have occurred for the partnership: Event 1: On April 1, 2017, after charging the old partners’ capital their share from a loss of P15,000 for the 1 st quarter, CC was taken in as a partner by purchasing 20% partners
THE NEXT ITEM(S) IS/ARE BASED ON THE FOLLOWING
On January 1, 2017, AA and BB formed a partnership by contributing cash of P50,000 and P40,000,
respectively. They have agreed to give AA 60% interest in capital and BB 50% interest in profit and
losses.
Since January 1, 2017, the following events have occurred for the partnership:
Event 1: On April 1, 2017, after charging the old partners’ capital their share from a loss of P15,000 for
the 1
st quarter, CC was taken in as a partner by purchasing 20% partnership interest,
proportionately from AA and BB as agreed among the partners. CC paid a total of P12,000 for
the purchased interest and was given a 20% interest in profits. The old partners have agreed to
maintain their old
Event 2: On July 1, 2017, to improve sales and profitability, the partnership merged with another firm
owned by DD, after crediting the partners for a profit of P10,000 for the second quarter. DD’s
net assets had a fair value of P30,000 when contributed and DD was given a 30% interest in
capital and in profits. The old partners have agreed to maintain their old profit and loss ratios.
Event 3: On October 1, 2017, BB, whose family was to immigrate to Vancouver, Canada, withdrew from
the partnership. The partnership recognized a profit of P15,000 for the 3
rd quarter. It was agreed
that the partnership net assets were fairly valued at that date and thus no revaluation had taken
place upon BB’s withdrawal. BB was paid P30,000 from the partnership cash.
Event 4: In November 15, 2017, DD, a CPA-MBA gave notice of withdrawing from the partnership by
the year-end. He was appointed a member of the Board of Accountancy and had to devote his
time fully to this exciting new endeavour. The partners have decided to liquidate the partnership
instead on December 31, 2017. The partnership recognized a profit of P20,000 for the 4
th
quarter ended. The loss on realization of assets was P8,000 and liquidation expenses paid were
P4,000
1. How much is the capital of AA upon formation of the partnership on January 1, 2017?
2. How much is the capital of CC upon his admission by purchased interest on April 1, 2017?
3. How much cash will BB receive on April 1, 2017 upon the admission of CC by purchase of interest?
Step by step
Solved in 2 steps with 1 images
