Jerico P.

Almario
AC303 MWF 5:00-6:00

PARTNERHSIP DISSOLUTION

ASSIGNMENT #3

Multiple Choice Questions

1. Which of the following forms of new partner admission will not result in a change in the
partnership’s net asset?
a. Purchase of an ownership interest directly from the partnership
b. Purchase of an ownership interest directly from an existing partner
c. Either of the above
d. Neither of the above

2. When a new partner joins a partnership by investing assets into the partnership, what
method may be used to record the admission of the new partner?
a. Revaluation of existing assets
b. Recognition of goodwill
c. Application of the bonus method
d. Any of the three or a combination maybe applied

3. Which method of recording the admission of a new partner into a partnership potentially
results in the existing partner’s capital accounts changing in value?
a. Bonus method
b. Goodwill method
c. Either bonus method or goodwill/revaluation method
d. Existing partner’s capital accounts never change when a new partner is admitted into a
partnership.

4. A partnership is formed with three equal partners. However, each partner invests a
different amount of net assets. Which of the following statement is true?
a. Under the bonus method, all partners will have equal initial capital balances.
b. Under the goodwill method, each partner will have a different initial capital balance.
c. Because the investments are unequal, setting each partners capital balance equal to the
amount invested cannot be used.
d. The capital balances will be equal no matter which method – bonus, goodwill, or FMV of
investment – is used.

5. Which of the following is true regarding the admission of a few partner by purchase of an
existing partnership interest?
a. Using the transfer of capital interest approach, total partnership capital increases.
 b. Using the transfer of capital interest approach, partnership capital of existing partners
does not change.
c. Using the revaluation or total adjustments in assets implied goodwill approach,
recognized adjustment in asset/goodwill equals the new partners investment divided by
his/her capital percentage.
d. Using the revaluation of total adjustments in assets/implied goodwill approach, the
recognized adjustment in assets/goodwill is shared among only the existing partners.

6. In the AD partnership, Allen’s capital is P140,000 and Daniels is P40,000 and they share
income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of
the following questions is independent of the others. Allen and Daniel agree that some of
the inventory is obsolete. The inventory account is decreased before David is admitted.
David invests P40,000 for a 1/5 interest. What is the amount of inventory written down?
a. P4,000
b. P10,000
c. P15,000
d. P20,000

Solution:

Total agreed capital after the admission of David:

(P40,000 x 5) P200,000
Less: Contribution/Investment of David 40,000
Capital balances of AD before the admission of David P 160,000
Capital Contribution (P140,000 + P40,000) 180,000
Reduction in Inventory P 20,000

7. Using the same information in number 6, David directly purchases a 1/5 interest by paying
Allen P34,000 and Daniel P10,000. The land account is increased before David is admitted.
By what amount is the land account increased?
a. P40,000
b. P36,000
c. P20,000
d. P10,000
Solution:

Amount paid (P34,000 + P10,000) P 44,000

Less: Book value of interest acquired [(P140,000+P40,000) x 1/5] 36,000
Excess 8,000
Divided by/capitalized at 1/5
Amount of land increased P 40,000
8. R and X formed a partnership and agreed to divide initial capital equally, even though R
contributed P25,000 and X contributed P21,000 in identifiable assets. Under the bonus
approach to adjust the capital accounts. X’s unidentifiable assets should be debited for? 83
a. P11,500
b. P4,000
c. P2,000
d. P0.00

Explanation
Under the bonus method, unidentifiable assets are not recognized. The total resulting
capital is the FMV of the tangible investments of the partners. Thus, there would be no
unidentifiable assets recognized by the creation of this new partnership.

9. A, B, and C are partners sharing profits in a 5:3:2 ratio and with capital balances of P95,000,
P80,000, and P60,000, respectively, on December 31, 2019 the partners decided to admit D
and a new partner on January 1, 2020. D will contribute cash P80,000 to the partnership
and also pay P10,000 for 15% of B’s share. D is to have a 20% share in profit, after the
admission of D, the total capital will be P330,000 and D’s capital will be P70,000. After the
admission of D, B’s capital would be?
a. P72,600
b. P74,600
c. P79,100
d. P81,100
Solution:
A B C D TOTAL
Capital balances before the admission of D P95,000 P80,000 P60,000 – P235,000
Admission by purchase: Book Value (80k x 15%) -12,000 12,000
Admission by investment 80,000 80,000
Total Contributed Capital P95,000 P68,000 P60,000 P92,000 P315,000
Bonus to all partners (5:3:2) 11,000 6,600 4,400 -22,000
Goodwill to old (5:3:2) 7,500 4,500 3,000 15,000
Total Agreed Capital P113,500 P79,100 P67,400 P70,000 P330,000

10. Jesse, Joseph, and Leslie are partners with capital accounts of P70,000, P120,000 and
P90,000, respectively. The partnership shares profits and losses 45%, 30%, and 25%,
respectively. They are considering allowing Hans to join the partnership in investing directly
into the partnership. The partners intend to revalue the assets before Hans admission.
Neither bonus nor goodwill are acquired. If the assets FMV exceeds book value P150,000,
how much will Hans invest to acquire a 20% equity interest in the partnership?
a. P107,500
b. P100,000
c. P86,000
 d. P70,000
Solution:

Jesse’s capital P 70,000

Joseph’s capital 120,000
Leslie’s capital 90,000
Assets-book value 150,000
Total P430,00
Divide by 0.80
Multiply by 0.20
Total amount Hans need to invest P107,500