A partnership had the following condensed balance sheet: Assets Liabilities and Capital Cash - 15,000 Liabilities - 45,000 Non-cash assets - 195,000 Aron, capital (50%) - 90,000 Charlie, loan - 15,000 Ben, capital (30%) - 30,000 Charlie, capital(20%) 60,000 Total - 225,000 Total - 225,000 The percentages in parenthesis after the partners’ capital balances represent their respective interests in profits and losses. The partners agree to admit Dale as a member of the firm under the following independent situations. From the following, prepare the journal entries needed to record the admission of Dave and the capital balances of the partners in the new partnership. Situation 1. Dave purchases a 1⁄4 interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner. Dave pays the partners P________ which is divided between them in proportion to the equities given up. Situation 2. Dave purchases a 1⁄4 interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner. Dave pays the partners P60,000, which is divided between them in proportion to the equities given up. The assets of the partnership are to be adjusted. Situation 3. Dave purchases a 1⁄4 interest in the firm. One-fourth of the capital of Aron and Ben is to be transferred to the new partner. Dave pays Aron and Ben P45,000. The assets of the partnership are to be adjusted.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
A partnership had the following condensed balance sheet:
Assets Liabilities and Capital
Cash - 15,000 Liabilities - 45,000
Non-cash assets - 195,000 Aron, capital (50%) - 90,000
Charlie, loan - 15,000 Ben, capital (30%) - 30,000
Charlie, capital(20%) 60,000
Total - 225,000 Total - 225,000
The percentages in parenthesis after the partners’ capital balances represent their respective interests in
Situation 1. Dave purchases a 1⁄4 interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner. Dave pays the partners P________ which is divided between them in proportion to the equities given up.
Situation 2. Dave purchases a 1⁄4 interest in the firm. One-fourth of each partner’s capital is to be transferred to the new partner. Dave pays the partners P60,000, which is divided between them in proportion to the equities given up. The assets of the partnership are to be adjusted.
Situation 3. Dave purchases a 1⁄4 interest in the firm. One-fourth of the capital of Aron and Ben is to be transferred to the new partner. Dave pays Aron and Ben P45,000. The assets of the partnership are to be adjusted.
Situation 4. Dave invests P75,000 for a 1⁄4 interest in the firm.
Situation 5. New partner Dave conveyed a tangible asset with fair value of P82,500 with an assumed mortgage of P15,000 in exchange for a 35% interest in capital. Dave would be acquiring a 1⁄4 interest in the profits of the partnership. The total agreed capital after admission is P270,000. The partnership will pay the mortgage.
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