this about partnership
Self-Check Exercise: Instructions: Answer the following based on your understanding from your study of Module 2 Topic 1. Case 1 The net assets of AB partnership consist of P1 capital balance of A and P1 capital balance of B. The net assets approximate fair value. Partners A and B have equal interest in the partnership. Are the following statements true or false? If false, make it true. 1. If C invests in the partnership for a 1/3 interest, C shall invest P1. 2. If C invests in the partnership for a 20% interest, the interest of A after C's admission will be decreased to 30%. 3. If C invests P1 to the partnership for 1/3 interest, the entry to record C's admission will be a debit to cash and a credit to C's capital balance. Case 2 Partner A retires from ABC Partnership and receive P100 as full settlement of his capital account with a balance of P120. Immediately before the retirement of A, the partnership net assets is P1,000, equal to fair value. Are the following statements true or false? If false, make it true. 1. If Partner A's capital balance was paid by Partner B, the partnership net assets after A's retirement would be P1,000. 2. If Partner A's capital balance was paid by the partnership, the partnership net assets after A's retirement would be P880. Admission of a new partner- Purchase of interest vs. Investment 1. A&B Partnership admits C as a new partner. The partnership statement of financial position immediately before the admission of C is shown below: Cash 26,000 Accounts Receivable 120,000 Inventory 180,000 Total Assets Accounts Payable 62,000 326,000 A, Capital (60% interest in P/L) 170,000 B, Capital (40% interest in P/L) 94,000 Total Liabilities and Equity 326,000 The following adjustments are determined: a. The recoverable amount of the accounts receivable is P1 16,400. b. A P25,000 recovery of a previous write-down on the inventory should be recognized. c. Prepaid assets as P3,600 and accrued liabilities of P4,000 should be recognized. Case #1: C acquires half of B's interest for P100,000 Requirements: a. Provide the entry to record the admission of C. b. Determine the balances of the partners' capital accounts following the admission of C. c. Determine the profit or loss sharing ratio of the partners after the admission of C. Case #2: C invests P71,250 cash to the partnership in exchange for a 20% interest. Scenario A: C's capital account is credited for the fair value of the 20% interest he acquired. Requirements: a. Provide the Journal entry to record the admission of C. b. Compute for the capital balances of the partners following the admission of C. c. Determine the profit or loss sharing ratio of the partners after the admission of C. Scenario B: C's capital account is credited for P100,000. Requirements: a. Provide the journal entry to record the admission of C. b. Compute for the capital balances of the partners following the admission of C. Case #3: If Partner C is ti invest sufficient cash to obtain 2/5 interest in the partnership, how much would Partner C contribute to the new partnership
