Question
Problem No. 1 Assume that after operations and partners' withdrawals during 2018 and 2019. DE Partnerships has a book value of P 120,000 and a
Problem No. 1
Assume that after operations and partners' withdrawals during 2018 and 2019. DE Partnerships has a book value of P 120,000 and a profit and loss percentage on January 1, 2020 as follows:
Capital Balances P and L %
D P 72,000 70%
E 48,000 30%
Total P 120,000 100%
On this date, F is admitted to the partnership.
Required:
1. Prepare journal entries to record the admission of F, assuming:
a. Purchase of interest from one partner. F paid P 28,800 directly to D in exchange for 1/3 interest.
b. Purchase of interest from all partners. This situation gives rise to three assumptions:
1. Purchase at book value. F purchases a interest in the firm. One- fourth of each partner's capital is to be transferred to the new partner. F Pays the partners P 30,000.
2. Purchase at more than book value. F purchased of D's interest for P 21,600 and of E's interest for P 14,400, making payment directly to D and E. The new partner will have a profit and loss ratio and the old partners continue to use their old profit and loss ratio.
3. Purchase at less than book value.F purchased of D's interest by paying P 26,400 directly to D and E. the new partner will have a profit and loss ratio and the old partners continue to use their old profit and loss ratio.
2. What are the capital balances of the partners immediately after admission?
Problem No. 2
Phoenix and Tim Tucson are partners in electrical repair business. Their respective capital balances are P 90,000 and P 50,000, and they share profits and losses equally. Because the partners are confronted with personal financial problems, they decided to admit a new partner to the partnership. After an extensive interviewing process they elect to admit Don Dallas into the partnership.
Required: Prepare the journal entry to record the admission of Don Dallas into the Partnership under each of the following conditions:
1. Don acquires of Phoenix capital interest by paying P 30,000 directly to him.
2. Don acquires 1/5 of each partners' capital interest. Phoenix receives P 25,000 and Tim receives P 15,000 directly from Don.
3. Don acquires 1/5 capital interest for a P 60,000 cash investment in the partnership. The total capital after the admission is to be P 200,000.
4. Don invest P 40,000 for a 1/5 interest in partnership capital. Implicit goodwill is to be recorded.
Problem No. 3
Agler, Bates and Colter are partners who share income in a 5:3:2 ratio. Colter, whose capital balance is P 150,000, retires from the partnership.
Required: Determine the amount paid to Colter under each of the following cases:
1. P 50,000 is debited to Agler capital account, the bonus approach is used.
2. Goodwill (or revaluation of asset) of P 60,000 is recorded; the partial goodwill approach (or revaluation of specific asset is used) is used. P 66,000 is credited to Bates' capital account; the total goodwill is used.
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