Goodwill method

Case 1: Purhase of interest - Goodwill to old partners

C purchased 20% interest from A and B for P100,000. The partners agreed
to recognized implied goodwill from C's payment

C's payment 100,000

0
Agreed capital 500,000
Contributed capital 400,000
Goodwill 100,000

Goodwill 100,000
A, Cap 40,000
B, Cap 60,000

A, Cap (150K + 40K) x 20% 38,000

B, Cap (250k + 60k) x 20% 62,000
C Cap 100,000

A B C Total
Unadjusted 150,000 250,000 400,000
Goodwill 40,000 60,000 100,000
Adjusted 190,000 310,000 - 500,000
C's interest (38,000) (62,000) 100,000
Agreed Capital 152,000 248,000 100,000 500,000

Case 2 = Investment - Goodwill to partners

C invests P120,000 to the partnership for a 20% interest. The partners agreed to
recognize an implied goodwill from C's investment

C's investment 120,000

C's interest 20%
Gross up 600,000
Contrbuted captial (400k + 120K) 520,000
80,000

Goodwill 80,000
A capital (80k x 40%) 32,000
B capital (80k*60%) 48,000

Cash 120,000
 C, Capital 120,000

Withdrawal of a partner

On December 31 2019, the capital balances of the following partners are as follows

Cruz Santos Rivera

PL ratio 30% 30% 40%
Capital balances 100,000 150,000 200,000

On June 30, 2020 Rivera withdrew from the partnership. As of that

date, the partnership profit amounted to P500,000
Also, the fair value of the partnership assets is more than its book value
by P60,000

Step 1 - Close the profit

Income Summary 500,000

Cruz, cap (500k x 30%) 150,000
Santos, cap (500k x 30%) 150,000
Rivera, cap (500k x 40%) 200,000

Step 2 - Record the revaluation of assets

Asset 60,000
Cruz, Cap(60k x 30%) 18,000
Santos, cap (60k x 30%) 18,000
Rivera, cap (60k x 40%) 24,000

Cruz Santos Rivera TOTAL

Unadjusted 100,000 150,000 200,000 450,000
Profit share 150,000 150,000 200,000 500,000
Revaluation 18,000 18,000 24,000 60,000
Adjusted 268,000 318,000 424,000 1,010,000
Additional revaluation 60,000 60,000 80,000 200,000
Adjusted 328,000 378,000 504,000 1,210,000

Case 1: Cruz and Santos agreed to purchase the interest of Rivera for 550k based on their
existing sharin of P&L

Rivera Cap 424,000

Santos Capital 212,000
Cruz, capita 212,000
Case 2 : The partnership will pay Rivera P500,000 for his interest

Rivera, capital 424,000

Cruz, capital (500k-424k) x 50% 38,000
Santos capital 38,000
Liability 500,000

INCORPORATION OF A PARTNERHSIP

Cruz Santos Rivera TOTAL

Unadjusted, Jan 1 100,000 150,000 200,000 450,000

On Dec 31, 2019The partners agreed to incorpoate the partnership in order

to have a wider access to the capital market

1.As of December 31, 2019, the condensed PL of the partnership are as follows:

Sales 1,500,000
Cost of sales (40%) (600,000)
Gross profit 900,000
OPEX 450,000
Net profit 450,000

2. Also the partnership assets has a fair value more than its book value by P100,000. The book value of the assets is P150,0

3. The SEC approved their incorporation with authorized capital shares of 200,000 common shares
with a par value of P5

Step 1 Close the P&L

Sales 1,500,000
Cost of sales 600,000
OPEX 450,000
Income Summary 450,000

Income summary 450,000

Cruz, capital- 30% 135,000
Santos capital - 30% 135,000
Rivera, cap - 40% 180,000

Step 2 Record the revaluation of assets

Assets 100,000
Cruz, capital (30%) 30,000
Santos, capital (30%) 30,000
 Rivera, capital (40%) 40,000

Cruz Santos Rivera TOTAL NET ASSETS

Unadjsuted 100,000 150,000 200,000 450,000
Profit share 135,000 135,000 180,000 450,000
Revaluation 30,000 30,000 40,000 100,000
Adjusted 265,000 315,000 420,000 1,000,000 1,000,000
Par value 5 5 5
No of shares issued 53,000 63,000 84,000 200,000

Agreed issued shares 50,000 60,000 80,000 190,000 200,000 10,000

5 5 5 5
250,000 300,000 400,000 950,000 950,000

CSR Corp books

Net assets 1,000,000

Common shares 950,000
Share premium 50,000
Case 3 The partnership will pay Rivera with the partnership Bldg with a book value of P300,000
and a fair value of 500,000

Building 200,000
Cruz, capital 60,000
Santos, capital 60,000
Rivera, capital 80,000
 Rivera, capital 504,000
Building 500,000
Cruz, capital 2,000
Santos, cap 2,000

alue of the assets is P150,000

k value of P300,000

a
LIQUIDATION

LUMPSON LIQUIDATION

Cruz, Santos, Rivera partners agreed to liquidate the partnership on January 1, 2020.
The statement of financial position of the partnership as of Dec. 31, 2019 are as follows

Cash 100,000
Accounts receivable 200,000
Loan, Cruz 30,000
Inventory 150,000
Equipment 300,000
TOTAL ASSETS 780,000 540,000
PL RATIO
Accounts payable 200,000
Loan, Santos 40,000
Cruz, capital 162,000 30%
Santos, capital 162,000 30%
Rivera, capital 216,000 40%
LIABILITIES AND CAPITAL 780,000

During the process of liquidation, the following transactions transpired:

28-Feb Only 90% of the accounts receivable were collected

30-Apr Inventory was sold for P200,000

30-Jun Equipment was sold for 280,000

STATEMENT OF LIQUIDATION
LOAN,
CASH AR CRUZ INVENTORY
Balances 100,000 200,000 30,000 150,000
28-Feb Collection of AR 180,000 (200,000)
280,000 - 30,000 150,000
Payment of liabilities (200,000)
Balances 80,000 - 30,000 150,000
30-Apr Sale of inventories 200,000 (150,000)
Balances 280,000 - 30,000 -
30-Jun Sale of equipment 280,000
Balances 560,000 - 30,000 -
Collection of loan from Cruz 30,000 (30,000)
 Payment of Loan to santos (40,000)
550,000 - - -

Cruz, Capital 135,000 Cash

Santos, capital 205,000 Loan, Cruz
Rivera, capital 220,000
Cash 560,000 Loan, santos
To record cash settlement to partners Cash

Cruz, cap
Santos, cap
Rivera cap
Cash

INSTALLMENT LIQUIDATION

STATEMENT OF LIQUIDATION
LOAN,
CASH AR CRUZ INVENTORY
Balances 100,000 200,000 30,000 150,000
28-Feb Collection of AR 180,000 (200,000)
Balances 280,000 - 30,000 150,000
Payment of liabilities (200,000)
Balances 80,000 - 30,000 150,000
Collections from Cruz 30,000 (30,000)
Balances 110,000 - - 150,000
Distribution of cash to partners (110,000)
Balances - - - 150,000
30-Apr Sale of inventories 200,000 (150,000)
Balances for distributiom 200,000 - - -
Distribution of cash to partners (200,000)
Balances - - - -
30-Jun Sale of equipment 280,000
Balances 280,000 - - -
Payment of loan to Santos (40,000)
Balances 240,000 - - -
Final cash settlement to partners (240,000)
Balances - - - -

SAFETY PAYMENT SCHEDULE

30% 30% 40%
CRUZ SANTOS RIVERA
Capital balances 156,000 156,000 208,000
Payable to Santps 40,000
Total capital before dist 156,000 196,000 208,000
Allocation of Loss
Inventory 150,000
Equipment 300,000
Estimated loss 450,000 (135,000) (135,000) (180,000)
21,000 61,000 28,000 110,000

Capital balances 150,000 110,000 200,000

Payable to Santos 40,000
Total capital 150,000 150,000 200,000
Allocation of loss
Equipment 300,000 (90,000) (90,000) (120,000)
60,000 60,000 80,000 200,000
 30% 30% 40%
LOAN, CRUZ, SANTOS, RIVERA,
EQUIPMENT AP SANTOS CAPTIAL CAPTIAL CAPTIAL
300,000 200,000 40,000 162,000 162,000 216,000
(6,000) (6,000) (8,000)
300,000 200,000 40,000 156,000 156,000 208,000
(200,000)
300,000 - 40,000 156,000 156,000 208,000
15,000 15,000 20,000
300,000 - 40,000 171,000 171,000 228,000
(300,000) (6,000) (6,000) (8,000)
- - 40,000 165,000 165,000 220,000
 (40,000)
- - - 165,000 165,000 220,000

30,000
Loan, Cruz 30,000

40,000
40,000

165,000
165,000
220,000
550,000

30% 30% 40%

LOAN, CRUZ, SANTOS, RIVERA,
EQUIPMENT AP SANTOS CAPTIAL CAPTIAL CAPTIAL
300,000 200,000 40,000 162,000 162,000 216,000
(6,000) (6,000) (8,000)
300,000 200,000 40,000 156,000 156,000 208,000
(200,000)
300,000 - 40,000 156,000 156,000 208,000

300,000 - 40,000 156,000 156,000 208,000

(21,000) (61,000) (28,000)
300,000 - 40,000 135,000 95,000 180,000
15,000 15,000 20,000
300,000 - 40,000 150,000 110,000 200,000
(60,000) (60,000) (80,000)
300,000 - 40,000 90,000 50,000 120,000
(300,000) (6,000) (6,000) (8,000)
- - 40,000 84,000 44,000 112,000
(40,000)
- - - 84,000 44,000 112,000
(84,000) (44,000) (112,000)
- - - - - -