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Peer Quiz No.1: Partnership Formation: Total

This document contains a 10 question peer quiz on partnership formation. Some key points: 1) Partners contribute assets and liabilities to the partnership. Assets are measured at fair value and liabilities assumed are deducted from the contributing partner's capital account. 2) One question involves partners Steve and Llouie contributing cash, accounts receivable, inventory, and land. Steve's adjusted capital balance after considering recoverable amounts is calculated. 3) Another question details contributions by partners Diane and June, including cash, machinery, buildings, and assumed mortgages. June's resulting capital account balance is calculated based on profit/loss sharing percentages. 4) The final question asks which partner contributing cash

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114 views

Peer Quiz No.1: Partnership Formation: Total

This document contains a 10 question peer quiz on partnership formation. Some key points: 1) Partners contribute assets and liabilities to the partnership. Assets are measured at fair value and liabilities assumed are deducted from the contributing partner's capital account. 2) One question involves partners Steve and Llouie contributing cash, accounts receivable, inventory, and land. Steve's adjusted capital balance after considering recoverable amounts is calculated. 3) Another question details contributions by partners Diane and June, including cash, machinery, buildings, and assumed mortgages. June's resulting capital account balance is calculated based on profit/loss sharing percentages. 4) The final question asks which partner contributing cash

Uploaded by

dianel villarico
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Peer Quiz No.

1: Partnership Formation

1. It is an accounting for initial investments to the partnership.


a. Dissolution c. Formation
b. Operations d. Liquidation
2. All assets contributed to (and related liabilities assumed by) the partnership shall be
measured at
a. Fair Value c. Revaluation Cost
b. Cost d. Any of these
3. The following are the characteristic of partnership except:
a. Mutual Agency c. Unlimited Life
b. Transfer of Ownership d. Unlimited Liability
4. What kind of agreement is utilized to create a partnership?
a. Written Agreement c. Both A and B
b. Oral Agreement d. None of them
5. QQ contributed land with fair value of P2,000,000 to a partnership. The land has an
unpaid mortgage of P800,000 which the partnership agreed to assume. How much is
QQ’s net contribution?
a. P2,000,000 c. P2,800,000
b. P 800,000 d. P1,200,000
6. Steve and Llouie contributed the following in the formation of a partnership business:

Steve Llouie

Cash 200,000 -
Accounts Receivable 120,000 -
Inventory 180,000 -
Land 360,000
Total 500,000 360,000

Additional information:

 Only 70% of the accounts receivable is recoverable


 The net realizable value of the inventory is P140,000. Steve acquired the
inventory on account; the partnership will assume the unpaid balance of P70,000.
 The land has a fair value of 600,000.

How much is the adjusted capital balance of Steve?

a. P354,000 c. P453,000
b. P600,000 d. P954,000
7. Provide the Journal Entry.
8. On July 1, 2020 Diane and June formed a partnership with each contributing the
following assets:
Diane June
Cash…………………………………… P400, 000 P 800, 000
Machinery and equipment ………. 350, 000 850, 000
Building………………………………… - 2, 350, 000
Furniture and fixtures………………… 200, 000 -

The building is subject to mortgage loan of P900, 000, which is to be assumed by the
partnership agreement provides that Diane and June share profits and losses 30% and
70%, respectively. On July 1, 2020 the balance in June’s capital account should be:

a. P3,100,000 c. P3,050,000
b. P3,150,000 d. P4,000,000

9. The same information in Number 8, except that the mortgage loan is not assumed by the
partnership. On July 1, 2020 the balance in June’s capital account should be:
a. P3,100,000 c. P3,050,000
b. P3,150,000 d. P4,000,000

10. Shanie, Sean and Sunny formed a partnership. Shanie contributed cash of P110,000.
Sean contributed equipment with historical cost of 730,000, carrying amount of
P210,000, and fair value of P120,000. Sunny contributed building with historical cost of
P2,000,000, carrying amount of 580,000, and fair value of P900,000. The partnership will
assume the unpaid mortgage of P760,000 on the building. Which partner has the largest
capital account balance on partnership formation?
a. Shanie c. Sunny
b. Sean d. All are equal
KEY ANSWER:

1. C

2. A

3. C

4. C

5. D

6. A

Solution:

  Steve Llouie Total


200,00
Cash 0 - 200,000
A/R (120k*70%) 84,000 - 84,000
140,00
Inventory 0 - 140,000
Land - 600,000 600,000
424,00 1,024,00
Total 0 600,000 0
Accounts Payable 70,000 - 70,000
Adjusted Capital 354,00
Balances 0 600,000 954,000

7. Entry:

Cash 200,000  
A/R 84,000  
Inventory 140,000  
Land 600,000  
A/P   70,000
S, Capital   354,000
L, Capital   600,000
8. A

9. D

Solution:

  Diane June Total


400,00 1,200,00
Cash 0 800,000 0
Machinery and 350,00 1,200,00
equipment 0 850,000 0
2,350,00
Building - 2,350,000 0
200,00
Furniture and fixtures 0 - 200,000
950,00 4,000,000 4,950,00
Total 0 0
Mortgage Loan   900,000 900,000
Adjusted Capital 950,00 3,100,000 4,050,00
Balances 0 0

10. C

 Shanie – P110,000
 Sean – P120,000
 Sunny- (P900,000 - P760,000) = P140,000

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