REVIEW MATERIAL 2023

FAR: PARTNERSHIP & CORPORATION

Theories:

1. A written arrangement embodying the nature of the partnership, the partners

and their contributions, their duties, their profit and loss sharing ratio, the
manner of withdrawing assets, the manner of dissolving or liquidating.
a. By Laws of the Partnership c. Articles of Co-Partnership
b. Contract of Partnership d. Law of Partnership

2. Partnership are taxable entities except for this type of partnership.

a. General Partnership c. General Professional Partnership
b. Limited Professional Partnership d. Limited Partnership

3. This partner cannot actively manage the partnership.

a. Limited partner c. Capitalist partner
b. Industrial partner d. Secret partner

4. This is the most equitable way of distributing profits.

a. Original capital c. Beginning capital
b. Ending capital d. Average capital

5. All, except one, may be given to a partner whether the operation is a net profit
or a net loss.
a. Interest c. Salaries
b. Bonus d. Regular drawings

6. Bonus is a special compensation usually given to this partner.

a. Limited c. Secret
b. General d. Industrial

7. If the partners have not drawn up an agreement, then they must share profits
and loses
a. By an appropriate ration c. Equally
b. By any means that will save d. Based on their capital contributions
taxes
8. A loan due to a partner is presented in the statement of financial position as a
a. Current Liability c. Partner’s Equity
b. Current Asset d. Noncurrent Asset

9. Which of the following will NOT dissolve the partnership?

a. Death of a partner c. Retirement of a partner
b. Admission of a new partner d. Incurrence of losses

10. It is the sum of capital balances of the old partners and the actual investment
of the new partner.
a. Capital credit c. Total agreed capital
b. Bonus d. Total contributed capital

11. The admission of a new partner under bonus method will result in a bonus to:
a. Old partners c. Both a or b
b. New partners d. Either a or b, but not both

12. A partner whose personal assets are less than his personal liabilities.
a. Solvent c. Deficient
b. Insolvent d. Deficient but solvent

13. If the proceeds from the sale is less than the book value of the non-cash assets
sold, this will:
a. Increase the partnership assets but decrease the partner’s equity
b. Decrease the partnership assets but increase the partner’s equity
c. Decrease the partnership assets but decrease the partner’s equity
d. Increase the partnership assets but increase the partner’s equity

14. A deficiency occurs for a partner when:

a. His share in the losses of the partnership is more than his capital balance
b. His personal assets are lesser than his capital balance
c. Loan payable by the partnership to him is greater than his capital balance
d. His personal assets are less than his personal liabilities

15. A deficient and insolvent partner will still have a chance to receive cash from
the partnership if:
a. If he makes additional investment
b. There is a loan payable to him that is higher than the deficiency and
insolvency of the partner
 c. If the other partners will absorb his deficiency
d. There is a loan payable to him which is higher than his capital deficiency

16. This account title is credited to represent shareholder’s equity for contributions
made in cash, property or service.
a. Treasury share c. Share capital
b. Subscribed share capital d. Subscription receivable

17. Shares of stock a corporation is allowed to issue

a. Subscribed Shares C. Issued Shares
b. Authorized Shares D. Share Capital

18. The amount at which the issue price exceeds the par value is credited to
a. Share Capital c. Retained Earnings
b. Subscription Receivable d. Share Premium

19. When a par value common stock is exchanged for an asset such as land, the
common stock should be credited at the
a. Appraisal value of the asset c. Original cost of the asset
b. Book value of the asset d. Par value

20. Subscription receivable callable within one year should be presented as

a. Current asset c. deduction from paid in
capital
b. Noncurrent asset d. part of paid in capital

21. Which of the following is NOT typically a characteristic of preference shares?

a. Preference as to voting rights
b. Preference as to dividends
c. Cumulative and callable terms
d. Preference over ordinary shareholders during liquidation

22. The corporation’s own stock that has been reacquired by purchasing it either in
the stock market or in a private transaction is called
a. Treasury stock c. Donated stock
b. Preferred stock d. Retired stock
23. The donation of land to the corporation by the government will
a. Increase its liabilities c. Increase retained earnings
b. Increase contributed capital d. Decrease stockholder’s equity

24. Which one is not a liability account?

a. Cash dividend payable c. Property dividend payable
b. Scrip dividend payable d. Stock dividend payable

25. A dividend declared out of the investment in stocks of other companies is a

a. Stock dividend c. Noncash dividend
b. Property dividend d. Scrip dividend

26. Which one does not affect total stockholder’s equity?

a. Scrip dividend c. Property dividend
b. Stock dividend d. Cash dividend

27. A dividend payable in merchandise is called

a. Cash dividend c. Property dividend
b. Merchandise dividend d. Inventory dividend

28. If the excess dividends are distributed to both common and preferred
stockholders, the preferred shares are presumed to be
a. Cumulative c. Participating
b. Callable d. All of the above

29. Dividends in arrears are distributed to preference stockholders

a. Only when there is a declaration
b. If it is cumulative
c. Both a and b
d. Neither a nor b

30. It represents the equity or right of a shareholder (expressed in peso share) in

the net assets of the corporation.
a. Earnings per share c. Book value per share
b. Market share d. Price-earnings ratio
Problems:

1. The Jef and Jim Partnership was formed on January 2, 2017. Under the
partnership agreement, each partner has an equal initial capital balance.
Partnership net income or loss is allocated 60% to Jef and 40% to Jim. To form
the partnership, Jef originally contributed assets costing P25,000 with a fair
value of P70,000 on January 2, 2017, and Jim contributed P30,000 cash.
Drawings by the partners during 2010 totaled P3, 000 by Jef an P9,000 by Jim.
The partnership net income in 2010 was P25,000.

Under the goodwill method, what is Jim’s initial capital balance in the
partnership?
a. 30,000
b. 70,000
c. 140,000
d. 40, 000

2. Using the information in No. 1, under the bonus method, what is the amount of
bonus?
a. 20,000 bonus to Jef
b. 20,000 bonus to Jim
c. 40,000 bonus to Jef
d. 40,000 bonus to Jim

Fact pattern for the next two independent questions:

Partners Y and Z had the following profit-sharing percentages and capital balances: A
(40%) ₱300,000 and B (60%) ₱500,000.

3. X was admitted to the partnership when he purchased 20% of Y’s and Z’s
capital interests for ₱200,000. If the book value method was used to record C’s
admission, how much would be the capital balance of Y after C’s admission?
a. 300,000
b. 240,000
c. 200,000
d. 210,000
4. D was admitted to the partnership when he invested ₱150,000 cash for a 20%
interest in the partnership. The partnership’s net assets are fairly valued on D’s
admission date. The partners used the bonus method to record C’s admission.
How much is the capital balance of A after the admission of C?
a. 284,000
b. 476,000
c. 304,000
d. 296,000

5. Ping, Pong and Prince are partners sharing profit and loss in the ratio of 1:1:2
respectively. Their capital balances are ₱500,000 for Ping, ₱300,000 for Pong
and ₱200,000 for Prince. Liabilities amounted to ₱200,000. There is also a loan
payable to Prince, ₱50,000. The cash balance amounted to ₱300,000 and it
increased to ₱1,400,000 as a result of the sale of the non-cash assets. How
much is the available cash for distribution to the partners?
a. 1,400,000
b. 1,200,000
c. 1,100,000
d. 250,000

6. A company issued 250 shares of ₱100 par value stock for ₱30,000 cash. The
total amount for addition paid-in capital is
a. 25,000
b. 30,000
c. 10,000
d. 5,000

7. Kumu Corporation was organized on January 1, 2015, with an authorization

of 2,000,000 ordinary shares with a par value of P6 per share. During 2015,
the corporation had the following equity transactions:
Jan. 8 - Issued 200,000 shares at P7 per share.
April 12 - Issued 100,000 shares at P9 per share.
June 27 - Issued 30,000 shares at P12 per share
July 30 - Purchased 50,000 shares at P5 per share.
Dec. 26 - Sold 70,000 shares held in treasury at P10 per share.
What should be the total Share Premium as of December 31, 2015?
 a. 960,000
b. 730,000
c. 1,010,000
d. 680,000

8. A company's board of directors votes to declare a cash dividend of 75 centavos

per share. The company has 15.000 shares authorized, 10,000 issued, and
9,000 shares outstanding. The total amount of the cash dividend is:
a. 7,500
b. 6,750
c. 11,250
d. 4,500

9. San Agustin Corporation has P100,000 of 8% noncumulative, nonparticipating,

preference shares outstanding. San Agustin Corporation also has P500,000 of
ordinary shares outstanding. In the company's first year of operation, no
dividends were paid. During the second year, San Agustin Corporation paid
cash dividends of P300,000. This dividend should be distributed as follows:
a. P80,000 preference; P220,000 ordinary.
b. P160,000 preference; P140,000 ordinary.
c. P75,000 preference; P225,000 ordinary
d. P150,000 preference: P150,000 ordinary.

10. Sy-Miguel Company had net income of P300,000. On January 1, the number
of shares of ordinary shares outstanding was 8,000. The company declared a
P270,000 dividend on it noncumulative, nonparticipating 10,000 preferred
shares. There were no other stock transactions. The company's earnings per
share is:
a. 37.50
b. 3.41
c. 16.67
d. 3.76