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.Required:Assume that Koro is allowed a 25% interest in the firm.What entries would be made in recording the investment if the asset revaluation method is used?What entries would be made if the bonus method is used?Which method will be preferred by Koro? How much will Koro gain by the use of this method?

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Answered: Karasuma and Irina are partners who…

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.

Required:

Assume that Koro is allowed a 25% 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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