28,000 b. P40,000 c. P42,000 d. P45,000
19. Based on #18, and assuming that any debit balance of partners’ capital is uncollectible, the share of E1 on
P28,000 cash for distribution was
a. P17,800 b. P18,000 c. P19,000 d. P40,000
20. The following statement of financial position was prepared for Elaine, Flor, and Gina Partnership on March 31,
2010
Cash P25,000 Liabilities P52,000
Other assets 180,000 Elaine, Capital (40%) 40,000
Flor, Capital (40%) 65,000
Gina, Capital (20%) 48,000
Total Assets P205,000 Total Liabilities and Equity P205,000
The partnership is being liquidated by the sale of assets in installments. The first sale of non-cash assets having a
book value of P90,000 realizes P50,000. The amount of cash each partner should receive in the first installation is
Elaine Flor Gina Elaine Flor Gina
a. P 0 P5,000 P18,000 c. P27,000 P5,000 P18,000
b. P12,000 P13,000 P22,000 d. P24,000 P49,000 P40,000

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21. Based on #20, and assuming P3,000 cash is withheld for possible liquidation expenses, how much cash should
Gina receive?
a. P3,000 b. P17,000 c. P21,000 d. P40,000
22. The statement of financial postion of XYZ Partneship as of December 31, 2009 is presented below
Cash P20,000 Liabilities P50,000
Other assets 280,000 Dalmacio, Loan Payable 25,000
Dalmacio, Capital 125,000
Damian, Capital 70,000
Davide, Capital 30,000
Total Assets P300,000 Total Liabilities and Equity P300,000
Profits and loss ratio is 3:2:1 for Dalmacio, Damian and Davide respectively. Other assets were realized as
follows:
Date Cash received Book value
January 2010 P60,000 P90,000
February 2010 35,000 77,000
March 2010 125,000 113,000
Cash is distributed as assets are realized. The total loss to Dalmacio is
a. P10,000 b. P20,000 c. P30,000 d. P60,000
23. Same as #22, the total cash received by Damian is
a. P15,000 b. P20,000 c. P50,000 d. P70,000
24. Same of #22, the cash received by Davide in January is
a. None b. P200 c. P500 d. P1,000
25. The statement of financial position of the firm of A, B, C and D, just prior to liquidation shows:
A, Loan P1,000 C, Capital P6,850
A, Capital 5,500 D, Capital 4,500
B, Capital 5,150
A,B, C, and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this is distributed to
partners. How much cash should C receive?
a. P3,283 b. P 0 c. P2,717 d. P6,000