BASIC ACCOUNTING - PARTNERSHIP AND CORPORATION

Partnership Dissolution.

PROBLEM SOLVING QUESTIONS.

Problem 1.

Camus and Cuenco are partners who have capital balances of P 90,000 and P 60,000, and who share profits 60% and 40%,
respectively. They agree to admit Cerda as a partner his payment of P 90,000.

Instructions: Give the journal entries to record each of the following assumptions.

1. One-third of the capital balances of the old partners are transferred to the new partner. Camus and Cuenco dividing the cash
between themselves.

2. One-thrd of the capital balances of the old partners are transferred to the new partner, Camus and Cuenco dividing the cash
between themselves. However, before recording the admission of Cerda, asset revaluation is undertaken on the firm books so that
Cerda’s capital may be equal to the amount paid for the interest.

3. The cash is invested in the business and Cerda is credited with a 1/4 interest in the firm, the bonus method being used in
recording the investment.

4. The cash is invested in the business and Cerda is credited with the full amount of the investment, which is to be 25% of the
new firm capital.

5. The cash is invested in the business and Cerda is credited for P 120,000 which includes a bonus from Camus and Cuenco.

Problem 2.

At the end of the fiscal year 2014, the capital accounts and the profit and loss sharing ratio for the partners of C3 Co., are
presented below. At this date, it is agreed that a new partner Canda, is to be admitted to the firm.

Capital P & L Ratio

Capco P 100,000 50%

Cular 80,000 30%

Cruz 60,000 20%

Instructions: For each of the following situations involving the admission of Canda into the partnership, give the journal entry to
record his admission.

1. Canda purchases one-fourth of Cular’s interest in the firm pating Cular P 50,000.

2. Canda buys a one-quarter interest in the firm for P 70,000 by purchasing one-fourth of the interest of each of the three
partners. Asset revaluation is made prior to admission of Canda.

3. Canda invests P 115,000 and receives a one-quarter interest in capital and profits of the business, bonus being allowed on the
admission.
Problem 3.

Partners Catral and Clemente are considering the admission of Conti into the partnership. Catral and Clemente share income and
loss in the ratio of 3:1, respectively. Catral’s capital balance is P 480,000 and Clemente’s capital balance is P 360,000.

Instructions: Prepare entries to record the admission of Conti into the partnership under each of the following independent
assumptions:

1. Conti acquired one-third of the interest of Catral paying P 160,000.

2. Conti acquired one-third of the interest of Clemente paying P 70,000.

3. Conti acquired a one-fourth interest from the old partners paying P 126,000. Asset revaluation has to be made prior to the
admission of Conti.

Problem 4.

Carlos and Cruz, partners have capital balances of P 200,000 and P 300,000, respectively. They admit Caparas and Carpio into the
partnership, Caparas purchases one-fourth of Carlos’ interest for P 56,000 and one-third of Cruz’s interest for P 72,000. Carpio is
admitted to the partnership with an investment of P 120,000 for which he is to receive an ownership equity of P 120,000.

Instructions:

1. Present the entries to record the admission into the partnership of (a) Caparas, and (b) Carpio.

2. What are the capital balances of each partner after the admission of Caparas and Carpio?

Problem 5.

Cuenca and Claudio share profits equallt and have equal investments in their partnership. The partnership’s net asset are carried
on the books at P 50,000. Cabral is admitted into the partnership with a one-fourth interest in profits and net assets. Cabral pays P
200,000 cash into the partnership for his interest.

Instructions: Prepare journal entries to show two possible methods of recording the admission of Cabral on the partnership books.

Problem 6.

The capital balances and the income and loss sharing ratio of the partners Choy, Chua, and Cheng are as follows:

Capital P & L Ratio

Choy P 150,000 3/7

Chua 125,000 2/7

Cheng 100,000 2/7

The partnership has been successful and the partners have decided to invite Chiu to join them. Chiu has been admitted into the
partnership with a one-fifth capital interest for a cash investment of P 120,000.
Instructions: Prepare the entries to record the admission of Chiu under the (1) bonus method, and (2) asset revaluation method.

Problem 7.

Carmen and Centeno are partners with capital balances of P 160,000 and P 80,000. They share profits 60%, 40%, respectively.
The partners agree to admit Corrales as a member of the firm.

Instructions: Give the required journal entries on the partnership books to record the admission of Corraled under each of the
following assumptions:

1. Corrales purchases a 1/4 interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner.
Corrales pays the partners P 60,000, which is divided between them in proportion to the equities given up.

2. Corrales purchases a 1/3 interest in the firm. One-third of each partner’s capital is to be transferred to the new partner.
Corrales pays the partners P 120,000, which is divided between them in proportion to the equities given up. Before Corrales’
admission, asset revaluation is undertaken and recorded on the firm books so that Corrales’ 1/3 interest will be equal to the
amount of his payment.

3. Corrales incests P 120,000 for a 1/4 interest in the firm. Asset revaluation is recorded on the firm books prior to the
admission.

4. Corrales invests P 120,000 for a 50% interest in the firm. Carmen and Centeno transfer part of their capital to that of Corrales
as a bonus.

5. Corrales invests P 160,000 in the firm. P 40,000 is to be considered a bonus to partners Carmen and Centeno.

6. Corrales invests P 160,000 in the firm and allowed a bonus to Carmen and Centeno of P 20,000 upon his admission.

7. Corrales invests P 100,000 for a 1/4 interest in the firm. The total firm capital after his admission is to be P 340,000.

8. Corrales invests P 110,000 for a 1/4 interest in the firm. The total firm capital after his admission is to be P 440,000.

9. Corrales invests P 96,000 for a 1/3 interest in the firm. The total firm capital after his admission is to be P 336,000.

10. Corrales invests sufficient cash for a 1/5 interest.

Problem 8.

Coral and Corpuz are partners with capital balances of P 180,000 and P 120,000, respectively. They share profits and losses in the
ratio of 4:1. They agree to admit Calma to the partnership.

Instructions: Journalize the admission of Calma to the partnership for each of the following independent assumptions.

1. Calma is admitted to a one-third interest in capital with a contribution of P 150,000.

2. Calma is admitted to a one-fourth interest in capital with a contribution of P 120,000. Total capital of the partnership is to be
P 420,000.

3. Calma is admitted to a one-fourth interest in capital upon contributing P 60,000. The total capital of the new partnership is to
be P 360,000.

4. Calma is admitted to a one-fourth interest in capital by the purchase of one-fourth of the interest of Coral and Corpuz for P
82,500. Total capital of the new partnership is to be P 300,000.

5. Same conditions as in (4), except that the new partnership capital is to be P 330,000 due to the asset revaluation undertaken
prior to the admission of Calma.
6. Calma is admitted to a one-fifth interest in capital upon contributing P 90,000. Total capital of the new partnership is to be P
450,000.

Problem 9.

In 2012, Castillo and Cordova established a partnership. Their operations have been very successful. Since Castillo devotes
full-time to the business and Cordova part-time, they share profits and losses in the ratio of 7:3, respectively. At the beginning of
2014, Coloma expressed his interest of joining the partnership. The capital balances of Castillo and Cordova on this date are P
560,000 and P 840,000, respectively.

Instructions:

1. Prepare the entries to record the admission of Coloma into the partnership under each of the following independent
assumptions:

a. Coloma invests P 350,000 cash for a one-fifth interest in the partnership.

b. Coloma invests P 500,000 cash for a one-fourth interest in net assets; the bonus method is used.

c. Coloma invests P 700,000 for a one-fourth interest; the asset revaluation method is used.

d. Coloma pays Castillo and Cordova a total of P 550,000 for one-fourth of their respective capital interest.

e. Coloma pays Catillo and Cordova a total of P 350,000 for one-fifth of their respective capital interest; no asset
revaluation is undertaken prior to the admission of Coloma.

2. Assuming Coloma paid a total of P 600,000 to Castillo and Cordova for two-fifths of their respectively capital balances,
prepare a schedule determining the amount of cash to be transferred to Castillo and Cordova.

Problem 10.

The following statement of financial position is for the partnership of Cortes, Canda and Cena, who share profits and losses in the
ratio of 3:2:1, respectively.

Assets Liabilities and Capital

Cash P 90,000 Liabilities P 210,000

Other Assets 810,000 Cortes, Capital 420,000

Canda, Capital 240,000

Cena, Capital 30,000

Total Assets P 900,000 Total Liabilities and Capital P 900,000

Instructions:
1. Assume that the assets and liabilities are valued fairly, and that the partnership wishes to admit Cruz as a new partner with
one-fifth interest in capital. Without recording bonus, determine what Cruz’s contribution should be.

2. If Cruz contributes P 210,000 for a one-fifth interest, determine the new capital balances of each partner using the (a) bonus
method, and (b) the asset revaluation method.

Problem 11.

The following are the capital accounts of the partners in the 3C Store on June 30, 2014:

Capital P & L Ratio

Ciara P 324,000 2/5

Cora 216,000 2/5

Celia 135,000 1/5

On July 1, 2014, Carla invests P 90,000 in the business for a 1/8 interest in net assets. Profits are to be shared equally after the
admission.

Instructions:

1. Give two alternative solutions, in journal entry form, to record Carla’s admission to the firm. Which method/solution will be
preferred by Celia

2. Give two alternative journal entries to record Carla’s admission, if instead of investing, she purchases a one-eight interest
from all the partners.

Problem 12.

Cabal, Cadiz, Caldea, business partners of a firm carrying their names, have agreed on a profit and loss ratio of 20:30:50,
respectively. On December 31, 2014, the books of their partnership showed the following credit balances:

Cabal - P 150,000; Cadiz - P 180,000; Caldea - P 300,000

On January 1, 2015, Camo was admitted as a new partner under the following terms and conditions:

a. Camo will share 20% in the profit and loss ratio, while the ratio of the original partners will remain proportionately the
same as before Camo’s admission.

b. Camo will pay P 25,000 for 1/6 of Cadiz’s share.

c. Camo will contribute P 150,000 in cash in the partnership.

d. Total capital of the partnership after Camo’s admission will be P 800,000 of which Camo’s capital account will be
shown as P 160,000.

Instructions:

1. Using the following suggested format, prepare a schedule showing the capital of each partner after the admission of partner
Camo.

Cabal Cadiz Caldea Camo Total

 Capital credit balances before the admission of Camo P 150,000 P 180,000 P 300,000 P 630,000

2. What is the profit and loss ratio of all the partners after Camo’s admission?

Problem 13.

Corona and Calderon are partners whose capital accounts on December 31, 2013, before the firm’s books are closed, are P
250,000 and P 150,000, respectively. The drawing account for Corona and shows a debit balance of P 41,000; for Calderon, a
debit balance of P 34,000. The partnership agreement with regards to profits provides that (1) each partner is to be allowed an
annual salary of P 45,000, and (2) Corona is to receive 60% and Calderon 40% of the profits after allowances of salaries.

The income summary account on December 31 has a credit balance of P 70,000 before any entry for the allowance of salaries, and
this balance is closed into the partners’ capital accounts. The balance of the drawing accounts are also closed into the capital
accounts.

On January 2, 2014, Calixto is admitted as a partner upon the investment of P 100,000 into the firm. The partners allow a bonus
on the investment so that Calixto may havea 1/3 interest in the firm. The new agreement provides that profits are to be distributed
as follows: Corona, 35%; Calderon, 25%; and Calixto, 40%. Salaries are not allowed.

On december 31, 2014, the partners’ drawing accounts have debit balances as follows: Corona - P 37,500; Calderon - P 25,000;
and Calixto - P 34,000. The income summary account has a P 75,000 debit balance. Accounts are closed.

The partnership was sold in January 2015 for P 87,500. Cash settlement was made to the partners.

Instructions: Prepare a statement of changes in partners’ equity, showing all of the changes that took place since December 31,
2014.

Problem 14.

Cosme, Canlas and Cura are partners with profit and loss ratio of 30%, 50% and 20%, respectively. Their capital balances are:
Cosme - P 150,000; Canlas - P 300,000; and Cura - P 50,000. Corazon is admitted into the partnership by investing P 150,000.

Instructions: Compute for the amount of asset revaluation or bonus in each of the following independent cases. Journal entries are
not required. Show solution in good form (Example: No asset revaluation; Bonus to new partner - P 30,000).

Corazon is allowed:

1. 1/5 interest in the partnership with a capital credit equal to his investment.

2. 1/5 interest in the partnership with total agreed capital of P 650,000.

3. 30% interest in the partnership with a total agreed capital of P 650,000.

4. 15% interest in the partnership with total agreed capital account of P 750,000.

5. 1/5 interest in the partnership, bonus being allowed.

Problem 15.

Partners Cueva, Costal, and Cison share profits and losses 4:2:4, respectively. The statement of financial position at September 30,
2014 follows:
Assets Liabilities and Capital

Cash P 80,000 Liabilities P 200,000

Other Assets 720,000 Cueva, Capital 148,000

Costal, Capital 260,000

Cison, Capital 192,000

Total Assets P 800,000 Total Liabilities and Capital P 800,000

The assets and liabilities are recorded at their current fair values. Cinco is to be admitted as a new partner with a 20% capital
interest and a 20% share of profits and losses in exchange for a cash investment. Asset revaluation or bonus will not be
considered.

Instructions: Determine the amount to be contributed by Cinco.

Problem 16.

Canete desires to purchase a one-fourth capital and profit and loss sharing interest in the partnership of Carandang, Cojuangco and
Capistrano. The three partners agreed to sell Canete one-fourth of their respective capital and profit and loss interest in exchange
for a total payment of P 120,000. The capital accounts and the respective percentage interests in profits and losses immediately
before the sale to Clarete are as follows:

Capital % Interest in
Profits and
Losses

Carandang P 240,000 60%

Cojuangco 120,000 30%

Capistrano 60,000 10%

P420,000 100%

Asset revaluation is to be undertaken prior to the admission of Canete.

Instructions: determine the capital balances of Carandang, Cojuangco, and Capistrano, after the admission of Canete.

Problem 17.

Dantes, Dungca and Dee are partners sharing profits in the ratio of 3:2:1, respectively. Capital accounts are P 50,000, P 30,000
and P 20,000 on December 31, 2014, when Dee decides to withdraws. The partnership paid Dee P 25,000 for his interest. Profits
after the retirement of Dee are to be shared equally.
Instructions:

1. Give two possible entries to record Dee’s retirement.

2. Which method is to be preferred by Dantes? What is the amount of gain to Dantes through the use of this method as
compared with the other alternative?

Problem 18.

Dayrit, Dayag and Diesta are partners in the Truple D Partnership. Their capital balance on October 1, 2014 are as follows: Dayrit
- P 100,000; Dayag - P 60,000; Diesta - P 80,000. They share profits and losses in the ratio of 3:1:1. Diesta is retiring from the
partnership on this date.

Instructions: Prepare journal entries to record Diesta’s withdrawal according to each of the following independent assumptions:

1. Diesta is paid P 90,000 and no asset revaluation is recorded.

2. Diesta is paid P 96,000 and asset revaluation is recorded.

Problem 19.

Daria is retiring from the partnership with Ditas and Dulce as of July 1, 2014 and is paid P 33,000. Their capital balances as of
January 1, 2014 and share in profits are as follows:

Ditas P 35,000 30%

Dulce 50,000 30%

Daria 25,000 40%

P 110,000 100%

Daria’s drawing for the first half of 2014 amounted to P 4,000 and net income for the first half of 2014 amounted to P 20,000. The
partners share profits and losses equally after the reiterment of Daria.

Instructions: Make the entry or entries incidental to the retirement of Daria under each of the following assumptions:

1. Capital increases through Asset Revaluation account is recorded.

2. The additional payment to the retiree is a bonus from the remaining partners.

3. Which of the two methods is to be preferred by Ditas?

Problem 20.

The partners of 3D Partnership agree to the withrawaal of Dolor. Prior to the withdrawal of Dolor, the partnership had the
following capital balances; Damian - P 32,000; Damaso - P 48,000; Dolor - P 40,000. Prior to the withdrawal of Dolor, the
partners shared profits and losses in the ratio 3:5:2.
Instructions: Prepare the entry or entries necessaryto record the withdraawal of Dolor from the partnership under each of the
following independent assumptions.

1. Each of the remaining partners will purchase 50% of the interest of Dolor for P 25,000.

2. The partnership will purchase the interest of Dolor fot P 32,000; the bonus method is used.

3. The partnership will purchase the interest of Dolor for P 46,000; asset revaluation prior to the retirement of Dolor being
recognized.

Problem 21.

The partnership of Dencio, Doctor, Domingo and Dizon has been in operation for two years with the partners sharing profits and
losses in the ratio of 40%, 20%, 20%, 20%, respectively. During the past year it has become apparent that Domingo and Dizon are
not compatible Domingo has decided to withdraw form the partnership as of the end of the year at the urging of Dencio and
Doctor. Domingo want P 90,000 for his share of capital. The balances in the capital accounts at the end of the year are:

Dencio P 102,000

Doctor 60,000

Domingo 70,000

Dizon 48,000

Instructions: Prepare the journal entry for the withdrawal of Domingo under each of the following assumptions.

1. The partners agree to Dizon’s purchasing Domingo’s interest.

2. The partnership will acquire Domingo’s interest for P 90,000 and will use the bonus method.

3. The partnership will acquire Domingo’s interest for P 90,000, which will be paid in five annual instalments of P 18,000, plus
interest of 10%. The partners feel that the price Domingo will accept for the capital share is a fair measure of the worth of the
business.

Problem 22.

Dimla and Distor wish to purchase the partnership interest of their partner Daza at June 30, 2014. Partnership assets are to be used
to purchase Daza’s partnership interest. The statement of financial position for the partnership on the date shows the following:

Dimla, Distor and Daza Partnership

Statement of Financial Position

June 30, 2014

Assets Liabilities and Capital

Cash P 21,600 Liabilities P 18,000

Receivable (net) 14,400 Dimla, Capital 48,000

Inventory 12,000 Distor, Capital 24,000

Equipment (net) 54,000 Daza, Capital 12,000

P 102,000 P 102,000

The partners share earnings in the ratio of 3:2:1.

Instructions: Prepare the entry to record the retirement of Daza under each of the following assumptions.

1. Daza is paid P 14,400 and the excess payment over the amount in Daza’s capital account is viewed as a bonus to Daza.

2. Daza is paid P 9,600 and the difference is viewed as a bonus to Dimla and Distor.

Problem 23.

Delfin, Diokno, and Decena have been partners for over 20 years, sharing profits and losses equally. Delfin is scheduled to retire
from the partnership. Since the partnership agreement does not include any provision for the retirement of a partner, several
alternative payments for Delfin’s interest are being considered. The capital balances of the partners are as follows: Delfin - P
200,000; Diokno - P 250,000; Decena - P 150,000.

Instructions: Prepare the entry or entries to record the retirement of Delfin under each of the following independent assumptions.

1. Delfin is paid cash equal to the book value of his interest.

2. Delfin is paid P 260,000 cash for his interest; excess payment is treated as a bonus.

3. Delfin is paid P 260,000 cash for his interest; excess payment is treated as an asset revaluation.

4. Delfin is paid P 160,000 cash for his interest; excess of his capital interest over the amount paid is treated as a bonus.

5. Delfin is paid P 175,000 cash for his interest; assets recorded in the books of the partnership should be reduced by the
amount relating to all the partners.

Problem 24.

Dahlia is to retire from the partnership of Danao and Associates as of July 31, 2014, the end of the fiscal year. After closing the
books, the capital balances of the partners are as follows:

Danao P 40,000

Daylan 30,000

Dahlia 25,000

They share net income and losses in the ratio of 2:1:1. The partners agree that the merchandise inventory be increased by P 7,000
and that the allowance for doubtful accounts be reduced by P 1,000. Dahlia agrees to accept an interest bearing note for P 25,000
in partial settlement of her ownership equity. The remainder of her claim is to be paid in cash. Danao and Daylan are to share
equally in the net income or loss of the new partnership.

Instructions: Prepare entries to record.

1. The adjsutments of the assets to bring them into agreement with current fair price.

2. The withdrawal of Dahlia.

Problem 25.
Partners Damo, Dayan, Datu have capital balances of P 120,000, P 70,000, and P 80,000, respectively on December 31, 2014. The
partners share profits and losses in the ratio 3:2:5, respectively. Duting the calendar year 2015, the partnership suffered a loss od P
40,000 and each partner had withdrawn P 25,000 in cash from the partnership. Dayan is unhappy with the operations of the
partnership and has decided to withdraw as of December 31, 2015.

Instructions:

1. Determine the balance of the partners’ capital accounts prior to the wothdrawal of Dayan.

2. Dayan will accept P 30,000 for his interest from the partnership. Prepare the journal entry for the withdrawal of Dayan if the
reason for Dayan being willing to accept less than his capital balance is that the inventory of the partnership is overvalued.

3. The partners agree to the partnership buying Dayan’s interest for P 47,000. Prepare journal entries for the withdrawal of
Dayan under each of the following independent assumptions:

a. Increase in capital balances for the asset revaluation.

b. Dayan is receiving a bonus.

Problem 26.

On January 1, 2014, Dancel decided to retire from the partnership of Daet, Dais and Dancel, who share profits and losses in the
ratio of 3:2:1, respectively. The condensed statement of financial position shown below presents the account balances immediately
before and, for seven independent cases, after Dancel’s retirement.

Balances prior to Balances after Dancel’s Retirement

Dancel’s
Accounts retirement Case 1 Case 2 Case 3

Assets

Cash P 200,000 P 40,000 P 200,000 P 70,000

Other Assets 400,000 400,000 400,000 400,000

Total Assets P 600,000 P 440,000 P 600,000 P 470,000

Liabilities and Capital

Liabilities P 120,000 P 120,000 P 120,000 P 120,000

Daet, Capital 160,000 148,000 300,000 166,000

Dais, Capital 180,000 172,000 180,000 184,000

Dancel, Capital 140,000 0 0 0

Total Liabilities and Capital P 600,000 P 440,000 P 600,000 P 470,000

Assets Case 4 Case 5 Case 6 Case 7

Cash P 32,000 P 120,000 P 200,000 P 200,000

Other Assets 468,000 440,000 400,000 400,000

Total Assets P 500,000 P 560,000 P 600,000 P 600,000

Liabilities and Capital

Liabilities P 120,000 P 120,000 P 120,000 P 120,000

 Daet, Capital 184,000 220,000 160,000 160,000

Dais, Capital 196,000 220,000 320,000 180,000

Dancel, Capital 0 0 0 0

Delia, Capital 0 0 0 140,000

Total Liabilities and Capital P 500,000 P 560,000 P 600,000 P 600,000

Instructions: Prepare the necessary journal entries to record the retirement of Dancel from the partnership for each of the seven
independent assumptions.

Problem 27.

David, Dizon and Duque have been partners in a law office for 15 years. Dizon has decided to retire and wishes to withdraw from
the partnership. To facilitate Dizon’s withdrawal, the partnership closed its books and prepared the Statement of Financial
Position shown below:

Assets Liabilities and Capital

Cash P 318,000 Accounts Payable P 60,000

 Accounts Receivable (net) 72,000 David, Capital 150,000

Books 120,000 Dizon, Capital 240,000

Other Assets 90,000 Duque, Capital 150,000

Total Assets P 600,000 Total Liabilities and Capital P 600,000

David, Dizon, and Duque share profits and losses in the ratio of 3:4:3, respectively.

Instructions: Prepare the necessary journal entries on the books of the partnership to record the withdrawal of Dizon under each
of the following assumptions.

1. The partnership agrees that the Books and Other Assets are undervalued by P 72,000 and P 48,000, respectively. Dizon is to
receive a lump sum cash payment.

2. Dizon is to receive P 120,000 now and P 108,000 in monthly instalments of P 12,000 each. Use the bonus method.

3. Dizon is to receive P 180,000 now and P 18,000 at the end of each of the next six months.

a. Use the bonus method.

b. Use the asset revaluation method.

Problem 28.

Partners Danao, Dizon, Dolor and Dungca share profits in the ratio of 40%, 30%, 15% and 15%, respectively. The partnership
agreement provides that in the event of the death of a partner, the firm shall continue until the end of the fiscal period. Profits shall
be considered to have been earned proportionately during the period and the deceased partner’s capital shall be adjusted by his
share of the profit or loss to the date of death. From the date of death until the date of settlement with the estate, there shall be
added interest of 10% computed on the adjusted capital. The remaining partners shall continue to divide profits in the old ratio.
Payment to the estate shall be made within two years from the date of the partner’s date. As of January 1, 2014, the capital
balances if the partners were as follows:

Danao P 84,000

Dizon 75,000

Dolor 48,000

Dungca 45,000

P 252,000

Dungca died on September 30, 2014. The books of the partnership were closed as of December 31, arriving at a credit balance for
the Income Summary account.

On December 31, 2014, Dolor notified the remaining partners that he was retiring from the partnership and was willing to accept
in settlement of his interest the balance of his capital account after the distribution of profits less 25%.

The remaining partners accepted his offer and issued a 120-day, 10% note to Dolor in payment of his interest.
Instructions: Make all necessary entries to record the above transactions on the books of the partnership and prepare the
Statement of Partners’ Equity for 2014.

Problem 29.

At the end of the 2014, the partnership of Donato, Dulay and Diones had the following Statement of Financial Position:

Donato, Dulay and Diones Partnership

Statement of Financial Position

December 31, 2014

Assets

Cash P 110,000

Receivable 50,000

Inventory 40,000

Equipment (net) 70,000

Total Assets P 270,000

Liabilities and Capital

Liabilities P 66,000

Donato, Capital 88,000

Dulay, Capital 60,000

Diones, Capital 56,000

Total Liabilities and Capital P 270,000

The partners share profits and losses in the ratio of 50% to Donato, 30% to Dulay, and 20% to Diones. It is agreed that Diones is
to withdraw from the partnership on this date.

Instructions: Listed below are a number of different situations involving the retirement of Diones from the firm. For each case,
prepare the entry or entries to record the withdrawal of Diones.

1. Dulay buys 1/4 of Diones’ interest for P 16,000 and Donato buys 3/4 for P 48,000.

2. Diones, with the consent of the other partners, gives his equity to his friend Dumlao, who is accepted as a partner in the firm.

3. An analysis of the assets indicates that P 8,000 if the receivables will probably prove uncollectible and that inventories are
understated by P 12,000 and equipment is understated by P 26,000. It is agreed that the assets are to be adjusted accordingly and
that Diones is to be paid an amount equal to the book value of his adjusted equity.

4. Diones is paid P 64,000 from the partnership funds for his interest. The bonus indicated by this payment is charged against
the continuing partners.

5. Diones is given P 20,000 cash and equipment having a book value of P 52,000. The partners agree that no revaluation of
assets will be made.
MULTIPLE CHOICE QUESTIONS.

1. If the total contributed exceeds the agreed capital with the new partner’s investment is the same as his capital credit, then the
admission of the new partner involved a

a. Bonus to the new partner c. Negative asset revaluation

b. Bonus to the old partners d. Positive asset revaluation

2. If the agreed capital is equal to the total contributed capital with the capital credited and contribution of the old partners
being the same, there exists

a. Asset revaluation and bonus c. No asset revaluation and no bonus

b. Negative asset revaluation d. Positive asset revaluation

3. If the capital credit of the new partner is less than his contribution with no adjustment in asset vales, then the admission
resuslted in a

a. Bonus to the old partners c. No bonus

b. Bonus to the new partner d. Both a and b

4. Calibo and Camos are partners with capital balances of P 60,000 and P 80,000 and sharing profits and losses 40% and 60%,
respectively. If Cueva is admitted as partner paying P 50,000 in exchange for 50% of Calibo’s equity., the entry in the partnership
books should be as follows

a. Dr: Calibo, Capital - P 50,000; Cr: Cueva, Capital - P 50,000

b. Dr: Calibo, Capital - P 30,000; Cr: Cueva, Capital - P 30,000

c. Dr: Cash - P 35,000, Other Assets - P 15,000; Cr: Cueva, Capital - P 50,000

d. Dr: Cash - P 50,000; Cr: Calibo, Capital - P 15,000, Cueva, Capital - P 35,000

5. Chan, Ching and Chen are partners who share profits and losses in the ratio 5:3:2, respectively. They agree to sell Chat 25%
of their respective capital and profits and losses ratio for a total payment directly to the partners in the amount of P 140,000. They
agree that asset revaluation of P 60,000 is to be recorded prior to the admission of Chat. The condensed Statement of Financial
Position of the CCC Partnership is presented below:

Assets Liabilities and Capital

Cash P 60,000 Liabilities P 100,000

Other Assets 540,000 Chan, Capital 250,000

Ching, Capital 150,000

Chen, Capital 100,000

Total Assets P 600,000 Total Liabilities and Capital P 600,000

The capital of Chan, Ching and Chen, respectively after the payment and admission of Chen are

a. P 187,500, P 112,500; P 75,000 c. P 280,000; P 168,000; P 112,000

b. P 210,000; P 126,000; P 84,000 d. P 250,000; P 150,000; P 100,000

6. C2 Partnership had a net income of P 24,000 for the month ended September 30, 2014. Carreon purchased an interest in the
C2 Partnership of Calvo and Calma by paying Calvo P 72,000 for half of the capital and half of his 50% profit sharing interest. At
this time, the capital balance of Calvo was P 96,000 and the capital balance of Calma was P 168,000. carreon should receive a
credit to his capital account of

a. P 36,000 b. P 48,000 c. P 72,000 d. P 84,000

7. Cheng, Chavez and Chato are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed Statement
of Financial Position of their partnership as of December 1, 2014 is presented below:

Cash P 100,000 Liabilities P 80,000

Other Assets 260,000 Cheng, Capital 120,000

Chavez, Cpaital 80,000

Chato, Capital 80,000

Total Assets P 360,000 Total Liabilities and Capital P 360,000

All the partners agree to admit Cua as 1/6 partner in the partnership without any asset revaluation nor bonus. Cua shall
contribute assets amounting to

a. P 20,000 b. P 56,000 c. P 70,000 d. P 120,000

8. On May 1, 2014, the business accounts of Cordova and Constancio appear below:

Cordova Constancio

Assets

Cash P 11,000 P 22,354

Accounts Receivable 234,546 567,890

Inventories 120,035 260,102

Land 603,000

Buildings 428,267

Furniture and Fixtures 50,345 34,789

Other Asset 2,000 3,600

P 1,020,916 P 1,317,002

Liabilities and Equities

Accounts Payable P 178,940 P 243,650

Notes Payable 200,000 345,000

Cordova, Capital 641,976

Constancio, Capital 728,352

P 1,020,916 P 1,317,002

Cordova and Constancio agreed to form a partnership contributing their respective assets ans equities subject to the
following adjustments:

a. Accounts Receivable of P 20,000 in Cordova’s books and P 35,000 in Constancio’s are uncollectible.

b. Inventories of P 5,500 and P 6,700 are worhtless in Cordova’s and Constancio’s respective books.

c. Other assets of P 2,000 and P 3,600 in Cordova’s and Constancio’s respective books are to be written off.

The capital accounts of the partners after the adjustments will be

 Cordova Constancio

a. P 614,476 P 683,052

b. P 615,942 P 717,894

c. P 640,876 P 712,345

d. P 613,576 P 683,350

9. Using the information #8, how much assets does the partnership have?

a. P 2,237,918 b. P 2,265,118 c. P 2,337,918 d. P 2,365,218

10. Using the information in #8, and assuming Cuyugan offered to join for a 20% interest in the firm, how much cash should he
contribute?

a. P 324,382 b. P 330,870 c. P 337,487 d. P 244,237

11. Using the information in #8, and assuming after Cuyugan’s admission, the profit and loss sharing ratio was agreed to be
40:40:20, based on credits, how much should the cash setlement between Cordova and Constancio?

a. P 32,272 b. P 32,930 c. P 33,602 d. P 34,288

12. Using the information in #8, and assuming that during the year of operations the partnership earned an income of P 325,000
and that this was distributed in the agreed manner. Assuming furhter that drawings were made in these amounts: Cordova, P
50,000; Constancio, P 65,000; and, Cuyugan, P 28,000, how much are the capital balances of the partners after the first first year?

Cordova Constancio Cuyugan

a. P 750,627 P 735,177 P 372,223

b. P 728,764 P 713,764 P 361,382

c. P 757,915 P 742,315 P 375,837

d. P 743,121 P 727,827 P 368,501

13. Conrado, Cosio, and Cosme are partners whose capital balances are share in profits are as follows: Conrado - 50%; Cosio -
25%; Cosme - 25%.

Cueto is admitted into the partnership by paying P 60,000 for 1/3 of the share in equity of Cosio and by contributing P
200,000. the parterns agree to the total capitalization to P 750,000, 1/3 of which is Cueto’s capital credit. Cueto’s share in net
income is laso 1/3 and the old partners are to divide net income in the old ratio among themselves.

The profit and loss sharing ratio among Conrado, Cosio, Cosme after the admission of Cueto is

a. 50%, 25%, 25%, respectively c. 2/6, 1/6, 1/6, respectively

b. 30%, 15%, 15%, respectively d. 1/3, 1/3, 1/3, respectively

14. Using the information in #13, the amount of the asset revaluation is equal to

a. P 15,000 b. P 50,000 c. P 120,000 d. P 200,000

15. Using the information in #13, the capital balances of the old partners after the admission of Cueto are

a. P 250,000, P 150,000, P 100,000, respectively c. P 250,000, P 100,000, P 100,000, respectively

b. P 275,000, P 112,500, P 112,500, respectively d. P 250,000, P 200,000, P 100,000, respectively

16. A person may become a partner in a partnership by all of the following methods except

a. Investing in the partnership with a bonus to the new partner

b. Making a loan to the partnership

c. Investing in the partnership with a bonus to the old partners

d. Purchasing a partner’s interest

17. If a new partners purchases his interest from an old partner, the only entry on the partnership books is a credit to the
purchaser’s capital account with a debit to

a. Bonus account c. Capital account of the selling partner

b. Cash account d. Capital accounts of other partners

18. Which of the following does not result in the dissolution of a partnership?

a. Marriage of a partner c. Addition of a new partner

b. Withdrawal of a partner d. Death of a partner

19. A new partner may be admitted into a partnership by any of the following except

a. Investing in the partnership c. Purchasing a partner’s interest

b. Purchasing preferred stock of the partnership d. Both a and c

20. Cabrera, Capulong, and Castor are partners with capital balances of P 250,000, P 150,000, and P 100,000, respectively. The
parters share income and losses equally. For an investment of P 250,000 cash. Concio is to be admitted as a partner with a
one-fourth interest in capital and income. Based on this information, the amount of Concio’s investment can best be justifies by
which of the following?

a. Assets of the partnership were overvalued immediately prior to Concio’s investment

b. The book value of the partnership’s net assets was less than the fair value immediately prior to Concio’s investment

c. Concio’s admission into the partnership does not involve a bonus nor an asset revaluation

d. Concio will receive a bonus from the other partners upon his admission to the partnership.

21. If A is the capital of a partnerhsip before the admission of a new partner, B is the total capital of the partnership after the
investment of new partner, C is the amount of the new partner’s investment, and D is the amount of capital credit to the new
partner, there is

a. Neither bonus nor asset revaluation if B = A + C and D > C

b. A bonus to the old partners if B > ( A + C ) and D < C

c. A bonus to the new partner if B = A + C and D < C

d. An asset revaluation to the old partners if B > (A + C) and D = C

22. Cuenco and Cuizon are partners with a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The bonus method
was used to record Calasin’s admittance as a new partner. What ratio should be used to allocate to Cuenco and Cuizon the excess
of Calasin’s contribution over the amount credited to his capital account?

a. Cuenco and Cuizon’s old profit and loss ratio

b. Cuenco and Cuizon’s old capital ratio

c. Cuenco and Cuizon’s new relative profit and loss ratio

d. Cuenco and Cuizon’s new relative capital ratio

23. Cunanan invests P 160,000 in a partnership for a one-fifth interest. Prior to Cunanan’s admission, the partnership had two
partners with capital balances if P 190,000 each. If no asset revaluation is recognized prior ti Cunanan’s admission, what amount
is credited to his capital account?

a. P 90,000 b. P 108,000 c. P 135,000 d. P 160,000

24. Collado’s interest in the partnership is P 112,000. Cuervo buys Collado’s interest for P 120,000. how much is the capital
balance of Cuervo after the purchase?

a. P 108,000 b. P 110,000 c. P 112,000 d. P 120,000

25. Cortez, Cuerdo and Claudio are partners with capital balances of P 180,000, P 100,000 and P 120,000, respectively. Conde is
admitted into the partnership with a one-fourth interest upon payment of P 160,000. If the old partners share profits and losses in
the ratio of 2/5, 2/5, and 1/5, then the capital account of Cortez after the admission of Conde will show a balance of

a. P 160,000 b. P 180,000 c. P 184,000 d. P 188,000

26. Castro contributes P 120,000 for a one-sixth interest in the partnership. The total capital balances of the partners prior to the
admission of Castro is P 360,000. If there is no asset revaluation is made prior to the admission of Castro, what amount is crdeited
to the capital account of Castro upon his admission?

a. P 80,000 b. P 96,000 c. P 120,000 d. P 160,000

27. Conn and Cass form a partnership and have capital balances of P 100,000 and P 200,000, respectively. If they agree to admit
Charr into tha partnership, how much will he have to invest to have a one-third interest?

a. P 100,000 b. P 120,000 c. P 150,000 d. P 200,000

28. Cardel desires to purchase a one-fourth capital and profit and loss interest in the partnership of Cariaso, Carino, and Carillo.
The three partners agree to sell Cardel one-fourth of their respective capital and profit and loss interest in exchange for a total
payment of P 200,000. The profit and loss ratio and capital balances of the partners are as follows: Cariaso (60%) - P 400,000;
Carino (30%) - P 200,000; Carillo (10%) - P 100,000. If assets are to be revalued prior to the admission of Cardel, what would be
the capital balances of Cariaso, Carino and Carillo after the admission of Cardel?

a. P 300,000; P 150,000; P 75,000 c. P 385,000; P 192,500; P 97,500

b. P 345,000, P 172,500; P 82,500 d. P 460,000; P 230,000; P 110,00

29. Based on the information in #28 and assuming assets are fairly valued, what would be the capital balances of Cariaso, Carino
and Carillo after the admission of Cardel?

a. P 300,000; P 150,000; P 75,000 c. P 385,000; P 192,500; P 97,500

b. P 345,000; P 172,500; P 82,500 d. P 460,000; P 230,000; P 110,000

30. Based on the information in #28 and assuming assets are fairly valued and that Cardel purchases a one-fourth capital and
profit and loss interest from Cariaso for P 200,000, what would be the capital balances of Cariaso, Carino and Carillo after the
admission of Cardel?

a. P 400,000; P 200,000; P 100,000 c. P 300,000; P 150,000; P 75,000

b. P 300,000; P 200,000; P 100,000 d. P 100,000; P 50,000; P 25,000

31. Based on the information in #28 and assuming assets are fairly valued and that Cardel purchases a one-fourth capital and
profit and loss from the partnership by paying P 200,000, what woudl be the capital balances of cariaso, Carino and Carillo after
the admission of Cardel?

a. P 300,000; P 150,000; P 75,000 c. P 385,000; P 192,500; P 97,500

b. P 400,000; P 200,000; P 100,000 d. P 460,000; P 230,000; P 110,000

32. Coral, Camus and Cerda are partners sharing profits in the ratio of 4:4:2, respectively. As of December 31, 2013, their capital
balances were Coral - P 190,000; Camus - P 160,000; Cerda - P 120,000.

On January 1, 2014, the partners admitted Cordero as a new partner and according to their agreement, Cordero will
contribute P 160,000 in cash to the partnership and will also pay P 20,000 for 15% of Camus’ share. Cordero will be given a 20%
share in profits while the original partners’ share will be proportionately the same before. After the admission of Cordero, the total
capital will be P 660,000 and Cordero’s capital be P 140,000.

The amount of the asset revaluation upon the admission of Cordero is

a. P 24,000 b. P 30,000 c. P 50,000 d. P 160,000

33. Using the information in #32, the bonus to Cerda upon the admission of Cordero is

a. P 8,800 b. P 17,600 c. P 22,000 d. P 44,000

34. Based on the information in #32, the capital of Camus after the admission of Cordero is

a. P 160,000 b. P 165,600 c. P 168,600 d. P 189,600

35. Based on the information in #32, the partners’ profit and loss ratio after the admission of Cordero shall be

a. 20%, 20%, 20%, 20% c. 32%, 32%, 16%, 20%

b. 25%, 25%, 25%, 25% d. 40%, 40%, 20%, 20%

36. When Delfin retired from the partnership of Delfin, Delan and Desta, the final interest exceeded Delfin’s capital balance.
Under the bonus method, the excess

a. Had no effect on the capital balances of Delan and Desta

b. Was recorded as asset revaluation

c. Reduces the capital balances of Delan and Desta

d. Was an expense

37. The accounting treatment for the sale of the interest of a retiring partner to an outsider or to the remaining partners is the
same as
 a. Admission of a partner by purchase c. Sale of interest to the partnership

b. Admission of a partner by investment d. Both a and b

38. When the partnership purchases a retiring partner’s interest, the settlement to the retiring partner includes the following
except

a. Cash c. Depreciation expense

b. Equipment d. Notes payable

39. The following should be considered in determining the interest of a retiring partner except

a. Payable to a co-partner c. Share in asset adjustment

b. Receivable from the partnership d. Share in profits

40. When a partnership purchases the interest of a retiring partner at less than book value, there must be a

a. Bonus to the remaining partners

b. Bonus to retiring partner

c. Bonus to remaining partners/ Negative asset revaluation or both

d. Bonus to retiring partner/ Postive asset revaluation or both

41. Dayrit, a partner in an accounting firm decided to withdraw from the partnership. Dayrit’s share of the partnership profits
and losses was 30%. Upon withdrawing from the partnership, he was paid P 71,000 in final settlement of his interest. The total of
the partner’s capital accounts, before asset revaluation, prior to Dayrot’s withdrawal was P 210,000. After his withdrawal, the
remaining partners’ capital accounts, excluding their share of the asset revaluation, totalled P 160,000. The total amount of the
asset revaluation recognized was

a. P 21,000 b. P 24,000 c. P 70,000 d. P 80,000

42. The partnership of Doctor, Dino and Dolor has reached an impasse as Dolor is no longer wolling to contribute the amount of
time and effort to the partnership that he has previously given. The partners share profits and losses in the ratio of 3:3:4,
respectively. The partners have the following capital balances just prior to Dolor’s withdrawal from the partnership.

Doctor P 45,000

Dino 35,000

Dolor 25,000

If Dino purchases Dolor’s interest for P 32,000 and no asset revaluation is recorded, the balance of Dino’s capital account
immediately after the withdrawal of Dolor is

a. P 55,000 b. P 60,000 c. P 61,000 d. P 67,000

43. Using the information in #41, and assuming that the partners agree that the partnership will purchase Dolor’s interest for P
33,000 and no asset revaluation is to be recorded, the balance of Dolor’s capital account immediately after the withdrawal of
Dolor is

a. P 37,000 b. P 39,000 c. P 39,600 d. P 41,000

44. Using the information in #41, and assuming the partners agree that the partnership will purchase Dolor’s interest for P
25,000 and will record no bonus nor asset revaluation, the balance of Dino’s capital account immediately after the withdrawal of
Dolor is

a. P 35,000 b. P 39,000 c. P 41,000 d. P 43,000

45. Using the information in #41, and assuming the partners agreed that the partnership will purchase Dolor’s interest for P
33,000 and will revaluate the partnership based on the price Dolor is willing to accept for his interest in the partnership, the
balance of Dino’s capital account immediately after the withdrawal of Dolor

a. P 39,000 b. P 40,000 c. P 41,000 d. P 43,000

46. The partnership of Digna, Dimla, and Distor have capital balances of P 70,000, P 100,000, and P 80,000, respectively. Their
profit and loss ratios are 30%, 50% and 20%, respectively. With the consent and knowledge of the Digan and Dimla, Distor sold
his interest to Diesta. Distor paid P 92,000 cash. The new capital balances would be

Digna Dimla Diesta

a. P 70,000 P 100,000 P 92,000

b. P 73,800 P 106,000 P 82,400

c. P 70,000 P 100,000 P 80,000

d. P 70,000 P 100,000 P 172,000

47. The statement of financial position as of June 30, 2014 for the partnershi of Dizon, Dionisio and Divino shows the following
information:

Total Assets P 720,000

Dizon, Loan P 40,000

Dizon, Capital 166,000

Dionisio, Capital 154,000

Divino, Capital 360,000

Total Liabilities and Capital P 720,000

It was agreed among the partners that Dizon, retires from the partnership and was further agreed that the assets be adjusted to
their fair value of P 816,000 as if June 30, 2014. The partnership would pay Dizon P 242,000 cash for Dizon’s partnership interest
and includes the payment of loan to Dizon.

Dizon, Dionisio and Divino share profits and losses 25%, 25% and 50%, respectively. What is Divino’s capital balance after
the retirement of Dizon?

a. P 240,000 b. P 400,000 c. P 408,000 d. P 720,000

48. Bianca, Mariel and Toniare partners with capital balances of P 100,000, P 140,000, and P 180,000, respectively. They share
profits and losses in the ratio of 20:40:40. Toni decides to withdraw from the partnership receiving P 220,000 including a loan to
the partnership in the amount of P 10,000. assuming the use of asset revaluation method, how much is the amount of asset
revaluation increase (decrease)?

a. P 30,000 b. P 75,000 c. (P 30,000) d. (P 75,000)

49. Piolo, Lloyd and Sam are partners with capital balances of P 40,000, P 50,000 and P 60,000, respectively. They share profits
and losses in the ratio 40:40:20, respectively. After one year, the operation resulted in a net profit of P 20,000. Withdrawals made
during the year are as follows: P 10,000, P 5,000 and P 15,000, respectively. Sam retired from the partnership and was paid P
80,000 for his interest. Assuming no asset revaluation was recorded, the excess payment is a

a. Bonus of P 27,000 to the remaining partners c. Bonus of P 31,000 to the remaining partners

b. Bonus of P 27,000 to the retiring partner d. Bonus of P 31,000 to the retiring partner

50. Using the information in #48, and assuming assets were revalued upon retirement of Sam, the share of Piolo and Lloyd in the
asset revaluation is

a. P 54,000, P 27,000 c. P 62,000, P 31,000

b. P 54,000, P 54,000 d. P 62,000, P 62,000

51. A partner may withdraw his interest at an amount equal to all of the following except at

a. Book value c. Less than book value

b. Future expected value d. More than book value

e.

52. When Alcantara retired from the partnership with Bores and Cruz, the final interest is less than Alcantara’s capital balance.
Under the bonus method, the difference

a. Had no effect on the capital of Bores and Cruz c. Increases the capital balances of Bores and Cruz

b. Was recorded as an asset adjustment d. Above his capital interest

53. A partner who withdraws his interest at book value receives assets

a. Equal to his capital account c. Less than his capital balance

b. With indeterminate value d. Above his capital balance

54. The withdrawal of a partner of his interest at more than book value results in a

a. Bonus from remaining partners c. Loss to remaining partners

b. Gain to remaining partners d. Gain or loss depending on the tax basis

55. A partner retires from the partnership and the final settlement is more than his capital interest. Under the bonus method, the
excess

a. Is recorded as an expense

b. Increases the capital balances of the remaining partners

c. Reduces the capital balances of the remaining partners

d. Is recorded as gain

56. Daza, Diaz and Ditas are partners with capital balances of P 80,000, P 120,000 and P 160,000, respectively. They share
profits and losses in the ratio of 30:40:30. Diaz decides to withdraw from the partnership. Diaz receives P 150,000 in settlement of
his interest. If the bonus method is used, what is the capital balances of Ditas immediately after the retirement of Diaz?

a. P 140,000 b. P 145,000 c. P 160,000 d. P 175,000

57. Using the information in #56 and assuming asset revaluation method is used, what is the capital balance of Ditas
immediately after the retirement of Diaz?

a. P 137,500 b. P 182,500 c. P 190,000 d. P 200,000

58. Using the information in # 56 and assuming Diaz was paid P 120,000, what is the capital balance of Daza immediately after
the retirement of Diaz?

a. P 57,500 b. P 65,000 c. P 80,000 d. P 95,000

59. Using the information in #56 and assuming bonus method is used, what is the total partnership capital immediately after the
retirement of Diaz?

a. P 120,000 b. P 130,000 c. P 200,000 d. P 210,000

60. A partner retired from a partnership and received an amount which exceeds his capital investment by P 40,000. The
remaining partners have profit and loss ratio of 3:1. Under the bonus method, the excess payment will be shared by the remaining
partners as follows

a. P 24,000 and P 16,000 c. (P 24,000) and (P 16,000)

b. P 30,000 and P 10,000 d. (P 30,000) and (P 10,000)

TRUR OR FALSE.

1. Admission of a new partner by investment will change total assets and total capital.

2. Asset revaluation and bonus are one and the same thing.

3. When a new partner is admitted, the partnership may continue operations based on a new based on a new contract among the
partners.

4. The total assets of the partnership may increase upon admission of a new partner by purchase of interest.

5. A new partner may be admitted into the partnership with the consent of the majority of the old partners.

6. A partnership dissolution will always lead to a partnership liquidation.

7. Bonus to a new partner is given by the old partners.

8. If the agreed capital exceed total contributed capital, the difference may be positive asset revaluation.

9. If the capital credit of the partner is less than his investment, the difference is always recorded as an asset revaluation.

10. The admission of a new partner in an existing partnership dissolves the old partnership.

11. A new partner may be admitted without an investment and without the recognition of capital interest.
12. The agreed capital can never be less than total contributed capital.

13. When a new partner enters an existing partnership by purchasing a partner’s interest, the cash paid to the existing partner for
the partnership interest is always equal to the new partner’s capital balance.

14. A bonus given to the old partners by a new partner increases the capital account balances of the old partners.

15. Admission of a new partner by purchase of interest is a personal transaction between the selling partner and the buying
partner. Hence, any indicated gain in the transaction is not recognized in the partnership books.

16. In the admission of a new partner by purchase, the new partner may pay more than, less than or equal to the book value of
the interest sold by any or all of the old partners.

17. Asset revaluation may be recorded upon the admission of a new partner whether by purchase or by investment.

18. In the admission of a new partner by investment, agreed capital must always equal contributed capital.

19. The sale of a partner’s interest in an existing partnership is a personal transaction between the selling partner(s) and the
buying or new partner.

20. Both asset revaluation and bonus affect total assets and total capital.

21. A partner who desires to withdraw from the partnership may, without the consent of the other partners, sell all or part of his
interest either to an outsider, to the other partners, or to the partnership itself.

22. The death of a partner transfers his entire interest to his estate prior to settlement by the partnership.

23. Any asset revaluation recognized upon the retirement of a partner is subjected to depreciation on the remaining partners’
operations.

24. The withdrawal of an existing partner dissolves the partnership; but the addition of a new partner does not.

25. Accounting for withdrawal of a partner when one of the remaining partners buys the retiring partner’s interest is not the same
as when as when an outside person buys a retiring partner’s interest.

26. The partnership must measure net income or net loss for the fraction of the year up to the withdrawal date of withdrawing
partner and allocate profit or loss according to the existing ratio.

27. Withdrawal by a partner at less than book value of his capital interest results in a loss to the other partners allocated
according through their profit and loss ratio.

28. When a retiring partner is paid more than his capital interest without recording asset revaluation, the excess payment is
treated as a bonus to the retiring partner from the remaining partners.

29. The retirement of one of the partners automatically dissolves the partnership.

30. The sale of interest of the retiring partner to a new partner will require the recognition of a gain or loss on the partnership
books.

31. The determination of the capital interest of an incapacitated partner is similar to the determination of the capital interest of a
retiring partner.

32. Upon death of one of the partners, the remaining partners may continue operations based on the old Articles of Partnership.

33. The asset revaluation at the time of retirement of one of the partners maybe calculated by dividing the excess payment to the
retiring partner by his fraction of interest.

34. The bonus to the retiring partner reduces the capital accounts of the remaining partners in the partnership.

35. A retiring partner’s interest is always payable in the form of cash.

36. The retiring partner’s capital interest includes his share in the net income or net loss of the partnership up to the date of
retirement.

37. Loans made by the partnership to the partners, as recorded on the partnership books, reduces the interest of the retiring
partner.

38. The partnership may allow any of its partners to withdraw or retire from the firm. After such withdrawal, the business may
continue its operations.

39. The interest of a retiring partner upon retirement need not be established; anyway the partner is already retiring.
40. Accounting for the sale of a retiring partner’s interest to the continuing partners is the same as sale to the partnership.