PARTNERSHIP DISSOLUTION

1. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 1:6:3:
Current Assets 1,000,000 Total Liabilities 600,000
Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000

On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of
the partnership at a price of P500,000.

1. What is the capital balance of D after his admission on January 1, 2021?

a. 540,000
b. 480,000
c. 420,000
d. 960,000

2. Assuming there is an implied asset revaluation upward/downward, what is the capital

balance of C after admission of D on January 1, 2021?
a. 213,000
b. 355,000
c. 420,000
d. 558,000

2. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 5:2:3:
Current Assets 1,300,000 Total Liabilities 300,000
Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1, 2021, D is admitted to the partnership by investing P1,000,000 to the partnership for
40% capital interest.
1. If the all the assets of the existing partnership are properly valued, what is the amount of
bonus to old Partner A?
a. 300,000
b. 600,000
c. 180,000
d. 0

2. If there is an implied asset revaluation upward/downward, what is the capital balance of

Partner B after admission of D?
a. 1,000,000
b. 400,000
c. 650,000
d. 450,000

3. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 5:1:4:
Current Assets 1,500,000 Total Liabilities 500,000
Noncurrent Assets 2,000,000 A, Capital 1,100,000
B, Capital 1,200,000
C, Capital 700,000
 On January 1, 2021, 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.
1. What is the capital balance of D after his admission to the partnership?
a. 500,000
b. 700,000
c. 560,000
d. 600,000

2. What is the capital balance of C after the admission of D to the partnership?

a. 444,000
b. 396,000
c. 1,136,000
d. 780,000

4. On December 31, 2020, 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 4:3:3. On
January 1, 2021, B retired from the partnership and received P280,000.

1. What is the capital balance of A after the retirement of B?

a. 440,000
b. 400,000
c. 428,000
d. 360,000

2. If there is an implied asset revaluation upward/downward, what is the capital balance of

C after the retirement of B?
a. 320,000
b. 250,000
c. 280,000
d. 180,000

5. On November 30, 2020, 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 25:25:50 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:
● Partnership assets have a fair value of P1,020,000
● Partnership has a income summary debit balance in the amount of P300,000 at the end of the
year, which have not yet distributed among the partners

What is the capital balance of Partner C after the retirement of Partner B?

a. 360,000
b. 357,000
c. 363,000
d. 447,000

6. A contribute P48,000 and B contributed P96,000 to form a partnership, and they agreed to share
profits in the ratio of their original capital contributions. During the first year of operations, they
made a profit of P32,580; A withdrew P10,100 and B P16,000. At the start of the following year,
they agreed to admit C into the partnership. He was to receive a ¼ interest in the capital and profits
upon payment of P60,000 to A and B, whose capital accounts were to be reduced by transfers to
C’s capital account of amount sufficient to bring back to their original capital ratio.

Under the asset revaluation method, how should the P60,000 paid by C be divided between A
and B, respectively?
 a. 19,650; 40,350
b. 20,000; 40,000
c. 30,000; 30,000
d. 18,600; 41,400

EXERCISES
1. If the total contributed capital exceeds total agreed capital with the new partner’s investment is the same as
his capital credit, then the admission of the new partner involved a
a. Bonus to new partner c. Bonus to old partner
b. Positive revaluation d. Negative revaluation

2. If the total agreed capital exceeds total contributed capital with the new partner’s investment is the same as
his capital credit, then the admission of the new partner involved a
a. Bonus to new partner c. Bonus to old partner
b. Positive revaluation d. Negative revaluation

3. If a bonus is given to the old partners, the bonus will be allocated among the partners according to the:
a. Profit and loss ratio of the old partnership.
b. Profit and loss ratio of the new partnership.
c. Capital ratio of the old partnership.
d. Capital ratio of the new partnership.

4. Which of the following forms of new partner admission will not result in a change in partnership capital?
a. Bonus method
b. Revaluation method
c. Purchase of interest directly from an existing partners
d. Purchase of interest directly from the partnership

5. The following are the capital account balances and profit and loss ratio of the partners in ABC Company
Capital P&L ratio
A 120,000 25%
B 160,000 50%
C 400,000 25%
On January 2, 2020, D is admitted to the partnership under the following agreement:
- D is to share 1/3 in the profits and losses while the other partners continue to participate in profits and
loss ratio in their original ratio.
- D is to pay B, P48,000 for a ¼ interest of the latter’s capital in the partnership net assets and is to invest
P280,000 cash in the partnership.
- The total capital after D’s admission is to be 1,040,000 of which, D’s capital account is to show
P300,000.

The capital account of the partners after D’s admission:

A B C
a. 147,000 166,000 427,000
b. 145,000 170,000 425,000
c. 138,366 156,744 418,336
d. 145,000 166,000 427,000

6. 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.

What amount should be reported as the capital balance of partner E after the retirement of partner F?
a. 84,667 c. 91,333
b. 89,000 d. 87,000

What amount should be reported as capital balance of partner G after the retirement of partner F?
a. 93,333 c. 100,667
b. 99,500 d. 98,500

Answer
1. D
2. B
3. B
4. C
5. B
6. C/C