Chapter 3

True Or
False
61 F
1 F 11 T 21 T 31 F 41 T 51 F
2 F 12 T 22 F 32 T 42 T 52 F 62 T
63 F
3 F 13 F 23 F 33 F 43 T 53 T
64 T
4 F 14 F 24 T 34 F 44 T 54 F
5 T 15 T 25 T 35 T 45 F 55 T 65 T
66
6 T 16 F 26 T 36 T 46 F 56 F
7 T 17 F 27 T 37 T 47 F 57 T
8 T 18 F 28 F 38 F 48 T 58 F
9 F 19 T 29 T 39 F 49 T 59 F
10 T 20 T 30 F 40 T 50 F 60 F

Multiple choice:
.

1. A

A B
Capital 40,000 20,000
X 1/4 1/4
Interest Sold 10,000 5,000

2. A

A B
Capital 40,000 20,000
X 3/4 3/4
Remaining Interest 30,000 15,000

3. A
4. C
A B
Capital 40,000 20,000
X 3/4 3/4
Remaining Interest 30,000 15,000

5. A 0 no gain is recognized by the partnership

6. C
Cash Realized 20,000
Interest sold 15,000
Gain of selling partner 5,000
7. D

Implied Capital (20,000/1/4) 80,000

Old capital 60,000
Under Revaluation 20,000

A B
Capital 40,000 20,000
Revaluation 16,000 4,000
Total 56,000 24,000
X 3/4 3/4
Remaining Interest 42,000 18,000

8. A
9. A
10. A No loss is recorded in the partnership books

11. B
Cash Realized 12,000
Interest sold 15,000
Gain of selling partner (3,000)

12. A
13. B
Implied Capital
(12,000/1/4) 48,000
Old capital 60,000
Under Revaluation (12,000)

A B
Capital 40,000 20,000
Revaluation (9,600) (2,400)
Total 30,400 17,600
X 3/4 3/4
Remaining Interest 22,800 13,200

14. A
TCC TAC Adjustment
A 40,000 43,000 3,000 80%
B 20,000 20,750 750 20%
Total 60,000 63,750 3,750
C 25,000 21,250 (3,750)
Total 85,000 85,000 -

15. B
16. D A 80% x 75% = 60% ; B 20% x 75% = 15% and C 25%

17. A
TCC TAC
A 40,000 36,800 (3,200)
B 20,000 19,200 (800)
Total (70%) 60,000 56,000 (4,000)
C (30%) 15,000 24,000 9,000 Bonus
75,000 80,000 5,000 Revaluation

18. A
19. D A 80% x 80% = 64% ; B 20% x 80% = 16% and C 20%

20. D
TCC TAC
A 40,000 58,000 18,000
B 20,000 24,500 4,500
Total (75%) 60,000 82,500 22,500
C (25%) 27,500 27,500 -
87,500 110,000 22,500 Revaluation

21. B
22. D A 80% x 80% = 64% ; B 20% x 80% = 15% and C 20%
23. A
TCC TAC
A 40,000 28,000 (12,000)
B 20,000 17,000 (3,000)
Total (60%) 60,000 45,000 (15,000)
C (40%) 15,000 30,000 15,000
75,000 75,000 -

Under bonus, TCC = TAC

24. A
25. C
Solution TCC TAC
A 40,000 10,000 (30,000)
B 20,000 12,500 (7,500)
Total (60%) 60,000 22,500 (37,500)
C (40%) 15,000 15,000 -
75,000 37,500 (37,500)

TAC = 15,000/40% = 37,500

26. A
27. D
28. B
29. A
30. C
31. A
32. C
33. B
34. B
35. A
36. A
37. D
38. D
39. C
40. A
A B C
Capital prior to admission 160,000 80,000 40,000
Multiply by remaining interest 3/4 3/4 3/4
Capital after admission 120,000 60,000 30,000

41. D

A 1,044,000
B 696,000
Total capital contribution of old partners 1,740,000
Divide by: Interest of old partners 80%
Total agreed capital 2,175,000
Multiply by: Interest of new partner 20%
Capital contribution of new partner 435,000

42. B
A B Total
Interest Sold 100,000 120,000 220,000
Balance: P&L ratio 8,000 12,000 20,000
Total 108,000 132,000 240,000

43. C/C/B
Req. 1 A B C Total
Capital Interest before admission 750,000 900,000 1,200,000 2,850,000
Net income 50,000 70,000 80,000 200,000
Balance before admission 800,000 970,000 1,280,000 3,050,000
x Remaining Interest 80% 80% 80% 80%
Capital after admission 640,000 776,000 1,024,000 2,440,000

Req. 2 A B C Total
Interest sold (20% x balance before admission) 160,000 194,000 256,000 610,000
Balance (15,000) (21,000) (24,000) (60,000)
Total payment received 145,000 173,000 232,000 550,000

Learnings: Adjust first the capital for net income prior admission, Loans are not included in the
computation under admission by purchased. The amount paid by the new partner will not be
recorded by the partnership, but instead, it shall be distributed to the selling partners.

Req. 3 A B C Total
Capital Interest before admission 750,000 900,000 1,200,000 2,850,000
Net income 50,000 70,000 80,000 200,000
Adjusted Capital before Revaluation 800,000 970,000 1,280,000 3,050,000
Revaluation - over (75,000) (105,000) (120,000) (300,000)
Balance after revaluation 725,000 865,000 1,160,000 2,750,000
x Remaining Interest 80% 80% 80% 80%
Capital Interest after admission 580,000 692,000 928,000 2,200,000

Implied capital (550,000/20%) 2,750,000

Old capital 3,050,000
Over valuation (300,000)
Learnings: adjust first the capital for any amount of net income and revaluation before admitting
the new partner. The capital of new partner is equal to his total amount paid to the partners.

44. D/D

Answer
Net
Capital Income TCC TAC Total
A 250,000 30,000 280,000 250,000 (30,000) 3/5
B 300,000 20,000 320,000 300,000 (20,000) 2/5
Total 600,000 80% 550,000 (50,000)
C 87,500 20% 137,500
687,500 = 687,500

Bonus to new partner of P50,000 = (280,000 TCC of A – 250,000 TAC of A = 30,000 ÷ 3/5 interest of A)
TAC of old partners P550,000 = TCC of old P600,000 – P50,000 bonus given to new partner C
TAC of partnership = 600,000 – 50,000 bonus to new partner = 550,000 / 80% = 687,500

Learnings: Adjust the capital for the net income before admission. If problem is silent for the
admission by investment use the bonus method.

Answer
Net
Capital Income TCC TAC Total
A 250,000 30,000 280,000 250,000 (30,000) 3/5
B 300,000 20,000 320,000 300,000 (20,000) 2/5
Total 600,000 80% 550,000 (50,000)
C 120,000 20% 137,500 17,500 Bonus
720,000 687,500 (32,500) Overvaluation

TAC = 600,000 – 50,000 bonus to new partner = 550,000 / 80% = 687,500

Overvaluation of P32,500 = TCC 720,000 – 687,500
Bonus of P17,500 to partner C = CC 120,000 – AC P137,500
Bonus given by partner B to C = P17,500 total bonus x 40%

45. C

Answer
NI - 9
Capital mos. TCC TAC Total
A 620,000 93,750 713,750 663,750 (50,000) 50%
B 500,000 56,250 556,250 526,250 (30,000) 30%
C 330,000 37,500 367,500 347,500 (20,000) 20%
Total 1,450,000 187,500 1,637,500 75% 1,537,500 (100,000)
D 412,500 25% 512,500 100,000
2,050,000 = 2,050,000
 A (40%) B (24%) C (16%) D (20%)
Capital as of October 1, 2020 663,750 526,250 347,500 512,500
Net Income - 3 months P62,500 25,000 15,000 10,000 12,500
Capital December 31, 2020 688,750 541,250 357,500 525,000

Learnings: Loans not included, Capital is adjusted for net income before dissolution (prorated), Be
mindful of the dates

46. A
47. C
48. B
49. C
50. C
51. C
52. D
53. B
54. C
55. B
56. B
57. D
58. C
59. D
60. C
61. B
TCC TAC
Irene 180,000 162,000 (18,000)
John 150,000 138,000 (12,000)
Total 330,000 2/3 300,000 (30,000)
Son 120,000 1/3 150,000
Total 450,000 450,000

62. B
Capital Contribution Purchase TCC TAC
A 120,000 120,000 145,000 25,000 25%
B 160,000 (40,000) 120,000 170,000 50,000 50%
C 400,000 400,000 425,000 25,000 25%
Total 680,000 640,000 740,000 100,000
D 280,000 40,000 320,000 300,000 (20,000) Bonus
Total 960,000 1,040,000 80,000 Revaluation

63. D
old Remaining interest in P&L New P&L (Old x 2/3)
A 25% 2/3 16.67%
B 50% 2/3 33.33%
C 25% 2/3 16.67%
64. D
TCC TAC
Earl 880,000 924,800 44,800
Jemn 640,000 684,800 44,800
Jansen 440,000 462,400 22,400
Total 1,960,000 70% 2,072,000 112,000
Faty 1,000,000 30% 888,000 (112,000)
Total 2,960,000 2,960,000 -

65. A/B/B
P Q
Capital 358,500 300,000
X 70% 70%
Remaining interest 250,950 210,000

Cash Realized 12,000

Interest sold 15,000
Gain of selling partner (3,000)

Implied Capital
(225,000/30%) 750,000
Old capital 658,500
Under Revaluation 91,500

P Q
Capital 358,500 300,000
Revaluation 54,900 36,600
Total 413,400 336,600
X 70% 70%
Remaining Interest 289,380 235,620

66. C/D

Bong Darwin Bryan Total

Unadjusted 360,000.00 180,000.00 540,000.00
Revaluation 135,000.00 45,000.00 180,000.00
After 495,000.00 225,000.00 720,000.00
Purchase - 165,000.00 - 75,000.00 240,000.00 -
Adjusted 330,000.00 150,000.00 240,000.00 720,000.00
67. B/A/A
Jayson Mike Paul Iram Total

Unadjusted 550,000.00 400,000.00 300,000.00 1,250,000.00

Revaluation 168,750.00 168,750.00 112,500.00 450,000.00

After 718,750.00 568,750.00 412,500.00 1,700,000.00
Purchase 359,375.00 359,375.00 -
Investment 300,000.00 300,000.00
Bonus 59,765.63 59,765.63 39,843.75 159,375.00 -
Adjusted 419,140.63 628,515.63 452,343.75 500,000.00 2,000,000.00

68. B/D

TCC Revaluation TCC TAC

A 20% 425,000 30,000 455,000 461,000 6,000
B 30% 400,000 45,000 445,000 454,000 9,000
C 50% 200,000 75,000 275,000 290,000 15,000
150,000 1,175,000 80% 1,205,000 30,000
D 331,250 20% (30,000)
1,506,250 1506250

TAC = 1,205,000 / 80%

Req. 1: Partner C: 290,000 TAC – Beg Cap 200,000 =90,000
Req. 2: TCC 1506,000 – Contribution of old partners 1,175,000 = 331,250

69. A
A B C
Capital before retirement 140,000 130,000 300,000
Adjustment of assets (720,000 - 600,000) 24,000 24,000 72,000
Balance after adjustment 164,000 154,000 372,000
Payment to A 204,000
Excess payment (40,000) (10,000) (30,000)
Capital after retirement 144,000 342,000

70. C/C/C/D/D
1&2 E F G Total
Capital 120,000 155,000 115,000 390,000
Net Loss : (140,000)
Inventory ; 12,000
Net adjustment (128,000) (32,000) (80,000) (16,000) (128,000)
Total 88,000 75,000 99,000 262,000
Payment to F 70,000
Excess 3,333.33 (5,000) 1,666.67
Capital after retirement 91,333 100,667

3. Answer Excess 5,000 / 5/8 = 8,000

4&5 E F G Total
Capital 120,000 155,000 115,000 390,000
Net Loss : (140,000)
Inventory ; 12,000
Net adjustment (128,000) (32,000) (80,000) (16,000) (128,000)
Total 88,000 75,000 99,000 262,000
Payment to F 70,000
Excess overvaluation (2,000.00) (5,000) (1,000.00) (8,000)
Capital after retirement 86,000 98,000

71. C
BM MC JB Total
Capital before retirement and adjustment 58,000 64,000 77,000 199,000
Depreciation (6,000) (6,000) (3,000) (15,000)
Balance after adjustment 52,000 58,000 74,000 184,000
Bonus to BM 1,200 (600) (600)
53,200
57,400 73,400 130,800

72. D
A B C
Capital Interest 200,000 400,000 400,000
Net income 250,000
Revaluation of NCA 200,000
Total 450,000 90,000 135,000 225,000
Total capital interest 290,000 535,000 625,000
Loan (not included) -
Total 290,000 535,000 625,000
Bonus to Retiring partner B (5,500) 19,250 (13,750)
Payment 554,250
Capital of Remaining Partners 284,500 611,250

73. A 672,000 x ¼ = 168,000

74. B Total capital 260,000 – 10,000 + 20,000 – 3,000 = 267,000

75. C
Unadjusted capital (94,800+214,200) 309,000
AR (20,000)
MI (22,000)
Fixed assets 6,600
Adjusted Capital 273,600
 Capital 273,600
Ordinary share (720 x 2 x P10) 14,400
Preference share 259,200
Divided by par 100
Number of Preference share 2,592

Straight Problems
A. ADMISSION
Problem 1:
Noy, capital (48,000
1 x1/3) 16,000
Ben, capital (24,000 x
1/3) 8,000
Noli, capital 24,000

2 Cash 20,000 TCC TAC

Noli, capital 20,000 Noy 48,000 40,800 (7,200)
Ben 24,000 19,200 (4,800)
Noy, Capital 7,200 Total 72,000 3/4 60,000 (12,000)
Ben,capital 4,800 Noli 20,000 1/4 20,000
Asset 12,000 Total 92,000 80,000 (12,000)

3 Cash 40,000
Noli, capital 40,000

Assets 8,000
Noy,capital 4,800
Ben, capital 3,200
4 Cash 40,000 TCC TAC
Noli, capital 40,000 Noy 48,000 55,200 7,200 60%
Ben 24,000 28,800 4,800 40%
Noli, capital 12,000 Total 72,000 3/4 84,000 12,000
Noy, capital 7,200 Noli 40,000 1/4 28,000 (12,000)
Ben, capital 4,800 Total 112,000 112,000 -

5 Cash 30,000 TCC TAC

Noli, capital 30,000 Noy 48,000 50,700 2,700 60%
Ben 24,000 25,800 1,800 40%
Noli, capital 4,500 Total 72,000 3/4 76,500 4,500
Noy, capital 2,700 Noli 30,000 1/4 25,500 (4,500)
Ben, capital 1,800 Total 102,000 102,000 -
 Adjusted
6 TCC Cap Adjustments TAC

Noy, capital 7,200 Noy 48,000 40,800 (7,200) 60% 36,000

Ben, capital 4,800 Ben 24,000 19,200 (4,800) 40% 24,000

Assets 12,000 Total 72,000 3/4 (12,000) 60,000

Cash 20,000 Noli 20,000 1/4 - 20,000

Noli ,capital 20,000 Total 92,000 (12,000) 80,000

Noy, capital 4,800
Ben, capital 4,800
Or
Noy,capital 12,000
Cash 20,000
Noli, capital 20,000
Asset 12,000

Problem 2
1. Journal entry

C, capital 550,000
D, capital 550,000

2. The total capital of ABC remains at P8,140,000. The total amount paid by D to C does not affect the
partnership and D does not become a partner with the assignment of 1/3 of C’s interest.

Problem 3: (1) P588,000; (2) P5,292,000

Problem 4
a.

TCC TAC
Ip 300,000 420,000 120,000 2/5
Man 120,000 300,000 180,000 3/5
Total (80%) 420,000 720,000 300,000
Lee (20%) 180,000 180,000
600,000 900,000 300,000

Cash 180,000
Inventory 300,000
Ip, capital 120,000
Man, capital 180,000
Lee, capital 180,000
b.

TCC TAC
Ip 300,000 324,000 24,000 2/5
Man 120,000 156,000 36,000 3/5
Total (80%) 420,000 480,000 60,000
Lee (20%) 180,000 120,000
600,000 600,000 -

Cash 180,000
Ip, capital 24,000
Man, capital 36,000
Lee, capital 120,000

c.

Ip, capital (300,000 x 20%) 60,000

Man, capital (120,000 x 20%) 24,000
Lee, capital 84,000

d.

TCC TAC
Ip 300,000 297,120 (2,880) 2/5
Man 120,000 115,680 (4,320) 3/5
Total (80%) 420,000 412,800 (7,200)
Lee (20%) 96,000 103,200
516,000 516,000 -

Cash 96,000
Ip, capital 2,880
Man, capital 4,320
Lee,
capital 103,200

e.

TCC TAC
Ip 300,000 285,600 (14,400) 2/5
Man 120,000 98,400 (21,600) 3/5
Total (80%) 420,000 384,000 (36,000)
Lee (20%) 96,000 96,000
516,000 480,000 (36,000)
 Cash 96,000
Ip, capital 14,400
Man, capital 21,600
Lee,
capital 96,000
Land 36,000

f.

Ip, capital (300,000 x 20%) 60,000

Man, capital (120,000 x 20%) 24,000
Lee, capital 84,000

Problem 5

1. Book value of interest acquired = (P180,000 + P90,000) × 1/3 = P90,000

Bonus Method

Cash 90,000
Marie, Capital 90,000

2. Book value of interest acquired = (P180,000 + P120,000) × 0.45 = P135,000

Book value of interest is greater than assets invested.

Bonus Method
Cash 120,000
Paul, Capital (0.60 × P15,000) 9,000
Irish, Capital (0.40 × P15,000) 6,000
Marie, Capital 135,000

The Revaluation method is not applicable because the partners agreed to total capital interest of
P300,000.

1
3. Book value of interest acquired (P180,000 + P120,000) × = P100,000
3
Bonus method cannot be used because Marie will not accept less than P120,000 capital interest.

Revaluation Method

Total capital implied from contract [P120,000/( 1/3)] P360,000

Minus current capital balance + Marie's investment (P180,000 + P120,000) 300,000
Revaluation P60,000

Asset 60,000
Paul, Capital (0.60 × P60,000) 36,000
Irish, Capital (0.40 × P60,000) 24,000

Cash 120,000
Marie, Capital 120,000
4. Book value of interest acquired (P180,000 + P40,000) × ¼ = P55,000
Book value of interest acquired is greater than assets invested.

Bonus Method

Cash 40,000
Paul, Capital (0.60 × P15,000) 9,000
Irish, Capital (0.40 × P15,000) 6,000
Marie, Capital 55,000
5.
Paul, Capital (0.30 × P92,000) 27,600
Irish, Capital (0.30 × P88,000) 26,400
Marie, Capital 54,000

Problem 6
1. 50,000,000
2. 5,000,000
3. 7,500,000; 13,500,000; 4,000,000

B. RETIREMENT
Problem 1:
1. Mark Jom Eric
Capital 50,000 80,000 50,000
Net Income 12,000
Supplies 12,000
Equipment 8,000
Net adjustment
32000 9,600 12,800 9,600
Total 59,600 92,800 59,600
Payment to F 92,800
Excess overvaluation - - -
Capital after
retirement 59,600 59,600

Journal Entry
Income Summary 12,000
Supplies 12,000
Equipment 8,000
Mark, capital 9,600
Jom, capital 12,800
Eric, capital 9,600
 Jom, capital 92,800
Cash 92,800

2. Mark Jom Eric

Capital 50,000 80,000 50,000
Net Income 12,000
Supplies 12,000
Equipment 8,000
Net adjustment 32000 9,600 12,800 9,600
Total 59,600 92,800 59,600
Payment to F 80,000
Excess overvaluation 6,400.00 (12,800) 6,400.00
Capital after retirement 66,000 66,000

Journal Entry
Income Summary 12,000
Supplies 12,000
Equipment 8,000
Mark, capital 9,600
Jom, capital 12,800
Eric, capital 9,600

Jom, capital 92,800

Mark, capital 6,400
Eric, capital 6,400
Cash 80,000
3. Mark Jom Eric
Capital 50,000 80,000 50,000
Net Income 12,000
Supplies 12,000
Equipment 8,000
Net adjustment 32000 9,600 12,800 9,600
Total 59,600 92,800 59,600
Payment to F 100,000
Excess overvaluation (3,600.00) 7,200 (3,600.00)
Capital after retirement 56,000 56,000

Answer
Income Summary 12,000
Supplies 12,000
Equipment 8,000
Mark, capital 9,600
Jom, capital 12,800
Eric, capital 9,600

Jom, capital 92,800

Mark, capital 3,600
Eric, capital 3,600
Cash 100,000
Problem 2

1 C, capital 164,000
A, capital (164,000 x2/3) 109,533
B. capital (164,000 x1/3) 54,667

2 C, capital 164,000
A, capital (6,000 x2/3) 4,000
B. capital (6,000 x1/3) 2,000
Cash 170,000

3 Assets 30,000
A, capital 12,000
B, capital 6,000
C, capital 12,000

C, capital 164,000
A, capital (21,000 x2/3) 14,000
B. capital (21,000 x1/3) 7,000
Cash 155,000

4 A, capital 2,400
B, capital 1,200
C, capital 2,400
Equipment 6,000

C, capital 161,600
Accumulated Depreciation 36,000
A, capital (3,600 x2/3) 2,400
B. capital (3,600 x1/3) 1,200
Cash 140,000
Equipment 54,000

Problem 3
a.
Dino Buzz Andy
Capital before retirement 150,000 90,000 120,000
Payment 144,000
Excess payment (18,000) (6,000) 24,000
Capital after retirement 132,000 84,000

Andy, capital 120,000

Dino, capital 18,000
Buzz, capital 6,000
Cash 144,000
b.
Dino Buzz Andy
Capital before retirement 150,000 90,000 120,000
Excess payment Revaluation 90,000 30,000 30,000 (30,000÷20%)
Adjusted capital 240,000 120,000 150,000

Assets 150,000
Andy, capital 30,000
Dino, capital 90,000
Buzz, capital 30,000

Andy, capital 150,000

Cash 150,000

c.
Dino Buzz Andy
Capital before retirement 150,000 90,000 120,000
Payment 115,000
Excess payment 3,750 1,250 (5,000)
Capital after retirement 153,750 91,250

Andy, capital 120,000

Dino, capital 3,750
Buzz, capital 1,250
Cash 115,000

d.
Andy, capital 120,000
Bullseye, capital 120,000

Problem 4
a.
Irvin Ivan Iram
Capital Before retirement 250,000 150,000 200,000
Settlement of interest 220,000
Excess (12,500) (7,500) 20,000
Total capital of the remaining partners and the partnership 237,500 142,500

b.
Irvin Ivan Iram
Capital Before retirement 250,000 150,000 200,000
Settlement of interest 160,000
Excess 25,000 15,000 (40,000)
Total capital of the remaining partners and the partnership 275,000 165,000

c.
 Irvin Ivan Iram Total
Capital Before retirement 250,000 150,000 200,000 600,000
Undervaluation 125,000 75,000 50,000 250,000
Capital after revaluation 375,000 225,000 250,000 850,000
Settlement of retiring partners interest (250,000)
Total capital of the remaining partners and the
partnership 375,000 225,000 - 850,000

Problem 5
Answer:
a. Tom capital before retirement 300,000
Bonus to Tom (100,000 ÷ 5/8) 160,000
Total payment to Tom 460,000

b. Tom capital before retirement 300,000

Share in total revaluation (120,000 x 20%) 24,000
Total payment to Tom 324,000

Problem 6
C, capital 288,000
Cash 288,000

A B C
Capital 560,000 480,000 240,000
Drawings (16,000)
LOan 24,000
560,000 480,000 248,000
MI (40,000)
Fixtures 120,000
Patents (120,000)
NI 240,000
Total Adj 200,000 100,000 60,000 40,000
Adj capital 660,000 540,000 288,000
Settlement (288,000)

-
b. C is to receive P304,000, using
- bonus method
- Total revaluation method

Answer: Bonus
C, capital 288,000
A, capital 10,000
B, capital 6,000
Cash 304,000
 A B C
Adj capital 660,000 540,000 288,000
Payment to C 304,000
Excess - Bonus (10,000) (6,000) 16,000
Capital after retirement 650,000 534,000

Answer: Revaluation
Assets 80,000
A, capital 40,000
B,
capital 24,000
C,
capital 16,000

C, capital 304,000
Cash 304,000

A B C
Adj capital 660,000 540,000 288,000
Payment to C
Excess - Revaluation 40,000 24,000 16,000 80,000
Capital after retirement 700,000 564,000 304,000

c. C is to receive 276,000, using

- Bonus method
- Adjustment in specific asset.
- Asset write-down traceable to the entire entity.
Answer: Bonus
C, capital 288,000
A, capital 7,500
B, capital 4,500
Cash 276,000

A B C
Adj capital 660,000 540,000 288,000
Payment to C 276,000
Excess - Bonus 7,500 4,500 (12,000)
Capital after retirement 667,500 544,500

Answer: Adjustment in specific asset

C, capital 288,000
Specific Asset 12,000
Cash 276,000
Answer: Asset write down traceable to entire entity
A, capital 30,000
B, capital 18,000
C, capital 12,000
Assets 60,000

C, capital 276,000
Cash 276,000

Problem 7
1. 3,120,000 – 3,000,000 = 120,000/10% = 1,200,000 x 50% = 600,000 + capital before 1,000,000 =
1,600,000

2. 3,120,000 – 3,000,000 = 120,000/ 1/5 = 600,000 bonus given – capital before 1,000,000 = 400,000

Problem 8

A B C
Beg 80,000 92,000 164,000 Fair Value 18,000
Revaluation (2,400) (1,200) (2,400) BV (60,000 x 40%) 24,000
Adjusted cap after revaluation 77,600 90,800 161,600 Overvaluation (6,000)
Settlement (140,000 + 18,000) 158,000
Excess 2,400 1,200 (3,600)
capital after retirement 80,000 92,000

Problem 9

D E F
Cap 83,000 77,000 180,000
Loan 20,000
Overvaluation - 15,000 (6,000) (2,250) (6,750)
Net Loss (28,000) (10,500) (31,500)
Total 69,000 64,250 141,750
Bonus to remaining (7,000) 1,750 5,250
Payment 62,000
Capital of Remaining 66,000 147,000
C. Death
Problem 1:
Ysa Dos Thirdy Fouth
Capital balance 300,000 250,000 150,000 180,000
Share in Profit January - June 30
200,000 x 20% 40,000
200,000 x 20% 40,000
200,000 x 30% 60,000
200,000 x 30% 60,000
Capital June 30 340,000 290,000 210,000 240,000

Profit 400,000
Jan - June 30
400,000 x 6/12 200,000
Interest expense
240,000 x 10% x 6/12 12,000
Profit July 1 - December 31 188,000

Ysa Dos Thirdy

Capital Balance July 1 340,000.00 290,000.00 210,000.00
Share in Profits July - December 31
188,000 x 2/7 53,714.29
188,000 x 2/7 53,714.29
188,000 x 3/7 80,571.43
Capital December 31 393,714.29 343,714.29 290,571.43
Payment to Thirdy 261,514.29
Bonus to Ysa and Dos 14,528.57 14,528.57 (29,057.14)
Capital December 31 of Ysa and Dos 408,242.86 358,242.86

1. Ysa Dos Thirdy

January - June 30 40,000.00 40,000.00 60,000.00
July - December 31 53,714.29 53,714.29 80,571.43
Total share in profit 93,714.29 93,714.29 140,571.43

2.
Capital of Fourth June 30 240,000.00
Accrued interest (240,000 x 10% x 6/12) 12,000.00
Liability to Fourth's estate 252,000.00

3.
Capital of Thirdy June 30 210,000.00
Bonus to Ysa and Dos (29,057.14)
Note Payable 180,942.86
4. Ysa Dos
Capital Balance of Ysa and Dos 408,242.86 358,242.86

5.
Payable to Fourth's estate 252,000.00
Interest Expense (240,000 x 10% x
4/12) 8,000.00
Cash 260,000.00

6.
Note Payable 180,942.86
Interest Expense (180,943 x 15% x 60/360) 4,523.58
Cash 185,466.43

Payable to Uno's Estate 400,000.00

Cash 250,000.00
Land 150,000.00

D. Incorporation

Entries in the Books of the new Corporation.

Inventories 520,000
Land 800,000
Accumulated Depreciation – Bldg 200,000
Accumulated Depreciation - Equip. 400,000
Joan,capital 560,000
Josh,capital 336,000
John,capital 224,000
To adjust the books of the partnership

Joan,capital 1,760,000
Josh,capital 736,000
John,capital 1,224,000
Ordinary Share 1,488,000
Share Premium 2,232,000
To rec ord issuanc e of 14,880 shares to the
partners
Joan (1,760,000 / P250) 7,040
Josh (736,000 / P250) 2,944
John (1,224,000 / P250) 4,896
Total share issued 14,880
Multiply by par value 100
Ordinary share 1,488,000

Cash 40,000
Ordinary share (2,000 sh. X P100) 20,000
Share premium 20,000
To rec ord the shares issued to Jazh and Jan

New Books Opened for the Corporation

Entries in the Books of the Partnership
Inventories 520,000
Land 800,000
Accumulated Depreciation - Bldg 200,000
Accumulated Depreciation - Equip. 400,000
Joan,capital 560,000
Josh,capital 336,000
John,capital 224,000
To adjust the books of the partnership

Shares of J Corp. 3,720,000

Accounts Payable 1,400,000
Accumulated Depreciation - Bldg. 200,000
Accumulated Depreciation - Equip. 1,000,000
Cash 800,000
Accounts Receivable 520,000
Inventories 1,200,000
Land 1,200,000
Building 1,000,000
Equipment 1,600,000
To rec ord transfer of assets and l iabil ities to J
Corp. and rec eipt of 14,880 shares of P100 par
value share valued at P250.

Joan,capital 1,760,000
Josh,capital 736,000
John,capital 1,224,000
Shares of J Corp. 3,720,000
To rec ord stoc k distribution to partners

Entries in the Books of the New Corporation

Cash 40,000
Ordinary share (2,000 sh. X P100) 20,000
Share premium 20,000
To rec ord the shares issued to Jazh and Jan

Cash 800,000
Accounts Receivable 520,000
Inventories 1,200,000
Land 1,200,000
Building 800,000
Equipment 600,000
Accounts Payable 1,400,000
Ordinary Share 1,488,000
Share Premium 2,232,000

Comprehensive Problem

Problem 1: B/A/D/B/C

Problem 2: C