CHAPTER 4

Partnership Dissolution

EXERCISES

Exercise 4-1
1. Camus, Capital (90,000 x 1/3) 30,000
Cuenco, Capital (60,000 x 1/3) 20,000
Cerda, Capital 50,000

2. Other Assets 120,000

Camus, Capital (P120,000 x 75%) 90,000
Cuenco, Capital (P120,000 x 25%) 30,000

Camus, Capital [(P90,000 + P90,000) x 1/3] 60,000

Cuenco, Capital [(P60,000 + P30,000) x 1/3] 30,000
Cerda, Capital 90,000

3. Cash 90,000
Cerda, Capital 60,000
Camus, Capital (P30,000 x 75%) 22,500
Cuenco, Capital (P30,000 x 25%) 7,500

4. Cash 90,000
Other Assets 120,000
Camus, Capital (P120,000 x 75%) 90,000
Cuenco, Capital (P120,000 x 25%) 30,000
Cerda, Capital 90,000
AC CC Asset Rev
Old P270,000 P150,000 P120,000
New 90,000 90,000 ------
P360,000 P240,000 P120,000

5. Cash 90,000
Camus, Capital (P30,000 x 75%) 22,500
Cuenco, Capital (P30,000 x 25%) 7,500
Cerda, Capital 120,000

Exercise 4-2
1. Cular, Capital 20,000
Canda, Capital 20,000

2. Other Assets 40,000

Capco, Capital 25,000
Cular, Capatil 10,000
Cruz, Capital 5,000
P70,000  ¼ = P280,000 – (P100,000 + P80,000 + P60,000) = P40,000

Capco, Capital (P100,000 + P25,000) x ¼ = P31,250 31,250

Cular, Capatil (P80,000 + P10,000) x ¼ = P22,500 22,500
Cruz, Capital (P60,000 + P5,000) x ¼ = P16,250 16,250
Canda, Capital 70,000

3. Cash 115,000
Chapter 4 - Partnership Dissolution
Suggested Answers

Canda, Capital 88,750.00

Capco, Capital (P26,250 x 5/8 = P16,406.25) 16,406.25
Cular, Capatil ( P26,250 x 2/8 = P6,562.50) 6,562.50
Cruz, Capital (P26,250 x 1/8 = P3,281.25) 3,281.25
AC CC Bonus
Old P266,250 P240,000 P26,250
New 88,750 115,000 (26,250)
P355,000 P355,000 P ------
Exercise 4-3
1. Catral, Capital 160,000
Conti, Capital 160,000
P480,000 x 1/3 = P160,000

2. Clemente, Capital 120,000

Conti, Capital 120,000
P360,000 x 1/3 = P120,000

3. Other Assets 168,000

Catral, Capital 56,000
Clemente, Capital 112,000
P252,000 1/4 = P1,008,000 – P840,000 = P168,000
P168,000 x 2/6 = P56,000; P168,000 x 4/6 = P112,000

Catral, Capital 134,000

Clemente, Capital 118,000
Conti, Capital 252,000
(P480,000 + P56,000) x 1/4 = P134,000
(P360,000 + P112,000 ) x 1/4 = P118,000

Exercise 4-4
1a. Carlos, Capital (P200,000 x ¼) 50,000
Cruz, Capital (P300,000 x 1/3) 100,000
Caparas, Capital 150,000

1b. Cash 120,000

Carpio, Capital 120,000

2. Carlos (P200,000 – 50,000 = P150,000) 150,000

Cruz (P300,000 – 100,000 = P200,000) 200,000
Caparas 150,000
Carpio 120,000

Exercise 4-5
1. Bonus Method
Cash 225,000
Cuenca, Capital (P16,667 / 2) 8,333
Claudio, Capital (P16,667 / 2) 8,334
Cabral, Capital 241,667
AC CC Bonus
Old P483,333 P500,000 (P16,667)
New 241,667 225,000 16,667
P725,000 P725,000 -----
2. Asset Revaluation Method
Cash 225,000
Chapter 4 - Partnership Dissolution
Suggested Answers

Cuenca, Capital (P50,000 / 2) 25,000

Claudio, Capital (P50,000 / 2) 25,000
Other Assets 50,000
Cabral, Capital 225,000
AC CC Asset Rev.
Old P450,000 P500,000 (P 50,000)
New 225,000 225,000 ------
P675,000 P725,000 (P50,000)

Exercise 4-6
1. Cash 120,000
Choy, Capital (P21,000 x 2/5) 8,400
Chua, Capital (P21,000 x 1/5) 4,200
Cheng, Capital (P21,000 x 2/5) 8,400
Chiu, Capital 99,000
AC CC Bonus
Old P396,000 P375,000 P21,000
New 99,000 120,000 (21,000)
P495,000 P495,000 -------

2. Other Assets 105,000

Choy, Capital 42,000
Chua, Capital 21,000
Cheng, Capital 42,000

Cash 120,000
Chiu, Capital 120,000
AC CC Asset Rev
Old P480,000 P375,000 P105,000
New 120,000 120,000 -
P600,000 P495,000 P105,000

Problem 4-1
1. Carmen, Capital 40,000
Centeno, Capital 20,000
Corrales, Capital 60,000

2. Other Assets 120,000

Carmen, Capital 90,000
Centeno, Capital 30,000
P120,000  1/3 = P360,000 – P240,000 = P120,000

Carmen, Capital ([P160,000 + P90,000] x 1/3) 83,333

Centeno, Capital [(P80,000 + P30,000) x 1/3] 36,667
Corrales, Capital 120,000

3. Other Assets 120,000

Cash 120,000
Carmen, Capital 90,000
Centeno, Capital 30,000
Corrales, Capital 120,000
AC CC Asset Rev
Old P360,000 P240,000 P 120,000
New 120,000 120,000 -----
Chapter 4 - Partnership Dissolution
Suggested Answers

P480,000 P360,000 P 120,000

4. Cash 120,000
Carmen, Capital (P60,000 x 75%) 45,000
Centeno, Capital (P60,000 x 25%) 15,000
Corrales, Capital 180,000
AC CC Bonus
Old P180,000 P240,000 P(60,000)
New 180,000 120,000 60,000
P360,000 P360,000 --------

5. Cash 160,000
Corrales, Capital 120,000
Carmen, Capital 30,000
Centeno, Capital 10,000

6. Cash 160,000
Corrales, Capital 140,000
Carmen, Capital 15,000
Centeno, Capital 5,000

7. Cash 100,000
Corrales, Capital 85,000
Carmen, Capital 11,250
Centeno, Capital 3,750
AC CC Bonus
Old P255,000 P240,000 P15,000
New 85,000 100,000 (15,000)
P340,000 P340,000 --------

8. Cash 110,000
Other Assets 90,000
Corrales, Capital 110,000
Carmen, Capital 67,500
Centeno, Capital 22,500
AC CC Asset Rev
Old P330,000 P240,000 P90,000
New 110,000 110,000 --------
P440,000 P350,000 P90,000

9. Cash 96,000
Carmen, Capital (P16,000 x 75%) 12,000
Centeno, Capital (P16,000 x 25%) 4,000
Corrales, Capital 112,000

10. Cash 60,000

Corrales, Capital 60,000
P240,000  4/5 = P300,000 x 1/5 = P60,000

Problem 4-2
1. Cash 150,000
Calma, Capital 150,000
Chapter 4 - Partnership Dissolution
Suggested Answers

AC CC
Old P300,000 P300,000
New 150,000 150,000
P450,000 P450,000

2. Cash 120,000
Calma, Capital 105,000
Coral, Capital 9,000
Corpuz, Capital 6,000
AC CC Bonus
Old (3/4) P315,000 P300,000 P15,000
New (1/4) 105,000 120,000 (15,000)
P420,000 P420,000 ------

3. Cash 60,000
Coral, Capital 18,000
Corpuz, Capital 12,000
Calma, Capital 90,000
AC CC Bonus
Old P270,000 P300,000 (P30,000)
New 90,000 60,000 30,000
P360,000 P360,000 -

4. Coral, Capital (P180,000 x ¼) 45,000

Corpuz, Capital (P120,000 x ¼) 30,000
Calma, Capital 75,000

5. Other Assets 30,000

Coral, Capital 18,000
Corpuz, Capital 12,000

Coral, Capital [(P180,000 + P18,000) ¼] 49,500

Corpuz, Capital [(P120,000 + P12,000) ¼] 33,000
Calma, Capital 82,500

6. Cash 90,000
Other Assets 60,000
Calma, Capital 90,000
Coral, Capital 36,000
Corpuz, Capital 24,000
AC CC Asset Rev.
Old P360,000 P300,000 P 60,000
New 90,000 90,000 ------
P450,000 P390,000 P 60,000

Problem 4-3
1. a. Cash 350,000
Coloma, Capital 350,000

b. Cash 500,000
Castillo, Capital (P25,000 x 8/10) 20,000
Cordova, Capital (P25,000 x 2/10) 5,000
Chapter 4 - Partnership Dissolution
Suggested Answers

Coloma, Capital 475,000

AC CC Bonus
Old P1,425,000 P1,400,000 P25,000
New 475,000 500,000 ( 25,000)
P1,900,000 P1,900,000 -----------

c. Cash 700,000
Other Assets 700,000
Castillo, Capital (P700,000 x 8/10) 560,000
Cordova, Capital (P700,000 x 2/10) 140,000
Coloma, Capital 700,000
AC CC Asset Rev
Old P2,100,000 P1,400,000 P700,000
New 700,000 700,000 -----------
P2,800,000 P2,100,000 P700,000

d. Castillo, Capital 140,000

Cordova, Capital 210,000
Coloma, Capital 350,000

e. Castillo, Capital 112,000

Cordova, Capital 168,000
Coloma, Capital 280,000

Problem 4-4
1. Total capital of old partners P690,000
Fraction of interest of old partners  4/5
Total partnership capital after admission of Cruz P862,500
Interest of Cruz x 1/5
Required contribution of Cruz P172,500

2 a. Bonus method
AC CC Bonus
Cortes P435,000 P420,000 P15,000
Canda 249,000 240,000 9,000
Cerra 36,000 30,000 6,000
Cruz 180,000 210,000 ( 30,000)
P900,000 P900,000 -------

2b. Asset Revaluation method

AC CC Asset Rev
Cortes P495,000 P420,000 P75,000
Canda 285,000 240,000 45,000
Cerra 60,000 30,000 30,000
Cruz 210,000 210,000 -
P1,050,000 P900,000 P 150,000

Problem 4-5
1. a. Asset Revaluation method
Cash 90,000
Clara, Capital 22,500
Chapter 4 - Partnership Dissolution
Suggested Answers

Cora, Capital 18,000

Celia, Capital 4,500
Other Assets 45,000
Carla, Capital 90,000
AC CC Asset Rev
Old P 630,000 P 675,000 (P45,000)
New 90,000 90,000 -
P720,000 P765,000 (P45,000)

b. Bonus method
Cash 90,000
Clara, Capital (P5,625 x 5/10) 2,813
Cora, Capital (P5,625 x 4/10) 2,250
Celia, Capital (P5,625 x 1/10) 562
Carla, Capital 95,625
AC CC Bonus
Old P669,375 P675,000 (P5,625)
New 95,625 90,000 (5,625)
P765,000 P765,000 -----

Clara Cora Celia Carla

Capital balances – Bonus method P321,187 P213,750 P134,438 P95,625
Capital balances – Asset Revaluation method P301,500 P198,000 P130,500 P90,000
Reduction in depreciation due to asset revaluation 11,250 11,250 11,250 11,250
Capital balances after reduction in depreciation P 312,750 P209,250 P141,750 P101,250
Net advantage (disadvantage) of bonus over asset rev. P 8,437 P4,500 (P 7,312) (P5,625)

Celia will prefer the asset revaluation method over the bonus method because of the P7,312 advantage over the bonus
method.

2. a. Clara, Capital 40,500

Cora, Capital 27,000
Celia, Capital 16,875
Carla, Capital 84,375

b. Other Assets 45,000

Clara, Capital 22,500
Cora, Capital 18,000
Celia, Capital 4,500
P90,000  1/8 = P720,000 – P675,000 = P45,000

Clara, Capital (P324,000 + P22,500) x 1/8 43,312

Cora, Capital (P216,000 + P18,000) x 1/8 29,250
Celia, Capital (P135,000 + P4,500) x 1/8 17,438
Carla, Capital 90,000

Problem 4-6
1. Cabal Cadiz Caldea Camo Total
Capital balances before the admission of Camo P150,000 P180,000 P300,000 P630,000
Purchase of 1/6 interest of Cadiz (30,000) 30,000 -----
Chapter 4 - Partnership Dissolution
Suggested Answers

Contribution to the partnership 150,000 150,000

Asset revaluation to old partners 6,000 6,000 8,000 20,000
Bonus to old partners 6,000 6,000 8,000 (20,000) ------
Capital balances after the admission of Camo P162,000 P162,000 P316,000 P160,000 P800,000

2. Cabal = 30% x 75% = 22.5% Caldea = 40% x 75% = 30%

Cadiz = 30% x 75% = 22.5% Camo = 25%

Problem 4-7
Corona Calderon Calixto Total
Capital balances Dec. 31, 2007 before closing P250,000 P150,000 P400,000
Distribution of 2007 profit:
Salaries P45,000 P45,000 P90,000
Balance (12,000) (8,000) (20,000)
Share in 2007 profit P33,000 P37,000 P70,000
Total P283,000 P187,000 P470,000
Drawing (41,000) (34,000) (75,000)
Capital balances, January 1,2008 P242,000 P153,000 P395,000
Investment of Calixto P100,000 100,000
Bonus to Calixto (39,000) (26,000) 65,000
Capital balances after the admission of Calixto P203,000 P127,000 P165,000 P495,000
Share in 2008 loss (26,250) (18,750) (30,000) (75,000)
Drawing (37,500) (25,000) (34,000) (96,500)
Capital balances, January 1, 2009 P139,250 P83,250 P101,000 P323,500
Loss on sale of the partnership business (82,600) (59,000) (94,400) (236,000)
Cash Settlement to partners P56,650 P24,250 P6,600 P87,500

MULTIPLE CHOICE
1. B
2. C
3. A
4. A

5. B Chan Ching Chen Total

Capital bal. before admission of Chat P250,000 P150,000 P100,000 P500,000
Asset Revaluation 30,000 18,000 12,000 60,000
Balances P280,000 P168,000 P112,000 P560,000
Interest sold to Chat (25%) ( 70,000) ( 42,000) ( 28,000) ( 140,000)
Balances after the admission of Chat P210,000 P126,000 P 84,000 P420,000

6. A P72,000 x ½ P 36,000

7. C Total partnership capital before the admission of Co P280,000

Fraction of interest of old partners  4/5
Total partnership capital after the admission of Co P350,000
Fraction of interest of Co x 1/5
Required contribution of Co P 70,000

8. A Cordova Constancio
Capital balances before adjustment P641,976 P728,352
Chapter 4 - Partnership Dissolution
Suggested Answers

Uncollectible accounts ( 20,000) ( 35,000)

Worthless inventories ( 5,500) ( 6,700)
Other assets written off ( 2,000) ( 3,600)
Adjusted capital P614,476 P683,052

9. C Total capital (P614,476 + P683,052) P1,297,528

Total liabilities (P178,940 + P200,000 + P243,650 + P345,000) 967,590
Total assets P2,265,118

10. D Total capital (P1,297,528 / 80%) P1,621,910

Interest acquired by Cuyugan x 20%
Cash to be contributed by Cuyugan P 324,382

11. D Cordova Constancio

Capital balances P614,476 P683,052
Required capital (P1,297,528 / 2) 648,764 648,764
Cash paid (received) P 34,288 (P 34,288)

12. B Cordova Constancio Cuyugan

Capital balances P614,476 P683,052 P324,382
Cash paid (received) 34,288 ( 34,288)
Net income 130,000 130,000 65,000
Drawings ( 50,000) ( 65,000) ( 28,000)
Capital balances, end of first year P728,764 P713,764 P361,382

13. C Conrado = ½ x 2/3 2/6

Cosio = 1/4 x 2/3 1/6
Cosme = 1/4 x 2/3 1/6

14. C Agreed capital P 750,000

Contributed capital (P500,000+P200,000) 700,000
Asset Revaluation P 50,000

15. B Conrado Cosio Cosme Cueto Total

Capital bal. before the
admission of Cueto P250,000 P150,000 P100,000 P500,000
Transfer of 1/3 interest ( 50,000) P 50,000 ------
Investment of Cueto 200,000 200,000
Asset Revaluation 25,000 12,500 12,500 50,000
Capital bal. after the
admission of Cueto P275,000 P112,500 P112,500 P250,000 P750,000
Chapter 4 - Partnership Dissolution
Suggested Answers

TEST MATERIALS
Test Material No. 14 Test Material No. 15
1. T 6. F 11. F 1. Asset Revaluation 11. Admission by investment
2. F 7. T 12. F 2. Agreed capital 12. Bonus to new partner
3. T 8. T 13. F 3. Bonus 13. Liquidation
4. F 9. F 14. T 4. Total contributed capital 14. Capital credit
5. F 10. T 15. T 5. Dissolution 15. When agreed capital is not
given
16. T 6. Interest 16. Old partners’ capital
17. T 7. Dissolution 17. Fraction of interest
18. F 8. Sale of interest to a partner 18. Positive Asset Revaluation
19. T 9. Agreed capital 19. Personal gain or loss
20. T 10 Admission by purchase 20. Net advantage

Test Material No. 16

1. B
2. C
3. A
4. B
5. B
6. D
7. A
8. C P160,000 + P380,000 = P540,000 x 1/4 = P135,000
9. B
10. C P120,000 + (P20,000* x 1/5) = P124,000
AC CC Bonus
*old partners P420,000 P400,000 P20,000
new partner 140,000 160,000 (20,000)
P560,000 P560,000 ------
AC CC Bonus
11. D old partners P320,000 P360,000 (P40,000)
new partner 160,000 120,000 40,000
P480,000 P480,000 -
12. C (P100,000 + P200,000)  3/4 = P400,000 x 1/4 = P100,000
13. B Cariaso Carino Carillo
Capital balances before admission of Cardel P400,000 P200,000 P100,000
Asset Revaluation
(P200,000  1/4) - P700,000 = P100,000 60,000 30,000 10,000
Capital balances after asset revaluation P460,000 P230,000 P110,000
Fraction of remaining interest ¾ ¾ ¾
Capital balances after admission of Cardel P345,000 P172,500 P82,500
14. A P400,000 x 3/4 = P300,000; P200,000 x 3/4 = P150,000; P100,000 x 3/4 = P75,000
15. B
16. C AC CC Bonus
Cariaso P385,000 P400,000 (P15,000)
Carino 192,500 200,000 (7,500)
Carillo 97,500 100,000 (2,500)
Cardel 225,000 200,000 25,000
P900,000 P900,000 -
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Suggested Answers

17. B Coral Camus Cerda Cordero Total

Capital bal. before the
admission of Cordero P190,000 P160,000 P120,000 P470,000
Transfer of 15% int. ( 24,000) P 24,000 ------
Investment of Cordero 160,000 160,000
Asset Revaluation 15,000 9,000 6,000 30,000
Bonus to old partners 22,000 13,200 8,800 (44,000) ------
Capital bal. after the
admission of Cordero P227,000 P158,200 P134,800 P140,000 P660,000
18. B
19. A
20. A Coral 50% x 80% = 40%
Camua 30% x 80% = 24%
Cerda 20% x 80% = 16%
Cordero 20%

Test Material No. 17

Problem A

1. Asset revaluation to old partners - P100,000; no bonus

AC CC Asset Rev
Old P600,000 P500,000 P100,000
New 150,000 150,000 -------
P750,000 P650,000 P100,000

2. No asset revaluation; bonus to old partners - P20,000

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 -------

3. No asset revaluation;, bonus to new partner - P45,000

AC CC Bonus
Old P455,000 P 500,000 (P45,000)
New 195,000 150,000 45,000
P650,000 P650,000 ------

4. Asset revaluation to old partners - P100,000; bonus to old partners - P37,500

AC CC Asset Rev Bonus
Old P637,500 P500,000 P100,000 P 37,500
New 112,500 150,000 ------- ( 37,500)
P750,000 P650,000 P100,000 -------

5. No asset revaluation; bonus to old partners - P20,000.

AC CC Bonus
Old P520,000 P500,000 P 20,000
New 130,000 150,000 ( 20,000)
P650,000 P650,000 --------
P750,000 P650,000 P100,000
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Suggested Answers

Problem B
Total capital of the partnership [(P148,000 + P260,000 + P192,000)  80%] P750,000
Interest of Cinco x 20%
Contribution of Cinco P150,000

Problem C

Carandang Cojuangco Capistrano

Capital balances before the admission of Canete P240,000 P120,000 P60,000
Asset revaluation [(P120,000  1/4) - P420,000] 36,000 18,000 6,000
Capital balances after asset revaluation P276,000 P138,000 P66,000
Remaining interest x 3/4 x 3/4 x 3/4
Capital balances after the admission of Canete P207,000 P103,500 P49,500