MM, NN, and OO are partners with capital balances on December 31, 20x5 of P300,000, P300,000 and

P200,000, respectively. Profits are shared equally. OO wishes to withdraw and it is agreed that OO is to
take certain equipment with second-hand value of P50,000 and a note for the balance of OO’s interest.
The equipment are carried on the books at P65,000. Brand new equipment may cost P80,000. Compute
for: (1) OO’s acquisition of the second-hand equipment will result to reduction in capital; (2) the value of
the note that will OO get from the partnership liquidation.

Answer: B. (1) P 5,000 each for MM, NN and OO, (2) P145,000.