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Partnership Dissolution: National College of Business and Arts

The document contains a multiple choice test on the topic of partnership dissolution. It asks 10 questions about scenarios involving the admission and retirement of partners from a partnership. The questions cover how partner capital accounts are adjusted, partnership equity totals, and profit/loss ratios when partners join or leave the partnership by purchasing interests from existing partners or being bought out.

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Kate Jezel Santonia
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411 views5 pages

Partnership Dissolution: National College of Business and Arts

The document contains a multiple choice test on the topic of partnership dissolution. It asks 10 questions about scenarios involving the admission and retirement of partners from a partnership. The questions cover how partner capital accounts are adjusted, partnership equity totals, and profit/loss ratios when partners join or leave the partnership by purchasing interests from existing partners or being bought out.

Uploaded by

Kate Jezel Santonia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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National College of Business and Arts

Partnership Dissolution

Multiple Choice

1. it is the change in the relation of the partners caused by any partner being disassociated from the business

a. Formation c. Dissolution
b. Operation d. Liquidation

2. Which of the following is correct when a new partner is admitted through purchase of interest from existing
partners?

a. The incoming partner's contribution is recorded in the partnership books.


b. Partnership capital is increased by the incoming partners
c. The incoming Partner's contribution is not recorded in the partnership books
d. this is not allowed under the law. The new partner can only purchase interest from the
partnership and not from the partners themselves.

Use the following information for the next eight questions:

The partners' capital account in AB partnership before the admission of a new partner are as follows:

Capital Accounts P/L ratios


A - Capital 200,000 60%
B - Capital 120,000 40%
320,000

3. C purchases 20% interest in the partnership from A for P 120,000. How much is the capital balance
of A after the admission of C?
Computation:
a. 133,333 c. 96,000 A Capital (200,000x20%/60%)
b. 24,000 d. 148,000

4. C Purchases 20% interest in the partnership proportionately from A and B for 120,000. how much is
the gain and loss recorded in the partnership books? A Capital (200,000 x 20%)
B Capital (120,000 x 20%)
a. 48,000 c. 60,000 C, Capital
b. 56,000 d. 0

5. Using the case in #4 above, how much is the total equity of the partnership after the admission of C

a. 320,000 c. 240,000
b. 440,000 d. 200,000

6. C acquires 20% interest in the partnership by investing 120,000 to the business. No bonus is given to C
how much is the capital balance of A after the admission of C?

a. 200,000 c. 240,000
b. 264,000 d. 0

7. What is the P/L ratio of B after the admission of C

a. 22% c. 32%
b. 28% d. 40%

8. before the admission of C, B decided to retire A acquires B's interest for 180,000
How much is the capital balance of A after the retirement of B?

a. 200,000 C. 280,000
b. 264,000 d. 320,000

9. Before admission of C, B Decides to retire the partnership pays B 180,000 in settlement


of his partnership interest. How much is the capital balance of A after the retirment of B?

a. 200,000 c. 260,000
b. 140,000 d. 320,000

10. Using the Case in# 8 above, how much is the total Equity of the partnership after the
retirement of B

a. 320,000 c. 240,000
b. 440,000 d. 500,000
Consideration Transferred 120,000
Capital Transferred to C 66,667
Personal Gain 53,333

A B C total
66,667 40% 40% 20%
133,333 120,000 66,667 320,000

40,000 A B C TOTAL
24,000 Capital Beg. 200,000 120,000 - 320,000
64,000 -40,000 -24,000 64,000
160,000 96,000 64,000 320,000

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