Problem #1 (Adapted)

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)?

Problem #2 (Adapted)

In a high school reunion, Tres met former classmate Uno and Dos. He learned that the two partners in a business of buying and selling general merchandise. While the business is profitable, it encounters occasional cash shortages due to growing investments in inventories and receivables. Tres was then invited to join the partnership of Uno and Dos by making a cash investment. At the time of his entry, the capital balances of Uno and Dos amounted to P40,000 and P200,000, respectively. They share profit and loss in the ratio of 6:4.

Required:

A. Prepare the journal entry to record the admission of Tresassuming:

1. He invested P300,000 for 1/3 interest in the partnership.

2. He invested P200,000 for a 20% interest in the partnership.

3. He invested P400,000 for a 50% interest in the partnership.

B. Determine the composition and the total partnership capital in each of the scenario in A.