PRACTICAL ACCOUNTING 2 TEST BANK

1. Jinky is trying to decide whether to accept a bonus of 25% of net income after salaries and bonus or a
salary of P97,500 plus a bonus of 10% of net income after salaries and bonus as a means of allocating
profit among the partners. Salaries traceable to the other partners are estimated to be P450,000. What
amount of income would be necessary so that Jinky would consider the choices to be equal?
a. P1,100,000 b. P1,197,500 c. P650,00 d. P1,262,500

2. Jamby and Minam just formed a partnership. Jamby contributed cash of P2,205,000 and office
equipment that cost P945,000. The equipment had been used in her sole proprietorship and had been
70% depreciated, the appraised value of the equipment is P630,000. Jamby also contributed a note
payable of P210,000 to be assumed by the partnership. Jamby is to have 60% interest in the partnership.
Miriam contributed only P1,575,000 merchandise inventory at fair market value. Assume the use of
bonus method, the partners capital must be in conformity with their profit and loss ratio upon
formation.

In the formation of a partnership, which of the following is true?

a. The agreed capital of Jamby upon formation is P2,625,000
b. The total agreed capital of the partnership is P4,375,000
c. The capital of Miriam will increase by P105,000 as a result of the transfer of capital
d. There is either an investment or withdrawal of asset under the bonus method

3. Batanes Construction Company recognized gross loss of P42,000 on its long-term project which has
accumulated costs of P490,000. To finish the project, the company estimates that it has to incur
additional cost of P735,000. The contract price is:
a. P798,000 b. P1,330,000 c. P1,225,000 d. P1,183,000