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Karasuma and Irina are partners whc have capitals of P6,000 and P4,800 and who share profits in the ratio of 3:2. Koro is admitted as a partner upon investing cash of P5,000, with profits to be shared equally. Assume that Koro is allowed a 40% interest in the firm.

Karasuma and Irina are partners whc have capitals of P6,000 and P4,800 and who share profits in the ratio of 3:2. Koro is admitted as a partner upon investing cash of P5,000, with profits to be shared equally. Assume that Koro is allowed a 40% interest in the firm.

FINANCIAL ACCOUNTING
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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Karasuma and Irina are partners who have capitals of P6,000 and P4,800 and who share profits in the ratio of 3:2. Koro is admitted as a partner upon investing cash of P5,000, with profits to be shared equally. Assume that Koro is allowed a 40% interest in the firm. 1. What entries would be made in recording the investment if the asset revaluation method is used? 2. What entries would be made if the bonus method is used? 3. Which method will be preferred by Koro? How much will Koro gain by the use of this method?
Transcribed Image Text:Karasuma and Irina are partners who have capitals of P6,000 and P4,800 and who share profits in the ratio of 3:2. Koro is admitted as a partner upon investing cash of P5,000, with profits to be shared equally. Assume that Koro is allowed a 40% interest in the firm. 1. What entries would be made in recording the investment if the asset revaluation method is used? 2. What entries would be made if the bonus method is used? 3. Which method will be preferred by Koro? How much will Koro gain by the use of this method?
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