Partnership Dissolution

ADMISSION

Problem 1. Rivera and Molina are partners with profit and loss ratio of 75:25 and capital
balances of P175,000 and P87,500 respectively. Gutierrez is to be admitted into the
partnership by purchasing a 20% interest in the capital, profits and losses for P105,000.
Assuming that no asset revaluation is to be made, the capital balances of Rivera and Molina,
respectively, after admission of Gutierrez are:
a. P140,000 and P70,000 c. P196,000 and P66,500
b. P210,000 and P105,000 d. P175,000 and P87,500

Assuming that equipment of the partnership is undervalued, the capital balances of Rivera,
Molina and Gutierrez, respectively, after the admission are:
a. P175,000; P87,500; P105,000 c. P140,000; P70,000; P52,500
b. P336,875; P135,625; P52,500 d. P297,500; P122,500; P105,000

Problem 2. Santiago, Aldaba and Tuazon are partners with capital balances of P392,000,
P1,365,000 and P595,000 respectively, sharing profits and losses in the ratio of 3:2:1. Diaz is
admitted as a new partner bringing with him expertise and is to invest cash for a 25% interest
in the partnership which includes a credit of P367,500 for bonus upon his admission. How
much cash should Diaz contribute?
a. P661,500 b. P294,000 c. P787,500 d. P1,050,000

Problem 3. Ponce; Salazar and Moran are partners sharing profits and losses of 5:3:2,
respectively. As of Dec 31, 2010, their capital balances were P498,750; P420,000; and
P315,000 respectively. On January 1, 2011, the partners admitted Adriano as a new partner
and according to their agreement Adriano will contribute P420,000 in cash to the partnership
and also pay P52,500 for 15% of Salazar’s share. Adriano will be given a 20% share in profits,
while the original partners’ share will be proportionately the same as before. After admission of
Adriano, the total capital will be P1,732,500 and Adriano’s capital will be P367,500. The
amount of asset revaluation is:
a. P78,750 b. 36,750 c. P115,500 d. P194,250

The amount of bonus in the admission of Adriano would be:

a. P115,500 b. 57,750 c. P63,000 d. P34,650

Problem 4: Lopez, Endaya and Gonzaga are partners with capital balances of P336,000,
P540,000 and P190,000 respectively, sharing profits and losses in the ratio of 2:5:1. Sevilla is
admitted as a new partner bringing with him expertise and is to invest cash for a 15% interest
in the partnership considering the transfer of capital from him of P90,000 upon his admission.

Upon admission of Sevilla, which of the following statements is wrong?

A. The capital balance of Endaya amount to P596,250
B. Cash will be debited in the amount of P204,000
C. The capital account of Gonzaga will be credited in the amount of P11,250
D. The total agreed capital of the old partners is P90,000 greater than there contributed
capital
Self-Test
Problem 5: Pineda, Bernardo and Tolentino were partners with capital balances on January 2,
2011 of P175,000; P262,500 and P350,000, respectively. Their profit ratio is 5:3:2 while their
capital interest ratio is 4:4:2. On July 1, 2011, Jose was admitted by the partnership for 20%
interest in capital and 25% in profits by contributing P43,750 cash, and the old partners agree
to bring their interest to their old capital and profit interest sharing ratio. The partnership had
net income of P105,000 before admission of Jose and the partners agree to revalue its
overvalued equipment by P17,500. The capital balance of Pineda after admission of Jose is:
a. P148,750 b. P294,000 c. P177,100 d. P235,200

RETIREMENT
Problem 1. Hizon, Nocum and Romero share profits in the ratio of 2:3:5. On January 20,
Romero opted to retire from the partnership. The capital balances on this date follow:

Hizon P43,750
Nocum P70,000
Romero P61,250

How much will be the capital of Nocum, assuming Romero sold his interest to Nocum for
P17,500:
a. P87,500 b. P43,750 c. P131,250 d. P70,000

How much is to be debited from Hizon, assuming Romero is paid P68,250 in full settlement of
his interest?
a. P4,200 b. P5,250 c. P7,000 d. P2,800

Problem 2. On December 30, 2011, the statement of financial position of Delighted Co. has
the following balances: Total assets P1,125,000; Villamin loan P62,500; Villamin capital
P259,375; Mendoza capital P240,625 and Leano capital P562,500. The partners share profits
and losses in the ratio of 25% to Villamin, 25% to Mendoza, and 50% to Leano. It was agreed
among the partners that Villamin retires from the partnership and the partnership assets be
adjusted to their fair value of P1,275,000 as of December 31, 2011. The partnership also
suffered net loss of P375,000. The partnership would pay Villamin P271,250 cash for his total
interest in the partnership.

What is the total capital of Mendoza after retirement of Villamin assuming the use of bonus
method?
a. P182,500 b. 191,875 c. P184,375 d. P190,000

Problem 3. The total of the partners’ capital accounts were P192,500 before the recognition of
partnership asset revaluation in preparation for the withdrawal of a partner whose profit or
loss sharing is 20%. He was paid P49,000 by the firm in final settlement for his interest. The
remaining partners’ capital accounts, excluding their share of the asset revaluation, totaled
P157,500 after his withdrawal. The total asset revaluation of the firm agreed upon was:
a. P70,000 b. P35,000 c. P49,000 d. P14,000
Problem 4. Faller, Donato and Garcia are partners dividing profits and losses in the ratio of
2:3:1 respectively. Their capital balances on December 31, 2010 were P374,500, P574,000,
and P339,500, respectively. Garcia is retiring from the partnership as of April 30, 2011.
Assume net income is considered as having been realized evenly throughout the year during
the year of a partner’s retirement. After retirement of a partner, remaining partners would
divide profits and losses in the remaining original ratio. The partnership reported net income
of P472,500 for the year 2011. Garcia is to be paid an amount which is 130 percent of his
adjusted equity as of the date of his retirement. Which of the following statements is false?

a. Upon retirement of Garcia, the balance of the capital account of Faller amount to P383,110.
b. At the end of 2011, the balance of the capital account of Donato is P266,805 higher than
the capital account balance of Faller.
c. The capital account of Faller has a net increase of P134,610 from beginning to end of 2011.
d. Upon retirement of Garcia, the capital account of Donato will have a net increase of
P12,915 as a result of the transfer of capital.

Self- Test
Problem 5: The statement of financial position as of September 30, 2011, for the partnership
of Daez, Elarmo and Fajardo shows the following information:
Assets P126,000 Daez, loan P 7,000
Daez, capital 29,050
Elarmo, capital 26,950
_______ Fajardo, capital 63,000

Total P126,000 Total P 126,000

====== ======

It was agreed among the partners that Daez retires from the partnership, and it was also
further agreed that the assets should be adjusted to their fair value of P120,750 as of
September 30, 2011. Net loss prior to the retirement of Daez amount to P24,500. The
partnership is to pay Daez P21,700 cash for his partnership interest. Daez, Elarmo and
Fajardo share profit 40%, 15% and 45% respectively. After the retirement of Daez, how much
is the capital balance of Fajardo?
0 a. P23,100 b. P47,775 c. P51,450 d. P64,838

Partnership Liquidation
1. On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit
or loss ratio of 6:1:3 of partners A, B and C respectively, revealed the following data:

Cash 1,000,000 Other Liabilities 2,000,000

Receivable from A 500,000 Payable to B 1,000,000
Other noncash assets 2,000,000 Payable to C 100,000
A, Capital 700,000
B, Capital (650,000)
C, Capital 350,000

On January 1, 2019, the partners decided to liquidate the partnership. All partners are
legally declared to be personally insolvent. The other noncash assets were sold for
P1,500,000. Liquidation expenses amounting to P100,000 were incurred.
 1. How much cash was received by B at the end of partnership liquidation?
a. 250,000
b. 150,000
c. 290,000
d. 270,000

2. How much cash was received by C at the end of partnership liquidation?

a. 270,000
b. 150,000
c. 350,000
d. 220,000

2. D, E and F are partners in DEF Partnership with profit or loss sharing ratio of 6:1:3. Due to
disagreement, the partners decided to liquidate their business with pre-liquidation
statement of financial position presented below:

Cash P3M Liabilities P10M

Noncash assets 17M D, Capital 1M
E, Capital 4M
F, Capital 5M

The following additional notes are provided:

 All partners are legally declared to be personally insolvent.

 All noncash assets are sold during the liquidation process.
 Liquidation expenses amounting to P2M were paid.
 E receives a total of P2,500,000 at the end of liquidation.

1. What is the amount received by F at the end of liquidation?

a. 500,000
b. 2,500,000
c. 0
d. 3,500,000

2. Using the same data, what is the net proceeds from the sale of all noncash assets?
a. 14,000,000
b. 10,000,000
c. 12,000,000
d. 8,000,000

3. On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit
or loss ratio of 5:3:2 of respective partners A, B and C. showed the following information:

Cash 1,600,000 Total Liabilities 2,000,000

Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000

On January 1, 2019, the partners decided to liquidate the partnership in installment. All
partners are legally declared to be personally insolvent.
 As of January 31, 2019, the following transactions occurred:
 Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000.
 Liquidation expenses for the month of January amounting to P50,000 were paid.
 It is estimated that liquidation expenses amounting to P150,000 will be incurred for the
month of February, 2019.
 20% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.

As of February 28, 2019, the following transactions occurred:

 Remaining noncash assets were sold at a loss of P100,000.

 The final liquidation expenses for the month of February amounted to P100,000.
 The remaining liabilities to third persons were settled.
 Remaining cash was finally distributed to the partners.

1. What is the amount of cash received by partner C on January 31, 2019?

a. 260,000
b. 240,000
c. 300,000
d. 350,000

2. What is the share of B in the maximum possible loss on January 31, 2019?
a. 275,000
b. 110,000
c. 120,000
d. 165,000

3. What is the amount of total cash withheld on January 31, 2019?

a. 550,000
b. 1,600,000
c. 1,750,000
d. 1,700,000

4. What is the amount of cash received by partner A on February 28, 2019?

a. 0
b. 25,000
c. 195,000
d. 130,000

4. On December 31, 2020, the Statement of Financial Position of UFC Partnership shows the
following data with profit or loss sharing of 2:3:5:

Cash P15,000,000 Liabilities to others P20,000,000

Other Noncash asset 40,000,000 U, Capital 15,000,000
F, Capital 12,500,000
C, Capital 7,500,000

On January 1, 2021, the partners decided to wind up the partnership affairs. During the
winding up, liquidation expenses amounted to P2,000,000 were paid. Non-cash assets with
book value of P30,000,000 were sold during January. 40% of total liabilities were also paid
 during January. P3,000,000 cash was withheld during January for future liquidation
expenses. On January 31, 2021, partner U received P10,000,000.
1. What is the amount received by partner F on January 31, 2021?
a. 2,500,000
b. 7,500,000
c. 5,000,000
d. 3,000,000

2. Using the same data, what is the net proceeds from the sale of non-cash assets during
January 2021?
a. 25,000,000
b. 20,000,000
c. 22,000,000
d. 23,000,000

5. On January 1, 2020, ACJ Partnership entered into liquidation. The partners’ capital
balances on this date were as follows: A (25%) P2,500,000 ; C (35%) P5,400,000 ; J
(40%) P3,700,000. The partnership has liabilities amounting to P4,400,000, including a
loan from C P600,000. Cash on hand before the start of liquidation is P800,000.

With the information given, answer the following independent situations:

1. Noncash assets amounting to P7,400,000 were sold at book value and the rest of the
noncash assets were sold at a loss of P4,200,000. How much cash will be distributed to
the partners?
a. 8,000,000
b. 4,400,000
c. 7,400,000
d. 11,800,000

2. After exhausting the noncash assets of the partnership, assuming all partners has
personal assets more than their personal liabilities. How much cash must be invested
by the partners to satisfy the claims of the outside creditors and to pay the amount due
to the partner/s?

a. 3,680,000
b. 4,480,000
c. 4,360,000
d. 3,800,000

3. If C received P2,255,000, How much was the loss from the realization of the noncash
assets?
a. 5,255,000
b. 10,700,000
c. 10,525,000
d. 9,945,000
Corporate Liquidation
Problem 1. The Global Corporation is undergoing liquidation and has the following condensed
statement of financial position as of January 1, 2013:
Assets Liabilities and SHE
Cash P 114,200 Salaries Payable P 50,000
Receivables (net) 340,800 Accounts Payable 108,500
Inventory 80,000 Mortgage Payable 400,000
Prepaid Expenses 2,500 Loan Payable 220,000
Building (net) 345,000 Note Payable 80,000
Goodwill 55,000 Ordinary shares 120,000
Deficit (41,000)
_______ _______
Total Assets P 937,500 P 937,500

The mortgage payable is secured by the building having a realizable value of P360,000.
Accounts payable amounting to P60,000 is secured by the receivables amounting to P85,200
which is collectible in the amount of P68,160. The balance in the book value of the receivables
which has a realizable value of P235,000 is used to secure the loan payable. The inventory has
a realizable value of P53,000. In addition to the recorded liabilities are accrued interest on
mortgage payable amounting to P4,000, liquidation expenses amounting to P9,500 and taxes
amounting to 4,000. (use two decimal places for the recovery percentage)

Which of the following statements is wrong?

A. The estimated deficiency to unsecured creditors is P45,640.
B. Payment to partially secured creditors is P392,358
C. Payment to unsecured creditors without priority is P94,499
D. Estimated loss on asset realization is P107,140

Problem 2: The following information was gathered from the books of OLATS Corporation
which is currently undergoing bankruptcy proceedings:

 Note payable of P97,500 is secured by furniture and equipment with a carrying amount of
P120,000 that is estimated to be 75% realizable.

 A mortgage payable of P192,500 is secured by building valued at P35,000 less than

carrying amount of P230,000.

 Assets not mentioned above have an estimated value of P62,500, an amount that is
P15,000 above carrying amount.

 Total liabilities not mentioned above total P96,000, including claims with priority of
P18,500.

1. How much is the estimated loss on asset realization?

a. 65,000
b. 50,000
c. 80,000
d. 60,000

2. How much is the estimated recovery percentage?

a. 80.65%
b. 56.77%
 c. 54.71%
d. 51.76%
3. How much is the estimated recovery percentage for partially secured creditors?
a. 96.67%
b. 96.52%
c. 98.51%
d. 96.29%

Problem 3: Bancarote Inc. is under court-supervised liquidation due to its insolvency. The
court appointed liquidator has provided the following data after conducting an inventory of
Bancarote’s assets and liabilities:

 The total assets which are not used as security for any liability amounted to P5M while
the total unsecured liabilities amounted to P20M.
 The total assets which are used as collateral or security for corporate obligations
amounted to P10M. ¾ of these assets secure a mortgage payable with book value of
P2M including interest while the remainder secure a note payable with book value of
P3.5M including interest.
 Salaries payable amounted to 2M while taxes due government amounted to P1M.

1. What is the estimated recovery percentage of unsecured creditors without priority?

a. 25%
b. 37.5%
c. 41.67%
d. 52.5%

2. Using the same data in number 1, what is the amount received by partially secured
creditors?
a. 2,750,000
b. 2,875,000
c. 2,916,700
d. 3,025,000

Problem 4: The following data were taken from the statement of realization and liquidation of
Intercontinental Corporation for the quarter ended June 30, 2013

Assets to be realized P515,625

Supplementary credits 796,875
Liabilities to be liquidated 843,750
Supplementary charges 731,250
Liabilities liquidated 562,500
Assets acquired 562,500
Assets realized 656,250
Liabilities assumed 281,250
Assets not realized 234,375

The ending capital balances of capital stock and retained earnings are P648,750 and P178,500,
respectively. A net loss of P226,500 for the period.

How much is the ending balance of cash?

A. P1,125,000
B. P1,260,000
C. P978,750
D. P807,000
Self-Test
Problem 5: The following information are related to WXY Corporation which is undergoing
liquidation:
 A bank loan amounting to P227,500 is secured by inventories with book value of
P262,500 and net realizable value of P175,000.
 Of the P560,000 accounts payable, P171,500 is secured by accounts receivable
amounting to P206,500 which is 90% collectible.
 Property and equipment costing P437,500 and which is depreciated by 20% has a net
realizable value of P294,000.
 Other unrecorded liabilities are accrued interest payable on bank loan, P22,750;
salaries payable, P56,000; taxes payable, P31,500; and trustee’s fee, P26,250.
 Cash available before liquidation amounts to P43,750.

Compute for the estimated deficiency to unsecured creditors and expected recovery percentage
of unsecured creditors.
A. P225,400 ; 51.40% C. P441,000 ; 48.89%
B. P463,750 ; 48.89% D. P490,000 ; 48.64%