CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN
PARTNERSHIP DISSOLUTION
Part I: Theory of Accounts
1. Which of the following statements pertains to partnership dissolution?
a. It refers to the process of converting the non-cash assets of the partnership and distributing the
total cash to the creditors and the remainder to the partners.
b. It refers to the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the partnership.
c. It refers to the extinguishment of the juridical personality of the partnership.
d. It refers to the end of the life of the partnership.
2. All of the following are true when an incoming partner purchases an interest from the partnership,
except
a. The partnership assets remain unchanged
b. No cash or other assets flow from the new partner to the partnership
c. The recording of this transaction involves a credit to the new partner
d. The cash paid by the incoming partner is recorded in the partnership books
3. When admitting a new partner into an existing partnership, and the total agreed capital is greater
than the total contributed capital, the difference shall be
a. Allocated to the old partners based on profit and loss ratio
b. Allocated equally to the old partners
c. Allocated using the fair values of the assets each partner has contributed
d. Allocated using the relative capital balances of the partners
4. In case of admission of a new partner in an existing partnership through investment, which of the
following scenario will result to bonus old partners?
a. When the amount credited to the new partner is more than the amount contributed
b. When the amount credited to the new partner is less than the amount contributed
c. When the total agreed capital equals the total contributed capital
d. When the total agreed capital differs from the total contributed capital
5. In case of retirement of an existing partner, which of the following scenario will result to an asset
revaluation downward?
a. When the retiring partner receives less than his capital balance and results in an increase in the
capital balance of the remaining partners
b. When the retiring partner receives more than his capital balance and results in a decrease in the
capital balance of the remaining partners
c. When the retiring partner receives less than his capital balance and results in a decrease in the
capital of the remaining partners
d. When the retiring partner receives more than his capital balance and results in an increase in the
capital balance of the remaining partners
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Part II. Problem Solving
1. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of [Link]
Current Assets 1,000,000 Total Liabilities 600,000
Noncurrent Assets 2,000,000 A, Capital 900,000
B, Capital 800,000
C, Capital 700,000
On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of
the partnership at a price of P500,000.
1. What is the capital balance of D after his admission on January 1, 2021?
a. 540,000
b. 480,000
c. 420,000
d. 960,000
2. Assuming there is an implied asset revaluation upward/downward, what is the capital
balance of C after admission of D on January 1, 2021?
a. 213,000
b. 355,000
c. 420,000
d. 558,000
2. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of [Link]
Current Assets 1,300,000 Total Liabilities 300,000
Noncurrent Assets 2,000,000 A, Capital 1,400,000
B, Capital 700,000
C, Capital 900,000
On January 1, 2021, D is admitted to the partnership by investing P1,000,000 to the partnership for
40% capital interest.
1. If the all the assets of the existing partnership are properly valued, what is the amount of
bonus to old Partner A?
a. 300,000
b. 600,000
c. 180,000
d. 0
2. If there is an implied asset revaluation upward/downward, what is the capital balance of
Partner B after admission of D?
a. 1,000,000
b. 400,000
c. 650,000
d. 450,000
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3. On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of [Link]
Current Assets 1,500,000 Total Liabilities 500,000
Noncurrent Assets 2,000,000 A, Capital 1,100,000
B, Capital 1,200,000
C, Capital 700,000
On January 1, 2021, D is admitted to the partnership by investing P500,000 to the partnership for
20% capital interest. The total agreed capitalization of the new partnership is P2,800,000.
1. What is the capital balance of D after his admission to the partnership?
a. 500,000
b. 700,000
c. 560,000
d. 600,000
2. What is the capital balance of C after the admission of D to the partnership?
a. 444,000
b. 396,000
c. 1,136,000
d. 780,000
4. On December 31, 2020, ABC Partnership’s Statement of Financial Positions shows that A, B and C
have capital balances of P400,000, P350,000 and P250,000 with profit or loss ratio of [Link]. On
January 1, 2021, B retired from the partnership and received P280,000.
1. What is the capital balance of A after the retirement of B?
a. 440,000
b. 400,000
c. 428,000
d. 360,000
2. If there is an implied asset revaluation upward/downward, what is the capital balance of
C after the retirement of B?
a. 320,000
b. 250,000
c. 280,000
d. 180,000
5. On November 30, 2020, the statement of financial position of ABC partnership has the following
balances: Total assets P900,000; A, loan P50,000; A, capital P207,500; B, capital 192,500; C,
capital P450,000. The partners share profit and losses [Link] respectively. It was agreed that
Partner A will retire from the partnership and will be paid P217,000.
However, the following were certain transactions that needed to be accounted for before Partner
A’s retirement:
Partnership assets have a fair value of P1,020,000
Partnership has a income summary debit balance in the amount of P300,000 at the end of the
year, which have not yet distributed among the partners
What is the capital balance of Partner C after the retirement of Partner A?
a. 360,000
b. 357,000
c. 363,000
d. 447,000
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6. A contribute P48,000 and B contributed P96,000 to form a partnership, and they agreed to share
profits in the ratio of their original capital contributions. During the first year of operations, they
made a profit of P32,580; A withdrew P10,100 and B P16,000. At the start of the following year,
they agreed to admit C into the partnership. He was to receive a ¼ interest in the capital and profits
upon payment of P60,000 to A and B, whose capital accounts were to be reduced by transfers to
C’s capital account of amount sufficient to bring back to their original capital ratio.
Under the asset revaluation method, how should the P60,000 paid by C be divided between A
and B, respectively?
a. 19,650; 40,350
b. 20,000; 40,000
c. 30,000; 30,000
d. 18,600; 41,400
END
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