PARTNERSH

IP
DISSOLUTI
ON
PROBLEMS
PROBLEM #1
TRUE OR FALSE
A partnership may be dissolved
without being terminated but
liquidation is always preceded by
dissolution.
ANSWER: TRUE
PROBLEM #2
IDENTIFICATION
The change in the relation of the
partners caused by any partner ceasing
to be associated in the carrying on of
the business.
ANSWER: DISSOLUTION
PROBLEM #3
ENUMERATION
What are the causes of Dissolution?
ANSWER:
• Admission of a new partner,
• Withdrawal, Retirement, or Death of a partner,
• Incorporation of a Partnership
PROBLEM #4
The capital balances and profit or loss ratio of the partners in Paw Friends Co. as follows:

P&L
Partners  Capital 
Ratio 
Popo  40,000  40% 

Branson  60,000  30% 

Cookie  80,000  30% 

TOTAL  180,000  100% 

Luna purchases ½ of Cookie’s capital interest for 48,000.

Required: Provide journal entry to record transaction.

SOLUTION

Cookie, Capital 40,000

Luna, Capital 40,000

Computation:

80,000/2 = 40,000

ANSWER: 40,000
PROBLEM #5
The capital balances and profit or loss ratio of the partners in Happy Co. Are as follows:

P&L
Partners  Capital 
Ratio 
Melissa  40,000  40% 

Elizabeth  60,000  30% 

Annete  80,000  30% 

TOTAL  180,000  100% 

Sandra purchases 25% of all partners' capital interest for 60,000.

Required: Journal Entry

SOLUTION
Melissa, Capital 10,000
Elizabeth, Capital 15,000
Annete, Capital 20,000
Sandra, Capital 45,000

Melissa, Capital (40,000*.25) 10,000

Elizabeth, Capital (60,000*.25) 15,000
Annete, Capital (80,000*.25) 20,000
Sandra, Capital 45,000
PROBLEM #6

How much is the capital

balances after Sandra's
admission?
SOLUTION

  Melissa  Elizabeth  Annette  Sandra  Total 

Capital Beg.  40,000  60,000  80,000  -  180,000 

Sold to interest (10,000) (15,000)
(20,000)  45,000  - 
Sandra     
Capital, End  30,000  45,000  60,000  45,000  180,000 
PROBLEM #7
On June 30, 2020, the condensed balance sheet for the partnership of Simon, Mara, and Alex,
together with their respective profit and loss sharing percentages was as follows:
Assets, Net of Liabilities 320,000

Simon, Capital (50%) 160,000

Mara, Capital (30%) 96,000
Alex, Capital (20%) 64,000
320,000

Simon decided to retire from the partnership and by mutual agreement is to be paid 180,000 out of partnership funds for
his interest. Total goodwill or adjustment in assets implicit in the agreement is to be recorded. After Simon’s retirement,
what are the capital balances of the other partners?

Mara Alex
A. 84,000 56,000
B. 102,000 68,000
C. 108,000 72,000
D. 120,000 80,000
SOLUTION
Amount Paid 180,000
Less: Interest of Simon (50%) 160,000
Excess/Partial Goodwill 20,000
Divided by 50%
Total Goodwill 40,000

Therefore, the capital of the remaining partners are:

Mara (96,000+(40,000x30%)) 108,000

Alex (64,000+(40,000x20%)) 72,000

ANSWER: C.108,00072,000
PROBLEM #8
Alias, Helen, and Anna sharing profits and losses equally. Anna
retires and the goodwill is appearing in the books at 30,000. Goodwill
of the firm is valued at 150,000. Calculate the net amount to be credited
to Anna’s capital account.

A.60,000
B.50,000
C.40,000
D.10,000
SOLUTION
Goodwill of the Firm 150,000
Less: Goodwill in the 30,000
books
Goodwill 120,000
Divided by 3
Net amount credited to 40,000
Anna’s Capital Account

ANSWER: C. 40,000
PROBLEM #9
Mike, Andy, and Joe are partners who share profits 40%, 20%, and 40%. Their
capital balances were 630,000, 420,000, and 210,000, respectively, before Joe’s
retirement. Joe was paid 270,000 from partnership assets to buy his interest

Compute the capital balances of Mike and Andy after Joe has withdrawn.

Mike Andy
A. 184,000 236,000
B. 590,000 400,000
C. 208,000 172,000
D. 320,000 480,000
SOLUTION
Mike’s capital balance: 630,000-((270,000-210,00)
x 40/60) = 590,000
Andy’s capital balance: 420,000-((270,000-210,00)
x 20/60) = 400,000

ANSWER: B. 590,000 400,000

PROBLEM #10
The statement of financial position of the partnership of Montealto and Oliver as of Dec. 31,
2019 showed the following:
Book Value Fair Value
Cash 200,000 200,000
Account Receivable 150,000 135,000
Allow. For bad debts (20,000)
Inventory 100,000 120,000
Equipment 250,000 180,000
Accum. Depreciation (50,000)
Accounts Payable 230,000 230,000
Montealto, Capital 200,000
Oliver, Capital 200,000

On this date, the partnership was dissolved and its net assets transferred to a newly-formed corporation.
Each of the partners was issued 10,000 shares of the corporation’s P20 par ordinary share. How much is the
share premium contributed by Montealto and Oliver to the new corporation?
SOLUTION
Books of Corporation
Cash 200,000

Accounts Receivable 150,000

Inventory 120,000

Equipment 180,0000

Allowance for Bad debts 15,000(150,000-135,000)

Accounts Payable 230,000

Share Capital 400,000

Share Premium 5,000

ANSWER: 5,000
PROBLEM #11
The condensed statement if financial position of the partnership of Buenaflor and
Gangoso as of December 31, 2020 showed the following:

Total Assets 200,000

Total Liabilities 40,000
Buenaflor, Capital 80,000
Gangoso, Capital 80,000

On this date, the partnership was dissolved and its net assets transferred to a newly-formed
corporation. The fair value of the assets was 24,000 more than the carrying value on the firm’s
books. Each partner was issued 10,000 shares of the corporation’s P1 par ordinary share. How
much is the Share Capital contributed by Montealto and Oliver to the new corporation?
SOLUTION
Total Assets 224,000

Total Liabilities 40,000

Share Capital 20,000

Share Premium 164,000

ANSWER: 20,000
PROBLEM #12
Mika and Ela are partners who share profits and losses in the ratio of 7:3;
respectively. Their respective capital are as follows:

Mika 35,000
Ela 30,000

They decided to admit Renz as a partner with a one-third interest in the capital and profits and
losses, upon an investment of P25,000. The new partnership will begin with a total capital of
P90,000. Immediately after Renz’s admission, what are the capital balances of Mika, Ela, and
Renz, respectively?
SOLUTION
Contributed Agreed Increase
Capital Capital (Dec.)
Old partner P65,000 P60,000 (P 5,000)
New partner 25,000 (1/3) 30,000 5,000
Total P90,000 P90,000 P –__

MIKA ELA RENZ

Capital balances before admission P35,000 P30,000 –
Investment by Renz – – 25,000
Bonus to Renz ( 3,500) ( 1,500) 5,000
Capital balances after admission P31,500 P28,500 P 30,000