M and N admits O as a new partner. The partnership statement of financial position immediately before the admission of C is shown below: Cash 28,000 Accounts Payable 65,000 Accounts Receivable 118,000 M, Capital (70%) 172,000 Inventory 187,000 N, Capital (30%) 96,000 Total Assets 333,000 Total Liabilities & Equity 333,000 The following adjustments are determined: a. The recoverable amount of the account receivable is P117,401. b. A P30,000 recovery of a previous write-down on the inventory should be recognized. c. Prepaid assets of P 4,600 and accrued liabilities of P 6,000 should be recognized. Case # 1: O acquires half of N’s interest for P 120,000. Case # 2: O invests P 81,250 cash to the partnership in exchange for a 25% interest. Case # 2, Scenario A: O’s capital account is credited for the fair value of the 25% interest he acquired. Case # 2, Scenario B: O’s capital account is credited for P 100,000.
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.
M and N admits O as a new partner. The
admission of C is shown below:
Cash 28,000 Accounts Payable 65,000
Inventory 187,000 N, Capital (30%) 96,000
Total Assets 333,000 Total Liabilities & Equity 333,000
The following adjustments are determined:
a. The recoverable amount of the account receivable is P117,401.
b. A P30,000 recovery of a previous write-down on the inventory should be recognized.
c. Prepaid assets of P 4,600 and accrued liabilities of P 6,000 should be recognized.
Case # 1: O acquires half of N’s interest for P 120,000.
Case # 2: O invests P 81,250 cash to the partnership in exchange for a 25% interest.
Case # 2, Scenario A: O’s capital account is credited for the fair value of the 25% interest he acquired.
Case # 2, Scenario B: O’s capital account is credited for P 100,000.
19. Under Case # 2, Scenario A: how much is the balance of M's capital account after O's admission?
a. P 193,601.8
b. P 192,600.7
c. P 193,600.8
d. P 191,600.7
20. Under Case # 2, Scenario B: how much is the balance of N's capital account after O's admission?
a. P 98,776.3
b. P 98,777.3
c. P 99,777.3
d. P 98,775.3
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