ASSIGNMENT: WITHDRAWAL, RETIREMENT, DEATH OR INCAPACITY OF A PARTNER

PROBLEM 1
The statement of financial position as of June 30, 2018 for the partnership of Dizon, Dungo and Dy
shows the following information:
P/L ratio
Total assets 720,000

Dizon, Loan 40,000

Dizon, Capital 166,000 25%
Dungo, Capital 154,000 25%
Dy, Capital 360,000 50%
It was agreed among the partners that Dizon retires from the partnership and was further agreed that
the assets be adjusted to their fair value of P816,000 as of June 30, 2018. The partnership would pay
Dizon P242,000 cash for Dizon’s partnership interest and includes the payment of loan to Dizon. What
are the capital balances of the remaining partners after Dizon’s retirement?
AC CC ASSET REV. BONUS
Dizon 190K 166K 24K 12K
Dizon 40K 40K
Dungo 174K 154K 24K (4K)
Dy 400K 360K 48K (8K)

Dizon, Capital 190,000

Dungo, Capital 4,000
Dy, Capital 8,000
Loan to Dizon 40,000
Cash 242,000

Ending balances after the asset revaluation

816,000 TOTAL ASSETS – 242,000 CASH = 574,000 TOTAL ASSETS

Dungo, Capital 174,000

Dy, Capital 400,000
PROBLEM 2
AA, BB and CC have been partners for over 20 years, sharing profits and losses equally. AA is scheduled
to retire from the partnership. Since the partnership agreement does not include any provision for the
retirement of a partner, several alternative payments for AA interest are considered. The capital
balances of the partners are as follows: AA P200,000; BB P250,000; CC P150,000.
Instructions:
Prepare the entry or entries to record the retirement of partner AA under each of the following
independent assumptions:
1. AA is paid cash equal to the book value of his interest
AA, CAPITAL 200,000
CASH 200,000
2. AA is paid P260,000 cash for his interest, excess payment is treated as a bonus.
AA, CAPITAL 200,000
BB, CAPITAL 30000
CC, CAPITAL 30000
CASH 260,000
3. AA is paid P260,000 cash for his interest, excess payment is treated as asset revaluation.
OTHER ASSETS 180,000
AA, CAPITAL 60,000
BB, CAPITAL 60,000
CC, CAPITAL 60,000
AA, CAPITAL 260,000
CASH 260,000

4. AA is paid P160,000 cash for his interest, excess of his capital interest over the amount paid
is treated as a bonus.

AA, CAPITAL 200,000

CASH 160,000
BB, CAPITAL 20000
CC, CAPITAL 20000

5. AA is paid P175,000 cash for his interest, assets recorded in the books of the partnership should
be reduced by the amount relating to all the partners.

AA, CAPITAL 25,000

BB, CAPITAL 25,000
CC, CAPITAL 25,000
OTHER ASSETS 75,000

AA, CAPITAL 175,000

CASH 175,000
PROBLEM 3

The partnership of Kim, Park, Lee and Minho has been in operation for two years with the partners
sharing profits and losses in the ratio of 40%, 20%, 20%, 20% respectively. During the past year it has
become apparent that Lee and Minho are not compatible and Lee has decided to withdraw from the
partnership as of the end of the year at the urging of Kim & Park. Lee wants P90,000 for his share of
capital. The balances in the capital accounts at the end of the year are: Kim P102,000; Park P60,000;
Lee P70,000 and Minho P48,000.

Instructions:
Provide the journal entry for the withdrawal of Lee under each of the following assumptions:
1. The partners agree to Yumi’s purchasing Lee’s interest.

LEE, CAPITAL 70,000

YUMI, CAPITAL 70,000

2. The partnership will acquire Lee’s interest for P90,000 and will use the bonus method.

LEE, CAPITAL 70,000

KIM, CAPITAL 10,000
PARK, CAPITAL 5,000
MINHO, CAPITAL 5,000
Cash 90,000

3. The partnership will acquire Lee’s interest for P90,000 and will be paid in 5 equal annual
instalments of P18,000 plus interest of 10%. The partners feel that the price of Lee will accept
for the capital share is a fair measure of the worth of the business.

Lee, Capital 90,000

Payable to Lee Interest 90,000

Interest Expense 1800? Or 9k??

Payable to Lee’s Interest 18,000
Cash 19,800 or 27,000? Idk
PROBLEM 4 ADMISSION OF A NEW PARTNER BY INVESTMENT

Corona and Calderon are partners of a gen. professional partnership whose capital accounts on Dec. 31,
2018, before the firm’s books are closed, are P250,000 and P150,000 respectively. The drawing account
of Corona shows a debit balance of P41,000; for Calderon a debit balance of P34,000. The partnership
agreement with regards to profits provides that:
a. each partner is to be allowed an annual salary of P45,000
b. Corona is to received 60% and Calderon 40% of the profits after allowance of salaries.
The income summary account on Dec. 31 has a credit balance of P70,000 before any entry for allowance
for salaries, and this balance is closed into the capital accounts. The balance of the drawing accounts
are also closed into the capital accounts.

On January 2, 2019, Calixto is admitted as a partner upon the investment of P100,000 into the firm. The
partners allow a bonus on the investment so that Calixto may have a 1/3 interest in the firm. The new
agreement provides that profits are to be distributed as follows: Corona 35%, Calderon 25% and Calixto
40%. Salaries are not allowed.

On Dec. 31, 2019, the partner’s drawing accounts have debit balance as follows: Corona P37,500;
Calderon P25,000; Calixto P34,000. The income summary account has a P75,000 debit balance.
Accounts are closed to the capital accounts.
Instructions: Prepare a statement of changes in partners’ equity, showing all the changes that took
place since 2018. (Provide all the necessary computations/schedule to support the figures/amount that
will be included in the statement of changes in partner’s equity).

LAUS DEO SEMPER

A BLESSED NEW YEAR TO ALL!

MALI TO DI PA NASOLVEEEEEEEEEEE
CORONA, CAPITAL = 250,000 DRWNGS – 41,000 = 209,000 + 33k = 242k
CALDERAN CAPITAL = 150,000 DRWNGS – 34,000 = 116,000 + 37k = 153k

SCHEDULE
CORONA CALDERAN TOTAL
Salary 45,000 45,000 90,000
6:4 ratio (12,000) (8,000) (20,000)
TOTAL 33,000 37,000 70,000

Dec 31, 2018

Income Summary 70,000
Corona, Capital 33,000
Calderan, Capital 37,000

CORONA, CAPITAL 41,000

DRAWINGS, CORONA 41,000
CALEDERAN, CAPITAL 34,000
DRAWINGS, CALDERAN 34,000

CALIXTO ADMITTED AS PARTNER 100,000K INVESTMENT 1/3 INTEREST OF THE FIRM

SCHEDULE AC CC bonus
CORONA 203,000 242,000 (39,000)
CALDERAN 127,000 153,000 (26,000)
CALIXTO 165,000 100,000 65,000
495,000 495,000 0

Jan 2, 2019 Cash 100, 000

Corona, Capital 39,000
Calderan, capital 26,000
Calixto, capital 165,000

CORONA, CALDERAN AND CALIXTO PARTNERSHIP

STATEMENT IN CHANGES OF PARTNERSHIPS’ EQUITY
FOR THE YEAR ENDED DEC 31 2019

Corona Calderan Calixto TOTAL

Capital Balances- dec 31, 2018 250k 150k 0 400k
Add: profit share 33k 37k 0 70k
Less: drawings 41k 34k 0 75k
Beg. Capital jan 1 2019 242k 153k 0 395k
Cap. Balances jan 2, 242k 153k 100k 495k
Bonus (39k) (26k) 65k 0
Total 203k 127k 165k 495k
less profit loss 26,250 18,750 30,000 75k
Less drawings 37500 25,000 34000 96500
Cap. Bal dec 312k19 139250 83250 101,000 323500

Corona, Capital 26,250

Calderan, Capital 18,750
Calixto,Capital 30,000
Income summary 75,000