EXERCISES
4-1.
Allyna and Allysa are partners with capital balances of P 480,000 and P 240,000. Their profit
and loss agreement is 75% and 25%, respectively. They agree to admit Aldrick as a partner of
firm.
Give the required journal entries to record the admission of Aldrick under each of the following
independent cases:
1. Aldrick purchases 25% interest in the firm. Aldrick pays the partners P 180,000
Allyna:
400,000 x 25% = 120,000
Allysa:
240,000 x 25% = 60,000
180,000
Allyna, Capital
Allysa, Capital
Aldrick, Capital
P 120,000
P 60,000
P 180,000
2. Aldrick purchases a 1/3 interest in the firm. Aldrick pays the partners P 360,000. Asset
revaluation is undertaken before Aldrick’s admission so that his 1/3 interest will be equal to
the amount of his payment.
New PC = 1,080,000
Allyna:
360,000 x 75% = 270,000
720,000
Allysa:
360,000 x 25% = 90,000
360,000
Other Assets
Allyna, Capital
Allysa, Capital
\
P 360,000
P 270,000
P 90,000
Allyna
480,000
270,000
750,000
X1/3
P 250,000
Aldrick
Allysa
240,000
90,000
330,000
X1/3
P 110,000
TOTAL
720,000
360,000
1,080,000
X1/3
P 360,000
\
Allyna, Capital
Allysa, Capital
Aldrick, Capital
P 250,000
P 110,000
P 360,000
3. Aldrick invests P 360,000 for a 25% interest in the firm. Asset revaluation is recorded on the
firm books prior to Aldrick’s admission.
OP Capital= 720,000
P&L= 75:25
AC=360,000/ 25% = 1,440,000
Allyna:
AC
1,080,000
360,000
P 1,440,000
360,000 x 75% = P 270,000
Allysa:
360,000 x 25% = P 90,000
75%
25%
OP
NP
Other Assets
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
CC
720,000
360,000
P 1,080,000
AR= 360,000
NO BONUS
360,000
P 360,000
P 360,000
P 270,000
P 90,000
P 360,000
4. Aldrick invests P 360,000 for a ½ interest in the firm. Allyna and Allysa transfer part of their
capital to Aldrick as bonus.
Bonus Method: AC= CC
AC
1/2
OP
540,000
1/2
NP
540,000
P 1,080,000
Allyna: 180,000 x 75% = (P 135,000)
Allysa:
CC
720,000
360,000
P 1,080,000
AR= (180,000)
BONUS= 180,000
180,000 x 25% = (P 45,000)
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
P 360,000
P 135,000
P 45,000
P 540,000
5. Aldrick invests P 480,000 in the firm. Bonus of P 120,000 is considered to partners Allyna
and Allysa.
\Allyna: 120,000 x 75% = P 90,000
Allysa: 120,000 x 25% = P 30,000
Investment
Bonus
AC NP
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
480,000
(120,000)
360,000
P 480,000
P 90,000
P 30,000
P 360,000
6. Aldrick invests P 480,000 in the firm with P 20,000 bonus allowed to Allysa and Allyna upon
his admission.
Allyna:
20,000 x 75% = P 15,000
Allysa:
20,000 x 25% = P 5,000
Investment
Bonus
AC NP
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
480,000
(20,000)
460,000
P 480,000
P 15,000
P 5,000
P 460,000
7. Aldrick invests P 300,000 for a ¼ interest in the firm. Total capital of the new partnership is
P 1.020,000.
AC
CC
3/4
OP
765,000
720,000
1/4
NP
255,000
300,000
BONUS= 45,000
P 1,020,000
P 1,020,000
Allyna: 45,000 x 75% = P 33,750
Allysa:
45,000 x 25% = P 11,250
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
P 480,000
P 33,750
P 11,250
P 255,000
8. Aldrick invests P 330,000 for a 25% interest in the firm. The total firm capital after his
admission is P 1,320,000.
AC
CC
75%
OP
990,000
720,000
AR= 270,000
25%
NP
330,000
330,000
NO BONUS
P 1,320,000
P 1,050,000
Allyna: 270,000 x 75% = P 202,500
Allysa:
270,000 x 25% = P 67,500
Cash
Other Assets
Allyna, Capital
Allysa, Capital
Aldrick, Captal
P 330,000
P 270,000
P 330,000
P 202,500
P 67,500
9. Aldrick invests P 288,000 for a 1/3 interest in the firm. The total firm capital after his
admission is P 1,008,000.
Allyna:
AC
672,000
336,000
P 1,008,000
(48,000) x 75% = (P 36,000)
Allysa:
(48,000) x 25% = (P 12,000)
2/3
1/3
OP
NP
Cash
Allyna, Capital
Allysa, Capital
Aldrick, Captal
CC
720,000
288,000
P 1,008,000
(48,000)
BONUS= 48,000
P 288,000
P 36,000
P 12,000
P 336,500
10. Aldrick invests sufficient cash for a 1/5 interest in the firm.
AC = OP CC / Interest share
AC = 720,000 / 4/5 = 900,000
NP CC = 900,000 x 1/5 = 180,000
Cash
Aldrick, Capital
4-2.
P 180,000
P 180,000
Partners Lakers and Celtics are considering the admission of Knicks into the partnership.
Lakers and Celtics share profit and loss in the ratio of 2:4, respectively. Capital balances of
Lakers and Celtics are P 240,000 and P 180,000 respectively.
Prepare journal entries to record the admission of Knicks under each of the following
independent assumptions:
1. Knicks acquired one-third of the interest of Lakers paying P 80,000.
Lakers, Capital
Knicks, Capital
Lakers: 240,000 / 3 = 80,000
P 80,000
2. Knicks acquired one-third of the interest of Celtics paying P 35,000.
Celtics, Capital
P 60,000
Knicks, Capital
Celtics: 180,000 / 3 = 80,000
P 80,000
P 60,000
3. Knicks buys a 25% interest in the partnership from the old partners paying each P63,000.
Asset revaluation has to be considered prior to the admission of Knicks.
63,000 x 2 = 126,000 / 25%= 504,000 (NPC)
(420,000) (OPC)
84,000
Lakers:
84,000 x 2/6 = P 28,000
Celtics:
84,000 x 4/6 = P 56,000
P 84,000
A.
Other Assets
Lakers, Capital
Knicks, Capital
P 84,000
P 28,000
P 56,000
Lakers
240,000
28,000
268,000
x25%
P 67,000
Add
Knicks
Celtics
180,000
56,000
236,000
x25%
P 59,000
TOTAL
420,000
84,000
504,000
x25%
P 126,000
B.
Lakers, Capital
Celtics, Capital
Knicks, Capital
P 67,000
P 59,000
P 126,000
4-3.
Utah, Atlanta, and Detroit have capital balances of P 150,000, P 200,000, and P
300,000,
respectively and they share profits and losses in the ration of 4:3:3. Miami purchases
15% interest in equity and profits from the partners for P 150,000.
a) What would be the new capital balance of Utah, Atlanta, and Detroit after the
admission of Miami?
Utah _____________ Atlanta ________________ Detroit ________________
b) Assume that some of the assets of the partnership are undervalued, how much is the
undervaluation in assets? _______________________
4.4.
On August 1, 2020, prior to the admission of Grant, E and F Enterprises have the following
account balances:
Cash
Accounts Receivable
Allowance for Bad Debts
Merchandise Inventory
Equipment - net
Accounts Payable
Erving, Capital
Fisher, Capital
P 30,000
400,000
36,000
110,000
134,000
38,000
300,000
300,000
Erving and Fisher share profit and loss on 1:1 ratio. Before the admission of Grant, the partners agree
on the following adjustments to bring the assets and liabilities to their fair values:
a) The allowance for Bad Debts should be brought to 10% of the outstanding accounts receivable.
The current market value of the merchandise inventory is P 140,000.
Accounts Receivable
Multiply by
Allowance for bad debts
Erving, Capital
Fisher, Capital
Allowance for Bad Debts
Merchandise Inventory, beg
Adjustment
Merchandise Inventory, agreed value
Merchandise Inventory
Erving, Capital
Fisher, Capital
P 400,000
10%
P 40,000
DR
2,000
2,000
CR
4,000
P110, 000
30, 000
P140, 000
30,000
15,000
15,000
b) Accrued expenses of P 4,000 should be recognized in the accounting records.
DR
2,000
2,000
Erving, Capital
Fisher, Capital
Expenses Payable
CR
4,000
c) If Grant purchases 50% of Erving’s capital at its adjusted carrying value, how much is the total
assets of the partnership just after the admission of Grant?
Cash
Accounts Receivable
Allowance for Bad debts
Merchandise Inventory
Equipment-net
Total Assets
P
30,000
400,000
(60,000)
140,000
134,000
P 664,000
d) If Grant is admitted into the partnership upon his investment of P 400,000 for 2/5 interest in
capital and profit, what is the total capital of the partnership just after the admission of Grant?
Grant, Capital
Divided by Interest Share
Total Capital
4-5.
P
400,000
2/5
P 1,000,000
Jake desires to invest P 200,000 for ¼ capital and profit and loss interest in the partnership of
Kim, and Lim, who at that time had capital balances of P 200,000 and P300,000, respectively.
Profit and loss ratio of the partners before the admission was 6:4. If a positive asset revaluation
is to be recorded, what are the capital balances of Kim, Lim, and Jake?
AC
CC
Asset Revaluation
¾ OP
¼ NP
Total
P 600,000
P 500,000
P 200,000
P 800,000
P 200,000
P 700,000
Other Assets
Kim, Capital
Lim, Capital
100,000
Cash
200,000
Jake, Capital
Kim: P100,000 x 6/10= P60,000
Lim: P100,000 x 4/10= P40,000
60,000
40,000
200,000
Kim ____P 260,000________ Lim ___P 340,000_______ Jake ___P 200,000______
4-6.
Pierce, Allen, and Rondo are partners with capital account balances at year-end of P90,000; P
110,000; and P 50,000, respectively. The partnership profit for the year is P 110,000.
a) They share profits and losses on a 4:4:2 ratio, after considering the following terms:
Interest of 10% shall be paid on that portion of a partner’s capital in excess of P100,000.
b) Salaries of P 10,000 and P 12,000 shall be paid to Pierce and Rondo, respectively.
c) Rondo is to receive a bonus of 10% of profit after bonus
How much is the total profit share of each partner?
Pierce _P 40 800______ Allen ___P 31,800______ Rondo ___P 37,400__________
Pierce
Interest
(110,000-100,000) x.10
Salaries
Bonus
Rondo
P 1,000
P 10,000
B= 10%(110,000-B)
B=11,000-.10B
B+.10B=11,000
1.10B=11,000
B= P 10,000
Remainder
77,000 x 4/10
77,000 x 2/10
Total
4-7.
Allen
P 30,800
P 40,800
Total
P 1,000
P 12,000
P 10,000
P 22,000
P 10,000
P 15,400
P 37,400
P 77,000
P 110,000
P 30,800
P 31,800
Anton, Barkley and Charles, partners of ABC Enterprises, have agreed on a profit and loss ratio
of 3:3:4, respectively. On December 31, 2019, the partnership books showed the following
capital balances:
Anton – P 450,000; Barkley – P 540,000; Charles – P 900,000
On January 1, 2020, Derek was admitted as a new partner under the following terms and
conditions:
a) Derek will share ¼ in the profit and loss ratio, while the ratio of the original partners will remain
proportionately the same as before Derek’s admission.
b) Derek will purchase 1/6 of Barkley’s interest paying him P 75,000.
c) Derek will contribute P 450,000 in cash to the partnership.
d) Total partnership capital after Derek’s admission will be P 2,400,000 of which Derek’s capital
interest will be P 480,000.
Instructions:
1. Using the format below, prepare a schedule showing the capital of each partner before and
after the admission of Derek.
Capital balances
before the
admission of
Derek
b. Purchase 1/6 of
Barkley interest
Anton
Barkley
Charles
Derek
Total
P 450,000
P 540,000
P 900,000
-
P 1,890,000
(P 90,000)
P 90,000
540,000 x 1/6 =90,000
c. Cash
contribution by
Derek
d. Bonus
60,000 x 3/10
60,000 x 4/10
d. Asset
Revaluation
60,000 x 3/10
60,000 x 4/10
Total
P 450,000
P 18,000
P 18,000
P 24,000
P 18,000
P 450,000
(P 60,000)
P 18,000
P 60,000
P 24,000
P 486,000
P 486,000
P 948,000
P 480,000
2. What is the profit and loss ratio of all the partners after Derek’s admission?
Derek: 25%
Old partners: =75%
Anton: 75% x 3/10= 22.5%
Barkley: 75% x 3/10= 22.5%
Charles: 75% x 4/10= 30%
P 2,400,000
4-8.
The CFM Partnership shows the following profit and loss ratios and capital balances:
Carter – 60% P 252,000; Fisher – 30% P 126,000; Malone – P 10% P 42,000
The partners decide to sell Shaq 20% of their respective capital and profit and loss interests for
a total payment P 90,000. Shaq will pay the money directly to the partners.
1. If the partners agree that asset revaluation is to be recorded prior to the admission of Shaq,
what are the capital balances of the partners after Shaq’s admission?
Carter _P 216,000 Fisher P 108,000_ Malone_P 36,000_ Shaq __P 90,000____
Computations:
Shaq, Capital
Divided by interest shared
New Partnership Capital
Less: Old Capital
Asset Revaluation
P 90,000
20%
P 450,000
420,000
P 30,000
Carter, Capital
Share on Asset Revaluation (30,000x.60)
Interest transferred to Shaq [( 252,000 +18,000)x.20]
Carter Capital after Shaq’s admission
P 252,000
18,000
( 54,000)
P 216,000
Fisher, Capital
Share on Asset Revaluation (30,000x.30)
Interest transferred to Shaq [( 126,000 +9,000)x.20]
Fisher Capital after Shaq’s admission
P 126,000
9,000
( 27,000)
P 108,000
Malone, Capital
P 42,000
Share on Asset Revaluation (30,000x.10)
Interest transferred to Shaq [( 42,000 +3,000)x.20]
Malone Capital after Shaq’s admission
Interest transfer by Carter
Interest transfer by Fisher
Interest transfer by Malone
Shaq, Capital
4-9.
3,000
( 9,000)
P 36,000
P 216,000
108,000
36,000
P 90,000
On January 1, 2020, Kevin Garnett and Steve Nash have capital balances of P 174,600 and P
110,400, respectively. On this date, Karl Malone is admitted as a partner upon his investment of
P 120,000 in the firm. Kevin and Steve, sharing profits and losses in the ratio of 65:35, gave a
bonus to Karl so that Karl may have a 40% interest in the firm.
How much is the decrease in Steve’s capital balance? _____P 14,700____________________
Karl, Capital (174,600+110,400+120,000) (.40)
Karl, invested
Bonus to Karl
Multiply by
Bonus from Steve
P 162,000
( 120,000 )
P 42,000
35/100
P 14,700
4-10. Jason and Kidd are partners who share profits and losses in the ratio of 3:1, respectively. On
August 1, 2020, their capital balances were: Jason – P 200,000 and Kidd – P 100,000. On this
date, Scottie invests 80,000 in the firm and is given a capital credit of P 50,000 which is to be
1/8 of the capital of the new partnership.
1. What is the agreed capital of the new partnership? __P 400,000___________
Scottie, Capital
Divided by
Agreed Capital
P 50,000
1/8
P400,000
2. What is the new capital balance of Jason after the admission of Scottie? _P 237, 500___
7/8 OP
1/8 NP
AC
P350,000
P 50,000
CC
P 300,000
P 80,000
TOTAL
P 400,000
P 380,000
BONUS OF P 30,000
Jason: P 30,000x ¾= P 22,500
Kidd: P 30,000x ¼= P 7,500
+ AR OF P 20,000
Jason: P 20,000X ¾= P 15,000
Kidd: P 20,000x ¼=P 5,000
DR
80,000
20,000
Cash
Other assets
Scottie, Capital
Jason, Capital
Kidd, Capital
CR
50,000
37,500
12,500
Computations:
Jason, Capital—Aug 1
Share in Asset Revaluation
Share in bonus
Jason, Capital—new
P 200,000
15,000
22,500
P 237,500
4-11. Terence and Romeo are partners who share profits and losses 60% and 40%, respectively.
Their capital accounts on July 1, 2020 were as follows: Terence – P 280,000; Romeo –
P240,000. On this date, they agree to admit Arwind as a new partner.
1. If Arwind purchased ¼ of the equity of Terence for P 100,000, how much would be the total
partnership capital after Arwind’s admission? ______P 520,000 __________________
Arwind, Capital ( 280,000 X ¼)
Terrence, Capital (280,000- 70,000)
Romeo, Capital
Total Partnership Capital
P 70,000
210,000
240,000
P 520,000
2. If Arwind invested P 180,000 for a ¼ interest in the firm and that the assets of the partnership
are fairly valued, what would be the capital of Terence after Arwind’s admission? ____
P 283,000__________________
¾ OP
¼ NP
AC
P 525,000
P 175,000
CC
P 520,000
P 180,000
TOTAL
P 700,000
P 700,000
Terrence, Capital
Bonus
Terrence Capital after Arwind Admission
Bonus of P 5,000
Terrence: 5,000 x 6/10= 3,000
Romeo: 5,000x 4/10= 2,000
P 280,000
3,000
P 283,000
3. If Arwind invested P 130,000 for a 25% interest in the firm and that the assets of the partnership
are fairly valued, what would be the capital of Romeo after the admission of Arwind? ______
_P 227,000__________________
AC
CC
75% OP
255 NP
P 487,500
P 162,500
P 520,000
P 130,000
TOTAL
P 650,000
P 650,000
Romeo, Capital
Bonus
Romeo Capital after Arwind Admission
Bonus of P 32,500
Terrence: 32,500 x 6/10= 19,500
Romeo: 32,500x 4/10= 13,000
P 240,000
(13,000)
P 227,000
4. If Arwind purchased 25% of the respective capital and profits and losses of Terence and
Romeo for P 150,000, how much is the share of Terence in the asset adjustment? _________
P48,000___________
Arwind, Capital
Divided by Interest shared
New Partnership Capital
Less Old Partnership Capital
Asset Revaluation
Asset Revaluation
Terrence: 80,000 x 6/10= P48,000
Romeo: 80,000 x 4/10 = P 32,000
P 150,000
25%
P 600,000
520,000
P 80,000