65. Jaime Dizon, a partner in an accounting firm, decided to withdraw from the partnership.

Dizon’s
share of the partnership profits and losses was 20%. Upon withdrawing from the partnership he was paid P74,000 in
final settlement for his interest. The total of the partners’ capital accounts before recognition of partnership goodwill
prior to Dizon’s withdrawal was P210,000. After his withdrawal the remaining partners’ capital accounts, excluding
their share of goodwill, totalled P160,000. The implied goodwill of the firm was:

a. P120,000
b. P140,000
c. P160,000
d. P250,000

Solution:

Partnership capital before withdrawal by Dizon P210,000

Less partnership capital after withdrawal (excluding goodwill) 160,000

Book value of Dizon’s interest P50,000

Price paid Dizon for 20% interest P74,000

Less book value of interest 50,000

Implied goodwill on 20% interest P24,000

Implied goodwill on entire firm (P24,000/20%) P120,000

66. Cina, Doy and Eli shared profit and losses based on 5:3:2. Eli was allowed to withdraw from the
partnership on 31 December 2016 with P600,000 cash as full settlement. The condensed statement of financial
position of the partnership as of that date was as follows: Assets Due from Eli P250,000 Goodwill 2,000,000 Other
assets 4,750,000 Total assets P7,000,000 Liabilities and Capital Liabilities P2,000,000 Due to Doy 750,000 Cina,
capital 1,750,000 Doy, capital 1,500,000 Eli, capital 1,000,000 Total liabilities and capital P7,000,000 Using the
goodwill method, the new capital balances of the remaining partners after Eli’s withdrawal are:

a. Cina, P1,843,750 and Doy, P1,556,250.

b. Cina, P1,375,000 and Doy, P1,275,000.
c. Cina, P2,000,000 and Doy, P1,650,000.
d. Cina, P1,750,000 and Doy, P1,500,000.

Solution:

Cina Coy Eli

Capital balances before withdrawal of Eli P1,750,000 P1,500,000 P1,000,000
Due from Eli (250,000)
Goodwill written off (P2,000,000) (1,000,000) (600,000) (450,000)
Capital balances before settlement 750,000 900,000 350,000
Settlement with Eli (600,000)
Total goodwill, P1,250,000
(P250,000/20%) 625,000 375,000 250,000
New capital balances after withdrawal P1,375,000 P1,275,000 -

67. Pastor, Ramon and Sendong were partners with capital balances as of January 1, 2013, of P100,000,
P150,000 and P200,000 respectively, sharing profit and losses on a 5:3:2 ratio. On July 1, 2016 Pastor withdraw
from the partnership. Partners agreed that at the time of withdrawal, certain inventories had to be revalued at
P70,000 from its cost of P50,000. For the six month period ending June 30, 2013, the partnership generated a net
income of P140,000. Further, partners agreed to pay Pastor P195,000 for his interest and that the remaining
partners’s capital account would be adjusted for whatever goodwill the settlement would generate. The payment to
Pastor included a goodwill of:
a. P15,000
b. P25,000
c. P50,000
d. P42,500

Solution:

Pastor’s capital before his retirement P100,000

Undervaluation of inventory (P20,000 x 50%) 10,000
Profit share (P140,000 x 50%) 70,000

Pastor’s interest P180,000

Settlement 195,000

Goodwill P15,000

68. The condensed statement of financial position of the partnership of Edong, Fredo and Godo with
corresponding profit and loss sharing percentage as of June 30, 2013 was as follows: Net assets P400,000 Edong,
capital (50%) P200,000 Fredo, capital (30%) 120,000 Godo, capital (20%) 80,000 P400,000 As of said date, Edong
retired from the partnership. By mutual agreement, he was paid P225,000 for his interest in the partnership. The total
implied goodwill was to be recorded. After Edong’s retirement, the total net assets of the partnership was:

a. P250,000
b. P175,000
c. P200,000
d. P225,000

Solution:

Edong’s capital P200,000

Settlement 225,000

Goodwill (50%) P25,000

Net assets before settlement with Edong 400,000

Settlement (225,000)
Total implied goodwill (P25,000/50%) 50,000

Net assets after Edong’s retirement P225,000

69. On December 31, 2013 the condensed statement of financial position of ABC Partnership is presented
below: Total assets P180,000 Amy loan P10,000 Amy, capital 45,000 Bea, capital 40,000 Cat, capital 85,000 Total
P180,000 Amy, Bea and Cat share profits and losses in the ratio of 3:2:1 respectively. It was agreed among the
partners that Amy retires from the partnership and the partnership’s asset to be adjusted to their fair value of
P210,000. The partners further agreed to pay Amy P64,000 cash for her total interest in the partnership. What is the
capital balance of Cat after the retirement of Amy?

a. P35,000
b. P92,000
c. P27,000
d. P33,000
Solution:

Cat’s capital balance before Amy’s retirement P85,000

Share in adjustment of assets (30,000 x 1/6) 5,000

Share in the bonus from Amy [(P55,000 + 15,000)

- P64,000] x 1/3 2,000

Cat’s capital balance after Amy’s retirement P92,00

70. On July 10, 2013 Lolo wants to retire from JKL Partnership. The statement of financial position for the
JKL Partnership before closing on that date shows the following: Cash P148,000 Liabilities P90,00 Receivables, net
72,000 Jose, capital 200,000 Equipment, net 270,000 Kiko, capital 96,000 Goodwill 60,000 Lolo, capital 84,000
Income summary 80,000 Total P550,000 P550,000 Jose, Kiko and Lolo share profits and losses in the ratio of 5:3:2
respectively. The partners agreed to write off the goodwill and to adjust the equipment to their fair market values if
P230,000. Lolo is paid P110,000 cash for his total interest. Assuming the use of the total goodwill method the total
assets of the new partnership after the retirement of Lolo is:

a. P554,000
b. P490,000
c. P474,000
d. P550,000

Solution:

Cash (P148,000-P110,000) P38,000

Receivables, net 72,000
Equipment, net 230,000
Goodwill (schedule1) 150,000

Total assets P490,000

Schedule 1: Computation of the total goodwill (new)

Lolo capital before his retirement P84,000

Profit share (P80,000 x 20%) 16,000
Goodwill written off (P60,000 x 20%) (12,000)
Undervaluation of the equipment(40,000x 20%) (8,000)
Total interest 80,000
Settlement (110,000)

Goodwill to Lolo (20%) P30,000

Total goodwill (30,000/20%) P150,000

71. Lina, Mina and Nina are partners with capital balances on January 2, 2013 of P300,000, P200,000 and
P100,000, respectively. On July 1, 2013 Lina retires from the partnership. On the date of retirement the partnership
net loss is P60,000 and the partners agreed that certain asset is to be revalued at P80,000 from its original cost of
P50,000. The partners agreed further to pay Lina P225,000 in settlement of her interest. The remaining partners
continue to separate under a new partnerhip MN partnership. What is the total capital of MN partnership?
a. P345,000
b. P285,000
c. P340,000
d. P280,000

Solution:

Lina Mina Nina

Capital balances P300,000 P200,000 P100,000
Net loss (30,000) (20,000) (10,000)
Underevaluation of asset, P30,000 15,000 10,000 5,000

Total 285,000 190,000 95,000

Settlement (225,000)
Bonus to Mina and Nina, 2:1 (60,000) 40,000 20,000

Capital balances P230,000 P115,000

Total capital (P230,000 + P115,000) P345, 000