Assignment 3

Partnership dissolution (Admission of a new partner)

Instruction: Prepare the answers in written form using a clean paper (e.g. Yellow pad, bond paper,
notebook etc.) and submit a snapshot in CANVAS.

PROBLEM 1. Assume that after operations and partner’s withdrawals during 2017 and 2018. DE
partnership has a book value of P120,000, that is D, capital P72,000 and E, Capital P48,000 on January 1,
2019. D and E share profits or losses of 70% and 30%, respectively. On the same date, F is admitted to
the partnership.

Required:

1. Prepare journal entries to record the admission of F, assuming:

a. F paid P28,800 directly to D in exchange for a 1/3 interest.
b. F purchased 1/4 of D’s interest for P21,600 and 1/4 of E’s interest for P14,400, making
payment directly to D and E. The new partner will have a 1/4 profit and loss ratio and the
old partners continue to use their profit and loss ratio.
b.1 Assuming book value approach
b.2 Assuming revaluation (goodwill) approach
2. What are the capital balances of the partners immediately after the admission?

PROBLEM 2. Assume the following data for GH partnership had the following condensed balance
sheet:

ASSETS LIABILITIES and CAPITAL

Cash P3,000 Liabilities P9,000
Non-cash assets 39,000 G, capital (60%) 24,000
G, Loan 3,000 H, capital (40%) 12,000
Total P45,000 Total P45,000

The percentages represent their respective profits and losses. The partners agree to admit J as
member of the firm.
Required: Prepare the journal entries to record the admission of J, assuming:

a. J invests P12,000 for a 1/4 interest in the firm. Total firm capital is to be P48,000.
b. j invests P12,000 for a 35% interest in the firm. The total agreed capital after admission is to be
P48,000.
c. J invests P12,000 for a 1/3 interest in the firm and is allowed a credit of P18,000 for his capital.
d. J contributed a tangible asset with a fair value of P30,000 with an assumed mortgage of P6,000 in
exchange for a 30% interest in capital, keeping in mind that J would be acquiring a 1/4 interest in
profits.
e. J must invest cash of P28,800 equivalent to 37.5% interest in a total agreed capital of P76,800.
Included in the noncash assets is an equipment undervalued by P8,400.
f. j invests P18,000 for a 40% capital interest and a 25% interest in profits. Assuming a bonus
approach.
g. j invests P18,000 for a 40% capital interest and a 25% interest in profits. Assuming a revaluation
approach.