1. Michelle and Steve are partners in a local business.

They currently share profits and losses 60/40 and

have capital account balances of P150,000 and P200,000, respectively. They are considering admitting
Jacob to the partnership. He will receive a 20 percent equity interest in the partnership for a P120,000
investment. Assuming that goodwill is to be recognized, which partner(s) are contributing the
goodwill?
a. Both new and existing partners are contributing goodwill
b. New partner is contributing goodwill
c. Existing partners are contributing goodwill
d. There is not enough information to answer this question

2. Assuming the same data in No. 1, what amount of goodwill would be disclosed on the partnership
balance sheet immediately after Jacob is admitted?

3. Susan and David are partners in a local business. They currently share profits and losses 45/55 and
have capital account balances of P250,000 and P300,000, respectively. They are considering admitting
Jane to the partnership. She will receive a 25 percent equity interest in the partnership for a P225,000
investment. Assuming that goodwill (revaluation) is to be recognized, which partner(s) are
contributing the goodwill?
a. New partner is contributing goodwill
b. Existing partners are contributing goodwill
c. Both new and existing partners are contributing goodwill
d. There is not enough information to answer this question

4. Assuming the same information in No. 3, what amount of goodwill would be disclosed on the partnership
balance sheet immediately after Jane is admitted?

5. At year-end, the Cisco partnership has the following capital balances:

Montana, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 130,000
Rice, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Craig, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Taylor, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000

Profits and losses are split on a 3:3:2:2 basis, respectively. Craig decides to leave the
partnership and is paid P90,000 from the business based on the original contractual
agreement. If the goodwill (revaluation) method is to be applied, what is the balance of
Montana’s capital account after Craig withdraws?

6. When Elsa Martin withdrew from Lewis, Martin, Noll & Ordway Partnership on January 31, 20x4, she
was paid P80,000, although her capital account balance was only P60,000. The four partners shared
net income and losses equally. The journal entry of the partnership to record Martin's withdrawal on
January 31, 20x4, preferably should include a debit of:
a. P6,667 to Lewis, Capital c. P80,000 to Goodwill
b. P20,000 to Goodwill d. P80,000 to Martin, Drawing

7. Harry, Susan, and Walter are partners who share profits and losses 35, 40, and 25 percent, respectively.
The partners have capital account balances of P80,000, P110,000, and P55,000, respectively. Harry is
withdrawing from the partnership. At the date of withdrawal, the partners are revaluing all of the
partnership’s assets, an increase of P200,000. If Susan and Walter acquire Harry’s equity, what will be
the amount of Susan’s capital on the partnership’s balance sheet immediately after Harry’s withdrawal,
rounded to the nearest peso?
8. Assuming the same information in No. 7, what will be the amount of total capital on the partnership’s
balance sheet immediately after Harry’s withdrawal?

9. Frank, George, and Scott are partners with capital accounts of P160,000, P120,000, and P210,000,
respectively. Scott has informed Frank and George that he must withdraw from the partnership. The
partners have agreed that the partnership will purchase Scott’s ownership interest for P250,000. The
profit and loss residual ratios before Scott’s retirement are 45 percent, 30 percent, and 25 percent,
respectively. How much will Frank’s capital account be reduced if the bonus method is applied for the
withdrawal?

10. Assuming the same information in No. 9, what will be the balance in Frank’s capital account if the bonus
method is applied for the withdrawal?

11. Bob, Claire, and Jack are partners who share profits and losses 30 percent, 25 percent, and 45 percent,
respectively. Bob informed Claire and Jack that he is withdrawing from the partnership. The partners’
capital accounts at the date of Bob’s withdrawal are P150,000, P135,000, and P225,000, respectively.
The partnership agreement states that the goodwill, if any, of the withdrawing partner will be
recognized for all partners immediately prior to the withdrawal of any partner. In this instance, the
partners determine that the goodwill associated with Bob is P22,500. Assuming that Bob’s equity is
purchased by a new partner (Deborah) approved by Claire and Jack, what is the amount of Deborah’s
initial capital account?

12. Using the same information in No. 11, except that Bob’s equity is purchased by Claire (60 percent) and
Jack (40 percent), what is the amount of Claire’s capital account at the date of Bob’s withdrawal?

Donald, Anne and Todd have the following capital balances; P40,000, P50,000 and P30,000 respectively.
The partners share profits and losses 20%, 40% and 40% respectively.

13. Anne retires and is paid P80,000 based on the terms of the original partnership agreement. If the
goodwill (revaluation of asset) method is used, what is the capital of the remaining partners?

14. Anne retires and is paid P80,000 based on the terms of the original partnership agreement. If the bonus
method is used, what is the capital of the remaining partners?

15. What is the total partnership capital after Anne retires receiving P80,000 and using the bonus method?

16. XX and YY are partners who have capital of P600,000 and P480,000 sharing profits in the ratio of 3:2.
ZZ is admitted as a partner upon investing P500,000 for 25% interests in the firm, profits are to be
allocated equally. Given the choice between goodwill and bonus method, ZZ will prefer bonus or
goodwill with a gain amounting to or be indifferent.