Partnership Dissolution

A, one of the partners in the ABC Partnership, decided to buy the share of B in the partnership. Which of the following statements is NOT true?

• Partnership assets will remain the same.

• There is no need to revise the partners' equity.

• Partners' equity in total amount will not change.

• Partnership profit and loss will change.

Dissolution always immediately causes the termination of the firm.

• True

• False

When total agreed capital (TAC) is greater than total contributed capital (TCC), we assume that the partners are using the BONUS method with the admission of the new partner.

• True

• False

Insolvency, insanity, or incapacity of a partner to perform may cause the dissolution of the firm.

• True

• False

Partnership assets are not affected whenever the admission of a new partner is through purchase of interest of an existing partner.

• True

• False

Upon the admission of a new partner under the BONUS method, the new partner will be the one to receive the bonus when his/her share in the agreed capital exceeds his contribution.

• True

• False

Asset revaluation affects the capital balances of not just the existing partners, but also the incoming new partner.

• True

• False

ABC Partners, whose capital balance totaled P400,000, decided to admit D who invested P100,000 for a 25% interest in the partnership. The effect of this transaction is a/an:

• increase in partners' assets, and increase in partners' equity

• increase in partnership assets but no increase in partners equity

• increase in capital with no corresponding increase in assets

• increase in partnership assets and increase in partners' equity

ABC Partners whose capital balances amounted to P400,000 decided to admit D who invested P100,000 cash for a 20% interest. Using bonus method, the accountant should recognize

• bonus to D

• bonus to A, B, C

• asset revaluation for A, B, C

• no bonus nor asset revaluation

An admission of a new partner causes a change in ownership interest of the original partners.

• True

• False