Xela Mae T.

Bigornia
BSA 3A

CHAPTER 3: PARTNERSHIP DISSOLUTION

THEORIES:

1. All the assets of the firm are _____ and all outsiders’ liabilities and partners’ loan and partners capitals
are ___ at the time of dissolution of firm.
a. Disposed Off, Paid
b. Paid, Disposed Off
c. Acquired , Paid
d. Disposed Off, Acquired

2. When a partnership firm can be dissolved

a.When all partners agree to dissolve the firm
b. By Notice
c. When business of the firm become unlawful.
d. All of the above

3. Provident Fund is a ______ on the firm towards employees

a. None
b. Liabilities
c. Assets
d. Both

4. If nothing is stated regarding the realisation of any tangible assets then such assets should be assumed to
be realized at
a. Both
b. Market Value
c. None
d. Book Value

5. The Assets of the firm and the amount contributed by the partners to make up the deficiency of capital
shall be applied for
a. First to pay shall be distributed among the partners in their profit sharing Ratio
b. First to pay partners capitals
c. First to pay the debts of the firm to the third parties
d. First to pay partners Loan

PROBLEMS:

1. XX, YY, and ZZ are partners who share profits and losses in the ratio of 5:3:2, respectively. They agree
to sell a 25% of their respective capital and profits and losses ratio for a total payment directly to the
partners in the amount of P140,000. They agree that goodwill of P60,000 is to be recorded prior to
admission of AA. The condensed balance sheet of the XYZ partnership is as follows:

Cash..........................................P60,000 Liabilities..........................P100,000
Non-cash assets..............P540,000 XX, Capital...........................250,000
YY, Capital.............................150,000
ZZ, Capital.............................100,000
Total.......................................P600,000 Total..........................................600,000

The capital of XX, YY and ZZ respectively after the payment and admission of AA are:
a. P187,500; P112,500; and P75,000
b. P210,000; P126,000; and P84,000
c. P280,000; P168,000; and P112,000
d. P250,000; P150,000; and P100,000

2. On June 30, 2004, the balance sheet of Western Marketing, a partnership, is summarized as follows:

Sundry assets...................................................................P150,000
West, Capital...................................................................... 90,000
Tern, Capital...................................................................... 60,000

West and Tern share profit and losses at a 60:40 ratio, respectively. They agreed to take in Cuba as a new
partner, who purchases 1/8 interest of West and Tern for P25,000. What is the amount of Cuba's capital to
be taken up in the partnership book if book value method is used?
a. P12,500
b. 18,750
c. 25,000
d. 31,250

3. OO and TT are partners with capital balances P60,000 and P20,000, respectively. Profits and losses are
divided in the ratio of 60:40. OO and TT decided to form a new partnership with GG, who invested land
valued at P15,000 for a 20% capital interest in the new partnership. GG's cost of the land was P12,000. The
partnership elected to use the bonus method to record the admission of GG into the partnership. GG's
capital account should be credited for:
a. P12,000
b. 15,000
c. 16,000
d. 19,000

4. RR and XX formed a partnership and agreed to divide initial capital equally, even though RR contributed
P25,000 and XX contributed P21,000 in identifiable assets. Under the bonus approach to adjust the capital
accounts. XX's unidentifiable assets should be debited for:
a. P11,250
b. 4,000
c. 2,000
d. 0

5. DD and GG, are partners with capital account balances of P12,000 and P18,000, respectively. They agree
to admit ZZ and a partner with a one-third interest in capital and profits, for an investment P20,000, after
revaluing the assets of DD and GG. Goodwill to the original partners should be;
a. P0
b. 6,667
c. 10,000
d. 13,333

ANSWERS:

THEORIES:
1. A
2. D
3. B
4. D
5. C

PROBLEMS:
1. B
SOLUTION:
The goodwill of P60,000 can be proven by the following computation.

Amount paid.......................................................................................................P140,000
Less; Book value of interest acquired:
(P250,000+ 150,00+ 100,000) ×25% ........................................ 125,000
Excess...................................................................................................................... 15,000
Divided by: .......................................................................................................... 25%
Goodwill..................................................................................................................P 60,000
XX: [P250,000+(P60,000×50%)]×75%=.............................................................P210,000
YY: [P150,000+(60,000×30%)]×75%=................................................................P126,000
ZZ: [P100,000+(60,000×20%)]×75%=................................................................P 84,000

2. B

SOLUTION:
Amount paid...................................................................................................................P25,000
Less: Book value of interest acquired:
P150,000×1/8........................................................................................... 18,750
Gain of West and Tern............................................................................................ P 6,250

3. D
SOLUTION:
Since bonus method is recognized, the total agreed capital of the partnership should equal to the total
contributed capital.

Total agreed capital(P60,000+20,000+15,000)...........................P95,000

Multiplied by: GG's capital interest........................................................ 20%
Agreed capital to be credited to GG......................................................P19,000

The investment made by GG is in the form of non-cash assets, therefore, they should be recorded based on
agreed value or fair value.

4. D
Under the bonus method, unidentifiable assets (i.e., Goodwill) are not recognized. The total resulting
capital is the FMV of the tangible investments of the partners. Thus, there would be no unidentifiable assets
recognized by the creation of this new partnership.

5. C
SOLUTION:
Since goodwill is recognized by the original (old) partners, therefore the P20,000 represents one-third
capital interest. Therefore,

Total agreed capital (P20,000÷1/3)...............................................................P60,000

Less: Total contributed capital
(P12,000+ 18,000+ 20,000)............................................................................ 50,000
Goodwill to the original partners........................................................................P10,000

Sources
Theories: http://educoop.com/questions/40gv.html
Problems: Practical Accounting 2 (Dayag)