FA2 Managing Financial Records

Chap 13 Practice Questions

Lecturer: Christine Colon, ACCA

Name:
Group: Date:

1. Which of the following statements provides the definition of a partnership?

A. A maximum of three people in business together

B. Persons in business together with the intention of sharing profits and losses
C. Two work colleagues who are employed by the same business
D. Two persons who each have their own business as a sole proprietor

The following information relates to questions 2 and 3.

Vivienne and Robert are in partnership, sharing profits and losses in a ratio of 3:2. They maintain current
accounts and fixed capital accounts. In the last year, their profit before appropriations was $27,800. Robert
is entitled to an annual salary of $3,800.

During the year Vivienne and Robert made cash drawings of $12,000 each.

2. What is Vivienne's share of the profit?

A. $2,280
B. $9,600
C. $14,400
D. $16,680

3. The correct entry for the partners' drawings has been made in the cash account.

What entry is needed to complete the posting for the partners' drawings?

A. A debit entry in the partners' capital accounts

B. A credit entry in the partners' capital accounts
C. A debit entry in the partners' current accounts
D. A credit entry in the partners' current accounts
 The following information relates to questions 4 to 8.

Three's A Crowd has three partners: Alan, Andy and Roger. The three partners share pro equally after
interest on capital at 5% and Andy's partnership salary of $12,500. The partner’s account balances at 31
July 20X4 are shown below:
Alan Andy Roger
Capital $20,000 $20,000 $10,000
Current $7,000 $5,250 $8,375
Drawings $13,750 $11,250 $9,500

No interest is paid on current account balances.

The net profit for the year ended 31 July 20X4 was $150,000.

4. What will the statement of financial position as at 31 July 20X4 show as the total owners' equity?
A. $186,125
B. $255,125
C. $36,125
D. $165,500

5. What will each partner receive as a share of residual profit?

A. $50,000
B. $45,000
C. $49,167
D. $45,833

6. What total profit will Andy receive for the year ended 31 July 20X4?
A. $46,000
B. $57,500
C. $58,500
D. $60,000

7. What will Alan's current account balance be after accounting for the profit share for the year ended 31 July
20X4?
 A. $53,000
B. $38,250
C. $32,250
D. $39,250

8. What will the total of the partners' current account balances at 31 July 20X4?
A. $136,125
B. $170,625
C. $205,125
D. $115,500
9. Gordon and Delia are in partnership and share profits and losses equally. On 1 Jan 20X8, Mary is admitted
to the partnership and it was agreed that, from that date, profits and losses would be shared equally
between the three partners. Goodwill was valued $60,000. Gordon and Delia had the following credit
balances on their capital and accounts at 1 January20X8:
Gordon Delia
Capital $60,000 $60,000
Current $15,000 $10,000

A goodwill account is not maintained in the books of the partnership.

How much is Mary required to contribute if she is to have a capital account credit balance of
$10,000 immediately after joining the partnership?

A. $10,000
B. $20,000
C. $30,000
D. $60,000
10. When accounting for goodwill upon admission of a partner, what accounting entries are
required to recognise goodwill due to the old partnership?

A. Dr Goodwill, and Cr Partners' capital accounts

B. Dr Goodwill, and Cr Partners' current accounts
C. Dr Partners' capital accounts and Cr Goodwill
D. Dr Partners' current accounts and Cr Goodwill