ADMISSION AND RETIREMENT OF PARTNERS

PROBLEM 1
Papa and Kiko are partners are with capital balances of 250,000 and 330,000, respectively, as of
January 5, 2015. They share profits in the ratio of 2:3. . The partners agreed to admit Chito into the
partnership.
Record her admission under each of the following cases:

1. Chito purchases 40% interest of Papa for 100,000.

2. Chito purchases 1/3 interest of Kiko for 100,000.
3. Chito buys a ¼ interest in the partnership for 130,000.
4. Chito purchases a 20% interest from both partners for 140,000. The assets of the partnership
will be revalued first so that Chito will be credited for also 140,000.

PROBLEM 2
On February 1, 2015, Pope and Francis have capital balances of 500,000 and 300,000,
respectively. The partners share profits in the ratio of 4:1. On this date, Tagle is admitted into the
partnership under each of the following independent cases:

1. Tagle invests 400,000 for a 1/3 interest in a total capital of 1,200,000.

2. Tagle invests 300,000 for a 30% interest in a new capital of 1,100,000.
3. Tagle contributes 250,000 for a 1/5 interest in an agreed capital of 1,050,000.
4. Tagle pays in 240,000 for a 25% interest in the firm.
5. Tagle contributes 330,000 for a 27.5% interest in the firm.
6. After the assets of the firm are revalued by 200,000, Tagle will contribute an amount that will
give him a 33 1/3% interest in the firm.
7. Tagle purchases a ¼ interest from the partners for 200,000.
8. Tagle pays in 400,000 for a 30% interest in the firm.

REQUIRED
1. Analyze each case and prepare the pertinent journal entries.
2. For cases 6, 7 and 8, determine the capital balances of all partners after the admission of Tagle.

PROBLEM 3
On January 17, 2015, the capital balances of Tac, Lo and Ban are 800,000, 600,000 and
200,000, respectively. They share profits in the ratio of 4:3:1. On this date, Lo is going to retire from the
partnership.

Record the retirement of Lo in each of the following independent assumptions:

1. Lo sells his interest to Tac for 750,000.

2. The partnership pays Lo 630,000.
3. The partners agreed that prepaid expense of 12,000 should first be written off before it pays an
amount to Lo resulting to a 16,000 bonus to the partners.
4. Before payment of 500,000 is given to Lo, the following items must be given effect:
a. The net loss of the partnership for January is 60,000
b. The accounts receivable and allowance for doubtful accounts of the partnership are
150,000 and 8,000, respectively. Only 90% of the receivables are collectible.
c. A note receivable of 8,000 is to be applied to the amount to be paid to Lo.

PROBLEM 4
Kristine and Kaye Ann are partners with capital balances of 600,000 and 400,000, respectively,
as of January 31, 2016. They share profits in the ratio of 5:3. The partners agreed to admit Jean into the
partnership. Record the admission under each of the following cases:

1. Jean purchases 30% interest of Kristine for 200,000.

2. Kristine purchases 1/3 interest of Kaye Ann for 100,000.
3. Kristine buys a 1/5 interest in the partnership for 180,000.
4. Kristine purchases a 30% from both partners for 270,000. Show the division of cash.
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PROBLEM 5
On December 15, 2015, Marvic and Leonen have capital balances of 4,800,000 and 3,200,000,
respectively. The partners share profits in the ratio of 3:2. On this date, Justice is admitted into the
partnership. Record his admission under each of the following assumptions (Indicate the kind of
admission in each case:

9. Justice buys a ¼ interest from the partnership for 2,200,000.

10. Justice invests 2,000,000 for a 20% interest in a new capital of 10,000,000.
11. Justice invests 2,000,000 for a 1/4 interest in an agreed capital of 10,000,000.
12. Justice contributes 4,000,000 for a 30% interest in the firm.
13. Justice contributes 1,600,000 for a 15 % interest in the firm.
14. Justice invests 1,500,000 for a 1/8 interest in the firm. Assets are to be adjusted so that Justice
will be credited for the same amount.
15. Justice purchases a 1/3 interest from the partners for 2,500,000.
16. Justice contributes cash for a 25% interest in the firm.

PROBLEM 6
On February 1, 2016, the capital balances of Pongkan, Kangkong and Kikyam are 600,000,
400,000 and 200,000, respectively. They share profits in the ratio of 5:3:2. On this date, Kikyam is
going to retire from the partnership.

Record the retirement of Kikyam in each of the following independent assumptions:

1. Kikyam sells his interest to Kangkong for 180,000.

2. Kikyam sells his interest to Pongkan and Kangkong for 250,000. Show the division of cash.
3. The partnership pays Kikyam 160,000.
4. The partners agreed that obsolete merchandise of 40,000 should first be written off before it pays
an amount to Kikyam resulting to a 22,000 bonus to the partners.
5. Before payment of 240,000 is given to Kikyam, the following items must be given effect:
a) The profit of the partnership of 120,000 for January must be closed to the three partners’
capital accounts.
b) The fair value of the firm’s building is to be decreased by 50,000.
c) Of the total amount to be paid to Kikyam, a note of 30,000 will be issued to him.
6. The partnership issues a note of 60,000 to Kikyam payable in two equal monthly installments
and pays him cash so that Kikyam got a bonus of 15,000.

PROBLEM 7
Bernal and Ruiz are partners who share profits and losses in a ratio of 3:2 and have capital
balances of 2,000,000 and 1,500,000, respectively, as of December 31, 2013.

1. Assume that the partners agreed to let Ayo into the partnership by investing 1,000,000 for a 1/5
interest. Ayo’s capital balance will be
a. 700,000 b. 1,000,000 c. 900,000 d. 800,000

2. Assume that the partners agreed to let Ayo into the partnership by investing 1,000,000 for a ¼
interest. Ayo’s capital balance will be
a. 750,000 b. 875,000 c. 1,000,000 d. 1,125,000

3. Assume that the partners agreed to let Ayo into the partnership by investing 1,000,000 for a ¼
interest. Bernal’s capital balance will be
a. 2,075,000 b. 2,062,500 c. 1,937,500 d. 1,925,000

4. Assume that the partners agreed to let Ayo into the partnership by investing 1,000,000 for a ¼
interest. Ruiz’s capital balance will be
a. 1,562,500 b. 1,550,000 c. 1,437,500 d. 1,450,000

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