Illustration 1

The capital accounts of A & B Company before the admission of C are

follows:
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C purchases 10% interest of out of the 30% interest of A for P100,000

The net assets of the firms as of this approximate their fair values.

Required: Prepare the journal entry to record the transaction

A, Capital 50,000
C, Capital 50,000
(150,000 x 10%/30%)

Illustration 2
The capital accounts of A & B Company before the admission of C are
follows:
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C purchases proportionate interest from A and B representing 10%

interest in the partnership for P100,000. The net assets of the firm
as of this date approximate their fair values.

Required:
a. Prepare the journal entry to record the admission of C
b. Compute capital balances of the partners after the admission of C

a. A, Capital (400,000 x 30% x 10%) 12,000

B, Capital (400,000 x 70% x 10%) 28,000
C, Capital (400,000 x 10%) 40,000
ission of C
The capital accounts of A & B Company before the admission of C are are
follows:
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C was admitted to the partnership when he purchased a proportionate

interest from A and B representing 10% interest in the partnership for
P100,000. However, before the admission of C, it was found out that
the building of the partnership is undervalued by P200,000.

Required: Provide the journal entries to record the revaluation of the

building and the admission of C.

Building 200,000
A, Capital (200,000 x 30%) 60,000
B, Capital (200,000 x 70%) 140,000
To record the revaluation of the building

A, Capital (600,000 x 30% x 10%) 18,000

B, Capital (600,000 x 70% x 10%) 42,000
C, Capital (600,000 x 10%) 60,000
To record admission of C

A B C TOTAL
Beg. Capital 150,000 250,000 - 400,000
Share in valuation 60,000 140,000 200,000
Credit 60,000 60,000
Debit -18,000 -42,000 -60,000
End capital 192,000 348,000 60,000 600,000
Illustration 1
Diala, Austria, and Tamayo are partners in Lavander Company.
Their capital balances as at July 31, 2023 are as follows:

Diala, Capital Austria, Capital

450,000 150,000

Each partner agreed to admit Miranda to the partnership.

Prepare the entries to record Miranda's admission to the partnership under each of the
following conditions:
a. Miranda paid Diala P125,000 for 20% of Diala's interest in the partnership
Diala, Capital (450,000 x 20%) 90,000
Miranda, Capital

b. Miranda invested P200,000 cash in the partnership and received an interest

equal to her investment
AC CC
Old partners 900,000 900,000
New partner 200,000 200,000
1,100,000 1,100,000

Cash 200,000
Miranda, Capital 200,000

c. Miranda invested P300,000 cash in the partnership for 20% interest in the
business. A bonus is to be recorded for the original partners on the basis of
their capital balances
AC CC
Old partners (80%) 960,000 900,000
New partner (20%) 240,000 300,000
1,200,000 1,200,000
 Cash 300,000
Diala, Capital (60,000 x 450/900)
Austria, Capital (60,000 x 150/900)
Tamayo, Capital (60,000 x 300/900)
Miranda, Capital

d. Miranda invested P300,000 cash in the partnership for 40% interest in the
business. The original partners gave Miranda a bonus according to the ratio of
their capital balance on July 31, 2023.
AC CC
Old partners (60%) 720,000 900,000
New partner (40%) 480,000 300,000
1,200,000 1,200,000

Cash 300,000
Diala, Capital (180,000 x 450/900) 90,000
Austria, Capital (180,000 x 150/900) 30,000
Tamayo, Capital (180,000 x 300/900) 60,000
Miranda, Capital

Illustration 2
Padilla and Tan are partners in Nayon Partnership with capital balances of P550,000 an
P350,000 respectively. They share income and loss in the ratio of 1:3, respectively. Th
partners are considering the admission of Conde.

Conde invested P140,000 cash in partnership for a one-eight interest. Assets

of the partnership are fairly valued except for equipment, which is undervalued
by P80,000. Net assets of the partnership are to be revalued and Conde is to be
admitted.

Required: Prepare the journal entries to record the admission of Conde

 AC CC
Old partners 980,000 900,000
New partner 140,000 140,000
1,120,000 1,040,000

Cash 140,000
Equipment 80,000
Padilla, Capital (80,000 x 1/4)
Tan, Capital (80,000 x 3/4)
Conde, Capital
 Tamayo, Capital
300,000

partnership under each of the

terest in the partnership

90,000

ip and received an interest

Bonus/AR
-
-
-

ip for 20% interest in the

al partners on the basis of

Bonus/AR
60,000
- 60,000
-
 30,000
10,000
20,000
240,000

ip for 40% interest in the

onus according to the ratio of

Bonus/AR
- 180,000
180,000
-

480,000

pital balances of P550,000 and

ratio of 1:3, respectively. The

ght interest. Assets

which is undervalued
ued and Conde is to be

ssion of Conde
Bonus/AR
80,000
-
80,000

20,000
40,000
140,000
Illustration 1
The capital account balances of the partners in ABC Partnership
on July 1, 2023 before any necessary adjustments are as follows:
Capital accounts
A, Capital (20%) 150,000
B, Capital (30%) 250,000
C, Capital (50%) 100,000
500,000

The partnership reported profit of P900,000 for the six months

ended July 31, 2023.

On July 1, 2023, C withdraws from the partnership when he was

bought-out by his co-partners for P620,000 cash. The net assets
of the firm as of this date approximate their fair values.

Required: Prepare journal entries

A (20%) B (30%)
Unadjusted balance 150,000 250,000
Share in profit 180,000 270,000
Adjusted balance 330,000 520,000

Income summary 900,000

A, Capital
B, Capital
C, Capital
To adjust capital balances

C, Capital 550,000
A, Capital (550,000 x 20%/50%)
B, Capital (550,000 x 30%/50%)
To record withdrawal of C
The capital account balances of the partners in ABC Partnership
on July 1, 2023 before any necessary adjustments are as follows:
Capital accounts
A, Capital (20%) 150,000
B, Capital (30%) 250,000
C, Capital (50%) 100,000
500,000

The partnership reported profit of P900,000 for the six months

ended July 31, 2023.

C retires on July 2023. It was agreed that C shall receive P620,000

cash from the partnership as settlement of his interest.

Required: Prepare journal entries

C, Capital 550,000
A, Capital (620,000 -550,000) x 20%/50% 28,000
B, Capital (620,000 -550,000) x 30%/50% 42,000
Cash

A B
Adjusted balance 330,000 520,000
Debit - 28,000 -42,000
302,000 478,000
C (50%) TOTAL
100,000 500,000
450,000 900,000
550,000 1,400,000

180,000
270,000
450,000

220,000
330,000
 620,000

Total
850,000
-70,000
780,000
Purchase of Interest
Illustration 1
The capital accounts of A & B Company before the admission of C are are
follows:
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C purchases 10% interest of out of the 30% interest of A for P100,000. The net assets of the firms as of this approximate their fair values.

Required: Prepare the journal entry to record the transaction

A, Capital 50,000

Date C, Capital (150,000 x 50,000

10%/30%)
to record the admission of C to the partnership

Illustration 2
The capital accounts of A & B Company before the admission of C are are
follows:
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C purchases proportionate interest from A and B representing 10% interest in the partnership for P100,000. The net assets of the firm
as of this date approximate their fair values.

Requirement (a):
A, Capital (400,000 x 10% x 30%) 12,000
B, Capital (400,000 x 10% x 70%) 28,000
Date
C, Capital (400,000 x 10%) 40,000
 Date

to record the admission of C to the partnership

Requirement (b):
A B C Totals
Capital, beg. 150,000 250,000 - 400,000
Credit - - 40,000 40,000
Debit -12,000 - 28,000 - - 40,000
Capital, end. 138,000 222,000 40,000 400,000

Revaluation of Assets
Illustration 1
The capital accounts of A & B Company before the admission of C are followsL
Capital accounts P/L ratios
A, Capital 150,000 30%
B, Capital 250,000 70%
400,000

C was admitted to the partnership when he purchased a proportionate interest from A and B representing 10% interest in the partnership for
P100,000. However, before the admission of C, it was found out that the building of the partnership is undervalued by P200,000.

Required: Provide the journal entries to record the revaluation of the building and the admission of C.

Date Building 200,000

A, Capital (200,000 x 30%) 60,000
B, Capital (200,000 x 70%) 140,000
to record the revaluation of the building

Date A, Capital (600,000* x 10% x 30%) 18,000

B, Capital (600,000* x 10% x 70%) 42,000
C, Capital (600,000* x 10%) 60,000
to record the admission of C to the partnership
 A B C Totals
Capital, beg. 150,000 250,000 - 400,000
Share in valuation 60,000 140,000 200,000
Credit - - 60,000 60,000
Debit -18,000 - 42,000 - - 60,000
Capital, end. 192,000 348,000 60,000 600,000

Investment in Partnership
Illustration 1
Diala, Austria, and Tamayo are partners in Lavander Company.
Their capital balances as at July 31, 2023 are as follows:

Diala, Capital Austria, Capital Tamayo Capital

450,000 150,000 300,000

Each partner agreed to admit Miranda to the partnership.

Prepare the entries to record Miranda's admission to the partnership under each of the
following conditions:
a. Miranda paid Diala P125,000 for 20% of Diala's interest in the partnership
Diala, Capital (450,000 x 20%) 90,000
Miranda, Capital 90,000

b. Miranda invested P200,000 cash in the partnership and received an interest

equal to her investment
AC CC Bonus/AR
Old 900,000 900,000 -
New 200,000 200,000 -
1,100,000 1,100,000 -
 Cash 200,000
Miranda, Capital 200,000

c. Miranda invested P300,000 cash in the partnership for 20% interest in the
business. A bonus is to be recorded for the original partners on the basis of
their capital balances
AC CC Bonus/AR
Old (80%) 960,000 900,000 60,000
New (20%) 240,000 300,000 - 60,000
1,200,000 1,200,000 -

Cash 300,000
Diala, Capital (60,000 x 450/900) 30,000
Austria, Capital (60,000 x 150/900) 10,000
Tamayo, Capital (60,000 x 300/900) 20,000
Miranda, Capital 240,000

d. Miranda invested P300,000 cash in the partnership for 40% interest in the
business. The original partners gave Miranda a bonus according to the ratio of
their capital balance on July 31, 2023.
AC CC Bonus/AR
Old 720,000 900,000 - 180,000
New 480,000 300,000 180,000
1,200,000 1,200,000 -

Cash 300,000
Diala, Capital (180,000 x 450/900) 90,000
Austria, Capital (180,000 x 150/900) 30,000
Tamayo, Capital (180,000 x 300/900) 60,000
Miranda, Capital 480,000

Illustration 2
Padilla and Tan are partners in Nayon Partnership with capital balances of P550,000 and P350,000 respectively. They share income and loss in the ratio of 1:3, respectively. The
partners are considering the admission of Conde.

Conde invested P140,000 cash in partnership for a one-eight interest. Assets of the partnership are fairly valued except for equipment, which is undervalued by P80,000
Net assets of the partnership are to be revalued and Conde is to be admitted.

Required: Prepare the journal entries to record the admission of Conde

AC CC Bonus/AR
Old 980,000 900,000 80,000
New 140,000 140,000 -
1,120,000 1,040,000 80,000

Cash 140,000
Equipment 80,000
Padilla, Capital 20,000
Tan, Capital 60,000
Conde, Capital 140,000

Withdrawal
Illustration 1
The capital account balances of the partners in ABC Partnership on July 1, 2023 before any necessary adjustments are as follows:
Capital accounts
A, Capital (20%) 150,000
B, Capital (30%) 250,000
C, Capital (50%) 100,000
500,000

The partnership reported profit of P900,000 for the six months ended July 31, 2023

On July 1, 2023, C withdraws from the partnership when he was bought-out by his co-partners for P620,000 cash. The net assets of the firm as of this date
approximate their fair values.

Required: Prepare journal entries

 A (20%) B(30%) C (50%) Total
Unadjusted balance 150,000 250,000 100,000 500,000
Share in profit of 900,000 180,000 270,000 450,000 900,000
330,000 520,000 550,000 1,400,000

Income summary 900,000

A, Capital 180,000
B, Capital 270,000
C, Capital 450,000
To adjust capital balances

C, Capital 550,000
A, Capital (550,000 x 20%/50%) 220,000
B, Capital (550,000 x 30%/50%) 330,000
To record withdrawal of C

New capital structure A B Total

Adjusted balance 330,000 520,000 850,000
Credit from withdrawal of C 220,000 330,000 550,000
550,000 850,000 1,400,000

Illustration 2
The capital account balances of the partners in ABC Partnership on July 1, 2023 before any necessary adjustments are as follows:
Capital accounts
A, Capital (20%) 150,000
B, Capital (30%) 250,000
C, Capital (50%) 100,000
500,000

The partnership reported profit of P900,000 for the six months ended July 31,2023

C retires on July 2023. It was agreed that C shall receive P620,000 cash from the partnership as settlement of his interest.
Required: Prepare journal entries
C, Capital 550,000
A, Capital (620,000 - 550,000) x 20%/50% 28,000
B, Capital (620,000 - 550,000) x 30%/50% 42,000
Cash 620,000

New capital structure A B Total

Adjusted balance 330,000 520,000 850,000
Debit for the bonus of C - 28,000 - 42,000 - 70,000
302,000 478,000 780,000