A partnership had the following condensed balance sheet:AssetsLiabilities and Capital5,00065,0005,000CashLiabilitiesNon-Cash AssetsCharlie, Loan15,00030,00010000Aron, Capital (50%)Ben, Capital (30%)Charlie, Capital (20%)Total20000Total75,00075,000The percentages in parenthesis after the partners' capital balances represent their respective interest in profits and losses. Thepartners agree to admit Dale as a member of the firm under the following independent situations.Situation 1 Dave purchases a 1/4 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner.Dave pays the partners P15,000 which is divided between them in proportion to the equities given up.Situation 2 Dave purchases a 1/4 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner.Dave pays the partners P20,000 which is divided between them in proportion to the equities given up. The assets of thepartnership are to be adjusted.Situation 3 Dave purchases a 1/4 interest in the Profit/Loss of the firm. One-fourth of the capital of Aron and Ben is to betransferred to the new partner. Dave pays Aron and Ben P15,000. The assets of the partnership are to be adjusted.Situation 4 Dave invests P25,000 for a 1/4 interest in the firm.4.1 Cash25,000Dave, Capital25,000To record Walk's investment in the partnership.Capital Accounts30k10k4.2AronBenCharlie20k25k85kDave4.3New P/L Ratio(100%-25%) x 50%(100%-25%) x 30%Charlie (100%-25%) x 20%Aron37.5%%3DBen22.5%15%Dave25%Situation 5 New Partner Dave conveyed a tangible asset with a fair value of P32,500 with an assumed mortgage of P5,000 inexchange for a 35% interest in capital. Dave would be acquiring a 1/4 interest in the profits of the partnership. The total agreedcapital after admission is P90,000Required:For each situation:1. Prepare the journal entries needed to record the admission of Dave.2. Compute for adjusted balances of all partners after the admission.3. Compute for new P/L ratio of all partners after the admission.

Admission of a partner - When a new partner gets admitted to the firm with the consent of all other…

Situation 1 Dave purchases a 14 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner. Dave pays the partners P15,000 which is divided between them in proportion to the equities given up.

Situation 1 Dave purchases a 14 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner. Dave pays the partners P15,000 which is divided between them in proportion to the equities given up.

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

A partnership had the following condensed balance sheet:
Assets
Liabilities and Capital
5,000
65,000
5,000
Cash
Liabilities
Non-Cash Assets
Charlie, Loan
15,000
30,000
10000
Aron, Capital (50%)
Ben, Capital (30%)
Charlie, Capital (20%)
Total
20000
Total
75,000
75,000
The percentages in parenthesis after the partners' capital balances represent their respective interest in profits and losses. The
partners agree to admit Dale as a member of the firm under the following independent situations.
Situation 1 Dave purchases a 1/4 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner.
Dave pays the partners P15,000 which is divided between them in proportion to the equities given up.
Situation 2 Dave purchases a 1/4 interest in the firm. One-fourth of each partner's capital is to be transferred to the new partner.
Dave pays the partners P20,000 which is divided between them in proportion to the equities given up. The assets of the
partnership are to be adjusted.
Situation 3 Dave purchases a 1/4 interest in the Profit/Loss of the firm. One-fourth of the capital of Aron and Ben is to be
transferred to the new partner. Dave pays Aron and Ben P15,000. The assets of the partnership are to be adjusted.
Situation 4 Dave invests P25,000 for a 1/4 interest in the firm.
4.1 Cash
25,000
Dave, Capital
25,000
To record Walk's investment in the partnership.
Capital Accounts
30k
10k
4.2
Aron
Ben
Charlie
20k
25k
85k
Dave
4.3
New P/L Ratio
(100%-25%) x 50%
(100%-25%) x 30%
Charlie (100%-25%) x 20%
Aron
37.5%
%3D
Ben
22.5%
15%
Dave
25%
Situation 5 New Partner Dave conveyed a tangible asset with a fair value of P32,500 with an assumed mortgage of P5,000 in
exchange for a 35% interest in capital. Dave would be acquiring a 1/4 interest in the profits of the partnership. The total agreed
capital after admission is P90,000
Required:
For each situation:
1. Prepare the journal entries needed to record the admission of Dave.
2. Compute for adjusted balances of all partners after the admission.
3. Compute for new P/L ratio of all partners after the admission.

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