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Chapter 3
Partnership Dissolution

NAME: TERUEL, MARIA NICOLE Date: 2/18/22

Professor: DR. LYSSANDER DELA CRUZ Section: BSA-3 Score:

QUIZ:

1. The following are the capital account balances and profit and loss ratios of the partners in AB
Partnership as of July 1, 20x1:
Capital accounts Profit & loss ratios
A, Capital 250,000 40%
B, Capital 350,000 60%
600,000

On July 1, 20x1, C was admitted to the partnership when he purchased half of A’s capital interest for
₱100,000. How much is A’s capital balance after the admission of C?
a. 100,000 c. 200,000
b. 125,000 d. 120,000

2. A and B are partners with the following capital balances and profit-sharing percentages: A (40%)
₱750,000 and B (60%) ₱1,050,000. A and B admitted C into the partnership when C purchased 20%
of the capital interests of A and B for ₱400,000. The partnership’s net assets on C’s admission date
were fairly valued. How much is the total equity of the partnership immediately after the
admission of C?
a. 1,800,000 c. 2,250,000
b. 2,200,000 d. 2,380,000

3. C was admitted to the partnership when he invested ₱60,000 cash for a 20% interest in the
partnership. Immediately prior to C’s admission, the carrying amounts and fair values of the assets
and liabilities of the partnership are as follows:
Carrying Fair
 
amount value
Cash 20,000 20,000
Equipment 340,000 320,000
Accounts payable 10,000 10,000
Provision for warranty obligation - 5,000
A, Capital (40%) 130,000 N/A
B, Capital (60%) 220,000 N/A

How much is the capital balance of B after the admission of C?

a. 94,800 c. 148,400
b. 128,400 d. 194,800

4. The following are the capital account balances and profit and loss ratios of the partners in AB
Partnership as of July 1, 20x1:
Capital accounts Profit & loss ratios
A, Capital 200,000 40%
B, Capital 400,000 60%
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600,000

On July 1, 20x1, C was admitted to the partnership when he acquired 20% interest in the net assets and
profits of the firm for a ₱120,000 investment. The net assets of the firm as of this date approximate their
fair values. How much is the capital balance of A after the admission of C if C’s admission was
accounted for using the bonus method?
a. 190,400 c. 194,800
b. 192,800 d. 206,667

5. The statement of financial position of AB Partnership shows the following information as of July 1,
20x1:
Cash 48,000
Receivable from A 32,000
Equipment 1,560,000
Totals 1,640,000
Payable to B 40,000
A, Capital (40%) 600,000
B, Capital (60%) 1,000,000
Totals 1,640,000

On July 1, 20x1, the partners decide to admit C as a new partner with a 20% interest. The net assets of
the firm as of this date approximate their fair values. If no bonus shall be allowed, how much should C
invest in the partnership?
a. 400,000 c. 420,000
b. 410,000 d. 392,000

6. The following are the capital account balances and profit and loss ratios of the partners in AB
Partnership as of Jan. 1, 20x1:
Capital accounts Profit & loss ratios
A, Capital 600,000 40%
B, Capital 1,000,000 60%
1,600,000

On Jan. 1, 20x1, C was admitted into the partnership when he invested equipment with a historical cost
of ₱400,000 and fair value of ₱320,000 for a 20% interest. The net assets of the partnership as of this date
approximate their fair values. If the bonus method is used to record the admission of C, how much
would be credited to C’s capital account?
a. 434,000 c. 384,000
b. 420,000 d. 360,000

Use the following information for items 7 to 9:

The capital account balances of the partners in ABC Partnership on June 30, 20x1 before any necessary
adjustments are as follows:

Capital accounts
A, Capital (20%) 600,000
B, Capital (30%) 1,000,000
C, Capital (50%) 400,000
Total 2,000,000
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The partnership reported profit of ₱3,600,000 for the six months ended June 30, 20x1.

7. On July 1, 20x1, C withdraws from the partnership when he was bought-out by his co-partners for
₱2,480,000 cash. How much is the capital balance of A immediately after the withdrawal of C?
a. 1,480,000 c. 1,880,000
b. 1,320,000 d. 2,200,000

8. C retires on July 1, 20x1. It was agreed that C shall receive ₱2,480,000 cash from the partnership in
settlement of his interest. How much is the capital balance of B right after the withdrawal of C?
a. 2,080,000 c. 1,912,000
b. 1,642,000 d. 2,120,000

9. C retires on July 1, 20x1. It was agreed that C shall receive cash of ₱2,000,000 and equipment with
carrying amount of ₱400,000 and fair value of ₱1,200,000 as settlement of his interest in the
partnership. The entry in the partnership’s books to record the retirement of C includes
a. a debit to C’s capital for ₱400,000.
b. a debit to C’s capital for ₱2,200,000.
c. a debit to A’s capital for ₱240,000.
d. The transaction is not recorded in partnership’s books.

10. On January 1, 20x1, the partners of ABC Partnership decided to admit other investors. As a result,
the partnership was converted to a corporation. Relevant information follows:
Carrying Fair
  amounts values
Cash 20,000 20,000
Receivables 60,000 40,000
Inventory 80,000 70,000
Equipment 540,000 670,000
Payables 50,000 50,000
A, Capital
150,000
(20%) N/A
B, Capital (30%) 200,000 N/A
C, Capital (50%) 300,000 N/A

The corporation has an authorized capitalization of ₱2,000,000 divided into 200,000 ordinary shares
with par value of ₱10 per share. Shares were issued to the former partners based on their respective
adjusted capital balances. How many shares did A receive?
a. 17,000 c. 35,000
b. 23,000 d. 75,000

“So do not fear, for I am with you; do not be dismayed, for I am your God. I will strengthen you and help you; I will
uphold you with my righteous right hand.” (Isaiah 41:10)

- END –
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Answer Sheet

1 B 6 C
2 A 7 D
3 D 8 C
4 A 9 C
5 A 10 A