Nagisa and Karma are partners in an electrical repair business. Their respective capital balances are P90,000 and P50,000, and they share profits and losses equally. Because the partners are confronted with personal financial problems, they decided to admit a new partner to the partnership. After an extensive interviewing process, they elect to admit Isogai into the partnership.Required: Prepare the journal entry to record the admission of Isogai into the partnership under each of the following conditions:Isogai acquires one-fourth of Nagisa’s capital interest by paying P30,000 directly to him.Isogai acquires one-fifth of each of Nagisa’s and Karma’s capital interests. Nagisa receives P25,000 and Karma receives P15,000 directly from Isogai.Isogai acquires a one-fifth capital interest for a P60,000 cash investment in the partnership. Total capital after the admission is to be P200,000.Isogai invests P40,000 for a one-fifth interest in partnership capital. Revaluation method was used and other assets are to be recognized (use “Other Assets”).

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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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Nagisa and Karma are partners in an electrical repair business. Their respective capital balances are P90,000 and P50,000, and they share profits and losses equally. Because the partners are confronted with personal financial problems, they decided to admit a new partner to the partnership. After an extensive interviewing process, they elect to admit Isogai into the partnership.

Required: Prepare the journal entry to record the admission of Isogai into the partnership under each of the following conditions:

Isogai acquires one-fourth of Nagisa’s capital interest by paying P30,000 directly to him.
Isogai acquires one-fifth of each of Nagisa’s and Karma’s capital interests. Nagisa receives P25,000 and Karma receives P15,000 directly from Isogai.
Isogai acquires a one-fifth capital interest for a P60,000 cash investment in the partnership. Total capital after the admission is to be P200,000.
Isogai invests P40,000 for a one-fifth interest in partnership capital. Revaluation method was used and other assets are to be recognized (use “Other Assets”).

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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