Assume the following data on January 1, 2019 for KLM Partnership had the following condensed balance sheet:

Assets Liabilities and Capital

Cash P60,000 Liabilities P12,000 Non-cash assets 48,000 K, Capital (30%) 36,000 Loans receivable K 6,000 L, Capital (50%) 48,000 M, Capital (20%) 18,000 Total P114,000 P114,000

The percentages in parentheses after partners capital balances represent their respective interests in profits and losses. On May 1, 2019, K retires from the partnership. The net income of the partnership to date of retirement amounted to P24,000. The partnership paid cash to the retiring partner also on retirement date.

Required:

1. Determine the total interest of K, L and M immediately before the retirement of K.
2. Prepare journal entries to record the retirement of K, assuming:

1. Payment at book value. The partnership paid K, P37,500.
2. Payment at more than book value. The partnership paid K, P42,000. Included in the non-cash assets is an inventory costing P7,200 with a fair value of P12,000. The remaining partners continue to use their old profit and loss ratio. (Hint: Record first the adjustment to capital balances on the fair value measurement of inventory)

b.1 Bonus method

b.2 Asset revaluation method (Total revaluation)

c. Payment at less than book value. The partnership paid K, P31,200.

c.1 Bonus method c.2 Asset revaluation method (Total revaluation)