PARTNERSHIP DISSOLUTION

Some partnerships, at some point in time, may discontinue its operation or otherwise
continue but with a different composition or structure, perhaps with a new partner or in another
instance where an old partner disassociates himself from the partnership. This process is called
dissolution. Partnership Dissolution is defined in Article 1825 of the Civil Code of the Philippines
as the change in the relation of the partners caused by any partner ceasing to be associated in the
carrying out of the business. Dissolution also refers to the termination of the life of an existing
partnership. This process does not, however, take into account whether or not the partnership
will resume its operation. When the business has totally terminated business activities and
winded up of its affairs in preparation for going out of business, the process is called liquidation.

The following occurrences progress into partnership dissolution.

1. Admission of a new partner
2. Removal of an old partner caused by
a. Voluntary withdrawal
b. Retirement
c. Death
d. Incapacity
e. Bankruptcy of a partner
3. Termination upon mutual consent of all the partners
4. Termination of the business upon completion of partnership
purpose/objective
5. Incorporation of a partnership.

ADMISSION OF A NEW PARTNER

A new partner may be admitted in a partnership by (a) the purchase of interest from one
or more of the old (original) partner/s or (b) investment or contribution of asset to the
partnership.

Admission by Purchase
A new partner is admitted in an existing partnership, after the approval of course of ALL
the current partners. Consequentially the old partnership dissolves and a new partnership
contract will be prepared. Terms such as purchase, sells, pays, bought, acquire, sold and
transferred denote admission by purchase.

The sale to a new partner of an old partner’s interest in an existing partnership is a

personally transaction between the selling partner and the buying partner. The amount paid by
the new partner who purchases an interest goes personally to the partner who sells his or her
interest; the amount paid does not go to the partnership.

The only entry required on the partnership books is the recording of the transfer of
capital from the capital account of the selling partner to that of the buying partner. The amount

Partnership Dissolution – Admission of a Partner Page 73

of capital transferred will be equal to the book value of the interest sold regardless of the amount
paid.

When the new partner pay more than or less than the book value of the interest sold by
the old partner will result in a gain or loss in the transaction. This gain or loss is considered a
personal gain or loss of the partner selling his share and not of the partnership; therefore no gain
or loss is recognized in the partnership books.

Sample Problem.

Maliksi and Matabil are partners with capital balances of P250,000 and P75,000
respectively. They share profits and losses 60% and 40% respectively. Mayumi will be admitted
as a new partner.

Case A –Mayumi is to purchase ¼ interest from Maliksi paying P62,500.

(New partner purchases from one of the partners at book value.)

Maliksi, Capital 62,500

Mayumi, Capital 62,500
P250,000 / 4 = P62,500

The partnership will only record the transfer of the ¼ interest from Maliksi to Mayumi.
The payment of P62,500 cash by Mayumi to Maliksi is not recorded in the company books
because it is a personal transaction.

After the admission of Mayumi, the total capital of the partnership will still be P325,000
as shown below:

MaliksiCapital (P250,000 – P62,500) P 187,500

Matabil, Capital 75,000
Mayumi, Capital 62,500
Total Capital P 325,000

Case B –Mayumi is to purchase ¼ interest from the partnership paying P81,250.

(New partner purchases at book value from more than one partner.)

Maliksi, Capital 62,500

Matabil, Capital 18,750
Mayumi Capital 81,250
P250,000 x ¼ = P62,500
P 75,000 x ¼ = P18,750

The partnership will only record the transfer of the ¼ interest from Maliksi and Matabil to
Mayumi. The payment of P81,250 cash made by Mayumi to Maliksi and Mayumi is not recorded
in the company books because it is a personal transaction. The amount paid is equal to the book
value of the acquired interest, therefore no gain or loss is recorded in the books.

Partnership Dissolution – Admission of a Partner Page 74

Case C – Mayumi is to purchase ¼ interest from the partnership paying P75,000.
(New partner purchases at less than the book value from the partners)

Maliksi, Capital 62,500

Matabil, Capital 18,750
Mayumi Capital 81,250
P250,000 x ¼ = P62,500
P 75,000 x ¼ = P18,750

The P75,000 paid by Mayumi to Maliksi and Matabil should not be shown in the
partnership books because the said amount was paid personally to the partners. The entry
reflected in the books would be the transfer of the ¼ capital of the old partners, P62,500 and
P18,750, respectively, to the new partner. The P6,260 difference will be a personal loss of Maliksi
and Matabil, the old partners.

Case D – Mayumi is to purchase ¼ interest from the partnership paying P85,000.

(New partner purchases at more than book value from the partners)

Maliksi, Capital 62,500

Matabil, Capital 18,750
Mayumi Capital 81,250
P250,000 x ¼ = P62,500
P 75,000 x ¼ = P18,750

The P85,000 paid by Mayumi to Maliksi and Matabil should not be shown in the
partnership books because the said amount was paid personally to the partners. The entry
reflected in the books would be the transfer of the ¼ capital of the old partners, P62,500 and
P18,750, respectively, to the new partner. The P3,750 difference will be a personal loss of
Mayumi, the new partner.

Keep in mind that from the foregoing cases, the transfer of capital from the old partners
to the new partner is recorded at book value notwithstanding the amount given up. The
payment, whether at more or less than the book value is recorded as if they are at book value.
Furthermore, the total partnership capital of P325,000 will remain the same after the transfer,
hence, total assets and total capital of the partnership is not affected.

Admission of a Partner by Purchase with Asset Revaluation

Customarily, revaluation of assets of the old partnership is being done before the
admission of the new partner. The result of the revaluation of assets is carried to the capital
accounts of the old partners. The adjusted capital of the old partners becomes the basis for the
interest transferred to the new partner.

Partnership Dissolution – Admission of a Partner Page 75

 Illustrative Problem A:

Capital balances Profit and Loss

Partners before admission Ratio
Masagana P 150,000 50%
Mahiwaga 100,000 30%
Maputla 50,000 20%
Total Capital P 300,000 100%

Maliwanag, the new partner, is to purchase 1/5 interest from the partners paying
P70,000. Prior to the admission of Maliwanag, the assets of the partnership will be revalued. The
amount to be paid by Maliwanag, P70,000, will be applied as the basis for the revaluation.

Entry for the Revaluation of Asset

Other Assets 50,000

Masagana, Capital 25,000
Mahiwaga, Capital 15,000
Maputla, Capital 10,000
New Partnership Capital = P70,000 ÷ 1/5 = P 350,000
Old Partners Capital 300,000
Asset Revaluation P 50,000

Distribution of P50,000 to old partners (based on profit and loss ratio)

Masagana P50,000 x 50% = P25,000
Mahiwaga P50,000 x 30% = P15,000
Maputal P50,000 x 20% = P10,000

Entry for the transfer of capital

Masagana, Capital 35,000

Mahiwaga, Capital 23,000
Maputla, Capital 12,000
Maliwanag, Capital 70,000

Masagana Mahiwaga Maputla Total

Capital balances before revaluation P150,000 P100,000 P50,000 P300,000
Share in asset revaluation 25,000 15,000 10,000 50,000
Capital balances after revaluation P175,000 P115,000 P60,000 P350,000
Interest purchased 1/5 1/5 1/5 1/5
Capital transferred to Maliwanag P35,000 P23,000 P12,000 P70,000

Capital balances after revaluation P175,000 P115,000 P60,000 P350,000

Capital transferred to Maliwanag 35,000 23,000 12,000 70,000
Capital balance after admission P140,000 P 92,000 P48,000 P280,000

Partnership Dissolution – Admission of a Partner Page 76

 Illustrative Problem B:

If instead, Maliwanag is to purchase 1/4 interest from the partners paying

P50,000, the admission will recorded this way.

Entry for the Revaluation of Asset

Masagana, Capital 50,000

Mahiwaga, Capital 30,000
Maputla, Capital 20,000
Other Assets 100,000

New Partnership Capital = P50,000 ÷ 1/4 = P 200,000

Old Partners Capital 300,000
Negative Asset Revaluation (P 100,000)

Distribution of negative asset revaluation of P100,000

Masagana P100,000 x 50% = P50,000
Mahiwaga P100,000 x 30% = P30,000
Maputla P100,000 x 20% = P20,000

Entry for the transfer of capital

Masagana, Capital 25,000

Mahiwaga, Capital 17,500
Maputla, Capital 7,500
Maliwanag, Capital 40,000

Masagana Mahiwaga Maputla Total

Capital balances before revaluation P150,000 P100,000 P50,000 P300,000
Share of Asset revaluation (50,000) (30,000) (20,000) (100,000)
Capital balances after revaluation P100,000 P70,000 P30,000 P200,000
Interest purchased 1/4 1/4 1/4 1/4
Capital transferred to Maliwanag P25,000 P17,500 P7,500 P50,000

Supposing that a new profit and loss has not been agreed upon by the partnership, it
would be assumed that Maliwanag would have 1/4 (or 25%) share and the 3/4 (or 75%) would be
divided upon by the old partners based on the old profit and loss ratio.

20% Maliwanag 20% = 25%

Masagana 75% x 50% = 37.5%
80% Mahiwaga 75% x 30% = 22.5%
Maputla 75% x 20% = 15%

Total 100%

Partnership Dissolution – Admission of a Partner Page 77

Admission by Investment
The admission of a new partner by investment constitutes the entry of a new partner with
a corresponding increase in total assets and increase in total capital of the partnership. There is
increase in assets from the investment of cash or non-cash assets made by the new partner.
Terms such as invests and contributes are used to indicate the admission of a new partner by
Investment.

For illustration, let use the following information

Capital balances Profit and Loss

Partners before admission Ratio
Maharlika P 100,000 35%
Magarbo 150,000 35%
Magiliw 50,000 30%
Total Capital P 300,000 100%

Case A- Maginoo, the new partner will invest P75,000 for 20% interest in equity and in profit in
the new partnership capital of P375,000.

Upon the admission of Maginoo, as per agreement, the new partnership capital would be
P375,000, which is equal to the actual contributions of the old partners and new partner.

Total Actual New Partnership

Contribution Capital
Old Partners P 300,000 = P 300,000
New Partner 75,000 = 75,000
Total P375,000 = P375,000

The entry to record the admission of the new partner

Cash 75,000
Maginoo, Capital 75,000

Case B- Maginoo, the new partner will invest P75,000 for 25% interest in equity and in profit in
the new partnership capital of P375,000. (BONUS TO NEW PARTNER)

After the admission of Maginoo, the total contributed capital balance would be P375,000
as agreed upon, with the total new partnership having the same amount. This would result to
Maginoo, the new partner being credited by P93,750 which is 25% of the new partnership
capitalization of P375,000. This would mean that from his contribution of P75,000, additional
capital would be transferred to him (amounting to P18,750) from the old partners to be able to
have a capital of P93,750. This occurrence is called BONUS where old partners transfer equity to
the new partner, or vice versa.

Partnership Dissolution – Admission of a Partner Page 78

 The entry to record the admission and bonus to new partner

Cash 75,000.00
Maharlika, Capital 6,562.50
Magarbo, Capital 6,562.50
Magiliw, Capital 5,625.50
Maginoo, Capital 93,750.00

New Cap credit P375,000x 25% = P93,750

Old Cap credit P375,000 – P93,750 =P281,250

New
Interest
partnership Total Actual
share
Capital Contribution
Old Partners 75% P 281,250 (18,750) P 300,000
New Partner 25% 93,750 18,750 75,000
Total P375,000 = P375,000

The transfer of capital from the old partners amounting to P18,750 will be divided based
on their old profit and loss ratio, as follows:

Maharlika P18,750 x 35% = P6,562.50

Magarbo P18,750 x 35% = P6,562.50
Magiliw P18,750 x 30% = P5,625.00

Case C- Maginoo, the new partner will invest P75,000 for 17% interest in equity and in profit in
the new partnership capital of P375,000. (BONUS TO OLD PARTNER)

After the investment of Maginoo, the total contributed capital balance of the partnership
would be P375,000 , the same as it has been agreed upon. This would result with Maginoo, the
new partner being credited by P63,750 which is 17% of the new partnership capital instead of his
actual contribution of P75,000. The difference amounting P11,250 would be transferred to the
capital of the old partners and will be divided based on the old profit and loss ratio. This transfer
of equity is called BONUS TO OLD PARTNERS.

The entry to record the admission and bonus to old partner

Cash 75,000.00
Maharlika, Capital 3,937.50
Magarbo, Capital 3,937.50
Magiliw, Capital 3,375.00
Maginoo, Capital 63,750.00
New Cap credit P375,000 x 17% = P 63,750
Old cap credit P375,000 x 83% = P311,250

Partnership Dissolution – Admission of a Partner Page 79

 New
Interest
partnership Total Actual
share
Capital Contribution
Old Partners 83% P 311,250 11,250 P 300,000
New Partner 17% 63,750 (11,250) 75,000
Total P375,000 = P375,000

The transfer of capital from the new partners amounting to P11,250 will be distributed
based on the old partner’s capital, as follows:
Maharlika P11,250 x 35% = P3,937.50
Magarbo P11,250 x 35% = P3,937.50
Magiliw P11,250 x 30% = P3,375.00

Case D- Maginoo, the new partner will invest P75,000 for 15% interest in equity and in profit in
the new partnership capital of P500,000.
(REVALUATION OF ASSET- Old partners’ capital are affected)

After the admission of Maginoo, the total contributed capital balance of the partnership
would be P375,000 while the agreed capital would be P500,000, prompting a Revaluation of
Assets amounting to P125,000. This would result with Maginoo, being credited by P75,000 which
is 15% of the new partnership capital P500,000 which is the same as his original/actual
contribution. The old partners should have a capital credit of P425,000 (85% of the new
partnership capital of P500,000) after admission thus the revaluation will be effected on the old
partners’ capital and will be divided based on the old profit and loss ratio.

The entry to record the admission and revaluation of asset

Cash 75,000
Other Assets 125,000
Maharlika, Capital 43,750
Magarbo, Capital 43,750
Magiliw, Capital 37,500
Maginoo, Capital 75,000
New Cap credit P500,000 x 15% = P 75,000
Old cap credi P500,000 x 85% = P 425,000

New
Interest
partnership Total Actual
share
Capital Contribution
Old Partners 85% P 425,000 125,000 P 300,000
New Partner 15% 75,000 = 75,000
Total P500,000 > P375,000

**Revaluation of Asset = P500,000 – P375,000 = P125,000

Partnership Dissolution – Admission of a Partner Page 80

 The revaluation of asset will be effected on the old partners’ capital based on the old
profit and loss ratio, as follows:

Maharlika P125,000 x 35% = P43,750

Magarbo P125,000 x 35% = P43,750
Magiliw P125,000 x 30% = P37,500

Case E- Maginoo, the new partner will invest P70,000 for 20% interest in equity and in profit in
the new partnership capital of P350,000.
(Negative REVALUATION OF ASSET- Old partners are affected)

After the admission of Maginoo, the total contributed capital balance of the partnership
will be P370,000 while the agreed capital will be P350,000, prompting a Revaluation of Assets
amounting to P20,000. This would result with Maginoo being credited by P70,000 which is 20% of
the new partnership capital P350,000 (that is the same as his original/actual contribution). The
old partners should have a capital credit of P280,000 (80% of the new partnership capital of
P350,000) instead of the actual capital contribution of P300,000, thus the revaluation of P20,000
will be effected on the their capital accounts and will be divided based on the old profit and loss
ratio.

The entry to record the admission and revaluation of assets

Cash 70,000
Maharlika, Capital 7,000
Magarbo, Capital 7,000
Magiliw, Capital 6,000
Other Assets 20,000
Maginoo, Capital 70,000

New Cap credit P350,000 x 20% = P 70,000

Old cap credit P350,000 x 80% = P280,000

New
Interest
partnership Total Actual
share
Capital Contribution
Old Partners 80% P 280,000 (20,000) P 300,000
New Partner 20% 70,000 = 70,000
Total P350,000 < P370,000

The revaluation of asset will be effected on the old partners’ capital based on the old
profit and loss ratio, as follows:

Maharlika P20,000 x 35% = P7,000

Magarbo P20,000 x 35% = P7,000
Magiliw P20,000 x 30% = P6,000

Partnership Dissolution – Admission of a Partner Page 81

Case F- Maginoo, the new partner will invest P75,000 for 15% interest in equity and in profit in
the new partnership capital of P400,000.
(BONUS AND REVALUATION OF ASSET to old partners)

The entry to record the admission

Cash 75,000
Other Assets 25,000
Maharlika, Capital 14,000
Magarbo, Capital 14,000
Magiliw, Capital 12,000
Maginoo, Capital 60,000
New Cap credit P400,000 x 15% = P 60,000
Old cap credit P400,000 x 85% = P340,000

New
Interest
partnership Total Actual
share
Capital Contribution
Old Partners 85% P 340,000 40,000 P 300,000
New Partner 15% 60,000 (15,000) 75,000
Total P400,000 25,000 P375,000

**Revaluation of Asset = P400,000 – P375,000 = P25,000

Bonus to old partners from new partners = P 60,000 – P75,000 = (P15,000)
Revaluation of Asset of New partner = P40,000 – P15,000 = P25,000

The bonus and revaluation of asset will be effected on the old partners’ capital based on
the old profit and loss ratio, as follows:
Maharlika P40,000 x 35% = P14,000
Magarbo P40,000 x 35% = P14,000
Magiliw P40,000 x 30% = P12,000

Partnership Dissolution – Admission of a Partner Page 82

 EXERCISES

4-1 Allyna and Allysa are partners with capital balances of P 480,000 and P 240,000. Their
profit and loss agreement is 75% and 25%, respectively. They agree to admit Aldrick as a
partner of firm.

Give the required journal entries to record the admission of Aldrick under each of the
following independent cases:

1. Aldrick purchases 25% interest in the firm. Aldrick pays the partners P 180,000
which is divided between Allyna and Allysa in proportion to the equities given up.

2. Aldrick purchases a 1/3 interest in the firm. Aldrick pays the partners P 360,000.
Asset revaluation is undertaken before Aldrick’s admission so that his 1/3 interest
will be equal to the amount of his payment.

3. Aldrick invests P 360,000 for a 25% interest in the firm. Asset revaluation is
recorded on the firm books prior to Aldrick’s admission.

4. Aldrick invests P 360,000 for a ½ interest in the firm. Allyna and Allysa transfer
part of their capital to Aldrick as bonus.

5. Aldrick invests P 480,000 in the firm. Bonus of P 120,000 is considered to partners

Allyna and Allysa.

6. Aldrick invests P 480,000 in the firm with P 20,000 bonus allowed to Allysa and
Allyna upon his admission.

7. Aldrick invests P 300,000 for a ¼ interest in the firm. Total capital of the new
partnership is P 1.020,000.

8. Aldrick invests P 330,000 for a 25% interest in the firm. The total firm capital after
his admission is P 1,320,000.

9. Aldrick invests P 288,000 for a 1/3 interest in the firm. The total firm capital after
his admission is P 1,008,000.

10. Aldrick invests sufficient cash for a 1/5 interest in the firm.

Partnership Dissolution – Admission of a Partner Page 83

4-2 Partners Lakers and Celtics are considering the admission of Knicks into the partnership.
Lakers and Celtics share profit and loss in the ratio of 2:4, respectively. Capital balances
of Lakers and Celtics are P 240,000 and P 180,000 respectively.

Prepare journal entries to record the admission of Knicks under each of the following
independent assumptions:

1. Knicks acquired one-third of the interest of Lakers paying P 80,000.

2. Knicks acquired one-third of the interest of Celtics paying P 35,000.

3. Knicks buys a 25% interest in the partnership from the old partners paying each
P63,000. Asset revaluation has to be considered prior to the admission of Knicks.

4-3 Utah, Atlanta and Detroit have capital balances of P 150,000, P 200,000, and P 300,000,
respectively and they share profits and losses in the ration of 4:3:3. Miami purchases
15% interest in equity and profits from the partners for P 150,000.

a) What would be the new capital balance of Utah, Atlanta and Detroit after the
admission of Miami?

Utah _____________ Atlanta ________________ Detroit ________________

b) Assume that some of the assets of the partnership are undervalued, how much
is the undervaluation in assets? _______________________

4-4 On August 1, 2020, prior to the admission of Grant, E and F Enterprises have the
following account balances:

Cash P 30,000
Accounts Receivable 400,000
Allowance for Bad Debts 36,000
Merchandise Inventory 110,000
Equipment - net 134,000
Accounts Payable 38,000
Erving, Capital 300,000
Fisher, Capital 300,000

Partnership Dissolution – Admission of a Partner Page 84

 Erving and Fisher share profit and loss on 1:1 ratio. Before the admission of Grant, the
partners agree on the following adjustments to bring the assets and liabilities to their
fair values:

a. The allowance for Bad Debts should be brought to 10% of the outstanding
accounts receivable.

b. The current market value of the merchandise inventory is P 140,000.

c. Accrued expenses of P 4,000 should be recognized in the accounting records.

1. If Grant purchases 50% of Erving’s capital at its adjusted carrying value, how
much is the total assets of the partnership just after the admission of Grant?
____________________

2. If Grant is admitted into the partnership upon his investment of P 400,000 for
2/5 interest in capital and profit, what is the total capital of the partnership just
after the admission of Grant? ________________________

4-5 Jake desires to invest P 200,000 for ¼ capital and profit and loss interest in the
partnership of Kim and Lim, who at that time had capital balances of P 200,000 and
P300,000, respectively. Profit and loss ratio of the partners before the admission was
6:4. If a positive asset revaluation is to be recorded, what are the capital balances of
Kim, Lim and Jake?

Kim _________________ Lim ________________ Jake ________________

4-6 Pierce, Allen, and Rondo are partners with capital account balances at year-end of
P90,000; P 110,000; and P 50,000, respectively. The partnership profit for the year is
P 110,000. They share profits and losses on a 4:4:2 ratio, after considering the following
terms:

a. Interest of 10% shall be paid on that portion of a partner’s capital in excess of

P100,000

b. Salaries of P 10,000 and P 12,000 shall be paid to Pierce and Rondo, respectively

c. Rondo is to receive a bonus of 10% of profit after bonus

How much is the total profit share of each partner?

Pierce _____________ Allen ______________ Rondo ________________

Partnership Dissolution – Admission of a Partner Page 85

4-7 Anton, Barkley and Charles, partners of ABC Enterprises, have agreed on a profit and loss ratio
of 3:3:4, respectively. On December 31, 2019, the partnership books showed the following
capital balances:

Anton – P 450,000; Barkley – P 540,000; Charles – P 900,000

On January 1, 2020, Derek was admitted as a new partner under the following terms and
conditions:

a. Derek will share ¼ in the profit and loss ratio, while the ratio of the original partners will
remain proportionately the same as before Derek’s admission.

b. Derek will purchase 1/6 of Barkley’s interest paying him P 75,000.

c. Derek will contribute P 450,000 in cash to the partnership.

d. Total partnership capital after Derek’s admission will be P 2,400,000 of which Derek’s
capital interest will be P 480,000.

Instructions:

1. Using the format below, prepare a schedule showing the capital of each partner before
and after the admission of Derek.

Anton Barkley Charles Derek Total

Capital balances before the
admission of Derek P 450,000 P 540,000 P 900,000 - P 1,890,000

2. What is the profit and loss ratio of all the partners after Derek’s admission?

4-8 The CFM Partnership shows the following profit and loss ratios and capital balances:

Carter – 60% P 252,000; Fisher – 30% P 126,000; Malone – P 10% P 42,000

The partners decide to sell Shaq 20% of their respective capital and profit and loss interests for a
total payment P 90,000. Shaq will pay the money directly to the partners.

1. If the partners agree that asset revaluation is to be recorded prior to the admission of
Shaq, what are the capital balances of the partners after Shaq’s admission?

Carter _________ Fisher _________ Malone __________ Shaq ___________

Partnership Dissolution – Admission of a Partner Page 86

4-9 On January 1, 2020, Kevin Garnett and Steve Nash have capital balances of P 174,600 and
P 110,400, respectively. On this date, Karl Malone is admitted as a partner upon his
investment of P 120,000 in the firm. Kevin and Steve, sharing profits and losses in the
ratio of 65:35, gave a bonus to Karl so that Karl may have a 40% interest in the firm.

How much is the decrease in Steve’s capital balance? _________________________

4-10 Jason and Kidd are partners who share profits and losses in the ratio of 3:1, respectively.
On August 1, 2020, their capital balances were: Jason – P 200,000 and Kidd – P 100,000.
On this date, Scottie invests 80,000 in the firm and is given a capital credit of P 50,000
which is to be 1/8 of the capital of the new partnership.

1. What is the agreed capital of the new partnership? _______________________

2. What is the new capital balance of Jason after the admission of Scottie?
______________

4-11 Terence and Romeo are partners who share profits and losses 60% and 40%, respectively.
Their capital accounts on July 1, 2020 were as follows: Terence – P 280,000; Romeo –
P240,000. On this date, they agree to admit Arwind as a new partner.

1. If Arwind purchased ¼ of the equity of Terence for P 100,000, how much would be
the total partnership capital after Arwind’s admission?
________________________

2. If Arwind invested P 180,000 for a ¼ interest in the firm and that the assets of the
partnership are fairly valued, what would be the capital of Terence after Arwind’s
admission? ______________________

3. If Arwind invested P 130,000 for a 25% interest in the firm and that the assets of the
partnership are fairly valued, what would be the capital of Romeo after the
admission of Arwind? _________________________

4. If Arwind purchased 25% of the respective capital and profits and losses of Terence
and Romeo for P 150,000, how much is the share of Terence in the asset
adjustment?
____________________

Partnership Dissolution – Admission of a Partner Page 87