No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

DISSOLUTION

COMPUTATION
1. On October 31, 20x4, the statement of financial position of ABS partnership shows the assets,
liabilities, capital and profit and loss sharing ratio:

Cash 1,000,000 Total Liabilities 600,000

Non-cash assets 2,000,000 Anton, capital (10%) 900,000
Bong, capital (60%) 800,000
Shey, capital (30%) 700,000

On November 1, 20x4, Marie is admitted to the partnership by purchasing 40% of the capital interest
of Bong at a price of P500,000.

Req. 1: What is the capital balance of Bong after the admission of Marie on November 1, 2021?

Req. 2: Assuming the company has net income of 250,000 prior to admission of Marie. New partner
Marie purchase 20% capital interest of all partners for P400,000, what is the share of Shey in the
P400,000 cash payment of Marie?

Req. 3: Assuming Anton has loan receivable from the partnership of P50,000 and the partnership has
total net income for the year amounting to P120,000. The new partner purchase 20% capital interest of
all partners for P400,000. The partners agreed to revalue the non-cash assets before admitting new
partner Marie. What is the capital of Anton after admission of partner Marie?

2. Boy and Stringer are partners who share profits and losses in the ratio of 3:2, respectively. On August
31, 20x2 their capital accounts are as follows:

Boy 245,000
Steph 210,000

On that date, they agree to admit Drey as a partner with a one-third interest in the capital and profits and
losses, for an investment of P175,000. The new partnership will begin with a total capital of P630,000.
The capital balance of Boy after the admission of Drey should be:

3. On December 1, 2022, the statement of financial position is presented below:

Cash 500,000 Accounts payable 150,000
Non-cash assets 1,000,000 Due to B 50,000
Due from A 100,000 A, capital (40%) 500,000
B, capital (40%) 600,000
C, capital (20%) 400,000
C, drawings (100,000)
Total 1,600,000 Total 1,600,000

The net income prior to admission od D amounted to P280,000. The capital of B after admission of
new partner D amounted to P720,000. D was admitted to the partnership for 20% interest in capital
and profit or loss.

Req. 1: What is the amount of cash investment of D?

Req. 2: Assuming the new partner D invested cash of P500,000, what is the amount of bonus received
by C upon admission of D?

1|P a g e RFERRER/RLACO/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

4. On January 1, 2030, the statement of financial position of ABC partnership and the partner’s profit
and loss ratio are presented below:
Cash 1,200,000 Accounts Payable 500,000
Inventory 200,000 Loan from B 100,000
Receivable from A 50,000 Loan from C 50,000
Equipment 1,000,000 A, capital (20%) 400,000
B. capital (45%) 800,000
C, capital (35%) 600,000
Total 2,450,000 Total 2,450,000

The net income of the partnership for year 2030 is P600,000. On December 31, 2030, Partner C is
retiring from the partnership and the partners agree to revalue its inventory to P180,000. Partners A, B
and C made cash withdrawals amounting to P40,000; P30,000 and P15,000, respectively.

Req. 1: Partner Z will receive P892,000 cash for his total interest in the partnership. What is the
remaining total interest of partners A after retirement of partner C?

Req. 2: Partner B capital after retirement of C becomes P923,000 and the partnership equipment is also
revalued. How much did partner C receive at the time of his retirement for the settlement of his total
interest in the partnership?

THEORY
1. The admission of a new partner under the bonus method will result in a bonus to:
a. the old partners only.
b. the new partner only.
c. either the new partner or the old partners, but not both.
d. none of the above.

2. When a new partner is admitted to an existing partnership through the purchase of a portion of existing
interest of incumbent partner, which of the following is correct?
a. The total capital of the old and new partnership will be the same.
b. The partnership will recognize gain or loss on the difference between the amount paid and capital
transferred.
c. Goodwill may be recognized by virtue of the admission.
d. There will be increase in the total assets of the partnership equivalent to the amount paid by the
newly admitted partner.

3. When a new partner is admitted to an existing partnership through the investment by the said partner,
which of the following is the most probable reason if the amount contributed by the new partner is
higher than his capital credit to the new partnership but the existing capital of the incumbent partners
decrease after the admission?
a. Bonus to new partner with positive asset revaluation
b. Bonus to old partners with negative asset revaluation
c. Bonus to old partners with goodwill recognition
d. Asset impairment only

4. Which of the following statements concerning the dissolution of partnership business is correct?
a. If a new partner is admitted by purchasing a portion of an existing partner’s capital, the total capital
of old partnership will be higher than the total capital of new partnership by the amount of selling
price.
b. If a new partner is admitted through his investment to the existing partnership, the capital
contributed by the new partner will be higher than the amount credited to him in the new partnership
by the amount of the impairment loss of existing assets.
c. If a new partner is admitted through his investment to the exiting partnership, the capital credited
to the old partners in the new partnership will be lower than the amount contributed by them if there
is positive asset revaluation without any bonus.
d. If a new partner is admitted through his investment to the existing partnership, the contributed
capital of the new partner will be different to the amount of capital credited to him if there is bonus
and asset revaluation at the time of his admission.

2|P a g e RFERRER/RLACO/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

5. At the time of retirement, a retiring partner receives more than the amount of his capital contribution
while the remaining partners capital increase after the retirement. Which of the following is most valid
reason?
a. Goodwill during retirement is recognized.
b. Asset revaluation is recognized.
c. Bonus is given by retiring partner to remaining partners.
d. Bonus is given by the remaining partners to retiring partner.

LIQUIDATION

COMPUTATION
1. The assets and equities of the PAUL, BONG, and DADA partnership at the end of its fiscal year on
October 31, 20x2 are as follows:

Cash 33,000 Liabilities 110,000

Receivables, net 44,000 Loan from DADA. 22,000
Inventory 88,000 PAUL capital (30%) 99,000
Equipment - net 154,000 BONG, capital (50%) 66,000
Loan to BONG 11,000 DADA, capital (20%) 33,000

The partners decide to liquidate the partnership. They estimate that the non-cash assets, other than the
loan to BONG, can be realized into P220,000 cash over the two-month period ending December 31,
20x2. Cash is to be distributed to the appropriate parties as it becomes available during the
liquidation process.

Req. 1: The partner most vulnerable to partnership losses on liquidation:

a. PAUL c. BONG
b. DADA d. BONG and PAUL

Req. 2: Assuming the total cash available for distribution to the partners is P16,500, the distribution to
partners will be to Paul, Bong and Dada, respectively:

2. On August 31, 20x6 Mike, Bernie and Nathan decided to liquidate MBN Partnership. Their capital
balances and their profit and loss ratio are shown below:

Mike (50%) 44,000

Bernie (30%) 49,800
Nathan (20%) 30,000

The net income prior to liquidation is P88,000. The total cash P12,000 and remaining liabilities,
including loan of P20,000 to Mike on August 31, 20x6 amounted to 60,000. The partners are solvent

Partner Mike receive P40,000 in full settlement of his interest, how much is the amount realized from
the sale of non-cash assets?

3. On August 11, 2020, the partners decided to liquidate the partnership. The following information of the
entity prior to liquidation are given below:
Cash 600,000 Due to B 100,000
Non-cash assets 1,300,000 Accounts payable 350,000
Due from A 200,000 A, capital (40%) 650,000
B, capital (40%) 500,000
C, capital (20%) 750,000
Net Loss 200,000 B, drawings (50,000)
Total 2,500,000 Total 2,500,000

The partnership paid liquidation expenses amounting to P50,000. Partner B received P90,000 for the
settlement of his interest in the partnership. All partners are considered insolvent.

Req. 1: What is the amount of cash realized from the sale of non-cash assets?

Req. 2: What is the total share of partner A in the loss on realization an liquidation from liquidation?

3|P a g e RFERRER/RLACO/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

THEORY
1. In the liquidation of limited partnership, which of the following credits shall be paid last?
a. Those owing to third persons.
b. Those owing to limited partners
c. Those owing to general partners for their share in profits.
d. Those owing to partners for their capital contribution.

2. In the liquidation of general partnership, which of the following credits shall be paid first?
a. Those owing to third persons.
b. Those owing to partners other than capital and profits.
c. Those owing to partners for their capital contribution.
d. Those owing to partners for their share in profits.

3. At the time of partnership liquidation, which credits shall be settled first?

a. Those amount owing to third persons.
b. Those amount owing to partners other than capital contribution and share in profit.
c. Those amount owing to partners with respect to capital contribution.
d. Those amount owing to partners with respect to share in profit.

4|P a g e RFERRER/RLACO/ATANG/PDEJESUS