Admission of a new partner -Purchase of interest vs. Investment 1. A&B Partnership admits C as a new partner. The partnership statement of financial position immediately before the admission of C is shown below: Cash 26,000 Accounts Receivable 120,000 Inventory 180,000 Total Assets Accounts Payable 62,000 326,000 A, Capital (60% interest in P/L) 170,000 B, Capital (40% interest in P/L) 94,000 Total Liabilities and Equity 326,000 The following adjustments are determined: a. The recoverable amount of the accounts receivable is P116,400. b. A P25,000 recovery of a previous write-down on the inventory should be recognized. c. Prepaid assets as P3,600 and accrued liabilities of P4,000 should be recognized. Case #1: C acquires half of B's interest for P100,000 Requirements: a. Provide the entry to record the admission of C. b. Determine the balances of the partners' capital accounts following the admission of C. C. Determine the profit or loss sharing ratio of the partners after the admission of C. Case #2: Cinvests P71,250 cash to the partnership in exchange for a 20% interest. Scenario A: C's capital account is credited for the fair value of the 20% interest he acquired. Requirements: a. Provide the Journal entry to record the admission of C. b. Compute for the capital balances of the partners following the admission of C. c. Determine the profit or loss sharing ratio of the partners after the admission of C