CHAPTER-3 Advance Accounting Solman

Partnership Dissolution Changes in Ownership
CHAPTER 3
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
3-1:
c
Implied capital of the partnership (P90,000/20%)
P450,000
Actual value of the partnership
( 420,000)
Goodwill
30,000
HIZON
Capital balances before Goodwill
Goodwill to old partners
_____
Total
Purchase by Hizon (20%)
_90,000
Capital balances after admission
P 90,000
3-2:
DAVID
P252,000
__18,000
P126,000
___9,000
P42,000
__3,000
P270,000
( 54,000)
P135,000
( 27,000)
P45,000
( 9,000)
P216,000
P108,000
P36,000
AQUINO
LOCSIN
DAVID
P252,000
( 50,400)
P126,000
( 25,200)
P42,000
( 8,400)
P201,600
P100,800
P33,600
AQUINO
LOCSIN
DAVID
P 50,400
P 25,200
P 8,400
__3,600
__1,800
___600
P 54,000
P 27,000
P 9,000
d
TOTAL
Capital transferred
P 84,000
Excess divided using profit and loss ratio
__6,000
Cash distribution
P 90,000
3-4:
LOCSIN
b
HIZON
Capital balances before admission
Purchase by Hizon (20%)
_84,000
P 84,000
3-3:
AQUINO
b
Selling price
Interest sold (444,000X1/5)
Combine gain
P132,000
( 88,800)
P 43,200
3-5:
b
Implied value of the partnership (P40,000/1/4)
P160,000
Actual value
( 140,000)
Goodwill
20,000
DIAZ
Cash balances
P 20,000
Goodwill, Profit and Loss ratio
__2,000
Total
BERNAL
CUEVAS
P 80,000
P40,000
__12,000
__6,000
P 92,000
P46,000
( 23,000)
( 11,500)
P 69,000
P34,500
BANZON
CORTEZ
P 16,000
P 4,000
__6,000
__4,000
P 22,000
P 8,000
PEREZ
CADIZ
P 24,000
P 48,000
5,430
10,860
000
Capital Transfer (1/4)
( 5,500)
P 16,500
49
Chapter 3
3-6:
b
TOTAL
Capital Transfer (20%)
P20,000
Excess, Profit and Loss ratio
_10,000
Cash distribution
P30,000
3-7:
d
TOTAL
Capital balances beginning
P 72,000
Net profit, 1:2
16,290
Drawings
( 5,050)
( 8,000)
P 24,380
P 50,860
( 5,570)
( 13,240)
P 18,810
P 37,620
,050)
P 75,240
Capital transfer (squeeze)
(18,810) (1/4)
Capital balances after admission 1:2
P 56,430
Capital transfer
P18,810
Excess, 1:2
_11,190
Cash
P30,000
3-8:
P 5,570
P 13,240
__3,730
__7,460
P 9,300
P 20,700
a
Total agreed capital (P150,000/5/6)
Diana's Interest
Cash distribution
3-9:
3-10:
P180,000
1/6
P 30,000
a
Total contributed capital (80,000+40,000+36,000)
Unrecognized Goodwill
P180,000
( 156,000)
P 24,000
Increase
(Dec.)
(P 10,000)
_10,000
P
Old partners
New partner
Total
Contributed
Agreed
Capital
Capital
P110,000
P100,000
__40,000
__50,000
P150,000
P150,000
Ben, capital balance before admission

Bonus share to new partner (10,000X60%)
Ben, capital after admission
3-11:
P 60,000
( 6,000)
P 54,000
c
Total agreed capital (P40,000+20,000+17,000)
Pete's interest
Pete's agreed capital balance
P 77,000
1/5
P 15,400
3-12:
b
Old partner
New partner
Total

Investment by Lory
Contributed
Capital
P 65,000
25,000 (1/3)
P 90,000
Agreed
Capital
P60,000
30,000
P90,000
Increase
(Dec.)
(P 5,000)
_5,000
P
FRED
P 35,000
RAUL
P30,000
LORY
25,000
Bonus to Lory
3-13:
(
3,500)
P 31,500
( 1,500)
P28,500
c
Total agreed capital (90,000+60,000+70,000)
Augusts' interest
Agreed capital
Contributed capital
Bonus to June & July
P220,000
_____1/4
P 55,000
__70,000
P 15,000
JUNE
P90,000
__7,500
P97,500

Bonus from August, equally
3-14:
JULY
P 60,000
__7,500
P 67,500
a
Total agreed capital (52,000 + 88,000)/80%)
Total capital of Mira & Nina after admission
Cash paid by Elma
3-15:
__5,000
P 30,000
P175,000
( 140,000)
P 35,000
a
Total contributed capital (P23,000+18,600+16,000)
Goodwill to new partner, Ang

Investment by Ang
Goodwill to August
LIM
P23,000
_____
P23,000
P 62,400
( 57,600)
P 4,800
ONG
P 18,600
______
P 18,600
ANG
16,000
__4,800
P20,800
51
Chapter 3
3-16:
Capital balances before

admission
P1,300,000
Admission by Dong:
By Purchase (1/2)
By Investment
___300,000
ANG
BENG
CHING
DONG
P600,000
P 400,000
P 300,000
( 300,000)
_______
_______
_______
300,000
_300,000
TOTAL
Goodwill and Bonus

P300,000
P1,600,000
Goodwill to Old Partners (sch. 1) 150,000
Bonus to Old Partners
(sch. 1) __37,500
________
Capital balances after
admission
P487,500
P2,000,000
Schedule 1:
Old Partners
New Partner
Total
P 400,000
P 300,000
P600,000
150,000
__37,500
100,000
__25,000
( 100,000)
P 587,500
P 425,000
CC
AC
P 1,000,000 P1,500,000
600,000 (25%) __500,000
P 1,600,000 P2,000,000
400,000
P500,000
Inc. (Dec.)
P500,000
( 100,000) Bonus
P400,000 GW
3-17: b
admission of Alma
P 200,000
Admission of Alma:
Investment
Goodwill to old partner,
70:30 (sch. 1)
___40,000
admission of Lorna
P 320,000
Admission of Lorna:
Goodwill Written off, 5:3:2
( P40,000)
Investment
Goodwill to old partners,
5:3:2 (sch. 2)
___20,000
Capital balances after
admission
P 375,000
MONA
LIZA
ALMA
LORNA
P150,000
P 50,000
80,000
__28,000
___12,000
_______
______
P178,000
P 62,000
P 80,000
(P 20,000)
(P 12,000) (
P8,000)
75,000
__10,000
____6,000
____4,000
______
P168,000
P 56,000
P 76,000
P 75,000
Schedule 2:
Total agreed capital (75,000/20%)
P 375,000
Total contributed capital (280,000+75,000)
80,000
Schedule 1:
Total agreed capital (80,000/25%)
P 320,000
Total capital contributed (200,000+80,000)
( 280,000)
Goodwill to old partners, 70:30
40,000
TOTAL
75,000
( 355,000)
Goodwill to old partners, 5:3:2
20,000
3-18:
TOTAL
Unadjusted capital balances
P320,000
Overvaluation of Marketable Securities
( 25,000)
Allowance for Bad Debts
( 25,000)
Adjusted capital balances before admission
P270,000
Total agreed capital (270,000/2/3)
Green's interest
Investment
3-19:
RED
WHITE
BLUE
P175,000
P100,000
P 45,000
( 12,500)
( 7,500)
( 5,000)
( 12,500)
( 7,500)
( 5,000)
P150,000
P 85,000
P 35,000
P405,000
1/3
P135,000
TOTAL
admission
P720,000
Capital transfer
to WW (1/6)
______
Balances
P720,000
Equalization of capital
______
Balances
P720,000
Net profit, equally
12,600
Drawings (2 months)
_( 7,000)
WWs Investment
P725,600
XX
YY
ZZ
WW
P360,000
P225,000
P135,000
( 60,000)
( 37,500)
( 22,500)
_120,000
P300,000
P187,500
P112,500
P120,000
( 100,000)
__12,500
__87,500
______
P200,000
P200,000
P200,000
P120,000
3,150
3,150
3,150
3,150
_( 1,500)
_( 2,000)
_( 1,500)
_( 2,000)
P201,650
P201,150
P201,650
P121,150
Total agreed capital (201,650+201,150+201,650)/2/3

WW's interest
Agreed capital of WW
Contributed capital (see above)
P906,675
1/3
P302,225
_121,150
3-20:
Cash to be invested
a
P181,075
Capital balances
P 45,000
Understatement of assets, P12,000
__6,000
Balances before settlement to A
P 51,000
Settlement to A
A's interest (23,750+5,000)
Partial Goodwill to A
A
P 20,750
B
P 19,250
__3,000
__3,000
P 23,750
P 22,250
P 30,250
_28,750
P 1,500
Therefore:
1. Under partial Goodwill method the capital balances of B is P 22,250
2. Under Bonus method the capital balances of B would be:
B, capital balances before settlement to A
P 22,250
Bonus to A (1,500X25/75)
_( 500)
B, capital after retirement of A
P 21,750
53
Chapter 3
3-21:
a
Perez
Suarez
Capital balances
P 200,000
Net income, P140,000
28,000
Undervaluation of inventory, P20,000
____4,000
Capital balances before settlement to Perez
P 232,000
Settlement to Perez
Bonus to Perez
_( 6,000)
Capital balances after retirement
P 226,000
3-22:
Reyes
P 100,000
P 150,000
70,000
42,000
___10,000
____6,000
P 180,000
P 198,000
( 195,000)
___15,000
_(
P 189,000
ELY
FLOR
P 320,000
P 192,000
9,000)
c
GLOR
Capital balances
P 128,000
Settlement to Ely
Total Goodwill (P40,000/50%)P80,000
___16,000
Capital balances after retirement of Ely
( 360,000)
__40,000 ___24,000
P
P 216,000
P 144,000
3-23:
c
Capital balance 3/1/011
Net loss-2011:
Salary (10 months)
Interest (10 months)
Bal. beg. cap. ratio: 48:24
Total
Capital balance
Drawings
Capital balance, 12/31/011
Net profit- 2012:
Salary
Interest
Balance, equally
Total
Capital balance
Drawings
Capital balance 12/31/12
_Alma_
480,000
_Betty_
240,000
480,000
40,000
( 544,000)
( 24,000)
456,000
( 24,000)
432,000
240,000
20,000
( 272,000)
( 12,000)
228,000
( 24,000)
204,000
720,000
60,000
( 816,000)
( 36,000)
684,000
( 48,000)
636,000
576,000
43,200
( 397,800)
221,400
653,400
( 24,000)
629,400
288,000
20,400
( 397,800)
( 89,400)
114,600
( 24,000)
90,600
864,000
63,600
( 795,600)
132,000
768,000
( 48,000)
720,000
Admission of Cora on Jan. 2, 2013:

Total contributed capital (720,000 + 400,000)
Coras interest
Coras agreed capital
Coras contributed capital
Bonus to Cora, from Alma and Betty 4:2
Therefore entry (c) is correct.
_Total_
720,000
1,120,000
40%
448,000
400,000
48,000
3-24:
a
Capital balance, beg. 2013
2013 net profit (90,000 59,000):
Interest
Compensation
Balance, 4:6
Total
Balance
Withdrawal
Repairs (charge to Pete)
_Pete_
P80,000
8,000
5,000
( 2,000)
11,000
91,000
( 8,000)
( 5,000)
78,000
1/1/013: Admission of Sammy

Total agreed capital (P117,000 +43,000)
Sammys interest
_Carlos_
P30,000
_Total_
P110,000
3,000
20,000
( 3,000)
20,000
50,000
( 11,000)
39,000
11,000
25,000
( 5,000)
31,000
141,000
(19,000)
( 5,000)
117,000
P160,000
20%
Sammys agreed capital

Sammys contributed capital
Bonus to Pete & Carlos, 4:6
Therefore entry (a) is correct.
3-25:
32,000
43,000
11,000
Capital balances, 8/1/012

Capital withdrawal
Balances before P/L distribution
Net income, 12/31, P100,000:
Interest
Salary to Maria
Balance, equally
Balances, 12/31/012
Capital withdrawal
Balances before P/L distribution
Net income, 7/1/013, P150,000:
Interest
Salary to Mara
Balance, 60:40
Balances before admission of Paz
Admission of Paz:
Cash investment
Goodwill to Maria and Ana,6:4
Balances, 7/1/013
Maria
P300,000
(25,000)
275,000
Ana
P1,500,000
(25,000)
1,475,000
6,250
40,000
11,250
332,500
(30,000)
302,500
31,250
11,250
1,517,500
(30,000)
1,487,500
37,500
40,000
22,500
1,850,000
(60,000)
1,790,000
8,312.5
48,000
33,450
392,262.5
37,937.5
22,300
1,547,737.5
46,250
48,000
55,750
1,940,000
276,000
668,262.5
184,000
1,731,737.5
* Total agreed capital (P800,000/25%)

Total contributed capital (P1,940,000 + P800,000)
Goodwill to Maria and Ana, 6:4
Paz
-
800,000
800,000
Total
P1,800,000
(50,000)
1,750,000
800,000
460,000*
3,200,000
P3,200,000
2,740,000
P460,000
55
Chapter 3
3-25: Continued
Balances after admission of Paz

Capital withdrawal
Balance before P/L distribution
Net income 12/31/013, P150,000:
Interest
Salaries
Balance, 45:30:25
3-26:
Maria
P668,262.5
(12,000)
656,262.5
Ana
P1,731,737.5
(12,000)
1,719,737.5
Paz
P800,000
(12,000)
788,000
Total
P3,200,000
(36,000)
3,164,000
16,707
12,000
15,300
P700,269.5
43,293
12,000
10,200
P1,785,230.5
20,000
12,000
8,500
P828,500
80,000
36,000
34,000
P3,314,000
Total agreed capital of the new partnership (P84,000 / 30%)

Total contributed capital:
Old partners (P45,000 + P65,000) + P30,000
P140,000
New partner
84,000
Goodwill
P 280,000
224,000
P 56,000
If the P56,000 goodwill proved to be worthless, Warren would be charged 35% of

P56,000, or P19,600. However, the real harm to Warren would be that of having paid
more to enter the partnership than he should have. If the goodwill did not exist, then the
adjusted assets of the previous partners would have been P140,0000, which represents
70% of the total partnership value of P200,000. In that case, Warren would have only
paid P60,000 for a 30% interest in capital. Therefore, Warren would have paid extra
P24,000 (P84.000 against P60,000) for the goodwill that proved to be worthless.
3-27:
c
Allocation of profits under the original partnerships agreement:
Amor
P30,000
12,000
10,000
P52,000
Salaries
Bonus to Amor*
Remaining profits
Total
Bea
P30,000
Cora
P40,000
4,000
P34,000
6,000
P46,000
Total
P100,000
12,000
20,000
P132,000
*Bonus = 10% (Net income Bonus)

110% Bonus = 10% (Net income)
110% Bonus = P13,200
Bonus = P12,000
Partnership Dissolution Changes in Ownership Interest
56
3-27, Continued
Allocation of new partnership profits necessary to satisfy Bea:
Salaries
Remaining profits (Sch. 1)
Bonus to Dina, (Sch. 2)
Total
Amor
P30,000
42,000
Bea
P30,000
14,000
Cora
P40,000
42,000
P72,000
P44,000
P82,000
Dina
P30,000
42,000
20,000
P92,000
Total
P130,000
140,000
20,000
P290,000
Sch. 1:
In order for Bea to increase his allocation by P10,000, she would need to received a P14,000 allocation
based on the profit ratio. Therefore, the total amount of profit subject to this allocation would be P140,000
(P14,000 / 10%).
Sch. 2:
If the cumulative total of income allocated before the bonus to Dina is P270,000, then Dina would be
entitled to the P20,000 bonus under the revised agreement.
3-28:
Total capital of the new partnership (P56,000 / 70%)

Total fair value of the net assets of the original partnership :
(P530,000 P474,000)
Dina should pay
3-29:
P80,000
56,000
P24,000
a.
Fair value of the original partnership:
Value of recorded net assets
Value of goodwill
Total fair value
P268,000
40,000
P308,000
Total agreed capital of new partnership (P308,000 / 70%)

Total capital of the original partnership
Total contribution needed from Carlos
Fair value of recorded assets contributed
Fair value of intangible contributed
Necessary cash contribution
P440,000
308,000
132,000
(90,000)
(20,000)
P
22,000
57
Chapter 3
3-30:
1. b
Net income per books
Adjustments:
Accrued expenses
Inventory overstated
Unrecorded purchases
Income received in advance
Supplies
Corrected net income
P50,000
2,400
(6,200)
(4,000)
3,000
1,800
P47,000
Linas new P/L ratio (50% x 80%)

Linas share
2.
3.
4.
40%
P18,800
Computations:
Capital balances bef. Adm.
Admission of Olga
Bonus to Olga (Sch. 1)
Balances, 1/1/012
Division of profit
Balances, 12/31/012
Sale of interest of L to M
Division of profit
Drawings
Balances, 12/31/013
Division of profit
Inventory overvalued
Balances before retirement
Settlement to Mina
Total goodwill
Balances, 12/31/014
Lina
P150,000
Mina
P90,000
Nina
P60,000
Olga
(14,000)
136,000
18,800
154,800
(154,800)
8,400)
81,600
11,280
92,880
154,800
100,000
(20,000)
327,680
65,000
(5,000)
387,680
(425,360)
37,680
(5,600)
54,400
7,520
61,920
40,000
28,000
68,000
9,400
77,400
100,000
(10,000)
151,920
65,000
(5,000)
211,920
100,000
(5,000)
172,400
65,000
(5,000)
232,400
37,680
249,600
37,680
270,080
3-31:
Total
P340,000
40,000
340,000
47,000
387,000
300,000
(35,000)
652,000
195,000
(15,000)
832,000
(425,360)
113,040
P519,680
58
a
Partnership
Fair value of original partnership:
Assets at book value
Liabilities at book and fair value
(a) Book value of original partnership
assets appreciation (depreciation)
(b) Net assets
AA
BB
CC
P500,000
(369,500)
130,500
(50,000)
80,500
P600,000
(410,000)
190,000
125,000
315,000
P800,000
(558,000)
242,000
50,000
292,000
Percent of new partnership represented by:

(c) Investment of new partner
(d) Fair value of the original partnership
(e) Fair value of new partnership
suggested by the fair value of the
original partnership (b / d)
(f) Fair value of original partnership
(g) Fair value of consideration that should
be conveyed by the Darna (e-f)
3-32:
30%
70%
25%
75%
20%
80%
P115,000
80,500
P420,000
315,000
P365.000
292,000
P34,500
P105,000
P73,000
1.a
2.a
3.b
4.b
Computations:
Maya
Rita
2010:
Balances, 1/1/10
Allocation of profit, sch. 1
Distributions
Balances, 12/31/10
P54,000
127,000
(100,000)
P81,600
P76,000
102,400
(100,000)
P78,400
2011:
Balances, 1/1/11
Admission of Hara *
Allocation of profit,sch. 1
Distributions
Balances, 12/31/11
P81,600
30,000
145,250
(80,000)
P176,850
P78,400
20,000
98,875
(80,000)
P117,275
Hara
Perla
Total
P130,000
230,000
(200,000)
P160,000
P 70,000
85,875
(80,000)
P 75,875
59
P160,000
120,000
330,000
(240,000)
P370,000
Chapter 3
3-32, Continued
2012:
Balances, 1/1/012
Sale of interest to Rita
Allocation of profit, sch. 1
Distributions
Balances, 12/31/012
2013:
Balances, 1/1/013
Adjustment of net assets
Maya
Rita
Hara
P176,850
(176,850)
P
-
P117,272
176,850
100,000
(60,000)
P334,125
P75,875
100,000
(80,000)
P95,875
P334,125
(5,000)
P95,875
(5,000)
Perla
Total
P370,000
200,000
(140,000)
P430,000
P430,000
(10,000)
Recognition of goodwill**
Sale of interest by Rita
Subtotal
Admission of Perla***
Balances, 12/31/013
20,875
(350,000)
P
-
P90,875
21,625
P112,500
75,000
P 75,000
20,875
(350,000)
P90,875
96,625
P187,500
Schedule 1:
2010 Allocation of profit:
Maya
40%
P80,000
46,000
1,600
P127,600
Profit and loss ratio

Salary
Bonus (see schedule 2)
Balance
Total
Rita
60%
P100,000
2,400
P102,400
Total
P180,000
46,000
4,000
P230,000
2011Allocation of profit:
Profit and loss ratio
Salary
Bonus (see schedule 2)
Balance
Total
Maya
30%
P80,000
66,000
(750)
P145,250
Schedule 2:
2010 Bonus:
Maya (P230,000 x 20%)
20011Bonus:
Maya (P330,000 x 20%)
Hara (P330,000 x 20%)
Rita
45%
P100,000
(1,125)
P98,875
Hara
25%
P70,000
16,500
(625)
P85,875
Total
P250,000
82,500
(2,500)
P330,000
P46,000
P66,000
16,500
P82,500

3-32, Continued
* Admission of Hara:
Total agreed capital of new partnership (P70,000 / 25%)
Total contributed capital (P160,000 + P70,000)
P280,000
230,000
P 50,000
** Sale of interest by Rita:

Settlement to Rita
Ritas adjusted capital balance
Goodwill traceable to Rita
P350,000
329,125
P 20,875
*** Admission of Perla:
Total agreed capital of the new partnership (P75,000 / 40%)

Total contributed capital of all the partners (P90,875 + P75,000)
Goodwill to Hara
P187,500
165,875
P 21,625
61
Chapter 3
SOLUTIONS TO PROBLEMS
(a)
Problem 3 1
1. Revaluation of Assets:
Total agreed capital (P75,000 25%).....................................P300,000
Total contributed capital........................................................ ._275,000
Upward revaluation of assets, P/L ratio..................................P 25,000
Entry
Assets................................................................................
Cash.................................................................................
Red, capital..................................................................
White, capital...............................................................
25,000
75,000
5,000
10,000
Blue, capital.................................................................
Green, capital...............................................................
10,000
75,000
2. Bonus Method:
Contributed capital of Green....................................................P 75,000
Agreed capital of Green (P275,000 x 25%).............................._68,750
Bonus to old partners, P/L ratio...............................................P 6,250
Entry:
Cash.................................................................................
Green, capital...............................................................
Red, capital..................................................................
White, capital...............................................................
Blue, capital.................................................................
75,000
68,750
1,250
2,500
2,500
(b) 1. Implicit Goodwill Method:

Total Implied Capital (P75,000 25)......................................P300,000
Total existing capital.............................................................. ._200,000
Implied Goodwill to old partners............................................P100,000
Entries:
Goodwill...........................................................................
Red, capital..................................................................
White, capital...............................................................
Blue, capital.................................................................
100,000
20,000
40,000
40,000
Red, capital (25% x P80,000)...........................................

White, capital (25% x p120,000)......................................
Blue, capital (25% x P100,000)........................................
Green, capital...............................................................
20,000
30,000
25,000
2. Red, capital (25% x P10,000)......................................................

White, capital (25% x P80,000)..................................................
Blue, capital (25% x P60,000)....................................................
Green, capital.......................................................................
15,000
20,000
15,000
75,000
50,000
Problem 3 2
a.
(1) Bonus Method:

Contributed capital of Tomas.............................................................................
Agreed capital of Tomas (P640,000 x 20%).......................................................
Bonus to old partners, P/L ratio..........................................................................
BRUNO
MARIO
TOMAS
Balances before admission..................... P200,000
P300,000
Admission of Tomas............................... ___9,000

___3,000
_128,000
Balances after admission........................ P209,000
P303,000
P128,000
(2) Goodwill Method:
Total agreed capital (P140,000 20%). .........................................
Total contributed capital.................................................................
P700,000
_640,000
P140,000
_128,000
P 12,000
TOTAL
P500,000
_140,000
P640,000
Goodwill to old partners, P/L ratio.................................................

BRUNO
MARIO
Balances before admission..................... P200,000
P300,000
Admission of Tomas............................... __45,000
__15,000
Balances after admission........................ P245,000
P315,000
P 60,000
TOMAS
P
_140,000
P140,000
TOTAL
P500,000
_200,000
P700,000
(3) Goodwill with subsequent write-off.

Balances from A-2..................................
Goodwill written off, 6:2:2.....................
Balances..................................................
b.
Balances from A-2..................................
Goodwill written off, 4:4:2.....................
Balances..................................................
BRUNO
P245,000
( 36,000)
P209,000
BRUNO
P245,000
( 24,000)
P221,000
MARIO
P315,000
( 12,000)
P303,000
MARIO
P315,000
( 24,000)
P291,000
TOMAS
TOTAL
P140,000
P700,000
( 12,000) ( 60,000)
P128,000
P640,000
TOMAS
TOTAL
P140,000
P700,000
( 12,000) ( 60,000)
P128,000
P640,000
Problem 3 3
a.
b.
Total capital after admission (P76,000 + P104,000).........................................................

Total capital before admission (P60,000 + P80,000)........................................................
Goodwill recorded............................................................................................................
P180,000
_140,000
P 40,000
Total capital of the partnership (P180,000 75%)...........................................................

Less: Total capital of old partners plus Goodwill (P140,000 + 40,000)...........................
Cash payment by Barry.....................................................................................................
P240,000
_180,000
P 60,000
Total capital after admission (P52,000 + P68,000)...........................................................

Total capital before admission..........................................................................................
Bonus to Barry..................................................................................................................
P120,000
_140,000
P 20,000
Agreed capital of Barry (P120,000 75%) x 25%...........................................................

Less: Bonus ...................................................................................................................
Cash payment by Barry.....................................................................................................
P 40,000
__20,000
P 20,000
Chapter 3
63
Problem 3 4
a.
Total agreed capital (P60,000 20%)..................................................P300,000

Total contributed capital (P100,000 + P40,000 + P60,000)................ ._200,000
Goodwill to old partners, P/L ratio......................................................P100,000
Entry:
Cash. ..........................................................................................
Goodwill.....................................................................................
Gene, capital.........................................................................
Nancy, capital.......................................................................
Ellen, capital.........................................................................
60,000
100,000
80,000
20,000
60,000
b.
Cash.................................................................................................
Ellen, capital...............................................................................
60,000
60,000
No Goodwill, no bonus because the total agreed capital is equal to the total contributed
capital.
c.
d.
Gene, capital.....................................................................................
Nancy, capital....................................................................................
Ellen, capital...............................................................................
20,000
Cash.................................................................................................
Ellen, capital...............................................................................
32,000
8,000
28,000
32,000
Since the total agreed capital (P172,000) is equal to the total contributed capital (P172,000),
then no Goodwill or bonus is to be recorded.
e.
Total agreed capital (P140,000 80%)................................................P175,000

Total contributed capital (P140,000 + P32,000).................................. ._172,000
Goodwill to new partner......................................................................P 3,000
Entry:
Cash. ..........................................................................................
Goodwill.....................................................................................
Ellen, capital.........................................................................
32,000
3,000
35,000
Problem 3 5
a.
b.
Cash.................................................................................................
Cherry capital.............................................................................
40,000
40,000
Total agreed capital (P120,000 + P50,000)..........................................P170,000

Cherry's interest...................................................................................____25%
Cherry's agreed capital.............................................................................42,500
Contributed capital............................................................................. .__50,000
Bonus to old partners, 70:30................................................................P 7,500

Problem 3-5, continued:
Entry:
Cash. ..........................................................................................
Cherry, capital......................................................................
Helen, capital........................................................................
Cathy, capital........................................................................
c.
50,000
Total agreed capital (P120,000 + P25,000)..........................................P145,000

Cherry's interest...................................................................................____25%
Agreed capital of Cherry.........................................................................36,250
Contributed capital............................................................................. .__25,000
Bonus to new partner.......................................................................... .P 11,250
42,500
5,250
2,250
Entry:
Cash. ..........................................................................................
Helen, capital..............................................................................
Cathy, capital..............................................................................
Cherry, capital......................................................................
d.
36,250
Total agreed capital (P50,000 25%)..................................................P200,000

Total contributed capital (P120,000 + 50,000).......................................170,000
Goodwill to old partners, 70:30...........................................................P 30,000
Entry:
Cash
.....................................................................................
Goodwill.....................................................................................
Cherry, capital......................................................................
Helen, capital........................................................................
Cathy, capital........................................................................
e.
25,000
7,875
3,375
50,000
30,000
50,000
21,000
9,000
Total agreed capital (P120,000 75%)................................................P160,000

Goodwill to new partner......................................................................P 15,000
Entry:
Cash
.....................................................................................
Goodwill.....................................................................................
Cherry, capital......................................................................
25,000
15,000
40,000
Problem 3 6
a.
Total agreed capital (P600,000 3/4).................................................................

Santos interest.....................................................................................................
Contribution of Santos........................................................................................
P800,000
_____1/4
P200,000
b.
Total agreed capital (P630,000 3/4).................................................................

Santos' interest....................................................................................................
Contribution of Santos........................................................................................
P840,000
_____1/4
P210,000
65
c.
d.
e.
Chapter 3
Total agreed capital (P624,000 3/4)............................................................................................

Less: Contributed capital of old partners.......................................................................................
P832,000
_600,000
Contributed capital of Santos........................................................................................................
P232,000
Total agreed capital (P600,000 3/4)............................................................................................

Less: Goodwill ............................................................................................................................
P800,000
__10,000
Contributed capital........................................................................................................................
Contributed capital of old partners................................................................................................
790,000
_600,000
P190,000
Total agreed capital (Contributed).................................................................................................

Less: Contributed capital of old partners.......................................................................................
P820,000
_600,000
P220,000
Problem 3 7
a.
b.
c.
Tony, capital
........................................................................................................
Noel, capital......................................................................................................
40,000
Cash
........................................................................................................
Noel, capital......................................................................................................
(P180,000 2/3) x 1/3 = P90,000.
90,000
Cash.........................................................................................................................
Goodwill...................................................................................................................
Noel, capital......................................................................................................
56,000
4,000
40,000
90,000
60,000
Total agreed capital (P180,000 3/4).............................................................................P240,000

Total contributed capital (P180,000 + P56,000).............................................................._236,000
Goodwill to new partner.................................................................................................P 4,000
d.
Subas, capital
...............
Tony, capital
..............
Inventory........................
24,000
14,400
9,600
Cash.........................................................................................................................
52,000
Noel, capital......................................................................................................
52,000
Total agreed capital (P52,000 1/4)...............................................................................P208,000
Total capital before inventory write-down (180,000 + 52,000)......................................(232,000)
e.
Write-down to old partners capital.................................................................................( 24,000)

Land.. ....
92,000
Subas, capital..........
Tony, capital.
Subas, capital (P155,200 x 1/4)................................................................................
38,800
Tony, capital (P116,800 x 1/4)...................................................................................
29,200
Noel, capital......................................................................................................
Total resulting capital (P68,000 1/4)...........................................................................P272,000
Total capital of old partner (net assets)............................................................................_180,000
Increase in value of land.................................................................................................P 92,000
Capital of old partner after revaluation of land:
Subas (P100,000 + P55,200)..................................................................................P155,200
Tony (P80,000 + P36,800).........................................................................................116,800
55,200
36,800
68,000

f.
Cash.................................................................................................
Subas, capital....................................................................................
Tony, capital .....................................................................................
Noel, capital................................................................................
40,000
2,400
1,600
Agreed capital of Noel (P220,000 x 1/5)..............................................P 44,000

Contributed capital of Noel...................................................................._40,000
Bonus to Noel.......................................................................................P 4,000
g.
Cash................................................................................................. P60,000
44,000
Goodwill. ..........................................................................................
Noel, capital................................................................................
Subas, capital (P60,000 x 3/5)....................................................
Tony, capital (P60,000 x 2/5).......................................................
60,000
P 60,000
36,000
24,000
Total agreed capital (P60,000 1/5)....................................................P300,000

Goodwill to old partner, 3:2.................................................................P 60,000
Problem 3 8
a.
b.
c.
Conny, capital....................................................................................
Andy, capital (P8,000 x 3/4)..............................................................
Benny, capital (P8,000 x 1/4).............................................................
Cash. ..........................................................................................
40,000
6,000
2,000
Goodwill. ..........................................................................................
Conny, capital....................................................................................
Cash. ..........................................................................................
10,000
40,000
Goodwill (P5,000 1/5)....................................................................

Conny, capital....................................................................................
Andy, capital (P25,000 x 3/5)......................................................
Benny, capital (P25,000 x 1/5)....................................................
Cash
.....................................................................................
25,000
40,000
48,000
50,000
15,000
5,000
45,000
Problem 3 9
a.
b.
Spade, capital....................................................................................
Jack, capital................................................................................
120,000
Goodwill (P30,000 50%)................................................................

Ace, capital.................................................................................
Jack, capital................................................................................
Spade, capital..............................................................................
60,000
Spade, capital (P120,000 + P30,000)................................................

Jack, capital................................................................................
150,000
120,000
12,000
18,000
30,000
150,000
67
Chapter 3
Problem 3-9 (Continued)
c.
Spade, capital....................................................................................
Cash. ..........................................................................................
180,000
Ace, capital (P60,000 x 2/5)..............................................................

Jack, capital (P60,000 x 3/5).............................................................
Spade, capital..............................................................................
24,000
36,000
180,000
60,000
d.
e.
f.
g.
Land.................................................................................................
Ace, capital (20%).......................................................................
Jack, capital (30%).....................................................................
Spade, capital (50%)...................................................................
20,000
Spade, capital....................................................................................
Ace, capital (P50,000 x .40)..............................................................
Jack, capital (P50,000 x .60).............................................................
Cash. ..........................................................................................
Land. ..........................................................................................
130,000
20,000
30,000
Goodwill. ..........................................................................................
Spade, capital....................................................................................
Cash. ..........................................................................................
30,000
120,000
Goodwill (P30,000 50%)................................................................

Spade, capital....................................................................................
Ace, capital (P60,000 x 20%)......................................................
Jack, capital (P60,000 x 30%)....................................................
Cash. ..........................................................................................
60,000
120,000
4,000
6,000
10,000
60,000
120,000
150,000
12,000
18,000
150,000
Land................................................................................................. P40,000
Ace, capital (20%).......................................................................
Jack, capital (30%).....................................................................
Spade, capital (50%)...................................................................
Spade, capital (P120,000 + P20,000)................................................
Ace, capital (P10,000 x 40%)............................................................
Jack, capital (P10,000 x 60%)...........................................................
Land. ..........................................................................................
Note payable...............................................................................
8,000
12,000
20,000
140,000
4,000
6,000
100,000
50,000
Problem 3 10
Case 1: Bonus of P10,000 to Eddy:
Eddy, capital...............................................................................
Charly, capital (P10,000 x 3/5)...................................................
Danny, capital (P10,000 x 2/5)....................................................
Cash .....................................................................................
Case 2: Partial Goodwill to Eddy:
70,000
6,000
4,000
80,000
Goodwill.....................................................................................
Eddy, capital...............................................................................
Cash .....................................................................................
Case 3: Bonus of P5,000 to remaining partner:
Eddy, capital...............................................................................
Charly, capital (P5,000 x 3/5)...............................................
Danny, capital (P5,000 x 2/5)...............................................
Cash .....................................................................................
Case 4: Total Implied Goodwill of P24,000:
Goodwill.....................................................................................
Eddy, capital...............................................................................
Charly, capital (P24,000 x 3/6).............................................
Danny, capital (P24,000 x 2/6).............................................
Cash .....................................................................................
Case 5: Other assets disbursed:
Eddy, capital...............................................................................
Other assets.................................................................................
Charly, capital (P60,000 x 3/6).............................................
Danny, capital (P60,000 x 2/6).............................................
Cash .....................................................................................
Case 6: Danny purchases Eddy's capital interest:
Eddy, capital...............................................................................
Danny, capital.......................................................................
4,000
70,000
74,000
70,000
3,000
2,000
65,000
24,000
70,000
12,000
8,000
74,000
70,000
20,000
30,000
20,000
40,000
70,000
70,000
69
Chapter 3
Problem 3 11
a. 1/1/10
Building...............................................................
Equipment............................................................
Cash ....................................................................
Santos capital..............................................
To record initial investment.
52,000
16,000
12,000
12/31/10Reyes capital.........................................................
Santos capital..............................................
22,000
40,000
12,000
Income summary.........................................
To record distribution of loss as follows:
1/1/11
10,000
Interest.................................................................
Additional profit..................................................
Balance to Reyes.................................................
Santos
P 8,000
4,000
______
Reyes
P
(22,000)
Total
P 8,000
4,000
(22,000
Total ....................................................................
P12,000
P(22,000)
(P10,000)
Cash ....................................................................
Santos capital (15%)...........................................
Reyes capital (85%).............................................
Cruz capital.................................................
15,000
300
1,700
17,000
(new investment by Cruz brings total capital to P85,000 after 2006 loss [80,000
10,000 + 15,000]. Cruz's 20% interest is P17,000 [85,000 x 20%] with the extra
P2,000 coming from the two original partners [allocated between them according
to their profit and loss ratio].)
12/31/11Santos capital.......................................................
Reyes capital........................................................
Cruz capital.........................................................
Santos drawings..........................................
Reyes drawings...........................................
Cruz drawings.............................................
10,340
5,000
5,000
10,340
5,000
5,000
To close drawings accounts for the year based on distributing 20%. Of each
partner's beginning capital balances [after adjustment for Cruz's investment] or
P5,000 whichever is greater. Santos's capital Is P51,700 [40,000 + 12,000 300].)
12/31/11 Income summary..................................................
Santos capital..............................................
Reyes capital...............................................
Cruz capital.................................................
To allocate P44,000 income figure as computed below:
Santos
Interest (20% of P51,700).................................... P10,340
15% of P44,000 income.......................................
6,600
Balance, 60:40..................................................... ______
44,000
Reyes
Cruz
P16,236
P10,824
Total ....................................................................
P16,940
P16,236
P10,824
Initial investment, 2010.......................................

2010 loss..............................................................
Cruz investment...................................................
2011 drawings......................................................
2011 profit...........................................................
Santos
P40,000
12,000
(300)
(10,340)
_16,940
Reyes
P40,000
(22,000)
(1,700)
(5,000)
_16,236
Capital, 12/31/11..................................................
P58,300
P27,536
16,940
16,236
10,824

Capital balances as of December 31, 2011

Cruz
P17,000
(5,000)
_10,824
P22,824
1/1/012 Cruz capital.........................................................

Diaz capital.................................................
To transfer capital purchase from Cruz to Diaz
22,824
22,824
12/31/012
Santos capital......................................................
11,660
Reyes capital........................................................
5,507
Diaz capital.........................................................
5,000
Santos drawings..........................................
11,660
Reyes drawings...........................................
5,507
Diaz drawings.............................................
5,000
To close drawings accounts based on 20% of beginning capital Balances (above) or
P5,000 (whichever is greater).
12/31/012
Income summary..................................................
Santos capital..............................................
Reyes capital...............................................
Diaz capital.................................................
To distribute profit for 2012 computed as follows:
61,000
20,810
24,114
16,076
Santos
P11,660
9,150
______
Reyes
Diaz
Interest (20% of P58,300)....................................

15% of P61,000 profit..........................................
Balance, P40,190, 60:40......................................
P24,114
P16,076
Total ....................................................................
P20,810
P24,114
P16,076
1/1/013 Diaz capital.........................................................

33,900
Santos capital (15%)...........................................
509
Reyes capital (85%).............................................
2,881
Cash............................................................
37,290
Diaz capital is [33,900 (P22,824 P5,000 +P16,076)]. Extra 10% is deducted
from the two remaining partners' capital accounts.
b. 1/1/10
Building...............................................................
Equipment............................................................
Cash ....................................................................
Goodwill..............................................................
Santos capital..............................................
Reyes capital...............................................
To record initial investments. Reyes is credited with goodwill of
Santos investment.
52,000
16,000
12,000
80,000
80,000
80,000
P80,000 to match
71
Chapter 3
12/31/19
1/1/11
Reyes capital........................................................
30,000
Santos capital..............................................
20,000
Income summary.........................................
10,000
Interest of P16,000 is credited to Santos (P80,000 x 20%) along with a base of
P4,000. The remaining profit is now a P30,000 loss which is attributed entirely to
Reyes.
Cash ....................................................................
15,000
Goodwill..............................................................
22,500
Cruz capital.................................................
37,500
Cash and goodwill contributed by Cruz are recorded. Goodwill is Computed
algebraically as follows:
P15,000 + goodwill =
.80 goodwill
=
goodwill
=
20% (current capital + P15,000 + goodwill)

20% (P150,000 + P15,000 + goodwill)
P33,000 + .20 goodwill
P18,000
P22,500
12/31/11 Santos capital......................................................

20,000
Reyes capital........................................................
10,000
Cruz capital.........................................................
7,500
Santos drawings..........................................
Reyes drawings...........................................
Cruz drawings.............................................
To close drawings accounts based on 20% of beginning capital
Balances: Santos, p100,000; Reyes, P50,000; and Cruz, P37,500.
12/31/11 Income summary..................................................
Santos capital..............................................
Reyes capital...............................................
Cruz capital.................................................
To allocate P44,000 profit as follows:
20,000
10,000
7,500
44,000
26,600
10,400
6,960
Santos
P20,000
6,600
______
Reyes
Cruz
Interest (20% of P100,000)..................................

15% of P44,000 profit..........................................
Balance of P17,400, 60:40...................................
P10,440
P 6,960
Total ....................................................................
P26,600
P10,440
P 6,960
Capital balances as of December 31, 2009:

Santos
Initial investment, 2010....................................... P80,000
2010 profit allocation...........................................
20,000
Additional investment..........................................
2011 drawings...................................................... (20,000)
2011 profit allocation........................................... __26,600
Reyes
P80,000
(30,000)
Capitals, 12/31/11................................................ P106,600
P50,440
(10,000)
_10,440
Cruz
P37,500
(7,500)
__6,960
P36,960

1/1/012 Goodwill.......................................................................
26,588
Santos capital......................................................
3,988
Reyes capital.......................................................
13,560
Cruz capital........................................................
9,040
To record goodwill implied of Cruz's interest. In effect, the profit Sharing ratio is 15% to
Santos, 51% to Reyes (60% of 85% remaining after Santos's income), and 34% to Cruz
(40% of the 85% remaining after Santos' income). Diaz is paying P46,000, P9,040 in excess
of Cruz's capital (P36,960). The additional payment for this 34% income Interest indicates
total goodwill of P26,588 (P9,040/34%).
1/1/012
Cruz capital..................................................................
Diaz capital.........................................................
To transfer of capital purchase.
46,000
12/31/012Santos capital................................................................
Reyes capital................................................................
Diaz capital..................................................................
Santos drawings..................................................
Reyes drawings...................................................
Diaz drawings.....................................................
To close drawings accounts based on 20% of beginning capitals.
22,118
12,800
9,200
12/31/012 Income summary..........................................................

Santos capital......................................................
Reyes capital.......................................................
Diaz capital.........................................................
To allocate profit for 2008 as follows:
61,000
46,000
22,118
12,800
9,200
31,268
12,800
9,200
Santos
P22,118
9,150
______
Reyes
Diaz
Interest (20% of P110,588)...........................................

15% of P61,000............................................................
Balance of P29,732, 60:40...........................................
P17,839
P11,893
Totals............................................................................
P31,268
P17,839
P11,893
Santos
P106,600
3,988
Reyes
P50,440
13,560
Diaz
(22,118)
__31,268
(12,800)
_17,839
P119,738
P69,039
Capital balances as of December 31, 2010:

12/31/07 balances.........................................................
Goodwill.......................................................................
Capital purchased.........................................................
Drawings......................................................................
Profit allocation............................................................
12/31/08 balances.........................................................
1/1/013
1/1/013
73
P46,000
(9,200)
_11,893
P48,693
Goodwill.......................................................................
14,321
Santos capital......................................................
2,148
Reyes capital.......................................................
7,304
Diaz capital.........................................................
4,869
To record implied goodwill. Diaz will be paid P53,562 (110% of the capital balance for his
interest. This amount is P4,869 in excess of the capital account. Since Diaz is only entitled
to a 34% share of profits and losses, the additional P4,869 must indicate that the partnership
as a whole is undervalued by P14,321 (P4,869/34%) which is treated as goodwill.
Diaz capital..................................................................
53,562
Cash....................................................................
53,562
To record settlement to Diaz.
Chapter 3
Problem 3 12
Partnership Books Continued as Books of Corporation
Entries in the Books of the Corporation
(1) Inventories..........................................................................................
Land ...................................................................................................
Building. .............................................................................................
Accumulated depreciation bldg.........................................................
26,000
40,000
20,000
20,000
Accumulated depreciation equipment...............................................

Equipment...................................................................................
Jack capital.................................................................................
Jill capital...................................................................................
Jun capital...................................................................................
To adjust assets and liabilities of the partnership
to their current fair values.
30,000
(2) Cash ...................................................................................................

Jack capital.........................................................................................
Jill capital...................................................................................
Jun capital...................................................................................
To adjust capital accounts of the partners to 4:3:3 ratio.
4,000
18,000
(3) Jack capital.........................................................................................

Jill capital...........................................................................................
Jun capital...........................................................................................
Capital stock...............................................................................
To record issuance of stock to the partners.
100,000
75,000
75,000
20,000
58,000
34,800
23,200
20,200
1,800
250,000
New Books Opened for the New Corporation

Entries in the Books of the Partnership
(1) Inventories..........................................................................................
Land ...................................................................................................
Building. .............................................................................................
Accumulated depreciation bldg.........................................................
Accumulated depreciation equipment...............................................
Equipment...................................................................................
Jack capital.................................................................................
Jill capital...................................................................................
Jun capital...................................................................................
To adjust assets and liabilities of the partnership.
26,000
40,000
20,000
20,000
30,000
(2) Cash ...................................................................................................

Jack capital.........................................................................................
Jill capital...................................................................................
Jun capital...................................................................................
To adjust capital accounts of the partners.
4,000
18,000
20,000
58,000
34,800
23,200
20,200
1,800

(3) Stock of JJJ Corporation.....................................................................

Accounts payable.................................................................................
Loans payable Jill.............................................................................
Cash in bank...............................................................................
Accounts payable........................................................................
Inventories..................................................................................
Land...........................................................................................
Building. .....................................................................................
Equipment...................................................................................
250,000
30,000
40,000
44,000
26,000
60,000
60,000
70,000
60,000
To record transfer of assets and liabilities to

The corporation and the receipt of capital stock
(4) Jack capital.........................................................................................
Jill capital...........................................................................................
Jun capital...........................................................................................
Stock of JJJ Corporation.............................................................
To record issuance of stock to the partners.
100,000
75,000
75,000
250,000
Entries in the Books of the Corporation

(1) To record the acquisition of assets and liabilities from the partnership:
Cash in bank. ......................................................................................
Accounts receivable.............................................................................
Inventories..........................................................................................
Land ...................................................................................................
Building (net). .....................................................................................
Equipment (net)...................................................................................
Accounts payable........................................................................
Loans payable.............................................................................
Capital stock...............................................................................
44,000
26,000
60,000
60,000
70,000
60,000
30,000
40,000
250,000
Problem 3 13
1.
a.
Bonus Method
2012 journal entries
Jan. 1: Cash
Inventory
Equipment
Notes payable
Aquino, capital (50%)
Binay, capital (50%)
To record initial investments at fair value along with equal
capital balances.
40,000
12,000
48,000
10,000
45,000
45,000
75
Chapter 3
Problem 3-13: Continued

Oct. 1: Cash
12,000
Aquino, capital
To record additional investment of Aquino.
Dec. 31: Computation of the bonus:
Net profit before bonus
Net profit after bonus (P33,000 / 110%)
Bonus
12,000
P33,000
30,000
P 3,000
Computation of interest on average capital:

Aquino: Beginning capital: P45,000 x 9 months =
New balance :
P57,000 x 3 months =
Total
P405,000
171,000
P576,000
Average capital: P576,000 / 12 =

Interest rate
Interest credited to Aquino
P 48,000
10%
P 4,800
P45,000 x 10% =
P 4,500
Binay:
Allocation of P33,000 profit:
Bonus
Interest
Balance of income
Total
Aquino
P 3,000
4,800
12,420
P20,220
Closing Entry:
Aquino, Capital
Binay, capital
Aquino, drawing
Binay, drawing
To close P800 per month drawing accounts for the year.
Income summary
Aquino, capital
Binay, capital
To close profit for the year.
Binay
P4,500
8,280
P12,780
Total
P 3,000
9,300
20,700
P33,000
9,600
9,600
9,600
9,600
33,000
20,220
12,780
76

b.
Statement of Changes in Partners Equity
Capital balances, beginning

Additional investments
Net income
Drawings
Capital balances, end
Aquino
P45,000
12,000
20,220
(9,600)
P67,620
Binay
P45,000
12,780
(9,600)
P48,180
Total
P 90,000
12,000
33,000
(19,200)
P115,800
2013 journal entries:

Jan. 1: Admission of Roxas.
Total agreed capital of the new partnership (P115,800 + P66,000)
Roxas interest
Roxas agreed capital
Roxas contributed capital
Bonus to Aquino and Binay, 60:40
Cash
P181,800
1/3
P 60,600
66,000
P 5,400
66,000
Roxas, capital
Aquino, capital
Binay, capital
To record admission of Roxas with bonus to original partners.
60,600
3,240
2,160
Several Withdrawal of Binay:

Years Binay capital balance
Later Settlement
Bonus to Binay, from Aquino and Roxas
Binay, capital
Aquino, capital
Roxas, capital
Cash
To record withdrawal of Binay with bonus from the
Remaining partners split equally.
2.
a.
Goodwill Method:
2012 Journal Entries:
Jan. 1: Cash
Inventory
Equipment
Goodwill
Note payable
Aquino, capital
Binay, capital
To record investments of the partners with goodwill
attributed to Aquino.
P78,000
90,000
P12,000
78,000
6,000
6,000
90,000
40,000
12,000
48,000
14,000
10,000
52,000
52,000
77
Chapter 3
Problem 3-13: Continued

Oct. 1: Cash
12,000
Aquino, capital
To record additional investment of Aquino.
De. 31: Bonus to Aquino (the same)
Interest on average capital:
12,000
P3,000
Aquino: Beginning capital:

New balance:
Average capital
Interest rate
Interest
P52,000 x 9/12 =
P64,000 x 3/12 =
P39,000
16,000
P55,000
x 10%
P 5,500
Binay:
P 5,200
P52,000 x 10%
Allocation of income of P33,000:
Bonus
Interest
Balance of income
Total
Aquino
P 3,000
5,500
11,580
P20,080
Closing Entries:
Aquino, Capital
Binay, capital
Aquino, drawing
Binay, drawing
To close out drawing accounts for the year.
Total
P 3,000
10,200
19,300
P33,000
9,600
9,600
9,600
9,600
Income summary
Aquino, capital
Binay, capital
To allocate profits computed above.
b.
Binay
P5,200
7,720
P12,920
33,000
20,080
12,920
Statement of Changes in Partners Equity
Capital balances, beginning

Additional investments
Net income
Drawings
Capital balances, end
Aquino
P52,000
12,000
20,080
(9,600)
P74,480
Binay
P52,000
12,920
(9,600)
P55,320
Total
P104,000
12,000
33,000
(19,200)
P129,800
78

2013 Journal Entries:
Jan. 1: Admission of Roxas
Total agreed capital of the new partnership (P66,000 / 1/3)
Total contributed capital (P129,800 + P66,000)
Goodwill
P198,000
195,800
P 2,200
2,200

To recognize goodwill based on Roxas investment.
Cash
1,320
880
66,000
Roxas, capital
To record admission of Roxas.
Several: Withdrawal of Binay
Years Binay capital balance
Later: Settlement
Goodwill to Binay (20%)
66,000
P78,000
90,000
P12,000
Total goodwill (P12,000/20%)
P60,000
Goodwill
Roxas, capital (20%)
To recognize total goodwill.
60,000
Binay, capital
Cash
To record cash settlement to Binay.
90,000
24,000
12,000
12,000
90,000

CHAPTER-3 Advance Accounting Solman

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CHAPTER-3 Advance Accounting Solman

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Partnership Dissolution Changes in Ownership

Ben, capital balance before admission

Partnership Dissolution Changes in Ownership

Capital balances before admission

Capital balances before admission

Capital balances before admission

Capital balances before

Goodwill and Bonus

Total agreed capital (201,650+201,150+201,650)/2/3

Admission of Cora on Jan. 2, 2013:

Partnership Dissolution Changes in Ownership

1/1/013: Admission of Sammy

Sammys agreed capital

Capital balances, 8/1/012

* Total agreed capital (P800,000/25%)

Balances after admission of Paz

Total agreed capital of the new partnership (P84,000 / 30%)

If the P56,000 goodwill proved to be worthless, Warren would be charged 35% of

*Bonus = 10% (Net income Bonus)

Partnership Dissolution Changes in Ownership Interest

Allocation of new partnership profits necessary to satisfy Bea:

Total capital of the new partnership (P56,000 / 70%)

Total agreed capital of new partnership (P308,000 / 70%)

Linas new P/L ratio (50% x 80%)

Partnership Dissolution Changes in Ownership Interest

Percent of new partnership represented by:

Profit and loss ratio

Partnership Dissolution Changes in Ownership

** Sale of interest by Rita:

*** Admission of Perla:

Total agreed capital of the new partnership (P75,000 / 40%)

(b) 1. Implicit Goodwill Method:

Red, capital (25% x P80,000)...........................................

2. Red, capital (25% x P10,000)......................................................

Partnership Dissolution Changes in Ownership Interest

(1) Bonus Method:

Admission of Tomas............................... ___9,000

Goodwill to old partners, P/L ratio.................................................

(3) Goodwill with subsequent write-off.

Total capital after admission (P76,000 + P104,000).........................................................

Total capital of the partnership (P180,000 75%)...........................................................

Total capital after admission (P52,000 + P68,000)...........................................................

Agreed capital of Barry (P120,000 75%) x 25%...........................................................

Total agreed capital (P60,000 20%)..................................................P300,000

Total agreed capital (P140,000 80%)................................................P175,000

Total agreed capital (P120,000 + P50,000)..........................................P170,000

Partnership Dissolution Changes in Ownership Interest

Total agreed capital (P120,000 + P25,000)..........................................P145,000

Total agreed capital (P50,000 25%)..................................................P200,000

Total agreed capital (P120,000 75%)................................................P160,000

Total agreed capital (P600,000 3/4).................................................................

Total agreed capital (P630,000 3/4).................................................................

Total agreed capital (P624,000 3/4)............................................................................................

Contributed capital of Santos........................................................................................................

Total agreed capital (P600,000 3/4)............................................................................................

Contributed capital of Santos........................................................................................................

Total agreed capital (Contributed).................................................................................................

Contributed capital of Santos........................................................................................................

Total agreed capital (P180,000 3/4).............................................................................P240,000

Write-down to old partners capital.................................................................................( 24,000)

Partnership Dissolution Changes in Ownership Interest

Agreed capital of Noel (P220,000 x 1/5)..............................................P 44,000

Total agreed capital (P60,000 1/5)....................................................P300,000

Goodwill (P5,000 1/5)....................................................................