PARTNERSHIP - Basic Considerations and Formation

Two sole proprietors and an individual can form a partnership.

• FALSE

• TRUE

A stipulation that includes all partners in the profit sharing is null and void.

• TRUE

• FALSE

A characteristic of a partnership that is shown in this scenario:

Hofstadter purchased merchandise from supplier Kripke without the knowledge of partners Cooper, Koothrappali and Wolowitz. The merchandise bought would be part of the partnership's inventory and later on sold to customers.

A partnership's juridical personality commences from...

• the first day of business of the partnership

• the execution of the articles of partnership

• the issuance of certificate of incorporation by the Securities and Exchange Commission

• the time of agreement by the partners

Missy is to contribute a plot of land to the Cooper Partnership.

• - Missy, and partners Georgie and Sheldon, agree that the land is to be valued at P180,000.

• - A neighboring lot with similar dimensions is for sale at P210,000 (fair market value).

• - The local assessor's office appraises the land at P200,000.

• Q: At what amount will the land be recognized in the books of the partnership?

• P180,000

• P210,000

• P200,000

• None of the above.

Answer explanation

When a partner invests non-cash assets, they are to be recorded at values agreed upon by the partners. In the absence of any agreement, the contributions will be recognized at their fair market values at the date of transfer of partnership.

Partner's investments may include which of the following?

• Cash

• Non-cash assets

• Non-cash assets with liabilities to be assumed

• All of the above

• Only a and b

A partner invested into a partnership a building with a P250,000 carrying value and P400,000 fair market value. The related mortgage payable of P125,000 was assumed by the partnership. As a result of the investment, the partner's capital account will be credited for

• P125,000

• P275,000

• P250,000

• P400,000

The partner's capital account is credited in the following cases except when it involves the recording of the

• additional investment

• original investment

• share in profit

• debit balance of the drawing account at the end of the period

Jake Peralta, Amy Santiago and Ray Holt are to form partnership Brooklyn Nine-Nine. Peralta, Santiago and Holt will contribute P150,000, P120,000 and P200,000 cash respectively. Santiago will also be contributing a building with a carrying value of P220,000, a market value of P280,000, and an attached mortgage of P50,000, which will be assumed by the partnership. Upon partnership formation, which of the following entries are recorded in the books of the partnership? (You can choose more than one)

• Cr. Santiago, Capital P350,000

• Dr. CASH P470,000

• Dr. BUILDING P280,000

• Cr. MORTGAGE PAYABLE P50,000

Bonus THREE (3) points!

Select choice C. Again, simply select choice C to get three points. C, okaaayyy???

• A

• B

• C

• D