ACTBFAR_LE#2_Review

1. As part of the initial investment, a partner contributes equipment that had originally cost P100,000 and on which accumulated depreciation of P75,000 has been recorded. If similar equipment would cost P120,000 to buy and the partners agree on a valuation of P35,000 for the contributed equipment, what amount should be debited to the equipment account?

• P100,000

• P25,000

• P120,000   

• P35,000

2. A sole proprietor, entered into partnership with another individual. His investment in the partnership included equipment that cost P64,000 when it was purchased. The equipment has a book value of P36,000 and a net agreed-on value of P40,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at?

• P64,000 and P24,000, respectively.

• P40,000 and P0, respectively.

• P36,000 and P0, respectively.

• P64,000 and P28,000 respectively.

C invested the following: Cash P324,000; Accounts receivable P73,080; Property P1,620,000. The property of C and D are mortgaged with the bank for P972,000 and P72,000, respectively. The partnership is to assume responsibility for these mortgages. The partners have agreed to share profits and losses on a 5:2:3 ratio, to C, D & E respectively. Compute the capital balance of partner C at the opening of business.

4. A admits B as a partner in business. Accounts in the ledger for A on December 31, 2020, just before the admission of B show the following balances: Cash P6,800; Accounts receivable P14,200; Inventory P20,000; Accounts payable P8,000. A's Capital before adjustment is P33,000. Compute for A's Capital if it is agreed that for purposes of establishing A’s interest, the following adjustments should be made:

• An allowance for doubtful accounts of 3% of accounts receivable should be established.

• The inventory is to be valued at 23,000.

• Prepaid salary expenses of 600 and accrued rent expense of 800 are to be recognized.

5. C invested P130,000 while N invested P560,000. The partnership agreement provides that C and N share profits and losses at 30% and 70% respectively. Assuming that the partners agreed to bring their respective capital in proportion to their profit or loss ratios, and using N's capital as the base. Compute the additional cash to be invested by C.

1.Under the direct method,

     the Income Summary account is closed to

       

1.Under the direct method, the Income Summary account is closed to       

       

       

• Capital accounts of the partners

• Drawing accounts of the partners

• Income Summary account

• Any nominal account of the partnership

2. Industrial partners do not have drawing accounts since they do not share in the partnership’s losses.

• T

• F

3. In computing for peso month averages, all investments and withdrawals made by the partner are considered.

• T

• F

4. Which of the following interest component calculation bases is LEAST susceptible to manipulation when allocating profits and losses to partners?

• Beginning capital account balance

• Ending capital account balance

• Average of the beginning and ending capital balances

• Weighted average capital account balance

5. When a partnership suffers a net loss, the partners are not entitled to

• Bonus

• Salary Allowances

• Capital Interest

• They are entitled to all the options stated