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