Reference no: EM132675073

PARTNERSHIP DISSOLUTION Give the explanation of its answers or computation True or False:

Question 1. The total capital of a partnership increases when an incoming partner purchases interest from an existing partner.

Question 2. According to law, a partnership is dissolved when a new partner is admitted or when an existing partner withdraws.

Fact pattern: You are partners with capital balances P5 each. We have equal interests in the partnership.

Question 3. Friend acquires one-half of your interest for P3. Your capital balance after the admission of Friend is P2.5.

Question 4. The payment of Friend is recorded in the partnership's books.

Question 5. The total partnership capital after the admission of Friend is P13.

Question 6. Disregard the previous assumptions. Friend acquires 20% interest by investing P2.5 to the partnership. No bonus is allowed. My capital after the admission of Friend is P3.75.

Question 7. The investment of Friend is recorded in the partnership's books.

Fact pattern: Dog, Cat and Mouse are partners with capital balance of P5 each. The partners have equal interests in the partnership. Mouse is fed up with Dog and Cat's quarrels and wants to withdraw from the partnership. The partnership's net assets are fairly valued.

Question 8. Dog acquires Mouse's interest for P2. Dog's capital after the withdrawal of Mouse is P10.

Question 9. The partnership pays Mouse P7 as settlement of his partnership interest. Cat's capital after the withdrawal of Mouse is P4.

Question 10. Cat was able to persuade Mouse to stay, on condition that the partnership should be converted into a corporation. The corporation issued 4 shares with par value of P1 per share to each of the partners. The credit to share premium is P2.