PARTNERSHIP DISSOLUTION 006

Kian and Kyle Partnership had the following condensed balance sheet:
Assets Liabilities and Equity
Cash 10,000 Liabilities 10,000
Non-cash Assets 75,000 Kian, Capital (70%) 60,000
Kian, Loan 15,000 Kyle, Capital 30,000
Total 100,000 Total 100,000

The partners agree to admit Chan-Chan as a member of the partnership.

Case 1
Chan-Chan purchases 1/3 interest in the firm. One-third of each partner’s capital is to be
transferred to the new partner. Chan-Chan pays the partners 40,000 which is divided between them
in proportion to the equities given up.
Required: The capital balance of Kian, Kyle and Chan-Chan after the admission should
be?

Case 2
Chan-Chan invests 35,000 in cash for a 1/3 ownership interest. The money goes to the
original partners
Required:
1. The capital balance of Kian Kyle and Chan-Chan after the admission assuming if book
value method is used:
2. The partnership gain (gain to be recognized in the partnership books).
3. The gain to be recognized by Kian and Kyle:
4. If revaluation/adjustments in assets are recognized, the capital balances of Kian, Kyle
and Chan-Chan:
Case 3
Chan-Chan purchases 1/3 interest in the firm. One-third of each partner’s capital is to be
transferred to the new partner. Chan-Chan pays the partners 25,000, which is divided between
them in proportionate to the equities given up.
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission if book value
method (no adjustments/no revaluation) method is used:
2. The partnership loss (loss to be recognized in the partnership books).
3. The gain/loss to be recognized by Kian and Kyle.
4. If revaluation/adjustments in assets are recognized, the capital balances of Kian, Kyle
and Chan-Chan:

Case 4
Chan-Chan invests 30,000 for a 1/3 interest in the firm. The total agreed capital is 120,000
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission should be:

Case 5
Chan-Chan invests 20,000 for a 1/3 interest in the partnership. The total agreed capital is
110,000.
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission should be:
2. The profit and loss of all partners after Chan-Chan’s admission should be:
Case 6
Chan-Chan, the new partner, conveyed a tangible asset with a fair value of 55,000 with an
assumed mortgage of 5,000 in exchange for a 20% interest in capital, keeping in mind that Chan-
Chan should be acquiring a 1/3 interest in profits.
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission if bonus method
is used should be:

Case 7
Chan-Chan, the new partner, conveyed a non cash asset with a fair value of 25,000 in
exchange for a 25% interest in capital and 1/5 interest in profits. The total agreed capital after
admission is 125,000
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission if bonus method
is used should be:
2. The new profit and loss of all partners after Chan-Chan’s admission should be:

Case 8
Chan-Chan invests 25,000 for a 25% interest in the firm.
Required:
1. If a bonus method is recognized, the capital balances of Kian, Kyle and Chan-Chan
after the admission should be:
2. If goodwill method is recognized, the capital balances of Kian, Kyle and Chan-Chan
after the admission should be:
3. If goodwill/adjustment in assets method is recognized and the goodwill allotted to Kyle
amounted to 3,000, the capital balances of Kian, Kyle and Chan-Chan after the
admission should be:
Case 9
Chan-Chan invests 40,000 in the firm, 10,000 is considered a bonus to Partners Kian and
Kyle.
Required:
1. How much is their respective capital balances after the admission?

Case 10
Chan-Chan invests 40,000 in the firm and is allowed a credit of 10,000 for goodwill upon
admission.
Required: How much is their respective capital balances after admission?

Case 11
Chan-Chan invests 40,000 for a 33.333333% interest in the firm. The total firm capital is
to be 120,000 and partners agreed that their capital is to be 120,000 and partners agreed that their
capital balances should made to equal their new profit and loss ratio.
Required:
1. The capital balances of Kian, Kyle and Chan-Chan after the admission should be:
2. The new profit and loss of all partners after Chan-Chan’s admission should be:
Tokyo, Berlin and Denver are partners sharing profits and losses of 50%, 25% and 25%
respectively. The December 31,2019 balance sheet of the partnership before any profit allocation
was summarized as follows:
Assets Liabilities and Capital
Cash 130,000 Accounts Payable 12,000
Inventories 120,000 Berlin, Loan 18,000
Furn & Fix (net) 150,000 Tokyo, Capital 200,000
Patent 50,000 Berlin, Capital 90,000
Denver, Capital 150,000
Berlin, Capital (20,000)
TOTAL ASSETS 450,000 TOTAL LIAB & CAPITAL 450,000

The partnership net income for the year amounted to 80,000

On January 1, 2020 Berlin had decided to retire from the partnership and by mutual agreement
among partners: the following have been arrived at:
a. Inventories amounting to 20,000 are considered obsolete and must be written off.
b. Furniture and Fixtures should be adjusted to their current market value of 180,000
c. Patents are considered worthless and must be written off immediately before retirement of
Berlin.
It was agreed that the partnership will pay Berlin for his interest in the partnership inclusive of the
loan balance.

Determine:
1. The interest of Berlin immediately before his retirement amounted to:

2. Berlin retires by receiving 98,000 cash (payment at book value, the capital balances of
Tokyo and Denver after the retirement of Berlin):

3. Berlin retires by receiving 101,000 cash (payment at more than book value). Using the
Bonus Method, the capital balances of Tokyo and Denver after the retirement of Berlin:
4. Berlin retires by receiving 101,000 cash (payment at more than book value). Using the
Partial Goodwill Method, the capital balances of Tokyo and Denver after the retirement
of Berlin:

5. Berlin retires by receiving 101,000 cash (payment at more than book value). Using the
Total (implied) Goodwill Method, the capital balances of Tokyo and Denver after the
retirement of Berlin:

6. Berlin retires by receiving 92,000 cash (payment at less than book value). Using the Bonus
Method, the capital balances of Tokyo and Denver after the retirement of Berlin:

7. Berlin retires by receiving 92,000 cash (payment at less than book value). Using the
Specific Adjustment in Assets, the capital balances of Tokyo and Denver after the
retirement of Berlin:

8. Berlin retires by receiving 92,000 cash (payment at less than book value). Using the asset
write-down traceable to the entire entity, the capital balances of Tokyo and Denver after
the retirement of Berlin: