Partnership Dissolution Exercise

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

Problem Solving
Problem 1
1. Miller, Capital (120,000 x 20% x 60%) 14,400
Davis, Capital (120,000 x 20% x 40%) 9,600
Shaw, Capital (120,000 x 20%)
24,000

2. Miller, Capital 80,000

Davis, Capital 40,000
Total capital of existing partners 120,000
Fair value of contribution of A 30,000
Total Capital of new partnership 150,000
Multiply by: Interest of Shaw 20%
 Credit to Shaw’s capital account 30,000

Journal Entry

Cash 30,000
Shaw, Capital 30,000

3. Miller, Capital 80,000

Davis, Capital 40,000
Total capital of existing partners 120,000
Fair value of contribution of A 40,000
Total Capital of new partnership 160,000
Multiply by: Interest of Shaw 20%
Credit to Shaw’s capital account 32,000

Journal Entries

Cash 32,000
Shaw, Capital 32,000

Cash 8,000
Miller, Capital 4,800
Davis, Capital 3,200

4. 50,000/20% = 250,000
250,000 – 180,000 = 70,000

Journal Entry

Cash 50,000
Goodwill 70,000
Miller, Capital 42,000
Davis, Capital 28,000
Shaw, Capital 50,000
Problem 2
a. William, Capital 75,000
Payable to William 80,000
Cash 155,000

b. Goodwill 5,000
William, Capital 75,000
Cash 80,000

c. Goodwill 30,000
William, Capital 75,000
Jane’s, Capital 15,000
Anne’s, Capital 10,000
Cash 80,000