CONCEPTUAL

1. The admission of a new partner requires the consent of the majority of the partners.
False

2. The remaining partners’ capital balance will increase when the amount of settlement to a retiring
partner is more than the retiring partner’s capital balance.
False

3. Pocholo, an incoming partner, acquires 10% interest in Southern Partnership by acquiring half of the
interest of Levi, an existing partner. This transaction will most likely require a debit in the partnership
books for the cash payment of Pocholo.
False

4. A partner may withdraw or retire from the partnership by

Any of these

5. A change in partnership ownership liquidates the partnership.

False

6. Ralph acquires 20% in Southern Partnership by contributing non-cash assets. This transaction will be
recorded in the partnership books as a transfer within equity
False

7. Partner A retires from ABC Partnership and receives P100.00 as full settlement of her capital account
with a balance of P120.00. Immediately before the retirement of A, the partnership net assets is
P1,000.00, equal to fair value. If Partner A’s capital balance was paid by the partnership, the
partnership net assets after A’s retirement would be P880.
False

8. The withdrawal of a partner legally dissolve the partnership.

True

9. C is admitted in the partnership of A and B by investing P120,000 for an interest of P150,000.

Assuming that the net assets of the partnership prior to C’s admission are fairly valued, this transaction
would result in
A decrease in the capital balance of A and B

10. The new partner’s capital credit exceeds his/her asset contribution to the partnership when bonus is
given to this new partner.
True

11. The total assets of a partnership will most likely increase when a new partner is admitted by investing
directly to the partnership.
True

12. Payment to a retiring partner of an amount in excess of his/her capital balance may indicate that some
partnership assets are undervalued.
True
13. Partner A retires from ABC Partnership and receives P100.00 as full settlement of her capital account
with a balance of P120.00. Immediately before the retirement of A, the partnership net assets is
P1,000.00, equal to fair value. If Partner A’s capital balance was paid by Partner B, the partnership net
assets after A’s retirement would still be P1,000.00.
True

14. When a new partner enters an existing partnership by purchase of interest, the cash paid to the old
partner for the partnership interest acquired is always equal to the new partner’s capital balance.
False

15. The net assets of AB Partnership consist of P10.00 capital balance of A and P10.00 capital balance of
B. The net assets approximate fair value. Partners A and B have equal interests in the partnership. If C
invests in the partnership for a 20% interest, the interest of A after C’s admission will be decreased to
30%.
False

16. The insanity of a partner causes dissolution of a partnership.

True

17. The net assets of AB Partnership consist of P10.00 capital balance of A and P10.00 capital balance of
B. The net assets approximate fair value. Partners A and B have equal interests in the partnership. If C
invests P10.00 in the partnership for a ⅓ interest, the entry to record C’s admission will be a debit to
Cash and a credit to C’s capital account.
True

18. The total assets of the partnership remains unchanged when a new partner purchases an interest
directly from an existing partner.
True

19. A bonus to the old partners from a new partner increases the old partners’ capital accounts.
True

20. A bonus to the new partner is normally shared by the existing partners using their profit or loss ratio.
True

21. The total assets of a partnership most likely increases when an incoming partner purchases the interest
from an existing partner.
False

22. When the net assets of the partnership are fairly valued and the amount invested by the incoming
partner is equal to the interest acquired, it is implied that there is
No bonus to either new or old partners

23. The payment to a retiring partner at less than book value results in a loss to the other partners, which
must be shared according to their profit or loss ratio.
False

24. Which of the following does not change the partnership ownership?
Marriage of a partner
 25. The net assets of AB Partnership consist of P10.00 capital balance of A and P10.00 capital balance of
B. The net assets approximate fair value. Partners A and B have equal interests in the partnership. If C
invests in the partnership for a ⅓ interest, C shall invest P10.00.
True

COMPUTATIONAL
QUESTION 1
Tess and Shirley who share profits and losses equally, have capital balances of P170,000 and P200,000,
respectively. They agree to admit Gen for a ⅓ interest in capital and profits for her investment of P200,000.
Partnership assets are not to be revalued.

● The total bonus to Tess and Shirley is 10000

QUESTION 2
Egay and Egoe who share profits and losses equally have capital balances of P200,000 and P240,000,
respectively. They admit Engly for a ⅓ interest in partnership capital and profits for an investment of P260,000.

● The net assets are undervalued by 80000

QUESTION 3
The partnership of A and B provides for equal sharing of profits and losses. Prior to the admission of C, the
capital accounts are A, P150,000 and B, P210,000. C invests P180,000 for a P150,000 interest.

● B, Capital immediately after the admission of C is 225000

QUESTION 4
Mike and Tess are partners with capital balances of P70,000 and P50,000, respectively. They share profits and
losses in the ratio of 3:1, respectively. Victor is to be admitted in the partnership for a cash contribution of
P60,000 for a ½ interest in partnership capital and in the future profits and losses.

● If Victor would be given a capital credit of P90,000, Mike’s capital would be charged by 22500

QUESTION 5
Partners Nitz, Pat and Candy share profits and losses 50:30:20, respectively. The statement of financial
position at July 31, 2020 shows the following balances:

Cash 40,000 Accounts Payable 100,000

Other Assets 360,000 Nitz, Capital 74,000

Pat, Capital 130,000

Candy, Capital 96,000

TOTAL 400,000 TOTAL 400,000

The carrying amount of assets and liabilities are equal to their fair values. Emmie is to be admitted as a new
partner with a 20% capital interest and a 20% share of profits and losses in exchange for a cash contribution.
No bonus is to be effected.

● Emmie’s contribution should be 75000

QUESTION 6
X, Y, and Z are partners sharing profits in the ratio of 3:3:2, respectively. On July 31, their capital balances are
as follows: X, P280,000; Y, P200,000; and Z, P160,000. They agree to admit W on the following conditions:
a. W is to pay X P200,000 for ½ of X’s interest;
b. W is to invest P160,000 in the partnership;
c. Some assets of the partnership are undervalued by P160,000;
d. W’s interest is to be 25%.

● The total partnership capital immediately after the admission of W is 960000

● The capital balance of X immediately after the admission of W is 222500

QUESTION 7
Presented below is the condensed statement of financial position of the partnership of Gan, Witt, and Windy.
The partners share profits and losses in the ratio 6:3:1, respectively.

Cash 85,000 Liabilities 80,000

Other Assets 415,000 Gen, Capital 252,000

Witt, Capital 126,000

Windy, Capital 42,000

Total 500,000 Total 500,000

Treat independently each of the following questions relative to Windy’s retirement from the partnership.
● If Windy is to receive P60,000 as cash settlement of her interest and the partnership assets are fairly
valued, the decrease in Gen’s capital as a result of Windy’s withdrawal is 12000
● Windy is to receive P60,000 as settlement for her interest. Assume that any difference between this
amount and the carrying value of her capital indicates that some assets have fair values in excess of
carrying values. The credit to Witt, Capital as a result of asset revaluation is 54000
● Gan and Witt buy ¼ and 3/4 , respectively, of Windy’s interest for P75,000 and P22,500. This indicates
that assets are overvalued by 120000
● Gan and Witt buy ⅓ and 2/3 , respectively , of Windy’s interest for P10,000 and P20,000. Gan, capital
immediately after Windy’s retirement is 266000
● Windy is to receive P33,000 as cash settlement. All assets and liabilities are fairly valued. The capital
balance of Witt immediately after withdrawal of Windy is 129000
● Allowance for bad debts of P4,000 and equipment impairment loss of P8,000 would be recognized. The
partnership would pay an amount to Windy equal to her adjusted capital. Cash settlement to Windy is
40800
QUESTION 8 - 1 of 2
Partners Ellie, Ollie, and Millie agreed to sell to Tillie ¼ of their respective capital and profit and loss interest for
a total cash payment of P160,000. The capital balances and the respective percentage interest in profits and
losses immediately before the sale to Tillie are

PARTNER P/L CAPITAL BALANCE

Ellie 50% 320,000

Ollie 30% 180,000

Millie 20% 60,000

● The capital balance of Ollie immediately after Tillie’s admission is 135000

● From the sale of portion of his interest sold to Tillie, Ellie would receive 80000 91429 90000

QUESTION 9
Sophia purchased ½ of Jay’s interest and share in profit in the JC Partnership by paying Jay P180,000.
Immediately before Sophia’s admission, the capital balances of Jay and Chris were P240,000 and P400,000,
respectively. Jay and Chris were sharing profits in the ratio 2:3, respectively.

● The capital balances of Sophia immediately after her admission is 120000

● In the new profit and loss ratio, Chris would have 30 (percent)
● In the new profit and loss ratio, Jay would have 20 (percent)

QUESTION 10
Luke and Mark, who share profits and losses equally, agree to take John into the partnership for a 40% share
in capital and profits. Luke and Mark retain 30% interest each. Luke and Mark have capital balances of
P100,000 and P140,000, respectively before the admission of John. John pays P120,000 directly to Luke and
Mark for his 40% interest. All assets of the partnership, except land, are fairly valued.

● Land is undervalued by 60000

● The capital balance of Mark after the admission of John is 102000