CHAPTER 5

Change in Capital Structure by Withdrawal, Retirement, Death or Incapacity of a Partner

Exercise 5-1
1.a. Bonus method
Dee, Capital 20,000
Dantes, Capital (P5,000 x 3/5) 3,000
Dungca, Capital (P5,000 x 2/5) 2,000
Cash 25,000

1.b Asset Revaluation method

Other Assets (P5,000 1/6) 30,000
Dee, Capital 20,000
Cash 25,000
Dantes, Capital (P30,000 x 3/6) 15,000
Dungca, Capital (P30,000 x 2/6) 10,000

2. Asset Rev. Dantes Dungca

Capital balances after retirement of
Dee under the bonus method P47,000 P28,000

Balances after retirement of Dee

under asset revaluation method P30,000 P65,000 P40,000
Depreciation on asset rev. equally (30,000) ( 15,000) ( 15,000)
Balances after depreciation ------ P50,000 P25,000

Dantes will prefer the asset revaluation method. The gain is P3,000 under the asset
revaluation method compared with the bonus method.

Exercise 5-2
1. Diesta, Capital 80,000
Dayrit, Capital (P10,000 x3/4) 7,500
Dayag, Capital (P10,000 x 1/4) 2,500
Cash 96,000

2. Other Assets (P16,000 1/5) 80,000

Diesta, Capital 80,000
Dayrit, Capital (P80,000 x 3/5) 48,000
Dayag, Capital (P80,000 x 1/5) 16,000
Cash 96,000

Exercise 5-3
Daria, capital, January 1 P25,000
Drawing ( 4,000)
Share in net income (P20,000 x 40%) 8,000
Interest of Daria upon retirement P29,000

1. Other Assets (P33,000 P29,000 = P4,000 / 40%) 10,000

Daria, Capital 29,000
Cash 33,000

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 Ditas, Capital (P10,000 x 30%) 3,000
Dulce, Capital (P10,000 x 30%) 3,000

2. Ditas, Capital (P4,000/2) 2,000

Dulce, Capital (P4,000/2) 2,000
Daria, Capital 29,000
Cash 33,000

Exercise 5-4
1. Dolor, Capital 40,000
Damian, Capital 20,000
Damaso, Capital 20,000

2. Dolor, Capital 40,000

Cash 32,000
Damian, Capital 3,000
Damaso, Capital 5,000

3. Other Assets (P46,000 P40,000 = P6,000/ 20%) 30,000

Dolor, Capital 40,000
Cash 46,000
Damian, Capital 9,000
Damaso, Capital 15000

Exercise 5-5
1. Domingo, Capital 70,000
Dizon, Capital 70,000

2. Dencio, Capital 10,000

Doctor, Capital 5,000
Dizon, Capital 5,000
Domingo, Capital 70,000
Cash 90,000

3. Other Assets (P90,000 P70,000 = P20,000 / 20%) 100,000

Domingo, Capital 70,000
Notes Payable 90,000
Dencio, Capital 40,000
Doctor, Capital 20,000
Dizon, Capital 20,000

Exercise 5-6
1. Dimla, Capital 1,440
Distor, Capital 960
Daza, Capital 12,000
Cash 14,400

2. Daza, Capital 12,000

Cash 9,600
Dimla, Capital 1,440
Distor, Capital 960

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 PROBLEMS

Problem 5-1
1. Delfin, Capital 200,000
Cash 200,000

2. Delfin, Capital 200,000

Diokno, Capital (P60,000 x ) 30,000
Decena, Capital (P60,000 x ) 30,000
Cash 260,000

3. Other Assets (P6,000 1/3) 180,000

Delfin, Capital 200,000
Cash 260,000
Diokno, Capital (P180,000 x 1/3) 60,000
Decena, Capital (P180,000 x 1/3) 60,000

4. Delfin, Capital 200,000

Cash 160,000
Diokno, Capital (P40,000 x 1/2) 20,000
Decena, Capital (P40,000 x 1/2) 20,000

5. Delfin, Capital 200,000

Diokno, Capital (P75,000 x 1/3) 25,000
Decena, Capital (P75,000 x 1/3) 25,000
Cash 175,000
Other Assets (P25,000 1/3) 75,000

Problem 5-2
1. Merchandise Inventory 7,000
Capital Adjustment Account 7,000

Allowance for Doubtful Accounts 1,000

Capital Adjustment Account 1,000

Capital Adjustment Account 8,000

Danao, Capital 4,000
Daylan, Capital 2,000
Dahlia, Capital 2,000

2. Dahlia, Capital 27,000

Cash 2,000
Notes Payable 25,000

Problem 5-3
1 Damo Dayan Datu
Capital, January 1, 2015 P120,000 P 70,000 P 80,000
Net loss ( 12,000) ( 8,000) ( 20,000)
Drawing ( 25,000) ( 25,000) ( 25,000)
Capital upon retirement of Dayan P 83,000 P 37,000 P 35,000

2. Damo, Capital 10,500

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 Datu, Capital 17,500
Dayan, Capital 37,000
Cash 30,000
Inventory 35,000
P37,000 P30,000 = P7,000 20% =P35,000

3a. Other Assets (P10,000 / 20%) 50,000

Dayan, Capital 37,000
Cash 47,000
Damo, Capital (P50,000 x 30%) 15,000
Datu, Capital (P50,000 x 50%) 25,000

b. Dayan, Capital 37,000

Damo, Capital 3,750
Datu, Capital 6,250
Cash 47,000

Problem 5-4
1. Daet, Capital 12,000
Dais, Capital 8,000
Dancel, Capital 140,000
Cash 160,000

2. Dancel, Capital 140,000

Daet, Capital 140,000

3. Dancel, Capital 140,000

Cash 130,000
Daet, Capital 6,000
Dais, Capital 4,000

4. Other Assets 68,000

Dancel, Capital 140,000
Cash 168,000
Daet, Capital 24,000
Dais, Capital 16,000

5. Other Assets 40,000

Dancel, Capital 140,000
Cash 80,000
Daet, Capital 60,000
Dais, Capital 40,000
6. Dancel, Capital 140,000
Dais, Capital 140,000

7. Dancel. Capital 140,000

Delia, Capital 140,000

Problem 5-5
1. Books 72,000
Other Assets 48,000
Dizon, Capital 240,000

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 Cash 288,000
David, Capital 36,000
Duque, Capital 36,000

2. Dizon, Capital 240,000

Cash 120,000
Notes payable 108,000
David, Capital 6,000
Duque, Capital 6,000

3a. Dizon, Capital 240,000

David, Capital 24,000
Duque, Capital 24,000
Cash 180,000
Notes payable 108,000

b. Other Assets (P288,000 P240,000 = P48,000/40%) 120,000

Dizon, Capital 240,000
Cash 180,000
Notes Payable 108,000
David, Capital (P120,000 x 30%) 36,000
Duque, Capital (P120,000 x 30%) 36,000

Problem 5-6
Danao, Diaz, Dolor and Dungca Partnership
Statement of Partners' Equity
For the Year Ended December 31, 2014

Danao Diaz Dolor Dungca Total

Capital, January 1 P 84,000.00 P 75,000.00 P 48,000.00 P45,000.00 P252,000.00
Distribution of net income:
Jan. 1 - Sept. 30 13,500.00 10,125.00 5,062.50 5,062.50 33,750.00
Oct. 1 - Dec. 31 4,705.15 3,528.86 1,764.43 9,998.44*
Transfer of Dungca capital to (50,062,50) ( 50,062.50)
his estate
Retirement of Dolor 7,832.42 5,874.31 ( 54,826.93) ( 41,120.20)
Capital, December 31 P110,037.57 P 94,528.17 --------- --------- P204,565.74
* P45,000 P33,750 (P50,062.50 x 10% x 3/12)) = P9,998.44

Income Summary 33,750.00

Danao, Capital 13,500.00
Diaz, Capital 10,125.00
Dolor, Capital 5,062.50
Dungca, Capital 5,062.50

Dungca, Capital 50,062.50

Payable to the Estate of Dungca 50,062.50

Income Summary 1,251.56

Payable to the Estate of Dungca 1,251.56

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 Income Summary 9,998.44
Danao, Capital 4,705.15
Diaz, Capital 3,528.86
Diaz Costa, Capital 1,764.43

Dolor, Capital 54,826.93

Notes Payable 41,120.20
Danao, Capital 7,832.42
Diaz, Capital 5,874.31

MULTIPLE CHOICE
1. C
2. A
3. C
4. A
5. A
6. C Amount paid by the partnership P 71,000
Capital of Dayrit
Total capital before withdrawal of Dayrit P210,000
Total capital after withdrawal of Dayrit 160,000 50,000
Asset Revaluation to Dayrit P 21,000
Profit share of Dayrit 30%
Total asset revaluation P 70,000
7. B Capital of Dino before purchasing interest from Dolor P 35,000
Interest of Dolor transferred to Dino 25,000
Capital of Dino P 60,000
8. D Doctor's capital before the withdrawal of Dolor P 45,000
Share in the bonus given to Dolor
(P33,000 - P25,000) x 3/6 4,000
Doctor's capital after the withdrawal of Dolor P 41,000
9. A The same as the capital before the withdrawal of Dolor, P35,000
10. C Dinos capital before the withdrawal of Dolor P 35,000
Share of Dino in the revaluation of assets
Excess payment to Dolor P8,000
Profit share of Dolor 40%
Increase in asset per revaluation P20,000
Share of Dino in the asset revaluation x 30% 6,000
Dinos capital after the withdrawal of Dolor P 41,000
11. C
12. B Dizon Dionisio Divino
Loan and capital balances P206,000 P154,000 P360,000
Revaluation of assets 24,000 24,000 48,000
Bonus to Dizon 12,000 ( 4,000) ( 8,000)
P242,000 P174,000 P400,000
13. B P180,000 + P10,000 P220,000 = (P30,000)/40% = (P75,000)
14. D P60,000 + (20,000 x 20%) - P15,000 - P80,000 = P31,000
15. D P31,000/20% = P155,000 x 40% = P62,000

TEST MATERIALS

Test Material No. 18

1. F 5. F 9. T 13. T 17. T

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2. T 6. T 10. F 14. T 18. T
3. T 7. F 11. T 15. F 19. F
4. F 8. T 12. F 16. T 20. F

Test Material No. 19

1. B
2. C
3. A
4. A
5. C
6. B P160,000 - (P30,000 x 1/2) = P145,000
7. B P30,000 40% = P75,000 x 30% = P22,500 + P160,000 = P182,500
8. C
9. B P80,000 + P160,000 P30,000 = P130,000
10. D

Test Material No. 20

1. Diones, Capital 56,000
Donato, Capital 42,000
Dulay, Capital 14,000

2. Diones, Capital 56,000

Dumlao, Capital 56,000

3. Diones, Capital 56,000

Inventories 12,000
Equipment 26,000
Allowance for Uncollectible Accounts 8,000
Cash 62,000
Donato, Capital 15,000
Dulay, Capital 9,000

4. Diones, Capital 56,000

Donato, Capital 5,000
Dulay, Capital 3,000
Cash 64,000

5. Diones, Capital 56,000

Donato, Capital 10,000
Dulay, Capital 6,000
Cash 20,000
Equipment 52,000

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