Partnership Dissolution

1.
The capital accounts of Faxon and Bell partnership on September 30, 2011, were:
Faxon capital (75% profit percentage) 140,000

Bell capital (25% profit percentage) 60,000
On October 1, 2011, Roberts was admitted to a 40% interest in the partnership when he
purchased 40% of each existing partner’s capital for P120,000, paid directly to Faxon and Bell.
What is the capital balances of Faxon, Bell and Roberts respectively, immediately after the
admission? (3pts)
Before Admission After Admission

Faxon P 140,000 P 84,000
Bell P 60,000 P 36,000
Roberts 0 P 80,000
Total P 200,000 P 200,000
2. Capital balances and profit sharing percentage for the partnership of Manda, Emeril, and Fotenot
on January 1, 2011 are as follows:
Manda (36%) 140,000

Emeril (24%) 100,000
Fotenot (40%) 160,000
On January 3, 2011, the partners agree to admit Bourdeaux for a 25% interest in capital and
earnings for his investment in the partnership of P120,000. What is the capital balance of
Bourdeax immediately after the admission? (3pts)
Capital before admission + Investment = Contributed Capital

Manda P 140,000
Emerik P100,000
Fotenot P 160,000
Bourdeaux 0 P 120,000 P 130,000
Total P 400,000 P 120,000 P 520,000
3. The December 31, 2011, balance sheet of Bennet, Carter and Davis partnership is summarized as
follows:
Cash 100,000 Carter loan 100,000

Other assets, net 500,000 Bennet, capital 100,000
Carter, capital 200,000
Davis, capital 200,000
600,000 P600,000
The partners share profits and losses as follows: Bennet 20%; Carter 30%; and Davis, 50%.
Carter is retiring from the partnership, and the partners have agreed that “other assets” should be
adjusted to their fair value of P600,000 at December 31, 2011. They further agreed that Carter
will receive P244,000 cash for his partnership interest exclusive of his loan, which is to be paid in
full. After Carter’s retirement, the capital balances of Bennet and Davis, respectively, will be:
(5pts)
Bennet Carter Davis
Increase in Fair Value 20,000 30,000 50,000

Capital balance before adjustments 100,000 200,000 200,000
Capital Balance after adjustments 120,000 230,000 250,000
Cash received from retirement (4,000) 244,000 (10,000)

Capital balance, ending (230,000)
Capital Balance after retirement 116,000 0 240,000
Assuming loan is not paid exclusively:
Bennet Carter Davis

Increase in Fair Values 20,000 30,000 50,000
Capital balance before adjustments 100,000 300,000 200,000
Capital balance after adjustments 120,000 330,000 250,000
Cash received by Carter 24,571 244,000 61,429

Capital balance after adjustments (330,000)
Capital balance after retirement 244,571 0 311,429
4. Partners Allen, Baker, and Coe share profits and losses 50:30:20, respectively. The balance sheet
at April 30, 2011, follows:
Cash 40,000 Accounts payable 100,000

Other assets 360,000 Allen, capital 74,000
Baker, capital 130,000
Coe, capital 96,000
400,000 P400,000
The partners assets and liabilities are recorded and presented at their respective fair values. Jones
is to be admitted as a new partner with a 20% capital interest and 20% share of profits and losses
in exchange for a cash contribution. How much cash should Jones contribute?
A. 60,000 C. 75,000
B. 72,000 D. 80,000
5. Williams desires to purchase a one-fourth capital and profit and loss interest in the partnership of
Eli, George and Dex. The three partners agree to sell Williams one-fourth of their respective
capital and profit and loss interests in exchange for a total payment of P40,000. Immediately
before the sale of their interests to Williams, the capital balances of the partners were as follows:
Eli (60%) 80,000

George (30%) 40,000
Dex (10%) 20,000
All assets, except for a depreciable asset, and liabilities of the partnership are fairly valued.
It was agreed to adjust the book of the partnership with respect to the undervalued before
the acquisition of Williams of the interest in the partnership. Immediately after William’s
acquisition, what should be the capital balances of Eli, George and Dex respectively?
Cash payment of Williams = P 40,000

Divided by: /25%
Total Capital after adjustments P 160,000
Less: Capital before adjustments P 140,000
Revaluation Surplus P 20,000
Eli George Dex

Revaluation 12,000 6,000 2,000
Capital before adjustments 80,000 40,000 20,000
Total 92,000 46,000 22,000
Multiply by: 75% P 69,000 P 34,500 P 16,500

Partnership Dissolution

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1.

Faxon capital (75% profit percentage) 140,000

Before Admission After Admission

Total P 200,000 P 200,000

Manda (36%) 140,000

Capital before admission + Investment = Contributed Capital

Total P 400,000 P 120,000 P 520,000

Cash 100,000 Carter loan 100,000

Bennet Carter Davis

Increase in Fair Value 20,000 30,000 50,000

Cash received from retirement (4,000) 244,000 (10,000)

Assuming loan is not paid exclusively:

Bennet Carter Davis

Cash received by Carter 24,571 244,000 61,429

Cash 40,000 Accounts payable 100,000

Eli (60%) 80,000

Cash payment of Williams = P 40,000

Eli George Dex

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