PARTNERSHIP DISSOLUTION ACTIVITY

TRUE or FALSE.

1.When the outgoing partner’s interest is settled at an amount greater than the value of his interest, the excess in the payment
is always accounted for as an adjustment to the partnership assets.

2. When a remaining partner purchased the interest of the outgoing partner, any excess of the payment over the interest of the
outgoing partner shall be treated as a bonus and be divided among the remaining partners based on their profit and loss
agreement.

3. When an outgoing partner’s interest is settled at amount greater than the value of his interest and there is an indication of
an asset undervaluation, the amount of undervaluation is the excess of the outgoing partner’s settlement over his interest.

4. When an outgoing partner’s interest is settled at amount greater than the value of his interest and there is an indication of
an asset undervaluation, the undervalued asset should be adjusted to its fair value and the gain should be divided among the
remaining partners.

5.The admission of new partner by purchase of interest is a personal transaction of one or more existing partner and the new
partner. Hence, any gain or loss from such transactions will not be recorded in the partnership books.

6. Debit selling partner capital, Credit buying partner capital is an example entry for the admission of a new partner by
purchase.

7. In admitting a new partner, whenever the contributed capital of the old partners and the new partner is equal to their agreed
capital, partners should recognize Asset revaluation.

8. B who is a partner in the A-B-C Partnership is to sell 1/2 of his interest to D while C is to sell all his interest, also, to D.
Based on the circumstances, there is no need for A's permission regarding the change of partnership structrue.

MULTIPLE CHOICE QUESTIONS.

1. Partner Z of XYZ Partnership is retiring from the partnership. Which of the situation below indicates that bonus are given to
the remaining partners?
A. Partner Z’s settlement is greater than his interest.
B. Partner Z’s settlement is lower than his interest wherein an overvalued asset is present.
C. Partner Z’s settlement is lower than his interest after all fair value adjustments.
D. None of the following.

2. A, B, C & D are partners who share Profit and Loss in the ratio 30%, 30%, 20% & 20% respectively. If C is to withdraw from
the partnership, the new profit and loss ratio would be
A. 30%, 30% 20% respectively B. 30%, 20%, 20% respectively C. 37.5%, 37.5%, 25% D. equally

3. If the total contributed capital exceeds the agreed capital with the new partner’s investment same as his capital credit, then
the admission of the new partner involved a
a. Bonus to old partners c. Positive asset revaluation
b. Bonus to new partner d. Negative asset revaluation

4. Total agreed capital can be determined by either of the following procedures except
a. old partners' contribution divided by their fraction of interest
b. new partner's contribution multiplied by his fraction of interest
c. new partner's contribution divided by his fraction of interest
d. old and new partners' agreed capital added

5. A, B and C are partners who share profit and loss 3:2:1. Capital balances as of the end of
January is P30,000, P20,000 and P10,000. If A was to withdraw from the partnership and receives
 an amount P5,000 greater than the book value of his capital, B's capital would be
A. credited by P5,000 x 2/6 B. credited by P5,000 x 2/3 C. debited by P5,000 x 2/6 D. debited by P5,000 x 2/3

PROBLEM SOLVING.

1. The partners Maria, Leonora and Teresa have capital balances of P330,000, P240,000 and P230,000, respectively, as of
March 31, 2023, before Tirso was admitted in the partnership. How much should Tirso invest so that if would be sufficient to
have 33 1/3 interest in the new partnership, with no bonus nor revaluation of assets.

Old partners’ CC 330+240+230= 800,000

fraction of interest / 2/3
TOTAL AC 1,200,000
fraction of interest of Tirso x 1/3
Investment of Tirso 400,000

2. CC Partnership had a Net Profit of P25,000- for the month ended September 30, 2023. Carry purchased an interest in the
CC Partnership of Carl and Caloy by paying Carl P80,000 for 1/3 of his capital and 1/3 of his profit sharing interest. At this
time, the capital balance of Carl and Caloy is P120,000 and P171,000 respectively, Carry should receive a capital credit to his
account

Carl’s CC 120,000
fraction of interest x 1/3
Carry’s Capital credit 40,000

3. Meen and Ping are partnership who share profits and losses in a ratio of 2:1 and have a capital balance of P750,000 and
P1,500,000, respectively. The partners agreed to admit Thai to the partnership. Thai invested P750,000 for a 35% interest in
the partnership. The new total capital balance after admitting Thai is P3,000,000. Ping’s capital balance after Thai is admitted
is
AC CC
OLD 1,950,000 2,250,000 -300,000
NEW 1,050,000 750,000 300,000
3,000,000 3,000,000

PING’S CAPITAL BEFORE THE ADMISSION 1,500,000

BONUS 300,000 X 1/3 -100,000
PING’S CAPITAL AFTER THE ADMISSION 1,400,000

4. Red and White are partners sharing profits and losses in the ratio of 7:3 respectively. Their capital balances were as
follows: Red – P 800,000; White – P 750,000. They agreed to admit Blue as a partner upon his investment of P500,000 for a
30% equity in the partnership. All partnership assets and liabilities are fairly valued. Immediately after Blue’s admission, what
are the capital balances of the partners?
AC CC
OLD 1,435,000 1,550,000 -115,000
NEW 615,000 500,000 115,000
2,050,000 2,050,000

RED WHITE BLUE

BEFORE 800,000 750,000 1,550,000
ADMISSION +500,000
BONUS (80,500) (34,500) 115,000
AFTER 719,500 715,500 615,000 2,050,000

5. The partners Aseana, Antarteca, Oceanea and Afrik are partners with capital balances of P215,000, P225,000, P150,500
and P137,500 respectively, as of March 1, 2023. They share profit and loss 22%, 25%, 28% and 25% respectively. Uropa, the
new partner is to invest P120,000 in the partnership, but will have capital credit of P115,000 in the new partnership
capitalization of P900,000. Upon the admission of Uropa there will be an asset revaluation amounting to _________

AC CC
OLD 785,000 728,000 +57,000
NEW 115,000 120,000 -5,000
900,000 848,000 +52,000

6. A, B, C and D share profits and losses equally and have capital balances of P600,000, P500,000, P700,000 and P650,000,
respectively. D decided to sell his interest for P1,250,000 to the partnership and leave the business on July 31 of this year. Net
income as of this date amounted to P1,350,000.Using the revaluation method, how much is A’s ending capital balance?
A B C D
BEFORE 600,000 500,000 700,000 650,000
PROFIT 337,500 337,500 337,500 337,500
ASSET REVALUATION 262,500 262,500 262,500 262,500
1,200,000 1,100,000 1,300,000 1,250,000

7. Yellow, Green, and Orange are partners sharing profits and losses in the ratio of 3:2:1 respectively. On December 31,
2023 partner Yellow decided to withdraw from the partnership. Their capital balances as of this date are: Yellow-P500,000;
Green-P400,000; Orange-P350,000. The partners agreed that Yellow will be paid P470,000 in full settlement for his interest in
the partnership. The partnership assets are fairly valued. What is the capital balance of Green right after the retirement of
yellow?

Yellow Green Orange

BEFORE 500,000 400,000 350,000
BONUS -30,000 20,000 10,000
470,000 420,000 360,000

8. Red, White and Blue are partners with capital balances of P160,000, P240,000 and P320,000, respectively. They share
profits and losses in the ratio of 3:4:3. White retires from the partnership and receives P300,000 as settlement of his interest.
Using the bonus method, what is the capital balance of Blue immediately after the retirement of White?

RED WHITE BLUE

BEFORE 160,000 240,000 320,000
BONUS -30,000 +60,000 -30,000
130,000 300,000 290,000
9. Allan, Bjorn and Collin are partners who shares profit and loss equally. Capital balances as of the end of January amounted
to P100,000, P120,000 and P120,000. If Dennis is to be admitted by purchasing 1/4 interest from the partnership, the new
capital balance would be

CAPITAL BEFORE 100+120+120 340,000

ADMISSION BY PURCHASE 0
CAPITAL AFTER 340,000

10. ABC Partnership admitted D in the partnership, who invested P 3,000,000 cash for a 15% interest. If the total capital of
ABC Partnership is P 17,500,000 before admitting D, how much is the bonus to D?

AC CC
OLD 17,425,000 17,500,000 -75,000
NEW 3,075,000 3,000,000 +75,000
20,500,000 20,500,000 0

11. Hermes and Jeff are partners with capital balances of P300,000 and P400,000 and share in the profit and loss ratio of
3:5, respectively. Clark was admitted by contributing P250,000 to the partnership and was given 25% capital credit for a new
capitalization of P1,000,000. How much is the new capital balances of the old partners after the admission of the new partner?

AC CC
OLD 750,000 700,000 +50,000
NEW 250,000 250,000
1,000,000 950,000

HERMES JEFF CLARK

BEFORE 300,000 400,000
ADMISSION 250,000
ASSET REVALUATION 18,750 31,250
AFTER 318,750 431,250 250,000

12. A decided to withdraw from his partnership with B and C. Before his withdrawal, A’s capital balance was P101,500, while
B’s was P112,000 and C’s was P134,750. Also, the partnership’s total assets amounted to P787,500, but the partners agreed
that a fixed asset was under-depreciated by P26,250. A, B and C share profits and losses in the ratio of 2:4:4, respectively.If A
was paid P93,100 upon his retirement, how much is the remaining partnership net assets after A’s withdrawal?

A B C
BEFORE 101,500 112,000 134,750
ASSET REV -5,250 -10,500 -10,500
AFTER 96,250 101,500 124,250
 -3,150 +1,575 +1,575
Settlement 93,100 103,075 125,825

103,075+125,825= 228,900

13. The total of the partners’ capital accounts were P770,000, before the recognition of partnership asset revaluation in
preparation for the withdrawal of a partner whose profit or loss sharing is 20%. He was paid P196,000 by the firm in final
settlement for his interest. The remaining partners’ capital accounts, excluding their share of the asset revaluation, totaled
P630,000 after his withdrawal. The total asset revaluation of the firm agreed upon was:

BEFORE 770,000
AFTER 630,000
RETIRED PARTNER’S INTEREST BEFORE ASSET REVALUATION 140,000
RETIRED PARTNER’S SETTLEMENT 196,000
HIS SHARE IN THE ASSET REV 56,000
FRACTION OF INTEREST /20%
TOTAL ASSET REV 280,000