On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the following data with profit or loss ratio of 1:6:3: Current Assets Noncurrent Assets 1,000,000 2,000,000 Total Liabilities A, Capital B, Capital C. Capital 600,000 900,000 800,000 700,000 On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of B at a price of P500,000. What is the capital balance of B after the admission of D on January 1, 2021? a. 540,000 b. 480,000 c. 420,000 d. 300,000

On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the following data with profit or loss ratio of 1:6:3: Current Assets Noncurrent Assets 1,000,000 2,000,000 Total Liabilities A, Capital B, Capital C. Capital 600,000 900,000 800,000 700,000 On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of B at a price of P500,000. What is the capital balance of B after the admission of D on January 1, 2021? a. 540,000 b. 480,000 c. 420,000 d. 300,000

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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Concept explainers

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.

Question

On December 31, 2020, the Statement of Financial Position of ABC Partnership provided the
following data with profit or loss ratio of 1:6:3:
Current Assets
Noncurrent Assets
1,000,000
2,000,000
Total Liabilities
A, Capital
B, Capital
C. Capital
600,000
900,000
800,000
700,000
On January 1, 2021, D is admitted to the partnership by purchasing 40% of the capital interest of B
at a price of P500,000.
•
What is the capital balance of B after the admission of D on January 1, 2021?
a. 540,000
b. 480,000
c. 420,000
d. 300,000

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