WorksheetsACP 6 - PARTNERSHIP FORMATION
Total questions: 16
Worksheet time: 11mins
When a partnership is formed, equity dictates that assets contributed to the partnership be recorded in the general ledger at their
adjusted tax basis
fair value
replacement value
book value
The partnership form of business is
an economic entity
a separate legal entity, just as a corporation is a legal entity
a taxable entity
a fiscal entity
A unique feature of partnership as compared to publicly owned corporation) is that
they do not have to follow GAAP
they are not governed by laws
books have to be maintained on the tax basis
they do not file income tax returns
A partnership is formed by two individual who were previously sole proprietor. Property other than cash that is part of the initial investment in the partnership would be recorded for financial reporting purposes at the
proprietor's book values or the fair value of the property at the date of the investment whichever is higher
proprietor's book values or the fair value of the property at the date of the investment whichever is lower
proprietor's book value at the property at the date of the investment
fair value of the property at the date of investment
The disadvantage of the partnership form of business organization, compared to corporation, include
the legal requirements for formation
unlimited liability for the partners
the requirement of the partnership to pay income taxes
the extent of government regulation
Under the bonus method, any increase or decrease in the capital credit of a partner is
deducted from or added the capital of the other partners
recognized as goodwill
recognized as expense
deferred and amortized to profit or loss
Under the bonus method, the asset contributed by a partner receiving a bonus is
debited at an amount greater than the asset's fair value
debited at an amount less than the asset's fair value
debited an amount equal to the asset's fair value
none of the above
On July 1, ML & PP formed a partnership, agreeing to share profits and losses in the ratio of 4:6, respectively, ML contributed a parcel of land that cost her Php 25,000. PP contributed Php 50,000 cash. The land was sold for Php 50,000 on July 1, four hours after formation of the partnership. How much should be recorded in ML's capital account on the partnership formation?
(a)
Max, Ike, and Tony are forming a partnership. The appraised value of assets contributed is Php 60,000; Php 80,000, and Php 100,000.00, respectively. In addition, Max and Tony agree that Ike experience is worth Php 30,000. The partners desire to apply the bonus method where applicable. What is the total capital recorded at the date the partnership is formed?
(a)
WW & MM drafted a partnership agreement that lists the following assets contributed at the partnership's formation: WW - Cash Php 20,000 & Furniture and Equipment Php 15,000; while MM - Cash Php 30,000, Inventory Php 15,000 & Building Php 40,000. The building is subject to a Php 10,000 mortgage, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What should be recorded as capital for WW & MM at the formation of the partnership?
WW Php 35,000; MM Php 85,000
WW Php 35,000; MM Php 75,000
WW Php 55,000; MM Php 55,000
WW Php 60,000; MM 60,000
Under the bonus method,
total partnership capital is equal to the fair value of the partners' contribution to the partnership.
total partnership capital is less than the fair value of the partners' net contribution to the partnership
total partnership capital is greater than the fair value of the partners' net contributions to the partnership
total partnership capital is less than the fair value of the partners' net contribution to the partnership, if the bonus is given to the incoming partner.
Transactions between and among the partners are
recorded in the partnership books
not recorded in the partnership books
either a or b
neither a nor b
WW & MM drafted a partnership agreement that lists the following assets contributed at the partnership's formation: WW - Cash Php 20,000 & Furniture and Equipment Php 15,000; while MM - Cash Php 30,000, Inventory Php 15,000 & Building Php 40,000. The building is subject to a Php 10,000 mortgage, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What should be journal entry to record MM contribution at the formation of the partnership?
DR Cash Php 30,000, Inventory Php 15,000, Building Php 40,000; CR Mortgage Payable Php 10,000, MM, Capital 75,000
DR Cash Php 30,000, Inventory Php 15,000, Building Php 40,000; CR MM, Capital 85,000
DR Cash Php 20,000, Furniture & equipment Php 15,000, Building Php 40,000; CR Mortgage Payable Php 10,000, MM, Capital 75,000
DR Cash Php 30,000, Furnitre & Equipment Php 15,000, Building Php 40,000; CR MM, Capital 85,000
WW & MM drafted a partnership agreement that lists the following assets contributed at the partnership's formation: WW - Cash Php 20,000 & Furniture and Equipment Php 15,000; while MM - Cash Php 30,000, Inventory Php 15,000 & Building Php 40,000. The building is subject to a Php 10,000 mortgage, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What should be journal entry to record WW contribution at the formation of the partnership?
DR Cash Php 30,000, Inventory Php 15,000, Building Php 40,000; CR Mortgage Payable Php 10,000, WW, Capital 75,000
DR Cash Php 30,000, Inventory Php 15,000, Building Php 40,000; CR WW, Capital 85,000
DR Cash Php 20,000, Furniture & equipment Php 15,000; CR Mortgage Payable Php 10,000, WW, Capital 25,000
DR Cash Php 20,000, Furniture & equipment Php 15,000; CR WW, Capital 35,000
Mr. A & Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A contributed Php 100,000 and Ms. B contributed Php 84,000 in identifiable assets. The partners agreed that the difference in the amount of credit to the partner's capital shall be treated as compensation for the expertise that the partner will be bringing to the partnership. How much is the initial capital balance of Ms. B?
Php 84,000
Php 92,000
Php 100,000
Php 102,000
Mr. A & Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A contributed Php 100,000 and Ms. B contributed Php 84,000 in identifiable assets. The partners agreed that the difference in the amount of contribution and the amount of credit to the partner's capital shall be treated as cash settlement between the partners. Which of the following is correct?
A pays B Php 16,000
B pays A Php 16,000
A pays B Php 8,000
The cash settlement between the partners is not recorded in the partnership books
