Dissolution True or False and Problems With Answers

TRUE OR FALSE
1. There can be partnership dissolution without liquidation but no liquidation can take place without
first having the partnership dissolved.
2. Bonus is given to the withdrawing partner when he is paid more than his interest in the partnership
3. When the existing partners give bonus to new partner, the existing capital accounts of the partners’
capital accounts are debited.
4. There is a bonus to old partners when total agreed capital is equal to the total capital contribution of
the partners and the new partner’s agreed capital is not equal to his capital contribution.
5. The amount of money that the buying partner pays to selling partner will go to the partnership and
not to the partners concerned.
6. Dissolution causes the termination of the partnership
7. Only admission of a new partner by purchase of interest necessitates adjustments of non current
assets into its fair market value.
8. Ownership may be transferred at will by anyone of the partners without consulting the other partners.
9. Admission by purchase of interest is a personal transaction between the selling partner and the
buying partner yet there is an increase in the capitalization of the partnership.
10. Admission by investment will increase the capitalization of the partnership.
11. An upward adjustment of partnership assets is implied before a new partner is admitted
A. when recorded book values are greater than market values.
B. this is prohibited by GAAP.
C.when the new partner's capital credit is greater than his or her investment of assets in the
firm.
D.when total contributions are less than total agreed equity and the new partner's capital credit
is the same as his or her investment of assets in the firm
12. Partnership is said to be dissolved when a

A. Partner dies
B. Any of these
C. New partner is admitted in the partnership
D. Partner retires
13. Which of the following could be possible cause for dissolution with liquidation of the
partnership business
A. Death of the partner
B. Retirement of a partner
C. When the partnership is being incorporated
D. Insolvency of the partner
E.
14. In the partnership of ABC, B sold the partnership interest share to D. Who will receive the cash
payment made by D?
A. Parner B
B. The partnership
C. Partners A, B and C
D. Partners A and B
15. If a bonus is traceable to the old partners rather than to a new partner, it is allocated among
the partners according to the
A. Capital ratio of the new partners
B. Profit and loss ratio of the new partners
C. Capital ratio of the old partners
D. Profit and loss ratio of the old partnership
16. Which of the following will not result in dissolution of partnership?

A. Admission of a partner
B. Incapacity of a partner
C. Negative capital balance of a partner
D. Bankruptcy of a partner
17. Admission of a new partner by investment will
A. Increase the assets of the partnership only
B. None of these
C. Increase the capitalization of the partnership only
D. Increase both the assets and capitalization of the partners
18. The following instances may dissolve the partnership except

A. Retirement of a partner
B. Change in partnership name
C. Admission of a new partner
D. Incorporation of a partnership
19. DEF partners , whose capital balances totaled P 400,000 decided to admit G who invested P
120,000 cash for a 20% interest . The partners agree to revalue the assets. This will result to
A. Asset revaluation for G of 20,000

B. Asset revaluation of 80,000 for D, E and F
C. Agreement is invalid
D. Asset impairment of 20,000 for D, E and F
20. Brenda is admitted to a partnership with a 25% capital interest by a cash investment of
P90,000. If total capital of the partnership is P390,000 before admitting Brenda, the bonus to
Brenda would be?
21. ABC Partnership decided to admit D who purchased 20% interest from A whose capital
balance was P 400,000. D paid her P 100,000. The entry to record this transaction in the
partnership would be
A. Debit: cash 80,000 and credit: D, capital 80,000
B. Debit: cash 100,000 and credit: D, capital 100,000
C. Debit: A, capital 80,000 and credit: D, capital 80,000
D. Debit: A, capital 100,000 and credit: D, capital 100,000
22. John invested P 400,000 for a one-fourth interest in the partnership in which the other
partners have capital totaling P 800,000 before admitting him. Under the bonus method
A. John will give up bonus of P100,000
B. John will receive a bonus of P100,000
C. John will have a capital balance of P 266,667
D. John will have a capital balance of P 400,000
23. Karen, Karmi and Kathy are partners sharing profits in the respective ratio of 2:3:5. On May 31,
2019, Kathy opted to retire. The capital account balances at that time are P 95,000 , P 140,000 ,
and P 135,000 respectively. Assuming that Kathy is paid P 132,000, Karen would be credited for?
24. Gwen purchases a 25% interest for P 30,000 when the partnership of Super, James and King
has a total capital of P270,000 . Prior to the admission of Gwen, each partner has a capital
balance of P 90,000. Each partner relinquishes an equal amount of his capital balance to
Gwen. The amount to be relinquished by King would be ?
25. Carla and Kidman are partners who share income and losses in the ratio of 3:2, respectively.
On August 31, their capital balances were: Carla, P175,000 and Kidman, P150,000. On that
date, they agree to admit Lorna as a partner with a one-third capital interest.
If Lorna invests P125,000 in the partnership, Carla's capital balance after Lorna's admittance
would be P ________________ (Use the Bonus method.)
26. Kring and Kong are partners who share profits and losses equally and have capital balances of
P560,000 and P490,000, respectively. Stan is admitted into the partnership by investing
P490,000 for 30% capital interest. ( Total Agreed capital is based on existing partners' capital
balances) Asset Impairment is recognized. The account balance of Kong, Capital after the
admission of Stan would be?
Answers:
1. True
2. True
3. True
4. True
5. False
6. False
7. False
8. False
9. False
10. True
11. D.
12. B
13. C.
14. A
15. D.
16. C.
17. D.
18. B
19. B
20. 30,000
21. C.
22. A
23. 267,000
24. 22,500
25. 156,000
26. 465,000

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TRUE OR FALSE

12. Partnership is said to be dissolved when a

16. Which of the following will not result in dissolution of partnership?

18. The following instances may dissolve the partnership except

A. Asset revaluation for G of 20,000

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