BASIC ACCOUNTING CUP-average

In a limited partnership, the entity ceases to legally exist:

• An existing partner retires or dies

• A new partner enters the partnership

• A limited partner transfers his/her interest

• A general partner is no longer present

Which of the following is not a similarity that exist between sole proprietorships and partnerships?

• Neither requires approval by a state to form

• Both can use an accounting method that does not conform to GAAP

• Owners put the company’s income on the owner’s individual tax return

• All of the above are similarities of sole proprietorships and partnerships

What theory of equity is applicable for partnerships?

• Proprietary theory

• Entity theory

• A mix of proprietary and entity theory

• Partnership theory

When can the bonus method be applied?

• When partnership is formed

• When a new partner is added to the partnership

• When an existing partner retires from the partnership

• The bonus method can be applied in all three of the above circumstances

1. D, E, and F are partners who share income in a 5:4:3 ratio. Each has a capital balance of P60,000. D retires from the partnership and is paid P95,000. In recording the retirement, no entry was made to E’s capital account. Which method of recording the retirement was used?

a. Bonus

b. Partial goodwill

c. Total goodwill

d. Transfer of asset

• Bonus

• Partial goodwill

• Total goodwill

• Transfer of asset

When shares with par value are sold, the excess of proceeds over the par value is credited to

• Share capital

• Share premium

• Retained earnings

• Gain on issuance of share capital

What is the meaning of net assets?

• Contributed capital

• Retained earnings

• Shareholder’s equity

• Legal capital

Detail of each class of share capital should be reported

• On the face of the statement of financial position only

• In disclosure notes only

• On the face of the statement of financial position or in disclosure notes

• On the face of the statement of comprehensive income and in disclosure notes

The par value of shares issued is normally recorded in

• Additional paid in capital

• Share capital account

• Retained earnings account

• Appropriated retained earnings account

Single Company issued 1,000 shares with P5 par to Taken as compensation for 1,000 hours of legal services performed. Taken usually bills P160 per hour of legal services. On the date of issuance, the share was trading on a public exchange at P140. By what amount should share premium increase as a result of the transaction?

• 135,000

• 140,000

• 155,000

• 160,000