NAME: CONSIGNA, EUVIEL O.

BSBA-HRM1F
ASSIGNMENT
iAcctg 1 – Partnership Dissolution
Answer the following problems and prepare the journal entries.

1. Basilio and Crispin are partners with capital balances of P200,000 and
P100,000, respectively. They share profits and losses equally. Elias is a new
partner.

A: Elias purchased ½ interest from Basilio by paying P100,000

CASE A: ANSWER

Basilio, capital 100,000

Elias, capital. 100,000

200,000 x ¹/₂ = 100,000

The P100.000 paid by the new partner Elias to the old partner Basilio should not be reflected in the
partnership books because the said amount goes directly to Basilio. What is recorded in the partnership
books is the transfer of ½ of the capital of Basilio to Elias The amount paid in the purchase is equal to the
book value of the acquired ¹/₂ interest; hence, the sale of interest does not give rise to gain or loss to
Basilio

B: Elias purchased ¹/₅ interest from the old partners by paying P60,000.
CASE B: ANSWER
Basilio, capital. 40,000

Crispin, capital 20,000

Elias, capital 60,000

BASILIO P 200,000 × ¹/₅ P 40,000

CRISPIN P 100,000 × ¹/₅ P 20,000
ELIAS P 60,000

The P60,000 paid by Elias to Basilio and Crispin should not be reflected in the partnership books because the said
amount goes directly to Basilio and Crispin. What is recorded in the partnership books is the transfer of 1/5 of the
capital of old partners Basilio and Crispin (P40,000 and P20,000, respectively) to the new partner Elias. The
admission of the new partner, by purchasing a 1/5 interest from the old partners at book value, does not result in
gain or loss to the old partners

C. Elias purchased 1/5 interest from the old partners by paying P50,000.
CASE B: ANSWER

Basilio, capital. 40,000

Crispin, capital. 20,000

Elias, capital. 60,000

BASILIO 200,000 × ¹/₅ 40,000
CRISPIN 100,000 × ¹/₅ 20,000
ELIAS 60,000

The P50,000 paid by Elias to Basilio and Crispin should not be reflected in the partnership books because the said amount was
paid directly to the old partners. What is recorded in the partnership books is the transfer of 1/5 of the capital of old partners
Basilio and Crispin (P40,000 and P20,000, respectively) to the new partner. The difference of P10,000 is a personal loss of the
selling(old) partners.

D. Elias purchased 1/5 interest from the old partners by paying P70,000.
CASE B: ANSWER
Basilio, capital 40,000
Crispin, capital. 20,000
Elias, capital 60,000
The P70,000 payment made by Elias to Basilio and Crispin should not be reflected in the partnership
books. What is recorded in the books of the partnership is the transfer of 1/5 of the capital of the old
partners to the new partner. The P10,000 excess payment is a personal gain of Basilio and Crispin

1. The capital balances and profit and loss distribution of ABC Partnership prior to dissolution are as follows :

PARTNERS CAPITAL BALANCES PROFIT/LOSS RATIO

A P150,000 30%
B 250,000 50%
C 100,000 20%
Total 500,000 100%
D wants to purchase a 20% interest in the partnership’s assets and profit by paying directly to
each of the existing partners 20% of their respective interest in the partnership.

The new profit and loss of the partners is computed as follows:

PARTNERS OLD PROFIT/RATIO MULTIPLY BY NEW CAPITAL BALANCE
A 30% * 80% 24%
B 50% * 80% 40%
C 20% * 80% 16%
D 20%
Total 100% 100%

New Capital Balances:

PARTNERS OLD CAPITAL MULTIPLY BY NEW CAPITAL BALANCE
A 150,000 * 80% P120,000
B 250,000 * 80% 200,000
C 100,000 * 80% 80,000
D (20% × 500,000) 100,000
Total P500,000 P 500,000

NOTE:
*THE 80% WAS COMPUTED AS FOLLOWS: 100% - 20% TO BE GIVEN TO ‘D’