UNIVERSITY OF CEBU

COLLEGE OF BUSINESS AND ACCOUNTACY

ACCOUNTING 111E
QUIZ 4
PARTNERSHIP: DISSOLUTION AND LIQUIDTION

NAME: _______________________________________ COURSE & YR. _____________ SCHEDULE: _______________

PROBLEM 1:
The partnership of Martin and Bosworth is being dissolved, and the assets and equities at book value and fair value
and profit and loss sharing ratios on January 1, 20x1 are as follows:

Book Value Fair Value

Cash 40,000 40,000
Accounts Receivable -net 200,000 200,000
Inventories 100,000 400,000
Plant assets -net 200,000 240,000
540,000 880,000

Accounts Payable 100,000 100,000

Martin, capital (50%) 240,000 -
Bosworth, capital (50%) 200,000
540,000

Martin and Bosworth agree to admit Trent into the partnership for one-third interest. Trent invests P190,000 cash and
a building to be used in the business with a book value to Trent of P200,000 and a fair value of P220,000. Assuming
that the assets are to be revalued but no goodwill recognized, how much capital should be credited to Trent?

ANSWER: 396,667

PROBLEM 2:
Partners F, G and H share profits and losses 5:3:2, respectively, and their balance sheet on October 30, 20x5 follows:

Cash P 160,000 Accounts Payable P 400,000

Other Assets 1,440,000 F, Capital 296,000
G, Capital 520,000
H, Capital 384,000

The assets and liabilities are recorded at their current fair value. I is to be admitted as a new partner with a 20%
interest in capital and earnings. F was credited a bonus of P10,000. How much cash should I contribute?

ANSWER: 325,000

PROBLEM 3:
A and B, partners to a firm, share profits equally and each has a capital balance of P900,000. C is admitted as new
partner by a cash investment of P1,200,000 for a 1/3 interest in both the firm’s assets and profits. C will be credited in
full for amount invested. The firm assets are fairly stated. Compute the firm’s new capital.

ANSWER: 3,600,000
PROBLEM 4:
Alicia and Marietta are partners with capitals P200,000 and P100,000 sharing profits and losses 3:1, respectively. They
agree to admit Amang as partner. Amang invests P125,000 for a 25% interest in the firm. Parties agree that the firm
capital after Amang’s admission is to be P425,000. The capital balances of the partners after Amang’s admission are:

ANSWER:
Alicia 214, 062.50 ; Marietta 104,687.50; Amang 106,250;

PROBLEM 5:
C and A are partners who share income and loss in the ratio of 7:3, respectively. On October 5, 2020, their respective
capital accounts are as follows: C, P35,000; A, P30,000.
On that date, they agreed to admit S as a partner with a 1/3 interest in the partnership upon his investment of P25,000
The new partnership will begin with a total capital of P90,000. Immediately after S’s admission, what are the capital
balances of C, A and S, respectively?

ANSWERS:
C 31,500 ; A 28,500 ; S 30,000 ;

PROBLEM 6:
S, T and U are partners whose capital balances and shares in profits are as follows:

Capital Balances P&L Ratio

S P 50,000 50%
T 30,000 25%
U 20,000 25%

V is admitted into the partnership by paying P12,000 for 1/3 of the share in equity of T and by contributing P40,000.
The partners agree to raising the total capitalization to P150,000, 40% of which is V’s capital credit. V’s share in the net
income is also 40% and the old partners are to divide net income in the old ratio among themselves.

The profit and loss sharing ratio between S, T and U after the admission of V is:

ANSWERS:
S- 30% T- 15% U- 15%

PROBLEM 7:
A, B, and C are partners with capital balances of P200,000, P300,000 and P400,000, respectively with profit and loss
sharing ratio of 2:3:5. D was admitted as a partner for a ¼ interest in the assets and profits of the partnership. D will
invest P500,000, and the agreed total capital after his admission is P1,500,000. The capital of B after D’s admission is

ANSWERS:
B, CAPITAL 367,500

PROBLEM 8:
Black, Brown and Green are partners in business and share in its earnings at the respective rates of 50%, 30%, and
20%. At the beginning of the new fiscal year, they admit White, who is to invest in the firm sufficient cash funds to give
him a 1/3 interest in the capital and in the earnings. The following closing trial balance is taken from the old firm’s
books:

Cash P 1,000,000 Accounts Payable P 500,000

Marketable Securities 750,000 Bank Loan 300,000
Accounts Receivable 2,250,000 Black, Capital 1,750,000
Brown, Capital 1,000,000
Green, Capital 450,000
P4,000,000 P4,000,000

The securities have a market value of P500,000, and an allowance of P250,000 is required to cover bad debts. No other
adjustments of net assets is necessary, but the three old partners must among themselves brig the balances in their
capital accounts into agreement with their interest in the earnings.

What amount must be invested by White? 1,350,000

What should be the balance of Black’s capital after White’s admission? 1,350,000

PROBLEM 9:
Roberts and Laver, who share profits and losses in the ratio of 4:6, are partners in a partnership with credit capital
balances of P60,000 and P80,000, respectively. Brown is to be admitted into the partnership for a 25% percent interest
in the capital of the firm.

Calculate the cash settlement by Brown if, after the cash investment is recorded, the capital balances of Roberst and
Laver are P76,000 and P104,000 and goodwill was recorded.

ANSWER: 60,000
PROBLEM 10:
Alston, Boyer, and Cane are partners with a profit and loss ratio of 5:4:1. The partnership was liquidated, and prior to
the liquidation process, the partnership balance sheet shows the following:

Cash P 80,000 Alson, Capital 320,000

Other Assets 720,000 Boyer, Capital 320,000
Cane, Capital 160,000
P800,000 P800,000

After he partnership was liquidated and the cash was distributed, Boyer received 128,000 in cash in full settlement of
his interest. The amount of realization loss on the sale of the other estate is: 480,000

PROBLEM 11:
Partners Jones, Kerr, and Lyons have decided to liquidate their partnership. The partnership’s balance sheet reveals
the following:

Cash P 50,000 Liabilities 60,000

Other Assets 500,000 Jones, Capital 180,000
Kerr, Capital 240,000
Lyons, Capital 70,000
P550,000 P550,000

The partners share profits and losses in a 4:4:2 ratio and all partners are personally solvent. Lyons received 98,000 in
cash in full settlement for her share in the partnership.

The selling price for the other assets is 640,000

PROBLEM 12:
X, Y, and Z have capital balances of P30,000, P15,000 and P5,000, respectively, in the XYZ partnership. The general
partnership agreement in silent as to the manner in which partnership losses are to be allocated but does provide that
partnership profits are to be allocated as follows: 40% to X, 25% to Y and 35% to Z. The partners have decided to
dissolve and liquidate the partnership. After paying all creditors, the amount available for distribution will be P20,000.
X, Y and Z are individually solvent. Under the circumstances, Z will receive or personally have to contribute an
additional of

ANSWER: PERSONALLY, NEED TO CONTRIBUTE 5,500

PROBLEM 13:
When Menchie and Mona, partners who share earnings equally, were incapacitated in an car accident, an admission
was appointed to wind up their business. The accounts showed Cash, P35,000; Other assets, P110,000; Liabilities,
P20,000; Menchie, capital 71,000; and Mona, capital of P54,000. Because of highly specialized nature of the noncash
assets, the liquidator anticipated that considerable time would be required to dispose them. The expenses in
liquidating the business (advertising, rent, travel, etc.) are estimated at P10,000. How much must be realized from the
total other assets for Mona to receive 50% mor of her present capital?

ANSWER: 174,000