REVIEWER IN XECODEV

PARTNERSHIP

A. Theories

1. The partner who has priority to receive first in the cash priority distribution plan is the
partner who
a. Has the largest total interest balance
b. Has the smallest total interest balance
c. Has the largest profit and loss ratio
d. Has the largest loss absorption capacity

2. prior to partnership liquidation, a schedule of possible losses is frequently prepared to

determine the amount of cash that may be safely distributed to the partner. The schedule of
possible losses
a. Shows the successive losses necessary to eliminate the capital accounts of
partners (assuming no distribution of personal assets by partners).
b. Consists of each partner’s capital account plus loan balance, divided by that
partner’s profit and loss ratio.
c. Assumes contribution of personal assets by partners unless there is a substantial
presumption of personal insolvency by the partners.
d. Indicates the distribution of successive amounts of available cash to each partner.

3. A partner’s loss absorption balance is calculated by

a. Multiplying distributable assets by the partner’s profit sharing percentage
b. Dividing the partner’s capital balance by his percentage interest in capital.
c. Dividing the partner’s total interest by his profit and loss sharing percentage
d. Multiplying the partner’s total interest by his profit and loss sharing percentage

4. If all partners are included in the first installment payment under installment liquidation,
then the next distribution will be made
a. According to the residual profit and loss ratio
b. On a schedule of safe payments
c. According to cash priority program
d. According to capital balances

5. Cash priority program is prepared

a. To determine the order and amount of cash each partner will receive as it comes
available for distribution
b. Each time a non-cash assets are realized
c. Each time cash is distributed to partners in an installment liquidation
 d. All of the above

6. The capital deficiency of insolvent partner shall be allocated based on

a. Profit and loss ratio to the absorbing partners
b. Profit and loss ratio of all partners
c. Capital ratio of the absorbing partners
d. None of the choices

7. While partner is considered the most vulnerable as a result of a computation of

vulnerability ranking
a. The partner with the highest loss absorption capacity
b. The partner with the lowest loss absorption capacity
c. The partner with the highest total interest
d. The partner with the lowest total interest

8. In preparing the schedule of safe payments, it is assume that:

a. All non-cash assets are considered worthless
b. Unpaid liabilities will be settled by the partners own personal property
c. All partners are solvent
d. No liquidation expenses will be settled

9. The total realization and liquidation losses include

a. Goodwill write-off
b. Loss on realization
c. Liquidation expenses
d. All of the above

10. At the time of partnership liquidation, which credits shall be settled first?
a. Those owing to third persons
b. those owing to partners other than capital contribution and share in profit
c. Those owing to partners with respect to capital contribution
d. those owing to partners with respect to share in profit

11. In the liquidation of general partnership, which of the following credits shall be
prioritized by the liquidating partner at the time of settlement?
a. Claim of the capitalist partners pertaining to their capital contribution
b. Claim of industrial partners pertaining to his just and equitable share in the
partnership profit
c. Claim of the partners arising from their advances made to the partnership
d. Claim of the capitalist partners pertaining to their share in the partnership profit
12. ST1 Partnership dissolution is always followed by liquidation.
ST2 In lump-sum liquidation, the distribution of cash to partners is made only after
all the non-cash assets have been realized, the total amount of gain or loss on realization
has been determined and distributed, and all liabilities have been paid.
a. Both True
b. Both False
c. True, False
d. False, True

13. Liquidation of a partnership includes all of the following steps, except

a. Obtaining court approval
b. Setting the partnership’s non-cash assets
c. Paying the partnership liabilities
d. Distributing the remaining cash to partners.

14. A capital deficiency in a partner’s capital that is uncollectible is

a. the result of a sale of non-cash assets at a profit
b. the result of a loss in operations
c. a loss to other partners
d. a gain to the other partners

15.. The other partner must absorb the deficiency in a partner’s capital account in liquidation
because of
a. limited life and mutual agency
b. mutual agency and unlimited liability
c. limited life and co-ownership of property
d. mutual agency and partnership’s taxability

16. When a partnership is liquidated, all of the following may occur, except:
a. a partner erases his deficiency by declaring bankruptcy
b. the other partners absorb a partner’s deficiency
c. a partner erases his deficiency by contributing property
d. a partner erases his deficiency by contributing cash

17. In the final liquidation transaction, the remaining cash is distributed to the partners. The
partners share in the cash according to their
a. profit and loss ratio
b. withdrawals
c. capital balances
d. cash balance
18. The order of partnership liquidation process is
a. sell assets, distribute cash to partners, pay liabilities
b. distribute cash to partners, pay liabilities, sell assets
c. pay liabilities, sell assets, distribute cash to partners
d. sell assets, pay liabilities, distribute cash to partners

19. In a partnership liquidation, a loss from sale of non-cash assets is

a. allocated to the partner with the lowest capital balance
b. allocated to the partnership liabilities
c. allocated to the partners based on their capital balances
d. allocated to the partners based on the profit and loss sharing ratio

20. When a cash priority program is prepared, a partner’s loan payable to partnership is:
a. Added to the capital account to determine the total interest.
b. Ignored
c. Offset to partners withdrawal account
d. Deducted to the capital account to determine the total interest

21. If all partners are included in the first installment payment under installment liquidation,
then the next distribution will be made
a. According the residual profit and loss ratio.
b. On schedule of safe payments
c. According to cash priority program
d. According to capital balances

22. When the partnership is liquidated, the payments should be made in the order of
priority:
a. Partners for capital accounts, loan from partner’s account and outside creditors.
b. Outside creditors, partners for capital accounts and loan from partner’s account
c. Loan from partner’s account, partners for capital accounts and outside creditors
d. Outside creditors, loan from partner’s account and partners for capital accounts

B. Problems

1.. A partnership liquidates and finds an excess cash after payment of liabilities of P100,000.
The four partners have equal capital balances and share profits and losses in the ratio of
10:20:30:40. The four partners will receive a final distribution of cash as follows:
a. P25,000, P25,000, P25,000, P25,000
b. P10,000, P20,000, P30,000, P40,000
 c. P12,000, P20,000, P8,000 , P60,000
d. P00,000, P100,000, P100,000, P100,000

2. Upon liquidation, The EE partnership realizes a gain on sale of assets amounting to

P120,000. The gain is allocated to the partners, Estrada and Esteban according to their
profit and loss ratio of 1:2. How is the gain allocated to each partner?
a. Estrada - P60,000 Esteban - P60,000
b. Estrada - P80,000 Esteban - P40,000
c. Estrada - P40,000 Esteban - P80,000
d. Estrada - P120,000 Esteban - P240,000

3. The liquidation of the partnership of Emma, Earl and Ester resulted in a deficiency in
Emma’s capital account of P100,000. Emma can contribute only P25,000 to offset her
deficiency. Earl and Ester, who have capital balances of P250,000 and P50,000 and share
profits and losses in the ratio of 2:3, will absorb the deficiency as follows:
a. Earl - P30,000 and Ester - P 45,000
b. Earl - P37,500 and Ester - P 37,500
c. Earl - P45,000 and Ester - P 30,000
d. Earl - P 0 and Ester - P 0

Ever, Angel and Encar are partners who share profits and losses in the ratio of 2:3:5. The
partners have decided to liquidate the partnership. Their capital accounts show the following
balances: Ever - P60,000 credit; Engel - P90,000 credit; Encar -
P 30,000 debit after the sale of non-cash assets and the payment of all liabilities.
4. What is the amount of cash available for distribution?
a. P160,000
b. P50,000
c. P120,000
d. P180,000

The following Statement of Financial Position is for the EEE Partnership. The partners Emy,
Ely and Evy share profits and losses in the ratio of 5:3:2, respectively.

Cash P 60,000 Liabilities P140,000

Other Assets 540,000 Emy, Capital 280,000
Ely, Capital 160,000
Evy, Capital 20,000
Total P600,000 Total P 600,000
5. Assuming the original partners agreed to liquidate the partnership by selling the other
assets, what should each of the respective partners receive if the other assets are sold for
P400,000?
a. Emy - P200,000; Ely - P115,000 ; Evy - P 0
b. Emy - P206,000; Ely - P114,000 ; Evy - P 0
c. Emy - P210,000; Ely - P111,800 ; Evy - P 8,000
 d. Emy - P280,000; Ely - P160,000 ; Emy -P20,000

The Statement of Financial Position for the partnership of Eden, Elisa, and Elma, who share
profits and losses in the ratio of 4:5:1, is as follows:

Cash P100,000 Liabilities P300,000

Inventory 720,000 Eden, Capital 320,000
Elisa, Capital 90,000
Elma, Capital 110,000
Total P820,000 Total P 820,000
6. If the inventory is sold for P600,000, how much should Eden receive upon liquidation of
the partnership?
a. P96,000
b. P200,000
c. P272,000
d. P320,000

7. Using the information in no. 13 and assuming the inventory is sold for P360,000, how
much should Elma receive upon liquidation of the partnership?
a. P56,000
b. P65,000
c. P74,000
d. P110,000

After all non-cash assets have been converted into cash in the liquidation of the Estacio and
Estioco Partnership, the ledger contains the following account balances:
Debit Credit
Cash P141,000
Accounts Payable P96,000
Loan Payable to Estacio 45,000
Estacio, Capital 21,000
Estioco, Capital 21,000

8. Available cash should be distributed with P96,000 going to Accounts Payable and
a. P45,000 to the Loan Payable to Estacio
b. P22,500 each to Estacio and Estioco
c. P24,000 to Estacio and P21,000 to Estioco
d. P21,000 to Estacio and P24,000 to Estioco

9. The statement of financial position of Poe and Ping Partnership on May 1, 2023 before
liquidation is as follows:
Assets Liabilities and Capital
Cash P14,000 Liabilities P35,000
Other assets 71,000 Poe, capital (70%) 28,000
Ping, capital (30%) 22,000
Total P85,000 Total P85,000

In May, assets with a book value of P34,000 are sold for P29,000. Creditors are paid in full.
Liquidation expenses of P1,000 is paid, and P3,000 is paid to partners. In May, how much
did Ping receive?
a. P-0-
b. P3,000
c. P 900
d. P2,700

Partners Bee, Cee, Dee and Gee who share profits 5:3:1:1, respectively, decide to liquidate
their partnership. Capital balances before liquidation are:
Bee P60,000
Cee 40,000
Dee 30,000
Gee 10,000

The partners agree to the following:

1. Partnership’s computer equipment with a book value of P12,000 is to be taken
over by partner Bee at a price of P15,000.
2. Partnership’s liabilities are to be paid off and the balance of cash on hand,
P30,000 is to be divided in a manner that will avoid the need for any possible
recovery of cash from a partner.

10. How much of the P30,000 cash be distributed to Partner Cee?

a. P10,000
b. P-0-
c. P20,000
d. P15,000

CORPORATION

1. The maximum number of shares of stock that the government gives a corporation
permission to issue is the
a. granted shares
b. authorized shares
c. issued shares
d. outstanding shares

2. A preference share capital that may be exchanged for ordinary share capital is known as
 a. cumulative
b. participating
c. noncumulative
d. convertible

3. The cost of organizing a corporation should be

a. expensed in the year of organization
b. reported as an intangible asset
c. reported as a tangible asset
d. deducted from share capital

4. The issuance of shares of ordinary share capital to shareholders

a. increases ordinary share capital authorized
b. decreases ordinary share capital authorized
c. increases ordinary share capital outstanding
d. decreases ordinary share capital outstanding

5. When there is no bidder for delinquent subscription, the subscribed shares

a. will be issued to the delinquent subscriber
b. will be issued in the name of the corporation
c. will be reverted back to unsubscribed shares
d. none of these

6. When a portion of shareholders’ original investment is returned in the form of a dividend,

it is called
a. compensating dividend
b. liquidating dividend
c. property divide d
d. equity dividend

7. Dividends representing a return of invested capital is known as

a. stock dividend
b. scrip dividend
c. property dividend
d. liquidating dividend

8. ST1 All incorporators are shareholders but not all shareholders are incorporators.
ST2 The authorized share represent the number of shares that a corporation may
issue.
a. Both statements are true
b. Both statements are false
c. True, False
 d. False, True

9. ST1 Share capital that has been sold and issued to a shareholder is called an
outstanding share capital.
ST2 When share capital is issued for consideration in the form of property other
than cash, the net book value of the property is used to record the transaction.
a. True, True
b. False, False
c. True, False
d. False, True

10. ST1 The highest bidder is the one who is willing to pay the entire unpaid
subscription plus any expenses incurred in the delinquency sale and at the same time
getting the highest number of shares.
ST2 The owners of a stock corporation are called shareholders, the owners of a
non0stock corporation are called members.
a. True, True
b. False, False
c. True, False
d. False, True

11. ST1 When the memorandum entry method is used, the account share capital is
credited upon issuance of stocks.
ST2 Under the journal entry method, the amount of share capital issued in
determined by deducting the balance of unissued share capital accounts from the balance of
authorized share capital account.
a. True, True
b. False, False
c. True, False
d. False, True

12. ST1 A stock dividend does not change total shareholders’ equity.
ST2 A debit balance in the Retained Earnings account is called a deficit.
a. True, True
b. False, False
c. True, False
d. False, True

13. ST1 Dividends may be declared even if a corporation has a deficit.

ST2 A cumulative preference share capital is entitled to payment of dividends in
arrears.
a. Both statements are true
b. Both statements are false
 c. True, False
d. False, True

14. An appropriation of Retained Earnings

a. leaves total Retained Earnings unchanged
b. means that cash has been set aside for a specific purpose
c. reduces the amount of Retained Earnings available for dividends
d. both a and c

15. When a corporation pays dividends, the three relevant dates for dividends occur in this
order:
a. date of record, date of declaration, date of payment
b. date of payment, date of declaration, date of record
c. date of declaration, date of payment, date of record
d. date of declaration, date of record, date of payment

16. When a corporation declares a cash dividend, the entry include a

a. debit to net income
b. debit to additional paid-in capital
c. debit to Retained Earnings
d. debit to cash

17. ST1 Treasury shares may be reported as assets.

ST2 A share (stock) split changes total shareholders’ equity
a. True, True
b. False, False
c. True, False
d. False, True

18. Violet Inc. issued 8,000 shares of P20 par ordinary share capital for P24 per share. In
recording this sale of share capital, Violet will include a credit to
a. gain on issuance of stock for P32,000
b. Ordinary share capital for P192,000
c. Paid in capital for P192,000
d, Discount on ordinary share capital for P16,000