RAMON MAGSAYSAY MEMORIAL COLLEGES

College of Accountancy
General Santos City, Philippines

Document Type: Document No.: DAP-03-03-146

TEST QUESTIONS Issue No.: 001 Revision No.: 00
Document Title: Effective Date: February 23, 2016
ACCTG 33 CN 3033 - PRELIM EXAMINATION Page 1 of 1

Name: ______________________________ Date: ___________ Score: _____________

Subject : ACCTG 33 PRELIM Examination
Instructor: Mrs. Marivic B. Peñaflor, CPA, MBA AY: 2021-2022 1st Semester

INSTRUCTION: Write your answer on one whole sheet of paper and take a picture and
upload it to lms in pdf file not later than 6pm today.

1. Which of the following is not a characteristic of most partnership?

a. Limited liability
b. Limited Life
c. Mutual Agency
d. Ease of Formation

2. Which of the following is not a characteristic of the proprietary theory that

influences accounting for partnership
a. Parnters’ salaries are viewed a distribution of income rather than a
component of net income.
b. A partnership is not viewed as separate entity, distinct, taxable entity
c. A partnership is characterized by limited liability
d. Changes in the ownership structure of a partnership result in the dissolution
of the partnership.

3. Which of the following statement is correct with respect to a limited partnership?

a. A limited partner may not be an unsecured creditor of the limited
partnership
b. A general partner may not also be limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership
d. A limited partnership can be formed with limited liability for all partners.

4. Roberts and Smith drafted a partnership agreement that lists the following assets
contributed at the partnership’s formation:

Contributed by
Roberts Smith
Cash 20,000 30,000
Inventory 15,000
Building 40,000
Furniture and Equipment 15,000

Roberts Smith
a. 35,000 85,000
b. 35,000 75,000
 c. 55,000 55,000
d. 60,000 60,000

5. On May 1, 2021, Cobb and Mott formed a partnership and agreed to share profits
and losses in the ratio of 3:7, respectively. Cobb contributed a parcel of land that
cost him P 10,000. Mott contributed P 40,000 cash. The land was sold for P 18,000
on May 1, 2021, immediately after formation of the partnership. What amount
should be recorded in Cobb’s capital account on formation of the partnership?

Cobb’s capital account 18,000

6. On December 1, 2021, EE and FF formed a partnership, agreeing to share for profits

and losses in the ration of 2:3, respectively. EE invested a parcel of land that cost
him P25, 000. FF invested P30, 000 cash. The land was sold for P80, 000 on the same
date, three hours after formation of the partnership. How much should be the
capital balance of EE right after formation?

EE’s capital account 80,000

For item nos.

On July 1, 2021, PP and QQ decide to combine their businesses and form a

partnership. Their balance sheets on July 1, before adjustments, showed the
following:

PP QQ
Cash P 9, 000 P 3, 750
Accounts receivable 18, 500 13, 500
Notes Receivable 60,000 40,000
Inventories 30, 000 19, 500
Furniture and fixtures (net) 35, 000 9, 000
Office equipment (net) 11, 500 2, 750
Prepaid expenses 6, 375 3, 000
Total P 170, 375 P 91, 500

Accounts payable P 45, 750 P 18, 000

Notes Payable 40,000 30,000
Capital 84,625 43, 500
Total P 170,375 P 91, 500

They agreed to have the following items recorded in their books:

1. Provide 5% allowance for doubtful accounts.

 2. PP’s furniture and fixtures should be P35, 000, while QQ’s office
equipment is over-depreciated by P1000.
3. Rent expense incurred previously by PP was not yet recorded
amounting to P1, 000 while salary expense incurred by QQ was not also
recorded amounting to P8,000.
4. The fair market value of inventory amounted to:

For PP P30, 500

For QQ 15, 000
5. PP has not recorded the interest on a 90 day 12% note with a face value
of P 20,000 from ABC, a trade customer dated May 1, 2021.
6. QQ has not recorded the interest on a 60 day 10% note with a face
value of P 10,000 from XXX, a trade customer dated June 1, 2021
7. PP has not recorded interest on notes payable dated May 1, 2021 at
12% interest per annum.
8. QQ has not recorded interest on notes payable dated April 1, 2021 at
14% interest per annum.

7. The adjusting entry to record item no. 1 is:

PP,Capital 925 QQ,Capital 675
AFDA 925 AFDA 675

8. The adjusting entry to record item no. 2 is:

no entry Accumulated depr. (OE) 1000
QQ,Capital 1000

9. The adjusting entry to record item no. 3 is:

PP,Capital 1000 QQ,Capital 8000
Rent Payable 1000 Salaries Payable 8000

10. The adjusting entry to record item no. 4 is:

Inventories 500 QQ,Capital 4500
PP,Capital 500 Inventories 4500

11. The adjusting entry to record item no. 5 is:

Interest receivable 400
PP,Capital 400

12. The adjusting entry to record item no. 7 is:

PP,Capital 800
Interest Payable 800
13. Compute the adjusted capital balance of PP
PP,Capital
925 84,625
1000
500
400
800
2725 85,525
82,800

14. Compute the adjusted capital balance of QQ

QQ,Capital
675 43500
1000
8000
4500
83
1050
14,225 44583
30,358

For item nos. 14 to 18 – Prepare a statement of financial position upon formation

PP & QQ
Statement of Financial Position
As of July 1, 2021
Assets Liabilities
Cash 12,750 Accounts payable 63,750
Accounts Receivable 32,000 Notes payable 70,000
AFDA -1,600 30,400 Rent Payable 1,000
Notes Receivable 100,000 Salaries Payable 8,000
Inventory 45,500 Interest payable 1,850
Prepaid Expenses 9,375 144,600
Interest Receivable 483
Current Assets 198,508 PP, Capital 82,800
Non-Current Assets: QQ, Capital 30,358 113,158
Furniture & Fixtures 44,000
Office Equipment 15,250
59,250
Total Assets 257,758 Total Liabilities & Partner's Equity 257,758
 For item nos. 19-20 – Prepare an opening entry in the book on the new partnership.
Cash 12,750
AR 32,000
NR 100,000
Inventory 45,500
Prepaid Expenses 9,375
Interest Receivable 483
Furniture & Fixtures 44,000
Office Equipment 15,250
AFDA 1,600
Accounts Payable 63,750
Notes Payable 70,000
Rent Payable 1,000
Salaries Payable 8,000
Interest Payable 1,850
PP, Capital 82,800
CC, Capital 30,358

21. If the partnership agreement does not specify how income is to be allocated
profits and loss should be allocated.
a. Equally
b. In proportion to the weighted average of capital invested during the period
c. Equitably so that partners are compensated for the time and effort
expended on behalf of the partnership
d. In accordance with their capital contribution
22. Which of the following is not a component of the formula used to distribute
income?
a. Salary allocation to those partners working
b. After all other allocation, the remainder divided according to the profit and
loss sharing ratio.
c. Interest on the average capital investment
d. Interest on notes to partners

23. Which of the following is not considered a legitimate expense of a partnership?

a. Interest paid to partners based on the amount of invested capital
b. Depreciation on asset contributed to the partnership by partners.
c. Salaries for management hired to run the business
d. Supplies used in the partners’ offices.

24. The fact that salaries paid to partners are not a component of partnership income
is indicative of
a. A departure from generally accepted accounting principles
b. Being characteristic of the entity theory
c. Being characteristic of the proprietary theory
d. Why partnerships are characterized by unlimited liability
 25. The partnership has the following accounting amounts:

a. Sales = P90, 000

b. Cost of Goods Sold = P30, 000
c. Operating Expenses = P10, 000
d. Salary allocations to partners = P13, 000
e. Interest paid to banks = P2, 000
f. Partners’ withdrawals = P8, 000

The partnership net income (loss) is: 48,000

26. The partnership agreement of RR and SS provides that interest at 10% per year is
to be credited to each partner on the basis of weighted-average capital
balances. A summary of the capital account of SS for the year ended December
31, 2021, is as follows:

Balance, January 1 P480, 000

Additional investment, July 1 90, 000
Withdrawal, August 1 ( 60, 000)

What amount of average capital balance of SS to be reported on December 31, 2021?

500,000
Months unchanged
January 480,000 x 6 2,880,000
July 570,000 x 1 570,000
August 510,000 x 5 2,550,000
12 6,000,000
12
500,000

Use this information to answer question nos. 27 to 39

MM and OO partners, share profits on a 5:3 ratio.

For the year 2022, the net income of the partnership was reported as P 500,500.
however, it was discovered that the following items were omitted in the firm’s
books:

Omission at Year-End 2021 2022

Prepaid Expense P80,000
Accrued Expense P60,000
Deferred Income 70,000
Accrued Income 50,000
 A summary of the capital account of MM and OO for the year ended December
31, 2022, are as follows:

MM OO

Balance, January 1 2022 P480, 000 Balance, January 1, 2022 P300, 000
Additional investment, July 1 90, 000 Additional investment, April 1 40, 000
Withdrawal, July 1 ( 60, 000)
Withdrawal, August 1 ( 60, 000)

27. What is the adjusted net income for the year 2022?

Net income (unadjusted) 500,500

Adjustments:
Prepaid Expense 80,000
Accrued Expense -60,000
Deferred Income -70,000
Accrued Income 50,000
Adjusted Net Income 500,500

28. If profit is divided in a 4:3 ratio, the share of MM and OO respectively in the profits
are:
MM OO
500,500 500,500
x 4/7 x 3/7
286,000 214,500

29. What is the journal entry to record the distribution of profit to MM and OO?

Income summary 500,500

MM, Drawing 286,000
OO, Drawing 214,500

30. What are the balances of MM and OO after distribution of profits?

MM OO
Beginning Balance 480,000 300,000
additional investment 90,000 40,000
Withdrawal -60,000 -60,000
Total 510,000 280,000
Add: (Share in net Income) 286,000 214,500
796,000 494,500
31. If profit is divided based on average capital balance, the share of MM and OO in
the profit would be:

500,000
MM x 500,500 310,870
805,000

305,000
OO x 500,500 189,630
805,000

32. The journal entry to record the distribution of profits to MM and OO would be:

Income summary 500,500

MM, Drawing 310,870
OO, Drawing 189,630

33. What are the capital balances of MM and OO after distribution of profits?

MM OO
Beginning Balance 480,000 300,000
additional investment 90,000 40,000
Withdrawal -60,000 -60,000
Total 510,000 280,000
Add: (Share in net Income) 310,870 189,630
820,870 469,630

34. Assuming that the MM and OO agreed the following terms in distributing profit or
loss:
a. MM and OO will receive annual salaries of 72,000 and 60,000 respectively.
b. Interest of 10 % shall be paid to MM and OO on that portion of their ending
capital (before profit distribution) in excess of P 200,000.
c. MM is to receive a bonus of 10% of net income after bonus.

The share of MM and OO in the profits of the partnership would be:

MM OO TOTAL
Salaries 72,000 60,000 132,000
Interest 31,000 8,000 39,000
Bonus 45,500 45,500
Remainder (5:3) 177,500 106,500 284,000
Total 326,000 174,500 500,500
 Bonus
Net Income 500,500
x Bonus Rate 10%
50,050
Divided by 1.10
45,500

35. The journal entry to record the distribution of profits would be:

Income summary 500,500

MM, Drawing 326,000
OO, Drawing 174,500
36. What are the capital balances of MM and OO after distribution of profits?

MM OO
Beginning Balance 480,000 300,000
additional investment 90,000 40,000
Withdrawal -60,000 -60,000
Total 510,000 280,000
Add: (Share in net Income) 326,000 174,500
836,000 454,500

37. Assuming that the MM and OO agreed the following terms in distributing profit or
loss:
a. MM and OO will receive annual salaries of 72,000 and 60,000 respectively.
b. Interest of 10 % of the initial capital shall be paid to MM and OO
c. MM is to receive a bonus of 10% of net income after salaries, interest and
bonus.
The share of MM and OO in the profits of the partnership would be:
MM OO TOTAL
Salaries 72,000 60,000 132,000
Interest 48,000 30,000 78,000
Bonus 26,409 26,409
Remainder (5:3) 165,057 99,034 264,091
Total 311,466 189,034 500,500

Bonus
Net Income 500,500
Less Salaries -132,000
less Interest -78,000
Total 290,500
x Bonus Rate 10%
29,050
Divided by 1.10
26,409
38. The journal entry to record the distribution of profits would be:

Income summary 500,500

MM, Drawing 311,466
OO, Drawing 189,034

39. What are the capital balances of MM and OO after distribution of profits?

MM OO
Beginning Balance 480,000 300,000
additional investment 90,000 40,000
Withdrawal -60,000 -60,000
Total 510,000 280,000
Add: (Share in net Income) 311,466 189,034
821,466 469,034

40. AA and BB entered into a partnership as of March 1, 2021 by investing P150, 00

and P75, 000, respectively. They agreed that AA, as the managing partner, was to
receive a salary of P30, 000 per year and a bonus computed at 10% of the net
profit after adjustment for the salary; the balance of the profit was to be distributed
in the ratio of their original capital balances. ON December 31, 2021, account
balances were as follows:

Cash P70, 000 Accounts payable P 60, 000

Accounts receivable 67, 000 AA, capital 125, 000
Furniture and fixtures 45, 000 BB, capital 75, 000
Sales returns 5, 000 AA, drawing ( 20, 000)
Purchases 196, 000 BB, drawing ( 30, 000)
Operating expenses 60, 000 Sales 233, 000

Inventories on December 31, 2021 were as follows: supplies, P3, 500, merchandise,
P70, 000. Prepaid insurance was P950 while accrued expenses were P1, 550.
depreciation rate was 20% per year.

The partners’ capital balances on December 31, 2021, after closing the net profit
and drawing accounts were:
AA BB
Capital Investments 150,000 75,000
Less Withdrawals -20,000 -30,000
Total 130,000 45,000
Add: (Share in net Income) 125,100 42,900
255,100 87,900