Midterm Examination Acctg. 126 Instructor: Braoul Nolan C.

Talip

I.

True or False 1. A trading partnership is also known as business co-partnership, it buys and sells finished merchandise or manufactures goods as its primary operational activity. 2. A non-trading partnership renders service only for a fee. 3. A general professional partnership is organized for the exercise of a common profession, and usually renders service based on the partners acquired profession. 4. Particular partnership is a partnership which has for its object determinate things, their use or the fruits, or a specific undertaking, or exercise of a profession. 5. A general partnership is comprised of a general partners or a combination of industrial and general partners; they are personally liable for the partnerships debts after the exhaustion of its assets. 6. A partnership at will is formed for a particular undertaking and may be terminated any time by the will of any of the partners or by mutual agreement of the partners. 7. A de jure partnership is established and organized in accordance with all the legal requirements for its existence. 8. A de facto partnership is established and organized without complying with the legal requirements for its existence. 9. An industrial partner contributes money or property to the partnership 10. A capitalist partner contributes money, property and industry to the partnership. 11. A limited partner assumes unlimited liability; he is be liable for the partnership debts to the extent of his personal assets. 12. A general partner is known as a partner but does not take active participation in running the affairs of the partnership. 13. A silent partner is appointed to liquidate partnership assets and settle unfinished transactions of the partnership and dissolution. 14. A dormant partner is not known as partner but takes active part in running the partnership. 15. A nominal or ostensible partner is not known as partner and inactive in the partnership. Problem solving 1. Prepare the journal entries to record the investment of the partners under each independent case pertaining to the formation of a partnership. a. A and B contributes P250,000.00 each. b. A, B, and C contribute the following: A- Cash, P50,000.00 B- Land, purchased price, P60,000.00; present market value, P100,000.00. C- Merchandise inventory with a fair market value of P80,000; quoted price of C is P100,000.00. c. A to contribute cash of P140,000.00 for the 40% of the total agreed capitalization. B to contribute the remaining cash.

II.

d. A to contribute his skill as industrial partner. B to contribute cash for the total partnership capitalization of P250,000.00.

2. Gabriel and San Miguel decided to combined their respective businesses into a partnership with an agreed total capital of P400,000. The noncash assets contributed by the two parties are as follows: GABRIEL Book value Accounts receivable Notes receivable Merchandise inventory Furniture Equipment Accounts payable REQUIRED: a. Journalize the partnership formation assuming that the partners capital account are to be equal after the assets and liabilities are absorbed by the partnership, and any deficiency shall be paid. You may show your solutions for additional points. b. Prepare the balance sheet of Gabriel and San Miguel partnership formation. 3. As single proprietorship has the following balances: CashP 10,000 Noncash assets- 90,000 Accounts payable25,000 B is invited to invest P125,000 to convert the sole proprietorship into partnership. The noncash assets of the sole proprietorship are fairly valued. A and B agreed that their respective capital balances would be 40% and 60% of the total partnership capitalization. REQUIRED: Prepare the journal entries to record the investments of A and B under 1. BUNOS METHOD 2. GOODWILL METHOD, (assuming the total partner to be based on partner B) P50,000 10,000 80,000 40,000 30,000 200,000 Fair Value P48,000 10,000 100,000 37,000 25,000 200,000 60,000 70,000 14,000 50,000 15,000 60,000 SAN MIGUEL Book value Fair value