PARTNERSHIP
DISSOLUTION
Contribution of
Division
money,
Agreement
property
of profits
Does
or industry
dissolution
refer to the
termination of
business
activities?
Mr. White
Mr. Black
Admission of a new partner
Mr. Black
Ms. Gray
Mr. Black
Mr. White
Mr. White
Withdrawal of an old partner
Ms. Gray
Mr. Black
Mr. White
Agreement
Bankruptcy
Does
Change in the
dissolution
original
refer to the
relationship
termination of
of
the
business
partners.
activities?
Mr. White
Mr. Black
Admission
of a
New Partner
Admission of a New Partner
Purchase of
Interest
Investment of
Assets
Purchase of Interest
2/4
1/4
Ms. Gray
1/4
Mr. Black
2/4
Mr. White
Admission of a New Partner
Fuentes and Garcia are partners with
profit and loss ratio of 70:30 and capital
balances of P80,000 and P20,000,
respectively. Hizon is to be admitted into
the partnership by purchasing a 15%
interest in the capital, profits and and
losses for P15,000.
SW1: PE L on page 110
Oliver and Patrick are partners with a profit and loss ratio
of 3:1 and capital balances of P1,000,000 and P500,000,
respectively. Nick is to be admitted into the partnership
by purchasing a 20% interest in the capital, profits and
losses for P500,000.
19. What would be the capital balances of Oliver and
Patrick after the admission of Nick?
SW1: PE L on page 110
Partner
P&L
Before
Adj.
After
Oliver
3
1,000,000 (200,000)
800,000
Patrick
1
500,000 (100,000)
400,000
300,000
300,000
Nick
Total
20%
1,500,000
0 1,500,000
SW2: PE L on page 110
Oliver and Patrick are partners with a profit and loss ratio
of 3:1 and capital balances of P1,000,000 and P500,000,
respectively. Nick is to be admitted into the partnership
by purchasing a 20% interest in the capital, profits and
losses for P200,000.
19. What would be the capital balances of Oliver and
Patrick after the admission of Nick?
SW2: PE L on page 110
Partner
P&L
Before
Adj.
After
Oliver
3
1,000,000 (200,000)
800,000
Patrick
1
500,000 (100,000)
400,000
300,000
300,000
Nick
Total
20%
1,500,000
0 1,500,000
SW3: PE J on page 110
Arthur, Bernie and Carlo are partners who share profits
and losses in the ratio of 5:3:2, respectively. They agree to
sell 25% of their respective capital and profit loss ratio to
Dwight for a total payment directly to the partners in the
amount of P130,000. The condensed statement of
financial position of the ABC Partnership is as follows:
SW3: PE J on page 110
Cash
P 60,000 Liabilities
P 100,000
Non-cash assets 540,000 Arthur, Capital
250,000
Bernie, Capital
150,000
Carlo, Capital
100,000
Total
P 600,000 Total
P 600,000
17. What would be the capital balances of Arthur, Bernie
and Carlo after the admission of Dwight?
SW3: PE J on page 110
Partner
P&L
Before
Adj.
After
Arthur
5
250,000
(62,500)
187,500
Bernie
3
150,000
(37,500)
112,500
Carlo
2
100,000
(25,000)
75,000
125,000
125,000
0
500,000
Dwight
Total
25%
500,000
AS: PE-C on page 107
Daisy wishes to purchase one-fourth interest in the capital and
profits in the partnership of Mickey, Minnie and Donald. The three
partners agreed to sell one-fourth of their respective capital and
profit and loss interest for a total payment of P400,000. the capital
accounts and the respective percentage interests in the profits and
losses immediately before the sale to Daisy follow:
Capital
P/L Ratio
Mickey
P 800,000
40%
Minnie
400,000
30%
Donald
200,000
30%
AS: PE-C on page 107
All assets and liabilities of the partnership are fairly
valued.
7. What should be the capital balances of Mickey, Minnie,
Donald and Daisy, immediately after Daisy’s
admission?
AS: PE-C on page 107
Partner
P&L
Before
Adj.
After
Mickey
40%
800,000 (200,000)
600,000
Minnie
30%
400,000 (100,000)
300,000
Donald
30%
200,000
(50,000)
150,000
Daisy
1/4
350,000
350,000
Total
1,400,000
0 1,400,000
AS: PE-C on page 107
All assets and liabilities of the partnership are fairly
valued.
8. What is the new profit and loss ratio between Mickey,
Minnie, Daisy and Donald, respectively?
AS: PE-C on page 107
Partner
P&L
New P&L
Mickey
40%
30.00%
Minnie
30%
22.50%
Donald
30%
22.50%
Daisy
1/4
25.00%
Reminders
1.
2.
The price paid is not recorded in the
partnership books.
The admission is recorded by merely
transferring the interest purchased from the
selling (old) partner to the buying (new)
partner.
Investment of Assets
2/6
2
Ms. Gray
2/4
2/4
2/6
2/6
Mr. Black
Mr. White
Investment of Assets
Fuentes and Garcia are partners with
profit and loss ratio of 70:30 and capital
balances of P80,000 and P22,000,
respectively, Hizon is to be admitted into
the partnership by investing cash for the
15% interest in the capital, profits and
losses amounting to P18,000.
SW4: PE L on page 110
Oliver and Patrick are partners with a profit and loss ratio
of 3:1 and capital balances of P1,000,000 and P500,000,
respectively. Nick is to be admitted into the partnership
by investing for the 20% interest in the capital, profits
and losses for P375,000.
19. What would be the capital balances of Oliver and
Patrick after the admission of Nick?
SW4: PE L on page 110
Partner
P&L
Before
Oliver
3
1,000,000
1,000,000
Patrick
1
500,000
500,000
20%
375,000
375,000
Nick
Total
1,875,000
Adj.
-
After
1,875,000
Investment of Assets
Fuentes and Garcia are partners with
profit and loss ratio of 70:30 and capital
balances of P80,000 and P22,000,
respectively, Hizon is to be admitted into
the partnership by investing cash for the
15% interest in the capital, profits and
losses amounting to P14,000.
SW5: PE H on page 109
R. Romero and S. Sandoval are partners who share profits
and losses in the ratio of 7:3, respectively. On May 1,
2013, their respective capital balances were as follows:
R. Romero
P 900,000
S. Sandoval
800,000
Total
P 1,700,000
SW5: PE H on page 109
On that date, they agree to admit Q. Quizon as partner for
a 40% interest in the capital and profits upon his
investment of P800,000. All assets and liabilities of the
partnership are fairly valued.
15. Immediately after Q. Quizon’s admission, what
amount would be the capital balance of R. Romero, S.
Sandoval and Q. Quizon, respectively?
SW5: PE H on page 109
Partner
P&L
Before
Adj.
After
R. Romero
7
900,000 (140,000)
760,000
S. Sandoval
3
800,000
(60,000)
740,000
Q. Quizon
40%
800,000
200,000 1,000,000
2,500,000
0 2,500,000
Total
SW6: PE E on page 108
Jack and Poy are partners who share profits and losses in the
ratio of 60:40, respectively. On December 31, 2013, the capital
balances of Jack and Poy were P800,000 and P700,000,
respectively. On that date, they agreed to admit Hoy as a
partner with a 30% capital interest.
10. If Hoy invests P500,000 in the partnership, what is the
capital balance immediately after the admission of Hoy?
11. If Hoy invests P800,000 in the partnership, how much is
Poy’s capital balance immediately after Hoy’s admission?
SW6: PE E on page 108
Invests P 500,000
Partner
P&L
Before
Adj.
After
Jack
60
800,000
(60,000)
740,000
Poy
40
700,000
(40,000)
660,000
Hoy
30%
500,000
100,000
600,000
Total
2,000,000
0 2,000,000
SW6: PE E on page 108
Invests P 800,000
Partner
P&L
Before
Adj.
After
Jack
60
800,000
66,000
866,000
Poy
40
700,000
44,000
744,000
Hoy
30%
800,000 (110,000)
690,000
Total
2,300,000
0 2,300,000
Reminders: Investment of an Asset
Invested amount = Agreed Capital
No revaluation or bonus.
Invested amount > Agreed Capital
Revalue assets up
or
Bonus to old partners
Invested amount < Agreed Capital
Revalue assets down
or
Bonus to new partner
SW7: PE G on page 108
Reyes and Santiago are partners who share profits and losses
in the ratio of 7:3, respectively. On January 1, 2014, their
capital accounts are:
Reyes
Santiago
Total
P 1,200,000
800,000
P 2,000,000
SW7: PE G on page 108
During the first three months of 2014, the partnership earned
profit of P500,000. On April 1, 2014, Torres is to be admitted
for a 30% interest in the partnership by direct purchase from
the partners for P800,000.
14. What would be the capital balances of Reyes and Santiago
after the admission of Torres?
SW7: PE G on page 108
Reyes
Santiago
Total
Capital balances 1,200,000 800,000 2,000,000
Share in profit
Total
350,000
150,000
500,000
1,550,000 950,000 2,500,000
SW7: PE G on page 108
Partner
P&L
Reyes
7
Santiago
3
Torres
Total
Before
Adj.
After
1,550,000 (465,000) 1,085,000
950,000 (285,000)
665,000
750,000
750,000
30%
2,500,000
0 2,500,000
SW8: PE B on page 107
Red and White are partners who share profits and losses in
the ratio of 7:3, respectively. On June 30, 2013, their capital
accounts were as follows: Red, P700,000; White, P600,000. On
that day, they agreed to admit Blue as a partner with onethird interest in the capital and profits upon his investment of
P500,000. All partnership assets and liabilities are fairly
valued.
6. Immediately after Blue’s admission, what are the capital
balances of Red, White and Blue, respectively?
SW8: PE B on page 107
Partner
P&L
Before
Adj.
After
Red
7
700,000
(70,000)
630,000
White
3
600,000
(30,000)
570,000
1/3
500,000
100,000
600,000
Blue
Total
1,800,000
0 1,800,000
Withdrawal
of a Partner
Withdrawal of a Partner
Fuentes, Garcia and Hizon are partners
with a profit and loss ratio of 80:10:10
and capital balances of P320,000,
P200,000 and P240,000 respectively. On
December 31, Fuentes decides to
withdraw from the partnership. It is
agreed that Fuentes should be paid for his
interest the amount of P320,000.
SW9: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
GoKong receives P300,000 of partnership funds for his interest.
The capital balances of Sy and Tan after the retirement of
GoKong are _____________________.
SW9: PE S on page 113
Partner P&L
Before Withdrawal
Sy
1/3
500,000
0
500,000
Tan
1/3
400,000
0
400,000
300,000 (300,000)
0
0
1,200,000 (300,000)
0
900,000
GoKong 1/3
Total
Adj.
After
Withdrawal of a Partner
Fuentes, Garcia and Hizon are partners
with a profit and loss ratio of 80:10:10
and capital balances of P320,000,
P200,000 and P240,000 respectively. On
December 31, Fuentes decides to
withdraw from the partnership. It is
agreed that Fuentes should be paid for his
interest the amount of P340,000.
SW10: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
29. GoKong receives P380,000 of partnership funds. The
remaining partners agree to absorb the excess payment to
GoKong. How much is the firm’s total capital after the
retirement of GoKong?
SW10: PE S on page 113
Partner P&L
Before Withdrawal
Sy
1/3
500,000
(40,000)
460,000
Tan
1/3
400,000
(40,000)
360,000
300,000 (380,000)
80,000
0
1,200,000 (380,000)
0
820,000
GoKong 1/3
Total
Adj.
After
SW11: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
30. GoKong receives P240,000 of partnership funds for his
interest, bonus being credited to the remaining partners’
accounts. How much is the capital of Sy after the
retirement of GoKong?
SW11: PE S on page 113
Partner P&L
Before Withdrawal
Adj.
After
Sy
1/3
500,000
30,000
530,000
Tan
1/3
400,000
30,000
430,000
300,000 (240,000) (60,000)
0
GoKong 1/3
Total
1,200,000 (240,000)
0
960,000
SW12: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
28. GoKong receives P340,000 of partnership funds for his
interest. The excess payment is attributable to an
undervaluation of the firm’s land. All other assets are fairly
valued. How much is Sy’s capital after retirement of
GoKong?
SW12: PE S on page 113
Sy
Tan
GoKong
Total
Capital balances 500,000 400,000 300,000 1,200,000
Revaluation of
the land
Total
40,000
40,000
40,000
120,000
540,000 440,000 340,000 1,320,000
SW12: PE S on page 113
Partner P&L
Before Withdrawal
Sy
1/3
540,000
0
540,000
Tan
1/3
440,000
0
440,000
340,000 (340,000)
0
0
1,320,000 (340,000)
0
980,000
GoKong 1/3
Total
Adj.
After
SW13: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
26. GoKong’s interest is sold to Consunji, a new partner, for
P360,000. How much is the total partnership capital after
GoKong’s retirement from the firm?
SW13: PE S on page 113
Partner P&L
Before Withdrawal
Sy
1/3
500,000
500,000
Tan
1/3
400,000
400,000
GoKong
After
300,000 (300,000)
0
300,000
300,000
0
0 1,200,000
Consunji 1/3
Total
Adj.
1,200,000
SW14: PE S on page 113
Sy, Tan and GoKong are partners with capital balances of
P500,000, P400,000 and P300,000, respectively. Profits and
losses have been shared equally. GoKong wishes to retire from
the firm.
27. GoKong’s interest is sold to the remaining partners, each
partner paying P180,000. How much is the capital of Tan
after GoKong’s retirement from the firm?
SW14: PE S on page 113
Partner P&L
Before Withdrawal
Sy
1/3
500,000
150,000
650,000
Tan
1/3
400,000
150,000
550,000
300,000 (300,000)
0
GoKong 1/3
Total
1,200,000
0
Adj.
After
0 1,200,000
SW15: PE F on page 108
B, C and D are partners sharing profits and losses in the ratio
of 3:2:1, respectively. On December 31, B decides to withdraw
from the partnership. The capital balances on this date after
dividing profit for the year are B, P346,0000; C, P213,000; and
D, P133,000. It is agreed the B should be paid P400,000 for his
interest.
12. Assume that the excess amount shall be treated as bonus
to B, what would be the capital balances of C and D after
B’s retirement?
SW15: PE F on page 108
Partner P&L
Before Withdrawal
Adj.
B
3
346,000 (400,000)
54,000
0
C
2
213,000
(36,000)
177,000
D
1
133,000
(18,000)
115,000
0
292,000
Total
692,000 (400,000)
After
SW16: PE F on page 108
B, C and D are partners sharing profits and losses in the ratio
of 3:2:1, respectively. On December 31, B decides to withdraw
from the partnership. The capital balances on this date after
dividing profit for the year are B, P346,0000; C, P213,000; and
D, P133,000. It is agreed the B should be paid P400,000 for his
interest.
13. Assume that instead that B is to be paid P310,000 and the
assets are faily valued. What would be the balances of C
and D immediately after B’s retirement?
SW16: PE F on page 108
Partner P&L
Before Withdrawal
B
3
346,000 (310,000) (36,000)
C
2
213,000
24,000
237,000
D
1
133,000
12,000
145,000
0
382,000
Total
692,000 (310,000)
Adj.
After
0
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
a. Wendy purchases ¼ of the equity of Candy for P80,000.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
(75,000)
225,000
Carol
2
200,000
(50,000)
150,000
125,000
125,000
0
500,000
Wendy
Total
1/4
500,000
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
b. Wendy invests P100,000 for 1/6 interest.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
0
300,000
Carol
2
200,000
0
200,000
1/6
100,000
0
100,000
600,000
0
600,000
Wendy
Total
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
c. Wendy invests P200,000 for 1/3 interest in the agreed
capital of P750,000. Partnership inventories are
understated by P50,000.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
330,000
(30,000)
300,000
Carol
2
220,000
(20,000)
200,000
1/3
200,000
50,000
250,000
750,000
0
750,000
Wendy
Total
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
d. Wendy invests P200,000 for a ¼ interest. An item of
equipment of the partnership is overvalued by P40,000.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
276,000
21,000
297,000
Carol
2
184,000
14,000
198,000
1/4
200,000
(35,000)
165,000
660,000
0
660,000
Wendy
Total
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
e. Wendy invests P300,000 receiving a capital credit of
P200,000 which is ¼ of the new partnership capital.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
60,000
360,000
Carol
2
200,000
40,000
240,000
300,000 (100,000)
200,000
800,000
800,000
Wendy
Total
1/4
0
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
f. Wendy invests P300,000 for a 50% interest.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
(60,000)
240,000
Carol
2
200,000
(40,000)
160,000
1/2
300,000
100,000
400,000
800,000
0
800,000
Wendy
Total
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
g. Wendy invests P300,000 for a 30% interest.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
36,000
336,000
Carol
2
200,000
24,000
224,000
30%
300,000
(60,000)
240,000
800,000
0
800,000
Wendy
Total
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
h. Wendy invests P300,000 receiving a capital credit of
P450,000.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
(90,000)
210,000
Carol
2
200,000
(60,000)
140,000
Wendy
300,000
150,000
450,000
Total
800,000
0
800,000
AS: Problem 4 on page 103
Cindy and Candy are partners with capital balances of
P300,000 and P200,000, respectively. They share profits and
losses in the ratio of 3:2, respectively. Wendy wishes to be
admitted as a partner in the partnership.
i. Wendy invests P200,000 for a 20% interest in the firm’s total
capital.
AS: Problem 4 on page 103
Partner
P&L
Before
Adj.
After
Cindy
3
300,000
36,000
336,000
Carol
2
200,000
24,000
224,000
20%
200,000
(60,000)
140,000
700,000
0
700,000
Wendy
Total