NATIONAL UNIVERSITY – Manila
Financial Accounting and Reporting
Dissolution: Withdrawal or Retirement and Death of a Partner
1. Interest of the Retiring Partner is Sold to an Outsider
Ange, Princess and Hyzel are partners who share the profits and losses at 40% , 30% , and 30%,
respectively. The partnership account balances, among others, are as follows:
Loan to partnership – Angel P20,000
Loan from partnership – Hyzel 40,000
Angel, Capital 400,000
Princess, Capital 300,000
Hyzel, Capital 300,000
Princess, Drawing 20,000
Hyzel, Drawing 20,000
Hyzel has decided to leave the partnership since she will be immigrating to Canada. The partners agreed
to recognize the following revaluation of assets and liabilities at the time of her retirement:
1. The net realizable value of accounts receivable is understated by P5,000.
2. The land is understated by P60,000.
3. The book value of the building is overstated by P20,000.
4. The accrued expenses of P4,000 are recognized.
Required:
1. Adjust the books of the partnership.
2. Compute the total interest of Hyzel.
3. Record the sale of interest of Hyzel to Izzy as follows:
a. Izzy paid the total interest of Hyzel for P240,000.
b. Izzy paid the total interest of Hyzel for P270,000.
2. Interest of Retiring Partner is Sold to the Existing Partners
Angel, Princess and Hyzel are partners who share the profits and losses at 40%, 30% and 30%,
respectively. The partnership shows the following account balances, among others:
Loan to partnership – Angel P 20,000
Loan from partnership – Hyzel 40,000
Angel, Capital 400,000
Princess, Capital 300,000
Hyzel, Capital 300,000
Princess, Drawing 20,000
Hyzel, Drawing 20,000
Hyzel has decided to leave the partnership since she will be immigrating to Canada. The partners agreed
to recognize the following revaluation of assets and liabilities at the time of her retirement:
1. The net realizable value of the accounts receivable is understated by P5,000.
2. The land is understated by P60,000.
3. The book value of the building is overstated by P20,000.
4. The accrued expenses of P4,000 are recognized.
The books of the partnership are adjusted properly, and the total interest of the retiring partner had
been computed:
Required: Prepare the entry recording the sale of the total interest of Hyzel to Angel and Princess as
follows:
1. Angel will buy 60% of the total interest of Hyzel for P165,000.
2. Princess will buy 40% of the total interest of Hyzel for P105,000.
3. Interest of the Retiring Partner is Sold to the Partnership
Angel, Princess, and Hyzel are partners who share the profits and losses at 40%, 30%, and 30%,
respectively. The partnership shows the following account balances, among others:
Loan to partnership – Angel P 20,000
Loan from partnership – Hyzel 40,000
Angel, Capital 400,000
Princess, Capital 300,000
Hyzel, Capital 300,000
Princess, Drawing 20,000
Hyzel, Drawing 20,000
Hyzel had decided to leave the partnership since she will be immigrating to Canada. The partners agreed
to recognize the following revaluation of assets and liabilities at the time of her retirement:
1. The net realizable value of the accounts receivable is understated by P5,000.
2. The land is understated by P60,000.
3. The book value of the building is overstated by P20,000.
4. The accrued expenses of P4,000 are recognized.
The books of the partnership are adjusted properly, and the total interest of the retirement partner has
been computed.
Required: Prepare the entry recording the sale of the total interest of Hyzel to the partnership under the
following independent assumptions:
1. The partnership paid P235,000.
2. The partnership paid P280,000.
4. Death of a Partner
Himatyon, a partner who shares 30% on the profits and losses of an existing partnership, recently died
from cardiac arrest. The accounts in the partnership related to Himatyon showed the following
balances:
Due to partnership P 30,000
Himatyon, Capital 400,000
Himatyon, Drawing 12,000
The partners agreed to give an accounting recognition to the following before the interest of Himatyon
is finally settled:
1. The merchandise inventory is overvalued by P10,000.
2. The amount of the prepaid expenses is P6,000.
3. The store equipment is revalued from the book value of P150,000 to P170,000.
4. The interim statement of comprehensive income shows a net profit of P50,000.
Required: Prepare the entry recording the settlement of the interest of the deceased partner under the
following independent assumptions:
1. The total interest is paid to the beneficiary.
2. The total interest cannot be paid yet to the beneficiary.
