CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PARTNERSHIP DISSOLUTION

Part I: Theory of Accounts

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 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.

3. 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?
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. 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.

4. 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. There is an overvalued asset to be adjusted before the retirement.
C. There is an undervalued asset to be adjusted before the retirement.
D. The retiring partner gives bonus to the remaining partner.

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Part II: Problem Solving

Problem 1

Partners P and Q had capital balances of P358,500 and P300,000 respectively before admitting R. P
and Q share profit and loss in the ratio 6:4. R paid P225,000 in exchange for 30% interest in the
partnership as well as the profit and loss.

1. How much is the capital of partner P after admission of R?

A. 250,950
B. 250,590
C. 279,480
D. 269,580

2. How much is debited to the capital account of partner Q upon admission of R?

A. 120,000
B. 90,000
C. 79,020
D. 105,360

3. If an equipment is undervalued, how much would be the capital balance of partner Q after
admission of R?
A. 336,600
B. 235,620
C. 335,600
D. 205,620

Problem 2

X and Y have capital balances of P150,000 and P180,000, respectively. Z is to invest P60,000 for 15%
in the partnership interest and also in the profit and loss. There is an undistributed net income in the
amount of P80,000. Partners X and Y share profit and loss 65:35.

1. How much is the capital credit of Z upon his admission?

A. 60,000
B. 61,500
C. 72,000
D. 70,500

2. How much is the bonus to partner X from partner Z?

A. 10,500
B. 6,825
C. 0
D. 3,675

3. If an equipment is overvalued, how much is the share of partner Y in the overvaluation of the
equipment?
A. 24,500
B. 45,500
C. 10,500
D. 28,000

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Problem 3

Partners E, F, G had capital balances of P120,000, P155,000, and P115,000 respectively. The
partnership generated net loss of P140,000 during the year. The partners share profit and loss 2:5:1
respectively.

Due to disagreement, partner F wanted out of the partnership. Before retirement, the value of inventory
increased from P85,000 to P97,000. The partners decided to pay partner F P70,000 upon retirement.

1. What amount should be reported as the capital balance of partner E after the retirement of
partner F?
A. 84,667
B. 89,000
C. 91,333
D. 87,000

2. What amount should be reported as capital balance of partner G after the retirement of
partner F?
A. 93,333
B. 99,500
C. 100,667
D. 98,500

3. Assume that an equipment is overvalued. How much is the overvaluation of the equipment?
A. 5,000
B. 2,500
C. 8,000
D. 4,000

4. In relation to No. 3, what amount should be reported as the capital balance of partner E after
the retirement of partner F?
A. 91,333
B. 84,667
C. 89,000
D. 86,000

5. In relation to No. 3, what amount should be reported as the capital balance of partner G after
the retirement of partner F?
A. 100,667
B. 97,333
C. 99,500
D. 98,000

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Problem 4

On December 31, 2024, the Statement of Financial Position of DEL Partnership shows the following
data with profit or loss sharing of 1:3:6:

Cash P5,000,000 Total Liabilities P10,000,000

Noncash Asset 15,000,000 Diane 5,000,000
Ellen 3,000,000
Liz 2,000,000

On January 1, 2025, Ana will be admitted to the new partnership named ADEL Partnership by
investing P4,000,000 for 30% capital interest in the new partnership which has total agreed
capitalization of P20,000,000.

What is the new capital balance of Liz upon admission of Ana in ADEL Partnership?
A. 4,400,000
B. 8,400,000
C. 5,600,000
D. 3,200,000

Problem 5

C and D have capital balances of P 560,000 and P 450,000 respectively. Both decided to admit E into
their partnership. He invested enough cash to have a 20% interest in the partnership. The profit and loss
ratio of the old partners is 3:2 respectively. After the admission of E, the capital balance of D amounted
to P 495,000.

What is the amount of cash invested by E?

A. 333,125
B. 112,500
C. 280,625
D. 393,125

END

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