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Friendship into Partnership: Business Case of Rosario's Dress Shop After careful consideration of each mode of acquiring additional financing, the partners agreed that a mixture of both is optimal. Hence, on March 1 , 2023 of the partnership's second year of operations, the partnership borrowed P150,000 from the bank at 10% interest per annum. Interests is payable on every anniversary of the loan. The face value/full contracted amount of loan is payable in three years. Effective July 1 of the same year, the partners also agreed to admit Rena and Martha to the partnership. The two were admitted as they can provide additional expertise in the field of designing. The two were also graduates of College of Saint Benilde and Harvard Graduate School of Design making them earn the trust of the partners and formidable forces to reckon with to sustain the partnership's growth. The new partnership will be named: "Rosario, Marie \& Partners Tailoring Services, Ltd." Due to the admission of new partners, the old partnership was dissolved. Therefore, it is necessary to draft another Articles of Co-Partnership and perform the necessary regulatory compliance procedures. In doing so, the partnership once again sought the assistance of a legal professional firm. Among all others, the partnership agreement provides for the following profit or loss allocation scheme: - The sharing scheme between the original partners will be carried forward to the new partnership. - New partners must contribute a sum of cash that would give each of them a 10% interest in the partnership capital - Annual salaries of P50,000 each will be given to the new partners. - Remaining profits or loss shall be allocated based on each partner's capital interest ratio. On July 3, the partnership entered into a lease agreement with a lessor for an office space to accommodate additional personnel. In addition, the partnership purchased the following assets pursuant to its objective to expand servicing capacity: 14 PARTNERSHIP DISSOLUTION Details of the partnerships results of operations during the year, as audited by external auditors, are as follows: January1toJune30July1toDecember31P212,800428,900 The external auditors also examined each of the partner's capital account. The external auditor reported the cash transactions of the original partners with the partnership below. The new partners, as reported by the external auditors, have no cash investment/withdrawal during the year since their admission. By year-end, Martha received an invitation to further her studies abroad. As such, the partners unanimously decide to accept her withdrawal from the partnership effective as of year-end. Martha received an amount equal to her capital account as of withdrawal date. As unanimously agreed by all partners, the terms of the partnership agreement will be retained except for the amendments necessary to affect the withdrawal of Martha. PARTNERSHIP DISSOLUTION 115 1. Compute for the share in net income of each partner prior to admission of the new partners. 2. How much were the adjusted capital balance of the original partners prior to admission of Rena and Martha? 3. How much should each be contributed by Rena and Martha upon their admission? 4. How will this additional investment be recorded in the partnership's books? 5. Please prepare share in profit or loss schedule for the year ended 2023. 6. How much is the ending capital balance of each partners for the year ended 2023? 7. Suppose Rena and Martha would purchase interest instead of investing additional cash. How much should each of them pay and how will this be recorded in the partnership's books? 8. How much was the settlement to the withdrawing partner? Ignore no. 7 above. PARTNERSHIP DISSOLUTION