UNIVERSITY OF NORTHERN PHILIPPINES ▪ COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
NAME: Date:
Year and Section:
PARTNERSHIP AND CORPORATION ACCOUNTING QUIZ 4: Partnership Dissolution
Problem 1
On December 31,2022, the Balance Sheet of ABC Partnership provided the following data with profit or loss
ratio of [Link]
Current Assets P1,000,000 Total Liabilities P600,000
Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000
On January 1,2023, D is admitted to the partnership by purchasing 40% of the capital interest of the
partnership at a price of P500,000.
a. What is the capital balance of D after his admission on January 1,2023? P960,000
b. Assuming there is an implied asset revaluation upward or downward, what is the capital balance of
each partner after admission of D on January 1,2023?
Problem 2
On December 31,2022, the Balance Sheet of ABC Partnership provided the following data with profit or loss
ratio of [Link]
Current Assets P1,300,000 Total Liabilities P300,000
Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1,2023, D is admitted to the partnership by investing P1,000,000 to the partnership for 40% capital
interest.
a. If all the assets of the existing partnership are properly valued, determine the agreed capital of each of
the partner in the new partnership.
b. If there is an implied asset revaluation upward (surplus) / downward (impairment), determine the
agreed capital of each partner in the new partnership. P650,000; P400,000; P450,000; P1,000,000
Problem 3
On December 31,2022, the Balance Sheet of ABC Partnership provided the following data with profit or loss
ratio of [Link]
Current Assets P1,000,000 Total Liabilities P600,000
Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000
On January 1,2023, D is admitted to the partnership by investing P500,000 to the partnership for 20% capital
interest. The total agreed capitalization of the new partnership is P2,800,000. Determine the capital balance of
each partner after admission of D to the partnership. P820,000; P784,000; P636,000; P560,000
Problem 4
On December 31, 2022, ABC Partnership's Statement of Financial Positions shows that A, B and C have
capital balances of P400,000, P350,000 and P250,000 with profit or loss ratio of [Link]. On January 1, 2023, B
retired from the partnership and received P280,000.
a. What is the capital balance of the remaining partners after the retirement of B?
b. If there is an implied asset revaluation upward/downward, what is the capital balance of C after the
retirement of B? P180,000
Problem 5
On November 30, 2022, the statement of financial position of ABC partnership has the following balances:
Total assets P900,000; A, loan P50,000; A, capital P207,500; B, capital 192,500; C, capital P450,000. The
partners share profit and losses [Link] respectively. It was agreed that Partner A will retire from the
partnership and will be paid P217,000.
However, the following were certain transactions that needed to be accounted for before Partner A's
retirement:
1
Partnership assets have a fair value of P1,020,000
Partnership has an income summary debit balance in the amount of P300,000 at the end of the year,
which has not yet distributed among the partners
a. Journalize all the necessary entries.
b. Determine the capital balances of the remaining partners after retirement of A. B=146,000; C=357,000
Problem 6
On January 1, 2023, the partners of ABC Partnership decide to admit other investors. As a result, the
partnership shall be converted to a corporation. The following information was determined:
Carrying amounts Fair values
Cash 20,000 20,000
Receivables 60,000 40,000
Inventory 80,000 70,000
Equipment 540,000 706,000
Payables 50,000 50,000
A, Capital 150,000
B, Capital 200,000
C, Capital 300,000
Compute for the total number of shares issued by the corporation if the par value per share is P15.
52,400
Problem 7
The capital accounts of A and B have balances of P1,750,000 and P2,424,000, respectively. They divide
profits and losses in the ratio 4:6, respectively. C is to be admitted to the partnership by purchasing ¼ of the
interest of A and B for P925,000. Compute the cash received by B as a result of the interest sold to C.
P534,900
Problem 8
The capital accounts of AB Partnership on December 31,2021 were:
A (60% profit percentage) P140,000
B (40% profit percentage) 60,000
On January 1, 2022, C was admitted to a 30% interest in the partnership when he purchased 30% of each
existing partner’s capital for P50,000 paid directly to A and B. On February 28,2022, D was admitted as a
partner by investing P80,000 for a 25% interest in the partnership. Compute for the total partnership capital
after admission of C & D.
P280,000
Problem 8
A and B who share profits and losses in the ratio 4:6, are partners with capital balances of:
A P450,000
B 374,600
C is to be admitted into the partnership for 24% interest in the capital of the firm. If assets are revalued and the
capital balances of A and B after recording the admission of C are P576,160 and P563,840, respectively.
Compute for the capital contribution of C.
P360,000
Problem 9
A, B and C were partners with capital balances on January 2,2021 of P100,000; P180,000 and P200,000,
respectively. Their profit and loss ratio is [Link]. On July 1,2021, A retired from the partnership. On the date of
retirement, the partnership net income is P140,000 and the partners agreed that inventories are to be revalued
at P80,000 from its original cost of P50,000. The partners agreed further to pay A P208,000 in settlement of his
interest. What is the capital balance of C after the retirement of A?
P224,800
Problem 10
The balance sheet of AB Partnership at December 31,2021 reported the following:
Total Assets P1,450,000
Total Liabilities 320,000
2
A, capital 550,000
B, Capital 580,000
On January 2,2022, A and B transferred all their assets and liabilities to a newly formed corporation. At the
date of incorporation, it was that found out the fair value of the equipment is P150,000 more than its carrying
amount, and that an additional P40,000 of accounts receivable is uncollectible. A and B were each issued
52,000 shares of the corporation’s P7 par value common stock. Immediately following the incorporation, what
is the amount of share premium to be recorded?
P512,000
Problem 11
A and B are partners sharing profits and losses in the ratio of 3:5 respectively. On January 1, C was admitted
as a new partner upon his investment of P36,000. On this date, the interest in the partnership of A and B are
as follows:
A P39,000
B P29,000
Assuming that the new partner is given 30% interest in the partnership and the assets are to be revalued. The
capital balance of B after admission of C is
P39,000
Theories
Multiple Choice. Write the letter of the correct answer beside the number. In capital letters. (Half point each)
1. Which of the following statements pertains to partnership dissolution?
a. It refers to the process of converting the non-cash assets of the partnership and distributing the total
cash to the creditors and the remainder to the partners.
b. It refers to the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the partnership.
c. It refers to the extinguishment of the juridical personality of the partnership.
d. It refers to the end of the life of the partnership.
2. Which of the following will not result to the dissolution of a partnership?
a. Insolvency of the partnership
b. Admission of a new partner in an existing partnership
c. Assignment of an existing partner's interest to a third person
d. Retirement of a partner
3. Which of the following statements is correct when a new partner is admitted to an existing partnership by
purchasing a portion of a capital interest of an existing partner?
a. It will result to revaluation or impairment of existing assets of the partnership.
b. The partnership will recognize gain or loss in the transfer of capital from one partner to another partner.
c. The partnership is not dissolved by the admission of a new partner by purchase.
d. It will just result to credit to capital of newly admitted partner with corresponding debit to capital
of the selling partner
4. In case of admission of a new partner in an existing partnership through investment to the partnership, which
of the following scenario will result to bonus to new partner and asset revaluation upward?
a. The total contributed capital of all partners is equal to the total agreed capital of new partnership while
the agreed capital of new partner is higher than the amount he has contributed.
b. The total contributed capital of all partners is more than the total agreed capital of new partnership
while the agreed capital of new partner is lower than the amount he has contributed. C
c. The total contributed capital of all partners is less than the total agreed capital of new
partnership while the agreed capital of new partner is higher than the amount he has
contributed.
d. The total contributed capital of all partners is more than the total agreed capital of new partnership
while the total agreed capital of old partners is equal to the amount they contributed.
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5. If a partner who retired from the partnership receives less than the capital balance before retirement which
also resulted to decrease in the capital balance of remaining partners, which is correct?
a. The retiring partner receives bonus from remaining partner.
b. An impairment loss is recognized before the retirement.
c. Revaluation surplus is recognized before the retirement.
d. The retiring partner gives bonus to the remaining partner.
6. In all cases of dissolution, the partnership assets and liabilities at date of dissolution may need to be
revalued to their fair values. Any revaluation increase or decrease is
a. allocated to all of the existing partners as at the date of dissolution.
b. allocated only to the partners existing after the dissolution.
c. allocated only to the partner ceasing to be associated with the partnership.
d. no revaluation shall be made.
7. This transaction will most likely be recorded in partnership books as a transfer within equity.
a. A invests P50,000 cash for a 20% interest in the partnership.
b. C retires and the partnership pays C P80,000 as full settlement of his capital balance.
c. E withdraws from the partnership when he was bought out by B and F.
d. G dies and his wife receives settlement of G's interest from the partnership.
8. Which of the following transactions or events does not affect the total assets of a partnership?
a. An old partner retires and his capital balance is settled by the partnership at a lower amount.
b. An incoming partner purchases interest from an existing partner.
c. A partnership is dissolved and its assets and liabilities are revalued to fair value.
d. A new partner is admitted in a partnership when he invested noncash asset to the partnership.
9. When Partner D retired, the partnership paid D an amount which was lower than the balance of his capital
account. Which of the following statements is incorrect?
a. The partnership assets decrease as a result of the retirement of D.
b. The other partners' capital balances increase.
c. The partnership assets are not affected.
d. The number of capital accounts in the partnership chart of accounts decreases.
10. In the AAA-BBB partnership, AAA and BBB had a capital ratio of 3:1 and a profit and loss ratio of 2:1,
respectively. The bonus method was used to record CCC's admittance as a new partner. What ratio would
be used to allocate, to AAA and BBB, the excess of CCC's contribution over the amount credited to Colter's
capital account?
a. AAA and BBB's new relative capital ratio
b. AAA and BBB's new relative capital profit and loss ratio
c. AAA and BBB's old capital ratio
d. AAA and BBB's old profit and loss ratio
