Chapter 4 – Partnership

REVIEW of the LEARNING OBJECTIVES MULTIPLE CHOICE

MC 4-1 If the total contributed capital exceeds the agreed capital with the new partner’s
1. Define partnership dissolution and identify the conditions giving rise to it. Partnership investment is the same as his capital credit, then the admission of the new partner
dissolution is a change in the relation of the partners caused by any partner ceasing to be involved a
associated in the carrying out of the business. Dissolution of a partnership may be caused a. bonus to new partner
by any of the following conditions: (1) admission of new partner; (2) retirement or b. bonus to old partners
withdrawal of a partner; (3) death, incapacity or bankruptcy of a partner, or (4) c. negative asset revaluation
incorporation of a partnership. d. positive asset revaluation

2. Understand the accounting procedures to record the admission of a new partner by MC 4-2 If the agreed capital is equal to the total contributed capital with the capital credit and
purchase. A new partner may be admitted into the partnership by purchasing a capital contribution of the old and new partners being the same, there exists a. asset
equity interest from one or more of the old partners. Admission of a new partner by revaluation and bonus
purchase represents a transfer of capital from the old partner/partners to the new partner. b. negative asset revaluation
The transfer of capital is recorded at the book value of the interest sold regardless of the c. no asset revaluation and no bonus
amount paid for the interest. Any gain or loss indicated in the transaction is a personal gain d. positive asset revaluation
or loss of the selling partner. Asset revaluation, however, may be undertaken by the old
partnership before admission of a new partner. In such a case, a positive or negative asset
MC 4-3 If the capital credit of the new partner is less than his contribution with no adjustment
revaluation will always accrue to the old partners.
in asset values. then the admission resulted in a
a. bonus to the old partners
3. Understand the accounting procedures to record the admission of a new partner by
b. bonus to the new partner
investment. The admission of a new partner by investment is a transaction between the
c. no bonus
original partnership and the new partner. The new partner's contribution increases the
d. both A and B
total assets and the total capital of the partnership. When the capital contribution of the
new partner is not equal to his capital credit in the new partnership or when the capital
contributions of the old partners is not equal to their capital credit in the new partnership. MC 4-4 Calibo and Camos are partners with capital balances of P60,000 and P80,000 and
the difference is accounted for by any of the following methods: (1) bonus method (bonus sharing profits and losses 40% and 60% respectively. If Cueva is admitted as partner
to the old partners from the new partner or bonus to the new partner from the old paying P50,000 in exchange for 50% of Calibo's equity, the entry in the partnership
partners); (2) asset revaluation method either positive or negative revaluation. books should be as follows:
a. Calibo. Capital 50,000
Cueva, Capital 50.000
b. Calibo, Capital 30,000
Cueva, Capital 30,000
c. Cash 45,000
Other Assets 15,000
Cueva, Capital 50,000
d. Cash 50.000
Calibo, Capital 15,000
Cueva, Capital 45.000

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Chapter 4 – Partnership

MC 4-5 Chan, Ching, and Chen are partners who share profits and losses in the ratio of 5:3:2 All the partners agree to admit Cua as 1/6 partner in the partnership without any asset
respectively. They agree to sell Chat 25% of their respective capital and profits and revaluation nor bonus. Cua shall contribute assets amounting to a. P 20,000
losses ratio for a total payment directly to the partners in the amount of P140,000. b. P 56,000
They agree that asset revaluation of P60,000 is to be recorded prior to the admission c. P 70,000
of Chat. The condensed statement of financial position of the CCC Partnership is d. P120,000
presented on the next page.
Assets Liabilities and Capital
Cash P 60,000 Liabilities P 100,000 MC 4-8 On May 1, 2014, the business accounts of Cordova and Constancio appear below:
Other Assets 540,000 Chan, Capital 250,000
Ching, Capital 150,000
Chen, Capital 100,000 Cordova Constancio
P 600,000 Total Liabilities and Capital P 600,000 Assets
Cash P 11,000 P 22,354
The capitals of Chan, Ching, and Chen respectively after the payment and admission of Account Receivable 234,536 567,890
Chat are Inventories 120,035 260,102
a. P187,500; P112,500; P 75,000 Land 603,000
b. P210,000; P126,000; P 84,000 Buildings 428,267
c. P280,000; P168,000; P112,000 Furniture and Fixtures 50,345 34,789
d. P250,000; P150,000; P100,000 Other Assets 2,000 3,600

MC 4-6 C2 Partnership had a net income of P24,000 for the month ended September 30,2014. P 1,020,916 P 1,317,002
Carreon purchased an interest in the C2 Partnership of Calvo and Calma by paying Equities
Calvo P72,000 for half of his capital and half of his 50% profit sharing interest. At this
Accounts Payable P 178,940 P 243,650
time, the capital balance of Calvo was P96,000 and the capital balance of Calma was
Notes Payable 200,000 345,000
P168,000. Carreon should receive a credit to this capital account of a. P36,000
Cordova, Capital 641,976
b. P48,000
Constancio, Capital 728,352
c. P72,000
P 1,020,916 P 1,317,002
d. P84,000
Cordova and Constancio agreed to form a partnership contributing their respective
MC 4-7 Cheng, Chavez and Chato are partners sharing profits and losses in the ratio of 4:3:3,
assets and equities subject to the following adjustments:
respectively. The condensed statement of financial position of their partnership as of
December 1, 2014 is presented below
a. Accounts Receivable of P20,000 in Cordova’s books and P35,000 in Constancio’s
are uncollectible
Cash P 100,000 Liabilities P 80,000
b. Inventories of P5,500 and P6,700 are worthless in Cordova’s and Constancio’s
Other Assets 260,000 Chan, Capital 120,000
respective books.
Ching, Capital 80,000
c. Other Assets of P2,000 and P3,600 in Cordova’s and Constancio’s respective books
Chen, Capital 80,000 are to written off.
P 360,000 Total Liabilities and Capital P 360,000

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Chapter 4 – Partnership

The capital accounts of the partners after the adjustments will be MC 4-13 Conrado, Cosio Cosme are partners whose and capital balances and share in profits are
Cordova Constancio as follows:
a. P614,476 P683,052 Conrado P250,000 50%
b. P615,942 P717,894 Cosio 150,000 25%
c. P640,876 P712,345 Cosme 100,000 25%
d. P613,576 P683,350
Cueto is admitted into the partnership by paying P60,000 for 1/3 of the share in equity
MC 4-9 Using the information in MC 4-8, how much assets does the partnership have? of Cosio and by contributing P200,000. The partners agree to the total capitalization to
a. P2,237,918 P750,000, 1/3 Of which is Cueto's capital credit. Cueto's share in net income is also l/3
b. P2,265,118 and the old partners are to divide net income in the old ratio among themselves.
c. P2,337,918
d. P2,365,218 The profit and loss sharing, ratio among Conrado, Cosio and Cosme after the admission
of Cueto is
a. 50%, 25%, 25%, respectively
MC 4-10 Using the information in MC 4-8, how much assets does the partnership have? b. 30%, 15%, 15%, respectively
a. P2,237,918 c. 2/6, 1/6, 1/6, respectively
b. P2,265,118 d. 1/3, 1/3, 1/3, respectively
c. P2,337,918 MC 4-14 Using the information in MC 4-13, the amount of the asset revaluation is equal
to
d. P2,365,218
a. P 15,000
b. P 50,000
MC 4-11 Using the information in MC 4-8 and assuming after Cuyugan's admission, the profit
and loss sharing ratio was agreed to be 40:40:20 based on capital credits, how much c. P120,000
should the cash settlement be between Cordova and Constancio? a. P32,272 d. P200,000
b. P32,930
c. P33,602 MC 4-15 Using the information in MC 4-13, the capital balances of the old partners after the
d. P34,288 admission of Cueto are
a. P250,000, P150,000, P100,000, respectively
MC 4 -12 Using the information in MC 4-8 and assuming that during the first year of operations b. P275,000, P112,500, P112,500, respectively
the partnership earned an income of P325,000 and that this was distributed in the c. P250,000, P200,000, P100,000, respectively
agreed manner. Assuming further that drawings were made in these amounts:
Cordova, P50,000, Constancio, P65,000, and Cuyugan, P28,000, how much are the
capital balances of the partners after the first year?

a. P750,627 P735,177 P372,223

b. P728,764 P713,764 P361,382
c. P757,915 P742,315 P375,837
d. P743,121 P727,827 P368,501

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