Direction:

a. Entry to record adjustments. Extract the revised capital balances.

Pen, Capital 7,200

May, Capital 10,800 ←
Accounts Receivable 18,000

Inventory 58,000
Pen, Capital 23,200 ←
May, Capital 34,800

Existing Partners' Revised Partners'

Adjustments
Equity Equity
Pen 450,000 16,000 466,000
May 650,000 24,000 674,000
Total 1,100,000 40,000 1,140,000 ←

b. May is willing to sell 40% of her interest and profit at a price that will earn for her a profit of P15,0

May's Revised Capital 674,000

Percentage 40%
May's Capital's 40% 269,600
Additional Profit 15,000
Wen's Payment 284,600

c. Give the entry to admit Wen for a 40% interest.

May, Capital 269,600

Wen, Capital 269,600

d. Determine the revised partners' capital after admission.

Partners' Revised Transfer of Revised Partners'

Equity Before Transfer Interest Equity After Transfer

Pen 466,000 - 466,000

May 674,000 (269,600) 404,400
Wen - 269,600 269,600
Total 1,140,000 - 1,140,000

e. For 2017, the business earned P350,000 profit. Give the profit share of each partner.

Pen May Wen

Profit Share Percentage 41% 35% 24%
Share in Net Profit 143,070 124,158 82,772

Income Summary 350,000

Pen, Drawing 143,070
May, Drawing 124,158
Wen, Drawing 82,772
 ENTRY TO RECORD ADJUSTMENT OF ACCOUNTS RECEIVABLE

ENTRY TO RECORD ADJUSTMENT OF INVENTORY

COMPUTATION FOR REVISED CAPITAL BALANCES AS OF DECEMBER 31, 2014

her a profit of P15,000. How much will Pen pay?

Total
100%
350,000
Direction:
a. Use the revised partners' equity in a) above which represents 60% interest, to arrive at total agre

Existing Revised Partners' Equity

Pen 466,000
May 674,000
Total 1,140,000
Percentage of Total Agreed Partners' Equity 60%
Total Agreed Partners' Equity 1,900,000

b. How much should Wen invest for a 40% share in the partnership?

Total Agreed Partners' Equity 1,900,000

Percentage Share of Wen 40%
Wen's Investment 760,000

c. Entry to record the admission of Wen.

Cash 760,000
Wen, Capital 760,000

d. Prepare the revised partners' equity just after admission.

Partners' Equity Revised Partners'

Admission
Before Admission Equity
Pen 466,000 - 466,000
May 674,000 - 674,000
Wen - 760,000 760,000
Total 1,140,000 760,000 1,900,000

e. Give the revised profit and loss ratio of the existing partners.

Pen May
Revised Partners' Equity 466,000 674,000
Profit Share Percentage 25% 35%

OLD PROFIT & NEW PROFIT &

LOSS RATIO LOSS RATIO
Pen 40% 25%
May 60% 35%
Wen - 40%
nterest, to arrive at total agreed partners' equity.

Wen Total
760,000 1,900,000
40% 100%
1. Wen is going to invest P500,000 for a 25% interest. Use the bonus method.
2. Wen is going to invest P300,000 for a 25% interest. It is agreed that non-current

Direction:
a. OPTION 1
I. Prepare a table starting with the partners' equity after the current assets were adjusted. Total agre

Contributed
Partners Agreed Equity Bonus
Capital
Pen 466,000 36,789
May 674,000 53,211
Wen 500,000 > 410,000 (90,000)
Total 1,640,000 = 1,640,000

II. Who will be credited for the bonus capital? Cite some reasons to justify the bonus. Prepare the e

ANSWER: Since Wen will be credited for P410,000 which is lesser than his actual contribution
which is P500,000, bonus capital is given to the existing partners, Pen and May, based on their old
profit and loss ratio before the admission of Wen.

Cash 500,000
Pen, Capital 36,789
May, Capital 53,211
Wen, Capital 410,000

b. OPTION 2
I. Prepare a table starting with the current partners' equity after the current assets were adjusted. U
agreed equity and compare with total contributed capital. Is there an upward or downward revaluat

Contributed Asset
Partners Agreed Equity
Capital Revaluation
Pen 466,000 (96,000)
May 674,000 (144,000)
Wen 300,000 = 300,000
Total 1,440,000 > 1,200,000 (240,000)

II. Give two entries to record the asset revaluation and admission.

Pen, Capital 96,000

May, Capital 144,000
Other Assets 240,000

Cash 300,000
Wen, Capital 300,000
onus method.
ed that non-current assets must be revalued.

ere adjusted. Total agreed capital should be the same as total contributed capital.

e bonus. Prepare the entry to record the admission of Wen.

contribution
ased on their old

ssets were adjusted. Use the new partner's contributed capital to determine total
or downward revaluation?

DOWNWARD
→
REVALUATION

← ENTRY FOR ASSET REVALUATION

← ENTRY FOR WEN'S ADMISSION

Direction:
a. Update the capital balances of the partners by recording the profit.

Income Summary 150,000

Liza, Drawing
Fe, Drawing
Arman, Drawing

b. Close the drawing account of Arman to the capital account.

Arman, Drawing 15,000

Arman, Capital

Liza Fe
Capital, January 1 200,000 300,000
Cash Withdrawals - -
Capital, June 30 200,000 300,000

c. Record the partner's retirement based in three options:

I. His interest is personally paid by the partners in the amount of P150,000. The pa

Arman, Capital 85,000

Liza, Capital
Fe, Capital

II. The partnership will pay P80,000 with bonus capital recognized for the differenc

Arman, Capital 85,000

Cash
Liza, Capital
Fe, Capital

III. The partnership will pay P200,000. Assets of the partnership should first be rev

Other Assets 575,000

Liza, Capital
Fe, Capital
Arman, Capital

Arman, Capital 200,000

Cash

d. Prepare a revised partners' equity using each option.

OPTION 1
Liza, Capital 242,500
 Fe, Capital 342,500
Total 585,000

OPTION 2
Liza, Capital 202,500
Fe, Capital 302,500
Total 505,000

OPTION 3
Liza, Capital 430,000
Fe, Capital 530,000
Total 960,000
 60,000
60,000
30,000

15,000

Arman Total
100,000 600,000
(15,000) (15,000)
85,000 585,000

e amount of P150,000. The partners agree on an equal sharing of Arman's interest.

42,500
42,500

al recognized for the difference.

80,000
2,500
2,500

partnership should first be revalued.

230,000
230,000
115,000

200,000
interest.