Jack and Jill are partners who share profit or loss in the ratio of 3:2. They have capital balance of P200,000 and P300,000, respectively. Jill needed money and made known to Jack her intention to withdraw part of her capital in the partnership. However, much of the partnership funds are tied-up in accounts receivables and inventories and Jack suggested that she just sell the interest of her to Hill, a common friend. Hill agrees to purchase of Jills interest for P170,000.

Required:

A. Prepare journal entry in the books of partnership to record the admission of Hill.

B. Determine the composition and total partnership capital after admission of Hill.

C. Does it necessarily follow that Hill will have 20% share in the profit or loss (1/2 of the share of Jill)?

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