1_PDFsam_01 Partnership - Retirementxx

PRACTICAL ACCOUNTING 2 THEORY & PRACTICE ADVANCE ACCOUNTING PARTNERSHIP - RETIREMENT OF A PARTNER QUIZZER

Partnership – Retirement of a Partner RETIREMENT OF A PARTNER Implied Goodwill 1. Pastor, Ramon and Sendong were partners with capital balances as of January 1, 2013, of P100,000, P150,000 and P200,000 respectively, sharing profit and losses on a 5:3:2 ratio. On July 1, 2013 Pastor withdraw from the partnership. Partners agreed that at the time of withdrawal, certain inventories had to be revalued at P70,000 from its cost of P50,000. For the six month period ending June 30,2013, the partnership generated a net income of PI40,000. Further, partners agreed to pay Pastor PI95,000 for his interest and that the remaining partners' capital accounts would be adjusted for whatever goodwill the settlement would generate. The payment to Pastor included a goodwill of: a. P15,000 c. P50,000 b. P25,000 d. P42,500 Guerrero 2013 2.

Jaime Dizon, a partner in an accounting firm, decided to withdraw from the partnership. Dizon's share of the partnership profits and losses was 20%. Upon withdrawing from the partnership he was paid P74,000 in final settlement for his interest. The total of the partners' capital accounts before recognition of partnership goodwill prior to Dizon's withdrawal was P210,000. After his withdrawal the remaining partners' capital accounts, excluding their share of goodwill, totalled PI 60,000. The implied goodwill of the firm was: a. P120,000 c. P160,000 b. P140,000 d. P250,000 Guerrero 2013

Total Assets 3. On July 10, 2013 Lolo wants to retire from JKL Partnership. The statement of financial position for the JKL Partnership before closing on that date shows the following: Cash P 148,000 Liabilities P 90,000 Receivables, net 72,000 Jose capital 200,000 Equipment, net 270,000 Kiko capital 96,000 Goodwill 60,000 Lolo capital 84,000 Income summary 80,000 Total P550,000 Total P550,000 Jose, Kiko and Lolo share profts and losses in the ratio of 5:3:2, respectively. The partners agreed to write off the goodwill and to adjust the equipment to their fair market values of P230,000.Lolo is paid P110,000 cash for his total interest.

Partnership Retirement of a Partner MCQ – Problems

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Advance Accounting Assuming the use of the total goodwill method the total assets of the new partnership after the retirement of Lolo is: a. P554,000 c. P474,000 b. P490,000 d. P550,000 Guerrero 2013 4.

The condensed statement of financial position of the partnership of Edong, Fredo and Godo with corresponding profit and loss sharing percentage as of June 30, 2013 was as follows: Net assets P400,000 Edong, capital (50%) P200,000 Fredo, capital (30%) 120,000 Godo, capital (20%) 80,000 P400,000 As of said date, Edong retired from the partnership. By mutual agreement, he was paid P225,000 for his interest in the partnership. The total implied goodwill was to be recorded. After Edong's retirement, the total net assets of the partnership was: a. P250,000 b. P17 5,000 c. P200,000 d. P225,000 Guerrero 2013

Partnership paid the retiring partner Revaluation method Remaining partners' capital balances 5. The December 31,2011, statement of financial position of the BB, CC, and DD partnership is summarized as follows: Cash P100,000 CC, loan .. PIOO.OOO Other assets, at cost 500,000 BB, capital 100,000 CC, capital 200,000 DD, capital 200,000 P600,000 P600,000 The partners share profits and losses as follows: BB, 20%; CC, 30%; and DD, 50%, CC is retiring from the partnership and the partners have agreed that "other assets" should be adjusted to their fair value of P600.000 at December 31, 2011. They further agree that CC will receive P244.000 cash for his partnership interest exclusive of the loan, which is to be paid in full. No goodwill implied by CC's payment will be recorded. Dayag 2013 After CC's retirement, the capital balances of BB and DD, respectively, will be: a. P116,000and P240,000 c. P 100,000and P200,000 b. P 101,714 and P254,286 d. P 73,143 and P182,857

Partnership Retirement of a Partner - MCQ Problems

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Partnership – Retirement of a Partner 6.

On June 30,2011, the statement of financial position for the partnership of CC, MM, and PP, together with their respective profit and loss ratios, were as follows: Assets, at cost P180,000 CC, loan 9,000 CC, capital (20%) 42,000 MM, capital (20%) 39,000 PP, capital (60%) 90,000 Total P180,000 CC decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P216,000 at June 30, 2011. It was agreed that the partnership would pay CC P61.200 cash for CC's partnership interest, including CC's loan which is to be repaid in full. No goodwill is to be recorded. After CC's retirement, what is the balance of MM's capital account? a. 36.450 c. 45,450 b. 39,000 d. 46,200 Dayag 2013

7.

In May 2010, Imclda, a partner of an accounting firm, decided to withdraw when the partners' capital balances were: Mikee, P600,000; Raul, P600,000; and Imelda, P400,000. It was agreed that Imclda is to take the partnership's fully depreciated computer with a second hand value of P24,000 that cost the partnership P36,000. If profits and losses are shared equally, what would be the capital balances of the remaining partners after the retirement of Imelda? Mikee Raul a. 600,000 600,000 b. 592,000 592,000 c. 608,000 608,000 d. 612,000 612,000 Punzalan 2014

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On December 31, 2013 the condensed statement of financial position of ABC Partnership is presented below: Total assets P180,000 Amy loan P10,000 Amy capital 45,000 Bea capital 40,000 Cat capital 85,000 Total P180,000 Amy, Bea and Cat share profits and losses in the ratio of 3:2:1 respectively. It was agreed among the partners that Amy retires from the partnership and the partnership's assets to be adjusted to their fair value of P210,000. The partners further agreed to pay Amy P64,000 cash for her total interest in the partnership.

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Advance Accounting What is the capital balance of Cat after the retirement of Amy? a. P35,000 c. P27,000 b. P92,000 d. P33,000 9.

Guerrero 2013

Cina, Doy and Eli shared profit and losses based on 5:3:2. Eli was allowed to withdraw from the partnership on 31 December 2013 with P600,000 cash as full settlement. The condensed statement of financial position of the partnership as of that date was as follows: Assets Due from Eli Goodwill Other assets Total assets

P250,000 2,000,000 4,750,000 P7,000,000

Liabilities and Capital Liabilities P2,000,000 Due to Doy 750,000 Cina, capital 1,750,000 Doy, capital 1,500,000 Eli, capital 1,000,000 Total liabilities and capital P7,000,000 Using the goodwill method, the new capital balances of the remaining partners after Eli's withdrawal are: a. Cina, PI,843,750 and Doy, PI,556,250. b. Cina, Pl,375,000 and doy, Pl,275,000. c. Cina, P2,000,000 and doy, PI,650,000. d. Cina, PI, 750,000 and Doy, PI,500,000. Guerrero 2013 10. On June 30,2013 the balance sheet for the partnership of Cruz, Merced and Prieto, together with their respective profit and loss ratio, were as follows: Assets, at cost

P180,000

Cruz, loan Cruz, capital (20%) Merced, capital (20%) Prieto, capital (60%)

9,000 42,000 39,000 90,000 P180,000

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Partnership – Retirement of a Partner Cruz had decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P216,000 at June 30, 2013. It was agreed that the partnership would pay Cruz P61,200 cash for Cruz's partnership interest, including Cruz's loan which is to be repaid in full. No goodwill is to be recorded. After Cruz's retirement, what is the balance of Merced capital account? a. P36,450 c. P45,450 b. P39,000 d. P46,200 Guerrero 2013 Effect on partners' capital balance 11. Peter, Queen, and Roy are partners with capital balances of P300,000, P300,000, and P200,000, respectively; and sharing profits and losses equally. Roy is to retire and it is agreed that he is to take certain office equipment with second hand value of P50,000 and a note for his interest. The office equipment carried in the books at P65,000 but brand new would cost P80,000. Roy's acquisition of the office equipment would result in a. Reduction in capital of P5,000 each for Peter, Queen, and Roy. b. Reduction in capital of P7,5000 each for Peter, Queen, and Roy. c. Reduction in capital of P15,000 for Roy. d. Reduction in capital of P55,000 for Roy. Punzalan 2014 12.

Cen, Deng and Lala are partners with capital balances on 31 December 2011 of P300,000, P300,000 and P200,000 respectively. Profit are shared equally. Lala wishes to withdraw and it is agreed that she is to take certain furniture and fixtures with second hand value of P50,000 and note for the balance of her interest. The furniture and fixtures are carried in the books at P65,000. Brand new, the furniture and fixtures may cost P80,000. Lala's acquisition of the second-hand furniture will result to: a. Reduction in capital of P15,000 each for Cen and Deng. b. Reduction in capital of P10,000 for Lala. c. Reduction in capital of P5,000 each for Cen, Deng and Lala. d. Reduction*in capital of P7,500 each for Cen, and Deng. Guerrero 2013

Total Capital 13. Lina, Mina and Nina were partners with capital balances on January 2, 2013 of P300,000, P200,000 and PI00,000, respectively. On July 1,2013 Lina retires from the partnership. On the date of retirement the partnership net loss is P60,000 and the partners agreed that certain asset is to be revalued at P80,000 from its original cost of P50,000. The partners agreed further to pay Lina P225,000 in settlement of her interest. The remaining partners continue to operate under a new partnership, MN partnership. What is the total capital of MN partnership? a. P345,000 c. P340,000 b. P285,000 d. P280,000 Guerrero 2013

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Advance Accounting Bonus Method Bonus to retiring partner 14. On October 31, 2010, Morris retired from the partnership of Morris, Philip, and Marl. Morris received P55,000 representing final settlement of his interest in the amount of P50,000. Under the bonus method, a. P5,000 was recorded as goodwill. b. P5,000 was recorded as expense. c. Charged P5,000 against the capital balances of Philip and Marl. d. P55,000 was recorded as bonus. Punzalan 2014 Comprehensive 15. Rita, Sisa, and Tina are partners with capital balances on June 30,2013 of P60,000, P60,000 and P40,000, respectively. Profits and losses are shared equally. Tina withdraws from the partnership. The partners agree that Tina is to take certain furniture at their second hand value of P2,400 and cash for the balance of her interest. The furniture is carried on the books as fully depreciated. The amount of cash to be paid to Tina and the capital balances of the remaining partners after the retirement of Tina are: a. b. c. d.

Cash P40,000 P37,600 P38,400 P42,800

Rita capital P6 0,000 P61,200 P60,800 P58,800

Sisa capital P60,000 P61,200 P60,800 P58,800

Partnership Retirement of a Partner - MCQ Problems

Guerrero 2013

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Partnership – Retirement of a Partner ANSWER SHEET 1.A 2.A 3.B 4.D 5.A 6.C 7.C 8.B 9.B 10.C 11.D 12.C 13.A 14.C 15.C

ANSWER KEY

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