Year 2018 On January 2018, Ri and Se-ri agreeed to combine their skills and capital and form a partnership. Ri contributes P20,000 Cash, Merchandise with a book value of P12,000 and a fair value of P10,000 and Equipment with a net book value of P32,000 and fair value of P20,000. Se-ri gave P15,000 Cash and Merchandise with a book value of P24,000 and a fair value of P15,000. All transactions of CLOY are cash basis. On December 31, 2018 before books are closed, the drawing accounts of Ri shows a debit balance of P7,000 and for Se-ri, a debit balance of P6,000. The balance of the drawing accounts are closed to capital accounts. The partnership agreement with regards to division of profits and losses provides that each partner is To be allowed an annual salary od P10,000 each Ri is to receive 65% and Se-ri 35% of the balance after allowance of salaries The partnership has the following information bringing the income summary balance account a credit of P28,000 before any entry for the allowance of salaries and this balance is closed directly to the partner's capital account. Sales 100,000.00 Purchases 40,000.00 Merchandise Inventory, 1/1/2018 25,000.00 Merchandise Inventory, 12/31/2018 23,000.00 Distribution Cost 18,000.00 Administrative Expenses 12,000.00 Year 2019 On January 2, 2019, Seo-Dan is admitted as a partner upon the investment of P40,000 in the firm. Ri and Se-ri sharing in the ratio 65:35 gave a bonus to Seo-Dan so that she may have a 40% interest in the firm. The new agreement provides that profits and losses are to be distributed as follows: Ri, 35% ; Se-ri, 25% ; Seo-Dan, 40%. Salaries are not allowed. Year 2020 On January 1, 2020, the partners decided to liquidate. The assets are realized on a lump sum basis. Cash realized from the sale of non-cash assets is P50,000. Partners Ri & Se-ri are solvent partners while partner Seo-Dan is insolvent. Required: Prepare the journal entry to record the intial investment of the partnership Prepare the Staement of Changes in Partner's Equity for Years 2018 and 2019 Prepare journal entry to record the admission of Seo-Dan Prepare Statement of Liquidation
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.
Year 2018
On January 2018, Ri and Se-ri agreeed to combine their skills and capital and form a partnership. Ri contributes P20,000 Cash, Merchandise with a book value of P12,000 and a fair value of P10,000 and Equipment with a net book value of P32,000 and fair value of P20,000. Se-ri gave P15,000 Cash and Merchandise with a book value of P24,000 and a fair value of P15,000. All transactions of CLOY are cash basis.
On December 31, 2018 before books are closed, the drawing accounts of Ri shows a debit balance of P7,000 and for Se-ri, a debit balance of P6,000. The balance of the drawing accounts are closed to capital accounts.
The partnership agreement with regards to division of
- To be allowed an annual salary od P10,000 each
- Ri is to receive 65% and Se-ri 35% of the balance after allowance of salaries
The partnership has the following information bringing the income summary balance account a credit of P28,000 before any entry for the allowance of salaries and this balance is closed directly to the partner's capital account.
| Sales | 100,000.00 |
| Purchases | 40,000.00 |
| Merchandise Inventory, 1/1/2018 | 25,000.00 |
| Merchandise Inventory, 12/31/2018 | 23,000.00 |
| Distribution Cost | 18,000.00 |
| Administrative Expenses | 12,000.00 |
Year 2019
On January 2, 2019, Seo-Dan is admitted as a partner upon the investment of P40,000 in the firm. Ri and Se-ri sharing in the ratio 65:35 gave a bonus to Seo-Dan so that she may have a 40% interest in the firm. The new agreement provides that profits and losses are to be distributed as follows: Ri, 35% ; Se-ri, 25% ; Seo-Dan, 40%. Salaries are not allowed.
Year 2020
On January 1, 2020, the partners decided to liquidate. The assets are realized on a lump sum basis. Cash realized from the sale of non-cash assets is P50,000. Partners Ri & Se-ri are solvent partners while partner Seo-Dan is insolvent.
Required:
- Prepare the
journal entry to record the intial investment of the partnership - Prepare the Staement of Changes in Partner's Equity for Years 2018 and 2019
- Prepare journal entry to record the admission of Seo-Dan
- Prepare Statement of Liquidation
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