Hernandez, Jessica O.

Partnership and Corporation

BSA 1-1 Chapter 5

Chapter 5- Partnership Dissolution

Change in Capital Structure by Withdrawal, Retirement,
Death or Incapacity of a Partner

Exercises- Odd Numbers Only

Exer 5-1

Dantes 50,000
Dungca 30,000
Dee 20,000 P and L Ratio- 3:2:1

Dee withdraws, settlement price of 25,000

1. Entries to record the retirement.

Under bonus method: Difference of 5,000, bonus from remaining partners

5,000 x 3/5 = 3,000
5,000 x 2/5 = 2,000

Dantes, Capital 3,000

Dungca, Capital 2,000
Dee, Capital 20,000
Cash 25,000

Under asset revaluation method: Difference of 5,000 (5,000 / 1/6 = 30,000)

30,000 x 3/6 = 15,000
30,000 x 2/6 = 10,000
30,000 x 1/6 = 5,000

Other Assets 30,000

Dee, Capital 20,000
Cash 25,000
Dantes, Capital 15,000
Dungca, Capital 10,000

2. The asset revaluation method will be preferred by Dantes as its net advantage is 3,000 more than the
bonus method.

Dantes Dungca
Capital balances 50,000 30,000
Under Bonus Method 47,000 28,000
Under Asset Revaluation
Method 65,000 40,000
Depreciation on Asset
Revaluation (15,000) (15,000)
Balance after Depreciation 50,000 25,000
Net Advantage/
Disadvantage (3,000) 3,000
Exer 5-3

1. Asset Revaluation- Difference of 4,000

(4,000 / .40 = 10,000)
4,000 x .30 = 3,000
4,000 x .30 = 3,000
4,000 x .40 = 4,000 2. Bonus from the remaining partners worth
4,000.
Other Assets 10,000 Ditas, Capital 2,000
Daria, Capital 29,000 Dulce, Capital 2,000
Cash 33,000 Daria, Capital 29,000
Ditas, Capital 3,000 Cash 33,000
Dulce, Capital 3,000

3. Ditas could prefer either of the two methods as it reflect the same capital balance.

Daria Ditas Dulce

Capital balances 25,000 35,000 50,000
Share in Profit 8,000 6,000 6,000
TOTAL 33,000 41,000 56,000
Withdrawal (4,000)
TOTAL 29,000 41,000 56,000
Under Bonus Method 39,000 54,000
Under Asset Revaluation 44,000 59,000
Method (5,000) (5,000)
39,000 39,000
Net Advantage/Disadvantage
0 0

Exer 5-5

Dencio 102,000 Domingo withdraws.

Doctor 60,000
Domingo 70,000 1. Dizon purchases Domingo’s interest.
Dizon 48,000 Domingo, Capital 70,000
P and L Ratio- 40%, 20%, 20%, 20% Dizon, Capital 70,000

2. Partnership purchases the interest for 3. Partnership purchases the interest for
90,000. 90,000.
Difference of 20,000, bonus from remaining Difference of 20,000, asset reval (20,000 / .20 =
partners. 100,000)
20,000 x 40/80 = 10,000 100,000 x .40 = 40,000
20,000 x 20/80 = 5,000 100,000 x .20 = 20,000
20,000 x 20/80 = 5,000 100,000 x .20 = 20,000
100,000 x .20 = 20,000
Dencio, Capital 10,000
Doctor, Capital 5,000 Other Assets 100,000
Dizon, Capital 5,000 Domingo, Capital 70,000
Domingo, Capital 70,000 Notes Payable 90,000
Cash 90,000 Dencio, Capital 40,000
Doctor, Capital 20,000
Dizon, Capital 20,000
Problems- Even

Prob 5-2

1. Adjusting Entry
Merchandise Inventory 7,000 2. Withdrawal of Dahlia
Allowance for Uncollectible Accounts 1,000 Dahlia, Capital 27,000
Danao, Capital 4,000 Notes Payable 25,000
Daylan, Capital 2,000 Cash 2,000
Dahlia, Capital 2,000

Prob 5-4

Case 1
-change in cash from 200,000 to 40,000 and its Dancel, Capital 140,000
difference of 160,000 means it’s the settlement Cash 130,000
price for retiring partner’s capital and decrease Daet, Capital 6,000
in Daet and Dais capital means there is bonus Dais, Capital 4,000
from them

Settlement Price of 160,000 less Capital Interest Case 4

of 140,000 = 20,000 bonus to retiring partner -decrease in cash and increase in other assets
by 68,000
Difference of 20,000, bonus from continuing
partners Other Assets 68,000
20,000 x 3/5 = 12,000 Dancel, Capital 140,000
20,000 x 2/5 = 8,000 Cash 168,000
Daet, Capital 24,000
Daet, Capital 12,000 Dais, Capital 16,000
Dais, Capital 8,000
Dancel, Capital 140,000 Case 5
Cash 160,000 -decrease in cash and increase in other assets
by 40,000
Case 2
-increase in Daet’s capital by 140,000 indicating Other Assets 40,000
that he bought the retiring partner’s capital Dancel, Capital 140,000
Cash 80,000
Dancel, Capital 140,000 Daet, Capital 60,000
Daet, Capital 140,000 Dais, Capital 40,000

Case 3 Case 6
-change in cash from 200,000 to 70,000 and its -increase in Dais’ capital by 140,000 indicating
difference of 130,000 means it’s the settlement that he bought the retiring partner’s capital
price for retiring partner’s capital andincrease in
Daet and Dais capital means there is bonus Dancel, Capital 140,000
given to them Dais, Capital 140,000

Settlement Price of 130,000 less Capital Interest Case 7

of 140,000 = 10,000 bonus to continuing -new partner purchased retiring partner’s
partners capital
Difference of 20,000, bonus from continuing
partners Dancel, Capital 140,000
10,000 x 3/5 = 6,000 Delia, Capital 140,000
10,000 x 2/5 = 4,000
Prob 5-6

1. Entries for the given transactions.

a. Record Distribution of 45,000 profit (Jan-

Sept) Income Summary 9,998
45,000 profit x 9/12 = 33,750 Danao, Capital 4,705
Diaz, Capital 3,529
Income Summary 33,750 Dolor, Capital 1,764
Danao, Capital 13,500
Diaz, Capital 10,125 9,998 x 40/85 = 4,705
Dolor, Capital 5,062.5 9,998 x 30/85 = 3,529
Dungca, Capital 5,062.5 9,998 x 15/85 = 1,764

33,750 x .40 = 13,500

33,750 x .30 = 10,125 d. Payable to Dungca
33,750 x .15 = 5,062.5 Income Summary 50,062.5
33,750 x .15 = 5,062.5 Payable to Estate of Dungca 50,062.5

b. Record 10% Interest of Deceased Partner e. Withdrawal of Dolor

Adjusted Capital Dolor, Capital 54,826.5
Dungca, Capital 45,000 Notes Payable 41, 119.88
Share in Profit 5,062.5 Danao, Capital 7,832.36
50,062.5 Diaz, Capital 5,874.27
x .10 x 3/12 = 1,252
Dolor Capital = 48,000 + 5,062.5 + 1,764 =
Income Summary 1,252 54,826.5
Payable to Estate of Dungca 1,252
54,826.5 x .75 = 41, 119.88
54,826.5 x .25 = 13,706.63
c. Share in Remaining Profit of Remaining x 40/70 = 7,832.36
Partners (Oct-Dec) x 30/70 = 5,874.27
45,000 – 33,750 (distributed) – 1,252 = 9,998

2. Statement of Changes in Equity

Danao, Diaz, Dolor, Dungca

Statement of Changes in Partners’ Equity
December 31, 2014

Danao Diaz Dolor Dungca Total

Equity, Jan 1, 2014 84,000 75,000 48,000 45,000 252,000
Add: Total Share in
Profit
Jan-Sept 13,500 10,125 5,062.5 5,062.5 33,750
Oct-Nov 4,705 3,529 1,764 ____ 9,998
Equity, Dec 31, 2014 102,205 88,654 54,826.5 50,062.5 295,748
Multiple Choice-1 Answers

1.C.
2.A.
3.C.
4.B.
5.C.
6.C.
7.B.
8.D.
9.A.
10.C.
11.C.
12.B.
13.B.
14.D.
15.D.

Multiple Choice-2 Answers

1.B.
2.C.
3.A.
4.A.
5.C.
6.B.
7.B.
8.C.
9.D.
10.D.