BC Dissolution of Partnership Retirement Discussion

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The partners share profits and losses in the ratio of 4:2:4. On July 1, 2010, Diaz asked to be allowed to withdraw from the partnership. The partners decided to close the books as of these date so as to determine the capital interest of Diaz. Profit for 6 months ended amounted P60,000 while drawings of Dy, David and Diaz amount to P6,000 , P8,000 and P4,000, respectively. Profits and losses are to be shared equally after the retirement of Diaz.

1. What are the journal entries to be prepared for the retirement of Diaz?

2. What are the Capital interest of each partner as of July 1, 2010?

3. Assumption: If Diaz decided to sale his interest to Taki for P150,000.00 what is the journal entry for the sale of interest?

4. Assuming the Sale of interest to the continuing partners. Diaz sold his interest to Dy and David for P90,000; the interest being divided equally by the remaining partners. Profits and losses after the retirement of Diaz will be divided equally, what is the journal entry for the sale of interest?

5. Assuming the Sale of interest to the partnership. Diaz sold his interest to the partnership. The partners reed to make immediate cash settlement to the retiring partner. Profits and losses after the retiring of Diaz will be divided equally.

Case 1: Settlement to retiring partner is equal to his capital interest. The partnership paid Diaz 122,000.00, what is the journal entry?

Case B – Settlement is less than the capital interest of the retiring partner (at less than book value). The partnership paid Diaz P90,000 which is P32,000 less than his capital interest of P122,000.

1. Bonus Method?

2. Asset Revaluation Method?

3. Payment to him will be recorded as?

4. Compound journal entry for the retiring partner?

Case C – Settlement is more than the capital interest if the retiring partner (at more than book value). The partnership paid Diaz P150,000 which is P28,000 more than his capital interest of P122,000.

1. Bonus Method?

2. Asset Revaluation Method?

3. Payment to him will be recorded as?

4. Compound journal entry for the retiring partner?

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