PARTNERSHIP DISSOLUTION

PROBLEM 4: MULTIPLE CHOICE- COMPUTATIONAL

1. B
Solution:

A’s, Capital 620,000

B’s, Capital 400,000 D’s interest D’s share of capital
C’s, Capital 380,000 A’s, Capital 620,000 x 20% 124,000
B’s, Capital 400,000 x 20% 80,000
Net assets before 1,400,000 2. Capital
C’s, 380,000 X 20% 76,000
admission
D’s investment 280,000

2. B
Solution:
A’s, Capital 139,200 Payment of D 132,000
B’s, Capital 208,800 Capital credit given to D* (88,800)
C’s, Capital 96,000 Combined personal gain of A 43,200
Net assets before 444,000 and B
admission

*Net asset before admission 444,000

Multiply by: D’s interest 1/5
Capital credit given to D = 88,800

3. C
Solution:

A’s, Capital 200,000 Net assets before admission 300,000

B’s, Capital 100,000 Investment of C 150,000
Net assets before 300,000 Net assets after admission 450,000
admission Multiply by: C’s interest in net assets 50%
C’s Capital Credit 225,000
Investment of C (150,000)
Bonus to C 75,000

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 A B C TOTAL
Capital, before admission 200,000 100,000 300,000
Investment of C 150,000 150,000
Bonus to C (56,250)* (18,750)** 75,000 -
(75,000 x 3/4)* 4.
(75,000 x 1/4)** 4.
Capital, after admission 143,750 81,250 225,000 450,000 4.
A
Solution:

Net assets after admission 425,000

Multiply by: C’s interest in net assets 25%
C’s Capital Credit 106,250
Investment of C (125,000)
Bonus to old partners (18,750)

A B C TOTAL
Capital, before admission 200,000 100,000 300,000
Investment of C 125,000 125,000
Bonus to old partners 14,062.5* 4,687.5** (18,750) -
(18,750 x 3/4)*
(18,750 x 1/4)**
Capital, after admission 214,062.5 104,687.5 106,250 425,000
5.
B
Solution:

New partner’s investment 18,000 *

Capital credit given to new (20,000) Capital credit based 100,000
partner* Multiply by: Interest of New 20%
Bonus to new partner 2,000 Partner
Capital Credit given to new 20,000
partner

6. C
Net assets before admission 120,000
Solution: Investment of Andre 30,000
Net assets after admission 150,000
2
Multiply by: Andre’s interest in net assets 1/3
Andre’s Capital Credit 50,000
Investment of Andre (30,000)
Bonus to Andre 20,000
Ming’s, Capital 80,000
Piw’s, Capital 40,000
Net assets before 120,000
admission

A B C TOTAL
Capital, before admission 80,000 40,000 120,000
Investment of Andre 30,000 30,000
7.
Bonus to Andre (12,000)* (8,000)** 20,000 -
(20,000 x 3/5)* 7.
(20,000 x 2/5)** 7.
Capital, after admission 68,000 32,000 50,000 150,000 7.
7.
B
Solution:
Retirement Entry of A:
DEBIT CREDIT
A, Capital 320,000
B, Capital 320,000

8. A
Solution:
ABC Co:

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 A B C TOTAL
Balance before withdrawal 320,000 192,000 128,000 640,000
Payment to A (360,000) (360,000)
Bonus to A 40,000 (24,000)* (16,000)** -
(40,000 x 30%/50%)*
(40,000 x 20%/50%) **
Balance after withdrawal - 168,000 112,000 280,000
9.
A
Solution:

Happy’s, Capital 60,000 Net assets before admission 80,000

Sad’s, Capital 20,000 Divide by: (100%- 20% interest of Angry) 80%
Net assets before 80,000 Net assets after admission 100,000
admission Multiply by: Angry’s interest in net assets 20%
Angry’s investment 20,000

HAPPY SAD ANGRY TOTAL

Capital, before admission 60,000 20,000 80,000
Investment of Angry 20,000 20,000
Capital, after admission 60,000 20,000 20,000 100,000

10. D
Solution:
Net assets before admission 80,000
Kern’s, Capital 60,000 Investment of Grant 15,000
Pate’s, Capital 20,000
Net assets after admission 95,000
Net assets before 80,000
admission
Multiply by: Grant’s interest in net assets 20%
Grant’s Capital Credit 19,0004
Investment of Grant (15,000)
Bonus to Grant 4,000
 11. D
Solution:
 To capitalize balances of the partners are adjusted as follows:

A B C TOTAL
Unadjusted balance 300,000 500,000 200,000 1,000,000
Share in Profit 360,000* 540,000** 900,000*** 1,800,000
(1,800,000 X 20%)*
(1,800,000 X 30%) ** 
(1,800,000 X 50%) *** 
Share in Revaluation 120,000* 180,000** 300,000*** 600,000 
(600,000 x 20%)* 
(600,000 x 30%)**

(600,000 x 50%)***
Adjusted Balance 780,000 1,220,000 1,400,000 3,400,000 

Partnership Capital after C’s withdrawal:
A B C TOTAL
Balance before withdrawal 780,000 1,220,000 1,400,000 3,400,000
Payment to C (1,600,000)* (1,600,000)
Bonus to C (80,000)** (120,000)*** 200,000 -
(200,000 x 20%/50%)**
(200,000 x 20%/50%)***
Balance, after withdrawal 700,000 1,100,000 - 1,800,000

*Cash 1,000,000 + Equipment 600,000 = 1,600,000

12. C

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Solution:

A B C TOTAL
Unadjusted capital 300,000 300,000 200,000 800,000
Share in Revaluation (5,000)* (5,000)* (5,000)* (15,000)
(65,000-50,000 ÷ 3)*
Adjusted Balance 295,000 295,000 195,000 785,000

13. D
Solution:

C’s share in Revaluation (5,000)

Debit to C’s capital for the fair (50,000)
value of the furniture
Net decrease in C’s Capital (55,000)

14. C
Solution:

Capital of C 200,000
C’s Share in Revaluation (5,000)
Adjusted Capital 195,000
Less: Fair Value of the Furniture (50,000)
Value of note issued to C 145,000

15. B
Solution:
Net assets before admission 260,000
Add (Deduct) adjustments:
A’s, Capital 140,000
Bad Debt (10,000)
B’s, Capital 120,000
Increase in Inventory 20,000*
Net assets before 260,000
Depreciation (3,000)
admission
Adjusted Capital 267,000
*Increase in inventory 140,000- 160,000=
20,000