Accounting for Partnership

The partnership of Red and White admits Blue as a partner on January 1, 20CY. The partnership has the following balances on December 31, 20PY:

Red and White Partnership

Balance Sheet December 31, 20PY

	Assets		Liabilities and Owners Equity
	Cash	P 450,000	Accounts Payable	P 2,500,000
	Other Assets	5,500,000	Red, Capital	2,250,000
			White, Capital	1,200,000
	Total Assets	P 5,950,000	Total Liabilities and Owners Equity	P 5,950,000

Profits and losses for Red is 60% and 40% for White, respectively.

Requirements:

1. Suppose Blue pays White P1,500,000 to buy out White. Red approves Blue as a partner.
   1. Record the transfer of equity on the partnership books on January 1, 20CY.
   2. Prepare the partnership balance sheet immediately after Blue is admitted as a partner.
2. Suppose Blue becomes a partner by investing P1,550,000 cash on January 1, 20CY to acquire a 1/4 interest in the business.
   1. Compute Blues capital balance, and determine whether theres any bonus. If so, who gets the bonus?
   2. Journalize Blues investment in the business.
   3. Prepare the partnership balance sheet immediately after Blue is admitted as a partner. Include the heading.
3. Assume that Red and White partnership liquidates by selling its other assets for P5,000,000. Prepare the entries to liquidate the partnership on January 1, 20CY.