MISSION OF A PARTNER BY INVESTMENT
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:d. Diana was admitted to the firm by paying P1,500,000 for ½ of Benedict's
equity after asset revaluation increase of P1,000,000.
e. Diana was admitted to the firm by purchasing 50% of Benedict's equity for
P1,000,000 after asset revaluation.
III. ADMISSION OF A PARTNER BY INVESTMENT
Use the following information for questions 1-2:
Carley and Kingman are partners who share income and losses in the ratio of 3:2, respectively.
On August 31, their capital balances were: Carley, P175,000 and Kingman, P150,000. On that
date, they agree to admit Lerner as a partner with a one-third capital interest.
1. If Lerner invests P125,000 in the partnership, what is Carley's capital balance after Lerner's
admittance?
2. If Lerner invests P200,000 in the partnership, what is Kingman's capital balance after Lerner's
admittance?
3. King and Nott are partners who share profits and losses equally and have capital balances of
P560,000 and P490,000, respectively. Starr is admitted into the partnership by investing
P490,000 for 30% capital interest. The account balance of Nott, Capital after the admission of
Starr would be
4. Hill and Eddy share partnership profits and losses in the ratio of 6:4. Hill's Capital account
balance is P320,000 and Eddy's Capital account balance is P200,000. Porter is admitted to the
partnership by investing P360,000 and is to receive a one-fourth ownership interest. Hill, Eddy
and Porter's capital balances after Porter's investment will be
and
5.
Judy and Deb have partnership capital account balances of P600,000 and P450,000,
respectively and share profits and losses equally. Anne is admitted to the partnership by
investing P250,000 for a one-fourth ownership interest. The balance of Deb's Capital account
after Anne is admitted is
2/2
:::
Transcribed Image Text:I. ADMISSION OF A PARTNER BY PURCHASE. Allan and Belen are partners
in a trading business and share profits in the ratio of 40% and 60% respectively.
Their capital balances as of December 31, 2020 were P1,200,000 and
P1,800,000 respectively. Calvin was admitted as a new partner upon payment of
P2,000,000 for a 50% interest from Belen on July 1, 2021. The records show that
net income for the first half of the year was P5,000,000 and the drawing accounts
of the partners showed regular monthly drawings of P30,000 each. The partners
further agreed to revalue the land by P3,000,000 but the building with a book
value of P8,000,000 has only a market value of P6,000,000.
Required:
a. Update the capital accounts for the revaluation of the assets and the profit
share of each partner.
b. Close the drawing accounts.
c. Determine the updated capital accounts.
d. Prepare the entry to record the admission of Calvin.
e. Prepare a revised partners' equity.
II. ADMISSION OF A PARTNER BY PURCHASE. Agnes, Benedict and Celine
are partners in an accounting firm with capital balances of P2,480,000,
P1,800,000 and P1,720,000 respectively. They share profit and loss in the ratio
of 50%, 25% and 25% respectively.
Prepare the necessary entries and revise the partners' equity in each of the
following independent cases:
a. Diana purchased 25% from Agnes by paying cash of P750,000.
b. Diana gave her car costing P3,500,000 but with a market value of P2,000,000
in exchange for a 25% interest from them.
c. Diana was admitted to the firm by paying P850,000 for a 20% interest from
Agnes after the firm's assets were revalued to P7,500,000.
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