COMPUTATIONAL

QUESTION 7
Presented below is the condensed statement of financial position of the partnership of Gan, Witt, and Windy.
The partners share profits and losses in the ratio 6:3:1, respectively.

Cash 85,000 Liabilities 80,000

Other Assets 415,000 Gen, Capital 252,000

Witt, Capital 126,000

Windy, Capital 42,000

Total 500,000 Total 500,000

Treat independently each of the following questions relative to Windy’s retirement from the partnership.
● If Windy is to receive P60,000 as cash settlement of her interest and the partnership assets are fairly
valued, the decrease in Gen’s capital as a result of Windy’s withdrawal is 12000
● Windy is to receive P60,000 as settlement for her interest. Assume that any difference between this
amount and the carrying value of her capital indicates that some assets have fair values in excess of
carrying values. The credit to Witt, Capital as a result of asset revaluation is 54000
● Gan and Witt buy ¼ and 3/4 , respectively, of Windy’s interest for P75,000 and P22,500. This indicates
that assets are overvalued by 120000
● Gan and Witt buy ⅓ and 2/3 , respectively , of Windy’s interest for P10,000 and P20,000. Gan, capital
immediately after Windy’s retirement is 266000
● Windy is to receive P33,000 as cash settlement. All assets and liabilities are fairly valued. The capital
balance of Witt immediately after withdrawal of Windy is 129000
● Allowance for bad debts of P4,000 and equipment impairment loss of P8,000 would be recognized. The
partnership would pay an amount to Windy equal to her adjusted capital. Cash settlement to Windy is
40800