PRACTICE SET 02: PARTNERSHIP DISSOLUTION

Use the following information for the next three(3) questions:

The AME Partnership shows the following profit and loss ratios and
capital balances:
Armin 60% P252,000
Mikasa 30% P126,000
Eren 10% P42,000
The partnership decide to sell Levi 20% of their respective capital and
profit and loss interests for a total payment of P90,000. Levi will pay
the money directly to the other partners.
1. If the partners agree that unrecognized goodwill is to be recorded
prior to the sale of Levi, what are the capital balances of the
partners after his admission?
Armin Mikasa Eren Levi
a. P198,000 P99,000 P33,000 P90,000
b. P201,600 P100,800 P33,600 P90,000
c. P216,000 P108,000 P36,000 P90,000
d. P255,600 P127,800 P42,600 P90,000
2. If the partners agree that the bonus method is used, what are the
capital balances of the partners after Levi’s admission to the
partnership?
Armin Mikasa Eren Levi
a. P198,000 P99,000 P33,000 P90,000
b. P201,600 P100,800 P33,600 P84,000
c. P216,000 P108,000 P36,000 P90,000
d. P255,699 P127,800 P42,600 P84,000
3. How much cash should Armin, Mikasa, and Eren receive, respectively from
Levi?
a. P50,400, P25,200, and P8,400, if and only if no goodwill is
recorded.
b. P50,400, P25,200, and P8,400, whether or not goodwill is
recorded.
c. P54,000, P27,000, and P9,000, if and only if goodwill is
recorded.
d. P54,000, P27,000, and P9,000, whether or not goodwill is
recorded.
4. Beatrix and Cyclops are partners who share profits and losses in the
ratio of 6:4. On January 1, 2023 their capital balances are:
Beatrix P80,000
Cyclops 20,000
TOTAL P100,000
Diggie is to be admitted for a 20% interest in the partnership by
direct purchase from the partners for P30,000.
How should the P30,000, cash be divided between Beatrix and Cyclops?
Beatrix Cyclops
a. P18,000 P12,000
b. P22,000 P8,000
c. P20,000 P10,000
d. P24,000 P6,000
5. At December 31, Rod and Sol are partners with capital balances of
P40,000 and P20,000, and they share profits and losses in the ratio of
2:1, respectively. On this date, Pete invests P17,000 in cash for a
 one-fifth interest in the capital and profit of the new partnership.
Assuming that assets are not revalued, how much should be credited to
Pete’s capital account on December 31?
a. P12,000
b. P15,000
c. P15,400
d. P17,000
6. Lim and Ang are partners sharing profits and losses in the ratio of
6:4, respectively. On January 2, the partners decided to admit Yu as a
new partner upon his investment of P16,000. On this date, the interest
in the partnership of Lim and Ang are as follows:
Lim P23,000
Ang 18,600
Assuming that the new partner is given a 1/3 interest in the firm and
the assets are revalued. The capital balances of the partners after
admission of Yu are:
Lim Ang Yu
a. P23,000 P18,600 P20,800
b. P23,240 P18,760 P16,000
c. P23,500 P18,600 P16,000
d. P23,000 P18,600 P16,000
7. A, B, and C are partners sharing profits in the ratio of 3:3:2. On June
30, their capital balances are as follows:
A P600,000
B 400,000
C 300,000
The partners agree to admit D on the following agreement:
I. D is to pay A P400,000 for ½ interest of A’s interest.
II. D is also to invest P300,000 in the partnership.
III. The total capital of the partnership is to be P2,000,000, of
which D’s interest is to be 25%.
What are the capital balances of the partners after the admission of D?
A B C
a. P487,500 P587,500 P425,000
b. P300,000 P400,000 P300,000
c. P400,000 P300,000 P300,000
d. P187,500 P187,500 P125,000
8. On April 27, 2023, the capital accounts of X, Y and Z shows the
following balances:
X P360,000
Y 225,000
Z 135,000
At this time, W is admitted to the firm when he purchased a one-sixth
interest in the firm for P82,500. The old partners equalized their
capital investments. Afterwards, all the partners agree to divide
profits and losses equally. The new partnership closes its books on
June 30, 2023 reporting a profit of P12,600 for two months. The
partners made the following withdrawals: X and Z, P750 per month; Y and
W, P1,000 per month. On June 30, 2023, W invest enough cash to increase
his capital to a one-third interest in the partnership. How much cash
is to be invested by W?
a. P180,755
b. P181,075
c. P20,000
d. P60,333
9. On December 31, 2023, the condensed statement of financial position of
ABC Partnership is presented below:
Total Assets (at cost) P90,000

Payable to A P5,000
A, Capital 20,750
B, Capital 19,250
C, Capital 45,000
Total P90,000
 A, B and C share profits and losses in the ratio of 25:25:50,
respectively. It was agreed among the partners that A retires from the
partnership and the partnership’s assets to be adjusted to their fair
market value of P102,000 as of December 31, 2023. The partnership would
pay A P30,250 cash for his total interest in the partnership. What is
the capital balance of B after the retirement of A assuming the use of
partial goodwill method and the bonus method?
Partial Goodwill Bonus
a. P22,250 P21,750
b. 29,750 20,750
c. 22,250 21,700
d. 19,250 45,000
10. PF, R and S were partners with capital balances on January 2,
2023 of P100,000, P150,000, and P200,000, respectively. Their profit
and loss ratio is 5:3:2. On July 1, 2023. PF retires 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
P70,000 from its original cost of P50,000. The partners agreed further
to pay PF P195,000 in settlement of his interest. What are the capital
balances of the remaining partners after the retirement of PF?
R S
a. P189,000 P226,000
b. P198,000 P232,000
c. P207,000 P238,000
d. P220,000 P226,000
11. Under the bonus method, when a new partner is admitted to the
partnership, the total capital of the new partnership is equal to:
a. The book value of the previous partnership plus the fair market
value of the consideration paid to the existing partnership by
the incoming partner.
b. The book value of the previous partnership minus any asset write
downs from book to market value plus the fair market value of the
consideration paid to the existing partnership by the incoming
partner.
c. The book value of the previous partnership plus any necessary
asset write ups from book value to market value plus the fair
market value of the consideration paid to the existing
partnership by the incoming partner.
d. The fair market value of the new partnership as implied by the
value of the incoming partner’s consideration in exchange for an
ownership percentage in the new partnership.
12. LuoYi, Roger, and Dyrroth are partners with capital credit
balances as at December 31 of P300,000, P300,000 and P200,000,
respectively. Dyrroth is allowed to withdraw, and it is agreed that he
is to take certain furniture items at the second-hand value of P12,000,
plus a promissory note for the balance of his interest. The furniture
items are carried on the books as fully depreciated; brand new however,
they would cost P20,000. If profits and losses are shared equally, the
acquisition of the furniture items by Dyrroth would result in
a. Increase in capital of P4,000 each for Luoyi, Roger and Dyrroth.
b. Decrease in capital of P6,000 each for Luoyi and Roger.
c. Increase in capital of P8,000 for Dyrroth.
d. Decrease in capital of P8,000 for Dyrroth.
Use the following scenario for 13-15.
Aiah and Nicollete’s capital is 600,000 and 480,000, respectively. Profit
share ratio 7:3. Sheena directly purchased a 1/3 interest by paying Aiah
195,000 and Nicollete 225,000. The land account is increase by 180,000
before Sheena is accepted.
13. What is the capital of Aiah after admitting Sheena?
a. P300,000
b. P356,000
c. P420,000
d. P484,000
14. What is the capital of Nicollete after admitting Sheena?
a. P300,000
b. P356,000
 c. P420,000
d. P484,000
15. What is the capital of Sheena after admission?
a. P300,000
b. P356,000
c. P420,000
d. P484,000
Use the following scenario for 16-18.
M, D and J are partners with capital balances of P448,000, P1,560,000
and P680,000 respectively, sharing profit and losses of 6:4:2. K 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
P420,000 bonus upon his admission.
16. How much cash should K contribute?
a. P336,000
b. P420,000
c. P756,000
d. P3,024,000
17. How much should be credited to K Capital?
a. P336,000
b. P420,000
c. P756,000
d. P3,024,000
18. What is the new profit or loss sharing ratio after admitting K?
a. 6%; 4%; 2%; 25%
b. 50%; 10%; 15%; 25%
c. 37.5%; 25%; 12.5%; 25%
d. 20%; 25%; 30%; 25%