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Solution manual special transactions millan chapter 3 2021
Accountancy (Saint Louis College)
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Chapter 3
Partnership Dissolution
PROBLEM 1: TRUE OR FALSE
1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. FALSE (50% before C’s admission – 25% sold to C) =
25%
6. TRUE
7. TRUE
8. TRUE
9. TRUE (7 payment – 5 capital) = 2 bonus to Mouse,
treated as reduction to Dog’s and Cat’s capital for 1
each. The entry is as follows:
Mouse, Capital
5
Dog, Capital (2 x ½)
1
Cat, Capital (2 x ½)
1
Cash
7
10. FALSE – (₱5 cap. x 3 partners) = ₱15 net assets;
(4 sh. x ₱1 par x 3 partners) = ₱12 aggregate
par value;
₱15 - ₱12 = ₱3 share premium
PROBLEM 2: MULTIPLE CHOICE – THEORY
1. D
2. C
3. D
4. D
5. D – The remaining partners’ capital accounts were
decreased. Therefore, the bonus method must have
been used.
PROBLEM 3: EXERCISES
1. Solution:
Date
C, Capital (200,000 x 1/2)
100,0
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D, Capital
00
2. Solutions:
Requirement (a):
Date
A, Capital (100,000 x 25%)
B, Capital (150,000 x 25%)
C, Capital (200,000 x 25%)
D, Capital
Requirement (b):
A
Capital,
100,00
beg.
0
(Debit)
(25,00
Credit
0)
Capital,
75,00
end.
0
B
150,00
0
(37,50
0)
112,5
00
100,0
00
25,0
00
37,5
00
50,0
00
C
200,00
0
(50,00
0)
150,0
00
112,5
00
D
Totals
450,000
112,5
00
112,
500
450,00
0
Requirement (c):
Zero.
Requirement (d):
A, B and C will divide D’s payment based on whatever
they have agreed upon or as follows:
C
Tota
A
B
l
25,0 37,5 50,0 112,5
Debit to capital account
00
00
00
00
Excess allocated based on
P/L ratio (150K - 112.5K credit
to D)
x 20%; 30%; & 50%
Share in the payment of
D
Debit to capital account
Personal gain (loss)
7,50
0
32,5
00
25,0
00
7,50
0
11,2
50
48,7
50
37,5
00
11,2
50
18,7
50
68,7
50
50,0
00
18,7
50
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37,50
0
150,0
00
112,5
00
37,50
0
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3. Solutions:
Requirement (a):
Date
Equipment (830K – 680K)
A, Capital (150,000 x 20%)
B, Capital (150,000 x 30%)
C, Capital (150,000 x 50%)
150,0
00
to record the revaluation of the
equipment
Capital, unadjusted
Share in revaluation
Capital, adjusted
Date
A
B
100,00
0
30,00
0
130,00
0
150,00
0
45,00
0
195,00
0
A, Capital (130,000 x 25%)
B, Capital (195,000 x 25%)
C, Capital (275,000 x 25%)
D, Capital
to record the admission of D
to the partnership
30,0
00
45,0
00
75,0
00
C
200,00
0
75,00
0
275,00
0
32,5
00
48,7
50
68,7
50
Totals
450,00
0
150,00
0
600,0
00
150,0
00
Requirement (b):
Capital, adj.
(Debit) Credit
Cap. after
adms’n.
A
130,0
00
(32,50
0)
97,50
0
4. Solution:
Date
Cash
D, Capital
B
195,0
00
(48,75
0)
146,2
50
C
275,0
00
(68,75
0)
206,2
50
(450K + 112.5K) x
D
150,0
00
150,
000
112,5
00
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Totals
600,00
0
600,0
00
112,5
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20%
00
5. Solution:
Requirement (a):
Date
Cash
D, Capital (450K + 180K) x 20%
A, Capital [(180K – 126K) x 20%]
B, Capital [(180K – 126K) x 30%]
C, Capital [(180K – 126K) x 50%]
180,0
00
126,0
00
10,80
0
16,20
0
27,00
0
Requirement (b):
Capital
before
admission
A
100,0
00
Investment of D
Bonus to old
partners
Capital after
admission
10,80
0
110,
800
B
150,0
00
16,20
0
166,
200
C
200,0
00
27,00
0
227,
000
D
180,0
00
(54,00
0)
126,
000
Total
450,0
00
180,00
0
630,0
00
Requirement (c):
A (100% - 20%) x 20%
B (100% - 20%) x 30%
C (100% - 20%) x 50%
D
P/L ratio
16%
24%
40%
20%
6. Solution:
Requirement (a):
Date
Cash
A, Capital [(110K – 100K) x 20%]
B, Capital [(110K – 100K) x 30%]
C, Capital [(110K – 100K) x 50%]
D, Capital [(450K + 100K) x
100,0
00
2,000
3,000
5,000
20%]
Requirement (b):
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110,0
00
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A
100,0
00
Capital
before
admission
B
150,0
00
C
200,0
00
Investment of D
Bonus to D
Capital after
admission
(2,00 (3,000 (5,000
0)
)
)
98,0
147,
195,
00
000
000
7. Solution:
A, Capital
B, Capital
C, Capital
D
Total
450,00
0
100,00
0
100,0
00
10,00
0
110,
000
550,0
00
100,000
150,000
200,000
Carrying amount of net assets
450,000
Revaluation
300,000
(500K – 200K)
Fair value of net assets
Divide by: (100% less D’s ¼ or 25% interest)
Grossed-up net assets
Multiply by: D’s interest
Required investment of D
750,000
75%
1,000,000
25%
250,000
8. Solution:
Total capital before the admission of D
Fair value of D’s contribution
Total capital after the admission of D
Multiply by: D's interest
Credit to D's capital account
450,0
00
160,0
00
610,0
00
20%
122,0
00
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Date
Equipment
D, Capital
A, Capital [(160K – 122K) x 20%]
B, Capital [(160K – 122K) x 30%]
C, Capital [(160K – 122K) x 50%]
Capital
before
admission
Investment of D
Bonus to old
partners
Capital after
admission
A
100,0
00
7,600
107,
600
B
150,0
00
160,0
00
C
200,0
00
11,40
0
161,
400
19,00
0
219,
000
D
160,0
00
(38,00
0)
122,
000
122,0
00
7,600
11,40
0
19,00
0
Total
450,0
00
160,00
0
610,0
00
9. Solution:
A
(20%)
B
(30%)
C
(50%)
300,000
500,000
200,000
Total
1,000,0
00
1.8M x 20%; 30% &
50%
360,000
Adjusted
balance
660,000
540,000
1,040,00
0
900,000
1,100,0
00
1,800,0
00
2,800,0
00
Unadjusted
balance
Share in profit
Requirement (a):
July 1, C, Capital
20x1
A, Capital (1.1M x 20%/50%)
B, Capital (1.1M x 30%/50%)
1,100,
000
440,0
00
660,0
00
Requirement (b):
Bal. before
A
B
C
Total
660,00
1,040,0
1,100,00
2,800,0
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0
440,00
0
1,100,
000
withdrawal
Withdrawal of C
Bal. after
withdrawal
00
660,00
0
1,700,
000
0
(1,100,0
00)
00
2,800,
000
-
Requirement (c):
No effect – same total capital of ₱2,800,000 before and
after C’s withdrawal.
10. Solution:
Requirement (a):
July
C, Capital (see computation in #9)
1,
A, Capital (1.24M – 1.1M) x
20x1
20%/50%)
B, Capital
(1.24M – 1.1M) x
30%/50%)
1,100,
000
56,000
84,000
1,240,
000
Cash
Requirement (b):
Bal. before
withdrawal
A
660,0
00
B
1,040,0
00
(56,00
0)
604,0
00
(84,00
0)
956,0
00
Payment to C
Bonus to C
Bal. after
withdrawal
C
1,100,00
0
(1,240,0
00)
Total
2,800,00
0
(1,240,0
00)
-
140,000
-
1,560,0
00
Requirement (c):
Decrease of ₱1,240,000
11. Solution:
A
(20%)
300,0
00
Unadjusted balance
Share in profit
[1.8M x (20%; 30% &
50%)]
Share in revaluation
360,0
00
80,00
B
(30%)
500,00
0
C
(50%)
200,00
0
Total
1,000,0
00
540,00
0
120,00
900,00
0
200,00
1,800,0
00
400,00
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gain [(600K - 200K) x
(20%; 30% & 50%)]
Adjusted balance
0
740,0
00
0
1,160,0
00
0
1,300,0
00
0
3,200,0
00
The entry to record the settlement of C’s interest is as
follows:
July
C, Capital
1,300,
1,
000
A, Capital (300,000 x 20%/50%)
20x1
B, Capital (300,000 x 30%/50%)
120,00
Cash
0
1,000,
Equipment
180,00
000
0 600,00
0
Bal. before
withdrawal
Payment to C
A
740,0
00
B
1,160,0
00
(120,0
00)
620,0
00
(180,0
00)
980,0
00
(1M
+ .6M)
Bonus to C
Bal. after
withdrawal
C
1,300,00
0
(1,600,0
00)
Total
3,200,00
0
(1,600,0
00)
-
300,000
-
1,600,0
00
12. Solution:
A
(20%)
300,0
00
Unadjusted balance
Share in profit
[1.8M x (20%; 30% &
50%)]
Adjusted balance
Divide by: Par value
No. of shares
issued
B
(30%)
500,00
0
C
(50%)
200,00
0
Total
1,000,0
00
360,0
00
660,0
00
100
540,00
0
1,040,0
00
100
900,00
0
1,100,0
00
100
1,800,0
00
2,800,0
00
100
6,600
10,400
11,000
28,000
PROBLEM 4: MULTIPLE CHOICE – COMPUTATIONAL
1. B (620K + 400K + 380K) x 20% = 280,000
2. B
B's payment
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132,000
B's capital credit [(139,200 + 208,800 +
96,000) x 1/5]
88,800
Combined personal gain of A and B
43,200
3. C
Net assets before
admission
Investment of C
Net assets after
admission
C's interest in net assets
C's capital credit
Investment of C
admission
Investment of C
Bonus to C (75K x ¾
& ¼)
Capital, after
admission
450,000
50%
225,000
150,000
Bonus to C
Capital, before
300,000
150,000
75,000
A
200,00
0
(56,250
)
143,75
0
4. A
Net assets before
admission
Investment of C
Net assets after
admission
C's interest in net assets
B
100,00
0
(18,75
0)
81,25
0
C
150,00
0
Total
300,00
0
150,00
0
75,000
225,0
00
450,0
00
300,000
125,000
425,000
25%
C's capital credit
Investment of C
106,250
125,000
Bonus to A and B
(18,750)
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A
B
Capital, before
admission
200,000
100,000
Investment of C
Bonus to A & B
(18,750 x ¾ & ¼)
Capital, after
admission
14,062.
50
214,06
2.50
4,687.5
0
104,68
7.50
C
Total
300,0
00
125,0
00
125,000
(18,750.
00)
106,25
0.00
425,0
00
18,0
00
2,00
0
20,00
0
5. B
Date
Cash
Old partners’ capital
C, Capital (100K x 20%)
6. C
Solution:
Andre's investment
Andre's capital credit
30,000
[(120K + 30K investment) x
50,000
1/3 interest]
Bonus to Andre
Capital, beg.
Andre's
investment
Bonus (20K x 3/5
& 2/5)
Capital, end.
20,000
Ming
Piw
80,000
40,000
(12,000
)
68,000
Andre
Total
120,000
30,000
30,000
(8,000)
20,000
32,000
50,000
150,00
0
7. B
Solution:
Date
A, Capital
B, Capital
320,0
00
to record the retirement of A from the
partnership
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320,0
00
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8. A
Solutions:
April
A, Capital
1,
B, Capital (360K – 320K) x
20x1
30%/50%
C, Capital (360K – 320K) x
20%/50%
Cash
320,0
00
24,00
0
16,00
0
360,0
00
to record the retirement of A from the
partnership
A
B
Bal. before
withdrawal
320,000
192,000
Payment to A
(360,00
0)
Bonus to A
40,000
Bal. after
withdrawal
-
(24,000
)
168,00
0
C
128,00
0
Total
640,00
0
(360,0
00)
(16,00
0)
112,0
00
280,00
0
9. A
Solution:
<List A> [(60,000 + 20,000) / 80%] x 20% = 20,000
<List B> 20,000, unaffected
10.
D (60K + 20K + 15K) = 95K total capital after
admission x 20% = 19,000
11.
D
Solution:
Capital, unadjusted
Profit
(1.8M x 20%; 30%; &
50%)
Revaluation
(600K - 0) x 20%; 30% &
50%
A
B
C
Total
300,0
00
500,00
0
200,000
1,000,00
0
360,0
00
540,00
0
900,000
1,800,00
0
120,0
00
180,00
0
300,000
600,000
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Capital before
retirement
Payment to C (1M
780,0
00
1,220,
000
(80,00
0)
700,0
00
(120,0
00)
1,100,
000
+ .6M)
Bonus to C
Capital after
retirement
July
1,
20x1
C, Capital
A, Capital
1,400,0
00
(1,600,0
00)
3,400,0
00
(1,600,0
00)
200,000
1,800,0
00
1,400,
000
80,000
120,00
0
(800K – 700K) x
20%/50%)
B, Capital
(800K – 700K) x
30%/50%)
Cash
Equipment
12.
1,000,
000
600,00
0
C
Unadjusted capital
Share in impairment
loss
(50K FV – 65K CA) ÷ 3
Adjusted capital
13.
-
A
300,00
0
B
300,0
00
C
200,00
0
Total
800,0
00
(5,000
)
(5,000
)
(5,000)
(15,00
0)
295,00
0
295,0
00
195,00
0
785,0
00
D
C's capital balance before retirement
Reduction in C's capital due to acquisition of
furniture:
(5,000
C's sh. in impairment of furniture [(65K –
)
50K) x 1/3]
(50,00
Fair value of furniture
0)
Balance
Reduction in C's capital in exchange for
note
C's capital after retirement
 Additional supporting analysis:
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200,00
0
(55,00
0)
145,00
0
(145,0
00)
-
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Date
Date
Impairment loss
Furniture
15,00
0
A, Capital
B, Capital
C, Capital
Income summary
5,000
5,000
5,000
15,00
0
(i.e., the
imp. loss)
Date
C, Capital
Furniture
Note payable
15,00
0
195,0
00
(squeezed)
50,00
0
145,0
00
5,000 + 50,000 = 55,000 reduction in C’s
capital due to acquisition of furniture
14.
C
C's unadjusted capital
C’s share in impairment loss on furniture
Fair value of furniture charged to C’s
capital
Note payable
15.
B
Unadjusted net assets (140K +
120K)
Provision for bad debts
Write-up of inventory (160K 140K)
155,000
(5,000)
(50,000
)
145,00
0
260,000
(10,000)
20,000
Further depreciation
(3,000)
Adjusted net assets
267,000
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PROBLEM 5: CLASSROOM ACTIVITY
1. Case 1:
Dat
A, Capital (100,000 x 1/2)
e
D, Capital
50,00
0
2. Case 2:
Date
A, Capital (100,000 x 20%)
B, Capital (60,000 x 20%)
C, Capital (20,000 x 20%)
D, Capital
Capital
before
admission
Sale to D
Capital after
admission
A
100,0
00
(20,00
0)
80,00
0
20,00
0
12,00
0
4,000
B
60,00
0
(12,00
0)
48,00
0
C
20,00
0
(4,00
0)
16,0
00
3. Case 3:
Dat
Cash
e
Capital
D, Capital (180K + 70K) x 20%
A, Capital [(70K - 50K) x 60%]
B, Capital [(70K - 50K) x 30%]
C, Capital [(70K - 50K) x 10%]
before
admission
D's investment
Bonus to old
partners
Capital after
admission
A
100,0
00
12,00
0
112,
000
B
60,0
00
6,00
0
66,0
00
C
20,0
00
2,00
0
22,0
00
D
36,0
00
36,0
00
70,00
0
D
70,00
0
(20,00
0)
50,00
0
New P/L
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50,00
0
36,00
0
Total
180,0
00
180,0
00
50,00
0
12,00
0
6,000
2,000
Total
180,0
00
70,00
0
250,0
00
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ratio
48%
24%
8%
20%
100%
A (100% - 20%) x 60%
B (100% - 20%) x 30%
C (100% - 20%) x 10%
D
4. Case 4:
Unadjusted net assets before D's
admission
Revaluation increase (410K - 365K)
Adjusted net assets before D's
admission
Divide by: (100% - 10%)
Net assets after D's admission
Multiply by: D's interest
D's required investment
180,000
45,000
225,000
90%
250,000
10%
25,000
5. Case 5:
Date
C, Capital
B, Capital
Capital before retirement
C's withdrawal
Capital after
retirement
20,00
0
A
100,0
00
100,
000
A
B (30% + 10% from C)
C
6. Case 6:
Date
C, Capital
A, Capital
B, Capital
(32K – 20K) x 6/9
(32K – 20K) x 3/9
B
60,0
00
20,0
00
80,0
00
C
20,00
0
(20,00
0)
-
New P/L
ratio
60%
40%
0%
100%
20,00
0
8,000
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20,00
0
Total
180,0
00
180,
000
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Cash
Capital before
retirement
A
100,0
00
B
60,0
00
(8,00
0)
92,0
00
(4,00
0)
56,0
00
C's retirement
Bonus to C
Capital after
retirement
4,000
32,00
0
C
20,00
0
(32,00
0)
12,00
0
Total
180,0
00
(32,00
0)
148,0
00
-
New P/L
ratio
66.67%
33.33%
0.00%
100.00%
A 60% ÷ 90%
B 30% ÷ 90%
C
7. Case 7:
Net assets of partnership (100K + 60K + 20K)
Aggregate par value of shares issued [(6K + 3K +
1K) x 10]
Share premium
180,000
100,000
80,000
PROBLEM 6: FOR CLASSROOM DISCUSSION
1. Solutions:
Case 1:
Cash
Accounts
receivable
Inventory
Equipment
Accounts payable
Carrying
amts.
Fair
values
30,000
30,000
Increase
(Decreas
e)
-
120,000
160,000
450,000
(80,000)
(20,000)
(40,000)
(50,000)
-
140,000
200,000
500,000
(80,000)
Downloaded by Ken Brian Nasol (kennasol28@gmail.com)
lOMoARcPSD|6571395
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Accrued liabilities
(20,000)
Net assets
790,000
Apple
Capital, beg.
515,000
Revaluation decrease
Adjusted, before
admission
Sale from Banana to
Carrot
Capital after
admission
Dat
e
(78,000)
437,000
437,00
0
660,000
Banan
a
275,00
0
(52,000
)
223,00
0
(111,50
0)
111,50
0
Carro
t
111,50
0
111,5
00
660,000
111,5
00
111,5
00
Before
admission
60%
Admission of
Carrot
After
admission
60%
40%
-20%
20%
20%
20%
100%
100%
Case 2:
Dat Apple, Capital (437K adj. cap. see above
e
Total
790,000
(130,00
0)
660,00
0
Banana, Capital (223,00 x 1/2)
Carrot, Capital (223,00 x 1/2)
Partn
er
Apple
Banan
a
Carrot
(20,000)
(130,000
)
x 20%)
Banana, Capital (223K adj. cap. x
20%)
Carrot, Capital
Apple
Adjusted cap.
(Debit) Credit
437,00
0
(87,400
Banan
a
223,000
(44,600)
87,40
0
44,60
0
132,0
00
Carrot
132,00
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Totals
660,00
0
-
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Capital, end.
)
349,60
0
178,40
0
0
132,00
0
Case 3:
Adjusted capital before admission
Divide by: (100% - 20%)
Amount of investment
Before
admission
A
60%
B
C
40%
660,000
80%
825,000
20%
Grossed-up amount
Multiply by:
Partn
er
660,00
0
165,000
Admission of
Carrot
(100% - 20%) x
60%
(100% - 20%) x
40%
20%
100%
Case 4:
Adjusted net assets before admission
Investment of Carrot
After
admission
48%
32%
20%
100%
660,000
100,000
Net assets after admission
Carrot's interest in net assets
760,000
20%
Carrot’s capital credit
Investment of Carrot
152,000
100,000
Bonus to Carrot
Date
52,000
Cash
Apple, Capital (152K – 100K) x 60%
Banana, Capital (152K – 100K) x
40%
Carrot, Capital
x 20%
(660K + 100K)
100,0
00
31,20
0
20,80
0
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152,0
00
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Adj. cap., before
admission
Apple
437,0
00
Bana
na
223,0
00
Investment of Carrot
Bonus to Carrot
Capital, after
admission
(31,20
0)
405,8
00
(20,80
0)
202,2
00
Carr
ot
100,0
00
52,00
0
152,
000
Downloaded by Ken Brian Nasol (kennasol28@gmail.com)
Total
660,0
00
100,0
00
760,0
00
lOMoARcPSD|6571395
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Case 5:
Adjusted net assets before admission
Investment of Carrot
660,000
180,000
Net assets after admission
Carrot's interest in net assets
840,000
20%
Carrot’s capital credit
Investment of Carrot
168,000
180,000
Bonus to Apple and Banana
(12,000)
Date
Cash
Carrot, Capital
(660K + 180K)
180,0
00
x 20%
Apple, Capital (12K x 60%)
Banana, Capital (12K x 40%)
Adj. cap., before
admission
Apple
437,0
00
Bana
na
223,0
00
Investment of Carrot
Bonus to old partners
Capital, after
admission
7,200
444,2
00
4,800
227,8
00
Carro
t
180,0
00
(12,00
0)
168,0
00
168,0
00
7,200
4,800
Total
660,0
00
180,0
00
840,0
00
2. Solutions:
Case 1:
Capital - Jan. 1, 20x1
Profit
Drawings
Capital - before
retirement
Sept
. 1,
A, Capital
A
320,0
00
400,0
00
(40,00
0)
680,0
00
B
192,0
00
240,0
00
(60,00
0)
372,0
00
C
128,0
00
160,0
00
(30,00
0)
258,0
00
680,0
Downloaded by Ken Brian Nasol (kennasol28@gmail.com)
Total
640,00
0
800,00
0
(130,00
0)
1,310,0
00
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20x1
B, Capital
00
Downloaded by Ken Brian Nasol (kennasol28@gmail.com)
680,0
00
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Capital - before
retirement
Sale from A to B
Capital - after
retirement
A
680,0
00
(680,0
00)
B
372,00
0
680,00
0
1,052,
000
-
P/L ratio after A’s retirement:
Before
Retirement
Partner
retirement
of A
A
50%
-50%
B
30%
30% + 50%
C
20%
100%
Case 2:
Sept
A, Capital
. 1,
B, Capital (700K – 680K) x
20x1
30%/50%
C, Capital (700K – 680K) x
20%/50%
Cash
Capital - before
retirement
Payment to A
Bonus to A
Capital - after
retirement
Partne
r
A
B
A
680,00
0
(700,0
00)
20,000
-
C
258,0
00
Total
1,310,0
00
258,
000
1,310,
000
After
retirement
80%
20%
100%
680,0
00
12,00
0
8,000
B
372,0
00
C
258,0
00
(12,00
0)
360,0
00
(8,00
0)
250,
000
P/L ratio
30% / (30% +
20%)
60%
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700,0
00
Total
1,310,0
00
(700,00
0)
610,0
00
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20% / (30% +
20%)
C
40%
100%
Case 3:
Sept
A, Capital
. 1,
Cash
20x1
B, Capital (680K – 650K) x
680,0
00
650,0
00
18,00
0
12,00
0
30%/50%
C, Capital (680K – 650K) x
20%/50%
to record the retirement of A from the
partnership
Capital - before
retirement
Payment to A
Bonus to B and C
Capital - after
retirement
A
680,00
0
(650,0
00)
(30,00
0)
-
B
372,0
00
C
258,0
00
18,00
0
390,0
00
12,00
0
270,
000
Total
1,310,0
00
(650,00
0)
660,00
0
3. Solution:
A
Adjusted capital
(see #2 -
Case 1)
Less: PS (1,000 x ₱200 par)
Remaining interest
Divide by: Par val. per OS
No. of ordinary sh.
issued
Preference shares
issued
Ordinary shares
issued
B
680,00 372,00
0
0
(200,00 (200,00
0)
0)
480,00 172,00
0
0
50
50
C
Total
258,00
0
(200,00
0)
58,000
50
1,310,0
00
(600,00
0)
710,00
0
50
14,200
9,600
3,440
1,160
A
B
C
1,000
1,000
1,000
3,000
9,600
3,440
1,160
14,200
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Total
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Total shares issued
10,60
0
4,440
2,160
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17,200