A) TRUE OR FALSE 1

Subject:AccountingPrice: Bought3

Share With

A) TRUE OR FALSE

1. In the admission of a partner by purchase, any change in the value of partnership assets and liabilities up to the date of dissolution shall be closed to the account of old partners. *

a.   True

b.   False

2. When new partner is admitted by purchase of interest, and partnership assets are undervalued (which they agreed to adjust prior to the new partner's admission), then the new partner will be credited with capital less than his contribution. *

a.   True

b.   False

3. As a general rule, no gain or loss, no asset revaluation or bonus, shall be recognized by the partnership when a new partner is admitted by purchase of interest. *

a.   True

b.   False

4. In admission of a new partner by investment, the total agreed capital can never be less than the total contributed capital. *

a.   True

b.   False

5. Admission by investment of a new partner, accounted by the bonus method, results to a total agreed capital greater than total contributed capital. *

a.   True

b.   False

6. If the capital credit of the new partner is more than his investment, and the total partnership capital does not change, a bonus is given by the old partners. *

a.   True

b.   False

7. If a new partner is admitted by investment and the total agreed capital is greater than total contributed capital, it is possible that bonus will be given to the new partner yet the old partner's capital will increase. *

a.   True

b.   False

8. When a retiring partner is paid more than his interest, it is implied that a bonus is given to the remaining partners. *

a.   True

b.   False

9. When the interest of the retiring partner is purchased by the partnership, the partnership total assets will decrease regardless of the amount given as payment. *

a.   True

b.   False

10. If bonus is traceable to the existing partners, such bonus is allocated based on their new profit and loss agreement. *

a.   True

b.   False

PROBLEM SOLVING

1. Oprah and Ellen are partners with capital balances P60,000 and P20,000, respectively. Profits and losses are divided in the ratio of 60:40. Oprah and Ellen decided to form a new partnership with Tyra, who invested land valued P15,000 for a 20% capital interest in the new partnership. Tyra's cost of land was P12,000. The partnership elected to use bonus method to record the admission of Tyra into the partnership. Tyra's capital account should be credited for? *

2. Cunanan invests P160,000 in a partnership for a one-fourth interest. Prior to Cunanan's admission, the partnership had two partners with capital balances of P190,000 each. If no asset revaluation is recognized prior to Cunanan's admission, what amount is credited to his capital account? *

3. Cardel desires to purchase a one-fourth capital and profit and loss interest in the partnership of Cariaso, Carino, and Carillo. The three partners agree to sell Cardel one-fourth of the respective capital and profit and loss interest in exchange for a total payment of P200,000. The profit and loss ratio and capital balances of the partners are as follows: Cariaso (60%) - P400,000; Carino (30%) - P200,000; and Carillo (10%) - P100,000. If assets are to be revalued prior to the admission of Cardel, what would be the capital balance of Cariaso after the admission of Cardel? *

4. Daza, Diaz and Ditas are partners with capital balances of P80,000, P120,000 and P160,000, respectively. They share profits and losses in the ratio of 30:40:30. Diaz decides to withdraw from the partnership. Diaz receives P160,000 in settlement of his interest. If the bonus method is used, what is the capital balance of Ditas immediately after the retirement of Diaz? *

5. The partnership of Doctor, Dino and Dolor has reached an impasse as Dolor is no longer willing to contribute the amount of time and effort to the partnership that he has previously given. The partners share profits and losses in the ratio of 3:4:4, respectively. The partners have the following capital balances just prior to Dolor's withdrawal from the partnership: Doctor - P45,000; Dino - P35,000; Dolor - P20,000. If Dino purchases Dolor's interest for P32,000 and no asset revaluation is recorded, the balance of Dino's capital immediately after the withdrawal of Dolor would amount to? *