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    QUIZZES - CHAPTER 13 - PARTNERSHIP DISSOLUTION With Answer

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    Bryan Joe De Mesa
    This document summarizes three cases involving the admission of a new partner, Carrots, to an existing partnership between Apple and Banana. In Case 1, Carrots acquires half of Banana's 40% interest for $800,000. In Case 2, Carrots invests $165,000 cash for a 20% interest in the partnership. Case 3 asks how much Carrots should contribute to obtain a 2/5 (40%) interest, calculating it as $440,000 based on adjusting the partnership's net assets.

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    QUIZZES - CHAPTER 13 - PARTNERSHIP DISSOLUTION With Answer

    Uploaded by

    Bryan Joe De Mesa
    2K views3 pages
    This document summarizes three cases involving the admission of a new partner, Carrots, to an existing partnership between Apple and Banana. In Case 1, Carrots acquires half of Banana's 40% interest for $800,000. In Case 2, Carrots invests $165,000 cash for a 20% interest in the partnership. Case 3 asks how much Carrots should contribute to obtain a 2/5 (40%) interest, calculating it as $440,000 based on adjusting the partnership's net assets.

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    QUIZZES_CHAPTER 13_PARTNERSHIP DISSOLUTION with answer

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    This document summarizes three cases involving the admission of a new partner, Carrots, to an existing partnership between Apple and Banana. In Case 1, Carrots acquires half of Banana's 40% interest for $800,000. In Case 2, Carrots invests $165,000 cash for a 20% interest in the partnership. Case 3 asks how much Carrots should contribute to obtain a 2/5 (40%) interest, calculating it as $440,000 based on adjusting the partnership's net assets.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    2K views3 pages

    QUIZZES - CHAPTER 13 - PARTNERSHIP DISSOLUTION With Answer

    Uploaded by

    Bryan Joe De Mesa
    This document summarizes three cases involving the admission of a new partner, Carrots, to an existing partnership between Apple and Banana. In Case 1, Carrots acquires half of Banana's 40% interest for $800,000. In Case 2, Carrots invests $165,000 cash for a 20% interest in the partnership. Case 3 asks how much Carrots should contribute to obtain a 2/5 (40%) interest, calculating it as $440,000 based on adjusting the partnership's net assets.

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    Chapter 13

    Partnership Dissolution
    NAME: BRYAN JOE DE MESA Date:
    Professor: Dr. Reyroso Section: Score:

    QUIZ:
    Use the following information for the next three cases:
    Carrots joins the partnership of Apple and Banana. Before the admission of Carrots, the partnership
    statement of financial position shows the following information:

    Cash 30,000
    Accounts receivable 140,000
    Inventory 200,000
    Equipment 500,000
    Total assets 870,000

    Accounts payable 80,000


    Apple, Capital (60%) 515,000
    Banana, Capital (40%) 275,000
    Total liabilities and equity 870,000

    The following adjustments are determined:


    a. The recoverable amount of the accounts receivable is ₱120,000.
    b. The inventory has a net realizable value of ₱160,000.
    c. The equipment has a fair value of ₱450,000.
    d. Unrecorded liabilities amount to ₱20,000.

    Case #1: Carrots acquires half of Banana’s interest for ₱800,000.


    Requirements:
    a. Provide the entry to record the admission of Carrots.
    b. Determine the balances of the partners’ capital accounts after the admission of Carrots.
    c. Determine the profit or loss sharing ratio of the partners after the admission of Carrots.

    Requirement A
    Existing partners’ capital balances are adjusted below

    Carrying Fair Increase


    Amounts Values (Decrease)
    Cash 30,000.00 30,000.00
    AR 140,000.00 120,000.00 (20,000.00)
    Inventory 200,000.00 160,000.00 (40,000.00)
    Equipment 500,000.00 450,000.00 (50,000.00)
    AP (80,000.00) (80,000.00)
    Accrued liabilities (20,000.00) (20,000.00)
    Net assets 790,000.00 660,000.00 (130,000.00)

    1
    Unadjusted Adjustment Adjusted
    Capital - Apple (60%) 515,000.00 (78,000.00) 437,000.00
    Capital - Banana (40%) 275,000.00 (52,000.00) 223,000.00
    790,000.00 660,000.00

    *adjustments
    -130k x 60% = -78k
    -130k x 40% = -52k

    Entry
    Banana, capital (223k x 50%) 111,500.00
    Carrot, capital 111,500.00
    to record the admission of carrot to the partnership

    Requirement B

    Before Admission After


    Admission of Carrot Admission
    Apple, capital 437,000.00 437,000.00
    Banana, capital 223,000.00 (111,500.00) 111,500.00
    Carrot, capital 111,500.00 111,500.00
    660,000.00 660,000.00

    Requirement C

    Before Admission After


    Admission of Carrot Admission
    Apple, capital 60% 60%
    Banana, capital 40% -20% 20%
    Carrot, capital 20% 20%
    100% 100%

    Case #2: Carrots invests ₱165,000 cash to the partnership in exchange for a 20% interest.
    Requirements:
    a. Provide the journal entry to record the admission of Carrots.
    b. Compute for the capital balances of the partners following the admission of Carrots.
    c. Determine the profit or loss sharing ratio of the partners after the admission of Carrots.

    Requirement A
    Adjusted net assets before admission of Carrot ÷ interest of old partners x interest of carrot
    660,000.00 ÷ 80% = 825,000.00 x 20% = 165,000.00

    Entry
    Cash 165,000.00
    Carrot, capital 165,000.00
    to record the admission of Carrot to the partnership

    2
    Requirement B

    Before Admission After


    Admission of Carrot Admission
    Apple, capital 437,000.00 437,000.00
    Banana, capital 223,000.00 223,000.00
    Carrot, capital 165,000.00 165,000.00
    660,000.00 825,000.00

    Requirement C

    Before Admission After


    Admission of Carrot Admission
    Apple, capital 60% 80% x 60% 48%
    Banana, capital 40% 80% x 40% 32%
    Carrot, capital 20% 20%
    100% 100%

    Case #3: If Carrots is to invest sufficient cash to obtain 2/5 interest in the partnership, how much
    should Carrots contribute to the new partnership?

    ⅖ = 40% ⅗ = 60%
    Solution
    Adjusted net asset ÷ Existing partners’ interest x carrots interest

    660,000.00 ÷ 60% = 1,100,000.00 x 40% = 440,000.00

    “The name of the Lord is a strong tower; the righteous run to it and are safe.” (Proverbs 18:10)
    - END -

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