Question

9 Which of the following statements is NOT true with regards to the division of proft that aliows interest allowance, salary alowance, and bonus? A Interest allowance is allowed regardiess of the result of operation B. Regardiess of the date when the partnership started ts operation, the amount of interest computed for the whole year must be allowed to the partners C. The amount of salary alowance will depend upon the partner's expertise and time devoted to the partnership D. Bonus is allowed only to the managing partner the Income Summary account has a final credit balance. 10. Which of the following is not used as basis in the distribution of proit or loss to partners? A Interest on loan payable to partners B. Interest on weighted average capital C After the usual allocations, the remainder is divided according to the profit and loss ratio D. Salary allowances to partners 11. If the partnership agreement provides a formula for the computation of bonus to the managing partner, the bonus would be computed at which stage of the allocation of proit and losses? A The bonus is always caloulatod after any salary allowance allocation. B. The bonus is always caloulated ater any interest allowance allocation. C. The bonus must always be calculated next to last since the last step is calculating the residual D. The bonus can be defined in such a way that its calculation can occur at any time during the allocation of profit and losses 12 Three (3) partners agree to distribute profits and losses as follows: L Interest on ending capital of 10% I Annual salary allowance of P50,000 each IRemainder divided equally Which of the following is TRUE assuming business operation eamed net income of only P50,0007 A Distribute according to agreement to the extent of P50,000 B. Follow lIll only because I and Il will require an amount exceeding P50,000 C Follow I and Ill and use number Il provision to comrect the over distribution made in I and D. Revise the agreement prior to the distribution of the P50,000 13. Galahad and Launcelot share profits and losses on a 6:4 basis. They have capital balances of P150,000 and P80,000, respectively. Arthur is admited to the partnership for a cash investment of P100,000 and 25% interest in the partnership. Which of the following is TRUE? A Arthur will have a capital credit of P100,000 B. Bonus will be given to the old partners C. Arthur will receive bonus from the old partners D. Aor C is possible in this situation If bonus is to be given to the old partners, it will be allocated according to the A P&L ratio of the old partnership B. P&L ratio of the new partnership C. Capital ratio of the old partners D. Capital ratio of the new partnership 14. 15. Which of the following will NOT dissolve a partnership? A Sale of a partner's 100% interest to the remaining partners B. Sale of a partner's 100% interest to an outsider C. Sale of a partner's 50 % interest to an outsider D. Sale of a partner's 50 % interest to an existing partner 16. When there is no agreement on how losses will be distributed among the partners, it will be distributed A. equally B based on the ratio of latest capital balances. C based on the ratio of original capital balances. D. in the same manner as the profits are distributed

Answer 1

9. D.Bonus is allowed only to the Managing partner if the income summary acount has a final credit balance.

10. D. salary allowance to the partner

11 .C, The bonus is always calculated next to last since the last step is calculating the residual.

12.A. Distrubute according to the agreement to the extent of P50000

13 .A. Arthur will have a capital credit of P100000

14,C. Capital ratio of old partners

15. A. Sale of 100% interest to the remaining partners will not dissolve the partnership.

16. A,Equally. If there is no agreement on how losses will be distributed then it will be shared equally among the partners,