1.
On June 30, 2018, the condensed balance sheet for the partnership of Eddy,
Fox, and Grimm together with their respective profit and loss sharing
percentage, was as follows:
Assets, net of liabilities P320,000
Eddy, capital (50%) P160,000
Fox, capital (30%) 96,000
Grimm, capital (20%) 64,000
P320,000
Eddy decided to retire from the partnership and by annual mutual agreement is to
be paid P180,000 out of partnership funds for his interest. Total goodwill implicit in
the agreement is to be recorded. After Eddy’s retirement, what are the capital
balances of the other partners?
1) Fox
2) Grimm
1) 108,000
2) 72,000
2. On October 31, Year 1, Morris retire from the partnership of Morris, Philip,
and Marl. Morris received 55,000 representing final settlement of his
interest in the amount of 50,000. Under the bonus method,
Charged 5,000 against the capital balances of Philip and Marl.
Under the bonus method, the excess of the amount paid by the partnership
to the retiring partner shall be absorbed by the remaining partners based on
their existing profit and loss ratio.
3. Davis has decided to retire from the partnership of Davis, Eiser, and
Foreman. The partnership will pay Davis P200,000. Goodwill is to be
recorded in the transaction as implied by the excess payment to Davis. A
summary balance sheet for the Davis, Eiser, and Foreman partnership
appears below. Davis, Eiser, and Foreman share profits and losses in a ratio
of 1:1:3, respectively.
Assets
Cash 75,000
Inventory 82,000
Marketable securities 38,000
Land 150,000
Building-net 255,000
Total assets 600,000
Equities
Davis, capital 160,000
Eiser, capital 140,000
Foreman, capital 300,000
Total equities 600,000
What goodwill will be recorded? 200,000
4. The trial balance of Nimpha, Esther, and Rebecca, on December 31, Year 4,
is as follows:
Cash 54,990
Other assets 25,000
Receivable from Nimpha 2,500
Merchandise inventory, Jan 1 Year 4 10,500
Purchases 33,500
Expenses 13,510
6% Note payable to Nimpha, dated
June 1 Year 4 6,000
Sales 66,000
Rental income 1,100
Nimpha, capital 23,220
Esther, capital 26,780
Rebecca, capital 16,900
Total 140,000 140,000
Merchandise inventory on December 31, Year 4, amounts to 9,100; accrued
interest on the note payable to Nimpha is to be recognized as of December
31. Nominal accounts are closed and 31,500 is paid for Nimpha’s net interest
in the firm (capital, receivable, and payable balances). A few days later,
Esther accepts a personal check for 32,000 from Rebecca to quit the business
and allow Rebecca to continue operations as a sole proprietor. The partners
share profit and losses equally.
Compute the ending capital balance of Rebecca immediately after Esther’s
withdrawal
56,490
5. Maxwell is trying to decide whether to accept a salary of 40,000 or salary of
25,000 plus a bonus of 10% of net income after salaries and bonus as a
means of allocating profit among partners. Salaries traceable to the other
partners are estimated to be 100,000. What amount of income would be
necessary so that Maxwell would consider choices to be equal?
290,000
6. When a partner retires from a partnership and the retiring partner is paid
more than the capital balance in her account, which of the following explains
the difference?
I. The retiring partner is receiving a bonus from the other partners.
II. The retiring partner's goodwill is being recognized.
Either I or II
7. Peter, Queen, and Roy are partners with capital balances of 300,000,
300,000, and 200,000, respectively; and sharing profits and losses equally.
Roy is to retire and it is agreed that he is to take certain office equipment
with second hand value of 50,000 and a note for his interest. The office
equipment carried in the books at 65,000 but brand new would cost
80,000. Roy’s acquisition of the office equipment would result in
Reduction in capital of 5,000 each for Peter, Queen, and Roy.
Peter Queen Roy
Second hand value taken 50,000
Loss on realization (65,000 - 50,000) (equally)
5,000 5,000 5,000
Total reduction in capital 5,000 5,000 55,000
8. In the RST partnership, Ron's capital is 80,000, Stella's is 75,000, and Tiffany's
is 50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring
from the partnership.
Refer to the above information. Tiffany is paid 60,000, and no goodwill
is recorded. In the journal entry to record Tiffany's withdrawal:
Stella, Capital will be debited for 4,000
