The balance sheet for the partnership of Nina, Pinta, and Santa Maria at January 1, 2014 follows. The partners share profits and losses in theratio of 3:2:5, respectively.Assets at costP 480,000LiabilitiesP 135, 000Nina, Capital75, 000Pinta, Capital120, 000Santa Maria, Capital150,000P 480.000Nina is retiring from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P540, 000 at January 1, 2014.Pinta and Santa Maria agree that the partnership will pay Nina P135, 000 cash for her parlnership interest. There is no goodwill is to berecorded. What is the balance of Pinta's capital account after Nina's retirement?

Profit on revaluation of assets = Fair value - assets at cost = P540000 - 480000 = P60,000

Answered: The balance sheet for the partnership…

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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ces Gorman and Morton form a partnership on May 1, 2022. Gorman contributes cash of $73,000; Morton conveys title to the following properties to the partnership: Equipment Licensing agreements Book Value $ 26,500 46,500 Fair Value $51,000 59,000 The partners agree to start their partnership with equal capital balances. No goodwill is to be recognized. According to the articles of partnership written by the partners, profits and losses are allocated based on the following formula: Gorman receives a compensation allowance of $1,300 per month. All remaining profits and losses are split 40.60 between Gorman and Morton, respectively. Each partner can make annual cash drawings of $5,000 beginning in 2023. Net income of $22,500 is earned by the business during 2022. Steele is invited to join the partnership on January 1, 2023. Because of her business reputation and financial expertise, she is given a 40 percent interest for $77,000 cash. The bonus approach is used to record this investment,…
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