After C’s admission, the partners agreed to adjust their capital balances to reflect their’ respective interests in the partnership’s net assets. Cash settlement is to be made between the partners. How much is the cash settlement?a) There would be no cash settlement between the partners. b) 34,288 payment of C to A and B c) 43,188 payment of B to A d) 43,188 payment of A to B The statement of financial position of the partnership of A and B as of December 31, 20x1 is shownbelow:Cash33,354Accounts receivable802,426Inventory380,137Land603,000Building428,267Equipment85,134Other assets5,600Total assets2,337,918Accounts payableNotes payable422,590545,000A, capital641,976B, capitalTotal liabilities and equity728,3522,337,918A and B share in profits and losses equally.On January 1, 20x2, C informed A and B of his intention to invest in the partnership for a 20%interest. The partners agreed on the following adjustments prior to C's admission:o Accounts receivable of P55,000 should be written-off.Inventories of P12,200 are obsolete and have no resale value.The 'Other assets' should be written off.

Admission of Partner For the admission of partner the admitted partner can bring the capital in form…

Answered: he partnership’s net assets. Cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

After C’s admission, the partners agreed to adjust their capital balances to reflect their’ respective interests in the partnership’s net assets. Cash settlement is to be made between the partners. How much is the cash settlement?

a) There would be no cash settlement between the partners.

b) 34,288 payment of C to A and B

c) 43,188 payment of B to A

d) 43,188 payment of A to B

The statement of financial position of the partnership of A and B as of December 31, 20x1 is shown
below:
Cash
33,354
Accounts receivable
802,426
Inventory
380,137
Land
603,000
Building
428,267
Equipment
85,134
Other assets
5,600
Total assets
2,337,918
Accounts payable
Notes payable
422,590
545,000
A, capital
641,976
B, capital
Total liabilities and equity
728,352
2,337,918
A and B share in profits and losses equally.
On January 1, 20x2, C informed A and B of his intention to invest in the partnership for a 20%
interest. The partners agreed on the following adjustments prior to C's admission:
o Accounts receivable of P55,000 should be written-off.
Inventories of P12,200 are obsolete and have no resale value.
The 'Other assets' should be written off.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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