The following are the capital account balances and the profit and loss sharing ratio of the partners of MTR Motors Company on December 31, 2019: M (25%) 60,000; T (50%) 80,000; and R (25%) 200,000. On January 1, 2020, L is admitted as a new partner under the following agreement: L is to share 1/3 in the profits and losses while the other partners will continue to share in the P/L in their original ratio. L is to pay T 24,000 for a ¼ interest to the latter’s equity in the partnership and is to invest 140,000 cash in the partnership. L’s capital account after the admission is to show 150,000 and the total capital of the new partnership is 520,000. Requirements: 1. Compute for the respective partner’s capital account balances after the admission of L. 2. Compute for the new P/L ratio of the partners in the new partnership.
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.
The following are the capital account balances and the
On January 1, 2020, L is admitted as a new partner under the following agreement:
L is to share 1/3 in the profits and losses while the other partners will continue to share in the P/L in their original ratio.
L is to pay T 24,000 for a ¼ interest to the latter’s equity in the
L’s capital account after the admission is to show 150,000 and the total capital of the new partnership is 520,000.
Requirements:
1. Compute for the respective partner’s capital account balances after the admission of L.
2. Compute for the new P/L ratio of the partners in the new partnership.
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