Hernandez, Jessica O.

Partnership and Corporation

BSA 1-1 Chapter 4

Chapter 4- Partnership Dissolution

Admission of New Partner

Exercises- Odd Numbers Only

Exer 4-1

Camus 90,000 - 60% Admission of Cerda who paid 90,000

Cuenco 60,000 - 40%

1. Transfer of 1/3 of old partners’ capital

Camus, Capital 30,000
Cuenco, Capital 20,000
Cerda, Capita 50,000
90,000 x 1/3 = 30,000
60,000 x 1/3 = 20,000

2. Transfer of 1/3 of old partners’ capital, assets are revaluated

New Partnership Capital Interest Transfer to New Partner

90,000 / 1/3 = 270,000 162,000 x 1/3 = 54,000
108,000 x 1/3 = 36,000
Amount of Asset Revaluation
270,000 – 150,000 = 120,000 Entries:

Asset Revaluation Allocation to Old Partners Other Assets 120,000

120,000 x .60 = 72,000 Camus, Capital 72,000
120,000 x .40 = 48,000 Cuenco, Capital 48,000

Capital Balances after Asset Revaluation Camus, Capital 54,000

90,000 + 72,000 = 162,000 Cuenco, Capital 36,000
60,000 + 48,000 = 108,000 Cerda, Capital 90,000

3. Cash is invested in the business, new partner credited with 1/4 interest, bonus method is used
AC CC Bonus
Old 180,000 150,000 30,000
New 60,000 90,000 (30,000)
240,000 240,000

Cash 90,000 Bonus to old partners Computation

Cerda, Capital 60,000 30,000 x .60 = 18,000
Camus, Capital 18,000 30,000 x .40 = 12,000
Cuenco, Capital 12,000
4. Cash is invested, new partner credited with his full interest which is to be 25% of the new firm capital
AC CC Asset Revaluation
Old 270,000 150,000 120,000
New 90,000 90,000 ______________
360,000 240,000 120,000

Cash 90,000 Other Assets 120,000

Cerda, Capital 90,000 Camus, Capital 72,000
Cuenco, Capital 48,000

Asset Revaluation Computation

120,000 x .60 = 72,000
120,000 x .40 = 48,000

5. Cash is invested in the business, new partner credited with 120,000, bonus method is used
AC CC Bonus
Old 120,000 150,000 (30,000)
New 120,000 90,000 30,000
240,000 240,000

Camus, Capital 18,000 Bonus from old partners Computation

Cuenco, Capital 12,000 30,000 x .60 = 18,000
Cash 90,000 30,000 x .40 = 12,000
Cerda, Capital 120,000

Exer 4-3

Catral 480,000 – 3/4 Admission of Conti

Clemente 360,000 – ¼

1. Conti acquired 1/3 of Catral’s interest for 160,000

Catral Capital 160,000 480,000 x 1/3 = 160,000
Conti, Capital 160,000 CC = AC

2. Conti acquired 1/3 of Clemente’s interest for 70,000

Clemente, Capital 120,000 360,000 x 1/3 = 120,000
Conti, Capital 120,000 CC < AC

3. Conti acquired 1/4 interest from the partners paying 126,000 assets are revaluated
New Partnership Capital Interest Transfer to New Partner
126,000 / 1/4 = 504,000 228,000 x 1/4 = 57,000
276,000 x 1/4 = 69,000
Amount of Asset Revaluation
840,000 – 504,000 = (336,000) Entries:

Asset Revaluation Allocation to Old Partners Catral, Capital 252,000

336,000 x 3/4 = 252,000 Clemente, Capital 84,000
336,000 x 1/4 = 84,000 Other Assets 336,000

Capital Balances after Asset Revaluation Catral, Capital 57,000

480,000 - 252,000 = 228,000 Clemente, Capital 69,000
360,000 - 84,000 = 276,000 Conti, Capital 126,000
Exer 4-5

Cuenco
Claudio partners with net assets of 500,000, sharing equally

Cabral is admitted paying 200,000, 1/4 interest

Bonus Method

AC CC Bonus
Old 525,000 500,000 25,000
New 175,000 200,000 (25,000)
700,000 700,000

Cash 200,000 Bonus to old partners Computation

Cabral, Capital 175,000 25,000 x .50 = 12,500
Cuenca, Capital 12,500 25,000 x .50 = 12,500
Claudio, Capital 12,500

Asset Revaluation Method

AC CC Asset Revaluation
Old 600,000 500,000 100,000
New 200,000 200,000 ______________
800,000 700,000 100,000

Cash ` 200,000 Other Assets 100,000

Cabral, Capital 200,000 Cuenca, Capital 50,000
Claudio, Capital 50,000

Asset Revaluation Computation 100,000/2 = 50,000

Problems- Even Numbers Only

Prob 4-2

Coral 180,000 4/5

Corpuz 120,000 1/5 Admits Calma as new partner.

1. Calma is admitted with 1/3 interet, paying 150,000.

300,000 x 1/3 = 150,000
AC CC
Old 300,000 300,000
New 150,000 150,000
450,000 450,000
Cash 150,000
Calma, Capital 150,000
2. Calma is admitted with 1/4 interest, paying 120,000 while total AC will be 420,000.
AC CC Bonus
Old 315,000 300,000 15,000
New 105,000 120,000 (15,000)
420,000 420,000

Cash 120,000 Bonus to old partners Computation

Calma, Capital 105,000 15,000 x 4/5 = 12,000
Coral, Capital 12,000 15,000 x 1/5 = 3,000
Corpuz, Capital 3,000

3. Calma is admitted with 1/4 interest, paying 60,000 while total AC will be 360,000.
AC CC Bonus
Old 270,000 300,000 (30,000)
New 90,000 60,000 30,000
360,000 360,000

Coral, Capital 24,000 Bonus from old partners Computation

Corpuz, Capital 6,000 30,000 x 4/5 = 24,000
Cash 60,000 30,000 x 1/5 = 6,000
Calma, Capital 90,000

4. Calma admitted with 1/4 interest in the firm capital so he purchases of 1/4 interest of old partners’
capital paying 82,500.
Coral, Capital 45,000 300,000 x 1/4 = 75,000
Corpuz, Capital 30,000 180,000 x 1/4 = 45,000
Calma, Capital 75,000 120,000 x 1/4 = 30,000

5. Same as (4) but with asset revaluation and new partnership capital will be 330,000.
Amount of Asset Revaluation Capital Balances after Asset Revaluation
330,000 – 300,000 = 30,000 180,000 + 24,000 = 204,000
Asset Revaluation Allocation to Old Partners 120,000 - 6,000 = 126,000
30,000 x 4/5 = 24,000
30,000 x 1/5 = 6,000 Interest Transfer to New Partner
204,000 x 1/4 = 51,000
126,000 x 1/4 = 31,000
Entries:
Other Assets 30,000 Coral, Capital 51,000
Coral, Capital 24,000 Corpuz, Capital 31,500
Corpuz, Capital 6,000 Calma, Capital 82,500

6. Calma is admitted to 1/5 interest, paying 90,000 and AC is to be 450,000.

AC CC Asset Revaluation
Old 360,000 300,000 60,000
New 90,000 90,000 _____________
450,000 390,000 60,000

Cash ` 90,000 Other Assets 60,000

Calma, Capital 90,000 Coral, Capital 48,000
Corpuz, Capital 12,000

Prob 4-4

1. Determine how much Cruz’ contribution should be.

Old Partners’ Capital/ Old Partners’ Ratio Cash 172,500

690,000 / 4/5 = 862,500 Cruz, Capital 172,500
Determined Capital x New Partner’s Ratio
862,500 x 1/5 = 172,500

2. Cruz pays 210,000 for 1/5 interest. Determine partners’ new capital balances using two methods.

Bonus Method
AC CC Bonus
Old 720,000 690,000 30,000
New 180,000 210,000 (30,000)
900,000 900,000

Cash 210,000 New Capital Balances

Cruz, Capital 180,000 (already the new capital balance)
Cortez, Capital 15,000 + 420,000 = 435,000
Canda, Capital 10,000 + 240,000 = 250,000
Cena, Capital 5,000 + 30,000 = 35,000

Bonus to old partners Computation

30,000 x 3/6 = 15,000
30,000 x 2/6 = 10,000
30,000 x 1/6 = 5,000
Asset Revaluation Method
AC CC Asset Revaluation
Old 840,000 690,000 150,000
New 210,000 210,000 ______________
1,050,000 900,000 150,000

Cash ` 210,000
Cruz, Capital 210,000 - New Capital Balance of Cruz

Other Assets 150,000 New Capital Balances

Cortez, Capital 75,000 + 420,000 = 495,000
Canda, Capital 50,000 + 240,000 = 290,000
Cena, Capital 25,000 + 30,000 = 55,000

Asset Revaluation Computation

150,000 x 3/6 = 75,000
150,000 x 2/6 = 50,000
150,000 x 1/6 = 25,000

Prob 4-6

1. Schedule showing the capital of each partner after the admission of Camo.

Cabal Cadiz Caldea Camo Total

Capital Balance before
the admission 150,000 180,000 300,000 630,000
Purchase 1/6 interest
of Cadiz (30,000) 30,000
Contribution 150,000 150,000
Asset reval to old
Partners 4,000 6,000 10,000 20,000
Bonus to old partners 4,000 6,000 10,000 (20,000)
Capital Balance after
the admission 158,000 162,000 320,000 160,000 800,000

2. Profit and Loss Ratio of partner’s after Camo’s admission.

100% - 20% = 80%

Cabal .20 x .80 = 16%

Cadiz .30 x .80 = 24%
Caldea .50 x .80 = 40%
Camo 20%
Multiple Choice-1 Answers Multiple Choice-2 Answers

1.C. 1.B.
2.C. 2.C.
3.A. 3.A.
4.B. 4.B.
5.C. 5.B.
6.B. 6.D.
7.B. 7.A.
8.A. 8.B.
9.B. 9.C.
10.A. 10.D.
11.D. 11.A.
12.B. 12.C.
13.C. 13.B.
14.B. 14.A.
15.B. 15.B.
16.A.
17.B.
18.A.
19.B.
20.C.