On January 2018, Ri and Se-ri agreed to combine their skills and capital and form a partnership. Ri

contributed P20,000 Cash, Merchandise with a book value of P 12,000 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 P 15,000. All transactions of CLOY

are cash basis.

On December 31, 2018 before the books are closed, the drawing accounts of Ri shows a debit

balance of P7,000 and for Se-ri, debit balance of P6,000. The balances 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 of 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% and Seo-Dan, 40%. Salaries are not allowed.

On December 31,2019, the partners' drawing account have debit balances as follows: Ri, P4,900; Seri

,P3,900 and Seo-Dan, P4,200. The income summary account has a debit balance of P12,000.

Accounts are closed.

YEAR 2020

On January 1, 2020, the partners decide 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:

1. Prepare the journal entry to record the initial investment of the partnership. (5 points)

2. Prepare the Statement of Changes in Partner's Equity for Years 2018 & 2019. (5 points)

3. Prepare the journal entry to record the admission of Seo-Dan

4. Prepare the Statement of Liquidation