Prepare the journal entries to record the following: 1. The admission of Pateno to be partnership on Jan. 2, 2019. 2. The income distribution for the year ended Dec. 31, 2019.
Prepare the journal entries to record the following: 1. The admission of Pateno to be partnership on Jan. 2, 2019. 2. The income distribution for the year ended Dec. 31, 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem #16
Admission by Investment and Division of Profits.
The condensed statement of financial position of Matuguinas and Sorima on Dec. 31, 2018, follows:
Matuguinas and Sorima
Statement of Financial Position
December 31, 2017
Assets
Current Assets P100,000
Plant Assets (net) 500,000
Total P600,000
Liabilities and Partner's Capital
Liabilities P300,000
Matuguinas, Capital 200,000
Sorima, Capital 100,000
Total P600,000
Matuguinas and Sorima shared profits or losses 40% and 60%, respectively. On Jan. 2, 2019, Pateno was admitted to the partnership by investing the net assets of her highly profitable proprietorship. The partners agreed to the following current fair values of the ust identifiable net assets of Pateno's proprietorship:
Current Assets P 70,000
Plant Assets 230,000
Total Assets P350,000
Less: Liabilities 200,000
Net Assets P100,000
Pateno's capital account was credited for P120,000. The partners agreed further that the current fair values of the net assets of Matuguinas and Sorima were equal to their carrying amounts and that the accounting records of the old partnership should be used for the new partnership.
The following partner-remuneration plan was adopted for the new partnership:
a. Salaries of P10,000 to Matuguinas, P15,000 to Sorima, and P20,000 to Pateno.
b. A bonus of 10% of income after salaries and bonus to Pateno.
c. Balance: 30% to Matuguinas, 40% to Sorima, and 30% to Pateno.
For the year ended Dec. 31, 2019, the profit of the partnership is P78,000 before salaries and bonus to Pateno.
Required: Prepare the journal entries to record the following:
1. The admission of Pateno to be partnership on Jan. 2, 2019.
2. The income distribution for the year ended Dec. 31, 2019.
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