Solution of Exam (Part 2)

Admission of a partnership ‫اضافه شريك جديد الى الشركة‬
Q1 (exam 2011 q3)

At april 30, partners’ capital balances in ELM company are :
Easi 49,000 , Lester 24,000, and Matt 22,000. The income –sharing are : 5 : 3 : 2,
respectively. On may 1, the ELM company is formed by admitting Ortiz to the firm as a
partner.
Required
a) Journalize the admission of Ortiz under each the following independent assumptions.
1. Ortiz purchase 50% of Matt’s ownership interest by paying Matt 9,000 in cash.
2. Ortiz purchase 50% of Lester’s ownership interest by paying Lester 16,000 in cash.
3. Ortiz invests 35,000 cash in the partnership for a 40% ownership interest that .
includes a bonus to the new partner.
4. Ortiz invests 30,000 in the partnership for a 15% ownership interest , and
.bonuses are given to the old partners.
b) Matt’s capital balance is 24,000 after admitting Ortiz to the partnership capital ,
what were (1) Ortiz’s cash investment and (2) the total bonus to the old partners?
Solution
Easi Lester Matt
Capital 49,000 24,000 22,000
Income ratio 5 : 3 : 2
a)
1) Ortiz purchase 50% of matt’s ownership
Ortiz, capital = 22,000 × 50% = 11,000
journal entry
April. Matt, Capital 11,000
30 Ortiz, Capital 11,000
2) Ortiz purchase 50% of lester’s ownership

Ortiz, capital = 24,000 × 50% = 12,000
journal entry
April. Lester, Capital 12,000
30 Ortiz, Capital 12,000
3) 1) total capital of existing partnership 95,000

(49,000 + 24,000 + 22,000)
Investment by Ortiz 35,000
Total capital of new partnership 130,000
2) Ortiz, capital = 130,000 × 40% = 52,000
1 | Page dr. magdy kamel

3) Bonus to Ortiz (new partner) = 52,000 – 35,000 = 17,000
4) Allocation of bonus
 Easi = 17,000 × 5/10 = 8,500
 Lester = 17,000 × 3/10 = 5,100
 Matt = 17,000 × 2/10 = 3,400
journal entry
April. Cash 35,000
30 Easi, Capital 8,500
Lester, Capital 5,100
Matt, Capital 3,400
Ortiz, Capital 52,000

(49,000 + 24,000 + 22,000)
Investment by Ortiz 30,000
2) Ortiz, capital = 125,000 × 15% = 18,750
3) Bonus to old partners = 30,000 – 18,750 = 11,250
Allocation of bonus
 Easi = 11,250 × 5/10 = 5,625
 Lester = 11,250 × 3/10 = 3,375
 Matt = 11,250 × 2/10 = 2,250
journal entry
April. Cash 30,000
30 Easi, capital 5,625
Lester, capital 3,375
Matt, capital 2,250
Ortiz, capital 18,750
b) total capital of existing partnership 95,000

investment by Ortiz ? .
total capital of new partnership (24,000 ÷ 15%) 160,000
Ortiz, Capital = 160,000 – 95,000 = 65,000

matt, bonus = 24,000 – 22,000 =2,000
Income ratio to matt  2/10
total bonus = 2,000 ÷ 2/10 = 10,000

Q2 (exam 2010 q5)
At april 30, partners’ capital balances in NTW company are :
A. Nolan 62,000, T. Tritt 36,000 , and T. Wuhom 12,000. The income sharing
ratios are : 5 : 4 : 1, respectively. On may 1 the NTWO company is formed by
admitting M. Otton to the firm as a partner.
Required
a) Journalize the admission of Otton under each of the following independent
assumptions
1. Otton purchases 50% of Wuhon’s ownership interest by paying Wubon 16,000 in
cash.
2. Otton purchases 33 1/3% of Tritt’s ownership interest by paying Tritt 15,000 in
cash
3. Otton invests 70,000 for a 30% ownership interest , and bonuses are give to the
old partners.
4. Otton invests 40,000 for a 30% ownership interest, which includes a bonus to the
new partners
b) Tritt’s capital balance is 30,000 after admitting Otton to the partnership by

investment , If Tritt’s ownership interest is 20% of total partnership capital , what
were. 1) Otton’s cash investment 2) the bonus to the new partner ?
solution
A. Nolan T. Tritt T. Wuham Total
Capital 62,000 36,000 12,000 110,000
Income ratio 5 4 1
a)
1) Otton purchase 50% of Wuham

Otton = 12,000 × 50% = 6,000
Journal entry
April. 30 T. Wuham, capital 6,000
Otton, capital 6,000
2) Otton purchases (1/3) of T. Tritt
Otton, capital = 36,000 × 1/3 = 12,000
Journal Entry
April. 30 Tritt, capital 12,000
Otton, capital 12,000

Investment by Otton 70,000
2) Otton, capital = 180,000 × 30% = 54,000
4) Allocation of bonus to old partners

 A. Nolan = )16,000 × 50%( = 8,000
 T. Tritt = )16,000 × 40%( = 6,400
 T. Wuhan = )16,000 × 10%( = 1,600
Journal Entry
April. 30 Cash 70,000
A. Nolan, Capital 8,000
T. Tritt, Capital 6,400
T. Wuhan, Capital 1,600
Otton, Capital 54,000

Investment by Otton 40,000
2) Otton, capital = 150,000 × 30% = 45,000
3) Bonus to new partners = 45,000 – 40,000 = 5,000
4) Allocation of bonus to old partners

 A. Nolan = 5,000 × 50% = 2,500
 T. Tritt = 5,000 × 40% = 2,000
 T. Wuhan = 5,000 × 10% = 500
Journal Entry
April. 30 Cash 40,000
A. Nolan, Capital 2,500
T. Tritt, Capital 2,000
T. Wuhan, Capital 500
Otton, Capital 45,000
b) 1. Total capital of new partnership (30,000 ÷ 20%) 150,000

total capital of existing partnership 110,000
Otton’s cash investment 40,000
2. decrease in T. Tritt’s Capital = 36,000 – 30,000 = 6,000
Tritt’s income ratio = 40%
Bonus to new partner = ( 6,000 ÷ 40%) = 15,000

Q3 exam 2017 q2
Jones and king are partners who share income in a 3 : 2 ratio. Their capital balance
are 50,000 and 40,000. Lane is to become a partner with one-fourth interest in capital
and income.
Required
A. If no goodwill or bonus is recorded, how much lane invests?
B. Prepare journal entries for the admission lane if he invests 25,000 for a one
fourth interest and goodwill is recorded.
C. Prepare journal entries for the admission lane if he invests 25,000 for 25
percent interest and total capital will be 115,000.
D. Prepare journal entries if lane directly purchases his interest by paying jones
15,000 and king 12,000.
Solution
a) ¾ total capital of existing partnership (50,000 + 40,000) 90,000

investment by lane ? .
total capital of new partnership ( 90,000 ÷ ¾) 120,000
lane, investment = 120,000 – 90,000 = 30,000

lane, capital = 120,000 × ¼ = 30,000
journal entry
Dec. 31 Cash 30,000
Lane, capital 30,000
b) 75% of estimated total resulting capital = 90,000

Estimated total resulting capital (90,000 ÷ 75%) 120,000
Difference 30,000
Investment by lane 25,000
Estimated goodwill to lane (new partner) 5,000
Journal entry
Dec. 31 Cash 25,000
goodwill 5,000
c) 1) total capital of existing partnership (50,000 + 40,000) 90,000

investment by lane 25,000 .
total capital of new partnership 115,000

2) lane, capital = 115,000 × 25% = 28,750
3) bonus to lane (new partner) = capital – investment
= 28,750 – 25,000 = 3,750

4) allocation of bonus
jones = 3,750 × 3/5 = 2,250
kings = 3,750 × 2/5 = 1,500
journal entry
Dec. 31 Cash 25,000
Jones, capital 2,250
Kings, capital 1,500
d) lane purchase 25% of jones & kings
lane, capital = 25% of jones + 25% of kings

= ( 50,000 × 25%) + ( 40,000 × 25%)
= 12,500 + 10,000 = 22,500
journal entry
Dec. 31 Jones, capital 12,500
Kings, capital 10,000
Q4 (exam 2013 q3) = 2012 q4

Omar and yahya sell computers. They wish to expand their computer lines and decide
to admit josef to the partnership. Omar’s capital is 80,000, yahya’s capital is 100,000
and they share income in ratio of 2 : 3.
Required
Record the admission of josef for each the following independent situations:
A. Josef directly purchases half of yahya’s investment in the partnership for 57,500.
B. Josef invests the amount needed to give him a one third interest in the capital of
the partnership if no goodwill or bonus is recorded
C. Josef invests 48,000 for one-fourth interest. Goodwill is to be recorded.
D. Omar and yahya agree that some of the inventory is obsolete. The inventory
account is decreased before josef is admitted invests 55,000 for one- fourth
interest.
E. Josef invests 35,000 for a one-fifth interest in the total capital of 215,000.
Solution
Omar Yahya
Capital 80,000 100,000
Income Ratio 2 : 3

a) josef purchase 50% of yahya’s investment
josef, capital = 100,000 × 50% = 50,000
journal entry
Yahya, Capital 50,000
Josef, Capital 50,000
b) 1) (2/3) total capital of existing capital (100,000 + 80,000) 180,000

investment by josef ? .
total capital of new partnership (180,000 ÷ (2/3) ) 270,000

2) investment by josef = 270,000 – 180,000 = 90,000
1
3) josef, capital = 270,000 × 3 = 90,000
journal entry
Cash 90,000
c) 75% of estimated total resulting capital 180,000

estimated total resulting capital (180,000 ÷ 75%) 240,000
difference 60,000
investment by josef 48,000
estimated goodwill to josef 12,000
josef,capital = 240,000 × ¼ = 60,000
journal entry
Cash 48,000
Goodwill 12,000
Josef, capital 60,000
d) total capital of existing partnership 180,000

decrease in inventory (?)
total capital of new partnership ( 55,000 ÷ ¼) = 220,000
decrease of inventory = (220,000 – 55,000 – 180,000) = 15,000
Allocation of decrease in inventory
Omar = 15,000 × 2/5 = 6,000
Yahya = 15,000 × 3/5 = 9,000
Record of decrease in inventory
Omar, capital 6,000
Yahya, capital 9,000
Inventory 15,000

Josef, Capital = 220,000 × ¼ = 55,000
journal entry
Cash 55,000
e) 1) total capital of existing partnership = 180,000

1
2) Josef , capital = 215,000 × 5 = 43,000
3) bonus to josef = 43,000 – 35,000 = 8,000
Omar = 8,000 × (2/5) = 3,200
Yahya = 8,000 × (3/5) = 4,800
the entry
Cash 35,000
Omar, Capital 3,200
Yahya, Capital 4,800
Q5: Exam (2008)q2

Mutt and Jefferson have capital balances of 60,000 and 20,000 and share income in
a ratio of 3 : 2 , respectively. Adams is to be admitted into the partnership with a 20
percent interest in the business.
Required
Record the admission of Adams for each of the following independent situations:
a) adams interests 25,000, and goodwill is to be recorded.
b) adams invests 25,000. Total capital is to be 105,000.
c) adams purchases the 20 percent by paying mutt 18,000 and Jefferson 7,000.
d) adams invests 17,000. Total capital is to be 97,000.
e) adams invests 17,000, and goodwill is to be recorded.
Solution
a) Estimated goodwill is computed as follows:
Step1 20% of Estimated total resulting capital 25,000
Estimated total resulting capital (25,000 ÷ 20%) 125,000
Step2 Estimated total resulting capital 125,000

total net asset not including goodwill
. (80,000 prior capital + 25,000 invested by Adam) (105,000)
Estimated goodwill 20,000
Allocation of goodwill
 Mutt = 20,000 × 3/5 = 12,000
 Jefferson = 20,000 × 2/5 = 8,000
Journal entry
Goodwill 20,000
Mutt, capital 12,000
Jefferson, capital 8,000
total capital of existing partnership (60,000 + 20,000) = 80,000

adam, investment 25,000
estimated goodwill old partners 20,000
adam, capital = 125,000 × 20% = 25,000
journal entry
Cash 25,000
Adam, capital 25,000
b) 1) total capital of existing partnership (60,000 + 20,000) = 80,000

2) adam, capital = 105,000 × 20% = 21,000
3) bonus to old partners = 25,000 – 21,000 = 4,000
 mutt = 4,000 × 3/5 = 2,400
 Jefferson = 4,000 × 2/5 = 1,600
journal entry
Cash 25,000
Mutt, capital 2,400
Jefferson , capital 1,600
c) adam purchase of 20% from mutt & Jefferson
Mutt, capital (60,000 × 20%) 12,000

Jefferson , capital (20,000 × 20%) 4,000

d) 1) total capital of existing partnership (60,000 + 20,000) = 80,000
2) adam, capital = 97,000 × 20% = 19,400
3) bonus to new partners = 17,000 – 19,400 = 2,400
 mutt = 2,400 × 3/5 = 1,440
 Jefferson = 2,400 × 2/5 = 960
journal entry
Cash 17,000
Mutt, capital 1,440
Jefferson , capital 960
e) Estimated goodwill for new partner

 80% of estimated total resulting capital 80,000
 Estimated total resulting capital (80,000 ÷ 80% ) 100,000
Difference 20,000
 Adam, Investment (new partner) (17,000)
 Estimated goodwill for new partner 3,000
adam, capital = 100,000 × 20% = 20,000
journal entry
Cash 17,000
Goodwill 3,000
Q6: (exam 2016 q4) = 2014 q2

Tom rolen and joe graham share partnership income on a 3 : 2 basis.
They have capital balances of 160,000 and 80,000 , respectively , when Ed vance is
admitted to the partnership
Required
Prepare the journal entry to record the admission of vance under each of the
following assumptions
a) Vance invests 100,000 for a 25% ownership interest.
b) Vance invests 60,000 for a 25% ownership interest.
c) Vance invests an amount that gives him a 25% ownership interest.

Solution
a)
1) total capital of existing partnership (160,000 + 80,000) 240,000
investment by vance 100,000
2) vance, capital = 340,000 × 25% = 85,000
4) allocation of bonus:
 tom = 15,000 × 3/5 = 9,000
 joe = 15,000 × 2/5 = 6,000
journal entry
Dec, 31 Cash 100,000
Tom, capital 9,000
Joe, capital 6,000
Vance, capital 85,000
b) 1) total capital of existing partnership (160,000 + 80,000) 240,000

investment by vance 60,000
2) vance, capital = 300,000 × 25% = 75,000
3) bonus to new partners = 75,000 – 60,000 = 15,000
4) allocation of bonus to old partners
tom = 15,000 × 3/5 = 9,000
joe = 15,000 × 2/5 = 6,000
journal entry
Dec, 31 Cash 60,000
Tom, capital 9,000
Joe, capital 6,000
c) 1) 75% total capital of existing partnership (160,000 + 80,000) 240,000

investment by vance ?
total capital of new partnership (240,000 ÷ 75/100) 320,000
2) investment by vance = 320,000 – 240,000 = 80,000
3) vance, capital = 320,000 × 25% = 80,000
journal entry
Dec, 31 Cash 80,000

Question (7) 2019
The following condensed balance sheet is presented for the partnership of Der, Egan,
and Oprins, who share profits and losses in the ratio of 4 : 3: 3, respectively.
Cash 40,000 Accounts payable 150,000

Other assets 710,000 Der, capital 260,000
Egan, capital 180,000
Oprins, Capital 160,000
Total assets 750,000 Total liabilities and capital 750,000
Assume that the partnership decides to admit snider as a new partner with a one
fourth interest
Required
For each of the following independent cases, determine the amount that snider must
contribute in cash or other assets.
a) no goodwill or bonus is to be recorded.

b) goodwill of 30,000 is to be recorded and allocated to the prior partners.
c) a bonus of 24,000 is to be paid by snider and allocated to the prior partners.
d) the prior partners, Der, Egan, and Oprins, agree to give snider $10,000 of goodwill
upon admission to the partnership.
e) other assets are revalued for an increase of $20,000, and goodwill of $40,000 is
recognized and allocated to the prior partners at the time of the admission of snider.
f) the partners agree that total resulting capital should be $820,000 and no goodwill
should be recognized.
g) other assets are revalued down by $20,000 and a bonus of $40,000 is paid to
snider at the time of admission.
Solution
a) 1. ¾ total capital of existing partnership 600,000

Snider, Investment ? .
total capital of new partnership (600,000 × 4/3) 800,000
2. Snider, Investment = 800,000 – 600,000 = $200,000
3. Snider, Capital = 800,000 × ¼ = 200,000
journal entries
Cash 200,000
Snider, Capital 200,000
b) journal entries to allocated goodwill to old partners
Goodwill 30,000
Der, Capital (30,000 × 4/10) 12,000
Egan, Capital (30,000 × 3/10) 9,000
Oprins, Capital (30,000 × 3/10) 9,000
¾ total capital of existing partnership 630,000

After goodwill recognized (600,000 +30,000)
Snider, investment ? .
Total capital of new partnership (630,000 × 4/3) 840,000
Snider, investment = 840,000 – 630,000 = 210,000

Journal entries
Cash 210,000
C) ¾ total capital of existing partnership 624,000

After bonus recognized (600,000 +24,000)
Snider, investment ? .
Total capital of new partnership (624,000 × 4/3) 832,000
Snider, investment = 832,000 – 624,000 = 208,000
Snider, capital = 832,000 × ¼ = 208,000
Cash required from snider = 208,000 + 24,000 bonus = 232,000
journal entries to record admission and bonus

Cash 232,000
Der, Capital (24,000 × 4/10) 9,600
Egan, Capital (24,000 × 3/10) 7,200
Oprins, Capital (24,000 × 3/10) 7,200
d) ¾ of estimated total resulting capital 600,000

estimated total resulting capital (600,000 × 4/3) 800,000
difference 200,000
- goodwill to snider ( new partner) (10,000)
Snider, investment 190,000
Journal entries
Cash 190,000
Goodwill 10,000

e) other assets are revalued for an increase of $20,000, and goodwill of $40,000
allocated to old partners
Other assets 20,000

Goodwill 40,000
Der, Capital (60,000 × 4/10) 24,000
Egan, Capital (60,000 × 3/10) 18,000
Oprins, Capital (60,000 × 3/10) 18,000
¾ of estimated total resulting capital 660,000

After revaluation (600,000 + 60,000)
Estimated total resulting capital (660,000 × 4/3) 880,000

Cash required from snider 220,000
Journal entry
Cash 220,000
Snider, capital 220,000
f) 1) total capital of existing partnership 600,000

snider, investment ? .
snider, investment = 820,000 – 600,000 = 220,000

2) snider, capital = 820,000 × ¼ = 205,000
Der = 15,000 × 4/10 = 6,000
Egan = 15,000 × 3/10 = 4,500
Oprins = 15,000 × 3/10 = 4,500
Journal entries
Cash 220,000
Der, Capital 6,000
Egan, Capital 4,500
Oprins, Capital 4,500

g) ) other assets are revalued down by $20,000
allocation of other assets:

 der = 20,000 × 4/10 = 8,000
 egan = 20,000 × 3/10 = 6,000
 sprins = 20,000 × 3/10 = 6,000
journal Entries
Der, Capital 8,000
Egan, Capital 6,000
Sprins, Capital 6,000
Other Assets 20,000
¾ estimated total resulting capital after 540,000

(600,000 – 20,000 revalued assets – 40,000 bonus)
Estimated total resulting capital 720,000
Difference 180,000
Bonus to old partners 40,000
Cash required from snider 140,000
Journal entries
Cash 140,000
Der, capital (40,000 × 4/10) 16,000
Egan, capital (40,000 × 3/10) 12,000
Sprins, capital (40,000 × 3/10) 12,000
Snider, capital (720,000 180,000
Question (8) : Exam(2015) Q3

The Grier and Otto partnership has partner capital account balances as follows:
Grier, capital $ 110,000
Otto, capital 50,000
The partners share income and losses in the ratio of 60% to Grier and 40% Otto.
Required
Prepare the journal entry on the books of the partnership to record the admission of
Trent as new partner under the following three independent circumstances.
1. trent pay $70,000 to Grier and $30,000 to Otto for one – half of each of their
ownership interest in personal transactions.
2. trent invests $170,000 in the partnership for a one - third interest in partnership capital
3. trent invests $35,000 in the partnership for a one - third interest in partnership capital.
Solution
1) trent purchases 50% of grier & 50% of Otto

trent, capital = 50% of grier + 50% of Otto
= (110,000 × 50%) + ( 50,000 × 50%)
= 55,000 + 25,000 = 80,000
journal entry
Grier, capital 55,000
Trent, captal 80,000
(2)
1) total capital of existing partnership (110,000 + 50,000) 160,000
Investment by trent (new partner) 170,000
2) Trent, capital = 330,000 × 1/3 = 110,000
4) Allocation of bonus
 Grier = 60,000 × 60% = 36,000
 Otto = 60,000 × 40% = 24,000
Journal entry
Cash 170,000
(3) 1) Total capital of existing partnership 160,000

Investment by trent 35,000
2) Trent, capital = 195,000 × 1/3 = 65,000
3) Bonus to new partner (trent) = 65,000 – 35,000 = 30,000
4) Allocation of bonus:
 Grier = 30,000 × 60% = 18,000
 Otto = 30,000 × 40% = 12,000
Journal entry
Cash 35,000

Withdrawal of retire partner ‫خروج شريك من الشركه‬
Q9 (Exam (2013 q4)
On Dec 31, the total capital balance and income reatios in BAG company are as follows:
Partner Capital Income ratio
Lois Hamilton 60,000 50%
Mary McGovern 40,000 30%
Donna guehler 34,000 20%
Required
a) journalize the withdrawal of Guehler under each of the following assumptions:
1) each of the continuing partners agrees to pay 18,000 in cash from personal funds to
purchase Guehler’s ownership equity. each receives 50% of Guehler’s equity
2) McGovern agrees to purchase Guehler’s ownership interest for 30,000 cash.
3) Guehler is paid 38,000 from partnership assets, which includes a bonus to the retiring
partner
4) Guehler is paid 28,000 from partnership assets, and bonuses to remaining partners
are recognized
b) if McGovern’s capital balance after Guehler’s withdrawal is 43,000 what were
1) total bonus to the remaining partners (2) cash paid by the partnership to Guehler ?
Solution
Hamilton McGovern Guehler

Capital balance 60,000 40,000 34,000
Income ratio 50% 30% 20%
a)
1 Guehler , capital 34,000
Hamilton, capital ( 34,000 × 50%) 17,000
McGovern, capital ( 34,000 × 50%) 17,000
2 Guehler, capital 34,000

McGovern , capital 34,000
3) Cash payment to Guehler 38,000

Guehler’s capital 34,000
Bonus To Guehler (Retire) 4,000
Allocation of bonus
50
 Hamilton, capital = 4,000 × 80 = 2,500
30
 McGovern, capital = 4,000 × 50 = 1,500

Hamilton, capital ( 4,000 × (50/80) ) 2,500
McGovern, capital (4,000 × (30/80) ) 1,500
Cash 38,000
4) Cash payment to Guehler 28,000

Guehler’s Capital = 34,000
Bonus to Old partners 6,000
allocation of bonus
50
 Hamilton, capital ( 6,000 × 80 ) = 3,750
30
 McGovern , capital ( 6,000 × 50 ) = 2,250
Journal entry
Hamilton, capital ( 6,000 × 50/80 ) 3,750
McGovern , capital (6,000 × 50/80 ) 2,250
Cash 28,000
b)
1) Mary McGovern capital after Guehler withdrawal = 43,000
Mary McGovern capital before Guehler withdrawal = 40,000
bonus to Mary McGovern 3,000
Mary McGovern income ratio with lois 3/8
3
Total bonus = 3,000 ÷ 8 = 8,000
2) Guehler, capital balance = 34,000

Total bonus to other partners = (8,000)
Cash paid to Guehler 26,000

Question (10) exam (2008)
Toshiba, miles and eden have capital balances of 50,000 , 40,000 , and 25,000
,respectively. Their income ratios are 5 : 3 : 2. Eden withdraws from the partnership
under each of the following independent conditions.
1. Toshiba and Miles agree to purchase Eden’s equity by paying 15,000 each from
their personal assets. Each purchaser receives 50% of Eden’s equity.
2. miles agree to purchase all of Eden’s equity by paying 22,000 each from her
personal assets.
3. Toshiba agrees to purchase all of eden’s equity by paying 26,000 each from her
personal assets.
Required
Journalize the withdrawal of Eden’s under each of the assumptions above.
Solution
Toshiba Milles Eden

50,000 40,000 25,000
5 3 2
1) Toshiba& millers receive 50% of Eden’s equity

 Toshiba = 25,000 × 50% = 12,500
 Milles = 25,000 × 50% = 12,500
journal entry
Eden, capital 25,000
Toshiba, capital 12,500
Miles, capital 12,500
2) miles agree to purchase all of Eden’s equity

journal entry
Miles, capital 25,000
3) Toshiba agree to purchase all of Eden’s equity

Journal entry
Toshiba, capital 25,000

Q11 (exam 2015 q4)
A, capital is 50,000, B, capital is 30,000 , and C, capital is 40,000.

They share income in a 3 : 1 : 1 ratio. C is retiring from the partnership.
Required :
Journalize the withdrawal of c under each of the following assumptions:
a) C is paid 48,000 , and no goodwill is recorded.

b) C is paid 50,000 , and only his share of the goodwill is recorded
c) C is paid 45,000 , and all implied goodwill is recorded
Solution
a) cash payment 48,000
C, capital 40,000
bonus to C 8,000
allocation of bonus to remaining partners
A = 8,000 × 3/4 = 6,000
B = 8,000 × 1/4 = 2,000
Journal entry
C, capital 40,000
A, capital 6,000
B, capital 2,000
Cash 48,000
b) cash payment 50,000

C, capital 40,000
goodwill to C 10,000
Journal entry
To record goodwill
Goodwill 10,000
C, capital 40,000
Cash 50,000
c) cash payment to C 45,000

C, capital 40,000
estimated goodwill 5,000
1/5 total estimated goodwill = 5,000
Total estimated goodwill = 5,000 ÷ 1/5 = 25,000
allocation of goodwill
 A = 25,000 × 3/5 = 15,000
 B = 25,000 × 1/5 = 5,000

 C = 25,000 × 1/5 = 5,000
Journal entry
Goodwill 25,000
A, capital 15,000
B, capital 5,000
C, capital 5,000
C, capital 45,000
Cash 45,000
Q12 (exam 2017 q3)

partner brown plans to withdraw from white, black, and brown partnership on july 10,
2016. The balance sheet for the partnership on that dates as follows:
balance sheet july 10, 2016
Cash 74,000 Liabilities 45,000
Accounts receivable 36,000
Plant assets (net) 135,000 Partners’ capital
goodwill 30,000 White, capital 120,000
Black, capital 60,000
Brown, capital 50,000
275,000 275,000
white, black and brown share net income and losses in the ratio of 3 : 2 : 1, respectively
Required
prepare journal entries to record brown’s withdrawal from the partnership on july 10,
2016 , under each of the following assumptions:
a) brown’s is paid 54,000 and the excess paid over brown’s capital account balance
is recorded as a bonus to brown from white and black.
b) brown is paid 45,000 , and the difference is recorded as a bonus to white & black .
from brown
c) brown is paid 45,000 , and goodwill currently in the accounting records of partnership
, which arose from white original investment of a highly profitable proprietorship,
is reduced by the total amount implicit in the transaction.
d) brown accepts cash of 40,500 and plant asset (equipment) with current fair value of
9,000. The equipment has cost 30,000 and was 60% depreciated, with no residual
value (record any gain or loss on the disposal of the equipment in the partners’
capital accounts).
Solution
a) cash paid to brown 54,000

brown’s capital 50,000
bonus to brown 4,000

allocation of bonus to remaining partners
 White = 4,000 × 3/5 = 2,400
 Black = 4,000 × 2/5 = 1,600
journal entry
July. 10 Brown, capital 50,000
White, capital 2,400
Cash 54,000
b) cash paid to brown 45,000
bonus to remaining partner 5,000
allocation of bonus:
 white = 5,000 × 3/5 = 3,000
 black = 5,000 × 2/5 = 2,000
journal entry
White, capital 3,000
Cash 45,000
c) cash paid to brown 45,000

estimated goodwill to brown 5,000 → reduction of goodwill
total goodwill = 5,000 ÷ 1/6 = 30,000
allocation of goodwill:
 white = 30,000 × 3/6 = 15,000
 black = 30,000 × 2/6 = 10,000
 brown = 30,000 × 1/6 = 5,000
journal entry
July. 10 White, capital 15,000
Goodwill 30,000
(record the reduction of goodwill)
Cash 45,000
(record retirement of brown)

d) Book value of equipment = cost – accumulated depreciation
= 30,000 – (30,000 × 60%)
= 30,000 – 18,000 = 12,000
F.V B.V decrease (downward)
equipment 9,000 12,000 3,000
allocation of decrease in equipment :
 white = 3,000 × 3/6 = 1,500
 black = 3,000 × 2/6 = 1,000
 brown = 3,000 × 1/6 = 500
journal entry
July. 10 White, capital 1,500
Brown, capital 500
Equipment 3,000
cash paid to brown = 9,000 + 40,500 = 49,500

brown, capital (50,000 – 500) 49,500
bonus -0–
journal entry
Cash 40,500
Equipment 9,000
Q13 (exam 2009 q4)

The partnership of Ace, Jack, and spade has been in business for 25 years. On
decemer 31, 2008 spade decide to retire from the partnership. The partnership balance
sheet reported the following capital balances for each partner at December 31, 2008.
Ace, capital 150,000

Jack, capital 200,000
Spade, capital 120,000
the partners allocate partnership income and loss in the ratio 20 : 30 : 50.
Required
Record the withdrawal of spade under each of the following independent situations.
a) spade’s capital interest was acquired for 150,000 by Jack In a personal

transaction. Partnership assets were not revalued, and partnership goodwill was
not recognized.
b) assume the same facts as in required part ‘’a‘‘ except that partnership goodwill
applicable to entire business was recognized by the partnership.

c) spade was given 180,000 of partnership cash upon retirement. Capital of the
partnership after spade’s retirement was 290,000.
d) spade was given 60,000 of cash and partnership land, with a fair value of 120,000
the carrying amount of the land on the partnership books was 100,000.
Capital of the partnership after spade’s retirement was 310,000.
e) spade was given 150,000 of partnership cash upon retirement. The portion of
. goodwill attributable to spade was recorded by the partnership.
f) assume the same facts as in required part ‘’e’’ except that partnership goodwill
attributable to all partners was recorded.
g) due to limited cash in the partnership , spade was given land with a fair value of
100,000 and ; notes payable for 50,000. The carrying amount of the land on the
partnership books was 60,000. Capital of the partnership after spade’s retirement
was 360,000.
Solution
a) jack, capital purchase of spade, capital interest

Dec. 31 Spade, capital 120,000
b) cash payment to spade 150,000

spade, capital 120,000
estimated goodwill to spade 30,000
total goodwill = (30,000 ÷ 50%) = 60,000
allocation of goodwill to all partners

 ace = 60,000 × 20% = 12,000
 jack = 60,000 × 30% = 18,000
 spade = 60,000 × 50% = 30,000
record goodwill
Dec. 31 Goodwill 60,000
Ace, capital 12,000
Record withdrawal
Dec. 31 Spade, capital (120,000 + 30,000) 150,000
c) cash payment to spade = 180,000

bonus to spade 60,000

allocation of bonus
20
 ace, capital = 60,000 × 50 = 24,000
30
 jack, capital = 60,000 × 50 = 36,000
journal entry
Ace, capital 24,000
Cash 180,000
D) F.V B.V Increase In Land

land 120,000 100,000 20,000
allocation of increase in land
 ace = 20,000 × 20% = 4,000
 jack = 20,000 × 30% = 6,000
 spade = 20,000 × 50% = 10,000
to record of increase in land

Dec. 31 Land 20,000
Ace, capital 4,000
Jack, capital 6,000
Land ( F.V) cash paid

Cash payment to spade = 120,000 + 60,000 = 180,000
Cash payment = 180,000
Spade, capital ( 120,000 + 10,000) = 130,000
Bonus to spade 50,000
Allocation of bonus to remaining partners
20
 Ace = 50,000 × 50 = 20,000
30
 Jack = 50,000 × 50 = 30,000
journal entry
Ace, capital 20,000
Cash 60,000
Land 120,000
e) cash payment to spade 150,000


estimated goodwill to spade 30,000
record goodwill
Spade’s retirement
Cash 150,000
f) estimated goodwill to spade 30,000

total goodwill = 30,000 ÷ 50% 60,000
 ace = 60,000 × 20% = 12,000
 jack = 60,000 × 30% = 18,000
 spade = 60,000 × 50% = 30,000
record goodwill
Ace, capital 12,000
Record withdrawal
Dec. 31 Spade, capital (120,000 + 30,000) 150,000
Cash 150,000
g) F.V B.V increase
land 100,000 60,000 40,000
allocation of increase in land
 ace = 40,000 × 20% = 8,000
 jack = 40,000 × 30% = 12,000
 spade = 40,000 × 50% = 20,000
to record of increase in land
Dec. 31 Land 40,000
Ace, capital 8,000
cash payment = 100,000 + 50,000 = 150,000

spade, capital (120,000 + 20,000) = 140,000
bonus to spade 10,000
allocation of bonus
 ace = 10,000 × 20/50 = 4,000
 jack = 10,000 × 30/50 = 6,000

journal entry
Ace, capital 4,000
Jack, capital 6,000
Notes payable 50,000
Land 100,000
14) exam 2018 q4

A, B, and C have operated a tax service. B has decide to retire from the partnership.
Before B’s withdrawal, the books are closed, and the following balance sheet is
prepared:
Cash 60,000 Accounts payable 15,000

Accounts receivable 14,000 A, Capital 35,000
Library (net) 30,000 B, Capital 50,000
Furniture (net) 56,000 C, Capital 60,000
160,000 160,000
A, B, and C share income in a 2 : 3 : 5
Required
Prepare journal entries for B’s withdrawal in each of the following independent
situation:
a) B is to receive $47,000 because the partners agree that the furniture is overvalued
the carrying value of the furniture is reduced.
b) the partners agree that the library is undervalued by $8,000. After recording the
increase, B is paid the amount in his capital accounts.
c) A and C allow D to purchase B’s interest in the partnership for $57,000. No

goodwill is recorded.
d) B receives $56,300. The bonus method is used.
e) B receives $56,300, and his share of the goodwill is recorded.
f) B receives $56,300 and the total implied goodwill is recorded.
Solution

a) cash payment = 47,000
B, capital = 50,000
decrease in furniture = 3,000  3/10
total decrease in furniture = 3,000 ÷ 3/10 = 10,000
allocation of decrease in furniture

 A = 10,000 × 2/10 = 2,000
 B = 10,000 × 3/10 = 3,000
 C = 10,000 × 5/10 = 5,000
Journal Entry
A, capital 2,000
B, capital 3,000
C, capital 5,000
Furniture 10,000
To record the withdrawal

B, capital 47,000
Cash 47,000
b) the library is undervalued by 8,000 so
allocation of increase in library to all partner

 A = 8,000 × 2/10 = 1,600
 B = 8,000 × 3/10 = 2,400
 C = 8,000 × 5/10 = 4,000
journal entry to record of library
Library 8,000
A, capital 1,600
B, capital 2,400
C, capital 4,000
To Record The Withdrawal

B, capital (50,000 + 2,400) 52,400
Cash 52,400
c) A & C allow D to purchase B’s equity
B, capital 50,000
D, capital 50,000
d) cash payment 56,300

b, capital 50,000
bonus to b (retire ) 6,300
allocation of bonus
 A = 6,300 × 2/7 = 1,800
 C = 6,300 × 5/7 = 4,500
Journal entry
B, capital 50,000
A, capital 1,800
C, capital 4,500
Cash 56,300
e) cash payment 56,300

B, capital 50,000
goodwill to B 6,300
journal entry
B, capital 50,000
Goodwill 6,300
Cash 56,300
f) cash payment = 56,300

B, capital = 50,000
goodwill to B 6,300  3/10
total goodwill = 6,300 ÷ 3/10 = 21,000
 A = 21,000 × 2/10 = 4,200
 B = 21,000 × 3/10 = 6,300
 B = 21,000 × 5/10 = 10,500
To Record Goodwill
Goodwill 21,000
A, capital 4,200
B, capital 6,300
C, capital 10,500
to record the withdrawal

B, capital 56,300
Cash 56,300

Solution of Exam (Part 2)

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Solution of Exam (Part 2)

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Admission of a partnership ‫اضافه شريك جديد الى الشركة‬

Q1 (exam 2011 q3)

2) Ortiz purchase 50% of lester’s ownership

3) 1) total capital of existing partnership 95,000

2) Ortiz, capital = 130,000 × 40% = 52,000

1 | Page dr. magdy kamel

4) 1) total capital of existing partnership 95,000

2) Ortiz, capital = 125,000 × 15% = 18,750

3) Bonus to old partners = 30,000 – 18,750 = 11,250

b) total capital of existing partnership 95,000

Ortiz, Capital = 160,000 – 95,000 = 65,000

2 | Page dr. magdy kamel

b) Tritt’s capital balance is 30,000 after admitting Otton to the partnership by

1) Otton purchase 50% of Wuham

2) Otton purchases (1/3) of T. Tritt

Otton, capital = 36,000 × 1/3 = 12,000

3 | Page dr. magdy kamel

2) Otton, capital = 180,000 × 30% = 54,000

3) Bonus to old partners = 70,000 – 54,000 = 16,000

4) Allocation of bonus to old partners

4) 1) total capital of existing partnership 110,000

2) Otton, capital = 150,000 × 30% = 45,000

3) Bonus to new partners = 45,000 – 40,000 = 5,000

4) Allocation of bonus to old partners

b) 1. Total capital of new partnership (30,000 ÷ 20%) 150,000

4 | Page dr. magdy kamel

a) ¾ total capital of existing partnership (50,000 + 40,000) 90,000

total capital of new partnership ( 90,000 ÷ ¾) 120,000

lane, investment = 120,000 – 90,000 = 30,000

b) 75% of estimated total resulting capital = 90,000

c) 1) total capital of existing partnership (50,000 + 40,000) 90,000

total capital of new partnership 115,000

5 | Page dr. magdy kamel

d) lane purchase 25% of jones & kings

lane, capital = 25% of jones + 25% of kings

Q4 (exam 2013 q3) = 2012 q4

6 | Page dr. magdy kamel

b) 1) (2/3) total capital of existing capital (100,000 + 80,000) 180,000

total capital of new partnership (180,000 ÷ (2/3) ) 270,000

c) 75% of estimated total resulting capital 180,000

d) total capital of existing partnership 180,000

7 | Page dr. magdy kamel

e) 1) total capital of existing partnership = 180,000

Q5: Exam (2008)q2

Step2 Estimated total resulting capital 125,000

total capital of existing partnership (60,000 + 20,000) = 80,000

adam, capital = 125,000 × 20% = 25,000

b) 1) total capital of existing partnership (60,000 + 20,000) = 80,000

2) adam, capital = 105,000 × 20% = 21,000

3) bonus to old partners = 25,000 – 21,000 = 4,000

c) adam purchase of 20% from mutt & Jefferson

Mutt, capital (60,000 × 20%) 12,000

9 | Page dr. magdy kamel

e) Estimated goodwill for new partner

Q6: (exam 2016 q4) = 2014 q2

10 | Page dr. magdy kamel

b) 1) total capital of existing partnership (160,000 + 80,000) 240,000

c) 1) 75% total capital of existing partnership (160,000 + 80,000) 240,000

11 | Page dr. magdy kamel

Cash 40,000 Accounts payable 150,000

a) no goodwill or bonus is to be recorded.

a) 1. ¾ total capital of existing partnership 600,000

total capital of new partnership (600,000 × 4/3) 800,000