Accounting for Partnership

Dissolution Without Liquidation

Answers to Exercise 4-1 to 4-11

Marivic Valenzuela-Manalo
Exercise 4-1

1. False 6. True
2. False 7. True
3. True 8. True
4. False 9. True
5. False 10. True
Exercise 4-2

1. D 6. B
2. C 7. C
3. A 8. A or D
4. D 9. C
5. C 10. B
 Exercise 4-3
Antonio Gary Leni
Original capital P30,000 P20,000 P50,000
Multiplied by: interest sold 1/2 1/4 1/4
Capital transfer to Rody P15,000 P15,000 P12,500
DATE P AR T IC ULAR S P/R D E B I T C R E D I T

Sep 30 Antonio, capital 1 5 0 0 0

Gary, capital 5 0 0 0
Leni, capital 1 2 5 0 0
Rody, capital 3 2 5 0 0
To record admission of Rody by purchase of
interest

Antonio Gary Leni

Original capital P30,000 P20,000 P50,000
Less:interest sold 15,000 5,000 12,500
Capital transfer to Rody P15,000 P115,000 P37,500
Exercise 4-4
Partner Original Contributed Agreed New Bonus
P&L Capital Capital P & L
A 40% P160,000 P162,400 30% P2,400
B 60% 60,000 63,600 45% 3,600
C - 48,000 42,000 25% (6,000)
Total 100% P168,000 P168,000 100% 0
Total agreed partnership capital P 168,000
Multiply by interest of C x 25%
Agreed capital of C P 142,000
Less: Contributed capital of C (48,000)
Bonus to old partners P 146,000
Bonus to old/original partners is divided among them in
accordance to their original profit & loss sharing ratio.
 Exercise 4-4
Entry to record the admission of C into the partnership is as follows:
DATE P AR T IC ULAR S P/R D E B I T CR E D I T

Sep 30 Cash 4 8 0 0 0
A, capital 2 4 0 0
B, capital 3 6 0 0
C, capital 4 2 0 0 0
To record admission of C in the partnership
and distribution of bonus to A and B.
Exercise 4-5
Joshua Capital before Jeremiah's
admission 32,000
Add: Share in bonus

30,000 x 4/9 13,333

Joshua Capital after Jeremiah's
admission 45,333
Exercise 4-5
Contributed Agreed
Capital Capital Bonus
Joshua 32,000 45,333 13,333
Jacob 80,000 90,000 10,000
Paul 16,000 22,667 6,667
Total before
admission 128,000 158,000 30,000
Jeremiah 69,500 39,500 30,000
Total after
admission 197,500 197,500
 Exercise 4-6
Mark, Capital 560,000
Isaiah, Capital 450,000
Total 1,010,000
Add Total bonus
(495,000-450,000 = 45,000/ 2/5)* 112,500
Total old partners' capital credit 1,122,500
Divided by old partners % of interest 80%
TOTAL AGREED CAPITAL 1,403,125
Multiply by Elijah's interest 20%
Elijah's Capital Credit 280,625
Add: Bonus to old partners 112,500
ELIJAH's INVESTMENT 393,125
* Isaiah's capital was credited for P495,000, which allows him a bonus of P45,000

Total bonus is determined by dividing Isaiah's share in bonus by his % of interest

 Exercise 4-6
Contributed Agreed
Capital Capital Bonus
Mark P 560,000 P 627,500 P 67,500
Isaiah 450,000 495,000 45,000
Total before
admission P 1,010,000 P 1,122,500 P 112,500
Elijah 393,125 280,625 112,500
Total after
admission P 1,403,125 P 1,403,125
 Exercise 4-7
Total Contributed Capital (105,000+90,000+75000) P 270,000
Total Agreed Capital 300,000
ASSET REVALUATION P 30,000
If TAC is greater than TCC, there is upward asset revaluation,
otherwise there is downward asset revaluation.
Ilyana Sabina
Capital balances before asset revaluation 105,000 90,000
Add: Asset revaluation
30,000 x 80% 24,000
30,000 x 20% 6,000
Capital balances before Lana's admission 129,000 96,000
 Exercise 4-7
Original Contributed Agreed New Bonus to
P&L Capital Capital P&L New Partner
Ilyana 8 129,000 109,000 2/15 (20,000)
Sabina 2 96,000 91,000 8/15 (5,000)
Lana 75,000 100,000 1/3 25,000
Total 10 300,000 300,000 3/3 0
 Exercise 4-8
Rina Rolan Roxy
Capital balances before
Red's admission 252,000 126,000 42,000
Interest sold to Red
252,000 x 20% (50,400)
126,000 x 20% (25,200)
42,000 x 20% (8,400)
Capital balances after
Red's admission 201,600 100,800 33,600
 Exercise 4-9

Original Contributed Agreed New Bonus to

P&L Capital Capital P&L New Partner

Paul 6 358,500 334,470 42% (24,030)

Quiel 4 300,000 283,980 28% (16,020)
Rodney 225,000 265,050 30% 40,050
Total 10 883,500 883,500 100% 0
 Exercise 4-10
Rocker Capital 30,000
Willow, Capital 70,000
Total Capital of old partners 100,000
Add Bonus to old partners 18,250
Total old partners' Capital Credit 118,250
Divided by partner's residual interest (100%-20%-25%) 55%
TOTAL AGREED CAPITAL 215,000
Less Rocker and Willow Capital (100,000)
New partners' capital credit 115,000
Less cash investment (10,000+55,000) (65,000)
Value of Equipment 50,000
 Exercise 4-11
1) Admission by purchase of interest Brawn Power Will

Capital balances before Will's admission 600,000 900,000

Interest sold to Will

600,000 x 30% (180,000) 180,000

900,000 x 30% (270,000) 270,000

Capital balances after Will's admission 420,000 630,000 450,000

 Exercise 4-11
2) Original Contributed Agreed New Bonus to
P&L Capital Capital P&L New Partner
Brawn 6 600,000 540,000 42% (60,000)
Power 4 900,000 860,000 28% (40,000)
Will - 500,000 600,000 30% 100,000
Total 2,000,000 2,000,000 100% -
Step 1: Effect upward revaluation of assets to get revalued capital balances of old partners.

Upward
Original Contributed Agreed New Asset
3) P&L Capital Capital P & L Revaluation
Brown 6 600,000 750,000 150,000
Power 4 900,000 1,000,000 100,000
Will - 500,000 500,000
Total 2,000,000 2,250,000 250,000

Exercise 4-11
Step 2: Use revalued capital balances of old partners as their contributed capital.

Original Contributed Agreed New Bonus to

3) P&L Capital Capital P & L New Partner
Brawn 6 750,000 750,000 42% (105,000)
Power 4 1,000,000 1,000,000 28% (70,000)
Will - 500,000 675,000 30% 175,000
Total 10 2,250,000 2,250,000 100% -

Exercise 4-11