Drill 11272019

Problem 1.
WW desires to purchase a one-fourth capital and profit and loss interest in the partnership of
EE, GG and DD. The three partners agree to sell to WW one-fourth of their respective capital and profit
and loss interest in exchange for a total payment of P80,000. The capital accounts and the respective
percentage interests in profits and losses immediately before the sale to WW are:
EE, Capital (60%) P160,000

GG, Capital (30%) 80,000
DD, Capital (10%) 40,000
Total P280,000 All other assets and liabilities are fairly valued, and with no asset adjustment (or book
value is to be recorded prior to the acquisition by WW). Immediately after WW’s acquisition, what would
be the capital balances of EE, GG, and DD, respectively?
Problem 2. The following are the capital account balances and the profits and loss ratio of the partners in
More Company on December 31, 2018: Capital Balances Profit and Loss Ratio M P120,000 25% O 160,000
50% R 400,000 25% On January 1, 2019, E is admitted to the partnership under the following agreement:
a. E is to share 1/3 in the profits and loss while the other partners continue to participate in profits and
loss in their original ratio. b. E is to pay O, P48,000 for ¼ interest of the latter’s equity in the partnership
net assets and is to invest P280,000 cash in the partnership. c. E’s capital account after admission is to
show P300,000 and the total capital is P1,040,000.
Required:
1. The capital account balances of the partners after E’s admission.
2. The new profit and loss ratio of the all partner’s after E’s admission.
Problem 3. Romeo and Juliet are partners with capital balances of P30,000 and P70,000, respectively.
Romeo has a 30% interest in profits and losses. All assets of the partnership are at fair market value except
equipment with book value of P300,000 and fair market value of P320,000. At this time, the partnership
has decided to admit Elsa and Anna as new partners. Elsa contributes cash of P55,000 for a 20% interest
in capital and a 30% interest in profits and losses. Anna contributes cash of P10,000 and an equipment
with a fair market value of P50,000 for a 25% interest in capital and 30% interest in profits and losses.
Anna is also bringing special expertise and clients contacts into the new partnership.
Required: Use the bonus method to show:
a) Journal entries to record revaluation of old partnership assets
b) Journal entries to record the admission of the new partners
c) The capital balances of the partners after
Problem 4. The partners operating the Librado company have been sharing profits and losses in the ratio
of their capital balances. At the end of the previous calendar year, the partnership balance sheet
appeared as follows:
Accounts
Cash 26,000 Payable 30,000
Receivables 15,000 Lizares, Capital 12,000
Braganza,
Merchandise Inventory 14,000 Capital 22,000
Building & Equipment(net) 25,000 Donesa, Capital 16,000
80,000 80,000
On this date, Donesa decided to withdraw from the partnership. Below is a list of independent cases
involving the withdrawal of Donesa which you are asked to journalize:
a) The interest of Donesa will be paid from partnership funds after an examination has revealed that no
overvaluation nor undervaluation of balance sheet accounts exists as of this date.
b) The partners agreed that merchandise inventory should be restated at P15,000 and building and
equipment should be recognized at replacement value of P29,000 whreas receivables should be valued at
P13,000. Donesa’s interest is to be paid in cash to the extent of 50% and a note is to be issued for the
balance.
c) Lizares buys 75% of Donesa’s interest for P12,000 and Braganza buys the remainder also at book value.
d) With the consent of the other partners, Donesa sold his total interest to Dominguez.
e) The partners agreed that the balance sheet values of the assets are reasonable but decided to pay
Donesa P18,000 for his interest in the firm. The remaining partners agreed to absorb the bonus of P2,000.
f) Donesa is paid the full amount of his interest after adjustment arising from the overvaluation of
merchandise inventory by P1,500.
g) Lizares buys Donesa’s interest in full for P17,000.
h) Donesa’s son, Mario took over Donesa’s interest in the partnership with the consent of the remaining
partners.

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Problem 1.

EE, Capital (60%) P160,000

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