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ADVANCE FINANCIAL ACCOUNTING AND REPORTING GORDON COLLEGE
PARTNERSHIP DISSOLUTION
Problem 1. Mark and Isaiah have capital balances of P560,000 and P450,000 respectively. Both decided to admit
Elijah into their partnership. He invested enough cash to have a 20% interest in the partnership. The profit and
loss ratio of the old partners is 3:2 respectively. After the admission of Elijah, the capital balance of Isaiah
amounted to P495,000. How much cash was invested by Elijah?
Problem 2. Partner’s P and Q has capital balances of P358,500 and P300,000 respectively before admitting R. P
and Q share profits and losses in the ratio 6:4. R paid P225,000 in exchange for 30% interest in the partnership
as well as the profit and losses.
Question 1. How much is the capital of partner P after admission of R? And how much is debited from
the capital of partner Q upon R’s admission?
Question 2. Assume that an equipment is undervalued, how much are the undervaluation of the
equipment and the capital balance of partner Q after admission of R respectively?
Problem 3. Erick and Mark are partners with capital balances of P30,000 and P70,000 respectively. Erick has a
30% interest in profits and losses. At this time, the partnership has decided to admit Rosa and Linda as new
partners. Rosa contributes cash of P55,000 for a 20% interest in capital and a 30% interest in profits and losses.
Linda contributes cash of P10,000 and an equipment for a 25% interest in capital and 35% interest in profits and
losses.
If bonus amounting to P18,250 is given to the old partners, what is the value of the equipment contributed by
Linda?
Problem 4. Felicity (60%), Blissfulness (20%), and Happiness (20%) are partners with present capital balances of
P60,000, P72,000 and P24,000 respectively. Gladness is to join the partnership upon contributing P72,000 to the
partnership in exchange for a 25% interest in capital and a 20% interest in profits and losses . The existing assets
of the original partnership are undervalued by P26,400. The original partners will share the balance of profits
and losses in proportion to their original percentages.
What would be the capital balances of felicity in the new partnership?
Problem 5. On June 30, 2017, the balance sheet for the partnership of Simon, James and John, together with
their respective profit and loss ratios was as follows:
Asset, at cost P540,000
Simon, loan 27,000

Simon, capital (20%) 126,000
James, capital (20%) 117,000
John, capital (60%) 270,000
Total P540,000
Simon decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair
value of P648,000 at June 30, 2017. It was agreed that partnership would pay Simon P183,600 cash for Simon’s
partnership interest, including Simon’s loan which is to be repaid in full. No goodwill is to be recorded. After
Simon’s retirement, what is the balance of Jame’s capital account?
Problem 6. The balance sheet as of September 30,2017 for the partnership of D, E and F shows the following
information: Assets, P360,000 ; D, Loan, P20,000 ; D, Capital, P83,000 ; E, Capital, P77,000 ; F, Capital, P180,000.
It was agreed among the partners that D retires from the partnership, and it was also further agreed that the
assets should be adjusted to their fair value of P345,000 as of September 30, 2017. Net loss prior to the
retirement of D amounted to P70,000. The partnership is to pay D P62,000 cash for D’s partnership interest,
which would include the payment of his loan. No goodwill is to be recorded. D, E, and F share profit 40%, 15%,
and 45% respectively. After D’s retirement, how much would F’s capital balance be?
PARTNERSHIP LIQUIDATION
Problem1. The following condensed balance sheet is for the William, Faith and Kim partnership. The partners
share profits and losses in the ratio of 5:3:2 respectively.
Cash P 125,000
Inventory 100,000
Other Assets 300,000
Total Assets P 525,000
Liabilities P 270,000
William, Capital 100,000
Faith, Capital 85,000
Kim, Capital 70,000
Total Liabilities and Equity P 525,000
The partners have decided to liquidate the business. Liquidation expenses are estimated to be P 8,000. The
other assets are sold for P 180,000. What distribution can be made to the partners?
Problem2. The Statement of Financial Position of LMN Partnership on December 31, 2017 is as follows:
Assets Liabilities and Equity

Cash 100,000 Liabilities 125,000
Other Assets 250,000 L, Loan 35,000
L, Capital (30%) 100,000
M, Capital (40%) 15,000
N, Capital (30%) 75,000
Total Assets 350,000 Total Liabilities and Equity 350,000
Cash is realized for Other Assets as follows and amount realized are distributed at the end of each month to the
appropriate parties.
2018 Assets Book Value Cash Proceeds

January 150,000 130,000
February 100,000 115,000
How much is the total cash distribution to L based on January?
Problem3. Flimsy, Frail, and Fragile share profits and losses in the ratio of 2:3:5. They have decided to liquidate
their partnership. The partnership balance sheet on January 31, 2017 is as follows:
ASSETS LIABILITIES AND OWNER’S EQUITY

Cash P 40,000 Liabilities P 50,000
Noncash Assets P200,000 Fragile, Loan 20,000
Flimsy, Capital 45,000
Frail, Capital 75,000
Fragile, Capital 50,000
Total P240,000 Total P 240,000
Additional Information:
During the liquidation of the partnership, the following events occur.
 In February 2017, noncash assets with a book value of are sold for a loss of P30,000 and P21,000 is paid to
outside creditors of the partnership.
 Liquidation expense of P3,800 are also paid.
 Cash is distributed to partners at the end of each month.
 Priority cash was paid in full during February.
What is the book value of the non-cash asset sold and at what amount did the partnership sell the non-cash
asset?
Problem4. The statement of financial position for the partnership of Beth, Carla and David who share profits in
the ratio of 2:1:1, shows the following balances just before the liquidation:
Cash P 12,000
Other Assets P 59,500
Liabilities P 49,000
Beth, Capital P 22,000
Carla, Capital P 15,500
David, Capital (P15,000)
On the first installment of the liquidation, a gain of P8,525 was realized from the sale of certain assets.
Liquidation expenses of P1,000 was paid, and additional liquidation expenses are anticipated. Liabilities paid
amounted to P34,400. Remaining book value of other assets is P1,550. On the first payment to partners, Beth
receives P6,250. What is the amount of cash withheld for anticipated liquidation expenses and unpaid
liabilities?

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ADVANCE FINANCIAL ACCOUNTING AND REPORTING GORDON COLLEGE

Asset, at cost P540,000

Simon, loan 27,000

Assets Liabilities and Equity

2018 Assets Book Value Cash Proceeds

How much is the total cash distribution to L based on January?

ASSETS LIABILITIES AND OWNER’S EQUITY

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