Exercise3: Retirement of a Partner G, H and I are partners whose capital balances as of January 1, 2019 are in the same proportion as their share in profit of 20:30:50. As of January 1, 2019, total partnership assets amount to P150,000 with the liabilities at P60,000. Their additional investments and withdrawals for 2019 are as follows: Additional Investments Drawing G P15,000 P9,000 H 18,000 10,000 I 12,000 H retires as of December 1, 2019, G and I agreed to a settlement for his share in equity plus 10% thereof after three months. Pending settlement, the amount due to H shall bear an interest of 12%. The partnership net income for 2019, prior to the above-mentioned interest, amounts to P32,400. Instructions: Determine the amount due to H as of December 31, 2019. Make the entries incidental to the retirement of H under each of the following assumptions: The additional consideration is to be treated as a bonus from the remaining partners. The additional consideration of 10% is H’s share in asset revaluation:
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Exercise3: Retirement of a Partner
G, H and I are partners whose capital balances as of January 1, 2019 are in the same proportion as their share in profit of 20:30:50. As of January 1, 2019, total partnership assets amount to P150,000 with the liabilities at P60,000. Their additional investments and withdrawals for 2019 are as follows:
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Additional Investments |
Drawing |
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G |
P15,000 |
P9,000 |
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H |
18,000 |
10,000 |
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I |
12,000 |
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H retires as of December 1, 2019, G and I agreed to a settlement for his share in equity plus 10% thereof after three months. Pending settlement, the amount due to H shall bear an interest of 12%.
The partnership net income for 2019, prior to the above-mentioned interest, amounts to P32,400.
Instructions:
- Determine the amount due to H as of December 31, 2019.
- Make the entries incidental to the retirement of H under each of the following assumptions:
- The additional consideration is to be treated as a bonus from the remaining partners.
- The additional consideration of 10% is H’s share in asset revaluation:
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